Scaled-back plan on outsourcing gets OK

Senate votes to limit funds for overseas work

March 05, 2004|By BLOOMBERG NEWS

WASHINGTON - The Senate voted 70 to 26 yesterday for a scaled-back plan to curb the use of federal funds for contracting work done outside the United States.

The proposal would prevent the government from buying goods such as automobiles and services such as software made overseas in China, India or other nations. The initial measure was weakened by a provision that the Secretary of Commerce must certify that the step doesn't lose more jobs than it saves.

If it becomes law, the legislation, part of a $110 billion corporate tax bill being debated in the Senate this week, would force the Bush administration to stand behind a statement by chief economic adviser N. Gregory Mankiw that the outsourcing of jobs is good for the U.S. economy.

"We look forward to them making that case," said sponsor Sen. Christopher J. Dodd, a Connecticut Democrat who sponsored the original amendment. "Giving jobs away is destroying our manufacturing base. What we're telling companies is that at least with taxpayer money, you need to do it differently."

The loss of software, technology, accounting, call center and other jobs to low-wage nations is an issue in the presidential campaign, with Democratic candidate Sen. John Kerry criticizing "Benedict Arnold" companies that move jobs overseas.

This year, Congress enacted, in a larger spending bill, a prohibition on companies' hiring foreign workers for about $1 billion in government contracts. The new measure would apply to about $280 billion of work, according to the Professional Services Council, which represents International Business Machines Corp. and other contractors.

Associations representing companies such as General Electric Co., Electronic Data Systems Corp. and IBM had fought the outsourcing provision, and warn that it sets a damaging precedent.

"One understands the political attractiveness of this," said William Reinsch, the president of the National Foreign Trade Council, which represents Boeing Co. and other exporters. "If everybody feels better, OK, but it's dealing with the symptoms, not the disease."

The amendment was changed to exempt defense, intelligence and homeland security agencies after Republicans complained that the original Democratic plan would compromise the ability of companies to provide essential goods or services to the U.S. government.

Also, 27 countries were exempted from the measure because they had signed a World Trade Organization agreement on government procurement. Dodd didn't provide a list of those nations.

"The modifications are a significant improvement, but there is still a long way to go," said Alan Chvotkin, senior vice president of the Professional Services Council. "My concern is that they're taking actions without sorting through the implications."

The Bush administration has argued that U.S. workers benefit from investment by foreign companies such as Toyota Motor Corp. in American factories, so lawmakers must be careful in how they try to curb U.S. investment overseas.

"There are a record number of people employed by foreign companies in the U.S.," Commerce Secretary Donald Evans told reporters last week, putting the figure at 6.4 million. "We need to be careful not to harm this."

Evans will be the one who must certify within 90 days of the legislation's becoming law that imposing the limited ban on overseas federal contracting will benefit U.S. employment.

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