Some Facts on Outsourcing

by Pejman Yousefzadeh on July 15, 2012

Barack Obama:

[Mitt Romney] invested in companies that have been called pioneers of outsourcing. I don’t want pioneers in outsourcing, I want some insourcing. I want to bring companies back.

That’s an amusing claim, given this:

The crucial factor in any employer’s decision to move, relocate or expand facilities and create jobs is policy. Obama and his supporters may want to distract with baseless allegations about Romney’s business dealings — but there is concrete evidence that a number of policies imposed or supported by the White House and Senate Democrats have led to the outsourcing of thousands of U.S. jobs.

Consider the five-year Farm Bill, approved by the Democratic-controlled Senate on June 21. One egregious aspect of this unnecessary $969-billion legislative monstrosity is the fact that it maintains Washington’s arcane and counterproductive sugar policies.

The U.S. currently imposes a tariff and quota on sugar imports — artificially inflating the price of sugar. This misguided program is why U.S. residents pay twice as much for sugar than the rest of the world. It’s also why Coca-Cola tastes so much better in Latin America – where it is not cost-prohibitive to make soft drinks with real sugar.

It’s remarkable that so many lawmakers last month voted to support this program — yet still feel comfortable deriding the outsourcing of jobs. For it is well-documented that our protectionist sugar programs force jobs overseas.

That’s one reason why Brach’s candy company moved operations to Mexico; Kraft now manufactures Life Savers in Canada instead of Michigan, and Hershey’s has had to close plants in Pennsylvania, California and Colorado, moving those operations abroad.

“At a time when we have lost millions of decent paying jobs because of outsourcing,” Sen. Bernie Sanders (I-Vt.) said recently on MSNBC, “Mr. Romney will take his outsourcing experience and make it even more prevalent.” .

In fact, it is Sanders and his Democratic colleagues in the Senate – including Sen. Debbie Stabenow (D-Mich.), Sen. Claire McCaskill (D-Mo.), Sen. Jon Tester (D-Mont.), Sen. Ben Nelson (D-Mont.), Sen. Sherrod Brown (D-Ohio) and Sen. Kirsten Gillibrand (D-N.Y.)– who voted to keep the sugar policies directly responsible for jobs being pushed overseas.

Agriculture is not the only sector where Democratic policies are precipitating the jobs flight overseas. The same dynamic is clear in health care.

“Obamacare” has understandably been in the news of late. Yet an important aspect of the law few have discussed is that, in a sense, “Obamacare” was a massive jobs bill. It will lead to the creation of thousands of jobs — thousands of jobs outside the United States that is.

And this:

During the past two weeks, President Barack Obama’s campaign has blasted Republican challenger Mitt Romney as an “outsourcer,” focusing on his career with private equity firm Bain Capital. The Romney campaign hit back on Tuesday, claiming Obama’s stimulus package failed to protect American workers and helped create jobs overseas.

If Romney really wanted a juicy example of outsourcing, he would have to look no further than the president’s jobs council.

Obama’s Council on Jobs and Competitiveness, 26 business leaders assembled by the president for job-spurring ideas, includes representatives of several companies that have used outsourcing, fueling job creation abroad and job losses in the U.S. Shipping work to low-cost overseas labor markets has been a trend in American manufacturing for decades. The White House has a plan to curb outsourcing, but companies represented on the jobs council reveal just how pervasive the practice is.

There’s General Electric, whose CEO Jeffrey Immelt has served as chair of the advisory board since January 2011. Since Immelt took over GE in 2001, the company has lost 37,000 American jobs, and added 25,000 jobs overseas, according to filings with the Securities and Exchange Commission. Some of those U.S. job losses are inflated by the company’s sale of NBC to Comcast in 2009.

Chris Townsend, political director of the United Electrical Workers labor union that represents roughly 5,500 GE employees in the U.S., said the company has closed more than 30 U.S. plants since Obama took office. GE would not confirm the number.

GE “is a company that, despite the constant claims of growth, continues to shrink in the United States,” Townsend said. “These are a mixture of things from garden-variety, old-line manufacturing plants to electrical apparatus service facilities, sometimes something to do with servicing. Several of them were GE Capital.”

And the list of Obama-approved outsourcers is not just limited to GE. Perhaps the Obama record on outsourcing is the reason why his own base can appear to be disgruntled about the president’s performance:

Barack Obama promised voters four years ago that he would work to slow the outflow of American jobs to other countries, proposing to revamp a federal tax code that encourages companies to maintain overseas operations.

Obama as president has continued to call for rewriting the rules that allow U.S. corporations to avoid paying taxes for a time on income generated overseas.

But the broad tax changes have not happened.

While White House officials say they have been waiting on Congress to act, Obama’s critics, primarily on the political left, say he has repeatedly failed in other ways to protect American jobs from being moved overseas. They point to a range of actions they say he should have taken: confronting China, reining in unfettered trade and reworking a U.S. visa program that critics say ends up sending high-tech jobs abroad.

The issue of overseas outsourcing has returned to the center of the presidential campaign, with Obama hammering the record of Mitt Romney’s financial company. The debate intensified in recent weeks with Obama’s campaign attacking his Republican rival after a Washington Post article reported that Romney’s private-equity firm, Bain Capital, had invested in companies that specialized in helping other firms relocate work overseas.

American jobs have been shifting to low-wage countries for years, and the trend has continued during Obama’s presidency. From 2008 to 2010, U.S. trade with China alone cost about 450,000 American jobs because of the growth of Chinese exports, said Robert E. Scott, a pro-labor advocate at the liberal Economic Policy Institute. That figure was less than in previous years, but the decrease was probably tied to the U.S. economic slowdown, which crimped demand for imports.

“I think he has walked away from the campaign commitments,” said Scott, the institute’s director of trade and manufacturing policy research. “He has done far too little to improve U.S. trade.”

I myself have no problem with outsourcing. I think that it is an often beneficial economic process, which often leads to better jobs being created in the stead of jobs that have been outsourced. Furthermore, the overall effects of outsourcing on job losses in the United States have been grossly exaggerated. But if we are going to discuss the issue, and if we are going to discuss which candidate has been most responsible for outsourcing, and for giving outsourcers significant amounts of political prominence, we need look no further than the current occupant of 1600 Pennsylvania Avenue, who can run those negative ads against himself anytime now.

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