04-16-2004, 11:44 PM
Came via email:
<b>This report once again clearly establishes the power of the US business lobby to thwart any measures which go against their vital interests.
Lesson: India needs to cultivate US corporates even more aggressively. </b>
<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->UNDERSTANDING OUTSOURCING
States' Efforts to Curb Outsourcing Stymied
Business Groups Take the Lead in Weakening
Attempts to Limit Work From Moving Abroad
By MICHAEL SCHROEDER
Staff Reporter of THE WALL STREET JOURNAL
April 16, 2004; Page A4
When India's largest software company won a $15
million contract to upgrade the processing of
Indiana's unemployment claims, public outrage prompted
the state Senate to vote to ban future outsourcing of
state contracts to other countries.
But then the business community swung into action to
derail the bill. The result: A watered-down version
was introduced in the state's lower house and
eventually died.
Indiana's experience is typical. Dozens of U.S. state
legislatures, responding to the furor over
white-collar jobs being sent overseas, have been
considering antioutsourcing bills. But so far, the
business lobby has killed or weakened every proposal
to prohibit government work from being sent abroad.
Spearheading the attack is the Coalition for Economic
Growth and American Jobs, formed late last year by the
U.S. Chamber of Commerce, the Business Roundtable, the
American Bankers Association and other powerful
business groups.
The coalition's success shows how hard it is for state
politicians to defeat a well-funded and well-organized
business lobby, even when populist anger is high.
Among its tactics: enlisting big employers to say they
would be hurt by the restrictions; warning that
taxpayers' costs would go up if outsourcing were
curbed, and trying to run out the clocks on the
legislative sessions.
The group has used similar arguments to bottle up a
half-dozen national proposals in Congress. Still,
business lobbyists worry the issue will heat up as the
election nears.
U.S. Chamber of Commerce President Thomas Donohue said
this week he's concerned about an "election-year
effort from people of both parties" to load up a
corporate-tax overhaul measure with amendments aimed
at curbing outsourcing abroad, and called on President
Bush's administration to more aggressively defend the
benefits of the global economy. Massachusetts Sen.
John Kerry, the likely Democratic presidential
nominee, is pushing a bill to require workers at
telephone call centers to disclose their physical
location at the beginning of each call.
On the state level, the foot soldiers of the corporate
campaign on outsourcing are local businessmen. At a
recent conference at the Boca Raton Resort & Club,
Bruce Josten, a coalition leader and executive vice
president of the U.S. Chamber of Commerce, outlined
the "blocking and tackling" techniques he says should
be used to fight antioutsourcing plans. For example,
business leaders should warn lawmakers that the
offending legislation would hurt foreign investment
and violate free-trade agreements, he told officials
from chambers of commerce from across the country.
The strategy is working: Of the 35 state legislatures
where tough antioutsourcing proposals were introduced
in recent months, six have adjourned without acting on
them. And the rest aren't likely to produce anything
better than watered-down versions of the bans sought
by organized-labor lobbyists.
"It's incredible the stranglehold the corporate
interests have on this issue," said Marcus Courtney,
president of the Washington Alliance of Technology
Workers, an affiliate of the Communications Workers of
America union based in Seattle. "It wouldn't surprise
me if we don't see anything passed this year and we
have to ramp up again next year."
The fight in state capitals has been under way since
last year, sparked by publicity that some contractors
were using call centers in India to answer questions
on health and welfare programs.
A look at Indiana shows why none of the initiatives
has made it into state law. News that the giant Indian
software company, Tata Consultancy Services, had won
the state contract caused a public outcry, prompting
the Democratic governor, Joseph Kernan, to cancel the
contract. (It had been awarded by his predecessor,
Frank O'Bannon, who died in office last fall.) A
spokeswoman for Gov. Kernan said the contract, which
is being rebid, was withdrawn because the bidding
process didn't allow Indiana companies a fair chance
to win the work.
Meanwhile, the state legislature jumped in. State Sen.
Jeff Drozda, a conservative Republican, proposed
requiring that all state work be performed in the U.S.
The measure, which was supported by the state AFL-CIO,
passed the Senate in February by a vote of 39-10.
Caught off guard, business lobbyists rushed to oppose
the bill, enlisting the help of American Express Co.,
Anthem Blue Cross and Blue Shield, Electronic Data
Systems Corp., Lincoln Financial Group, as well as a
newly created credit-card company coalition. In
one-on-one meetings with lawmakers, some of the
companies fretted, among other things, that the
measure could disrupt work on existing state contracts
that already had been partially outsourced.
In a nod to their concerns, the House Democratic Floor
Leader, Russell Stilwell, in February offered a
watered-down version of the Senate bill. It provided
only a "preference" for Indiana companies for state
work. Even so, Democrats were hesitant to force the
governor to pick sides between business and labor on a
hot-button issue. The House left town in March without
voting on the bill.
Maryland lawmakers faced similar dilemmas. Democratic
State Delegate Pauline Menes introduced a bill in
January to prohibit work on state contracts from being
performed "by a contractor or subcontractor from a
site that is located outside the U.S."
In response, a lobbyist for Nationwide Mutual
Insurance Co. of Columbus, Ohio, complained that the
bill would interfere with its work on a contract
involving the state's employee-pension program,
because an Indian subcontractor had developed the
software. Separately, the University of Maryland
worried that the bill would affect its overseas-study
programs because they employ foreign nationals. It
later got an exemption from the bill.
Lawmakers ultimately hammered out a compromise to
allow the state procurement office, in awarding a
contract, to consider where the work would be
performed. "We struggled to find a balance," said
Maryland Delegate Dan Morhaim, a Democrat who chairs
the subcommittee handling the bill.
After passing the House of Delegates, the weakened
bill was approved by the Senate in the final minutes
of Maryland's session this week. Susan Levitan, a
lobbyist for the Maryland branch of the AFL-CIO, said
the bill is "a first step." The union plans to push
strong outsourcing limits next year.
For critics of outsourcing, there is one bright spot:
Four governors have attacked the practice
administratively, though only one has banned it. In
Arizona, Democrat Janet Napolitano decreed that state
work must be done in the U.S. In Missouri, Democrat
Bob Holden ordered that no state work could be sent
abroad absent compelling reasons. Similarly, in
Michigan, Democrat Jennifer Granholm ordered the state
procurement office to give preference to U.S. and
in-state bidders for state work. In Minnesota,
Republican Tim Pawlenty issued new requirements that
companies disclose any state work being done outside
the U.S.
By contrast, Republican Gov. Jeb Bush of Florida
recently signed an order endorsing outsourcing as a
way to save taxpayer money. But, with an eye to the
political ramifications, he also directed a state
agency to study the effect of outsourcing the work.
Write to Michael Schroeder at mike.schroeder@wsj.com
<!--QuoteEnd--><!--QuoteEEnd-->
<b>This report once again clearly establishes the power of the US business lobby to thwart any measures which go against their vital interests.
Lesson: India needs to cultivate US corporates even more aggressively. </b>
<!--QuoteBegin-->QUOTE<!--QuoteEBegin-->UNDERSTANDING OUTSOURCING
States' Efforts to Curb Outsourcing Stymied
Business Groups Take the Lead in Weakening
Attempts to Limit Work From Moving Abroad
By MICHAEL SCHROEDER
Staff Reporter of THE WALL STREET JOURNAL
April 16, 2004; Page A4
When India's largest software company won a $15
million contract to upgrade the processing of
Indiana's unemployment claims, public outrage prompted
the state Senate to vote to ban future outsourcing of
state contracts to other countries.
But then the business community swung into action to
derail the bill. The result: A watered-down version
was introduced in the state's lower house and
eventually died.
Indiana's experience is typical. Dozens of U.S. state
legislatures, responding to the furor over
white-collar jobs being sent overseas, have been
considering antioutsourcing bills. But so far, the
business lobby has killed or weakened every proposal
to prohibit government work from being sent abroad.
Spearheading the attack is the Coalition for Economic
Growth and American Jobs, formed late last year by the
U.S. Chamber of Commerce, the Business Roundtable, the
American Bankers Association and other powerful
business groups.
The coalition's success shows how hard it is for state
politicians to defeat a well-funded and well-organized
business lobby, even when populist anger is high.
Among its tactics: enlisting big employers to say they
would be hurt by the restrictions; warning that
taxpayers' costs would go up if outsourcing were
curbed, and trying to run out the clocks on the
legislative sessions.
The group has used similar arguments to bottle up a
half-dozen national proposals in Congress. Still,
business lobbyists worry the issue will heat up as the
election nears.
U.S. Chamber of Commerce President Thomas Donohue said
this week he's concerned about an "election-year
effort from people of both parties" to load up a
corporate-tax overhaul measure with amendments aimed
at curbing outsourcing abroad, and called on President
Bush's administration to more aggressively defend the
benefits of the global economy. Massachusetts Sen.
John Kerry, the likely Democratic presidential
nominee, is pushing a bill to require workers at
telephone call centers to disclose their physical
location at the beginning of each call.
On the state level, the foot soldiers of the corporate
campaign on outsourcing are local businessmen. At a
recent conference at the Boca Raton Resort & Club,
Bruce Josten, a coalition leader and executive vice
president of the U.S. Chamber of Commerce, outlined
the "blocking and tackling" techniques he says should
be used to fight antioutsourcing plans. For example,
business leaders should warn lawmakers that the
offending legislation would hurt foreign investment
and violate free-trade agreements, he told officials
from chambers of commerce from across the country.
The strategy is working: Of the 35 state legislatures
where tough antioutsourcing proposals were introduced
in recent months, six have adjourned without acting on
them. And the rest aren't likely to produce anything
better than watered-down versions of the bans sought
by organized-labor lobbyists.
"It's incredible the stranglehold the corporate
interests have on this issue," said Marcus Courtney,
president of the Washington Alliance of Technology
Workers, an affiliate of the Communications Workers of
America union based in Seattle. "It wouldn't surprise
me if we don't see anything passed this year and we
have to ramp up again next year."
The fight in state capitals has been under way since
last year, sparked by publicity that some contractors
were using call centers in India to answer questions
on health and welfare programs.
A look at Indiana shows why none of the initiatives
has made it into state law. News that the giant Indian
software company, Tata Consultancy Services, had won
the state contract caused a public outcry, prompting
the Democratic governor, Joseph Kernan, to cancel the
contract. (It had been awarded by his predecessor,
Frank O'Bannon, who died in office last fall.) A
spokeswoman for Gov. Kernan said the contract, which
is being rebid, was withdrawn because the bidding
process didn't allow Indiana companies a fair chance
to win the work.
Meanwhile, the state legislature jumped in. State Sen.
Jeff Drozda, a conservative Republican, proposed
requiring that all state work be performed in the U.S.
The measure, which was supported by the state AFL-CIO,
passed the Senate in February by a vote of 39-10.
Caught off guard, business lobbyists rushed to oppose
the bill, enlisting the help of American Express Co.,
Anthem Blue Cross and Blue Shield, Electronic Data
Systems Corp., Lincoln Financial Group, as well as a
newly created credit-card company coalition. In
one-on-one meetings with lawmakers, some of the
companies fretted, among other things, that the
measure could disrupt work on existing state contracts
that already had been partially outsourced.
In a nod to their concerns, the House Democratic Floor
Leader, Russell Stilwell, in February offered a
watered-down version of the Senate bill. It provided
only a "preference" for Indiana companies for state
work. Even so, Democrats were hesitant to force the
governor to pick sides between business and labor on a
hot-button issue. The House left town in March without
voting on the bill.
Maryland lawmakers faced similar dilemmas. Democratic
State Delegate Pauline Menes introduced a bill in
January to prohibit work on state contracts from being
performed "by a contractor or subcontractor from a
site that is located outside the U.S."
In response, a lobbyist for Nationwide Mutual
Insurance Co. of Columbus, Ohio, complained that the
bill would interfere with its work on a contract
involving the state's employee-pension program,
because an Indian subcontractor had developed the
software. Separately, the University of Maryland
worried that the bill would affect its overseas-study
programs because they employ foreign nationals. It
later got an exemption from the bill.
Lawmakers ultimately hammered out a compromise to
allow the state procurement office, in awarding a
contract, to consider where the work would be
performed. "We struggled to find a balance," said
Maryland Delegate Dan Morhaim, a Democrat who chairs
the subcommittee handling the bill.
After passing the House of Delegates, the weakened
bill was approved by the Senate in the final minutes
of Maryland's session this week. Susan Levitan, a
lobbyist for the Maryland branch of the AFL-CIO, said
the bill is "a first step." The union plans to push
strong outsourcing limits next year.
For critics of outsourcing, there is one bright spot:
Four governors have attacked the practice
administratively, though only one has banned it. In
Arizona, Democrat Janet Napolitano decreed that state
work must be done in the U.S. In Missouri, Democrat
Bob Holden ordered that no state work could be sent
abroad absent compelling reasons. Similarly, in
Michigan, Democrat Jennifer Granholm ordered the state
procurement office to give preference to U.S. and
in-state bidders for state work. In Minnesota,
Republican Tim Pawlenty issued new requirements that
companies disclose any state work being done outside
the U.S.
By contrast, Republican Gov. Jeb Bush of Florida
recently signed an order endorsing outsourcing as a
way to save taxpayer money. But, with an eye to the
political ramifications, he also directed a state
agency to study the effect of outsourcing the work.
Write to Michael Schroeder at mike.schroeder@wsj.com
<!--QuoteEnd--><!--QuoteEEnd-->