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Manufacturing is still critical to the economy United States. Clyde Prestowitz, says it's time to start realizing the positive spillovers that manufacturing creates... Read more  

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Stephen Olson at Chinese Development Institute Conference

 

 Clyde Prestowitz giving presentation to CDI...

 

Steve Olson teaching trade negotiations at the Mekong Institute...

 

Stephen Olson to speak at upcoming workshop organized by the International Institute for Trade and Development on 

"Economics of GMS Agricultural trade in goods and services towards the world market"

Chiangmai, Thailand Sep 8-12.

(12/29/2005) Clyde Prestowitz interviewed in the Philadelphia Enquirer

Philadelphia Inquirer
December 29, 2005
Section: BUSINESS

Offshoring affects more complex U.S. jobs
Work done by junior architects and lawyers can now be done overseas faster or more cheaply.

By Kevin G. Hall, Inquirer Washington Bureau

The practice of transferring American jobs to lower-cost countries, called offshoring, is moving up the food chain. It's no longer just software programming and help desks that are being sent to India and elsewhere in Asia.

Increasingly, skilled professional jobs are being sent abroad, including some in architecture, accounting, law, publishing, finance and insurance. For example:

Fidelity National Financial of Jacksonville, Fla., is looking for tax processors in India.

Intelliways, an Indian company that's working on behalf of a U.S. Internet firm, wants someone there to write news releases.

India's Cactus Communications Pvt. Ltd. seeks someone in Asia to edit complex English-language research papers on topics in nuclear physics, astrophysics and particle physics for U.S. and other foreign clients.

With more than three million jobs projected to be shipped overseas in the next decade, many analysts question what this means for future U.S. competitiveness.

"Any professional service that can be boiled down to predictable steps, even if they are complicated steps, is now exportable to South Asia," said Robert Reich, who was the secretary of labor in the Clinton administration. "We have to understand there is no longer any sharp distinction between manufacturing and services."

Broadly defined, the services sector now employs eight of every 10 American workers. When global trade eroded U.S. manufacturing jobs in the 1980s and '90s, experts said the U.S. economy was making the transition to a service economy. Now that sector doesn't feel so safe anymore.

"Labor has always been a commodity, but it has never been so fungible, so easy to move," said Clyde Prestowitz, the director of the Economic Strategy Institute, which challenges free-trade assumptions, and the author of the recent book Three Billion New Capitalists. It concludes that China and India will threaten U.S. job security.

When the American Institute of Architects surveyed its members last year, it found that 11 percent had shipped some design work overseas and an additional 14 percent were considering it.

"I was a little bit surprised that it was that high; 25 percent had at least thought about it," said Kermit Baker, the institute's chief economist.

Of those who had shipped some work overseas, a quarter cited lower costs, another quarter cited faster production, and 50 percent of the architectural firms polled said offshoring helped them cover peak demand, allowing round-the-clock work on projects. Most of it is computer-aided design work, traditionally done by junior architects.

Lawyers look for help abroad, too.

A poll published Dec. 1 by the American Lawyer magazine found that 77 percent of the top 200 U.S. law firms use contract lawyers on a temporary basis, with 6 percent contracting to lawyers offshore.

"When I saw that, my eyes popped out. Six percent is, to me, quite a bit when it was barely on the radar screen two years ago," said Ron Friedmann, the president of Prism Legal Consulting, an Arlington, Va., company that guides law firms on technology issues, including offshoring.

The trend is undermeasured and sure to grow, George Hefferan said. In 2001, he left a law firm to help pioneer offshoring of legal services. Now his Chicago company, Mindcrest Inc., operates a subsidiary with 25 lawyers in the Indian city of Mumbai.

They handle such responsibilities as document drafting and legal research that surveys all 50 U.S. states. The work is considered administrative and, thus, fit for junior lawyers.

"We can do that work at much lower costs," Hefferan said. He's doubling his staff in India next year.

Does offshoring service-sector jobs threaten American competitiveness? After all, if junior accountants, lawyers or architects tend to be overseas, how do Americans rise to senior positions? Experts are divided.

"What we have is a vibrant economy that's redeploying people, and if you can move them away from activities that can be done cheaply elsewhere, you are creating opportunities for value creation here," said Diana Farrell, the director of the McKinsey Global Institute, a pro-business research center.

The liberal Center for Economic and Policy Research disagrees, fearing that offshoring is a threatening trend.

"It's at a low level now. It will grow rapidly from its small percentage," said Dean Baker, the center's codirector.

The risk for American workers, he said, is "Wal-Martization," in which some large company aggressively offers U.S. corporations a large menu of service-sector jobs abroad at rock-bottom prices.

"That would be what really starts to change the nature of the market in those sectors," Baker said.

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