^^^Sound off on this issue

so what do you think?

^^^Papers

• Globalization of IT Services and White Collar Jobs: The Next Wave of Productivity Growth, Catherine L. Mann, a controversial policy paper that argues that overseas low cost production of software components will enable a new wave of growth, just as commoditization of hardware components did in the 1990s.

• Capturing the Real Value of Offshoring in Asia by John Hagel http://www.johnhagel.com, a working paper arguing that most companies significantly misunderstand the real value of offshoring. Maintains that offshoring should be viewed as an offensive competitive weapon, rather than simply as a defensive, cost-reduction measure. Companies that recognize this will not only restructure their own operations but increasingly will restructure entire industries as well.

• The Outsourcing Bogeyman, According to the election-year bluster of politicians and pundits, the outsourcing of American jobs to other countries has become a problem of epic proportion. Fortunately, this alarmism is misguided. Outsourcing actually brings far more benefits than costs, both now and in the long run. If its critics succeed in provoking a new wave of American protectionism, the consequences will be disastrous -- for the U.S. economy and for the American workers they claim to defend. Daniel W. Drezner is Assistant Professor of Political Science at the University of Chicago and the author of "The Sanctions Paradox." He keeps a weblog at http://www.danieldrezner.com/blog

^^^Articles

• "Job Losses and Trade" -- Cato Institute Paper

http://www.freetrade.org/pubs/briefs/tbp-019es.html

• Now is time to face facts, make needed investment, Dan Gillmor, Mercury News, 3/14/03
• U.S. Tax Code Provisions Encourage Offshore Jobs, WSJ, 3/12/04, excerpt:

The tax code is written in a way that allows companies not to pay the full 35% U.S. corporate tax rate on foreign income when that money remains invested overseas.

Backing up a step, here's how it works before the loophole: A company earns $100 million abroad in Lowtaxistan where the corporate tax rate is 20%. The foreign subsidiary pays that
money to the U.S. parent. The parent then pays $35 million to the U.S. government and takes a credit for the 20% (or $20 million) payment to the Lowtaxistan government. So the net to the U.S. Internal Revenue Service is $15 million.

But here's how it works with the loophole: The U.S. subsidiary simply keeps the money offshore and certifies to its accountants that the money is invested overseas. It never remits the money to the parent and so never pays the $15 million extra to Uncle Sam.

Do the math yourself. Which is better?

a) A factory in Lowell, Mass., that will generate $100 million in pre-tax profit that nets $65 million, or

b) A factory in Lowtaxistan that will generate $100 million in pretax profit that nets $80 million.

All things being equal, most people would pick "b." (And they aren't equal because Lowtaxistan has 750 gazillion people who will work for two gonzolees a day -- and the gonzolee is fixed to the U.S. dollar at a rate of 8.65.)

These are called "unrepatriated earnings" and they are increasingly commonplace. Just go into Free Edgar http://www.freeedgar.com4 or some other SEC search engine (I like 10K Wizard5) and plug in the term "unremitted earnings" or "undistributed earnings" and search 10-K forms to see how many annual statements come up.

^^^Blog Posts

• India and Offshoring, notes from another conference, Ross Mayfield, 2/2/04

• Drucker on India and China, Ross Mayfield, 1/6/04

• Off-shoring Manifesto/Rant: Eighteen Hard Truths about Inevitabilities, Pitfalls, and Matchless Opportunities, some observations from Tom Peters

• Offshoring, this thread from Joel on Software is packed with great view points - many from Indian and Russian programmers on the other side of the outsourcing equation.

• The Secret of Our Sauce, Thomas Friedman in the New York Times talks about America's secret sauce. Quote: Our competitors know the secret of our sauce. But do we?