U.S. imports of computing services -- the most controversial area of outsourcing -- came to just 0.4 percent of the gross domestic product in 2003. China and India, the two countries most blamed for outsourcing, actually outsourced more than we do -- 0.6 percent of GDP for the former and 2.4 percent of GDP for the latter.
Contrary to popular belief, the United States is a large recipient of outsourcing from other countries -- i.e., insourcing. In 2002, the United States was the world's largest exporter of computer services, which added almost $60 billion to our exports. By contrast, India's total exports in this area came to less than $20 billion and China's were just over $10 billion.
In 2002, the United States ran a healthy trade surplus in the area of outsourcing -- receiving $22 billion more in outsourcing from other countries than it paid in outsourcing to other countries.
The number of jobs gained from outsourcing approximately equal the number of jobs lost.
The Federal Reserve Bank of Kansas City did the most recent study of outsourcing. It concluded that outsourcing has no permanent employment effects, although there can be temporary displacements.
Finally, press reports indicate that the outsourcing boom may have already peaked. A Sept. 22 report in The Wall Street Journal said that Chinese workers are now demanding better pay and more time off, which has sharply raised the number of labor disputes. This is quickly eroding the cost advantage of outsourcing to China.
An Oct. 7 report in the Financial Times says that General Electric, which pioneered outsourcing to India, has decided to sell its international outsourcing business. It found that the savings from outsourcing were mostly one-time gains that tended to dissipate over time. One reason is high employee turnover. Call centers operated by GE in India lost 40 percent to 50 percent of their workers every year.
Perhaps for these reasons, in his debate with President Bush on Oct. 8, Kerry backed away from some of the more extreme statements he and Edwards have previously made about outsourcing. Said Kerry, "You can't stop all outsourcing. ... You can't." He added that anyone who says he will stop outsourcing "would be pandering."
Kerry is right. I hope Edwards and other Democrats were listening.