Foreign outsourcing benefits U.S. economy

Politicians continue to target outsourcing as a threat to U.S. employment and prosperity, but studies show that turning to foreign suppliers for lower-cost goods and services benefits the U.S. economy in the short run as well as the long run, say researchers Daniel T. Griswold and Dale D. Buss.

For example:

The McKinsey Global Institute says outsourcing reduces costs for information technology (IT) and other services by as much as 60 percent, keeping U.S. companies competitive in global markets; in fact, McKinsey calculates that every $1.00 spent on foreign outsourcing creates $1.12 to $1.14 of additional economic activity in the United States.

The Institute for International Economics says global sourcing for information technology (IT) hardware cut the final costs to businesses and consumers by 10 to 30 percent and a cumulative $230 billion to U.S. gross domestic product (GDP).

Global Insights estimates the U.S. economy will be $124 billion larger in 2008 if outsourcing continues, compared to no outsourcing.

The changes brought about by off-shoring are just the most recent manifestation of a process that has always been an integral part of the U.S. market-based economy. If the United States, its companies and its workers are to remain leaders in the global economy, off-shoring must remain a tool available to its corporations, say Griswold and Buss.

Source: Daniel T. Griswold and Dale D. Buss, Outsourcing Benefits Michigan Economy and Taxpayers, Mackinac Centre for Public Policy, September 16, 2004.

For text http://www.mackinac.org/archives/2004/s2004-06.pdf

For McKinsey Global Institute studyhttp://www.mckinsey.com/knowledge/mgi/rp/offshoring/perspective/

For Institute for International Economics study http://www.iie.com/publications/pb/pb03-11.pdf

For Global Insighthttp://www.globalinsight.com/

For more on Benefits of Tradehttp://www.ncpa.org/iss/tra/

FMF Policy Bulletin/5 October 2004