Outsourcers in Chief?

There’s something about hot summers in Washington, D.C. that raises political temperatures to their boiling points, especially when certain subjects are mentioned. Like outsourcing. And if you think the rhetoric on outsourcing the 2012 presidential campaign trail is already overheated, there are some previously unreported facts to report that, because they are awkward politically, won’t necessarily lower temperatures before the Nov. 6 election. Not at Romney campaign headquarters. Not in the Obama White House. Definitely not in the Washington Post newsroom and the Washington Post Co.’s corporate suites. Not even at the State Department or certain unnamed defense and intelligence agencies which all benefit, one way or the other, from outsourcing back-office business processing operations. While the diplomats and spooks have merely been spending tax dollars wisely, their efforts are not likely to be much appreciated by some of the more insular-minded denizens of Capitol Hill.

Sorting out the unnoticed facts in the current outsourcing controversy helps illuminate the fundamental economic facts of global competition that drive outsourcing —economic realities that have been almost totally obscured in the the current hot exchange of negative television commercials between President Obama and his Republican challenger. The current heated rhetoric has been sparked by a recent investigative report in the Washington Post.

“Mitt Romney’s financial company, Bain Capital, invested in a series of firms that specialized in relocating jobs done by American workers to new facilities in low-wage countries like China and India,” reported Tom Hamburger on June 21. Hamburger’s essential facts were pinned to public-record filings pertaining to several Bain investments, when Romney was at the helm, in companies that developed successful overseas call centers. Romney howled. But he is the one who set himself for such criticism. Given his background in international business, the Republican must be presumed to understand that outsourcing helps American firms’ competitiveness — and that at Bain, he did nothing to be ashamed of. But rather than offer thoughtful explanations that would appeal to the better nature of the American public, Romney has been talking down to them. He’s been running as something of a Buy American candidate, attempting to out-flank Obama’s economic nationalist appeals by railing against Chinese and other foreigners who “kill” American jobs. One thing about ordinary Americans: they can always sense when they are being talked down to. The Post’s piece quickly resonated because it exposed Romney’s insincere-sounding double-talk.

Obama, who really does appear to believe in economic nationalism, is determined never to be out-flanked when it comes to the Buy American business. The president quickly launched a still-continuing flurry of negative television spots in key electoral battleground states like Virginia. The Obama commercials — touting the Washington Post’s report, while stretching Pinocchio-like beyond the facts that the newspaper had reported — essentially say that Romney wants to be president so he can ship as many American jobs to Asia as he can. Fearing that too many American voters are gullible enough to swallow such strained logic, Romney has shot back with his own negative commercials calling Obama’s charges “dishonest,” and typical of a president who “doesn’t tell the truth.” Lost in all the hot air: any hint from either candidate that outsourcing may be something other than scandalous — and that there are overall benefits from outsourcing to American jobs.

Just look at new fact number one, which begins with the newspaper that has sparked the current controversy. The Washington Post itself outsources its subscription services to a call center in the Philippines. So do other respected major news organizations — the Financial Times and Thomson-Reuters stand out — which understand how such outsourcing of lower-end tasks helps sustain their bottom lines (and the jobs of U.S.-based reporters, even those who go around investigating call centers in aspiring Southeast Asian tigers like the Philippines as if they were unsavory massage parlours).

A second set of facts begins with President Obama, the nation’s number one critic of outsourcing. Flying in the face of his campaign rhetoric, Obama presides over a federal bureaucracy that itself benefits from billions of dollars in outsourced contracts to process back-office services. Obama probably has never thought of it this way, but there are U.S. national security benefits, not to mention savings of tax dollars, that result from hundreds of millions of dollars in outsourced federal contracts just involving national-security agencies.These contracts are very important to U.S. agencies whose operations simply can’t be cut off from the rest of the world they deal with, whether the politicians they report to understand that or not. Here’s the story:

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Asia’s Next Tiger

President Aquino’s anti-corruption program is just what the Philippines economy needs.

Once considered the most promising economy in Asia after Japan, the Philippines has fallen far behind Southeast Asia’s nimble, export-led economies. But things are finally looking up. Tired of being scorned as “the sick man of Asia,” President Benigno Aquino III asserts: The Philippines is now “open for real business.”

Judging by some very visible changes, Aquino, who has been in office for two years, isn’t engaging in wishful thinking. Manila’s luxury hotels are crawling with Asian, American, and European investors in search of opportunity. And the city’s skyline, a symbol of its past as a home to slow-moving domestic oligarchs, is now dotted with cranes. Foreign direct investment is on track to triple this year, while GDP growth is expected to rise from 3.7 percent last year to a respectable 5 percent in 2012. Karen Ward, a London-based analyst for HSBC bank, speculates that the Philippines, now the world’s 43rd largest economy, could be the 16th largest by 2050.

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The TPP Negotiations: Is the U.S. Poised to Fail?

Trade aficionados may be treated to some positive spin concerning the Trans-Pacific Partnership negotiations on the sidelines of the forthcoming G-20 Summit, which will be held in Los Cabos, Mexico on June 18-19. President Barack Obama and Mexico’s president, Felipe Calderon, seem to be ready to announce that Mexico will join the TPP talks. There is a possibility — not considered a probability, as this article went to press — that Canada and Japan would also be invited to join the negotiations. More likely, Obama will say that while both Tokyo and Ottawa are not quite ready to participate, they are making progress and he looks forward to welcoming them into the TPP talks as soon as they are ready, hopefully by the end of this year. The White House spinmeisters will portray whatever happens in Los Cabos as another illustration that the US continues to exercise leadership aimed at expanding trade flows in the fastest-growing part of the world. It is safe to predict that there will be repeated references to the exciting TPP success story from candidate Obama until the Nov. 6 presidential election.

[As this article went to press, all that seemed clear was that the White House was positioned to welcome the Mexicans into the TPP next week, or at least before Mexico’s presidential elections on July 1. Much thought in the administration seemed to be focused on how to explain the inevitable awkward questions as to why Canada, like Mexico a Nafta member, would be excluded. White House economic adviser Michael Froman was believed prepared to play a blame game, portraying the Canadians (and Japanese) as lacking the political will to negotiate a fast-moving, high-standard 21st century TPP deal. At a recent appearance before an audience of Washington insiders convened by the influential Center for Strategic and International Studies, Froman spoke of trade “tensions” with both Ottawa and Tokyo, but (unconvincingly) denied that any decision to keep them out had been made. A spokeswoman for U.S. Trade Representative Ron Kirk declined to comment. There there also seemed to be quite a bit of intense behind-the-scenes high-level jockeying going on this week, raising the possibility that Prime Minister Stephen Harper and Japanese PM Yoshihiko Noda were perhaps privately-but-firmly going to take Obama to the mat over their TPP accession — hoping to avoid their humiliation in Los Cabos. Of course, both the Canadians and Japanese have been widely criticized for foot-dragging on trade liberalization in recent years. Still, the buzz around town has focused on the question as to whether the Obama White House really has earned the right to decide whether other countries can be trusted to deliver on enhanced market-opening moves. Especially in the TPP context, a perceived American negotiating intransigence is widely believed to explain why the TPP negotiations are not on track to be concluded this year, as previously promised.]

Regardless of how the issue of possible TPP participation involving the Mexicans, Canadians and Japanese plays out at the G-20 Summit, or perhaps soon thereafter, there are some fundamental concerns about where the TPP process is heading that haven’t received the public attention they seem to deserve. Serious diplomatic observers say privately that while the U.S. is moving to strengthen its military and security ties throughout Asia, they worry that America’s economic influence in the region could be on the decline.

Let’s take a closer look at why the worries about the U.S. approach to the TPP is raising such geo-political concerns.

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