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Background on Offshoring

It is important to distinguish between outsourcing (typically used to describe the generic contracting-out of government work) and offshoring (U.S. companies sending work overseas), and between outsourced government work being sent overseas and purely private sector work going offshore. Different policy considerations apply to these different circumstances.

The offshoring of government work is a government procurement policy issue. Countering such offshoring could require, for instance, legislation forbidding the use of tax dollars on contracts for services to be performed by workers outside of the United States.

Private sector offshoring is a different matter that must be addressed in the context of the terms under which certain kinds of private sector work can or cannot be moved offshore. Thus, legislation could establish large penalties against U.S. companies if they offshore work that must be performed by a licensed professional in the United States (doctors, engineers, accountants) to individuals in other countries who do not possess the required U.S. professional qualifications and licenses. Or, legislation could require that activities involving the handling of information that is protected under U.S. privacy laws (medical, banking, attorney-client privileged information e.g.) cannot be outsourced, or that if such work is outsourced, extremely high penalties could be applied to the outsourcing U.S. company if any privacy violations occur. Legislation also could forbid private sector offshoring of work that could threaten U.S. security or infrastructure, such as design work on the electric power grid or maintenance of domestic commercial aircraft.  Finally, numerous bills have been already introduced in the U.S. Congress to change provisions in the U.S. tax code that provide incentives for U.S.-controlled companies to send jobs overseas.

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