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Federal Procurement

Congressional Proposals

In terms of specific proposals at the federal level, there has been much discussion, but so far only three legislative proposals have been introduced that would directly restrict overseas outsourcing by the federal government:

  • A weakened version of an anti-offshoring amendment to the Omnibus Appropriations bill of January 2004 forbids private contractors that win contracts through the A-76 bidding process from sending the work overseas, but only a very small proportion of contracts are awarded through the A-76 process. This prohibition will expire at the end of the 2004 fiscal year.
  • A bill introduced by U.S. Sen. Dodd (D-CT) passed in the Senate by a 70-26 margin as a (modified) amendment to the "Jumpstart Our Business Strength" (JOBS) Act  on March 4, 2004 in extremely watered down form. This would have created a stronger prohibition against using federal tax dollars to subsidize pay for offshoring of U.S. jobs. However, as passed, it was significantly weakened by an amendment by Sens. McConnell (R-KY) and Frist (R-TN) that makes all provisions dependent on a certification by the Secretary of Commerce that they not "result in the loss of more jobs than [they] would protect and will not cause harm to the U.S. economy." This amendment was agreed to by unanimous consent (no vote taken).
  • The original Dodd amendment was picked up by Rep. DeLauro (D-CT)  in the House. Rep. DeLauro offered it in the Budget Committee as a "sense of the House" amendment to the FY2005 federal budget resolution, where it was defeated along party lines by a 20-16 vote on March 17, 2004.

If you support these proposals, please let your Congressperson know.

Further Reading:

Policy Tools and Challenges

Stopping the offshoring of government work requires changes to both the technical specifications (to be clear the service must be provided by a worker operating in the United States) and the supplier qualification language (to require a company to show that it can perform the government contract with U.S.-domiciled workers). Further, Congress could create a strong incentive against all offshoring by requiring that to be qualified for federal bids a company cannot conduct any offshoring – including in its nongovernmental work.

 WTO Agreement on Government Procurement (AGP)

The Office of the U.S. Trade Representative (USTR) and assorted business associations that slipped the AGP rules into the WTO are now using them to undercut anti-offshoring proposals. The AGP was designed to handcuff governments from adopting most policies intended to ensure that government spending policies reflect taxpayers’ values or interests, including the use of preferences for domestic goods, services or workers to ensure that tax dollars are recycled back into the local economy.

In 1993, the United States pushed and then signed this plurilateral WTO procurement agreement that only 27 other WTO countries (28 including the U.S) of the current 148 WTO member nations signed. It requires ‘national treatment’ for all procurement of signed-on governments regarding goods and services. This means that a government that signed this WTO agreement must treat foreign suppliers from the other 27 countries the same as their domestic suppliers. The agreement also forbids non-performance-related conditions in product or service technical qualifications and supplier qualifications. Thus, countries that signed the agreement are forbidden from setting procurement rules that give preferences or set conditions on anything except the ability to perform the contract.

The Central America Free Trade Agreement (CAFTA) would extend these limits to six more countries. Indeed, if the full list of countries with which the United States seeks new bilateral trade agreements were to be realized, 38 additional countries could attack U.S. anti-offshoring policies. Avoiding such future constraints is vital if Congress is to have effective means to counter the offshoring of government jobs.

Further reading:

U.S. work has been offshored to several countries - China, Ireland, Russia and Israel among them. Interestingly, India, the hot offshoring destination for technology, is not a signatory to the AGP. The Bush administration supports offshoring (see comments by Mankiw and Snow), and has encouraged India to sign the AGP. Unless India signs the AGP, neither it nor other nonsignatories – including China and Russia, can attack U.S. anti-offshoring legislation at the WTO.

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