State Trying To Block Outsourcing?

August 6, 2004
Print
Text Size:
A A

LANSING — In an effort to hinder offshore outsourcing, state lawmakers are mulling a package of bills that would prohibit the award of state contracts to companies that send work overseas.

House Bills 5080 and 5081 would ban state agencies from investing in or purchasing goods or services from companies that outsource jobs or relocate to foreign countries.

Another legislative proposal, House Bill 4940, would require that contractors providing services for the state certify that the services covered under the contract will be performed in the United States by U.S. citizens, legal resident aliens and those with a valid visa.

In a similar vein, Gov. Jennifer Granholm issued a pair of executive orders in March that she said “will ensure that Michigan taxpayers are not subsidizing the export of jobs.”

Her executive orders give preference to Michigan-based companies in the state contract bidding process over firms that operate overseas. In addition, the orders require bidders to disclose whether they are engaged in exporting jobs, whether they’re using an offshore tax shelter and the location of their employees and operations.

The state awards some $8 billion in contracts to the private sector annually.

Richard Studley, senior vice president of government relations for the Michigan Chamber of Commerce, refers to the bills as “a bunch of election year silliness and political grandstanding.” The bills are now stuck in committee and the state chamber of commerce hopes they stay there.

“I think a lot of this debate is being driven by the fact that it’s an election year and some politicians are looking for campaign issues,” he said. “Our view is that first and foremost, public officials have a responsibility to make sure they are good stewards of the tax dollars that they’re sent, so we support open, competitive bidding.”

All things being equal, there’s nothing wrong with giving a preference to Michigan firms or American-based companies, “but the key part there is all things being equal,” Studley added.

As far as he’s concerned, whether it’s state, federal or local government, elected and appointed public officials have a responsibility to make sure that tax dollars are spent wisely and that they pay a fair price and get a good return on investment.

However well-intended, he argued that these types of job protection laws could easily result in higher cost for government and taxpayers in terms of additional paperwork, bureaucracy and higher wages for workers here, compared to lower cost labor overseas.

Studley pointed out that Michigan is a large industrial state, which means it’s an exporting state.

“Another potential problem with this type of legislation is that it could easily trigger retaliatory provisions from other states or foreign countries that could cost Michigan jobs.

“We want Michigan-based companies and American-based companies to be treated fairly, but at the same time we have to remember that Michigan is part of the national economy and our country is part of a global economy.”

Another thing proponents of the bills need to remember is that Michigan is “insourcing” a lot of jobs, as well, he said.

According to the Organization for International Investment, foreign companies with operations in the United States employ a record high 6.4 percent of American workers. 

OFII data reveals that U.S. subsidiaries employ 244,200 Michigan workers, and the state ranks eighth in the United States in the number of employees supported by U.S. subsidiaries of foreign companies.

“Until I see a study that says we’re actually going to save jobs as a result of this legislative action, then it’s primarily a symbolic gesture — then it’s a political move rather than a business move,” said Jeff Meyer, executive director of GrandValleyStateUniversity’s Van Andel Global Trade Center.

By eliminating the sources of outsourcing, will the state get rid of competition, thereby increasing the cost to the government and increasing the taxes citizens pay? Meyer asked.

“If we’re going one step up and three steps back, that’s obviously something that has to be looked at, too. There’s no doubt that at the end of the day it will cost you and I more.”

U.S.-based firms that rely on government contracting for 50 percent or more of their business could be significantly impacted and some could even be put out of business, he added. 

Meyers predicts that a more protectionist stance would have some real repercussions on the U.S. export market. Such legislative actions, he said, also could have unintended consequences on government contracts the United States fulfills for other countries. 

“There will be some sort of response; it’s hard to say what that will be,” he said.    

Editor's Picks

Comments powered by Disqus