Observing that protectionist measures will not help in retaining American jobs, the Governor of the US State of Pennsylvania Edward G Rendell has called for using the "power of incentives" to stop companies from outsourcing to countries like India.

Rendell on Thursday endorsed the legislation -- planned by state lawmakers Michael Veon and Michael P McGeeham (both Democrats) -- that aims at reducing overseas outsourcing of the American jobs by rewarding contractors who agree to use domestic workers.

"The legislation will use the power of the state as buyer of services to encourage companies to keep jobs in the United States," the governor said.

"Some 690,000 American jobs were lost to overseas outsourcing in the years 2001-2003, and estimates suggest that 3.3 million service jobs will have gone overseas by 2015. I firmly believe that we can and should slow that trend where possible," he said.

The state awards more than $1 billion worth of service contracts annually, the governor said. While many of these contracts focus on services that cannot be performed offshore, they often include call centres or information technology services that are increasingly outsourced overseas.

Under the proposal announced on Thursday, the state service contract specifications will include a "social responsibility" preference.

Companies responding to requests for proposals on state service contracts will earn extra consideration in the evaluation of their proposals if they indicate that they will use domestic workers to the fullest extent possible in fulfilling the contract.

Each biding vendor will also have to certify whether or not work performed for the state will result in moving domestic jobs to an overseas location.

Governor Rendell said he does not think the federal and state government contracts should prohibit offshore hiring.

"Protectionist measures will cause companies to hide their real practices," the governor said. "We have a global economy, and we need to use market forces, not protectionism, to ensure that workers in our country win."

Addressing the press conference with Veon and McGeehan, Governor Rendell said more and more companies are sending good paying jobs to places like India.

"If you call with a question about your home computer, the man or woman answering the phone is most likely there. If you bring your taxes to a tax-prep office, there is a growing likelihood that the actual work is performed overseas. We cannot wave a magic wand and make this problem go away.

"We should not demagogue this issue and blame other countries for taking American jobs. But we should not sit by passively either, especially when as customers we can influence the decision on where our money goes. We are proposing a credible, practical approach to ensure that the taxpayers' money is not only well spent, but is spent with a conscience," he added.

The legislation, he said, uses the power of incentives so that "we affect business decision-making."