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Home > Business > Business Headline > Report

Jobloss reports exaggerated: US trade body

R Raghavendra in Bangalore | April 12, 2004 10:08 IST

The American Electronics Association, US' largest trade association in the technology sector, has said that the number of people being hurt by offshore outsourcing is 'exaggerated.'

The AEA report outlines the fact that offshoring is a global trend and not the main reason for job losses. It said most of the jobs lost over the last three years is attributable to productivity increases and a weak economy.

AEA says the problem is that the US lags behind many other countries in engineering degrees granted. It said the US share of engineering degrees granted worldwide will continue to decline. Engineering degrees conferred in the US dropped from a high of 76,200 in 1985 to 60,600 in 2002, declining 20 per cent. Almost 55 per cent of the math and engineering PhDs were awarded to foreign nationals in 2002.

Quoting the latest data from the US National Science Foundation, the AEA has said, "US graduates 6.6 per cent of the worldwide engineering bachelor degrees. China and India are rapidly expanding these programmes and US engineering degrees are not increasing. India's premier technology university, the Indian Institute of Technology, is widely considered to be one of the best and most selective technology universities of the world, accepting only 3500 of 178,000 applicants. Engineering degrees awarded in China and the European Union grew by 37 per cent and 22 per cent between 1995 and 1999, respectively, while in the US, they dropped by 4 per cent."

Detailing the fact that offshoring is a global trend, the AEA has said that India itself has taken to offshoring.

"Tata Consultancy Services, one of the India's four largest software exporters, has begun to offshore its staff. By 2005, TCS plans to have 3000 software engineers in China, or 15 per cent of their global workforce. The Giga Information Group reports that Indian vendors are developing facilities in other low-cost countries, such as China and Eastern Europe."

The report adds, "McKinsey & Co states that the net value of US offshoring is greater than if jobs are kept in the US, thus increasing the international competitiveness of US companies. McKinsey estimates that every dollar spent on outsourcing creates $1.45 to $1.47 in the global economy, with $1.12 and $1.14 returning to the US economy."

The report highlights the fact that US is the preferred destination for in-sourcing_the creation of jobs in the US by foreign companies.

"US direct investment abroad in high-tech manufacturing totaled $69 billion in 2002, while foreign direct investment in the US for the same sector was $54 billion. Contrary to conventional wisdom, foreign direct investment in the US for all manufacturing totalled $471 billion in 2002 compared with $390 billion of US direct investment abroad."

AEA feels that if US federal, state or local governments promulgate protectionist measures to deal with offshore outsourcing or other issues, no industry will be more vulnerable to the likely retaliation than high-tech.

"Foreign retaliation puts at risk $171 billion in US high tech exports and large surpluses of high-tech services sold overseas. American companies will continue to innovate, create jobs and create wealth. But changes in the rest of the world in terms of education, economic policies, infrastructure, demographics and the use and development of technologies, have dramatically changed the economic world in which US companies must operate. Offshore outsourcing is just one change in the competitive equation. But we ignore these changes at our competitive peril."

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