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April 19, 2004

UCSC hosts workshop on global outsourcing

Long-term U.S. competitiveness at stake, say economists

By Jennifer McNulty

Headlines that decry the outsourcing of U.S. jobs are missing the point, according to economists who say the United States faces a far greater long-term economic threat if it doesn’t keep pace in innovation and knowledge work.

"The Bush-Kerry debate is more about the shortrun adjustment costs of outsourcing, but we need to go to the deeper issues that are going to matter 10 years from now.”

--Nirvikar Singh, UCSC professor of economics

The impacts of global sourcing on regions of innovation will be the focus of a daylong public workshop on Friday, April 30, at the UCSC-Silicon Valley Regional Center at Moffett Field. The workshop will take place from 9 a.m. to 5 p.m. in the Moffett Training and Conference Center at NASA Ames Research Park.

Featured participant Catherine Mann of the Institute for International Economics in Washington, D.C., will discuss the economic gains and policy challenges of the movement of information technology jobs offshore, while the impacts of global sourcing on Silicon Valley will be the focus of a talk by Cynthia Kroll and Ashok Deo Bardhan of the Fisher Center at UC Berkeley (see full agenda online at http://sccie.ucsc.edu/git2).

“Outsourcing, like other forms of international trade, creates winners and losers, but the policy challenge is how to deal with the losers,” said workshop co-organizer Nirvikar Singh, professor of economics at UCSC. “One way is to ban outsourcing, but that is costly and detrimental in the long run because it keeps the economy from changing and maintaining competitiveness.”

The deeper issue, which will be the focus of the workshop, is the long-term threat to U.S. competitiveness posed by growing centers of innovation in places such as India and China, said Singh.

“It’s natural for ‘back office’ jobs to move overseas, just as factory jobs did before them, but the growth of research and development in emerging global centers like India and China has far greater implications for U.S. competitiveness than the movement of these jobs,” said Singh. “What if U.S. companies, by pursuing shortrun cost advantages, are creating future competitors in knowledge and innovation?”

For decades, the United States has relied on immigrants from Europe and Asia to bolster its leadership in innovation. “About half of all Ph.D.s earned in science in this country go to foreign-born students,” said Singh. “These people who innovate are the engines of the U.S. economy, so the real question is whether the globalization of knowledge work poses a challenge to U.S. competitiveness.”

“The United States has been the global leader in patenting, but what if it becomes China? What if it becomes India?” asks Singh. “We’ve seen earlier waves of innovation emerge in Europe and Japan, but it was different when there were only two or three global centers for innovation. What if there are a dozen?”

Ultimately, global economic growth is good, but it requires adaptation, just as the U.S. automobile industry had to adapt to competition from Japanese manufacturers, said Singh, noting that policy makers need to weigh the implications of increasing support to research and development, education, and other areas.

“The Bush-Kerry debate is more about the shortrun adjustment costs of outsourcing, but we need to go to the deeper issues that are going to matter 10 years from now,” said Singh. “If the U.S. maintains its edge in innovation and knowledge creation, we have nothing to worry about.”

The workshop is being hosted by the Santa Cruz Center for International Economics, the Center for Global, International and Regional Studies, and the Baskin School of Engineering.

To register to attend the workshop “Global Sourcing and Regions of Innovation,” e-mail sccie@ucsc.edu by April 21. Lunch will be provided. Please bring photo identification.

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