More tweaks and twists on Outsourcing

I have often complained (confessed?) that I don't understand economics, especially the economics of outsourcing. There are certain fundamentals at play that I grasp (and everyone grasps), but the fine points are a bit nugatory.

And it's all in the fine points -- for instance, the question of whether the jobs that are sent abroad are really replaced with more rewarding, "creative" gigs here in the U.S. Is it really true that everybody could potentially be benefiting, as my Indo-Republican (leaning), Software-engineer wallah friends tend to claim? Another question is whether the profit sustained by U.S. firms that outsource is greater than the net flow of capital out of the country. And a third question: are the recent stats on outsourcing taking into account the distinction between intra-firm 'outsourcing' and external contract-work?

And there are a dozen other problems and questions that have been circulating in the real media as well as the blog world this fall. Not many have been answered very comprehensively, it seems to me.

Today, I came across two further tweaks and twists on the story. The first, from an essay published in an IMF journal called Finance & Development, (and summarized on Rediff) suggests that the U.S. is actually very much in the black when it comes to "business services imports" (a codeword, I gather, for various kinds of corporate and high-tech outsourcing). In other words, for at least some kinds of outsource work, the U.S. is much more a destination than it is a sponsor.

US business service imports as a share of GDP have almost doubled in each of the past several decades, from 0.1 per cent in 1983 to 0.2 per cent in 1993 and 0.4 per cent in 2003.

[UPDATE: See Drezner's reading of this. He acks. me]

The second surprise is that for all the ballyhoo (or should I say "bollyhoo"?) about India's job "imports," it is, according to the numbers given to the International Labor Organization (ILO) very much a net-outsourcer to the U.S., Germany, Japan, and the U.K.! To the tune of $11 billion!

These numbers might be suspect. The $11 billion number might look a little different if we were to see some trend-lines, for instance. Did the ILO compile the same statistic 10 years ago? Anyone know how to find out?

Still, if these reports are true, then virtually all of the conventional debates about white-collar outsourcing as a) a looming danger to the U.S. economy, and b) an immediate benefit to the Indian economy, are completely off-track.

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