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Off-shoring and ebXML: a policy to save American IT jobs
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For two decades this country has watched American companies send many manufacturing jobs overseas and that practice has begun hitting knowledge workers, especially in the information technology (IT) industry. One solution is to establish a national electronic business infrastructure, with ebXML at its core.
The off-shoring issue – the practice of cutting of American payrolls and sending the jobs overseas where costs are lower – has exploded into the current American presidential debate. For two decades this country has watched American companies send many manufacturing jobs overseas and that practice has begun hitting knowledge workers, especially in the information technology (IT) industry. One solution to help reverse the practice is to establish a national electronic business infrastructure, with ebXML at its core. In Europe and Asia, other countries notably Australia, Korea, and Hong Kong have embarked on a similar path, and the U.S. cannot afford to be left behind. As a public policy, it makes sense, and would cost the taxpayers next to nothing.
Whatever the merits of off-shoring (not 'out-sourcing', as many clueless Washington pundits still call it), the practice is beginning to take its toll on the IT industry. A New York Times story on 15 February 2004 tells about former American IT workers whose jobs were shifted to India and China. The story also cites a 2002 Forrester Research study that forecasts the loss of some 3.3 million jobs to off-shoring by 2015, with 500,000 of those in IT.
Be careful what you ask for
Proponents of off-shoring warn that taking legal steps to end this practice could hurt our economy much more than it helps. The U.S. has a healthy trade surplus in services, such as banking, engineering, and higher education. The proponents of off-shoring warn that attempts to wall-off American jobs from overseas competition will only raise prices and invite retaliation in those sectors where America has an advantage. As the 2004 Economic Report of the President noted (pp. 24-25) ...
The benefits from new forms of trade, such as in services, are no different from the benefits from traditional trade in goods. Outsourcing of professional services is a prominent example of a new type of trade. The gains from trade that take place over the Internet or telephone lines are no different than the gains from trade in physical goods transported by ship or plane. When a good or service is produced at lower cost in another country, it makes sense to import it rather than to produce it domestically. This allows the United States to devote its resources to more productive purposes.
Then should government just sit by and hope for the best? Government has for decades defined full employment as a top public policy goal, and for good reason. Jobs do more for people than provide an income. For most workers, their jobs also provide health benefits and retirement plans, with obvious positive impacts for society at large. Jobs also define who we are. Occupations provide identities and aspirations. When jobs are taken involuntarily, even under favorable financial conditions such as early retirement, many people feel demeaned, cut-off, and adrift. Places of employment provide much of the social network for individuals, families, and communities. When factories or offices close, communities can be devastated.
While recognizing the compelling need for government to take action, the question is what action? Congress moves carefully when dealing with business, for any number of reasons, but Congress often wants to make sure any actions taken really work and do not inadvertently hurt the companies they are trying to help. One of the traditional methods in these circumstances is to build incentives into the tax code that encourage businesses investment. Taxes can be a blunt instrument, however, and tinkering with the tax code can result in unintended and unpleasant consequences down the road.
A successful intervention: Y2K
In recent years, government has shown it can create policies that help business do business, especially when confronted with a compelling policy need. A good example occurred some five years ago with Y2K. Companies faced threats of litigation from antitrust and liability suits if they cooperated with other companies through their supply chains or industry groups to develop best practices for Y2K compliance. The result was Year 2000 Information and Readiness Disclosure Act, (S.2392) that relieved companies of Y2K liability for voluntarily sharing information, strategies, and solutions on Y2K. This law shows that Government can take action to help businesses solve a critical problem for the nation, but not mandate the solutions.
In the case of off-shoring, the U.S. has a clear policy interest in protecting jobs, but the challenge is to do it in a positive way that encourages the desired outcome without asking for retaliation from trading partners. One way of meeting the challenge is to be help make American companies more competitive in world markets and more productive overall. E-business can help meet these goals, but the U.S. cannot let its companies fall further behind European and Asian companies that are adopting ebXML on a national and even cross-national scale.
In ebXML Forum, we have documented how the EU, Australia, Hong Kong, Japan, and Korea are encouraging companies and industries to adopt ebXML, either directly or through industry organizations. With ebXML soon to become an international standard through ISO, the U.S. faces further isolation, putting the U.S. at an even greater disadvantage than before.
Five-step program
Here are five actions with ebXML that the U.S. can take to help boost IT jobs in this country. With the U.S. encouraging ebXML, companies can retool their information systems for the 21st century knowledge-based economy, and better compete in the global marketplace. And at minimal (if any) cost to the taxpayer.
-- Make ebXML the standard for e-business transactions with federal agencies.
This step would bring the U.S. up to the same level as the European Union EU, which has recommended ebXML as the standard for electronic public administration. Already Centers for Disease Control and Prevention and Department of Defense Logistics Agency have adopted ebXML.
-- Recommend ebXML as the inter-enterprise e-business standard for the nation
Using transactions with federal agencies as a model, the government can encourage businesses to invest in new or upgraded systems that support ebXML. Companies would not be required to follow ebXML or even to upgrade their systems. But like electronic filing of tax returns, the government would encourage businesses to use ebXML as a way to improve their productivity and become more competitive in the world economy. Australia has taken this approach as part of its national electronic infrastructure.
-- Encourage industry organizations to support ebXML and adapt it to their business requirements
As the automotive, travel, paper, and electric power industries have done, industry groups can build their e-business guidelines around ebXML. Industry organizations will want to specify more than ebXML and can add their own vocabularies, identify best practices, and specify extra security requirements as needed. The groups can also adopt related specifications that meet their business requirements, such as Universal Business Language (UBL), Web services for internal integration, and single sign-on guidelines like the Liberty Alliance specifications. Industry groups would be required to make their specifications and guidelines available royalty-free to anyone (ideally through an ebXML registry), so they do not limit their availability or impose future intellectual property claims on the users.
-- Establish NIST as the lead agency that would create a registry of American vendors and organizations that support ebXML, and use the wide network of American educational institutions to help gain acceptance by businesses.
National Institute of Standards and Technology (NIST) would become the central clearinghouse on ebXML offering a registry of American vendors with products and services that support ebXML, as well as industry organizations and standards groups with the specifications, sample transactions, best practices, training courses, or guidelines to help businesses get started. At Hong Kong University, CECID has become a center for research and development, training, and pilot tests on ebXML. American educational institutions, like the XML/Web services program at City University of New York, can provide the same kind of services. American land-grant colleges have a tradition going back to the 19th century of disseminating agricultural knowledge among farmers. American colleges and universities can fill this same role with e-business.
-- Relieve supply-chain partners adopting ebXML of antitrust or liability litigation
Companies and industries need reassurance that their efforts to adopt ebXML will not make them more susceptible to antitrust or liability litigation. Five years ago, a similar step helped companies and industries meet the challenge of Y2K.
This series of actions would give a significant boost to the American IT industry. It would remove the uncertainty over direction of e-business standards, and thus encourage investment in new business systems. By developing registries of U.S.-based vendors and encouraging the involvement of American industry organizations, this program would help connect end-user businesses with American IT vendors, creating more IT jobs in this country. The program would NOT prohibit or inhibit vendors from outside the United States from competing for American IT business, but they would have to use mechanisms other than U.S. government facilities for making their case.
One can expect opposition to a program of this kind, from free-market purists who do not want government involved in any kind of business activity, as well as companies who have chosen not be part of ebXML, notably Microsoft. The non-ebXML world has had three years to come up with an alternative, and they are still far from finished. As Joseph Chiusano pointed out at XML 2003, at this stage only the core Web services specifications and a few security specifications are completed. Most of the other Web services specifications are still in committee discussions. Except for the few completed core and security specifications, none are ready for day-to-day adoption, and only the core standards have been tested for interoperability by WS-I.
The recent news of a Microsoft patent on XML script automation raises a warning on whether the U.S. (or any country for that matter) can leave matters involving critical industries completely to the private sector. Microsoft can't be faulted for doing what's best for Microsoft, but can we trust Microsoft to look after the future of American workers? Also, without a guarantee of royalty-free availability, adoption of company-owned specifications invite hidden user costs later on.
These steps will not, by any means, solve the whole off-shoring problem. But it can start giving a boost to the industry that helped give the U.S. much of its prosperity in the 1990s. And it would cost the U.S. Treasury a whole lot less than another tax cut.
Comments, reactions, alternative ideas? Send them to the ebXML Forum editor.
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