Toward a new foreign policy.

Key Recommendations

* The U.S. government should ensure that tax, government procurement and subsidy policies are instruments for supporting good U.S. jobs.

* Washington should promote internationally recognized labor rights and an end to trade and finance policies that contribute to the destruction of small-scale agriculture and the privatization of social services.

* The U.S. should work with other rich nations to advance more effective debt reduction and development aid mechanisms.

The overall goal of U.S. policy on outsourcing should be to attack the factors that make workers--in the U.S. as well as around the world--vulnerable to exploitation by increasingly mobile and unregulated global corporations. The approach needs to recognize that raising standards overseas is vital to retaining stable and substantial jobs at home. This requires a multifaceted response encompassing changes in domestic tax, procurement and labor laws as well as in multilateral trade, finance and aid policies.

On the domestic side, a first step should be to reform tax and procurement policies at all levels of government to ensure that they support good jobs in the United States. Additional subsidies that enhance the incentives for corporations to shift jobs overseas should also be eliminated. These include risk insurance and loan guarantees provided by the Overseas Private Investment Corporation as well as technical assistance and other supports offered by the U.S. Trade and Development Agency. Moreover, the U.S. government should ensure that U.S. authorities, as well as their counterparts around the world, have the right to use tax and procurement policies as instruments to support social goals without being undermined by international trade agreements.

The domestic policy response should also involve labor law reforms that reduce current obstacles to union organizing and that beef up rules related to laying off workers. Most European countries require that corporations guarantee higher severance pay based on years of service, which substantially raises the cost of moving jobs. Many European countries also oblige companies that are planning to close an operation to consult with unions and sometimes to negotiate over the decision. By contrast, under U.S. law, unions may only bargain over the effects of a closure. Thus, although European countries also experience outsourcing-related job loss, the practice is not as advanced as in the United States.

However, domestic measures, while significant, do not address the biggest incentive for outsourcing--extreme wage gaps. Tackling this problem will require a long-term commitment to supporting sustainable economic activity in poor countries and should focus on the factors that make workers around the world vulnerable to exploitation by global companies.

One of these factors is lax enforcement of internationally recognized labor rights, which artificially depresses wages. U.S. policymakers must learn from the failure of NAFTA's weak labor rights mechanism and should develop a better model. The Hemispheric Social Alliance has proposed involving the International Labor Organization in monitoring compliance and investigating complaints related to rights violations. If necessary, assistance would be provided to help countries achieve compliance. Only if this approach was unsuccessful would sanctions be applied, and if the perpetrator was a specific company, the punishments would be targeted at the company rather than at the host government.

Any labor rights initiative, however, should be integrated within a broader strategy toward poorer nations. Other factors that make workers vulnerable are high unemployment and poverty. Although national governments are not without responsibility for these problems, international financial institutions and trade agreements have played an exacerbating role. For example, the World Bank, the International Monetary Fund and the World Trade Organization all threaten the livelihoods of tens of millions of farmers by pressuring poor-country governments to eliminate tariffs and agricultural subsidies. Likewise, privatization supported by these international financial institutions has often resulted in mass layoffs and weakened social services. These multilateral agencies should instead join governments in promoting "global green deal" policies that stimulate stable and substantial employment while protecting the environment.

Regarding trade, Washington should withdraw its support for rules--such as in Chapter 11 of NAFTA--that grant excessive protection to U.S. investors against public interest laws and other host government actions that diminish profits. Such trade rules undermine democracy and encourage U.S. firms to shift jobs overseas.

To enhance this new and broader strategy toward poorer nations, the U.S. government should advocate for stronger international mechanisms to transfer resources from richer to poorer countries. Where appropriate, this would include debt reduction or cancellation. Washington could also promote the adoption of international taxes on both foreign exchange transactions and arms sales to generate revenues for development purposes. The U.S. must also revamp its development aid policies to emphasize anti-poverty measures, healthy communities and a clean environment rather than handouts to U.S. corporations like Halliburton and Bechtel.

In short, a comprehensive response to corporate outsourcing requires a sea change in the outlook of both the U.S. public and its politicians toward America's role in the world. Just as Americans are less secure when much of the world is plagued by extreme poverty, inequality and instability, worker exploitation overseas translates into exploited workers and less secure jobs at home. The electoral debate over outsourcing offers an opportunity to create a new policy approach that combines solidarity with self-interest in a whole-scale effort to benefit the entire world.

Sarah Anderson is the Director of in the Global Economy Program at the Institute for Policy Studies (IPS) and John Cavanagh is the Director of IPS (www.ips-dc.org).