The ban was crafted by Senators George Voinovich, R-Ohio, and Craig Thomas, R-Wyo. It was contained in a catchall spending bill for the current fiscal year that President Bush signed into law last week.
Voinovichs spokeswoman, Marcie Ridgway, said, The senators reasoning is very simple: Jobs that were previously done by American citizens for American taxpayers shouldnt be shipped overseas to be done by people in other countries.
That echoes arguments put forward in several state legislatures that are considering similar proposals.
However, Bruce Josten, executive vice president of the US Chamber of Commerce, said, The ban is counter to the general procurement agreement under the World Trade Organisation.
That agreement provides for open trade in government purchases of goods and services. It has been signed by 46 other nations, the US government and at least 37 US states that were eager for their home-state firms to do business with foreign governments, Josten said.
This (ban) could potentially open the door to retaliatory action against US, and hinder job growth and economic growth, Josten said at the chambers Washington headquarters.
Its a short-term, feel-good opportunity for politicians, but its going to kill the US IT industrys chances of creating millions of new jobs for the American work force, said Harris Miller, president of the Information Technology Association of America.
Governments around the world buy services and products from US companies all the time, Miller, said. Based on all the phone calls and e-mail Ive gotten, (the ban) has kicked up a firestorm around the world.
Nasscom, which includes firms that run call centers or back-office operations for hundreds of American firms, said the ban is not in keeping with the increasing globalization of trade, which benefits all countries.
Nasscom estimated that the US government now accounts for 2 per cent of the software and services exported by Indias IT firms. China, Indonesia and Mexico are among other nations with firms hoping to get more business from the US government or its suppliers.
Much of that trade isnt directly threatened, and might even expand. The new measure, which expires September 30, only bars US firms that outbid federal employees for work being done in the United States from exporting it overseas. It specifically allows federal purchases of foreign-supplied information technology, by exempting IT products from the protectionist Buy American Act.
However, Nasscom said the ban on job-shifting threatens to weaken a healthy global trend.
In the context of budget deficits, governments around the world are leveraging offshore resources to lower costs of government services and improve quality of service delivered to the citizens, thereby making governance more effective and productive, it said.
The implications of the ban are more insidious than its immediate effects, according to Stan Soloway, president of the Public Services Council, a Virginia-based trade association for more than 150 firms like Acxiom, Northrop Grumman Corp and Boeing Co, which sell professional or technical services to the federal government.
Theres very little, if any, offshore outsourcing of federal jobs going on right now, Soloway said. What bothers us is that there wasnt any analysis of the long-term ramifications before Congress did this.
There is considerable confusion about how many jobs are affected by the ban. Estimates range from fewer than 30,000 to as many as 40,000 of the 1.8 million civilians who work for the federal government.
Federal agencies have identified about 400,000 federal jobs that could conceivably be put up for competition between in-house groups of employees and outside vendors, according to a report issued in October by the Office of Management and Budget.
The OMB said plans are already under way to put up 102,000 of the jobs up for competition.
In the past, nearly half the jobs put up for competitions ended up being privatised. So as many as 50,000 federal jobs could be privatised in the current round.
However, most of the work, such as laundry or custodial services, or fee collection at national parks, couldnt be done outside the United States.
There is also some question whether the new ban affects workers outside the Transportation and Treasury departments and smaller agencies also funded under a spending bill to which the measure was originally attached. Business lobbyists said that as recently as December they received assurances that it would not.
However, the OMB recently decided that the Voinovich-Thomas ban applies to all federal departments and agencies, said an administration official, who spoke only on the condition that his name not be mentioned. At the US chamber, Josten said he had heard similar reports.
ANDREW MOLLISON / NY