Do techies win with free trade?

A report from labor groups yesterday rekindles a debate about the effect of free trade policies on U.S. techies.

The study, from the Washington Alliance of Technology Workers (WashTech), the Society of Professional Engineering Employees in Aerospace and the American Ingenuity Alliance, argues that the proposed Central America Free Trade Agreement is bad news for American technology professionals.

According to the report, CAFTA would require the Dominican Republic and five Central American nations to become members of the World Trade Organization's Information Technology Agreement. "This could actually disadvantage U.S. information technology producers by granting new, tariff-free access to all of the members of the WTO's ITA, not just to U.S. IT exports to Central America," the report states. "For U.S. high-tech workers, this would sustain the pattern of job losses already experienced due to offshoring of U.S. high-tech jobs."

Tech industry groups, for their part, defend CAFTA. "[T]he U.S. faces market access barriers in Central America," said Jesse Feder, director of international trade and intellectual property at the Business Software Alliance trade group. "CAFTA will eliminate most of those barriers. We anticipate that, as a result of CAFTA, U.S. exports to Central America will increase substantially."

In a way, the debate boils down to who wins and who loses in global trade arrangements. It seems that in the short run, at least, U.S. techies may be more the losers than gainers. A report last year on offshore outsourcing of software and IT services indicated that sacrifices by U.S. IT workers would result in an improved U.S. economy overall.

That study, sponsored by the Information Technology Association of America trade group, found that 490,000 software and services jobs would be created in the U.S. by 2008 if "global sourcing" were stopped. If offshore outsourcing is allowed to continue, just 244,000 software and services jobs will be added in the U.S., while 270,000 jobs will be created offshore.

Thus U.S. techies would lose out with fewer new jobs--and therefore less demand for their skills. But the U.S. economy overall would benefit from 317,000 net new jobs between 2000 and 2008 thanks to offshore IT outsourcing, according to the report.

Some observers have suggested the U.S. erect tariffs or take other steps that would protect the jobs of U.S. workers. A less dramatic reform would be to strengthen programs that help workers who lose their jobs because of global trade. One key federal program, the Trade Adjustment Assistance program, does not apply to all technology professionals.

The fact that U.S. workers stung by trade face a relatively weak safety net may turn out to haunt the Bush administration, which has been working toward making CAFTA a reality. Last week, a group of prominent, normally pro-free-trade Democrats announced their opposition to the pact, citing concerns for workers' rights abroad and "eroding investment in American workers at home."

"The Bush Administration's fiscal irresponsibility--including its misguided philosophy on spending and tax cuts--has undermined our ability to invest in education and skills training that are desperately needed in this country. Domestically, the president has not done enough to help American workers retrain and compete on the international stage," Rep. Adam Smith, D-Wash., said in a statement. "I am deeply dismayed that (the Administration has) pursued policies that leave many workers who qualify for Trade Adjustment Assistance benefits without access to the program simply because the Administration either can't or won't provide adequate funding."