Ohio outsourcing ban puts practice in perspective for other states

On August 6 of this year, Ohio Governor Ted Strickland issued Executive Order 2010-09S, which prohibits the use of public funds for services provided offshore. The outsourcing ban has riled the Indian Commerce and Industry Minister in the wake of a US-India Trade Policy Forum. But Ohio is hardly the only state to look at such legislative provisions when it comes to offshore or outsourced contracts.

In signing the Executive Order, Gov. Strickland said he was standing up for one of the hardest hit economies in the nation. “Ohioans have been among the hardest hit by more than a decade of unfair trade agreements and the trickle-down economic policies that promoted offshoring jobs at the expense of Ohioans who work for a living,” he said.

The supposed catalyst behind the bold order was a contract between the state’s Department of Development and Texas-based Parago, Inc., who was hired to help the agency implement a stimulus-funded appliance rebate program. Parago ultimately used offshore labor while meeting the service requirements, the governor found.

Although the program was deemed a success, stimulating appliance manufacturing in the state, and sending nearly $10.5 of the $11 million in program funding to Ohio consumers, Gov. Strickland said, “…contracting with a domestic service provider that ultimately outsourced jobs could and should have been prevented.”

This past Tuesday, Gov. Strickland reaffirmed his position on the matter, sending a letter to US Trade Representative Ron Kirk. While acknowledging Indian officials’ objections with the decision, he said, “…no one in India, or anywhere else, is going to tell the citizens of Ohio where we can create jobs or how we can spend our resources.”

Indian Commerce and Industry Minister Anand Sharma continued the volley, telling reporters yesterday, calling the Ohio ban “an ill-advised decision,” continuing, “We hope that there is no other State which would follow the ill-advised and less informed path chosen by the Ohio state government,” according to India’s Hindu newspaper.

Mr. Sharma also reminded reporters and the Ohio governor that a recent deal between India-based Bharti Airtel and IBM was signed for $3.5 billion to do work in Africa’s mobile telecommunications market. India is also the largest buy of boeing aircraft, Mr. Sharma reminded US officials.

Even Gov. Strickland admitted to benefiting from Indian investment in his letter to the USTR Kirk, acknowledging that Tata Consultancy Services built its North American headquarters in Ohio. Still, such policies are not likely to have any significant impact on the robust US-India trade relationship, Carol J. Guthrie, an assistant U.S. trade representative, told the Columbus Dispatch.

But is Ohio the only state to take such measures? According to an analysis by the National Conference of State Legislatures, it maybe the only one to be successful, but it is hardly the only state to try.

A list of 2009 legislation (.pdf) shows that more than a half-dozen states tried to limit or ban contracts given to companies who outsource to foreign entities. States ranging from New York to Arizona, Pennsylvania to Texas have pieces of legislation before them that would institute policies similar to what Ohio has done. Most of the legislation was referred to various House and Senate committees before the end of the year. But if the Ohio order is any indication, it would not take much to quickly institute such policies.

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