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Tech Bills Face Protectionist Measures

WASHINGTON -- Offshoring concerns combined with election year politics will make anti-free trade proposals the hot topic for the rest of the 108th Congress, key Capitol Hill staffers predicted Tuesday afternoon at the Electronic Industries Alliance's (EIA) Spring Conference.

With only five months left in the current legislative session, the offshoring debate has tied up technology-related bills important to the EIA, a legislative lobbying coalition that includes the Consumer Electronics Association, the Telecommunications Industry Association and the Electronic Components, Assemblies and Materials Association.

"The [protectionist] efforts we've seen most recently and throughout the appropriation process, we expect they will be rather commonplace in the foreseeable future," said Bill Womack, legislative director for Rep. Tom Davis (R-Va.), chairman of the House Government Reform Committee.

Throughout the winter and spring, the offshoring issue mostly centered in the Senate, where a bitter debate on jobs between Democrats and Republicans blocked a corporate tax bill containing key provisions favored by multi-national tech companies.

Part of a much broader, complex bill aimed at halting European Union (EU) trade sanctions, the tech provision reduces foreign dividend taxes from 35 percent to 5.25 percent for one year. Tech proponents say the tax break will "repatriate" more than $300 billion into the U.S. economy and create as many as a half million new jobs.

Democrats used the debate on the bill as a platform to denounce offshoring, calling the provision to reduce the tariffs a tax subsidy for companies moving jobs offshore. John Breaux (D-La.) and Diane Feinstein (D-Calif.) lost floor votes to amend the bill to "ensure the repatriated tax breaks would be used for job creation."

Another amendment to substitute payroll tax cuts for the foreign dividends tax breaks was also defeated.

The bill finally passed the Senate on May 13. The bill now moves to the House of Representatives, which has its own version of the legislation that does not include the foreign dividends tax relief.

At a May 5 press conference in Washington, EIA President Dave McCurdy said Congress "must move beyond election-year demagoguery over offshore outsourcing and think rationally about the long-term health of the U.S. economy."

McCurdy added, "The current debate over offshore outsourcing has been reduced by many to a binary argument: U.S. jobs vs. worldwide trade. These are important issues, but for the sake of the nation and the U.S. economy, we should be focusing our energy on the much larger long-term issue of the future of U.S. innovation."

The EIA is urging policymakers and candidates for political office to begin public discussion and work to create a national "innovation strategy" based in part on 40 recommendations outlined in a new EIA policy paper.

Womack, who was Davis' point man on the House Telecom Subcommittee, praised the EIA position, saying, "If you take a look at the offshoring-outsourcing debate, it is akin to painting over rotting wood. The reality is there is a large, skilled, extremely educated workforce overseas with whom we have to compete."

Tricia Barrentine, deputy chief of staff for Rep. Jim Davis (D-Fla.), told the EIA members, "We can't bash the fact we have free trade."

Although the government collects no official data on offshore outsourcing in the services sector, one study by Forrester Research estimates that over the next 15 years, 3.3 million U.S. service jobs and $136 billion in wages will move offshore. Another study by McKinsey's Global Institute suggests the number of service jobs moving out of the United States will accelerate at an annual rate of 30 percent to 40 percent over the next five years.

"If America wants to retain its preeminence in information technology, we've got to take those steps that are geared towards guaranteeing that American workers are, in fact, competitive," Womack said.