AEA concurs: those against outsourcing don't know anything.

The debate over offshore outsourcing of jobs in the high-tech sector has led to "hysteria" and "is bereft of any understanding of the larger context in which it is taking place," says the American Electronics Association. Changes taking place in the world economy "are beyond the control of any

U.S. companies have "no choice" but to outsource jobs, given the competitive challenges they face and the fact that companies in other countries are actively engaged in the practice. "Failure to do so in certain instances not only will result in less competitiveness, but in the elimination of many more jobs than would be lost to offshore outsourcing," says the AEA in a dismissive report entitled "Offshore Outsourcing In An Increasingly Competitive and Rapidly Changing World--A High-Tech Perspective."

The United States faced a similar challenge in the late 1980s and early 1990s when pundits predicted that Japan was going to swamp the U.S. with its technological prowess. "It didn't happen," says AEA. "That extraordinary comeback by the American high-tech industry may never have happened if the wrong U.S. laws, policies and regulations had been implemented in response to the fears about Japan."

The electronics industry has the most at stake in the debate over outsourcing, given that high-tech is the largest exporter of products, totaling $171 billion in 2003. "More than 60 percent of all U.S. high-tech companies receive more than half of their revenue from markets outside the United States," AEA explains. If protectionist legislation is adopted "for many high-tech companies, the majority of their revenues are at risk" from overseas retaliation.

Some workers are being displaced in the United States as a result of outsourcing to China and India, but no government data exists to determine the full extent of its impact, AEA notes. Nonetheless, the number is small.

Most jobs have been lost due to the end of the tech bubble, low demand worldwide for electronics, and productivity improvements. "We believe that offshore outsourcing is the least important variable in the decline of high-tech jobs," says AEA.

Various forecasts about the loss of jobs to low-cost overseas nations are based upon questionable assumptions, says AEA. The well publicized Forrester Research study claiming that 3.3 million U.S. service sector jobs will be lost by 2015 "has been accepted as fact," yet its extrapolations are "very tentative" and its assertions "likely are overstated."

The Bureau of Labor Statistics' extrapolations offer far more robust projections on job creation in the U.S. high-tech sector over the coming years, says the AEA.

The United States needs to realize that it no longer controls technology, the AEA notes, citing a quote from Peter Drucker in a January 12, 2004, interview in Fortune magazine in which he states: "The dominance of the U.S. is already over." Other countries have surpassed the United States in the education of scientists and engineers including China and India. "Preference for the United States as a business destination for highly talented and highly educated foreign scientists and engineers is waning," AEA points out.

The U.S. government isn't funding the physical sciences; the influx of intellectual talent into the United States is slowing; and foreign companies are improving their quality and effectiveness. "Offshore outsourcing is just one change in the competitive equation and pales in comparison" to these other changes, says AEA. "We ignore these changes at our competitive peril."

What is the solution? Improve training and retraining programs for displaced manufacturing and service sector workers, says AEA. The nation needs to improve the k-12 educational system in science and technology; increase federal R&D support of the physical sciences; make the R&D tax credit permanent; give a green card to any foreigner who earns a Ph.D. in the United States; adopt broadband throughout the country; and reduce the cost of doing business in the United States by passing tort, regulatory and health care reform.