“Offshoring” of State Contracts
June 20, 2005
The Business Council strongly opposes this legislation, which would preclude the use of non-U.S. labor or services in satisfying procurement contracts awarded by New York State government in most instances.
There are two fundamental flaws regarding this legislation.
- First, given New York's significant role in the international
economy, New York has more to lose than to gain from the adoption
of artificial trade barriers. For example, New York State's
residents and economy benefit greatly from the “insourcing” of
jobs from foreign nations – and would be severely hurt by international
trade barriers. Nearly 400,000 New Yorkers are currently employed
by the U.S. subsidiaries of foreign businesses, the second highest
job count among the states. This number includes more than 72,000
manufacturing jobs, and this “insourced” job count in
New York has increased by 33 percent – or 97,000 jobs – over
the past five years. Given these factors, the New York State legislature
should oppose protectionist/domestic preference legislation being
considered by New York and other U.S. and foreign jurisdictions.
- Second, the real way to improve New York's economy is by addressing key problems impacting our competitiveness, not by imposing protectionist barriers. The legislature has already adopted several important reform this session, including key tax and medicaid reforms, that will help reduce non-competitive cost factors in New York. More needs to be done, including legislation to reduce the cost of private health care insurance, workers' compensation costs, and the price and reliability of electric power, to name just three areas in need of legislative action. To the contrary, it is far from certain that the provisions of S.8669 will help protect even one New York State job.
This legislation is also inconsistent with long-standing state law that penalizes jurisdictions that impose trade barriers. New York's State Finance Law generally precludes the awarding of state contracts to “discriminatory jurisdictions,” i.e., states that give state contract preference to their in-state businesses.
New York State continues to enjoy significant economic benefits from its position as a center for international finance, from its reliance on exports, and its significant number of “insourced” jobs. For all these reasons, the New York State legislature should continue to be an strong supporter of free trade, and should reject measures such as A.8669.
This legislation will be included as one of the scoring measurements of The Business Council's “Vote for Jobs Index 2005.” This is The Business Council's annual assessment of legislator's action on key issues of concern to the state's business community.