Issue

Should using global sourcing strategies prohibit employers from receiving state or local grants or loans or result in greater state regulation?

Policy

The Minnesota Chamber opposes state legislation that places restrictions on employers that use global sourcing strategies whether the restrictions relate to the ability to receive state or local grants or loans, additional reporting requirements, or limitations on call-center activity. We oppose these restrictions for several reasons:

• Governor's executive order addresses the issue.

  The executive order allows agencies to consider where the work will be performed when determining the “best value” for the state in awarding contracts. It also requires vendors to disclose the location where services will be performed and to receive approval before a change in location can be made.

• Penalizing Minnesota employers for staying competitive.

  Prohibiting Minnesota employers that use global sourcing strategies from receiving state or local grants or loans puts them at a competitive disadvantage to companies in other states that use the same cost-saving tactics.

• Minnesota employers and employees benefit from global sourcing.

  Global sourcing allows U.S. corporations to stay competitive and continue to employ people in the United States and Minnesota in high-skill, high-wage jobs. According to the Department of Employment and Economic Development, more than 80,000 Minnesotans are employed by foreign-owned firms. This investment directly benefits Minnesota through the wages paid to employees and the goods and services they purchase. Minnesota also benefits from foreign investment made by U.S. companies. This investment increases living standards of foreign countries and the ability of foreign citizens to purchase U.S. goods and services.

• Global sourcing improves the economy.

  A study by Global Insight for the Information Technology Association of America concluded that sourcing IT services outside the United States lowers inflation, increases productivity and lowers interest rates, resulting in increased economic activity and increased business and consumer spending. The report also concluded that Minnesota’s employment and gross state product were higher in 2003 – and will continue to be higher through 2008 – due to global sourcing in the information technology industry.

• Constitutionality.

  In 1996, the U.S. Supreme Court ruled in Crosby, et al. v. National Foreign Trade Council that a Massachusetts law prohibiting state agencies from purchasing goods or services from companies doing business with Burma was unconstitutional. We believe that legislation proposing similar restrictions on Minnesota agencies also would be unconstitutional.

In 2007, legislation was introduced that required call centers to identify their location if a Minnesota resident asked for the information. Moreover, the legislation also required foreign call centers to transfer calls back to a U.S. call center if requested and the option existed. The Chamber opposes such initiatives because they create operational problems for call centers, they would likely result in customer inconveniences, and they most likely violate U.S. trade agreements.

Business Impact

If Minnesota restricts the use of global sourcing, it could put some Minnesota businesses at a competitive disadvantage compared with businesses in other states when competing for state contracts. It also could result in retaliation by other nations – i.e. restrictions on the purchase of Minnesota goods and services abroad.