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Insourcing?

We all bitch about outsourcing, but is anyone aware of any companies that insource?  That is, foreign companies that send work to the US (or elsewhere).

The main one that occurs to me is foreign automakers that build plants in the US, but those are usually cases where the end-product is meant for the US market.

For those of you outside the US, is outsourcing as hot of a topic in your country as it is here?

Jason
Saturday, August 28, 2004

A McDonalds shop owner in India has outsourced his marketing, POS system development, product development, and business model creation to America.

Kalani
Saturday, August 28, 2004

"The main one that occurs to me is foreign automakers that build plants in the US, but those are usually cases where the end-product is meant for the US market."

It was my understanding that this occurs for no other reason than the manufacturers can wave a "Made in the USA" flag, even tho >95% of materials are foreign, and the company is foreign owned.

I'd like to know if theres any other reason for "insourcing"...

whateva
Saturday, August 28, 2004

"It was my understanding that this occurs for no other reason than the manufacturers can wave a "Made in the USA" flag, even tho >95% of materials are foreign, and the company is foreign owned."

Did a UAW friend tell you this? Most "foreign" cars made in North America are almost entirely made in North America (in fact they're often designed in North America as well. Honda has a large design division in California), spawning a large feeder industry of parts suppliers. They hardly bring it all in on a boat and put it together. Furthermore it's quite a distinction calling them "foreign owned" when they're publicly traded and you and I can have our piece of them.

Of course I own a Honda - made about 60km from where I live, paying the salaries of neighbours. Hilarious being told (by a CAW member) that it's people like me that put North Amercans out of work.

Dennis Forbes
Saturday, August 28, 2004

Everytime they buy a copy of Windows or Photoshop or Redhat organizations throughout the globe are "outsourcing" a segment of their business (I mean technically they _could_ write their own OS or photo editing app). While the US is a voracious importer, it exports about a trillion dollars worth annually so clearly some people are "outsourcing" to the US.

Dennis Forbes
Saturday, August 28, 2004

dennis -

yes, actually it was an asp.net development contract with the UAW that tuned me in to that.

if you can provide links I'd appreciate it. Otherwise, if you look at cases like BMW, and their plant in NC, its exactly as I had described... a foreign owned company cashing in on the "made in the USA" label.

Tell me ANY benefits on a forign company insourcing other than being able to wave the "Made in USA" label.

whateva
Sunday, August 29, 2004

Here's the biggest benefit - if the car's made in the US, the builder doesn't have to pay import tariffs. That can take thousands off the final price of the car.

I wouldn't be surpised if the tariff structure was set up to encourage exactly that.

Chris Tavares
Sunday, August 29, 2004

The tarriff structure IS set up exactly for that reason.

One result is that the cars that attract a tarriff are more expensive than they would otherwise be. Is that a good thing? You've got to weigh up all the consequences.

Australia slaps on a $10k+ tarriff on imported used cars and similar tarriffs on new cars not manufactured in Australia.

The benefits include: that car manufacturing is viable in Australia, Australians are employed in auto manufacture, Australians buy predominantly Australian made cars and now Australia actually manufactures production of small run vehicles for their U.S. parent companies (Ford does this).

The costs include: it is not at all practical to import used cars from Japan as happens in New Zealand. 2nd hand vehicles are very cheap in New Zealand (once you drive a new car off the lot its resale value plummets) - as an example the price of an equivalent Nissan Skyline in N.Z. is about 1/2 the price it is in Australia - making it easier for consumers to afford and buy cars.

Of course in most N.Z. cities you arguably NEED to own a car, whereas most Australian cities have a (relatively) decent public transport infrastructure.

As another example, a lot of U.S. and European agricultural products are heavily subsidised - the recent U.S. Australian "free" trade agreement includes a clause saying Australia canNOT negotiate access to the U.S beef market for another 18 years. This means beef in the U.S is more expensive than it needs to be (inefficient production is propped up while more efficient competitors have artifical penalties slapped on them).

Consumers are paying for this twice - via taxes to support the subsidies and via prices being higher than they could be. Is a price reduction worth a significant change in how the U.S beef producers do business (i.e. job losses in the beef sector) worth it? If you think that's an okay sacrfice then isn't it logical that the sacrifice of U.S tech jobs is also sacrificial?

The U.S is in an interesting and difficult position. It's a REALLY expensive place to do things when you compare it to many many other places in the world. In the case of tech it's not as simple as farming cows overseas and then sticking them on a boat (I think the potential cost savings have been overstated by quite a bit because it's not as simple as those embracing outsourcing want it to be), but while the U.S is a relatively expensive place to do business, business owners in the U.S will look offshore to reduce costs.

Walter Rumsby
Sunday, August 29, 2004

LOL, most cars are "made" in "North America."

But remember "North America" includes Canada and Mexico.
Most car parts are not  made in the US. For example most oem  rims are stamped in china then shipped o the U.S.

Funny story: It costs more money to ship an emtpy cargo container back to china, than bring a full one into the U.S. Most containers wind up in states like louisiana.

Most parts do come pre-assembled from other parts of the world. Engines from mexico, frames from china, eletronics assemblies(made from parts shipped from taiwan) from the U.S.

Most cars are assembled using the concept of just-in-time manufacturing. Meaning parts arrive just in time to be used in assembling the final product.

The big three have very strict standards that they push down to thier suppliers. Infact when GM says they want to cust costs, they realy mean then want their suppliers to give them a better deal. Most agree because having an oem contract is like printing money sometimes.

As for the "Made in the USA" label, no one realy cares excep t for the japanese. There is a hot lowrider subculture in japan that goes crazy for anything lowrider from the U.S. There is this guy that imports rims from korea into the U.S. then sends them back to Japan labled U.S.A.

As for BMW, they are assembling SUV's in North America because it's cheaper than dealing with the labor unions in germany. Just try getting fired there and they'll send you on holiday for stress relief. Since it's a new plant, they don't have to deal with labor unios in the U.S. To make the deal sweeter, don't forget to subtract the sipping an import tax on finished goods.

Yes, there are times when it's cheaper to build things in the U.S. Especialy when it involves import taxes. The big tree are rushing to build plants in Mexico because of NAFTA, just like the CRT manufactures(which is in major decline at the moment because of the growth in demand of flat displays).

Because of the close proximity, then can ship back engines at little cost and not have to pay high tarifs on a completed car.

Don't buy into that "Made In the U.S.A" hype, most people in the U.S. don't either. They are more than willing to pay more for "German Engineered", "Italian designed" parts than made in the U.S. But in general, it's the price that matters, which is why china is just about killing most manufacturing in the U.S.

On a side note: SoCal has become the hot bed of car design in the last few years. Everyone has jumped on the band wagon and opened thier own design center. California is one of the most influential car markets in the world. The L.A. Car shows draws ten's of thousands every year.

It is also the hot bed of after market parts. We have a very big car culture, where you are judged by what you drive. The car is truely king here, without a central metropolitan area like New York or chicago, it's hard to live without one.

anon-88
Sunday, August 29, 2004

There's also a dirtier side to tariff avoidance.

There are provisions that allow for a company to ship parts between operations tariff-free.  So, when a global company manufactures an end product in the United States, components can be manufactured or purchased by one of their offshore operations and then transferred to the US plant.

I'm not saying the auto makers are doing this, but I worked for a Japanese electronics company that did.  The US plant was just a final assembly plant - much of the value added occurred offshore.

Plus, the big hit was that the cost of the components was inflated (sometimes 10-fold), so when the accounting was done, the money was transferred to the offshore operations and the US plant was barely profitable.

It's a pretty sweet tariff loophole.

Yet another anon
Sunday, August 29, 2004

Walter, equating opposition to offshoring with support for agriculture subsidies is not strictly correct.

In the case of agriculture subsidies, the beneficiaries are largely corporations. American agriculture is predominantly agribusiness now.

In the case of opposition to offshoring, the beneficiaries would be workers.

In other words, in sectors where corporations need protection to make greater profits, they get it. In sectors where protection harms their profits, they get freedom from protection.


Sunday, August 29, 2004

Walter Rumsby >> but while the U.S is a relatively expensive place to do business, business owners in the U.S will look offshore to reduce costs

You have to take into account:
1. it doesn't matter as much whether it's expensive to do business in such and such country if that price difference is compensated by higher quality, higher design, etc. that people are willing to pay for (for insta,ce, quality-wise, it looks that you get a better deal when buying a Japanese compact than a BMW, but people who can afford if prefer to shell out more for a BMW because it's a status symbol)

2. lower cost often means lower quality, lower productivy, etc. Thanks to productivity, a country can enjoy higher salaries... and produce cheaper goods and services than a third-world nation. Consequently, the important thing is not cost of labor in isolation, but rather computed while taking into account productivity.

Otherwise, considering the huge discripancy in costs of labor, there wouldn't be any industry left in the so-called  industrialized countries, and all this work would be done in, say, Vietnam or the Philipines. It's not, and as long as we invest in higher education, R&D, infrastructures, health care, we're likely to maintain this advantage.

Fred
Sunday, August 29, 2004

The automotive industry is different to almost every other kind of industry you could think of.

Its impossible to build a vehicle that's acceptable either in marketing, design or technically in every single market around the world.  Ford tried it with the Orion but it still had engine differences in almost every market.

Its cheaper to build a car in the US, not because of labour issues but simply because its cheaper to build to US specifications than it is to ship into the US and pay the excess duty.  The exceptions are the marques where there is a cachet of them being imported.

Apart from an extremely tiny enthusiast market there is no market for US built cars outside of the continental US simply because they don't fit into any other transport culture around the world.

It was very funny during the years of Bush Sr that there was so much lobbying of Japan to accept US imported vehicles when half the people lobbying didn't understand they'd need right hand drive and an MPG that was closer to 35 than 18.

Simon Lucy
Sunday, August 29, 2004

---" Apart from an extremely tiny enthusiast market there is no market for US built cars outside of the continental US simply because they don't fit into any other transport culture around the world."----

The Gulf; a few years back the only Japanese car a Saudi would be seen driving was a Lexus. Because there is less money around now Saudis are starting to buy Japanese, and even Korean cars, but I've seen a nineteen year old kid put down his first pay check for a nearly new Honda Civic, and then change it a week later for a ten year old Caprice Classic.

Stephen Jones
Sunday, August 29, 2004

>In the case of agriculture subsidies, the beneficiaries are largely corporations. American agriculture is predominantly agribusiness now.
>
>In the case of opposition to offshoring, the beneficiaries would be workers.

I don't think it's as simple as that. Subsidies keep U.S workers in agricultural jobs - businesses that could not exist without subsidies would close and jobs would be lost. For instance, when there is even a hint that agricultural subsidies in France will be cut it's angry farmers, not angry business people, who protest.

U.S software companies benefit from lower costs, higher profits, improved viability. (Again WRT offshoring I don't think it's so simple as outsourcers want it to be, but they're buying into the promise not the reality).

Walter Rumsby
Sunday, August 29, 2004

>> if you can provide links I'd appreciate it. Otherwise, if you look at cases like BMW, and their plant in NC, its exactly as I had described... a foreign owned company cashing in on the "made in the USA" label. <<

Only partly true.  The engines and differentials are flown in on 747s thru the GSP airport. Many of the other parts are sourced locally, either by companies who were there prior to BMWs arrival (Spartanburg Steel being one), and others by foreign firms who set up shop in the area so they could meet BMW's strict just-in-time manufacturing process requirements.

http://europe.autonews.com/page.cms?pageId=307

example
Sunday, August 29, 2004

>This means beef in the U.S is more expensive than it needs to be (inefficient production is propped up while more efficient competitors have artifical penalties slapped on them).
>Consumers are paying for this twice - via taxes to support the subsidies and via prices being higher than they could be. Is a price reduction worth a significant change in how the U.S beef producers do business (i.e. job losses in the beef sector) worth it?

Walter, sorry but you're totally insane and don't know jack shit what you're sputtering about.

Beef farmers are NOT subsidized by the government.

US Beef is very inexpensive in the US, 1/4 or less what you pay in Europe and 1/50 what you pay in Japan and much of asia.

It is very expensive to airship refrigerated beef to the US. It's only worthwhile if it can be sold at a premium. This is not possible not because the government is propping up inefficient production, as you falsely and ignorantly claim, but because the US beef industry is THE most efficient beef production in the world today.

Get your facts straight before spouting of like a moron.

Dennis Atkins
Sunday, August 29, 2004

Dennis,

Get YOUR facts right. U.S protects its beef markets (if they didn't why would they bother to add a clause to the "free" trade agreement saying that negotiation on access would not be permitted for 18 years? For fun?). Europe and Japan ALSO protect their beef markets.

When the U.S talks about fair/free trade they generally mean U.S firms having access to other markets NOT opening access for foreign firms to the U.S market.

There are two common ways to restrict access:

1. Give local producers subsidies - so their product costs less than non-subsidies product (seems to cost less to consumers, but consumers pay for this through taxation anyway). Foreign product cannot compete on price.

2. Artificially raise the price of foreign goods by whacking a tarriff on them. Foreign product cannot compete on price and local product may be able charge more than they would if they were competing on price with foreign product. Consumers pay because prices are higher than they could be.

Sure things in the U.S are cheaper than in Japan, because Japan is an extremely expensive country - Japanese buyers will pay more for better quality and they love packaging so much so that fruit are individually wrapped in styrofoam when you buy them from the supermarket, etc.

Do a little Googling: http://www.google.com/search?hl=en&lr=&ie=UTF-8&q=us+agricultural+subsidies+beef&btnG=Search

Walter Rumsby
Sunday, August 29, 2004

Walter, your initial approach to this comparison has been too simplistic. You just assume "subsidies." In fact, it's not agriculture workers who lobby for subsidies at all. It's not even family farmers. It's agribusiness companies and their influential Washington lobbyists.


Sunday, August 29, 2004

Also, don't accept at face value everything you read in Australia about the FTA.


Sunday, August 29, 2004

The agribusiness wants protection because they don't have to compete on price of good sold.

The tech business wants outsourcing because they want to force workers to compete on price.

In both cases the business wants to maximise its profit.

Walter Rumsby
Sunday, August 29, 2004

Exactly.


Sunday, August 29, 2004

But, returning to your original point, the "protection" that's talked about in agriculture has nothing to do with protecting jobs.

In fact, agribusiness has successfully cut workers' wages over the past decade, at the same time as increasing its profits from other sources.

Gartner, McKinsey and those hacks only protection is bad when it's for workers, especially computer workers.


Sunday, August 29, 2004

Walter, sorry but you're REALLY an ass who don't know jack shit what you're spewing about.

Beef farmers are NOT subsidized by the government in the US. OK, so beef farmers in AUSTRALIA are supported by the government, as was pointed out in one of the articles you linked to. So? This does not support your argument.

Get your facts straight before spouting of like an imbecile.

> Get YOUR facts right. U.S protects its beef markets (if they didn't why would they bother to add a clause to the "free" trade agreement saying that negotiation on access would not be permitted for 18 years? For fun?). Europe and Japan ALSO protect their beef markets.

If its not "free" trade, as you like to double-quote apparently indicating your sarcastic use of the word 'free', the australians are perfectly entitled not to trade with us.

> When the U.S talks about fair/free trade they generally mean U.S firms having access to other markets NOT opening access for foreign firms to the U.S market.

Personally, I am all for completely closed markets and high tarrifs. It disappoints me that we don't have this.

> Do a little Googling: http://www.google.com/search?hl=en&lr=&ie=UTF-8&q=us+agricultural+subsidies+beef&btnG=Search

Nice collection of random articles containing those words. I read several of them, none of which supported your stupid ignorant claims that US beef farmers recieve subsidies, or that US taxpayers pay more for beef in two ways.

US beef is cheap and unsubsidized. If the aussies aren't smart enough to produce beef for a reasonable cost, I don't see why the US government has to grant them special privledges and subsidies to cover for their incompetance. That should be the job of their own retarded government.

Dennis Atkins
Monday, August 30, 2004

Anyway, YOU need to provide solid evidence that US taxpayers are being assessed taxes to support beef subsidies. You'll have to show me the specific tax laws assesing those taxes, and the specific laws that are subsidizing the farmers. I want to know what beef farmers are recieving subsidies and I want to know how much money they are receiving. I want to know what branch of government sends the checks and what they need to do ;ualify for the subsidies.
 
> Consumers are paying for this twice - via taxes to support the subsidies

If you, Walter Rumsby. can not back up these claims, that YOU have ACCUSED ME of not being accurate when I questioned you, then YOU STAND EXPOSED AS A LIAR.

>  and via prices being higher than they could be.

You need to substantiate this with specific, credible numbers from analysis or studies by credible sources. How much higher? And how do you explain that the US has among the LOWEST beef prices in the world? How can it be that prices are higher than the could be when they are lower than almost everywhere else? you explain that to me Walter Rumsby, or you STAND EXPOSED AS A LIAR.

Dennis Atkins
Monday, August 30, 2004

1. U.S agricultural subsidies: http://archive.salon.com/tech/feature/2002/05/01/farmers/

2. U.S beef tarriffs: http://www.fff.org/freedom/1094d.asp

3. Beef restrictions: http://www.dfat.gov.au/trade/negotiations/us_fta/faqs.html

"In  addition, Australia will gain an 18.5 per cent increase in quota volumes  over 18 years, valued at $245 million in the final year at current prices."

4. Whatever. I might be incorrect in the sense that the restrictions are primarliy tarriffs and not subsidies, but subsidies vs. tarrifs are effectively the same - as pointed out in the article (2) above consumers end up paying more. It's a fact that U.S farmers have access to subsidies that are not available to farmers in other parts of the world (excepting already wealthy regions like Japan and Europe).

Walter Rumsby
Monday, August 30, 2004

The word 'beef' doesn't even appear in article #1 you just gave. What the heck?

The second article you give is from 1994. In 1994, Australian beef farmers received more than 50% of their income in cash subsides from the australian government - something we've never had in the US. Not even close. Want to talk about subsidies and protectionism, let's talk about Australia.

So basically, you don't have anything and you admit that you are a liar.

Dennis Atkins
Monday, August 30, 2004

Also, the 1994 one is about beef QUOTAS on australian beef, not tarriffs. Totally different things. At the time (over ten years ago, dude), Australia was radically protectionist and the US had every right to impose quotas to stem the flood of low quality beef 'dumping' from australia.

Dennis Atkins
Monday, August 30, 2004

Oh my god Dennis you are a freakin dumbass. Wake up and learn some 20th century economics you snotty nosed little punk.

Nailuj
Monday, August 30, 2004

#3 shows that nearly all restrictions on australian beef have been eliminated and those left are being phased out. AUSFTA  is outrageously one sided in favor of the australians. The wool has been pulled over our eyes on this one. AUSFTA hould be repealed immediately - it gives everything to the Australians and the Australians concede virtually nothing at all. A real piece of shit law.

Dennis Atkins
Monday, August 30, 2004

Nailuj,

Thank you for your insightful post. I particularly was educated by the facts and figures you presented. So rational, so thought provoking.

Dennis Atkins
Monday, August 30, 2004

Personally I've had it with the uppity Australians so full of themselves with their australian superiority complex. We pulled the cowards asses out of WWII and they holler and scream about sending a few troops to iraq. I see how this works. Sheepbuggers, one and all.

Dennis Atkins
Monday, August 30, 2004

Tariffs and quotas are different mechanisms that are designed to have the same result: lower imports, higher local prices,
"propping up local industry". Quotas only really work however when there is no substitute good in the market of the quota holder.

A farm in New Zealand can provide high-quality grass-fed beef products to the US for significantly less than US-local cost in USD, due to exchange rates and the nature of NZ beef farming. The US imposes tariffs on this beef to protect its local market, and ALSO as a carrot to hold over the NZers in the event of a similar free trade negotiation to the Aus situation. Why would they give free trade for free?

Nailuj
Monday, August 30, 2004

> A farm in New Zealand can provide high-quality grass-fed beef products to the US for significantly less than US-local cost in USD, due to exchange rates and the nature of NZ beef farming.

Let's see you evidence of this absurd claim.

Dennis Atkins
Monday, August 30, 2004

http://www.ers.usda.gov/briefing/cattle/Trade.htm

"Most beef that the United States imports is grass-fed beef..."

"The third-largest exporter of beef to the United States is New Zealand."

Simple logic indicates that NZ exports grass-fed beef to the US. Note however, that this article seems to prioritise "grain-fed" over "grass-fed" in terms of quality. I had until now believed that grass-fed cuts were prized over the grain-fed ones. I could be wrong about the relative quality of NZ vs US beef -- I don't know MUCH about the international beef market (being a software engineer and all). However, certainly the organic market prefers grass-fed beef.

http://www.msnbc.msn.com/id/4873743/:
"Mad cow disease is thought to be transferred through animal protein found in cattle feed, and New Zealand's beef is almost entirely grass-fed."

http://www.mla.com.au/content.cfm?sid=1482:
"US domestic production and imports from Canada, Mexico, New Zealand and Uruguay are the major sources of competition in the US for imported Australian beef."

Oh, and same article:
"Since the late 1970s, the US beef import market has operated under a tariff rate quota (TRQ) with country specific allocations to major suppliers.  Under the current TRQ (introduced in 1995), Australia has a beef quota of 378,214 tonnes shipped weight.  Australian beef exported to the US within this quota incurs a tariff of 4.4US¢/kg, with product exported out-of-quota incurring a 26.4% tariff."

Nailuj
Monday, August 30, 2004

To answer one of the OP's original questions, here in France, outsourcing is also a hot topic.

A lot of companies delocalize work to cheaper countries, especially since the cost of the workforce is rather high here (esp. since the 35 hours work week).

A few companies even recently managed to force workers to revert back to the 40h work week (still paid 35h...), threatening them to delocalize if they refused.

It concerns mainly factory workers, but software engineering is also concerned by outsourcing, although it seems to me not as much as in the US: but I work in a large multinational company and we've seen a couple of projets sent to China or elsewhere.

I'm also curious about the situation in other countries!...

anonyme
Monday, August 30, 2004

Well, just to throw my 2 cents in.

Show me a country that does not have some sort of trade laws? I believe they don't exist.

Now, try and compare what you have left. You will find that those countries with the most restrictions have the poorest local consumers.

I cringe when imagining the annointed working to make my life better.

Show me a country with less trade laws than the U.S. and I'll show you a country with a future.

BTW, don't imagine all cars are the same. I spend a lot of time in Brazil and prices for cars there have really fallen over the years (especially as they've reduced tariffs on imported cars, gosh ... maybe a correlation). But those cars are tin cans compared to U.S. cars.

Also, good read is The Reckoning by Halberstam.

me
Monday, August 30, 2004

Liberalising agriculture - Why the United States Should Look To New Zealand and Australia: http://www.heritage.org/Research/Agriculture/bg1624.cfm discusses the trade reforms in New Zealand and Australia in the 1980s. New Zealand is a considerably freer market than Australia.

Dennis:

1. The strength of the US dollar means that any U.S goods are frequently more expensive than goods manufactured in countries whose currency is not as strong as the dollar.

2. The fact that NAFTA removed tarriffs from Canadian and Mexican beef suggests there needed to be some tarriffs to remove. The fact that the Australian free trade agreement discusses increasing the quota suggests a quota is in place. Tarriffs, quotas and subsidies all act as a barrier to imported goods. Significantly they make the protected product appear cheaper than its competition.

3. Calm down.

4. Do a little research into the protections given to U.S sugar and steel producers too.

5. The United States is in a unique, interesting position. In a relative sense it can only fall. I don't have any grievances with the U.S. I do think it can be insular (which is to be expected with such a large and populous country which more or less can sustain itself), and I get vaguely annoyed when I hear some of the mythologising that goes on (other countries do it too). The fact is, as another poster pointed out, MOST countries don't engage in free trade - and they do so to the detriment to the developing world. I seriously doubt that U.S beef is cheaper than beef from ANY other market because of simple things like the cost of doing business in the U.S (e.g. paying U.S dollars for commodities and services).

Walter Rumsby
Monday, August 30, 2004

Walter, you will have seen, also at the Heritage site, the article about who receives those subsidies in America. As I pointed out to you, it is corporations.

http://www.heritage.org/Research/Agriculture/BG1542.cfm

Now you have gone off on a tangent about relative efficiency of US and Australian agriculture. You seem now to be championing "free trade" as part of an attack on America.

Walter, heritage.org has its own agendas. So did all the discussion in Australia about the mean, bad US. Most of it was poorly informed. America is the most successful economy in the world. Trade arrangements are complex.


Monday, August 30, 2004

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