"Today's world is increasingly more competitive. Given the intense competition, many of the companies that outsource jobs overseas usually have no alternative, as that is exactly what their competitors are doing," said William T. Archey, president and CEO of American Electronics Association, the report's sponsor. "Failure to do so will result in an even greater loss of jobs than would be lost to offshoring alone."

According to the report, outsourcing is increasing not only in the United States, but also in Western Europe, Japan and India. Citing Deloitte Research, the report says Western Europe will offshore 730,000 financial services/IT jobs by 2008 and Japan will offshore 400,000.

The paper questions current hype that U.S. workers are losing jobs due to outsourcing: "For over 30 years, the United States has been a major benefactor of the converse of offshore outsourcing -- the creation of U.S. jobs by foreign-owned companies." Citing the U.S. Bureau of Economic Analysis, the report says 6.4 million Americans were employed by U.S. affiliates of foreign companies in 2001. In another citation, the report says every dollar spent on outsourcing creates $1.45 to $1.47 in the global economy, with $1.12 to $1.14 returning to the U.S. economy (Source: McKinsey & Co.).

The report contends that the single biggest competitive challenge to U.S. companies may be that many countries have caught up with the U.S., particularly in education. Also, the Internet -- having "enabled workforces all over the world to become mobile without moving" -- enables offshore outsourcing, thereby increasing international competition.

In addition, the paper warns that the costs of doing business in the United States is a major concern. Rising health care, litigation and regulatory costs undermine U.S. business competitiveness and spur U.S. companies to do business elsewhere.

The full report includes recommended solutions to seven outsourcing issues outlined by AEA. It is available at http://www.aeanet.org/publications/IDMK_AeA_Offshore_Outsourcing.asp