Review and Outlook
April 19, 2004
The Law of Outsourcing
Amid this election year's outsourcing clamor, politicians in at least 33 states are busy trying to pass "Buy American" laws. Apart from forcing taxpayers to pay more for services, the laws have another large problem: They violate the U.S. Constitution.
That's the finding of a new study out today from the National Foundation for American Policy, a Virginia think tank. Two lawyers examined more than 100 anti-outsourcing bills before Congress and state legislatures and concluded that the laws are dubious on both constitutional grounds and under America's international trade agreements.
Most of the proposals would ban government contracts to companies that carry out the work overseas. In the case of state laws, this trespasses on Washington's constitutional prerogative to run foreign affairs and regulate commerce. We're all for federalism, but the Supreme Court has routinely found that Indiana isn't supposed to have an independent foreign policy. As recently as its 2000 unanimous Natsios ruling, for example, the High Court overturned a Massachusetts statute barring state agencies from letting contracts to companies that did business with Burma. This means that sooner or later state outsourcing laws are likely to be struck down by federal courts.
Congress can of course commit foreign policy, but the legal problem here is that outsourcing bans will violate global trade pacts that the U.S. has agreed to. The World Trade Organization, for one, requires that foreign companies receive national treatment on government-procurement contracts. So instead of "saving" U.S. jobs, a federal outsourcing ban would only jeopardize them by inviting foreign countries to retaliate against U.S. firms.
An anti-outsourcing amendment sponsored by Democrat Chris Dodd passed by a 70-26 vote in the Senate last month. Is it too much to ask politicians to think about the old laws they're breaking when they vote for a new one?