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Software Tariffs and US IT Outsourcing?
HeelToe asks: "A while back I worked with someone who thought the US should simply impose tariffs on imported products to adjust their price to equalize foreign labor rates to the US minimum wage. I was laid off and my position moved to Canada last year. Since then, I've thought a lot about his ideas, as well as one of our topics of conversation a while back: Why doesn't the US tax the import of software? It seems to me like they should. It's not a "tangible" product (same reason used to deny my co-workers and me NAFTA and Trade Act benefits), but when someone outsources to another country with cheap labor for any other industry, there are usually import tariffs. Why is software different, and how would this change the climate of US IT jobs leaving for other parts of the world if we did tax software imports? I've done some looking on the web, but can find nothing in the Harmonized Tariff Schedule of the United States. I did find this thread from a few months back on informationweek.com's Career Development Forum, but not much else. What does Slashdot think?"
There are some significant differences between Trade Rules (NAFTA, HT Etc.) and Labelling.
Application of NAFTA rules to items with foreign content involves breaking the item apart into it's constituents and assigning values to each part based on cost, labor, and country of origin for that part. Then if enough is NAFTA made, no duty (simplified version). So while, Mexico and Canada wouldn't get hit, India, Singapore etc. could potentially be tariffed. Packaging is usually not a significant cost factor in the calculation from my experience.
The application of international trade tariffs to software is otherwise difficult. The old bits Vs. atoms problem.
bwh
- A proud Canadian ashamed of his federal gov't.
I've heard that Dell outsourced all it's frontline support to India.
:D
It makes me sick everytime I see that Dell Intern "Who turned out the lights in tech support?" commercial knowing that what they portray on TV doesn't resemble reality at all.
Dell cannot draw me into it's delusion of an american company anymore. I still love their service contracts though
Software can be encrypted and sent over the Internet so the IRS cannot detect it coming into our borders.
Then even if they detect it, how do they decide a value on which the tax will be applied? A piece of software can cost anywhere from $0 to a over a billion dollars. The IRS will always end up undervaluing or overvaluing it.
Some countries are actually retarded enough to impose import duties on software; anything downloaded off the Internet gets in duty-free because they can't catch it, while anything physically brought in on CDs or diskettes gets taxed based on a value that the customs officer pulls out of their ass. I recently sent my brother 2 CDs with Linux and other free software because broadband is not widely available in his country, and they slapped on US$50 duty, ignoring the $2 value I put on the customs form (for the cost of the media) and the glaring FREE SOFTWARE label on the CDs.
Then there is the consideration that software can be duplicated infinitely. Someone can import a single copy of a software package that is worth $200 by itself, then get it installed on 10,000 machines.
And how would you assess the foreign value component of software that was developed by teams in the US collobarating with overseas developers?
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There is inferior bacteria on the interior of your posterior.
You make the mistake to think that the stats you are reading are actually the same.
Really? The BBC seems to think they are comparable.
http://news.bbc.co.uk/2/hi/europe/687918.stm
Then we have longer term studies that show that the US has far stronger job creation than Europe, and in fact the unemployment measurements in Europe are artificially low because of training programs, early retirement, workweeks limited to 35 hours, etc.
http://www.epf.org/labor99/intrncontx.htm
Lowest unemployment rates? Not true in January 2003, at least, according to this table from the OECD - the US rate was 5.7%, whereas Austria had 4.1% and Sweden had 5.3%, for example.
Another example similar to your sugar one: US steel tarrifs, ruled illegal by the WTO anyway, have cost more jobs (US compaies who rely on steel laying people off) that it's saved.
Thanks for the well-thought out analogy.
I've not made up my mind about whether software should be taxed. I honestly don't think the government could truly levy the tax anyway, because enforcement would be hard. I mostly find it a somewhat hypocritical stance to tax one form of import but completely ignore another.
Oh, and my job did move up to Canada, but I don't really feel like the grass is greener there. I keep in touch with folks still from the Canadian office and they have it as bad or worse than a lot of people here in the US. I guess I just included that commentary because it put a context around why I had those discussions with an ex cow orker.
I've been attempting to emphasize to potential employers that I have good technical skills, great writing skills, good presentation skills, and a willingness to help management see the business value and reason behind building high quality software. This in the long run I hope will be my differentiator and keep me employed when most of the "here, hammer out the spec for me in C#" type work goes overseas.
Here are more details about the sugar/candy issue: http://www.libertysearch.com/articles/2002/000034. html
If U.S. software companies have to pay high tariffs in order to outsource work to India (and other sources of cheap, yet highly skilled labor), some of them may move to Canada in order to avoid the tariff. (Moving directly to India would also be an option, but I think U.S. executives would be more inclined to move their companies to Canada for language/cultural reasons. In other words, if the choice is between moving to India or moving to Canada and then outsourcing to India, I think most U.S. executives would prefer the latter.)