The Offshoring of American Government
38 Pages Posted: 12 Jun 2008 Last revised: 10 Nov 2008
A new reality is emerging in the public sector: state governments are spending an untold amount of tax dollars on public contracts that are performed overseas. Although the private sector has offshored jobs for decades, state governments have only recently become part of the offshoring bandwagon. As media reports of government offshoring increased during the 2004 election, lawmakers in virtually every state introduced legislation to restrict state contractors from performing work outside of the United States. While only few states have imposed restrictions, state lawmakers continue to introduce such legislation today. This Note argues that state offshore contracting restrictions are unconstitutional. In short, the Foreign Commerce Clause of the U.S. Constitution prohibits state governments from regulating international trade and burdening foreign commerce. Through these offshore contracting restrictions, states are discriminating against foreign commerce, thus impairing the federal government's ability to speak with "one voice" in international trade relations. Further, state offshore contracting restrictions intrude on the federal government's exclusive power to conduct foreign relations. Application of these constitutional provisions leads to a curious result: once a state puts a contract in the stream of commerce, it is unable to prevent its contractors from offshoring the contract. After reviewing the costs and benefits of offshore contracting, this Note concludes that the nation must engage in a serious debate about whether to permit states to restrict offshore contracting, given the potential challenges offshoring poses for state governments. Before this debate can occur, however, this Note calls on both the federal and state governments to make a serious commitment to study and identify the issues and implications of offshoring because policy solutions, if any, depend on the availability of offshoring data.
Keywords: Foreign Commerce Clause, Commerce Clause, Outsourcing, Offshoring, Procurement, dormant Commerce Clause, Japan Lines, Globalization, Privatization
JEL Classification: M55, F1, J5, M2, L33
Suggested Citation: Suggested Citation