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Trump and the Philippine Outsourcing Industry

November 10, 2016 Claire Ponsaran
Trump and the Philippine Outsourcing Industry

President-elect, Donald J. Trump, has been firm and clear in his campaign against illegal immigrants and offshoring. He wants to “ensure that open jobs are offered to American workers first.” What does this mean for offshore outsourcing? What will happen to offshore outsourcing in the Philippines?

Truth? Nothing much.

Free Trade Will Always Be Free

International free trade allows businesses many freedoms in search of greater profits. Trump can’t stop businesses from going offshore. Creating a law that will punish those businesses that outsource is unconstitutional. That will curtail their freedom to choose where they’ll transact business and who they’ll transact it with.

Offshore outsourcing may cost American companies a lot. They’ll be taxed heavily if they chose to move some of their operations elsewhere. However, there’s a limit to the percentage of tax that the U.S. president can impose. For example, Trump can only raise the tariff up to 15% for imports without pushing Congress to change the law.

The fact that there’s no tax scheme for the outsourcing of skills instead of goods seems to work to our advantage. Companies who outsource to us don’t need to bring their hired staff into the United States on H-1B visas. Rethink Staffing takes care of the recruitment, implementation, and management of their team at an affordable cost.

Big Firms are Obvious Targets

Politicians usually lash out at the big players. Rethink Staffing is small fry. No, we’re not minimizing our role in the global outsourcing industry. But, most of our clients are small fry, too. They use the savings they have from global collaboration as a way to expand their operations sooner than they would normally have without resorting to outsourcing.

We say this with confidence: heavy taxation or high tariffs won’t be a problem for us. What we export is skilled labor, not people or goods. Rethink Staffing employs people with technical and communications skills, plus the wisdom and confidence that only come from experience. We provide quality service while helping our clients reach their goals, save money through low-cost labor, and grow their business.

Automation is the Enemy of Onshore and Offshore Outsourcing

Contrary to popular belief, Americans didn’t lose their jobs to Mexicans and Asians. Automated machines replaced them, and will continue to do so, according to an article by Nate Church of BREITBART. He came up with a troubling conclusion based on the latest “Economic Report of the President” published by the White House:

The report suggests an over 80% chance that jobs paying less than $20 per hour will eventually succumb to the cybernetic revolution. Jobs in the $20 to $40 look to be cut by about one-third, but positions at the high end should see less than 5% losses to automation. The numbers are staggering and, if true, represent the biggest shift in labor that the modern world has ever seen.

The Washington Post also provided a shocking report:

The McKinsey analysts sharpened their argument in a paper released last month. Their estimates, based on U.S. Bureau of Labor Statistics data covering more than 800 occupations, draw a shocking picture of the future. In manufacturing, 59 percent of activities could be automated, and that includes “90 percent of what welders, cutters, solderers and brazers do.” In food service and accommodations, 73 percent of the work could be performed by machines. In retailing, 53 percent of current jobs could be lost.

White-collar workers may imagine that they’re safe, but that’s wishful thinking. If computers can be programmed to understand speech as well as humans do, 66 percent of jobs in finance and insurance could be replaced, the most recent report says.

But, not all jobs can be done by machines. Many Americans still believe that some jobs still need people and they will probably exist even after 50 years.

Yet even as many Americans expect that machines will take over a great deal of human employment, an even larger share (80%) expect that their own jobs or professions will remain largely unchanged and exist in their current forms 50 years from now. And although 11% of today’s workers are at least somewhat concerned that they might lose their jobs as a result of workforce automation, a larger number are occupied by more immediate worries – such as displacement by lower-paid human workers, broader industry trends or mismanagement by their employers.

Too Early to Call It

Economists are already tolling the death knell for the IT-BPO industry in the Philippines:

Capital Economics senior Asia economist Gareth Leather said in a report – “What would a Trump victory mean for Asia?” – that “the Philippines would be the biggest loser if Trump followed through on his threat to punish American companies that outsource jobs abroad.”

“The Philippines has a thriving business process outsourcing sector, which last year brought in revenues equivalent to around 10 percent of GDP (gross domestic product),” Leather added.

An economist from a local bank, likewise, noted emerging markets may suffer from a Trump presidency since the Republican candidate has been very outspoken against trade and immigration.

But it’s too early to lament the probable negative effects of a Trump administration. We have to believe that he’ll make sure the American companies that have offshore operations will continue to thrive. And, offshoring is one way of ensuring a business will survive. After all, Trump is an astute businessman.

How Will This Affect Philippine Outsourcing?

It may not be even Trump’s win that will affect the Philippine BPO industry. It’s the anti-US rants of President Rodrigo Duterte that will probably weaken the Philippine outsourcing industry. The Philippine Daily Inquirer quoted a Citi Philippines economist about that issue:

“Not that existing US-based IT (information technology)/BPO firms operating in the country would be likely to leave abruptly under a Trump presidency, but ‘prospective’ BPO business may diminish, already wary of (President Rodrigo) Duterte’s anti-US rhetoric and shift to a more independent foreign policy,” Trinidad said.

Trinidad further said that “discretionary spending items, such as those spent in restaurants and hotels,” may be the biggest losers because of a weakened BPO industry in the Philippines.

“Since BPO office requirements sparked the commercial office segment building boom, lost BPO opportunities may shade real investment gains as well. Upbeat construction jobs, up recently by 655,000 (based on July labor survey) due to strong investments, would be affected, reinforcing potential consumption weakness,” Trinidad said.

None of these news reports, however, declared that the BPO industry in the Philippines will disappear pretty soon. The industry will be affected, but it’s safe to say it will bounce back.

Keep in mind that businesses will always find ways to increase their profits and that free trade is not a zero-sum game. It will always balance out and be mutually beneficial for everyone who engages in the global exchange of goods and services.

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