The Muddles over Outsourcing

Critics have muddled the public debate over offshore outsourcing by using the term interchangeably to refer to altogether different phenomena such as on-line purchase of services, direct foreign investment and, sometimes, all imports. We argue that clarity requires distinguishing among these various phenomena and define outsourcing explicitly as the services trade at arm's length that does not require geographical proximity of the buyer and the seller–the so-called Mode 1 services in the WTO terminology–conducted principally via the electronic mediums such as the telephone, fax and Internet. The definition is appropriate because this is the phenomenon that is relatively new and scary in public consciousness…