Outsourcing and Offshoring: Is There Really a Difference?

By Kyle Blaine

Jun 25, 2012 6:10pm

If you’re going to attack Mitt Romney, make sure to define your terms correctly.

Romney came under attack after a Washington Post story painted him as an “outsourcing pioneer,” but his top campaign advisers are pushing back against those attacks, accusing the media and the Democrats of conflating outsourcing with offshoring.

Politics aside, Romney’s advisers may have a point. The two terms can have different meanings, and often “outsourcing” is used mistakenly in the place of “offshoring.”

Outsourcing occurs when a company contracts a specific process out to a third party, finding someone who specializes in whatever needs to be done.  Offshoring happens when businesses send in-house jobs overseas.  Both may save a company money, but only offshoring specifically means sending jobs out of the country.

On “Face The Nation” Sunday, Romney campaign senior adviser Eric Fehrnstrom explained the difference.

“Outsourcing is what the Obama campaign does when they hire an outside telemarketing vendor to provide telemarketing service. This is done by companies every day. They take functions and they allow vendors to do it instead of handling it in-house. Offshoring is the shipment of American jobs overseas,” he said.

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However, according to Roger Noll, Professor Emeritus of Economics at Stanford, outsourcing and off-shoring can occur simultaneously.

“I suspect some of what Romney did was a combination of outsourcing and off-shoring,” Noll said. “Yet all this talk about outsourcing and off-shoring distracts from what matters, which is, was it the case that bad companies were made healthy or was it the case that good companies were made sick?”

The question now is whether the Romney campaign’s attempt at playing English professor will deflect this new line of attack.

President Obama certainly doesn’t think so. At a campaign event in New Hampshire on Monday, Obama criticized the Romney campaign for its attempts to clarify the issue.

” Now, what Governor Romney and his advisers don’t seem to understand is this:  If you’re a worker whose job went overseas, you don’t need somebody trying to explain to you the difference between outsourcing and offshoring,” Obama said. “You need somebody who’s going to wake up every single day and fight for American jobs and investment here in the United States.  That’s what you need.  That’s why I’m running. ”

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