Policymakers worried that outsourcing will harm the economy are misleading the public. Outsourcing creates as many jobs as it destroys while bringing consumers more services for lower prices.

California Senators Feinstein and Boxer both supported a recent bill to prohibit U.S. companies from outsourcing federal contract work overseas. Another bill before Congress seeks to expand federal job-retraining benefits to high-tech and other service workers, while a third requires companies to give a 90-day notice before moving jobs overseas.

These bills unnecessarily discourage outsourcing and harm the economy. Gregory Mankiw, Chair of the President’s Council of Economic Advisors, echoed economists’ consensus opinion on free trade when he said that outsourcing is “just a new way of doing international trade” and “a plus for the economy in the long run.”

International trade in services is not fundamentally different than international trade in manufacturing. In each case, both countries gain by trading. But until recently, service jobs had been largely immune from international competition because being close to customers was a necessity. Now, however, information technology and telecommunications have become so advanced they allow call centers and information processing firms to serve consumers around the globe.

The steam engine lowered transportation costs and expanded the array of manufactured goods and agricultural products available to millions of consumers in the 19th century. Information technology promises to do the same for services in the 20th century. And just as with the manufacturing shift, outsourcing services will greatly benefit American consumers by providing more and cheaper services.

Many fear outsourcing will destroy American jobs. It is easy to observe someone in another country performing a job formerly done by a U.S. worker. What is harder to see is that outsourcing creates another job in the United States to replace the one that is lost.

When U.S. consumers spend money on an outsourced service the foreign firm receives dollars. The foreign workers and firms do not simply hang on to the dollars. They send them back to the U.S. to purchase goods and services or to invest. The jobs created by dollars flowing back to U.S. export industries may be harder to see but they are no less real.

One 2002 report estimated that by 2015 more than 400,000 information technology jobs and more than 3.3 million service jobs will relocate overseas. Whatever the actual number, a similar number of new jobs will be created in the U.S.

In fact, over the past 50 years, total U.S. civilian employment and the size of the U.S. labor force have tracked each other fairly closely. Various trade policy changes did not alter the relationship because trade policy neither creates nor destroys jobs on balance.

Instead of altering the number of jobs, free trade changes the mix of jobs in the country to reflect those areas in which we have the greatest competitive advantage over other countries. International trade in services expands the process of job specialization and raises living standards.

Although outsourcing of services will not, on net, destroy jobs, when the mix of jobs changes some unemployed workers will have to move to other industries. The bill to extend the Trade Adjustment Assistance (TAA) program to information technology and service workers is aimed to help those temporarily unemployed by outsourcing. But the TAA program’s record for helping manufacturing workers is not impressive.

One economic study found that TAA programs didn’t substantially raise the earnings of the trainees. The people who went through the program did not find better paying jobs than those who did not. Extending the TAA to service workers only extends an inefficient government program to more workers who are unlikely to benefit.

Outsourcing of service jobs will create jobs in America’s export industries, lower domestic firms’ costs, and increase the quality and quantity of services for consumers at lower prices. In the long run outsourcing will benefit all Americans and with its reliance on international trade, this change will be especially beneficial to Silicon Valley. If government interferes with the ability of U.S. businesses to outsource, we will all lose.