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Intel Co-Founder Calls For Tax On Offshored Labor

Soulskill posted more than 4 years ago | from the wishful-thinking dept.

Businesses 565

theodp writes "Intel co-founder and ex-CEO Andy Grove calls BS on the truism that moving production offshore to locations with much lower wages is a sound idea. 'Not only did we lose an untold number of jobs,' says Grove, 'we broke the chain of experience that is so important in technological evolution. As happened with batteries, abandoning today's "commodity" manufacturing can lock you out of tomorrow's emerging industry.' To rebuild its industrial commons, Grove says the US should develop a system of financial incentives, including an extra tax on the product of offshored labor. 'If the result is a trade war,' Grove advises, 'treat it like other wars — fight to win.'"

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How do you decide what's offshored labor? (4, Insightful)

Qzukk (229616) | more than 4 years ago | (#32776900)

The first thing companies will do is spin off "Offshore Labor, Inc" to a separate corporation headquartered in the Cayman Islands or wherever, then import the products for sale here. No offshored labor here!

Re:How do you decide what's offshored labor? (3, Interesting)

binarylarry (1338699) | more than 4 years ago | (#32777016)

Ask the companies who are being audited by the IRS for their existing Cayman tax dodging practices how much fun that is.

This is one thing Obama should be lauded for (and I'm not a huge fan).

Re:How do you decide what's offshored labor? (4, Informative)

QuantumRiff (120817) | more than 4 years ago | (#32777674)

Then they just do what haliburton did, and move their headquarters out of the US, to Dubai...

Re:How do you decide what's offshored labor? (0)

Anonymous Coward | more than 4 years ago | (#32777184)

Google "Value Added Tax" to see how this is dealt with.

Part of Obama's agenda (0, Funny)

Anonymous Coward | more than 4 years ago | (#32777362)

The 3-prong assault on freedom includes:

-Socialism (limit economic growth)
-Homosexual education in high school (or before)
-Apple-style culture

The second amendment is the true and only guarantee of freedom for the American people in the entire Constitution. Please do not forget that if you're going to vote DemocRat.

Re:Part of Obama's agenda (3, Funny)

macintard (1270416) | more than 4 years ago | (#32777594)

I am now dumber for reading your comment. Your power to reduce intelligence is amazing.

Re:How do you decide what's offshored labor? (1, Interesting)

Anonymous Coward | more than 4 years ago | (#32777586)

But doesn't that mean the "product" is now subject to import duties (ie, taxes)?

I'm not being a smart-ass, I'm curious how that pans out...

Re:How do you decide what's offshored labor? (5, Interesting)

ducomputergeek (595742) | more than 4 years ago | (#32777866)

From the stand point of double taxation of foreign profits in the US, you are much better creating your corporate HQ somewhere like the Isle of Man or the Caymens, et. al. and then creating a separate US entity. Then your profits made in other countries are taxed in those countries, but if you send the profits to the Caymens you aren't taxed again on those profits.

As it works now, if you are HQed in the US and have different operating units in other countries, you pay the taxes in those countries. Then any remaining profits sent back to the US are taxed again by the IRS. So the US company is being taxed for the profits made in the UK, Germany, Russia, or wherever.

In most countries, if their company makes profits in the US, they aren't taxed again back home when they bring the profit back.

Is Grove running for office? (3, Interesting)

rsborg (111459) | more than 4 years ago | (#32776936)

This is not only good common sense, it's totally populist and would win him many single-issue votes (including mine).

I am completely sick of being screwed over by the corporatist plutocrats.

Re:Is Grove running for office? (1, Funny)

Anonymous Coward | more than 4 years ago | (#32777162)

He almost got me to buy Intel again. That alone is an achievement that deserves recognition.

Re:Is Grove running for office? (3, Insightful)

MrEricSir (398214) | more than 4 years ago | (#32777246)

Too bad he's not the CEO anymore.

And too bad all of Intel's products seem to be made in China these days.

Re:Is Grove running for office? (5, Insightful)

hoggoth (414195) | more than 4 years ago | (#32777322)

If the laws and taxes make it economically infeasible to compete without offshoring, Intel like every other corporation will offshore. Grove is suggesting we make it more feasible to compete with local labor because of the long term benefits it will have for innovation. I expect if it were economically feasible to keep work here they would.

Nothing hypocritical here.

Re:Is Grove running for office? (1, Insightful)

Anonymous Coward | more than 4 years ago | (#32777610)

Only if you define "economically feasible" as "the absolute greatest profit".

Re:Is Grove running for office? (2, Informative)

TheRaven64 (641858) | more than 4 years ago | (#32777604)

They might be made in China, but the decent ones aren't designed there. They're designed in Israel.

Grove is a two faced .... (5, Informative)

AnonymousClown (1788472) | more than 4 years ago | (#32777266)

When Grove was CEO of Intel, HE was the one who moved much of their R&D overseas because they were "unable to get qualified Americans."

Re:Grove is a two faced .... (4, Insightful)

Anonymous Coward | more than 4 years ago | (#32777544)

Of course they couldn't find qualified Americans.....for $10/hour. That's his whole point. If the offshore labor was taxed for the same things local labor is taxed for, the scales wouldn't be quite so imbalanced.

Re:Grove is a two faced .... (5, Insightful)

Local ID10T (790134) | more than 4 years ago | (#32777878)

When Grove was CEO of Intel, HE was the one who moved much of their R&D overseas because they were "unable to get qualified Americans."

Of course he did. When he was CEO of Intel, his job was to do what was best for Intel. Now that he is not the CEO of Intel, he is looking at a different picture: what is best for the USA. There is nothing two-faced about it.

Re:Is Grove running for office? (2, Interesting)

stms (1132653) | more than 4 years ago | (#32777630)

Taxes aren't for creating a desired behavior, they're for collecting funds. If you want to financially punish people for an undesired behavior you should fine them. A new tax will make our already overly complex taxation system even more complex.

Re:Is Grove running for office? (2, Insightful)

AmazinglySmooth (1668735) | more than 4 years ago | (#32777818)

Taxes were not intended to change behavior, but they do. There is no way to avoid it unless you tax something everyone wants to do (earn money and spend money).

Re:Is Grove running for office? (2, Interesting)

scamper_22 (1073470) | more than 4 years ago | (#32777770)

Absolutely not. This is the absolute worst thing that you can do.

I'd rather the government just be straight up protectionist and say solutions must be made in the USA or at least in NAFTA.
Companies will always find ways around taxes. they will form subsidiaries... who knows. Not that, but who ends up with the money of a tax? It will be the government. It won't be the struggling American tech worker. I see no benefit in taxes in the government's hands so it can give the money to more bureaucrats.

The other question is how much will the tax be. Lets say a laborer in the developing world is 1/4 your salary. How much tax do you think it is going to take until it is economically rational to hire an American over a Chinese person?

No, I'd rather we take his message which is sound. I'm tired of hearing about the innovation economy and blah blah. We need regular commodity industry as well as a retention of knowledge and the ability to innovate on existing knowledge.

Especially with digital technology today, do we want to end up in a world where if you want to work on CPUs, you have to move to India or something? Now let's not pretend we're the victim all the time.

American companies make a lot of money by exporting. Intel, Cisco... all want to see to the billion indians / chinese. If we take protectionist measures, they will too.
So let's not pretend too much here, Mr. Intel CEO. I'd rather each region have reasonable job prospects in each field. So a Chinese CPU firm makes CPUs for Asia. Intel and AMD fight for the NA market. The EU does its own thing. It will limit growth opportunities for these global players, but it will ensure a more robust economy in each region

We need to preserve freedom and industry. Putting money in the hands of government doesn't help.
It's better to have a free market limited to NAFTA than a fake free global market with government directing the whole thing.

Damn Skippy! (3, Insightful)

FutureCIS (1382381) | more than 4 years ago | (#32776946)

This is an excellent point. Offshore labor is why I cant understand tech support anymore. I would rather pay a get more for the product to ensure I get good customer support.

Re:Damn Skippy! (4, Insightful)

eln (21727) | more than 4 years ago | (#32777228)

I would rather pay a get more for the product to ensure I get good customer support.

You say that now, but how many products tell you where their tech support is based on the packaging? If you see two identical products on the shelf and one is ten bucks less than the other, you're going to buy the cheaper product without even thinking about where their call center is. Consumers cannot be trusted to vote with their dollars on things like this, especially since in the vast majority of cases they are called upon to make purchasing decisions with incomplete information.

Global free trade is one of those things that sounds really good in theory, but in practice ends up driving down wages everywhere, decreasing quality of products and services, and gutting the middle class of more prosperous nations. We've seen this over the past decades. Unfortunately, both consumers and suppliers make decisions on short-term scales, meaning they tend to make decisions based on what the balance sheets say today without even considering the impact those decisions will have years or decades down the line. In theory, government regulation is supposed to help provide a hedge against that sort of thing, since governments are supposed to be concerned with more long-term economic matters.

This is not to say globalization in and of itself is bad. However, it needs to be undertaken much more carefully and gradually than it has been. Simply dropping all tariffs and letting businesses run wild all at once has produced a situation where everyone except for the very richest among us suffers, and even they will start to suffer if we allow the middle class to completely disappear and they have to drive through squalor on the way to their gated compounds like they do in many developing countries.

It's in everyone's best interest to preserve a robust middle class in developed countries and encourage the middle class to grow in developing countries. Globalization policies should be undertaken with that goal in mind, not with the sole purpose of driving down cost as has been done so far.

Re:Damn Skippy! (2, Insightful)

TheKidder (894874) | more than 4 years ago | (#32777624)

Global free trade is one of those things that sounds really good in theory, but in practice ends up driving down wages everywhere, decreasing quality of products and services, and gutting the middle class of more prosperous nations.

Wait, what?

Re:Damn Skippy! (2, Funny)

COMON$ (806135) | more than 4 years ago | (#32777254)

Then stop supporting the offshore companies. Don't tax them.

You have many choices of places to get support from. All that taxing these companies will do is push the cost on to you the customer.

As a side note, I have found that I get better support many times from the offshore folks than I do from the bubblegum chewing American doing the minimal amount of work to pass me off to the next level of support. Of course I am a Nebraskan so I am accent neutral, talking to overseas is just fine with me.

Re:Damn Skippy! (4, Interesting)

hedwards (940851) | more than 4 years ago | (#32777436)

Sigh, I wish this line of reasoning would die the swift death it deserves. Taxes are probably the least controlling way of making these sorts of adjustments. You're not realistically going to vote with your money because there's few if any products which aren't at some stage created in that fashion. A tax is a simple way of shifting the cost curve up in areas which aren't desirable so that the new equilibrium is a bit more responsible. And it works wonders. There's a reason why Seattle beats the crap out of pretty much any other major US city in terms of fuel efficiency. The state legislature instituted high taxes on gas and when combined with the oil industries tendency to screw us over at the pump more than other parts of the state you end up with people making sensible decisions over all.

By taxing them you put people on a more even footing to make informed decisions, it's not telling companies that you can't do it, it's telling them that if they want to do it they'll have to compete on a more even playing field.

Re:Damn Skippy! (-1, Troll)

Anonymous Coward | more than 4 years ago | (#32777880)

I am positive that you are an idiot, that is why you don't understand tech support or anything else for that matter.

Treat it like other wars... (5, Funny)

bl4nk (607569) | more than 4 years ago | (#32776966)

... and enter it with reckless abandon and no exit strategy; that last part is crucial.

Re:Treat it like other wars... (3, Insightful)

GrumblyStuff (870046) | more than 4 years ago | (#32777096)

And weak to no media coverage and using the same soldiers over and over until they're ground to a pulp physically and/or mentally and ensure that the general population suffers no ill effects of the war to the point that it doesn't affect more than the occasional purchase of a "Support our troops!" magnetic ribbon.

Re:Treat it like other wars... (2, Insightful)

bennomatic (691188) | more than 4 years ago | (#32777420)

And don't forget about torturing your competition but decrying that torture when used against your own people!

Re:Treat it like other wars... (1)

Bill_the_Engineer (772575) | more than 4 years ago | (#32777584)

Wow this thread assumes that the war is being directly managed by politicians... oh wait... it is.

Re:Treat it like other wars... (2, Interesting)

Rakshasa Taisab (244699) | more than 4 years ago | (#32777612)

While we're going all Iraq Invasion Style here...

How about the rest of the world add tariffs for stuff like exceeding a certain baseline aggregated carbon emissions for the production of goods, or paying salaries to textile workers that are lower than some predefined (and local price level adjusted) level?

This would IMO lead to a decrease in the use of manufacturing processes (and energy generation for these) that are focused on saving pennies on the dollar in exchange for large increases in pollution. In the case of sweatshops, companies can pay livable salaries without losing their competitiveness.

Treating symptoms instead of disease (0, Flamebait)

mark72005 (1233572) | more than 4 years ago | (#32777012)

As usual, the only solution the small-minded can come up with is to tax something into oblivion

Re:Treating symptoms instead of disease (1)

Bryansix (761547) | more than 4 years ago | (#32777288)

That's not the point. If you pay attention closely then you will clearly see that the reason that the USA has a trade defecit is because the other countried don't play by THEIR OWN RULES! Take China for instance. Nevermind the constant problem of paying employees less then a minimum wage or the prevailing culture of "one employee, two jobs" or the crazy amount of pollution their industrial revolution is dumping. The REAL problem was their currency. They pegged it to the dollar. They just last week allowed it to float to a more fair level. However this was after years and years of the people in the know yelling from the rooftops that it was a problem.

Take India for instance. Some call centers are expertly run. Cisco TAC is amazing beyond belief. But for every good example of a call center in India there are 10 examples of call centers run by untrained morons who can't even speak in a manner which is recognizable by half the US population. India is not really a country with fair wages either.

So yes, if taxing it gets the job done then I'm all for it because in this war the other side has been breaking all the rules for some time now.

Re: (3, Interesting)

MyFirstNameIsPaul (1552283) | more than 4 years ago | (#32777616)

How is it that China, and Japan before them, are able to peg their currencies? This is a question rarely discussed. The easiest and most effective way to accomplish this is by purchasing U.S. bonds, which we sell in abundance to cover our enormous debts. In effect, the politicians railing about how unfair the Chinese currency policy is actually contribute more to the problem than anyone else.

'Outsourcing' allows smaller firms to take on projects that they otherwise could not afford to do. I own a small business and at least two of my products I could never hope to bring to market if my only option was to use domestic resources. Those products make money and allow me to expand. This is not a burden on the U.S. economy; it is a positive contribution.

Re:Treating symptoms instead of disease (1, Insightful)

clarkkent09 (1104833) | more than 4 years ago | (#32777490)

Assuming a truly globalized and free economy, this is a broken window fallacy. Increasing the cost of production (by taxing the more efficient producers to make their products as expensive as the products of the less efficient producers) can never lead to any overall increase of wealth. Of course one can use force to get one party wealthier at the expense of another, and that is pretty much what he is proposing.

Dont tax, remove tax breaks. (5, Insightful)

Kenja (541830) | more than 4 years ago | (#32777022)

If you send work off shore, you no longer get all the corporate welfare tax breaks that US companies get.

Re:Dont tax, remove tax breaks. (1)

mark72005 (1233572) | more than 4 years ago | (#32777082)

On the other hand, you avoid the demonization that is part and parcel with being a "big corporation"

Re:Dont tax, remove tax breaks. (4, Insightful)

dfetter (2035) | more than 4 years ago | (#32777356)

When you frame something as "demonizing," you're implying that the characterization of demonic behavior is not accurate.

Given the actual track record of corporations since the beginning of the East India Company, your implication is false on its face.

Re:Dont tax, remove tax breaks. (3, Insightful)

assertation (1255714) | more than 4 years ago | (#32777396)

But would that, alone, be enough to make offshoring financially ?

If the answer is "no", I would say do it anyway. Tax breaks are really taxes put onto someone else...American citizens. If fewer American citizens are earning money from these companies ( to be taxed ) I see no reason why Americans should subsidize these companies with gifts.

Re:Dont tax, remove tax breaks. (3, Interesting)

bennomatic (691188) | more than 4 years ago | (#32777472)

Isn't that the same thing? Effectively removing tax breaks that have been in place for 5, 10, 15, or 20+ years is just like creating a new tax, at least in the minds of people who will have to oversee its payment, potentially for the first time in their careers.

No CFO in the world will say, "Thank goodness we've been saving so much over the years with those tax breaks! All that money is right here in a piggy bank, so we're ready to start paying those taxes again." Those same CFOs already received huge bonuses based on those breaks, and that money's long spent.

Re:Dont tax, remove tax breaks. (4, Insightful)

Kenja (541830) | more than 4 years ago | (#32777562)

Same effect, less paper work. But bottom line is that if you dont want to have the jobs in the US you shouldn't get the benefits of incorporating here.

I'd live to see the tax loopholes closed altogether, but failing that lets stop reducing money coming in (by sending jobs offshore) while at the same time paying out in tax breaks.

Government is the problem, not the solution (-1, Flamebait)

slk (2510) | more than 4 years ago | (#32777076)

The fact is, despite the cheaper labor, there is a great deal of overhead in doing business in China and similar countries. This includes infrastructure issues (i.e. electricity and transportation), responsiveness to customer demand, bribes, and the fact that it really does take more people to get the same work done. The US could be competitive, but it needs to unshackle itself from bad policy:
  • Pass a national right-to-work law
  • Reduce the power of unions, kill any threat to employers of card-check
  • Move healthcare to either a totally open market (individuals buy policies, regulated, priced fairly based on avoidable risk), get the companies out of that business
  • Cut corporate marginal tax rates, so companies are actually willing to make a profit in the US
  • Work to eliminate regime uncertainty; stop dangling "we're going to overhaul this later" over major and minor US industries
    (regime uncertainty will hopefully get better after November)
  • Work hard to reduce employer/employment burdens and costs

If our government did not make it so expensive to hire people, companies would hire more people. (Obvious 101, but apparently not to the current leadership)

Re:Government is the problem, not the solution (3, Insightful)

FuckingNickName (1362625) | more than 4 years ago | (#32777200)

Or just remove worker benefits entirely. And freedom of asembly. And speech. And make it easier to bribe government officials. Also workhouses. Rows and rows of beds. That's the way to increase employment! Make workers so cheap and desperate that their only alternative is slow death. We did eliminate healthcare, yes? Good.

Re:Government is the problem, not the solution (2, Insightful)

assertation (1255714) | more than 4 years ago | (#32777480)

That is already what is happening....more and more good jobs go overseas, Americans become more willing to accept lower standards of living.

Re:Government is the problem, not the solution (0, Flamebait)

MyFirstNameIsPaul (1552283) | more than 4 years ago | (#32777684)

Another baseless, rhetorical argument that meanders on to unrelated claims of purgatory. I suppose our current course of increased regulation, spending, and taxing is going to lead to some bright place?

Re:Government is the problem, not the solution (1)

bennomatic (691188) | more than 4 years ago | (#32777746)

Unrelated claims of purgatory? Have you no knowledge of history? The GP's description is exactly as things were before unions and gov't regulation of employment practices in the states.

Re:Government is the problem, not the solution (-1, Flamebait)

mark72005 (1233572) | more than 4 years ago | (#32777276)

I like how the "flamebait" label is reserved for posts from only one side of the political spectrum....

(go ahead, lay it on me)

Re:Government is the problem, not the solution (1)

Xiver (13712) | more than 4 years ago | (#32777530)

Making strawmen just makes them feel good about themselves. If they actually analyzed their position they may be forced to realize they're not as smart as they believe. The Slashdot crowd has always been pretty left leaning, but the pendulum farther in that direction than it has ever been. Don't let it bother you, reality will come crashing down on them eventually.

Re:Government is the problem, not the solution (2, Interesting)

bennomatic (691188) | more than 4 years ago | (#32777708)

I think the "flamebait" rating on your comment is unfair. Maybe "overrated". I wish there were a "wrong" or "misinformed" option.
  • Unions are not the problem. Without them, we'd still be eating hot dogs with up to 1% human flesh in them, much of that flesh coming from children whom companies would have no problem putting in danger for little or no pay.
  • Healthcare has had years of light regulation to get it right. Making it totally open is theoretically great, but if you think there wouldn't be collusion and price fixing, you're blind. And a truly "open" market is contradicted by your suggestion of regulation: who would choose the "fair" prices?
  • Do you even know how little most corporations pay in taxes? If it were less, the government would be paying most corps to do business.
  • Regime uncertainty? Vote for your tea party people if you will, but they're the wild card. This is a party built of folks who are in it for themselves and nothing else. I'm not saying that Obama nor the current congress have been perfect, but I believe they're trying to move things in the right direction.

I agree with your last point. I think that we should drop personal income/payroll taxes for anyone making less than $200,000/year and have corporations pay strictly based on gross revenue minus non-executive salaries of US workers. That would cut costs and get more money moving throughout the economy.

Taxing middle class but not taxing imports is dumb (0)

Anonymous Coward | more than 4 years ago | (#32777086)

Military, courts, social security, welfare cost money. Working Joes pay for it. Walmart and Steve Jobs don't. Time to redirect.

Blasphemy! (0, Flamebait)

ch-chuck (9622) | more than 4 years ago | (#32777108)

That's anti free trade and will only hurt the consumer. If USians can't compete in the open market maybe we don't deserve to have a 'chain of experience'. The only thing we need to teach our children is how to collect a government handout and shop at WalMart. Andy should be haunted by the spirit of Reagan in the church of Limbaugh.

(sorry, too much energy drink!!)

how is it (5, Interesting)

nimbius (983462) | more than 4 years ago | (#32777124)

every american businessman inevitably refers to business process in terms of war.

Re:how is it (2, Insightful)

Pojut (1027544) | more than 4 years ago | (#32777152)

You have obviously never tried to convince an American "businessman" to consider customers first and profits second.

Re:how is it (2, Interesting)

suomynonAyletamitlU (1618513) | more than 4 years ago | (#32777812)

I'm pretty sure if they had any interests other than making profit, they could find employment doing something more useful than management.

Well, okay, that's not fair. What I mean is, the people who went into business from the get-go were never interested in being of service to others. You don't earn a business degree as opposed to an engineering degree, science degree, law degree, etc, because you wanted to do interesting things. You earn it because you want to be in control of a business. Businesses "do whatever" and make money from it. End of story.

I know this is biased and spiteful and a little bit flamebait-ish; however, it's a touchy subject, and I think rightfully so.

Re:how is it (2, Interesting)

Pojut (1027544) | more than 4 years ago | (#32777846)

Personally, I'm going after a business degree primarily because I already have technical skills. I will be much more capable having an understanding of both sides, rather than only one.

It will narrow my job opportunities, but the opportunities it allows will be worth it.

Re:how is it (0)

Anonymous Coward | more than 4 years ago | (#32777248)

war on poverty
war on illiteracy
war on smoking
war on cancer
war on racism

darn businessmans

Re:how is it (1, Troll)

DaveV1.0 (203135) | more than 4 years ago | (#32777404)

I don't know how you were voted interesting when the term "trade war" has been around a very long time and is a political and economics term.

It is not that "every american businessman inevitably refers to business process in terms of war." Rather, many businessmen of all countries use the same terminology and you are picking on American businessmen because you are most-likely anti-American.

Re:how is it (2, Funny)

pitchpipe (708843) | more than 4 years ago | (#32777694)

how is it every american businessman inevitably refers to business process in terms of war.

How DARE you misrepresent the American Businessman this way! This means WAR!

Balance of tradeoffs (2, Insightful)

Myji Humoz (1535565) | more than 4 years ago | (#32777130)

The trouble with these type of taxes is that the corporations simply pass it onto the customers. Unless a huge tax is placed on the products, it will still be cheaper overall to offshore labor and charge consumers more. There are three scenarios:

1) Low tax, say taxing the corporations for 20% of the difference between US cost of labor and offshored cost of labor. Consumers will pay more in the US, but get no new jobs, and are worse off. The government earns taxes and is better off. The corporations sell slightly fewer products due to slightly higher cost, and are slightly worse off.

2) Medium tax rate, say taxing the corporations for 80% of the difference between US cost of labor and offshored cost of labor. Consumers will pay more in the US, but get no new jobs, and are worse off. The government earns lots of taxes and is better off. The corporations sell fewer products due to higher cost, and are noticeably worse off.

3) High tax rate, say taxing the corporations for 120% of the difference between US cost of labor and offshored cost of labor. Consumers will pay more in the US, but get some new jobs, and are worse off unless they would be unemployed otherwise. The government earns very little in taxes and is barely better off. The corporations sell fewer products due to higher cost, and are much worse off.

Of course, the corporations lose less money if the goods in question are price inelastic (demand doesn't drop that much if price increases) and there's a social benefit from more employment and technical expertise, but the government gets the most money in case 2, where everyone except for the government is made worse off by the taxes. In real life, there's a huge time in cost and effort needed to move manufacturing back to the US, what with hiring new managers, building or reopening factories, establishing entirely new supply lines, canceling contracts, etc. Because of this, companies are unlikely to move manufacturing back to the US even if the tax makes hiring offshore workers the same as hiring American workers; the slight gain in quality and public respect is canceled out by the upfront cost of moving.

I for one sincerely doubt that the US government will tax corporations with a high enough rate to make most of them move back to the US, as the tax income is the lowest in that situation. Sadly, even if this knee jerk reaction goes through, social benefit to consumers and citizens will likely take a back seat to corporate interests and government revenue collection.

Re:Balance of tradeoffs (2, Insightful)

frosty_tsm (933163) | more than 4 years ago | (#32777456)

3) High tax rate, say taxing the corporations for 120% of the difference between US cost of labor and offshored cost of labor. Consumers will pay more in the US, but get some new jobs, and are worse off unless they would be unemployed otherwise. The government earns very little in taxes and is barely better off. The corporations sell fewer products due to higher cost, and are much worse off.

You're analysis is impressive, but is missing one point in scenario 3. While cost of goods are higher, domestic demand is raised due to more jobs and a higher median income. Neglecting domestic jobs has reduced demand (less money to shop with), which has been offset by cheaper goods.

Re:Balance of tradeoffs (1)

Myji Humoz (1535565) | more than 4 years ago | (#32777764)

The type of jobs introduced by manufacturing in this day and age don't pay very well. Even if a megacorp moved all of their production into the US, they might add 20,000 jobs. In a nation with 130+million employees, the increase in domestic demand is negligible. An increase in cost per product of 5%, however, is noticeable by almost every consumer.

To h4rr4r who posted below this comment who says that if "you have a cost and pass it on, your prices go up," that's sort of the definition of passing a cost on. Everyone and anyone can raise prices, it just wouldn't make economical sense to do so when they're at an optimal level. The tax alters the economics, which alters the optimal point, which alters the resulting steady state price. Every one of their competitors likely use offshored labor if those competitors are american, and thus they would also be sharing in the higher cost. According to game theory, they'll see that all their costs will rise, and they'll be comfortable letting their prices rise.

Re:Balance of tradeoffs (2, Insightful)

h4rr4r (612664) | more than 4 years ago | (#32777502)

ECONOMIES DO NOT WORK THAT WAY!

If you have a cost and pass it on, your prices go up! If they could raise the price they already would have. Their competitors would drink up their milkshakes if they did what you are suggesting.

Re:Balance of tradeoffs (2, Insightful)

hedwards (940851) | more than 4 years ago | (#32777554)

Consumers are already paying for the degenerate practice of shipping jobs overseas. It's already being accounted for by artificially reduced wages and tax revenue that never gets collected since corporate entities don't have to ever book those profits. Putting a tax of this sort on those items puts the price of said items closer to what they'd be were the Chinese and Japanese engaging in illegal currency manipulation. Yes, it will make things cost more, but they would've already cost more were the entirety of the cost passed on as it should've been previously.

Re:Balance of tradeoffs (1)

TemporalBeing (803363) | more than 4 years ago | (#32777636)

The trouble with these type of taxes is that the corporations simply pass it onto the customers. Unless a huge tax is placed on the products, it will still be cheaper overall to offshore labor and charge consumers more. There are three scenarios: 1) Low tax, say taxing the corporations for 20% of the difference between US cost of labor and offshored cost of labor....
2) Medium tax rate, say taxing the corporations for 80% of the difference between US cost of labor and offshored cost of labor....
3) High tax rate, say taxing the corporations for 120% of the difference between US cost of labor and offshored cost of labor....

Haven't heard of a tariff, now have you?

The whole point of a tariff is that you raise the cost of the imported item at issue (e.g. off-shoring) to be the same or greater than that of doing the same thing domestically. Sure companies (of all sizes) may try to pass it on their customers; but that just means they're going to go to another vendor that can provide it cheaper because they don't have to pay the tariff. At best, the minimum price level becomes the same - since labor, etc. is generally fixed per the tariff (e.g. pay per employee, etc. - not truly 100% fixed).

And yes, I do support getting rid of a lot of the free trade stuff (NAFTA, etc.) and imposing more tariffs. Off-shoring was a nightmare that we are just being to understand the true consequences of.

Re:Balance of tradeoffs (1)

mckinnsb (984522) | more than 4 years ago | (#32777664)

Not necessarily - the argument of "passing on the tax to the consumer" doesn't really hold up in a free market. If a good or manufactured product faces many competitors in the same market, and the prices are competitive, then the company will be more reluctant to raise the price, especially if there is little else differentiating it from its competitors. Companies act individually. They don't always act in concert.

Lets say, for instance, you have companies A, B, and C. All companies perform the same amount of work offshore, which translates into roughly the same amount of cost savings. Lets say that we now tax all three companies along the same lines of the first scenario which you have described above. Company A is the first to "pass" its tax to the consumer, and is quickly followed suit by Company B, which also "passes" its tax to the consumer, but only passes about half of the tax.

Company C is now in an interesting position. Assuming the goods of all three companies are the same, Company C now has the cheapest product on the market. It may be making less net profit per item sold, but there is a good chance that the sales for its product will increase, because it is now the cheapest alternative. It can now choose to hold its price instead of "passing the tax" to make the difference on the loss in profit from the tax, banking on higher sales because the competition has increased the price of their products.

Disregarding the companies themselves, as far as the government is concerned, it is probably more interested in getting citizens off unemployment and collecting off their income taxes than making money from corporate taxes incurred from offshoring, so analyzing how much the government would benefit from tax revenue pursues the wrong path of inquiry. The national and state governments make far more money off of income tax.

Lastly, a tax such as this would serve as a deterrent for future offshoring, which is a real concern. If a company notices that after construction, moving, and re-organizational costs, that it will also be subject to a tax that may easily be raised, then it will think more carefully about offshoring. We have lost a great many jobs, but we absolutely cannot afford to shed them in similar numbers in the future. Not all of it was due to offshoring, but a lot of the jobs that we have lost that will be difficult to replace were. Preventing that from happening again is a good idea.

Re:Balance of tradeoffs (1)

Myji Humoz (1535565) | more than 4 years ago | (#32777800)

There are very few markets where the products are near identical. Consumers are heavily influenced by brand name, societal perception of item status, and so forth.

Shibby! (0)

Anonymous Coward | more than 4 years ago | (#32777158)

It'll never happen , but it's good to hear from someone in the industry.. freaking sweet !

Ugh (4, Interesting)

COMON$ (806135) | more than 4 years ago | (#32777174)

I subscribe to the theory that you should not tax just to generate income or punish. You should tax based on liability, if it costs the gov't cash to maintain a service you pay for it. fairtax.org Im so tired of paying extraneous taxes for random stuff. We seem to have this thought that we have a budget shortfall so lets tax something. Or we don't like people behaving like X so lets tax them. Did we forget what taxes are for?

Of course this ever happening in the US this is a pipe dream, but I like to visit these dreams every once in a while and yes it makes me feel better.

Re:Ugh (3, Insightful)

Rivalz (1431453) | more than 4 years ago | (#32777496)

I think the problem is there just aren't enough jobs. For local / offshore / everywhere.
Too many people in the world, not enough resources, not enough of anything to be honest. So we want to make a system that further skews things because too far in one direction is worse then a crappy balancing act. Offshore pushes towards labor inequality. I just wish the offshore people would demand more from their employers and it seems to be slowly moving that way. But the fact is that there are too many people that can do the same job, but with varying demands of compensation. So taxing them because they are willing to work for less does not seem very ethical to me but that is why I will always be broke. I'm not willing to screw people over just for a little extra money.

Re:Ugh (1)

TheRaven64 (641858) | more than 4 years ago | (#32777810)

One thing that I've proposed before is making a minimum wage laws international. If you pay below the minimum wage in a different country, then you have to pay the difference in import duty. Similarly, if you don't respect local time off and environmental laws. If you pollute in China and aren't taxed for it, then you pay the same tax on imports as you would pay for producing the goods near the point of sale.

Re:Ugh (1)

larkost (79011) | more than 4 years ago | (#32777590)

Your attitude does not stand up to even moderate scrutiny, and seems to be based on the assumption that a large percentage of the Federal budget goes to stuff that benefits only a small portion of the US. I would invite you to go look at the "Death and Taxes 2011" poster:

http://www.wallstats.com/deathandtaxes/

Looking at the poster you can't help but realize that the vast majority of the expenditures (either discretionary like most of the poster, or the including the non-discretionary as in the small inset) are not things that could be paid for out of use-fees (as you seem to be advocating). After all, how do you decide how much of the military you are using? Or how do you decide how much of a safety net you need? Both of these things are things that a society (so a collective of people) need to work at together, and the government is exactly the body that we have erected to do things like this for us.

Politicians love to point at government waste and blame their opponents for it, but in reality that accounts for a trivial amount of the budget.

Short of radically cutting back on social services (and thus bringing back the worst of our capitalistic days where Civil War widows were living on the streets in great numbers), this is just not going to happen.

Re:Ugh (1)

COMON$ (806135) | more than 4 years ago | (#32777758)

Im not saying it is easy. But a better way is a consumption tax. Military is supposed to be protecting our land, that is why we pay property taxes. We need to take care of our elderly, thus social security, straight forward right? However look at what your property taxes go to, look at your income tax, then your sales tax. There is a better way.

Re:Ugh (1)

hedwards (940851) | more than 4 years ago | (#32777654)

Fairtax is a scam whereby the rich don't pay their fair share and the rest of us end up picking up the tab. 23% sales tax is enough to kill pretty much any economic activity.

But then again, what the hell, lets just let corporate entities make up their own decisions, I mean it's not like we just had to spend trillions of dollars bailing them out for incompetent decisions. Wait, we did, didn't we? Taxing things of this nature is the least intrusive way of guiding things in a reasonable direction. It allows them to have a say, but makes it less costly for companies that choose to behave responsibly.

Re:Ugh (1)

COMON$ (806135) | more than 4 years ago | (#32777808)

Fair share of the taxes? what BS world do you live in? Look at it, who can afford fancy tax attorneys, and who cannot? Who do you think is paying more for taxes. Because of this convoluted system we give breaks to the rich. A fair tax works because there aren't loopholes, you pay tax on what you buy and use. 23% on what I buy is better than 30-50% of my entire take home. You are taxed based on what you spend, period...scam my ass.

the economic justification is actually simple (5, Insightful)

electrosoccertux (874415) | more than 4 years ago | (#32777208)

Now, I would consider myself fairly conservative. Usually the argument goes "they're taking our jobs!! We need to enact protectionist policies to protect American workers!"
Doing this blindly, I have a problem with it-- it doesn't make economic sense. If we are more efficient at producing one good, and they are more efficient at producing something else, then it doesn't make sense for us to waste money trying to produce it ourselves in the States.

However, I cannot economically justify free trade when
1). the trade occurring is uni-directional (IE, we're buying from them and they're not buying anything of ours-- I don't count China's investment in Treasuries as real goods-based Trade [even though financial trade is _technically_ trade])
2). one of the countries (China) involved in the trade refuses to let their currency's value be determined by the market.

In other words, what we have now is not true "free trade". If it were free trade, China would be buying our products [unfortunately much of our product is now Intellectual Property and it's difficult to enforce consumption of these goods], and China would not be fixing the value of their currency. If they weren't fixing the value of their currency relative to ours, then any trade imbalances would be slowly corrected as it becomes more and more expensive (in dollars) to outsource labor/manufacturing to China.

The Intel guy is mostly right; we just differ on how the imbalance should be corrected. I'd much rather a natural, market-driven return to mean, than a politically dangerous (taxing imports) one.

Re:the economic justification is actually simple (1)

Palpatine_li (1547707) | more than 4 years ago | (#32777522)

so who won in the 19th century merchantilism wars?

Re:the economic justification is actually simple (2, Insightful)

assertation (1255714) | more than 4 years ago | (#32777566)

The Intel guy is mostly right; we just differ on how the imbalance should be corrected. I'd much rather a natural, market-driven return to mean, than a politically dangerous (taxing imports) one.

What would be a realistic example of that?

Re:the economic justification is actually simple (2, Insightful)

seanadams.com (463190) | more than 4 years ago | (#32777742)

If we are more efficient at producing one good, and they are more efficient at producing something else, then it doesn't make sense for us to waste money trying to produce it ourselves in the States.

You aren't addressing Grove's point, which is that there is intellectual capital to be gained and retained by continuing to manufacture such commodities ourselves. Textiles vs semiconductors differ in this respect. There is also physical capital we might like to have ready to go, i.e. the fabs, for when China gets tired of taking our Monopoly money.

Re:the economic justification is actually simple (0)

Anonymous Coward | more than 4 years ago | (#32777836)

Good point... after all, how many computers in China run Windows? And how many of those copies were *paid for*?

We pay the Chinese for their products, but they take ours and don't pay a cent.

Re:the economic justification is actually simple (0)

Anonymous Coward | more than 4 years ago | (#32777862)

[unfortunately much of our product is now Intellectual Property and it's difficult to enforce consumption of these goods]

That. Unfortunately, our collective hallucination about how copyrights and patents are somehow similar to "property" is coming around to bite us in the ass. Us paying them money to receive tangible stuff isn't optional. Getting them to pay for knowledge, on the other hand, turns out to be a much less reliable proposition.

Even my toddler gets the difference between physical property ("Mine!") and "intellectual" property ("I'm going to grow up to be rich selling pictures of Tom and Jerry to other kids!" "No you're not, they're copyrighted!" "Huh? They're just pictures, and I'll draw them" "Nevermind, I'll explain when you grow up.")

Re:the economic justification is actually simple (0, Troll)

AmazinglySmooth (1668735) | more than 4 years ago | (#32777874)

Just make it illegal to sell US Treasuries to foreign owners. Seems like it might be treason to do so anyways.

Hmm... (3, Interesting)

fuzzyfuzzyfungus (1223518) | more than 4 years ago | (#32777218)

I wonder where the good Mr. Groves stands on Intel's large R&D base in Israel... Should we be taxing that, or is this only a tax for his dirty competitors who are fabbing with TSMC?

Win-Win case (1)

stanlyb (1839382) | more than 4 years ago | (#32777332)

The funny thing about outsourcing is that the outsourced company/branch is avoiding (taking back) the taxes, simply because the main company is based here (or some other tax trick). Or to make it more clear, if a company MicroHardware for example, with main office in USA, offshore 100% of its business in India, for example, then Microhardware will NOT pay taxes in USA (for the obvious reason), and will NOT pay taxes in India (for some another obvious reason). Win-win situation, but as usual, for the big pocket guys, not us, regular people.

Changed my mind on this (1)

m0s3m8n (1335861) | more than 4 years ago | (#32777352)

As a conservative, I always felt it was the corporation's responsibility to insure the highest possible return on investment to the company owners. However, if no one has work, then who will buy the products produced? Perhaps free trade has gone too far. Of course this will not be popular with our trading partners and treaty signers (NAFTA, etc.). With that said, I refuse to buy inferior products JUST because they are made in the USA. Detroit was handed their lunch by producing Pintos and Vegas when Civics and Corrolas were SO SUPERIOR.

Walling yourself in and burning bridges bad (2, Insightful)

MSTCrow5429 (642744) | more than 4 years ago | (#32777380)

The US is not the only economy in the world, and Americans are not going to stay in the US if there are no jobs. The policy of the Federal and State governments should be to work to attract high-wage jobs by cutting taxation, regulation, and the deficit, and returning to hard currency. Trying to fence jobs in will only result in foreign employers even more strenuously avoiding the US, while the most capable Americans will strive even more vigorously to escape.

Re:Walling yourself in and burning bridges bad (1)

DaveV1.0 (203135) | more than 4 years ago | (#32777648)

Sorry, but that will not work.
First off, it is harder to immigrate to other countries than it is to immigrate to the United States, so Americans will not be going overseas to work.

Second, even if they did, most Americans are not willing to work for 16 hours a day for $2.00 per hour and live in a company sponsored dorm as happens in China, etc.

Third, those high-wage jobs require high cost schooling that is getting harder to get. Also, there will not be enough of those jobs to go around. Computer programming used to be an under-staffed, high-wage career. Now, it is quickly being moved off-shore. Manufacturing jobs used to be good wage earning jobs. Now, most manufacturing has been off-shored. Even telephone jobs, which were decent paying service sector jobs have been moved off-shore. What you end up with is a tiny group of very rich people, a small group of middle-upper and upper class people with those high-age jobs you talk about, and a whole host of people working as burger flippers, Walmart stockers, and various other low-wage service and retail sector jobs.

If you off-shore all the middle-wage jobs, you end up with huge numbers of low wage jobs, few high paying jobs, low tax income for the government, high tax outlays for all the social services need by those low wage families, and a huge deficit. This will lead to a bankrupt government and hyperinflation.

Re:Walling yourself in and burning bridges bad (0, Troll)

MSTCrow5429 (642744) | more than 4 years ago | (#32777780)

Hate to break this to you, but I know of people who are finding work overseas, I have friends that are, and I'm thinking of doing it myself. We are all highly educated, or at least can pass as such. Not all jobs are high-tech, and you can certainly find well-paying jobs outside the US in any industry. I don't want to be in a banana republic US where I'm upper-middle class (or a politician), while everyone else is starving.

That FSCKER! (4, Insightful)

bennomatic (691188) | more than 4 years ago | (#32777382)

Some years back, my uncle got an MBA at UC Berkeley's Haas school of business, and the commencement speaker was none other than Andy Grove.

He basically told them they were all fscked. "Somewhere in India," he said, "there's someone willing to do what you do and more for 1/10 your salary. Sitting next to you are people who will do anything to beat you at your own job," and so on. He talked on and on about how much you have to compete to survive, effectively saying, "your work needs to be your life and you need to expect nothing from it."

And that'd all be well and good, but that same year, he was compensated over $100M, partially because of the cost savings of outsourcing, of forcing his employees to compete ruthlessly for each other, and so on. It seemed disingenuous at best to say, "This is the reality," when it's the decision of him and people like him to enforce that reality.

What this change in tone says to me is that he feels that other companies are beating Intel at the outsourcing racket. Maybe he's upset that Samsung is making Apple's A4 for the iPad and iPhone, and he wishes it had been Intel ARM chips going into those millions of devices over the last quarter or so. Maybe it's something else, but this rings of the spoiled kid down the block leaving the game with his football because his team is losing.

There is another way to run your company. Treat your employees like valued contributors. If they don't contribute, find out if they want to be in another role, or another company and let them do that. But if you're always looking to get the cheapest workers, you're in danger of losing your best people, and being beaten at the bottom dollar game as well.

OK, end of rant.

"We broke the chain of experience..." (4, Insightful)

dpbsmith (263124) | more than 4 years ago | (#32777410)

"We broke the chain of experience that is so important in technological evolution..." Darn straight. I sure wish more company management understood that.

You can document a little, you can document a lot, but you can't ever document everything. Every company relies on stuff in peoples' heads. Reading other peoples' code and then being able to ask them about it. Solving problems at the time they occur by talking to the right person for five minutes in the hallway, instead of writing thirty-page memos and scheduling a series of weekly hour-long meetings, which eight people attend so that two of them can talk.

The guy who says "Well, it worked well when we did it thus-and-such way on the Dash-Twenty-Twos."

Even more important, the guy who says, "Well, the reason we're doing it that way now is because of concerns X, Y, and Z that we had on the Dash Twenty-Twos, but those reasons don't apply any more.

FINALLY, someone gets it (1, Insightful)

Anonymous Coward | more than 4 years ago | (#32777452)

'Not only did we lose an untold number of jobs,' says Grove, 'we broke the chain of experience that is so important in technological evolution

ding ding ding ding ding ding

Give that man a cigar.

The problem with offshoring all the entry level jobs is that in 5 years, all the folks with 5 years experience will be somewhere else, in 10 years, all the folks with 10 years experience will be somewhere else, and in 15 years there will be few folks around qualified to do more than ask if you want fries with that. (yes, I know that we've been offshoring entry level work for many years, the only reason that we aren't all phone sanitizers by now is that we haven't thrown _everything_ overseas.)

Senior folks, capable of sustaining interesting, cutting edge work don't fall out of the sky. They need to get a first job somewhere. A country that doesn't invest in new hires is sacrificing tomorrow for today.

Ridiculous populist agenda (1)

Palpatine_li (1547707) | more than 4 years ago | (#32777468)

Can you stop the free flow of capital? If you are planning to build a centralized socialist economy, maybe. But what the U.S. actually needs is better education and less bureaucracy so it (at least some of the states) can compete in the world market. Stop whining for the lost jobs like a spoiled child.

Outdated industrial policy. (0)

Anonymous Coward | more than 4 years ago | (#32777474)

"If the result is a trade war treat it like other wars -- fight to win" What an asinine statement. It sounds all gung-ho but as any economist knows trade wars, even more so that regular wars, contain only losers. This idea is thankfully unenforceable (without an outright ban on trade) because it would be terrible if put into practise.

The movement of "commodity" manufacturing from the U.S. to China is overstated in it's importance, and much misunderstood. What no-one seems to have the courage to say is that we are better off as a result. Consumers are the real winners to the tune of $trillions.

Trade is a positive sum game.

Industrial policy of the sort Grove advocates rarely works. Occasionaly you get successes but 9 times out of 10 you breed industries with more expertise in lobbying the government for protection than producing goods.

sh1t.. (-1, Offtopic)

Anonymous Coward | more than 4 years ago | (#32777534)

muCh as Windows [goat.cx]

Oblig Monty Python (1)

JoeRandomHacker (983775) | more than 4 years ago | (#32777652)

I'd tax all foreigners living abroad.

Dumb idea! (1)

meburke (736645) | more than 4 years ago | (#32777670)

Jeez...doesn't anybody know any basic Economics? I mean, some places, like China, have an absolute competitive advantage in manufacturing, and that's where certain things will be manufactured because of it. The off shoring mostly a "comparative advantage" and it is still better to have things produced where this comparative advantage exists. What Andy Grove is talking about is a tariff...the worst idea of all (except for, maybe, subsidies). As much as I admire Andy Grove, this is a BAD idea.

Entry Barrier (1)

kenp2002 (545495) | more than 4 years ago | (#32777688)

Of course he is now they have exploited it for over a decade. You have to make sure you are shutting out any up-and-coming companies from leveraging it. Now that Wipro and other contracting shops makes outsource as easy as a phone call and some basic contract negotiations they have to lock out startup from getting access to cheap labor. ONLY US MEGACORPS ARE ALLOWED!! F*#$&%( UPPITY PEASANTS!!!

You'll notice the same two faced bullshit when it came to the Internet.

A: Internet is novel.
B: Oh shit there is money to be made, get on it
C: Now that we are on it we need to lock out competition from getting on it
D: Buy up bandwidth...
E: Shit they network keeps growing....
F: Quick get those political whore we own to pass some laws so we can lockout the competition on the Internet

In short: We don't mind regulations so long as we are ones controlling those regulations to our benefit.

More BS from an elite that thinks nothing more then 'cattle' when looking at the common human.

taxes hurt us not them. (0)

Anonymous Coward | more than 4 years ago | (#32777698)

I don't understand why so many people can't understand fundamental economics. If you tax the corps, they will just pass that cost down to us consumers.
Quit being stupid.

WHERE THE FUCK WAS THIS IN 2000??? (1)

blair1q (305137) | more than 4 years ago | (#32777700)

Holy fuck, Andy.

Where were you when Carly and your boy Craig were agitating to move jobs offshore at the beginning of this millennium?

You didn't say a fucking WORD when Bush cut the outsourcing tax to let them do it.

You'd better start campaigning against those people, because now that they've ruined their companies and our economy, they're running for public office.

New Form (2, Interesting)

fathom108 (706747) | more than 4 years ago | (#32777748)

Your proposed solution to general social economic problems will fail because:

[X] It requires investors to care about something other than short term profits
[ ] It requires corporations to care about something other than short term profits
[X] It requires politicians to care about citizens rather than corporations
[X] It requires laws without loopholes

Newsflash: Security trumps economics (1)

gestalt_n_pepper (991155) | more than 4 years ago | (#32777830)

In case nobody's noticed, we win wars on technology.... made abroad in China and India. One day, either may not like us so much, or may like another country more.

So all you "free flow of capital" guys can tell me about it when the bombs are falling and the troops are standing at your door with dogs and guns at 5 am. This happened to my Uncle and Grandfather when the Russians stopped by to chat. Think it can't happen here? Think again.

Right now, there's no tax or any other incentive to produce in the USA, so corporate executives who can afford to live comfortably in any country they wish were, and still are, quite happy to accumulate money while selling people who work in the USA (i.e. peasants) down the river. An invasion or economic depression here won't bother them. There's always another country.

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