The Impact of Trade Agreements on the San Diego Service Sector

Kenneth R. Peres  |  Chief Economist  |  May 22, 2015

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Fast Track legislation will apply not only to the Trans-Pacific Partnership which is being negotiated by the U.S. and 11 other countries but also the Trans-Atlantic Trade and Investment Partnership (TTIP) that is being negotiated with the European Union and its 28 member countries and the Trade in Services Agreement (TISA) being negotiated with 23 other countries as well as any other agreements that arise during the six year time frame of the current Trade Promotion Authority bill. These trade deals will have a profound impact on the U.S. service sector in general and the San Diego service sector in particular.


Three hundred twenty four thousand seven hundred and ten (324,710) San Diego service sector workers are employed in occupations that are at risk of being off-shored. These off-shorable jobs represent 25% of the San Diego metropolitan area’s entire employed workforce. These numbers were derived by applying the results of a national Bureau of Labor Statistics (BLS) study that identified the specific service sector occupations that are off-shorable to those same occupational titles in the San Diego metropolitan area.[1] The national study identified 160 occupations accounting for 30 million jobs that are at risk of being off-shored. The BLS identified four characteristics that make an occupation susceptible to off-shoring: inputs and outputs that can travel easily across long distance, such as electronically over the internet; work that requires little interaction with other types of workers; work that requires little knowledge of social or cultural idiosyncrasies of the target market; and work that is routine in nature. These off-shorable occupations were quite diverse in their job functions, educational attainment and wages. More than half of these jobs are classified as professional and technical occupations.

The San Diego service sector jobs at risk of being off-shored include 19,040 customer service representatives who earn an average annual salary of $37,850; 3,500 computer programmers who average $83,810 a year; 2,530 financial analysts who average $89,770; 14,300 Bookkeeping, Accounting and Auditing Clerks who average $41,590 a year; and 285,340 additional workers spread across another 156 occupations. See the appendix for a listing of these San Diego service sector occupations, the number of workers affected, and their average annual salaries.


The TPP as well as other impending trade deals such as TTIP and TISA will accelerate the process of off-shoring service sector jobs by expanding the rights of corporations and reducing the risks associated with off-shoring while providing duty-free access to the U.S. market.

  • Expanded corporate rights would make it safer to off-shore U.S. jobs – including service sector jobs. The leaked investment chapter of the TPP includes, and even expands, the special foreign investor privileges included in NAFTA.[2] The TPP would provide U.S. firms that wish to offshore the production of goods or services special protections and privileges not provided in the laws of the countries where they seek to relocate, such as compensation for the costs of complying with new regulations. These terms also remove the risks involved in relying on other countries’ court systems. Instead, firms would be empowered to “sue” governments before international tribunals comprised of corporate attorneys to obtain compensation for government actions that undermine their new TPP investor rights and privileges. This process, called Investor-State Dispute Settlement (ISDS) only allows foreign corporations to initiate these claims. The Cato Institute describes this process as “a subsidy to mitigate the risk of outsourcing.”[3] The expanded corporate rights in the TPP’s investment chapter effectively lower the risk premium on offshoring and makes it safer for firms to relocate abroad.
  • Corporations would be enabled to challenge laws that would protect or expand service sector employment in the U.S. If Congress passed a law that required call center staff to identify where they were located and/or to require that U.S. callers be guaranteed a U.S.-based operator if they so choose, then a foreign firm could file an investor-state claim that this policy altered their expectations. Or, if such a policy was about to be passed, an investor could file a case to try to chill the action from occurring. In these instances, a firm incorporated in a TPP country or a U.S. firm that incorporates a subsidiary in a TPP country could demand compensation from the U.S. government, i.e., from taxpayers – if the corporation felt that such a policy was undermining its expected future profits. There are two provisions under which such claims are made: the guarantee of a “Minimum Standard of Treatment” and “Compensation for Indirect Expropriation.” Both standards are enumerated in vague, elastic language, which has allowed investor-state tribunals to award large sums to investors/corporations for government actions that have the effect of changing the competitive conditions for a foreign investor or firm, even if a law applies equally to domestic and foreign firms. There is no outside appeal on the merits of these decisions. Thus, a tribunal is free to impute what it believes is an investors “reasonable expectations” at the time an investment was established and then to award damages if a government action or policy undermines those expectations. Unfortunately, firms are increasingly filing cases to chill initiatives and having success in doing so. Governments know that even if ultimately they may win a case, if they enact the policy being challenged they will spend years in investor-state litigations, spend millions in government legal expenses and likely will be required to pay half of the tribunal’s costs which average $8 million per case.
  • Trade in cross border services would explicitly forbid the U.S. – or any other country – from requiring that a foreign corporation set up domestic operations or employ domestic workers to provide services. The language from the U.S.-Korea Free Trade Agreement (KORUS) provides the model for the TPP. KORUS states that “Neither Party may require a service supplier of the other Party to establish or maintain a representative office or any form of enterprise, or to be resident, in its territory as a condition for the cross-border supply of a service.”[4] In relation to the TPP, this language would allow corporations in other TPP countries to supply services to the U.S. without employing any U.S. workers and would prohibit any laws, rules or regulations that would require, for instance, that a call center firm have some S. operations employing some U.S. workers and/or establish a domestic entity paying U.S. taxes in order to also provide services.
  • The TPP would undermine the ability of the U.S. federal government – and possibly state governments – from requiring that contracted services must be supplied by U.S. firms employing U.S. workers. The procurement chapter of TPP will require “national treatment” for government contracts for services, as well as goods. Thus, the TPP would allow foreign corporations to challenge any law, rule or regulation issued by the U.S. government – and maybe our state governments also – that requires the awarding of contracts for services to U.S. workers and firms. For example, if the TPP were to go into effect, every corporation in any TPP country would have to be given equal rights to bid on any government contract for privatized or outsourced government services. Thus, our tax dollars will be offshored and there will be fewer U.S. service jobs. Furthermore, ISDS tribunals could require that the U.S – and possibly state governments – to pay taxpayer dollars to compensate these foreign corporations for the loss of expected future profits if an ISDS case was successful.


The threat of off-shoring is not limited to the 11 other countries currently in the TPP negotiations. The TPP is a “docking agreement” that allows other countries like the Philippines or even India to join in the future. The TPP was expanded already to include Mexico and Canada in 2012 and Japan in 2013.

  • The Philippines wants to join the TPP to increase service sector off-shoring from the U.S. and to increase its presence in the U.S market. The Philippines has expressed interest in joining the TPP at some point in the future. In a March 2013 press release, the Philippines ambassador to the U.S. “outlined Manila’s interest in joining” the TPP and “laid-down the roadmap” for its participation that was prepared by the Philippines Department of Trade and Industry.[5]
  • The TPP would accelerate an already significant flow of U.S. service sector jobs and investment into the Philippines which already employs 500,000 call center workers serving the U.S. market. Specifically, the TPP would create added incentives for corporations to off-shore jobs to the Philippines by expanding the rights of foreign investors and reducing the risks of investing in low-waged countries. After all, corporations have already established a significant base of operations in the Philippines.
    • Approximately 500,000 Philippine BPO voice jobs serve the U.S. market.[6]
    • The U.S. market represents 74% of the Philippines $9 billion revenue from its Business Process Outsourcing (BPO) sector.[7]
    • Philippines BPO-Voice has captured 30% of the entire U.S. BPO voice market. [8]
  • Examples of U.S. Offshoring to the Philippines
    • S. Offshoring Call Centers to Philippines.
      • In 2013, Capital One announced that it is setting up a call center in the Philippines that would employ 2,200 workers. Meanwhile employment at its Tigard, Oregon call center was cut from 950 to 300.
      • In 2012, T-Mobile closed six U.S. based call centers, slashing 3,300 jobs. T-Mobile contracted with a vendor in the Philippines to provide customer service to American customers.
      • In 2012, Bank of America closed call centers in Ohio, Michigan, Pennsylvania and California eliminating 1,800 jobs. Meanwhile, Bank of America continues to operate call centers in the Philippines.
    • Top U.S. Outsourcing Firms and their Employment in Philippines
      • Convergys has 55,000 workers in the Philippines or 40% of its global workforce of 120,000. It was the 2nd largest BPO firm in terms of 2012 revenues of PhP (Philippine Pesos) 17.3 billion.[9]
      • Teletech employed 20,000 workers in the Philippines in 2012 out of its total workforce of 41,000 and generated PhP $7 billion in revenue. [10]
      • JP Morgan employs 25,000 workers in the Philippines in 2012 and generated PhP 10.8 billion.[11]
    • Reasons for Outsourcing Call Center Work to the Philippines: Low Wages
Direct Operating Cost for English Voice Work Per Year, 2010[12]
United States Tier 2 $72,000
Mexico City $32,000
Krakow $25,000
Kuala Lumpur $20,000
Cairo $17,000
Manila $16,000
Examples of Tier 2 cities in the U.S. include Sioux Falls SD, Springfield IL, Jacksonville FL, and San Antonio TX. All the other cities in other countries identified in the chart are Tier 1.
Annual Median Basic Salary for Call Center Workers [13]
United States $ 30,870
PH: Manila Metro: 400,000+ seats $4,000 to $5,320
PH: Bacolod, Davao and Iloilo 20,500 seats $2,664 to $4,000
  • Reasons for Outsourcing Call Center Work to the Philippines: Low Expense for Working Conditions
    • ILO Survey/Study of Philippines BPO Working Conditions[14]
      • 43% of BPO employees work the night shift which is associated with “occupational safety and health concerns such as sleep disorders, fatigue, eye strain, neck, shoulder and back pains; and voice problems.”
      • 48% suffer from insomnia
      • 54% suffer from fatigue
      • Heavy workloads bound with periodic performance targets, enforced by electronic monitoring
      • Time for toilet or cigarette breaks are deprived
      • Denial of constitutionally guaranteed labor rights
      • Many schemes to prevent workers from becoming “regularized” and permanent employees
    • EILER Survey/Study of Philippines BPO Working Conditions[15]
      • Low pay
    • Erratic work schedule
    • Stressful work load and unreasonable metric valuations
    • Long working hours and forced overtime and forced holiday work
    • Restroom breaks used against productivity and considered as unpaid work
    • Occupational related diseases: hypertension, headaches, urinary tract infections
    • Significant numbers of probationary, casual, contractual and project-based jobs
    • Denial of constitutionally guaranteed labor rights
  • Reasons for Outsourcing Call Center Work to the Philippines: Government Incentives for BPOs[16]
    • Income tax holiday for 4 years, extendable to 8 years
    • After ITH period, special 5% tax on gross income in lieu of all national and local taxes
    • Exemption from duties and taxes on imported capital equipment, spare parts, supplies and raw materials
    • Domestic sales allowance of up to 30% of total sales
    • Exemption from export taxes, wharfage dues, imposts and fees
    • Exemption from Value Added Tax on allowable local purchases such as telecom, power and water bills
    • Additional deduction of total manpower training cost under the special 5% gross income tax.


Credit Analysts 410 $           73,890
Financial Analysts 2,530 $           89,770
Insurance Underwriters 530 $           65,370
Tax Preparers 580 $           54,900
Computer Programmers 3,500 $           83,810
Computer User Support Specialists 6,500 $           54,740
Architectural and Civil Drafters 1,330 $           57,640
Electrical and Electronics Drafters 820 $           58,400
Mechanical Drafters 450 $           63,360
Biochemists and Biophysicists 1,350 $           89,690
Physicists 340 $           84,360
Paralegals and Legal Assistants 3,160 $           59,110
Title Examiners, Abstractors, and Searchers 660 $           59,230
Pharmacists 2,280 $         127,070
Pharmacy Technicians 2,720 $           36,020
Medical Transcriptionists 230 $           49,990
Parts Salespersons 2,170 $           34,140
Telemarketers 1,830 $           25,280
Switchboard Operators, Including Answering Service 1,390 $           28,990
Bill and Account Collectors 3,220 $           39,520
Billing and Posting Clerks 5,030 $           36,800
Bookkeeping, Accounting, and Auditing Clerks 14,300 $           41,590
Payroll and Timekeeping Clerks 1,980 $           42,960
Procurement Clerks 810 $           41,730
Credit Authorizers, Checkers, and Clerks 240 $           33,680
Customer Service Representatives 19,040 $           37,850
Computer Operators 630 $           47,900
Data Entry Keyers 1,740 $           30,510
Word Processors and Typists 1,490 $           39,790
Insurance Claims and Policy Processing Clerks 3,460 $           37,900
Proofreaders and Copy Markers 80 $           41,030
Sub-Total 84,800











Avg. Annual Wage

Purchasing Managers 870 $         118,450
Compensation and Benefits Managers 160 $         128,910
Buyers and Purchasing Agents, Farm Products 100 $           58,770
Purchasing Agents, Except Wholesale, Retail, and Farm Products 3,500 $           71,620
Claims Adjusters, Examiners, and Investigators 2,650 $           65,900
Human Resources Specialists 5,080 $           68,760
Logisticians 2,120 $           80,610
Compensation, Benefits, and Job Analysis Specialists 930 $           68,030
Market Research Analysts and Marketing Specialists 6,910 $           68,480
Accountants and Auditors 10,570 $           78,030
Appraisers and Assessors of Real Estate 390 $           58,460
Budget Analysts 790 $           80,710
Personal Financial Advisors 1,350 $         115,650
Financial Examiners 460 $           86,430
Loan Officers 2,590 $           80,510
Computer and Information Research Scientists 760 $         110,260
Software Developers, Applications 8,260 $         107,780
Software Developers, Systems Software 7,900 $         117,990
Database Administrators 950 $           90,580
Network and Computer Systems Administrators 4,130 $           82,530
Actuaries ** $         108,560
Mathematicians 110 $           96,240
Operations Research Analysts 980 $         113,570
Statisticians 240 $         104,200
Architects, Except Landscape and Naval 940 $           95,740
Cartographers and Photogrammetrists 180 $           71,110
Biomedical Engineers 630 $           80,290
Chemical Engineers 220 $           86,630
Computer Hardware Engineers 3,820 $           99,050
Electrical Engineers 4,140 $         111,180
Electronics Engineers, Except Computer 4,390 $         111,920
Materials Engineers 310 $           98,390
Mechanical Engineers 3,180 $           95,230
Nuclear Engineers ** $         103,630
Aerospace Engineering and Operations Technicians 230 $           71,570
Electrical and Electronics Engineering Technicians 2,750 $           63,730
Electro-Mechanical Technicians 320 $           58,330
Mechanical Engineering Technicians 790 $           62,320
Surveying and Mapping Technicians 310 $           57,150
Microbiologists 880 $           96,210
Epidemiologists 30 $           87,940
Medical Scientists, Except Epidemiologists 3,490 $         108,380
Atmospheric and Space Scientists 120 $           79,730
Chemists 1,780 $           90,050
Materials Scientists 150 $           70,370
Economists 80 $           87,940
Survey Researchers 150 $           71,350
Anthropologists and Archeologists 260 $           59,220
Historians ** $           71,890
Biological Technicians 2,740 $           54,130
Chemical Technicians 630 $           47,520
Social Science Research Assistants 260 $           56,690
Lawyers 6,130 $         144,450
Business Teachers, Postsecondary 640 $         104,260
Computer Science Teachers, Postsecondary 380 $           90,420
Mathematical Science Teachers, Postsecondary 610 $           87,990
Architecture Teachers, Postsecondary 60 $           78,390
Engineering Teachers, Postsecondary 350 $         125,220
Agricultural Sciences Teachers, Postsecondary 30 *
Biological Science Teachers, Postsecondary 650 $         115,840
Atmospheric, Earth, Marine, and Space Sciences Teachers, Postsecondary 180 $         120,420
Chemistry Teachers, Postsecondary 210 $           95,230
Physics Teachers, Postsecondary 140 $         109,060
Anthropology and Archeology Teachers, Postsecondary 100 $           89,490
Area, Ethnic, and Cultural Studies Teachers, Postsecondary 220 $           69,860
Economics Teachers, Postsecondary 120 $         119,430
Geography Teachers, Postsecondary 40 *
Political Science Teachers, Postsecondary 140 $         108,130
Psychology Teachers, Postsecondary 670 $           84,720
Sociology Teachers, Postsecondary 120 $           97,290
Social Sciences Teachers, Postsecondary, All Other ** $           81,610
Health Specialties Teachers, Postsecondary 870 $           76,910
Nursing Instructors and Teachers, Postsecondary 440 $           92,810
Education Teachers, Postsecondary 540 $           76,920
Library Science Teachers, Postsecondary 40 $           86,440
Law Teachers, Postsecondary 150 $           96,530
Art, Drama, and Music Teachers, Postsecondary 1,770 *
Communications Teachers, Postsecondary 380 $           88,210
English Language and Literature Teachers, Postsecondary 950 $           87,690
Foreign Language and Literature Teachers, Postsecondary 410 $           84,950
History Teachers, Postsecondary 240 $           93,490
Philosophy and Religion Teachers, Postsecondary ** $           75,540
Graduate Teaching Assistants 3,080 $           30,850
Recreation and Fitness Studies Teachers, Postsecondary 360 $           94,940
Vocational Education Teachers, Postsecondary 1,370 $           59,410
Postsecondary Teachers, All Other ** $           73,280
Craft Artists ** $           29,690
Fine Artists, Including Painters, Sculptors, and Illustrators ** $           42,910
Multimedia Artists and Animators 490 $           62,170
Commercial and Industrial Designers 310 $           85,330
Fashion Designers 260 $           67,110
Graphic Designers 2,070 $           52,130
Editors 640 $           62,850
Technical Writers 840 $           82,050
Writers and Authors 320 $           70,540
Film and Video Editors 130 *
Dietitians and Nutritionists 440 $           66,300
Dietetic Technicians 350 $           34,480
Private Detectives and Investigators ** $           57,490
Sales Engineers 1,190 $         109,810
First-Line Supervisors of Office and Administrative Support Workers 14,260 $           54,810
Brokerage Clerks 360 $           50,830
Court, Municipal, and License Clerks 450 $           43,540
Interviewers, Except Eligibility and Loan 1,700 $           38,930
Loan Interviewers and Clerks 1,810 $           41,760
New Accounts Clerks 680 $           41,130
Order Clerks 2,230 $           36,400
Human Resources Assistants, Except Payroll and Timekeeping 1,510 $           42,060
Reservation and Transportation Ticket Agents and Travel Clerks 1,020 $           36,720
Police, Fire, and Ambulance Dispatchers 730 $           56,110
Dispatchers, Except Police, Fire, and Ambulance 2,210 $           37,750
Desktop Publishers 90 $           45,130
Statistical Assistants 120 $           49,580
Avionics Technicians 280 $           69,260
Aircraft Mechanics and Service Technicians 1,260 $           57,150
Sub-Total 151,720
LOWER RANGE Employment Avg. Annual Wage
Chief Executives 2,610 $         197,680
General and Operations Managers 23,050 $         122,040
Advertising and Promotions Managers 260 $         101,420
Marketing Managers 2,630 $         145,850
Sales Managers 5,000 $         122,570
Public Relations and Fundraising Managers 500 $         123,220
Administrative Services Managers 3,500 $           94,970
Computer and Information Systems Managers 4,040 $         157,390
Financial Managers 5,470 $         135,350
Training and Development Managers 270 $         106,450
Architectural and Engineering Managers 3,160 $         155,290
Natural Sciences Managers 1,250 $         174,630
Wholesale and Retail Buyers, Except Farm Products 1,350 $           56,700
Management Analysts 7,650 $           91,530
Meeting, Convention, and Event Planners 910 $           45,210
Training and Development Specialists 2,400 $           63,800
Credit Counselors 410 $           80,030
Computer Systems Analysts 5,310 $           91,740
Landscape Architects 320 $           81,490
Civil Engineers 4,160 $           97,320
Environmental Engineers 610 $           86,420
Health and Safety Engineers, Except Mining Safety Engineers and Inspectors 240 $           93,700
Industrial Engineers 3,360 $           96,430
Food Scientists and Technologists ** $           60,930
Urban and Regional Planners 620 $           83,300
Art Directors 320 $         104,950
Interpreters and Translators 740 $           53,100
First-Line Supervisors of Non-Retail Sales Workers 2,150 $           67,560
Advertising Sales Agents 1,630 $           62,400
Securities, Commodities, and Financial Services Sales Agents 4,270 $           77,810
Sub-Total 88,190
Total Employed in Off-Shorable Occupations 324,710
Total Employed in All Occupations 1,320,390
Employment in Off-Shorable Occupations as Percentage of Total 24.6%


[1] Roger Moncarz, Michael Wolf and Benjamin Wright, Service-providing occupations, offshoring and the labor market, Bureau of Labor Statistics, Monthly Labor Review, December 2008; Bureau of Labor Statistics, May 2014 Metropolitan and Nonmetropolitan Area Occupational Employment and Wage Estimates, San Diego, CA.

[2] WikiLeaks, Secret Trans-Pacific Trade Agreement Investment Chapter,; Public Citizen, Analysis of Leaked Trans-Pacific Partnership Investment Text, March 25, 2015

[3] Daniel Ikenson, Hyperbole Aside Elizabeth Warren is Right about the Risk of Investor State, Cato at Liberty, February 26, 2015,

[4] Korea-U.S. Free Trade Agreement, Chapter 12 Cross-Border Trade in Services, Article 12.5: Local Presence,

[5] Embassy of the Philippines, Press Release: PH Presents Roadmap for Participation in TPP Trade Pact, March 16, 2013,phildet/

[6] For 2004-2012, First Metro Investment Corporation, The Philippine BPO Industry, October 8, 2013; Ecumenical Institute for Labor Education and Research, Modern Day Sweatshops in the Service Sector: BPO within Special Economic Zones in the Philippines, Dec 2010; Roberto Romulo, IT-BPO Industry, Philippine Star, August 22, 2013. For 2013, Roberto Romulo, BPO Here to Stay, August 22, 2014; Projections for 2014: Ted Torres, PHL Closes in on India as top BPO site, Philippines Star, October 12, 2014.

[7] First Metro Investment Corporation, The Philippine BPO Industry, October 8, 2013

[8] First Metro Investment Corporation, The Philippine BPO Industry, October 8, 2013. There was no source given for the data or how the U.S. market was measured – but it probably was measured by total sales.

[9] Employment figures from Roberto Romulo, BPO Here to Stay, Philippine Star, August 22, 2014; Revenue figures from Dugom Pinoy, Top 36 BPO Companies in the Philippines, January 2, 2014.

[10] Employment figures from Teletech, Inside Teletech, Jan-Feb 2013, figures from Dugom Pinoy, Top 36 BPO Companies in the Philippines, January 2, 2014.

[11] Economist, At the Front of the Back Office, June 23, 2012.

[12] First Metro Investment Corporation, The Philippine BPO Industry, October 8, 2013; US BLS, Occupational Employment Statistics, 2013.

[13] First Metro Investment Corporation, The Philippine BPO Industry, October 8, 2013; Philippines pesos converted to U.S. dollars.

[14] Cited in Ecumenical Institute for Labor Education and Research, Modern Day Sweatshops in the Service Sector: BPO within Special Economic Zones in the Philippines, Dec 2010

[15] Ecumenical Institute for Labor Education and Research, Modern Day Sweatshops in the Service Sector: BPO within Special Economic Zones in the Philippines, Dec 2010, pp. 47-48

[16] First Metro Investment Corporation, The Philippine BPO Industry, October 8, 2013

[17] Roger Moncarz, Michael Wolf and Benjamin Wright, Service-providing occupations, offshoring and the labor market, Bureau of Labor Statistics, Monthly Labor Review, December 2008; Bureau of Labor Statistics, May 2014 Metropolitan and Nonmetropolitan Area Occupational Employment and Wage Estimates, San Diego, CA. The BLS study differentiated three levels of susceptibility to off-shoring: highest ranked; middle ranked; and lowest ranked.

© 2014 San Diego and Imperial Counties Labor Council
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