With the recent Covid-19 situation and everything, organizations have realized that remote jobs are indeed a viable option. So, hypothetically the organization could say let's just outsource everything that can be done remotely to a country where this can be done for cheap. So, is there anything that prevents them from doing so?

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    Depends on the industry. For somebody making smart-phone games, this is done all the time. For something like military defense projects, this can't be done. – Ron Beyer Jul 1 '20 at 13:45

International trade agreements make it hard to ban outsourcing outright. As a result, most bans are narrow, aimed at products where outsourcing could compromise national security. However, there are plenty of laws that countries can use to discourage outsourcing. These laws vary enough that the answer to your question depends on where you live, what you make, and where you want to outsource to.

The most direct way to discourage outsourcing is by using tariffs, taxes on imports, and/or subsidies to local producers. By taxing imports, tariffs raise the price of outsourced goods, offsetting the advantage of lower cost of production overseas. By helping domestic producers, subsidies such as tax-breaks offset the disadvantage of higher domestic costs. Tariffs and subsidies are often narrowly tailored to protect and promote specific industries, such as sugar producers in Louisiana.

Various regulatory laws, including those requiring licensing and inspection, can be used to indirectly favor local producers by raising costs to overseas producers.

Local content laws limit outsourcing by requiring a certain percentage of the content of any product be locally produced. Canada is notorious for using local content laws, most (in)famously in requiring local content in entertainment, including radio and tv broadcasts.

A recent example of how different laws work together to discourage outsourcing and promote local productions involves renewable energy producers. To encourage investment in renewable energy, many governments offered tax breaks or other subsidies to investors. Often, these subsidies were only available to products that met local content laws. (Not surprisingly, Canada had a myriad of such requirements.)


Generally, no

In fact, it’s done routinely.

As an Australian I am aware of many Australian companies with China based manufacturing, Philippines based call centres, India based software developers and Thai based construction engineers (not necessarily the same company).

There are certain industries with legal impediments like security for defence industries and privacy for health businesses.

  • Thanks Dale, I am a software developer myself (India born, living in Canada) and was wondering what happens if all software companies in Canada, say for instance outsource all their work to India, I mean if legality is not an issue then they could, right? But then would'nt it impact the economy of Canada? I mean no more software developers in Canada, no reason for people to study Software Engineering, so does the government of a country have some contract in place for organizations? – Saurabh Gour Jul 1 '20 at 22:04
  • @SaurabhGour why don’t you ask all the workers who used to make textiles in Canada but now don’t because all the worlds textiles are made in Bangladesh? – Dale M Jul 1 '20 at 22:08
  • Oh, I was not aware that this already happened to an entire industry, I always thought that there might be some government laws preventing that so that people living within the country are offered jobs first, on a side note Canada does have Labour Market Impact Assessment which means an employer has to justify the need for foreign employer to fill the job, but I guess that is separate from outsourcing? – Saurabh Gour Jul 1 '20 at 22:12
  • @SaurabhGour there are almost certainly WTO rules against such protectionism where it isn't for national security reasons. – Moo Jul 1 '20 at 22:16

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