Foreign brainpower fuels America's race for the top

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Companies that hire workers abroad are said to be in a "race to the bottom," offering jobs to impoverished foreigners. Some of that is happening, and if you were an impoverished foreigner, you might be thankful for it. But America's most important race for foreign labor is for the top. It is a search not for muscle, but for brains.

Take Microsoft. Its product is distilled brainpower. To maintain its intensely profitable sort-of-a-monopoly, it needs to recruit the world's highest-caliber brainpower.

Where to go for that? You would go where there are many rolls of the genetic dice. Microsoft has done that with a development center in China and the one it is building for 600 engineers and administrators in Hyderabad, India. It also has centers in England, Israel and California.

Take Boeing. With a little literary license, an airplane is also distilled brainpower. As one-half of a global duopoly, Boeing needs to contest every market in the world. It, too, seeks brains where it can find them.

It has been finding them in Russia. Why there? Russia is a populous country with strong science education. In the communist years, it developed its own aerospace industry, with such triumphs as the MiG-23. When it rejoined the world economy, its civilian jetliners were not competitive, but certain of its engineering skills were.

Hank Queen, vice president for engineering and manufacturing at Boeing Commercial Airplanes, gives two examples of this. One is the production of titanium alloys that could be forged, cast and welded. "We didn't have alloys like that," he says. The other is the design of monolithic structures, or large subassemblies. The Russians, working in a command economy, used monolithic structures to save time. Boeing is using them to save money.

Boeing began its business in Russia a decade ago by contracting with state technical institutes. Five years ago, it added its own engineering shop, the Boeing Design Center, in Moscow. It has 500 engineers there.

Setting this up was not cheap. There are continuing costs of distance and accessibility, of a difference in language, culture and time zones, of dealing with two bureaucratic governments. Of course, the wage scale in Russia is lower than here, but Boeing says that is not the reason it went there.

What is the national interest when Boeing hires engineers in Russia? Think of it from the Russian view. The pride of Russian aviation has gone to work to create an American product. As a Russian, you might not like that. But if Russia forbade Boeing from hiring its engineers, would Russia be better off? Perhaps not. Russian companies didn't have enough business to keep them busy.

If America decided to forbid Boeing from hiring Russian engineers, who would hire them? Airbus might. Boeing's French rival also has a design shop in Moscow, Queen says, and already it has hired away some of Boeing's people.

Define America's interest as income for Americans. How would you maximize that? By restricting American companies from hiring smart people abroad? But smart foreign employees may allow the American company to have a better product to sell, to the benefit of Americans.

Two-thirds of Microsoft's 55,000 employees are in the United States, but North America accounts for only a bit over half of Microsoft's geographically identified revenue. Seventy percent of revenue at Boeing Commercial Airplanes is from foreign customers, but 83 percent of its parts, by value, are sourced in the United States, says James Morris, senior vice president for supplier management. Boeing and Microsoft are different in a lot of ways, but each captures a world market to the benefit of Americans.

The label on one of my baseball hats says it was made in Bangladesh. Probably that is from a "race to the bottom," and probably to the benefit of the workers in Bangladesh. In any case, Seattle's future is not in the manufacture of baseball hats. It is in airplanes, software, computers, medical devices, biotech and things as yet unthought-of. In these endeavors the important race is for the top.

Bruce Ramsey's column appears regularly on editorial pages of The Times. His e-mail address is bramsey@seattletimes.com