Speaking at a news conference, Donohue defended the practice, saying that restricting it legislatively for political gain may lead to retaliation from U.S. trade partners.
"Building a wall around this country by limiting business options is a failed economic model and a violation of our own trade agreements, which could start a trade war," Donohue said. "Political need cannot change economic reality."
His comments come at a time when debate about corporate outsourcing of jobs overseas has heightened into an issue in the presidential election.
Donohue criticized the Bush administration for not doing enough to defend the practice.
While his group supports legislation to improve analysis of the phenomenon, Donohue said limiting the tax benefits associated with outsourcing -- as proposed by Democratic presidential candidate Sen. John Kerry of Massachusetts -- should not be enacted because foreign competitors receive tax advantages in their home countries.