I am not so sure that the free market does really offer what you're saying. For example, a big problem in have in the US is that a lot of smart people don't want to become programmers (for example, because they don't want to compete with programmers from India). But it is well known that the USA has more openings for programmers than available workers. So, it seems that the free market is not doing its job of moving more workers to the field.
Regulation would have the very beneficial side effect that salaries would increase, and therefore it would encourage lots of people to become trained in the IT industry. This would not have an adverse effect in the competitiveness of US companies. It is well known that salaries are just a small portion of the costs for major software companies. Moreover, salaries for programmers in the US are already way higher than in other nations, which doesn't seem to have had a negative influence in the results achieved by these companies.
Regulation would mean people being certified by the Louisiana Board of Computer Programming for the Wizwoz system 2.0. Yuck! Some of the software industry will move abroad, but even more most large countries will start having local markets. The thing going for software is very fast innovation and adoption, leading to IT, software, mobile undercutting a lot of traditional industries and practices, and this is just the beginning. Stopping it would mean killing the golden goose.
Regulation would have the very beneficial side effect that salaries would increase, and therefore it would encourage lots of people to become trained in the IT industry. This would not have an adverse effect in the competitiveness of US companies. It is well known that salaries are just a small portion of the costs for major software companies. Moreover, salaries for programmers in the US are already way higher than in other nations, which doesn't seem to have had a negative influence in the results achieved by these companies.