The Hindu Business Line : Outsourcing issue likely to snowball

THE move in the US Senate to bar private sector contractors who get federal government contracts to dish out sub-contracts to other countries such as India or China was expected to come about sooner or later.

The amendment on outsourcing should have come about last October itself but narrowly missed; and persistent law makers such as the Republican Senator from Ohio, Mr George Voinovich, made sure that it was embedded in an Omnibus spending measure that clear the Senate on Thursday.

And for all the persistent talk of `competition', the White House will not be vetoing this catchall spending bill.

Knowledgeable people are making the first assessment that the impact of US Senate anti-outsourcing measure on India will be little.

"How little is little, we don't know," quipped one going on to stress that in a broad sense the federal level contracts that goes "off shoring" is perhaps only between 2 per cent and 5 per cent.

What is however being pointed out is that while the direct damage may be "little", there is the political damage that has been set in motion by way of a precedent value.

The anti-outsourcing move is right now confined only to the federal sector.

But what worrisome is that the States may look at the Senate move and start along similar lines. In effect States may say that contractors getting state money must keep their work inside the respective States.

Last year several States such as Connecticut, Maryland, Florida, Indiana, Michigan, New Jersey, New York and North Carolina introduced, in one form or another, anti-outsourcing bills.

But none of them passed. And just this week the state of Maryland is said to be once again seriously considering whether government work could be off-shored.

Analysts are saying that from a political perspective the "heat" over outsourcing — bringing with it the rhetorics — will be growing for the simple reason that this is election year.

Besides, the contest for the White House, all 435 members of the House of Representatives, 34 senators and 11 governors are facing elections. And secondly, the debate over outsourcing is directly linked to the jobs scenario, another sensitive issue in an election year.

One statistic quoted in an agency report has predicted that at least one of out ten technology jobs in the US will move out by the year 2004; and another has it that that at least 3.3 million white collar jobs accounting for about $ 136 billions in wages will move out of the US to low cost countries by 2015.

Outsourcing has attracted the attention of democratic presidential candidates. For instance, the Massachussetts Senator,

Mr John Kerry, has said that while he would not ban outsourcing, he will provide tax incentives to companies to keep their jobs in the US and close "every single loophole" that facilitate companies moving jobs overseas.

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