The Hindu Business Line : Outsourcing row: US may press for greater market access

THE jitters over job-loss fears in the wake of outsourcing outcry in the United States, particularly with manufacturing job fleeing to China and service-sector jobs being "offshored" to India could not have come handy to politicians of both the US and India who are facing elections this year.

The US Secretary of State, Mr Colin Powell, undoubtedly reassured New Delhi on March 16 that there is no quid pro quo over what he said in a different context that he would like India open up its economy more as well, implying thereby that there is a link between restraint on the part of the US in terms of maintaining a liberal regime and progress from India in opening up its economy.

This must have assuaged the concern that despite the Federal Government recent Bill banning outsourcing of government contracts to Indian companies, the Bush Administration is not patently protectionist.

However, a closer scrutiny of what Mr Powell said should not lull New Delhi into any sense of false complacency over what the External Affairs Minister Mr Yashwant Sinha graphically put in the same press conference here that "there should be a clear roadmap with milestones for enhancing and strengthening the economic engagement between India and US and take it further".

While stating that "we have also seen outsourcing of jobs in the US to Mexico, China and to other parts of the world as the global world develops," Mr Powell went on to add that "what we have to do, and what we are doing is making sure that those services that we can provide to the rest of the world, that is so valuable to the rest of the world and that only US can provide, we should focus on those and make sure that we are training our young people for those kinds of jobs.

"At the same time we hope that there will be trading opportunities in other parts of the world so that US can offset the kinds of losses that we get when we outsource our jobs to other parts of the world."

Implied in the latter part of this remark is the keenness of the US to apprise the Indian side of the need for enhanced market access for trained young US persons for jobs that only US can provide, though what those jobs which only the US young people could do in this part of the world is left unsaid.

Be that as it may, Mr Colin Powell pressed New Delhi to open markets to US firms or personnel in areas or activities where the US is good at to help defuse the politically charged issue of outsourcing of US jobs in India. Indian officials are quick to deny any potential link in this, though mandarins in the Commerce Ministry as they apprehend that there might be a blatant bid to link up outsourcing opportunities to giving enhanced market access for US firms or personnel in India. In that eventuality, New Delhi might perforce go to the WTO for redress of any potential linkage being forged to permit outsourcing to market opening threats.

Already, US Under Secretary Mr Larsen held a meeting a few days ago with the Economic Advisor to the Prime Minister, Dr Narayan on issues like foreign direct investment and with India's reform practices, easing bureaucratic barriers to entering into Indian markets by US firms.

It is also interesting to note that notwithstanding the political backlash against outsourcing of white collar jobs to such places as India and Ghana, the latest US Government data suggest that foreigners outsource far more office work to the US than American companies send abroad.

The US Commerce Department said on March 12 that the value of US exports of legal work, computer programming, telecommunications, banking, engineering, management consultancy and other private services jumped to $131 billion (around Rs 5,93,037 crore) in 2003, up $8.42 billion from the previous year.

In a just published monograph "Job Losses and Trade: A Reality Check", Washington-based independent think tank, Cato Institute's Centre Trade Policy Study Director Mr Brink Lindsey said that job losses are an inescapable part of a dynamic market economy, adding that from 1993-2002 total US employment grew by 17.8 million. But during that decade, 310 million jobs were eliminated and replaced with 328 million new jobs. Hence, he rightly advocates that calls for new trade restrictions to preserve current jobs are misguided and that is the message the Bush Administration should ponder over before trying to prise open markets of developing countries by way of reprisal to the alleged loss of jobs for US citizens presumably due to outsourcing.

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