The Hindu Business Line : Expert assails Kerry's trade policy

WHETHER the Democratic nominee for this November 2 Presidential election is going to heed the advice of the former President, Mr Bill Clinton, and start concentrating on his economic strengths as opposed to getting mired further into a debate with Republicans on such issues as Vietnam and Iraq, there are those in the academic and intellectual communities that view with dismay what Senator Kerry once stood for in the realm of trade and trade policy and what he has been dragged into.

In a straight forward no-nonsense opinion piece in The Wall Street Journal, Prof.Jagdish N. Bhagwati, University Professor Columbia University, Economics Department, poses the first question as to how the Massachusetts politician who was known for his impeccable record on trade "has allowed himself to be forced into such muddled and maddening positions on trade policy that, if one were an honest intellectual as against a party hack, one could only describe them as the voodoo economics of our time''.

One of the things that Mr Bhagwati picks apart in his article titled `Muddled and Maddening' is the "surrender to hysteria'' over the so-called outsourcing where the Columbia Professor and Andre Meyer Senior Fellow at the Council on Foreign Relations has argued that Mr Kerry has made "at least two howlers that would make my first year students blush a shade of beetroot''.

Mr Bhagwati talks about the first — the so-called long distance or arm's length services such as call answering services, reading of X-Rays and preparing tax filings in India or the Philippines creating a "scare that service jobs will move offshore''.

He points out that outsourcing in these areas has resulted in a loss of no more than 1,00,000 jobs and that the "best estimates'' predict the annual flow over the next decade to double at worst. "Nor should one forget that the US itself benefits from others outsourcing to it in medical, legal, accounting, teaching and other high-value arm's length services.''

Secondly, the writer pointed out that Senator Kerry has "muddled matters by confusing the outsourcing of services with the altogether different issue of foreign direct (i.e., equity) investments by US firms'', going on to point out that Dell may outsource problem solving calls to Bangalore, but may buy those services from an Indian firm like Infosys which is simply trade.

"But direct investment is different: it occurs typically when a firm in Nantucket closes shop and moves production to Nairobi'', Mr Bhagwati says.

Referring to the fact that Senator Kerry went as far as to describe American firms that invested abroad as `Benedict Arnolds', Mr Bhagwati has some sharp observations for journalists like Mr Lou Dobbs of CNN "whose outpouring against sundry forms of imports and outward investment is a farrago of nonsense, offered by him with a list...of traitor firms that `ship jobs abroad'''.

The distinguished economist says: "If firms that buy cheap abroad suffer from "corporate greed'', is Mr Dobbs — whose girth and success doubtless suggests that he buys for his supper French brie and Burgandy rather than Milwaukee beer and Kraft cheese — be accused of the same logic of "shipping jobs abroad'' because of "Personal Gluttony''? (What is sauce for the corporate goose must be sauce for the journalist gander).

Mr Bhagwati joins issue with the many pro-trade advisers and columnists who have argued privately that Senator Kerry is actually a free trader, who has merely taken on a protectionist Trojan Horse to just get him into the White House.

Calling it "too simplistic'' a position, he poses the question: "Is it not better for us to tell Sen. Kerry that his trade policy positions are the pits — before he digs himself deeper into the pit from which there is no dignified exit?''

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