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India, US up the ante in turf
war
By Ranjit Devraj
NEW
DELHI - The spat between India and the United States
about which country should liberalize more and faster on
sensitive items such as agriculture and offshore
services can only worsen - until the world's two largest
democracies have their elections safely behind them.
US Trade Representative Robert Zoellick could
not have chosen a worse time than last weekend to hold
discussions with India's pugnacious commerce minister,
Arun Jaitley, on moving forward the Doha agenda of the
World Trade Organization (WTO).
"We have to find
a way out to make food products available to the middle
class at lower prices while protecting marginal farmers
at the same time," Zoellick told a press conference
Monday, where exasperation with Jatiley's opposing views
was evident.
Jaitley said afterwards that he
found it "strange that on the one hand people [in the
developed Western countries] are talking about opening
markets and the on the other the US is banning business
process outsourcing [BPO]." He was referring to a demand
made by Zoellick that India further open up its market
for agricultural products - a prospect that food
security experts have warned would threaten the
livelihoods of some 600 million farmers in this
predominantly farming country. Jaitley accused the US of
having "double standards" and vowed to take the issue to
the WTO. This is alongside protests already lodged over
agricultural subsidies, which prevented the produce of
countries like India and China from becoming competitive
in world markets.
India, a major agricultural
producer, has in recent years also emerged as a choice
destination for Western corporations that wish to cut
costs on jobs that can be farmed out over the Internet
or telephone. In the last financial year, India exported
services worth US$8.5 billion to the US.
So when
the US Senate decided in January to ban federal
government departments from outsourcing information
technology (IT) enabled services to developing countries
like India - with a large pool of skilled workers - an
uproar ensued, and has now become worse.
"This
is an election year in the United States and so we can
expect more of this," rationalized Arun Shourie, India's
minister for IT and communications. The short-term
remedy he prescribed Indian companies is to shift focus
to other markets like Germany and Japan.
What
Shourie did not say was that his own ultra-nationalist
Bharatiya Janata Party-led government expects to fight a
general election in the next few months. Critics say its
ability to raise employment levels among the country's
billion-plus people has been woefully inadequate and the
BPO sector, though lucrative, employs less than 200,000
people.
But in the US, the BPO issue has become
a "hot button" political issue. For instance,
presidential front-runner for the Democratic Party, John
Kerry, has described as "traitors" companies that move
jobs to countries like India.
So hot has the
issue become that Gregory Mankiw, chairman of the White
House Council of Economic Advisors, who have supported
outsourcing as economically beneficial, have been
compelled to take back such remarks. In releasing US
President George W Bush's annual report on February 10,
Mankiw called outsourcing "the latest manifestation of
the forces of free trade and increasing international
specialization in production".
"We are less used
to services being produced in one country and sent over
fibre optic cable - advances in technology have expanded
the range of commercial activities," he said.
But after the speech brought on calls for his
resignation from Republicans, Mankiw was compelled say
that the comments he made about the benefits of
international trade were far from clear and were
"misinterpreted to suggest I was praising US job
losses".
In the end, the Senate legislation
represented only a fraction of the $12 billion worth of
services that India exports and has little more than
symbolic value in an election year. It has not, for
example, prevented Bank of America from announcing plans
to set up a wholly-owned subsidiary in India that would
employ at least 1,000 persons by mid-2005. The new unit,
slated to become functional by June this year in the
southern city of Hyderabad, is expected to provide
back-office support for processes within the bank's main
business - including consumer, corporate and commercial
sectors.
Bank of America is already one of the
biggest clients of leading Indian software majors, such
as Tata Consultancy Services and Infosys Technologies.
Azim Premji, chairman of Wipro, another IT major that
does business process outsourcing, has described the
trend in the industry as "irreversible" in the near
future.
Indian analysts cite remarks by Carly
Florina, head of the computer hardware giant
Hewlett-Packard, who in an article in The Wall Street
Journal rejected arguments for protectionism in the
United States. "Not only do our competitors have
increasingly knowledgeable work forces, but they can
compete for jobs that were once the sole province of the
developed world," Florina said. "There is much outcry -
but not much constructive action."
"Once again
our leadership is being challenged - not by Japan, but
by emerging nations like India, Russia and China. What
makes this challenge different is that these nations not
only share rich educational heritage, but they are
investing heavily in innovation and research and
development to help drive the next generation of
growth," Florina wrote.
(Inter Press
Service)
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