Recent pronouncement by the Ohio State Governor Mr.Ted Strickland ordering a ban on outsourcing government projects to companies outside the US and subsequent announcements by the US President that tax breaks should go only to companies that create jobs in the US and not overseas have raised concerns among the IT fraternity and have invited strong reactions from the Indian IT companies as well as from some quarters in the Indian government. These steps followed similar restricting actions earlier like increasing the visa fee for H1 and L1 Visas has added to the concerns of the Indian IT industry. The fact that the US government might have been forced by their own local compulsions like a faltering economy, high unemployment levels along with other political factors has not been a source of solace for the IT industry barons in India.
Indian IT industry has grown considerably over the last two decades and has become a significant contributor to the national GDP with 5.5% coming from the IT and ITeS sectors. 2 million people are directly employed by the $70 billion IT sector with another 7-8 million being employed indirectly. UK and US continue to be the major market for the Indian IT Companies with 61% of the revenue coming from the US, 18% from the UK and the rest from other European countries. Thus, outsourcing is the lifeline for the majority of our IT Companies and hence they are naturally in the forefront of the ongoing outcry against the ban imposed on the outsourcing. The NASSCOM head has been very prompt in pointing out that the IT companies were always been supportive of free trade and open market policies (it is another matter that in many instances these policies have been detrimental to our own economic and national interests). The Indian IT Company’s representative body had no hesitation in calling the action as ‘discriminatory’ trade barrier. However, besides the perspective from a narrow business interest of the Indian IT Companies, the issue of outsourcing needs wider examination from a broader perspective to evolve the appropriate response towards the ban imposed.
One of the triggers for the Ohio Governor’s order was the public outcry following a revelation about a call center services for a federally funded program being outsourced to El Salvador. The program, which was funded by the US government's $780 billion stimulus package (The package released by the US federal govt to help their economy recover from recession and to bail out banks, create employment, boost consumer spending etc), was to provide tax rebate to consumers who purchase energy efficient appliances. Ohio State contracted the project to a Texas based company Perago Inc. This company then outsourced the call center connected with this program to El Salvador. This was in fact discovered by a citizen (not the state) and caused a public outcry against the impropriety of siphoning out the public money, targeted for stimulating local economy and create jobs, by corporate to make profit for themselves. So, the irony was that a program which was designed to generate jobs and stimulate economy locally ended up creating jobs in El Salvador instead of Ohio because of the greed of the contracting company to increase their profit. A program designed to help people out of recession by pumping tax payer's money was ironically taking the jobs away! The situation naturally prompted the state government to act to remedy the situation. Will it be appropriate to condemn this decision of Ohio state government?
‘Outsourcing ban’ per se thus is not something that needs to be objected. Should we be asking US to encourage outsourcing? Should we be arguing that US should uphold India’s interest above own interest? Should we be aligning with the US corporate who in their greed to farther their huge level of profits outsource work to each and every corner of the world wherever cheap labor is available, completely ignoring the local people’s interest and growing unemployment? Answer to all these questions should be in the negative. We should respect Ohio State’s right to ban outsourcing to protect local employment and US government’s decision to withdraw any tax concessions to the companies who take job elsewhere in pursuit of higher profit via cheaper labor. However, it should be pointed out in the same vein that the US is preaching the whole world to abstain from these very protectionist actions that they are currently indulging in to protect their jobs and economy. The current ban brings out this contradiction all the more glaringly once again to the utmost discomfort of the free market apostles!
It is important for us not to miss the fact that the ban is clearly another example of the double standard that the US time and again pursues in the matters of ‘free market’ and ‘free trade’. As numerous other incidents and instances have repeatedly demonstrated, US’s preach on free market lasts only as long as it suits their interests and whenever it doesn’t, they have no inhibitions to employ trade restrictions and protectionism to safeguard it. It is very ironical that while the US President on one side argues for protecting US jobs and economy by banning the outsourcing, in the same breath, he demands India to open up the market for the American farm products imports. While he is loud and clear to stress on US’s right in protecting employment in the US, he turns a blind eye when it comes to appreciating India’s right to act in the interest of her farmers. Wish the Indian policymakers can see through the scheme and learn from it instead of blindly jumping on the globalization bandwagon and surrendering the nation’s interest to the global corporate in the name of ‘liberalization’.
The irony once again is highlighted by the fact that the US is a member of GPA (Agreement on Government Procurement), which is an agreement under WTO for setting fair rules for public purchases. The fact that the US while advocating such an agreement to other countries is violating the very spirit of it by relying on such protectionist measures helps only to expose once again the double talk they indulge in. US wants India to open up every conceivable markets, including insurance, banking, retail, media, services, nuclear etc but doesn’t want to open up own backyard for the Indian IT Companies speak volumes of the hollowness of US’s preaching on the free market and free trade. Apostle of free market has to turn to the methods of government intervention to control the market forces once again demonstrates the failure of open market policies to work for the welfare of the people. Current ban on outsourcing should make all the developing nations to open their eyes to the dangers of unilaterally submitting their national interest to the forces of the west lured by the hollow promises of globalization and free market capitalism! .
India government and Indian IT Companies have valuable lessons as take away from these developments. Indian IT sector has been overly relying on the US and European markets for too long. For example, 98.2% of Infosys revenue comes from outside with US accounting for 62.6%, Europe 26.8 and rest of the world 8.8%. The domestic share lay at a paltry 1.8%! Apart from diversifying the market to other parts of the world, it is also critical that the Indian IT Companies start increasingly looking to cater to the domestic market more seriously instead of continuing to heavily rely on outsourced projects from outside. May be time to start another self-reliance movement, this time for indigenous software?
Suresh Kodoor
Sunday, November 7, 2010
On the issue of the US ban on Outsourcing
The upcoming visit by the President of USA to India next week provides an opportunity to all the progressive minded individuals and groups to express their strong protest and condemnation at the imperialistic, undemocratic and anti-people policies pursued by the USA all over the world. Some of the key issues that could be highlighted as part of the protest campaign include US’s insistence and pressure on India to get India’s markets open up in the areas of retail, banking, services, education and others, US’s continuing pressure on developing nations to allow US conglomerates to relentlessly exploit and loot their economies, continuing embargo on Cuba irrespective of overwhelming condemnation from all parts of the worlds, Atrocities on the people of Iraq and Afghanistan, Nuclear liability bill, so on and so forth.
However, it is felt that protest against ‘Ban on Outsourcing’ not be part of this list. ‘Outsourcing ban’ per se is not something that should be objected but at the same time it should be used as a campaigning issue to expose as yet another example of the double standard of US in the matters of ‘free market’ and ‘free trade’.
Following points be considered while formulating a reaction to the issue of ‘outsourcing ban’.
* Should we be asking US to encourage outsourcing? Should we be arguing for asking US to uphold India’s interest above own interest? Should we be aligning with the US corporate who in their greed to farther their huge level of profit outsource work to each and every corner of the world wherever cheap labor is available, completely ignoring the local people’s interest and growing unemployment?
* Background on Ohio state passing the bill on Outsourcing: One of the triggers for the bill was the revelation about a call center services for a federally funded program being outsourced to El Salvador. The program, which was funded by the US government's $780 billion stimulus package (The package released by the US federal govt to help their economy recover from recession and to bail out banks, create employment, boost consumer spending etc), was to provide tax rebate to consumers who purchase energy efficient appliances. Ohio state contracted the project to a Texas based company Perago Inc. This company then outsourced the call center connected with this program to El Salvador. This was in fact discovered by a citizen (not the state) and caused a public outcry against the impropriety of siphoning out the public money targeted to stimulated local economy and create jobs by corporate to make profit for themselves. So, the irony was that a program which was designed to generate jobs and stimulate economy locally ended up creating jobs in EL Salvador instead of Ohio because of the greed of the contracting company to increase their profit. A program designed to help people out of recession by pumping tax payer's money was ironically taking the jobs away! The situation naturally prompted the state govt to act to remedy the situation. Will it be appropriate to condemn this decision of Ohio state government? The point is, banning the outsourcing per se is not a wrong thing. However the double standard of the USA, who force every other country to act against such protectionism and open up their market, as once again demonstrated by this act which is against their own ‘free market’ preaching is to be exposed.
* The irony once again is highlighted by the fact that the USA is a member of GPA (Agreement on Government Procurement), which is an agreement under WTO for setting fair rules for public purchases. Only a few countries are member of this agreement and India is not one. As per this agreement a member nation cannot discriminate countries in cases of public purchases. The point is, US who advocate such an agreement to other countries itself relying on such protectionism only expose their real intend. ie loot other market while protecting their backyard whenever it find it necessary. This is what need to be exposed in this context.
* So, our contention in this is that when US protects their interest by imposing restrictions and intervening in the market, US should agree that the developing countries also are equally within their rights to impose such restrictions to protect their economy and safeguard their people's interest. US making hue and cry in the name of free trade and free market in those instances when developing countries try to protect their economy is hypocritical, selfish and double standard. This double talk and deed is what should be exposed.
* A system that boast of 'free market' and 'free capitalism' engaging in such protectionism should be viewed as a public admission of ineffectiveness and inability of 'capitalism' and 'free market' to protect people's interest. It is the public demonstration of the fact that government intervention is very much necessary in the market and economy to ensure the welfare of the society and large section of the people. This is against the very tenants of free capitalism and a falling back to some of the ways of 'welfare economics'. Thus actions such as 'Outsourcing Ban' coming from the apostle of free market should be used as the biggest campaigning tool to expose the hollowness of 'free market' claims. This should be used to strengthen our campaign against Dr.Manmohan Singh government’s shameless submission to the demands of US in opening up markets and signing up trade agreements that is blatantly favorable to the interests of the US and against our own economic and people’s interests.
* Suppose Indian IT companies choose to bring in IT workers from say Nepal or other third world countries (they will be able to get workers at a fraction of the cost being paid to Indian IT workers then), what would be our stand? Or say if Indian IT Companies choose to outsource all the work to Bangladesh, Thailand, Srilanka or other such countries leaving Indian IT workers jobless, what would be out stand? Or if Indian diamond industry outsources the whole diamond cutting jobs to outside, what should be our stand? What is 'right' for us cannot be 'wrong' for others!
* We stand against the irresponsible import of agricultural products and other goods, which will put the life of our farmers in difficulties (our protect against importing rubber, edible oil, sugar etc a case in point or our objections on India entering ASEAN or similar treaties and for that matter many of the agreements under WTO itself). This stand is from the realization that developing nations need to rely on protectionism to safeguard their economy. Any nation might have to turn to such practices to safe guard their economy. Again our contention is that US should respect this rights of all the sovereign countries instead of trying to impose their hegemony and force market world over to open up to allow their looting. The present issue of outsourcing ban should be used to once again highlight this fact. Arent we time and again stressing on the need to restrict foreign investment only to those fields which are absolutely necessary (that too based on conditions that are favorable to us) and to be very judicious in allowing foreign investments? Then how can we argue that US should export their jobs outside in spite of so many people going jobless there?
* Finally, the ban on outsourcing is only for federal jobs, which is only an insignificant part of actual outsourcing work. So, in practice, this is not really going to make any impact. US senate passed a similar bill banning outsourcing in the year 2004 as well. However hardly it was enforced or been effective.
However, it is felt that protest against ‘Ban on Outsourcing’ not be part of this list. ‘Outsourcing ban’ per se is not something that should be objected but at the same time it should be used as a campaigning issue to expose as yet another example of the double standard of US in the matters of ‘free market’ and ‘free trade’.
Following points be considered while formulating a reaction to the issue of ‘outsourcing ban’.
* Should we be asking US to encourage outsourcing? Should we be arguing for asking US to uphold India’s interest above own interest? Should we be aligning with the US corporate who in their greed to farther their huge level of profit outsource work to each and every corner of the world wherever cheap labor is available, completely ignoring the local people’s interest and growing unemployment?
* Background on Ohio state passing the bill on Outsourcing: One of the triggers for the bill was the revelation about a call center services for a federally funded program being outsourced to El Salvador. The program, which was funded by the US government's $780 billion stimulus package (The package released by the US federal govt to help their economy recover from recession and to bail out banks, create employment, boost consumer spending etc), was to provide tax rebate to consumers who purchase energy efficient appliances. Ohio state contracted the project to a Texas based company Perago Inc. This company then outsourced the call center connected with this program to El Salvador. This was in fact discovered by a citizen (not the state) and caused a public outcry against the impropriety of siphoning out the public money targeted to stimulated local economy and create jobs by corporate to make profit for themselves. So, the irony was that a program which was designed to generate jobs and stimulate economy locally ended up creating jobs in EL Salvador instead of Ohio because of the greed of the contracting company to increase their profit. A program designed to help people out of recession by pumping tax payer's money was ironically taking the jobs away! The situation naturally prompted the state govt to act to remedy the situation. Will it be appropriate to condemn this decision of Ohio state government? The point is, banning the outsourcing per se is not a wrong thing. However the double standard of the USA, who force every other country to act against such protectionism and open up their market, as once again demonstrated by this act which is against their own ‘free market’ preaching is to be exposed.
* The irony once again is highlighted by the fact that the USA is a member of GPA (Agreement on Government Procurement), which is an agreement under WTO for setting fair rules for public purchases. Only a few countries are member of this agreement and India is not one. As per this agreement a member nation cannot discriminate countries in cases of public purchases. The point is, US who advocate such an agreement to other countries itself relying on such protectionism only expose their real intend. ie loot other market while protecting their backyard whenever it find it necessary. This is what need to be exposed in this context.
* So, our contention in this is that when US protects their interest by imposing restrictions and intervening in the market, US should agree that the developing countries also are equally within their rights to impose such restrictions to protect their economy and safeguard their people's interest. US making hue and cry in the name of free trade and free market in those instances when developing countries try to protect their economy is hypocritical, selfish and double standard. This double talk and deed is what should be exposed.
* A system that boast of 'free market' and 'free capitalism' engaging in such protectionism should be viewed as a public admission of ineffectiveness and inability of 'capitalism' and 'free market' to protect people's interest. It is the public demonstration of the fact that government intervention is very much necessary in the market and economy to ensure the welfare of the society and large section of the people. This is against the very tenants of free capitalism and a falling back to some of the ways of 'welfare economics'. Thus actions such as 'Outsourcing Ban' coming from the apostle of free market should be used as the biggest campaigning tool to expose the hollowness of 'free market' claims. This should be used to strengthen our campaign against Dr.Manmohan Singh government’s shameless submission to the demands of US in opening up markets and signing up trade agreements that is blatantly favorable to the interests of the US and against our own economic and people’s interests.
* Suppose Indian IT companies choose to bring in IT workers from say Nepal or other third world countries (they will be able to get workers at a fraction of the cost being paid to Indian IT workers then), what would be our stand? Or say if Indian IT Companies choose to outsource all the work to Bangladesh, Thailand, Srilanka or other such countries leaving Indian IT workers jobless, what would be out stand? Or if Indian diamond industry outsources the whole diamond cutting jobs to outside, what should be our stand? What is 'right' for us cannot be 'wrong' for others!
* We stand against the irresponsible import of agricultural products and other goods, which will put the life of our farmers in difficulties (our protect against importing rubber, edible oil, sugar etc a case in point or our objections on India entering ASEAN or similar treaties and for that matter many of the agreements under WTO itself). This stand is from the realization that developing nations need to rely on protectionism to safeguard their economy. Any nation might have to turn to such practices to safe guard their economy. Again our contention is that US should respect this rights of all the sovereign countries instead of trying to impose their hegemony and force market world over to open up to allow their looting. The present issue of outsourcing ban should be used to once again highlight this fact. Arent we time and again stressing on the need to restrict foreign investment only to those fields which are absolutely necessary (that too based on conditions that are favorable to us) and to be very judicious in allowing foreign investments? Then how can we argue that US should export their jobs outside in spite of so many people going jobless there?
* Finally, the ban on outsourcing is only for federal jobs, which is only an insignificant part of actual outsourcing work. So, in practice, this is not really going to make any impact. US senate passed a similar bill banning outsourcing in the year 2004 as well. However hardly it was enforced or been effective.
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