Businessworld has just (June 16) done an excellent story on the outsourcing backlash India faces in the United States of America. Since 70 per cent of information technology exports are headed to the US and the share is even more for business process outsourcing, the backlash is most serious in the US, although there have been ripples in Britain, Germany and even the Netherlands. As Indians, we should feel flattered. East Asian and Chinese successes in manufactured exports led to a barrage of anti-dumping and anti-subsidy investigations. If our service exports take off, we ought to expect such a backlash of protectionism.
Protectionism is correlated with how an economy is doing. For instance, if US economic growth inches up to 3 per cent or more and employment intensity of growth also increases, protectionist pressures will fizzle out. If not, jobs threatened now are white-collar ones. This is different from blue-collar jobs moving to east or southeast Asia. The threatened segments now are vocal ones, with high decibel levels.
A point can indeed be made about developed country protectionism, as the commerce minister has been doing. That’s true not only of cross-border movements of labour, but also agriculture. But having made that point, what recourse do we have in the case of any American action' Depends on the form the action takes.
The Businessworld story mentions mushrooming of anti-immigration and anti-outsourcing sites. It lists some of these sites, but doesn’t quote from them. I am going to give you some quotes, as these illustrate possible forms of action. “We are here to save American jobs. We are not racists, xenophobes or bigots. We are displaced American Workers. Displaced by a little known immigration visa approved by congress at the request of large US corporations. These visas known as H-1B and L-1 are used to import foreign workers to replace American workers with cheap foreign labour. The replacement started with US computer programmers and engineers and is now taking hold in various professions like nursing, teaching and truck drivers. Basically any decent paying jobs are now targets of these large corporations and government institutions.” This is from http://www.h1bprotest. com/protest/protest.asp.
There were 65,349 H1-B visas issued in 1985, increasing to 294,658 in 2000. Again, 47,322 L-1 visas were issued in 1985, increasing to 355,605 in 2000. “The L-1 visa permits US employers, such as Oracle, to pay third-world wages to tech workers from other countries, even when they are working at US sites. There is NO LIMIT on L-1 visas. Why would US employers EVER hire US workers'” This is from http://www.familyinjustice. com/h1b/.
“The promiscuous immigration programmes for studies or work in the United States allow foreign terrorists easy passage into the United States. Given the tragic events of September 11, 2001, all non-immigrant visas should be immediately halted in the interest of national security.” This is from http://www.zazona.com/Shame H1B/.
“Stop all immigration now, legal or illegal, during this time of war. Our national security depends on it. We must rethink our entire immigration policy, and this will take time. The systems and safeguards needed to guarantee secure borders are years away. The INS will then have the resources to more effectively track business travellers and tourists, track down the 9 million illegal aliens within our borders, and fix its systemic problems. End student visas — This is a primary loophole for illegal aliens and terrorists. Lower student demand for US colleges will lower the cost of education for American kids as universities will be forced to compete in a tighter market. American kids will also be able to get into a better school. Our kids should come first. Most universities are subsidized by our tax dollars. Do we expect other nations to educate our kids'” This is from http:// www.stopimmigrationnow.org.
“To get an H1B visa, you have to have a degree. It is unfair to take the best-trained and educated people from a poorer country like India and allow them to come to the USA. The “brain drain” hurts these countries and keeps them poor. Maybe that is what the US government wants' It is true that the governments in India, Africa and the Far East do not encourage entrepreneurs. They really should. That is a totally different discussion. The H1B programme hurts the country these workers come from much more than it hurts the US economy. So maybe H1B visas are good for us US programmers. Instead of an industry wide competition, we get competition for individual jobs.
“Actual cost of producing engineering talent outside non-European countries (exception being France), is in reality very comparable to the educational costs for an engineer here in the US. However one point that’s lost in the fog, is that many of these same countries, have what is known as free or heavily subsidized education at the college/university levels and beyond. In other words, the true cost of producing an engineer in, let’s say India, is in all realities equal to costs here. However, given the fact that these actual costs are paid for by the home governments, the rational conclusion is that indeed what one has is “price masking”, or put a different way, selling at well below true cost. If this isn’t dumping, then WTF'” This is from http://discuss.fogcreek.com/joelonsoftware/default.asp'cmd=show&ixPost=9419.
“In my home state, you have now adopted another country. After laying off approximately 170 occupational employees and 90+ management employees, you have hired Indian Nationals from Ta Ta (sic) Corporation to work on our so-called secure national phone system. Thru Ta Ta (sic) Corp via H1B visas, you are training trainers who will go back to India and start a remote workforce which will have full access to our telephone system where they can shut down, reroute, or even destroy our whole long distance network. That India recently signed a telecommunication information sharing policy with Iraq, is just another thing that Americans don’t need to know.” This is from http://att.nac.net/ armstrong041402.h.
Here you have the essential ingredients of possible action, especially for services done on-site. First, tighten L1 visa procedures and impose caps. Second, thanks to the Uruguay Round’s (1986-94) market access negotiations, the US has a minimum commitment of 65,000 H1-B visas. Resist pressure by US IT companies to increase actual H1-B visas to above the bare minimum.
Third, the Doha development agenda’s negotiations on services are at a request-offer stage. These will eventually modify existing Uruguay Round commitments. Services can be delivered through four means — mode one, cross-border trade; mode two, consumption abroad; mode three, commercial presence; mode four, presence of natural persons. As a generalization, it is possibly true that developed countries pushed for mode three during the Uruguay Round and resisted mode four (the H1-B cap) and in the process, did not pay sufficient attention to exemptions in, say, mode three. Hence, some of the proposed anti-outsourcing legislation in New Jersey, Maryland, Washington, Connecticut and Missouri may very well be World Trade Organization-incompatible. While opening up, and exemptions are functions of quid pro quo obtained, negotiations will no longer be as simple as mode three versus mode four.
Fourth, attempt to extend coverage of anti-subsidy and anti-dumping agreements to cover services. Fifth, bring in security through Article XXI of the general agreement on tariffs and trade. Notwithstanding the WTO, the 1947 GATT agreement still stands. Here is what Article XXI(b)(iii) says: “Nothing in this Agreement shall be construed to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests taken in time of war or other emergency in international relations”.
After 9/11, nothing more is needed to justify protectionism. And as with actual number of H1-B visas granted, the best antidote is pressure by US companies, who find it in their commercial interests to outsource or hire foreign workers.