The Telegraph
Since 1st March, 1999
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Blair counts outflow gains, heads for clash

London, March 23: Tony Blair has stepped into the row over outsourcing by claiming the flow of jobs to India and China could be good for western economies — a stance which places him on a collision course both with British trade unions and with US leaders, notably Democratic presidential contender John Kerry.

What the British Prime Minister said was nothing new but it was the way he said it.

“Yes, China competes with us and can take jobs away, but our exports to China have also trebled since 1996, creating more jobs,” Blair said in a speech to bankers and financial executives at the London offices of the Goldman Sachs Group.

“Globalisation is not our enemy but our friend,” he added.

Blair backed up his argument by citing a report from management consultants McKinsey & Co, which last year estimated that every dollar in US labour costs moved overseas leads to the creation of $1.45 to 1.47 of net additional value for the world economy.

The low-wage country keeps 33 cent of that and the rest comes to the US, the McKinsey report claimed.

Blair said that shifting operations to lower-cost economies “can actually increase the provision of jobs”.

Some estimates suggest that Europe and the US will lose 5 million jobs to India and China by 2015.

Investment and jobs have gone from Delta Airlines, General Electric and HSBC Holdings. It is pointed out that China’s economy is growing at an annual rate of 9.9 per cent, compared with 8.4 per cent in India.

In the US, Senator John Kerry is taking the line in the run-up to the November presidential elections that western economies must resist the movement of investment to Asia by altering tax laws to penalise companies which outsource jobs.

Blair’s government has taken the opposite view, which is that free trade and competition through greater skills and investment would benefit both developed and developing economies.

In Britain, trade unions have put pressure on the Labour government to stem job losses through outsourcing. The Prime Minister’s arguments of long-term benefits will not impress them.

Blair’s line was first spelt out by his trade and industry secretary, Patricia Hewitt, who opposed protectionist measures.

In a speech to the Confederation of British Industry, Hewitt warned against “siren voices” in Britain and the US which were demanding measures to restrict the freedom of firms to relocate.

“It is much easier to see the short-term benefits of protectionism than to see the long-term costs to consumers and business competitiveness,” she said.

“We cannot preach liberalisation to the rest of the world and practise protectionism at home.”

The trade union point of view is put by Amicus, whose spokesman said: “The government is missing the point. Outsourcing is not about developing the Indian economy, it is about companies pursuing a short-term profit. Once India has been sucked dry, offshoring companies will move on to China and south-east Asia leaving India and the UK in their wake.”

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