The Telegraph
Since 1st March, 1999
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Back-office deals out of trade haggle
- US runs reality check on outsourcing, snaps link with market access

New Delhi, March 16: The United States today made it clear that it isn’t seeking to link outsourcing of American jobs to Indian companies with the broader, and perhaps more contentious, issue of providing American businessmen and investors greater access to Indian markets.

“It is not a quid pro quo,” said US secretary of state Colin Powell, squelching fears in India Inc that the US and the Bush administration — which is vulnerable to attacks from the Democrats over the loss of 2.8 million US jobs during the four-year tenure — could ratchet up pressure to force India to reach some sort of a deal on market access.

Powell said though Washington wanted reforms in India to continue, perhaps at a faster pace, outsourcing was a global reality of the 21st century. “I think it is time for us to educate the American public about these realities,” he said.

Outsourcing — the US corporate practice of shifting jobs to lower-wage countries like India — has become an issue in the US presidential campaign.

This is the first categorical statement on outsourcing made by a senior American leader and should allay fears in Indian Inc — especially in the business process outsourcing segment — which has been worried by recent moves to pass legislation in the US to stop outsourcing of jobs on government contracts to countries like India.

Powell said the number of Indian jobs created as a result of outsourcing — estimated by one US official at 100,000 to 180,000 — is small relative to the US economy.

The Democrats in the US have successfully turned outsourcing into a major election issue. The Republicans, who have not been averse to US firms outsourcing jobs to India and other countries to maintain their profits, have been sandbagged by Democrat presidential candidates led by John Kerry on the issue of job losses in the US because of outsourcing and have been adopting a defensive stand on the issue.

As a result of a stream of comments from the US — most of which were not well received in Delhi — outsourcing had turned into a controversial topic that could seriously undermine the otherwise “excellent” Indo-US relations.

The issue predictably came up for discussion between Powell and his Indian counterpart Yashwant Sinha this afternoon. Both leaders decided to have further engagements on the subject and underscored their determination not to allow it to create a “misunderstanding” in bilateral ties.

“Outsourcing is a reality of the 21st century global environment. While we have outsourced some jobs and positions to India, there are opportunities for Americans as well to service Indian needs,” Powell said after his talks with Sinha.

The US secretary of state made it clear that while India needed to understand “the need for reforms” which will help American firms gain more opportunities in the country, it was also important for the people in the US to understand that outsourcing did not result in loss of jobs.

“We have to do a better job in the US to create more jobs and greater opportunities so that those who have lost jobs will have opportunities in the future,” Powell said.

“But it is a reality of 21st century international economics that these kinds of dislocations will take place. What we have to do is to work to minimise these dislocations and provide new opportunities for workers. This is a major issue that we will be focusing on in the months ahead,” said Powell.

Sinha also took the opportunity to clarify that the reforms undertaken by India was a part of a process that had started many years back. “It is something which is not being done under US pressure. We want to do it because it will be beneficial for India to integrate itself with the global economy," he said.

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