03-08-2004, 10:43 PM
<b>Bush Seeks to Use Backlash on Jobs As Lever on India</b>
By MICHAEL SCHROEDER and JAY SOLOMON
Staff Reporters of THE WALL STREET JOURNAL
The Bush administration hopes to use the American backlash against job outsourcing to press India into concessions in other trade disputes, but New Delhi is resisting.
U.S. Trade Representative Robert Zoellick challenged Indian officials to lower trade barriers as a strategy to help defuse the U.S. jobs-protection debate raging in Congress and American state capitals. To keep U.S. markets open to India, New Delhi "has to open" its markets, he said.
The U.S. wants India to reduce its agricultural and industrial tariffs and quotas, liberalize its government-procurement rules and stiffen its intellectual-property protection. These have been longtime U.S. goals, but the Bush administration is betting India might be more amenable to doing so if it will stave off American legislative proposals to limit the flow of U.S. jobs to India.
Last year, trade between the two countries totaled $18 billion. India, which is about the 19th largest trading partner of the U.S., had an $8 billion trade surplus with the U.S. last year, a 50% increase from five years earlier.
The U.S. Senate put more muscle behind Mr. Zoellick's warning on Thursday, when it approved a measure that would impose restrictions on government contractors to discourage companies from outsourcing American jobs overseas. The ban wouldn't apply to countries that have signed an international accord liberalizing government-procurement rules, but India and China haven't signed that pact.
The Bush administration hasn't backed any proposals to limit outsourcing of U.S. jobs, but still to be considered are dozens of bills in Washington and in state legislatures that further aim to hinder U.S. companies from outsourcing computer-programming, accounting and medical work to India.
For the moment, India is resisting the U.S. gambit and is threatening to increase its own pressure on Washington. Senior Indian officials led by Commerce Minister Arun Jaitley say that unless the U.S. ensures the free flow of service jobs abroad, India might try to stall resumption of global trade talks. Restarting the talks is a top Bush administration goal.
"I can't help but observe that this step has created an adverse environment in India with regards to the entire trade talks," Mr. Jaitley said last week. The Indian minister is a leader of the bloc of developing countries that helped torpedo world trade talks in Cancun, Mexico, last year.
Cutting agricultural tariffs and quotas would be difficult for India, Mr. Jaitley said, especially if the U.S. doesn't take steps to remove what he calls "trade-distorting subsidies" for American farmers.
Since it won independence in 1947, India has used trade policy to protect its hundreds of millions of subsistence farmers. Mr. Zoellick said India's tariffs on farm goods are as high as 112%, or more than 10 times the level in the U.S.
Mr. Jaitley stressed that India has been opening its long-shuttered economy. Recently, New Delhi slashed tariffs on consumer and industrial goods and raised ceilings on foreign investment in the banking and oil sectors. Still, after aggressively cutting tariffs on products such as cellphones and computers, overall industrial tariffs in India remain at 20%, compared with 3% in the U.S.
In the past decade, India has developed a substantial information-processing industry, with its success dependent on well-educated, inexpensive labor. U.S. information-technology businesses employ about 250,000 workers in India, either directly or in subcontracted work, based on economists' estimates.
Total world-wide revenue from India's exports of software and services continues to surge. Revenue growth of 26% to $12 billion is expected for the year ending March 31, according to New Delhi's National Association of Software and Service Companies, an industry lobbying group also known as Nasscom.
Mr. Jaitley says he became concerned in January when legislation passed the U.S. Congress to bar some companies that win federal 2004 contracts from using offshore labor to perform privatized federal-government tasks. In November, India's largest software company, Tata Consultancy Services, had its contract with the state of Indiana to process unemployment claims canceled. Jonathan Swain, a spokesman for Indiana Gov. Joseph Kernan, said the contract, which is being rebid, was withdrawn from Tata because the bidding process didn't allow Indiana companies a fair chance to win the work.
Although the Bush administration didn't push the federal measure, Mr. Zoellick said the measure conformed with world trade rules and represents only a tiny part of the U.S. government's procurement. "We want to keep our markets open, but to do so we need to be able to open markets abroad," Mr. Zoellick told Indian officials during a swing through New Delhi last month. Trade is a "two-way street," he said.
The use of protectionist moves by the U.S. Congress to press nations to open their markets is a long-standing tactic by Washington negotiators. "The message is that if your market is closed, don't be surprised if our elected officials will be expected to respond to the anxieties in the work force," said former U.S. Trade Representative Carla Hills. During the first Bush administration from 1989 through 1992, she used similar tactics to press Japan for concessions on automobiles and semiconductors.
Nasscom President Kiran Karnik said that encouraging Indian companies such as Tata to invest in the U.S. would help defuse trade tension. "It's beginning to happen by a lot of Indian software companies," he said. Some Indian companies are interested in buying American software companies, he added.
Boosting investment in the U.S. was a tactic that Japan successfully used in the 1980s and 1990s to reduce U.S. trade pressure.
URL for this article:
http://online.wsj.com/article/0,,SB1078686...4448503,00.html
By MICHAEL SCHROEDER and JAY SOLOMON
Staff Reporters of THE WALL STREET JOURNAL
The Bush administration hopes to use the American backlash against job outsourcing to press India into concessions in other trade disputes, but New Delhi is resisting.
U.S. Trade Representative Robert Zoellick challenged Indian officials to lower trade barriers as a strategy to help defuse the U.S. jobs-protection debate raging in Congress and American state capitals. To keep U.S. markets open to India, New Delhi "has to open" its markets, he said.
The U.S. wants India to reduce its agricultural and industrial tariffs and quotas, liberalize its government-procurement rules and stiffen its intellectual-property protection. These have been longtime U.S. goals, but the Bush administration is betting India might be more amenable to doing so if it will stave off American legislative proposals to limit the flow of U.S. jobs to India.
Last year, trade between the two countries totaled $18 billion. India, which is about the 19th largest trading partner of the U.S., had an $8 billion trade surplus with the U.S. last year, a 50% increase from five years earlier.
The U.S. Senate put more muscle behind Mr. Zoellick's warning on Thursday, when it approved a measure that would impose restrictions on government contractors to discourage companies from outsourcing American jobs overseas. The ban wouldn't apply to countries that have signed an international accord liberalizing government-procurement rules, but India and China haven't signed that pact.
The Bush administration hasn't backed any proposals to limit outsourcing of U.S. jobs, but still to be considered are dozens of bills in Washington and in state legislatures that further aim to hinder U.S. companies from outsourcing computer-programming, accounting and medical work to India.
For the moment, India is resisting the U.S. gambit and is threatening to increase its own pressure on Washington. Senior Indian officials led by Commerce Minister Arun Jaitley say that unless the U.S. ensures the free flow of service jobs abroad, India might try to stall resumption of global trade talks. Restarting the talks is a top Bush administration goal.
"I can't help but observe that this step has created an adverse environment in India with regards to the entire trade talks," Mr. Jaitley said last week. The Indian minister is a leader of the bloc of developing countries that helped torpedo world trade talks in Cancun, Mexico, last year.
Cutting agricultural tariffs and quotas would be difficult for India, Mr. Jaitley said, especially if the U.S. doesn't take steps to remove what he calls "trade-distorting subsidies" for American farmers.
Since it won independence in 1947, India has used trade policy to protect its hundreds of millions of subsistence farmers. Mr. Zoellick said India's tariffs on farm goods are as high as 112%, or more than 10 times the level in the U.S.
Mr. Jaitley stressed that India has been opening its long-shuttered economy. Recently, New Delhi slashed tariffs on consumer and industrial goods and raised ceilings on foreign investment in the banking and oil sectors. Still, after aggressively cutting tariffs on products such as cellphones and computers, overall industrial tariffs in India remain at 20%, compared with 3% in the U.S.
In the past decade, India has developed a substantial information-processing industry, with its success dependent on well-educated, inexpensive labor. U.S. information-technology businesses employ about 250,000 workers in India, either directly or in subcontracted work, based on economists' estimates.
Total world-wide revenue from India's exports of software and services continues to surge. Revenue growth of 26% to $12 billion is expected for the year ending March 31, according to New Delhi's National Association of Software and Service Companies, an industry lobbying group also known as Nasscom.
Mr. Jaitley says he became concerned in January when legislation passed the U.S. Congress to bar some companies that win federal 2004 contracts from using offshore labor to perform privatized federal-government tasks. In November, India's largest software company, Tata Consultancy Services, had its contract with the state of Indiana to process unemployment claims canceled. Jonathan Swain, a spokesman for Indiana Gov. Joseph Kernan, said the contract, which is being rebid, was withdrawn from Tata because the bidding process didn't allow Indiana companies a fair chance to win the work.
Although the Bush administration didn't push the federal measure, Mr. Zoellick said the measure conformed with world trade rules and represents only a tiny part of the U.S. government's procurement. "We want to keep our markets open, but to do so we need to be able to open markets abroad," Mr. Zoellick told Indian officials during a swing through New Delhi last month. Trade is a "two-way street," he said.
The use of protectionist moves by the U.S. Congress to press nations to open their markets is a long-standing tactic by Washington negotiators. "The message is that if your market is closed, don't be surprised if our elected officials will be expected to respond to the anxieties in the work force," said former U.S. Trade Representative Carla Hills. During the first Bush administration from 1989 through 1992, she used similar tactics to press Japan for concessions on automobiles and semiconductors.
Nasscom President Kiran Karnik said that encouraging Indian companies such as Tata to invest in the U.S. would help defuse trade tension. "It's beginning to happen by a lot of Indian software companies," he said. Some Indian companies are interested in buying American software companies, he added.
Boosting investment in the U.S. was a tactic that Japan successfully used in the 1980s and 1990s to reduce U.S. trade pressure.
URL for this article:
http://online.wsj.com/article/0,,SB1078686...4448503,00.html