The Hindu : Outsourcing: trade deficit aggravates feelings?

Online edition of India's National Newspaper
Sunday, Feb 15, 2004

International

International

Outsourcing: trade deficit aggravates feelings?

By Sridhar Krishnaswami

WASHINGTON, FEB. 14. The foreign trade deficit of the United States has nearly hit a record $490 billions in 2003 providing further ammunition to the Democrats in an election year on such issues as loss of jobs and outsourcing.

Though exports grew at 4.5 per cent last year to a little over $1 trillion, imports rose by more than 8 per cent to $1.5 trillions with the deficit rising in December alone by more than 11 per cent over November. Economists and analysts say while there is a robust growth in consumption, the statistics are also a reminder of the negative aspects such as a lack in employment growth which has been fobbed off in many circles as a result of loss of jobs due to foreign competition by way of outsourcing.

The U.S. posted a trade deficit of about $124 billions with China or nearly twice as that of what it had against Japan where the figure stood at $66 billions. The U.S. also posted deficits of nearly $55 billions with Canada; with Mexico $40 billions and Germany at $39 billions.

This week the White House came under some intense fire from leading Democrats when one of the Mr. Bush's top economists, Gregory Mankiw, argued that the move of service jobs outside was "just a new way of doing international trade". Democrats said the statement was proof that the White House was `insensitive' to job losses. And Senate Democrats introduced on Thursday the Jobs for America Act which would mandate companies that move jobs overseas to not only specify how many jobs are being moved but also where and why.

If there is a political potency against outsourcing, it is on account of deep stagnation in the jobs and also in a perception that this Bush administration is looking after only the corporate interests as companies move jobs to India, China, Brazil, Mexico or Russia to make money.

Former officials of the Clinton administration point to a difference in the impact of outsourcing over the last decade and say what needed to be done now.

"In the 1990s we had a lot of this outsourcing going on and that did hurt some sectors of the economy, but other sectors were rapidly expanding. And what we are missing now is other sectors that are rapidly expanding, at least in terms of emplyment," Jeffrey Frankel, a former member of Mr. Clinton's Council of Economic Advisors has been quoted in The Washington Post.

And Gene Sperling, former Chair of Mr. Clinton's National Economic Council has said that policies then emphasised training and education for victims of free trade to find work; but the shift now is that many of the jobs moving to India such as software writing and technical support are precisely the ones that the Clinton administration thought unemployed would get.

Mr. Sperling has also said the federal government should subsidise the kind of infrastructure expansions that are heavily underwritten by the Governments of India and China. "One may not be able to control whether wages are lower in Bangalore than Buffalo, but you could make sure broadband access is not better there."

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