The Hindu : India, U.S. clash on outsourcing issue

Online edition of India's National Newspaper
Tuesday, Feb 17, 2004

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India, U.S. clash on outsourcing issue

By Sushma Ramachandran

NEW DELHI, FEB.16. India and the United States today clashed on the issue of business process outsourcing (BPO) with the Commerce Minister, Arun Jaitley, contending that BPO ban implied the closing of markets and the visiting U.S. Trade Representative, Robert Zoellick, insisting that trade should mean job creation on both sides.

Mr. Jaitley, who held an hour-long meeting with Mr. Zoellick, said that it was strange that, on the one hand, people were talking about opening up of markets and, on the other hand, banning outsourcing. Referring to the U.S. demands on opening up markets in agriculture, he said the sector here was fragile as it was not subsidised as in the U.S.

Conceding the importance of concerns over subsistence farmers in India, Mr. Zoellick later said that opening up of the services and agriculture sectors would strengthen the hands of the U.S. to lift the ban on outsourcing.

Replying to questions at a press conference, he said that trade should be a "win-win" situation. He did not agree that the U.S. was closing its markets by banning the outsourcing of government contracts. "It is unfair to say we are closing markets when we have an $8 billion trade deficit with India," he said.

Asked about Mr. Jaitley having quoted him as being opposed to the initial moves in American States to ban outsourcing, he was critical of such public disclosure of private conversations. In this context, he said, "we have political sensitivities, you have political sensitivities," evidently referring to the elections in both countries this year. The reversal in Mr. Zoellick's views on outsourcing has been attributed to the election campaign in the U.S. where job loss on this account is being blamed on the Bush administration.

Defending the BPO ban for government contracts, he said not only was it within the legal ambit of the World Trade Organisation but also accounted for only a "very small part" of government procurement. At the same time, he said India had not joined the agreement on government procurement under GATT and thus should not make the present ban an issue.

On the contentious issue of agriculture subsidies, he said the U.S. was prepared to cut subsidy in case Europe and Japan did so. He recognised the sensitive nature of agriculture for India but felt that markets could be opened to the middle class while dealing with the issue of subsistence farmers.

Mr. Zoellick, who is here on a mission to revive the WTO talks after the collapse of the Cancun Ministerial Conference, has already visited Japan, China, Singapore and Pakistan and now goes to South Africa, Kenya and Costa Rica followed by visits to the WTO headquarters in Geneva and Brussels. Describing the talks here as having been "productive and useful," he said the two sides discussed how to work together to convince the developing countries that opening up the services sector would offer positive benefits.

Mr. Zoellick, who also met the National Security Adviser, Brajesh Mishra, said the U.S. was keen on engaging India in a "strategic dialogue" on the progress of the Doha development agenda and the WTO in the context of the recovery of the U.S. economy.

Later, at a function organised by the National Productivity Council, Mr. Jaitley carried the BPO debate forward by pointing out that India had been successful in getting outsourced business from abroad, including the U.S., because of its competitive edge and by virtue of being a low-cost economy. India's best allies in the U.S. and Europe were their domestic industry as it was the U.S. industry which had argued that costlier domestic services would make them non-competitive.

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