The Hindu : A NON-EXISTENT LINKAGE

Online edition of India's National Newspaper
Thursday, Mar 18, 2004

Opinion

Opinion - Editorials

A NON-EXISTENT LINKAGE

A UNITED STATES Secretary of State can be expected to be more diplomatic than a U.S. Trade Representative, one of whom in the 1980s quite infamously said that she would wield a crowbar to pry open export markets. So it is not surprising that Colin L. Powell was careful with his words when speaking in New Delhi about the controversial subject of business process outsourcing (BPO). Where the USTR, Robert E. Zoellick, said last month during his visit that trade between the two countries was "a two-way street," Mr. Powell has denied that there is any quid pro quo between the U.S. keeping offshore contracts free from controls, and India opening its market further to imports. However, shorn of the niceties of language, the message from both senior officials of the Bush administration has been the same: If India bought more U.S. products, the administration would find it easier to sell the concept of outsourcing to the electorate, as new jobs would be created in export-oriented manufacture and services. Comments from the White House on Mr. Powell's visit, that Washington is focussed on opening the Indian market, confirm that the two issues are not unrelated.

The current Republican administration has sought to finesse its position after BPO became an election issue. There is no unqualified defence, as there was earlier, of the right of companies to outsource some of their activities to foreign suppliers, nor is there a move to impose restrictions, as demanded by John Kerry, the presumptive presidential candidate of the Democratic Party. The strategy is instead to argue that placing curbs on outsourcing would be counter-productive for the domestic economy and, at the same time, to stress government efforts at expanding foreign markets. The Secretary of State's remarks in India are consistent with this position. However, there are two fundamental problems with the linkage between outsourcing and more open markets that is an integral part of this strategy. First, India and the U.S. have been engaged, bilaterally and at the World Trade Organisation, in negotiations about how to lower existing barriers to trade in goods and services. On the other hand, the BPO issue is one where new barriers are being erected. It is indefensible to demand that India lower its customs duties in return for Washington abstaining from introducing fresh controls, where until recently there were none, on BPO contracts.

The second problem with the `two-way-street' approach is that if Indian regulations on imports are to be brought into the picture, so too must U.S. controls on a number of industrial and agricultural products. The average import tariff may be just a fraction of India's, but averages are, as so often, misleading in this case. It is well-known that U.S. regulations are the most stringent on products where the developing countries have a competitive advantage. There is the over-arching issue of farm subsidies where the level of protection to domestic agriculture gives the lie to claims that it is the country with one of the most open trade regimes in the world. High average duties, widespread prevalence of customs duty peaks and an extreme degree of tariff escalation (higher duties on finished products) are common on imports of textiles, leather and other labour-intensive manufactured products that are of interest to India. In addition, the U.S. is expanding the scope of regulations. One recent example is the proposal to impose anti-dumping duties on shrimps, a move which has already had an adverse impact on aquaculture farmers in India and other developing countries.

Printer friendly page
Send this article to Friends by E-Mail

Opinion

News Update

Stories in this Section

A NON-EXISTENT LINKAGE

ELECTIONS IN MALAYSIA

Redefining secularism

Haiti: this time we must get it right

After Spain, Poland fears it is next