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Bush may use BPO backlash to pressure India

Agencies | March 08, 2004 17:07 IST

America is keen to extract its pound of flesh from India.

Having first sent US Trade Representative Robert Zoellick to India to ask New Delhi to open up its markets in exchange for the thousands of outsourcing jobs that India is attracting, US President George W Bush now plans to pressure India onthe BPO issue.

The Wall Street Journal reported that the Bush administration may use the backlash against outsourcing as a lever to make India give in to major trade concessions, but New Delhi is unwilling to relent.

"The US 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 US 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 US jobs to India," the WSJ said.

Meanwhile, on Monday, India's IT Minister Arun Shourie wondered: "If the US feels that we must understand their political compulsions, why should not American politicians or trade negotiators understand our political difficulties?"

Lamenting the US stance, Shourie said those who lecture about free trade should practice it and added that whenever such issues rise in the competitive politics the economy suffers.

Bilateral trade between India and US stood at $18 billion in 2002-03, but India had a $8 billion surplus with the US, said the WSJ. India is America's 19th largest trading partner.

The US has been slowly turning on the pressure on India over the raging outsourcing controversy. What began as a single bill that was presented in the New Jersey house to protest against outsourcing of US government jobs has spread all over the US. Trade associations, workers' lobbies and politicians have all jumped on to the anti-outsourcing bandwagon.

The US Senate, said the WSJ, put more muscle behind Zoellick's warning (India must open its markets if it wants to access US markets), when it approved a measure that would impose restrictions on government contractors to discourage companies from outsourcing American jobs overseas, said the WSJ.

The ban will not apply to nations that have signed an international accord liberalising government-procurement rules, but India and China do not fall into this category.

"The Bush administration hasn't backed any proposals to limit outsourcing of US jobs, but still to be considered are dozens of bills in Washington and in state legislatures that further aim to hinder US companies from outsourcing computer-programming, accounting and medical work to India," reported the WSJ.

America has since long used protectionist measures as a strategy to press nations to open their markets, said the WSJ.

India, meanwhile, is resisting the US gambit and is threatening to increase its own pressure on Washington. Senior Indian officials led by Commerce Minister Arun Jaitley say that unless the US 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, reported the WSJ.

"I can't help but observe that this step has created an adverse environment in India with regards to the entire trade talks," 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, said the WSJ.

The cutting of agricultural tariffs and quotas would be difficult for India, Commerce Minister Arun Jaitley said, especially if the US doesn't take steps to remove 'trade-distorting subsidies' for American farmers, reported the WSJ.

Jaitley stressed that India has been opening its long-shuttered economy. Recently, India cut tariffs on consumer and industrial goods and raised the ceilings on foreign investment in the banking and oil sectors. Yet despite the reduction in tariffs, industrial tariffs in India are at a steep 20 per cent as compared with America's 3 per cent.

Jaitley, said the WSJ, became concerned in January when legislation passed the US Congress to bar some companies that win federal 2004 contracts from using offshore labour to perform privatised US-government tasks.

Although the Bush administration didn't push the federal measure, Zoellick said the measure conformed with world trade rules and represents only a tiny part of the US government's procurement. "We want to keep our markets open, but to do so we need to be able to open markets abroad. Trade is a 'two-way street," the WSJ quoted Zoellick has having said.

Boosting investment in the US was a tactic that Japan successfully used in the 1980s and 1990s to reduce US trade pressure, said the WSJ.

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