The Hindu Business Line : Equity, not equality

THE latest controversy between the US and the Indian points of view on business process outsourcing (BPO) focus on an issue which has been a part of the debate on development since the end of the Second World War.

Should there be clinical equality between the rich and poor nations in the global drive towards economic development, or should there be fairness in the approach taking into account past economic exploitation of the colonial economies by the developed countries of today?

But, first, what exactly is the latest BPO controversy about? Briefly, earlier this week, the US charge d'affaires in New Delhi told an audience that the "most important step India can take to counter efforts to restrict outsourcing is to continue to open its markets".

Among other things, he is reported to have said that the caps on foreign investment in financial services, insurance and telecom were problem areas and that New Delhi would do well if it raised the FDI limits permissible in these sectors, among others.

The External Affairs Minister, Mr Yashwant Sinha, has taken objection to this, stating that the charge d'affaires' formulation of the problem "smacked of retaliation", and that he could "never agree with the logic" that India would have to open up more in order to prevent unfair restrictions being placed on jobs being outsourced from India.

Basically, the issue is between `fairness' and `unfairness', and not one of international agreements being transgressed which, as everyone knows — particularly in today's WTO-bound world — is totally unacceptable.

As one former Deputy Director-General of the WTO has put it, the US has not violated any of the rules of the multilateral trading system by enacting the offending BPO legislation, which applies only to government contracts. Additionally, government purchases of services "are completely excluded from the scope of commitments under the General Agreement on Services (GATS), making it possible for WTO members to grant preference to domestic suppliers as well".

Technically, therefore, the Bush Administration cannot be faulted for pushing through the measure banning outsourcing of government contracts. Even if one does not agree with the measure, one cannot pull up Washington for taking the legislative step it has, at least on these two counts. But it is an entirely different matter when an effort is made — as is the case now — to use the legislation to pry open the Indian market, the unstated (and unacceptable) principle being that India has to provide US jobs by opening up its domestic market further if it is to be allowed to take away similar jobs by the outsourcing method.

What this implies is that the US and Indian economies are mechanically comparable to each other, which is clearly not acceptable when the development stages the two economies are in are compared. Put very simply, this is why there is US aid for India and not the other way round.

The problem is that if Washington is prepared to use the basis of equality (and not equity or fairness) to negotiate with New Delhi on subjects such as market liberalisation, etc, it may not be out of place to suggest that the entire WTO process is doomed to failure.

Briefly, the rich have no alternative but to contribute much more if the poor are to be given a fair chance of providing a better life to their people, a transformation which will make the rich economies themselves much stronger in the long run.

More Stories on : Outsourcing | View Point | Politics

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Equity, not equality

Takeover rights and wrongs

The economic strangulation of Bihar

How to go after gas and gardeners

Getting `firm' on transfer gains

There is no innocent economist

L-1 visas: 'Specialised knowledge' the contentious issue

Should parallel imports be regulated at all?

Better cages won't help rein in rogue corporates