The Hindu Business Line : BPO trade-offs

THE US TRADE Representative, Mr Robert Zoellick's statements in New Delhi on the business process outsourcing issue have, expectedly, raised a storm of protest, but there is another side to the picture which, if ignored, could project a distorted view of the evolving India-US economic relations. In fact, Mr Zoellick himself provided the hint when he said the US too had its quota of "sensitive politics" to address, especially in an election year. Domestic political imperative is casting a long shadow on the Administration's public posturing on the BPO issue, though the US policy may be different. In this context, one should not ignore Mr Zoellick's description (last June) as "bad policy" of the efforts of US States to introduce legislation to bar outsourcing of government jobs to India, or his more recent affirmation of the sensibility of the outsourcing process made in the US President's report on the US economy.

The inference of all this is that once the political imperative to adopt a stand against outsourcing wanes, a more sensible policy would be adopted, especially at the federal level. Yet, it must also be pointed out that certain arguments of the US Administration in support of its anti-BPO stand, if allowed a free play, could hit at the very basis of all multilateral trade negotiations, including the effort to get back on track the Doha Round of the World Trade Organisation. Perhaps, the most important of these is the attempt to "equate" the economic status of the negotiating partners.Certainly, as Mr Zoellick said, trade "is a two-way street...It should be a win-win deal". But it is also sensible to expect the economically stronger partner to provide more concessions for all-round progress at the end of the negotiation and implementation.

This apart, the US is also trying to use the BPO issue to prise open certain sectors of the Indian economy to American farm exports. Though sensible from Washington's point of view, given India's trade surplus, this must be strongly resisted by New Delhi because of the deep structural impact such imports can have on the farm sector in India. Indeed, Mr Zoellick openly linked softening of Washington's stand on the BPO issue to India opening its doors to American farm exports, a demand that was rightly rejected by the Commerce Minister, Mr Arun Jaitley, on the ground that Indian farming "was fragile since it was not subsidised (as) in the US".

Clearly, if the protection of US economic interest is going to be the cornerstone of Mr Zoellick's initiative to get the Doha Round restarted, that effort is doomed. He has pointed to a convergence of views between New Delhi and Washington on difficult subjects including elimination of farm export subsidies and the reduction in domestic support given to farmers — areas where the European Union, rather than the US, is seen as playing the spoilsport. This is welcome, but it must be made clear to Washington that it must concede much more in areas close to its heart — such as asking for a faster reduction in import tariffs by the poor world — if its voice is to be acceptable to countries such as Brazil and India which, post-Cancun, are bound to play an important role in the resumption of the multilateral trade talks.

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