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Global tenders for govt procurement, please
The Economic Times, India Sunday, September 12, 2010

Swaminathan S Anklesaria Aiyar
To project jobs, Ohio Governor Strickland has banned outsourcing by companies getting state government funds, which has led to much protests in India. Similar rhetoric was used after the 2001 recession, when US politicians inveighed against the “export of US jobs” . Protectionism is selfdestructive in anything but the short run. India itself flourished after selfsufficiency was replaced by trade interdependence, writes Swaminathan Aiyar in The Economic Times.

To project jobs, Ohio Governor Strickland has banned outsourcing by companies getting state government funds. This has raised a storm of protest in India, but it’s a storm in a tea cup. Our IT exports to the US federal and state governments are very modest.

... ...

President Obama will not extend tax breaks to overseas operations of US firms. He has also raised visa fees for visiting engineers, to shift more work to US engineers. He waxes eloquent with swadeshi rhetoric about US jobs. Similar rhetoric was used after the 2001 recession, when US politicians inveighed against the “export of US jobs” .

This plays to the domestic gallery but is logically faulty. Jobs do not belong by right to any nation: they have to be earned by competitiveness. India and China dominated world manufacturing till the Industrial Revolution , specializing in handloom textiles . But then, the machinery of the Industrial Revolution produced textiles more cheaply than handlooms, crushing Chinese and Indian production . Did Europeans call this the export of Indian jobs to Europe? Not at all.

Jobs are not property rights. They are a means to meet consumer needs, and should move across companies, within countries or across the globe to where they serve consumers best. Just as textile jobs went to Europe during the Industrial Revolution, so are software jobs moving to India today , and in both cases consumer prices have fallen.

... ...

Protectionism is selfdestructive in anything but the short run. India itself flourished after selfsufficiency was replaced by trade interdependence.

The US swadeshi ploy is not new. During the 2001 recession, states like New Jersey imposed outsourcing curbs. These, however, proved ineffective . When the 2008 recession struck, the US mandated that bankrupt companies rescued with government funds must not use the money for outsourcing.

...

Some Indians claim that Ohio’s outsourcing curbs violate WTO rules. Not so. The WTO has a plurilateral agreement on government procurement , obliging all signatories to allow fellow-signatories to bid for all government contracts. The US has signed but India has not. India will be better placed to get US and European government contracts — for software and everything else — if it signs the plurilateral agreement.

...

International bidding is obligatory for World Bank contracts. Extending this to all government contracts would eliminate thousands of crores in kickbacks. For Indian politicians , this will mean unthinkable impoverishment. For Indians citizens , it is a must.

Don’t be misled by the swadeshi rhetoric behind which corrupt politicians hide. Joining the WTO agreement on government procurement will not only slash corruption and costs in Indian projects, it will ensure access for Indians to government contracts in the US and other signatories. That’s the way to go.

This article was published in the The Economic Times on Sunday, September 12, 2010. Please read the original article here.
Author : Mr Aiyar is consulting editor of Economic Times and writes the Swaminomics column in Times of India
Tags- Find more articles on - outsourcing | United States | WTO

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