Bridges Weekly Trade News Digest • Volume 8 • Number 9 • 10th March 2004
India, US Clash Over Us Move To Halt Federal Outsourcing
In a move to ban the outsourcing of US federal jobs, the US Senate on 4 March approved a measure preventing American companies from using money from certain federal contracts to export jobs overseas. The measure was attached to the "Jumpstart Our Business Strength (JOBS) Act," designed to heal trade ties with the EC. The Act itself aims at repealing a tax break for US exporters, which the WTO has ruled to be an illegal trade subsidy in the EC-US "Foreign Sales Corporations" dispute (see BRIDGES Weekly, 3 March 2004). The measure banning outsourcing would not apply to Defence, Homeland Security and Energy department contracts related to national security.
Zoellick: India not in a position to protest
The new US federal outsourcing ban would not apply to the 28 countries that have signed the plurilateral WTO Government Procurement Agreement (GPA). The GPA, comprising largely developed country Members, prohibits signatories from discriminating against foreign products and suppliers. Testifying at a hearing of the Senate Finance Committee on 9 March, US Trade Representative Zoellick said that "the Indians have absolutely no right to complain" about US restrictions on outsourcing government contracts to other countries because India (as China) is not a signatory to the WTO Agreement on Government Procurement". He also noted that India had been "one of the more difficult players" in the current round of global trade negotiations.
According to Senator Chris Dodd, who sponsored the bill, there was "hardly a level playing field out there," as the US could not compete for procurement contracts in countries such as India. He stated that in practice, procurement contracts were going to countries that were not signatories to the GPA. Forty US states now reportedly outsource jobs, as do 400 of the top 1,000 US corporations.
India: Difficult to accept double standards
The measure evoked complaints from India, which called a meeting of WTO Members in Geneva on 4 March to express concern over US steps to halt the outsourcing of jobs. During a visit by Robert Zoellick to New Delhi on 16 February, Indian Commerce Minister Arun Jaitley described the proposed restrictions as unacceptable to India. He considered it "strange" that on the one hand the US was talking about opening markets, and on the other, banning business process outsourcing. Jaitley declared that "it is difficult for our people to accept the double standards".
According to India’s National Association of Software and Services Companies (NASSCOM), the measure would only have a minimal impact, as the share of US federal government contracts in exports of information technology software and services from India was less than two percent. However, the Association expressed dismay over the measure, declaring that it was "not in keeping with the increasing globalisation of trade, which benefits all countries, and is contrary to the spirit of free trade being promoted by the WTO and long espoused by the US".
The US Senate is expected to finish work on the bill later this month.
ICTSD reporting; "US Senate Approves Federal Contract Ban For Outsourcing," DOWJONES, 4 March 2004; "At WTO Meeting, India Signals Concern About U.S. Moves to Counter Outsourcing," WTO REPORTER 9 March 2004; " USTR Says India Has ‘No Right’ to Criticize U.S. for Seeking to Halt Outsourcing of Jobs," WTO REPORTER, 10 March 2004.