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India unmoved by US protectionism, for now

By SHIHOKO GOTO, UPI Senior Business Correspondent   |   Nov. 18, 2003 at 5:54 PM   |   Comments

WASHINGTON, Nov. 18 (UPI) -- China, and increasingly India, are taking away jobs not only from the American manufacturing sector, but also in the higher-paying technology and service sectors, according to some U.S. policymakers. And as the race for the White House heats up ahead of next year's presidential elections, there is concern that the issue could be politicized even further and potentially swell into a full-fledged trade dispute.

While some Chinese and India business leaders as well as government officials dismiss such fears of a trade war flaring up, it is clear that the same time, the trade imbalance between the United States and several developing nations continues to widen, especially with China's exports to U.S. markets reaching record levels in recent months. Such trends have alarmed voters from areas that have been particularly hard hit by the crunch in the labor market.

There is no specific number as to how many jobs have left the United States and relocated to India, but Congress has ordered the General Accounting Office to produce a report on that specific topic by next year. But it is clear that apart from straightforward, manufacturing jobs and lower-end back-office jobs such as telemarketing and other call-center related jobs, more and more jobs are being exported to the subcontinent. The allure for U.S. businesses is, of course, that the Indian labor force is willing to work for far cheaper wages, and often for much longer hours, for the same jobs that U.S. workers do. Meanwhile, technology-related jobs such as software design are also going offshore, as companies such as IBM and Intel relocate some positions to India, leaving U.S. workers in the lurch.

Yet a long-time Indian government official dismissed U.S. concerns about a massive exodus of jobs from the United States to the subcontinent, and pointed out that India is still very much an impoverished nation and largely agrarian. Krishna Chandra (KC) Pant, who currently serves as deputy chairman of India's government planning commission pointed out that it was actually in the interest of industrialized nations to see the subcontinent grow at a steady clip and emerge as a fully developed nation.

Moreover, Pant argued that it would be unfair for U.S. policymakers to demand India to try to curb its growth rate, currently averaging about 6.5 percent in annual GDP expansion, on its own accord.

"How can you ask a country to deliberately lower its growth rate, when there is so much poverty...and every Indian should be entitled to basic necessities," said Pant, who also served as finance and defense ministers amongst other positions in the Rajiv and Indira Gandhi governments.

It could be argued that India's gains would ultimately be in the United States' best interest, given that it would open up a huge market for U.S. businesses by the sheer size of the Indian population. Moreover, it could reduce or even potentially eliminate the need for U.S. financial aid to the country as well.

That may well be, but the problem is the growing perception that India's gain leads to the United States' pain. Trade thus because a highly emotional topic, especially when it is linked so closely to people's jobs. In fact, so worried are a large number of voters about the growing threat of China and India that Democratic presidential hopefuls are already banking on the public fears about more and more jobs being relocated overseas, and have made no bones about potentially rolling back some of the gains made in multilateral free trade agreements. Specifically, they have argued that companies are forced to relocate to countries that will allow them to cut down on labor costs and increase output.

At the same time, many businesses and policymakers alike have complained that they are at an unfair advantage competing overseas, as many developing countries deliberately make their home ground more attractive to U.S. entrepreneurs.

"The current global economic situation all too often creates pressures on and incentives for businesses and investors to engage in a race to the bottom in wage levels, worker safety conditions and environmental protection. Indeed, under the current global economic rules, U.S. companies in industry after industry are forced into a no-win choice: relocate and operate overseas to compete, or remain loyal to U.S. workers and communities and face bankruptcy," said Sen. Richard Gephardt (D-MO), who is one of the nine candidates running for the Democratic nomination of the presidency, in a recent statement.

Gephardt added: "All too often, workers here and around the globe find themselves in an economic downward spiral. This system is hollowing out the U.S. manufacturing base on which our country's national security and middle class workforce rely. Almost two million manufacturing jobs have been lost in the past two years alone."

For many who are alarmed by the rapid rate U.S. jobs are being outsourced abroad, the enemy is India, as well as China, from which U.S. workers must be protected.

"Month after month, for nearly three years, manufacturers have fired more workers than they hired, and the world-class manufacturing sector that has been the heart of America's strength continues to shrink," said Howard Dean, a former Vermont governor who currently leads the pack in garnering support from the Democrats.

Indeed, such calls for more protectionist measures appear to be getting bipartisan support, for in its latest round of introducing protectionist measures, the Bush administration announced Tuesday that it would impose quotas on certain Chinese-produced textiles. Specifically, it will cap imports of Chinese-made brassieres, dressing gowns, robes and knit fabrics at 7.5 percent above shipments from last year, as the country's U.S. exports in those items have surged over the past 12 months.

"This decision demonstrates the Bush administration's commitment to our trade rules and America's workers. I believe this will advance our future dealings with China, for no market operates fairly without open dialogue," Commerce Secretary Don Evans said.

Of course, the question is whether such moves will actually bolster the U.S. economy and protect jobs at home, and some analysts have argued otherwise.

"New trade restraints, on top of 40 years of quotas and high tariffs, will do nothing to save textile industry jobs. They will, however, raise prices for consumers and harm trade relations with China," warned Daniel Ikenson, a trade policy analyst at the Cato Institute.

© 2003 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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