For example, the Economic Policy Institute explains about post-NAFTA Mexico:

"In Mexico, real wages have fallen sharply and there has been a steep decline in the number of
people holding regular jobs in paid positions. Many workers have been shifted into subsistence-
level work in the 'informal sector'... Additionally, a flood of subsidized, low-priced corn from the
U.S. has decimated farmers and rural economics."

The impact on workers in countries as India, Indonesia, and China has been even more severe,
with innumerable instances of starvation wages, child workers, slave-labor hours and perilous
work conditions.

US jobs outsourcing to india

Indians taking up small lower kinda jobs in US

Indian IT Inc need not lose sleep over US postures DHNS

However, India Inc seems unperturbed about the moves and is optimistic about the positive growth of IT
sector in India. The Obama administration that came to power in the year 2008 is striving hard to revive
America’s past glory of a financial superpower. The priority of the recovery process is also creation of
new jobs. At the preliminary stages, the government had announced stimulus packages to boost the
American economy which was reeling under the pressure of economic crisis due to collapse of major
banks and financial institutions from mortgage crisis.

However, despite the massive stimulus package of $700 billion the American economy failed to recover
to the extent the government had expected and the slow recovery now haunts the administration which
is nearing the November elections to the United State Congress and Ohio governorship.

Earlier, in the month of May, Obama had announced new tax proposal to eliminate loopholes that allow
US firms to avoid paying tax on profits earned overseas. However, among the news coming from the
Unird States government, many feel that the ban on outsourcing of government IT and back office
projects outside the US announced by Ohio Governor Ted Strickland is a political posturing.

The announcement came out at a time when IT industry and industry bodies were scouting for options
to overcome the senator Charles Schumer’s Border Security Bill doubling fees for H1B visas and the
‘Chop shop’ remark.

US firms to be hit more

On Ohio governor Strickland’s new regulation in off shoring, India Inc reacted strongly. In its strong
reaction to Ohio State’s decision National Association of Software and Services Companies (Nasscom),
the IT industry representative, termed the move as discriminatory. In a statement, Nasscom said, “We
are leading a delegation to the US later this month and will be taking this up with relevant officials in the
US. The ban on outsourcing can only be viewed as counter -productive to the US government thrust on
reducing public deficit. It only reinforces our stand on discrimination.”

Commenting on the Ohio offshore ban, Infosys Technologies CEO & MD Kris Gopalakrishnan said,
“Infosys’ initiative in the public services sector is focused on creating a domestic delivery centre in the
US, hence this should not affect us.” Another IT services bellwether Wipro said, “We believe in the
fundamental strength of the US economy and has invested in expanding our presence there through
partnerships with many.”

Swift reaction

While IT industry reacted swiftly and strongly to the Ohio governor’s statement on outsourcing, analysts
estimate that the American government sector accounts for only a small percentage of the total
outsourcing business for Indian firms. Industry veterans and analyst feel that the move to curtail
outsourcing within the US will create a large impact on the US majors like, IBM, Hewlett Packard,
Microsoft, Accenture and Oracle who has significant presence in India by way of offshoring.

According to data, these companies alone share around 11-13 per cent of the US governmental projects.
Further, industry experts feel that the move will hit the bottom-line of these corporations who offshore
major chunk of their government projects to India where they employ lakhs of people.

According to Industry research firm Tholon, most large American companies have significant presence in
India and most of the works are outsourced. “For Indian companies, the US government projects form
only a small percentage of business. But these kind of moves will not send a right signal to the market,”
Tholon Vice-President Nishant Verma said.

Commenting on the issue MindTree Vice-Chairman and Gardener Subroto Bagchi, “The Ohio ban is more
of a political rhetoric. The US government is trying to resolve an economic issue through a political
posturing and they still say India is a strategic partner.”
Further he said, “It is nothing new. In the 80s, it was about bashing Japan. Before NAFTA, there was
some bashing of Mexico as well. Then it was China and now, with probably the least of all justifications,
it is India. Ironically, it is the US that has been the vanguard of the free market and now it risks being
seen at the forefront of protectionism.”

A recent data from the US, says that the new US claims for unemployment benefits dropped in last week
to a two-month low, while the trade deficit narrowed sharply in July, hopeful signs for the stuttering
economic recovery. The new scenario in the financial superpower is considered as a political ball game
during the November elections. And market leaders believe that this kind of electoral rhetoric can be
expected in the next few months, they also believe that more stringent measures may follow.

Indian lobbying

In such a situation, only relief for the Indian industry is the power of the business lobby in the US. When
earlier, the Obama administration came out with some new regulations, industry body Nasscom had
said that it will talk to influential Congressmen and Senators and also will avail the services of
professional lobbying firms to ensure Indian interests are protected. According to data available in a US
government website Nasscom has been actively using the service of Washington based Hill and
Knowlton Inc from the year 2003-2008 for lobbying.

As per other media reports Ministry of Commerce and Industry has decided to register its protest
against the move by Ohio. According to an expert, the move by the federal government in the US is a
poll gimmick and said China also took away a large number of manufacturing jobs from the US.
Americans are only targeting India, the reason is that China is a low cost manufacturing country for
consumer goods and other components used in the US.

The government cannot directly oppose the Chinese as they manufacture cheaper products consumed
directly by US consumers in their daily life. Indian software or call centers are acting as facilitator of
better and low cost services in sectors like insurance, banking, hospitality, health and telecom in a cost
effective and efficient manner. But the benefits are not directly linked with the consumers.

Commenting on the importance of Indian IT companies in making global firms cost-competitive, KPMG
IT Director Kumar Parnkal said, “The unemployment rate and the US recovery is slow. Outsourcing is the
right way for small companies to make profit.

The ban in outsourcing and cutting sops will affect profitability of the companies. Companies looking at
India as an offshore destination, always look for value as primary objective. The outsourcing is primarily
helping the Americans by providing better services at lower cost.”

The worrying aspect of politicians making protectionist move, however, is that more such measures
might be taken. The Ohio diktat can also be copied by other states as a popular move resulting in more
bans or tax strictures in the future. Indian software exporters must keep this possibility in mind as these
moves might impact their profit margins.  

To insulate themselves from such moves in future, Indian firms must diversify to many other countries
aggressively and must also develop the domestic software market in a big way.