President Obama: offshoring fears are outdated, unwarranted

The perception that Indian call centers and back office operations cost U.S. jobs is an old stereotype that ignores today’s reality that two-way trade between the U.S. and India is helping create jobs and raise the standard of living in both countries, U.S. President Barack Obama told a gathering of business executives in Mumbai on Saturday.

President Obama’s remarks come after some moves in the U.S. that had Indian outsourcers worried that the U.S. may get protectionist in the wake of job losses in the country. The state of Ohio, for example, banned earlier this year the expenditure of public funds for offshore purposes.

U.S. exports to India have quadrupled in recent years, and currently support tens of thousands of manufacturing jobs in the U.S., he said in a speech that was also streamed live. In addition, there are jobs supported by exports to India of agriculture products, travel and education services.

Indian investment in the U.S. also runs into billions of dollars, and supports jobs in the country, he said.

President Obama, who is in India on a three-day visit, said that more than 20 deals worth about US$10 billion [b] were announced on the first day of his visit. The deals, in a variety of areas including aircraft, turbines, and mining equipment, could potentially create over 50,000 jobs in the U.S., he added.

President Obama said his objective was to create jobs in the U.S., and to rebuild the country’s economy, but it would not be at the expense of the creation of jobs in other countries. The U.S. will instead discover, create and build products that are sold all over the world, he said.

President Obama’s speech is a recognition that jobs cannot be created by protectionism but by a growth in trade, said Som Mittal, president of the National Association of Software and Services Companies (Nasscom). The message for India’s outsourcing industry in the speech was very positive, he added.

India’s top outsourcers like Tata Consultancy Services and Infosys Technologies, have posted strong revenue and profit growth in the quarter ended Sept. 30, and are adding staff by the thousands.

Besides the Ohio decision, the Indian outsourcing industry was hit earlier this year by a $600 million [m] measure for increased surveillance of the U.S.-Mexican border to prevent illegal immigrants. The funds for the bill, which was signed into law by President Obama, are to be raised from an increase in visa fees paid by tech workers brought into the country by companies with more than 50 staff, and in which more than 50 percent of the staff are on these visas.

Indian outsourcers, who send a large number of staff to customer sites in the U.S., were saddled as a result with an increase in visa costs. But they were more alarmed by the threat of increased protectionism from the U.S.

President Obama’s own remarks earlier this year fueled this fear. While proposing to reform the U.S. tax system for companies earning profits abroad, he alarmed Indian outsourcers in May last year when he made a reference to jobs getting created by U.S. companies in Bangalore, the hub of India’s outsourcing industry. The tax code is broken as it's a tax code "that says you should pay lower taxes if you create a job in Bangalore, India, than if you create one in Buffalo, New York", the president said.

President Obama this week however made it clear that trade between India and the U.S. should not be a one-way street. Less than 10 percent of India’s imports of goods are from the U.S., and only 2 percent of U.S. exports of goods are to India. There is still untapped potential for trade between the two countries, he said.

Some of the trade would be in technologies that were adapted by U.S. companies for Indian markets, such as mobile telephony towers that run on solar power, he said.

The president also said the U.S. would reform controls on the export of high technology to India. Some of these controls on dual-use technologies, that can be used for both civilian and military purposes, were imposed by the U.S. on certain government labs and organizations after India exploded a nuclear device.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com

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