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Ohio’s Outsourcing Ban is the Tip of the US Protectionism Iceberg

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The H-1B Visa fee hike and the ban imposed on outsourcing by the state of Ohio  are the latest of the US protectionist measures unveiling once again the protectionist policies of the US Government. The U.S. teaches the entire world to follow free market economic principles. It does so even at G7 meetings to the so-called most developed countries of the world.

Protecionist tariffsThe US started GATT negotiations asking the world nations to “accept or reject” the agreement, as if there were no other alternative. They’ve ultimately established WTO, completed Uruguay Round and are pushing to complete Doha Round trade negotiations for further liberalization, privatization and globalization (LPG).

Not New

While the GATT negotiations of the Uruguay Round were underway, US television transmitted a news item showing an Indian garment catching fire instantly, telling viewers not to buy Indian garments, as there was imminent danger of their easily catching fire. This was during the second half of the 90s, and US garment manufacturers were alleged to be behind the news item. High tariffs imposed on Chinese tires in the name of anti-dumping duties is another such case. This is nothing but covert protectionism. As conditions for IMF and World Bank loans, the US stipulates strictures such as reducing or abolishing subsidies to agricultural sectors, selling every service – hospital user charges, water charges by metering the consumption even by farmers, and so on – to Third World countries.  The US, aka its companies, wants people of all countries buying its agricultural products and inputs. Every country in the world should buy the America-produced grains, wheat, burgers, pizzas and what not?

Larger Background

Actually, the matured capitalist economies like the US, the EU and Japan are increasingly facing crisis after crisis from which recovery is becoming more and more difficult. Japan’s painful and decade-long recession from the 90s into 21st Century and the present deflation and dead-slow growth, the dotcom bubble’s burst at the beginning of the millennium, the ongoing world financial crisis, the EU’s debt crisis, which is still threatening, and renewed fears of double-dip recession for the US are only a few examples of these ongoing crises. Driven by the necessity of coming out of these crises, the developed countries have laid out a unanimous plan, giving birth to the LPG policies. They are beneficial to the developed countries, but devastating to the developing and least- underdeveloped countries. It is actually economic terrorism, launched by the developed economies with the help of the World Bank and International Monitory Fund.

Popular resistance

Even after successfully completing the Uruguay Round, the developed countries could not achieve the desired objective of unobstructed access to the economies of Third World countries for naked loot and plundering. The ruling classes of the third world signed the agreement with the looters, but not the people. The peasants, workers, unorganized labor, middle class employees and various sections of intellectuals and activist groups resisted these policies, though not up to the mark. They changed the governments, agitated and protested against the policies regularly to defend their livelihoods. It is an established fact that the never ending series of crises of the capitalist imperialism is an innate characteristic of the capitalist system. One cannot move the hill with a single piece of hair, however long it may be.

Outsourcing is itself a Protectionist Measure

The fee hike for H-1B and L1 visas and the ban of outsourcing will definitely reduce the business opportunities for Indian IT companies. But it seems that the governments forgot how the outsourcing evolved. The outsourcing of business practices (OBP) came into existence to evade taxes at home, to escape from stringent laws of environment at home, to avoid high salary levels at home and to avail themselves of cheap labor at the outsourcing target countries. Evading taxes, escaping laws and avoiding salaries at home; and availing themselves of cheap labor abroad are nothing less than protectionist measures practiced by the companies. Outsourcing evolved for the benefit of the companies who are outsourcing their businesses. Getting employment from outsourced business practices is an effect of the OBP, but not the cause. The outsourcing companies are accumulating enormous profits by evading taxes, by avoiding stringent laws and by avoiding high salaries.

Elections Time

The US government works for the benefit of corporate houses but not for the people of America. Outsourcing of the IT industry is mainly concentrated in China and India.  Other countries are also outsourcing. New Zealand has outsourced its chartered accountancy to India. Analysts expect India’s $51 billion IT industry would adversely be impacted by protectgionist measures. Last week, US President Barack Obama also raised the outsourcing issue, stressing that he would end “tax breaks” for companies that “create jobs and profits in other countries.” Indian IT companies like Infosys Technologies, Wipro, HCL Technologies and TCS get 60% of their export revenue from the US. Among others, the apex body of Indian IT industry Nasscom also expressed its concerns over Ohio’s ban on outsourcing.

One should not forget that this is election time. With the November congressional elections around the corner, politicians are wooing voters with various gimmicks. Why did only Ohio ban outsourcing? It did it because the elections for Ohio governorship are also due in November. It was a political gimmick and moreover a temporary sentiment.  An analyst commented with Reuters that, in addition to IT companies, MNC’s like IBM and Accenture were more exposed to the fears of a ban.

So, people of America! Don’t get fooled by political gimmicks. You can demand your government not to outsource. And you should also demand not to launch aggressive wars against independent countries as part of an imperial design. Though I am an Indian, I stand with people of every country who sweat to produce a thing that has a “use value” (not an exchange or market value – a thing possesses an exchange value, if and only if it has a use value.)

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About Sekhar

  • Human

    Nice article. It’s true, globalization negatively impacts poorer nations. It also negatively impacts working people from richer nations. It helps the rich get richer at the expense of poor people from all over the world

  • Sekhar

    Hi Human,

    Your name for display is interesting and also revealing something about you. Thanks for the appreciation.

    I am thirsty of knowledge particularly of economic and political developments. My thirsty is also to put the acquired knowledge into an ordered perspective of common people.

    If I’m successful even 1% in my endeavor it would be a great achievement for me.


  • jgo

    That’s “Glorious US Open and Honest Trade” to you.

    Trade minister Nath said that the H-1B was “the outsourcing visa”, apparently, from the context, meaning “the off-shore out-sourcing visa”.

    Phiroz Vandrevala of Tata gloated that they paid their Indian workers $30K less than US compensation levels.

    In July, India’s media cheered the exemption from pay-roll taxes of guest-workers from India, which would add about $10,500 to the arbitrage. So, should India’s STEM workers get a $20K raise, and US STEM workers a $20K cut (taking the latter to the median for all occupations — unskilled and skilled, no HS diploma and those with PhDs, the exec set with their multi-tens of million dollar parachutes).

  • link from #3

  • Sehkar,

    I am not surprised that you are also for ending the out-sourcing of American jobs.

    I am thoroughly-sickened to learn of the makers of the i phone.

    How many living-hells are we creating for others so that we can all have our American toys.

    Next time someone says that unions are bad, I’ll tell them to go get a job at Foxconn.

    JD Good article.

  • Sekhar

    Hi JD,

    It’s another certificate from you. Thanks.

    I’ve followed links provided by you and jgo (both led to same page). I felt excited seeing the term (covert protectionism) coined by me is already there on the linked page as covert outsourcing.

    Though the former covers more wider picture than the later, I take it as like-mindedness on this particular issue.

    And it seems there is also a plenty of information on the site. I’m looking forward to read it.

    Foxconn is enjoying a sort of bonded labour, disciplined by China Communist Party union. Pro-management union, mostly unpaid OT, suppression of industrial actions and cheapest labour with minimum risks of industrial relations…, these are the characteristics Foxconn’s profits. Recent skirmishes at Foxconn were allowed under strict control by the government.

  • Sekhar,

    Who paid for the suicide net, the workers?

    Foxconn is enjoying a sort of bonded labour, disciplined by China Communist Party union. Pro-management union, mostly unpaid OT, suppression of industrial actions and cheapest labour with minimum risks of industrial relations…, these are the characteristics Foxconn’s profits. Recent skirmishes at Foxconn were allowed under strict control by the government.

    If Foxconn has a union, it’s certainly not a union of the laborers, 35 cents and hr, 10 people to a sleeping quarter, and 18 years in prison if you try to form your ownunion.

    For all the crying and complaining American workers (working or not) do. When they finally do get a job, the fact that it’s non-union is never an issue.

    Like everything else in this life, you don’t know what a precious opportunity you had until it’s gone.

    JD- Thanks for commenting with me! 😀

  • Sekhar

    It seems complicated for the people being played. For the people who are playing, it is crystal clear.

    Your comment is prompting me to write another article about how outsourcing is linked to the big players, the world’s wealthy sections, from Dalal street to Wall street; about how they are leaving the issue of outsourcing to a mere election propaganda.

    But, I’m afraid of my language. I want to take some time to avoid linguistic mistakes in writing articles. I’ll contact you if I write it.


  • wookieFart

    In less than 30 days I can get a 90 day Visa for anyone from India to come to my employer, teach them how to do a job, and then work from offshore. I think keeping money close to home for any government is good policy – that way they can tax you when you earn it and tax you when you spend it. If jobs are done offshore, how is my government supposed to collect it’s taxes and become more powerful?

  • It seems you didn’t read the article completely. I said in the article that the outsourcing took shape out of hunt for more profits by the companies.

    In order to increase profits, the companies wanted to avoid stringent environmental laws, high levels of salaries and taxes. At the same time cheap labour available offshore makes them earn more profits. With reduced costs, they can offer their products at competitive prices. That leads to more sales and hence more profits.

    Outsourcing is not for employing Indian and Chinese people. It is born out of greed of earning more and more profits of the capitalists. These capitalists are big people. They have enormous money. They control the governments with that money power. Election campaigns are funded by them. So government works for them.

    You need not work on logic to oppose outsourcing. Just see the facts. What you can do is to fight against it.

    By outsourcing, the companies are keeping more money at home. There are many places at home to keep money. They can keep money with people through employment. They can keep it with the govt. through paying taxes. They can keep the money with themselves by not doing the these two things. There should not be any confusion that they chose the 3rd option.

    So outsourcing keeps more money at home but in capitalists’ coffers.

    One has to understand, the business process outsourcing is not a question of providing employment at home or abroad, for the employers. It is the question of making their products more competitive and earning more profits.

    For the governments, the BPO is just an election issue. It is also an issue of funding election campaigns, of funding pol parties’ coffers, of funding bank a/cs of government people.

    But for the people, it is the question of losing livelihood which is not at all an issue either for the employers or for the government. They are insensitive to peoples’ needs. What you can do is to make your case in a way that these people can recognize it.

  • americansoftwareengineer

    The united states is no mired in a horrible recession (I don’t care if economist say it is over) because of offshoring and outsourcing manufacturing and IT jobs to other nations. I am an American, and it is not America’s job to create a middle class in other nations at our expense. Outsourcers are traitors trying to save money and make a quick buck. They have destroyed the US economy. The jobless rate in the US is a fact, and no pinhead economist can convince anyone with a bit of common sense that outsourcing and bad trade deals are good for America.

  • Rehman Amsen

    Outsourcing will still continue to thrive because in a bad economy American companies need to stay competitive and need to outsource jobs. America is a capitalist country (for the rich and by the rich) and outsourcing is part of this capitalism which is brought by the wealthy Americans. Even if outsourcing is stopped by law they need to bring in foreign workers for their superior quality of work especially in IT field.
    In US the educational system is compromised, the first two years of a university student is spend on general education (like history courses which has nothing to do with a student of an engineering major), fixing the damage done by failing high schools, and the last two years they focus on the major field of study. The reason one of my professor gave was that American students will be well rounded and learn critical thinking. But in my view for an engineering student to learn critical thinking via history lessons is stupid to me it sound like university is trying to give jobs to these looser history professors by forcing every student even if it has nothing to do with their major to study these courses by making it part of prerequisites so they can consume more government money.
    While in Asian countries like India, all general education is done by 12th grade. In Universities they specialize only in their field no history course for an engineering student. Math and science are taught the way they need to be taught not by using history critical thinking on math problems (utterly useless technique for science grad), that’s why lots of American students drop out from college because they can’t handle higher math and science courses, not to mention American high school, it’s just a joke. Even though Indian education is not well rounded they are focused only on the respective major field of study, and that’s exactly what Microsoft, Intel and Nike wants, more specialization (deep knowledge) in their respective fields. That’s why even in this bad economy these companies bring foreign workers on work visa to Beaverton, Oregon and Seattle, Washington and hire them indirectly through contract companies like Infosys, thereby they get the superior skilled workers to work for cheap labor (in India their education is very cheap and most of them don’t even have student loans their education fully paid by their family and they are willing to work for cheap) and Americans cannot blame Microsoft, Nike or Intel because they don’t directly hire foreign workers, so they are safe both politically and economically.
    Unfortunately, American students have to suffer unemployment as long as the educational system puts them down, and fixing this bureaucracy is not feasible. Many entrepreneur like Steve Jobs (Apple computers), Bill Gates (Microsoft) have addressed this issue about current education but looks like hard to make the right change.
    The best way to survive unemployment is best the system not fixing it, we must outsource education especially in engineering field, computer major students can study in India for dirt cheap and compete with other IT engineers for jobs. Indian education is pure education, field focused (specialization) and they will be masters in their major and highly competitive and very few student loans to pay.

  • Rehman, You have added another important dimension to the outsourcing problem in America. You are correct regarding Indian high education, but it still is not reachable to many poor students. According to a study, only a 4% of the graduates are able to reach higher studies, to acquire specialization skills.

    What you have mentioned about the American studies is really shocking to me. As per your analysis the intermediate and graduate education is handicapped in the US. It is made so to fulfill the interests of profit-hungry companies.

    It is an eyeopening information for the US people.