Outsourcing U.S. jobs a source of tension on Obama's India trip

By Emily Wax
Washington Post Foreign Service
Sunday, November 7, 2010

BANGALORE, INDIA - In a futuristic lab on a leafy information technology campus, an inventor showed off a power strip that calculates a household's carbon emissions for the environmentally conscious U.S. market. In a research center nearby, rocket scientists worked on designs for lighter, more aerodynamic wings for Boeing fighter jets.

The engineers at Infosys Technologies, India's second-largest technology company, are at the cutting edge of the country's $60 billion IT industry, which is shedding its image as a low-cost call center, with young Indians keeping U.S. credit card and banking systems humming all night.

In the latest phase of globalization, some economists say, Silicon Valley is in danger of losing a sizable piece of its knowledge-based industry to India in much the same way Detroit lost its lead to Japan in the auto industry.

While the United States is still the innovation leader with global projects such as the iPhone, thousands of high-tech jobs with iconic companies like IBM and Accenture have been shipped to India.

"If you look at the historical evolution of globalization, this is simply the latest phase. The center of gravity has shifted, with cars moving to Japan, then low-cost manufacturing moving to China and now the more knowledge-intensive work flowing to India," said Partha Iyengar, head of research for Gartner India, a U.S.-based global IT research organization. "Unfortunately, this time the U.S. is feeling it."

The outsourcing issue is a sore point in an otherwise deepening relationship between India and the United States, which see each other as vital partners in areas like counterterrorism, defense contracts and nuclear energy.

'Not just a one-way street'

President Obama arrived here Saturday, days after voters concerned about unemployment handed the Democrats a decisive defeat in midterm elections. Many candidates pounced on the outsourcing issue before the vote.

At a Mumbai summit of top Indian and American chief executives, Obama said that in the United States a caricature exists of India as a nation filled with call centers that were taking away American jobs.

In India, Obama said, many see the arrival of American companies as a threat to the livelihood of neighborhood shopkeepers. "These old stereotypes and old concerns ignore today's reality," the president said on the first of three days he will spend in India. "Trade between our countries is not just a one-way street of American jobs and companies moving to India. It is a dynamic two-way relationship that is creating jobs, growth and higher standards in both our countries."

But many Indian industry leaders are upset at the U.S. government for doubling fees for guest worker visas, which Indian companies based in the United States say hurts their efforts to recruit Indian workers. A bill sponsored by Sen. Richard J. Durbin (D-Ill.) and Rep. Bill Pascrell Jr. (D-N.J.) would add new restrictions, fees and penalties for employers to obtain skilled-worker visas. Pascrell says unemployed Americans are eager for the same jobs, which pay guest workers far less. Indian companies say the restrictions and fee increases are unfair.

"It's another form of tax and discourages the free movement of business," said Girish S. Paranjpe, a joint chief executive of IT business for Wipro, the third-largest IT firm in India.

Obama has also urged Congress to close tax breaks that he says encourage companies to create jobs in other countries. India's outsourcing industry was shaken last year when Obama said he wanted to change "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."

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