US links outsourcing row with WTO talks

The recent curbs on outsourcing in the US appear to be blocking progress in world trade talks, with India and the US linking negotiations in other sectors to the contentious issue.

Visiting US Trade Representative Robert Zoellick made it clear yesterday that Washington would use outsourcing to countries like India as a lever to gain access in sectors like agriculture, services and manufactured goods during the current round of talks at the World Trade Organisation.

India, on its part, said such curbs would make it difficult for the government to convince the people about further liberalisation.

"We conveyed our concerns over the moves to restrict outsourcing. We told the US that an adverse environment was being created for the WTO talks with moves to close markets that were open hitherto. Accepting this would be difficult for the public and the government," Commerce Minister Arun Jaitley told reporters after a meeting with Zoellick.

"Despite the progress in sectors like telecom and infotech, India has been reluctant to open its service sector. We want to keep our markets open, but want to make it a two-way street in services, agriculture and manufacturing," Zoellick said at a press conference.

He said India could not complain about the recent US government legislation banning outsourcing because it was not a signatory to the government procurement agreement under the General Agreement on Trade and Tariffs.

"One cannot complain if one is not part of the agreement," Zoellick said, adding that the US had not violated any legal provisions and the move was WTO-compatible.

The US Trade Representative also said the curbs, introduced as part of the Appropriations Bill by President George Bush, would curtail outsourcing mainly by the treasury and transport departments, while a large part of the federal government's procurement and the entire private sector sourcing would remain unaffected.

He said if India wanted gains from sectors like outsourcing, it had no option but to liberalise other sectors. Zoellick pointed out that India's import tariffs remained among the highest.

In the case of agriculture, he said, India's bound rate of 112 per cent was twice the global average and 10 times the US average.

Similarly, in the manufacturing sector, the average US tariff was 3 per cent, while India's applied rate was 20 per cent and bound rate 34 per cent.