Unctad for multilateral trade deal on BPO

According to a draft report prepared by the United Nations Conference on Trade and Development (Unctad), India should take the lead in bringing legal restrictions on outsourcing under the framework of multilateral trade negotiations.

The international body on trade and development, in its preliminary findings, has suggested "India should take the initiative to see legal restrictions placed on outsourcing (e.g. the New Jersey Bill) are brought within the coverage of the General Agreement on Trade in Services (GATS)".

A number of US state legislatures, including Michigan and Washington, have taken steps to curb the outflow of such services to overseas destinations.

The report says the services have the potential to lift India out of poverty just as the phenomenal growth in manufacturing in China has sharply reduced the incidence of poverty there.

It points out that contrary to public perception that services provide employment for highly skilled workers, some calculations have revealed that nearly two-thirds of employment in the services sector may consist of low skilled or medium skilled people, pointing to their high potential for poverty alleviation in India.

"By directly employing both skilled and unskilled personnel, its poverty alleviation effects are very high and of even greater importance are the indirect effects through remittances, which are real injections into the economy and have multiplier growth effects," it said.

It further said liberalisation in movement of service suppliers could be of extreme importance to India given its vast reservoir of qualified and trained personnel.

Acknowledging the impact of trade liberalisation on poverty alleviation, the report said India and other developing countries should further reform their economic policies, by reducing tariff rates and addressing trade distortions.

"Trade liberalisation has definitely contributed to reducing poverty but this has not been enough. The effectiveness of any liberalisation process will be on domestic reform policies, both economic and social," the report said.

It said the emergence of the G-20, the group of 20 developing nations, was an important opportunity for India to follow a trade reform agenda.

Increased trade between these countries on the basis of their comparative advantage would increase the level of income and employment and also have both direct and indirect impacts on poverty alleviation in India.

The report further said most of the poverty gains from trade liberalisation would result from India's own reforms.

Any credible poverty reduction strategy must rest on two pillars "" a good investment climate to propel growth and empowerment of poor people through participation in decisions that shape their lives.

The report noted that states that are better integrated into the global process have witnessed the highest reduction in poverty.

On agriculture, it said domestic reforms would have a greater impact on rural poverty than external sector reforms.

"Developing countries such as India will stand to gain immensely if agricultural protectionist measures such as tariff peaks and tariff elimination and other trade distorting practices like export subsidies and domestic support in developed countries are immediately addressed," it observed.

On non-agricultural goods, the report said the tariff rates in India were one of the highest in the world.

"Such high tariffs raise the costs of the products that the poor consume the most . Therefore, a reduction in average tariff based on modalities which reflect the concerns of developing countries is desirable," it said.

Stating that export growth was crucial, it said better access in export markets for seven products in which India had comparative advantage looked an attractive proposition.

"Issues such as tariff peaks, tariff escalation etc need immediate redress," it added.