Is there a jobs “feud” growing between US and India?

Posted by Jim Stroud

June 5, 2007

Tensions are rising as an inquiry into how Indian outsourcing firms operate in the U.S. threatens to escalate into a broader trade dispute between the two countries.

In recent weeks two Midwestern senators, Richard Durbin (D-Ill.) and Charles Grassley (R-Iowa), have been investigating whether Indian outsourcers such as Infosys Technologies and Wipro are abusing a U.S. program for temporary workers. Now, Indian authorities are taking issue with the probe, arguing that it undermines the principles of free trade.

The latest volley came on May 30 from Nasscom, the trade group that represents India’s software and services companies. In a letter to Durbin and Grassley that was made public, the organization pointedly noted that any impression that trade between the U.S. and India flows in one direction is "mistaken." Rather, Nasscom said, India’s tech industry buys products from Hewlett-Packard, Dell, Microsoft, Oracle, and others. The country also buys "a whole host of U.S. goods and services, including aircraft, wheat, branded garments and accessories, etc."

A "Negative Message"

A Nasscom spokesman declined to comment beyond the statement. But the implication is that any effort to stop Indian companies from selling their services in the U.S. could result in limitations on U.S. companies being able to sell into India. Nasscom said the tighter restrictions on foreign workers in the U.S. that Durbin and Grassley are advocating are "protectionist" and that it hopes "the U.S. will not specifically penalize non-U.S. firms and continue to promote free and fair trade."

India’s tech companies appear to have the support of the government. Kamal Nath, India’s minister of commerce and industry, said earlier this month that the Durbin and Grassley probe sends a "negative message." The U.S. actions, he said, could undermine the latest round of negotiations at the World Trade Organization, potentially harming the movement toward more open global trade.

"Such statements by responsible U.S. policymakers certainly impact the climate for negotiations because of uncertainties and lack of future predictability," he said (see BusinessWeek.com, 5/18/07, "India Links Visa Flap with Doha Talks").

Top Firms Targeted

The Durbin-Grassley inquiry has prompted a particularly strong reaction in India, where the probe has received prominent treatment in daily newspapers and on television news shows. One reason is the perception that the senators are singling out the nation’s most prominent, successful companies and questioning their ethics. "This is really insulting to India," says Ron Somers, president of the U.S.-India Business Council, an advocacy group that represents 250 of the largest American companies investing in India, as well as global Indian companies. "You’re challenging the integrity of India’s modern-day heros."

Two weeks ago, Durbin and Grassley requested information from nine Indian companies about how they use a program for temporary work visas, known as H-1B visas. The Indian companies include Infosys, Wipro, Satyam Computer Services, and Tata Consultancy Services, all of which provide outsourcing services. The senators say they want to find out whether the Indian companies are using the U.S. visa program to facilitate the outsourcing of American jobs.

"I am afraid it is being abused by foreign companies to deprive qualified Americans of good jobs," Durbin said earlier this month (see BusinessWeek.com, 5/15/07, "Crackdown on Indian Outsourcing Firms").

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