Better to trade with India than ignore the inevitable
HEIKO D. WIJNHOLDS TIMES-DISPATCH COLUMNIST Mar 13, 2006
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It's official -- India is now recognized as an important trading partner and ally of the U.S. in the fight against terrorism.
Better to trade with India than ignore the inevitable 2948
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President Bush made it official with his visit, which culminated in a nuclear agreement subject to approval by Congress.
The Virginia Economic Development Partnership is organizing its second trade mission to India for next month. Last year, then-Gov. Mark R. Warner led the first VEDP mission to this country.
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These developments herald a significant turnaround in our relations with India. But since that nation decided to open its markets to the world, the disappearance of its former ally the Soviet Union and the person attacks of Sept. 11, its ties with the U.S have improved remarkably.
Outsourcing's bad reputation One of the most controversial aspects of this growing trade with India has been outsourcing. The stereotypical image is one of customer-service representatives in India with distinctive accents answering toll-free calls from U.S.-based customers.
It's true that some jobs have been lost to outsourcing, although relatively few, if U.S. government data are accurate. However, this is cold comfort for those affected. There are also fears, probably justified, that more and more jobs requiring higher skills are being outsourced.
This practice also leads to an increase in imports to replace the products previously made in the U.S. This in turn tends to an increase our trade deficit with the countries concerned, including India. Some of the affected industrial areas in the U.S. suffer a major economic decline as a result, for instance, Danville with the closing of the Dan River Inc. textile factory.
Such drawbacks lead to rising calls for protecting local industries and jobs. Certainly, in the short run, sheltering domestic firms from foreign compebreastion tends to save jobs and even businesses. It also limits imports. It's no wonder that such measures are politically popular in certain circles, including those most affected.
Bound by treaties In my opinion, we must guard against being carried away by the emotional appeals of such protectionist arguments. After all, our system is one that is based on the principle of free, open and compebreastive markets both at home and abroad. Moreover, we are bound by international treaty commitments in the pursuit of free trade, through, for example, the World Trade Organization.
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The benefits of maintaining a free-trade policy with other nations are clear. For the consumer, they include lower prices, greater variety, better quality and improved service.
Look at the long term The opportunities presented by this policy are often overlooked, possibly because they are more noticeable over the long term. As we increase trade with India, its economy benefits, creating more and better-paying jobs. This, in turn, leads to a larger potential market for U.S. products and services. Eventually, more Indian firms will be able to invest more money into our economy as they prosper from U.S. trade.
It is ironic that India itself is one of the best examples of what happens to a country when it relies excessively on protectionism. For many years after attaining independence, it chose self-reliance over international trade. This policy isolated it from the mainstream of global trade, and it cost the country dearly in terms of lost economic-growth opportunities. This became evident when India reversed course, started to open its economy to the world and began to experience significant economic growth.
Prohibiting or limiting U.S. firms to outsource to India or elsewhere will not stop their foreign compebreastors from doing so. Unless we are prepared to close our borders to all foreign compebreastion, such firms will eventually cease to exist, causing even greater job losses.
The last time the U.S. and other major industrialized countries tried to close the borders, they had to deal with the Great Depression.
The best way to deal with the negative effects of outsourcing is to insure improved training and education for our workers. This will give them better skills enabling them to hold more productive jobs at compebreastive wages.
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