From: Tariq Siddiqui <[EMAIL PROTECTED]>
In any case, a subsidary of a foreign company will create more jobs in the US thanNot necessarily. Case in point: TCS and Wipro do not create more U.S.-based jobs than they do in Bangalore, Poona or Hyderabad. It is precisely the low cost of programer labour in India ($6/hour) versus the cost of similar labour in the USA ($60/hour) which adds jobs to the country that gains western outsourcing contracts.
vice versa (exactly) because of the size of the US market.
That also does not mean that jobs were lost in the home country of the foreign companies
Quite right. In fact, the home country you refer to stands to gain jobs.
You still have not understood my argument. When Honda set up a factory in the US, it
did not close down a plant in Japan. Moreover, the product was meant for the US and
not for the Japanese market.
That's right, but it's only a part of the picture. Honda could have chosen to produce more for the US market out of factories in Japan--and it would have helped the Japanese manufacturing and shiping industries, among others--but given the diminished marginal returns, it makes more sense to have them 'insource' their operation to the United States. It is a classic case for the benefits of insourcing--benefits for the business (higher profits) and for the consumer (lower cost of manufacture, lower price).
Strong trade is not and will never be a zero-sum game. (In a zero-sum game a win for Indian exports must translate to a loss for its trading partner.)
Such a situation might mean a loss of American jobs in one sector (automobile), or even a part of a sector (automobile/factory workers), but it often translates into gains elsewhere. There was a great hue and cry when NAFTA passed in 199x, and the automobile industry in the USA lost 10,000 jobs almost immediately. The less publicised fact was that 40,000 new jobs were created in the same region (Detroit) in the same industry over the next three years. The most recent Indian administrations seem to have understood that international competition is a "good thing" (TM).To help you understand better, I have no problem if GM sets up a factory in China
and builds cars there for the local Chinese market. I would have a problem if GM
sets up a factory in China only to build cars for export to the US and closes down
factories here at the same time.
Tariq, in the grand scheme of things this becomes a micro issue. Is it more acceptable if they outsource such a process to a domestic company as opposed to a foreign company? Will the company as a whole continue to be viable if it does so? It is a business decision to divide tasks between a local labour source and a foreign one. It may or may not have a significant bearing on an industry or the economy.There is also another aspect here that you should consider. If you outsource a
certain part of your business process because you need to have your employees
concentrate on other process to generate more revenue, that would also be
acceptable.
When you talk about "not having a problem" with a certain business model, or another one being "acceptable", you're essentially trying to create an equation which says that if one country gains jobs by trade or outsourcing, then the other country must necessarily lose. This pattern of thought left economies such as India very stunted for decades. The only ways by which a country to prosper are to establish rule of law, provide good education and allow free trade (in that order).
Peter
