Re: [Goanet]Re: Tariq on Insourcing
--- Peter D'Souza [EMAIL PROTECTED] wrote: 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). Your comments are not without merit. However, I am inclined to believe that you look only at the positives of globalization by looking at the larger picture, without looking at the immediate impact. That is what, I believe, most economists do as well. Yes, in the long run, and perhaps in an ideal world, free trade will have many, many benefits. But that is still a theory, since there is no free trade anywhere in the world, and we have not reached the year 2050 (?). What we have today is a pseudo-free trade where some industries are protected and some are not. Today, Chinese textile imports in the US are reduced by a quota. The same exists for shrimp from Thailand or Catfish from Vietnam. At the same time, farmers in the US/EU are heavily subsidised allowing them to undersell rice/wheat etc. Here I am not arguing the merits or demerits of quotas or subsidies, but merely pointing out their existence in the US and all countries in the world. So when we talk abot free trade today, we must talk about its benefits with a caveat. Now let us say all countries eliminated quotas and subsidies overnight. Don't you think that entire industries in almost every country will be destroyed by China? Let us forget the US here and just think about the impact it will have in Cambodia or Bangladesh or Pakistan, where textiles form the basis of their export. These industries will vanish overnight in those countries and their already sickened economies will die. We see that today happening on a limited scale with textiles, plastics etc. There is a cost. Not to the businesses for sure, but to the workers. Now I come to my last main point. If free trade is to be successful, then perhaps we should also allow free transfer of labor. That does not happen and perhaps will never happen. -Tariq __ Do you Yahoo!? Send holiday email and support a worthy cause. Do good. http://celebrity.mail.yahoo.com
[Goanet]Re: Tariq on Insourcing
From: Tariq Siddiqui [EMAIL PROTECTED] In any case, a subsidary of a foreign company will create more jobs in the US than vice versa (exactly) because of the size of the US market. Not 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. 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.) 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. 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). 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. 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. 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
