Stan Lepeak, Managing Director, Global Research
US president Barack Obama recently completed a trip to India as part of a four country Asia tour. While the India visit was light on new policy initiatives, outside of some arms deals and US support for India becoming a permanent member of a reorganized United Nations security council, it did highlight the growing importance of the relationship between the world’s two largest democracies. So the president who has routinely lectured US business on the evils of shipping jobs offshore and has pressed for tax legislation changes that would make the economics of global sourcing less appealing took a more constructive tone on trade while in India, citing that “It is a dynamic, two-way relationship that is creating jobs, growth and higher living standards in both our countries.” The optimistic tone may have been partial inspired by the signing of $15B in US arms export deals to India that the president cited would lead to the creation of 50,000 US jobs.
So will global trade and in particular global services get more attention and support in the second half of the president’s term? Possibly, but likely not. Global trade and globalization is a contentious issue in good economic times and under current conditions of slow growth and high unemployment support for expanding the global trade in services is a tough sell. For every unemployed US IT worker ranting against “shipping jobs to India” there is a small farmer in India ranting about US agricultural subsidies or the evils of Monsanto and Cargill entering the local market and (purportedly) driving up grain prices.
This does not imply the global trade in services will decline, either. Global services providers and their clients have proven creative and resilient in pursuing their global sourcing efforts. EquaTerra research finds ITO and BPO service providers optimistic on demand growth and the increased use of global sourcing. While the industry would benefit from more supportive tax and immigration practices, or minimally more clarity on to what degree current tax and immigration policies will change in the near term, the chances of any new agreements being developed that significantly promote global services trade are slim. Buyers need to factor in this uncertainty to the global sourcing strategies and tactics just as they do other elements such as risk. Global trade in services it unlikely to decline any time soon nor is it likely to get any easier or less contentious to successfully undertake.