Bussines India Article, 05/2009   Free trade or Protectionism – The American Tight Rope walk   The introduction of the H1B and L1 Visa reforms bill in the US Senate by Assistant Majority Leader Democrat Dick Durbin and Republican Charles Grassley has caused the predictable shock wave to spread across the Indian outsourcing industry. The affectionate statement of Prime Minister Singh to President Obama that many middle class Indian families have a member or more working in the US may well prove to be the Achilles heel rather than the strength of the Indian IT Services value proposition as the dark clouds of protectionism again hover over India’s most successful industry. The consolation is that this is not an unexpected development and in many meetings with the staffers of the Senators in Washington DC and a personal chat with Senator Grassley in March, the imminent introduction of the bill was never in doubt. It is more the implications of its contents and the likelihood of its successful passage that is creating murmurs in IT Boardrooms today. The ramifications of this bill becoming law are obvious. The same Senators in the previous Congress had introduced a bill seeking to limit the number of H1B visas which are intended primarily to augment US resources with highly skilled foreign workers. The fact that it did not go through is as much due to the Indian industry’s own efforts as the opposition it faced from the American technology sector which relies on manpower from all over the world for its own needs. This time however the addition of the L1 visa in its scope which is primarily a visa used for intra company transfer between locations and the suggestion of a 50:50 clause which would prohibit any additional visas to firms that already have over fifty percent of their staff in the US as H1B or L1 Visa holders threaten to put a temporary stoppage of movements of aspiring Indians to work overseas till the impacted firms are able to meet the criterion. Interesting to note that this will affect only Indian majors since the American firms would not have to restructure their workforce in any way!. The additional problem this time around is the level of unemployment in the US and the general negative sentiment in the country. The mood in Rochester, New York and Washington DC in March where the NASSCOM March delegation spoke and presented to Senators and their economic policy advisors, staffers and think tanks on Capitol Hill and equally concerned associations like the National Association of Manufacturing, the Coalition of Services Industries and Tech America was sombre. As one worthy rightly put it after listening to our eloquent logic in favour of globalisation and anti protectionism, “Your logic is irrefutable but the free traders will have to wait till better news comes from the corporate sector and that does not seem likely to happen anywhere in the near future!” The green shoots of economic recovery have sprung up in the ensuing two months but the economic decline has not stopped though it has perceptibly slowed and jobs continue to be lost every week. The logic for outsourcing remains string with enough think tanks supporting the Indian industry’s argument that free flow of manpower has significantly enhanced the competitiveness of US business and industry and employment creation in the US is actually enhanced by the development of new products and solutions where H1B employees play a major role. It is true that there have been cases of Visa fraud but these have mainly originated in small US based staffing firms and have no bearing on the intent or the implementation of workforce strategies in the larger Indian firms. The willingness to employ locally and provide skills training has also been demonstrated by many firms but there is no short cut to the development of the quality of skills in technology , project management and software engineering that Indian engineers and IT graduates possess and most local graduates in the US and Europe lack at this point of time. The critics may point to wage arbitrage as the only reason for visa usage, but in a global delivery model that is now the standard for the industry, cost advantages are only a part of the reason for global workforce deployment. It could be argued that the strident voices in India are not doing the industry any favours by over reacting to every move of the Obama administration. The outcry over the “Buy America” clause in the stimulus package and the directive to the companies receiving government monies to avoid using foreign workers to replace displaced Americans was misplaced and the reaction to President Obama’s speech to Congress where his comment on the tax deferral scheme for countries generating profits abroad was construed as an imminent tax on outsourcing missed the mark again. We should support the US in the tight rope walk that the administration is having to do between free trade and protectionism and hope that there will be a happy ending for the USA itself as well as all the countries whose fortunes depend in some part on the continuance of pragmatism as a cornerstone of US policy. So will the Durbin Grassley bill reshape the Indian Software Exports industry? Let’s wait and watch and do what we can to ensure this does not happen!       Back