Outsourcing means job creation is a must, Powell says

BANGALORE, INDIA - While outsourcing is a reality of the 21st century and inevitable, the U.S. must create jobs to replace those being lost, U.S. Secretary of State Colin Powell said Tuesday in Delhi.

"Outsourcing invariably does result in the loss of jobs and we have to do a better job in the United States, a good job in the United States, of creating opportunity in the United States to provide more jobs, so that those who have lost jobs will have opportunities in the future," said Powell at a joint press conference in Delhi with India's external affairs minister, Yashwant Sinha.

Powell's remarks come against the backdrop of a growing outcry in the U.S. against the loss of jobs by offshore outsourcing to low-cost locations like India. A large number of U.S. companies are shipping jobs in software development, business process outsourcing (BPO) and call centers to their Indian subsidiaries or to contractors in India with an eye to cutting costs.

"It is the reality of 21st century international economics that these kinds of dislocations will take place," said Powell, according to a transcript of the press conference. "And what we have to do is work to minimize these dislocations and provide new opportunities for workers. This is a major issue that we will be focusing on in the months ahead."

"When you put in place the Internet system, and when you put in place broadband capabilities, so that information and services can be moved around the world and connected to other parts of the world at the speed of light, people will take advantage of that kind of capability and that gives you the kind of outsourcing that we have seen here (in India)," Powell said. " We have also seen outsourcing of jobs in the United States to Mexico, to China, to other parts of the world as the global world develops."

While emphasizing that it was not a "quid pro quo" that the U.S. expects from the Indian government, Powell said that there are also opportunities for U.S. citizens to service Indian needs, and expressed hope that India understands the need for reforms so that the U.S. can have more opportunities in India. India should allow more foreign direct investment, continue with economic reforms and make it easier for U.S. businesses to enter the Indian market, he added.

Outsourcing of work overseas, commonly known as offshoring, has come in for criticism from both legislators and workers' unions. The U.S. Senate passed in January an appropriations bill totaling $328 billion, which contains provisions that restrict government contractors from outsourcing work overseas.

This legislation has been sharply criticized by Indian government officials. "It is strange that on the one hand people are talking about openness of markets, and on the other the U.S. is banning business process outsourcing," said Arun Jaitley, India's commerce and industry minister.

Powell's emphasis that there would be no quid pro quo between outsourcing and trade reforms by the Indian government contrasts with remarks in Delhi in February by another key U.S. government official, Robert Zoellick, the U.S. trade representative, who tried to establish a link between outsourcing to India and the opening of India's markets for both services and agriculture.

"We need to make it a two-way street that includes services, goods, and agriculture," said Zoellick, adding that India was not in a position to complain as it has not signed a World Trade Organization agreement on government procurement.