Posted by Global Sourcing Forum on Tue, Apr 27, 2010
By Jacob Cherian of BPOVoice.com
The combination of globalization with outsourcing is a major thrust for China's blistering economic growth. However, the end result has also caused a trade imbalance with the U.S.
Most recently, American factories, jobs, and niche technologies have been offshored to top web design companies, web development firms and software development firms. Analysts say that the Chinese no longer have to resort to unfair trade practices of patent violations in order to be competitive.
Many skeptics argue that the U.S. and the Obama Administration in particular has bartered nationalism and national security in exchange for cheap labor. In 2001, the Doha, Qatar trade pacts were designed to assist underdeveloped countries like China to start participating in the trade and wealth of developed countries. This would be achieved by lowering trade barriers and getting rid of protectionism.
Ironically, many say that due to the widespread use of offshoring or outsourcing abroad, the White House is once again voicing protectionist sentiments. In a speech to the nation, President Obama said that he would revoke tax breaks to companies outsourcing jobs abroad. This caused some hysteria in leading outsourcing nations like India, but the practice of outsourcing is expected to continue for at least another twenty years.
China has in fact moved up from its classification as a third world nation. It could be argued that China has overtaken the U.S. in its industrial strength. Nonetheless, the most populous country still has some privileges that are exclusive to underdeveloped countries. Critics and former Treasury Secretary under the Bush Administration, Henry Paulson have advocated that China is blocking access to unsaturated domestic markets and manipulating the Yuan, the domestic currency. This ultimately gives China an unfair trade advantage when it comes to outsourcing.
Proponents of protectionism in the U.S. say that America was never better than during the pre-Doha round agreement stage. During this phase, import tariffs presumably kept jobs in America, while unemployment remained in check. Hence, the debate regarding the reversal of the impact of outsourcing and globalization continues. But it is almost certain that in order for top-notch firms to stay competitive in the global economy, cost efficiency will take center stage. According to several surveys published, outsourcing is expected to pick up speed in the next ten years as well. And as far as the Obama Administration is concerned, there's little it can do to prevent big MNC's from outsourcing overseas to favored destinations like India and China because of the incentives and benefits involved.