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6/3/2009
09:17 PM
Bob Evans
Bob Evans
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Trade War With India Looms Over Protectionist IT Legislation

A Senate bill aimed at limiting some H-1B visas will hurt the competitiveness of American companies, jeopardize ongoing projects, trigger a trade dispute with India, and prove to be "misguided and dangerous," say Indian IT execs. Anyone else foresee a Pyrrhic victory from all this protectionist grandstanding?

A Senate bill aimed at limiting some H-1B visas will hurt the competitiveness of American companies, jeopardize ongoing projects, trigger a trade dispute with India, and prove to be "misguided and dangerous," say Indian IT execs. Anyone else foresee a Pyrrhic victory from all this protectionist grandstanding?At the heart of the controversy surrounding the Durbin-Grassley legislation is a provision that would prevent U.S. companies with more than 50 U.S. employees from receiving additional visas if more than half of their U.S. workforce is made up of holders of H-1B or the similar L-1 visas, according to BusinessWeek.

Executives from the big Indian outsourcing companies say that limitation threatens their core business model - which I doubt the legislators even understand, let alone care about - and will in turn threaten the ability of their U.S.-based clients to remain globally competitive, a dynamic that I also doubt the legislators understand but that they should sure as heck care about.

Som Mittal, president of the high-profile NASSCOM trade group representing India's vast software and services industry, says the 50/50 provision is "misguided and dangerous," according to BusinessWeek, and predicts that "both U.S. and Indian industry would suffer."

Wipro executive chairman Azim Premji says the legislation would be so harmful to India's IT sector that the Indian government would have no alternative but to strike back at the U.S. with costly and counterproductive trade sanctions of its own: "There is no way our government can take it lightly," says Premji. "It's a vital piece of the economy."

And in what should be the scariest comment of all from Indian executives - and I say "scariest" because of its accuracy - Tata Consultancy chief operating officer Natarajan Chandrashekaran said, "It certainly does surprise us that the U.S., being so capitalist, is now going in the opposite direction. We certainly have to be watchful."

Maybe the retaliatory trade sanctions being contemplated within the Indian government will undercut the recent deal in which Indian airlines agreed to purchase 100 aircraft from Boeing valued at $17 billion over the next several years. Why in the world would India NOT strike back in such a fashion should the U.S. enact legislation that would threaten an industry that makes up 25% of India's overall economy, and has been the primary factor in that company's rapid economic development that has raised standards of living for many tens of millions of Indians?

Stick with me on this Boeing deal for a bit more - I realize it's over the heads of our senators from both parties, but businesspeople need to understand this. The recently signed $17B deal with India is a part of a much larger agreement between Boeing and its excellent and rapidly growing customers in India that calls for those airlines to purchase 1,000 aircraft from Boeing across 20 years at a value to Boeing of $105 billion.

If the current administration initiates a trade war with India, how badly will the backlash be for Boeing and other major American corporations that do huge volumes of business with India? How many jobs will be lost because of such short-sighted, ill-conceived legislation? Which government official will then do something other than flapping his gums when those Indian airlines take some or all of their $105 billion over 20 years and give it to Airbus?

We live in a global economy and talent will be found and utilized where it is most productive to the companies that are paying for it. And if the U.S. Congress could lift its head out of…the sand for just long enough to try to understand that, perhaps it would stop this dangerous legislation before it has the chance to destroy far more jobs than even its most starry-eyed supporters believe it could ever "protect."

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