Letter from America

The surge in popularity for John Kerry in the early stages of the race to find the Democratic Party’s candidate for the upcoming US presidential elections may have intriguing consequences for the burgeoning market for ‘offshore’ outsourcing services. That is because the Massachusetts senator has consistently fought to stem the flow of IT jobs from the US to offshore centres such as India and China. Political commentators say that Kerry would probably seek to make it a campaign issue were he to win his party’s nomination.

His would-be opponent, President George W Bush, is not averse to protectionist measures either, although, in the wake of the steel tariffs fiasco, he has been slow to take up the offshore issue.

Senator Kerry’s most recent contribution to the protectionist movement was when he introduced a bill in November 2003 requiring call centre employees to disclose their location at the start of each call. He cited an estimate by analyst Gartner that one in 20 IT jobs at user companies will move overseas by the end of 2004.

It is not the only piece of anti-offshoring legislation passing through Congress. There are at least nine bills pending that will seek to bar non-US workers from government contracts. And four states – Indiana, Michigan, New Jersey and North Carolina – are considering similar legislation. But it is by no means certain that any of these measures will be enacted, say observers. Many US politicians are worried that efforts to impede offshore outsourcing could trigger a trade war with developing nations that would ultimately harm the US economy more.

Some say that a trade war has already begun. In India, a growing lobby of business leaders are calling on the Delhi government to extend tax breaks for offshore services to include organisations with non-core business process outsourcing (BPO) functions in India. At present, the tax breaks, which are due to last until at least 2009, only apply to pure BPO providers. “We have built the BPO industry on tax breaks,” says one local BPO executive.

By 2009, the outsourcing sector’s centre of gravity may well have shifted westwards again, especially if Senator Kerry gets his way. In the meantime, expect fresh calls for sanctions to be imposed on offshore centres.

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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