Financial Express (India) | 24 October 2006
Doha is past ; look towards FTA with US as the future, says Icrier
New Delhi, Oct 23 — After the suspension of the Doha Round, India will gain much from a an FTA with the US in the ITeS/BPO sector, a study by economic thinktank Indian council of international economic relations has suggested.
The study says this is possible as both the countries have strong complementaries in the sector. Since both of them have gained through outsourcing, the study says ITeS/BPO will continue to be a key decision for US firms.
While multilateral negotiation is believed to be the best way for gaining market access in services, higher liberalisation in certain areas has been achieved more through bilateral agreements than multilateral ones, the study says. For instance, the US has shown more willingness to relax visa/work-permit related barriers in its bilateral agreements than in the WTO. By following a negative list approach, the US FTAs have a more comprehensive sectoral coverage than under GATS.
Outsourcing enabled US companies to reduce cost and at the same time maintain the same or higher levels of productivity and efficiency. In India, relocation has led to employment creation, economic development, increase in wages and growth of ancillary industries. Indian companies are moving up the value chain to provide specialised services to US clients.
The study says Indian companies are facing several barriers in the US market such as anti-outsourcing bills, barriers to temporary movement in the US, concerns about data protection regime in India and domestic regulation related barriers.
HOW INDIA, US ARE MUTUALLY DEPENDENT
• Outsourcing enabled US companies to reduce cost and maintain same or higher levels of productivity and efficiency
• In India, relocation has led to job creation, economic development, increase in wages and growth of ancillary industries
WHAT INDIA SHOULD DO
• Improve efficiency of the telecom sector; lower broadband cost & increase performance standards
• Focus on power reforms and basic infrastructure and strengthen mechanism for data protection
• Given the cross-sector nature of the services, India should consider forming a negative list for making commitments
In order to gain from bilateral liberalisation, India should work on improving its telecommunication sector. The study says there is an urgent need to lower broadband cost further and increase connectivity, reliability, and performance standards. It should also focus on power reforms, basic infrastructure, strengthen data protection, the study suggested.
The FTA can help enhance trade in this sector if these barriers can be addressed during bilateral negotiations. The study says, given the cross-sector nature of these services, on its part, India should consider following a negative list for making commitments.
India’s negotiating strategies should not only focus on removing existing barriers, but India needs to pre-empt trade barriers that may arise in the future. India and the US should collaborate to strengthen India’s data protection regime and implement international standards.
The proposed FTA should enhance cooperation and collaboration among industry associations of the two countries and market the key strength of Indian companies in the US. Collaboration in training and skill development will be beneficial for India.