A Devil's Pact

In US congressional offices during the final months of 2003, election-year strategies were being developed and platforms laid out. For the Democrats, eager to wrest control of the White House from Republican hands, a major source of hope in winning the presidential election and restoring public faith in the party lay in an all-important four-letter word: Jobs.

Month after month, US economic data had confounded politicians and their out of work constituents. US gross domestic product was strong, productivity was too. And then there was the matter of jobs. Over 2.7 million jobs net had been lost in the first two and a half years of George W. Bush's presidency.

Only since March 2004, over two years into the recovery that began in November 2001, had monthly job growth showed minimal strength.

It was a trademark of the US economic recovery: as some of the millions of unemployed and underemployed workers in the US regained their jobs in early 2004, many others stopped searching all together. Over 700,000 discouraged workers left the labor force in the beginning months of 2004, the Bureau of Labor Statistics reported.

The economic anomaly of a jobless recovery rocketed to the forefront of electoral politics in late 2003. Politicans searched for an answer or a scapegoat to win the hearts and minds of the unemployed and underemployed US electorate.

Led by Democratic presidential candidates and followed by many Republicans, the call went out: India — the outsourcing haven — was largely responsible for the jobless recovery.

Buoyed by a Forrester Research report that predicted at least 3.3 million white-collar jobs and $136 billion in wages would shift from the United States to low-cost countries by 2015, a flurry of union protests and anti-outsourcing legislation swept through the country.

Legislators floated, in over 25 states, more than 80 anti-outsourcing bills, and across the country, unions began chanting the slogan "American Jobs for Americans First."

Proponents of outsourcing have questioned the efficacy of bills such as Senator Tom Daschle's proposal to have call center workers identify which country they are speaking from or legislation passed in January in the US Senate prohibiting government contractors from shifting work overseas. Opponents of the bills were quick to point out that neither proposal would stem the flow of service jobs overseas as long as lower costs and higher profits remain the primary focus of corporate America. Indeed, the Senate bill would only affect 2% of outsourced work, according to congressional estimates.

But for the millions of unemployed and underemployed workers in the US, the fear of joblessness remains real. What may not be real and recognizable to the many workers caught in an increasingly partisan debate, is the apparent source of the unemployment situation in the US.

A March 2004 Wall Street Journal Online survey of 50 economists estimated that the total number of US jobs lost by movement of operations overseas since 2001 has been 188,000 in the services sector and 502,000 in manufacturing. That's a small fraction of the 58.6 million overall layoffs that companies undertook between 2001 and 2003, the survey found.

Conflicting, hugely disparate data like Forrester's and the Wall Street Journal's have been presented from all sides of the outsourcing debate. However, what remains clear amidst the flurry of numbers is that in an electoral minute, India has become a scapegoat for America's new economic paradigm: strong productivity growth, solid corporate profit-making without strong job creation.

Opportunity Amid Tumult

In the last months of 2003 in the US, another type of strategy was being conceived — this time in the halls of the White House. The administration had stayed decidedly silent on pending protectionist jobs legislation and offered little to clear the public's confusion over the outsourcing tumult. There were special interests to protect. For corporate America, the race to the bottom-line has proved quickest via India and other developing nations. The use of cheap Indian labor has been a boon to top outsourcing companies like Fidelity Investments, which has given Bush $164,908 in campaign donations and American Express, which has given Bush $39,000. Although these individual donor amounts are trivial, dozens of such service-sector companies together have been a major source of the total $130 million Bush raised in 2003 to fund his campaign.

Seeing opportunity in public fear and confusion, the Bush administration decided to ride the anti-outsourcing wave (a position it does not support) to levy India towards trade concessions. Bush's government had won a bargaining chip, and any potential furor directed at the administration has for the time being, been deflected.

In the beginning months of 2004, US Trade Representative Robert Zoellick began a whirlwind tour of the developing world to revive the Doha "development" round of World Trade Organization talks that collapsed at the Cancun Ministerial Conference in September 2003. In Cancun, India, along with China and Brazil, spearheaded a campaign that has temporarily halted the US and European Union from imposing new demands on developing nations to liberalize their markets while simultaneously heavily subsidizing their own.

Zoellick very notably stopped in India to speak with Commerce Minister Arun Jaitley in January 2004. His message was clear: open up or else. During a press conference on Feb. 16, he said: "We need to make (trade) a two-way street. And that includes services, goods and agriculture."

In the words of Bush's chief economic advisor, Gregory Mankiw, "outsourcing is just another way of doing international trade." So by extension, if America is providing India with jobs, Zoellick contended, India would have to provide America's agribusiness sector with a market to exploit.

The groundwork was laid. The onslaught would follow.

The first three months of this year saw a barrage of US rhetoric about India's "trade-distorting tariffs," in the agricultural sector. After returning from India, Zoellick headed next to testify before the US Senate Finance Committee, where he called India "one of the most closed economies in the world."

The US's new ambassador to India, David Mulford soon chimed in, not deviating from the script: "There must be new market openings from developed and developing countries, especially those like India," he said in March. The US is determined to "further open international markets and to mitigate trade distortions, particularly in agriculture," he added.

Secretary of State Colin Powell in a mid-March visit to India offered much of the same rhetoric about the need for India to be more receptive to US investment and agricultural products. He hedged some of the administration's bullishness, however, saying there was no "quid pro quo" when it came to jobs for market-access. Zoellick's statements have proven otherwise.

In his campaign of pressure, Zoellick repeatedly said that India's tariffs on farm goods are as high as 112%, or more than 10 times the level in the US. The trade representative has used this figure to back up his claim that India is one of the "most closed economies in the world."

Food policy analyst Devinder Sharma has been quick to point out, however, that since the inception of the WTO — when trade was made "free" — agricultural commodity imports to India have increased 400%.

And as Jaitley, India's commerce minister, told Zoellick in January: "Our agriculture is fragile as it is not subsidized, like in the US." A dramatic decrease in tariffs would shock the agricultural sector, which feeds the country's billion-plus people. Moreover, India's 650 million farmers would face unprecedented economic hardships in the wake of more uneven Western competition.

The US heavily subsidizes its own farming industry even as it pressures India to reduce its "trade-distorting" practices.

The 2002 US Farm Bill provides the country's 2 million farmers with up to $180 billion in subsidies for the next 10 years, with more than a third coming in the first three years. The great "distortion" comes in that 47% of these payments go to large farms with average household incomes of $135,000 or more, according to Food First. It is not the small US farmer who stands to benefit from this extra government help. Rather, it is the large agribusiness firm that finds incentives to overproduce, distort international commodity prices and then flood developing markets.

India doesn't subsidize its farmers in the same manner, but does offer indirect aid on a much smaller scale. In addition to receiving discounted materials for production, such as fertilizer and seeds, the government has in the past bought farmers' crops at pre-determined prices (called procurement prices) which are higher than depressed market prices.

According to India's Economic Survey, these forms of indirect aid to India's 650 million farmers total $1 billion a year. In comparison, the richest 24 countries in the world, led by the US, give $1 billion a day in direct and indirect agricultural subsidies to their farmers.

The Plight Of The Farmer

As the middle and upper classes in India and the US fight over keeping small numbers of high-paying jobs in their respective countries, 650 million farmers in India teeter on the edge of deeper poverty and hunger.

So far, India has fought back against the US and WTO when it comes to the matter of subsidies and tariffs. What remains to be seen is how long India's skepticism towards "free trade" will last, especially as the media-and-money-attracting outsourced jobs come under increasing pressure. Major government decisions show that the official pro-agriculture stance may be far from the unofficial reality.

Since 1991, India has been on a steady liberalization process. In the past year, it has accelerated the rate of privatization greatly to meet a March 31 deadline to raise $3 billion to reduce its budget deficit — a move seen as essential to luring in more foreign investment. To this end, India raised about $2.2 billion recently by putting up for sale a 10% stake in the state-owned Oil & Natural Gas Corp, the country's largest company. It has similarly privatized parts of five other national companies, attracting millions of US dollars and investment interest.

With deficit-reduction and foreign investment on the collective mind of the Indian government, it has begun decreasing state aid for farm credits and other indirect subsidies.

According to India's Economic Survey for 2001 to 2002, the latest data available, total investment in agriculture as a share of GDP fell from an already miniscule 1.6% in 1993–1994 to 1.3% in 2001–2002. Moreover, imports of agricultural goods increased as exports decreased from 2000 to 2002. Even as more imported goods flood in, the Indian government has eliminated qualitative restrictions on certain imported products as part of the WTO's "free" trade program. As a result, particularly vulnerable agricultural products have even less protection in the face of competition from cheap imports, which are usually harvested and modified with better technology.

What has greatly worried farmers, food policy analysts and activists in recent years has been the decentralization of the main government body responsible for holding, buying and redistributing the country's food stocks, which are stored in over 2,000 "godowns," or factories.

The Food Corporation of India (FCI), which provides price support and farm credits as well as redistributes grains to the hundreds of millions of hungry people in India, is at the beginning of its end, many say.

The FCI, set up in the 1960s to buy grain from India's farmers, has mismanaged the 60 million tons of food and grain it holds in its factories, causing an estimated 320 million people in dire need of food to continue to go hungry, according to Devinder Sharma. Selling these stocks at low prices to hungry families would require transportation and other coordination services — which cost money — so the Indian government hasn't been addressing the issue, he said. When the government does sell its stocks, even the discount prices are unaffordable for India's poor. In many instances this "excess" food is thrown out because it rots, or it gets sold to private companies who then resell the food at higher prices or export it.

As of January, even as the Indian government defended its agricultural policies to the US's bullying, it allowed the private sector direct access to the farm market. Private traders have now been permitted to go into the grain market without using the FCI, which has traditionally been an intermediary for India's farmers. The pitting of traders, whose primary interest in the agricultural market is profit-making, against the farmer, whose major interest in the market is her life, has proven disastrous. Any protective buffers from over-supply or poor demand and other "market forces" have been wiped out.

As a result, farmers have had to look for other ways to manage their small plots and eke out a living for their families as the FCI continues to be dismantled.

With the decrease in aid, small and peasant farmers have increasingly begun borrowing money from private lenders, who charge high interest rates decided upon their own discretion. Thousands of farmers, distressed from increasing levels of debt, competition from western imports and at the whim of the monsoon season, have been committing suicide in India — hoping that in their deaths, the government will wipe out some of their outstanding debt and refocus on their plight.

Estimates of farmer suicides vary between 16,000 to 20,000 in the last decade, as India's farmers fall deeper into poverty and hunger.

The situation has gotten so bad, that the southern state of Tamil Nadu began a program in January of feeding its small farmers and their families (along with agricultural workers) one meal a day for free.

Other states in India may have to follow Tamil Nadu's example as the trade concession-outsourcing fight gains speed.

"Nearly 600 million Indian farmers will now have to pay the price to keep 1.6 lakh jobs in the service sector afloat. This is the price that the poor and marginalized must shell out to keep the minuscule face of urban elite shining," Sharma wrote in a recent essay.

April 17 marked the International Farmers' Day of Struggle, organized by the global movement Via Campesina, to which many Indian farmers belong. As their fight for food sovereignty moves forward, the words "outsourcing," "foreign investment" and "bargaining chip" will have to be added to the dialogue of the struggle.

Whether the ideas of food sovereignty and food security — the right of a people to have food and decide their agricultural and food policy without any "dumping" by other countries — can become part of the exchange between the Indian and US governments, remains to be seen.


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