McCain’s free- trade mantra woos Indian firms

Obama’s protectionism also just election politics: Experts

NEW YORK: Pro-free trade John McCain might suit Indian business more than Barack Obama who has threatened to end tax breaks for US companies shipping jobs overseas and then changed tack by suggesting outsourcing is a fact of life.

In February, Obama told a supporters in Houston that he would end tax breaks for companies shipping jobs overseas. In June, he adopted a softer line saying outsourcing was irreversible in a competitive world where “revolutions in communication have sent jobs wherever there’s an Internet connection.”

“McCain is clearly more committed to free trade. Democrats and Obama have protectionist leanings. In the debates, Obama has spoken about labour and environment standards that need to be enforced through trade agreements. From India’s perspective, as one of US’ large trade partners, McCain is a better choice,” Arvind Panagariya, a professor of Economics at Columbia University, told DNA.

Obama has spent many years at the University of Chicago, which is identified with pro-free trade economics but his hands are tied by the constituencies he is answerable to, such as the labour unions, and in particular — the American Federation of Labour and Congress of Industrial Organisations. “He himself may not be protectionist, but he has to listen to the unions who form his Party’s key base. As for outsourcing, McCain would hold the line against protection a lot better.

It is, of course, possible that Obama’s rhetoric of protectionism is stronger than his actions will be. But McCain, who is openly committed to free trade, is more likely to follow free trade,” said Panagariya, who has authoured India: The Emerging Giant.

In February, Obama said that as president, he “will stop giving tax breaks to companies that ship jobs overseas, and start giving them to companies that create good jobs right here in America.” Economists and legal advisors contacted about those comments said they are unaware of any specific tax breaks aimed at offshoring tech jobs.

Instead, Computerworld quoted experts saying that Obama may be targeting broader tax deferment strategies, such as the ability of multinational firms to avoid taxes on profits by moving money overseas.

Obama serious or just posturing
Jim Harvey, the partner and co-chair of the global technology and outsourcing practice group at Hunton & Williams LLP in New York, told the magazine Obama could have success fighting the shift of jobs through the second half of his point — by creating incentives for companies to add jobs in the US.

He said state and local governments could be “very active” in creating incentives to retain jobs, including tying a particular number of jobs to the size of a tax break.
Meanwhile, Indian outsourcing firms told DNA that Democrats always turned outsourcing into a political hot potato during elections. “This is political posturing. I think Obama will adopt a more business-as-usual approach to outsourcing once elections are over,” said an IT executive.

History shows India has had better relations with Republicans than Democrats and Bush has turned out to be the most India-inclined president so far. The Democratic mantra of “fair trade, not free trade” doesn’t bode too well for India. 

*For the latest projections and developements on the eve of the US election, look out for the final part of our Road to White House special next Monday