Tag Archives: outsourcing

Immigration Blog

The beginning of Brain Drain 2.0?

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There has been a lot of sound and fury over the introduction, or rather the re-introduction of the proposed Startup Visa  by Sen. Kerry and Lugar in the Senate. Much of the commentary coming out of India (including mine) almost pre-supposes that the legislation will be passed shortly though this is not necessarily the case. In fact, the prior version of the Bill expired in Congress in 2010 since it couldn’t gain enough momentum. Even the most ardent supporters of the legislation only give it a 1% chance of success and predict it will go the way of the previous legislation unless sufficient political momentum is built up through lobbying and community mobilization.  Nonetheless, the introduction of the Bill provides an opportunity to discuss the basic premises underlying the Bill, and their possible impact.

That this Bill is being introduced in a country which has always been highly conflicted about migration and at a time when the economy is in the relative doldrums speaks volumes in itself. Senator  John Kerry, while talking up the Bill, described it as one that was meant to keep America’s leadership in the innovation sphere. In his words, “Global competition for talent and investment grows more intense daily and the United States must step up or be left behind.”  Other countries such as the United Kingdom are also coming out with versions of their own, indicating that these words go beyond mere hyperbole.  The emphasis of immigration policies seems to have shifted from attracting new talent to retaining the foreign talent trained in the United States that is already at hand. It is with this intent that H1B visa holders and foreign students have been included within the ambit of the Visa for the first time.

Going by the numbers, there will be many takers for this Visa if and when it comes into fruition. According to the U.S. Government Accountability Office (GAO), Indians make up 46 per cent of all H1B visa holders, the numbers of which range between 650,000 to 1 million.  Similarly, there are over 100,000 Indian students in the United States. According to a Brookings Institution Study,  between 1994 and 2005, 10,836 doctorates or  11% of all Doctorates awarded in the Science and Engineering streams, went to students  from India.

Whatever discussion there is in India is around the impact of the proposed Bill on the nascent startup ecosystem in India which was gathering steam partly on the back of the reverse migration phenomenon. One blog post even goes as far as to use the title “Startup Visa And The Impact on Indian Startup Ecosystem [BrainDrain 2.0].” Another post wonders why the Indian government doesn’t come out with a Startup Visa of its own to attract Indian and other entrepreneurial talent to india.  However, the bottomline remains that none of this will help unless it becomes easier for businesses to set up shop in India.  Till then, any wannabe entrepreneur, given a chance, will wing his way to Silicon Valley, considering it better to be a participant in the brain drain than have his brain in the drain. If the competition for talent and skills gets any tougher, the Indian government could consider the easy way out and did what it once did in 1964 when it restricted the issuance of passports to medical personnel  “to check their exodus in the national interest.”

India-US Relations Blog

Gary Locke’s Missed Opportunity

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U.S. Commerce Secretary Gary Locke traveled to India earlier this month for a six-day tour focused on enhancing bilateral high-tech trade and cooperation. The first U.S. Cabinet officer to come to India since President Obama’s state visit last November, he brought with him representatives from 24 U.S. companies, including Boeing, Lockheed Martin and Westinghouse.  The trip resulted in an agreement on closer collaboration in the area of energy technology as well as an announcement about the further easing of U.S. export controls on India. As one senior U.S. official accompanying Locke stated: “We have agreed to an unprecedented level of technology transfers to India and we can go even further.” Judged by the usual standards of such trade missions, the visit was not unproductive. Yet by the time Locke’s sojourn ended, one had the feeling that he nonetheless missed a good opportunity to significantly advance the bilateral economic agenda.

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Just how large a miss this was became clear a few days later, when Indian and Japanese Cabinet officials gathered in Tokyo to sign a comprehensive economic partnership agreement (CEPA). This accord provides a stark counterpoise to Locke’s visit, exemplifying the imaginative initiatives that should have been on his brief. The Indian-Japanese pact not only eases the movement of goods but also the flow of services, capital and labor.  It promises to increase the value of bilateral trade 150 percent over the next few years and has been received with great enthusiasm by the Indian business community. Indeed, the agreement is an apt economic expression of the growing partnership that the two countries are forging in the geopolitical realm.

Indian trade diplomacy is on a tear. Just days after the deal with Tokyo, New Delhi signed a similar arrangement with Kuala Lumpur, which will further deepen India’s involvement in Southeast Asia’s dynamic economy. And Commerce Minister Anand Sharma has raised expectations that trade negotiations with the 27-nation European Union will soon be concluded.  India has also concluded free trade accords with South Korea, Thailand and the ten-country Association of Southeast Asian Nations (ASEAN) in recent years, and has launched bilateral trade negotiations with China and Canada.

Suggestions have been floated about crafting a U.S.-India free trade agreement (FTA), an idea that would certainly result in significant economic gains for both countries. Despite dramatic increases over the past decade, the bilateral economic relationship is far from achieving critical mass and will require purposeful nurturing to reach its full potential.  Trade and investments flows between the two countries remain a small fraction of the U.S.-China level, and China recently eclipsed the United States as India’s top trading partner. Indeed, it is a telling indicator that President Obama’s visit to India netted trade deals worth some $10 billion, while Chinese Prime Minister Wen Jiabao’s trip just a month later resulted in $16 billion in business deals – this despite the increased diplomatic tensions that color India-China relations. Moreover, the two countries used the Wen visit to announce an ambitious effort to nearly double their trade in the next five years to $100 billion annually. For all of the spectacular improvement in U.S-India ties, India is still only the 14th largest trading partner for the United States and India remains a comparatively minor destination for U.S. investment flows.

So a far-reaching multi-dimensional U.S.-India FTA deserves an important spot on the bilateral agenda, though one must also admit the difficulties in forging one. Given that Washington and New Delhi are at loggerheads in the Doha Round negotiations, as well as the unpromising political climate in the United States regarding trade policy, the prospects for a broad-based bilateral FTA are not strong in the foreseeable future.  Moreover, the agricultural access issues that will need to be included are highly problematic for both sides. Consider, for example, that India’s negotiations with the European Union have lasted nearly four years and since the EU is not a large exporter of farm products, agricultural issues have not been the major obstacle in the EU-India FTA talks that they would be in an U.S.-India negotiation. At best, Washington and New Delhi should announce a commitment to signing such an accord by 2015, even if it is one whose provisions take effect over an extended period. An excellent opportunity to make such an announcement is in early April, when the next round of the U.S.-India Strategic Dialogue convenes in New Delhi.

But even as Washington and New Delhi hash out the terms of a broad-based FTA, trade officials should focus the bulk of their energies on an accord that promises a large payoff in the immediate term. A sweeping initiative aimed at capitalizing on mutual synergies in the area of high-technology trade would do just that.

The high-tech sector plays a critical – and largely complementary – role in the economies of both nations, and the United States has been a prominent factor in the spectacular development of the Indian IT sector. Yet overall bilateral trade in advanced technology products is surprisingly low and important synergies remain untapped. And unlike a more comprehensive FTA – entailing prolonged negotiations, unwieldy bargaining tradeoffs and protracted coalition-building at home – an arrangement with a limited but sharp focus on the innovation economy could likely be formulated relatively quickly, and its self-evident “win-win” features would override bureaucratic timidity and domestic opposition.

A model for such an initiative exists in the 1997 Information Technology Agreement (ITA), which eliminated tariffs on a range of capital goods, intermediate inputs and final products in the information and communications technology sector. The agreement was negotiated by 29 original countries (then representing about 80 percent of the global IT trade). Although conducted under the auspices of the World Trade Organization, the agreement was formulated quickly outside of its normal (and cumbersome) negotiating process. The final agreement was quickly joined by other countries (including India) and currently has over 70 participants (collectively representing 97 percent of the global IT trade). The ITA is credited with spurring world trade in IT products, currently estimated at $4 trillion annually, and remains the only industry-specific comprehensive free trade agreement ever signed.

While the ITA is still in effect, its value has been significantly diluted by a series of technological developments in the period since its creation. Specifically, disputes have arisen among the signatories over how to apply the agreement to hundreds of new IT products that were not foreseen a decade ago and on addressing the issue of non-tariff barriers. Moreover, multi-party negotiations to update the ITA have been stalled for years.

In light of these problems, the United States and India should launch a bilateral effort to further liberalize trade and deepen engagement in the IT field or, even more one that covers the entire range of advanced technology products and services.  This agreement could then be opened to the participation of other like-minded countries.  Given the vital role of the high-tech sector in the American and Indian economies, not to mention the broader world economy, such an initiative would pay robust commercial dividends.  Additionally, with Washington and New Delhi at odds in the Doha Round talks, this initiative would have great political value, further solidifying the U.S.-India partnership and providing an important example of joint leadership in the global economy between developed and emerging nations.  Finally, it would be a good down payment on the Obama administration’s pledge to double U.S. exports over the next five years, as well as India’s effort to double its own trade levels.

An effort focused on crafting a bilateral free trade mechanism relevant to the advanced technology sectors would instill a level of momentum in bilateral ties that has been noticeably missing since George W. Bush left the White House. The Obama state visit succeeded in righting a relationship that had been adrift for the better part of two years.  But with the civilian nuclear accord now a done deal, officials in both governments are still searching for a bold, creative initiative capable of driving relations forward.  An exchange that occurred at the start of the Obama administration is instructive. In January 2009, Richard Boucher, then U.S. Assistant Secretary of State for South Asia, suggested to Shivshankar Menon, then India’s Foreign Secretary and now Prime Minister Singh’s National Security Advisor, that both capitals needed to find “the next big idea” to animate bilateral affairs. Menon concurred, noting that in the absence of something that captures the imagination “Indians were beginning to view the relationship with the U.S. as only about political-military and nuclear issues.”

Focusing on the high-tech agenda would be a very good way to stir imaginations in both countries. It would underscore the critical role that economic engagement has played in launching the new era in U.S.-India affairs.  Indeed, increased private-sector ties will be one key in securing the growth of broad-based, resilient relations over the long term, since they work to limit the risk that momentary political and diplomatic frictions could escalate and disrupt the overall bilateral partnership.

Indian-Americans and U.S. Politics Blog

Make a New Year’s Resolution

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On Wednesday December 29, 2010, I heard Rick Santelli proclaim on CNBC that “This is the best country in the world and we are going to fight for it to keep it great and solvent”. This was a couple of minutes after he warned, “…I tell you what Joe, in the next couple of years I think we are going to have an internal conflict in this country of huge proportions…” Rick Santelli, the voice of the Bond Market on CNBC, is better known as one of the founding spirits of the Tea Party.

The Tea Party was the most important phenomenon in America in 2010. I am less concerned about the message, the political views or the social stance of the Tea Party. What is relevant to the rest of the World and to India in particular is the deep passion of the people who came together to form the Tea Party, their outrage at the direction in which the country was headed and the arrogance with which they saw the political establishment treat the American people. The Tea Party came together to take back their country. And they did in the November 2010 elections.

In sharp contrast is the ennui in Europe and in India. Europe seems headed towards economic, social, and perhaps demographic disaster.  The desperate state of Europe’s youth, the highest-educated generation in Europe’s history, is well described in the New York Times article Europe’s Young Grow Agitated Over Future Prospects. Europeans have realized their social system is a “Ponzi scheme,” in the words of an expert in fiscal policy quoted in the article. Yet, the European people are quiet, supine and inclined to wither away in relative silence.

In recent months, we have seen a massive corruption scheme come to light in India. The entire Indian Establishment has been shown to be a giant web of cronyism – from cabinet ministers to politicians to TV anchors to corporate lobbyists. If you are inside this web, you sit pretty. If you are outside, you face the doubling of the price of onions, the most basic food in India. This is on top of a chronic food inflation virus that is eating away at the incomes of all but those in the politico-business circle. At the same time, one hears that the education system in India, especially the College-University system, is in serious decay. Degrees are proliferating, students are graduating but the education keeps getting less and less relevant to the needs of the job market. And on top of all this, the Indian Government is giving away enormous sums of money in the name of protecting the poor.

The Indian middle class and the poor are getting caught in a vicious pincer. Yet, you do not see the middle class in India expressing their outrage. There is no evidence of either a spontaneous or an organized movement by the middle class in India to pull down the corrupt or to launch reforms that will cut down on government waste. Tea might be a great Indian export, but there is no Tea Party in India.

Unfortunately, this ennui of Indian society has been imported by Indian-Americans into America. The current downtrend has been rough on many Indian-Americans. In some sense, Indian Americans are more vulnerable. They have no political power; they are known to be quiet people. There is little risk of a backlash if Indian-Americans are laid off or fired.

Ironically, the success of a few Indian-Americans and the current media darling status of India have made it more difficult for the average Indian-American to argue unfair treatment. We forget and most don’t realize that the few Indian-Americans that have made it to the top are people who succeeded from the inside and often with the help of mentors within their own circles.

But, despite their successes and troubles, the Indian-American community has not   thrown up a vocal activist in the genre of Rick Santelli.

This is surprising. After all, being a “loud mouth” is an Indian characteristic. The Indian protest against British rule began with “loud mouth” lawyers, professors and journalists expressing their anger in print and in political forums.

But today’s Indian-American middle class does not exhibit this spirit. Without this spirit, the Indian-America community will remain on the periphery of American society, a quiet, affluent but powerless and invisible microcosm. That would be a pity.

It is necessary for each Indian-American to make a resolution this New Year to fight for some goal or against some problem. Speak out fervently and rationally for or against issues that they care about. No issue is too small or too large. It is important that you protest, in person, over the phone or via email. Share your outrage with your friends and build a movement.

If you don’t fight for what you believe, you truly doom yourself and your community to obscurity.

India-US Relations Blog

Musings on a Presidential Visit

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As the President’s visit draws nearer, the delicate dance being played out by both sides is fascinating to watch. While the American side would prefer the Tango, the hosts have decided that a carefully choreographed (with emphasis on choreographed) ballet is the way to go.  The managers of the visit seemed to have decided to err on the side of caution when drawing up the Presidential itinerary, major considerations being his way with words, what he symbolizes in his persona, and the volatility of the inter-governmental relationships in the region. So, out went the President’s visit to Chabad House on security grounds. Out also went the President’s visit to Wagah border where he would presumably have made a speech on the lines of Ronald Reagan’s 1997 entreaty to President Gorbachov at the Brandenberg Gate which brought the Berlin Wall crashing down.  Whether a speech would have had any result other than further burnish his Nobel Peace prize can only now exist in the realms of speculation.

As is the norm during such State visits, both sides draw up wish lists and there then ensues some hard bargaining with lots of give and take.  This worked when such visits were few and far between.  Whilst summit level diplomacy worked well in case of the U.S.-India Civilian Nuclear Deal (that has proved to be a flash in the pan), Prime Minister Singh’s State visit to Washington  in November last yielded very little by way of substance.  The increased frequency of these visits has meant that the list of issues that are yet to find closure for various reasons, from a totalisation agreement, to defense agreements is growing, even as new issues such as the legislation on H1-B visa and outsourcing are bringing new irritants into the relationship. The parlous state of the U.S. economy plus the fact that a Democrat administration is in power would mean that these new issues will also go into the intractable issues column on that list.

Reading between the lines, the Americans seem to have made it clear that discussion on issues that would impact American jobs is a no-go area.  The American argument seems to be that when the going was good, we welcomed thousands of Indians to the United States and provided them with jobs; and now it’s your turn to help us out by buying our goods and services in a big way. This argument is of course somewhat fallacious since the United States was responding to the needs of its own economy, as it has always done, when it opened the gates for foreign workers.

If the United States is bent on improving trade relations, then on top of its agenda should be the removal of the constraints on trade and collaboration in high-technology items. That however, does not seem to be the case, with the U.S. still stopping short of completely removing these impediments. The nuclear deal notwithstanding, this is still a transactional relationship with strategic considerations very much playing second fiddle. As the Prime Minister’s successful visit to Japan amply testifies, a strategic relationship finds traction only when there is a clear and overwhelming desire on both sides to take that relationship forward. Of course, one advantage with the India-Japan Strategic Partnership is the absence of domestic spoilers. The Japanese Prime Minister has no need to turn Bangalore into a bogeyman for domestic audiences nor do sections of India polity look on Japan with suspicion.

Administration officials have been tom-tomming the fact that this is one of only two visits by an American President to India in the first two years of his first term in office. Well, the earlier one was by President Jimmy Carter, and we all know how that went. For those too young to recollect, it began with “the biggest crowds [Carter] had addressed as President” assembling at the Ram Lila grounds in Delhi on New Year’s Day of 1978 and ended with Carter (caught off mike) telling his Secretary of State Cyrus Vance that “after we return, we must write a letter, very cold and blunt” to Prime Minister Morarji Desai. (This was in the context of Desai refusing to Carter’s request to open Indian nuclear facilities to international inspection.) The Indian authorities are no doubt hoping that the similarities between the two visits are confined to the positive.