India's Refusal To Open Domestic Markets Could Put Outsourcing Industry At RiskIndia's Refusal To Open Domestic Markets Could Put Outsourcing Industry At Risk

Technology and business services outsourcing is India's Golden Goose. But the country's refusal to open many of its own markets to foreign competition may be putting that gilded bird's future at risk, and along with it, the ability of U.S. companies to freely tap the Indian IT talent they say they need. Here's the connection...When Indian commerce and industry minister Kamal Nath walked out of the WTO's Doha Round trade talks over the weekend in Geneva, the moment symbolized for many the country's refusal to budge on the issue of granting foreign companies wider access to its agricultural, services, and retail markets. India argues that the U.S. and other Western countries must first cut the big subsidies they give to their farmers before it makes any meaningful trade concessions. That may be a fair point, but both U.S. and Indian tech services and BPO firms fear that a trade war over manufactured and agricultural products could spill over to their turf.

Recently, the U.S. Coalition of Services Industries--a group that includes EDS, IBM, and Microsoft--teamed up with India's NASSCOM and several other global services organizations to jointly express frustration with the Doha process. "Once again, progress in services--which represent the greatest share of economic output in both developed and developing countries--is being prevented by WTO members' lack of political will to reach agreement in agriculture and goods," the group said in a joint statement.

The stakes are high. Congress thus far has resisted the many cries from within the U.S. by unions and some media commentators to impose limits on offshore outsourcing. But for how long can it keep up that resistance if India itself continues to ignore U.S. requests for greater market access?

I recently spoke with an IT exec at Continental Airlines who was frustrated by India's burdensome trade regulations. Continental wanted to route customer calls to its Delhi base made from within India to a service center in the U.S.--kind of a reverse BPO.

No can do, said the Indian government. Customer calls originating from within India must be handled by Indian workers. Meanwhile, Indian BPO staffers handle millions of calls per day that originate in the U.S. That doesn't sound like fair trade, does it?