Volume 19, Number 3 Article by Arpita Mukherjee and Paramita Deb Gupta September, 2007
Indo-US FTA: Prospects for IT-Enabled/BPO services :
With increased globalisation and development of information technology, IT-enabled services (ITES) is now an important and growing component of India’s trade in services with the US. While the Indian government is providing various incentives to support the growth of this sector, companies are facing several barriers in the US market such as anti-outsourcing regulations, restrictive visa/work permit regime and concerns relating to the protection of sensitive data. Multilateral negotiations would have been the best route to address many of these barriers, but with the slow progress of the Doha Round of talks, it has become important for countries to evaluate alternative routes such as bilateral Free Trade Agreements (FTAs). Both India and the US are focusing on bilateral FTAs for removal of trade barriers. In this context, this study, based on a survey of 112 companies, analyses the current trade between India and the US in the ITES/BPO sector, identifies the trade barriers and suggests how these can be addressed if the two countries enter into an FTA.
The study shows that the US-FTAs have achieved a higher level of liberalisation than in the WTO. It suggests various negotiating strategies for India such as a negative list approach, signing mutual recognition agreements in key professional services, asking for a H1B1 type of visa, pushing for removal of domestic regulation-related barriers, among others, which would enhance market access for Indian companies in the US. It also points out that Indo-US collaborations for data protection, skill development and raising awareness of the advantages of outsourcing in the US would be mutually beneficial. The study discusses regulatory and other reforms which will improve the productivity, efficiency and global competitiveness of this sector and enable the country to gain from the FTA.
Reprint No 07304
