In the Western world, the term “outsourcing” is more often than not greeted with disapproval. Outsourcing is considered an almost unpatriotic practice, the economic significance of which is nothing more than to cause job loss. However, there are many arguments as to why protectionist policies against outsourcing are not in the best interest of the US. One often overlooked argument is that to advocate against outsourcing is in reality to advocate against economic globalization.
Economic globalization is the greater integration of national economies. The key to economic globalization is a reduction in trade barriers. Hence, economic globalization is not sustainable if economic integration is only in one direction. Globalization is only possible if each respective economy is permitted to do what it is best at whilst seeking assistance with what can be done better abroad.
When viewed from this perspective, it is evident that outsourcing is merely one side of economic globalization. McDonald’s, Ford’s and Hollywood’s expansion into India and the decision to outsource back office jobs to India are a part of the same economic equation i.e. globalization. Thus, when anti-outsourcing supporters advocate protectionist policies against outsourcing, it is not “outsourcing” per se which is coming under scrutiny but in fact the very idea of globalization itself. Outsourcing is a part of globalization; you cannot have one without the other.
When protectionist policies against outsourcing are championed the anti-outsourcing camp must accordingly think more carefully and consider the bigger picture. Anti-outsourcing campaigners must ask themselves if a decrease in globalization is in the best interest of the US economy. Undoubtedly, the answer to this is no.
That the implementation of protectionist policies against outsourcing could result in less cooperation between India and the US is certainly a very real possibility. It was only as recent as 1990 that the Indian market was in effect completely closed to foreign companies. And whilst the market has since been significantly liberalized, the doors to the Indian market have yet to be fully opened by the Indian government. In July 2010, British Prime Minister David Cameron came to India with the intention of gaining greater access for British companies to the Indian banking, insurance and retail markets. He even stated, “One of the things we want to see is an opening up of banking and insurance and retail industry that are relatively still protected and which would benefit British business. Open doors in India so our businesses can invest.”
Was the UK to implement protectionist polices against outsourcing, it is unlikely the British Prime Minister would succeed in his objective of greater access to the Indian market. Any such protectionism against outsourcing, in all likelihood, would be met with some form of economic retaliation by the Indian government.
Protectionism pulls in the opposite direction of globalization; globalization is cooperation, protectionism is seclusion. The possibility of less cooperation because of the implementation of protectionist policies against outsourcing is a real possibility. Protectionism stifles globalization, for it results in an ever escalating series of governmental protectionist retaliation which inevitably leads to “closed doors” for all. One must recall that North American and European countries are not the only countries that can implement protectionist policies; India can do the same. Considering the huge opportunity India now offers the Western world through greater integration, it is the West that has the most to win and lose from increased access to the Indian market. The anti-outsourcing camp needs to think more carefully about the potential repercussions of the policies they so vehemently advocate.