Thursday, September 16, 2004

Drezner on Bhagwati on John Kerry

Daniel Drezner has more on outsourcing, Jagdish Bhagwati, and John Kerry. (I may disagree with Drezner on many things relating to politics, but I have to say I find him an interesting blogger.)

This issue is a sticky one for those of us who are of South Asian descent and also democrat-identified. Outsourcing has generated a lot of excitement in India, and led to the creation of a lot of wealth very quickly. People in my own family are currently making pretty good money by Indian standards doing this kind of work (and I'm not talking about call-centers -- real software consulting & real business consulting).

And while its actual economic consequences within India are questionable, especially outside of the English-educated upper-middle class, most U.S.-based Indians (republican or democrat) are for it, even if they are uneasy about the jobs in the U.S. that are quickly getting "BPOed."

Bhagwati fits the pro-outsourcing Indian democrat profile pretty closely. He says he's a committed democrat, but he favors Bush on global trade and outsourcing. He has a new Op-Ed in the Wall Street Journal that only *!%$#$* elitist subscribers have access to, but Drezner excerpts three key paragraphs:

How does one forgive him his pronouncements on outsourcing, and his strange silences on the Doha Round of multilateral trade negotiations? Indeed, Sen. Kerry, whose views and voting record were almost impeccable on trade, has allowed himself to be forced into such muddled and maddening positions on trade policy that, if one were an honest intellectual as against a party hack, one could only describe them as the voodoo economics of our time.

There seem to be three arguments by Sen. Kerry's advisers that have prompted this sorry situation for the Democrats: First, that the Bush trade policy is no better; second, that electoral strategy requires that Sen. Kerry act like a protectionist, while indicating subtly (to those that matter) a likelihood of freer trade in the White House; and third, at odds with the previous argument, that the U.S. does indeed have to turn trade policy around toward some sort of protectionism (and restraints on direct investment abroad) if it is going to assist workers and reward the unions. Each argument is flawed....

In the end, Sen. Kerry cannot totally jilt his constituencies. He will have to claw his way to freer trade, making him a greater hero in a war more bloody than Vietnam. The unions, in particular, are going to insist on their reward. This is forgotten by the many pro-trade policy advisers and op-ed columnists who argue privately that we should not worry -- because Sen. Kerry is a free trader who has merely mounted the protectionist Trojan Horse to get into the White House. The irony of this last position is that it is, in fact, too simplistic. Besides, it suggests that when President Bush does the same thing, he's lying, but that when Sen. Kerry does it, it's strategic behavior! Is it not better, instead, for us to tell Sen. Kerry that his trade policy positions are the pits -- before he digs himself deeper into a pit from which there is no dignified exit?

I think Bhagwati is over-stating the case. Kerry on outsourcing is like Bush on abortion. There's a lot of noise being generated, but most of it is just there to please constituents.

Moreover, all of this name-calling distracts from a more sober consideration of the effects of outsourcing within the Indian economy, as well as its real long-term effects in the U.S.


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