India: A Tempest Over Tech Outsourcing

It has been a rough few months for India's IT-services companies. With a slow global economy and increasing competition from multinationals on their own turf, their profit margins have been sliding. So the last thing they need is a trade spat with the U.S. But that's just what they're getting. Alarmed by the loss of jobs to foreigners, American lawmakers are trying to limit the outsourcing of tech services and other white-collar work abroad. Says a top IT executive in Bangalore: "When bad news starts coming, it comes in truckloads." The U.S. accounts for 70% of India's software services exports.

The momentum against the export of white-collar U.S. jobs has been building for months. Congress in early June began considering bills to close an immigration-law loophole where foreigners can service U.S. clients using guest worker visas. Representative Nancy L. Johnson (R-Conn.) has asked that large insurance companies disclose how much of their IT work is being done by foreign workers in the U.S. At the state level, legislatures in Maryland, Washington, Connecticut, Missouri, and New Jersey are considering laws banning outsourcing of government tech-services contracts to low-wage developing countries. Even if they don't pass, though, they might make a U.S. company think twice before outsourcing more work to India and elsewhere.