Arvind Panagariya 
Professor of Economics and Jagdish Bhagwati Professor,
Indian Political Economy, School of International and
Public Affairs, Columbia University
How do you see immigration of skilled labor issue in the U.S.A. shaping up?
In the past, much of the debate has been around illegal and, therefore, unskilled immigrants. But when the U.S. Congress went to work, it took it upon itself to tamper with policies toward skilled immigrants as well. In the past, this accounted for its failure to carry through the legislation. While I do not see a major threat to the entry of tech. workers, how much it is eased up in the future will partly depend on the effectiveness of the business community in the U.S.A. to lobby.
What is the acceptance of offshoring among the common people?
Free trade advocates like myself have their work cut out. Economists are virtually unanimous that outsourcing is good for the U.S.A. and other rich countries. While the business community is generally favorable to this view, it has at best limited traction with the public.
Some experts have questioned the tremendous growth of the outsourcing industry. What’s your take on it?
My fears are on two fronts: One, the higher education system in countries like India is antiquated and, without a major reform, may fail to keep pace with the rising demand for high-quality skilled workers. Two, protectionist pressures in the U.S.A. may rise. None of the democratic presidential candidates in the current campaign has been a shining example of liberal trade policy advocate to-date.
Does the nearshoring trend pose a warning signal for Asia?
In the end, distance is not the decisive factor. What matters is the cost, on-time delivery and quality control. Even in manufacturing, which requires the physical shipping of goods and, therefore, gets more expensive with distance (in contrast to services outsourcing that goes on the wire at more or less the same cost regardless of distance), China is seen as the most serious threat, not Mexico or Colombia next door. Only the confused think that distance is the decisive factor in determining the benefits of trade.
How well equipped are the nearshore destinations to handle IT/BPO work from the U.S.A.?
Obviously not well enough — otherwise they will be the ones supplying the services. Also, English is a distant second or third language in Latin America. Their mother tongue is either Spanish or Portuguese, which is not what most buyers from the U.S.A. are looking for.
How much of an issue is outsourcing in the coming Presidential elections?
Just wait and see — outsourcing will be a major issue.
The U.S. economy seems to be less open for after 9/11. Will it still be a market where providers will head?
This is too pessimistic for me. While trade economists have to be continuously on guard, let us not make the opposite mistake of thinking that the U.S.A. is about to close its markets massively. The fight is at the margin. But in broad terms, the U.S.A. cannot close its markets any more than India can in today’s globalized world. Any nation that does that will seriously risk hurting its own citizens.
How is the acceptance in the U.S.A. about jobs being offshored?
While the business community is favorable to the view that outsourcing is for the good, the governments and firms in provider economies will need to be very vigilant to ensure that the buyer markets remain open.
