Ohio Ban on Offshore Outsourcing Raises More Ire from Asia

Ohio is attempting to curb public funding for offshore outsourcing services. Combined with the recent H-1B visa fee increase, pro-business trade groups from Asia are upset.

In an executive order put forth by Gov. Tim Strickland of Ohio in August, his state is no longer allowed to outsource work offshore, despite some federal stimulus monies being paid to a Texas company Parago in March for services on a federally funded appliance rebate program.

"Ohio's policy has been-and must continue to be-that public funds should not be spent on services provided offshore," said Strickland in a statement. "Ohioans have been among the hardest hit by more than a decade of unfair trade agreements and the trickle-down economic policies that promoted offshoring jobs at the expense of Ohioans who work for a living. We must do everything within our power to prevent outsourcing jobs because it undermines our economic development objectives, slows our recovery and deprives Ohioans and other Americans of employment opportunities."

India's National Association of Software and Service Companies (Nasscom), which represents all of the major outsourcing companies, including Wipro, Satyam, Infosys and Tata Consultancy, plans to fight this measure in trade talks with the United States at the end of September. This latest move by Ohio follows recently passed U.S. legislation that ups the cost of H-1B visa applications for companies that employ more than 50 percent of its workforce with H-1B visa holders. That move was called protectionist and discriminatory by Nasscom as it "unfairly" targets Asian outsourcers that are major global competitors with American-based outsourcing companies including IBM, Accenture and others.

"Ohio's ban on outsourcing can only be viewed as counterproductive to the U.S. government thrust on reducing public deficit and possibly lead to an increased tax burden on its citizens," wrote Nasscom in an official statement against Ohio's ban of offshore outsourcing services. Nasscom counts over 1,200 member companies from India and other multinationals.

Nasscom cites the midterm and the Ohio governor's forthcoming elections in November as causing these politically charged moves. Ohio has been one of the hardest hit states by the recession, with a very slow recovery on jobs.

"Throughout my administration, procurement procedures have been in place that restrict the purchase of offshore services," said Gov. Strickland. "Despite these requirements, federal stimulus funds were recently used to purchase services from a domestic company which ultimately provided some of those services offshore. This incident was unacceptable and has caused me to redouble my commitment to ensure that public funds are not expended for offshore services."

"While the public sector represents a small fraction in the overall demand for offshored services, it does represent a future focus area," wrote Nasscom in the same statement. "Globally governments are beginning to see the benefits that can be reaped out of employing Information Technology in public services. India too is opening up not only in IT, but other areas, representing a growth market for global and domestic companies."