Ohio Governor bans outsourcing

Running behind in opinion polls, Ohio Governor Ted Strickland of Democratic party, who till now was going out of his way to woo Indian companies, has banned outsourcing, arguing that this undermines economic development and has unacceptable business consequences for his state.

"Outsourcing jobs does not reflect Ohio values," Strickland said in a statement after he signed an executive order banning outsourcing. Reacting to the order, the Indian IT sector, which gets 60 per cent of its export revenue from the US, termed the move as discriminatory and said it amounts to a trade barrier.

The move, which comes ahead of US President Barack Obama's visit to India in November, follows a controversial legislation that increased H-1B and L1 visa fees, hitting India's over USD 50 billion IT industry.

The Indian industry will take up the issue with its US counterparts and seek government's support to flag it with the American authorities. "Nasscom is leading a delegation to the US later this month and will be taking this up with relevant officials in the US," the apex body of the IT and ITES industry said in New Delhi.

Seeking re-election in the November gubernatorial polls, Strickland acknowledged that he is running behind his Republican opponent John Kasich. By pushing such protectionist measures, his campaign believes that he would be able to win over crucial votes in the run-up to the November elections.

As per the latest opinion polls, Strickland is running behind 12 percentage point against Kasich. Earlier, Strickland had made special efforts to attract Indian companies to Ohio.

In 2007, TCS said it would build its North American Delivery Centre in Milford, an Ohio city, after Strickland offered about USD 19 million in tax credits and other incentives. TCS now has some 400 employees working here.

Signalling an apparent change of heart, Strickland said Ohioans have been among the hardest hit by more than a decade of unfair trade agreements and the trickle-down economic policies that promoted off-shoring 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," he said.

"Ohio's policy has been -- and must continue to be -- that public funds should not be spent on services provided offshore," Strickland said in the order. He said that throughout his administration, procurement procedures have been in place that restrict the purchase of offshore services.

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," said the Ohio Governor. In March, the Ohio Department of Development contracted with Texas-based service provider Parago, Inc to assist with the agency's implementation of the federal stimulus-funded appliance rebate programme.

Despite state procurement requirements designed to restrict service providers from using public funds for offshore labour -- in particular, a DAS directive that requires agencies to ask potential vendors to list all locations where the services will be performed -- the contract was let with a company that ultimately used offshore labour, the statement said.

Earlier this week, the Governor asked Development Director Lisa Patt-McDaniel to further review the circumstances surrounding the award of the Parago contract, including any potential legal recourse with the vendor, the official statement said.

The state's appliance rebate programme has stimulated manufacturing activity with Ohio companies such as Whirlpool, which has increased shifts and moved to a six-day schedule to satisfy demand generated by the scheme.

Nearly USD 10.5 million of the USD 11 million in total programme funding were awarded directly to Ohio consumers for the purchase of energy-efficient appliances. Parago was awarded USD 357,300, or 3.2 per cent, of the total funding, for providing services.

"This programme was successful in stimulating economic activity for Ohio appliance manufacturers and retailers," Strickland said. "But contracting with a domestic service provider that ultimately outsourced jobs could and should have been prevented. This order will ensure that this never happens again," the Governor said.