Fear has big eyes, says a Russian proverb. “It also can have deaf ears,” suggests an essay titled ‘The muddles over outsourcing’ included in ‘The Political Economy of Trade, Finance, and Development’, a compilation of T.N. Srinivasan’s writings edited by N.S.S. Narayana (www.oup.com).
“Public debate over outsourcing has been marred by two sets of serious muddles,” frets the essay. “The first set of muddles relates to what is meant by outsourcing.” According to some, the word goes “beyond purchases of offshore arm’s length services to include, without analytical clarity, phenomena such as offshore purchases of manufactured components, and even direct foreign investment by firms.”
The second set of muddles is subtler, says Srinivasan. Even some economists who use the appropriate definition of outsourcing sometimes worry about whether arm’s length trade in services should be treated with the same analytical tools as trade in goods, or whether it presents different issues, he notes.
