To Niche His Own: How Do We Protect Against Protectionism?

The Philippines and India have carved a name for themselves in the business process outsourcing (BPO) industry in giving world class offshore services to companies of the major economies. In short, the Philippines and India for all intents and purposes are rivals. But they have chosen to come together to protect and strengthen their respective outsourcing industry against protectionism, the effects of which are yet to be felt but the probability of such is imminent as the US aims to save $210 billion through tariffs on US companies that send their functions offshore to save on costs. If the US succeeds, European economies will more than likely follow suit. Bad for us, yet not necessarily good for them.

The Philippines and India are up for the challenge. This month, the Business Processing Association of the Philippines (BPAP) and India’s National Association of Software and Services Companies (NASSCOM) will sign a memorandum of agreement that outlines the course of action to take in the face of looming protectionism. In a nutshell, the alliance aims to drive home the advantages and savings foreign companies stand to gain when they outsource– this is despite the incentives these companies will lose by outsourcing. Emphasis will be on the talent and skills Filipino and Indian BPO professionals bring to the table that have buoyed up foreign companies to survive and compete.

Why, you ask, is protectionism bad? You see, protectionism will ruin more than it will protect. Protectionism on principle restrains trade between nations by imposing restrictive economic regulations such as higher-than-usual tariffs on “erring” companies, i.e. in this case, companies which outsource. Its aim is supposedly to protect local markets, but it contrasts with globalization and free trade. Needless to say, in our trade-dependent world, protectionism is just not the way to go. The argument against protectionism is quite simply rooted in “No man is an island.”

Protectionism right now will worsen the global financial crisis. How? Lessened business overall as the scope for growth and output becomes limited. Also through retaliation from countries whose goods and services got over-regulated, if not rejected. And, take note, bad blood isn’t confined just to the two countries involved but often extends to their allies, and bad blood takes long to heal. Protectionism will result in catastrophe, that is, the collapse of more businesses… and greater loss of jobs all around. Then a stalemate, a standstill and what-have-you.

So what will work? Global cooperation in the creation of niche markets is the key. It’s not entirely wishful thinking. The UK supported it at the G-20 summit they hosted last April where the world’s twenty major economies convened in an attempt to reshape the global economy. Niche markets would force economies to rethink and come up with new ways of doing business. Or, come to think of it, go back to the old way of doing business: we each find a need and one-up each other trying to be the best supplier. People in better economies, for instance, can perhaps stop mourning data-processing jobs lost to workers in emerging (ok, “poorer”) economies, and instead aim higher on an individual and personal level, so that countries like the US can have higher-skill (not to mention better-paying) work as their forte.

President Obama emphasized the need for skills enhancement for his constituents soon after he got to the Oval Office, his point being that the creation of more jobs is well and good but please be prepared to step up. He set their expectations straight by pointing out that the low-paying and mostly back-office jobs sent offshore are not going home to the US because companies wanting to survive will continue to direct their non-core functions to countries where labor is cheaper. Sad that these very jobs mean so much to developing countries, but at the moment, everywhere, when you get lemons, just make lemonade.

The reality is not totally grim. Identifying and creating a niche for all will be a slow and arduous process for sure with capital in short supply, but for the long term, not only will that benefit developing countries but also the US and countries like it because what they get are higher-end jobs that can’t be offshored or easily replicated elsewhere. Take Ireland. Their unemployment rate went up when Dell shifted jobs to a cheaper-charging Poland, but Ireland in a manner of speaking is now throwing caution to the wind. With their abundance of wind and waves, Irish companies are looking into harnessing these into renewable energy.

So, yes, niche markets and niche market providers. Ambitious to be exact but there is just no other way that the major economies and the poorest ones will survive alongside each other without this strategy. Coupled with conscientious supervision of the world’s financial flow, niche markets just might spur global financial rehabilitation and growth within the next few years. To “niche” his own!