Global Policy Forum

By Robert Kuttner*

If you get into a conversation with a billing representative of your credit card provider or phone company, you may notice a faint Indian accent. That's because the services industry is shifting more back room operations to India, where labor costs are a fraction of those in the United States. IBM, likewise, will soon move several thousand computer programming jobs to India, where programmers get far lower salaries. This decision has angered IBM employees and is contributing to a rare unionization drive at the high-tech giant, a company that once prided itself on never laying anyone off.

In these cases, industry defends the moves as cost-effective and economically logical. If productive English-speaking workers in India can perform the jobs, why not move the work there and pass the savings along to shareholders and consumers? Most economists, enthusiasts of free commerce, agree that these shifts help both India and the United States.

But hold on a moment. India figures in another controversy. Indian pharmaceutical labs make prescription drugs at a fraction of the cost that American drug makers charge consumers. In this case, however, it is illegal for American consumers to benefit. The politically powerful pharmaceutical industry contends that imports of cheaper foreign drugs violate patent rights and safety regulations. The industry is also battling legislation that would allow consumers to import cheaper drugs from Canada, which legally manufactures or purchases the drugs under license from the US pharmaceutical companies and conforms to US safety standards or better.

If you notice a double standard here, you're right.

American industry wants to be free to shift labor around the globe. And it fiercely lobbies against any restrictions, such as transnational labor standards. But when it comes to property, business lobbies just as hard for ground rules that make it impossible for consumers to benefit from product imports that allegedly breach property rules.

The pharmaceutical industry would reply that when Canada, under its national heath program, negotiates cheaper drug prices, those drugs are intended for Canadians, not for export back into the United States. If the United States wants a national health program with cheaper drugs for everyone, let's contest that question directly and not via the Canadian back door (and count on the drug makers to lead the opposition!). The industry also contends that when Indian labs manufacture drugs at a fraction of the US cost, that's not just abusing a negotiated discount; it's piracy of patent rights. But hold on again.

The existence of patents is an artifact of law, which in turn reflects politics. When Congress passed the first patent laws two centuries ago, it balanced the rights of inventors with the value of broadly diffusing the benefits of invention. The terms of patents and trademarks were far shorter back then.

The extended patent protection enjoyed by the pharmaceutical industry today simply reflects that industry's immense political power. US presidents of both political parties have also done the industry's bidding by coercing countries like India to accept US conceptions of patent protection. Third World countries have resisted, both because their own people need cheaper medicines and because they need to develop economically. (The young American Republic developed its industry by ''stealing'' manufacturing processes from mother England.) And while the Bush administration's Food and Drug Administration suddenly invokes safety concerns when it comes to doing the drug industry's dirty work, it is remarkably relaxed about the safety of food imports. Many of the products grown overseas are fruits of international agribusiness, another political client of the administration.

So the inconsistent treatment of workers and of corporate products (with policy in both cases tilting toward business) is not based on necessary economic logic. It's a reflection of the power imbalance of business and labor. For instance, we could imagine an intellectual property code in which drug industry patent terms were far shorter, more research was publicly financed and in the public domain, and safety was certified by an international agency. Citizens in the United States, Canada, and India would all benefit from cheaper drugs.

Likewise, we could imagine a labor code where all domestic and foreign workers employed by US companies or their contractors enjoyed basic labor rights like collective bargaining, health and safety standards, and pay scales that reflected their productivity. That would also be good for workers and citizens in both India and North America.

These systems of labor and property rights would be no less efficient than the ones we have. They would just represent a vastly different distribution of wealth, power, benefits, and rules. Only that.

About the author: Robert Kuttner is co-editor of The American Prospect.

FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Policy Forum distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C íŸ 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.