'US curb on offshoring retrograde in nature'

NEW DELHI: It highlights the frustration of US multi-national corporations against plans by the country’s lawmakers to tax foreign income and force companies to curb outsourcing to countries like India and China.

Alexander M Cutler — chairman and CEO of the $12-billion Eaton Corporation — has said any such move will be retrograde in nature and blunt the competitiveness of US corporations.

Cutler, who has been at the helm of the diversified US corporation since 2000 and steered it through the economic recession, said such a restriction would only weaken American corporations and work to their disadvantage. “All jobs in one country is like an argument of the 50s. The world is much more capable now,” he told TOI.

A measure discouraging outsourcing of work to cost-competitive, and rapidly growing, economies would be counter-productive. “This would hurt American jobs,” he said, hinting that US multi-national corporations would only get weak by such measures.

The American Jobs and Closing Tax Loopholes Act of 2010 — approved by the House of Representatives in late May — is being vigorously pushed by the Democrats and is now in the Senate. The Bill seeks to do away with tax breaks on income earned overseas as a measure to discourage companies to move work and jobs outside the US.
The rising unemployment in the US, post the economic recession that saw job cuts in the country, has been among the reasons that have strengthened calls for such a legislation.

Many US corporations, including Eaton, had slashed jobs at the peak of the recession in efforts to stay afloat. Eaton cut workforce from 85000 to 70000, mostly in US and Europe where recession was severe.

Cutler said it was imperative to recognise that emerging economies would fuel growth. “These would grow at least two-three times faster than the developed nations. For Eaton, we currently get 20% of our sales from emerging markets and their share is expected to rise to 30% by 2014.” Eaton currently gets more half of its sales, at 55%, from outside home market US. “This is will grow to 60% by 2014, and half of it would come from emerging markets,” he said.

While he said that the company was adequately staffed currently, Cutler said future recruitments would be higher in emerging nations where business would grow faster. “Where there is growth, there would be much more employment.”

And recognising India’s prowess in engineering and research, the company has opened its biggest engineering centre in India which has a strength of 750. This is an integrated, multi-disciplinary research, development and engineering center and supports all areas of the company’s businesses and its US Innovation Centre.