Why Not Services?

At the Washington Post George Will urges the Congress to pass the bill imposing sanctions on Russia’s biggest trading partners:

The Senate, recently passive regarding its prerogatives and deferential regarding presidential assertiveness, might insert itself into policymaking concerning Ukraine. And the Senate — hopefully with the House concurring — might do so where presidents are most protective of their ability to act unilaterally: foreign affairs. The Senate’s contemplated action has been “coordinated” with the current president, who is a notably aggressive assertor of executive prerogatives.

South Carolina Republican Sen. Lindsey Graham has introduced legislation that, having attracted 82 supporters (counting Graham), proves two things: the possibility of bipartisanship about large questions and Congress’s relevance in making foreign policy.

In a letter to the Wall Street Journal, Graham writes that he has “coordinated” with the White House concerning his legislation, which he jointly introduced with Democratic Sen. Richard Blumenthal of Connecticut. The legislation would impose a 500 percent tariff on goods sent to the United States from “any country that buys Moscow’s energy products” (e.g., oil, gas, uranium). The countries that matter most are China and India.

A good deal of his column is devoted to wondering why the bill does not have unanimous support in the Senate (rather than the presumably 82% support it has). What I wondered about was why it only pertained to goods imports. Why not to services?

The United States goods imports from India are estimated at around $124 billion per year. Oddly, we don’t actually know how large our services trade with India is but there’s little question it dwarfs our goods trade with the country. How so? When you tally up the annual revenues of the a largest Indian consultancy companies it’s well over that figure and most of those services are performed for U. S. companies. To understand the scale of our consumption of offshore outsourcing 90% of large companies offshore their IT, HR, and/or finance departments wholly or in part and that doesn’t include call centers which is what many people think of when they refer to offshore outsourcing. And even small U. S. companies are able to outsource those services offshore. We can’t be certain what the total volume is because there is no legal reporting requirement expressly governing offshore outsourcing. The figure of $35 billion sometimes cited is obviously a tremendous understatement.

If we really want to incentivize India to stop trading with Russia, we should hit them where it really hurts and that’s services.