An expert on Indo-US relations has warned that continued outsourcing of jobs from the United States to India could become a major political element in President George W Bush's election and if the American economy does not pick up substantially, could lead to the construction of firewalls and unemployment guarantees against outsourcing by the US.

This could lead to more New Jersey type of legislation and in turn could become a factor in Indo-US economic relations, said Stephen Cohen, an expert on India and Pakistan and currently at the Brookings Institution, a Washington-based think tank that does significant research and provides inputs for the US foreign policy establishment.

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Cohen said he saw the domestic ramifications of US outsourcing as "analogous to the Indian dilemma of privatising public sector undertakings".

Both moves, he said, were faithful to the principle of economic reform and made economic sense, but both led to job losses with all the concomitant political problems.

Cohen said there was evidence that the American economy was picking up. However, the war in Iraq and the reconstruction of the country had not brought the kind of returns for the US that were expected. The situation had to be watched closely, he said.

Former US Ambassador to India Robert Blackwill had warned before he left India that unless there was greater symmetry in the Indo-US trade and the balance of trade (which is heavily in India's favour currently) was corrected, the political constituency for arguing for greater outsourcing from India would be weakened because of perceived asymmetry and lack of reciprocity.

Bush's re-election campaign for end-2004 has already started and among the significant domestic factors that feature in the campaign, unemployment is rated as the top priority of voters. The estimate is that over 3 million jobs have been lost since Bush assumed office.

Historians say this is the biggest job-loss since President Herbert Hoover (1928, Republican) lost to Franklin Delano Roosevelt (1932, Democrat). They say while that job-loss was largely caused by the stock market crash of 1929, the Depression, and led to the New Deal offered by Roosevelt that involved stimulation of the economy and reform, currently all that President Bush has on the table is a promise of prosperity, some nebulous indicators that the economy is improving and his continued commitment to the privatisation of social security.

Cohen said Indo-US economic relations were predicated on interdependence. But if the perception gained ground that India was stealing US jobs in an economy already labouring under assault from unemployment, the political results could be unpredictable.