India is weighing the possibility of taking the US to the dispute settlement body (DSB) of the World Trade Organisation (WTO) on the latter’s recent “discriminatory” move to drastically hike the H-1B and L-1 visa charges, which is estimated to quadruple the Indian information technology industry’s annual visa costs to $400 million, reports Banikinkar Pattanayak in New Delhi. Sources told FE that India stands a fair chance at the WTO if it approaches the multilateral trade body with solid data on how such protectionist measures by the US are discriminative of the Indian IT industry and are adversely affecting it.
The move is a sign that New Delhi will henceforth invoke the WTO’s dispute settlement process more unhesitatingly than earlier to expeditiously settle its disputes with trading partners, rather than try striking bilateral deals that have proven to be a sub-optimal strategy.
Analysts said India’s decision to make greater use of the multilateral dispute resolution framework is also prompted by the increasing instances of the country’s trading partners resorting to the same and achieving the outcome they wanted.
In 2014, for instance, the US had dragged India to the DSB against its National Solar Mission that favoured the use of locally manufactured solar equipment and managed to get a ruling against India. Also, in March 2012, the US approached the WTO against India’s ban on the import of various agriculture products including poultry meat and eggs from the US; again, the DSB ruled in favour of the US.
India is “understandably miffed” that the visa fees were hiked by the US without adequate consultations with key stakeholders such as the Indian government or its IT industry, and without factoring in the contribution of the Indian IT industry to the US economy, one of the sources said. While India seems to prefer negotiations to any hard reaction initially to resolve the crisis, it’s not ruling out any steps that would be required to counter such unfair measures, he added. The government is learnt to have already taken up the issue with the US.
In December, the Obama administration announced the imposition of a special fee for H-1B and L-1 visas, which is estimated to drive up the IT industry’s visa costs to $400 million a year from $100 million now. The special fee will be charged over a period of 10 years, and the money generated will be used to fund a biometric entry and exit tracking system as also the healthcare needs of 9/11 victims.
Trade analysts say even if the US claims that its decision to hike the visa fees isn’t country-specific, solid data on how the decision is cleverly tailor-made to target the Indian IT industry will bolster India’s case at the WTO. This is because India is a major user of such temporary work visas for skilled professionals, making up for roughly 67% of the H1-B visas and 28% of the L-1 visas (in 2013-14). The US also accounts for more than a half of the revenues of the major Indian IT companies like TCS and Infosys.
One of the analysts said it’s ironical that the US — which had dragged India to the WTO on the latter’s domestic solar programme arguing that the provision of local-purchase requirements for solar cells and modules appeared to “nullify” or “impair” the benefits accruing to the US directly or indirectly — has now resorted to much worse protectionist measures. “Even India’s solar programme wasn’t a country-specific move. Still the US challenged it in the WTO’s dispute panel,” he added.
The Indian IT industry is concerned that the unfounded allegations of a large number of American jobs allegedly going to Indians have again surfaced in the build-up to the presidential elections in the US this year, which ignored the contribution of Indian IT companies to the US economy.
According to a Nasscom report released in September last year, Indian IT companies were providing more than 4 lakh jobs in the US, of which around 3 lakh were held by either US citizens or permanent residents. These companies also invested over $2 billion in the 2011-2013 period and paid a staggering $22.5 billion in taxes to the US during those years.
The visa fee hike just compounds the problems of Indian IT companies that are in any case paying around $1 billion per year in the form of social security payments for Indian employees. This is despite the fact that the employees don’t get to reap the benefits of social security as they don’t live long enough to be eligible for them. A totalisation agreement between India and the US to resolve this issue hasn’t moved forward either.
The WTO’s dispute settlement process, put in place in 1994 following the Dispute Settlement Understanding by its members, involves besides the the parties to the dispute, third parties and often the DSB panels, the Appellate Body, the WTO Secretariat, arbitrators and independent experts.