At a time when the developed world is turning more protectionist in services trade, India has submitted a raft of proposals to the World Trade Organization (WTO), pitching for a smooth movement of working professionals across nations, an exemption to companies of a country from mandatory payments for social security in another and cross-border insurance coverage for health-related services. In its legal text on a trade facilitation agreement on services (TFS), India wants each WTO member to put in place “adequate mechanisms for separate categories of visas that correspond to each category of natural person in respect of which commitments are taken”. WTO members must also develop “a scheme for a GATS (general agreement on trade in services) visa applicable for categories of natural persons committed in their schedule of specific commitments”.
India has submitted the text with the WTO for circulation among members for wider consultations, in its first decisive step to gather a global consensus on a framework in services trade, akin to the existing one on goods.
India’s proposals reflect some of the major challenges its own service providers, mainly the IT industry, have been facing in recent years in countries like the US and the UK. Analysts say India’s TFS proposals may invite resistance at the WTO from developed countries, especially the US, given the Trump administration’s belligerent stance on visas for foreign workers. Already, Indian IT companies saw a 37% drop in approved petitions for H-1B visas in 2016 from a year earlier, according to a report by the National Foundation for American Policy—a Washington-based think-tank.
“Each Member shall endeavour to exempt natural persons of another member engaged in the supply of services from social security contributions in its territory,” it said. Such exemption of social security contributions may be based upon an agreement or arrangement with the member concerned, or may be accorded autonomously, it added.
However, according to the legal text, in case such an exemption is not possible, and the worker is unable to avail of the benefits, or can only partially enjoy benefits from the social security contribution, then the country which has collected the contribution, shall refund such contribution, or the unused portion thereof at the time of the worker’s return to their home country.
The issue is crucial, as Indian IT companies are paying around $1 billion a year to comply with the social security norms for their Indian employees in the US, despite the fact that these people don’t work there long enough to be eligible for such benefits. Despite repeated requests by India, a totalisation agreement with the US for exemption from such payments has remained elusive.
India has also said: “In order to enable meaningful access to services consumed in another member, each member shall encourage the insurance service providers in its territory to enable insurance coverage in respect of health-related services availed of in another member”.
Each member must try its best to grant multiple entry visas to service suppliers of another member, subject to them meeting such member’s prescribed immigration formalities, India has said in its TFS proposal.
For the first time in June last year, following India’s persistent demand for a TFS to better regulate services trade globally, WTO director general Roberto Azevedo had asked India to submit a formal proposal so that it can be taken up by the multilateral body for wider discussion and subsequent approval. India then submitted a concept note formally in October last year and has followed it up with a broader legal text.
India is keen on services trade, as they account for over 60% of its economy. The country is the world’s eighth-largest commercial service exporter, making up for 3.4% of such exports globally, double its share of 1.7% in merchandise exports.
While services account for over 60% of global production and employment, they represent no more than 20% of total trade, according to an earlier WTO estimate. But this — seemingly modest — share should not be underestimated, as many services, which have long been considered genuine domestic activities, have increasingly become internationally mobile. This leaves a huge scope for countries to boost services trade if processing governing such exports and imports are made much smoother.