A US President?s visit to India has always brought with it a great sense of expectation. President Barack Obama?s visit is no exception, although a spate of disappointments in the bilateral economic relations and widely divergent positions held by the 2 countries in several multilateral forums would hardly seem to be justifying such expectations.
Since the onset of the economic downturn, India has been facing an increase in trade protectionism from the US, particularly in the area of services. The mood turned sour in 2009 as Senators Dick Durbin and Chuck Grassley proposed restrictions on inflows of non-immigrant workers to the US through their proposal to introduce the H1B and L1 Visa Reform Act 2009. This was a narrowly tailored bipartisan legislation that was aimed at amending the Immigration and Nationality Act in order to prevent ?abuse and fraud? and to ?protect American workers?.
The impact of this change in mood was felt on the applications for H1B visas, of which Indians have been major users. Every year, 65,000 H1B visas are issued to non-immigrant workers for joining the US workforce the following year.
Before the onset of the current crisis, the US Citizenship and Immigration Services used to receive petitions for H1B visas several times in excess of the target. In 2007, for instance, 1,50,000 applications were received within the first 2 days of accepting applications. But the situation has changed dramatically in the past 2 years. The quota for 2010 could not be completed even in December 2009 and in 2010, the total number of applications being considered for H1B visas is less than 37,000. And, despite the fact that the situation has improved in the current year, the total number of applications received till October 22 was just over 44,000, which was well below the 65,000 cap.
Protectionist sentiments received a fillip in recent months as President Obama initiated a move that would put the brakes on outsourcing activities, thus affecting a huge segment of Indian IT and ITES firms. On the campaign trail, the President announced withdrawal of tax breaks that ?encourage companies to create jobs and profits in other countries?. Striking a very nationalist note, he declared ?a more generous, permanent extension of the tax credit that goes to companies for all the research and innovation they do right here in … the United States of America?. While President Obama?s pronouncements are signs that his administration is increasingly facing the problems arising from the uncomfortable numbers on the unemployment front, moves like the ones he is proposing militate against the consensus that the major economies have voiced in several forums to keep the markets open.
Perhaps the most cogent articulation to keep markets open would be to conclude the Doha Round in a balanced manner. This outcome would be possible, in our view, if the negotiating mandate agreed to by the trade ministers in 2001, which laid primary focus on the need to factor in the development aspirations of the developing countries, is adhered to. But the Doha negotiations have moved very little, if at all, since the beginning of 2009, the period that coincides with the Obama administration. Although US trade negotiators have been voicing the need to push the negotiations forward, they are unable to inject the requisite momentum since they do not have the negotiating mandate from the Congress that would allow them to participate more effectively in the negotiations. As a result, the rest of the WTO membership has been unable to get a clear understanding of the positions that the present US administration would take in the Doha negotiations.
This issue becomes all the more important given President Obama?s statement during the Toronto G20 Summit that the Doha Round negotiations must ensure new market opportunities in key emerging markets?including China, Brazil and India. This was reinforced by US Trade Representative Ron Kirk when he informed a Senate Hearing on promoting US agricultural exports that the US was taking ?the lead in pursuing new trade opportunities, with a special focus on the world?s fastest-growing markets, through initiatives with individual trading partners, across economically significant regions?. This strategy, according to Kirk, testified that the Obama administration was ?committed to trade policies that keep American farmers and ranchers supplying high quality food and fibre around the world?. This intent of the US administration could militate against the realisation of the Doha mandate that refers to increasing market access opportunities for developing countries.
The unease with the Obama administration?s trade agenda also arises because of the fact that trade measures are being proposed to get compliance on the climate change front. Currently, the US Congress is deliberating the introduction of domestic regulations for reducing emissions of greenhouse gases. The regulations that are proposed include provisions that would result in imposition of ?carbon tariffs? on exporters not meeting the emission standards set by the US.
This lack of agreement on issues of considerable importance to both India and the US makes the engagement of the 2 countries at the highest political level even more significant. And, given the positive intent with which the two countries? leaders have been engaging, there is strong justification for expecting early resolution of these differences, in mutual interest.
The author is director general, Research and Information System for Developing Countries (RIS)