India files complaint against USA at WTO over visa fee hike

wto_india_usa_visa_fee_hike_case_analysisIndia has formally initiated a WTO dispute proceeding against the United States over the increased visa fees for two categories of non-immigrant temporary working visas into the US, and measures relating to numerical commitments for some visas ,as per the announcement on the WTO website here.

On 3 March 2016, India notified the WTO Secretariat that it has initiated a WTO dispute proceeding against the United States regarding measures imposing increased fees on certain applicants for two categories of non-immigrant temporary working visas into the US, and measures relating to numerical commitments for some visas. According to India, the measures appear to be inconsistent with US commitments under the General Agreement on Trade in Services.

The United States hiked the fees for the popular H-1B and L-1 visas in December last year. This increase in fees will lead to an estimated loss of around 400 million USD to the Indian IT companies. The Indian IT workers are also asked to pay social security fees while entering USA. There is no way to get this fee refunded or recovered since these workers are only allowed to stay for seven years while the minimum duration of stay to become eligible for a refund is 10 years.

The Prime Minister of India had also raised this issue in telephonic conversation with Obama, who “assured Prime Minister Narendra Modi that his administration would soon look into India’s concerns over the recent move to increase visa fees.”[1] Andrew Bates, spokesman for US Trade Representatives reaffirmed that the United States’ visa program is fully consistent with their WTO obligations.[2]

The popular H-1B and L-1 visas are visas for specialty occupation and intra-company transferees. The H-1B visa allows a person to perform services in a pre-arranged professional job and the L-1 visa is required if an employee is being temporarily transferred to a parent branch, affiliate, or subsidiary of the same company in the United States. Clearly, the Indian IT companies depend on these visas to a great extent.

As stated above, according to India, these measures are inconsistent with the General Agreement on Trade in Services (“GATS”). The GATS not only applies to cross-border flows of services, but additional modes of supply such as commercial presence of a service supplier of one Member in another Member’s territory to provide a service ,and presence of natural persons.

The ‘Annex on Movement of Natural Persons Supplying Services’ under the Agreement regulate the presence of natural persons who are service suppliers of a member. It governs all those measures, which affect natural persons who are service suppliers of a Member, and natural persons of a Member who are employed by a service supplier of a Member, in respect of the supply of a service. However, the Agreement is not applicable to measures affecting access to employment market of a Member, citizenship, residence or permanent employment.

The Annex also carves out an exemption for measures employed by a country to regulate

  1. the entry of natural persons into, or their temporary stay in, its territory,
  2. (including) measures necessary to protect the integrity of border, and
  3. to ensure the orderly movement of natural persons across its borders.

The chapeau to this exception states that such measures should not be applied in such a manner as to nullify or impair the benefits accruing to any Member under the terms of a specific commitment.

According to one Report, India argued in the complaint that less favourable treatment is being meted out to the juridical persons of India having a commercial presence in USA under Mode 3 of GATS. Mode 3 of GATS (Commercial Presence), one of the four pillars of GATS, guarantees opportunities to foreign service suppliers to establish, operate or expand a commercial presence in the Member’s territory, such as a branch or agency.

india_wto_visa_fee_hike_us_analysis_dispute
Picture Credits: Kainaz Amaria (New York Times)

Major Indian IT Companies such as Infosys, TCS and Wipro employee over 15,000 people each in USA and foot the visa bill of temporary workers employed by them. This gives them the huge advantage of paying less salaries since the salary demanded by the H1-B workers is less. This is why the issue of rise in the number of H1-B workers is one of the prominent issues in the US elections right now.

A study by the trade association of the Indian IT Industry said Indian companies pay $70 and $80 million annually in visa fees. The increased fees would mean that the companies would have to pay around $1.4 billion- $1.6 billion now.[3]

Therefore, by increasing the fee of only H1-B and L-1 visa types, out of a total of 20 non-immigrant visas sub-types, the United States is allegedly meting out Indian services suppliers, having commercial presence in United States, less favourable treatment than other suppliers. Since, it is not a case of de jure discrimination, it will be interesting to see how India proves presence of de-facto discrimination. The Appellate Body, in the past, has held that  “treatment no less favourable”in the Most Favoured Nation provisions (Article II:1) of the GATS should be interpreted to include de facto, as well as de jure, discrimination.

To establish defacto descrimination, India would have to prove that this measure modifies the conditions of competition in favour of other like services or service suppliers of other Members.[4]

Apart from this nullification and impairment of the benefits accruing to India directly and indirectly under GATS, India has also argued that these measures applied by the US are inconsistent with its scheduled specific commitments under the GATS.

United States’ specific commitments in all Sectors with respect to ‘Entry And Stay of Natural persons’ and limitations on ‘Market Access ‘are “unbound”. The word unbound signifies that a measure inconsistent with the obligation of non-discriminatory market access may be introduced in the sector for a specific mode of supply without penalty and such measures may grow more restrictive in future. Exceptions to this exist in certain areas such as Services Salespersons, Intra-corporate Transferees and Fashion Models and Specialty Occupations. However, no additional commitments have been made in ‘Computer and Related Services’. [5]

Given the importance of this issue in the ongoing US Elections, the consequences of this dispute may be far reaching. Several Presidential Candidates have promised to tighten H1-B visa rules if elected. We will only get to know more once the consultations period of sixty days gets over.

_________________________________

[1] US will look into India’s concerns on visa fee hike: Obama assures Modi <http://www.thehindu.com/news/national/us-will-look-into-indias-concerns-on-visa-fee-hike-obama-assures-modi/article8199325.ece&gt;
[2] US says visa scheme consistent with WTO rules, will discuss with India <http://www.btvin.com/article/read/news/4734/economicsurvey2016&gt;
[3] U.S. hikes H1B, L1 visa fee; to hit Indian IT companies <http://www.thehindu.com/news/international/us-hikes-h1b-l1-visa-fee-to-hit-indian-it-companies/article8102133.ece&gt;
[4] See Article XVII of the GATS
[5] The lists of Specific Commitemnts of different countries are available at https://www.wto.org/english/tratop_e/serv_e/serv_commitments_e.htm
Advertisements

One thought on “India files complaint against USA at WTO over visa fee hike

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s