In recent weeks, there have been reports that the Indian government has decided to invoke the dispute settlement procedures of the World Trade Organization (WTO) against the US for increasing the visa fees, with an explicit intent to discourage foreign workers from joining the workforce in the US. The new visa regime legislation introduced through Public Law 111-230, was adopted by the US Congress nearly two years back. It increased the filing fee and fraud prevention and detection fee by $2,000 for H-1B visas. These are granted to those intending to work for a US employer in a professional-level position and by $2,250 for L-1 visas, which have been used by the Indian information technology (IT) and IT-enabled services (ITeS) sectors to transfer their employees to their affiliates and subsidiaries located in the US. The increases in fees were made applicable to employers who employ 50 or more employees in the US and more than 50% of the employees are in H-1B or L-1 status. The revised fees were initially made effective until 2014, but the period was subsequently extended by another year.
This change in the visa rules clearly militates against the commitments that the US had made under the General Agreement on Trade in Services (GATS) of WTO, a point that was made quite emphatically by some of the major US think tanks. In one of the early assessments, the National Foundation for American Policy (NFAP) had observed that the US had “made a commitment under GATS to allow the temporary admission of (non-immigrant) speciality workers under the H-1B and L-1 visa provisions” and since the US is “bound by this commitment under GATS, it may not adopt or maintain measures now that would conflict with that commitment, or nullify or impair the benefits accruing to WTO members under the commitment”. According to NFAP, “restricting the availability of H-1B and L-1 visas through the increased fees could violate this commitment under GATS”.
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The question that many will ask is: if it is already so clear that the US was violating its commitments under WTO thus affecting the interests of India’s IT and ITeS sectors, why is India reacting so late? There are at least two reasons why the timing of the government seems appropriate. One, protectionist sentiments in the US have strengthened in the run-up to the presidential election later this year and through its action on the visa fee increase case, India can challenge such moves. And, two, disconcerting trends regarding the issuance of H-1B and L-1 visas have surfaced in the past two years and these show that the Indian IT and ITeS sectors are being systematically targeted.
Over the past months, labour organizations such as the American Federation of Labor and Congress of Industrial Organizations and Institute of Electrical and Electronics Engineers have been vocal against the immigration laws permitting foreign workers to work in the US. These voices may get more shrill after the new job data released last week showed that all is not well with the US labour market. Although unemployment rate decreased a tad, there was a sharp decline in the number of new hirings in the country—new jobs created in March were well below expectations.
Obtaining H-1B and L-1 visas have become increasingly difficult since the onset of the economic downturn in 2008 after restrictions were imposed by the US to protect jobs at home. Beginning 1 April each year, the US Citizenship and Immigration Services (USCIS) receives H-1B petitions for filling the congressionally mandated cap of 65,000 visas, which are issued to non-immigrant workers for joining the workforce the following year. In 2007, the number of applications had reached 150,000 in the first two days, while in 2008, USCIS had received enough applications to meet H-1B quota within a week. The situation changed completely thereafter: in the following three years, at least seven months were needed to fill the H-1B quota for the year.
Analysis of data available with USCIS shows that during the past four years, the agency has dramatically increased denials of L-1 applications, used by Indian firms to expand their business in the US. Denials of L-1B applications (granted for business purposes) rose from 7% in 2007 to 22% in 2008, a period when no apparent change in the law or regulation on L-1B visas were seen. The denial rates remained high for L-1B petitions at 26% in 2009, 22% in 2010 and 27% in 2011.
This trend could be largely due to sharp increases in the denial cases involving applicants from India. In 2007, the L-1B denial rate of new applications (not extensions) was 0.9%, rising to 2.8% in 2008. However, in 2009, the denial rate of new L-1B petitions for Indians skyrocketed to 22.5%, reflecting the protectionist sentiments that were dominant in the US. With economic prospects improving subsequently, denial rate for Indian L-1B petitions improved to 10.5% in 2010, but this was well above its historic levels. This improvement has provided to be short-lived—in 2011, L-1B denial rate was 13.4%. India thus has a fistful of evidence to protect the IT and ITeS sectors from a long summer of discontent.
Biswajit Dhar is director general at Research and Information System for Developing Countries, New Delhi.
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