BackIndia-US fight over short-term service providers escalates
Proposal for discussion on regulatory barriers in the movement of natural persons blocked by Washington
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Geneva: The US has escalated the battle over the short-term service providers with India at the World Trade Organization (WTO) by blocking New Delhi’s proposal for a comprehensive discussion on growing regulatory barriers in the movement of natural persons under Mode 4 of the General Agreement on Trade in Services (GATS).
Mode 4 deals with the movement of short-term service providers by a WTO member in another member-country on a non-immigration framework.
But access for Mode 4 trade is undermined by regulatory measures such as “increased application fees for entry by certain categories of foreign professionals, increased salary thresholds for foreign professionals, or implementation of visa categories in a manner that renders effective market access meaningless and non-portability of social security benefits".
On Friday, the US opposed India’s proposal “Mode 4: Assessment of Barriers" on the ground that New Delhi is already pursuing a trade dispute on the same issue against Washington. It also blocked India’s request for a revised assessment by the WTO Secretariat on the continued barriers in the movement of natural persons under Mode 4 since 2009.
At a meeting of WTO’s Council for Trade in Services (CTS), India introduced its seven-page restricted proposal on Mode 4 which called for redressing the regulatory barriers to existing commitments made by members.
Many developing countries strongly supported India’s proposal saying that it is important to address the regulatory and other barriers imposed by industrialized countries in an area of services trade that is most beneficial for their services providers.
Major industrialized countries who secured substantial market access in developing countries for their capital-intensive services such as financial services, telecom services, distribution services and courier services among others have slapped increasingly complex barriers to Mode 4 entry, according to a WTO Secretaraiat background paper of 2009.
Citing the findings of the WTO paper, India said “the degree of Mode 4 access that has been committed in current GATS schedules of WTO Members [commitments] is rather shallow." Much of the commitments made by members in Mode 4 cover “inter corporate transferees" which is largely confined to executives, mangers and specialists.
India stated several obstacles to Mode 4 trade ranging from the need to set up commercial establishment in the host country, numerical quotas, economic needs tests, eligibility criteria for visas and work permits (the worldwide costs of processing visa/work permit applications represent 0.3% of global GDP, according to a report cited in the WTO study), nationality and residence requirements, and non-portability of social security benefits.
In its proposal circulated on March 15, and reviewed by Mint, India cited the regulatory requirements that impede Mode 4 access in the US, Canada, and the UK. “Measures in the US that have imposed specific barriers include measures imposing increased fees on certain applicants for L-1 and H-1B categories of non-immigration visas," India maintained.
While the HI-B visa category corresponds to the US’s commitments in GATS schedule with respect to natural persons engaged in “speciality occupations", the L-1 visa category corresponds to intra-corporate transferees. The US has collected around $375 million by way of application fees in the past five years because of the higher visa fees levied by American authorities. Effectively, the higher visa fees have increased the cost of doing business for Indian service providers in the US.
Further, the Indian non-immigrant service suppliers, who typically stay for a period of three to seven years, are forced to pay approximately $1.6 billion towards the US Social Security System. The cumulative contributions made by the Indian service suppliers in the past six years in the US ranges between $8-12 billion for social security.
However, when such people return to India after performing their services, they do not obtain any benefits in respect of their social security contributions, India lamented. “In nutshell, a service supplier on a non-immigrant visa loses all his social security contributions since there is no mechanism for refund, or of portability of such benefits to the home country," New Delhi maintained.
India urged WTO members to finalize a multilateral solution at the GATS level for exempting categories of natural persons committed under a WTO Member’s commitments from such payments. WTO members who collected social security funds from the non-immigrant services providers must “allow for refund of any such payments at the end of the stay by any such person in the host Member", India maintained.
In response to the US’s opposition to start a discussion on Mode 4, India argued that is proposal covers many new issues which are not part of the dispute. India also demanded that the WTO Secretariat update the 2009 paper by informing members about the nature of new obstacles and regulatory impediments.
The US and Canada blocked the Indian move, saying that they remain opposed to any new revised paper on Mode 4.
South Africa expressed dismay over the opposition from the US and Canada to India’s request, saying that one developed country is blocking a revised paper on Mode 4 while it forced the WTO Secretariat circulated to issue a paper on the offers made by WTO members at a signalling conference in 2008.
India’s proposal has come at a time when the political opposition for the Mode 4 trade is increasing rapidly within the US, said a participant familiar with the discussion.
Besides, the US is also concerned about India’s Mode 4 dispute on the ground that it could open a Pandora’s box on the barriers imposed by industrialized nations on the movement of short-term skilled personnel while they force the developing countries to open private banking, telecom, and health service so to ensure their participation.
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