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Business News/ Opinion / Online Views/  Protectionism by another name

Protectionism by another name

Tinkering with visa regimes amounts to raising protectionist barriers. The US has made that a fine art

Illustration by Jayachandran/Mint (Illustration by Jayachandran/Mint)Premium
Illustration by Jayachandran/Mint
(Illustration by Jayachandran/Mint)

US Congressmen have proposed significant amendments in that country’s immigration laws with an eye to ensure that their citizens get preference in new employment opportunities.

In mid-March, Republican Senator Chuck Grassley introduced the H-1B and L-1 Visa Reform Act of 2013 (S. 600) with the stated intent to “amend the Immigration and Nationality Act to reform and reduce fraud and abuse in certain visa programs for aliens working temporarily in the United States".

A more comprehensive legislation, the Border Security, Economic Opportunity, and Immigration Modernization Act of 2013 (S. 744) was introduced last week. The more publicized objectives of this legislation, a bipartisan effort of eight Congressmen, is to provide legal status to almost 11 million illegal immigrants subject to the completion of several security requirements expressedly included in the Bill. However, what is less known is that S. 744 also targets employment-based non-immigrant visas, including the H-1B and L-1 visa regimes.

The changes that the two legislation propose in the US immigration laws are of considerable interest to Indian professionals and companies, for they have been the largest users of the two categories of visas that are on offer. While there are numerical limits on the issuance of H-1B visas for professions, there is no such system for the L-1 visas used by companies. At present, the US immigration authorities issue 65,000 H-1B visas per annum, which is in keeping with its commitment under the services agreement of the World Trade Organization (WTO). An additional 20,000 visas are offered to non-immigrants who have secured advanced degrees from US universities.

The Bill introduced by Senator Grassley proposes a number of changes in the requirements employers will have to meet before offering an H-1B visa. These requirements include those related to the determination of minimum wages that must be offered to non-immigrants and publication on the Internet for at least 30 calendar days, a detailed description of each position for which the services of a non-immigrant are being sought. In addition, non-immigrants cannot exceed 50% of the total strength of enterprises having a workforce exceeding 50.

Firms using L-1 visas for engaging non-immigrants will also be under a scanner, according to the proposed Bill. They will be required to establish that they have not displaced and do not intend to displace a resident within six months of hiring the non-immigrant. Companies requiring L-1 visas to open new establishments in the US could also face several new conditions, including a requirement that they did not get similar approvals more than once in the immediately preceding two years. This is tantamount to the introduction of numerical quotas for establishing new enterprises.

S. 744, in contrast, is an admission on part of lawmakers that the US economy requires additional skilled workforce. The Bill proposes an increase in H-1B visas cap from the current level of 65,000 per annum to 110,000 in 2015, which can be increased subsequently to 180,000 per annum. However, the number of visas will be determined by a “high skilled jobs demand index", based on changes in the demand for foreign workforce and the availability of domestic workers in the “management, professional, and related occupations" categories. Thus, the legislation proposes that the grant of H-1B visas would be market determined.

The two legislation raise a number of issues for the potential users of H-1B and L-1 visas. The proposal to allow the market to determine H-1B visas implies a tacit application of the so-called “economic needs test", a mechanism that members of WTO have refused to accept in the past. The reason for the rejection is fairly obvious—it will allow the importing countries to impose artificial barriers to the entry of non-immigrant workers and, therefore, make the regime followed by countries such as the US in respect of cross-border movement of natural persons even more opaque. Employers will be discouraged if they have to meet the additional requirements for employing non-immigrants and this could lead to a contraction in the employment possibilities in the US.

The timing of the proposed changes in US immigration laws and the return of protectionist sentiment seems inexplicable given that the American economy is performing better than most of the advanced industrial countries. Recent projections of the International Monetary Fund (IMF) show that the rebound in the country’s economic growth over the past few quarters would consolidate further during the next 18 months. Alongside, there has been an appreciable decline in the unemployment rate. Latest figures from the US Bureau of Labor Statistics suggest that since the beginning of 2012, unemployment rate has declined by 0.7% to reach 7.6% at the end of March this year. This is the lowest unemployment rate recorded since the outbreak of the crisis in 2008.

The buoyant employment situation was also reflected in the high demand for non-immigrant workers. Since the beginning of the month, US Citizenship and Immigration Services received almost 124,000 applications for the issuance of H-1B visas from non-immigrants whose services are required by US firms in 2014. In view of the fact that the H-1B visa window can currently accommodate only 85,000 workers, the present immigration regime would leave a sizeable chunk of the US industry without the workers that they need to maintain their economic turnaround.

Biswajit Dhar is director general at Research and Information System for Developing Countries,
New Delhi.

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Updated: 23 Apr 2013, 12:06 PM IST
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