The challenges to free movement of labour
4 min read 15 Dec 2016, 01:59 AM ISTAs populism reigns in Western economies, India must push back against labour protectionism
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Microsoft chief executive officer Satya Nadella, Apple CEO Tim Cook, Alphabet CEO Larry Page, Facebook chief operating officer Sheryl Sandberg. The Wednesday meeting between the heavyweights of Silicon Valley and US president-elect Donald Trump would have been a delicate affair. Trump’s anti-immigration rhetoric has been catholic, as punchy about the influx of white-collar tech workers fuelling America’s tech behemoths as it has been about blue-collar workers from south of the US border. Little wonder the uncertainty about the future Trump administration’s H-1B visa policy has made Indian IT companies wary.
Over in the UK, meanwhile, Prime Minister Theresa May has vowed to bring down net migration figures and the easiest way to do this is, of course, to go after international students. As home secretary back in 2012, May had scrapped the UK’s policy of allowing foreign students to work in the country for up to two years after graduation. This seems to have had an adverse impact on the number of Indian students enrolling in UK universities—from 68,238 in 2010, this figure has now fallen to 11,864 in 2016.
As the popular tide against globalization rises in the developed world, economic empiricism falls by the wayside. Christian Dustmann of University College London and Tommaso Frattini of the University of Milan, for instance, have shown that contrary to the popular perception of immigrants being a drain on public resources, they have made a positive contribution of more than £4 billion to Britain between 1995 and 2011. And economist Giovanni Peri has found in the context of the US that the other major economic fear about immigrants—that they depress local wages and displace local labour—is untrue as well. These are not isolated findings. The vast bulk of empirical studies bear them out.
The populist shift in countries that have traditionally been meccas for Indian professionals and students means that the burden on New Delhi to navigate these currents is going to grow steadily. Indeed, this has been in evidence for some time now. When the matter was raised during May’s India trip last month, she did not budge from her position—but it is interesting to note that her government is now willing to make some concessions for Indian businesspersons visiting the UK. And on 13 December, the parliamentary under-secretary of state at the foreign and Commonwealth office with special responsibility for the Asia-Pacific region said that May would like India to be the first country to be offered the “Registered Traveller Scheme" which allows business travellers expedited clearance at the UK border.
Across the pond, the US government increased visa fees for the L1 and H-1B categories last year, which hurt Indian IT professionals. Trump’s future policies may remain a matter of speculation for now—it’s possible that economic realities will compel him to walk back at least some of his rhetoric on labour protectionism—but the fact that his attorney-general pick is Jeff Sessions, a staunch critic of the existing visa policies, is a matter for concern.
How, then, should New Delhi position itself? It has made a good start at the World Trade Organization (WTO), arguing that the US has violated its obligations under the General Agreement on Trade in Services (GATS) and the GATS Annex on Movement of Natural Persons Supplying Services. This is the first time that a WTO member has challenged the immigration laws of another member as a GATS violation, and if the matter moves to the formal dispute settlement panel phase—it is currently in the first consultation phase —the trade body may recommend that the US amend its policies. The recommendation won’t be binding, but if the US doesn’t comply, it may be subject to WTO-authorized trade retaliation.
Concurrently, even as the nations that built their economic fortunes on the back of immigration look to turn inwards, India must move towards the position they are abandoning. Existing Indian regulations not only make it cumbersome for foreign firms to set up shop in the country—as is evident from India’s poor performance in the ease of doing business rankings—but make employment a difficult prospect for skilled foreign nationals as well.
India is at a point in its economic growth trajectory wherein it stands to benefit from the expertise of these foreign workers. Take the higher education sector, for example. Posts in universities and colleges across the country lie vacant because there aren’t enough professors with the relevant expertise. Similarly, in the high-end defence manufacturing sector that is being pushed aggressively by the Narendra Modi government, there are valid concerns about personnel expertise and training. Here too, foreign workers can play an important role in galvanizing a new ecosystem by bringing in technical know-how and best practices from around the world.
In 1929, the US passed restrictive immigration laws despite the role immigrants had played in building the US economy in the 19th century. 1965’s Immigration and Nationality Act rolled back the restrictions—and helped unleash decades of economic dynamism and technological innovation. There are lessons in that for India.
How can India deal with the move away from free movement of labour? Tell us at views@livemint.com
