Trade war: India, US head to WTO over US visa, poultry row

New York: The US hauled New Delhi to the World Trade Organisation (WTO) last month over an Indian ban on poultry meat and chicken eggs, imposed in 2007. Now the boot is on the other foot, as India is pursuing a complaint against the US at the WTO over a US law enacted two years ago, that significantly increased visa fees for skilled workers and has caused plenty of heartache at Indian tech firms.

The US law, which was passed in August 2010, raised visas fees for firms with at least 50 employees in the US who already have more than half their US staff on H-1B or L1 visas. The practical impact of this legislation is that it doubles the H-1B and L1 fees to nearly $4,500 per visa applicant (from $2,320) for Indian tech companies like Tata Consultancy Services, Wipro, Infosys and Mahindra Satyam.

More from Economy

Inflation likely to be a big focus area for budget 2024, say sources Explained: Will the Bank of Japan break tradition and raise interest rates?

[caption id=“attachment_270825” align=“alignleft” width=“380” caption=“The US law, which was passed in August 2010, raised visas fees for firms with at least 50 employees in the US who already have more than half their US staff on H-1B or L1 visas. AFP”]  [/caption]

“It is an unfair trade practice that runs counter to the WTO’s General Agreement on Trade in Services (GATS). It is a breach of the services agreement,” a commerce ministry official told Firstpost.

GATS, is a 1995 treaty to reduce trade barriers in services that was a result of the Uruguay round of negotiations.

The visa fee increase was used to finance US-Mexico border security upgrades. The language of the legislation doesn’t specifically single out Indian companies, but the law invariably ends up impacting mostly Indian outsourcing firms. An Indian commerce secretary once quipped on a trip to Washington that the US was basically asking India to “pay for security provisions down South.”

The Business Standard reported on Tuesday that the visa move is the first time India is hauling the US to the WTO. The poultry spat, on the other hand, marks the fifth time the US has brought a WTO case against India and the first under the Obama administration.

India hasn’t lodged a formal complaint against the US with the WTO’s Dispute Settlement Body (DSB), but has sought consultations with the US, which is the first step. If both parties arrive at an amicable solution during the consultation process the visa case will not be filed with the WTO.

“We have already made a request for consultation with the US over the issue of the hike in H-1B and L1 visa fees and discrimination against certain Indian IT companies. We will inform them formally once the draft proposal is ready,” a senior commerce department official told Business Standard.

Many Americans have a “caricature” of India as a place of call centers where US jobs get Bangalored. India’s IT industry is concerned Indian firms will be picked on during this US election year despite the outsourcing model having made US firms more competitive and productive.

Meanwhile, the US launched a case against India in March at the WTO, charging that India’s ban on poultry imports - imposed to prevent avian flu - violated global trade rules. The US is the world’s largest broiler meat producer and second largest exporter, behind Brazil.

The move comes as the Obama administration has become more aggressive on trade enforcement, recently establishing a new taskforce across government agencies to co-ordinate litigation efforts.

“The United States has repeatedly asked India to justify its claim that a ban on poultry products from the United States is necessary. However, to date, India has not provided valid, scientifically based justification for the import restrictions,” US agriculture secretary Tom Vilsack said earlier.

The National Chicken Council in the US, says the US has much to gain in going to the WTO as the Indian poultry market is expanding by 8 to 10 percent every year and could potentially lead to annual US exports of $300 million, if the ban were lifted.