If H-1B visa reform goes ahead, here are the GATS violations US would be committing

Indians eager to know the fortunes of their H-1B life would do well to direct their astrological queries on international trade dispute judges rather than attempting to prognosticate the American President’s intent on work-visa programs.

While NR Narayana Murthy — co-founder of a company that has led the Indian outsourcing drive — may have given US President Donald Trump’s proposed reform of the H-1B regime a thumbs-up, the real battle would have to be fought through international lawsuits in Geneva.

Representational image. Reuters

Few know that India has already filed an objection (referred to as ‘request for consultation’ which is the first step for trade dispute settlement) with the World Trade Organisation (WTO) in March last year on the current H-1B visa rules. If Trump has his way upending work-visa programs than the present Indian concerns may just look finicky.

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India requested for consultations with the US, regarding certain American measures for imposing increased fees (objections to “pay higher filing fees and fraud prevention and detection fees under certain specified circumstances”) on certain applicants for L-1 (a non-immigrant visa which allows companies to relocate foreign qualified employees to its US subsidiary or parent company) and H-1B (a non-immigrant visa that allows American employers to temporarily employ foreign workers in speciality occupations), and concerns relating to a numerical commitment for H-1B visas.

India has said that these measures are in violation of several articles of the General Agreement on Trade in Services (GATS) — the set of multilateral rules that govern international trade in services.

New Delhi requested for consultations with Washington that were held last year. India has not yet requested the WTO for establishing a Dispute Settlement Board (DSB).

Specifically, India has said that some Washington measures on these categories of visa holders violate clauses related to Most-Favoured-Nation (MFN) treatment, rules on transparency, clauses on domestic regulation, measures to increase the participation of developing countries in world trade and commitments to market access and national treatment.

Consider some of these stipulations under GATS.

The national treatment clause says that a government shall accord services and service suppliers of other countries “in respect of all measures affecting the supply of services, treatment no less favourable than that it accords to its own like services and service suppliers”.

The MFN treatment clause requires that governments should accord “immediately and unconditionally” treatment “no less favourable” to a country what it accords to other countries for like services and service suppliers.

In sectors where a country has undertaken market commitments, the measures that a country cannot “adopt or maintain” in its sub-regions or its territory extend to limitations on the number of service suppliers whether in the form of numerical quotas, monopolies, exclusive service suppliers or the requirements of an economic needs test, limitations on the total number of service operations or on the total quantity of service output expressed in numerical units in quotas, among other such stipulations.

The clause on movement of Natural Persons Supplying Services in the GATS Annex says that though GATS does not prevent a country from applying measures to regulate the entry of natural persons into, or their temporary stay in its territory, “provided that such measures are not applied in such a manner as to nullify or impair the benefits accruing to any Member under the terms of a specific commitment”.

All of these possible violations would be important to cite if India chooses to request WTO to set up a DSB. After the panel judgment, either of the countries can appeal against the judgment. If the highest international trade court even then rules in favour of India then US would be bound to comply.

However, it is unclear how much the Trump administration would feel bound by its WTO commitments, including dispute judges’ verdicts against it. The growing rhetoric of “unfair” trade agreements used in the current US political discourse might even see Washington pulling out of the WTO.

India and most other WTO members are in for rough weather in the present climate as far as trade negotiations with the US are concerned.

In a hypothetical situation of India winning a case against the US regulations on work visas at the highest trade court and US ignoring the verdict against it, India can seek WTO’s authorisation to retaliate (to “suspend concessions or other obligations”) against the US — normally such an authorisation is not refused, trade experts opine. India could then consider imposing punitive tariffs on US imports.

Another option for retaliation, experts say, could be the refusal to recognise some of the intellectual property (IP) rights of US right holders. But this option of retaliation could involve a much more complicated procedure.

An across-the-board or discriminatory higher tariffs, on the face of it, would also be violative of international trade rules, particularly the MFN clause, though much depends on the nitty-gritties of the American legal changes in trade policy.

Even Trump’s ‘Buy American, Hire American’ would not be so easy to implement if US does choose to abide by its international trade commitments. There could be two scenarios: one, when the US government procures only from domestic sources, and linked with that the government mandates that even a private entity must source from within the US. In both these possible realities, there is no talk of subsidies yet (which could violate other WTO rules).

“In the first situation, the US has some flexibility — it is government procurement to mandate procurement from domestic sources provided this is for non-commercial use and for government’s own use. Then the US would be within its rights to mandate such a local procurement for government purposes. But if the US government mandatorily requires even the private sector to source domestically then that would be violative of WTO rules,” Abhijit Das, Head of the Centre for WTO Studies at the Indian Institute of Foreign Trade says.

“Then the second situation where US government gives incentives to procure domestically, such an incentive would be violative of WTO subsidies agreement. This is commonly called the local content subsidy, which is prohibited,” he adds.