India Claims New Law Violates WTO Agreements

As I discussed last week, the $600 million that congress wasted on additional Border Security was paid for entirely by raising visa fees on companies(primarily India-based) whose main purpose is importing cheap labor using H1-b and L-1 visas.   India is not taking this lying down.  They are claiming that it violates our WTO treaties.

India’s Commerce Secretary Rahul Khullar told reporters in Delhi on Tuesday that the visa fee hike is incompatible with the WTO.

Nasscom’s president Som Mittal warned on Monday in an interview that the hike in visa fees could lead to a trade spat, and could also affect U.S. companies that are negotiating access to Indian markets.

The WTO is an organization of several countries dedicated to free and open trade.  Joining the WTO requires not just agreeing to 1 agreement, but almost 60.

The WTO oversees about 60 different agreements which have the status of international legal texts. Member countries must sign and ratify all WTO agreements on accession. A discussion of some of the most important agreements follows. The Agreement on Agriculture came into effect with the establishment of the WTO at the beginning of 1995. The AoA has three central concepts, or “pillars”: domestic support, market access and export subsidies. The General Agreement on Trade in Services was created to extend the multilateral trading system to service sector, in the same way the General Agreement on Tariffs and Trade (GATT) provides such a system for merchandise trade. The Agreement entered into force in January 1995. The Agreement on Trade-Related Aspects of Intellectual Property Rights sets down minimum standards for many forms of intellectual property (IP) regulation. It was negotiated at the end of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) in 1994.

The Indian government is claiming that the visa fees unfairly target foreign companies.  The specific agreement that it claims is being violated, according to The Hindu Business Line,  is Article VI of the General Agreement on Trade in Services(GATS).

They said Article VI of the WTO’s General Agreement on Trade in Services specifies that domestic regulations of all countries should be administered in a reasonable, objective and impartial manner. The sources said domestic regulations also should not be more burdensome than necessary to ensure the quality of the service, adding that they should also not cause restriction on the supply of the service.

Here is Article VI of the GATS:

1.        In sectors where specific commitments are undertaken, each Member shall ensure that all measures of general application affecting trade in services are administered in a reasonable, objective and impartial manner.

2.        (a)        Each Member shall maintain or institute as soon as practicable judicial, arbitral or administrative tribunals or procedures which provide, at the request of an affected service supplier, for the prompt review of, and where justified, appropriate remedies for, administrative decisions affecting trade in services. Where such procedures are not independent of the agency entrusted with the administrative decision concerned, the Member shall ensure that the procedures in fact provide for an objective and impartial review.

(b)        The provisions of subparagraph (a) shall not be construed to require a Member to institute such tribunals or procedures where this would be inconsistent with its constitutional structure or the nature of its legal system.

3.        Where authorization is required for the supply of a service on which a specific commitment has been made, the competent authorities of a Member shall, within a reasonable period of time after the submission of an application considered complete under domestic laws and regulations, inform the applicant of the decision concerning the application. At the request of the applicant, the competent authorities of the Member shall provide, without undue delay, information concerning the status of the application.

4.        With a view to ensuring that measures relating to qualification requirements and procedures, technical standards and licensing requirements do not constitute unnecessary barriers to trade in services, the Council for Trade in Services shall, through appropriate bodies it may establish, develop any necessary disciplines. Such disciplines shall aim to ensure that such requirements are, inter alia:

(a)        based on objective and transparent criteria, such as competence and the ability to supply the service;

(b)        not more burdensome than necessary to ensure the quality of the service;

(c)        in the case of licensing procedures, not in themselves a restriction on the supply of the service.

5.        (a)         In sectors in which a Member has undertaken specific commitments, pending the entry into force of disciplines developed in these sectors pursuant to paragraph 4, the Member shall not apply licensing and qualification requirements and technical standards that nullify or impair such specific commitments in a manner which:

(i)        does not comply with the criteria outlined in subparagraphs 4(a), (b) or (c); and

(ii)        could not reasonably have been expected of that Member at the time the specific commitments in those sectors were made.

(b)        In determining whether a Member is in conformity with the obligation under paragraph 5(a), account shall be taken of international standards of relevant international organizations(3) applied by that Member.

6.        In sectors where specific commitments regarding professional services are undertaken, each Member shall provide for adequate procedures to verify the competence of professionals of any other Member.

I’m not a lawyer or an expert on international law, so I’ll have to let somebody else tell you whether or not these threats are real or idle.  I will offer this though, the case to me doesn’t appear to be a slam dunk for either side which means that the proceedings could drag out for years.

Of course this could seriously put off track the border control bill.  If the visa’s are found to violate WTO, congress would either have to borrow the money for the extra border control, find another way to fund it, or rescind the law.  Of course, one way that it could remove the burden could be to lower the fee, but extend it to all H1-b and L-1 visas.  If it targets all companies and visa holders, then India can’t claim the United States is playing favorites.

Of course if India does take legal action, India isn’t exactly guilt free when it comes to free and open trade.  Several companies are having some trouble with providing Internet services there.  (see here and here).  This customs & border bill keeps getting more and more interesting.

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