India's Appeals to the WTO
India's Appeals to the WTO
Date: Thursday, June 05, 2003 4:36 PM
JOB DESTRUCTION NEWSLETTER
www.ZaZona.com
India is complaining to the WTO that the United States is too
restrictive in it's immigration and outsourcing policies. Expect the
WTO to ask our president to use his Trade Promotion Authority (TPA) to
make an agreement that complies with the WTO rulings.
Here are some of the issues that India is bringing to the WTO. Reform
in this case is a nice term for using the WTO to force the United
States to allow more foreign workers to have access to our job market.
Mode 1 - India wants BPO services to be totally liberalized. As an
example, they want doctors in India to be able to treat U.S. patients
by email.
Mode 4 - In order to understand this one it's necessary to understand
how the WTO defines "Movement of natural persons".
http://www.wto.org/english/tratop_e/serv_e/mouvement_persons_e/mouvement_persons_e.htm
Movement of natural persons refers to the entry
and temporary stay of persons for the purpose of
providing a service. It does not relate to persons
seeking citizenship, permanent employment or permanent
residence in a country.
H-1B and L-1 visa holders are considered "natural persons." India
argues that the H-1B yearly limit on the number of visas issued
restricts the movement of natural persons. Therefore the United States
is in violation of the WTO unless the lift all numerical limits on
H-1B.
Here are some other things India is demanding from the WTO:
* Prevailing salary should never be used for salary and wage
comparisons with Indian workers. In other words, no matter how low
Indians are willing to work for, they should always be allowed into the
USA to work.
* Indians should be able to go back and forth from India to wherever
they work in the USA without restrictions.
* There should be no competency exams or local certification by medical
boards in order to restrict BPOs.
* Developing countries (like India of course) have large stocks of
human workers and these workers should have complete freedom to exploit
their comparative advantage.
* India has indicated that bans on outsourcing are a clear violation of
GATS and they will complain to the WTO if states such as New Jersey try
to limit it.
* Cheap Indian labor will help U.S. consumers by getting services at a
lower price.
http://www.rediff.com/money/2003/jun/05wto.htm
India readies plan for WTO dialogue
| PTI | June 05, 2003 | 19:48 IST
The government on Thursday approved the broad strategy for World Trade
Organisation services negotiation under which India would be willing to
open up several services including health, financial, computer-related,
architecture, tourism and book keeping.
The strategy approved by the Cabinet Committee on WTO, headed by Prime
Minister Atal Bihari Vajpayee, made it clear that India was not willing
to negotiate opening up of four services -- distributive (retail and
wholesale business), legal, posts and courier, and audio-visuals like
films.
Official sources told PTI that?there are a few other services like
energy, education, environment, recreation, culture and sports, which
could be considered for opening up only after undertaking more studies
on these sectors.
The government was trying to play a pro-active role in the services
negotiations and was willing to open up many of the sectors that
included maritime services and urban land services.
Under the service negotiations, India has already made its offer to 62
countries, of which 25 have responded including the United States and
European Union, the sources said.
The strategy was approved by the Cabinet Committee on WTO, which
enables the commerce ministry to make the offer in services in
consultation with the concerned ministries.
The sources also said the negotiations could be bilateral, multilateral
and pluralistic and the government would adopt a strategy that would
maximise gains to the country while protecting national interest as in
any other trade.
The General Agreement on Trade in Services provides for categorisation
into four modes.
The Mode 1 negotiations pertain to business process outsourcing, which
are generally known as cross-border services like doctors providing
consultation to a patient in the US sitting in India through e-mail.
Under Mode 1 negotiations, India wanted it to be totally liberalised so
that there were no restrictions for carrying out the outsourcing
services.
Under Mode 4 negotiations, which provides for movement of natural
persons, India has been demanding that the bound rate for granting
visas for professionals should be substantially increased.
To cite an example, under Mode 4, the US has bound itself to give up to
65,000 H1B visas for professionals from outside the country seeking
employment. But Washington on its own has increased that number to
190,000 professionals in the face of growing demand in that country.
However, it still maintains the bound rate at 65,000 giving it a
leverage to lower the number of such visas from 190,000.
India is pressing for the bound rate to be raised substantially from
65,000 so that movement of professionals becomes easier.
The Mode 3 is related to the flow of foreign direct investment as it
pertains to the commercial presence of organisations in various
countries.
The issue of Mode 3 was crucial for telecom and financial services
where there is a sizeable flow of FDI.
http://sdnp.delhi.nic.in/resources/wto/news/bl-20-8-freetrade.html
India for free movement of natural persons
India favours a separate agreement for freer trade in services through
movement of natural persons, since the General Agreement on Trade in
Services (GATs) has not succeeded in addressing the interests of
developing countries in trade in services.
In a policy paper on the subject submitted to the World Trade
Organisation (WTO) recently, New Delhi has contended that this would
also prove ``beneficial'' to the developed countries by providing them
access to professionals such as doctors, nurses, software experts at
much more competitive prices.
The paper assumes importance in the light of the run-up to Seattle
Ministerial of WTO scheduled for November 1999 in the US where GATs
would come under review.
India said such an agreement could embody the ensuing broad principles:
(i) The rules should be transparent; (ii) each contracting party should
publish and make freely available procedures applicable for movement of
personnel and the country entry procedures; (iii) there should not be
any additional tariff/tax or other regulatory restrictions on the
nationals of foreign countries that do not simultaneously and with
equal force apply to its own nationals; (iv) there should be not any
quantitative limitations (i.e. number of visas) on temporary movement
of professionals, just as there are to be no quantitative limitations
on trade in goods; and (v) fees, charges applicable to residents and/or
citizens with a view to providing social security nets or retirement
benefits should not apply as there is only temporary movement of
professionals rather than permanent residence or citizenship.
Other principles embodied in India's proposals include, among others,
(vi) salary and wage comparisons with residents and/or citizens should
not be used as trade restrictive measures; (vii) there should not be
unreasonable limitations on repeat delivery of services using the same
professionals; (viii) there should be no non-tariff barriers by way of
requirements for passing of local competency examination or local
certification by medical boards or the like, except on an international
standard basis for such certification can be reasonably expected to be
available in the home country of the deliverer of services; and
(ix) the issue of civil and criminal liabilities, if any, arising out
of the stay and work of a professional service provider in a foreign
country and the mode of dealing with such liabilities should be clearly
and equitably established.
India has said that in order to have increasing participation of
developing countries in trade in services, there is a need for greater
freedom of trade in services through movement of personnel particularly
for professionals.
The developing countries which have distinct comparative advantages in
delivery of such services owing to their large stock of human
intellectual capital and their past and continuing investments in
education and training should be free to exploit their comparative
advantage.
``Any restrictions on the means of delivery of these services
constitute an unreasonable restraint on free global trade in
services,'' it was contended.
Stating that the commitments made till date do not benefit developing
countries in any significant manner, India said that this is because
the present commitments are largely restricted to business visitors and
intra corporate transferees. There are very limited commitments for
qualified specialist personnel.
Even where commitments are made for qualified specialist professionals
they cannot move in individual capacity but should be employees for
specified duration of the juridical person in the other country.
The movement of personnel is linked to commercial presence and few
developing countries are in a position to benefit from commercial
presence mode of supply because of high capital requirement for
establishment in developed countries, lack of technology and inherent
comparative advantages.
India further noted that the categories of professionals do not
prominently figure in the commitments whereas in actual practice there
is considerable global trade in these labour services.
Though in Article IV of GATs there is clear obligation to increase
participation of developing countries in sectors and modes of supply of
export interest to them, the post-Uruguay Round experience reveals that
the marginal commitments made by developed countries do not incorporate
the export interests of the developing countries.
Further, the inherent imbalance in GATs and the basic asymmetries in
trade in service between developed and developing countries have got
further ``accentuated'' with increased level of commitments from
developing countries in the spillover negotiation on basic
telecommunication services and financial services where developing
countries have hardly had any demands from the developed countries.
``GATs appears to be becoming merely an exercise in fostering greater
capital movement with most of the commitments being made in the
commercial presence mode.''
Finally, India argued that freer access to the service providers would
help consumers in getting services at a lower price. For instance, as a
result of exorbitant labour costs, there is a general lack of
availability of after-sale service in the developed nations, which
means costlier replacement syndrome rather than the cheaper route.
Source : G. Srinivasan,
http://www.ciol.com/content/news/repts/102122405.asp
Article Title: Industry cautious, not worried by New Jersey Bill
URL: http://www.ciol.com/content/news/102122405.asp
Section: News
Author Name: Balaka Baruah Aggarwal
Author Email: balakaa@cmil.com
NEW DELHI: In an attempt to create more jobs for native Americans and
discourage outsourcing to foreign countries (India included), the New
Jersey Senate in the US has approved a bill to ban companies that take
government contracts to move their call centres abroad for cheap labor.
However, the bill passed in the state of New Jersey banning the
outsourcing of government projects would not affect Indian the BPO
industry in more than any way. One, the total government business from
the US is about two percent to three percent and two, the Bill is being
passed in one state only. The Bill has to go the Legislative Assembly
to become a law.
Said Kiran Karnik, President, Nasscom, "This Bill in particular is not
going to impact Indian BPO industry in any way. But we also cannot
afford to sit back and relax. We have to act and do it in a diplomatic
manner since there is an emotional issue involved."
Therefore, Nasscom does not expect the US industry to come out in the
open to advocate outsourcing, although it is a matter of grave concern
for American companies. Nasscom, however, plans to align with industry
bodies and build its case. It is also in the process of appointing a
public relations company, which would be finalized in the next few
days.
"Even then, if the outcome is not favorable, we shall approach the WTO,
although we would prefer not to do that," added Karnik. Banning
outsourcing would be a clear violation of WTO principles, which stands
for free movement of goods and services in order to have the best
economic benefit.
Raman Roy, Vice-Chairman and CEO of Spectramind felt that the Bill is
essentially a populist measure meant to assuage the sentiments of the
locals. With jobs being lost and money flowing out of the country,
there is bound to be resentment.
As politicians the elected members had to react and passed the Bill.
But there is also an economic reality, which would not make such a Bill
feasible. He brushed away any impact on the Indian industry, "The Bill
refers to only one segment of the target customers which anyway is a
very small base. Besides Spectramind as a company does not target the
government anyway," Roy added.
Pavan Vaish, Senior Vice-President, Daksh e-Services also felt that the
Bill is not likely to impact the Indian BPO players much since most of
the projects anyway come through third parties and not directly through
the government. SS Ghosh, CMD of CMC pointed out to another reality.
"Although there is a fear that the Bill could have a cascading effect
in other states, it cannot be viewed in isolation. The New Jersey Bill
may be about BPO, but here we are talking about larger issues like
manufacturing where outsourcing is a necessity today" he said
"Twenty years ago, there was a similar wave of resentment against the
Japanese auto industry. Japanese companies were forced to set up a
presence in the US due to that resentment. Today the entire US auto
industry outsources its components from Asian countries like Taiwan,
Philippines," he added.
Outsourcing is an economic reality and the Americans would have to take
cognizance of that fact. Today, India's Hindustan Motors also has a
huge outsourcing deal with General Motors for manufacturing components.
"America is a nation driven by hard economic reality. It is bound to
realize the economic implications of banning outsourcing", said Ashank
Desai, Chairman and CEO of Mastek Ltd.
"While there is a possibility that the emotional factor may catch on in
the short term, in the long run, US companies have to be cost-effective
in order to remain competitive. And if companies make profits, it would
in turn boost the American economy. It is this message that has to be
sent across to the American people, " he added.
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