India to Challenge Visa Fees at WTO

India is expected to launch a WTO dispute against the US in the coming days over increased visa fees for skilled workers, according to top government officials. The announcement comes a month after Washington lodged its own complaint against New Delhi regarding India’s ban on imports of US poultry and other farm products, hinting at rising tensions between the two trading partners (DS430).

The US visa regime is “an unfair trade practice that runs counter to the WTO’s General Agreement on Trade in Services (GATS),” an unnamed official with the Indian Ministry of Commerce and Industry commented to British newspaper Firstpost.

The United States has yet not received a request for WTO consultations from India regarding visas, a USTR spokeswoman told on Tuesday. As a result, New Delhi’s WTO claims are not yet known, leaving it to experts to speculate about the exact legal arguments.

The complaint will be lodged at the global trade arbiter within the coming week, officials say. “In the next few days we will inform our ambassador [in Geneva] and then we will file the formal complaint,” Indian Trade Secretary Rahul Khullar explained to the Financial Times on Tuesday.

Indian Trade Minister Anand Sharma brought attention to the issue when US Commerce Secretary John Bryson visited India late last month. “We had a very frank discussion,” Sharma said afterward, highlighting concerns over the high rate of visa rejection.

Visa fees to finance US-Mexico border security, fight “body shop” practice

The subject of India’s complaint are increased visa fees implemented to finance the Southwest Border Security Bill, which was passed by the US Congress and signed into law by President Barack Obama in 2010.

Notably, the purpose of the law is to strengthen border security along the US-Mexican border rather than create immigration barriers for skilled foreign workers. However, the 2010 law came with a US$600 million price tag.

In order to pay for the bill, Senators Claire McCaskill and Charles Schumer - both Democrats who were among the bill’s sponsors in that chamber - proposed raising fees for H1B and L1 visa applications. These visas, limited to employment with the sponsoring company, allow the temporary employment of high-skilled foreign workers in the US for specialty occupations.

The McCaskill and Schumer proposal resulted in an almost 100 percent increase in visa application fees for firms that have at least 50 employees in the US and have more than half of their workforce on an H1B or L1 visa. The fee has nearly doubled for these workplaces to US$4500 per applicant.

These “body shop” companies “try to exploit loopholes in our immigration system in order to employ the vast majority of their workers on foreign work visas. [They] staff their foreign workers to companies in America and take away good-paying jobs that can easily be taken by Americans,” Schumer argued at the time.

In the US, “body shopping” is often used to refer to an outsourcing practice whereby foreign nationals are employed in a foreign IT company based in the US in order to work as short-term on-site consultants for other US companies.

However, New Delhi rejects this “demonised” version, arguing that the new visa fee is protectionist in nature, disadvantaging its services trade by limiting the entry of skilled workers to the US. In WTO jargon, this is called “mode 4″ services trade - a situation where services are provided by foreign nationals abroad. India claims that its price advantage in services is adversely affected by the measure, substantially hurting its competitive position.

According to the US Senate, the increased visa fees predominantly affect Indian companies, namely the four software giants Tata, Infosys, Wipro, and Mahindra Satyam.

However, the law does not single out Indian companies per se - a fact that some trade lawyers note could make a WTO case difficult for India, as New Delhi would have to prove that its services are being subjected to de facto discrimination by Washington. At this stage it is also unclear what type of services trade is affected by the measure.

Tit-for-tat challenges?

The US brought a separate complaint at the WTO last month where it asked India to open its market for poultry, meat, and eggs. Some analysts speculate that the expected complaint on services could be a tit-for-tat challenge, aimed at bringing Washington to the negotiating table on the poultry issue.

India has maintained a prohibition on US poultry and other farm products for five years with the alleged goal of preventing domestic avian influenza outbreaks. The US has claimed that the ban is not based on strong scientific evidence.

India is also expected to challenge the US’ import duty on steel pipes at the WTO in the coming days, an unnamed official told Reuters on Tuesday. The US Commerce Department set a preliminary import duty of nearly 286 percent on a certain type of steel pipe from India in March in order to offset government support, with a final decision on the duties expected by August.