A sovereign state has every right to take appropriate measures which suit the country’s interest but at the same time such decisions should not be merely based on the sentiments echoed during election
Shshank Saurav
Donald Trump is on a war-path with the Liberals after his decision to ban entry of people coming from seven Muslim countries. However, there was another development which didn’t receive the due attention of the media. It was
introduction of private bills in the United States (US) House of Representatives which are aimed to alter the visa rules.
Trump came to power on the promise of creating jobs for Americans and he has reiterated it after assuming the power also. The US administration is working on
amending the H-1B visa rules and
meanwhile, there is another private bill named as the RAISE Act which is aimed to reduce the number of legal immigrants in USA over a period. The US has every right to take adequate safeguards for protecting its citizens’ rights and charting a path which suits its economic condition as well as the aspirations of working class but at the same time it has certain commitments also towards the international community which need to be honoured.
The US is one of the most vocal members favoring free-trade and it is the dichotomy of the western powers that they speak about free movement of goods and capital but use protectionism when it comes to free movement of services.After years of efforts by the developing countries, it was in 1995 when the General Agreement on Trade in Services (GATS) treaty was adopted by WTO members. However, movement of individual service supplier (known as Mode 4 in WTO treaty) is still restricted by member countries by adopting various measures.
In the current scenario, Trump Administration is trying to control the movement of labour (or service supplier) by two ways. Firstly they want to increase the minimum salary for
H-1B visa immigrant from USD 60K to USD 130K and thereby, bringing an end to cost arbitrage for foreign companies. Secondly, they want to gradually reduce the overall immigration. The recent move raises certain questions over the double standards of western powers which can be understood from the fact that if the US companies are setting-up manufacturing facilities outside their country and brining their technicians for execution of project, what’s wrong if Indian companies on board send Indian employees for executing deliveries in the USA? If the manufacturing giants of developed western world can choose Asia as a manufacturing destination to reduce their labour cost and increase the margins, what is wrong if an Indian entity which is having commercial
presence in US or European Union (EU) hires an Indian employee to maintain its margin and remain commercially viable? In any case an Indian entity sends their staff onshore workers whose skills are in short supply in the
destination country.
The USA which is considered as the leader of the West practiced protectionism whenever it suited its interest and after the global financial crisis of 2008, it seems that entire West is dumping the idea of free trade. There is expectation from India that we would open our markets for foreign players (which we are doing in a gradual
manner) but it is worthy to see what the preachers of free trade do at home. In 2002, US President Bush imposed tariff on steel import from EU and for a
perspective it may be noted that US heavily subsidises its farm products but there is expectation from the emerging economies to open the barriers and
welcome foreign goods and foreign
capital with open arm. Of course, an investee will always remain a market for the investor and will not even get the intellectual property rights of the processes employed for manufacturing goods in its backyard.
With the advancement of technology the distinction between goods and services has become blurred and we are observing a combo of products & services where both are combined together rather than stand-alone products or
services. It is quite often for mighty west to argue in favour of free trade and raise concerns over protectionism but they choose to remain silent when developing countries ask for similar treatment in case of services.
Recent controversy will have far reaching implications on the Indian industry if the proposal takes shape of law. It will not only impact the ability of Indian firms to deliver services to their clients and reduce their margins but will also impact the inward remittances also and thereby, increase the balance of trade gap. The US accounts for almost 62 per cent of software exports while EU contributes 28 per cent and if we don’t raise our concerns now then sooner or later EU will also follow the US line of protectionism. Revenue per employee for Indian IT companies is USD 50K per employee and raising the minimum wages for H-1B visa holder will drastically reduce the margins for an industry which is highly dependent on American region. The US President’s threat to impose higher tax rate on companies which shift the production outside USA is likely to impact inflow of capital (FDI) also.
Various economic fora like EU, ASEAN, NAFTA, BRICS, SAARC etc. were created in past but their success was stalled due to failure in resolving the outstanding
bilateral/multilateral issues. There were economic as well as political reasons behind dismal success of these organisations. Though no country can afford to live in isolation, globalisation has caused cultural erosion also and at times it appears that all the local cultures are going to take a common shape which is also referred to as “McDonaldisation” in lose term. It can be understood from the change in living style and we can judge it from the examples of people from UK to India watching TV series “Games of Thrones” and Levis being the most common jeans brand from US to India. This globalisation has given birth to a new term named “Global Culture” which is
considered problematic by intellectuals like Anthony Smith. He says that “global culture” is impossible as the term “culture” refers to a plural fact. As a matter of fact people welcome new technologies coming to their country (e.g. success of computers) and they also welcome the good part of other civilisation but resistance arises when efforts are made towards homogenisation. Process of economic globalisation can take place smoothly only when the superior economic & political powers stop
trying to impose their own practices in the name of global culture. Let the local and global cultures allow to assimilate & exchange their best by way of a natural process.
On the one hand, world leaders are talking about integration to fight issues like terrorism, but on the other hand, we are witnessing alienation and Brexit is the recent example. Trump has made it clear that he will work on his protectionist agenda as promised during the poll and he has proved it by walking away from Trans-Pacific Partnership (TPP) trade deal on the very first day of his office. A sovereign state has every right to take appropriate measures which suits the country’s interest but at the same time such decisions should not be merely based on sentiments echoed during the election.
(The writer is Chartered Accountant and Anti Money-Laundering Specialist)
