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Nirmala Sitharaman Refers to US Cos in India as Protectionism Raises Concerns

Concerned over Indian companies getting hit by tightening of US visa rules, Union Commerce Minister Nirmala Sitharaman on Thursday said the "whole debate" has to be expanded to include several American firms that are earning their profits in India.


Updated:April 20, 2017, 11:27 PM IST
Nirmala Sitharaman Refers to US Cos in India as Protectionism Raises Concerns
File photo of the new Defence Minister Nirmala Sitharaman.

New Delhi: Concerned over Indian companies getting hit by tightening of US visa rules, Union Commerce Minister Nirmala Sitharaman on Thursday said the "whole debate" has to be expanded to include several American firms that are earning their profits in India.

The comments assume significance in the wake of Indian companies, specially IT services providers, getting concerned over protectionism by the US and several other countries.

Sitharaman said, "Let us also understand that not just Indian companies in the US, several big US companies are in India too. They are also here, they are earning their margins, they are earning their profits which goes to the US economy.

"So, it is a situation where it's not just unilateral just Indian companies having too face the US executive order, there are several US companies in India who are doing business for some years now and therefore I want this whole debate to be ... if it has to be expanded, it has to be expanded to include all these aspects and we shall ensure that all these factors are kept in mind."

The minister said that developed nations are now clearly raising protectionist walls with regard to flow of labour and a WTO-backed global framework is needed to facilitate the services trade. Citing examples of the US, the UK, Australia and New Zealand, which are making their visa norms stricter for movement of skilled professionals, she said: "Countries are now very clearly raising protectionist walls as regards service trade."

"And it is time that we have a global framework within which trade in services can happen. We will be actively pursuing our proposal in the WTO," she told reporters here.

The proposal is aimed at liberalising rules for movement of professionals and other steps to reduce transaction costs to boost services growth.

India is pitching for this pact at the WTO as the services sector contributes over 60 percent to GDP and 28 percent to total employment. The move is aimed at developing a broader framework governing global services trade similar to a pact implemented by the WTO on goods trade. India wants all the member countries to study the proposal before the forthcoming ministerial meeting in Argentina in December.

About the executive order signed by US President Donald Trump on H1B visas, she said America has committed a certain number of these visas to India and "we would definitely want America to honour that commitment".

The minister is in touch with the Indian industry on these issues amid fears that the new American visa regime would make visas more expensive and restrictive.

She further said Finance Minister Arun Jaitley, who is in the US, would take up the matter with the US administration.

"It is not just the US, but several countries now adopting such measures," she said, suggesting that the government and the industry need to work together on the issue.

According to Sitharaman, India will engage with these countries to sort out the visa related matters. The restrictive visa regime would also impact the US companies that are operating in India.

"So, it is not a unilateral (issue) where Indian companies would have to face this, there are several US companies in India which are doing business for years here," she said.

Asked whether India would drag the US and Australia to the WTO's dispute resolution mechanism, she said: "At this stage, we will engage constructively. At the same time, India will ensure it will not accept unfair treatment."

Indian IT companies use temporary work visas to send employees to work on client sites. With visa programmes in these countries becoming more rigorous, domestic technology firms will face challenges in movement of skilled professionals and spike in their operational costs.

These companies get over 60 percent of their revenues from the North American market, about 20 per cent from Europe and the remaining from the other economies. With the rising protectionism across markets like the US, the UK, Singapore and Australia, domestic companies are beginning to adjust their business models to reduce their dependence on visas by hiring more locals.

The US, under a new executive order, proposes to replace the current lottery system for issuing H-1B work visas with a merit-based approach. The country is reviewing its visa programme for foreign workers to curb purported abuse and frauds related to visas.

Similarly, Australia has abolished a work visa programme -- 457 visa -- used by over 95,000 temporary foreign workers, a majority of them Indians, to tackle the growing unemployment in the country. New Zealand, too, is introducing tougher norms for immigrant workers. One of the changes will need immigrants to get a job in which they earn at least the median income to qualify as skilled.

Speaking at the Hero Mindmine Summit here, Sitharaman said India has asked the WTO for a special session to discuss "why trade facilitation in services cannot be formalised".

She was "surprised" that trade in services does not have any global framework despite the fact that "trade in services has a very big chunk" in global trade. The minister said she always protests when movement of skilled professionals is being equated with asylum-seeking migrants.

"... So, this false equivalence which is being brought to manage numbers is just a smokescreen behind which many countries do realise that they are going to have to depend on these services trade," the commerce minister said. She rejected the view of developed countries that Indian professionals are taking away their jobs.

Citing an example, she said the UK charges extra visa fee and uses that money to train their own people. "Increasingly, we are approaching bodies like the WTO to question such practices in the services sector," Sitharaman said, adding that many of the rich countries are framing policies on their "whims and fancies".

This kind of discretionary use of measures to control movement of professional is "hurting them and us also". Asked about demographic dividend, Mohandas Pai, former director of Infosys, said there are "no" demographic dividend in India as crores of youth are unemployed here.

"... we are in the midst of a disaster. But whatever we produce, that is adequate to serve the world because of digitisation," he said.

"India produces a million engineers, of which two lakh are good quality, 2,00,000 can be trained and the balance 60 percent can drive Ola and Uber. I mean they are good for that."

The minister, however, asserted that the remaining lot will not be driving Ola only, they will do better things.

Sitharaman added that the government is taking a lot of steps to impart skills to the youth.

| Edited by: Ashish Yechury
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