India may drag US to WTO for raising visa fee.

India is considering dragging the US to the World Trade Organization (WTO) for increasing the fees of some visas, a move that will hurt information technology (IT) firms such as Tata Consultancy Services Ltd (TCS), Infosys Technologies Ltd and Wipro Ltd.

“There is no doubt that the new law is in violation of the WTO rules. Now that it (the Bill) has become law, we will decide our next course of action,” India’s commerce secretary Rahul Khullar said, adding that the options include taking the US to the WTO. “We are deeply disheartened and very disappointed. The US cannot pass a law which clearly hurts India’s interests and then realistically expect us to accommodate their commercial interests,” he said.

On Friday, President Barack Obama signed the controversial proposal to fund increased border security expenses by charging companies hiring from abroad, after it got the approval of the US Congress.

Fees for H-1B and L category visas for firms that hire more than half their workers from abroad will be increased as a result, hurting several Indian IT firms. Commerce minister Anand Sharma has already protested against the “highly discriminatory” move in a letter to US trade representative Ron Kirk.

The visa fee hike will harm the competitiveness and commercial interests of Indian companies in the US, Sharma wrote in the 10 August letter. “Though the need of the US government to strengthen their border security is understandable, it is inexplicable to our companies to bear the cost of such a highly discriminatory law.”

Anwarul Hoda, professor at the Indian Council for Research on International Economic Relations and and an expert on WTO, also called the law protectionist. “However, we need to study it in detail to see whether it is compatible with the WTO commitments of the US or not.”

The US decision flies in the face of its own data that shows the IT sector has been the only net creator of jobs in the world’s biggest economy over the past year. According to the US Bureau of Labor Statistics, computer system design, management and technology consulting firms created a net 31,000 jobs in the US between June 2009 and June 2010. Sectors such as construction, manufacturing, retail and financial activities saw a net job loss of 602,000. Construction alone accounted for 376,000, or more than half the job losses.

While the professional and technology services sector saw net job losses of 59,000, it also added 5,000 jobs in the last month of this period.

The border security law proposes an investment of $600 million (Rs2,808 crore) to strengthen security along the US border with Mexico. The move will be funded by raising the fees for H1B and L category visas, which currently cost $3,320, by $2,000.

This will mean an additional expense of more than $250 million a year for Indian IT companies operating in the US, such as TCS, Infosys and Wipro.

Only a fraction of these visas are allotted to Indian firms. Out of the 65,000 H-1B visas issued every year, the maximum ever issued to Indian firms has been 12%. Yet, they are likely to suffer as the change in rules targets companies that hire more than half their staff on these visa categories.

Som Mittal, president of the Indian IT lobby Nasscom, said the new law is discriminatory and in violation of WTO rules.

The legislation comes ahead of an India-US trade policy forum meeting in September and Obama’s scheduled November visit to India.

The commerce ministry is also disappointed by the foreign ministry’s inaction over the issue.

“Foreign policy cannot be devoid of economic content,” said a commerce ministry official, requesting anonymity. “If action by another country clearly targets our commercial interest, how can there be no policy response?”

The ministry of external affairs did not comment on the issue.

India took the European Union and the Netherlands to WTO in May over the seizure of Indian generic drugs at European ports. Currently, both sides are going through the process of consultation, the first step in a formal dispute. The first round of consultation has been completed without any breakthrough.

Source : livemint.com