India's premier outsourcing outfits are facing serious political heat in the U.S. over concerns that they are using the temporary and coveted temporary work visas (known as H-IBs) to replace U.S. employees with foreign workers and paying them below-market wages to undercut U.S. competitiveness. Led by giants such as Infosys (INFY) and Wipro (WIP), these Indian companies use a sizable number of the 65,000 visas allowed each year.
On May 14, U.S. Senators Chuck Grassley (R-Iowa) and Richard Durbin (D-Ill.) sent letters to nine foreign outsourcing companies, asking for detailed information on how they use temporary work visas to bring foreign workers into the U.S. Indian Commerce & Industry Minister Kamal Nath discussed the controversy and the outlook for the Doha round of global trade talks with BusinessWeek.com's Nandini Lakshman. Here are edited excerpts:
Do you think Indian IT companies are misusing the H-1B visas?
We have no information of any misuse by Indian companies. Had there been any, surely the efficient US system would have found the violators. Some time back, there were media reports of some misuse; however, none of them was an Indian company. We are certainly against any misuse.
How serious is this issue for the Indian government?
This is a serious issue, because it affects trade at a time when all the countries are trying to move WTO trade talks forward in a positive manner. At a time like this, signals about the creation of non-tariff barriers send a negative message to negotiators.
In the absence of any other more appropriate category, it is the H-1B visa that is used by service providers in the IT industry to deliver services (often necessitating temporary movement of people for short periods) required by their customers as part of a contract. Restrictions on such movement through artificial caps are certainly a non-tariff barrier to trade.
Since IT services is India's large export sector, this is a matter of considerable concern to the Indian government, and could be a potential roadblock in the trade talks. Moreover, this really should be an important issue between U.S. business and Congress and the U.S. administration.
In what way will these statements by U.S. Senators affect the future of WTO negotiations?
Such statements by responsible U.S. policy makers certainly impact the climate for negotiations because of uncertainties and lack of future predictability. However, I am confident that this will be resolved quickly.
I understand that there are bills in the U.S. Congress to raise the cap on the H-1B visa. This is as important to U.S. companies, which are facing a shortage of tech talent, as it is to Indian IT companies. I am, therefore, hopeful that we will see an early solution.
What kind of breakthrough are you looking at in the service negotiations?
We have to match the breakthrough in services with the breakthrough in other areas. This is very important. That's why we have been talking of receiving 'bankable' commitments in the various services areas of our interest, at the time of the breakthrough. We have made it clear that for India, a breakthrough in services will have to include significant movement from important markets in the areas of our export interest.
Equally important for us is the issue of Domestic Regulations in Services, as such regulations have an obvious impact on market access. Strong disciplines in areas such as qualification requirements and procedures are essential to the market access that is being committed. A good package on domestic regulations is therefore an integral part of the breakthrough for India.
The U.S Congress is considering reworking U.S. immigration policy. Do you worry that the outsourcing sector could be hurt?
The H-1B visa issue is a trade matter and is not related to the immigration issue. It is a means of fulfilling a trade contract that sometimes requires the temporary movement of people. I do not see any pressure on the outsourcing sector. Just as Indian companies need to send people temporarily to the U.S. to execute contracts, the U.S. companies too need tech manpower, which is in short supply in the U.S.
Without the availability of such talent, their growth and competitiveness in the global market will be affected. A combination of outsourcing work and moving people will be needed. To the extent that there is a trade-off between the two, it is for each company and each country to decide what is the optimum point. However, these decisions must be made without erecting barriers to trade.
We in India have opened up our markets in a big way. Many large contracts from the Indian government have been awarded to US IT companies, despite the availability of local alternatives. Our industry has gone through a painful adjustment, as have Indian workers. In this context, globalization cannot be a one-way street.
What is the way out of this? Aren't most of the Indian IT companies hiring locals in the U.S. and other foreign markets?
Indian companies are hiring local nationals in all the countries that they operate in, and the trend is growing. In fact, many foreign nationals are being recruited to work in India, too, since they prefer that.
Already, in Britain, India is the second biggest overseas investor, creating many thousands of new jobs. In this, the IT industry has been a major player. I do not doubt that we will see the same in the U.S., with Indian companies investing increasing amounts and creating local jobs. They have already begun to do so.
In addition, the H-1B visa holders who come on purely temporary assignments pay Social Security tax in the U.S., even though they are not eligible to receive any benefits for 10 years (by when their visa has long expired).
Would you term this as protectionism by U.S. lawmakers?
Protectionist tendencies are certainly worrisome at a time when we are trying to move towards a more open regime of global trade. We in India have opened up our economy. Even though we have gone through some pains, we have seen the overall benefits to the economy and to the people. We are, therefore, staying the course.
We do hope that those who set us on this path of globalization do not themselves reverse direction. Trade not only creates mutual prosperity, it also develops partnerships and links at all levels, with growing degrees of interdependency and trust.
Nothing can be more important in the world of today than this. Isolation and protectionism, on the other hand, have implications beyond trade with negative worldwide repercussions. I am sure that the U.S., as the economic powerhouse of the world, is conscious of these factors, besides the more obvious economic truisms about the benefits of free trade.