US policy wise : Visa, Free Trade and WTO

US policy wise : Visa, Free Trade and WTO

H-1B visa amid the U.S. elections

Note4Students

From UPSC perspective, the following things are important :

Prelims level : H-1B term

Mains level : Paper 2- H-1B visa issue

Trump administration’s two moves on the visa could have implication for both  India and corporate America. It needs to be seen whether the situations will remain the same after the Presidential elections in the U.S.

Context

  • The U.S. President announced a hike in the salaries for those arriving in the U.S. on H-1B or skilled-worker visas.

Implications for India

  • This hike is expected to cut visa applications by around 33%.
  • Trump administration has in its earlier executive actions banned the issuance of new skilled worker visas and new green cards.
  • India’s export of services to the U.S. is estimated to be at $29.6 billion in 2018, 4.9% more than in 2017, and 134% more than 2008 levels.
  • The U.S. has been issuing 85,000 H-1B visas annually, of which 20,000 are given to graduate students and 65,000 to private sector applicants, approximately 70% of which are granted to Indian nationals.
  • The visa issuance ban, combined with the mandatory salary floor soon to be instituted, will seriously hit U.S. imports of services from India.

Criticism of the move

  • A federal judge in the Northern District of California blocked the enforcement of the new visa ban, ruling that the President “exceeded his authority” under the U.S. Constitution.
  • Google CEO hit out at the ban, saying, “Immigration has contributed immensely to America’s economic success, making it a global leader in tech, and also Google the company it is today.”

Consider the question “What makes the H-1B visa important for India? What are the implications of the recent rise in the salary floor by the U.S. for the visa on India?”

Conclusion

While the ban and floor limit on salary come in the election milieu, India should prepare for the after election scenario.

US policy wise : Visa, Free Trade and WTO

Trading with America

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much.

Mains level : Paper 3- Need for India to take a look at its current trade policy.

Context

Trump has made India’s trade headache more acute. But he has also opened up opportunities.

Political polarisation in both countries

  • Impeachment attempt: The Democrats in the US have struggled to oust Trump from the White House and rarely find anything they can agree with their President on.
  • The deeper political divide in India: While ousting Narendra Modi through a legal process of impeachment is not an option in India, the political divide is even deeper.
  • No consensus on foreign policy
    • Under Trump, consensus on foreign policy in Washington has broken down.
    • In Delhi, the Opposition has never been willing to acknowledge the diplomatic successes of the government.
    • But the usually bipartisan support for foreign policy in the strategic community has eroded.
    • Many leading voices of the establishment who have a long and distinguished service have become major critics of foreign policy.

Comparison of India’s trade with the US and China

  • Trade with the US: In 1995, total two-way trade, including goods and services, between India and the US was $11 billion.
    • In 2018, it crossed $140 billion.
    • It is reported to be around $150 billion in 2019.
    • In trade with the US, India enjoys a surplus of nearly $23 billion.
    • A 14-fold increase in trade turnover in 25 years is certainly not something to sneer at.
    • Can India and the US do better on trade? Yes, of course.
    • Only a few years ago, the two sides were looking at an annual trade target of $500 billion. That looks rather ambitious amidst the current disputes
  • Trade with China: India’s China trade too has risen, even more rapidly.
    • From a couple of hundred million dollars in the mid-1990s to nearly $90 billion in 2019.
    • India has a deficit of nearly $57 billion with China.

Trade disputes between India-US

  • Trade has long been a contentious issue between Delhi and Washington.
  • There had been enduring tension since the late 1980s between the US demand for-
    • Greater market access.
    • Intellectual property protection.
    • And a host of other demands and India’s own cautious approach to economic liberalisation.
  • Rise in pressure under Trump administration: All recent US administrations have applied continuous pressure on India for trade agreements.
    • The pressure has significantly risen under President Trump.
  • Trade dispute at the centre of the relationship: If his predecessors were willing to cut some slack for India by citing larger political and strategic considerations in the bilateral ties, Trump has put trade disputes at the front and centre of the relationship.
    • Officials in the Department of Commerce and the US Trade Representative’s office have adopted extremely aggressive tactics in the negotiation with India.
  • Result of a radical reorientation of US trade policy: Trump has undertaken a radical reorientation of US trade policy.
    • For Trump, this is a matter of long-standing ideological conviction as well as a political convenience.
    • He has bet that the anti-free-trade White working classes in the American rust belt are the key to his re-election.
  • No option but to deal with it: Given America’s pole position in the global trading system, you have no option but to deal with it.
    • Trump is getting away with his demand for the restructuring of trade relations with key economic partners.
    • He has renegotiated the NAFTA with neighbours Canada and Mexico and has compelled China to start reducing the massive trade deficit with the US.
  • The difference in India and China’s response to the US: In response to Trump’s pressure, Xi reaffirmed his commitment to economic globalisation and domestic liberalisation and wooed American investors with even greater vigour than before.
    • India embracing protectionism: India appears to be sending the opposite signal — of a definitive drift towards protectionism. India’s trade troubles are certainly not limited to the engagement with the US.

Problem with India’s trade policies

  • India walking away from RCEP: Delhi walked away at the very last minute from signing the RCEP agreement last year to deep disappointment among its partners including the ASEAN, Australia, Japan and New Zealand.
    • The trade deficit with China: One of the main arguments cited by India was the massive trade deficit with China and the potential danger of it widening further under RCEP.
  • Failure in negotiations with the EU: The European Union is reluctant so far to restart trade negotiations that ended in great frustration for Brussels some years ago.
  • No deal with Australia and New Zealand: Australia and New Zealand have given up.
  • Neighbours complaint: India’s immediate neighbours complain that India’s rhetoric on connectivity and regionalism is matched by the multiple non-tariff barriers that continue to constrain commerce across the South Asian frontiers.
  • Why so many deals are pending? It is certainly probable, statistically, one in a million, that the fault lies, always, with India’s partners. But one would think there might be a real problem with Delhi’s own trade policies.

Conclusion

  • New opportunity: Trump has certainly made India’s trade headache more acute. But he has also opened up opportunities.
    • His trade war on China has put pressure on the global supply chains centred around China.
    • India not the beneficiary of the US-China trade war: Many companies are moving their production out of China, but only a few are turning towards India.
    • While Delhi has talked the talk on taking advantage of the US-China trade war, it is yet to get its act together.
  • No opposition against protectionism at home: What makes Delhi’s devaluation of trade as a key instrument of economic growth potentially irreversible is the fact that there is little domestic political opposition to it.
  • Time to take a hard look at trade policy: For now, though, India’s partnership with the US might not only survive the current trade tensions but advance during Trump’s visit.
    • There is so much happening elsewhere in the relationship — especially in the defence and security domain.
    • But the time has come for Delhi to take a hard look at its current trade policy that threatens to undermine India’s regional and international prospects.

 

 

 

 

US policy wise : Visa, Free Trade and WTO

USTR takes India off Developing Country List

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much.

Mains level : Paper 3- Designation of India as developed country by the US and its implications for India-Strategy to counter the impact.

Context

The United States’s annual exercise of designating developing, and least developed countries has assumed importance for India this year: it has been dropped from the list of developing countries.

 ‘Developing’ or ‘developed’ country designation by the US

  • Last week, the United States officially designated developing and least-developed countries for the purposes of implementing the countervailing measures.
    • The division is provided by the Agreement on Subsidies and Countervailing Measures (ASCM) of the World Trade Organisation (WTO).
  • Why the designation matters?
    • The higher level of subsidies allowed: According to the ASCM, developing countries are allowed to grant higher levels of subsidies as compared to the developed countries before countervailing duties (CVD) can be imposed.
    • What are the limits? The maximum limit of the subsidy is-
    • For developed country: Limit is maximum 1% of the import value of the investigated product.
    • For developing country: Limit is a maximum 2% of the import value of the investigated product.
    • If the limit is breached the importing country can impose a countervailing duty on the product.

India as a target by the US

  • Provision of self-designation: Under the WTO rules, any country can “self-designate” itself as a developing country.
  • No criteria specified by the WTO: The WTO does not lay down any specific criteria for making a distinction between a developed and a developing country member, unlike in the World Bank where per capita incomes are used to classify countries.
  • Arbitrary criteria used to designate India: Despite this clearly laid down criterion in the WTO rules, the United States Trade Representative (USTR) employed an arbitrary methodology that took into consideration-
    • Economic, trade, and other factors, including the level of economic development of a country (based on a review of the country’s per capita GNI) and a country’s share of world trade” to exclude India from list of designated developing countries.
  • Second such instance after denying GSP: Excluding India from the lists of developing countries for the purposes of using countervailing measures or denying benefits of GSP are but two of the more recent initiatives that the U.S. has taken to challenge India’s status as a developing country in the WTO.

What would the impact on India?

  • Loss of Special and Differential Treatment (S&DT): India would lose the ability to use the special and differential treatment (S&DT) to which every developing country member of the WTO has a right.
    • What is S&DT? In short, S&DT lessens the burden of adjustment that developing countries have to make while acceding to the various agreements under the WTO.
    • How S&DT benefited India?S&DT has been particularly beneficial for India in two critical areas: one, implementation of the disciplines on agricultural subsidies and, two, opening up the markets for both agricultural and non-agricultural products.
  • Limits on subsidies: The WTO Agreement on Agriculture(AoA) provides an elaborate discipline on subsidies.
    • Subsidies are classified into three categories, but two of these are virtually outside the discipline since the WTO does not limit spending on these categories of subsidies.
    • Limits on price support measures: The discipline exists in case of price support measures (minimum support price) and input subsidies which is the more common form of subsidies for most developing countries, including in India.
    • Limits on spending on prices support measures: For developing countries, spending on price support measures and input subsidies taken together cannot exceed 10% of the total value of agricultural production.
    • In contrast, developed countries are allowed to spend only 5% of their value of agricultural production.

Shifting to DBT

  • Why shifting to DBT necessary? India is a major user of price support measures and input subsidies.
    • And given the constraints imposed by the AoA, the government has spoken about its intention to move into the system of direct benefit transfer (DBT) for supporting farmers.
    • No limit on spending through DBT: A shift to DBT is attractive for India since there are no limits on spending, unlike in case of price support measures and input subsidies.
    • Rework subsidies’ programme: Faced with on-going farm distress, the government has had to rework its subsidies’ programme in order to extend greater benefits, especially to small and marginal farmers.
  • Challenges in the implementation of DBT
    • Implementation of DBT in agriculture has several insurmountable problems.
    • Difficulty in identifying the beneficiary: Targeting potential beneficiaries of DBT seems difficult at this juncture for a number of reasons, including inadequate records of ownership of agricultural land on the one hand, and the presence of agricultural labour and tenants on the other.
    • This implies that in the foreseeable future, India would continue to depend on price support measures and input subsidies.
    • How it matters: Given this scenario, the government needs the policy space to provide adequate levels of subsidies to a crisis-ridden agricultural sector.
    • And therefore it is imperative that continues to enjoy the benefits as a developing country member of the WTO.

Issue of tariffs

  • The issue of market access, or the use of import tariffs, is one of the important trade policy instruments.
  • Provision of no reciprocal tariff cuts: It has some key provisions on S&DT, which the developing countries can benefit from. The most important among these is the undertaking from the developed countries that they would not demand reciprocal tariff cuts.
    • Over the past two years, the government of India has been extensively using import tariffs for protecting Indian businesses from import competition.
    • With the increasing use of tariffs, almost across the board, India’s average tariffs have increased from about 13% in 2017-18 to above 17% at present.
  • Why it matters? Developed country members of the WTO have generally maintained very low levels of tariffs, and, therefore, India’s interests of maintaining a reasonable level of tariff protection would be well served through its continued access to S&DT, by remaining as a developing country member of the WTO.

Conclusion

With the changing stance of the US towards India, the government must ensure its international trade and agriculture at home is not adversely impacted.

 

US policy wise : Visa, Free Trade and WTO

A new approach on investment

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much.

Mains level : Paper 2- Trade deal with the US, issues involved.

Context

When Prime Minister Narendra Modi welcomes U.S. President Donald Trump to India this month the two leaders are expected to sign a first-ever trade agreement.

What will be on the agenda of the trade deal?

  • GSP issues: The restoration of India’s Generalised System of Preferences benefits,
  • Pricing of medical devices.
  • And agriculture trade are all important.
  • Incremental outcomes: If the two sides continue efforts to achieve incremental outcomes, the start of negotiations on a comprehensive free trade agreement (FTA) could even be a credible scenario. Presently, this is not the case.

What could be the incremental outcomes?

  • The most obvious candidates are-
    • Intellectual property rights (IPR).
    • IPR has historically been an area of contention between the two, but discussions on IPR have progressed well in recent years.
    • Digital trade.
    • Both are grappling with the appropriate scope and approach for regulating electronic commerce issues in this digital age.
    • Ideally, there should be room to seriously consider better ways to encourage skilled professionals to work in the other’s economy.
  • Progress on the investment

There are already some shared interests in the area of investment.

  • For example, India invests in the U.S. and continues to seek U.S. investment in India.
  • FDI issue: Foreign direct investment (FDI), this is an important moment to do more to encourage it than simply welcoming it.
  • Need to negotiate o investment: Ideally, the two sides should move ahead to negotiate an agreement on investment matters that can provide greater transparency, predictability, and regulatory certainty to investors from the other country.
  • Negotiation on FDI off the table: It appears that the traditional approach through which countries pursue commitments on FDI, bilateral investment treaties, or ‘BITs’ (bilateral investment treaties) is off the table.
  • The Trump administration has put a hold on negotiating additional BITs and appears to be suspicious of how well they balance U.S. interests.
  • The Indian government is similarly sceptical of BITs, having cancelled all existing ones soon after it came into office.

Need for the new approach on the investment issues

  • Until they resume their work on BITs, the two sides may find common ground in devising a new approach to investment issue.
  • What the new approach involve?
  • Taking cues from their respective FTAs: A starting point should be to review what they have done in their recent FTAs.
  • Abandonment of investor-state dispute settlement: The recently concluded U.S.-Mexico-Canada Agreement contains a novel approach on investment notably its abandonment of investor-state dispute settlement with respect to the U.S. and Canada.
    • Similarly, the Regional Comprehensive Economic Partnership, which India had been negotiating with ASEAN, Australia, China, Japan, Korea, and New Zealand, does not include investor-state dispute settlement.
    • While India chose not to join the Regional Comprehensive Economic Partnership when it was concluded at the end of last year, it appears to have been on board with the FTA’s investment provisions.
  • Where the agreement focus as of now? For now, however, both countries should focus on what is doable. A U.S.-India investment agreement could focus on-
    • Fair treatment for investors from the other country.
    • Regulatory transparency and predictability.
    • And approaches for resolving concerns short of investor-state dispute settlements.
  • At a later stage: At a later stage-
    • Most likely when the two are prepared to negotiate a more comprehensive bilateral FTA, they can go further on investment matters.

Conclusion

A new, hybrid approach on investment would be a substantial step in the right direction. It will be critical to sustaining momentum coming out of a first trade deal when the two leaders meet in Delhi. If India and the U.S. fail this test, the trade relationship is more likely to languish than blossom.

 

US policy wise : Visa, Free Trade and WTO

Global Migration Report 2020

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Global Migration Report 2020

Mains level : Remittances inflows in India


The Global Migration Report 2020 highlighting the international migrants stock was recently released.

Global Migration Report 2020

  • It released by the UN-affiliated International Organization for Migration (IOM).
  • It reiterates the key trend of the International Migrant Stock 2019 dataset released by the UN Population Division in September — of the 272 international migrants worldwide (3.5% of the global population).
  • According to the report, roughly two-thirds of international migrants are labour migrants.
  • Oceania (a geographic region that includes Australasia, Melanesia, Micronesia and Polynesia) is the region with the highest proportion of international migrants.
  • The UAE is the country with the highest proportion of international migrants.

Top destinations

  • The top destination for international migrants is the US where, as of September 2019, there were 50.7 million international migrants.
  • The US is followed by Germany, Saudi Arabia, Russian Federation and the UK.
  • The top migration corridors for Indians are the United Arab Emirates, the US and Saudi Arabia.
  • Conversely, the highest number of migrants entering India comes from Bangladesh.
  • The US is also the top choice for migrants from China.

Indian case

  • India accounts for the highest share with 17.5 million Indians living outside the country
  • India is followed by Mexico (11.8 million) and China (10.7 million).

Remittances inflows

  • Among other details in the new report, the high count of international migrants living abroad also makes India the leading recipient of remittances.
  • International remittances in 2018 (2020 report) reached $689 billion, out of which India received $78.6 billion from the 17.5 million living abroad.
  • India is currently followed by China ($67.4 billion), Mexico ($35.7 billion), Philippines ($33.8 billion), Egypt ($28.9 billion) and France ($26.4 billion).
  • The US was the top remittance-issuer, at $68 billion, followed by the United Arab Emirates ($44.4 billion) and Saudi Arabia ($36.1 billion).

US policy wise : Visa, Free Trade and WTO

International Migrant Stock 2019

Note4Students

From UPSC perspective, the following things are important :

Prelims level : International Migrant Stock 2019

Mains level : Indian diaspora


  • India has emerged as the leading country of origin for immigrants across the world, with 17.5 million international migrants in 2019 coming from India, up from 15.9 million in 2015.

International Migrant Stock 2019

  • The data is released by the UN DESA’s Population Division.
  • Data shows that the number of international migrants in the world had reached an estimated 272 million 2019 — 51 million more than in 2010.
  • The percentage of international migrants of the total global population has increased to 3.5% from 2.8% in 2000.

India at the top

  • While India remained as the top source of international migrants, the number of migrants living in India saw a slight decline from 5.24 million in 2015 to an estimated 5.15 million in 2019 – both 0.4% of the total population of the country.
  • Bangladesh was the leading country of origin for migrants in India.

Global scene

  • In a statement, the UN DESA Population Division said that one-third of all international migrants originated from 10 countries.
  • After India, Mexico ranked second as the country of origin for 12 million migrants, followed by China (11 million), Russia (10 million) and Syria (8 million).
  • The European region hosted the highest number of the immigrants at 82 million in 2019, followed by North America (59 million) and Northern Africa and Western Asia (49 million).
  • Among countries, the U.S. hosts the highest number of international migrants (51 million), about 19% of the global population.
  • Forced displacements continue to rise, with the number of refugees and asylum seekers increased by about 13 million from 2010 to 2017.

US policy wise : Visa, Free Trade and WTO

[op-ed snap] Clouds of war

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Nothing Much

Mains level : Iran Us on brink of war

CONTEXT

U.S. President Donald Trump’s decision to pull back from air strikes on Iran, after the latter shot down an American drone near the Strait of Hormuz, was a rare moment of restraint amid otherwise escalating tensions between the two countries.

Background 

  • The rationale behind the pull-back, according to Mr. Trump, was that he did not want to cause any loss of Iranian lives as no American lives were hurt by the Iranians.
  • Avoiding open conflict – Clearly, Mr. Trump, who had campaigned against the costly wars of the U.S. overseas, does not seem to be in favour of launching an open conflict with Iran.
  • Iran’s Strengths – A war with Iran could be prolonged and disastrous. Iran has ballistic missiles, proxy militias and a relatively vibrant navy.
  • And the Strait of Hormuz, through which one-third of the world’s seaborne oil shipments move, is within its range.
  • Mr. Trump does not want to take a risk unless there are provocations from Iran targeting American lives.
  • Maximum pressure – While this approach is better than that of Mr. Trump’s National Security Adviser, John Bolton, who has threatened Iran with war several times, what the U.S. President overlooks is that the current state of tensions is a product of his “maximum pressure” tactic.
  • A year ago Mr. Trump pulled the U.S. out of a nuclear deal with which Iran was fully compliant, setting off the escalation.
  • His plan was to squeeze the Iranian economy and force Tehran back to the table to renegotiate the nuclear issue as well as Iran’s missile programme and regional activism, for a “better deal”.
  • A year later, the U.S. and Iran are on the brink of a war.

Issues with maximum pressure

  • The problem with Mr. Trump’s “maximum pressure” approach is that he doesn’t seem to have a plan between the sanctions-driven pressure tactics and a potential military conflict.
  • Iran, on the other hand, is ready to take limited risks, as its actions such as the threat to breach the uranium enrichment limits set by the nuclear deal and the downing of the American drone suggest, to break the stranglehold of the sanctions.
  • As a result, Mr. Trump has a situation where maximum pressure is not producing the desired result, and both countries are edging towards a war he doesn’t want.
  • This is a strategic dilemma that warrants a recalibration of policy.
  • Mr. Trump’s decision to call off the strike and the new red line he set for Iran could create an opportunity for such a recalibration.
  • He could seize the moment to assure Iran that his primary goal is engagement, not conflict.

Way Forward

  • What Iran wants the most is relief from the sanctions.
  • Instead of sticking to a policy that has proved to be counter-productive and risky, Mr. Trump could offer Tehran some reprieve in return for its remaining in the nuclear deal, which could be followed up by a fresh diplomatic opening.
  • If he continues with the pressure tactics, tensions will stay high, the Strait of Hormuz would be on the brink, and further provocations by either side, or even an accident, could trigger a full-scale conflict.
  • That is a dangerous slope.
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