WTO should not be the first response

Last week the U.S. Congress passed a border security bill that plans to generate funds by hiking H1-B and L-1 visa fee by $2000 per application per person. This would help fund the $600 million emergency fund for securing the U.S. border, particular with Mexico. (See David’s post for details.)

Though it is not explicitly directed towards Indian IT companies, they would be one of the worst affected by the provision. Losses could run into millions of dollars for the bigger companies such as Infosys and TCS. The Indian side has retaliated by threatening to go to the World Trade Organization (WTO) in protest against the protectionist move by the U.S. I, have a problem with that.

I sincerely believe that it is too soon for the move. The Indian side should first talk to the US and exhaust all bilateral avenues before going the WTO route. The proper way to go about it would be to sit down, analyze and draw up a plan of action in conjunction with the Indian companies that would be affected by the move. It is their business and their money that will be lost, and they are therefore one of the most important stakeholders in the issue. The government needs to be more of a facilitator. The effects on other aspects of bilateral trade and bilateral relations with the U.S. should be carefully analyzed before taking any aggressive measures. The Indian side should have a serious conversation with the U.S. and persuade it to change the provision. If talks fail, then taking the U.S. to the WTO would be an option.

An important question that the Indian side needs to ask itself is, “Can the WTO really change things?” Or would it simply ask the U.S. to pay up a fine and consider the matter closed. Organizations such as these are good for pressuring smaller countries with lesser clout. But would it really matter to the U.S. if it was taken to the WTO for being protectionist? Even if the WTO were to ask the U.S. to change its provision, would the U.S. do it?

Another thing that puzzles me is the motive behind this desire to go to the WTO. Is it serious indignation and protest, or simply symbolism that the Indian government is interested in? As mentioned earlier, taking the U.S. to the WTO cannot be realistically expected to produce any significant effect. So then, is the Indian government trying to show the world that it is not afraid to stand up against the U.S.? Or is it putting up the show for its domestic U.S.-hating/doubting allies who accuse it of being dependent upon and dictated by the U.S.?

I am all for standing up against the protectionist attitude of the U.S.; but not at the cost of damaging diplomatic relations and goodwill. National interest comes first, and business, the kind that Indian IT companies generate, is a big part of it. But any protest registered against the U.S. should be carefully planned for maximum effect and minimum damage to Indian interest. It should be remembered that the U.S., even with its economic recession, can afford to ignore Indian protests. India can hope to affect U.S. decisions by wielding the bilateral business/trade card, but the mutual dependence factor with a comparatively weaker Indian side should not be overlooked.

The U.S. decision to hike H1-B visa fees is protectionist, punishes the wrong people for generating profitable business, and will most likely do more damage to U.S. jobs and move them out of the country than the outsourcing haters would like to believe. Yet, it is still not the right time for India to approach the WTO against the U.S.