India is pushing for a work programme on services that will draw elements from the country’s own proposal on trade facilitation in services at the 11th ministerial conference of the World Trade Organization (WTO) that started on Sunday. At a time when the developed world is turning more protectionist in services trade, India has pitched for a smooth movement of working professionals across nations (Mode 4 services), an exemption to companies of a country from mandatory payments for social security in another (through totalisation agreements) and cross-border insurance coverage for health-related services, among others. The country is drumming up support from African nations and other developing countries, especially on Mode 4 services. While South Africa is opposed to data flow, India has reservation on certain aspects of cross-border investment proposals pitched for by some developed nations. Some countries, particularly the US, are not keen on endorsing totalisation agreements.
In its legal text on a trade facilitation agreement on services (TFS) submitted with the WTO earlier, India wanted each member to put in place “adequate mechanisms for separate categories of visas that correspond to each category of natural person in respect of which commitments are taken”. WTO members must also develop “a scheme for a GATS (general agreement on trade in services) visa applicable for categories of natural persons committed in their schedule of specific commitments”. India’s submission of the text for circulation among members for wider consultations was its first decisive step to gather a global consensus on a framework in services trade, akin to an existing one on goods.
India’s proposals reflect some of the major challenges its own service providers, mainly the IT industry, have been facing in recent years in countries like the US and the UK. Analysts say India’s TFS proposals may invite resistance at the WTO from developed countries, especially the US, given the Trump administration’s belligerent stance on visas for foreign workers. Already, Indian information technology companies saw a 37% drop in approved petitions for H-1B visas in 2016 from a year earlier, according to a report by the National Foundation for American Policy — a Washington-based think-tank — earlier this year.
On totalisation, foreign service providers are mandated to contribute towards social security purposes in the US, but do not get any tax credits in home country. Consequently, they land up paying double taxes, which be avoided only by entering into totalisation pacts with the US, and others, if any.
India is keen on services trade, as they account for over 60% of its economy. The country is the world’s eighth-largest commercial service exporter, making up for 3.4% of such exports globally, double its share of 1.7% in merchandise exports.
While services account for over 60% of global production and employment, they represent no more than 20% of total trade, according to an earlier WTO estimate. But this — seemingly modest — share should not be underestimated, as many services, which have long been considered genuine domestic activities, have increasingly become internationally mobile. This leaves a huge scope for countries to boost services trade if processing governing such exports and imports are made much smoother.
Travel for these reports was sponsored by the commerce ministry