Centre examines option of dragging US to WTO on social security issue

Unable to persuade the US to sign a bilateral social security agreement that could save Indian IT firms operating in the country an estimated $4 billion every year, the Centre is exploring the option of dragging it to the World Trade Organisation on the matter.

The Commerce Ministry recently held a meeting to discuss whether the US has violated it obligation under the General Agreement on Trade in Services (GATS) when it makes Indian employees pay for social security that they can’t benefit from because of the existing work visa rules.

The Ministry was examining if it could build a strong case that would be worth fighting.

“It is unfortunate that we have not been able to persuade the US to sign a totalisation agreement with us so that our IT company employees don’t have to make deposits for a service they don’t use. Since it results in almost a $4-billion loss for our IT companies annually, we are trying to see if we can make a case of discrimination at the WTO,” a Commerce Ministry official told BusinessLine .

India, however, will continue to take up the matter at the bilateral level as well. The totalisation issue, coupled with the issue of increased visa fees for professionals, will be the priority item on Prime Minister Narendra Modi’s agenda during his scheduled meeting to the country next month.

New Delhi believes Indian IT professionals are being discriminated against their counterparts from other countries, with which the US has totalisation pacts and don’t have to make the compulsory payments. “We believe it is discrimination if you don’t have the option of getting the money back, but are made to pay,” the official said.

For years, India has been trying to negotiate a social security pact to exempt Indian workers on H-1B visa from contributing to social security as they are not eligible for refunds. According to US laws, social security refund can be claimed by foreign workers after 10 years of service, whereas the H-1B visas are given for only six years.

Late last year, the US had declined to sign a social security pact with India on the grounds that it did not meet the legislative requirement of having at least half its population under social security cover. It refused to recognise schemes such as Atal Pension Yojana and Rashtriya Swasthya Bima Yojana as these are not mandatory.

“It will not be a very easy case for India to fight a case as it involves a whole muck of domestic regulations that are not defined very well at the WTO. But, a good argument could be that a country can’t create conditions that affect free movement of labour and makes them give up the possibility of coming to the US as such payments make pay packages unattractive,” pointed out Biswajit Dhar, Professor, JNU.

(With inputs from Nayanima Basu)

COMMENT NOW