Services industry coalition trying, without success, to change view in congress

Original Publication Date: 
30 September, 2005

Immigration, an issue of well-documented political toxicity within the United States, is now also complicating efforts to strike a deal in the Doha Round of multilateral trade negotiations. Negotiators in Geneva are racing against a December deadline to reach an agreement in principle on cutting farm supports and opening markets to more merchandise trade. But their progress could be stymied by congressional opposition to raising the number of foreign professionals and skilled service workers allowed to temporarily enter the United States to work.Stonewalled by Washington on this issue, some developing countries, which desperately want the foreign currency sent home by their skilled workers living abroad, are resisting opening their markets to American service providers, such as banks, insurance companies, and tourist agencies. "Sectors like financial and express delivery services will pay because of our intransigence on temporary entry," said Robert Vastine, president of the Coalition of Service Industries, a group of U.S. businesses that wants to reduce barriers to U.S. services exports.More important, this impasse over the movement of temporary workers has become an impediment to concluding the broader Doha negotiation. Without offers from the developing world to open their domestic markets to U.S. and European service providers, the European Union is reluctant to offer cuts in its agricultural subsidies; that in turn means that the United States is reluctant to make similar farm concessions, and thus the current Doha stalemate goes on.To break this deadlock, many experts say, the United States needs to put a serious offer on the negotiating table in Geneva to ease the temporary entry of skilled service workers. But such a move is now opposed by Rep. Jim Sensenbrenner, R-Wis., chairman of the House Judiciary Committee, and others in Congress who worry that such proposals are a backdoor effort to reform immigration and could make it easier for terrorists to enter the country. Also, a U.S. offer would probably meet opposition from some labor-oriented Democrats, who fret that greater immigration, even of a temporary nature, would further undermine already-stagnating American wages.To overcome such fears, U.S. Trade Representative Rob Portman would probably have to condition any eased access to the United States for skilled workers on greater cooperation on migration issues by the sending countries. And he would need to link the additional number of temporary workers permitted entry each year to the state of the U.S. economy. If the economy here is healthy, more temporary workers could come in; if not, fewer would be allowed entry.Without such conditionality -- which would offer opponents of temporary migration new safeguards they have long sought -- the impasse over the movement of service workers could torpedo the Doha Round.Currently, no international rules regulate labor migration. Most nations set their own rules, using programs like the U.S. H-1B visa for professionals with specialty occupations.The General Agreement on Trade in Services, ratified by Congress in 1994 as part of the implementing legislation for the Uruguay Round of multilateral trade negotiations, did, however, establish a framework for developing rules for the international trade in services, including labor. But little progress has been made in actually liberalizing the trade in services, especially in the temporary movement of people. Doha Round efforts to address this unfinished business have been blocked by the conflicting objectives of rich and poor countries.American and European multinational businesses have long sought to ease the temporary cross-border movement of specialists, technicians, and corporate managers. They complain that obtaining approval for an intracorporate transfer, a business visit, or an assignment overseas often proves cumbersome, arbitrary, and time-consuming.Advanced developing nations, such as India and Brazil, also support the easing of constraints on the movement of skilled personnel. They hope to earn valued foreign exchange by exporting their computer technicians and scientists to America and Europe, where they'll earn good wages and send money back home. Moreover, they hope that Intel or General Motors, for example, will be more likely to invest in their countries if such multinational firms can move their managers about more freely.But Delhi and other foreign capitals seek a broader definition of "skilled personnel" than that envisioned in Brussels and Washington. And some poorer nations still hope for an easing of restrictions against the movement of unskilled personnel, too, for work such as construction; for Pakistan, Bangladesh, and others, unskilled labor may be the only service they can export advantageously.Such nations are adamant about obtaining concessions on temporary migration, because they believe that the stakes are high. "The greatest demonstrable gains to developing nations from relaxing restrictions in the world economy today lie in the liberalization of temporary-labor flows," according to Dani Rodrik, a professor of international political economy at Harvard University's John F. Kennedy School of Government. Even a relatively small program of temporary work visas in the rich countries could generate income gains for workers from poor countries that exceed all of the other gains they could make from all of the other Doha proposals on agriculture, industry, and services put together, he said. "A temporary work-visa scheme that amounts to no more than 3 percent of the rich countries' labor force would easily yield $200 billion annually for the citizens of developing nations," Rodrik added.Pascal Kerneis, managing director of the European Services Forum, a trade association of European services companies, retorts, "This is absolute nonsense." Kerneis contends that such estimates irresponsibly confuse the benefits to be derived from general migration of all types of labor with the much more limited labor movements envisioned in the Doha Round negotiations. Talk of hundreds of billions of dollars in potential remittances that would be sent to developing countries from their workers abroad raises unrealistic expectations in poor countries and unnecessary fears in rich ones, Kerneis said.Vastine agreed. "We have to be very clear," he said. "Temporary entry does not include gangs of construction workers. It is temporary entry of key personnel, managers, consultants, lawyers."Complicating the issue is congressional insistence that changes in U.S. immigration policy are a Capitol Hill prerogative. "The inclusion of immigration matters in bilateral or multilateral trade agreements undermines congressional authority to exercise its exclusive authority over this subject," Sensenbrenner wrote in a letter to Portman in May.The fears fueling this assertion of congressional sovereignty -- that trade deals will be used as a backdoor way of opening U.S. borders to terrorists and other illegal immigrants -- are ill-founded, the business community contends. But so far, their arguments have fallen on deaf ears.As a result, the Doha negotiations are at a standstill. Wary of Capitol Hill opposition, and not convinced that labor mobility is a linchpin issue in the negotiations, the Bush administration touts existing migrant-worker programs, saying that they rank the U.S. "among the most generous of all WTO members." But it has offered nothing new in Geneva.In contrast, the European Union has recently put forward a revised offer that, while containing many exclusions, would permit the entry of foreign service workers in a wide range of occupations for six months to a year. The revised E.U. offer would also allow some self-employed service suppliers -- such as lawyers -- temporary entry into the European Union."We can't expect other countries to create the business opportunities for our services sector unless we take a more liberal attitude toward the movement of people," said Peter Mandelson, the E.U. trade minister.India has been pushing for the freer movement of independent professionals -- doctors and information-technology specialists, for example -- workers that Delhi has in great supply. Moreover, India has called for broadening the scope of occupational categories covered by any Doha deal to include middle- and lower-level professionals, a refinement supported by many other developing countries that see their comparative advantage lying at the lower end of the skills spectrum.Both the European and American business communities are saying that the Indians are now playing a much more constructive role in the talks. The U.S. and India agreed in late September to co-chair a special group to boost the services negotiations.To address Congress's security and economic concerns about more migration, Aaditya Mattoo, an economist at the World Bank, has proposed that new agreements on labor mobility be conditioned on the sending countries' making specific commitments to better screen temporary migrants, to facilitate migrants' return when their visas expire, and to improve efforts to curb illegal immigration.Mattoo has also suggested calibrating the entry of new skilled migrants to the health of the economy. Germany, for example, already has an agreement with some Eastern European countries under which the German quota on temporary migrants increases or decreases by 5 percent for every 1-percentage-point change in the German unemployment rate. It is an admittedly crude tool, but it addresses some economic fears. And such a condition would be compatible with WTO rules as long as it applied to all nations.Few expect the Bush administration to make a proposal on temporary labor migration this fall. Any U.S. offer would most likely be an endgame concession made next year, if the Doha Round is nearing a final deal, and would be limited to what is necessary to conclude the negotiations successfully. But if Congress is to go along, the political groundwork for such an initiative must begin now. And it is likely to require making more-open borders conditional on greater foreign cooperation in controlling illegal immigration and in adapting to changes in the U.S. economy.Migration of temporary workers is an issue U.S. trade negotiators can no longer ignore.