The United States has ruled out signing a Totalization Agreement with India for now, despite an intensive push by the Indian government and the country’s information technology sector in that direction.
These agreements are signed by the US government for avoiding double taxation of income on social security taxes. These agreements must be taken into account when determining whether any alien is subject to US social security/medicare tax.
In an interview via email to Business Standard, US trade representative Ron Kirk said the US was permitted to enter into totalization agreements only with countries that met certain objective statutory conditions. This was not the case with India.
An agreement would enable Indian professionals working in the US to benefit from their contributions to American social security programmes even if they return to India after working for fewer than 10 years in the US, the case for several Indians who go to the US on H1B visas.
After his meeting with Kirk here on Thursday, Indian commerce minister Anand Sharma had told Business Standard he’d pressed for a totalization agreement, noting both India and the US had similar agreements with several European nations, and should be able to work out an agreement with each other as well.
However Kirk said, “We look forward to changes in India’s social welfare regime that could form the basis of further discussions. Until then, however, the United States will not be in a position to negotiate a totalization agreement with India.”
On complaints about the higher rate of rejection of H1B and L1 visa seekers from India this year, Kirk said the state department (the American foreign ministry) was responsible for consular affairs. Adding: “I appreciate that this is of serious concern to many in India but I know that our consular officers in India have been working harder than ever to review a record number of visa applications so that qualified applicants can enter the United States.”
Other irritants
The USTR’s office noted after the latest meeting between Sharma and Kirk that the value of trade in goods between the two countries had increased over threefold in the past decade. However, several irritants remained, including the old complaint from the Obama administration about restrictions faced by American solar energy firms trying to do business in India.
On that issue, Kirk suggested India might be breaching World Trade Organisation (WTO) rules. “We continue to have serious concerns about the local content requirements under India’s National Solar Mission, including with respect to their compatibility with WTO rules,” he said. “We are particularly disappointed that India recently chose to expand the scope of those requirements for Phase-1, Batch-2. We look forward to working constructively with India in its Phase-2 guidelines to ensure it can meet its clean energy objectives in a manner that does not discriminate against imports.”
Asked about expectations from the US administration and business groups for India to open its multi-brand retail sector to foreign direct investment, Kirk said, “We share the hopes of several Indian ministers that a favourable policy can be announced in short order.”
Sharma had told Business Standard on Thursday that this issue would have to take a back seat to the New Manufacturing Policy, his top priority at this time.
Kirk did not demonstrate much optimism for quick progress on multilateral trade talks, either. There is, clearly, considerable distance between the Indian and American positions on reviving the deadlocked Doha Round of WTO talks. India contends there is enough on the table for developed and developing countries to take a staggered approach and work out a series of smaller agreements. Kirk disagreed, saying there were obstacles to reaching agreements even on smaller issues.
“The United States worked very hard with WTO members, including India, over the past six months, trying to reach outcomes on Doha, including some type of small package outcome. But divergent views on all issues under discussion have continued to inhibit a positive outcome,” Kirk said. He called for WTO members to recognise that “business as usual is not working, and have an active, structured consideration of next steps” leading up to the December Ministerial meeting.
Kirk and Sharma are scheduled to co-chair the next round of the India-US Trade Policy Forum next January. A USTR statement after their meeting here noted the TPF is the primary bilateral mechanism for addressing trade and investment issues, playing a critical role in promoting trade and investment flows to higher levels that better reflected the importance of the bilateral economic partnership.
