Congressional Testimony of Dan Stein, Executive Director, Federation for American Immigration Reform

Submitted For THE TRADE SUBCOMMITTEE OF THE HOUSE WAYS AND MEANS COMMITTEE

Tuesday, June 10, 2003

This statement outlines FAIR’s views on the provision in the Singapore and Chile Free Trade Agreements governing the operation of intra-company personnel transfers. That provision relates to operation of the L-1 visa category.

Summary:The Singapore and Chile Free Trade Agreements (FTAs), if they enter into force, contain provisions that will preclude the adoption of needed legislative changes in the operation of intra-company transfers (L-1 visas) program. The issue at stake is the FTA’s restrictions on correcting abuses in the L-1 visa program. At present, this visa category is being used to sacrifice U.S. jobs to foreign workers. The abuse has been growing, and it has contributed to a record level of unemployment for U.S. high-tech workers. FAIR considers that this provision of the FTAs is so harmful that Congress should reject the Singapore and any other FTA with similar provisions and require the Administration to renegotiate them to retain flexibility for Congress to amend the law to protect U.S. jobs from this abuse.

Background On The L-1 Visa Program

The intra-company transfer provision of the immigration law is a long-standing visa category designed to allow trans-national firms, whether U.S. or foreign, with operations both in the United States and abroad to exchange personnel on a temporary basis. The primary impetus for the program was to allow for the mobility of management personnel, but the program also provides for personnel with “specialized knowledge” of the company’s operations. Visas issued under this category are valid for seven years for management and supervisory personnel and for five years for technical staff.

The number of these L-1 visas issued has been steeply rising in recent years. During the late 1980s and early 1990s, the number of visas was between 60-70,000 per year. Then during the 1990s, the number of visas began to surge: 1992 — 75,315; 1994 — 98,189; 1996 — 140,457; 1998 — 203,255; 2000 — 294,658. In 2001, the last year for which the INS (now DHS) has released statistics, the number of L-1 visas issued was 328,480. This meteoric rise in L-1 visa issuance highlights the fact thatat present there is no limit on the number of these visas that can be issued in a given year.

Increasingly, according to news accounts, (see “Special Visa’s Use for Tech Workers is Challenged,” New York Times, May 29, 2003) the intra-company transfer L-1 visa is being used to bring high-tech workers to do U.S. jobs similar to the temporary worker H-1B visa program that currently is capped at 195,000 visas per year. However, unlike the H-1B visa, the L-1 visa does not require that the employer pay the worker in the U.S. the prevailing wage for the type of work being performed. That means that a subsidiary of a company headquartered in India, for example, can transfer its employees who are computer programmers to a subsidiary incorporated in the United States and continue to pay the workers Indian wage rates while they may be doing subcontract work for a U.S. company, such as Intel. Thus the Indian subcontractor can underbid a competitor paying prevailing wages, and Intel can lay off higher paid U.S. computer programmers.

Another difference between the H-1B visa program and the L-1 visa program is that reforms adopted in 2000 provided that companies that are “H-1B dependant,” i.e., that have a significant share of their total workforce composed of these foreign temporary workers, must make attestations that they have attempted to hire U.S. workers and that they had not and would not lay off any American workers in the near term to replace them with foreign workers. This provision was estimated to apply to only about 50 employers in the country. Even this minimal protection for U.S. workers is absent from the L-1 visa program.

Because of the growing size of the L-1 visa program and the growing use of it to take the jobs of U.S. workers, who often have been required by their employers to train their foreign replacements, and because of the fraud in the program noted by the General Accounting Office three years ago, Rep. John Mica has introduced legislation (H.R. 2154) to reform the L-1 visa program. Other members, such as Rep. Peter DeFazio, have also publicly expressed their concern with regard to the operation of the visa program.

Effect Of The Singapore And Chile Free Trade Agreements

On May 6, 2003, President Bush signed the Singapore FTA as an executive agreement. As it is not a treaty, it does not require Senate ratification and will go into effect unless Congress initiates action disapproving the agreement. The Singapore FTA currently before this body for its consideration contains provisions that relate to both the H-1B temporary worker visa program and the L-1 intra-company transfer visa program. We have been told that the Chile FTA which has been negotiated and is due to be signed this month, includes similar provisions. Annex 11A, Section III (2) of the Singapore FTA (dealing with Intra-Company Transferees) states as follows:

• A Party shall not:
  • (a) as a condition for temporary entry under paragraph 1, require labor certification tests or other procedures of similar effect; or
  • (b) impose or maintain any numerical restriction relating to temporary entry under paragraph 1.

This section has the effect of diminishing the ability of Congress to abolish or significantly restrict the program, if it should decide to do so because the L-1 visa program creates unfair competition for U.S. workers. Specifically, the agreement language precludes the adoption of a labor market test as to whether U.S. workers with similar qualifications are available to fill the job, and it bans the adoption of any numerical limit on the program, such as the one for the H-1B visa program. A provision similar to the restriction on amending the L-1 program is contained in Annex 1603 of the NAFTA agreement. It seems clear that unless Congress acts to oppose this restriction on its ability to amend these programs to protect U.S. jobs, U.S. trade negotiators will agree to an unending stream of similar restrictions on Congressional legislative action.

Although the FTA applies only to operations between Singapore and the United States, the existence of this permanent freezing of the current harmful provisions of the L-1 visa represents a major obstacle to efforts to reform the visa program. Foreign companies could easily establish a subsidiary in Singapore ? or in Chile, or in Central America, where current negotiations may result in a similar agreements ? to make use of the provision even if Congress were to decide change the visa program by, for example, establishing a numerical limit, or including a labor certification test to assure that the program not be used to replace U.S. workers.

In contrast to the effect of the FTA in locking into place the current no-holds-barred provisions for the L-1 visa program, the Administration carefully provided for the ability of Congress to tighten protections for U.S. workers from the operation of the H-1B visa program. By an exchange of letters dated May 6, 2003, the U.S. notified Singapore that, “The United States intends to require all business persons seeking entry as professionals to the United States under the terms of the Agreement to present an attestation of compliance with certain labor and immigration laws from an employer in the United States.”

Fair’s Position

FAIR strongly believes that the L-1 visa program needs to be significantly amended along lines that are specifically proscribed by the Singapore FTA ? and the Chile FTA, as we understand it. It, therefore, would constitute a hindrance to that reform effort for the Congress to accede to the Singapore FTA as it is currently written. Accordingly, FAIR requests that this committee act to deny accession to the Singapore FTA and to instruct the Administration to renegotiate the portion of the agreement concerning intra-company transfers or simply to delete that section.