Impact of Trump Administration Policies on TN Visa?
Date Published – 16 Jan 2017
Recent News Related to NAFTA :
Prediction: More than 100,000 Canadians have been living in the United States on the “TN Visa” immigration category visa. Even if NAFTA treaty is extended after significant modifications, major tightening of TN Visa issue, renewal and vetting process is in the offing. Immigration Hardliners have rarely spoken openly about TN Visa, however, in closed circles, have complained about misuse of TN visa by US employers. In other circles, there has been similar discussions on the E-3s (Australian) and H-1B1s (Singaporean or Chilean) free trade agreement visas. Some of these immigration hardliners from CIS (Center for Immigration Studies) are now advising DHS and USCIS in various consulting roles. It is a foregone conclusion that TN visa will either be fully revoked or it will become harder and harder to get work authorization for various roles in the United States. The mobility of temporary sales or after sales service teams will most probably stay intact. In our consulting work across the border, we are already hearing from healthcare providers in the United States that they are receiving increased RFE’s (Request for Evidence) for all alien visa issue including salary benchmark disparity, documented effort to hire American workers and multiple other queries.
Why are we Tracking TN Visa developments?
Utilizing “Hyperforecasting” to generate predictive forecasts, we are tracking everything under legal and immigration changes in the United States which have the potential to impact the economy of expat home countries as well as host nations. As a small consulting firm that punches above its weight in the forecasting and prediction industry, we are working with some clients who want to develop advanced strategies for diligent investing decisions. First some lawyer lingo, I am not a lawyer, I interpret laws, rules, developments as everyone else does. Unless you have retained our firm or me personally for providing professional advice around the services areas we specialize in, we are not providing professional advice in a public forum and please read this and take actions at your own risk.
On the above basis, if you want to hear my opinion being aware that this is not legal advice or professional advice, then, there is a 90% chance (see predictive range chart) that significant changes will be made to TN Visa stifling labor mobility. Barring an impeachment or a catastrophic world event, the above prediction is on track.
This post is an extract of the article “ Trump Uncertainty Principle – Impact on Guest Worker Programs“. TN visas are issued under the NAFTA agreement. NAFTA is not an employment treaty, but a trade treaty which also allows free movement of professionals across the borders. This could change soon. Even if TN visa is not canceled, the changes made to the TN visa through executive orders leave this visa category vulnerable to significant scrutiny. Canadians were granted exemption from the requiring of applying for the visa at a consulate through an Executive Order. USCIS also did not add additional rules through the federal rulemaking process, such as the minimum salary threshold, employer sponsorship, and labor market assessment prior creating the rules around TN Visa issuance. While TN visa cancellation requires cancellation of NAFTA through the congressional majority, ramping up the pre-requisite conditions for the visa issuance only needs a signed Executive Order. If Canadian Oil is a trump card in Canada’s NAFTA discussions with Trump Administration, TN Visa is a trump card that will be used by our southern neighbors at the first available opportunity. As reported in CBC, our negotiators have already experienced an aversion from the American side around any discussions on the NAFTA Professional Visa and Labour Mobility discussions.
Under the recently announced NAFTA preferences, Canada wants the cross-border movement of professionals eased. However, Trump administration is filled with immigration hardliners who are working behind the scenes to bottleneck the flow of foreign guest workers under all categories to the United States. Multiple court cases targeting H4 EAD (Spouse Visa), OPT and STEM OPT (Graduate Work Visas) and Entrepreneur Visas are making their way through the US courts. The premise and common denominator behind these court cases are that congressional caps on work visa authorization have been bypassed using various schemes like H4-EAD. TN Visas, OPT/STEM OPT, H1/L1 Visas. The hardliners want to shut down all these peripheral bypass roads to work authorization in the United States for Aliens. We have been unable to find any valid congressional or legislative authorization for TN Visas except for pre-sales and after-sales activities. It seems that the previous American administration expanded the use of TN visas using”Comment and Rule Making” process. Across the board, the new administration is rolling back all foreign worker authorization which was issued without legislative approvals. It is possible that Americans could roll back the TN Visa to its original mandate i.e cross-border professional movement permitted only for pre-sales and after-sales support.
All indications are that Trump administration will announce significant immigration reforms towards the end of 2017 to force American employers to hire Americans first. TN Visa is a wildcard which will unexpectedly surprise those who do not see it coming. Our politicians are either too naive to think that Americans will not discuss the TN Visa or have a pretty good strategy to negotiate when handed the short end of the stick. They forget that NAFTA is an employment treaty and any labor concessions are likely to be excluded or significantly tightened as we will discuss below.
Trump administration will use the TN visa as a wild card in NAFTA discussions. There are already indications that TN Visas applications at the border are under increased scrutiny. With changes coming to H/L and other Visa Categories, TN visa will not be left untouched. There are many ways the Trump administration can bottleneck issue of new TN visas or renewal of these visas. To understand why such changes are imminent, one needs to be aware of the electorate base that got Trump into the White House.
The North American Free Trade Agreement (NAFTA; Spanish: Tratado de Libre Comercio de América del Norte, TLCAN; French: Accord de libre-échange nord-américain, ALÉNA) is an agreement signed by Canada, Mexico, and the United States, creating a trilateral trade bloc in North America. The agreement came into force on January 1, 1994.It superseded the Canada–United States Free Trade Agreement between the U.S. and Canada (Source – Wikipedia). The North American Free Trade Agreement (NAFTA) laid the framework for international trade between the three countries. The Agreement is made up of eight sections and 22 chapters. NAFTA has two supplements: the North American Agreement on Environmental Cooperation (NAAEC) and the North American Agreement on Labor Cooperation (NAALC).
Advocates and Opponents of NAFTA Agreement
The origin of NAFTA began with President Ronald Reagan who had advocated for a united North American market. The “Trade and Traffic Act” was passed by Congress in 1984, catalyzing Reagan’s push to negotiate and ink sign trade partnerships. The first partnership was signed between Canada and the United States named “Canada-U.S. Free Trade Agreement”. In 1992, NAFTA eventually replaced the US-Canada Free Trade Agreement and was signed by President George H.W. Bush, Mexican President Salinas, and Canadian Prime Minister Brian Mulroney. President Bill Clinton signed into law on December 8, 1993, and the law became effective Jan 1994. Hillary Clinton in her First Lady role also openly advocated for this agreement attracting opposition from liberal activists and trade unions.
NAFTA agreement was actively promoted by proponents as a job creation agreement which will make America prosperous. Former President Bill Clinton highlighted in his speech on Dec 8, 1993 “In a few moments, I will sign the North American free trade act into law. NAFTA will tear clown trade barriers between our three nations. It will create the world’s largest trade zone and create 200,000 jobs in this country by 1995 alone. The environmental and labor side agreements negotiated by our administration will make this agreement a force for social progress as well as economic growth. Already the confidence we’ve displayed by ratifying NAFTA has begun to bear fruit. We are now making real progress toward a worldwide trade agreement so significant that it could make the material gains of NAFTA for our country look small by comparison”
“It will create the world’s largest trade zone and create 200,000 jobs in this country by 1995 alone – President Bill Clinton, 1993”
Since then, critics have complained that the agreement did not live up to its standards. They claimed that while the proponents “got NAFTA, the workers got the SHAFTA”. The “Economic Policy Institute” claimed in 2011 that 700,000 jobs were lost in the United States since NAFTA agreement was signed. The figure has since been revised to above 800,000 by NAFTA critics. Some claim that NAFTA never created the promised jobs and the net effect of jobs promised but not created and claim that the job losses are above the million mark. More than a decade later, no one thought that the forgotten opponents of this agreement will propel President Donald Trump to power. The people who lost mostly manufacturing jobs lived in what we now know as the “Rust Belt” also known as the “Factory Belt”/”Manufacturing Belt” or “Steel Belt”. A significant opposition to Democrats and Hillary Clinton came from this segment. These rust belt workers saw no hope in the garden variety politicians and Trump became their savior.
There is another segment who will define the guest worker policies of new the administration. These are the American White Collared workers who have lost their jobs to “Guest Worker Programs” and the various “Free Trade Agreements”. As we will highlight below, the TN Visa category is an area which will muster significant opposition in the near future. Unlike the geographic clustering of”Rust Belt”, the “White Belt” consisting of negatively affected white colored workers are more widely and heterogeneously dispersed throughout the United States.
Trump’s Policy on Trade, Regulatory and Energy Policy (NAFTA Impact)
Trump campaign’s economic policy was written by “Peter Navarro,” the Harvard Ph.D. and University of California professor and “Wilbur Ross Jr“, a Harvard MBA and a billionaire private equity investor. Navarro is the author of the bestseller “Crouching Tiger: What China’s Militarism Means for the World” while Ross is a vocal critic of bad trade deals. Both Navarro and Ross are advisors to the Trump administration, and Ross is also the nominee for Commerce Secretary.
They jointly authored a policy document for Trump Campaign titled “Scoring the Trump Economic Plan – Trade Regulatory and Energy Policy Impacts.”
Navarro and Ross are both critical of Clinton’s economic plan. Some of the key highlights relevant to this report are :
- They propose four pillars to grow the nation’s GDP (Gross Domestic Product) consumption growth, the growth in government spending, investment growth, and net exports. The national income accounts are divided into three categories Residential Fixed Investments, Change in Private Inventories and Non-Residential Fixed Investment. Their focus is on Non-Residential Fixed Investment, the CAPEX intensive capital investment in PPE (Plant, Process, Equipment) as well Intellectual Property. Unfavorable tax, trade, energy and/or regulatory policies create a reduction in the last category of investment due to what they call “Offshoring Drag”. They strongly cite that America has already lost tens of thousands of factories, millions of jobs, and trillions in wages and tax revenues due to the shortsightedness of the previous administrations who did not put “America First” in its negotiations.
- They believe that there are approximately 2.2 million American workers excluded from the participation pool skewing the positive unemployment rate. They argue that if these workers are included in the Bureau of Labour Statistics, the unemployment rate will be close to 6.2%. Increasing the GDP growth from 1.9% to 3.5% would get those workers back into the workforce.
- They believe that Trump’s trade negotiations will not start a trade war. Instead, they firmly believe that America is already holding the short end of the stick on Trade War.
- The proposal is to reduce taxation, regulations, reduce or balance trade deficits thereby spurring investments in PPE. A strong energy policy will combine with increased Non-Residential Fixed Investment will create significant new opportunities for the workforce.
Surprisingly, there is no mention of Worker Mobility agreement in NAFTA and the TN visas in this report. Neither are TN Visas a focus on Trump’s draft Executive Order on H1B. However, our premise is that TN Visas will be a focus on negotiations and possible reductions/rollback. In the North American Free Trade Agreement (NAFTA), the two sections that are relevant to our Risk Advisory are Chapter 16 (Annex 1603), Section A to D.
Section A – Business Visitors
Section B – Trade and Investors
Section C– Intra-Company Transferees
Section D – Professionals
The relevant provisions under which workers from each country can work on guest worker visas in the partner countries are guided by Section D. The key highlights of Section D are :
- Each Party shall grant temporary entry and provide confirming documentation to a business person seeking to engage in a business activity at a professional level in a profession set out in Appendix 1603.D.1
- No Party may:
- (a) as a condition for temporary entry under paragraph 1, require prior approval procedures, petitions, labor certification tests or other procedures of similar effect; or
- (b) impose or maintain any numerical restriction relating to temporary entry under paragraph 1.
NAFTA agreements allow special work visas to be issued for Canadians and Mexicans. It allows professionals in almost all categories to work in the United States and vice versa.
Discussions have been muted on this topic. However, Trump Administration could reduce or completely roll back this visa category. Unlike H1B Visa, there is no cap on the number of visas issued. It is estimated that there are currently more than 70,000-100,000 guest workers in the United States from Canada (including 30,000-40,000 TN Visa Holders from Canada who work in multiple sectors as per the professions listed here.) In addition to TN Visas, Canadians and Mexicans can also apply for H1B Visas. Our premise is that NAFTA TN Visas will be a major negotiation point for the Trump Administration. They cannot tighten up H/L Visas and leave a large uncapped work visa loophole available to Canadians and Mexicans. We are still collating current data on TN Visa admissions every year (admissions for approved/extended visa holders) as well as new issues of TN Visas. Looking at the legacy data, it is clear that TN Visa has been admitting almost as many numbers of guest workers as H and L Visas combined. It is unlikely that the new administration will leave the TN Visa category untouched.
Here is a comparative graphic evaluation of H and L Visas compared to the TN Visas from legacy data.
Note that the number of admissions does not equal the number of Visas issued every year. TN Visas are initially valid for three (3) years and can be indefinitely extended without any caps. The total number of admissions is the cumulative number of NAFTA workers inside the United States assessed for the year ending statistics. TN-1 Visa for Canadians is also exempt from any minimum wage limit. If a limit is introduced on minimum wage such as being proposed for H1B, the number of TN-1 visas issued will significantly drop in numbers. NI V is an abbreviation for Non-Immigrant Visas.
Our premise is that NAFTA TN Visas will be a major negotiation point for the Trump Administration.
Looking at the figure below, the total number of TN Visas Holders (both from Canada and Mexico) who were admitted to the United States for year-end 2015 were 787,180. Please note that admissions are not equal to the number of Visa Holders. These guest workers are working in various industries in the United States. Canadian CEO’s and politicians should be careful of their rhetoric against the Trump Administration as any reduction in the number of TN visas will most definitely lead to a countrywide recession in Canada for years to come. Imagine 100,000 or even 30,000 workers having to go back to Canada and lose their employment in the United States. We disagree with analysts who perceive this as a major opportunity for Canada. The Trump administration could perceive Canada as a major competitor and tighten up compliance on TN Visas as well as close the “Incorporated Employee Loophole“.
Analysing the initial data we have collated on H1B, L1 and TN visas issued to both NAFTA partners, the overall impact on Canadians and Mexican Nationals will be severe.
The below numbers include other categories of visas e.g. H-Visa includes (H1B, H2A, and H2B Visas).
Some claim that the TN Visa allows highly skilled workers to enter the United States. Analysis of legacy data indicates otherwise. While Engineers and Computer Scientists made a bulk of TN Visas issued to Mexicans and Canadians, the cumulative number of low-skilled categories is very high. TN Visas are a major bone of contention in the rust belt (Manufacturing and Steel Belt) and the white belt (skilled workers). Critics claim that it is too easy to get TN Visas as there is no minimum wage cap, there is no visa sponsor required and there are many loopholes in the system.
Impact on TN Visas
- Currently, TN Visas can be issued to Canadians and Americans at the Port of Entry. It is our premise that this privilege will be rolled back and all TN visas will be issued through the Consulate. This will allow consulate officers to scrutinize applications and seek access to Labour Market Assessment Reports for each category of visa issued. One can expect a significant increase in rejection rates and also increase in document scrutiny due to the above changes.
- The TN Visa has no minimum wage requirement, no Labour Market Assessment and does not require a sponsoring employer. A minimum salary for TN Visas is likely to be introduced which may be combined with labor market assessment. With the recent appointment of conservative hardliners from CIS (Center for Immigration Studies), it is certain that TN visa will be significantly reformed. CIS has written in the past about the TN Visa abuse and the broken immigration system.
- Immigration Hardliners are pointing to recent OECD data that Canada’s average earnings and wages are 20% lower than the United States which provides a massive incentive to migrate to the United States under the lax TN visa rules. Some are even claiming that Canadian colleges are overproducing graduates and degree holders to cope with increased demand from US employers who are exploiting labor arbitrage opportunities as being done with H1B hires. Combined with forced-unionism in Canada for some professions versus “Right to Work‘ laws in many states in the United States, United States offers a massive advantage over Canada for employers who potentially double dip on underpaying roles under TN visas placing American workers at a significant disadvantage. Hence, there are calls by Canada to end “Right to Work” legislation which is counterproductive and American protectionist interests may instead attack the framework of NAFTA TN visas.
- Meanwhile, TN Visa applicants are likely to face significant uncertainty at the Port of Entry. CBP Officers are already scrutinizing applicant documents following the book and sending applicants back to furnish more information. We continue to collate data from various sources and will post it here, once we have analyzed the same. It is apparent that the rejection rate for new TN Visa applications and renewal applications has soared since Jan 2017.
- CBP officers manning the United States entry points have become emboldened and initial data reveals that secondary inspection (temporary questioning and detention) for all foreigners entering the country have increased by 24% since Jan 2017. One can expect more detentions, entry denials and even prosecution for misrepresenting information to the CBP.
- Currently, TN Visa holders can be employed at a short notice by employers across the United States. It is our premise that this is likely to change. The new administration will likely introduce some time creep in the application approval process and only permit selected categories into the country. The negotiations will definitely include discussions on reducing the overall intake of TN Visa holders and negotiate some sort of numerical cap. In addition, employers who over-rely on TN visas will be asked to demonstrate that their made good faith effort to hire Americans prior hiring workers on TN Visas. There are already ongoing Discrimination lawsuits against Infosys from laid-off American workers due to H-1B Visas and one can expect similar cases in more visa categories.
- Department of Labour (DOL) is carrying out an extensive study of all foreign workers in the United States including TN Visas. They propose to publish quarterly reports of visas issued. Some professionals such as nursing professionals are high demand TN visa categories. The new administration can investigate whether Hospitals are systematically hiring Canadian workers rather than American workers under the guise of lack of availability. They can also force these employer(s) to take initiatives to train and hire more American workers if they feel there is a significant skills shortage. With healthcare reform on the way, employer (s) who do not toe the administration line could be barred from government contracts.
- The new administration may also demand that demand on caps be placed on TN Visas till a numerical equivalency in issued visas is achieved between the two countries. Our numbers show that there are 6-7 TN Visas issued to Canadians versus 1-2 Visas issued to Americans to work in Canada. In addition, the TN visas issued to Americans in Canada are mostly senior executive positions.
- To avoid court battles, the administration will most likely allow individuals with existing TN Visas to stay till expiry. Meanwhile, DHS and USCIS teams could identify American companies or industries which employ a significant number of foreign workers specifically TN visa holders. It could potentially ask them to demonstrate that they attempted to hire American workers before hiring foreigners. Such a move could trigger discrimination lawsuits by negatively impacted American workers which the DOJ and DHS may potentially join. There are multiple news reports of companies being asked to submit compliance data within 60-90 days of receiving the RFE (Request for Evidence) demonstrating that American workers were accorded priority. Besides Management Consultants, Nurses, Lawyers, and Finance/Accounting specialists form the majority of the TN visa holders. These occupations stand to be most negatively impacted if the new policy framework is introduced.
- In a recent case filing for H4 EAD (Spouses of H1B Holders) litigation, a declaration by USCIS Chief, Business, and Foreign Workers Division provides a clear indication that administration is actively aligning its policies with the President’s priority agenda, “Buy American, Hire American“.
- Finally, the Americans are aware of the CRA Crackdown on “Incorporated Employee Loophole” which could also be used by American Employers to hire staff in Canada as contractors versus employees. Many IT professionals use this loophole to create layers of subcontracts between American Companies, Recruiters, and Consultants within Canada. While the Trump administration cannot stop American companies from outsourcing across the borders, they can use information provided by Canadian Authorities on “Incorporated Employee Cases” under investigation to identify American Employers who are utilizing this tactic. Cross-Border movement of all foreign employee(s)/contractors/business visitors associated with such companies could come under significant scrutiny and entry refusals may spike. The administration has clearly indicated by its recent actions that they prefer tightening up administrative procedures rather than getting legislative approvals for achieving their campaign outcomes.
With the recent ongoing sparring between Canada and United States on the lumber issues, Trump administration could use the TN Visa wildcard to sent a shock wave through the industry. Americans have demonstrated in levying duties on Bombardier and the Lumber industry that they can match their rhetoric with actions. TN Visas have not been brought up in discussions so far, however, will most certainly be a bone of contention. All indications are that extensive analysis of foreign workers (H, L, TN, STEM OPT etc.) in the United States is ongoing. Once the analysis is submitted to the White House at end of Dec 2017 when the OMB (Office of Management and Budget) releases its annual reports, we can expect fireworks around this visa category.