Circular Labour Migration and Offshoring of IT Services: What can be Done to Remove Unnecessary Trade Barriers?

India has since the early 1990s moved from being an inward-looking economy with import-substitution policies to become one of the world’s leading IT services exporters. This paper examines the global delivery model (GDM)—based on electronic supply and circular labour migration—that India’s IT services sector has developed to expertly produce and deliver IT services to international markets. It analyses U.S. and UK work permit data and shows how these countries’ temporary migration schemes for highly skilled workers have been leveraged by the Indian IT services sector to build a multibillion dollar export industry. This paper develops a taxonomy for the restrictions that impede circular labour migration between India and its major trading partners—the United States and the UK—and examines their impact on trade and investment. Based on the regulatory review and interviews with senior managers in the Indian IT services sector, this paper concludes that the UK work permit system is more conducive to trade than the U.S. work permit system and that work permit processing services are more transparent, predictable and expedient in UK consulates than U.S. consulates. It concludes with suggestions how current impediments to circular labour migration can be overcome in an economically compelling way.