Nov 18, 2016
Why the E-2 Visa Will Become Critical in the Trump Years
We are continuing our analysis of what to expect for business immigration from the Trump Administration. Previously, Jonathan Grode discussed what to expect with regard to H-1Bs and Worksite Compliance. My colleague Tim Golden followed up with an excellent article discussing how the Trump Administration’s clear signal that it is willing to walk away from the North American Free Trade Act (NAFTA) would affect TN Visas if carried out. To briefly summarize their analysis: we are pessimistic that the H-1B and/or TN visas will be as attractive or viable as they are under the present laws and policies if Trump’s campaign rhetoric becomes immigration law or policy.
So the question now remains: How will the Trump Administration approach investor visas? We will publish a separate article regarding EB-5. The immigrant investor visa presents its own complicated analysis; the least of which is that the Regional Center program will need an extension approximately six weeks before Trump takes office and likely another one just a few months after inauguration. For now, we will give our readers our thoughts regarding the E-2 Nonimmigrant Treaty Investor Visa. We hold similar thoughts regarding the E-1 Treaty Trader Visa, although that is not used as frequently among our clientele.
Let’s start with a history lesson. Believe it or not, the E-2 Visa’s roots are deeper than those of the immigration laws themselves. Traditionally, the E-2 arises out of a “Treaty of Friendship, Commerce and Navigation” between the U.S. and a given foreign country, explaining why the visa is available to nationals of some countries but not others. The oldest such treaty that presently gives rise to an E-2 Visa is that signed with the United Kingdom on July 3, 1815. For historical perspective, this treaty was ratified merely several months after the Treaty of Ghent which ended the War of 1812. Moreover, restrictions on the U.S.’ historical Open Door Policy did not come about until the Page Act of 1875 (focused on the exclusion of convicts and prostitutes) and the shameful Chinese Exclusion Act, enacted seven years later. Indeed, the makings of a comprehensive immigration scheme did not arise until the Immigration Act of 1924, culminating in the McCarran Walter Act of 1952, the “grandfather” to the current INA.
Why is this historical context so important? It’s necessary to illustrate our opinion that so long as there will be international investment with treaty countries, there will E-2 Visas enabling oversight of those investments. This unique history of the visa and the mechanisms in which countries may qualify make a significant distinction in how an administration would restrict its use. For instance, unlike the H-1B which could become crippled by labor market tests or prohibitively high prevailing wages, these visas have no such statutory requirement designed to protect U.S. workers. Rather, the E-2 Visa leverages international law enabling bilateral investment and entrepreneurship – the pain felt by E-2 companies in the U.S. could similarly be felt by American companies operating abroad.
Consider the different political optics as well. The conventional wisdom is Donald Trump was able to resonate well with “Rust Belt” voters in part by railing against NAFTA. An anti-NAFTA position was low-hanging fruit for Trump given that it was signed into law by former President Clinton and many within his electoral base have railed against perceived U.S. trade deficits since its inception. Importantly, should NAFTA fall, the TN Visa scheme would as well, absent some kind of renegotiation (an E-2 reconfiguration would be needed for Canadian and Mexican entities, but the visa scheme would likely remain viable). Consider, however, that the E-2 Visa requires investment into the United States which results in the creation of a non-marginal (e.g. American-job creating) business. The political optics viewed this way – shutting down a visa scheme that creates jobs for Americans through foreign investment – make the E-2 relatively more appealing, even to a protectionist demographic. While across-the-board repudiation of international investment and trade treaties is theoretically possible, it would cost significantly more political capital and lack the symbolic victory for Trump that a NAFTA cancellation or renegotiation would bring. We think a worldwide gutting of the E-2 is much less likely, if not out of the question.
We cannot stress enough that our analysis at this juncture involves a high degree of crystal-ball gazing uncertainty. Understanding this point as a caveat, it is our opinion that status quo of the E-2 visa is more likely to be upheld than those of the H-1B or TN Visas. We think that investors should accordingly consider such points when weighing establishment of an E-qualifying entity and that employers that have the option of changing a foreign employee’s status to E-1 or E-2 explore such possibilities in the coming months. The E-2 Visa will remain critical for the establishment, direction, and staffing of foreign businesses operating in the U.S. even amidst such unpredictability.