Expanding Foreign Investment through Treaty Investor (E-2) Visa Reform

(E-2) Visa Reform

David Berry and Jeffrey Gorsky

December 22, 2016 12:00 AM

For over 50 years, the U.S. has attracted foreign investment through a visa program known as the E-2 treaty investor category. This allows individuals making a substantial business investment in the U.S., whether through startups or existing enterprises, to come to the U.S.

The E-2 visa is an important driver of business growth, as tens of thousands of individuals who obtain these visas each year are required to invest, create jobs, and maintain an active investment in order to preserve their immigration status. It is available to nationals of countries that have certain bilateral treaties with the U.S. who will make substantial investments in enterprises where they have a controlling interest as well as to qualified employees of the same nationality.

Due to Congress’ objections and refusal to grant countries signing new treaties with the U.S. access to the program, expanding this status to a larger and more diverse pool of foreign investors has been halted. As our new president and Congress once again turn their attention to fixing a broken system, they should also embrace the E-2 visa category and leverage its ability to bring money and jobs to the U.S.

The Oldest Visas

The E-1 Treaty Trader and E-2 Treaty Investor non-immigrant visa statuses may be the oldest U.S. visa classifications. Even before visa requirements existed, certain traders in the 19th century were entitled to protection under bilateral treaties of friendship, commerce, and navigation.

The E-2 visa program continued to expand as the U.S. moved to sign “bilateral investment treaties” with individual countries in the 1980s. Now there are 80 countries that qualify for E-2 status, based on either the treaties of friendship, commerce, and navigation or the newer bilateral investment treaties (BITs).

As a result, the E-2 visa has become popular—41,162 E-2 visas were issued in fiscal year 2015. The status, used by both large corporations and small companies, requires job creation in the United States as well as maintaining investments in the U.S.—if the investment business is no longer active, the E-2 person would lose eligibility to the visa status.

Congressional Opposition

Objections to further expand E-2 visas arose in the 1990s when the United States began negotiating free trade agreements containing immigration provisions. In 1993, the North American Free Trade Agreement (NAFTA) created a special immigration status for Canadian and Mexican professionals, and the Chile and Singapore Free Trade Agreements created a new status similar to the H-1B classification.

Less than a decade later, immigration provisions in the Chile and Singapore agreements drew bipartisan objections from Congress. Both the chairman and ranking member of the House Judiciary Committee wrote to the United States trade representative on July 10, 2003, to formally object to immigration provisions in free trade agreements.1 Later that month, the Senate unanimously passed a resolution stating that trade agreements should not contain immigration-related provisions.

In light of these concerns, the U.S. Trade Representative stopped placing immigration provisions in treaties, including BITs. Congress has not stepped in to fill the void, as only Israel has been accorded E-2 status by legislation. The assumption today is that the USTR will not include immigration provisions in any BIT.

Practical Solutions

Congressional concern over using FTAs to create new immigration classifications should not apply to BITs. BITs do not create a new immigration category; they only extend access of an existing congressionally defined visa category to new countries that agree to reciprocal treatment of American citizens. The congressional definition for the status expressly requires using treaties as a basis of eligibility, so using this treaty process is consistent with congressional intent. Treaties were used for 50 years to extend E-2 visa eligibility without any objection from Congress.

“There are 80 countries that qualify for E-2 status, based on either the treaties of friendship, commerce, or navigation."

Legislation is not an adequate substitute for treaty negotiation. Legislation is a cumbersome way to extend treaty eligibility—when the House of Representatives added Denmark to the E-2 program in 2005, the Senate never acted on the legislative proposal. Moreover, BITs would still have to be negotiated with other countries, even if legislation passes, to ensure that U.S. citizens would obtain equivalent access to invest in those countries.

Foreign investment is essential to our modern globally based economy, and there should not be artificial barriers to immigration provisions that directly support foreign investments. Congress should rescind its objection and allow the continued use of BITs to expand foreign investments in the United States.

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