The International Entrepreneur Rule Wasn't Perfect, but the Trump Administration Killing It Sends the Wrong Message, Experts Say
Google. eBay. Tesla. Yahoo. AT&T. Procter & Gamble. Pfizer. From online bidding to pharmaceuticals, these companies cover a wide range of industries. As for what they have in common? They were founded -- completely or in part -- by immigrants.
In 2017, America’s top 500 companies brought home $12.1 trillion in revenue, and more than 40 percent of those earnings came from companies founded by immigrants or their children. That same group founded more than half the top 25 firms on the annual Fortune 500 list, headquartering their companies in 33 of the 50 states and employing more than 12.8 million people worldwide.
Despite these successes, it’s not easy for foreign-born entrepreneurs to launch businesses in the United States. And one controversial new development in laws regarding immigrant entrepreneurs is decried by some, while others deem it necessary.
Here’s the rundown: The Department of Homeland Security has now formally proposed to remove the International Entrepreneur Rule (IER), an executive order by the Obama administration set to go into effect in June 2017. The department stated in a release that the rule “represents an overly broad interpretation of parole authority, lacks sufficient protections for U.S. workers and investors and is not the appropriate vehicle for attracting and retaining international entrepreneurs.” (As the rule was never put into place, the entrepreneurs involved in the companies mentioned above came to the U.S. through other avenues.)
The much-debated IER program, due to take effect in June 2017, was enacted to allow more entrepreneurs to immigrate to the U.S. to start their businesses. To qualify, an entrepreneur needed to have an ownership stake of at least 10 percent in their company, as well as garner at least $250,000 from a qualified investor or at least $100,000 via a qualified government award or grant, says Douglas Ligor, a senior behavioral and social scientist at RAND Corporation, a nonprofit global policy think tank (and a former employee at the Department of Homeland Security). The program’s pros included the fact that it lowered the financial threshold often required for entrepreneurs immigrating to the U.S.
Experts say the IER also has quite a few cons. Despite being colloquially referred to as the “startup visa,” the IER isn’t a visa at all -- rather, it’s a parole period for immigrant entrepreneurs that begins with 2.5 years. If a business meets certain success requirements (creating at least five qualified jobs and reaching at least $500,000 in annual revenue), the parole period can be extended another 2.5 years. But at the end of that time period, the entrepreneur cannot receive an admission status, and unless they’re approved for a green card through other avenues, the government will require them to leave the country no matter how well the business is doing. “So what happens to the business?” Ligor asks. He mentions that historically, parole has been used almost solely for humanitarian benefits, so this application of the law is seen by many as an inefficient workaround. He also says the current administration sees the rule as burning up too many agency resources for something temporary -- especially when other, less temporary avenues exist for immigrant entrepreneurs to launch businesses in the U.S. (These other avenues, called the the E-2 nonimmigrant classification and the EB-5 immigrant classification, have their own pros and cons.)
The Obama administration estimated 2,490 people would apply to the IER program each year, but just 12 applications have been received to date, according to an estimate from a United States Citizenship and Immigration Services (USCIS) spokesperson. Some experts attribute this in part to the Trump administration’s new rule, published days before the IER’s implementation, stating that the program would be delayed and likely rescinded completely in the future.
Despite the IER’s shortcomings, some experts believe it’s a step in the right direction for the United States to make foreign-born entrepreneurs feel welcome.
“The United States is one of only two or three industrial economies in the world that does not have a designated visa category explicitly designed for foreign-born entrepreneurs who want to come to the United States to launch their businesses,” says John Dearie, founder and president of the Center for American Entrepreneurship (CAE). Many other countries have overhauled immigration laws in recent years to “roll out the red carpet” for immigrant entrepreneurs in particular, and the U.S.’s stricter rules could close the country off to potential new businesses. When it comes to an individual with a viable business idea, private investment to back it up and the intent to create jobs, “there’s no other immigrant category of greater economic value,” Dearie says.
Indeed, more than half of the nation’s billion-dollar startups have an immigrant co-founder, according to data from the Ewing Marion Kauffman Foundation. Immigrants are also nearly twice as likely as native-born Americans to start businesses -- a statistic that has held true for the past several years.
“The decision by the current administration to rescind the IER sends the absolute wrong message at the wrong time,” says Larry Jacob, vice president of public affairs at the Kauffman Foundation. “When entrepreneurship has been in a decades-long decline, we need more dreamers, doers and makers in our country.”
The Department of Homeland Security will allow people to submit their thoughts on the IER’s removal in written comments up until June 28, 2018 either online or by mail. For online comments, visit the Federal eRulemaking Portal (here’s the shortcut link to comment on this particular issue), and follow instructions to submit.
An alternative to the IER, the “Startup Act,” was re-introduced in September 2017 by U.S. Senators Jerry Moran (R-Kan.), Mark Warner (D-Va.), Roy Blunt (R-Mo.) and Amy Klobuchar (D-Minn.). The lawmakers claim the number of startups in America has declined by almost half over recent decades. In light of the fact that at least seven other countries -- Canada, Chile, the United Kingdom, Singapore, Cyprus, Latvia and Lithuania -- have taken action in recent years to support foreign-born entrepreneurs, the legislation includes provisions for a “startup visa” for 75,000 legal immigrants to launch businesses and create jobs in the U.S.