April 6, 2016

Nuclear Summit: An Opportunity to Improve U.S.-India Economic Ties?

The following op-ed was written by GIPC’s Executive Director of International IP, Patrick Kilbride, and National Association of Manufacturers’ Vice President of International Economic Affairs, Linda Dempsey. This piece was originally published in Morning Consult on April 6, 2016. For the full text, please click here

Leaders from more than 50 nations, including India’s Prime Minister Narendra Modi, gathered in Washington, D.C., last week to discuss strengthening nuclear security and cooperation at the fourth annual Nuclear Security Summit. These discussions are important for both the U.S. and India, given that commercial nuclear cooperation also reflects an important aspect of the evolving relationship between India and the United States.

As Prime Minister Modi and other senior Indian officials continue to engage regularly with their U.S. counterparts on high-level issues like nuclear security, these engagements present an important opportunity to reflect on the broader bilateral relationship and the importance of growing mutually beneficial economic and commercial ties.

Since Prime Minister Modi took office almost two years ago, the United States and India have worked to improve the level, frequency, and tone of dialogue between our two countries, including efforts to launch the U.S.-India Strategic and Commercial Dialogue (S&CD) and revive the U.S.-India Trade Policy Forum (TPF). These high-level dialogues have raised a broad range of issues important to U.S. manufacturers and other industries, including the importance of making it easier to do business in India, promoting a more open economy, and the need to protect innovation and intellectual property.

Yet rhetoric, even positive rhetoric, does not equal progress. To date, there has been limited tangible progress in India on these priority economic and commercial issues. Several of Prime Minister Modi’s landmark initiatives—such as Make in India, Startup India, efforts to improve the ease of doing business, and a near-finalized National IPR Policy—could, if appropriately implemented, begin to level the playing field for foreign companies operating in India. In practice, however, many of these initiatives haven’t gotten very far or are not envisioned to go far enough to tackle core problems faced by foreign and also Indian companies. Recent policy developments make it clear that India needs to do more to become a preferred destination for business, investment and manufacturing.

India has done little to correct protectionist policies that discriminate against U.S. and other foreign manufacturers and businesses, and continues to impose new and burdensome regulatory barriers and import tariffs. For example, India recently moved to increase import tariffs on some pharmaceutical and medical device imports.

The government also proposed expanding the 10 percent import tax that already exists on information and communications technology (ICT) products to other electronic products, including many covered under the expanded Information Technology Agreement. Even in the nuclear sector, the two sides remain stuck on rules for India’s proposed nuclear liability pool that would provide clear, long-term solutions to challenges that hinder foreign investment.

Furthermore, India continues to pursue localization policies that discriminate against foreign businesses. Last month the World Trade Organization (WTO) panel found that India’s forced localization rules under India’s national solar policy violate WTO rules – but India has announced plans to appeal. Though global manufacturing secured a victory in this case, these policies are a prime example of India straying from global trade norms of non-discriminatory treatment. To compete for global trade and investment, India must show that it can and will fulfill its international obligations in the WTO and other bodies.

Additionally, despite India’s ongoing dialogue around improvement of IPR policies, there is growing frustration with India’s lack of action on these issues. By all reports, the National IPR Policy, once finalized, may actually increase onerous local manufacturing requirements and is unlikely to make concrete recommendations in areas such as patents and trade secrets. Companies also remain concerned about the government’s broad views on the availability of compulsory licenses, which serve to undermine the basic economic incentives underlying research and development investment.

Turning dialogue into real progress on these issues would bring strong benefits to all stakeholders operating in India.  Stronger IP protections will allow all parties to innovate and manufacture advanced products to meet the challenges of tomorrow. Lower tariff rates will help Indian and foreign companies create integrated supply chains. Business-friendly policies that benefit all businesses, not just Indian ones, will attract more investment and create more opportunities for U.S. and Indian companies to collaborate both in India and abroad.

It’s clear that India’s efforts to improve the business and regulatory environment for foreign companies are falling short. Stronger dialogue between the U.S. and India mark an important first step toward improvement, but it’s time to increase the effectiveness of high-level talks with concrete reforms to improve the business environment in India for foreign and domestic companies alike – and to ensure that both sides show a record of tangible progress before there are efforts to launch other new initiatives.

As India and the U.S. continue to meet and work together on solutions, both countries need to ensure that issues with trade barriers, forced localization requirements, and IP restrictions remain at the forefront of commercial engagements. The path to ensuring a broad, healthy relationship between India and the U.S. that benefits stakeholders in both countries can benefit from policies that promote free and fair trade.

Dempsey is the National Association of Manufacturers’ (NAM) vice president of international economic affairs. Kilbride is executive director of international intellectual property for the U.S. Chamber of Commerce’s Global Intellectual Property Center (GIPC). The NAM and GIPC serve as co-chairs of the Alliance for Fair Trade with India.

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