India ? US: Trade issues

By Abhishek Gupta

Edited by Nidhi Singh, Junior Editor, The Indian Economist

In an age of rapid pace, we can expect everything to change quickly – be it technology or relationships. Indo- US relations are a fitting example, where we saw estranged partners coming close in 1999 and then again symbolically in 2005, and are now witnessing another turnaround, but this time for the worse.  Based on the three pillars of geostrategic convergence, intersecting economic interests and shared values and societal contracts, it was naturally a blow for the relationship after the 2008 economic crisis, which shifted attention inwards to domestic concerns. 2013 was a particularly strenuous year, with disputes ranging from yet-to-be-resolved issues in pharmaceutical and solar sectors to the diplomatic arena.

The pharmaceutical sector issue came into further limelight after US Trade Representatives (USTR) report Special 301 which was speculated to include India in the ‘Priority Foreign Countries’ list (it did not, in the end) a category meant for the worst offenders of Intellectual Property Rights. This comes in the backdrop of 2 major decisions- one by the GOI (in 2012) to grant compulsory license to Natco, allowing it to manufacture the generic version of Bayer’s cancer medicine; and the other by the SC (in 2013), which  struck down Novartis’s patent application on the basis of Section 3(d) of Indian Patents Act, which prohibits evergreening.  This was looked at with scorn by ‘Big Pharma’, which argued that it would not bode well for innovation in the sector, and more so when countries like Brazil and South Africa (which along with India are important markets for them) are treading India’s path. Therefore the intense lobbying by them which has brought matters to what they are today.

Indian steps are totally within the TRIPS norms, and therefore the US is not bringing up the matter in WTO, where it may lose the case. Instead, the US International Trade Commission (USITC) has launched its investigation into Indian trade and industrial policies, and India has justifiably refused to cooperate. While India has taken the compulsory license route for the first time, and has repeated that it will only be used in exceptional public health circumstances, the pharma companies are not impressed, because they refuse to budge from the profit oriented and domination motives. Indian claims are totally rationalistic and balanced on this count, but they need the support of a growing economy to lend weight to its voice.

The provisions of Jawaharlal Nehru National Solar Mission (NSM) are another bag of contentions. US approached the WTO earlier this year on the ground that mandatory sourcing of domestic contents hinders market access for its firms and is discriminatory (it had also complained to the WTO in 2013 against similar provisions, but did not take the case further). India maintains that it is a government procurement policy – which is not covered by the WTO (it falls under WTO’s Govt Procurement Agreement, which has not been signed by India). India infact accuses the US of double standards, as it itself has restrictive solar policies and local labour and product sourcing requirements for its renewable projects. Indian solar companies find it hard to enter the US market because of the local government support – something the US is against in India.

India and US have set a target of increasing their trade from the existing $100bn figure to $500bn by 2020^[1]. Such a strong engagement demands better political and diplomatic relations as a first step. Here in India, whoever forms the government in a few weeks will surely have a high priority to sort out these issues. Existing dialogue mechanisms that seem to have frozen would have to be re-energized. The civil nuclear deal must move forward to some concrete steps, while India must look for some compensating deal if the US immigration reforms are carried forward. BIT (Bilateral Investment Treaty) is an outcome both look forward to, but it should be carefully negotiated. However, the best course would be to reposition our economy onto the fast track, for only it can provide substance to all the above structural arrangements.

In the words of Indian Ambassador to the US, Dr S. Jaishankar, “Relationship building is never without challenges. Some of it is structural; the rest emanates from our different histories…Building ties requires a degree of give and take that can test officialdoms. Appreciating each other’s interests can be more difficult than we generally assume”.If both sides are genuinely interested in a vibrant engagement that goes beyond symbolism, they must be willing to accommodate and keep in mind other’s legitimate concerns. A new government will be the best opportunity in a long time to reaffirm our intentions and commitment towards a long term relationship.

[1]: http://www.thehindu.com/news/national/sushma-kerry-discuss-500billion-target-for-trade/article6063109.ece, also http://articles.economictimes.indiatimes.com/2014-06-11/news/50508622_1_us-india-business-council-indian-ipr-commerce-secretary-rajeev-kher.