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Biden’s Visit an Opportunity to Put U.S.-India Economic Relations Back on Track

US_ India

U.S. Vice President Joe Biden’s trip to India today (Monday, July 22) marks the highest-ranking U.S. official to visit India in four years. It couldn’t have come at a better time. In recent years, U.S.-India economic relations have been significantly strained by a range of policies that India’s government has implemented that favor domestic producers at the expense of foreign competitors.

Such policies include India’s Preferential Market Access (PMA) mandate for electronic and information and communication technology (ICT) products, a “forced localization” policy which requires that a specific share of each product’s market in public (and possibly also  private) procurement of electronic goods must be filled by India-based manufacturers. India’s introduction of local content requirements on wind turbines and solar cells if firms are to receive significant government subsidies is another. So are India’s imposition of compulsory licenses on biopharmaceutical products, as in the case of Bayer’s anti-cancer drug Nexavar, and India’s denial of or revocation of existing patent rights, as in the case of Novartis’s Glivec or Pfizer’s Sutent drugs, respectively. In short, India has been steadily shutting out foreign competition and making it increasingly difficult for U.S. businesses to compete in India.

These types of policies harm both American companies and workers and Indian industry and citizens alike. For example, India’s failure to recognize foreign intellectual property rights in the biopharmaceutical industry costs American jobs and also deprives companies of the resources and incentive to invest in the risky and expensive research needed for the development of new products. This will preclude or inhibit the invention of new therapies that could benefit citizens not just in India or America, but throughout the world. By discriminating against foreign competition, India is choosing to cut off its citizens’ access to newer and cheaper products and technologies. More broadly, when India competes by forcing foreign corporations to invest in India rather than attracting their investment, it’s taking a shortcut to growth instead of engaging in the hard work that India needs to bolster investments in infrastructure, scientific research, and education and implement a strong business and regulatory environment that will underpin India’s genuine competitiveness and long-term economic growth.

Moreover, these policies threaten to jeopardize what has historically been a strong and robust trading relationship. In fact, the United States is India’s second largest export trading partner and accounts for the largest trade surplus India runs with any nation. The bilateral trade relationship exceeded $60 billion in 2012. The partnership is vitally important for both countries, but if it is to remain positive and robust, the United States must take this opportunity to have an open and direct conversation with Indian Prime Minister Manmohan Singh.

The United States must make it clear to India’s top leadership that barriers to free and open trade between India and the United States must be addressed if our close economic and diplomatic relationship is to continue to grow. Vice President Biden’s trip is an excellent opportunity to address these persistent trade issues and ensure that future relations between out two nations are fair and productive for all parties.

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About the author

Stephen Ezell is vice president, global innovation policy, at ITIF. He focuses on innovation policy as well as international competitiveness and trade policy issues. He is coauthor of Innovating in a Service-Driven Economy: Insights, Application, and Practice (Palgrave MacMillan, 2015) and Innovation Economics: The Race for Global Advantage (Yale, 2012). Ezell holds a B.S. from the School of Foreign Service at Georgetown University.
  • Anonymous

    “India’s denial of or revocation of existing patent rights, as in the case of Novartis’s Glivec or Pfizer’s Sutent drugs, respectively.”

    I agree that IPR rights should be protected but Novatis was engaging in the unethical ever-greening of patents. I do not need to spell out the ethics of this – if you prolong IPR to this extent, you create a monopoly and this makes the price of vital drugs soar – which means that the 2 billion people in poverty who suffer from crippling diseases cannot afford the medicines that could have saved their lives.

    Also, Americans should be proud of their heritage as the upholders of righteousness, ethics and good moral judgement. I leave you with a Thomas Jefferson quote:

    “He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper [(candle)] at mine, receives light without darkening me.

    That ideas should freely spread from one to another over the globe, for the moral and mutual instruction of man, and improvement of his condition, seems to have been peculiarly and benevolently designed by nature, when she made them, like fire, expansible over all space, without lessening their density in any point, and like the air in which we breathe, move, and have our physical being, incapable of confinement or exclusive appropriation.”

    Your gains from saving lives will far exceed the gains from extending patents indefinitely. And maybe that way, Americans can proudly hold on to the values their forefathers left behind.