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US think tank seeks suspension of trade policies with India

May 15, 2013 09:42 IST

American flagAlleging that recent trade policies of India are jeopardising its trade ties with the US, a Washington-based think tank has recommended the Congress to suspend trade benefits for New Delhi.

"To be clear, a strong, growing, and collaborative trade relationship between the US and India is in both parties' best interests.

But India's recent trade policies are placing that relationship in jeopardy," Stephen Ezell, senior analyst at the Information Technology & Innovation Foundation , said in a paper released Tuesday.

"The US should not sit idly by as the Indian government enacts regulations that harm American industry and jobs.

"Strong leadership will be needed from both sides to ensure a continued constructive and robust trade relationship between the two countries," Ezell demanded.

In an abstract of the report 'The Indian Economy at a Crossroads', Ezell said India's innovation mercantilist policies, if not significantly modulated, threaten to inflict harm not only on its own, but also the global economy.

The full report would be released later.

"US government and industry have been engaged in intense dialogue with Indian officials for well over a year towards modifying the PMA, compulsory licensing, and related policies without seeing significant improvement.

"It's time to add some sticks to the carrots, and Congress and the US government should look at all available options to level the playing field," Ezell said.

He demanded that Congress should immediately direct the US International Trade Commission to investigate how India's mercantilist policies damage the US economy, as it did in 2011 to examine effects of China's intellectual property infringement and indigenous innovation policies.

"Congress should also begin the process of withdrawing India's participation from the Generalised Systems of Preferences, which provides reduced tariffs for Indian goods entering US markets," it said.

"In fact, India was the top developing country GSP beneficiary in 2011, with $3.7 billion in imports entering the US duty free, and the country has benefited significantly from the preference," he said.

"Indeed, as a 2011 report finds, GSP concessions [have] helped to accelerate India's exports into the USA," Ezell said.

According to him, the best path forward for India is to offer globally mobile investment and enterprise all of the attractors of China with none of the 'innovation mercantilist policies' multinational corporations all-too-often encounter in China.

The full report, Ezell said would make the case that India's robust economic growth over the past several decades has largely arisen from the country's choice to abandon the import substitution industrialisation policies of the 1970s and embrace core tenets of free markets, open and non-discriminatory trade, and openness to flows of goods, people, technology, and capital.

"Unfortunately, just over the past several years India has embraced a range of 'innovation mercantilist' policies such as forced intellectual property transfer or mandated local production as a condition of market access that seek to bolster Indian economic and employment growth by distorting global trade rules and forcing investment and production occur in India," he said.

"India has erected these policies in a diverse range of sectors from information and communications technology to life sciences, clean energy, digital content, financial services, and retail," Ezell said.

In reality, these policies will only serve to damage India's economy-while also hurting the broader global economy, including the US, the report notes.

Moreover, India could more readily achieve employment and economic growth it seeks if it adopted a range of pro-innovation policies, such as improving its environment for business and investing in infrastructure, education, and scientific research, and also, playing an attraction instead of compulsion strategy with global multinational enterprises, it said.

"India's recent embrace of innovation mercantilist policies threatens to imperil the historically strong US-India trade relationship. US policymakers should meet this challenge first with dialogue, but then if necessary through a combination of carrots and sticks," Ezell said.

Lalit K Jha in Washington
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