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Business News/ Politics / Policy/  US urges India to pull down wall of protectionism

US urges India to pull down wall of protectionism

Washington may use Tuesday's trade meet to seek greater market access and tighter intellectual property rules in India

US trade representative Michael Froman at the US-India Trade and Investment Relationship function. Photo: AFPPremium
US trade representative Michael Froman at the US-India Trade and Investment Relationship function. Photo: AFP

New Delhi: US trade representative Michael Froman on Monday urged India to dismantle its “wall of protectionism", strengthen its intellectual property rights (IPR) regime and focus on improving the business environment, signalling that the meet between the trade ministers of the two nations on Tuesday was set to be frank and robust.

Froman made his comments a day before the sixth ministerial trade policy forum meeting between the US and India— the nodal platform to discuss and resolve bilateral trade and investment-related issues— that last met four years ago.

In Tuesday’s meeting between trade minister Nirmala Sitharaman and her counterpart Froman, India is expected to raise the issues of the totalization agreement aimed at avoiding double taxation of income with respect to social security taxes and high visa costs for Indians visiting the US.

The US may use the opportunity to urge greater market access and tighter IPR rules in India.

The meeting follows Sitharaman’s announcing that India and the US have resolved their differences on the Bali package of the World Trade Organization (WTO) to expedite implementation of the trade facilitation agreement (TFA), which will liberalise customs rules.

Froman, speaking at an event organised by industry lobby group Federation of Indian Chambers of Commerce and Industry (Ficci), said the Narendra Modi-led government had taken some positive steps—faster project approvals and raising foreign equity caps in defence and railways. But he expressed concern over some raising tariffs: “So we are optimistic but we are cautiously optimistic. There remains great potential for further liberalization, structural reform and the facilitation of business."

Elaborating on the recent deal between the two countries on the food stockpiling issue under the 2013 Bali pact, Froman said as part of the deal to allow the TFA to be fully implemented, both sides had agreed to intensify efforts to find a permanent solution to the food stockpiling issue and eliminate any ambiguity in the Bali package about the availability of the so-called peace clause in the meantime, “provided that food stockpiling programmes meet the conditions set in Bali".

“And together, we agreed that both of these elements— trade facilitation and food stockpiling—should be approved simultaneously in the WTO General Council, and which we are hopeful will happen in the next few days," he added. The Council is scheduled to meet on Wednesday to formalise the deal.

Lauding Modi’s Make In India initiative, Froman said the best way to promote manufacturing is by providing incentives—not by mandating it.

“If the government of India focuses on improving the business environment, addressing the issues reflected in India’s ease of doing business rating, foreign manufacturing will come and invest, create jobs and bring technology and integrate India into globally competitive supply chains. By contrast, as a number of studies have demonstrated, rigid local content requirements are likely to spawn less competitive industries, increase costs to producers and consumers and lower India’s economic welfare."

Froman said to achieve its full potential, India’s manufacturing future lies in creating the conditions in which world class investment will want to come to India, “not in building uncompetitive industries behind a wall of protectionism".

Noting that one-third of all Silicon Valley start-ups in the US have an Indian-American co-founder, Froman said it was in India’s interests to have and enforce a world-class IPR regime to promote innovation and entrepreneurship.

“Patents, copyright, trade secrets... piracy, counterfeiting, compulsory licensing... These are challenging issues, but dealing with them directly is critical if India is to play a leadership role in the knowledge economy, including on its way to becoming Digital India. In that regard, we have great interest in the ongoing review of India’s intellectual property rights policy," he said.

The US last month launched an out-of-cycle review of India’s IPR regime. The US has often blamed India alleging it is a regular offender of global IPR laws, while India has defended its patent policies and challenged the US to take the matter to the WTO. In September, both sides agreed to step back, and establish a high level working group on IPR to address issues of mutual interest.

Meanwhile, in preparation for Tuesday’s meeting, deputy USTR Robert Holleyman met with commerce secretary Rajeev Kher and industry secretary Amitabh Kant on Monday. “We had frank exchange of views. We will continue to work together and see how we can work towards a common goal... (several) issues were brought up and discussed and we would like to see each other’s perspective on those issues," Kher told reporters.

A commerce ministry official speaking on condition of anonymity said that with India liberalising sectors such as defence, railways and construction, US firms should start manufacturing in India, rather than complain.

“China is becoming a high-cost economy, hence such companies should start investing in India to make it part of the global supply chain. The US companies should also be shifting their research and development facilities to India as the future lies here." he added.

But the official admitted that US officials have raised some “genuine" concerns over unpredictability of tax policies and India’s rigid labour laws, which he said the centre was working on.

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Published: 24 Nov 2014, 03:30 PM IST
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