BackWTO deal deadlock hangs over Narendra Modi’s business push with Obama
India will be looking for more investments from the US, especially in manufacturing and high-end technology
Premium
New Delhi: India and the US will look to impart fresh momentum to bilateral economic ties during Prime Minister Narendra Modi’s upcoming visit and talks with President Barack Obama, but a lingering deadlock over the Bali agreement under the World Trade Organization (WTO) may prove to be a stumbling block.
After reaching the high-water mark in 2008 with the signing of the civilian nuclear cooperation deal, the relationship between India and the US has seen a downward spiral, with widening differences on trade and economic issues, including India’s patent regime.
As Modi prepares for his first meeting with Obama, both have their sights set on reviving economic ties and have resumed discussions to engage in ministerial-level talks through the Trade Policy Forum, which has not met since 2010.
In 2012, three days before the eighth round of Trade Policy Forum talks were to begin, the meeting was deferred indefinitely by the US, allegedly because it was certain that India was unlikely to yield to its demands.
Commerce secretary Rajeev Kher earlier in September met acting deputy US trade representative Wendy Cutler to set the agenda, modalities and dates for the Trade Policy Forum meeting, to be held in New Delhi by December.
While the US proposed to set up a secretary-level working group to resolve concerns over India’s intellectual property rights (IPR) regime, especially relating to pharma patents, India is not very keen on the suggestion; India feels such discussions should happen at a much lower level.
India will be looking for more investments from the US, especially in manufacturing and high-end technology, given Modi’s focus on reviving stalled industrial production in the country.
A US government official said on condition of anonymity that the outcome of the talks should be judged by their tone rather than substance. He also indicated that the US can at best create a system to facilitate investments into India.
One irritant is India stalling implementation of the WTO’s trade facilitation agreement (TFA) reached in Bali, Indonesia, last year to simplify customs procedures, facilitate the speedy release of goods from ports and cut transaction costs.
India has tied its ratification of the agreement to a permanent solution on the contentious issue of public stockholding of foodgrains.
At the heart of the problem is a WTO rule that caps subsidies to farmers in developing countries at 10% of the total value of agricultural production, based on 1986-88 prices.
Developing countries complain that the base year is outdated and that they need to be given leeway to stock enough grains for the food security of millions of their poor. Developed countries say India had agreed to make trade facilitation a WTO rule by 31 July, while a permanent solution to the food security issue will be found only by 2017.
India argues that keeping different timelines for various parts of the Bali package is against the WTO rules of a single undertaking, where everything needs to be implemented simultaneously. India believes progress on the TFA, which suits wealthy nations, has been quicker than that on food security.
The US has already indicated that it will press Prime Minister Modi not to block the TFA.
US assistant secretary of State for South and Central Asian Affairs Nisha Biswal said earlier this week that India “does itself a discredit" by blocking the TFA, rekindling a dispute that overshadowed an 1 August meeting between US secretary of state John Kerry and Modi in New Delhi.
The two sides have also dragged each other to the WTO, further vitiating bilateral ties. The US in 2012 took India to the WTO on India’s ban on the import of poultry products from the US. India dragged the US to the WTO for consultations over import duties levied on Indian steel products.
A dispute settlement panel has also been set up at the WTO in May on the request of the US, which complained that certain provisions mandating the use of local inputs in India’s solar power generation programme were not compatible with multilateral trade rules.
India has also been threatening to seek consultations at the WTO against what it calls a discriminatory US government procurement and a visa-fee regime, which are also likely to feature during the Obama-Modi talks.
Restriction on the mobility of India’s IT professionals has been a continuing concern for India. The new restrictive measures on skilled immigrant visas being discussed in the US Congress as part of a broader immigration reform proposal have made Indian IT companies jittery.
Finalising a so-called totalisation agreement to protect the interests of Indian professionals in the US, who contribute more than $1 billion annually to the US social security system without availing of any benefits in return, may also be raised by India.
The US on its part may raise the long pending negotiations for a bilateral investment treaty to provide greater protection to US investments in India and greater market access, especially in the agriculture sector.
India’s intellectual property regime is another cause of friction. The US has expressed concern over India issuing compulsory licence to Hyderabad-based Natco Pharma Ltd in March 2012, allowing it to manufacture and sell a copy of Bayer AG’s liver and kidney cancer drug Nexavar.
That was the first time an Indian firm was granted the so-called compulsory licence, which permits a generic drug producer to make and sell its version of a patented drug without the consent of the patent holder in specific cases citing domestic public health concerns.
The US is also disturbed with the patent rules followed by India in granting drug licences. The Indian Supreme Court in April 2013 rejected a patent application by Swiss company Novartis AG for its cancer drug Glivec, citing a section of the law that doesn’t allow evergreening of drug patents with a minor tweaking of the formula.
India, however, has maintained that its intellectual property policy is transparent and consistent with the trade-related intellectual property rights (TRIPS) agreement and it has only used flexibilities available to all members of the WTO.
The US has been threatening to further downgrade India from its current status of priority watch list based on its alleged poor record of protecting IPR, but desisted in April from categorising it as a priority foreign country—a move that could have invited trade sanctions.
But it said that it would conduct an out-of-cycle review of progress made by India on this front in the fall this year.
The US is worried about India’s intellectual property regime and Obama will likely push Washington’s point of view hard in discussions with Modi, said Anwarul Hoda, a professor at the Indian Council for Research on International Economic Relations.
“The current developments on IPR and WTO issues indicate the stand off will continue," he said.
Modi’s visit to the US and talks with Obama may produce more rhetoric and fewer results, said Biswajit Dhar, a professor of international trade at the Jawaharlal Nehru University.
“Obama is already on a weak wicket on the domestic front. There is hardly any assurance that he can give on issues of India’s interest such as visa and the totalisation agreement."
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
