2016 NTE Report Confirms U.S. Exporters Face Significant Barriers to Trade and Investment in India
The Office of the United States Trade Representative (USTR) recently released its 2016 National Trade Estimate Report on Foreign Trade Barriers (NTE), which includes a detailed analysis of the current trade and investment relationship between India and the United States. The report highlighted many of the concerns detailed by USTR in October, including new and existing tariff barriers, localization policies, and intellectual property restrictions that prevent India from becoming a preferred business destination for foreign companies and investors.
USTR and AFTI both acknowledge that there has been increased high-level dialogue between the United States and India on commercial and economic issues and that India has announced ongoing economic reform plans. However, India has not taken significant, concrete steps to correct a wide range of trade barriers, from burdensome regulatory requirements and import tariffs to IP restrictions, which undermine innovation and in some cases discriminate against U.S. businesses operating in India.
As highlighted in the NTE report, below are a few examples of policies in India that must be reformed to level the playing field for American workers and businesses:
Domestic testing requirements on electronics and information and communications technology (ICT) are overly burdensome and expensive.
“…India retains the objective of testing all ‘security-sensitive’ telecommunications equipment in India starting April 1, 2016. However, the testing criteria have yet to be published or notified to the WTO, and India’s domestic security testing capacity is currently very limited.”
“In 2015, the coverage of the CRO [Compulsory Registration Order] increased from 15 to 30 product categories. U.S. stakeholders have raised concerns with the government of India that include delays in product registration due to the lack of government testing capacity, a cumbersome registration process, and tens of millions of dollars in additional compliance costs, which include factory-level and component–level testing.”
India has increased duties on a number of imports, and the country’s custom tariff structure is complex and lacks transparency.
“Despite its goal of moving toward Association of Southeast Asian Nations (ASEAN) tariff rates (approximately 5 percent on average), India has not systematically reduced the basic customs duty in the past six years… Rather than liberalizing its customs duties, India instead operates a number of complicated duty drawback, duty exemption, and duty remission schemes for imports.”
“In 2014, India increased tariffs on certain categories of telecommunications equipment… In 2015, India increased duties on a variety of goods. In August 2015, it increased duties on certain iron and steel products… India maintains very high basic customs duties, in some cases exceeding 20 percent, on drug formulations, including life-saving drugs and finished medicines listed on the World Health Organization’s list of essential medicines… Many of India’s bound tariff rates on agricultural products are among the highest in the world, ranging from 100 percent to 300 percent.”
India’s growing array of forced localization barriers disadvantages U.S. businesses and manufacturers.
“India’s National Manufacturing Policy calls for increased use of local content requirements in government procurement in certain sectors (e.g., ICT and clean energy). Consistent with this approach, India issued the Preferential Market Access notification, which requires government entities to meet their needs for electronic products in part by purchasing domestically manufactured goods.”
“Under the JNNSM [Jawaharlal Nehru National Solar Mission], India imposes certain local content requirements (LCRs) for solar cells and modules. Specifically, under the JNNSM, participating solar power developers must use solar cells and modules made in India in order to enter into long-term power supply contracts and receive other benefits from the Indian government…In May 2013, the WTO established a panel to examine the LCRs under Phase I and II of the JNNSM …On December 21, 2015, the [WTO Dispute] Panel issued a report finding the LCRs inconsistent with India’s national treatment obligations…” (Note: India may appeal this case)
Weak protection and enforcement of intellectual property rights in India remain a serious concern, particularly in the areas of copyrights, patents, trade secrets, and innovation-promotion.
“…[C]urrent Indian law suggests that the lack of local manufacturing in India may be considered in reviewing a request for a compulsory license, and India’s National Manufacturing Policy recommends curtailing patent rights to facilitate technology transfer in the clean energy sector… In addition, while the United States welcomes India’s interest in reducing patent review times, the proposed draft patent rules published in October 2015 raise serious concerns, particularly with respect to imposing local manufacturing requirements in exchange for expedited review.””
“India currently lacks a specific law to enforce against trade secrets misappropriation. While other laws may be used in certain circumstances to provide civil and criminal recourse, foreign and domestic Indian companies would benefit from stronger and clearer protection in the market.”
The USTR NTE, as well as the 2015 International Trade Commission’s Trade and Investment in India 2014-15 Report, clearly shows that the pro-business rhetoric of the Modi government has not yet translated into positive action. AFTI urges the Indian government to consider carefully the concerns raised by U.S. companies, with their long track record of promoting sustainable growth, job creation, and economic opportunity in countries around the world. Addressing these concerns and establishing a transparent, predictable and friendly environment for innovative businesses would go a long way toward the achievement of the Modi administration’s goals for India’s future prosperity.