The Hill: India’s Republic Day should bring action toward trade reform

The Hill

India’s Republic Day should bring action toward trade reform

January 24, 2015

By Patrick Kilbride and Chris Moore

Next week, President Obama will travel to New Delhi as Prime Minister Narendra Modi’s chief guest for India’s Republic Day celebration. The invitation is the first ever extended to a U.S. head of state and an important symbol of all that unites our two nations.

The occasion will celebrate the birth of a constitution that guarantees freedoms for India’s more than 1.2 billion people. But the President’s visit also offers the leaders of the world’s largest democracies a chance to discuss ways to further a promising bilateral commercial relationship that has failed to achieve its full potential. For example, with the third largest economy and second largest population on earth, India ought to be a leading U.S. trading partner. Yet the United States exports less to India than to a much smaller Singapore.

A growing list of trade and investment barriers in India is threatening the future growth and development of two of the world’s most creative economies – from high tariffs to policies that mandate the local production of telecommunication and solar energy equipment, to a weak intellectual property regime.

Removing these barriers would have a significant impact on trade and investment, helping to unlock the job creation and economic growth potential of the bilateral commercial relationship. Just last year, the U.S. International Trade Commission (ITC) surveyed more than 3,700 U.S. businesses and found that more than a quarter of them are “substantially adversely affected by restrictive Indian policies.”

Not surprisingly, more than 60 percent of firms affected have made strategic changes in response to these barriers, most often directing fewer resources to the Indian market. But according to the ITC, eliminating trade and investment restrictions and raising intellectual property protection standards in India would increase U.S. exports to that country by two-thirds and more than double U.S. investment. That is a powerful incentive for reform and change that would benefit India and the United States.

Modi’s landslide election last May raised hopes that reform was on the way. His government announced plans to strengthen India’s business environment by increasing investment limits in key sectors and addressing tax challenges for overseas firms. Under his leadership, India and the United States are re-engaged in bilateral discussion on trade, investment, intellectual property, information technology and many other shared priorities.

However, promising early statements and increased discussions have not yet delivered real results. Over the last seven months, India has not only maintained existing restrictions and defended weak intellectual property protection policies, but increased tariffs on information technology products. These steps, among others, contradict Modi’s commitment to an India that is “open for business”.

To put India-U.S. economic ties on a productive path and build a truly strategic partnership, talk must turn to action. Obama must urge the prime minister and his government to level the playing field for U.S. exports and investment. He must promote the kinds of market-opening reforms that can build trust, provide certainty for investors and innovators, and create shared opportunities for businesses and workers in both countries.

Change will be challenging, as it always is. It will take work on both sides. But with so much to gain from greater economic freedom and openness and from policies and approaches that support and reward innovation, we can’t afford to miss this chance. On Republic Day, businesses in the United States congratulate India on the achievements of the past, and we look forward to concrete steps that can build and strengthen trade and investment ties in the months ahead.

Kilbride is executive director for International Intellectual Property for the U.S. Chamber of Commerce’s Global Intellectual Property Center (GIPC). Moore is senior director for International Business Policy for the National Association of Manufacturers (NAM). NAM and GIPC serve as co-chairs of the Alliance for Fair Trade with India (AFTI).