Indo-US trade: US accuses India of using unfair means

"I promise you a kinder and gentler America."- George Bush during the American presidential campaignLast month, the kind and gentle America was nowhere on view. In its place was a rampaging Rambo holding out threats against India - along with Japan and Brazil - if it did not open up its markets, ease restrictions on foreign investment and change patent laws.The US move had been a long time coming. Still, when in late May US Trade Representative Carla A. Hills cited India's so-called restrictive trade practices as possible grounds for future trade retaliation, it set off shock waves in India. The Government has appealed to the General Agreement on Tariffs and Trade (GATT), the Geneva-based international trade agency, against the US action.Government officials, opposition leaders and businessmen reacted with a mixture of bravado and trepidation. Union Commerce Minister Dinesh Singh fumed: "The US is guilty of double standards. There are quotas on US imports of sugar and textiles besides a variety of other restrictions. In fact, we find them placing barriers in each area in which we become competitive." Janata Dal President V.P. Singh said: "We must make it clear to the US that we cannot be forced to go against our national priorities." Even so, apprehensions persisted that tough US measures could hit exports to the US, restrict Indian access to advanced technology - and even spark off a trade war.The US has threatened action under two provisions of a new law passed last year. The so-called "Super 301" clause relates to unfair trade practices. Under the "special 301" provision India will be clubbed with eight other countries in a "priority watch list" for allegedly not properly enforcing intellectual property rights such as patents, copyrights and trademarks. The stiff law also authorises retaliation against another country if its actions are considered "unreasonable" - even if these do not violate any bilateral or multilateral agreement."The US is guilty of double standards. We find them placing barriers in each area in which we become competitive."Dinksh Singh Union minister for commerceQuite clearly, the tough talk would be unacceptable to the Indian Government in an election year - as US Ambassador John R. Hubbard told Hills over the telephone, according to a diplomatic source. But Hills had already made up her mind. The "301" moves, she said, would make other countries "sit down and talk (to the US) about (removing) trade barriers."The US has made it amply clear what it expects from India {see box). But many in India argue that the US has few grounds for complaint on trade-related matters. US exports to India have jumped sharply in the last two years. India's trade surplus with the US last year was about $700 million (Rs 1,120 crore), small beer when compared with Japan's $55 billion (around Rs 88,000 crore), South Korea's $9 billion (Rs 14,400 crore) or Taiwan's $13 billion (Rs 20,800 crore). Why then was India bracketed with Japan when Taiwan and South Korea were left out?One answer: the absence of a strong pro-India lobby in the US. While South Korea and Taiwan flew in planeloads of officials to negotiate with the US Government, India sent only a delegation of businessmen. And as a member of the delegation admits, it arrived "too late".Others believe the US was peeved by the launch of the Agni missile and India's trade dispute with Nepal. American officials, point out that the US Congress had initiated these steps as early as last August.A more plausible explanation is that India and Brazil are being penalised for attacking US positions in forums such as GATT. Says Howard Rosen of the Washington-based Institute for International Economics: "At GATT, the US had watched India and Brazil walk away after blocking its efforts to push its trade interests. This is a way of bringing them back. It is no accident that the 18-month deadline for negotiations coincides with the conclusion of GATT's Uruguay round of talks in December 1990.""I asked the Americans, what will be the political effect when a poor man in India loses his job because of you?"Hari Shankar Singhania lndo-US Joint Business CouncilFinally, some Indian Government officials argue that the US is worried about India's growing economic stature. Insists a Planning Commission official: "They want to take pre-emptive action before we become as powerful as Japan." That may be overstating the case, but Hills bolstered some of these perceptions when she said the US action had been governed by points of "principle" and has nothing to do with trade volumes.The US is hardly entitled to hold forth on principles. Admits a US diplomat: "During the Reagan administration, the proportion of US imports that had some restriction or the other nearly doubled from 11 per cent to 21 per cent."Still, the chief concern last fortnight was not ethics but the possible consequences. Retaliation could mean higher duties on Indian exports or the removal of particular items from the Generalised Scheme of Preferences list, which allows goods to enter America at zero or low rates of duty. That's what business associations are worried about. Says D.H. Pai Panandiker, secretary-general of the Federation of Indian Chambers of Commerce and Industry: "We are most concerned."Squeezing Indian exports is not the only way the US can hit back. Says a senior Finance Ministry official: "We saw what happened in the case of the Cray supercomputer. Now, if the US prevents us from importing components we require for our space and nuclear energy programmes, we'll be in a real fix."Some businessmen also worry about the political fall-out. Industrialist Hari Shankar Singhania, who heads the Indian side of the Indo-US Joint Business Council, pointed out to US officials that more than 70 per cent of Indian exports to the US were goods produced in labour-intensive industries. Says Singhania: "I asked them, are you going to retaliate against these industries? What will be the political effect when a poor man in India loses his job because of you?"The problem is that the US seeks radical alterations in the Indian approach to fundamental policy matters:Foreign access to the Indian market. The US has consistently complained of import licensing regulations and heavy tariffs, arguing that these place barriers to the entry of US goods. Among the demands: easier access for US insurance companies and American films and home videos.Foreign investments. The US wants foreign companies to be allowed more than 50 per cent of the equity in ventures here.Intellectual property rights. US officials have been pressing India to tighten patent and copyright laws - and join the Paris Convention for the Protection of Intellectual Property, that lays down patent protection guidelines for its 98 member-countries.All this, Ambassador Hubbard argued, would be in line with the Rajiv regime's liberalisation policies - an argument that's not gone down well with the Government. Retorts Dinesh Singh: "They can't dictate what our pace of liberalisation should be.""If India accepts US demands on stronger laws for product patents, we will be setting the clock back."Bhai Mohan Singh Chairman, Ranbaxy GroupFor the moment at least, the Government is not willing to toe the US demands. It has pointed out that foreign companies can hold more than 40 per cent equity in Indian firms (up to 100 per cent in some cases), if they are export-oriented and operate in high-technology areas. And to US objections that the procedures to obtain such permission are too cumbersome, an Indian Government official retorts: "Do they (American companies) expect us to give them more concessions than are given to large business houses here covered by monopoly laws?" No one takes seriously the US demand that foreign firms be allowed to enter the Indian insurance sector (other than marine insurance and re-insurance). A highly-placed US diplomat exclaimed: "It is sheer insanity to expect India to suddenly privatise its insurance industry."On intellectual property rights, India concedes that its patent laws can be better enforced. But it also maintains that in a developing country, the rights of the individual inventor must be seen in relation to his obligations to society.Moreover, Indian pharmaceutical manufacturers could be hard hit by any changes in the patent law. The law tilts the scales towards pharmaceutical manufacturing processes, rather than products. The Patent Act of 1970 has helped the Indian drug industry develop, kept prices low and brought life-saving drugs to the country quicker than they would otherwise have. Warns Bhai Mohan Singh, chairman of the Delhi-based Ranbaxy group of pharmaceutical companies: "If India accepts US demands on stronger laws for product patents, we will besetting the clock back." He also points out that the so-called discriminatory laws have hardly prevented foreign drug companies from expanding in India.There is no denying, however, that computer software piracy is rampant. Says Ashok Bhojwani who heads TSG Consultants, a Delhi-based software firm: "If a pirated software package costs Rs 1,000, there is every incentive for an Indian to buy that instead of a legally imported one at 15 times the cost.""The world's two largest democracies are destined to live amicably with each other."Nrupknder Rao Indo-American Chamber of CommerceAmidst the controversy, there have been some fears that the Government is buckling under the US pressure. It agreed to participate in talks on intellectual property rights under the aegis of GATT. But the Government insists it has not compromised its position, merely shifted its "negotiating stance".The one bright spot in all this ballyhoo is that the US law delays retaliation for quite some months. Retaliation will have to be preceded by an "investigation" by the US trade representative to quantify the losses suffered by US companies on account of India's so-called restrictive trade practices.A few moves have already been made in this direction. In April, an American association of seven bodies representing US computer, film, publishing and music industries placed estimates of the loss suffered due to "piracy and market access barriers" in India last year at $123 million (Rs 197 crore).Meanwhile, the Government seems to have adopted a cautious stance. Says a Union minister: "Sine we cannot, and must not, conduct official negotiations, I would favour quiet, informal behind-the-scenes talks." A bureaucrat adds: "If the US hits back, there's little we can do."Not everyone believes that the US will implement the threat of retaliation. "I don't think they will hit back because that would hurt American business interests in the long run," says Binay Kumar, chairman of Banaras House Ltd, a large exporter of Indian textiles to the US. Nrupender Rao, president of the Indo-American Chamber of Commerce, too is optimistic: "The differences will be sorted out. The world's two largest democracies are destined to live amicably with each other."Published By: AtMigration Published On: Jun 30, 1989--- ENDS ---

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Indo-US trade: US accuses India of using unfair means

US accuses India of using unfair means.

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