The meeting between Prime Minister Manmohan Singh and US President Barack Obama on September 27, 2013, saw reaffirmations of what the leaders described as an "outstanding" and "indispensable" partnership, and of the US' support for the emergence of a "strong India". Implicit in their approach was the recognition that beyond the domestic political gridlock that currently preoccupies both leaders, India and the US also face daunting economic challenges. Understandably, the primacy of economic issues and invigorating economic growth was in the forefront of the Obama-Singh meeting agenda.
At this juncture, it is important for India and the US to rise above transactional bickering and realign their sights towards the vast potential of bilateral economic ties. This necessitates a constructive engagement on economic issues that the leaders apparently achieved but evidently continues to elude powerful interests among the US business lobbies and Congress.
It would appear from a spate of recent "opinion" pieces in US business journals that the tirade against India's allegedly discriminatory business practices has only continued to escalate. Lobbyists for US' pharmaceutical industry are demanding action by the Congress and the administration against India's so-called "mercantilism", including through retaliatory measures designed to halt India's "misappropriation" of intellectual capital.
Such blatant propaganda is both unsustainable and unproductive, and only serves to further deteriorate the business climate between India and the US. It is also unusual.
As noted economist Arvind Subramanian of the Peterson Institute observed in his article "The curious case of the protectionist dog that has not barked" (Financial Times, July 10, 2013), the huge structural trade shock from an unprecedented surge of Chinese exports in recent years did not elicit a significant US response, or anything more than a whimper of demands for protectionist actions.
India-US business interactions are hardly based on head-to-head competition, except marginally in the case of information technology services and generic medicines. India can be blamed for shackling its economy but hardly of rampant mercantilism. It would be reasonable to conclude that the drumbeat of complaints against India that have already led to the launch of an investigation of India's trade practices by the US Federal Trade Commission are basically motivated by business rivalries.
It is well recognised by Indian policymakers that urgent steps are necessary to improve India's investment climate and revive economic growth. These must include, inter alia, strengthening the enforcement of intellectual property rights (IPRs).
That said, there is no truth to the argument that Indian laws and regulations single out the US for discriminatory treatment, or exact punishment on US businesses and workers.
Between April 2010 and March 2013 alone, India's Controller General of Patents, Designs and Trade Marks awarded as many as 1001 pharmaceutical patents, of which 771 (a staggering 77 per cent) were granted to foreign firms, largely from the US and Europe. In fact, the two greatest beneficiaries during this period were US-based pharma giants Eli Lilly and Pfizer, who between them secured a total of 68 patents.
India has made tremendous progress on IPR protection since acceding to the WTO in 1995 and introducing its new patent system in 2005. India's patent laws and policies have remained well within the rights and obligations accorded by the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS). The provisions of India's Patent Act of 2005 are fully TRIPS-compliant, including with regard to necessary safeguards for the protection of public interest, national security, bio-diversity and traditional knowledge.
Decisions taken by the Indian courts on patent cases are in keeping with the enforcement of Indian law that imposes tough standards on the patentability of incremental innovation, while rewarding "true innovation". In its landmark judgement against Myriad Genetics on June 13, 2013, the US Supreme Court ruled that naturally occurring genes cannot be patented. This reinforces the precedent that countries such as Brazil and India have set in challenging patent proliferation and evergreening that is prevalent in advanced economies such as the US, in the interest of providing affordable health care products for their citizens.
In finding a way forward, it is time for the Indian government to address the growing trust deficit with foreign pharmaceutical manufacturers on the question of IPRs. Within the broad framework of the existing law, the concerned Indian authorities must try to improve the enforcement of patent protection, including through swift action against infringements, facilitating effective recall mechanisms and punishing violators. India needs to ensure a balanced and predictable IPR regime, where unwarranted interpretations of the law or arbitrary enforcement of compulsory licences are minimised.
On its part, the US - and the international - pharmaceutical industry needs to revisit its approach to doing business in India, particularly its pricing of life-saving drugs. It must accept that practices developed primarily for the excessively high-cost US health care market, dominated by insurance exchanges and restrictively high pricing, are neither feasible nor likely to find traction in the public interest in India, or elsewhere among emerging economies, for that matter.
On several other areas of concern to US business, there are signs of forward movement. India has already taken action to review the provisions of its preferential market access policy. Hopefully, the coming months will also see improvements on taxation and transfer pricing issues.
India, meanwhile, awaits redressal by the US of its concerns over the free movement of highly-skilled workers under the proposed US immigration Bill, and progress on the totalisation of social security contributions paid by Indian H1B workers.
Placing the India-US economic relationship on an accelerated trajectory requires serious bilateral engagement under the US-India Trade Policy Forum as well as fast-tracked progress on a bilateral investment treaty. Hopefully, the reassuring outcomes of the recently concluded Singh-Obama meeting will help restore a more reasoned discourse on trade and investment issues that will prove far more beneficial than laundry lists of recrimination and demands for retaliation.
H K Singh holds the Wadhwani US Chair at ICRIER, New Delhi. Aman R Khanna is research associate with the Chair
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