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What Narendra Modi may offer in exchange for Donald Trump’s goodwill

LiveMint logoLiveMint 23-06-2017 D. Ravi Kanth

Geneva: Prime Minister Modi is expected to offer costly trade and economic deliverables to US President Donald Trump on Monday in return for Guardian drones and other defence items as well as Washington’s political support and intelligence-sharing, according to people familiar with details of the upcoming meeting.

The deliverables demanded by the US include further concessions on the intellectual property front, such as TRIPS-plus (Trade-Related Aspects of Intellectual Property Rights) commitments and market access for several health-related products, technologies and other hi-tech items. An early indication of the US’ wish-list of demands became clear from comments by US trade representative Ambassador Robert Lighthizer at a Senate finance committee meeting.

Ambassador Lighthizer said: “Discussions are underway on a list of trade irritants, including India’s spotty intellectual property rights protection”, according to a report in Washington Trade Daily on 22 June.

“Mr Lighthizer said he is hoping for some ‘deliverables’ out of the Trump-Modi meeting, but added the administration is prepared to take action where it believes India is violating WTO (World Trade Organization) rules,” the report said.

Ahead of Modi’s visit, several US lawmakers have also demanded that New Delhi reconsider its decision to cap prices of heart stents, threatening that it could adversely affect American firms, preventing them from launching new medical products in India, according to a Reuters report.

Although Modi is bound to take up issues concerning the recent hurdles created by the Trump administration in information technology (IT), steel and other sectors, it is not clear whether Washington will agree to any specific commitments to provide more access to Indian manufacturing and services companies.

“India cannot be a one-way street for the US administration, which continues to block Indian opportunities in the American market while expecting that the Indian market should be wide open to them,” said a person familiar with the preparations for Modi’s visit.

At a time when most countries, including those in the European Union and China, are closing their markets, India must remain cautious with the US instead of agreeing to a “skewed” exchange rate in terms of the price paid by India for political and defence support on the one side, and the trade and economic concessions offered by New Delhi on the other, this person said.

On the trade/economic front, for example, India has consistently demanded that the US settle for a “totalization” agreement involving the protection of benefit rights of workers and short-term IT and other service providers who divide their working career between two or more countries. The US and India have already signed totalization agreements with several countries.

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But when it comes to signing a totalization agreement with India, whose IT companies lose more than more than $1 billion on social security payments in the American market, Washington has consistently rejected India’s demand, according to another person who asked not to be quoted. “Effectively, the Indian IT companies are annually paying a tax of more than $1 billion to the US,” the person said.

The US also refuses to agree to India’s demand for treating short-term IT service providers “as a trade and not an immigration problem”.

WTO’s General Agreement on Trade in Services has categorized the movement of short-term service providers under Mode 4 involving the movement of natural persons.

At a time when there is a serious shortage of skilled IT workers in the US, Prime Minister Modi must convey in unmistakable terms that the US’s restrictions are unsustainable. “Both economies gained in IT services and perhaps the US gained much more than India,” the second person cited above said.

US companies have a huge presence in the Indian market as nine of the top 15 companies are American, with an annual turnover of more than $25 billion. “Both countries must recognize the importance of the IT sector in the bilateral relationship, which is the ‘cornerstone’ of the Indo-US partnership and which must be nurtured and allowed to grow, instead of stymieing it,” the person added.

“Otherwise, the whole initiative of strategic partnership of taking it (India-US bilateral trade) from $100 billion (in 2014) to $500 billion (in 2025) is not going to happen,” he added.

“The IT sector, which has benefited both sides enormously, should not be viewed as though it benefited or helped one country,” Rentala Chandrasekhar, president of industry lobby group Nasscom, told Mint.

On the intellectual property front, the US wants India to agree to “TRIPS plus” standards of IP protection and enforcement that will severely affect the Indian pharmaceutical sector. The TRIPS-plus standards in the pharmaceutical sector involve the definition of patentability criteria, patent term extensions, test data protection, the linkage of regulatory approval with patents and enforcement of IPRs (intellectual property rights), including border measures.

Such provisions, according to TRIPS analysts, will delay the market entry of generics and increase prices of medicines. “What the US is asking in the IP sector is purely a US requirement as set out in the Special 301 which is over and above international obligations,” said a TRIPS negotiator from South America.

India has complied with the WTO’s TRIPS agreement and therefore, the US complaint that India’s IPR protection and enforcement is deficient is unsustainable, the negotiator added.

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