Monday, 10 August 2020

Why future is bleak for limited Indo-US trade deal too

By Ashwani Mahajan
Updated: February 24, 2020 12:20 pm

It’s a known fact that Indian government’s action on capping the prices of stents, knee implants and many other medical devices havebeen irking the US, as this action has impacted the profitability of their companies because they are no longer able to charge hefty prices for these implants and devices. However, at the same time this act of the government has given huge relief to patients and it goes without saying that this has been an important and popular decision of Modi government about which Prime Minister has been taking pride.

Indo-US limited trade deal is in works for long, but it couldn’t be concluded. The reason behind the inconclusive trade deal has not been very far to seek. The US has been asking for the concessions, which India may not be able to concede due to the concerns of public health, domestic industry and even the religious sentiments. Now that the US’s Trade Representative (USTR) Robert Lighthizer is in New Delhi from February 11 to put pressure on the Indian negotiators and stitch together the deal before proposed visit of the US President Donald Trump by February end; there is no need to succumb to the pressure. The deal is their political requirement in their election year. The Indian negotiators must put the country’s interests and benefit for Indian entrepreneurs paramount.

 

Price Controls and IPRs

For long the US firms have been lobbying against price controls of medical devices, especially coronary stents. It’s an open secret that these companies have been charging unaffordable prices for these stents, causing huge hardships for patients and that led National Pharmaceutical Pricing Authority to suggest for capping the price, which had tacit support of civil society; and government finally enforced the same. Now US wants the cap to be lifted and replaced by capping trade margins instead of price caps. Removing price controls on medical devices and regulating only trade margins, as the U.S. has demanded, would allow manufacturers to fix very high introductory prices and compromise access to medical devices. If India concedes it would be an unpopular decision, which Modi government can ill afford to take. Moreover, there is no reason why India should negotiate price control policies, in trade negotiations, which are meant to protect public health.

Further, US multinational pharmaceutical companies have been lobbying for removing public interest safeguards in the a Patents Act such as provisions restricting the scope of patentability (ever-greening of patents), local working as a ground for grant of a compulsory license, pre-grant oppositions etc. These provisions in the Patent Act have a history and are key to protect our public health; and tweaking of the same may have far reaching implications. Therefore, this demand again is very unlikely to be conceded by Indian side.

 

Lifting curbs on E-Commerce giants

We all know that US’s displeasure, with India is linked to the economic interests of their companies. It’s notable that India is trying to curb the discounts given by US e-commerce firms Amazon and Walmart (which has acquired Flipkart). India has a clear stand that these companies have been circumventing laws by burning cash and offer deep discounts, endangering livelihood of crores of people engaged in retail trade and also aspiring young e commerce players, who are not able to survive due to deep discounts. If under these circumstances, US wants India to lift curbs on unethical and illegal business practices of US giants, it can’t be accepted in view of huge job losses feared.

 

Non Vegetarian Milk

Milk is a vegetarian diet in India. Demand of US administration is that India should remove the condition that only the milk of vegetarian cows be imported from US. Since, in the US, cows are fed with blood and meat, and import of milk from such cows is prohibited in India; India wants that US exporters certify that milk is from cows, which are fed only vegetarian feed. US needs to understand that this demand of US is not only unjust, it can’t be accepted also due to religious reasons.

US needs to understand that strong India is important for its economic and strategic interests. The fast-developing Indian economy is good for the American economy. US exports Oil and gas worth $4.5 billion to India and growing. In next seven years India will also be buying 300 Boeing aircraft from the US at a total cost of $39 billion. Apart from this, several Indian defence deals are also in the pipeline. Therefore, if US is bargaining on India’s present trade surplus with US, the same would turn to deficit in coming years.

It’s important to note that while US is pressing India to protect interests of its companies, India’s first priority is to protect its public health, employment in small businesses and industries.

 

Delusion of GSP

In March 2019, President Trump announced withdrawal of General System of Preferences (GSP) from India. Impression was sought to be created that India is the largest beneficiary of the US’s GSP regime as 1900 products are covered under it, this withdrawal will impact India’s annual export of US$5.6bn to the U.S., which is approximately 10 per cent of its total export to that country. Its notable that total value of duty concession under GSP is US$190mn per year for Indian exporters.

After the withdrawal of GSP by US, India’s official stand has been that this will not have much impact on Indian exports. Although some may argue that this may impact leather exports from India and may potentially affect employment; however, this is also true that most of the items under GSP have been intermediate products for US industries, which are essential for US industries producing high value products with significant value addition. Higher duty on these products are likely to affect competitiveness of these US industries. Perhaps that’s the reason that post GSP withdrawal, exports items from India actually increased by 32 percent in June 2019, rather than declining.

Now when President Trump is trying to negotiate GSP to gain access in Indian markets and force India to tweak its price controls and IPR, it raises questions on the ethical grounds for the same. It may be noted that GSP is US’s unilateral policy gesture for developing countries and withdrawal or revoking of the same shouldn’t be ethically used in any manner whatsoever to press those countries to sacrifice their national interests including public health, employment and livelihood.

The US pressure on India, can be termed as arm twisting exercise. But if India concedes, this would go against the interests of the Indian people—our farmers, traders and others.

Finally, while negotiating with US, demands such as giving access to US agricultural products, lowering tariff on Harvey Davidson Motorcycle are also on table, but US needs to appreciate India’s concerns of livelihood, employment and public health.

By Ashwani Mahajan

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