Secretary of State John Kerry was in India this week for the fourth U.S.-India Strategic Dialogue. Secretary Kerry's mission is designed to enhance what has been a traditionally strong trade and diplomatic relationship between the two countries. Unfortunately, storm clouds loom on the horizon that need to be addressed to ensure that this relationship remains effective and in the best interest of both countries.
In particular, India is taking a page from its Chinese neighbors and embracing deeply mercantilist trade policies which threaten to not only undermine global trade, but also U.S. competitiveness and jobs. For example, India's new turn to "forced localization" seeks to make local production a condition of accessing Indian markets. The centerpiece of India's new strategy is its Preferential Market Access (PMA) mandate that uses restrictive government procurement rules to ensure that 80 percent of the computers and electronics sold in the country are manufactured domestically by 2020. But India is not content to require domestic production of ICT products, it wants to ensure domestic production in many other industries. For example, India's Supreme Court garnered headlines when it denied a patent for the revolutionary cancer drug Glivec (though the drug had been patented in dozens of countries), paving the way for copies of the drug to be produced by Indian drug manufacturers.
For too long the United States has allowed critical competitiveness issues like these to take second place to security and political concerns. Believing that the U.S. economy is so dominant that we can afford to turn a blind eye to foreign mercantilist polices, American policy makers have long sacrificed U.S. competitiveness concerns on the altar of global diplomacy, including now the issue of global warming as Secretary Kerry presses the Indians to act on climate change (something America has failed to do). But the days of U.S. economic dominance are gone. As such, India's adoption of such "innovation mercantilist" policies should no longer be a dormant, backburner issue in U.S.-India negotiations. They should be front and center since they directly limit the ability of American companies to sell into India's vast marketplace, resulting in fewer American jobs. These policies also limit global innovation and directly contravene numerous trade agreements between the two nations as well as World Trade Organization commitments.
Yet, while our foreign policy establishment may still be operating as if we're stuck in the 20th century, others are increasingly taking note of how these actions threaten the U.S. economy. The House Energy and Commerce Committee held a hearing today on how India's industrial policy hurts U.S. companies and last week more than 170 Members of Congress wrote to President Obama urging swift action against India's unfair trade policies. This followed a letter sent by House Ways and Means Chairman Dave Camp imploring the administration to raise "several pressing trade and investment issues" at the Strategic Dialogue. In addition, 40 Senators, led by Senator Rob Portman (R-Ohio) and Senator Bob Menendez (D-NJ), sent a letter to Secretary Kerry urging him to engage in bilateral discussions with the Government of India on these same concerns. Elsewhere, a collection of 17 U.S. business organizations sent correspondence to President Obama strongly urging the administration to press India to repeal existing and eschew enacting new unfair trade practices.
It's time for Secretary Kerry and the administration to make discussion of India's mercantilist trade policies a top priority. With $60 billion in trade revenues between the two nations, it's imperative that India-U.S. trade is based on market forces, not Indian government dictates. American jobs are at stake and our long-term competitiveness hangs in the balance. And that means being willing to put American economic interests ahead of global geopolitical interests.