Trade

Moving the U.S.-India Relationship from Aspirations to Action

In his recent Independence Day speech, India’s Prime Minister Narendra Modi laid out his vision for a future driven by innovation and aimed at improving the lives of all Indians. To achieve a “Digital India”, his government plans to build the infrastructure necessary to ensure all Indians have access to essential public services and information.

It’s a critical focus and surely an inspiring signal to his constituents and international partners. After all, innovation is essential for the growth of any nation in the 21st century. By embracing the potential of technology, the people of India can connect and unite like never before. From improving access to education and embracing the diverse benefits of telemedicine, to increasing the country’s electronic manufacturing capabilities, even those living in the far remote expanses of rural India could benefit.

The Obama Administration was quick to praise Modi’s approach and to highlight opportunities for collaboration.  In comments at the New York Foreign Press Center, U.S. Assistant Secretary of State for South and Central Asia Nisha Biswal expressed “a great deal of desire to look and see what we can do to create or stand up a infrastructure platform that would allow American companies to be able to focus their tools, their technologies, their capabilities around the priorities that have been identified by the Indian Government.”

Indeed, there is “a great deal of desire.” But translating Modi’s grand vision into reality will be difficult, and so far there’s been more talk than action. India continues to maintain discriminatory industrial policies that are blocking U.S. exports of the very information and communication technology products Modi will need to achieve a “Digital India.”  Widespread copyright piracy and weak protection of intellectual property rights in India are discouraging innovation and investment.

While other countries are opening their markets and undertaking the kinds of legal and economic reforms necessary to build and sustain a modern digital economy, India is falling further behind.  Between 2013 and 2014, India slipped ten places in the global innovation index  and now ranks a disappointing 76th in the world. According to the 2014 World Economic Forum’s Global Enabling Trade Report, India’s trading regime ranks 96th out of 132 countries in terms of enabling trade.

Modi’s government is still in its early days, and manufacturers remain hopeful that positive progress can be achieved and that a promising bilateral commercial relationship can get back on track. If India’s new leadership is serious about taking the actions necessary to achieve their vision, the NAM and American businesses stand ready to work with them.

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Exporters for Ex-Im: Bank A “Valuable Tool” For Commercial Cleaning System Exporter

Bob Toews, vice president of Kaivac Inc., says his company is defined by its entrepreneurial spirit. That resourcefulness helped them design a no-touch commercial cleaning system that can clean floors 30 times better than a mop – in a fraction of the time.

Their patented cleaning system has appeal across the globe. It’s used in London Heathrow and Amsterdam Airports, to name a few, as well as the iconic Louvre Museum in Paris. But as is the case for many businesses looking to tap into global demand, Kaivac found the Export-Import Bank to be a valuable asset in making those deals possible.

Kaivac is based in Hamilton, Ohio, and has 50 employees. When the company started to explore potential new markets, Toews said the company networked through friends and family to reach new customers. Their success, however, was limited by the fact that they needed required cash in advance for overseas sales.

The company needed to offer credit terms to grow, but the availability of private sector credit insurance did not, according to Toews, “reach down to their level.” In 2010, Toews started using Ex-Im Bank credit insurance and got five international customers qualified.

“Offering foreigners credit terms was a big benefit. It ratcheted up their interest and ability to buy,” he said

The result has been a significant uptick in overseas sales. Toews said that last year, the company doubled their export sales – about half of which were supported by Ex-Im credit insurance. In fact, the company has just hired another person solely dedicated to selling the cleaning systems internationally.

Toews says Ex-Im is so valuable because it is “a great tool to reach markets that are hard to reach without it.” He is disappointed about the current fight in Congress for reauthorization but is confident the benefits of Ex-Im will shine through.

“At the end of the day,” Toews noted, “what other programs really help small businesses?”

“Exporters for Ex-Im” is a blog series focused on the importance of the Export-Import Bank to manufacturers. To learn more or to tell Congress you support reauthorization of the Export-Import Bank, visit http://www.nam.org/Issues/Trade/Ex-Im-Bank.aspx.

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Timmons in WSJ Op-Ed: Delhi Holds Trade Growth for Ransom

Less than two weeks after India took a hard and unexpected stance against a previously agreed upon WTO Trade Facilitation Agreement (TFA), the international community is still reeling and contemplating the possible repercussions.  NAM President and CEO Jay Timmons recently outlined in a Wall Street Journal (WSJ) Asia op-ed the impact India’s decision to block an agreement that would have added an estimated $1 trillion boost to the global economy based on domestic concerns could have on global development:

Though India’s economic future was looking bright with the newly elected Indian Prime Minister Narendra Modi’s promise to improve India’s business environment, followed by Finance Minister Arun Jaitley’s budget speech confirming that India was ready to facilitate trade and cut through some of the country’s red tape, the nation’s actions to block this critical agreement have signaled business as usual.

Why? New Dehli says it is protecting its agricultural programs, but many WTO members are calling its bluff. Timmons believes that India is using the deal as leverage since the global agreement requires consensus from all WTO members to move forward.

“This high-stakes gamble risks hurting economic growth worldwide while calling into question India’s respect for its international commitments,” said Timmons in the piece. Even more disappointing is that a trade facilitation agreement would stand to support growth in developing countries the most.

The bottom line is that the agreement would have benefitted all countries working to grow their economies by lowering international transaction costs. India boasts the world’s third largest economy and missed an opportunity to emerge as a world leader in trade and to show the world that it is indeed “open for business.”

As Timmons referenced in the WSJ, India must realize, “a trade-facilitation agreement that delivers on its promise will require strong coordination and assistance from donor countries, international financial institutions, multilateral organizations and the private firms.” All nations will benefit from a more open trading system.

Thousands of U.S. firms trade and do business across the Asia-Pacific region and globally, resulting in the injection of much needed foreign investment into both developing and developed countries. The new Government of India is well aware of this benefit and has expressed public commitment to opening up its borders to international trade on behalf. It is time Prime Minister Modi makes good on those claims to turn the tide on protectionist trade policies and focuses on future opportunities to prove to the international community that India is a viable and worthy trade partner.

Read the full text of Timmon’s piece here.

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Protecting Innovation and Creativity in India; A First Step to Stronger Bilateral Trade and Investment Ties

This week, senior officials from the Office of the U.S. Trade Representative (USTR) are visiting India to continue discussions on various bilateral trade issues, including intellectual property (IP) rights. The talks are a precursor to a long-awaited India-US Trade Policy Forum scheduled to take place later in the year. They are a welcome opportunity to consider how both nations can benefit from stronger IP protection and enforcement.

India’s recent actions to block a WTO Trade Facilitation Agreement that could have added an estimated $1 trillion to the global economy raised serious concerns about Prime Minister Modi’s commitment to opening India’s market and incentivizing overseas investment. India’s actions dealt a particular blow to poor countries, which would have benefitted disproportionately from a trade facilitation deal. According to the OECD, full implementation would have reduced international transaction costs for low and lower middle income countries by up to 15 percent.

However, there’s still time for India’s new government to break from the protectionist policies of the past. The fact that dialogue between India and the United States is even taking place is a step in the right direction. And few steps would have a greater impact on promoting economic growth and jobs in India and repairing a damaged bilateral trade and investment relationship than reforming India’s patent regime and strengthening IP protection and enforcement.

India’s economic present and future depend on technology and creative industries. The Indian Software Product Industry Roundtable believes the country has the potential to build a US$ 100 billion software product industry by 2025. Bollywood is already the world’s largest film industry, and gross receipts have almost tripled since 2004. Yet by almost any measure, India’s climate for IP protection and enforcement consistently ranks among the very worst in the world.

According to the U.S. Chamber of Commerce, India’s IP environment ranks dead last among 25 industrialized and emerging economies measured against 30 factors that are indicative of IP regimes that foster growth and development. The country’s long track record of rampant copyright piracy and repeated steps to deny, revoke and compulsory license patents on innovative medicines have earned it a place on USTR’s Special 301 Priority Watch List for a record 26 straight years.

If Prime Minister Modi really wants India to be “open for business,” as he stated repeatedly on the campaign trail, then his government must put in place measures to protect new ideas and technologies – including bringing patent rules in line with global norms, reforming copyright laws to better protect creative industries and safeguarding confidential business information.

Implementing measures that strengthen IP protection and enforcement in India would be a welcome first step to improving trade relations with the US and would signal to the world that India is serious about becoming a global economic leader for years to come.

Manufacturers in the United States expect USTR to make a clear case for reform and real results leading to a more mutually beneficial trade and investment partnership this week. We hope India will listen.

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Global Manufacturing Economic Update – August 8, 2014

Here is the summary for this month’s Global Manufacturing Economic Update:

The International Monetary Fund (IMF) predicts that world output will grow 3.4 percent in 2014, down from 3.7 percent in its April forecast. Much of the downward movement stems from weaker-than-expected data from the first quarter. In the United States, for instance, real GDP declined by a disappointing 2.1 percent, and even with a rebound in the second quarter, the economy expanded by just 0.9 percent in the first half. Fortunately, manufacturers are mostly upbeat about the second half, and the IMF predicts 1.7 percent and 3.0 percent growth in the United States for 2014 and 2015, respectively. Europe is anticipated to grow 1.1 percent this year, and the Chinese economy should increase by 7.4 percent. While the emerging markets as a whole have started to see signs of improvement, notable weaknesses still exist in Brazil, Russia and South Africa, to name just a few. Geopolitical risks abound, of course, with crises around the world also negatively impacting activity.

The good news is that global manufacturing activity continues to expand modestly, with the pace little changed in July from June. New orders, production and employment growth slipped a little for the month, but exports picked up. In July, 8 of the top 10 markets for U.S.-manufactured goods had expanding economies, with Brazil and South Korea contracting once again. Among the expanding nations, Canada and China saw accelerating levels of manufacturing demand and production in July, with relatively decent growth seen in both the Netherlands and the United Kingdom. At the same time, manufacturers in the United States have continued to rebound from softness earlier in the year. The Institute for Supply Management’s Manufacturing Purchasing Managers’ Index (PMI) increased to its highest level since November on strong output and sales growth.

The Chinese economy has begun to stabilize, with manufacturers in China expanding for the second straight month. New orders, exports and production growth all strengthened in July, and we anticipate a pickup in industrial production and fixed-asset investment rates when they are released next week. China’s real GDP has increased slightly, from 7.4 percent at the annual rate in the first quarter to 7.5 percent in the second quarter. Meanwhile, Eurozone manufacturers have now expanded for 13 straight months, but activity has decelerated since January. Confidence measures have weakened, year-over-year inflation remains very low and the unemployment rate stayed elevated (even as it fell to 11.5 percent). Still, the latest industrial production and retail sales have reflected a rebound.

In general, we have seen the U.S. trade deficit narrow over the past couple years as we have become less dependent on foreign sources of energy. In June, the trade deficit was at its smallest level since January, as goods imports declined at a faster pace than goods exports increased. Still, we continue to see relatively slow growth for U.S.-manufactured goods exports, which have increased 1.7 percent year-to-date. Ideally, we will see improvements moving into the second half, as the current pace represents a deceleration from last year’s 2.6 percent rate of growth.

The last month saw important progress in ongoing trade negotiations with Europe and 11 Pacific Rim nations, as well as environmental goods talks in the World Trade Organization (WTO). However, India and others successfully blocked agreement on a global trade facilitation package that would add an estimated $1 trillion to the world economy, potentially setting up a last-ditch effort to revive the deal in September. Responding to rising tensions in the Ukraine, the United States and the European Union (EU) imposed fresh sanctions on Russia in the financial, energy and defense sectors.

With Congress now in recess for the month of August, manufacturers are engaging Senators and Representatives in their states and districts and gearing up for action in the fall on a range of stalled trade measures—including reauthorization of the Export-Import Bank, Trade Promotion Authority, a miscellaneous tariff bill and the Generalized System of Preferences. A House bill that would provide access to federal civil enforcement for trade secrets theft is fast gaining cosponsors, laying the groundwork for a Judiciary Committee markup and possible passage in September. The planned official visit of India’s new Prime Minister, Narendra Modi, to Washington at the end of next month will provide another opportunity to address outstanding trade and investment barriers in that important market.

Chad Moutray is the chief economist, National Association of Manufacturers. 

manufactured exports growth - aug2014

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India’s Protectionism and Africa’s Economic Opportunities

Over 40 African heads of state and government are in Washington this week to discuss ways we can work together to promote economic growth and development in Africa.

But what if working together to open markets and reduce barriers in developing countries turns out to be the best way to promote growth in Africa? With industrialized countries in North America, Europe and elsewhere now largely open to African products, the continent’s greatest chance to drive future export growth may come from reducing high barriers in major developing country markets like India.

The U.S.-Africa Leaders Summit aims to promote economic growth and development by fostering stronger trade and investment ties. The United States has and can contribute much to that goal. Through the African Growth and Opportunity Act (AGOA), it has eliminated tariffs on substantially all African exports. Africa is home to some of the world’s fastest growing economies, and manufacturers in the United States are eager to invest and strengthen economic partnerships across the continent.

Yet overall, some 70 percent of tariffs developing country exporters face are applied by other developing countries, and the protectionist challenge is even greater in particular regions of the world. According to the World Bank, tariffs imposed by India and other South Asian countries on imports from developing countries are frequently five times as high as the rates imposed by industrial countries.

Reducing those tariffs is critical, the Bank says, because nearly 90 percent of the stimulus to developing country exports following past tariff cuts has come from liberalization by other developing countries.

Sadly for Africa, India and others in a position to lead in lowering barriers and contributing to growth and economic development are moving in the opposite direction. A Global Trade Alert study found G20 economies collectively imposed 692 protectionist measures between 2008 and 2010, and India and other emerging markets were among the biggest sinners. Many of those measures harmed the commercial interests of least developed countries – 70 percent of which are in Africa.

Just last week, India single-handedly thwarted a WTO deal that would have drastically cut the cost of moving goods across borders in Africa and around the world. According to the Peterson Institute of International Economics, a successful trade facilitation agreement would have added $1 trillion to the global economy.

Developing countries stood to gain the most. An OECD study found full implementation would have reduced international transaction costs for low and lower middle income countries in Africa and elsewhere by up to 15 percent.

Unfortunately, India seems bent on pursuing policies that are standing in the way of African exports and African development. This week, African countries and the United States have an opportunity to make common cause and to look at ways to work together to reduce trade barriers in India and other emerging markets.

With so much to gain from cooperation, we can’t afford to miss this chance.

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India’s Opportunity in this Week’s Strategic Dialogue

This week, Secretary of State John Kerry and Secretary of Commerce Penny Pritzker travelled to India to participate in the 5th U.S.-India Strategic Dialogue with India’s External Affairs Minister Sushma Swaraj. While there, Kerry will also meet with Prime Minister Modi, marking the first Cabinet-level contact with India’s new leader and laying the groundwork for Modi’s visit to the United States in September.

Manufacturers in the United States have much to contribute to a more open Indian economy focused on jobs and growth. As Secretary Kerry noted in his remarks this week at an event hosted by the Center for American Progress, “American companies lead in exactly the key sectors where India wants to grow: in high-end manufacturing, in infrastructure, in healthcare, information technology, all of them vital to sort of leapfrogging stages of development so you can provide more faster to more people.”

Kerry spoke of the historic potential of this visit to reinvigorate a sometimes troubled bilateral trade and investment relationship and promote expanded dialogues that give India’s new government a chance to demonstrate its commitment to reform and a mutually beneficial trade and investment partnership. By breaking down barriers and leveling the playing field, India could not only increase trade and foreign investment, but also spur entrepreneurship and drive innovation among its own businesses and industries.

Renewed dialogues are a welcome step in the right direction. But whether or not these exchanges deliver progress and real results will depend on India. Will the new Modi government take steps to boost trade by abandoning forced localization policies and ensuring its trade policies conform to international norms? Will it work to encourage entrepreneurship and technological advancement by strengthening intellectual property protection and enforcement? Or will it let these opportunities slip by?

Over the past few months, the global business community has seen early developments in India that, if continued and expanded, have the potential to transform its economy and trade relationships with countries around the world. In his budget speech earlier this month, Indian Finance Minister Arun Jaitley spoke of incentivizing overseas investment and announced plans to raising foreign investment caps for defense and insurance to 49 percent.

But India’s actions to block progress on the WTO Trade Facilitation Agreement are a devastating step in the wrong direction – harming global growth and the trade potential of other developing markets. The OECD estimates that a successful trade facilitation deal would cut international transaction costs for low and middle income countries by as much as 15 percent. Recent decisions in India to deny patents and uphold compulsory licensing of cancer medicines have the troubling look and feel of business as usual.

During their visit to Delhi this week, the NAM urges Secretaries Kerry and Pritzker to squarely and frankly address outstanding bilateral trade and investment concerns that are preventing the U.S.-India economic and commercial relationship from achieving its full potential. India has much to gain in the bargain. As Kerry remarked earlier this week, “India’s willingness to support a rules-based trading order and fulfill its obligations will help to welcome greater investment from the United States and from elsewhere around the world.”

Will the Modi government seize this chance to show the work it is open for business? Manufacturers will be watching.

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Improved Trade Policies Will Foster Indian Innovation and Opportunity

While there are many variables that factor into a country’s development, the ability for businesses and individuals to innovate is key to empowering economic growth and fostering opportunity. When countries like India embrace innovation, they can create new jobs, expand trade opportunities and strengthen international relations.

There is reason to hope that the government of newly elected Prime Minister Narendra Modi will improve the India’s innovation environment and reverse a worrying downward trend in the protection and enforcement of intellectual property rights. Case in point, India was ranked 76th in the annual Global Innovation Index (GII) Survey published earlier this week by Cornell University, INSEAD, and the World Intellectual Property Organisation. With a drop of 10 spots from last year, India was the worst performer among the BRICS nations and the only BRICS member that did not improve its position from last year.

Part of this drop in rankings is the result of protectionist policies that undermine international trade norms and unfairly prop up domestic markets by closing off markets to foreign competition. For example, India has implemented retail investment caps that require stores to purchase from Indian producers as well as domestic manufacturing requirements that mandate certain materials be manufactured within India. As a result of these harmful policies, this is the fourth consecutive year that India has dropped in the GII rankings.

Ultimately, these policies create barriers to cutting edge technologies and harm domestic companies by restricting innovators’ access to next generation technologies. Rather than creating false protections for domestic producers at its own economic expense, India should incentivize ingenuity and entrepreneurship by implementing policies that reward the invention and creativity of its citizens.

Manufacturers hope the Indian government will continue on a path toward productive trade negotiations that will ultimately lead to policies that incentivize innovation and foster creativity. We are ready to work with Indian businesses to share best practices and improve operations to grow economic opportunity and create jobs in both of our nations.

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Investment Is Critical to an Ambitious and Successful T-TIP

As the United States and EU meet this week in Brussels to continue the Transatlantic Trade and Partnership (T-TIP) talks, U.S. and EU officials are not engaged in any formal discussion on the biggest economic driver of the transatlantic partnership – cross-border investment. Cross-border investment tops $4 trillion between the United States and the EU, making it the largest investment partnership in the world.

The EU had asked to put T-TIP investment talks on hold while it reviews the input it had requested and received from its investment public consultation, which closed on July 13.

On July 7, the NAM submitted detailed comments regarding the investment provisions in the T-TIP, Investment emphasizing that:

  • Investment is a critical driver of economic growth and jobs in both the United States and EU, and in third countries around the world.
  • The United States and EU have an important opportunity to set high standards for the protection of property and investment through the T-TIP that reflect our own core principles and help influence investment instruments being negotiated around the world.
  •  The investment treaties and experience of EU member states and the United States has been highly positive, reinforcing basic rule of law standards with our international partners.
  • While a lot of critiques have been made, the facts are very clear. U.S. and EU investment instruments are not a threat to good  government; in fact, they promote it and promote growth and jobs as well.

The United States and EU members states have long negotiated provisions recognizing core principles of their own legal systems – the protection of private property, fairness, non-discrimination and an independent and neutral venue for the resolution of disputes. The NAM and many organizations representing businesses that create millions of jobs on both sides of the Atlantic are strongly urging the EU and the United States to include high-standard investment access and protections, backed up by investor-state dispute settlement, in the final T-TIP.

While the U.S.-EU investment relationship is vibrant, that relationship will benefit from common rules and disciplines, similar to the way that the extensive trade in goods and services will also benefit from trade-agreement provisions. Including a strong investment chapter will create greater confidence and opportunities between the United States and EU, and also set an important example of the type of standards that the EU and its stakeholders hope to achieve with major economies around the world.

As negotiators begin planning the next T-TIP round, the NAM is expecting investment to be back on the table so that the United States and EU can realize the ambitious T-TIP that they began just a year ago.

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On MTB, the Time for Talk has Expired; Manufacturers Need Action NOW

A year ago today, House Ways and Means Chairman Dave Camp (R-MI) introduced Miscellaneous Tariff Bill (MTB) legislation, H.R. 2708, along with his colleagues, Representatives Sander Levin (D-MI), Devin Nunes (R-CA), and Charles Rangel (D-NY). Unfortunately, the House has not taken any further action on MTB legislation and neither has the Senate.

It has been 562 days since the 2010-passed MTB expired and manufacturers have been calling on Congress to extend it ever since. It is long past due time that both chambers of Congress act on critical MTB legislation. As a result of Congressional inaction on an MTB package, manufacturers in America have been facing higher taxes that substantially increase their production costs and concretely threaten their competitiveness as well as their ability to retain and create new manufacturing jobs for American workers.

While some members of Congress provide explanations as to their inaction, there is no excuse. The MTB passed in 2010 enjoyed broad bipartisan support and sailed through the House by a vote of 378-43 and the Senate by unanimous consent. If both chambers acted on this crucial jobs legislation today, we would expect a similar show of support from both sides of the aisle.

In response to inside-the-beltway concerns that MTB provisions resemble earmarks, even stalwart conservatives like Grover Norquist, President of Americans for Tax Reform, has emphasized the importance of passing the MTB, saying that MTB measures “are not spending bills; they are tax cuts, period….While earmarks favor only a special few, the tariff-cuts benefit wide swaths of American industry and help create U.S. jobs and economic growth.” Mr. Norquist aptly points out that, without Congressional action, “the United States is applying a tax that only makes it harder for American companies to compete with their foreign competitors – and harder for them to create or even maintain existing jobs and economic growth.”

Job creators like PING, Bayer, BASF, and Lasko Products cannot afford to wait any longer for this cost-cutting legislation to be enacted.  If Congress is serious about supporting manufacturing in the United States, they will move MTB legislation without further delay.

Members of Congress can call the MTB whatever they like, but for manufacturers, it is nothing less than a jobs bill and it is time that Congress act on it now to support American manufacturers and workers.

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