Every year, the city of Hannover, Germany, hosts the world’s largest industrial trade fair—the Hannover Messe—which increasingly highlights the most important advancements in manufacturing technologies. Next year, the United States will be the official partner country, and the National Association of Manufacturers (NAM) is very excited that manufacturers in the United States will have a special showcase for their innovations and best-in-class manufacturing solutions. (continue reading…)
Want to Add Billions to U.S. Exports? Eliminate Discriminatory Barriers and Boost IP Protection in India
If India removed discriminatory barriers and improved intellectual property protection, U.S. exports to that country would rise by two-thirds (the equivalent of $14.4 billion, based on 2013 data) and U.S. investment would roughly double. That’s the stunning conclusion of a U.S. International Trade Commission (ITC) study out today on the impact of India’s trade, investment and industrial policies on the U.S. economy.
The ITC’s results confirm what manufacturers have long known – India’s unfair policies increasingly are harming U.S. exports of a wide array of products, costing jobs and growth in both countries. The results provide a powerful roadmap for change as U.S. and Indian officials continue to work toward stronger bilateral commercial ties through the U.S.-India Trade Policy Forum and the High-Level Working Group on Intellectual Property. (continue reading…)
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.
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.
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.
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.
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.
Here is the summary for this month’s Global Manufacturing Economic Update:
Global growth has been slower than desired in the early months of 2014, and as a result, we have seen many analysts—including me—downgrade their forecasts for this year. Indeed, the latest World Bank’s Global Economic Prospects now predicts global GDP growth of 2.8 percent for the year, down from the 3.2 percent forecast in January. Much of that stems from softer growth in the first half of this year in the United States and decelerated activity in the emerging markets. Brazil, Russia and China experienced contracting manufacturing activity levels in May, with only India experiencing modest growth.
The good news is that the global economy is anticipated to pick up in the second half of this year, continuing into next year. The World Bank estimates real GDP growth of 3.4 percent in 2015, with the U.S. economy expanding by 3.0 percent. This would be consistent with the relatively upbeat outlook seen in the most recent National Association of Manufacturers (NAM)/IndustryWeek Survey of Manufacturers. Still, there continue to be threats to growth that could dampen these predictions, including deflationary risks in Europe, tighter monetary policies in the United States and a number of geopolitical struggles. For example, crude oil prices have risen sharply in the past few days to around $107 a barrel this morning because of confrontations in Iraq and worries about energy supplies.
In general, manufacturing activity worldwide continues to expand modestly, but at varying paces across a number of nations. The JPMorgan Global Manufacturing Purchasing Managers’ Index (PMI) increased slightly, up from 51.9 in April to 52.2 in May. Yet, 5 of the top 10 markets for U.S.-manufactured goods had declining levels of activity for the month, up from two in March and zero in December. China tops this list, having experienced its fifth consecutive monthly contraction despite some easing in the pace of the monthly decline. Three of the other four countries with contractions were also in Asia, including Hong Kong, Japan and South Korea. Meanwhile, Brazil has now contracted for two straight months, which is perhaps not the way it wanted to kick off the World Cup. At the other end of the spectrum, we continue to see strong growth in the United Kingdom and the United States, both of which saw heavy production gains in May.
Meanwhile, European economies continue to experience slight expansions, but growth eased in May. The Markit Eurozone Manufacturing PMI decreased from 53.4 to 52.2, its slowest pace since November but the 11th straight month for expanding levels of activity. This resulted from a deceleration in new orders, output, exports and hiring. Nonetheless, growth in the Eurozone remains subpar, with real GDP up just 0.2 percent in the first quarter and expected to increase around 1 percent in 2014 as a whole. Still, retail sales have increased in each of the first four months of 2014, and industrial production increased at its fastest pace since November.
Yet, the big worry in Europe continues to be deflation. Producer prices fell 0.1 percent in the Eurozone in April, with declines of 1.2 percent year-over-year. At the same time, annual inflation has fallen to 0.5 percent. Fears about deflation and slow growth have prompted the European Central Bank (ECB) to take actions to further stimulate the Eurozone economy at its June 5 meeting, cutting its main interest rate to 0.15 percent. In essence, the ECB will charge negative interest rates on bank deposits in an effort to spur institutions to lend more, and there is some speculation that it might pursue a more aggressive asset purchasing program in the future, if needed.
On the policy front, there is an increased focus from both a business and policy perspective on India, with its election of a new prime minister, and Europe, which also elected a new parliament and is constituting a new commission. Trade negotiations in the Asia-Pacific and Europe continue, but work needs to be done on both. Domestically, there is a heavy U.S. focus on the reauthorization of the Export-Import Bank before its expiration on September 30 and passage of a new Miscellaneous Tariff Bill, which has lagged more than 17 months, as well as new legislation on trade secrets.
Chad Moutray is the chief economist, National Association of Manufacturers.
Here is the summary for this month’s Global Manufacturing Economic Update:
Worldwide equity markets have grappled with struggles in emerging markets in recent weeks, with some countries forced to defend their currencies by raising interest rates. Turkey, for instance, raised its key interest rate to as much as 12 percent to stem significant declines in its lira. Argentina, India, South Africa and other countries have taken similar moves. While many of these nations have suggested that the Federal Reserve’s polices have contributed to their current plight, recent events have exposed larger structural weaknesses in these countries that the Federal Reserve’s quantitative easing program might have camouflaged. Realizing that these challenges might be more isolated, global stock markets have recovered mostly of late.
For manufacturers, the latest data continue to show improvements in most major economies, including emerging markets. Some measures indicated a pullback to begin the new year, with the JPMorgan Global Manufacturing PMI down slightly from 53.0 in December to 52.9 in January. Yet, the larger story is that manufacturer sentiment has increased globally for 15 straight months, and several of our largest trading partners are experiencing multiyear highs. The Markit Eurozone Manufacturing PMI, for example, reflected the fastest pace of growth since May 2011, buoyed by strong gains in new orders and output in countries such as Germany, Italy and Spain. Even Greece had positive manufacturing activity for the first time since August 2009. France remains one of the few European countries that continues to struggle.
In all, nine of the top 10 markets for U.S.-manufactured goods had manufacturing PMI values greater than 50—the threshold for expansion. The one country where the manufacturing sector contracted in January was China. The HSBC China Manufacturing PMI dropped from 50.5 to 49.5, its lowest level in six months. However, we should not make too much of this decline, particularly if February’s data rebound. The measure for output continued to show modest growth, albeit at a slower pace. Moreover, real GDP in China grew 7.7 percent in the fourth quarter and for all of 2013, higher than the 7.5 percent rate in the third quarter. While Chinese economic growth has decelerated from past years, the country has shown improvements from mid-2013 and still continues to grow strongly.
Meanwhile, the U.S. trade deficit narrowed in 2013 overall, but it rose somewhat in December. Spurred energy production in the United States has helped the overall trade balance, with petroleum exports up and imports down for the year. Still, one of the more frustrating storylines of 2013 was the sluggish growth of manufactured goods exports, up just 2.4 percent for the year. This was below the 5.7 percent pace of 2013, and the disappointing increase remained true even with overall improvements in the global economy. Exports of manufactured products to South America and Europe were down 2.0 percent and 0.1 percent, respectively, with an easing in the growth rate of exports to our two largest trading partners—Canada (0.7 percent) and Mexico (5.1 percent). One of the brighter spots was China—defying conventional wisdom—with U.S.-manufactured goods exports up 18.4 percent in 2013. To be fair, however, the manufactured goods trade deficit with China remains large.
From the President’s remarks on Trade Promotion Authority (TPA) in his State of the Union address to hearings on the reauthorization of the Export-Import (Ex-Im) Bank, trade legislation is a prominent part of the discussion in our nation’s capital. Globally, U.S. negotiators will be seeking to make progress in the next rounds of the Trans-Pacific Partnership (TPP) and Transatlantic Trade and Investment Partnership (T-TIP) this month and next. India garners substantial attention from the Office of the United States Trade Representative (USTR) and business groups, while the sanctions agreement with Iran takes effect.
Chad Moutray is the chief economist, National Association of Manufacturers.
The Economist appropriately dubbed it “The Indian Problem” to explain why the World Trade Organization (WTO) has been unable to reach a deal that would help the world’s poorest countries by cutting red tape at the border. In its Nov. 23rd issue, the Economist lays the blame squarely at India’s door: “Opposition to a global trade deal risks hurting the very countries India claims it is trying to protect… [India’s] stubborn opposition could deliver a serious blow to the poorest countries in the emerging world.”
India’s machinations to seek yet another exemption from the international trading system agricultural rules was a prime cause of the demise of the Trade Facilitation negotiations– negotiations that the Organization for Economic Cooperation and Development (OECD) estimates would reduce total trade costs by 10 percent annually in advanced economies and by 13 percent to 15.5 percent in developing countries, helping to boost worldwide income more than $40 billion – with most of the benefits going to developing countries.
Sadly, no one should be surprised by India’s approach. It is the same approach India is using more broadly in its trade relations. Flouting the basic rules of the global trading system it helped create more than sixty years ago, India’s manufacturing policy seeks to force Indian production of a wide range of products, from solar and power generation equipment to pharmaceutical and other medical equipment, at the expense of global producers everywhere. The United States has already filed a WTO cases against India’s requirement that Indian developers of solar photovoltaic projects use Indian-only solar cells.
And there is no end in sight as India’s Commerce Minister, Anand Sharma, emphasized just yesterday that his government is “committed . . . to protect Indian generics” and grow its own pharmaceutical industry. He failed to mention that this policy, like Indian policies on manufacturing broadly, is based on forcing local production of as many products as possible, even as basic protections for intellectual property are broken again and again.
India’s actions are unfair and violate the basic rules of the global trading system. Not only are they hurting manufacturers in the United States, they are hurting India and as importantly developing countries that are trying to grow their economies through increased trade and investment. The Economist urges the Indian government to make the “hard choice” to embrace the global trading system which will “likely pay dividends over time.” We agree.