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.