As President Donald J. Trump descends on Davos this week, he’ll have the chance to meet with dozens of business and government leaders from around the world. This meeting is one of the best opportunities for the president to reinforce his fair trade agenda with our global trade partners, and there is no better place to start than with India.
While Trump’s rhetoric toward unfair Chinese trade policies is valid, India deserves just as much criticism for their new “Make in India” program.
The “Make in India” program has been lauded by the Indian government as a way to encourage investment in 25 key sectors of their economy, including electronics/IT, automobiles, aviation and pharmaceuticals, which opened the door to foreign investors. While this program may sound good on the surface, it continues to promote India’s antiquated protectionist policies that prevent many American goods from reaching Indian markets.
This policy prescription favors companies who want to buy or manufacture goods in India, and targets those who want to sell in India. American companies who want to engage in the Indian economy face immense regulatory hurdles, which too often price them out of the market.
Cliff-high tariffs range from nearly 50 percent to 113 percent on agricultural goods, according to the U.S. International Trade Administration: flowers, 60 percent, natural rubber, 70 percent, automobiles and motorcycles, 60 percent to 75 percent, raisins, 100 percent, alcoholic beverages, 150 percent, and textiles, some rates exceed 300 percent.
Further, imports are subject to state-level value-added or sales taxes and the Central Sales Tax, as well as various local taxes and charges. Additionally, India doesn’t make commerce easy by maintaining its infamously unresponsive and corrupt bureaucracy.
India is also one of the world’s most notable offenders against U.S. intellectual property rights. For example, India spends less than 1 percent of its GDP on healthcare, does not issue patents for U.S. medicines, and legislates price controls on medicines and medical devices. Meanwhile, the United States spends 18 percent of its GDP on healthcare and invents the vast majority of new medicines and medical devices—innovations that save and extend lives.
To make matters worse, The United States recently opened its market to Indian firms, whereas U.S. companies that invent medicines still are unable to access the Indian market. Additionally, American trade policy welcomes the import of Indian generics, 1 in 5 of which are likely to not be what sellers claim they are.
It is critical to maintain the U.S.-India trade relationship, and to ensure that India is open about the regulatory burdens it imposes on American companies. The “Make in India” program must be implemented in line with the basic tenets of free trade in the 21st century.
President Trump recently described India as a “leading global power” and asserted that in the future, he’ll work to deepen America’s strategic partnership with India and support its leadership role in maintaining security in the Indo-Pacific region.