I recently published a piece analyzing the trade relationship between the United States and South Korea. I now turn my attention to India in my ongoing research into our trade relationships with friendly nations. As President Trump and his team prepare to attend The World Economic Forum meeting in Davos, Switzerland, he should focus not just on how to continue isolating rogue nations such as Iran and North Korea, but also on how to improve upon existing trade relationships with our close allies, such as India.
India, like South Korea, is an important ally of the United States. Just as South Korea has a hostile neighbor at its border, India has had Pakistan at its since the very early years of its independence. Moreover, India continues to be an attractive target for radical Islamic terror. Thus, India must continue to enjoy American support.
However, there is growing concern that India is engaging in what could be called a “bait and switch” public relations campaign, which advertises India’s purportedly low regulatory regime despite the country’s protectionist policies that effectively cut off American goods from the Indian market.
This effort, entitled “Make in India,” was launched in 2015 by the Indian Prime Minister and the Department of Industrial Policy and Development. The initiative was intended to encourage companies to invest, build, and manufacture in India. But while the Indian economy welcomes global companies that want to buy or manufacture in India, it hinders firms that want to sell in India. American companies looking to export to India face a gauntlet of barriers blocking their goods. In 2016, India actually increased tariffs on telecommunications equipment. Likewise, medical equipment and devices, such as pacemakers, coronary stents and surgical instruments, and parts of medical devices imported to India face a 7.5 percent basic customs duty, a 12.5 percent additional duty, and a 4 percent “special” additional duty.
It is also widely known that India is one of the worst violators of international intellectual property law. For example, India runs open-air counterfeit markets with fake apparel, footwear, automobiles, auto parts, electronics, leather goods, mobile phones, CDs and DVDs, luxury goods, etc. The Indian government has made no effort to impede these markets’ continuous disregard for American intellectual property.
President Trump has made it clear that the United States should strengthen and deepen its bond with India. It is clear that the future is bright for the U.S.-India relationship. At the same time, President Trump has made it clear that one-sided trade schemes have historically hurt American workers and businesses and his administration will not allow the United States to be taken advantage of.
In order for the U.S.-India relationship to flourish, India needs to be transparent about its regulatory aims. President Trump and Robert Lighthizer, the US Trade Representative, should work with our Indian friends to ensure that India’s “Make in India” initiative is carried out in a manner that respects the basic tenants of fair and free trade. Going forward, this will improve upon an already strong alliance and benefit both the United States and India for years to come.