India's Protectionist Prescription
At the recent Group of 20 Summit, Indian Prime Minister Manmohan Singh implored American policymakers to recommit to encouraging robust growth in India and other emerging markets. It was a surprising request from a leader who has spent the past year overseeing a barrage of damaging reforms that threaten the American economy — and India’s prosperity.
India has been systematically shutting out foreign goods in an effort to prop up domestic industries. Indian officials have recklessly ignored basic intellectual-property protections, unfairly bolstering their own businesses at the expense of improved public health. America’s leaders need to make clear that a fair and open relationship benefits both India and the United States. If India wants to remain a valued economic partner, this kind of crude protectionism won’t be tolerated.
In recent months, India’s policymakers have pulled out all the stops to give homegrown companies an unfair advantage. Since the beginning of last year, the government has raised customs duties on high-end cars from 75 percent to 100 percent. In April, leaders mandated that all cosmetic products be registered with the Indian government prior to marketing there — a bureaucratic hurdle designed to obstruct foreign firms. Yet another new regulation requires that procurements by the country’s military give priority to Indian defense firms.
All together, the country has enacted 33 potentially trade-restricting measures since October 2008, according to a recent report from the European Commission. Where India’s self-serving policies have been especially irresponsible, however, is in the area of intellectual property, particularly for cutting-edge pharmaceuticals.
The country’s blatant disregard for intellectual-property rights was made clear in April, when India’s Supreme Court denied patent protection for a new form of the cancer drug Gleevec. In doing so, the court gave India’s $22 billion domestic drug industry free rein to sell copycat versions of the treatment. Indian officials were quick to declare the decision a victory for their poorest citizens, applauding the court for helping to make sophisticated medicines more affordable.
This claim, however, entirely misrepresents the decision and its consequences. Officials strategically neglected to mention that 95 percent of Indians who rely on Gleevec already receive the drug free of charge, thanks to a program supported by the drug’s manufacturer, Novartis. The Gleevec case was never about improving pharmaceutical access; the real intent was always to benefit India’s drug manufacturers.
By unfairly boosting the country’s generic industry, the court announced to health care research firms around the world that India is no friend to cutting-edge treatments — and the repercussions of such a message could be severe.
A breakthrough drug such as Gleevec requires, on average, more than a decade of trial and error to create and costs firms more than $1 billion. If India isn’t willing to protect the basic intellectual-property protections companies need to earn back some of that investment, drug firms won’t be able to offer their products to Indian patients, much less give them away for free. Considering India is home to the largest population of people who lack access to essential drugs, Indian leaders can ill afford to shun foreign pharmaceutical companies and the advanced medicines they offer.
Additionally, there is the direct threat India’s policies pose to the American economy. U.S. exports to India totaled $33 billion in 2011, an increase of more than 12 percent from the year before. As Rep. John B. Larson, Connecticut Democrat, and Rep. Erik Paulsen, Minnesota Republican, noted in a recent letter to fellow lawmakers in Congress, no fewer than 75 U.S. industries depend on intellectual-property protections. All told, companies in these fields are responsible for roughly 40 million American jobs.
America’s technology, agriculture and information-technology industries — among other sectors — are already feeling the effects of India’s current policies. If India continues to erect trade barriers, more and more U.S. firms will be denied a valuable and growing market for their goods.
What’s more, if our leaders don’t reverse this protectionist shift, many other nations may follow suit. In fact, many already have: The European Commission found that between May 2012 and May 2013, 154 new trade-restricting measures were adopted around the world, while only 18 were lifted.
As Mr. Singh made clear at the G-20 summit, America continues to have considerable influence on India’s economic future. It’s time our leaders use this clout to pressure India’s government to abandon their destructive trade policies. Officials in Washington must demonstrate to India — and the world — that fair economic partnerships are mutually beneficial and that protectionist tactics won’t be tolerated.
Peter J. Pitts, a former associate commissioner at the Food and Drug Administration, is president of the Center for Medicine in the Public Interest.