[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
U.S.-INDIA TRADE RELATIONS:
OPPORTUNITIES AND CHALLENGES
=======================================================================
HEARING
before the
SUBCOMMITTEE ON TRADE
of the
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
MARCH 13, 2013
__________
Serial 113-TR01
__________
Printed for the use of the Committee on Ways and Means
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82-909 WASHINGTON : 2013
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COMMITTEE ON WAYS AND MEANS
DAVE CAMP, Michigan,Chairman
SAM JOHNSON, Texas SANDER M. LEVIN, Michigan
KEVIN BRADY, Texas CHARLES B. RANGEL, New York
PAUL RYAN, Wisconsin JIM MCDERMOTT, Washington
DEVIN NUNES, California JOHN LEWIS, Georgia
PATRICK J. TIBERI, Ohio RICHARD E. NEAL, Massachusetts
DAVID G. REICHERT, Washington XAVIER BECERRA, California
CHARLES W. BOUSTANY, JR., Louisiana LLOYD DOGGETT, Texas
PETER J. ROSKAM, Illinois MIKE THOMPSON, California
JIM GERLACH, Pennsylvania JOHN B. LARSON, Connecticut
TOM PRICE, Georgia EARL BLUMENAUER, Oregon
VERN BUCHANAN, Florida RON KIND, Wisconsin
ADRIAN SMITH, Nebraska BILL PASCRELL, JR., New Jersey
AARON SCHOCK, Illinois JOSEPH CROWLEY, New York
LYNN JENKINS, Kansas ALLYSON SCHWARTZ, Pennsylvania
ERIK PAULSEN, Minnesota DANNY DAVIS, Illinois
KENNY MARCHANT, Texas LINDA SANCHEZ, California
DIANE BLACK, Tennessee
TOM REED, New York
TODD YOUNG, Indiana
MIKE KELLY, Pennsylvania
TIM GRIFFIN, Arkansas
JIM RENACCI, Ohio
Jennifer M. Safavian, Staff Director and General Counsel
Janice Mays, Minority Chief Counsel
______
SUBCOMMITTEE ON TRADE
DEVIN NUNES, California, Chairman
KEVIN BRADY, Texas, Chairman CHARLES B. RANGEL, New York
DAVID G. REICHERT, Washington RICHARD E. NEAL, Massachusetts
VERN BUCHANAN, Florida JOHN B. LARSON, Connecticut
ADRIAN SMITH, Nebraska EARL BLUMENAUER, Oregon
AARON SCHOCK, Illinois RON KIND, Wisconsin
LYNN JENKINS, Kansas
CHARLES W. BOUSTANY, JR., Louisiana
PETER J. ROSKAM, Illinois
C O N T E N T S
__________
Page
Advisory of March 13, 2013 announcing the hearing................ 2
WITNESSES
Dan Twining, Senior Fellow for Asia, German Marshall Fund of the
United States, Testimony....................................... 6
Arvind Subramanian, Senior Fellow, Peterson Institute for
International Economics, and the Center for Global Development,
Testimony...................................................... 15
Ambassador Allen F. Johnson, Founder, Allen F. Johnson &
Associates, and Former Chief Agricultural Negotiator, Office of
the United States Trade Representative, Testimony.............. 34
Dean Garfield, President & CEO, Information Technology Industry
Council, Testimony............................................. 41
Roy Waldron, Senior Vice President and Chief Intellectual
Property Counsel, Pfizer, Testimony............................ 50
SUBMISSIONS FOR THE RECORD
American Bar Association......................................... 87
ASCAP............................................................ 90
BIO.............................................................. 100
Blue Diamond Growers............................................. 110
CII.............................................................. 117
CSIS............................................................. 126
Dairy Industry................................................... 130
DISCUS........................................................... 135
IBM.............................................................. 141
IIPA............................................................. 144
ITIF............................................................. 154
KEI.............................................................. 164
NAM.............................................................. 169
National Chicken Council 1....................................... 173
National Chicken Council 2....................................... 174
National Chicken Council 3....................................... 176
National Chicken Council 4....................................... 180
National Cotton Council.......................................... 182
NPPC............................................................. 185
PhRMA............................................................ 188
Rapaport......................................................... 195
Rio Tinto........................................................ 201
SoFTEC........................................................... 203
Wine Institute................................................... 206
U.S.-INDIA TRADE RELATIONS:
OPPORTUNITIES AND CHALLENGES
----------
WEDNESDAY, MARCH 13, 2013
U.S. House of Representatives,
Committee on Ways and Means,
Washington, DC.
The Subcommittee met, pursuant to notice, at 10:08 a.m., in
Room 1100, Longworth House Office Building, the Honorable Devin
Nunes [chairman of the subcommittee] presiding.
[The advisory of the hearing follows:]
HEARING ADVISORY
Chairman Nunes Announces Hearing on
U.S.-India Trade Relations:
Opportunities and Challenges
Wednesday, March 6, 2013
House Ways and Means Trade Subcommittee Chairman Devin Nunes (R-CA)
today announced that the Subcommittee will hold a hearing on U.S.-India
trade relations. The hearing will focus on the growing trade and
investment relationship between the two countries as well as the
significant challenges facing U.S. job creators in this vibrant and
dynamic market. The hearing will take place on Wednesday, March 13,
2013, in 1100 Longworth House Office Building, beginning at 10:00 A.M.
In view of the limited time available to hear the witnesses, oral
testimony at this hearing will be from invited witnesses only. However,
any individual or organization not scheduled for an oral appearance may
submit a written statement for consideration by the Committee and for
inclusion in the printed record of the hearing. A list of invited
witnesses will follow.
BACKGROUND:
The United States and India are experiencing the largest bilateral
trade and investment flows ever recorded in this bilateral
relationship, with total goods and services trade in 2011 recorded at
$86 billion. The United States is India's third largest trading
partner, and India is our 13th largest trading partner. The trade
relationship fits into the larger bilateral relationship, which, over
the past 20 years, has seen an enhancement of relations between the
world's largest and oldest democracies.
Despite this positive story, the U.S.-India trade relationship
faces some difficult issues. As India strives to prepare its economy
for the challenges of its changing demographics--around one-half of the
population of 1.2 billion is under 25 years of age--the country is
putting in place policies to increase manufacturing (currently 18% of
GDP) as well as protect domestic industries and agricultural
production. These policies reveal a disturbing trend in which India is
turning inward and erecting barriers to trade and investment. U.S.
manufacturers, farmers, and ranchers are negatively affected by these
policies and find it increasingly difficult to sell to, enter, and
operate in India.
This hearing on U.S.-India trade issues will explore the positive
aspects of the bilateral relationship, examine India's tariff and non-
tariff barriers that affect U.S. job creators and analyze how bilateral
trade and investment can be further expanded. Areas of focus will
include: tariff structures; investment; agriculture market access; the
Bilateral Investment Treaty; India's National Manufacturing Policy;
local content requirements; intellectual property policies; services;
and U.S.-India cooperation in bilateral and multilateral trade fora.
In announcing this hearing, Chairman Nunes said, ``The U.S.-India
partnership is and will continue to be crucial to the global economy in
the 21st century, and bilateral trade and investment ties are the
lynchpin to keeping this strategic relationship strong. India faces
tremendous domestic political challenges as it seeks to grow its
economy and lift millions of people out of poverty. However, I am
concerned that India has launched a series of alarming policies that
harm U.S. job creators and are counterproductive. I intend to push
India to remove barriers that prevent U.S. companies, farmers,
ranchers, and workers from competing on a level playing field and
selling their world-class products and services to India's 1.2 billion
consumers.''
FOCUS OF THE HEARING:
The hearing will provide an opportunity to explore current U.S.-
India trade issues such as: (1) deepening and expanding the long-term
trade and investment relationship with India; (2) completing a
Bilateral Investment Treaty, addressing investment caps, and exploring
new investment opportunities; (3) addressing agricultural market access
barriers; (4) evaluating India's National Manufacturing Policy and
other forced localization policies including the Preferential Market
Access (PMA) on information technology products; (5) ensuring the
protection of intellectual property rights; (6) addressing the issuance
of compulsory licenses, patent revocations, and other policies on
pharmaceuticals; (7) examining India's system of cascading tariffs,
taxes, and other import charges; and (8) advancing WTO negotiations,
including ``post-Doha'' issues such as an international services
agreement, Information Technology Agreement expansion, and a trade
facilitation agreement in partnership with India.
DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:
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Chairman NUNES. Good morning. I want to welcome our panel
of witnesses and everyone else to our hearing on U.S.-India
Trade Relations.
It is an honor and privilege to be chairing my first
hearing as Trade Subcommittee Chairman and to be serving with
my colleague, Ranking Member Charles Rangel.
Under Chairman Camp and Chairman Brady's leadership, the
previous Congress passed seven bipartisan trade bills. These
achievements show that Congress and the White House, Republican
and Democrats can come together and pursue pro-growth, pro-job
policies. We must now accelerate this momentum so that U.S.
businesses, farmers, ranchers and workers will find new
opportunities abroad, where 95 percent of the world's consumers
live.
That takes us to the focus of today's hearing. India has
risen rapidly since its market-opening reforms in the early
1990s. Its GDP has grown from 275 billion in 1991 to 1.8
trillion in 2012.
Nevertheless, India remains the largest recipient of
benefits under the U.S. Generalized System of Preferences. This
is a program that expires this July and one this Committee must
deal with.
The U.S.-India Strategic Partnership is a key relationship
with bilateral trade in goods and services rising from
minuscule amounts 25 years ago to more than 86 billion a year
now. But there is scope for much more. With a population of
over 1.2 billion, India's market holds potential for world
class U.S. products and services.
I want to ensure that U.S. job creators compete there on a
level-playing field. This hearing will provide an opportunity
for the Committee to explore the positive aspects of the U.S.-
India economic relationship, as well as to examine India's
tariff and non-tariff barriers that are acting as impediments.
In particular, I want to examine the following issues:
Deepening and expanding the long-term trade and investment
relationship;
Understanding the existing U.S.-India bilateral for a for
discussion and how they can be more effective in addressing
bilateral irritants and establishing metrics for measuring
progress;
Addressing India's troubling use of forced localization in
key sectors;
Ensuring India's protection of intellectual property
rights;
Addressing agricultural market access barriers to ensure a
level playing field for U.S. farmers and ranchers;
Completing a bilateral investment treating;
Addressing investment cap; and
Exploring new bilateral investment opportunities which are
all vital to U.S. growth;
And, finally, partnering with India to advance negotiations
at the WTO, including a post-DOHA issue such as Information
Technology Agreement Expansion, a trade facilitation agreement,
and the International Services Agreement negotiations that are
about to be launched in Geneva.
I look forward to having a comprehensive discussion today
about promoting economic growth and job creation by solving
difficult bilateral issues and strengthening U.S.-India ties.
I will now yield to Ranking Member Rangel for the purpose
of an opening statement.
Mr. RANGEL. Let me on behalf of the Democrats congratulate
you, Chairman Nunes, for becoming the chair, and also thank you
for having this first hearing.
As was pointed out so many times, the area of trade has
been the most successful area in which we have been able to
penetrate the depth of partisanship that exists in our Congress
unfortunately. But I do hope that you know that you can depend
on us to move forward in working with you toward improving the
economic situation that exists in our country on the
international area.
I think there is much agreement, especially with our
terrific relationship with India, who is a vital ally not only
in terms of national security, but it is one of our great
growing trading relationships; a great democracy. Total trade
was nearly $50 billion, up from just 8 billion in 2000, and
total services have grown just as rapidly, from 4.5 billion in
2000 to 28.5 billion in 2011. And our investment in India and
India's investment in the United States has been constantly and
continuously expanding.
This people should recognize, we being the two greatest
democracies in the world, and I think that we do have problems
as most friends and family would have, and we like to point out
some of what we believe are unfair incentives in order to
improve the relationship that exists, as we think that many of
these things violate international trade.
We know the particular concerns that India has with its
large, young population. We also know in our country what the
pains are of unemployment. But we do have forums that we can
try to work out these differences in how we try to bring a
better working relationship with both of our great democracies.
We hope that we can avoid threatening taking every issue to
the World Trade Organization. We hope that our business people,
as well as legislators, work to eliminate or take away the
problems that we have in this area, and we hope that we will do
this under your leadership and the Congress and the President.
And once again, I welcome you to the chair, and our
committee is anxious to get started.
Chairman NUNES. Well, thank you, Mr. Rangel.
And Mr. Rangel and I are trying to work as closely as we
can. I think we both feel that this is really one of the issues
in Congress where there is bipartisan agreement, and we hope to
advance the trade agenda as best as we can.
Today we are joined by five witnesses. Our first witness
will be Dan Twining, Senior Fellow for Asia, at the German
Marshall Fund of the United States. Mr. Twining will be our
scene setter regarding the past, present and future of the
U.S.-India relationship.
After him, Arvind Subramanian, Senior Fellow, at the
Peterson Institute for International Economics and the Center
for Global Development, will be our second witness. Dr.
Subramanian will speak about India's economy and domestic
developments that are affecting India's outward policies.
Our third witness will be someone who is familiar with this
Committee, Ambassador Allen Johnson, founder of the Allen F.
Johnson & Associates. Ambassador Johnson has held the position
of Chief Agricultural Negotiator at the Office of the United
States Trade Representative and will speak today about the
multilateral and bilateral relations with India, focusing on
agricultural issues.
Our fourth witness will be Dean Garfield, President and CEO
of The Information Technology Industry Council. Mr. Garfield
will speak on the opportunities and challenges in bilateral
high-tech trade.
Our fifth and final witness will be Roy Waldron, Senior
Vice President and Chief Intellectual Property Counsel, at
Pfizer, Inc. Mr. Waldron will testify about his company's
longstanding work in India and India's intellectual property
regime.
We welcome all of you and look forward to your testimony.
Before recognizing our first witness let me note that our
time this morning is limited. So we will be limiting questions
to five minutes in the hopes of giving as many Members the
opportunity to be recognized as possible.
Mr. Twining, your written statement, like those of all the
witnesses, will be made part of the record, and you are now
recognized for five minutes.
STATEMENT OF DAN TWINING, SENIOR FELLOW FOR ASIA, GERMAN
MARSHALL FUND OF THE UNITED STATES
Mr. TWINING. Thanks, Mr. Chairman, Members of the
subcommittee. It's an honor to appear before you today to
discuss the enormous potential of U.S.-India trade and
investment relations.
Within a generation India is likely to become one of
America's most vital partners in world affairs. It will bring
more capabilities to the table than any existing U.S. ally in
pursuit of our convergent interests; defeating terrorism and
extremism, managing China's rise, keeping open the Indian Ocean
sea lanes, and sustaining a liberal international order.
Recognizing this, Washington and New Delhi have developed a
far-reaching strategic partnership centered on defense
cooperation, but our economic relationship remains strangely
underdeveloped. Despite disappointing growth recently, India's
economy has doubled in size in less than seven years. Its
economy is likely to become the world's third largest sometime
in the 2020s.
The U.S. National Intelligence Council forecasts that India
will become the biggest driver of middle class growth on earth
by 2030 and will surpass China in economic dynamism. The NIC
also forecasts that India could have the world's largest
economy by the end of this century. This is a country America
will want to work with to sustain an open global economy that
promotes the prosperity of all free societies.
A decade ago, then American Ambassador Bob Blackwill
famously said that U.S.-India economic ties were ``flat as a
chapatti''. The situation has improved. America is now India's
top economic partner measured in goods and services trade.
China is India's top partner measured in terms of goods alone.
Since 2001, U.S.-India trade has doubled every five years.
It is approaching the 100 billion dollar mark. This is good
news in a way, but it is also disappointing. It is a low number
still. Our trade with India is only one-seventh of our trade
with China, despite the fact that one country is a strategic
partner and the other is a strategic competitor.
Regrettably, the Obama Administration's signature trade
initiatives, TTP and TTIP, do not include India. The primary
economic initiative between our two countries has been a modest
bilateral investment treaty. It has been stuck in the bowels of
our bureaucracies for years.
At the same time, India has enacted or is negotiating trade
agreements with Japan, the EU, ASEAN and a number of other
partners, but not the United States. Although India is part of
Asia's security architecture, it is not part of Asia's economic
architecture. India applied for APEC membership back in 1991,
but the U.S. eventually backed a moratorium on membership. That
moratorium has expired. India's exclusion makes little sense
for a country that sits in the middle of Asia, is an important
trading partner to America, China, and Japan, and has an
economy that comprises nearly 20 percent of global GDP by 2060,
according to the OECD.
Without a strategic framework for economic cooperation,
Indian and American trade negotiators skirmish frequently in
bilateral channels and at the WTO. Our trade ties too often
degenerate into parochial disputes over things like pistachio
nuts and chickens that have occupied even top political
leaders. This is no way to build a strategic economic
relationship between the world's largest democracies.
To elevate our bilateral relations to the strategic level,
I believe America and India should launch negotiations for a
free trade agreement. India will have to undertake far-reaching
domestic reforms to qualify. New Delhi might find it easier to
undertake these reforms if it can do so as part of a process of
acceding to APEC. This will take time, but the requirements of
membership could incentivize an Indian system wary of reform,
the political costs of reform, to pursue aggressive
liberalization.
The prize of eventual APEC membership coupled with an
eventual FTA with America could empower economic reformers
within the Indian system and mobilize the Indian private sector
which is, frankly, quite fed up with the government's slow pace
of reform.
Skeptics will argue correctly that Indian officials have
been among the most obstreperous opponents of the U.S. trade
agenda in venues like the WTO. This is true. Stepping back,
however, looking strategically at India's deepening involvement
in international institutions, we see that India behaves quite
differently once it is inside a club than when it is excluded
from it. Rather than throwing bombs from the outside, India has
acted more responsibly in institutions like the IAEA and the
U.N. Security Council. Indians crave the status of full
membership in an international order they believe has excluded
them for too long. Once seated at the high table, they are more
inclined to help enforce global rules. I think the same would
be true if India should accede to APEC.
India needs to grow in order to underwrite its security in
a very tough neighborhood and to uplift more poor people than
exist in all of Sub-Saharan Africa. The country has implemented
massive rural welfare schemes, but government welfare alone
will never build the world's largest middle class. Only a
dynamic private sector will do that.
The U.S. can help accelerate this process by incentivizing
our Indian friends to open up their economy to again produce
growth rates approaching ten percent. China grew at this pace
for several decades, as did Japan and South Korea before it.
There is no cultural or historic reason India cannot deliver a
``South Asian miracle'' to match the ``East Asian miracle'' we
have seen in the Pacific.
India should ultimately find it has no stronger partner in
economics than the United States. It is time to put in place an
agenda for economic cooperation between our countries that
mirrors the ambitions of our strategic partnership, and
catalyzes enduring prosperity for both our peoples.
Thank you.
[The prepared statement of Mr. Twining follows:]
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Chairman NUNES. Thank you, Mr. Twining.
Mr. Subramanian.
STATEMENT OF ARVIND SUBRAMANIAN, SENIOR FELLOW, PETERSON
INSTITUTE FOR INTERNATIONAL ECONOMICS, AND THE CENTER FOR
GLOBAL DEVELOPMENT
Mr. SUBRAMANIAN. Thank you, Chairman Nunes, Ranking Member
Rangel, and Members of the subcommittee for giving me the
opportunity to testify today.
In the brief time available, I want to make three
observations and three recommendations. Observation number one,
the prize is big. I have breaking news for you. In 2012 India
became the world's third largest economy in purchasing power
parity terms, surpassing Japan and now behind only the United
States and China.
My forecast is that this $4.7 trillion economy will double
every seven to ten years. This one trillion trade economy will
double every seven years, and the U.S. has benefitted
immensely, as my colleague has suggested, and it is worth
emphasizing that India-U.S. trade and investment are balanced
so that you do not have the kinds of tensions with other
countries from imbalanced trade.
Observation number two, the sectorial and the micro should
not obscure the broad macro development, and these developments
are that despite India's transitional turbulence that is
happening now, slower growth, mounting macro vulnerabilities,
the predominant trend has been toward opening.
In the last two, three years, few countries have opened up
to FDI and foreign capital across the board, you know, stock
markets, equities, debt instruments, et cetera, like India has,
and that is because it reflects a deep and fundamental
bipartisan consensus within India that the way forward is
greater openness and globalization.
Observation number three, all that being said, however,
there are, I think, three major challenges that the U.S. States
and U.S. business face in India. Two of these I think my
colleagues are going to talk about. One is the localization
that, Chairman Nunes, you referred to. And here I just want to
say that India has caught the China bug. India wants to do the
same Chinese indigenization and localization that China has
been doing, and I think there is a domestic imperative to
create a manufacturing base which India has not been able to
do. So it is resorting to these measures.
A second challenge is the weak and uncertain regulatory and
tax environment that affects the U.S., the civil nuclear
industry, pharmaceuticals, agriculture, infrastructure, et
cetera, and I'll have more to say on that.
The third big challenge that American firms are not
complaining about but which they should most of all is what my
colleague referred to, which is that because of all these free
trade agreements that India has signed or is about to sign,
U.S. business is getting disadvantaged.
And why is this serious? For two reasons. India has very
high barriers, and it is a growing market. So the extent of
disadvantage to American business is absolutely huge.
How should these three challenges be addressed? One, on the
localization protectionist measures, the regulatory
environment, my strong urging would be to dialogue in the first
instance, but if not, if that doesn't work, use the WTO to
resolve conflicts as much as possible for two reasons.
One, you can test the validity of claims, you know, about
India being way out of line on many of these issues, IPRs,
agriculture; and, second, India has a great record of complying
with WTO rulings. A factor that I think is worth pointing out
is that India's biggest trade reform came after the U.S.
initiated a dispute against U.S.-Indian quantitative
restrictions on consumer goods that went through. India
complied with it, and you had the biggest change possible.
Recommendation number two, on the uncertain regulatory
environment I think the problem here is serious. It is not
going to get resolved very soon. I think that U.S. business has
a challenge to adapt to the Indian environment because if not,
it risks losing ground to other countries, other competitors
that are getting in despite the challenging environment.
Recommendation three, and my last recommendation, go big.
This is a marathon, not a sprint. This is multidimensional, not
unidimensional, and sometimes going big is the best way to
address even the small. You cannot resolve chickens by talking
only chickens.
So a common theme running through many of these testimonies
here this morning is that there is no broad strategic framework
for dealing with U.S.-India trade relations. I think my
colleague made a very good point. I think it is important for
three reasons: the fundamental sharing of values as a
democracy; second, to reverse the disadvantage that's taking
place with both sides negotiating free trade agreements; third,
above all, I think it is very important to realize that a U.S.-
India trade relationship is absolutely vital for the other big
prize, which is China and keeping China tethered to the
multilateral trading system and ensuring that China remains
open, nondiscriminatory, and follows the policies that we want.
Finally, I would just add by saying that for this reason
and FTA, relations on an FTA make sense, and we at the Peterson
Institute have embarked on a big project and hopefully by the
end of the year we will have something to show you for it.
[The prepared statement of Mr. Subramanian follows:]
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Chairman NUNES. Thank you, Mr. Subramanian.
Ambassador Johnson.
STATEMENT OF AMBASSADOR ALLEN F. JOHNSON, FOUNDER, ALLEN F.
JOHNSON & ASSOCIATES, AND FORMER CHIEF AGRICULTURAL NEGOTIATOR,
OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE
Mr. JOHNSON. Thank you, Mr. Chairman, for having me, and
Mr. Rangel. It is a very interesting discussion listening to
the other two panelists. From an agricultural point of view the
potential in India is very significant.
As you mentioned there are 1.2 billion people. It is 17
percent of the world's population. It is growing income,
growing population, and it is changing in better diets. It is a
young population. About 60 percent are under 30, and we have
seen and I put in my testimony that there is growing demand,
significant growing demand for a lot of products that the
United States can export effectively and efficiently in
providing for the Indian market.
And we have seen some progress, although India has seen
more. Since 1995, we have seen our agriculture exports triple
to India to almost $900 million, and that is out of the total
U.S. export of $141 billion. So it is really about a half of
one percent of our exports go to India even though it is 17
percent of the world's population. It is the 27th largest
market in the United States behind Guatemala, which is 14
million people. About a third of that number comes from
almonds, which is followed at some distance by other
commodities that are listed in my testimony.
But India has fared far better. Their exports over that
same period have increased by tenfold, now over $5 billion. So
in other words, they export five times as much agricultural
products to the United States than we export to them. Half of
that is rubber, but even then you are looking at two and a half
times what is exported to the United States, and these are
things like cashews, essential oils and other things I list in
my testimony.
So you would ask yourself: what is wrong with this picture?
They have four times the people. They have a growing population
and income. They obviously have dietary needs that we can
service, and yet we actually have an agricultural food deficit
with the country. And the answer is pretty simple, which is
India is very protectionist when it comes to agriculture and to
a large extent because they are concerned about rural economic
and political instability.
First of all, they have very high agricultural tariffs,
among the highest in the world; maximum bound rates are
generally between 100 and 300 percent with an average of about
120 percent. The applied tariffs are about on average 35
percent, and the difference between the bound and the applied
is what we call water. They use that water effectively for
managing imports basically. So if they want to avoid domestic
food inflation, they lower the tariff. If they want to protect
domestic prices, they raise the tariff, and they can do it
within their WTO bound levels.
Most U.S. exports could face a bound level of up to 100
percent. Almonds are top export, as I mentioned earlier, faces
a specific rate of 35 rupees per kilogram for shelled and 57
rupees per kilogram for unshelled. That is equal under recent
prices to about a 14 percent tariff. Imagine what we could do
if that did not exist, and it even today is our third largest
export markets for almonds.
Other products, such as beef, pork, poultry are facing
similar situations in that they have bound rates of 100 percent
and applied rates between 30 and 100 percent. Dairy, for
example, has bound rates between 40 and 150 percent, and
applied rates between 30 and 60 percent. There are more details
on this in my testimony.
The second thing that they do is they have high sanitary
and phytosanitary barriers, arbitrary export certificate
requirements, restrictive maximum residue levels, unjustified
animal disease controls, among other things. For example, in
dairy we've been effectively blocked since 2003 due to
unwarranted important requirements. Both the U.S. Government
and the industry believe these are not scientifically
justified. I believe the industry has a paper here today. And
to add insult to injury, we actually import twice as much dairy
from India as we export.
Pork had access denied due to import residue requirements
that do not have a scientific justification, as well as other
requirements. U.S. livestock, poultry and pork are denied
access due to overly restrictive avian influenza standards, and
they have a ban on low-path AI, which is inconsistent with
international standards. So the U.S. has initiated a WTO case
on this, which had a panel instituted last month.
As a global player, India we have to recognize is a very
important player. Unfortunately, it has not always been helpful
in moving forward, and at times it has advocated moving
backwards. It is a leading member of the G20 and the G33 in the
WTO talks, helping those groups to define positions for
developing countries that often are not related to market
openings, and even loosening rules on tariffs and subsidies
allowing developing countries to actually increase the barriers
or the subsidies.
They have been active in other trade agreements beyond the
WTO, but to a large extent agriculture has been excluded. For
example, in the Mercosur Agreement, they only included 20
tariff lines and in the Chilean agreement only 40 in
agriculture, and that are out of over 600 tariff lines that
they could have included.
The good news is, consistent with what he is saying, by not
including us, they have not put us at a significant
disadvantage relative to other exporting countries in
agriculture, but as he has pointed out, they could easily start
doing that and put us at a disadvantage.
The more interesting thing to me is that the world is
changing very clearly. After a drought of activity in
negotiations, we are seeing stepped up United States in a lot
of negotiations that are very important to us. We have seen
Europe and others who have never stopped having negotiations
and bilateral regional agreements. Even Japan is talking about
joining the TPP.
What India does and how it sees its role and sees its
interests being affected by this changing environment,
especially as the WTO has been stalled, is going to be very
interesting. If I were them, I would be watching negotiations
very closely and thinking about what I should be doing to
engage in a world that is becoming more interactive without me.
So thank you, Mr. Chairman.
[The prepared statement of Mr. Johnson follows:]
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Chairman NUNES. Thank you, Mr. Ambassador.
Mr. Garfield.
STATEMENT OF DEAN GARFIELD, PRESIDENT AND CEO, INFORMATION
TECHNOLOGY INDUSTRY COUNCIL
Mr. GARFIELD. Thank you, Mr. Chairman, Ranking Member
Rangel, Members of the committee.
On behalf of the Information Technology Council and the
world's most dynamic and innovative companies, I would like to
thank you for your bipartisan approach on trade holding this
hearing. It is quite timely.
We have submitted my testimony for the record, and so
rather than repeat what I know you have read, what I will do is
make three points.
First, this relationship is incredibly important for
geopolitical and economic reasons. The rest of the world is
watching, including China, and these two democracies at least
for the last 20 years have been illustrative of the power of
innovation and open markets to improve lives and drive economic
growth. The economist Julian Simon has made the point that the
earth's greatest resource is human innovation, and that has
come to the fore and has been demonstrated quite well by India
over the last 20 years.
As they have opened their markets, we have seen wholly new
industries created in India, many in partnership with U.S.-
based companies. The result of that for India has been real,
but also for the United States. We have gone over some of the
statistics this morning about the number of people, for
example, who have been moved out of poverty in India, over 400
million people. They have created a middle class that, in fact,
is larger than the entire U.S. population.
The result of that is actually economic growth and job
creation in the United States as well. India has moved rapidly
up the list of our trading partners. In 1990, for example, the
two-way trade between India and the United States was a mere $5
billion. Now it exceeds $60 billion, which has created jobs in
this country.
Point number two, there are real challenges on the ground
in India right now. In spite of the opportunities that exist
and the impact, the positive impact that open markets have had
on the ground in India, the Government of India seems to be
doing a stutter-step on open markets and setting up a steeple
chase of barriers to the success of foreign companies,
especially American entities.
And the examples are wide ranging, from random new
regulations, for example, new testing and certification regimes
that require testing your products in the market in order to
have access to the market at all. Some of the other folks
testifying this morning have alluded to the tax regime there.
To say it is unpredictable is to be quite kind.
Similarly, on trade agreements India is one of the partners
and participants in the Information Technology Agreement, or
``ITA,'' that was signed in 1996, but the world has changed
tremendously since 1996. None of us are carrying around mobile
devices that we held back then, and yet still India seems
resistant to updating that agreement and moving forward with a
new ITA.
Most problematic, which we have alluded to earlier, is the
preferential market access regime that is now in place in India
which essentially boils down ``to if it's not manufactured in
India, then it cannot be merchandised in India there,'' which
has the potential to foreclose that market to foreign players,
including the United States, and as a result, over the last few
years we've started to see a decline in foreign direct
investment in India, and a lot of companies questioning their
ability to fully access the market, particularly since it is
not just limited to government procurement, but includes
private sector arrangements and deals between private entities.
India has suggested that the concern there is really
focused on information security and protecting the security of
the country, which we can empathize with, but the security of
their products is not related to where it is made. It is
related to how it is made, and there are reasonable ways for
addressing those security concerns that I think industry is
well prepared to address.
The third and final point is that though these issues are
important for our relationship with India, they are, in fact,
quite significant because of the potential contagion effect.
India is not the only market that is moving forward with these
forced localization requirements that Chairman Nunes referred
to. We see the same sorts of developments, of course, in China,
but we see them as well in Brazil, Argentina, and in certain
parts of Africa. And so if we do not take steps now to deal
with these challenges, they will continue to grow and will
actually have real and meaningful impact on the ability of
U.S.-based industries and companies, particularly in the tech
sector, to continue to grow.
We look forward to working with this Committee and Congress
generally to resolving these problems.
Thank you.
[The prepared statement of Mr. Garfield follows:]
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Chairman NUNES. Thank you, Mr. Garfield.
Mr. Waldron.
STATEMENT OF ROY WALDRON, SENIOR VICE PRESIDENT AND CHIEF
INTELLECTUAL PROPERTY COUNSEL, PFIZER
Mr. WALDRON. Chairman Nunes, Ranking member Rangel, and
Members of the subcommittee, thank you for the opportunity to
testify here today.
My name is Roy Waldron, and I serve as the Chief
Intellectual Property Counsel at Pfizer. In that capacity, I am
responsible for managing and protecting Pfizer's intellectual
property portfolio worldwide.
Pfizer was founded in 1849. Our mission is to apply science
to improve the health and well-being of people's lives. We have
developed some of the world's best known pharmaceutical
products. We employ 90,000 individuals worldwide, and 30,000 in
the U.S. We have a presence in all 50 States with 17
manufacturing facilities and 21 R&D sites located throughout
the U.S.
In the U.S., our industry supports over four million jobs,
invests over 35 billion annually in R&D, and exports 46 billion
in goods. The pharmaceutical sector is the country's sixth
largest exporter. Ninety-five percent of our consumers are
outside the United States. Emerging markets like India are our
key growth markets.
R&D is the lifeblood of our industry. It produces new and
innovative medicines to treat diseases for patients worldwide,
and intellectual property rights protect the fruits of our
innovation.
Today it takes on average more than one billion dollars and
ten to 15 years to research and develop a new medicine. Our
industry is high risk. Only about one in 10,000 compounds ever
enters the drug discovery phase and is approved by the FDA.
India is a critical growth market for Pfizer and for the
pharmaceutical sector generally. Pfizer is committed to India
and has been operating there for over 60 years, yet the
business environment for innovative industries has deteriorated
significantly and created uncertainty in that market.
India has taken steps that call into question the
sustainability of foreign investment and the ability to compete
fairly. India has essentially created a protectionist regime
that harms U.S. job creators. Despite being a member of the WTO
and an important global trading partner, India has
systematically failed to interpret and apply its IP laws in a
manner consistent with recognized global standards. In fact,
the Global IP Center's International IP Index ranked India last
in terms of overall IP protection.
In September of last year, India revoked Pfizer's patent
for a cancer medication, Sutent. The patent for Sutent was
granted in 90 countries around the world, including India, the
United States, Europe and Japan. The Indian patent had been in
effect for five years prior to its revocation. The revocation
will now allow Indian generic companies to manufacture and sell
generic copies of Sutent long before the patent is set to
expire.
I would like to note that to ensure Sutent is available to
patients who need it, Pfizer developed a patient access program
in India. The program provides 80 percent of the patients
taking Sutent with a complete or partial subsidy.
We believe that India is undermining IP by misuse of its
compulsory license provisions. Compulsory licenses are intended
for use in extraordinary situations of extreme urgency or other
national emergency. Last March India issued a compulsory
license for a cancer medicine, Nexavar, that the Indian
Government had justified in part because the product was
imported rather than manufactured locally. Such an industrial
policy plainly contravenes established international trade
obligations.
Recent reports indicate that India has started the process
of issuing compulsory licenses for the manufacture of three
additional cancer medicines under a public emergency provision
that sidesteps notice and public comment obligations. If left
alone, this trend will destroy the market for innovative
pharmaceuticals in India.
And since many other countries look to India as a leader
and an example, India's actions reverberate far beyond its
borders. We have seen several countries adopt policies similar
to India's which are leading to a worldwide deteriorating trend
on intellectual property rights.
These actions also diminish our exports, jeopardize our R&D
activities, and ultimately harm U.S. jobs. We need your help.
We need the support of Congress and the Administration. It is
vital that you prioritize this matter and work together to
address these challenges.
Specifically, I would like to highlight four
recommendations: that the U.S. Government increase the
frequency of talks with the Indian Government and continue to
raise concerns directly with Indian officials;
That the U.S. Government should raise concerns at every
available bilateral and multilateral forum to send a strong
signal to the Indian Government and to other governments that
it does not condone these actions;
The U.S. Government should review all available trade
policy tools in light of the deteriorating IP environment.
And, four, the U.S. Government should pursue a robust trade
agenda that includes strong intellectual property protections,
including robust provisions in the trans-Pacific partnership
agreement.
Thank you for holding this hearing today, and I look
forward to answering your questions.
[The prepared statement of Mr. Waldron follows:]
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Chairman NUNES. Thank you, Mr. Waldron.
So as you all know, this Committee has basically two major
capabilities. One is to produce legislation. The other is to
conduct oversight. So I am going to ask just a real basic
question to all of you, and that is if you had up to three
things that we could do either legislatively or through
oversight, specifically what would you like to see this
Committee engage in over this coming Congress?
And we will just start on the left with Mr. Twining.
Mr. TWINING. Mr. Chairman, rather than three things, I
mean, my prize would be one big thing, which is passing trade
promotion authority so that the President and the Executive
Branch can negotiate the suite of trade agreements, these very
ambitious trade agreements. I mean whether or not we include a
U.S.-India FTA in that. TTP, TTIP, these horizon stretching
agreements, I think some of us are worried that the enabling
foundation, should we get to a point where we have these
agreements, is not yet in place to see them move through this
body expeditiously, and that would be my quick answer.
Chairman NUNES. Thank you, Mr. Twining.
Mr. Subramanian.
Mr. SUBRAMANIAN. I would wholeheartedly endorse what Mr.
Twining just said, that we need legislative authority to
pursue, you know, all the things that are already on the table,
TTP, TTIP, but also a whole bunch of new initiatives like with
India, but also to move beyond the DOHA round to a new kind of
round of negotiations.
Because the fact of the matter is it is true that India is
not very actively participating, Chairman Nunes, in the
agreement that you said, and I think there is a problem here.
But I think some of that could be overcome if you have a
broader agenda, multilateral agenda, moving beyond DOHA that
includes items of interest to China and India, as well.
So I think you need a broader agenda for which I think
getting this broad based trade authority is very important.
Second, I would urge also that in looking at the economic
architecture in Asia, that greater efforts be made to bring
India into that architecture as a way of promoting some of the
objectives that have been put forward.
And finally, the third thing I would say, you asked us what
you could do, but I also want to say something on what perhaps
you should not do, if I may with your permission. I think, for
example, GSP expires in July, and certainly I read some of the
comments you are saying that, you know, maybe we should use all
trade tools available. I think on the GSP my kind of cautious
advice would be the following.
I think the U.S. needs to think about graduating many
countries out of GSP. I mean, I will give you one good reason.
India itself now gives GSP to many least developed countries.
So it is a bit odd for, you know, a GSP granting country to
give GSP.
However, I would not link that to either use that as kind
of a retaliatory threat or use it to force, you know, action,
change within India because you incur the diplomatic cost
without necessarily getting any benefits out of it because I
would be highly doubtful whether actions like that, you know,
would really change the regulatory environment in a way that we
all want to see it changed.
Chairman NUNES. Thank you, Mr. Subramanian.
Ambassador.
Mr. JOHNSON. Yes. Thank you.
I often think of India as being a developing country with a
First World bureaucracy. They are capable of stopping things
very creatively, and so hearings like this and engagement,
whether it is through letters or calling in Indian officials to
talk about problems that they have created to our trade, I
think, is really priceless because it forces an action. It
forces some interaction within their own government about
problems as they exist.
The second thing I would suggest is that you encourage
trade, and having many battle scars from pursuing trade
promotion authority in the past, I would encourage you to do it
again. But I think the main thing is that, as I mentioned in my
testimony, the more that India sees the rest of the world is
moving, the more it has to think about the consequence to
itself for not moving, whether it is in agriculture, in
bilateral agreements, or in a World Trade Organization
agreement. They could be constructive players if they decided
that it was in their best interest to do so.
As I mentioned earlier, we have taken a WTO case recently
against India on AI, and I think we are going to need to
continue to do those sorts of things.
On other activities, my general point, and you brought up
GSP, is that what we should be doing is encouraging them to be
moving from the rural areas to other industries, and so as we
can encourage that, I think that helps them in taking some of
the pressure off reform in agriculture, which is ultimately
essential for their own development.
Chairman NUNES. Thank you, Ambassador.
Mr. Garfield.
Mr. GARFIELD. Yes. Number one, I agree with what the other
panelists have said about trade promotion authority. I think
that is critically important.
Two is making clear the exigency of moving forward and
resolving the issues around the preferential market access
regulations that are in place. This hearing is quite timely.
Just yesterday there was a report out of India that they intend
to proceed full speed ahead with the private sector portions of
that, which would be significantly detrimental to businesses
globally, but specifically here in the United States as well.
And so making sure through Congress as well as the
Administration that we are dealing with that and dealing with
it now I would say is the second thing.
And then the third is something that you have done before,
which is through your letters that come through in a bipartisan
fashion making clear that you are paying attention, and that
this is an area of emphasis and focus I think is quite
important, and continuing that, I think, would be quite
helpful.
Chairman NUNES. Thank you, Mr. Garfield.
Mr. GARFIELD. You are welcome
Chairman NUNES. Mr. Waldron.
Mr. WALDRON. I have to echo the comments of my fellow
panelists, but I think that some of the emphasis has to be on
intellectual property. I think that there is an exigency, as
Mr. Garfield references. The acceleration of compulsory license
policies has accelerated in the last year. So there is some
urgency with respect to the frequency of talks that we have
with the Indian Government to register our displeasure with the
developments that have taken place there.
I also agree that IP chapters or IP understandings are also
important in these bilateral and multilateral fora. So this is
really something as a second matter that I think we really have
to pursue and go with our eyes wide open as to what is really
happening right now, and essentially if we wait too long, we
may find ourselves in a situation where it is irremediable.
And referring back to some earlier comments on GSP, I think
that we do have to review all available policy tools. I think
it is a matter of equity and fairness, and perhaps the upcoming
renewal will be a time to actually seriously look at what we
want to do and how we want to do that.
Thank you.
Chairman NUNES. Thank you, Mr. Waldron.
With that, my time is up and I yield to you, Mr. Rangel.
Mr. RANGEL. Thank you, Mr. Chair.
I have to admit to the panel that I have not really been up
to India's position as it relates to problems that they see in
international trade, and I wonder whether any of the witnesses
today, although you want to improve the trade relationship,
actually can be speaking on behalf of the Government of India
as to how they see.
Are any of you in touch with the Government of India
directly? You are.
Mr. GARFIELD. We all are.
Mr. RANGEL. How could I have any little bit of assurances
that if we did do what you are recommending, that the
Government of India would say, ``Thank you and let's move
forward''?
What do I have to work with?
Mr. GARFIELD. Well, the thing that I would point to is what
has happened in India in the last 20 years. I think all of the
panelists have been pretty consistent about the turnaround
story and the growth story and the power of innovation in
India, the industries that are being created, the people that
are being moved out of poverty, the people that have been moved
into the middle class, which is the point I made earlier, which
is that segment of the population is now larger than the U.S.
population in its entirety.
Mr. RANGEL. Mr. Garfield, I did not frame my question
correctly. I think all of us are excited about the increase in
trade, the number of people that are moving out of poverty into
the middle class, and the Chairman asked what is it that all of
you three would think is the most important, and of course,
that is good.
I also want to know whether there is anyone here that can
say this is what India thinks is the most important. Does India
want to move toward a free trade agreement? Does India agree
with Mr. Subramanian that rather than get issues resolved, that
we should take them to the WTO with all the time and expense we
have with that?
And even though I would acknowledge you to answer, I cannot
perceive that India would support that. You know, do not work
it out. We have got a good record with the WTO. Talk to them.
Does that make any sense? What am I missing?
Mr. SUBRAMANIAN. If I may.
Mr. GARFIELD. Yes.
Mr. SUBRAMANIAN. Thank you, Chairman Rangel.
I would say two things in response. One, does India want to
move forward? I think there is a sense, firstly, India is
moving forward with Japan, the EU, Canada, ASEAN Plus Six, et
cetera, et cetera.
Mr. RANGEL. Well, how does India deal with the observations
that some of our business have that they have not been fair in
terms of their trade agreements, and so why in the world would
we be supporting them in the WTO or free trade agreements?
Who here would suggest that India recognizes that we have
problems with the tariffs? We have problems with them like we
want to make it in USA and they want to make it in India. We
recognize that these are problems that we have with all
countries, and they have got big problems with us.
I am just having a small problem and wondering how you can
help us to deal with these problems. I think after this meeting
when I talk with the Ambassador from India more of my questions
will be answered as I can deal with their trade people and get
a better answer.
But I just do not know if you told the Chair the three
things you thought were important and all of us agreed, then
what would we do? Tell our Trade Representatives to do it?
Mr. GARFIELD. Yes. If I can jump in as well. Fundamentally,
I do not think India would necessarily agree with all of the
solutions we have offered. That is number one.
Number two, to the question of what we hear from India,
most of what we hear in response to the concerns that we raise
relates to security, and so what we are told is this is not
directed at the United States, but it is a broader concern
about security and the security of India, which we empathize
with. And we spend a lot of time talking to the Indian
Government, including with the Ambassador, whom we are seeing
this evening, about ways of addressing those legitimate
security concerns without building a wall around India and
Balkanizing the country.
Mr. RANGEL. I am sorry. Who are ``we'' that is concerned?
When you say ``we''?
Mr. GARFIELD. When I say ``we'' it is actually broad, you
know. So we just----
Mr. RANGEL [continuing]. I know, but who are you talking
about?
Mr. GARFIELD. Actually most specifically I am talking about
the global technology sector when I say ``we,'' but I am also
talking about the United States and other countries that have
significant concerns about the direction in India.
Just a few weeks ago we sent a letter to the Prime Minister
that was signed by 39 different entities representing over ten
different countries, and so we are here in front of the U.S.
Congress, and so, of course, this is a U.S. concern, but I feel
comfortable saying this is a multi-sectorial and a
multinational issue where the United States and this Congress
can play a significant leadership role.
Mr. RANGEL. I yield back, Mr. Chairman.
Chairman NUNES. Thank you, Mr. Rangel.
Mr. Reichert is recognized for five minutes.
Mr. REICHERT. Thank you, Mr. Chairman.
I just want to follow up on the Ranking Member's questions.
So as you said, Mr. Garfield, 39 international trade groups
have written the Prime Minister. Other groups have followed
with additional letters expressing their concerns about India's
actions. But an official at India's Department of
Telecommunications said, ``The concerns expressed by various
stakeholders would be considered as India finalizes their
rules.''
What does that really mean? It does not sound too
promising, as I think Mr. Rangel was pointing out.
We have sent letters; Congress has sent letters expressing
our concern. You have sent letters. Others have sent them. What
does that really mean, ``we will take this under
consideration,'' the concerns?
Mr. SUBRAMANIAN. Let me jump in here. I do not carry a
brief for anyone, but I think the important point to recognize
is that what is also a response to Chairman Rangel is that the
Indian Government's response would be that on many of the
concerns that have been raised, we are actually consistent with
our international obligations, you know, and where we are not,
we are open to dialogue, including, you know, dispute
settlement under multilateral procedures.
So I think in some ways to understand the Indian
perspective one has to take into account what the domestic
challenges are, you know, creating a manufacturing base, for
example, you know, imitating China, and that underlies the PMA
policy, for example.
But in response to the concerns, they would say in
agriculture, yes, our tariffs are high, but out bound tariffs
are much higher, and we are not violating any of them. So I
think that is why to test some of these claims I think it is
useful to get them adjudicated under multilateral dispute
settlement procedures.
Mr. REICHERT. Is there any concern on India's part that,
you know, we are all, as Mr. Rangel, again, said, pleased to
see that a lot of people are moving out of poverty and upward
mobility into the middle class and higher in India, and that
has been the result of some of their policies possibly.
But when they look into the future, is there any concern at
all that as they move ahead other countries are developing
other technologies that they will not necessarily have access
to, and they will begin to fall behind?
Has that been a consideration at all?
I am from Washington State, and we do a lot of business
with India. We just opened, I think our seventh Starbucks in
India, some progress, but we are concerned because in 2012
Washington State exported $1.2 billion worth of goods to India,
up from $661 million in 2011, but down $3 billion since 2007.
So, you know, we are losing our ability to interact with
India and exchange ideas and technology, negative on us, but is
India even aware or thinking about the future and the loss of
this technology and these opportunities to interact with other
countries in the future where they may lose instead of be
gaining?
Mr. GARFIELD. I think it is hard to ignore. The foreign
direct investment numbers over the last three years are
reflective of that. Starbucks is a great example because
they're in, but there are a lot of other retailers, including
some in the technology sector, who would like to be in and are
challenged in doing so, some very prominent ones, in fact.
Your initial question, I think we have heard it before,
which is it is under advisement, and we will consider it, and I
think until there is a sense that the implications of not
addressing this are going to be significant, then it will
continue to be under advisement, and that is why this hearing
today is so important.
We know the powers that be in India are, in fact, paying
attention.
Mr. REICHERT. Yes.
Mr. SUBRAMANIAN. I just want to add, I just want to say
that, you know, again, I think one risks obscuring, you know,
what is happening in specific sectors with what is happen
overall; that in fact, late last year the most dramatic opening
to FDI happened, you know, which would allow Walmart to go into
India. That happened recently.
And in the last three years, the access that U.S. investors
have to Indian stocks, equities, bonds, have been increased
dramatically. So I think one needs to have this balance of,
yes, there are sectorial problems, but the underlying trends.
FDI came down during the crisis, but it has picked up again
once again.
Mr. REICHERT. Thank you, Mr. Chairman.
Chairman NUNES. Thank you, Mr. Reichert.
Mr. Neal is recognized for five minutes.
Mr. NEAL. Thank you, Mr. Chairman.
Just a quick footnote. The issue of intellectual property
has lingered here for a long time as we have witnessed this
growing relationship between the United States and India, but
it is a very stubborn problem, but I want to take you to
another question that is more specific with a specific company
located in New England, TAKO. They have asked that because we
are holding this hearing that I raise this issue specifically
on their behalf.
This is an American company that is moving part of their
manufacturing business to India from China. Now, you would
think that that would be a good thing for India. However, India
has made the move so difficult that the company is now
beginning to regret the decision.
For example, TAKO has sent some samples of their finished
products to Indian vendors who will be manufacturing their
products and TAKO ran into major problems with Indian customs,
including long holds on samples and arbitrary duties and fees.
With a work force of 500 million people which is slated to grow
over these next 25 years, India is grasping at any means to
generate manufacturing employment, and we have seen and
witnessed some forced localization measures.
Here is an instance where an American manufacturer is
trying to create manufacturing jobs in India, and India is
making it very difficult for them to do so.
As witnesses, is there any one of you who wishes to speak
specifically to this question?
And I would note that TAKO is headquartered in Cranston,
Rhode Island.
Mr. TWINING. Sir, I can make just a general point, which is
that one reason the U.S. and India had a very fraught
relationship really throughout the Cold War was not simply
because of Cold War divisions, but because India socialized
most of its economic base when it became independent after the
British Colonial period. Most of us are pretty progressive, and
we are used to thinking about India as this dynamic market, a
billion plus people, one of the biggest economies down the
road, but in fact, you still have a government whose tentacles
are everywhere in the economy, and it is one reason why the
Indian private sector, quite interestingly, they are so fed up
with the regulatory mess in India that many of them are
actually going abroad. It is actually much easier and more
rewarding for many Indian companies to invest in Europe or the
United States than it is in their own country.
And so we do not have an Indian private sector
representative here at the dais, but if we did, I suspect he
would say, ``Gosh, we have this kind of problem ourselves and
it drives us nuts.''
But from a ten, 20-year perspective, the Indian Government
has been in the process of stepping back from the economy, but
it is still far too heavily involved in it, and that is
something we think, again, I think there is a consensus that a
big push on trade liberalization between our countries would
help to extract the Indian state in ways that would really
benefit the Indian people through greater economic growth.
Mr. NEAL. But the difficult with that point is that as we
pursue free trade agreements and breaking down barriers to
trade, one of the items, I think, that could fairly be ascribed
to governments in China or India is that they are for free
trade on their terms.
Mr. SUBRAMANIAN. I think that that is a fair point, Mr.
Neal, but I think the other side, the way this could possibly
work, the big push that we are talking about is because trade
is a two-way street. For example, just as localization and
others, IP issues are raising concerns, I think the Indian
Government also has, you know, issues of concern in the U.S.
which, you know, a kind of big push would allow this kind of
tradeoff to be made.
To give one example, the H1B issue, the immigration issue,
you know, export licensing, for example, that is another issue.
Totalization in Social Security agreements, that is another
issue.
So I think the important thing here is how can we create a
framework so that more of these exchanges can take place and it
does not just become, you know, U.S. business complaining about
problems in India which no doubt exist, but creating a more
positive two-way dynamic to create the incentives that Mr.
Twining talked about also for India to change some of these
policies.
Chairman NUNES. Mr. Waldron.
Mr. WALDRON. I think it is possible here at least in the
discussion of technology and intellectual property to create
win-win situations. I think you want to be able to convince the
Indian Government that this is not a zero sum game. This is
about creating an environment for innovation, and India has the
resources technically to advance very far in terms of creating
new, innovative technologies, yet it seems to be going towards
a very short-term view of what is going on.
But I think we can play a very strong role in at least
advocating, look, the long term and the future here of
prosperity is with advancing a win-win situation.
Mr. NEAL. Thank you, Mr. Chairman.
Chairman NUNES. Thank you, Mr. Neal.
Mr. Smith.
Mr. SMITH. Thank you, Mr. Chairman, and thank you to our
witnesses for your participation today.
Ambassador Johnson, you touched a bit on agriculture and,
you know, I guess in general and some more specific terms,
obviously we know we have got a globalized economy, and I think
of a business that exports around the world. This business
happens to obviously be in my district, but in a town of 300
population, and I hear from them that India's policies have
inconsistent tariffs, non-tariff trade barriers, various other
challenges.
Could you elaborate on that perhaps?
Mr. JOHNSON. I am sorry. What was the business?
Mr. SMITH. Agriculture.
Mr. JOHNSON. Oh, in general.
Mr. SMITH. Right.
Mr. JOHNSON. Well, I come from a town of 300 people in
Iowa. So I have sympathy for your constituents.
No, actually in combination response to the question that
Chairman Nunes has asked in sort of responding to Congressman
Nunes, is that what India basically wants is agreements on its
own terms, whether you are talking about the WTO that they
actually want to backtrack on tariffs and developing country
subsidies, or are you talking about bilateral agreements where
they basically leave agriculture out. They include 20 tariff
lines out of 600 potentially.
And in response to Chairman Nunes, I tried to say that I
think this Committee is showing an aggressive agenda, an
aggressive agenda on trade that India would be left out of if
they do not start acting in a way that is more conducive to
trade. It would be helpful.
In agriculture, we see countless not just in the number of
SPS barriers, but the goal line keeps moving. If you start
addressing one and then another one seems to pop up. There is
one reason, motivation for it, and you deal with that. Then
they come up with another reason for justifying a barrier.
And then as we started out by saying they have very high
tariffs, the highest in the world when it comes to agriculture
across virtually all of their agricultural industries, and that
is very problematic, and it allows them because they have a
high bound rate and they apply it, it gives them so much water,
so much protection that it gives them the flexibility to lower
it whenever they need something, if there is a draught or
something domestically, but they put it right back up.
Well, if you are an exporter, it is hard to build a
business around not knowing what is going to happen either on
the tariff side or on the regulatory, sanitary and
phytosanitary rules that seem to be somewhat arbitrary at
times.
I hope that answers your question.
Mr. SMITH. Sure. Now, could you reflect a little bit in
terms of the restrictions that are or are not based on the
sound science and economics?
Mr. JOHNSON. Well, for example, in the dairy industry they
have had in place a number of regulations that, in fact, have
been changing over time that have to do with what we feed our
animals or the drugs that we might use that are internationally
recognized and accepted, and then when we go through and we
spend a lot of time assisting the industry on this, when we go
through trying to address each one of those problems, we get
sort of similar responses to what we heard over here, which is
that they are under consideration or they still believe they
are justified. And so far we have not pulled a trigger on a WTO
case.
Another one is avian influenza, which basically they put a
ban in place for low path avian influenza, which is not an
internationally recognized standard. We have the most rigorous
system for monitoring and dealing with avian influenza in the
world, and India has actually had high path avian influenza on
numerous occasions.
And so now we have taken a WTO case against them that the
panel was just empowered last month.
Mr. SMITH. When you say that the policies are changing,
could you elaborate on that?
Mr. JOHNSON. So I know the dairy industry has a paper here,
but so, for example, when we start working through trying to
deal with even things that are not science based, so, for
example, they do not want certain drugs to be used for the
dairy products that are sent there.
So even when we start investigating how we could be
identifying suppliers that could address that specific
requirement, then we will find later that there is another
reason that those suppliers maybe do not fit the case or the
conversation does not continue.
Mr. SMITH. Or perhaps it has less to do about public safety
than some other----
Mr. JOHNSON [continuing]. Oh, clearly, and I think it is
pretty clear on a number of these that there is not a human or
animal health benefit from the regulation, but really there are
effectively acts of protectionism.
Mr. SMITH. Would anyone else? Mr. Subramanian?
Mr. SUBRAMANIAN. Just a thought. You know, the description
of going to WTO as pulling the trigger, at one level that is
true, but I think you have to recognize that many of these
regulations that are formulated within India come about because
of complicated interests, and sometimes having an international
ruling which says this is not based on sound science actually
helps the pro liberalization law be within India to act on
those who are against it.
So I think that is a big advantage of having, you know,
international pressure through, you know, multilateral
procedures to kind of strengthen the hands of kind of the good
guys within India.
Mr. SMITH. Okay. Thank you. I yield back.
Chairman NUNES. Thank you.
Mr. Larson is recognized for five minutes.
Mr. LARSON. Thank you, Chairman Nunes and Mr. Rangel, and
our distinguished guests that are here today. The testimony has
been enlightening and certainly we all share the concerns and
the great opportunity that exists with the vast potential of
India.
I would like to amplify a point that Mr. Neal made and one
that continues to be a thorny issue for this Committee and
American manufacturers in general, and that deals with the
issue of intellectual properties.
And having several value added manufacturers in the
Northeast and specifically in the State of Connecticut and one
testifying today in terms of Pfizer, I would like to get the
perspective, if I could, Mr. Waldron, from you and other
panelists if they want to join in, about the difficulties that
American companies face.
I believe it was Mr. Garfield that talked about the
complications of preferential markets and the bureaucratic
entanglements that that creates, and of course, the ongoing
concern that so many American manufacturers have related to us
about intellectual property, if you could, sir.
Mr. Waldron.
Mr. WALDRON. Thank you, Congressman Larson.
I think we have to sort of talk about balance here in the
intellectual property area. I mean, even though India will
proclaim it is consistent with trade obligations in terms of
its patent law, we have had in the recent past about eight sort
of cases that have come up dealing with patented products, and
frankly, we are dealing with a situation where we are at zero
and eight in terms of the patent being upheld or any sort of
pushing back on a compulsory license or revocation actions. I
think it speaks to a very poor record, and there is something
out of balance.
I mean, the rest of the world has IP provisions that are
consistent with international obligations. Yet we are so far
towards the range where everything is revoked or there is no
valid patent in India. I think we really have to sort of
address this quickly before it becomes a very dire situation
and we find ourselves where we really have nothing left.
Mr. LARSON. Would you say that that is because of an
ensnarled bureaucracy or more of a deliberate plan of India?
Mr. WALDRON. Well, I cannot speak to the intentions of the
Indian Government, but I think the government there should play
a role and does play a role in at least communicating what it
finds important and its priorities. So if all the
administrative agencies are deciding cases in a certain way,
that seems to be reflective of the tone that is being set at
the highest levels.
I really think that there is a role that the Indian
Government can do in communicating to its agencies in terms of
creating a more positive environment because, frankly speaking,
their interests lie in creating a culture of innovation, as we
do here. The IP system has been the driver, the historic driver
of innovation over many years and contributed to the great
prosperity that we enjoy in this country. It is something that
we should share. I think it is a legacy that we have to bring
to them simply because we are in a world where we do not have
drug products that cure all diseases. I think we really need to
get further along, and these are interests that we all share in
common with every country regardless of border.
So the emphasis really has to be on innovation, and there
really needs to be messages from the top within India.
Mr. GARFIELD. If I could add.
Mr. LARSON. Sure.
Mr. GARFIELD. There are multiple forces at play here, and
so in part it is bureaucracy. In part it is a slowing economy,
and markets like India looking at China and that model and
thinking that maybe the path to take, and so the point that has
been made about creating opportunities for multidirectional or
bidirectional dialogue, so we're exchanging ways in which their
interests can be met as well as ours, and when I say ``ours,''
I mean global companies, I think will serve us all well.
The concern I have is--and not to sound too much like the
boy who cried wolf--is that some of these challenges that are
progressing now could become non-remediable if we do not
address them immediately, and so creating those opportunities
and that dialogue immediately, I think, is critically
important.
Mr. LARSON. I believe it was Gandhi who said, ``I want all
of the winds of the world to be able to blow freely through my
house, but I will not be blown over by any.''
And it seems to me, both Mr. Waldron and Mr. Garfield, that
what you have said this would enhance their ability to stand
with the rest of the world.
Mr. GARFIELD. Well articulated.
Chairman NUNES. Thank you, Mr. Larson.
Mr. Boustany is recognized for five minutes.
Mr. BOUSTANY. Thank you, Mr. Chairman.
This has been a really informative and compelling hearing.
I really appreciate all of our witnesses and their testimony.
It has been clearly stated obviously that the benefits of a
close trade and investment relationship with India is very
significant, and it is also strategically important as well as
we look at the growth in Asia, the Rim around the Indian Ocean,
and so forth, and back in the second term of the Bush
Administration, I was really enthusiastic about the civil
nuclear agreement. I thought this was a very important
strategic step, an opening, if you will, toward India to really
formalize and enhance the relationship, and yet subsequently we
saw the liability regime that was put in place, and it sort of
really dampened the enthusiasm across the board.
So it is sort of like we take a step, and then there is a
reaction which further pushes, and I found this problematic,
but hopefully we can continue to move forward.
India clearly is critical, I think, as you all have stated
very clearly. India is critical in getting back to rules-based
global trading system and bring China in and so forth, and I
know we are pushing on TPP and the trans-Atlantic agreement as
leverage to hopefully bring them in and to deal with China. But
the problem is we are behind timing-wise on this while India is
already moving forward with a number of other regional
agreements that are, you know, not as comprehensive, but
clearly put us at a disadvantage as you all stated.
But it seems to me in answering Mr. Rangel's question, and
clearly we need to talk to the Indians about it as well; I
agree with you, but a couple of observations.
One, India needs to move up the value chain on
manufacturing. That is clearly one of their objectives, but
secondly, you know, the security issue as was raised by Mr.
Garfield. But what was not mentioned is India's severe
vulnerability with regard to energy and the need for energy.
And as I think about this, I know Cheniere Energy, for
instance, is a company in my district. In fact, the first LNG
export license has been granted to Cheniere, and we in
Louisiana are very, very excited about this because it does
mean jobs. They have completed a 20-year contract with the
Indian energy company. GAIL, I believe, is the name of the
company, and this is taking effect in 2017. I think the
contract entails 3.5 million tons of natural gas, liquefied
natural gas exported from the U.S. annually.
This is a time limited opportunity given, you know, the
nature of the change in global LNG markets. We have an
arbitrage opportunity that is immense, but it is time limited.
None of you address this specifically in your testimony, and as
I look at how do we catalyze this relationship with India, what
can we use as leverage?
The energy vulnerability seems key in this to me on many
levels, both from a security and manufacturing standpoint, and
so forth. I would like Mr. Twining and Dr. Subramanian to
comment on how we could, you know, position ourselves because
this is the second step granting this type of export license to
a non-FTA country.
Mr. TWINING. Sir, that is an excellent question, and I am
so glad you raised it. India has one of the greatest energy
import requirements in the world, and that dependency on world
energy supplies will only grow as the country develops, as the
population continues to bloom.
One of the smartest things the United States could do
strategically in Asia, we are quite used to thinking about our
military presence, our naval presence, our alliance
commitments. We also sometimes talk about our trade agenda and
some kind of market liberalization, but we need to add an
energy pillar to this.
And exactly as you say, the shale gas revolution in the
United States creates an extraordinary opportunity for us to
export it, and I think we should probably export it to the
world, but we should also particularly build in that dimension
to our key security partnerships in Asia. I would say in Asia
our most important, most capable security partnerships are with
Japan and India. In different ways, and say to them, ``Look.
Part of this package could be preferential access or some
facilitated agreement to U.S. energy exports because, in fact,
we have a national security interest in helping you develop
your economy and helping you develop your military capacity,
help us police this tough region in the world, create some
ballast in Asia other than around China,'' and this is
something our allies desperately need.
And so, you know, I think this could be a game changer if
we play it right.
Mr. SUBRAMANIAN. It is a great question, and I agree
completely with what Mr. Twining said. I would just add a
couple of points.
One is that India is heavily dependent on coal. So from a
climate change point of view as well, getting cleaner gas from
the United States, I think, will help enormously, and also the
fact that not only is coal dirty, but Indian coal supplies are
kind of now again boggled by all of these regulatory problems.
So I think there is a huge opportunity there, both the
energy side on the climate change side, and I think the United
States should use that as leverage, you know, in pursuing not
just the energy agenda. So this comes back to my point about,
you know, the two-way need.
I mean, just as, you know, concerns that we have, the U.S.
has this great leverage in terms of energy exports. So I think
that reinforces my view that we need to get this big thing
going whether much more two-way tradeoffs are possible.
And just one comment on your value added. The Indian
problem is not moving up the value added chain. It's moving
down the value added chain because, you know, it's too skill
intensive and too technology intensive. We need to create more
jobs and employment.
Mr. BOUSTANY. Thank you.
Chairman NUNES. Thank you, Mr. Boustany.
Mr. Roskam is recognized for five minutes.
Mr. ROSKAM. Thank you, Mr. Chairman.
Mr. Twining, in your opening remarks you said that India
plays better inside the club than outside the club, and I just
wanted to follow up on Dr. Boustany's observation about the
civil nuclear agreement in which they sort of made their own
club.
In other words, it seems to me that part of what India has
got going for it is they say, ``Look. We are so big and so
strategically important we are going to wait and you are going
to redefine rules based on how big we are.''
Am I overstating that? Is that an over-characterization or
how would you frame that up?
Mr. TWINING. The way I would frame it is as somebody who
worked in the Bush Administration on the civil nuclear
agreement was we had a problem, which is that we had a country
that was completely outside of the normal proliferation regime,
the nonproliferation regime. We had a country that had nuclear
weapons and was not proliferating them like China, Pakistan,
other countries have proliferated them beyond its borders, but
we had a big hole in the rule book on global nuclear trade and
proliferation.
We eventually concluded, the U.S. Congress concluded along
with the Administration that bringing India into the system
would be better than having it on the outside. The liability
law that India subsequently passed shot itself in the foot. I
mean, a lot of domestic politics here, a lot of domestic
politics there. The government in India had fought so hard for
that civil nuclear deal. It was the first time an Indian Prime
Minister had put his government on the line on a foreign policy
issue, put his government on the line over building this new
relationship with us.
He won that, but then it was almost like the fight went out
of his Administration. They let the parliament devise this
liability law that was, frankly, inadequate.
What we had seen though in terms of your question, India's
inclusion in the club, not only did we collectively bring India
into this civilian nuclear regime, in civilian trade in nuclear
components. India now is lobbying to join the clubs that had
excluded it: the Australia group, the nuclear suppliers group,
the WASSENAAR arrangement, all of these nuclear cartels that
control the civilian trade in nuclear energy. India now wants
to be a full member of those clubs.
Mr. ROSKAM. So in that case, I mean, the paradigm has
shifted, and what you are describing is more of an opportunity
to invite----
Mr. TWINING [continuing]. No, I think it is a longer term
socialization opportunity. We have also seen, I know, the Hill
India's policies towards Iran were a huge cause of concern
during the civil nuclear debates. There was no quid pro quo.
We have seen India vote with the United States against Iran
five times now in the IAEA, and so I think that is another
example of where the country can be more responsible when it is
inside than when it is out.
Mr. ROSKAM. Okay. Thank you.
Mr. TWINING. Thank you.
Mr. ROSKAM. Mr. Subramanian, when you went through your
one, two, three and one, two, three, and thank you for doing
that in a very organized way, by the way, for one of your
comments I wrote down, ``Rub some dirt on it,'' meaning the
U.S. should basically get over the regulatory and tax problems.
Can you describe what you meant? In other words, what it
sounded like to me as, look, this is really big and
complicated, and we are not going to be able to influence this
as much as we think we can. So the phrase when a kid bumps
himself, ``Hey, rub some dirt on it. Get over it and move on.''
Is that what you are saying?
Mr. SUBRAMANIAN. Well, I would put it in the following way.
The thrust is you got it exactly right, but the issue is
something that is an important issue because, you know, the
first best is, for example, on the civil nuclear, is to get a
much better law. There is no question about that.
But what if you don't get that law? What if it's not going
to happen? Then I think there is a dilemma for American
business.
Mr. ROSKAM. So the point is do not wait.
Mr. SUBRAMANIAN. Yes, because others are getting in.
Mr. ROSKAM. Okay. That is my next question. Who is getting
in? How are they beating us to this?
So when this Committee in the last Congress was dealing
with PNTR for Russia, for example, one of the recurrent themes
and it was very persuasive and agreed was that lack of action
on the part of the committee and Congress gives other global
competitors an advantage in the Russian marketplace.
And so I think we did the right thing and moved forward on
it. Who is beating us to the punch? And what are they doing
differently? If it is so complicated for us to get these deals
and sort of the nickel and dime stuff of pistachios and
chickens as you guys were making these analogies, who is
beating us? And are they less sophisticated agreements?
What are we missing or how are these being compared?
Mr. SUBRAMANIAN. That is a great question. So I will just
give you an example. On the civil nuclear, I think France and
Russia, whatever inadequacies are there in the India law, make
it up in some way through kind of government guarantees of some
sort, and that is the way.
Mr. ROSKAM. Okay.
Mr. SUBRAMANIAN. I mean, unfortunately we are done here,
right?
Mr. ROSKAM. Right.
Mr. SUBRAMANIAN. And so it is a problem, but that is one of
the examples of the way they are heading. In infrastructure,
for example, I think, you know, the East Asians and Malaysians
are getting in in a way that U.S. business is not.
Mr. ROSKAM. Well, what are they doing? What are the
Malaysians doing, for example? And then wind it up because we
have got the red light.
Mr. SUBRAMANIAN. I mean, I think that essentially partly
they are willing to take greater risks because I think U.S.
business needs this rule of law comfort, you know, which is
very good, but I think it loses out in the process.
Mr. ROSKAM. Okay. Fair enough. Thank you.
Yield back.
Chairman NUNES. Thank you.
Mr. Kind is recognized.
Mr. KIND. Thank you, Mr. Chairman, and thank you for
holding this very insightful and helpful hearing, and I want to
thank the witnesses for your excellent testimony here today.
This is a crucial relationship, not only geopolitically but
economically, and it is one that is going to require a lot of
care and nurturing and attention as we move forward, given some
of the challenges and the obstacles that we face.
I had a chance, Mr. Chairman, last October to head for
India for a few day with Adam Smith, Duncan Hunter, and a
couple of other members, and it was not just New Delhi. We got
out in the countryside and the various cities, and it was a
fascinating place with tremendous potential, but also some huge
challenges in regards to our economic relationship.
Ambassador Johnson, I appreciate your update on where we
are with the agricultural sphere of it and the difficulties
that we still face trying to get India to open up a little bit
more in regards to our own egg products.
Coming from my home State of Wisconsin, dairy obviously is
a source of concern and, Mr. Chairman, I notice that the
National Milk Producers and the Dairy Export Council submitted
a statement for today's hearing. I am not sure if it was
officially included in the record, but I would ask unanimous
consent at this time to have it included if it was not.
Chairman NUNES. Without objection.
[The information follows: Dairy Industry]
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Mr. KIND. Thank you.
But, Mr. Subramanian, something that you mentioned earlier
when you were going through your litany of three things as far
as U.S.-India relations, the final one was what not to do, and
that is GSP. Obviously that is coming up for reauthorization,
and given the compulsory license decisions that they have made
right now, which is very unsettling and could detrimentally
affect Indian foreign investment going into the country, but
also some of the other hurdles that we have faced, agricultural
or otherwise, your recommendation is not to use that as a point
of leverage as far as engaging India.
But assuming we did, what would the consequences be if they
lost GSP preference from us, and what would that mean as we
move forward?
Mr. SUBRAMANIAN. That is a great question, Mr. Kind. My
sense is that the loss of GSP in quantitative terms will not be
huge for India, you know. India basically exports a lot of high
tech, you know, more advanced goods, and apart from a few
things here and there, I think the quantitative impact will not
be great.
So it does not make for a very strong lever vis-a-vis
India, but I think you are going to incur the diplomatic costs
because this will be symbolically seen as a kind of, you know,
retaliatory action or so. That is why I think on the balance of
cost and benefits I would be a little hesitant about using
that.
And on the compulsory licensing, I do agree with Mr.
Waldron that, you know, there are a few things in Indian law
like Section 3(d) of the Indian Patent Act has these
requirements for a patent, the efficacy requirement or the
working requirement. I think these are things that are well
tested in the WTO. I mean, I do not think we need to resort to
retaliatory threats to get these changes because I think
because India might be out of line with international practice,
I think it is good to get an international----
Mr. KIND [continuing]. You think it would be fair game as
we come up with reauthorization of GSP to be looking at India
and other countries involved, too, in regards to whether we
need to at this point in development extend those preferences
to India or some others.
Mr. SUBRAMANIAN. Yes, but that should be a more generic
discussion, right?
Mr. KIND. Yes.
Mr. SUBRAMANIAN. Because, as I have said, why should a
country that grounds GSP receive GSP, and that is true for many
countries. But that is a different conversation and a different
dynamic from using this as a specific----
Mr. KIND [continuing]. Mr. Waldron, let me go back to the
compulsory license issue on that, and assuming they are moving
forward on this, what would be the impact on foreign investment
or other private companies looking to do business in India if
they go down this road?
Mr. WALDRON. Well, I cannot speak to all of the individual
countries, but I would say that if you are an innovator and you
are trying to sell innovative products there, you are going to
find yourself in competition with numerous other products. We
have had products on the market there that did not have patent
protection, where we were competing against 60 other
competitors marking the same thing. So obviously, the
consequences of that are dire.
I guess in talking about trade instruments or trade tools,
I do think that they are somewhat of a blunt instrument to try
to deal with something that you are really trying to get focus
on. If you are trying to focus on specific issues, you may not
get that through the revocation of certain preferences or a WTO
case, which has all kinds of unintended consequences.
But you really have to send strong messages on the things
that you believe are priorities, and I think that that is
really the starting point, but obviously we do not have a lot
of time.
Mr. KIND. Yes. Well, thank you, Mr. Chairman. I certainly
encourage this Committee with your leadership to continue to
focus on India and any parliament or congressional exchanges
that we might have, too, so that we can have the dialogue at
that level I think would be very helpful and productive as we
move forward.
Thank you.
Chairman NUNES. Thank you, Mr. Kind.
Mr. Paulsen is recognized for five minutes.
Mr. PAULSEN. Thank you, Mr. Chairman, also for holding this
hearing.
Great testimony today. I really have appreciated kind of
the reinforcement about what I have heard about these
disturbing trends within India kind of turning inward and
erecting more barriers to trade and investment and kind of
turning back the clock, if you will, and so some real
challenging opportunities for us moving forward.
One of Minnesota's largest exports to India is in the area
of medical technology, and unfortunately, I understand that the
United States medical manufacturers are facing incredible
challenges now selling their products in India, including lack
of transparency in pricing under India's central government
health care scheme, as well as discriminatory government
procurement policies.
And there is no doubt that American medical device
companies are well positioned to partner with the Indian
Government toward improving health care access and outcomes and
awareness and developing much need more stronger health care
infrastructure, but they are going to have a difficult time
doing so in the current environment.
Mr. Waldron, you touched on some of this from the drug
perspective. Now, can you also maybe comment from the
perspective of maybe how an American medical device company
might have difficulty selling their products in India?
And is it going to be helpful to have a renewed or a
revised bilateral trade dialogue in this area, addressing this
industry's concerns?
Mr. WALDRON. I guess very generally I think it is probably
one of the more important tools that might be helpful. I guess
it all depends on the particularities of what is included in
that. So I would say that if it is amongst the instruments that
you could move forward on, but I mean, a lot of medical
instruments also depend on intellectual property and sort of
the respect for the innovation that is coming in.
So I think it is sort of like part and parcel of the same
kind of environment that we are trying to create there. I think
we are all experiencing it in the same way. Our innovation
really is not being respected, and it is being pushed back.
Mr. GARFIELD. The thing that I would add there is
particularly in the context of GSP coming up for renewal,
before we get there I think we have an opportunity to engage in
the kind of bidirectional dialogue so that we can talk
strategically about differing interests that can help us
advance and resolve some of the challenges we are facing in the
market, and so it is something that we would highly endorse.
Mr. SUBRAMANIAN. Just a thought on this, the PMA policy. So
India, I mean, it is not a member of the Government Procurement
Code, and so localization in government contracts is okay, and
now it is extending it to the private sector. I think there is
a great opportunity here actually through the government
procurement route because the government wants to save money in
its purchases. Fiscal deficits are very high, and you know,
getting the fiscal under control is a major objective.
Therefore, I think getting India into the Government
Procurement Code is actually an easier way of, you know,
dealing with the PMA policy than it is, in fact, of addressing
PMS in the private sector. I think that is the kind of thing
that is worth considering, and that is another reason why I
think getting India into the WTO, into the Government
Procurement Code would be worth pursuing.
Mr. PAULSEN. Let me ask this question, too, because today
global supply chains are absolutely playing a more increasing
integral role in trade overall, and there are a lot of
Minnesota companies that have a strong network of supply
chains, you know, 3M, General Mills, Cargill, Equal Labs, C.H.
Robinson, Medtronic. The list goes on and on and on.
But more and more of these goods and services now used by
producers and consumers contain inputs and value added
components from a number of countries rather than just being
produced in one country alone. How well is India itself
integrated now into global supply chains and how can it improve
that integration in the global supply chain? Anybody?
Mr. GARFIELD. It is incredibly well integrated certainly
for technology, and that is a part of what is so surprising
about the direction in which India has been going in the last
couple years, particularly as it relates to the PMA and some of
the regulation that we talked about earlier, including the
testing or certification or taxes.
They have benefitted. India has benefitted significantly,
given the global integrated supply chains that we see today,
and given the policies they put in place though, they stand to
lose their role as a part of that process, and so our hope is
that through these types of conversation, they are able to see
as well as we are how we mutually benefit from this
relationship.
Mr. PAULSEN. Anyone else?
[No response.]
Mr. PAULSEN. Thank you, Mr. Chairman. I appreciate it.
Chairman NUNES. Thank you, Mr. Paulsen.
I would like to thank the witnesses for their testimony and
for the responses to our questions. I think you have given us
much to think about concerning the opportunities and the
challenges presented by the U.S.-India bilateral relationship.
Our record is open until March 27th, 2013, and I urge
interested parties to submit statements to inform the
committee's consideration of the issues discussed today.
With that this hearing is now adjourned.
[Whereupon, at 11:42 a.m., the subcommittee was adjourned.]
[Submissions for the Record follows:]
American Bar Association
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