India – The Land Of Business Fraud?

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President Trump has set out to correct America’s misguided trade policy. For decades, one-sided trade deals allowed other nations access to our bountiful consumer market even as those same nations blocked American good and services from their own shores.

Our trading partners would break the rules, steal trade secrets, force companies to transfer technology, and impose steep tariffs to keep American products out.

Trump has repeatedly called out China for predatory trade practices. While China is the best known and perhaps biggest offender, it is not alone.

A new report from Southern Methodist University Cox School of Business finds India systematically violates intellectual property rights, the rule of law and basic norms of governance for American businesses operating in that country.

The report, “Doing Business in India,” concludes the Asian nation must drastically improve its business climate, governance and transparency if it wants to be a trusted economic and diplomatic ally with the United States.

In 2015, Indian Prime Minister Narendra Modi launched the “Make in India” campaign to encourage foreign companies to invest, build and manufacture in India.

The government identified 25 sectors, including electronics/IT, automobiles, aviation and pharmaceuticals, and opened the door to foreign investors.

The campaign succeeded in making India the world’s top destination for foreign direct investment, beating both the United States and the People’s Republic of China.

But while India promised to respect the intellectual property of American companies doing business there, the report found the reality to be quite different.

India is regularly featured on the U.S. government’s watch list of the world’s worst offenders of American intellectual property rights, and earned the top spot in 2017. The Commerce Department notes: “Despite positive statements and initiatives upon which the Modi administration has embarked, … India has yet to take steps to address longstanding IP issues that are affecting innovative industries. … The country continues to remain the home to several “Notorious Markets” across the breadth of the country, according to the U.S. Trade Representative’s latest report.”

American companies face daunting obstacles, excessive reporting requirements and lengthy delays in securing patents in India. Crippling regulations hobble three industries that make an outsize contribution to American GDP: software, pharmaceuticals, and information and communications technology.

Software: Sixty percent of software in India is pirated, and American companies find it impossible to protect their inventions.

Pharmaceuticals: The Indian government places price caps on American companies selling medicines and medical devices. This amounts to a wealth transfer, with American health care consumers paying more to subsidize artificially low prices in India.

Information and Communications Technology: India imposes onerous technology-transfer requirements under the rubric of cybersecurity. American companies must now hand over highly valuable intellectual property as a precondition of doing business in India. China has notoriously used this tactic to rip off trade secrets and knock off competitors’ products.

Five decades ago, the United States adopted a policy known as Generalized System of Preferences to help developing countries build their industries and middle classes. We dropped import tariffs and in return, the partner countries would drop their barriers to American exports.

India has benefited the most from this policy, but it has not lived up to its end of the bargain.

Trump understands that one-sided trade schemes have hurt American workers and businesses. He vows, “We are not going to let the United States be taken advantage of anymore.”

India is the world’s largest democracy and a valued ally. It’s time for India to act like one, or lose the special trade preferences we have bestowed on it for so long.

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