[Ip-health] Fwd: {Macroeconomics for Development ) India or US? Whose interests will the Chief Economic Advisor Subramanian serve?

K.M. Gopakumar kumargopakm at gmail.com
Tue Oct 21 05:11:51 PDT 2014



Economy <http://firstbiz.firstpost.com/category/economy> Oct 21, 2014
India or US? Whose interests will the Chief Economic Advisor Subramanian
 By G Pramod Kumar <http://firstbiz.firstpost.com/author/pramod>
 [image: India or US? Whose interests will the Chief Economic Advisor
Subramanian serve?]

Arvind Subramanian. Image: Flickr/kris krüg

   -  1

 “US business faces three major challenges in India. Two challenges common
to all foreign business are: first, the weak and uncertain regulatory and
tax environment that affects the civil nuclear industry, infrastructure,
pharmaceuticals, and more broadly the operations of foreign multinationals
in India. Second, although the broad macroeconomic picture is one of
opening and surging trade and investment, protectionism in selected sectors
has re-surfaced. India is seeking increasing recourse to localization—in
banking, telecommunications, retail, and solar panels among others—which
favors domestic providers of inputs and equipment over foreign providers.
Thus, broad trade and macroeconomic policies toward foreigners are moving
in the right direction but sectoral policies have experienced setbacks.”

Who could have said this?

A trade specialist working for the US interests? An advisor to some US
trade body or an advisor to the US government? Or an overseas critic of
prime minister Narendra Modi’s plans to localise manufacturing?

The answer is none of the above, but the current Chief Economic Advisor
(CEA) Arvind Subramanian.

This is not a random statement that he could have made long ago, but has
been taken from his testimony before the “Ways and Means Committee of the
United States Congress”, which was hearing on “US-India trade relations.”
in March 2013.

As a senior fellow at the Peterson Institute for International Economics
and Center for Global Development, he was obviously advising the US on how
to do business with India. The tone and tenor is that of an American trade
specialist who is quite keen on protecting his country’s interests.

Some of the points that he mentions in the paragraph above as India’s
weaknesses from the US point of view are in fact its strengths which
protect its people’s interests - the regulatory and tax environment of the
nuclear industry and pharmaceuticals and the operations of foreign MNCs.
Additionally, he refers to “protectionism” and “recourse to localisation”
which favour domestic providers over foreign providers as challenges to the

His voice on pharmaceuticals resembles that of the pharma MNCs and the US
trade bodies that constantly find fault with India’s pharma policies which
are compliant with its domestic laws and conditions (pricing and patents)
and WTO (TRIPS flexibilities). In the recent past, particularly ahead of
prime minister Modi’s visit to the US, there had been an onslaught on
India’s intellectual property regime as it relates to the pharma industry.
Attempts had been made to portray India as a renegade. By calling the
regulatory and tax environment related to pharmaceuticals, “weak and
uncertain”, Arvind Subramanian had indeed refused to side with the
interests of Indians. There have been reports that the prices of drugs have
been increasing after the government
recently removed the price controlling powers of the National
Pharmaceutical Pricing Authority (NPPA). Possibly under pressure, so far it
has refused to intervene.

Now read what Rod Hunter, senior vice-president, Pharmaceutical Research
and Manufacturers of America, wrote in an article in the Hindustan Times
<http://www.hindustantimes.com/StoryPage/Print/1265781.aspx>, : “One of the
obstacles to investment in knowledge-intensive industries in India is
intellectual property (IP) rights. India has been hostile to IP protection,
especially for biopharmaceuticals. In recent years, India has invalidated
or otherwise attacked patents on a significant portion of innovative drugs
available in India in order to make way for local champions.”

In the same congressional testimony, Arvind Subramanian goes on to add:

“American firms are increasingly facing implicit but substantial
discrimination in India’s large and growing market because of India signing
(or on the verge of signing) free trade and economic partnership agreements
with its largest trading partners that are all major competitors to the US:
Europe, Japan, Singapore, ASEAN, and possibly ASEAN-plus 6. Soon, if not
already, this discrimination may be the bigger challenge for US business
than some recent sectoral measures. These RTAs are neither as comprehensive
in their coverage across and within sectors as the FTAs negotiated by the
United States, nor as expeditious in the time frame for implementation. But
they provide more favorable access to non-American suppliers and because
India’s tariffs and barriers can be high, the discrimination can be
substantial. Combined with the fact of India’s large and growing market, US
suppliers can really be disadvantaged.”

Here again, he picks on India’s trade ties with countries other than the US
and focusses on the FTAs with the US. FTAs, particularly with the US and
the EU, are viewed with a lot of suspicion by development economists and
activists in India and elsewhere because they are inherently harmful to the
larger interests of people. The latest trade and development report (2014)
of the UNCTAD said that the FTAs affect the policy space of developing
countries. The large-scale protest in Thailand against the FTA with the US
a few years ago is a case in point.

The most telling in the present CEA’s advice to the US in his previous
avatar is the following:

“The US should adopt the following multi-pronged strategy for solving trade
conflicts and maximizing the underlying potential. First, the US should
address frictions especially where Indian policies are demonstrably
protectionist (as in the case of many local content requirement policies)
through multilateral (WTO) dispute settlement procedures. The US should not
be reticent in this regard.”

Now the question is whose interests will the CEA serve? India’s or that of
the US? The fault is not with him, but with India. He is one of the many
professional faces of transnational capital that’s highly mobile. IMF and
World Bank pedigree doesn’t necessarily serve the interests of the majority
of Indians who are desperately poor. It’s time we applied the “make in
India” principle to our home grown experts too.

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