India has excellent record of compliance with WTO rulings: Subramanian

Arvind Subramanian had in March 2013 suggested to the United States to address frictions with India over its protectionist measures through World Trade Oranization (WTO) dispute settlement procedures.

“The US should not be reticent in this regard. India has an excellent record of compliance with WTO rulings against it,” Subramanian had said in his testimony to the US legislature. At the time, he was a Senior Fellow at the Washington-based Peterson Institute for International Economics.

On Wednesday, Bharatiya Janata Party leader Subramanian Swamy demanded the dismissal of the chief economic advisor (CEA) over this. “Who said to US Cong on 13/3/13 the US should act against India to defend US Pharmaceuticals interests? Arvind Subramanian MoF !! Sack him!!!,” Swamy said on Twitter, the micro blogging site.

Subramanian had at the time also said there was merit in initiating a deeper bilateral trade integration between India and the US, as a framework for giving recognition to the broader strategic imperative of closer cooperation between the two countries, for pursuing further liberalisation in both and for reversing the discrimination each was inflicting on the other.

He’d told the US Congress that after growing rapidly in recent times, India was encountering a bout of severe turbulence. “On the economic front, growth has decelerated sharply, from nine per cent annually to 4.5 per cent. And, macro economic vulnerabilities — high fiscal deficits (nine per cent of gross domestic product), stubbornly elevated (double-digit) inflation, and a deteriorating external balance (over four per cent of GDP) — have been mounting.”

Adding: “In response to adverse developments, the government has undertaken, since late 2012, major domestic economic reforms. Reforms have also included an ambitious opening of the economy to foreign direct investment and to foreign financial investors. Indeed, since the global financial crisis, few countries have opened up to foreign capital to the extent that India has,” Subramanian had then said.

Plus: “Significantly, and reflecting a domestic bipartisan consensus, there have been no major macro economic reversals of opening to foreign trade and capital. These reforms have come against the backdrop of a longer-term trend of surging Indian trade and foreign direct investment, with enormous benefits for foreign and American business,” he had said.

However, US business faced three major challenges in India. Two challenges common to all foreign business were: 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, Subramanian had said.

Second, although the broad macroeconomic picture is one of opening and surging trade and investment, protectionism in selected sectors had re-surfaced, he had argued.

India is seeking increasing recourse to localisation—in banking, telecommunications, retail, and solar panels, among others—which favours domestic providers of inputs and equipment over foreign providers, he had said.

“Thus, broad trade and macroeconomic policies toward foreigners are moving in the right direction but sectoral policies have experienced setbacks.”

Later, in May 2014, Subramanian gave another testimony to the United  States Trade  Representative (USTR). He had suggested the USTR desist from designating India as a ‘Priority Foreign Country’ (a pejorative term in the relevant US law) over an allegedly lax intellectual property rights (IPR) regime in the largest South Asian  country. The label would have triggered trade sanctions against India.

SUBMISSION OF ARVIND SUBRAMANIAN TO THE US CONGRESS IN 2013

• India’s economy growing rapidly, at about 6.5% for over three decades since 1980, and close to 9% in the last decade
• It has emerged a major power, with an economy ($4.7 trillion) that in 2012 became the world’s third largest (in purchasing power terms), surpassing Japan and now behind only China and the US
• This dynamism has expanded opportunities for the US business
• However, India currently encountering a bout of severe turbulence
• But, the government has undertaken major domestic economic reforms
• However, sectoral policies have experienced setbacks
• 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
• India has excellent record of compliance with WTO rulings against it