U.S. urged to take tougher line on Indian trade practices

By Doug Palmer

WASHINGTON (Reuters) - A U.S. think tank on Tuesday recommended Congress suspend trade benefits for India, in the latest sign of U.S. frustration over Indian policies that block American exports and "free ride" on costly U.S. research to develop new medicines and other forms of valuable intellectual property.

"The United States should not sit idly by as the Indian government enacts regulations that harm American industry and jobs," Stephen Ezell, senior analyst at the Information Technology & Innovation Foundation (ITIF), said in a paper.

Congress should start to remove India from the U.S. Generalized System of Preferences (GSP) program, which waives duties on most goods from developing countries, and direct the U.S. International Trade Commission to investigate "how India's mercantilist policies damage the U.S. economy," he said.

India was the top recipient of GSP benefits in 2012, with some $4.5 billion in imports from that country entering the United States duty-free. The entire GSP program expires at the end of July, creating an opportunity for lawmakers to tinker with the program as they work on its renewal.

The U.S. House of Representatives' Ways and Means Committee recently held a hearing where it heard a slew of complaints about India's industrial policies.

India is the United States' 13th largest trading partner, with two-way trade totaling $62.9 billion last year.

But that is not as large as it should be "because of entrenched trade barriers and other unfair practices" that make it difficult for U.S. companies to compete in the subcontinent, said Ed Gerwin, a senior fellow at Third Way, a policy think tank, during a panel discussion on the ITIF paper.

The ITIF paper listed several actions taken by the Indian government that it said were aimed at "stripping" foreign biopharmaceutical companies of valuable patent protections.

In essence, Indian government policy allows its generic drug manufacturers to "free ride" on the research and development costs of foreign drug manufacturers, former U.S. Trade Representative Charlene Barshefsky said.

In just two of several high-profile cases, India issued a license to allow generic production of Nexavar, a cancer therapy drug researched and developed by Bayer in the United States, and denied Novartis' patent application for the cancer drug Glivec, even though nearly 40 other countries approved it, the ITIF paper said.

In the electronics sector, the Indian Ministry of Communications and Information Technology has imposed local content requirements for government and private sector purchases that have "security implications for the country," potentially blocking foreign equipment manufacturers from a huge section of the Indian market, the paper said.

India's record has made it "the current outlier when it comes to intellectual property protection," said Mark Elliot, executive vice president for the U.S. Chamber of Commerce's Global Intellectual Property Center. "Indian law, when it comes to protecting IP, is mostly lacking," he said.

(Reporting by Doug Palmer; Editing by Tim Dobbyn)