Opinion

Free Trade And IP Protection Will Benefit From Improving US-India Ties

Alexander Hendrie Americans for Tax Reform

Bilateral relations between India and the United States have taken yet another step in the right direction this weekend with President Obama’s state visit to India during the nation’s Republic Day, a national holiday commemorating the creation of the Indian constitution. This increased dialogue is leading to the resolution of a number of contentious issues, most importantly a long overdue recognition of the importance of property rights on the part of the Indian government.

In a joint statement released Sunday, President Obama and Prime Minister Narenda Modi announced their desire to continue working to enhance intellectual property rights.

IP protections are crucial to the economic well-being of people everywhere because they encourage innovation and creativity and foster trade and foreign direct investment across the globe. The International Property Rights Index, compiled annually by the Property Rights Alliance has found that countries that exhibit strong physical and intellectual property protections have a GDP per capita up to thirteen times greater than those that disregard property rights.  Unfortunately, India has long lagged behind more developed nations in this area, which has delayed its transformation into a modern, innovative economy. In fact, in the 2014 International Property Rights Index, India ranked 46th in the world with a score of 5.5 out of 10. Such a low score for the second most populous nation is unacceptable, but if New Delhi can implement genuine reforms to improve IP protections, its economy will experience swift and strong economic growth.

Fortunately, Prime Minister Modi appears to recognize the importance of global competitiveness and has so far demonstrated a strong commitment to ensuring his nation implements strong pro-growth economic policies, with IP protection a central pillar of this plan.

The Modi government announced it would begin crafting IP reform last September, just four months after taking office and has since pushed forward at a break-neck pace. A newly established government think-tank released the first draft of the national IPR policy in the final days of 2014 with the stated aim being to:

“establish a dynamic, vibrant and balanced intellectual property system in India, to foster innovation and creativity in a knowledge economy and to accelerate economic growth, employment and entrepreneurship.”

This strong rhetoric and accelerated action is leading to increased optimism among foreign investors and firms hoping to tap into the potential of the Indian economy.

But, while there has undeniably been strong progress, there remains resistance amongst some Indian stakeholders to reform, based on a desire to retain the protectionist economic policies that have failed time and time again across the world.

A report released by the Information Technology and Innovation Foundation outlines the many challenges and opportunities that face Indian policymakers. In particular, the report raises the danger that India will resort to innovation mercantilism, such as mandating foreign investors transfer technology to local firms as a condition of market access.

Although the Modi government appears to be committed to comprehensive IP reform, they must not choose to revert to the regressive policies that have for so long disregarded property rights and hurt India’s global reputation. After numerous cases of IP abuse over many years, the United States Trade Representative was forced to place India on its ‘Priority Watch List’ in early 2014 due to concerns about New Delhi’s commitment to IP protection and enforcement. While India is justifiably still on the watch list because it has not implemented reform, the USTR recently made some important concessions in acknowledging the sincere steps the new pro-growth government has made towards improvement.

It would be unrealistic to expect this state visit to mark a clear, definitive breakthrough moment that embodies India’s revival as a global economic power. Rather, it will mark one among many encouraging signs of progress towards respect for fundamental property rights.

At the same time, while encouraging progress has certainly been made, India must continue to make strides towards strong IP reform. Doing so will not only benefit its economy and global standing but will provide new opportunities for trade with America, and the world.

Alexander Hendrie is an associate at the Property Rights Alliance.