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Remarks by Deputy U.S. Trade Representative Demetrios Marantis to Students in Chennai, India

Remarks by Deputy U.S. Trade Representative Demetrios Marantis to Students

U.S. Consulate
Chennai, India
December 7, 2012

*As Prepared for Delivery* 

“I am pleased to be here in Chennai to discuss how we can continue to deepen the dynamic partnership between the United States and India through our already impressive two-way trade and investment relationship.

“I think one of the reasons I enjoy being here so much is because India, like the United States, has in many ways defied the odds in becoming the incredible economic success it is today.

“When India appeared on the world stage as a “sovereign democratic republic” over 60 years ago, more than a few commentators expressed doubts that a country this diverse – a land of so many languages, so many cultures, and so many religions – could truly hold itself together. In the intervening years, however, India demonstrated that its diversity was not a sign of weakness but a source of strength. True, there were challenges among different groups over the years along linguistic, cultural, and religious cleavages, among others. But, after enduring all these challenges, India has emerged stronger, more cohesive, and still unambiguously and proudly democratic. India’s political story is one of success because of – not despite – its pluralism.

“On the economic side, India has pursued a variety of policies over the past several decades. The late 1980s and 1990s began a trajectory of increasing openness, as India moved beyond the “license raj” and then gradually reduced tariffs and quantitative restrictions, thereby integrating itself more into the world economy. Just as at India’s birth as a republic, there were voices all along the way that foretold of dire consequences that would come from such openness. Those voices were uniformly based on the assumption that Indians could not compete on such an open playing field.

“And, again, India proved its detractors wrong – spectacularly so. What no one could have predicted, including India’s biggest cheerleaders, was the burst in innovation and economic growth that resulted from this opening, a burst which, if India stays the course, we expect will lift hundreds of millions out of poverty. India’s economic story has been one of success because of – not despite – its increasing openness.

“As a consequence of that trajectory towards openness, India is overcoming an image of anemic growth and persistent poverty. It is increasingly realizing its potential and bringing to market new homegrown products like the Jaipur Foot and the Embrace Infant Warmer-- making it ground zero in the “frugal innovation” boom. India has been demonstrating the sort of inclusive growth that has eluded most countries and is starting to show how democratic, market-led economic development can stimulate growth and raise living standards across the board. I like to call this model “Brand India.”

“This “brand” has undergirded India’s leadership role among both developed and developing economies, and it has reflected the reality that the democratic process – while not always linear or neat – is ultimately the best solution for lasting, sustainable economic progress.

“The United States has been a longstanding champion of India’s market-led, democratic “brand.” The U.S.-India trade and investment relationship has rapidly became one of the most dynamic economic relationships in the world. Two-way U.S.-India trade in goods in 1980 was only $2.8 billion in today’s terms. Over the course of the following decade, that number more than doubled to $5.7 billion. In the decade between 1990 and 2000, we realized what was at the time unprecedented growth in two-way trade, amounting to $14.4 billion in today’s dollars. Of course, that actually ended up being relatively modest compared to the growth we experienced this past decade when two-way trade skyrocketed over 400% to $57.7 billion in 2011.

“However, we cannot take that incredible success for granted. India has spent years building its brand into its current form. But, like other brands, India’s “brand” will need to keep moving along its successful trajectory to maintain its reputation. And, like other brands, it will be much easier to lose that reputation than it will be to build that reputation back. Unfortunately, some recent policies seriously threaten to undercut the Indian “brand.”

“First, we turn to India’s efforts to promote domestic manufacturing. While this is a worthy objective, and one the United States and other countries are also actively pursuing, the policy direction that India appears to be taking undermines that objective. For example, several Indian policies try to “encourage” domestic manufacturing by essentially forcing innovators to purchase goods made by domestic firms. We see this approach in local content requirements in the National Solar Mission that only allow solar developers to use equipment made in India; and a Preferential Market Access (PMA) policy that requires private firms to ensure that any telecom products they purchase are made in India.

“But innovators do not need governments to tell them what to do. Innovators are the ones who know best how to innovate, and what they need to do so. Governments need not do more than create the environment where the innovators can access anything they might need. Local content requirements and other policies that restrict that choice hurt rather than help the prospects for innovation to take root in India.

“Second, we turn to India’s intellectual property regime. Intellectual property rights reduce the risk inherent to the inventive process and provide individuals incentives to participate in that process. Innovation economies reward risk-taking innovators because they provide benefits to society that could not be achieved to the same degree without their endeavors. In order to innovate, individuals must be able to trust that their intellectual property rights are secure and will be enforced by the government.

“Recent actions, however, raise questions for innovators about whether “Brand India” will still uphold its end of the bargain. First, we saw in last November’s National Manufacturing Policy an indication by the government of India that it would seek to curtail patent rights to facilitate technology transfer in the clean energy sector. Then, earlier this year, the Controller General of Patents effectively ruled that an innovator must manufacture in India in order to avoid being forced to license an invention to third parties. Undermining intellectual property rights to advance industrial policy is difficult to reconcile with the more open approach that India has been taking to promote the interests of inclusive growth.

“It is not too late to correct these policies, however. As both of our leaders have made clear, there is a distinct path forward through innovation. President Obama attributed the United States economic success in the 20th century to its leadership in innovation and observed that “[t]oday, the competition is keener; the challenge is tougher; and that’s why innovation is more important than ever.” Likewise, Prime Minister Singh declared that “new systems, new structures and new ways of doing things” would need to be harnessed during what he labeled this “Decade of Innovation.” Working together, the United States and India can realize the kind of innovation our leaders envision, and we have already begun doing so.

“First, we are working together to strengthen our respective education systems. A well-educated workforce and partnerships between academia and the private sector are basic and necessary elements for any innovation economy. The U.S.-India Higher Education Dialogue is forging such partnerships, which will provide the skills and on-the-job training for students in both countries to succeed and make meaningful contributions to our economies.

“Second, the United States and India recognize that we must increase our respective investment in research, as well as its commercialization. As the Government of India notes in its draft National IPR Strategy, “[f]or Innovation to create any impact, it is imperative to take the idea/innovation from mind/laboratory to the market, where their true intrinsic value is realized – through products and services.” Our governments’ cooperation in the science and technology sphere has awarded grants supporting the commercialization of innovative technologies from U.S.-Indian ventures, while our Energy Dialogue oversees joint research that helps both countries advance low-carbon growth.

“Third, and this is the reason why I am here in India this week, we need to do a better job creating the conditions to enhance U.S.-India trade and investment. Fostering innovation requires open and non-discriminatory trade and investment policies that promote competition. Competition and access to foreign innovative products increases innovators’ productivity and forces them to specialize in what they do best. It also gives them the opportunity to build upon and improve innovations from other countries. On the other hand, policies such as: technology transfer mandates, discriminatory government procurement requirements, local manufacturing requirements, country-specific standards, and requirements to provide services using local facilities or infrastructure deprive an economy of the very competition needed for a culture of innovation to take root. Through mechanisms such as the U.S.-India Trade Policy Forum, our ongoing negotiations on a bilateral investment treaty, and the High Technology Cooperation Group, the United States and India are working together to create the competitive conditions necessary for innovation to flourish.

“As you can see, the broad range of U.S.-India collaboration reinforces the steps both governments are taking to promote an innovation-friendly environment in their respective economies. Nonetheless, it is true that we face many common challenges that at times will lure governments away from these principles. As we work to promote the development of local manufacturing, innovation economies, and the competitiveness of our industries, we would be well served to look to our remarkable bilateral economic relationship as a source of strength in difficult times rather than a hindrance that should be curbed by limiting the commercial collaborations between our private sectors.

“The shared interest of the United States and India in these outcomes — our shared interest in preserving the integrity of “Brand India”— will be critical to reaching our common goals. Our economies each have some of the world’s best ideas, goods, and services. Working towards pro-innovation policies that allow consumers in each society to benefit from the best of both countries will ensure that the U.S.-India bilateral economic relationship will reach its full potential in the coming years. I am eager to get working on this with my friends in the Indian Government and in the Indian private sector, and look forward to a productive partnership moving forward.”