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India’s Trade, Investment and Industrial Policies to be Subject of ITC Probe

Friday, August 30, 2013
Sandler, Travis & Rosenberg Trade Report

The International Trade Commission launched Aug. 29 an investigation of policies and measures in India that allegedly discriminate against U.S. trade and investment. This is the latest indication of growing trade tensions between the U.S. and India, which have escalated this year despite a nearly fivefold increase in two-way trade since 2000 to more than $100 billion annually.

In its investigation the ITC will:

- enumerate restrictive trade and investment policies that India maintains or has recently adopted, determine which sectors of the U.S. economy are most affected by these policies, and describe the competitiveness of Indian firms in these sectors;

- provide several case studies of U.S. firms or industries that have been particularly affected by India's restrictions;

- perform a quantitative analysis of the effects of these policies on trade, investment and the U.S. economy; and

- survey a sample of U.S. firms to measure perceptions of India's policies and the impact of those policies on firms' strategies toward India.

The ITC will hold a public hearing in connection with this investigation on Feb. 13, 2014. Requests to appear at the hearing are due no later than Jan. 21. Written submissions for the record should be submitted no later than April 11. The ITC will deliver its report to the Senate Finance and House Ways and Means committees by Nov. 30, 2014.

In requesting this investigation, committee leaders pointed out that U.S. exports of goods and services to India, sales of services in India by majority U.S.-owned affiliates, and U.S. foreign direct investment in India remain low. They asserted that India maintains and continues to put in place measures that appear to contradict its stated growth objectives, including a complex, non-transparent tariff and fee system, “byzantine and overburdensome” customs procedures, significant tariff and non-tariff barriers to U.S. goods and service participation in sectors including retail and agriculture, local content and technology transfer requirements in the green technology and information and communications technology sectors, and inadequate protection and enforcement of intellectual property rights. The lawmakers also expressed concern about the broader impact that India’s trade policy may be having on the global trading system, “both in terms of the model it is setting for other countries and the drag it is exerting on multilateral trade negotiations.”

Others have complained about India’s trade policies this year as well. A group of 40 senators and 170 members of the House sent separate letters to the White House earlier this summer registering concerns similar to those detailed above. More than a dozen associations representing a wide range of small, medium and large U.S. companies decried the “persistent pattern of discrimination” by courts and policymakers in India and said the U.S. should keep open the option of litigation at the World Trade Organization. The Office of the U.S. Trade Representative’s annual report on foreign trade barriers devoted 12 pages to India, citing in addition to the above issue problems such as customs valuation methodologies that do not reflect actual transaction values, inconsistent government procurement practices and export subsidies. Little wonder, then, that USTR Mike Froman has said he expects concerns about the investment and innovation environment in India “to be a major early focus of his tenure.”

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