Business lobbies in the United States urging a trade war with New Delhi must not be allowed to dominate the India-U.S. strategic dialogue

Business lobbies in the United States live the American adage — squeaky wheel gets the oil. The fourth round of the India-U.S. Strategic Dialogue begins today whipped up by a mini tornado of complaints from the American business lobby about India’s economic policies and an alleged lack of intellectual property protection. It threatens to dominate the conversation to the exclusion of more important geopolitical issues facing the two countries.

Secretary of State John Kerry’s briefing book is weighed down by letters from U.S. Congressmen and senators, detailing India’s “hostile” trade environment. The letters, filled with red-hot buzzwords, claim Indian policies on preferential market access, compulsory licensing and retroactive taxation shut U.S. companies out of the market. They undermine American innovation and threaten “millions” of U.S. jobs.

Some U.S. officials have raised the pitch by hinting at a trade war with India. Indian officials say the “fevered” pitch of the campaign is neither rooted in reality nor ensures resolution. Instead, it shows U.S. industry’s trademark impatience with the complex Indian environment.

Generalised

Mr. Kerry will do well to take the dossier of discontent with a healthy dose of salt. The generalised complaints drafted by the U.S. pharma and IT industries, when examined carefully, reveal that there is little to complain about. Yet, lobbyists have been telling the U.S. Congress to punish India by keeping the anti-H1-B visa provisions in the current immigration reform bill, which directly target Indian IT companies.

Foreign Minister Salman Khurshid and Mr. Kerry are expected to try to work the problem issues to give momentum to the relationship, which many analysts say is in need of a political push. The question facing both leaders is: should this relationship be held hostage to commercial interests on the U.S. side and eternal doubters on the Indian side? Hopefully their answer is a resounding “No.”

Pharma judgments

U.S. pharma companies are enraged over recent Indian decisions that they fear could lead to other countries following suit. India’s Controller General of Patents, Designs and Trademarks (CGPDTM) had revoked Pfizer’s patent on the anti-cancer drug, Sutent, last year. But earlier this month the Intellectual Property Appellate Board (IPAB) set aside the revocation and ordered a fresh review in a time-bound manner.

Indian officials say this shows the system’s responsiveness. India granted 4,064 patents between 2005 and 2011 and 85 per cent of them went to foreign companies. Of those, the highest share went to U.S. nationals.

Behind the loud campaign by U.S. pharmaceutical companies against recent Indian court decisions on patents is a larger aim — to stop similar decisions by other countries.

This is one reason for the unusually strong pressure tactics from big pharma being channelled through the U.S. Congress. They fear what India does today, other developing countries may do tomorrow, cutting into U.S. commercial profits.

“India is a thought leader among emerging countries, and others have already begun emulating India’s IP (intellectual property) policies,” says a letter signed by 170 U.S. Congressmen. “The U.S. government must send a strong signal to the Indian government that these actions are inconsistent with India’s international obligations…”

U.S. businesses want their issues to dominate the strategic dialogue between India and the United States. In the face of a wide-ranging agenda, it is unclear how much weight Mr. Kerry will give to commercial complaints.

Indian officials stress that India’s patent laws are fully consistent with WTO’s Trade Related Intellectual Property Rights agreement. The whole IP framework is rooted in law.

But U.S. pharma companies are unhappy. They have complained bitterly about India’s decision to grant its first-ever compulsory license (CL) last year to an Indian company to manufacture a generic version of Bayer’s Nexavar, an anti-cancer drug, on grounds that the price was beyond the reach of most people. Bayer charged $5,600 for a month’s supply while Natco Pharma will sell the same regimen at $176 and give a six per cent royalty to the German company.

Pharma giants claim this one CL by India will open the floodgates to other such decisions, seriously affecting their profits. They forget that both developing and advanced countries use CL provisions to balance public good with private profit. So far 15 countries, including Canada, France and Italy, have exercised the right on 35 occasions. Canada overruled a Bayer patent and authorised generic manufacture of ciprofloxacin in 2001 to build stockpiles against a possible anthrax attack. The U.S. too threatened to use CL the same year during the anthrax scare to authorise imports of the same drug.

The other source of “outrage” is the Indian Supreme Court judgment in April rejecting a patent for Glivec, a leukaemia-fighting drug by Novartis, a Swiss company, on grounds that the new version did not amount to innovation. The 200-page judgment was detailed, balanced and paid close attention to the facts presented. The court determined the reconfigured drug had failed to show “enhanced therapeutic efficacy” — a standard set by India’s patent law.

Good foundation

But India-U.S. economic engagement is far healthier than the noisemakers would have us believe. Indian companies have invested nearly $11 billion in the U.S. in sectors varying from tractors to medical equipment. They have created jobs, not robbed them. Bilateral trade has crossed $100 billion and is fairly balanced unlike either country’s experience with China. This is a healthy foundation block.

Analysts say the truth is U.S. pharma companies didn’t like the verdict because it went against their financial interests. They are used to getting new patents for minor modifications under the more lenient U.S. patent laws. This allows blatant “evergreening” of drugs to gouge patients. Even The Wall Street Journal has characterised U.S. patent law as “runaway.”

(Seema Sirohi is a senior journalist based in Washington.)

More In: Comment | Opinion