GS-3, Indian Economy, Uncategorized

Trading charges

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In February, 2016, U.S. President Barack Obama signed the Trade Facilitation and Trade Enforcement Act of 2015.

  • The focus of the law is to enhance enforcement of IPR over the U.S.’s trading partners. It introduces important measures relating to intellectual property rights (IPR) issues.
  • This law is expected to impact India’s ability to develop an IP policy suited to its own developmental needs.

Present scenario:

The Special 301 list, brought out by the United States Trade Representative (USTR), has consistently featured India, most often as a Priority Watch List (PWL) country, since its institution in 1989.

  • This has caused some disquiet within India, which has been disappointed that its proactive steps to improve domestic IP protection and engage with the U.S. have been unsuccessful in placating the U.S.

Why be concerned about this?

  • Countries featured on Special 301 list are those that the USTR believes have either national laws or regulations that detrimentally affect U.S. trade or the rights of IP holders.
  • If a trading partner is on this list, the U.S. believes that the country is providing inadequate IPR protection, enforcement, or market access for persons relying on intellectual property.
  • Also, any country classified as PWL is subject to USTR scrutiny in the form of investigations and possible sanctions under the procedures set out under the Trade Act, 1974.

How the new law further aggravates the existing problem?

Trade Facilitation Act will increase the level of pressure to comply with the USTR’s requirement for countries like India that feature on the PWL for more than a year.

  • The Act specifically requires the USTR to develop action plans with benchmarks for PWL countries. The USTR has traditionally developed action plans in consultation with the country in question. However, under Trade Facilitation Act, the USTR is not required to consult with the listed country.
  • Also, Benchmarks refers to legislative or other institutional action that a sovereign country like India will need to establish to facilitate U.S. trade. And instituting benchmarked changes remains the only way to remove a country from the Special 301 list no matter how harsh they are. Since the role of USTR is focussed on U.S. trade, it is not obliged to take developmental or public health needs of the trading partner into account when developing action plans or listing benchmarks.
  • A country that refuses to comply with the benchmarks within a year can face appropriate action, resulting in further unilateral investigations followed by punitive trade sanctions. Such trade sanctions can include denial of preferential duty for exports, which developing countries rely on to export goods to the U.S.
  • The Act creates a new position within the office of the USTR titled ‘Chief Innovation and Intellectual Property Negotiator’ (IP negotiator). The IP negotiator is required to “take appropriate actions to address acts, policies, and practices of foreign governments that have a significant adverse impact on the value of U.S. innovation.”
  • Also, with a view to facilitating unilateral actions, the Act creates a Trade Enforcement Trust Fund for legal actions against foreign countries to ensure “fair and equitable market access for U.S. persons.”

Is it not possible to seek any help from the WTO?

Under World Trade Organisation jurisprudence, legality of unilateral actions over sovereign countries remains questionable. Hence, the U.S. may stay away from imposing unilateral sanctions, but tries to bring about change in a country’s domestic IP law through mechanisms like the Special 301 list.

Thus, under U.S. laws, compliance with WTO obligations is immaterial. A country that is compliant with WTO rules can be the subject of investigations if the USTR believes that U.S. trade is detrimentally affected by that country’s IP laws. Thus, India’s traditional defence that it is in compliance with WTO obligations has limited reach.

Conclusion:

India should be concerned about the heightened pressure that is bound to follow with the passage of the Trade Facilitation Act, especially on issues where its compliance with its TRIPS obligations is not disputed. As India continues to strategically engage with the U.S., it is time to develop a coalition of like-minded countries to monitor demands for legislative actions that result in WTO-plus standards.

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