[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]



 
                      U.S.-INDIA TRADE RELATIONS:

                      OPPORTUNITIES AND CHALLENGES
=======================================================================


                                HEARING

                               before the

                         SUBCOMMITTEE ON TRADE

                                 of the

                      COMMITTEE ON WAYS AND MEANS

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 13, 2013

                               __________

                            Serial 113-TR01

                               __________

         Printed for the use of the Committee on Ways and Means




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                      COMMITTEE ON WAYS AND MEANS

                      DAVE CAMP, Michigan,Chairman

SAM JOHNSON, Texas                   SANDER M. LEVIN, Michigan
KEVIN BRADY, Texas                   CHARLES B. RANGEL, New York
PAUL RYAN, Wisconsin                 JIM MCDERMOTT, Washington
DEVIN NUNES, California              JOHN LEWIS, Georgia
PATRICK J. TIBERI, Ohio              RICHARD E. NEAL, Massachusetts
DAVID G. REICHERT, Washington        XAVIER BECERRA, California
CHARLES W. BOUSTANY, JR., Louisiana  LLOYD DOGGETT, Texas
PETER J. ROSKAM, Illinois            MIKE THOMPSON, California
JIM GERLACH, Pennsylvania            JOHN B. LARSON, Connecticut
TOM PRICE, Georgia                   EARL BLUMENAUER, Oregon
VERN BUCHANAN, Florida               RON KIND, Wisconsin
ADRIAN SMITH, Nebraska               BILL PASCRELL, JR., New Jersey
AARON SCHOCK, Illinois               JOSEPH CROWLEY, New York
LYNN JENKINS, Kansas                 ALLYSON SCHWARTZ, Pennsylvania
ERIK PAULSEN, Minnesota              DANNY DAVIS, Illinois
KENNY MARCHANT, Texas                LINDA SANCHEZ, California
DIANE BLACK, Tennessee
TOM REED, New York
TODD YOUNG, Indiana
MIKE KELLY, Pennsylvania
TIM GRIFFIN, Arkansas
JIM RENACCI, Ohio

        Jennifer M. Safavian, Staff Director and General Counsel

                  Janice Mays, Minority Chief Counsel

                                 ______

                         SUBCOMMITTEE ON TRADE

                   DEVIN NUNES, California, Chairman

KEVIN BRADY, Texas, Chairman         CHARLES B. RANGEL, New York
DAVID G. REICHERT, Washington        RICHARD E. NEAL, Massachusetts
VERN BUCHANAN, Florida               JOHN B. LARSON, Connecticut
ADRIAN SMITH, Nebraska               EARL BLUMENAUER, Oregon
AARON SCHOCK, Illinois               RON KIND, Wisconsin
LYNN JENKINS, Kansas
CHARLES W. BOUSTANY, JR., Louisiana
PETER J. ROSKAM, Illinois


                            C O N T E N T S

                               __________
                                                                   Page

Advisory of March 13, 2013 announcing the hearing................     2

                               WITNESSES

Dan Twining, Senior Fellow for Asia, German Marshall Fund of the 
  United States, Testimony.......................................     6
Arvind Subramanian, Senior Fellow, Peterson Institute for 
  International Economics, and the Center for Global Development, 
  Testimony......................................................    15
Ambassador Allen F. Johnson, Founder, Allen F. Johnson & 
  Associates, and Former Chief Agricultural Negotiator, Office of 
  the United States Trade Representative, Testimony..............    34
Dean Garfield, President & CEO, Information Technology Industry 
  Council, Testimony.............................................    41
Roy Waldron, Senior Vice President and Chief Intellectual 
  Property Counsel, Pfizer, Testimony............................    50

                       SUBMISSIONS FOR THE RECORD

American Bar Association.........................................    87
ASCAP............................................................    90
BIO..............................................................   100
Blue Diamond Growers.............................................   110
CII..............................................................   117
CSIS.............................................................   126
Dairy Industry...................................................   130
DISCUS...........................................................   135
IBM..............................................................   141
IIPA.............................................................   144
ITIF.............................................................   154
KEI..............................................................   164
NAM..............................................................   169
National Chicken Council 1.......................................   173
National Chicken Council 2.......................................   174
National Chicken Council 3.......................................   176
National Chicken Council 4.......................................   180
National Cotton Council..........................................   182
NPPC.............................................................   185
PhRMA............................................................   188
Rapaport.........................................................   195
Rio Tinto........................................................   201
SoFTEC...........................................................   203
Wine Institute...................................................   206


                      U.S.-INDIA TRADE RELATIONS:

                      OPPORTUNITIES AND CHALLENGES

                              ----------                              


                       WEDNESDAY, MARCH 13, 2013

             U.S. House of Representatives,
                       Committee on Ways and Means,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10:08 a.m., in 
Room 1100, Longworth House Office Building, the Honorable Devin 
Nunes [chairman of the subcommittee] presiding.
    [The advisory of the hearing follows:]

HEARING ADVISORY

                  Chairman Nunes Announces Hearing on

                      U.S.-India Trade Relations:

                      Opportunities and Challenges

Wednesday, March 6, 2013

    House Ways and Means Trade Subcommittee Chairman Devin Nunes (R-CA) 
today announced that the Subcommittee will hold a hearing on U.S.-India 
trade relations. The hearing will focus on the growing trade and 
investment relationship between the two countries as well as the 
significant challenges facing U.S. job creators in this vibrant and 
dynamic market. The hearing will take place on Wednesday, March 13, 
2013, in 1100 Longworth House Office Building, beginning at 10:00 A.M.
      
    In view of the limited time available to hear the witnesses, oral 
testimony at this hearing will be from invited witnesses only. However, 
any individual or organization not scheduled for an oral appearance may 
submit a written statement for consideration by the Committee and for 
inclusion in the printed record of the hearing. A list of invited 
witnesses will follow.
      

BACKGROUND:

      
    The United States and India are experiencing the largest bilateral 
trade and investment flows ever recorded in this bilateral 
relationship, with total goods and services trade in 2011 recorded at 
$86 billion. The United States is India's third largest trading 
partner, and India is our 13th largest trading partner. The trade 
relationship fits into the larger bilateral relationship, which, over 
the past 20 years, has seen an enhancement of relations between the 
world's largest and oldest democracies.
      
    Despite this positive story, the U.S.-India trade relationship 
faces some difficult issues. As India strives to prepare its economy 
for the challenges of its changing demographics--around one-half of the 
population of 1.2 billion is under 25 years of age--the country is 
putting in place policies to increase manufacturing (currently 18% of 
GDP) as well as protect domestic industries and agricultural 
production. These policies reveal a disturbing trend in which India is 
turning inward and erecting barriers to trade and investment. U.S. 
manufacturers, farmers, and ranchers are negatively affected by these 
policies and find it increasingly difficult to sell to, enter, and 
operate in India.
      
    This hearing on U.S.-India trade issues will explore the positive 
aspects of the bilateral relationship, examine India's tariff and non-
tariff barriers that affect U.S. job creators and analyze how bilateral 
trade and investment can be further expanded. Areas of focus will 
include: tariff structures; investment; agriculture market access; the 
Bilateral Investment Treaty; India's National Manufacturing Policy; 
local content requirements; intellectual property policies; services; 
and U.S.-India cooperation in bilateral and multilateral trade fora.
      
    In announcing this hearing, Chairman Nunes said, ``The U.S.-India 
partnership is and will continue to be crucial to the global economy in 
the 21st century, and bilateral trade and investment ties are the 
lynchpin to keeping this strategic relationship strong. India faces 
tremendous domestic political challenges as it seeks to grow its 
economy and lift millions of people out of poverty. However, I am 
concerned that India has launched a series of alarming policies that 
harm U.S. job creators and are counterproductive. I intend to push 
India to remove barriers that prevent U.S. companies, farmers, 
ranchers, and workers from competing on a level playing field and 
selling their world-class products and services to India's 1.2 billion 
consumers.''
      

FOCUS OF THE HEARING:

      
    The hearing will provide an opportunity to explore current U.S.-
India trade issues such as: (1) deepening and expanding the long-term 
trade and investment relationship with India; (2) completing a 
Bilateral Investment Treaty, addressing investment caps, and exploring 
new investment opportunities; (3) addressing agricultural market access 
barriers; (4) evaluating India's National Manufacturing Policy and 
other forced localization policies including the Preferential Market 
Access (PMA) on information technology products; (5) ensuring the 
protection of intellectual property rights; (6) addressing the issuance 
of compulsory licenses, patent revocations, and other policies on 
pharmaceuticals; (7) examining India's system of cascading tariffs, 
taxes, and other import charges; and (8) advancing WTO negotiations, 
including ``post-Doha'' issues such as an international services 
agreement, Information Technology Agreement expansion, and a trade 
facilitation agreement in partnership with India.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Please Note: Any person(s) and/or organization(s) wishing to submit 
for the hearing record must follow the appropriate link on the hearing 
page of the Committee website and complete the informational forms. 
From the Committee homepage, http://waysandmeans.house.gov/, select 
``Hearings.'' Select the hearing for which you would like to submit, 
and click on the link entitled, ``Click here to provide a submission 
for the record.'' Once you have followed the online instructions, 
submit all requested information. ATTACH your submission as a Word 
document, in compliance with the formatting requirements listed below, 
by the close of business on Wednesday, March 27, 2013. Finally, please 
note that due to the change in House mail policy, the U.S. Capitol 
Police will refuse sealed-package deliveries to all House Office 
Buildings. For questions, or if you encounter technical problems, 
please call (202) 225-1721 or (202) 225-3625.
      

FORMATTING REQUIREMENTS:

      
    The Committee relies on electronic submissions for printing the 
official hearing record. As always, submissions will be included in the 
record according to the discretion of the Committee. The Committee will 
not alter the content of your submission, but we reserve the right to 
format it according to our guidelines. Any submission provided to the 
Committee by a witness, any supplementary materials submitted for the 
printed record, and any written comments in response to a request for 
written comments must conform to the guidelines listed below. Any 
submission or supplementary item not in compliance with these 
guidelines will not be printed, but will be maintained in the Committee 
files for review and use by the Committee.
      
    1. All submissions and supplementary materials must be provided in 
Word format and MUST NOT exceed a total of 10 pages, including 
attachments. Witnesses and submitters are advised that the Committee 
relies on electronic submissions for printing the official hearing 
record.
      
    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
review and use by the Committee.
      
    3. All submissions must include a list of all clients, persons and/
or organizations on whose behalf the witness appears. A supplemental 
sheet must accompany each submission listing the name, company, 
address, telephone, and fax numbers of each witness.
      
    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.
      
    Note: All Committee advisories and news releases are available on 
the World Wide Web at http://www.waysandmeans.house.gov/.

                                 

    Chairman NUNES. Good morning. I want to welcome our panel 
of witnesses and everyone else to our hearing on U.S.-India 
Trade Relations.
    It is an honor and privilege to be chairing my first 
hearing as Trade Subcommittee Chairman and to be serving with 
my colleague, Ranking Member Charles Rangel.
    Under Chairman Camp and Chairman Brady's leadership, the 
previous Congress passed seven bipartisan trade bills. These 
achievements show that Congress and the White House, Republican 
and Democrats can come together and pursue pro-growth, pro-job 
policies. We must now accelerate this momentum so that U.S. 
businesses, farmers, ranchers and workers will find new 
opportunities abroad, where 95 percent of the world's consumers 
live.
    That takes us to the focus of today's hearing. India has 
risen rapidly since its market-opening reforms in the early 
1990s. Its GDP has grown from 275 billion in 1991 to 1.8 
trillion in 2012.
    Nevertheless, India remains the largest recipient of 
benefits under the U.S. Generalized System of Preferences. This 
is a program that expires this July and one this Committee must 
deal with.
    The U.S.-India Strategic Partnership is a key relationship 
with bilateral trade in goods and services rising from 
minuscule amounts 25 years ago to more than 86 billion a year 
now. But there is scope for much more. With a population of 
over 1.2 billion, India's market holds potential for world 
class U.S. products and services.
    I want to ensure that U.S. job creators compete there on a 
level-playing field. This hearing will provide an opportunity 
for the Committee to explore the positive aspects of the U.S.-
India economic relationship, as well as to examine India's 
tariff and non-tariff barriers that are acting as impediments.
    In particular, I want to examine the following issues:
    Deepening and expanding the long-term trade and investment 
relationship;
    Understanding the existing U.S.-India bilateral for a for 
discussion and how they can be more effective in addressing 
bilateral irritants and establishing metrics for measuring 
progress;
    Addressing India's troubling use of forced localization in 
key sectors;
    Ensuring India's protection of intellectual property 
rights;
    Addressing agricultural market access barriers to ensure a 
level playing field for U.S. farmers and ranchers;
    Completing a bilateral investment treating;
    Addressing investment cap; and
    Exploring new bilateral investment opportunities which are 
all vital to U.S. growth;
    And, finally, partnering with India to advance negotiations 
at the WTO, including a post-DOHA issue such as Information 
Technology Agreement Expansion, a trade facilitation agreement, 
and the International Services Agreement negotiations that are 
about to be launched in Geneva.
    I look forward to having a comprehensive discussion today 
about promoting economic growth and job creation by solving 
difficult bilateral issues and strengthening U.S.-India ties.
    I will now yield to Ranking Member Rangel for the purpose 
of an opening statement.
    Mr. RANGEL. Let me on behalf of the Democrats congratulate 
you, Chairman Nunes, for becoming the chair, and also thank you 
for having this first hearing.
    As was pointed out so many times, the area of trade has 
been the most successful area in which we have been able to 
penetrate the depth of partisanship that exists in our Congress 
unfortunately. But I do hope that you know that you can depend 
on us to move forward in working with you toward improving the 
economic situation that exists in our country on the 
international area.
    I think there is much agreement, especially with our 
terrific relationship with India, who is a vital ally not only 
in terms of national security, but it is one of our great 
growing trading relationships; a great democracy. Total trade 
was nearly $50 billion, up from just 8 billion in 2000, and 
total services have grown just as rapidly, from 4.5 billion in 
2000 to 28.5 billion in 2011. And our investment in India and 
India's investment in the United States has been constantly and 
continuously expanding.
    This people should recognize, we being the two greatest 
democracies in the world, and I think that we do have problems 
as most friends and family would have, and we like to point out 
some of what we believe are unfair incentives in order to 
improve the relationship that exists, as we think that many of 
these things violate international trade.
    We know the particular concerns that India has with its 
large, young population. We also know in our country what the 
pains are of unemployment. But we do have forums that we can 
try to work out these differences in how we try to bring a 
better working relationship with both of our great democracies.
    We hope that we can avoid threatening taking every issue to 
the World Trade Organization. We hope that our business people, 
as well as legislators, work to eliminate or take away the 
problems that we have in this area, and we hope that we will do 
this under your leadership and the Congress and the President.
    And once again, I welcome you to the chair, and our 
committee is anxious to get started.
    Chairman NUNES. Well, thank you, Mr. Rangel.
    And Mr. Rangel and I are trying to work as closely as we 
can. I think we both feel that this is really one of the issues 
in Congress where there is bipartisan agreement, and we hope to 
advance the trade agenda as best as we can.
    Today we are joined by five witnesses. Our first witness 
will be Dan Twining, Senior Fellow for Asia, at the German 
Marshall Fund of the United States. Mr. Twining will be our 
scene setter regarding the past, present and future of the 
U.S.-India relationship.
    After him, Arvind Subramanian, Senior Fellow, at the 
Peterson Institute for International Economics and the Center 
for Global Development, will be our second witness. Dr. 
Subramanian will speak about India's economy and domestic 
developments that are affecting India's outward policies.
    Our third witness will be someone who is familiar with this 
Committee, Ambassador Allen Johnson, founder of the Allen F. 
Johnson & Associates. Ambassador Johnson has held the position 
of Chief Agricultural Negotiator at the Office of the United 
States Trade Representative and will speak today about the 
multilateral and bilateral relations with India, focusing on 
agricultural issues.
    Our fourth witness will be Dean Garfield, President and CEO 
of The Information Technology Industry Council. Mr. Garfield 
will speak on the opportunities and challenges in bilateral 
high-tech trade.
    Our fifth and final witness will be Roy Waldron, Senior 
Vice President and Chief Intellectual Property Counsel, at 
Pfizer, Inc. Mr. Waldron will testify about his company's 
longstanding work in India and India's intellectual property 
regime.
    We welcome all of you and look forward to your testimony.
    Before recognizing our first witness let me note that our 
time this morning is limited. So we will be limiting questions 
to five minutes in the hopes of giving as many Members the 
opportunity to be recognized as possible.
    Mr. Twining, your written statement, like those of all the 
witnesses, will be made part of the record, and you are now 
recognized for five minutes.

   STATEMENT OF DAN TWINING, SENIOR FELLOW FOR ASIA, GERMAN 
               MARSHALL FUND OF THE UNITED STATES

    Mr. TWINING. Thanks, Mr. Chairman, Members of the 
subcommittee. It's an honor to appear before you today to 
discuss the enormous potential of U.S.-India trade and 
investment relations.
    Within a generation India is likely to become one of 
America's most vital partners in world affairs. It will bring 
more capabilities to the table than any existing U.S. ally in 
pursuit of our convergent interests; defeating terrorism and 
extremism, managing China's rise, keeping open the Indian Ocean 
sea lanes, and sustaining a liberal international order.
    Recognizing this, Washington and New Delhi have developed a 
far-reaching strategic partnership centered on defense 
cooperation, but our economic relationship remains strangely 
underdeveloped. Despite disappointing growth recently, India's 
economy has doubled in size in less than seven years. Its 
economy is likely to become the world's third largest sometime 
in the 2020s.
    The U.S. National Intelligence Council forecasts that India 
will become the biggest driver of middle class growth on earth 
by 2030 and will surpass China in economic dynamism. The NIC 
also forecasts that India could have the world's largest 
economy by the end of this century. This is a country America 
will want to work with to sustain an open global economy that 
promotes the prosperity of all free societies.
    A decade ago, then American Ambassador Bob Blackwill 
famously said that U.S.-India economic ties were ``flat as a 
chapatti''. The situation has improved. America is now India's 
top economic partner measured in goods and services trade. 
China is India's top partner measured in terms of goods alone.
    Since 2001, U.S.-India trade has doubled every five years. 
It is approaching the 100 billion dollar mark. This is good 
news in a way, but it is also disappointing. It is a low number 
still. Our trade with India is only one-seventh of our trade 
with China, despite the fact that one country is a strategic 
partner and the other is a strategic competitor.
    Regrettably, the Obama Administration's signature trade 
initiatives, TTP and TTIP, do not include India. The primary 
economic initiative between our two countries has been a modest 
bilateral investment treaty. It has been stuck in the bowels of 
our bureaucracies for years.
    At the same time, India has enacted or is negotiating trade 
agreements with Japan, the EU, ASEAN and a number of other 
partners, but not the United States. Although India is part of 
Asia's security architecture, it is not part of Asia's economic 
architecture. India applied for APEC membership back in 1991, 
but the U.S. eventually backed a moratorium on membership. That 
moratorium has expired. India's exclusion makes little sense 
for a country that sits in the middle of Asia, is an important 
trading partner to America, China, and Japan, and has an 
economy that comprises nearly 20 percent of global GDP by 2060, 
according to the OECD.
    Without a strategic framework for economic cooperation, 
Indian and American trade negotiators skirmish frequently in 
bilateral channels and at the WTO. Our trade ties too often 
degenerate into parochial disputes over things like pistachio 
nuts and chickens that have occupied even top political 
leaders. This is no way to build a strategic economic 
relationship between the world's largest democracies.
    To elevate our bilateral relations to the strategic level, 
I believe America and India should launch negotiations for a 
free trade agreement. India will have to undertake far-reaching 
domestic reforms to qualify. New Delhi might find it easier to 
undertake these reforms if it can do so as part of a process of 
acceding to APEC. This will take time, but the requirements of 
membership could incentivize an Indian system wary of reform, 
the political costs of reform, to pursue aggressive 
liberalization.
    The prize of eventual APEC membership coupled with an 
eventual FTA with America could empower economic reformers 
within the Indian system and mobilize the Indian private sector 
which is, frankly, quite fed up with the government's slow pace 
of reform.
    Skeptics will argue correctly that Indian officials have 
been among the most obstreperous opponents of the U.S. trade 
agenda in venues like the WTO. This is true. Stepping back, 
however, looking strategically at India's deepening involvement 
in international institutions, we see that India behaves quite 
differently once it is inside a club than when it is excluded 
from it. Rather than throwing bombs from the outside, India has 
acted more responsibly in institutions like the IAEA and the 
U.N. Security Council. Indians crave the status of full 
membership in an international order they believe has excluded 
them for too long. Once seated at the high table, they are more 
inclined to help enforce global rules. I think the same would 
be true if India should accede to APEC.
    India needs to grow in order to underwrite its security in 
a very tough neighborhood and to uplift more poor people than 
exist in all of Sub-Saharan Africa. The country has implemented 
massive rural welfare schemes, but government welfare alone 
will never build the world's largest middle class. Only a 
dynamic private sector will do that.
    The U.S. can help accelerate this process by incentivizing 
our Indian friends to open up their economy to again produce 
growth rates approaching ten percent. China grew at this pace 
for several decades, as did Japan and South Korea before it. 
There is no cultural or historic reason India cannot deliver a 
``South Asian miracle'' to match the ``East Asian miracle'' we 
have seen in the Pacific.
    India should ultimately find it has no stronger partner in 
economics than the United States. It is time to put in place an 
agenda for economic cooperation between our countries that 
mirrors the ambitions of our strategic partnership, and 
catalyzes enduring prosperity for both our peoples.
    Thank you.
    [The prepared statement of Mr. Twining follows:]
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.eps                                 

    Chairman NUNES. Thank you, Mr. Twining.
    Mr. Subramanian.

   STATEMENT OF ARVIND SUBRAMANIAN, SENIOR FELLOW, PETERSON 
   INSTITUTE FOR INTERNATIONAL ECONOMICS, AND THE CENTER FOR 
                       GLOBAL DEVELOPMENT

    Mr. SUBRAMANIAN. Thank you, Chairman Nunes, Ranking Member 
Rangel, and Members of the subcommittee for giving me the 
opportunity to testify today.
    In the brief time available, I want to make three 
observations and three recommendations. Observation number one, 
the prize is big. I have breaking news for you. In 2012 India 
became the world's third largest economy in purchasing power 
parity terms, surpassing Japan and now behind only the United 
States and China.
    My forecast is that this $4.7 trillion economy will double 
every seven to ten years. This one trillion trade economy will 
double every seven years, and the U.S. has benefitted 
immensely, as my colleague has suggested, and it is worth 
emphasizing that India-U.S. trade and investment are balanced 
so that you do not have the kinds of tensions with other 
countries from imbalanced trade.
    Observation number two, the sectorial and the micro should 
not obscure the broad macro development, and these developments 
are that despite India's transitional turbulence that is 
happening now, slower growth, mounting macro vulnerabilities, 
the predominant trend has been toward opening.
    In the last two, three years, few countries have opened up 
to FDI and foreign capital across the board, you know, stock 
markets, equities, debt instruments, et cetera, like India has, 
and that is because it reflects a deep and fundamental 
bipartisan consensus within India that the way forward is 
greater openness and globalization.
    Observation number three, all that being said, however, 
there are, I think, three major challenges that the U.S. States 
and U.S. business face in India. Two of these I think my 
colleagues are going to talk about. One is the localization 
that, Chairman Nunes, you referred to. And here I just want to 
say that India has caught the China bug. India wants to do the 
same Chinese indigenization and localization that China has 
been doing, and I think there is a domestic imperative to 
create a manufacturing base which India has not been able to 
do. So it is resorting to these measures.
    A second challenge is the weak and uncertain regulatory and 
tax environment that affects the U.S., the civil nuclear 
industry, pharmaceuticals, agriculture, infrastructure, et 
cetera, and I'll have more to say on that.
    The third big challenge that American firms are not 
complaining about but which they should most of all is what my 
colleague referred to, which is that because of all these free 
trade agreements that India has signed or is about to sign, 
U.S. business is getting disadvantaged.
    And why is this serious? For two reasons. India has very 
high barriers, and it is a growing market. So the extent of 
disadvantage to American business is absolutely huge.
    How should these three challenges be addressed? One, on the 
localization protectionist measures, the regulatory 
environment, my strong urging would be to dialogue in the first 
instance, but if not, if that doesn't work, use the WTO to 
resolve conflicts as much as possible for two reasons.
    One, you can test the validity of claims, you know, about 
India being way out of line on many of these issues, IPRs, 
agriculture; and, second, India has a great record of complying 
with WTO rulings. A factor that I think is worth pointing out 
is that India's biggest trade reform came after the U.S. 
initiated a dispute against U.S.-Indian quantitative 
restrictions on consumer goods that went through. India 
complied with it, and you had the biggest change possible.
    Recommendation number two, on the uncertain regulatory 
environment I think the problem here is serious. It is not 
going to get resolved very soon. I think that U.S. business has 
a challenge to adapt to the Indian environment because if not, 
it risks losing ground to other countries, other competitors 
that are getting in despite the challenging environment.
    Recommendation three, and my last recommendation, go big. 
This is a marathon, not a sprint. This is multidimensional, not 
unidimensional, and sometimes going big is the best way to 
address even the small. You cannot resolve chickens by talking 
only chickens.
    So a common theme running through many of these testimonies 
here this morning is that there is no broad strategic framework 
for dealing with U.S.-India trade relations. I think my 
colleague made a very good point. I think it is important for 
three reasons: the fundamental sharing of values as a 
democracy; second, to reverse the disadvantage that's taking 
place with both sides negotiating free trade agreements; third, 
above all, I think it is very important to realize that a U.S.-
India trade relationship is absolutely vital for the other big 
prize, which is China and keeping China tethered to the 
multilateral trading system and ensuring that China remains 
open, nondiscriminatory, and follows the policies that we want.
    Finally, I would just add by saying that for this reason 
and FTA, relations on an FTA make sense, and we at the Peterson 
Institute have embarked on a big project and hopefully by the 
end of the year we will have something to show you for it.
    [The prepared statement of Mr. Subramanian follows:]
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    Chairman NUNES. Thank you, Mr. Subramanian.
    Ambassador Johnson.

  STATEMENT OF AMBASSADOR ALLEN F. JOHNSON, FOUNDER, ALLEN F. 
JOHNSON & ASSOCIATES, AND FORMER CHIEF AGRICULTURAL NEGOTIATOR, 
        OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE

    Mr. JOHNSON. Thank you, Mr. Chairman, for having me, and 
Mr. Rangel. It is a very interesting discussion listening to 
the other two panelists. From an agricultural point of view the 
potential in India is very significant.
    As you mentioned there are 1.2 billion people. It is 17 
percent of the world's population. It is growing income, 
growing population, and it is changing in better diets. It is a 
young population. About 60 percent are under 30, and we have 
seen and I put in my testimony that there is growing demand, 
significant growing demand for a lot of products that the 
United States can export effectively and efficiently in 
providing for the Indian market.
    And we have seen some progress, although India has seen 
more. Since 1995, we have seen our agriculture exports triple 
to India to almost $900 million, and that is out of the total 
U.S. export of $141 billion. So it is really about a half of 
one percent of our exports go to India even though it is 17 
percent of the world's population. It is the 27th largest 
market in the United States behind Guatemala, which is 14 
million people. About a third of that number comes from 
almonds, which is followed at some distance by other 
commodities that are listed in my testimony.
    But India has fared far better. Their exports over that 
same period have increased by tenfold, now over $5 billion. So 
in other words, they export five times as much agricultural 
products to the United States than we export to them. Half of 
that is rubber, but even then you are looking at two and a half 
times what is exported to the United States, and these are 
things like cashews, essential oils and other things I list in 
my testimony.
    So you would ask yourself: what is wrong with this picture? 
They have four times the people. They have a growing population 
and income. They obviously have dietary needs that we can 
service, and yet we actually have an agricultural food deficit 
with the country. And the answer is pretty simple, which is 
India is very protectionist when it comes to agriculture and to 
a large extent because they are concerned about rural economic 
and political instability.
    First of all, they have very high agricultural tariffs, 
among the highest in the world; maximum bound rates are 
generally between 100 and 300 percent with an average of about 
120 percent. The applied tariffs are about on average 35 
percent, and the difference between the bound and the applied 
is what we call water. They use that water effectively for 
managing imports basically. So if they want to avoid domestic 
food inflation, they lower the tariff. If they want to protect 
domestic prices, they raise the tariff, and they can do it 
within their WTO bound levels.
    Most U.S. exports could face a bound level of up to 100 
percent. Almonds are top export, as I mentioned earlier, faces 
a specific rate of 35 rupees per kilogram for shelled and 57 
rupees per kilogram for unshelled. That is equal under recent 
prices to about a 14 percent tariff. Imagine what we could do 
if that did not exist, and it even today is our third largest 
export markets for almonds.
    Other products, such as beef, pork, poultry are facing 
similar situations in that they have bound rates of 100 percent 
and applied rates between 30 and 100 percent. Dairy, for 
example, has bound rates between 40 and 150 percent, and 
applied rates between 30 and 60 percent. There are more details 
on this in my testimony.
    The second thing that they do is they have high sanitary 
and phytosanitary barriers, arbitrary export certificate 
requirements, restrictive maximum residue levels, unjustified 
animal disease controls, among other things. For example, in 
dairy we've been effectively blocked since 2003 due to 
unwarranted important requirements. Both the U.S. Government 
and the industry believe these are not scientifically 
justified. I believe the industry has a paper here today. And 
to add insult to injury, we actually import twice as much dairy 
from India as we export.
    Pork had access denied due to import residue requirements 
that do not have a scientific justification, as well as other 
requirements. U.S. livestock, poultry and pork are denied 
access due to overly restrictive avian influenza standards, and 
they have a ban on low-path AI, which is inconsistent with 
international standards. So the U.S. has initiated a WTO case 
on this, which had a panel instituted last month.
    As a global player, India we have to recognize is a very 
important player. Unfortunately, it has not always been helpful 
in moving forward, and at times it has advocated moving 
backwards. It is a leading member of the G20 and the G33 in the 
WTO talks, helping those groups to define positions for 
developing countries that often are not related to market 
openings, and even loosening rules on tariffs and subsidies 
allowing developing countries to actually increase the barriers 
or the subsidies.
    They have been active in other trade agreements beyond the 
WTO, but to a large extent agriculture has been excluded. For 
example, in the Mercosur Agreement, they only included 20 
tariff lines and in the Chilean agreement only 40 in 
agriculture, and that are out of over 600 tariff lines that 
they could have included.
    The good news is, consistent with what he is saying, by not 
including us, they have not put us at a significant 
disadvantage relative to other exporting countries in 
agriculture, but as he has pointed out, they could easily start 
doing that and put us at a disadvantage.
    The more interesting thing to me is that the world is 
changing very clearly. After a drought of activity in 
negotiations, we are seeing stepped up United States in a lot 
of negotiations that are very important to us. We have seen 
Europe and others who have never stopped having negotiations 
and bilateral regional agreements. Even Japan is talking about 
joining the TPP.
    What India does and how it sees its role and sees its 
interests being affected by this changing environment, 
especially as the WTO has been stalled, is going to be very 
interesting. If I were them, I would be watching negotiations 
very closely and thinking about what I should be doing to 
engage in a world that is becoming more interactive without me.
    So thank you, Mr. Chairman.
    [The prepared statement of Mr. Johnson follows:]
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.eps                                 

    Chairman NUNES. Thank you, Mr. Ambassador.
    Mr. Garfield.

  STATEMENT OF DEAN GARFIELD, PRESIDENT AND CEO, INFORMATION 
                  TECHNOLOGY INDUSTRY COUNCIL

    Mr. GARFIELD. Thank you, Mr. Chairman, Ranking Member 
Rangel, Members of the committee.
    On behalf of the Information Technology Council and the 
world's most dynamic and innovative companies, I would like to 
thank you for your bipartisan approach on trade holding this 
hearing. It is quite timely.
    We have submitted my testimony for the record, and so 
rather than repeat what I know you have read, what I will do is 
make three points.
    First, this relationship is incredibly important for 
geopolitical and economic reasons. The rest of the world is 
watching, including China, and these two democracies at least 
for the last 20 years have been illustrative of the power of 
innovation and open markets to improve lives and drive economic 
growth. The economist Julian Simon has made the point that the 
earth's greatest resource is human innovation, and that has 
come to the fore and has been demonstrated quite well by India 
over the last 20 years.
    As they have opened their markets, we have seen wholly new 
industries created in India, many in partnership with U.S.-
based companies. The result of that for India has been real, 
but also for the United States. We have gone over some of the 
statistics this morning about the number of people, for 
example, who have been moved out of poverty in India, over 400 
million people. They have created a middle class that, in fact, 
is larger than the entire U.S. population.
    The result of that is actually economic growth and job 
creation in the United States as well. India has moved rapidly 
up the list of our trading partners. In 1990, for example, the 
two-way trade between India and the United States was a mere $5 
billion. Now it exceeds $60 billion, which has created jobs in 
this country.
    Point number two, there are real challenges on the ground 
in India right now. In spite of the opportunities that exist 
and the impact, the positive impact that open markets have had 
on the ground in India, the Government of India seems to be 
doing a stutter-step on open markets and setting up a steeple 
chase of barriers to the success of foreign companies, 
especially American entities.
    And the examples are wide ranging, from random new 
regulations, for example, new testing and certification regimes 
that require testing your products in the market in order to 
have access to the market at all. Some of the other folks 
testifying this morning have alluded to the tax regime there. 
To say it is unpredictable is to be quite kind.
    Similarly, on trade agreements India is one of the partners 
and participants in the Information Technology Agreement, or 
``ITA,'' that was signed in 1996, but the world has changed 
tremendously since 1996. None of us are carrying around mobile 
devices that we held back then, and yet still India seems 
resistant to updating that agreement and moving forward with a 
new ITA.
    Most problematic, which we have alluded to earlier, is the 
preferential market access regime that is now in place in India 
which essentially boils down ``to if it's not manufactured in 
India, then it cannot be merchandised in India there,'' which 
has the potential to foreclose that market to foreign players, 
including the United States, and as a result, over the last few 
years we've started to see a decline in foreign direct 
investment in India, and a lot of companies questioning their 
ability to fully access the market, particularly since it is 
not just limited to government procurement, but includes 
private sector arrangements and deals between private entities.
    India has suggested that the concern there is really 
focused on information security and protecting the security of 
the country, which we can empathize with, but the security of 
their products is not related to where it is made. It is 
related to how it is made, and there are reasonable ways for 
addressing those security concerns that I think industry is 
well prepared to address.
    The third and final point is that though these issues are 
important for our relationship with India, they are, in fact, 
quite significant because of the potential contagion effect. 
India is not the only market that is moving forward with these 
forced localization requirements that Chairman Nunes referred 
to. We see the same sorts of developments, of course, in China, 
but we see them as well in Brazil, Argentina, and in certain 
parts of Africa. And so if we do not take steps now to deal 
with these challenges, they will continue to grow and will 
actually have real and meaningful impact on the ability of 
U.S.-based industries and companies, particularly in the tech 
sector, to continue to grow.
    We look forward to working with this Committee and Congress 
generally to resolving these problems.
    Thank you.
    [The prepared statement of Mr. Garfield follows:]
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.eps                                 

    Chairman NUNES. Thank you, Mr. Garfield.
    Mr. Waldron.

   STATEMENT OF ROY WALDRON, SENIOR VICE PRESIDENT AND CHIEF 
             INTELLECTUAL PROPERTY COUNSEL, PFIZER

    Mr. WALDRON. Chairman Nunes, Ranking member Rangel, and 
Members of the subcommittee, thank you for the opportunity to 
testify here today.
    My name is Roy Waldron, and I serve as the Chief 
Intellectual Property Counsel at Pfizer. In that capacity, I am 
responsible for managing and protecting Pfizer's intellectual 
property portfolio worldwide.
    Pfizer was founded in 1849. Our mission is to apply science 
to improve the health and well-being of people's lives. We have 
developed some of the world's best known pharmaceutical 
products. We employ 90,000 individuals worldwide, and 30,000 in 
the U.S. We have a presence in all 50 States with 17 
manufacturing facilities and 21 R&D sites located throughout 
the U.S.
    In the U.S., our industry supports over four million jobs, 
invests over 35 billion annually in R&D, and exports 46 billion 
in goods. The pharmaceutical sector is the country's sixth 
largest exporter. Ninety-five percent of our consumers are 
outside the United States. Emerging markets like India are our 
key growth markets.
    R&D is the lifeblood of our industry. It produces new and 
innovative medicines to treat diseases for patients worldwide, 
and intellectual property rights protect the fruits of our 
innovation.
    Today it takes on average more than one billion dollars and 
ten to 15 years to research and develop a new medicine. Our 
industry is high risk. Only about one in 10,000 compounds ever 
enters the drug discovery phase and is approved by the FDA.
    India is a critical growth market for Pfizer and for the 
pharmaceutical sector generally. Pfizer is committed to India 
and has been operating there for over 60 years, yet the 
business environment for innovative industries has deteriorated 
significantly and created uncertainty in that market.
    India has taken steps that call into question the 
sustainability of foreign investment and the ability to compete 
fairly. India has essentially created a protectionist regime 
that harms U.S. job creators. Despite being a member of the WTO 
and an important global trading partner, India has 
systematically failed to interpret and apply its IP laws in a 
manner consistent with recognized global standards. In fact, 
the Global IP Center's International IP Index ranked India last 
in terms of overall IP protection.
    In September of last year, India revoked Pfizer's patent 
for a cancer medication, Sutent. The patent for Sutent was 
granted in 90 countries around the world, including India, the 
United States, Europe and Japan. The Indian patent had been in 
effect for five years prior to its revocation. The revocation 
will now allow Indian generic companies to manufacture and sell 
generic copies of Sutent long before the patent is set to 
expire.
    I would like to note that to ensure Sutent is available to 
patients who need it, Pfizer developed a patient access program 
in India. The program provides 80 percent of the patients 
taking Sutent with a complete or partial subsidy.
    We believe that India is undermining IP by misuse of its 
compulsory license provisions. Compulsory licenses are intended 
for use in extraordinary situations of extreme urgency or other 
national emergency. Last March India issued a compulsory 
license for a cancer medicine, Nexavar, that the Indian 
Government had justified in part because the product was 
imported rather than manufactured locally. Such an industrial 
policy plainly contravenes established international trade 
obligations.
    Recent reports indicate that India has started the process 
of issuing compulsory licenses for the manufacture of three 
additional cancer medicines under a public emergency provision 
that sidesteps notice and public comment obligations. If left 
alone, this trend will destroy the market for innovative 
pharmaceuticals in India.
    And since many other countries look to India as a leader 
and an example, India's actions reverberate far beyond its 
borders. We have seen several countries adopt policies similar 
to India's which are leading to a worldwide deteriorating trend 
on intellectual property rights.
    These actions also diminish our exports, jeopardize our R&D 
activities, and ultimately harm U.S. jobs. We need your help. 
We need the support of Congress and the Administration. It is 
vital that you prioritize this matter and work together to 
address these challenges.
    Specifically, I would like to highlight four 
recommendations: that the U.S. Government increase the 
frequency of talks with the Indian Government and continue to 
raise concerns directly with Indian officials;
    That the U.S. Government should raise concerns at every 
available bilateral and multilateral forum to send a strong 
signal to the Indian Government and to other governments that 
it does not condone these actions;
    The U.S. Government should review all available trade 
policy tools in light of the deteriorating IP environment.
    And, four, the U.S. Government should pursue a robust trade 
agenda that includes strong intellectual property protections, 
including robust provisions in the trans-Pacific partnership 
agreement.
    Thank you for holding this hearing today, and I look 
forward to answering your questions.
    [The prepared statement of Mr. Waldron follows:]
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.eps                                 

    Chairman NUNES. Thank you, Mr. Waldron.
    So as you all know, this Committee has basically two major 
capabilities. One is to produce legislation. The other is to 
conduct oversight. So I am going to ask just a real basic 
question to all of you, and that is if you had up to three 
things that we could do either legislatively or through 
oversight, specifically what would you like to see this 
Committee engage in over this coming Congress?
    And we will just start on the left with Mr. Twining.
    Mr. TWINING. Mr. Chairman, rather than three things, I 
mean, my prize would be one big thing, which is passing trade 
promotion authority so that the President and the Executive 
Branch can negotiate the suite of trade agreements, these very 
ambitious trade agreements. I mean whether or not we include a 
U.S.-India FTA in that. TTP, TTIP, these horizon stretching 
agreements, I think some of us are worried that the enabling 
foundation, should we get to a point where we have these 
agreements, is not yet in place to see them move through this 
body expeditiously, and that would be my quick answer.
    Chairman NUNES. Thank you, Mr. Twining.
    Mr. Subramanian.
    Mr. SUBRAMANIAN. I would wholeheartedly endorse what Mr. 
Twining just said, that we need legislative authority to 
pursue, you know, all the things that are already on the table, 
TTP, TTIP, but also a whole bunch of new initiatives like with 
India, but also to move beyond the DOHA round to a new kind of 
round of negotiations.
    Because the fact of the matter is it is true that India is 
not very actively participating, Chairman Nunes, in the 
agreement that you said, and I think there is a problem here. 
But I think some of that could be overcome if you have a 
broader agenda, multilateral agenda, moving beyond DOHA that 
includes items of interest to China and India, as well.
    So I think you need a broader agenda for which I think 
getting this broad based trade authority is very important.
    Second, I would urge also that in looking at the economic 
architecture in Asia, that greater efforts be made to bring 
India into that architecture as a way of promoting some of the 
objectives that have been put forward.
    And finally, the third thing I would say, you asked us what 
you could do, but I also want to say something on what perhaps 
you should not do, if I may with your permission. I think, for 
example, GSP expires in July, and certainly I read some of the 
comments you are saying that, you know, maybe we should use all 
trade tools available. I think on the GSP my kind of cautious 
advice would be the following.
    I think the U.S. needs to think about graduating many 
countries out of GSP. I mean, I will give you one good reason. 
India itself now gives GSP to many least developed countries. 
So it is a bit odd for, you know, a GSP granting country to 
give GSP.
    However, I would not link that to either use that as kind 
of a retaliatory threat or use it to force, you know, action, 
change within India because you incur the diplomatic cost 
without necessarily getting any benefits out of it because I 
would be highly doubtful whether actions like that, you know, 
would really change the regulatory environment in a way that we 
all want to see it changed.
    Chairman NUNES. Thank you, Mr. Subramanian.
    Ambassador.
    Mr. JOHNSON. Yes. Thank you.
    I often think of India as being a developing country with a 
First World bureaucracy. They are capable of stopping things 
very creatively, and so hearings like this and engagement, 
whether it is through letters or calling in Indian officials to 
talk about problems that they have created to our trade, I 
think, is really priceless because it forces an action. It 
forces some interaction within their own government about 
problems as they exist.
    The second thing I would suggest is that you encourage 
trade, and having many battle scars from pursuing trade 
promotion authority in the past, I would encourage you to do it 
again. But I think the main thing is that, as I mentioned in my 
testimony, the more that India sees the rest of the world is 
moving, the more it has to think about the consequence to 
itself for not moving, whether it is in agriculture, in 
bilateral agreements, or in a World Trade Organization 
agreement. They could be constructive players if they decided 
that it was in their best interest to do so.
    As I mentioned earlier, we have taken a WTO case recently 
against India on AI, and I think we are going to need to 
continue to do those sorts of things.
    On other activities, my general point, and you brought up 
GSP, is that what we should be doing is encouraging them to be 
moving from the rural areas to other industries, and so as we 
can encourage that, I think that helps them in taking some of 
the pressure off reform in agriculture, which is ultimately 
essential for their own development.
    Chairman NUNES. Thank you, Ambassador.
    Mr. Garfield.
    Mr. GARFIELD. Yes. Number one, I agree with what the other 
panelists have said about trade promotion authority. I think 
that is critically important.
    Two is making clear the exigency of moving forward and 
resolving the issues around the preferential market access 
regulations that are in place. This hearing is quite timely. 
Just yesterday there was a report out of India that they intend 
to proceed full speed ahead with the private sector portions of 
that, which would be significantly detrimental to businesses 
globally, but specifically here in the United States as well.
    And so making sure through Congress as well as the 
Administration that we are dealing with that and dealing with 
it now I would say is the second thing.
    And then the third is something that you have done before, 
which is through your letters that come through in a bipartisan 
fashion making clear that you are paying attention, and that 
this is an area of emphasis and focus I think is quite 
important, and continuing that, I think, would be quite 
helpful.
    Chairman NUNES. Thank you, Mr. Garfield.
    Mr. GARFIELD. You are welcome
    Chairman NUNES. Mr. Waldron.
    Mr. WALDRON. I have to echo the comments of my fellow 
panelists, but I think that some of the emphasis has to be on 
intellectual property. I think that there is an exigency, as 
Mr. Garfield references. The acceleration of compulsory license 
policies has accelerated in the last year. So there is some 
urgency with respect to the frequency of talks that we have 
with the Indian Government to register our displeasure with the 
developments that have taken place there.
    I also agree that IP chapters or IP understandings are also 
important in these bilateral and multilateral fora. So this is 
really something as a second matter that I think we really have 
to pursue and go with our eyes wide open as to what is really 
happening right now, and essentially if we wait too long, we 
may find ourselves in a situation where it is irremediable.
    And referring back to some earlier comments on GSP, I think 
that we do have to review all available policy tools. I think 
it is a matter of equity and fairness, and perhaps the upcoming 
renewal will be a time to actually seriously look at what we 
want to do and how we want to do that.
    Thank you.
    Chairman NUNES. Thank you, Mr. Waldron.
    With that, my time is up and I yield to you, Mr. Rangel.
    Mr. RANGEL. Thank you, Mr. Chair.
    I have to admit to the panel that I have not really been up 
to India's position as it relates to problems that they see in 
international trade, and I wonder whether any of the witnesses 
today, although you want to improve the trade relationship, 
actually can be speaking on behalf of the Government of India 
as to how they see.
    Are any of you in touch with the Government of India 
directly? You are.
    Mr. GARFIELD. We all are.
    Mr. RANGEL. How could I have any little bit of assurances 
that if we did do what you are recommending, that the 
Government of India would say, ``Thank you and let's move 
forward''?
    What do I have to work with?
    Mr. GARFIELD. Well, the thing that I would point to is what 
has happened in India in the last 20 years. I think all of the 
panelists have been pretty consistent about the turnaround 
story and the growth story and the power of innovation in 
India, the industries that are being created, the people that 
are being moved out of poverty, the people that have been moved 
into the middle class, which is the point I made earlier, which 
is that segment of the population is now larger than the U.S. 
population in its entirety.
    Mr. RANGEL. Mr. Garfield, I did not frame my question 
correctly. I think all of us are excited about the increase in 
trade, the number of people that are moving out of poverty into 
the middle class, and the Chairman asked what is it that all of 
you three would think is the most important, and of course, 
that is good.
    I also want to know whether there is anyone here that can 
say this is what India thinks is the most important. Does India 
want to move toward a free trade agreement? Does India agree 
with Mr. Subramanian that rather than get issues resolved, that 
we should take them to the WTO with all the time and expense we 
have with that?
    And even though I would acknowledge you to answer, I cannot 
perceive that India would support that. You know, do not work 
it out. We have got a good record with the WTO. Talk to them.
    Does that make any sense? What am I missing?
    Mr. SUBRAMANIAN. If I may.
    Mr. GARFIELD. Yes.
    Mr. SUBRAMANIAN. Thank you, Chairman Rangel.
    I would say two things in response. One, does India want to 
move forward? I think there is a sense, firstly, India is 
moving forward with Japan, the EU, Canada, ASEAN Plus Six, et 
cetera, et cetera.
    Mr. RANGEL. Well, how does India deal with the observations 
that some of our business have that they have not been fair in 
terms of their trade agreements, and so why in the world would 
we be supporting them in the WTO or free trade agreements?
    Who here would suggest that India recognizes that we have 
problems with the tariffs? We have problems with them like we 
want to make it in USA and they want to make it in India. We 
recognize that these are problems that we have with all 
countries, and they have got big problems with us.
    I am just having a small problem and wondering how you can 
help us to deal with these problems. I think after this meeting 
when I talk with the Ambassador from India more of my questions 
will be answered as I can deal with their trade people and get 
a better answer.
    But I just do not know if you told the Chair the three 
things you thought were important and all of us agreed, then 
what would we do? Tell our Trade Representatives to do it?
    Mr. GARFIELD. Yes. If I can jump in as well. Fundamentally, 
I do not think India would necessarily agree with all of the 
solutions we have offered. That is number one.
    Number two, to the question of what we hear from India, 
most of what we hear in response to the concerns that we raise 
relates to security, and so what we are told is this is not 
directed at the United States, but it is a broader concern 
about security and the security of India, which we empathize 
with. And we spend a lot of time talking to the Indian 
Government, including with the Ambassador, whom we are seeing 
this evening, about ways of addressing those legitimate 
security concerns without building a wall around India and 
Balkanizing the country.
    Mr. RANGEL. I am sorry. Who are ``we'' that is concerned? 
When you say ``we''?
    Mr. GARFIELD. When I say ``we'' it is actually broad, you 
know. So we just----
    Mr. RANGEL [continuing]. I know, but who are you talking 
about?
    Mr. GARFIELD. Actually most specifically I am talking about 
the global technology sector when I say ``we,'' but I am also 
talking about the United States and other countries that have 
significant concerns about the direction in India.
    Just a few weeks ago we sent a letter to the Prime Minister 
that was signed by 39 different entities representing over ten 
different countries, and so we are here in front of the U.S. 
Congress, and so, of course, this is a U.S. concern, but I feel 
comfortable saying this is a multi-sectorial and a 
multinational issue where the United States and this Congress 
can play a significant leadership role.
    Mr. RANGEL. I yield back, Mr. Chairman.
    Chairman NUNES. Thank you, Mr. Rangel.
    Mr. Reichert is recognized for five minutes.
    Mr. REICHERT. Thank you, Mr. Chairman.
    I just want to follow up on the Ranking Member's questions.
    So as you said, Mr. Garfield, 39 international trade groups 
have written the Prime Minister. Other groups have followed 
with additional letters expressing their concerns about India's 
actions. But an official at India's Department of 
Telecommunications said, ``The concerns expressed by various 
stakeholders would be considered as India finalizes their 
rules.''
    What does that really mean? It does not sound too 
promising, as I think Mr. Rangel was pointing out.
    We have sent letters; Congress has sent letters expressing 
our concern. You have sent letters. Others have sent them. What 
does that really mean, ``we will take this under 
consideration,'' the concerns?
    Mr. SUBRAMANIAN. Let me jump in here. I do not carry a 
brief for anyone, but I think the important point to recognize 
is that what is also a response to Chairman Rangel is that the 
Indian Government's response would be that on many of the 
concerns that have been raised, we are actually consistent with 
our international obligations, you know, and where we are not, 
we are open to dialogue, including, you know, dispute 
settlement under multilateral procedures.
    So I think in some ways to understand the Indian 
perspective one has to take into account what the domestic 
challenges are, you know, creating a manufacturing base, for 
example, you know, imitating China, and that underlies the PMA 
policy, for example.
    But in response to the concerns, they would say in 
agriculture, yes, our tariffs are high, but out bound tariffs 
are much higher, and we are not violating any of them. So I 
think that is why to test some of these claims I think it is 
useful to get them adjudicated under multilateral dispute 
settlement procedures.
    Mr. REICHERT. Is there any concern on India's part that, 
you know, we are all, as Mr. Rangel, again, said, pleased to 
see that a lot of people are moving out of poverty and upward 
mobility into the middle class and higher in India, and that 
has been the result of some of their policies possibly.
    But when they look into the future, is there any concern at 
all that as they move ahead other countries are developing 
other technologies that they will not necessarily have access 
to, and they will begin to fall behind?
    Has that been a consideration at all?
    I am from Washington State, and we do a lot of business 
with India. We just opened, I think our seventh Starbucks in 
India, some progress, but we are concerned because in 2012 
Washington State exported $1.2 billion worth of goods to India, 
up from $661 million in 2011, but down $3 billion since 2007.
    So, you know, we are losing our ability to interact with 
India and exchange ideas and technology, negative on us, but is 
India even aware or thinking about the future and the loss of 
this technology and these opportunities to interact with other 
countries in the future where they may lose instead of be 
gaining?
    Mr. GARFIELD. I think it is hard to ignore. The foreign 
direct investment numbers over the last three years are 
reflective of that. Starbucks is a great example because 
they're in, but there are a lot of other retailers, including 
some in the technology sector, who would like to be in and are 
challenged in doing so, some very prominent ones, in fact.
    Your initial question, I think we have heard it before, 
which is it is under advisement, and we will consider it, and I 
think until there is a sense that the implications of not 
addressing this are going to be significant, then it will 
continue to be under advisement, and that is why this hearing 
today is so important.
    We know the powers that be in India are, in fact, paying 
attention.
    Mr. REICHERT. Yes.
    Mr. SUBRAMANIAN. I just want to add, I just want to say 
that, you know, again, I think one risks obscuring, you know, 
what is happening in specific sectors with what is happen 
overall; that in fact, late last year the most dramatic opening 
to FDI happened, you know, which would allow Walmart to go into 
India. That happened recently.
    And in the last three years, the access that U.S. investors 
have to Indian stocks, equities, bonds, have been increased 
dramatically. So I think one needs to have this balance of, 
yes, there are sectorial problems, but the underlying trends. 
FDI came down during the crisis, but it has picked up again 
once again.
    Mr. REICHERT. Thank you, Mr. Chairman.
    Chairman NUNES. Thank you, Mr. Reichert.
    Mr. Neal is recognized for five minutes.
    Mr. NEAL. Thank you, Mr. Chairman.
    Just a quick footnote. The issue of intellectual property 
has lingered here for a long time as we have witnessed this 
growing relationship between the United States and India, but 
it is a very stubborn problem, but I want to take you to 
another question that is more specific with a specific company 
located in New England, TAKO. They have asked that because we 
are holding this hearing that I raise this issue specifically 
on their behalf.
    This is an American company that is moving part of their 
manufacturing business to India from China. Now, you would 
think that that would be a good thing for India. However, India 
has made the move so difficult that the company is now 
beginning to regret the decision.
    For example, TAKO has sent some samples of their finished 
products to Indian vendors who will be manufacturing their 
products and TAKO ran into major problems with Indian customs, 
including long holds on samples and arbitrary duties and fees. 
With a work force of 500 million people which is slated to grow 
over these next 25 years, India is grasping at any means to 
generate manufacturing employment, and we have seen and 
witnessed some forced localization measures.
    Here is an instance where an American manufacturer is 
trying to create manufacturing jobs in India, and India is 
making it very difficult for them to do so.
    As witnesses, is there any one of you who wishes to speak 
specifically to this question?
    And I would note that TAKO is headquartered in Cranston, 
Rhode Island.
    Mr. TWINING. Sir, I can make just a general point, which is 
that one reason the U.S. and India had a very fraught 
relationship really throughout the Cold War was not simply 
because of Cold War divisions, but because India socialized 
most of its economic base when it became independent after the 
British Colonial period. Most of us are pretty progressive, and 
we are used to thinking about India as this dynamic market, a 
billion plus people, one of the biggest economies down the 
road, but in fact, you still have a government whose tentacles 
are everywhere in the economy, and it is one reason why the 
Indian private sector, quite interestingly, they are so fed up 
with the regulatory mess in India that many of them are 
actually going abroad. It is actually much easier and more 
rewarding for many Indian companies to invest in Europe or the 
United States than it is in their own country.
    And so we do not have an Indian private sector 
representative here at the dais, but if we did, I suspect he 
would say, ``Gosh, we have this kind of problem ourselves and 
it drives us nuts.''
    But from a ten, 20-year perspective, the Indian Government 
has been in the process of stepping back from the economy, but 
it is still far too heavily involved in it, and that is 
something we think, again, I think there is a consensus that a 
big push on trade liberalization between our countries would 
help to extract the Indian state in ways that would really 
benefit the Indian people through greater economic growth.
    Mr. NEAL. But the difficult with that point is that as we 
pursue free trade agreements and breaking down barriers to 
trade, one of the items, I think, that could fairly be ascribed 
to governments in China or India is that they are for free 
trade on their terms.
    Mr. SUBRAMANIAN. I think that that is a fair point, Mr. 
Neal, but I think the other side, the way this could possibly 
work, the big push that we are talking about is because trade 
is a two-way street. For example, just as localization and 
others, IP issues are raising concerns, I think the Indian 
Government also has, you know, issues of concern in the U.S. 
which, you know, a kind of big push would allow this kind of 
tradeoff to be made.
    To give one example, the H1B issue, the immigration issue, 
you know, export licensing, for example, that is another issue. 
Totalization in Social Security agreements, that is another 
issue.
    So I think the important thing here is how can we create a 
framework so that more of these exchanges can take place and it 
does not just become, you know, U.S. business complaining about 
problems in India which no doubt exist, but creating a more 
positive two-way dynamic to create the incentives that Mr. 
Twining talked about also for India to change some of these 
policies.
    Chairman NUNES. Mr. Waldron.
    Mr. WALDRON. I think it is possible here at least in the 
discussion of technology and intellectual property to create 
win-win situations. I think you want to be able to convince the 
Indian Government that this is not a zero sum game. This is 
about creating an environment for innovation, and India has the 
resources technically to advance very far in terms of creating 
new, innovative technologies, yet it seems to be going towards 
a very short-term view of what is going on.
    But I think we can play a very strong role in at least 
advocating, look, the long term and the future here of 
prosperity is with advancing a win-win situation.
    Mr. NEAL. Thank you, Mr. Chairman.
    Chairman NUNES. Thank you, Mr. Neal.
    Mr. Smith.
    Mr. SMITH. Thank you, Mr. Chairman, and thank you to our 
witnesses for your participation today.
    Ambassador Johnson, you touched a bit on agriculture and, 
you know, I guess in general and some more specific terms, 
obviously we know we have got a globalized economy, and I think 
of a business that exports around the world. This business 
happens to obviously be in my district, but in a town of 300 
population, and I hear from them that India's policies have 
inconsistent tariffs, non-tariff trade barriers, various other 
challenges.
    Could you elaborate on that perhaps?
    Mr. JOHNSON. I am sorry. What was the business?
    Mr. SMITH. Agriculture.
    Mr. JOHNSON. Oh, in general.
    Mr. SMITH. Right.
    Mr. JOHNSON. Well, I come from a town of 300 people in 
Iowa. So I have sympathy for your constituents.
    No, actually in combination response to the question that 
Chairman Nunes has asked in sort of responding to Congressman 
Nunes, is that what India basically wants is agreements on its 
own terms, whether you are talking about the WTO that they 
actually want to backtrack on tariffs and developing country 
subsidies, or are you talking about bilateral agreements where 
they basically leave agriculture out. They include 20 tariff 
lines out of 600 potentially.
    And in response to Chairman Nunes, I tried to say that I 
think this Committee is showing an aggressive agenda, an 
aggressive agenda on trade that India would be left out of if 
they do not start acting in a way that is more conducive to 
trade. It would be helpful.
    In agriculture, we see countless not just in the number of 
SPS barriers, but the goal line keeps moving. If you start 
addressing one and then another one seems to pop up. There is 
one reason, motivation for it, and you deal with that. Then 
they come up with another reason for justifying a barrier.
    And then as we started out by saying they have very high 
tariffs, the highest in the world when it comes to agriculture 
across virtually all of their agricultural industries, and that 
is very problematic, and it allows them because they have a 
high bound rate and they apply it, it gives them so much water, 
so much protection that it gives them the flexibility to lower 
it whenever they need something, if there is a draught or 
something domestically, but they put it right back up.
    Well, if you are an exporter, it is hard to build a 
business around not knowing what is going to happen either on 
the tariff side or on the regulatory, sanitary and 
phytosanitary rules that seem to be somewhat arbitrary at 
times.
    I hope that answers your question.
    Mr. SMITH. Sure. Now, could you reflect a little bit in 
terms of the restrictions that are or are not based on the 
sound science and economics?
    Mr. JOHNSON. Well, for example, in the dairy industry they 
have had in place a number of regulations that, in fact, have 
been changing over time that have to do with what we feed our 
animals or the drugs that we might use that are internationally 
recognized and accepted, and then when we go through and we 
spend a lot of time assisting the industry on this, when we go 
through trying to address each one of those problems, we get 
sort of similar responses to what we heard over here, which is 
that they are under consideration or they still believe they 
are justified. And so far we have not pulled a trigger on a WTO 
case.
    Another one is avian influenza, which basically they put a 
ban in place for low path avian influenza, which is not an 
internationally recognized standard. We have the most rigorous 
system for monitoring and dealing with avian influenza in the 
world, and India has actually had high path avian influenza on 
numerous occasions.
    And so now we have taken a WTO case against them that the 
panel was just empowered last month.
    Mr. SMITH. When you say that the policies are changing, 
could you elaborate on that?
    Mr. JOHNSON. So I know the dairy industry has a paper here, 
but so, for example, when we start working through trying to 
deal with even things that are not science based, so, for 
example, they do not want certain drugs to be used for the 
dairy products that are sent there.
    So even when we start investigating how we could be 
identifying suppliers that could address that specific 
requirement, then we will find later that there is another 
reason that those suppliers maybe do not fit the case or the 
conversation does not continue.
    Mr. SMITH. Or perhaps it has less to do about public safety 
than some other----
    Mr. JOHNSON [continuing]. Oh, clearly, and I think it is 
pretty clear on a number of these that there is not a human or 
animal health benefit from the regulation, but really there are 
effectively acts of protectionism.
    Mr. SMITH. Would anyone else? Mr. Subramanian?
    Mr. SUBRAMANIAN. Just a thought. You know, the description 
of going to WTO as pulling the trigger, at one level that is 
true, but I think you have to recognize that many of these 
regulations that are formulated within India come about because 
of complicated interests, and sometimes having an international 
ruling which says this is not based on sound science actually 
helps the pro liberalization law be within India to act on 
those who are against it.
    So I think that is a big advantage of having, you know, 
international pressure through, you know, multilateral 
procedures to kind of strengthen the hands of kind of the good 
guys within India.
    Mr. SMITH. Okay. Thank you. I yield back.
    Chairman NUNES. Thank you.
    Mr. Larson is recognized for five minutes.
    Mr. LARSON. Thank you, Chairman Nunes and Mr. Rangel, and 
our distinguished guests that are here today. The testimony has 
been enlightening and certainly we all share the concerns and 
the great opportunity that exists with the vast potential of 
India.
    I would like to amplify a point that Mr. Neal made and one 
that continues to be a thorny issue for this Committee and 
American manufacturers in general, and that deals with the 
issue of intellectual properties.
    And having several value added manufacturers in the 
Northeast and specifically in the State of Connecticut and one 
testifying today in terms of Pfizer, I would like to get the 
perspective, if I could, Mr. Waldron, from you and other 
panelists if they want to join in, about the difficulties that 
American companies face.
    I believe it was Mr. Garfield that talked about the 
complications of preferential markets and the bureaucratic 
entanglements that that creates, and of course, the ongoing 
concern that so many American manufacturers have related to us 
about intellectual property, if you could, sir.
    Mr. Waldron.
    Mr. WALDRON. Thank you, Congressman Larson.
    I think we have to sort of talk about balance here in the 
intellectual property area. I mean, even though India will 
proclaim it is consistent with trade obligations in terms of 
its patent law, we have had in the recent past about eight sort 
of cases that have come up dealing with patented products, and 
frankly, we are dealing with a situation where we are at zero 
and eight in terms of the patent being upheld or any sort of 
pushing back on a compulsory license or revocation actions. I 
think it speaks to a very poor record, and there is something 
out of balance.
    I mean, the rest of the world has IP provisions that are 
consistent with international obligations. Yet we are so far 
towards the range where everything is revoked or there is no 
valid patent in India. I think we really have to sort of 
address this quickly before it becomes a very dire situation 
and we find ourselves where we really have nothing left.
    Mr. LARSON. Would you say that that is because of an 
ensnarled bureaucracy or more of a deliberate plan of India?
    Mr. WALDRON. Well, I cannot speak to the intentions of the 
Indian Government, but I think the government there should play 
a role and does play a role in at least communicating what it 
finds important and its priorities. So if all the 
administrative agencies are deciding cases in a certain way, 
that seems to be reflective of the tone that is being set at 
the highest levels.
    I really think that there is a role that the Indian 
Government can do in communicating to its agencies in terms of 
creating a more positive environment because, frankly speaking, 
their interests lie in creating a culture of innovation, as we 
do here. The IP system has been the driver, the historic driver 
of innovation over many years and contributed to the great 
prosperity that we enjoy in this country. It is something that 
we should share. I think it is a legacy that we have to bring 
to them simply because we are in a world where we do not have 
drug products that cure all diseases. I think we really need to 
get further along, and these are interests that we all share in 
common with every country regardless of border.
    So the emphasis really has to be on innovation, and there 
really needs to be messages from the top within India.
    Mr. GARFIELD. If I could add.
    Mr. LARSON. Sure.
    Mr. GARFIELD. There are multiple forces at play here, and 
so in part it is bureaucracy. In part it is a slowing economy, 
and markets like India looking at China and that model and 
thinking that maybe the path to take, and so the point that has 
been made about creating opportunities for multidirectional or 
bidirectional dialogue, so we're exchanging ways in which their 
interests can be met as well as ours, and when I say ``ours,'' 
I mean global companies, I think will serve us all well.
    The concern I have is--and not to sound too much like the 
boy who cried wolf--is that some of these challenges that are 
progressing now could become non-remediable if we do not 
address them immediately, and so creating those opportunities 
and that dialogue immediately, I think, is critically 
important.
    Mr. LARSON. I believe it was Gandhi who said, ``I want all 
of the winds of the world to be able to blow freely through my 
house, but I will not be blown over by any.''
    And it seems to me, both Mr. Waldron and Mr. Garfield, that 
what you have said this would enhance their ability to stand 
with the rest of the world.
    Mr. GARFIELD. Well articulated.
    Chairman NUNES. Thank you, Mr. Larson.
    Mr. Boustany is recognized for five minutes.
    Mr. BOUSTANY. Thank you, Mr. Chairman.
    This has been a really informative and compelling hearing. 
I really appreciate all of our witnesses and their testimony.
    It has been clearly stated obviously that the benefits of a 
close trade and investment relationship with India is very 
significant, and it is also strategically important as well as 
we look at the growth in Asia, the Rim around the Indian Ocean, 
and so forth, and back in the second term of the Bush 
Administration, I was really enthusiastic about the civil 
nuclear agreement. I thought this was a very important 
strategic step, an opening, if you will, toward India to really 
formalize and enhance the relationship, and yet subsequently we 
saw the liability regime that was put in place, and it sort of 
really dampened the enthusiasm across the board.
    So it is sort of like we take a step, and then there is a 
reaction which further pushes, and I found this problematic, 
but hopefully we can continue to move forward.
    India clearly is critical, I think, as you all have stated 
very clearly. India is critical in getting back to rules-based 
global trading system and bring China in and so forth, and I 
know we are pushing on TPP and the trans-Atlantic agreement as 
leverage to hopefully bring them in and to deal with China. But 
the problem is we are behind timing-wise on this while India is 
already moving forward with a number of other regional 
agreements that are, you know, not as comprehensive, but 
clearly put us at a disadvantage as you all stated.
    But it seems to me in answering Mr. Rangel's question, and 
clearly we need to talk to the Indians about it as well; I 
agree with you, but a couple of observations.
    One, India needs to move up the value chain on 
manufacturing. That is clearly one of their objectives, but 
secondly, you know, the security issue as was raised by Mr. 
Garfield. But what was not mentioned is India's severe 
vulnerability with regard to energy and the need for energy. 
And as I think about this, I know Cheniere Energy, for 
instance, is a company in my district. In fact, the first LNG 
export license has been granted to Cheniere, and we in 
Louisiana are very, very excited about this because it does 
mean jobs. They have completed a 20-year contract with the 
Indian energy company. GAIL, I believe, is the name of the 
company, and this is taking effect in 2017. I think the 
contract entails 3.5 million tons of natural gas, liquefied 
natural gas exported from the U.S. annually.
    This is a time limited opportunity given, you know, the 
nature of the change in global LNG markets. We have an 
arbitrage opportunity that is immense, but it is time limited. 
None of you address this specifically in your testimony, and as 
I look at how do we catalyze this relationship with India, what 
can we use as leverage?
    The energy vulnerability seems key in this to me on many 
levels, both from a security and manufacturing standpoint, and 
so forth. I would like Mr. Twining and Dr. Subramanian to 
comment on how we could, you know, position ourselves because 
this is the second step granting this type of export license to 
a non-FTA country.
    Mr. TWINING. Sir, that is an excellent question, and I am 
so glad you raised it. India has one of the greatest energy 
import requirements in the world, and that dependency on world 
energy supplies will only grow as the country develops, as the 
population continues to bloom.
    One of the smartest things the United States could do 
strategically in Asia, we are quite used to thinking about our 
military presence, our naval presence, our alliance 
commitments. We also sometimes talk about our trade agenda and 
some kind of market liberalization, but we need to add an 
energy pillar to this.
    And exactly as you say, the shale gas revolution in the 
United States creates an extraordinary opportunity for us to 
export it, and I think we should probably export it to the 
world, but we should also particularly build in that dimension 
to our key security partnerships in Asia. I would say in Asia 
our most important, most capable security partnerships are with 
Japan and India. In different ways, and say to them, ``Look. 
Part of this package could be preferential access or some 
facilitated agreement to U.S. energy exports because, in fact, 
we have a national security interest in helping you develop 
your economy and helping you develop your military capacity, 
help us police this tough region in the world, create some 
ballast in Asia other than around China,'' and this is 
something our allies desperately need.
    And so, you know, I think this could be a game changer if 
we play it right.
    Mr. SUBRAMANIAN. It is a great question, and I agree 
completely with what Mr. Twining said. I would just add a 
couple of points.
    One is that India is heavily dependent on coal. So from a 
climate change point of view as well, getting cleaner gas from 
the United States, I think, will help enormously, and also the 
fact that not only is coal dirty, but Indian coal supplies are 
kind of now again boggled by all of these regulatory problems.
    So I think there is a huge opportunity there, both the 
energy side on the climate change side, and I think the United 
States should use that as leverage, you know, in pursuing not 
just the energy agenda. So this comes back to my point about, 
you know, the two-way need.
    I mean, just as, you know, concerns that we have, the U.S. 
has this great leverage in terms of energy exports. So I think 
that reinforces my view that we need to get this big thing 
going whether much more two-way tradeoffs are possible.
    And just one comment on your value added. The Indian 
problem is not moving up the value added chain. It's moving 
down the value added chain because, you know, it's too skill 
intensive and too technology intensive. We need to create more 
jobs and employment.
    Mr. BOUSTANY. Thank you.
    Chairman NUNES. Thank you, Mr. Boustany.
    Mr. Roskam is recognized for five minutes.
    Mr. ROSKAM. Thank you, Mr. Chairman.
    Mr. Twining, in your opening remarks you said that India 
plays better inside the club than outside the club, and I just 
wanted to follow up on Dr. Boustany's observation about the 
civil nuclear agreement in which they sort of made their own 
club.
    In other words, it seems to me that part of what India has 
got going for it is they say, ``Look. We are so big and so 
strategically important we are going to wait and you are going 
to redefine rules based on how big we are.''
    Am I overstating that? Is that an over-characterization or 
how would you frame that up?
    Mr. TWINING. The way I would frame it is as somebody who 
worked in the Bush Administration on the civil nuclear 
agreement was we had a problem, which is that we had a country 
that was completely outside of the normal proliferation regime, 
the nonproliferation regime. We had a country that had nuclear 
weapons and was not proliferating them like China, Pakistan, 
other countries have proliferated them beyond its borders, but 
we had a big hole in the rule book on global nuclear trade and 
proliferation.
    We eventually concluded, the U.S. Congress concluded along 
with the Administration that bringing India into the system 
would be better than having it on the outside. The liability 
law that India subsequently passed shot itself in the foot. I 
mean, a lot of domestic politics here, a lot of domestic 
politics there. The government in India had fought so hard for 
that civil nuclear deal. It was the first time an Indian Prime 
Minister had put his government on the line on a foreign policy 
issue, put his government on the line over building this new 
relationship with us.
    He won that, but then it was almost like the fight went out 
of his Administration. They let the parliament devise this 
liability law that was, frankly, inadequate.
    What we had seen though in terms of your question, India's 
inclusion in the club, not only did we collectively bring India 
into this civilian nuclear regime, in civilian trade in nuclear 
components. India now is lobbying to join the clubs that had 
excluded it: the Australia group, the nuclear suppliers group, 
the WASSENAAR arrangement, all of these nuclear cartels that 
control the civilian trade in nuclear energy. India now wants 
to be a full member of those clubs.
    Mr. ROSKAM. So in that case, I mean, the paradigm has 
shifted, and what you are describing is more of an opportunity 
to invite----
    Mr. TWINING [continuing]. No, I think it is a longer term 
socialization opportunity. We have also seen, I know, the Hill 
India's policies towards Iran were a huge cause of concern 
during the civil nuclear debates. There was no quid pro quo.
    We have seen India vote with the United States against Iran 
five times now in the IAEA, and so I think that is another 
example of where the country can be more responsible when it is 
inside than when it is out.
    Mr. ROSKAM. Okay. Thank you.
    Mr. TWINING. Thank you.
    Mr. ROSKAM. Mr. Subramanian, when you went through your 
one, two, three and one, two, three, and thank you for doing 
that in a very organized way, by the way, for one of your 
comments I wrote down, ``Rub some dirt on it,'' meaning the 
U.S. should basically get over the regulatory and tax problems.
    Can you describe what you meant? In other words, what it 
sounded like to me as, look, this is really big and 
complicated, and we are not going to be able to influence this 
as much as we think we can. So the phrase when a kid bumps 
himself, ``Hey, rub some dirt on it. Get over it and move on.'' 
Is that what you are saying?
    Mr. SUBRAMANIAN. Well, I would put it in the following way. 
The thrust is you got it exactly right, but the issue is 
something that is an important issue because, you know, the 
first best is, for example, on the civil nuclear, is to get a 
much better law. There is no question about that.
    But what if you don't get that law? What if it's not going 
to happen? Then I think there is a dilemma for American 
business.
    Mr. ROSKAM. So the point is do not wait.
    Mr. SUBRAMANIAN. Yes, because others are getting in.
    Mr. ROSKAM. Okay. That is my next question. Who is getting 
in? How are they beating us to this?
    So when this Committee in the last Congress was dealing 
with PNTR for Russia, for example, one of the recurrent themes 
and it was very persuasive and agreed was that lack of action 
on the part of the committee and Congress gives other global 
competitors an advantage in the Russian marketplace.
    And so I think we did the right thing and moved forward on 
it. Who is beating us to the punch? And what are they doing 
differently? If it is so complicated for us to get these deals 
and sort of the nickel and dime stuff of pistachios and 
chickens as you guys were making these analogies, who is 
beating us? And are they less sophisticated agreements?
    What are we missing or how are these being compared?
    Mr. SUBRAMANIAN. That is a great question. So I will just 
give you an example. On the civil nuclear, I think France and 
Russia, whatever inadequacies are there in the India law, make 
it up in some way through kind of government guarantees of some 
sort, and that is the way.
    Mr. ROSKAM. Okay.
    Mr. SUBRAMANIAN. I mean, unfortunately we are done here, 
right?
    Mr. ROSKAM. Right.
    Mr. SUBRAMANIAN. And so it is a problem, but that is one of 
the examples of the way they are heading. In infrastructure, 
for example, I think, you know, the East Asians and Malaysians 
are getting in in a way that U.S. business is not.
    Mr. ROSKAM. Well, what are they doing? What are the 
Malaysians doing, for example? And then wind it up because we 
have got the red light.
    Mr. SUBRAMANIAN. I mean, I think that essentially partly 
they are willing to take greater risks because I think U.S. 
business needs this rule of law comfort, you know, which is 
very good, but I think it loses out in the process.
    Mr. ROSKAM. Okay. Fair enough. Thank you.
    Yield back.
    Chairman NUNES. Thank you.
    Mr. Kind is recognized.
    Mr. KIND. Thank you, Mr. Chairman, and thank you for 
holding this very insightful and helpful hearing, and I want to 
thank the witnesses for your excellent testimony here today.
    This is a crucial relationship, not only geopolitically but 
economically, and it is one that is going to require a lot of 
care and nurturing and attention as we move forward, given some 
of the challenges and the obstacles that we face.
    I had a chance, Mr. Chairman, last October to head for 
India for a few day with Adam Smith, Duncan Hunter, and a 
couple of other members, and it was not just New Delhi. We got 
out in the countryside and the various cities, and it was a 
fascinating place with tremendous potential, but also some huge 
challenges in regards to our economic relationship.
    Ambassador Johnson, I appreciate your update on where we 
are with the agricultural sphere of it and the difficulties 
that we still face trying to get India to open up a little bit 
more in regards to our own egg products.
    Coming from my home State of Wisconsin, dairy obviously is 
a source of concern and, Mr. Chairman, I notice that the 
National Milk Producers and the Dairy Export Council submitted 
a statement for today's hearing. I am not sure if it was 
officially included in the record, but I would ask unanimous 
consent at this time to have it included if it was not.
    Chairman NUNES. Without objection.
    [The information follows: Dairy Industry]
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    Mr. KIND. Thank you.
    But, Mr. Subramanian, something that you mentioned earlier 
when you were going through your litany of three things as far 
as U.S.-India relations, the final one was what not to do, and 
that is GSP. Obviously that is coming up for reauthorization, 
and given the compulsory license decisions that they have made 
right now, which is very unsettling and could detrimentally 
affect Indian foreign investment going into the country, but 
also some of the other hurdles that we have faced, agricultural 
or otherwise, your recommendation is not to use that as a point 
of leverage as far as engaging India.
    But assuming we did, what would the consequences be if they 
lost GSP preference from us, and what would that mean as we 
move forward?
    Mr. SUBRAMANIAN. That is a great question, Mr. Kind. My 
sense is that the loss of GSP in quantitative terms will not be 
huge for India, you know. India basically exports a lot of high 
tech, you know, more advanced goods, and apart from a few 
things here and there, I think the quantitative impact will not 
be great.
    So it does not make for a very strong lever vis-a-vis 
India, but I think you are going to incur the diplomatic costs 
because this will be symbolically seen as a kind of, you know, 
retaliatory action or so. That is why I think on the balance of 
cost and benefits I would be a little hesitant about using 
that.
    And on the compulsory licensing, I do agree with Mr. 
Waldron that, you know, there are a few things in Indian law 
like Section 3(d) of the Indian Patent Act has these 
requirements for a patent, the efficacy requirement or the 
working requirement. I think these are things that are well 
tested in the WTO. I mean, I do not think we need to resort to 
retaliatory threats to get these changes because I think 
because India might be out of line with international practice, 
I think it is good to get an international----
    Mr. KIND [continuing]. You think it would be fair game as 
we come up with reauthorization of GSP to be looking at India 
and other countries involved, too, in regards to whether we 
need to at this point in development extend those preferences 
to India or some others.
    Mr. SUBRAMANIAN. Yes, but that should be a more generic 
discussion, right?
    Mr. KIND. Yes.
    Mr. SUBRAMANIAN. Because, as I have said, why should a 
country that grounds GSP receive GSP, and that is true for many 
countries. But that is a different conversation and a different 
dynamic from using this as a specific----
    Mr. KIND [continuing]. Mr. Waldron, let me go back to the 
compulsory license issue on that, and assuming they are moving 
forward on this, what would be the impact on foreign investment 
or other private companies looking to do business in India if 
they go down this road?
    Mr. WALDRON. Well, I cannot speak to all of the individual 
countries, but I would say that if you are an innovator and you 
are trying to sell innovative products there, you are going to 
find yourself in competition with numerous other products. We 
have had products on the market there that did not have patent 
protection, where we were competing against 60 other 
competitors marking the same thing. So obviously, the 
consequences of that are dire.
    I guess in talking about trade instruments or trade tools, 
I do think that they are somewhat of a blunt instrument to try 
to deal with something that you are really trying to get focus 
on. If you are trying to focus on specific issues, you may not 
get that through the revocation of certain preferences or a WTO 
case, which has all kinds of unintended consequences.
    But you really have to send strong messages on the things 
that you believe are priorities, and I think that that is 
really the starting point, but obviously we do not have a lot 
of time.
    Mr. KIND. Yes. Well, thank you, Mr. Chairman. I certainly 
encourage this Committee with your leadership to continue to 
focus on India and any parliament or congressional exchanges 
that we might have, too, so that we can have the dialogue at 
that level I think would be very helpful and productive as we 
move forward.
    Thank you.
    Chairman NUNES. Thank you, Mr. Kind.
    Mr. Paulsen is recognized for five minutes.
    Mr. PAULSEN. Thank you, Mr. Chairman, also for holding this 
hearing.
    Great testimony today. I really have appreciated kind of 
the reinforcement about what I have heard about these 
disturbing trends within India kind of turning inward and 
erecting more barriers to trade and investment and kind of 
turning back the clock, if you will, and so some real 
challenging opportunities for us moving forward.
    One of Minnesota's largest exports to India is in the area 
of medical technology, and unfortunately, I understand that the 
United States medical manufacturers are facing incredible 
challenges now selling their products in India, including lack 
of transparency in pricing under India's central government 
health care scheme, as well as discriminatory government 
procurement policies.
    And there is no doubt that American medical device 
companies are well positioned to partner with the Indian 
Government toward improving health care access and outcomes and 
awareness and developing much need more stronger health care 
infrastructure, but they are going to have a difficult time 
doing so in the current environment.
    Mr. Waldron, you touched on some of this from the drug 
perspective. Now, can you also maybe comment from the 
perspective of maybe how an American medical device company 
might have difficulty selling their products in India?
    And is it going to be helpful to have a renewed or a 
revised bilateral trade dialogue in this area, addressing this 
industry's concerns?
    Mr. WALDRON. I guess very generally I think it is probably 
one of the more important tools that might be helpful. I guess 
it all depends on the particularities of what is included in 
that. So I would say that if it is amongst the instruments that 
you could move forward on, but I mean, a lot of medical 
instruments also depend on intellectual property and sort of 
the respect for the innovation that is coming in.
    So I think it is sort of like part and parcel of the same 
kind of environment that we are trying to create there. I think 
we are all experiencing it in the same way. Our innovation 
really is not being respected, and it is being pushed back.
    Mr. GARFIELD. The thing that I would add there is 
particularly in the context of GSP coming up for renewal, 
before we get there I think we have an opportunity to engage in 
the kind of bidirectional dialogue so that we can talk 
strategically about differing interests that can help us 
advance and resolve some of the challenges we are facing in the 
market, and so it is something that we would highly endorse.
    Mr. SUBRAMANIAN. Just a thought on this, the PMA policy. So 
India, I mean, it is not a member of the Government Procurement 
Code, and so localization in government contracts is okay, and 
now it is extending it to the private sector. I think there is 
a great opportunity here actually through the government 
procurement route because the government wants to save money in 
its purchases. Fiscal deficits are very high, and you know, 
getting the fiscal under control is a major objective.
    Therefore, I think getting India into the Government 
Procurement Code is actually an easier way of, you know, 
dealing with the PMA policy than it is, in fact, of addressing 
PMS in the private sector. I think that is the kind of thing 
that is worth considering, and that is another reason why I 
think getting India into the WTO, into the Government 
Procurement Code would be worth pursuing.
    Mr. PAULSEN. Let me ask this question, too, because today 
global supply chains are absolutely playing a more increasing 
integral role in trade overall, and there are a lot of 
Minnesota companies that have a strong network of supply 
chains, you know, 3M, General Mills, Cargill, Equal Labs, C.H. 
Robinson, Medtronic. The list goes on and on and on.
    But more and more of these goods and services now used by 
producers and consumers contain inputs and value added 
components from a number of countries rather than just being 
produced in one country alone. How well is India itself 
integrated now into global supply chains and how can it improve 
that integration in the global supply chain? Anybody?
    Mr. GARFIELD. It is incredibly well integrated certainly 
for technology, and that is a part of what is so surprising 
about the direction in which India has been going in the last 
couple years, particularly as it relates to the PMA and some of 
the regulation that we talked about earlier, including the 
testing or certification or taxes.
    They have benefitted. India has benefitted significantly, 
given the global integrated supply chains that we see today, 
and given the policies they put in place though, they stand to 
lose their role as a part of that process, and so our hope is 
that through these types of conversation, they are able to see 
as well as we are how we mutually benefit from this 
relationship.
    Mr. PAULSEN. Anyone else?
    [No response.]
    Mr. PAULSEN. Thank you, Mr. Chairman. I appreciate it.
    Chairman NUNES. Thank you, Mr. Paulsen.
    I would like to thank the witnesses for their testimony and 
for the responses to our questions. I think you have given us 
much to think about concerning the opportunities and the 
challenges presented by the U.S.-India bilateral relationship.
    Our record is open until March 27th, 2013, and I urge 
interested parties to submit statements to inform the 
committee's consideration of the issues discussed today.
    With that this hearing is now adjourned.
    [Whereupon, at 11:42 a.m., the subcommittee was adjourned.]
    [Submissions for the Record follows:]

                                 

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