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India’s Protectionist Policies Harm Virginia's Economy

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The next few years will be decisive for Virginia’s economy. According to a new report, Old Dominion’s job growth is expected to drop below the national average at least through 2014.

Virginia’s innovators, entrepreneurs and manufacturers are a powerful force at work to keep our state strong. To thrive, it is critical they have opportunity to compete in the global economy. Unfortunately, recent protectionist actions by a key Virginia trading partner and US ally — the government of India — threaten our state’s growing export economy and the thousands of jobs it supports.

Federal officials need to confront India’s discriminatory trade practices quickly and directly. Restoring a fair relationship between our two countries will preserve American jobs, help both our economies grow and put this long time strategic partnership on sounder footing.

Between 2009 and 2012, Virginia’s exports have grown steadily from just over $15 billion to $18.2 billion. India, one of the world’s fastest growing economies, has emerged as a critical growth market for American goods. In 2011 alone, our state’s exports to India amounted to more than $284 million, an increase of 17 percent from the year before.

But in recent months, Indian officials have jeopardized this mutually beneficial trade relationship by discriminating against a wide range of goods invented, developed and manufactured in the United States and elsewhere outside India in a misguided attempt to bolster its own domestic producers.

Among the industries singled out for special protection is my industry bioscience, as well as energy and information technology — three of Virginia’s most promising sectors.

According to a 2012 Battelle study, from 2007 to 2010 Virginia bioscience establishments grew at a rate that outpaced the in-state private sector by a better than five-to-one margin. During that same period, as Virginia’s private sector struggled with negative employment growth of -5.1 percent, our state’s bioscience sector posted 2.6 percent growth. The average annual wage I the bioscience sector in Virginia was nearly twice that in Virginia’s private sector. India’s practices threaten the success of this thriving industry.

In one example of unfair trade manipulation, the Indian government mandated that as much as 100 percent of all telecom and electronic equipment be sourced domestically. These “forced localization” requirements violate global trade rules and disadvantage countless Virginia businesses, particularly the 5,000 Virginia manufacturers that account for 230,000 jobs and 80 percent of state exports.

Presently, over 90,000 state jobs depend on shipments overseas. And 85 percent of Virginia exporters are small businesses, which add jobs at a faster rate than more mature businesses. Those employed by companies that export earn about 18 percent more than the national average wage. If exporters are forced to downsize, Virginia’s median family income may no longer be the country’s highest.

But India’s government is doing more than just keeping out U.S. goods — it is also making it easier for Indian companies to steal intellectual property (IP) from foreign innovators. This should be of great concern to anyone interested in innovation, research and development driving economic growth and advances in human health. On a recent index comparing IP environments across countries, India ranked last on nearly every indicator.

In April, India’s Supreme Court denied a patent to a pharmaceutical firm for one of the firm’s most advanced cancer treatments, though it had been patented in over 40 other countries, including the US, China and Russia. India’s disregard for even basic IP protections undermines the incentives for all firms to invest in innovation. Over time, this will cost not only American industries such as bioscience, but Indian consumers as well.

So while India’s protectionism may benefit a few domestic firms in the short term, it will ultimately harm Indian citizens by raising prices and restricting consumer choice. By disregarding established trade norms, India discourages foreign investment and disrupts the supply chains on which its domestic businesses depend.

Putting an end to the Indian government’s destructive policies will require direct engagement by the federal government. Our leaders should make clear to Indian policymakers that, for the sake of both countries, India must respect its obligations as a U.S. trading partner.

Ending India’s unfair trade policies will bolster Virginia growth, innovation and job creation. When given a level playing field, state businesses have what it takes to compete and prosper, and to create, invest, develop and share the fruits of their efforts in the global economy.

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