Implications of Trade Facilitation and Trade Enforcement Act 2015 on India

In February 2016, the President of the United States Barak Obama had signed a Trade Facilitation and Trade Enforcement Act of 2015. The main focus of the law is to enhance enforcement of IPR over the trading partners of U.S. and introduce important measures pertaining to intellectual property rights (IPR) issues.

What is USTR? How it views India?

United States Trade Representative (USTR) is an agency that is part of the executive office of the President of the US. It performs two main tasks. One is to negotiate trade agreements and the other is to oversee enforcement of U.S. trade policy, including IP policy.

USTR creates an annual Special 301 list since 1989. USTR places those countries that have either national laws or regulations that detrimentally affect U.S. trade or the rights of IP holders on this list. It is the belief of the US that these countries are providing inadequate “IPR protection, enforcement, or market access for persons relying on intellectual property.” USTR places these countries in three categories. The most egregious violators are featured as Priority Foreign Countries (PFC), serious offenders are featured on the Priority Watch List (PWL), and less serious offenders in the Watch List (WL). The Special 301 list has continuously placed India most often as a PWL country. A country falling under PFC or PWL category is subject to USTR scrutiny. They are subjected to investigations and may face sanctions under the procedures under the Trade Act, 1974.

What are the implications for India?

• The US already scrutinizes the developments of IP law in its trading partners. This new law will further impact India’s ability to develop an IP policy to cater to its own developmental needs.
• The new law will increase the level of pressure on India to comply with the USTR’s requirement, as it has featured on the PWL for more than a year.
• Till now, USTR had been developing action plans with benchmarks in consultation with India/listed country. But under the new law the USTR need not consult India/listed country while developing action plans with benchmarks. “Benchmarks” are legislative or other institutional action that needs to be established to facilitate US trade by a sovereign country like India. This provision will make USTR to ignore developmental or public health needs of India/trading partner into account.
• It has been provided that instituting benchmarked changes as the only option available to the trading partner to come out of the Special 301 list. If a country refuses to comply with the benchmarks within a year, then it is liable to be elevated to the PFC status and will be subjected to further unilateral investigations followed by punitive trade sanctions such as denial of preferential duty for exports, on which the developing countries like India mainly depend upon to export goods to the US.
• The act provides for a new position within the office of the USTR titled ‘Chief Innovation and Intellectual Property Negotiator’ (IP negotiator). The IP negotiator’s role is to enforce U.S. priorities in IP more vigorously on behalf of U.S. innovation and IP interests and to put the pressure towards this cause.
• The act provides for the creation of a Trade Enforcement Trust Fund for taking legal actions against foreign countries to ensure “fair and equitable market access for U.S. persons.”

What is the legality of unilateral sanctions of the US?

Under World Trade Organisation jurisprudence, legality of the unilateral actions by the US over other sovereign countries remains questionable. So, the U.S. tends to avoid imposing unilateral sanctions. But to cater to its needs, the US tries to bring about a change in a country’s domestic IP law by adopting mechanisms like the Special 301 list.

What can be done by India?

Over the years, India tried its level best to accommodate US concerns by becoming more transparent and engaged. Also, India fully complies with its TRIPS obligations. In this scenario, critics feel that India’s accommodation of US interests particularly on the Pharma issues such as compulsory licensing is unwarranted. Since India has complied with WTO’s TRIPS agreement, it is not justifiable for the US to scrutiny India and subject it to investigations.

But for US, India’s compliance with TRIPS is immaterial. According to it, if it feels that the US trade is detrimentally affected by any country’s IP laws, it has right to scrutinize such countries.

For India, the way forward is to develop a coalition of like-minded countries to monitor and tackle such demands for legislative actions from countries like US that result in WTO-plus standards.