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India is on the brink of finalising a free trade agreement with the European Union (EU).
India became a “strategic partner” with the EU in 2004, and three years later, officials started taking the first steps towards a bilateral free trade agreement. Seven years and 11 rounds later, they’re very close to a deal. International negotiators have hinted at finalising the agreement this summer.
This accord could help India’s economy enormously, as it would lead to customers in the EU purchasing more Indian goods and services. And it will establish India as a global heavyweight capable of competing at the highest level globally for decades to come.
“It is time for India’s leaders to decide whether they want India to have an innovation economy or an imitation economy.”
Yet even as the deal gets close, one area remains hotly contested: protection for intellectual property (IP). There is a controversy over “data exclusivity” for pharmaceuticals.
Data exclusivity is the period of time during which an innovative drug manufacturer is allowed to keep its research data private. EU negotiators are fighting for data protection for their innovator firms partly because the normal protection given by patents has often been denied.
India’s patent office and courts have seemingly bowed to pressure from powerful domestic producers to deny patent protection on several deserving oncology products such as Novartis’ Glivec and Roche’s Tarceva, and HIV products such as Gilead’s Viread.
If copy products are encouraged by arbitrary patent decisions, then innovative research firms will think twice, and may ultimately be unwilling or unable to continue R&D of new medicines in India.
India’s bureaucrats and politicians should overcome short-term thinking and improve India’s IP systems, from ensuring deserving products receive patents to making sure trademarks are enforced.
Roughly 450 million Indians now live below the poverty line. FDI has dropped precipitously over the last fiscal from over Rs9,000 crore in April 2010 to about Rs4,500 crore in March 2011. And experts predict that the national inflation rate could hit as high as 8.2% by June.
India needs foreign investment — a key ingredient for full economy recovery. Establishing strong IP protections will indicate India supports innovation. Foreign investors will be more comfortable pouring capital into upstart firms.
Protecting IP is also good for domestic medical research companies, which will be encouraged to innovate if they have strong legal assurances that new medicines won’t immediately be copied by opportunistic competitors.
It is time for India’s leaders to decide whether they want India to have an innovation economy or an imitation economy. Strong IP will breed a new generation of local biotech companies that create original medicines. Indian policymakers can set the stage for a robust domestic pharmaceutical industry that generates cutting-edge drugs.
Stronger IP will enhance private actions against counterfeiters of Indian products. Many of them are illegal Chinese operators, who are rarely prosecuted by a rather ponderous Indian legal system and many counterfeit drug cases take years and most never get anywhere.
Some political leaders apparently don’t see the value in IP protection. Some have explicitly said they would not agree to anything that improves domestic Indian laws and World Trade Organisation standards from 20 years ago. One negotiator went so far as to say his hands were tied, as any new IP protections would be in breach of the existing Indian law — refusing to recognise that a change in existing Indian law is exactly what we need.
These attitudes are unhelpful. What some Indian leaders don’t seem to appreciate is that without innovation and investment, economy will suffer. Innovation and investment are dependent on fair and regularly enforced IP protections, especially patents. India needs to reconsider its position on IP, embrace the world market and push this trade deal.
Roger Bate is the Legatum Fellow in Global Prosperity at AEI.
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