Withdraw India’s GSP Preference If It Continues to Impose Localization Barriers to Trade on Foreign Enterprises

January 23, 2013

Developed nations, including the United States, can take measures to help other developing nations such as Brazil and India resist the tempting lure of adopting China-like mercantilist policies by stepping up action against Beijing. For example, pressing China to stop manipulating its currency for competitive advantage would make it easier for India’s manufacturers to succeed. Without rolling back Chinese innovation mercantilism, the temptations for nations such as India and Brazil to go down the innovation mercantilist path may prove to be irresistible.

Nations and multinational corporations alike are sensitive to India’s desire to boost its manufacturing sector, and are willing to collaborate in helping India achieve this goal (to wit the United States’ GSP program), but policies that distort international trade and that attempt to force (rather than attract) behavior by globally mobile enterprises are not the right path forward and are likely to only end up producing the opposite effect.