China, India, Beyond: Global Exporters Aren’t Good Importers When They Protect Domestic Markets

Here at Spend Matters, we've been long aware of the onerous rules governing manufacturing sales in China by the US and European companies. In order to access the local market, you essentially need to form a joint venture with a local Chinese company with either direct or indirect government interests that will then steal your IP and ultimately compete against you in the coming decade. Why we allow this behavior given our consumption of Chinese-made products in the US without fairer trade rules that go both ways, I'll never fully understand. But China is not alone in protecting its domestic market. We can -- and should -- add India to the list as well, albeit from a different angle given the greater protections afforded IP in the world's largest democracy.

According to a recent Times of India article, India's own commerce department has come is examining how an internal proposal to "mandate local sourcing of products, especially from small scale units, by foreign retailers setting up stores in India" is "is not compatible with India's commitment" to the TWO. Specifically, "the department had been asked to examine the proposal in the wake of concerns expressed by the ministries of telecom and information technology and the micro, small and medium enterprises, who fear that Chinese imports would surge once 51% foreign direct investment is permitted in multi-brand retail."

While informed outsiders might dismiss such requirements as inconsequential in comparison to often onerous offset requirements within the A&D markets that mandate local tier suppliers, the equivalent requirement in the US in the services business would be to require that all outsourced contracts serving US customers require a minimum onshore domestic labor component. And we know how such a move would impact India's booming BPO business in the US. It's Spend Matters' view that countries like China and India that have blossomed economically due to trade liberalization should do far more to break down domestic market access barriers on both a philosophical and pragmatic level. But as a start, we'll take enforcement of WTO rules. After all, at least India, unlike China, usually plays by the letter of the regulation rather than finding a continuous inventive scheme of ways to skirt free trade policy.

Jason Busch