Impact of the US-India trade war on the health sector: What lies ahead

As the US-China trade war intensifies, the US-India deadlock on medical devices could see some resolution.

Amir Ullah Khan September 23, 2019 17:00:56 IST
Impact of the US-India trade war on the health sector: What lies ahead
  • US manufacturers exported medical devices worth $1.6 billion to India in 2018

  • Imposing price caps affected India's economy as it impacted market access for the global research-based medical device industry that supports nearly 75% of India's medical technology demand

  • As the US-China trade war intensifies, the US-India deadlock on medical devices could see some resolution

Prime Minister Narendra Modi’s visit to the United States comes at a crucial stage with regards to the trade relationship between the two countries. Even as Modi and US President Donald Trump posed for cameras in France, there were hectic negotiations on to end the trade stalemate. Now, as the two are set the sit on the negotiation table again, speculations are rife that they will announce a trade package that will ease the entry of American agricultural goods, information and communications technology (ICT) products and medical devices into the Indian markets.

The Trump administration, worried as it is on the Chinese front, is now working hard towards announcing a new deal with India. The Modi government also seems to be ready for some major concessions, particularly in the agriculture sector that it has protected for so long. The US wants to capitalize on India’s willingness to make it easier for America to export to India its agricultural produce, medical devices and ICT products by lowering tariffs. These three segments have been constant sore points that continued to disrupt the trade relationship between India and the US for quite some time.

Impact of the USIndia trade war on the health sector What lies ahead

Prime Minister Narendra Modi and US president Donald Trump at the 'Howdy, Modi' rally. PTI

Trade tensions between the two countries peaked in May this year when the Trump administration revoked the trade benefits given to India under the ‘Generalised System of Preferences’ programme. The move directly hit Indian goods exports worth $6 billion that were being shipped under this scheme. India in-turn retaliated by increasing tariffs on 28 US products in June. The US government has now further justified its withdrawal of GSP benefits alleging that the Indian government actions like price controls that discriminate against the import of high-technology products and force US producers to sell in India at a loss.

India has been criticized by many for missing out on garnering the spoils of a raging US-China trade war. As the manufacturing sector seeks to leave behind some draconian Chinese regulation, there was some expectation locally that this investment would come to India. But this did not happen, given a stand-off due to India’s tariff levels on the back of a very challenging environment – labour laws, bureaucracy, infrastructure, etc. The other reason India is missing out to Vietnam and Bangladesh is its weakness by way of infrastructure that can nurture manufacturing.

In 2017, India had imposed a price ceiling on coronary stents and knee implants that negatively affected US companies. US manufacturers exported medical devices worth $1.6 billion to India in 2018. Imposing price caps affected India’s economy as it impacted market access for the global research-based medical device industry that supports nearly 75% of India’s medical technology demand. The price caps on medical devices had become a sore point between the two nations but efforts are being made by both the US Government and the Government of India to address market access concerns of US research-based medical device companies in India.

The US medical device manufacturers have made proposals to the Modi government giving alternatives to address India’s concerns about access and affordability and allowing them to bring innovative products into the Indian market. The Indian government must allow global research-based medical device companies to develop India as a manufacturing hub, for both domestic demand and international markets. This will not only provide a platform for investments but also innovation in the healthcare sector. As the US-China trade war intensifies, the US-India deadlock on medical devices could see some resolution. The tricky part will be to balance Prime Minister Modi’s Make in India dream with President Trump’s demands to further open-up India’s market.

 

Dr. Amir Ullah Khan is a Development Economist with a primary focus on health. Currently, he’s a professor at the MCRHRDI, Government of Telangana and has previously served as a Senior Policy Advisor to Bill and Melinda Gates Foundation.

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