India to Western Tech Firms: If You Want To Sell It Here, Build It Here

NEW DELHI—India has proposed sweeping curbs on the import of technology products ranging from laptops to Wi-Fi devices to computer-network equipment.

The proposed regulations, which were reviewed by The Wall Street Journal, would create an expansive "Buy India" mandate requiring a large percentage of the high-tech goods sold in the country to be manufactured locally.

If implemented, the rules could wreak havoc on the business plans of a wide range of U.S. and other foreign firms, including hardware-makers Cisco Systems Inc. CSCO and Dell DELL Inc.; services companies such as International Business Machines IBM Corp.; and telecom-gear suppliers such as Nokia Siemens Networks B.V. and Telefon AB L.M. Ericsson.

To comply with the rules, foreign companies would have to set up factories in India quickly—possibly as soon as April—or significantly expand their existing manufacturing capacity in a country where the infrastructure is poor and building plants can take years because of red tape and other hassles.

Or they could face the loss of current business—collectively the industries affected generate billions of dollars in sales here annually—and the chance to tap into what is expected to be a booming technology market in years to come. Spending in India's technology and electronics market is expected to reach about $400 billion by 2020, up from $45 billion in 2009.

The rules are in draft form, and their sweep may reflect some brinkmanship on the part of the Indian government, which wants foreign firms to increase manufacturing in India. The government could still choose to delay or scale back its plan.

Still, U.S. lobbyists and industry are strenuously opposing the proposals, which have quickly become the most serious point of tension in commercial relations between the two countries. The proposals also aren't the U.S. government's only concern.

O.K. I grant you that the Indian proposal was no more “protectionist” than China’s incentives to foreign companies, ON THE SURFACE.

However,

on the positive side, for China, they did more in terms of infrastructive than India has managed to do;

but, on the negative side, China not only sought foreign firms to manufacture in China if they wanted product placement in China, they quite often (a) REQUIRED, MANDATED those deals to include “partnerships” with local Chinese companies, very frequently companies part-owned by a unit of the Chinese government, and (b) many of them resulted in technology transfers to the Chinese partner and many of them, (c) once they had enough technology and education from the foreign partner went into competition with the foreign partner;

those measures by China - (a), (b) and (c) were long-term “protectionist” measures.

GM itself might be chuckling at it’s success today in China but it will one day rue the day it ever believed it would last.

China’s “capitalism” is fascistic state-Capitalism and it has no intention of foreign firms success lasting longer than their usefulness to helping build their Chinese competitors.

India can adopt a different model of attractiing foreign manufacturers and do so without the long term negatives in the Chinese method, but first it needs to do as well as China in what any manufacturers need - good infrastructure in energy and transportation.

” they did more in terms of infrastructive than India has managed to do;”

Bureaucratic tardiness aside, China has FAR more financial resources then India, #1 for having been the early bird on economic reforms and #2 because of political and economic patronage and support for the US. That doesn’t mean India hasn’t doesn’t any improvement in infrastructure.

India infrastructure development has actually seen some phenomenal growth. It only pales when compared to China. A good way to measure India’s infrastructure growth is to compare it to Pakistan, both countries started at same point. While China has the ability to throw enormous amounts of money at a problem. India never had that luxury, India is more judicious, resourceful and creative in solving basic infrastructure problems. While growth in China is entirely government driven activity, India is far more entrepreneurial.

It is true that many part of India still lack basic hygiene, water supply, electricity. etc, how ever there are also parts of India that have faster broadband then even the US. While the condition of the roads are still bad, the growth in civil aviation is likely to the among the biggest in the world.

As for your (a) (b) and (c), every single country in the world has tried to extract and benefit from the scientific and technological knowledge and experience gained by other countries....on way or another. Even the US has done that at the beginning of last century. Steam engines and rocket technology weren’t invented in the US. You are simply trying to broaden the definition of “protectionism”.

What you forget about GM is that, its a non-state entity. If it is making profits, what does it care about where it is located geographically, whether US, China or India? Anyways most of GM’s profits comes from Asia, it might as well become a Chinese company. And competition will always be there from somewhere. A lot of American companies will eventually either end up becoming practically Chinese companies or will be bought out by Chinese companies. It would actually be much easier for the Chinese to buy off an entire US company lock stock and barrel then to slowly nibble away at bits and pieces of US technology.

As for the long “term negatives of China”, I haven’t quite see anything of that sort yet. Although India might want to avoid the long term negatives of US and Europe, we ARE seeing that right now. Yes India does need good infrastructure. And some tactful measure by the government such as the one mention in the article above might not be such a bad idea. One just needs to study its effects more closely and weight the pros and cons.

“As for your (a) (b) and (c), every single country in the world has tried to extract and benefit from the scientific and technological knowledge and experience gained by other countries....on way or another. Even the US has done that at the beginning of last century. Steam engines and rocket technology weren’t invented in the US.”

There are cummunist-planned-economy and Asian-mercantilist-economy models behind, and at work with (a), (b) and (c) in China that were not part of how and why foreign technology spread and technology transfers occurred in the early U.S. industrial build-up. Most U.S. “protectionism” depended on the tarriff but foreign investment here was not otherwise discouraged nor directed by government nor managed by politically directed government run enterprises, industrial or financial.

“What you forget about GM is that, its a non-state entity. If it is making profits, what does it care about where it is located geographically, whether US, China or India?”

What you forget is the GM subsidary in China is not a totally “private” free enterprise entity. It was required to bring certain politically connected (party members) onto the board of the subsidary and it was required to establish a partnership between that subsidary and a wholly state-owned fledgling vehicle manufacturer and it was required to provide certain technolgy transfers to that state-owned company, including technology involved in production. That partner is still smaller than but growing faster than GM in China and it will one day leave the partnership with GM and eat GM alive in China. That is not by any free-enterprise-capitalist natural process; it is by state design.

That is the “long term negative” for western firms doing business today in China - they are being suckered.

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