NDTV, India

The Future of Indo-US Trade

By Shivnath Thukral

3 November 2008

Over the last few days we have been talking about various issues, be it business, be it IT outsourcing or the way the American campaign is looking at India an the rising power of Indian voters. But as we go into the period post the election verdict the big questions will be who takes the bold steps on the multilateral trade talks, the WTO aspect, and the Form subsidy aspect.

Our focus today is the future of Indo-US trade when it comes to WTO and the trade treaties.

Joining us now from the US in Washington DC is Susan Esserman, a former Deputy USTR in the Clinton administration. She is a well-known attorney and a friend of India, just like Ron Somers. Back home in India we have G K Pillai, Commerce Secretary, to give his perspective on the issue.
The issues that we are going to touch upon are what is the future of the WTO talks stalemate? Can the controversial farm subsidy issue be resolved and who is better for trade relations?

NDTV: In your assessment, it seems like it’s quite a deadlock. We haven’t really moved much in terms of trade talks. That is all that will confront the new president.

Susan Esserman: I believe there’ll be a great opportunity to move forward under WTO in the future. The WTO round, the conclusion of the WTO round will be an important trade priority, no matter who is elected president. But I think it is important to understand that the first focus immediately with the new administration in place, no matter who is elected, Obama or McCain, will be economic recovery and financial stability and the WTO round will be looked at. But I do believe, no matter what has happened in the past, that there would be an opportunity for India and the US to work together in the future. India is a very important player in the international arena and I think they can play a leader ship role.

NDTV: In India as well, starting early next year, there might be a new administration. In your experience, the way the politics of the both the countries have played out, do you really think we are very close to a resolution or would we have to begin all over again because there would be a new president in the White house and there could be a new Prime Minister back home?

Susan Esserman: I believe that we can build on the work that is done before, but of course, any new administration will make a fresh assessment and look at trade not only in the WTO context but also in a broader context as I mentioned before, like the economic recovery issues. Yes, we will build on the past, we’ll learn from the past and but the new administration will come in and take soundings, work with all the different key international players, of which India is such a leader, and try to move forward.

NDTV: We have seen beyond the stalemates, the deadlocks and the roadblocks. There have been movements forward. There have been positives at the far end of the Bush term, when it comes to bilateral talks, investments, and businesses. You could shed some light on what groundwork has been done with respect to the benefits of the bilateral trade talks that we have had in the past few months?
Susan Esserman: There has been progress on the bilateral side. First the Bush administration, building on work done by the Clinton administration, made relations with India a very important priority and I think this has business ramifications. Second, the Bush administration, working with the Indian government has decided to move ahead to launch bilateral investment treaty negotiations. I think it is a very positive step for both the nations. It comes at a time when both countries are investing in the other country and it is an important foundational trade step that has mutual benefit. An investment really provides great benefits to both sides because foreign investment provides legal protection against arbitrary and discriminatory government actions. So this is a positive step. I hope these negotiations move forward, both on the Indian and the US side and this is very important to our business community.

NDTV: As we look forward to hearing from the Indian side as well, in your experience what would be the major roadblocks right now, when it comes to the Indian businesses wanting to enter the US? In your recession where are the roadblocks today, where you have to intervene, whether there are clauses in terms of job loss aspect of it or the kinds of recessionary trends that we are going to witness in the US?
Susan Esserman: First of all, there has been great progress in terms of investment and trade, but there remain certain issues and trade is not as robust as it could be. There are a variety of issues. In some cases there are high tariffs. There is a great deal of concern about aggressive, arbitrary and inconsistent tax enforcement. Of course there are concerns about labour restrictions. These are some of the critical issues that the companies face.
But it is important to keep in mind the broader context of optimism by the business communities about the prospects of business in India.
NDTV: Let’s come to the Doha deadlock, since you have worked in the area extensively. I read in an article in the American Press that said that Kamal Nath assumed the mantle of taking forward the developing economies’ agenda. Talking about the Doha deadlock whether it is the sharp differences in the safeguards limits, the differences of the approach, of what you see the new president’s, could be on the farm subsidy because there would be a huge lobby in the US as well and the entire assumption that India has a protectionist approach. On all those three counts, why do think that all of a sudden India and the US are, especially in trade and the WTO, on such adverse positions?
Susan Esserman: It is always difficult to conclude the WTO trade negotiations since there are so many issues at stake. I would just say, most broadly, I believe there has to be broad benefits on all parties’ side in order for there to be a conclusion for an agreement. We have to be sensitive to India’s sensitivity on the farm issues and I think India too needs to be sensitive to some of our constituent needs. But having said that the US government, whoever is in power, will view the WTO negotiations as very important. I think if the government sees there are significant, sufficient concessions made by other trading partners then they will make meaningful concessions and get a conclusion of the round.
I feel far too much time is spent pointing fingers at one party or the other. That would not help any party to move forward. I think you need to get down, look at the details, look at the policy and work in a sphere of compromise, then perhaps there could be a conclusion to the agreement. It is a very difficult thing to do, as there are so many parties now involved. But I do think that India plays a very big role and should play a big role. Today they are an international powerbroker and as an international powerbroker they have a very big responsibility in playing a leadership role and bringing the stocks to a conclusion.
NDTV: We have Mr G K Pillai, Commerce Secretary of India with us to give us the Indian perspective; as to how strong is India’s position on the entire negotiating table when it comes to WTO. Mr Pillai, in your assessment, as we head into the new presidency in the United States, do we have to go back to base one, from where we started, or will the new president have an action plan to engage with India right now?
G K Pillai: I don’t think we’ll ever go back to base one. I think we already have about 70 per cent of the work on the agricultural and NAMA negotiation. It should be possible for us to work forward. In Geneva, the negotiators are at work trying to narrow the differences. I expect the new President would have quite a lot of a agreed modalities and then would take off from there.
NDTV: We had talked about the issues of the safeguard clauses. Why is that suddenly India and the US, the so-called great economic allies, are in such opposite directions on so crucial issues?
G K Pillai: I think, primarily it’s because in one sense the US looks upon itself as a major agricultural exporter, whereas here in India we have quite a large number of small and subsistence farmers. Their protection and their concerns have to be met for us to get a development the deal.
NDTV: Ambassador Esserman let me ask you to identify the issues of the future talks or the kind of priority items that the new president will have to look at when it comes to India. In your assessment, how should the new president approach this entire thing?
Susan Esserman: The new administration will build on the already very strong political strategic partnership that the Bush administration has championed and which the Clinton administration initiated. So we start on a very strong political base and it is really heart warming to see the extent of the broad bipartisan support behind this new relationship with India. I think it would be very productive if the new government built on this political partnership by seeking to strengthen the economic partnership. There are various steps that the government can take. First is moving forward rapidly to proceed with the bilateral investment negotiations that the two countries have just launched only a month ago. Our business community sees this as a very important step. First of all, it’s foundational, it will build confidence in the economy and will help to deal with arbitrary and discriminatory actions that investors might face. That is the first and foundational step. Second, our countries share so much in terms of values and now so much common interest in the other’s economy. I think we need to look hard and how the governments can help to facilitate, in the broadest possible way, investment in trade that is going on between the two countries.
NDTV: Mr Pillai, how would you put forward India’s cause? We have seen the entire rupee-dollar factor helping our exporters. But in terms of policies and roadblocks, which are the key areas you would want to be addressed by the US administration that would help boost India’s potential?
G K Pillai: I think between India and the United states, currently if you look and last year’s figures, there is clearly a trade balance of around $20-$21 billion exports and imports. For the US there was a surge in exports to India, by almost 70 per cent during the year 2007-08. I think where the US businessmen are lacking is that they are not willing to take the risk and come into the Indian market and invest. We have seen so many businessmen from Europe, Japan, Korea, to name a few, who have come to India and made lots of money. I think, the US businessmen must not be shy and come forward and invest in India.
NDTV: Why do you think there is a holding back on the part of the investments that you’d say are not coming in hoards like the other countries?
G K Pillai: One reason, I think, is that the US businessmen are very unfamiliar with the Indian business environment. Now that the Indo-US bilateral investment promotion treaty is also being negotiated, and we hope that it will be conclude in the next few months, I’m hopeful that they will get the confidence to invest. We have found that those foreign countries that have come to India and invested have all done well, including the American companies.
NDTV: Ambassador Esserman, you too have pointed out the unfamiliarity angle, many a time in the past. In your assessment, what kind of initiatives would you want to see, both sides, especially the new administration, to take for these unfamiliarity issues to be resolved?
Susan Esserman: I think we must try build on the good things that have already been started. I think giving investors greater confidence in the rule of law and the hope that the decisions that the government takes will be consistent and will remain, would be very, very helpful. I feel that it would be very beneficial if the two governments took a look at the tax policies and worked together to give investors greater confidence in the tax policies that the governments are adopting. This would really help to stimulate greater American investment in the Indian economy.
NDTV: Do you see expect some surprise positive decisions or any major announcements coming through from the American side immediately after, or in the back drop of the November 15, G-20 meeting. Or do you feel that nothing can really happen before January in the US?
Susan Esserman: As far as trade is concerned, I don’t think there will be any immediate announcement. Of course, the big attention immediately will be on how to bring an economic recovery to the United States and how to stabilise the financial situation, both in United States and abroad. I think that will be the critical focus, as I said at the outside and trade, I feel, will be a part of it. I do not expect there to be a big announcement on trade between now and the start of the new administration. That would be highly unlikely. The trade issue will take time to resolve. We must do it in the right way, in a way that brings the support of the key countries in the WTO and I think that is not going to happen overnight.
NDTV: Now let me conclude by asking Mr Pillai how do you look at the next six months, because we are going to live in politically uncertain environment when it comes to India. US will have its clarity by next week. What do you see emerging between the two countries in the talking table?
G K Pillai: As far as bilateral trade is concerned, we have the institutional framework already there, we have the trade policy forum, we have the private sector advisory group, we have the US-India CEO forum, we have the commercial dialogue going on. I think these would enable industries on both sides to understand each other better and to move forward. So I’m quite optimistic on the trade front. There are a lot of programs under way and I’m sure that the trade between India and the United States would possibly double in the next three years.
NDTV: All right double. It’s a very optimistic note that we end on.