Speeches and Remarks 2006
Briefing for Indian Media by Ambassador Karan Bhatia
Deputy U.S. Trade Representative
May 30, 2006
New Delhi, India
Ambassador Bhatia: Thank you, and thanks, everybody, for coming. We are here as part of a pretty large U.S. inter-agency delegation for the U.S.-India Trade Policy Forum. Let me provide just a little bit of background about the context in which this set of meetings is occurring, and what we're talking about, and then what we hope to obtain out of it, and then open it up for questions. The U.S.-India Trade Policy Forum was launched, was conceived of, during Prime Minister Singh's visit to Washington last year. It was launched in November of last year, when U.S. Trade Representative Portman visited New Delhi, and he and Minister Nath co-chair the forum. It's chaired by the U.S. Trade Representative and the Minister of Commerce. After being launched in November, it has been extremely active since then, with - frankly, a level of interaction between the Indian side and the U.S. side that's probably, in my experience, unrivalled, in terms of bilateral communications between two trading partners. Between that point in November and now we are in June - effectively June, end of May - we have had two ministerial-level meetings, one in November and then the other one just preceding the President's visit here. The Trade Policy Forum was the conduit for a fair amount of the economic activity, the economic dialogue that happened leading up to, and in the President's visit to India. We have also had - this is our second meeting at the Deputy level, so my, with me and Commerce Secretary Menon co-chairing. The broad context for the dialogue is that the President and the Prime Minister have clearly committed our two countries to the vision of a vigorous, strong economic partnership. U.S.-Indian economic relations, while growing, continue to have substantial potential. We have in the neighborhood of, getting towards $30 billion in bilateral trade. That's a number that, I think, both Presidents feel could be substantially greater - and indeed they have endorsed in the President's most recent visit here - the vision of a doubling of bilateral trade in three years. If that's going to happen, there has to be a lot of activity, and there has to be a lot of activity by our private sectors, which are, I think, increasingly engaged with each other, both on the trade and on the investment front. But it also depends on governments interacting in a way that helps facilitate those flows, and that means reducing barriers to trade, be they tariffs or non-tariff barriers, and those are obligations that frankly fall on both the United States and on India. In addition to removing barriers, doing things that actively can stimulate trade and investment where it would otherwise not occur. I like to think of these as sort of win-win partnerships that we are trying to structure in a variety of areas. The nature of our discussions today - we've had a preliminary opening plenary session, co-chaired by myself and Commerce Secretary Menon. Our focus groups are now meeting, and these are chaired by senior representatives of both the Indian and U.S. governments. There are five focus group areas: agriculture, agricultural trade; tariff and non-tariff barriers in industrial products or goods; third, services, trade and services; fourth, investment, things to stimulate investment, both in the United States and in India; and finally, fifth, what we call innovation and creativity, which deals with, among other things, intellectual property rights regimes in both the United States and India. The groups will be meeting to talk this afternoon about areas and progress, things that have been made, taking stock of developments, but also figuring out action plans moving forward. The goal that we are working towards most immediately is the visit of Minister Nath to the United States in June, which we see as being an important visit, one that is going to be, I think, looked at very closely by members of U.S. industry, U.S. Congress, and one that we at the United States Trade Representative's office are very much looking towards. That will include a meeting between Minister Nath, a Trade Policy Forum meeting between Minister Nath and Susan Schwab, who is our soon-to-be-confirmed U.S. Trade Representative, replacing Ambassador Portman. I can't comment on the meetings thus far, because we're still in the middle of them, but I feel fairly optimistic that we'll continue the strong progress that we have made, working through issues. I have to say that the, when you think back to the nature of the trade relationship that the United States and India had, even five years ago - let alone ten, or fifteen - the type of interaction we're having today is just, it's a different ball game. The notion that we have a twenty-five person delegation of senior USG officials coming out to India - during a period where it's a little hot here - to engage in meaningful discussions across the table with twenty-five senior-level representatives of the Indian government, I think, puts in perspective how this is a new relationship. There is a level of trust that exists, that I think didn't exist, perhaps, in years past, and there is a spirit of mutual cooperation that pervades all of this. So there are areas where we have different interests. There is no question. That's the nature of trade negotiations. But when you look at it in each area, our conversations are not trying to figure out how to butt heads, but they are figuring out how to try and work through problems in ways that will be mutually satisfactory. And the final thing I would say is - it truly is an equal partnership here. It is the Indian Government trying to address concerns that Indian industry and Indian investors have in the United States, and it is the United States trying to address those similar concerns on the Indian side. And that makes, I think, for a very healthy relationship. So we have, we are in the midst of that set of discussions, we are hopeful that we will have some good progress coming out of today's meetings, including action plans for the several weeks ahead leading up to Minister Nath's visit. With that, I will stop, and turn to you all for any questions that you've got.
Q: Sushma Ramachandran, The Hindu newspaper. There were some comments you made yesterday after meeting Mr. Kamal Nath, on WTO. What has been the nature of your discussions on these WTO talks? And how do you think that even India and the U.S. can help in sort of pushing forward these negotiations?
Bhatia: The WTO talks are at the moment, obviously, at a very important juncture. There has not been, probably, as much progress as we - both India and the United States - would have liked, including the missing, the deadline that had been established for modalities, setting of modalities, at the end of April. I can tell you that people are working very, very hard in Geneva right now on trying to reach some sort of agreement, basically, on these core issues. The nature of my discussion with Minister Nath was not getting into the details of particular pillars of those negotiations, particularly, but rather sharing with him my impressions of the need for both sides to approach the negotiations with a continued sense of ambition. It is, in our view, critically important that the Doha negotiations both come to a successful conclusion this year. But that they come to a successful conclusion that will result in meaningful benefits for both exporters and consumers around the world, and that they serve the goal of the Doha round that was established in the declaration of contributing to development of the developing countries around the world, including least-developed countries. That requires, in my view, an ambitious outcome to this round, and it's going to require all of the countries concerned to do more, and to recognize that offers on the table in Geneva need to meaningfully open markets to allow the, frankly, the world's poor greater access to both developed and developing country markets.
Q: Monica Gupta from Business Standard. You just said that countries need to do more. Would the U.S. be willing to do more? Because there is a view that the stalemate, particularly in agriculture, is because of the tough stance that the U.S. and the E.U. are taking.
Bhatia: I do hear this point. I hear the point that the United States has not done more, particularly in the agricultural area. I look back at the offer that the United States put on the table in October of last year, which to this day continues, in my view, to be the most ambitious offer that's been put out there. It involves substantial cuts to domestic supports in agriculture, including very substantial cuts to U.S. domestic supports, and it also calls for substantial market opening, including in the agricultural markets of the E.U., Japan, and others. The reality is that, I think, a deal that is not ambitious in agriculture will not be a deal that can be, that the U.S. Congress would embrace politically. But I also think that it would be a deal that would fail to meet the promise of the Doha declaration. So we retain a high level of ambition in agriculture. Now, I recognize that some countries like India have challenges in that respect, from a political perspective. I believe that we are willing to work with India, and I have made clear to Minister Nath that we are willing to work with India bilaterally to, hopefully, address those concerns. But at the end of the day, this round must result in greater market access. Not just in agriculture, but in other sectors, as well, and the other pillars, as well. The United States has always said that we are prepared to meet ambition with ambition in this regard, but to this point, and particularly in the agricultural area, we're still awaiting meaningful responses on the part of some of our developed country partners.
Q: I am Raj Kumar from Reuters. During your meetings with government officials, did the issue of increasing FDI limits in some of the sectors figure in? And will you be more specific on which sectors you discussed? And secondly, is there a thinking of further refining the tax and investment treaties between India and the U.S.?
Bhatia: What I would say is that certainly the issue of investment between the United States and India has come up. I think it's the desire of both of our governments to strengthen the investment relationship. Remember, today, investment is just the other side of the coin from trade. A strong economic relationship between the United States and India is one that has got to have both strong trade and investment components. And the investment numbers between the United States and India, while growing, continue to be far more limited than what I would like them to be. U.S. FDI in India was $6.2 billion in 2004, which by the way is the latest data that we have available - it backs up one year. And Indian FDI in the United States was $522 million in 2004. But those numbers, I should point out - the glass is half-full, half-empty. The half-empty part is that those are relatively small numbers, especially when you compare them to the kinds of numbers that we have with some of our other major trading partners. But the half-full part is that you should look at the percentage increases. U.S. FDI in India was up 28.4% from 2003, Indian FDI in the United States was up 82.5% from 2003. Those are very impressive growth numbers. U.S. FDI in India was $6.2 billion in 2004, which is a 28.4% increase from 2003. Indian FDI in the United States was $522 million in 2004, which is up 82.5% from 2003. And this is an area that again, to get back to your question, yes, the Indian government officials and I have spoken about, indeed we have got an entire focus group talking about this area right now, because it is my belief that the strengthening of the U.S.-India relationship, to strengthen the U.S.-India relationship, we are going to have to see substantial growth in those numbers. I think, to some extent, this would happen of its own accord. India is a great place to invest for many American companies - there are great opportunities here, great market opportunities, with a burgeoning middle class, with an economy that is growing at a very rapid pace - great opportunities. Likewise, I believe the United States offers some great opportunities for Indian investors. I have met with some of those investors in my recent trips, and I think you can see that there is a real interest in exploring the United States as a market for Indian investors. But there are policy, there are certain areas where restrictions on FDIs or other policies adversely affect those flows, and it would be my hope that in time those FDI restrictions would be addressed. And I say that, not because I believe that FDI restriction, lifting FDI restrictions, is something that India should do for the benefit of the United States, but because I think it's something that is very much in the interests of India's own consumers, especially in areas like the financial services area, where to be a globally competitive financial services market, I think it is critically important that one not be constrained by limitations in terms of foreign investment.
Q: The FDI cap in retail? (inaudible follow-up)
Bhatia: I would not say that we had specific negotiations on the subject of the FDI cap in retail, no.
Q: Rajesh Mahapatra from the Associated Press. Ambassador, you know, we have been having a lot of these talks, we have India-U.S. Economic Dialogue, Trade Policy Forum, so many visits in the last three years. But somewhere, things are not working out, in terms of showing concrete outcomes. You see, the last three years with China, India's trade has almost risen five times. The way that we are growing with China, it's far, far ahead of where we are with U.S. They now have $18 billion with us, you over $27 billion, and the day won't be far when actually China emerges as our number one country-specific trade partner. Where are things going wrong?
Bhatia: I wouldn't say that things are going wrong at all. I think if you look, India is if not the fastest, certainly among a handful of our fastest growing international trading partners. The U.S. economy is a very strong economy. It is an economy that I should point out is growing at much slower rate than either the Chinese economy or the Indian economy. Both India and China are economies that are growing extremely fast. They are at a different level of development, obviously. So, you have growth rates here in the area of 8, 9, in China's case, 10% per annum. With that backdrop, it is probably natural that you would see substantially fast-growing trade between those two economies, especially as they are both changing, and recognize there is also a geographic proximity there. The U.S.-India trade relationship, I am quite bullish on. I don't think things are going wrong, I think when you look at - let me just read to you some numbers here - let's go back to 1994, which is a little more than ten years ago, $2.3 billion worth of U.S. exports and $5.3 billion worth of U.S. imports. Today, you are looking at, with 2005, you are looking at $8 billion in U.S. exports, so that's more than three times the amount, and imports of $18.8 billion, so that's more than three times the amount for Indian imports. There is steady growth here, as the two countries become more closely integrated. So, I don't think anything's going wrong. What we are saying is that both governments believe that there is a need to pay special attention to the economic leg of this relationship to ensure that there is continued growth. And that means both stimulating private sector interest in each other and also in doing concrete tangible things that will try and remove trade and investment barriers. Doug, do you want to? Let me not monopolize the mike here. Doug?
Q: Ambassador, if the trade deficit also grown more than three times (inaudible), how much is that a problem in terms of moving forward? We don't want to get the kind of (inaudible) here in U.S. above China.
Bhatia: I appreciate your sensitivity to the trade deficit, and yes, the United States does have a trade deficit that is in excess of $700 billion, of which more than $200 billion is with China. Look, the reality is that we believe in open markets. We believe in opening the United States, we believe in opening India. And let the trade flow where it will. My belief is that U.S. companies are globally competitive companies, as are Indian companies. And left to compete in an open market, we will have a very effective and fair trading relationship with India, and India, I believe, will have a very strong presence in the U.S. market. And if that results in a trade surplus for us, great, if it results in a trade deficit for us, so be it. My goal is to make sure that there is vibrant flows of trade going in both directions that are not distorted by governmental policies that have the effect of closing down one sector or another.
Q: I am Bhagyashree Pande from The Pioneer. My question pertains to the intellectual property rights. There has been a lot of concern in the U.S. about the intellectual property rights being very lax in India and in China as well. How are you looking at tackling these issues, and have you had a word with the Minister, or are you planning to take it up in the next round?
Bhatia: Intellectual property rights is an area that we have focused on in the Trade Policy Forum, and continues to be a subject of dialogue. We believe this is very important. And again, I would point out this is important not just because it's something that American companies about, although they do care about it, but because this is an area where for India we believe there is such tremendous possibility, such great strength here. India has all the ingredients to be truly among the top two or three knowledge-based economies in the world, I believe. But one needs infrastructure for that, in the same way that the infrastructure for trade in goods may be highways, or ports, I believe the requisite infrastructure for a knowledge-based economy is vigorous intellectual property rights. Indian scientists should not go to the United States to patent their inventions. They should be patenting their inventions, doing their R&D, doing all of their development here in India, and I believe with continued progress in intellectual property rights, precisely that outcome will obtain. India has already adopted, I think, a very good patent law, which has been widely praised. There are some areas where we would like to see stronger implementation, implementing regulations, and I think what's critically important is enforcement, both in India, but also in the United States, as well. It is critically important that regulations and laws be followed up with strong enforcement. One of the areas we've talked about is doing some things jointly in this area, ranging from technical consultations, to actual joint enforcement efforts, and I think that's an area where there's really potential for good cooperation. This is a very important area, and I think perhaps more so, it is one of the areas that I think it is most critical that we obtain real results. And, not in a matter of years, but in a matter of months.
Q: Ranjeet Kumar from Navbharat Times. Recently, the restrictions on high technology exports to India have been lifted. So what is the trend in high technology exports to India in recent years?
Bhatia: I don't have the data, in terms of control - basically, what you're talking about is dual-use controlled trade. I do know that this has been an area that there has been growth in. One thing I should point out is that the Civil Nuclear Deal that was concluded between the President and the Prime Minister, I think is going to have benefits that cut across sectors. It does not, it is not only limited to the area of nuclear and civil nuclear technology, but indeed will likely stimulate greater trade in some other high technology areas, as well, as it builds a level of confidence and trust between the two countries. So, we have been very supportive, obviously, of the Civil Nuclear Agreement, but I think one of the benefits that's going to flow from it will be greater trade in high technology items. There is, among the different dialogues we have going on, is a dialog on high technology cooperation. It is chaired by Undersecretary McCormick from the Commerce Department. I think there has been very good progress that has been made thus far in trying to resolve some of the issues that have impeded trade in that area in the past.
Thank you all very much.