Remarks of Franklin L. Lavin
Under Secretary of Commerce for International Trade
U.S. - India Business Council Meeting
March 16, 2006
Good afternoon, and thank you, Ron Somers, for that warm introduction.
It is a pleasure to be here with you today at such an auspicious time
in U.S. - India relations. I'm particularly pleased to be addressing the
U.S. - India Business Council because of your leadership role in opening
up a more vibrant economic relationship between the United States and
India. You helped to bring us to this important point in the history of
the bilateral relationship and you will be key to future progress as well.
Today I would like to discuss where U.S. - India relations stand and provide
some thoughts on how we should proceed. I'll discuss the good news and
the challenges that lie ahead for our governments and for U.S. companies.
I will address the importance of President Bush's trip to India and new
opportunities in the commercial relationship. Finally, I will talk to
how all of these developments have led us to what we view as a major step
ahead for the U.S. - India Commercial Dialogue.
A LOGICAL PARTNERSHIP
Let's begin with the bilateral relationship. In my view, the U.S. and
India are logical, natural partners, although the relationship has not
always lived up to its promise. The United States and India share the
same bedrock democratic values. India is increasingly enjoying a consensus
on the importance of economic growth to create jobs and elevate the lives
of its people. Whether we look at the two million Americans of Indian
descent or the 85,000 Indian students who come here annually for their
education, we can see there is a good fit between our two countries on
a range of issues.
The economic numbers bear this out. Twenty-five years ago our total bilateral
trade was only $2.8 billion. By 2005, that had increased nearly tenfold
to $27 billion. U.S. exports to India have nearly doubled in the last
three years from $4.1 billion in 2002 to nearly $8 billion in 2005. With
a population of over 1 billion and an economy with an 8% growth rate,
India is increasingly a market of interest to American companies. It is
important not only as a market for goods and services and also as a partner
in opening world markets to free and fair trade.
We applaud the liberalization moves that India has already undertaken
such as an open skies air services agreement with the United States and
raising investment caps in several sectors. India has lowered the import
tariff on most industrial goods to 12.5%, taking an important step in
the right direction.
And we are seeing evidence of results. The U.S. Commercial Service in
India reports unprecedented interest by American companies this year.
This month alone we will see state delegations from Michigan, Iowa, Illinois
and Rhode Island visiting India. I helped join the trend while serving
in Singapore because I was able to take a business delegation to India
comprised of U.S. companies based in Singapore. So I know from personal
experience of the growing interest in the market.
So there's a lot of good news in the relationship and in the great potential
that we share in trade. But we face significant challenges as well.
Despite the good trade statistics and the progress that India has made
in economic reforms and moving towards more open markets in the last 15
years, there's a lot of ground to be made up if trade and investment are
to reflect India's role in the world economy. India had the great misfortune
of gaining independence at the intellectual high water mark of Fabian
socialism and third world nationalism. Unfortunately, those economic philosophies
held India hostage for several decades. India still has to make up for
many years of little to no economic growth. As a reference point, even
with a 30% growth in U.S. exports to India last year, the vast market
of India accounts for less than 1% of all U.S. exports.
Additionally, India's reforms are taking place in a context of reforms
around the world. So in the competition for business attention globally,
India's moves might seem less impressive. Remember, businesses look at
relative opportunity and not absolute rates of GDP growth. So the $8 billion
dollars of annual U.S. exports to India is about what the U.S. will ship
to Canada in a two-week period.
A few other examples: Cumulative U.S. foreign direct investment in India
amounted to $6.3 billion at the end of 2004. While the U.S. is India's
largest investor, think of the potential being missed when you consider
that U.S. FDI in Singapore amounts to $56.9 billion.
Beyond investment, India needs to sort through the challenge of its high
trade barriers. The more India can lower its barriers, the better off
its people will be. While India has significantly lowered tariffs on non-agricultural
products, agricultural tariffs remain around 40%.
Governance is another area that requires attention. Because if a society
is hindered by corruption or bureaucracy, removing trade barriers will
not get you very far.
A transparent and efficient legal system, and companies that play by
the rules are important for translating the opportunity of market economics
into benefits for India's citizens. A vibrant IPR regime is critical to
the promotion of a creative, technologically advanced economy.
Some progress has been made toward creating a more comprehensive framework
for IPR protection in India. For example, in 2005 India extended patent
protection to pharmaceutical and agricultural products. Still, India does
not have in place a TRIPS-consistent data exclusivity regime for these
products. Also, many perceive an uneven enforcement of India's existing
trademark and copyright laws. India consumers and businesses deserve the
finest IPR protection around. India should be a global leader in pharmaceutical
research and development. But until the IPR laws are world class, R&D
will take place elsewhere.
Finally, although India has recently opened up a sliver of its retail
sector to foreign investment, the sector is still closed to most American
retailers. This would be of great benefit to Indian consumers to allow
them more convenient access to desired consumer goods at lower prices.
CHALLENGE FOR U.S. COMPANIES
So India faces challenges. And I would argue that the U.S. companies also
need to do a better job. The U.S. companies need to think creatively about
how to adapt their products and calibrate their activities to take advantage
of the great potential in India and meet aggressive competition from companies
from Japan, Korea, Europe, and Canada.
So we each have our responsibilities. India is working on making its market
more friendly, and U.S. companies are trying to develop architecture and
an approach that allows them to enjoy success there.
And Government has an important responsibility in this process as well
brings us to President Bush's recent trip to India.
The President's trip was a milestone in U.S. - Indian relations and is
symbolic of our broader hopes for creating a rich and vital new collaboration.
The President has made the relationship with India a priority and has
announced cooperation in a number of areas including civil nuclear power
and other clean and safe technologies to allow our nations to reduce their
dependence on oil.
Importantly for all of us here today, President Bush and Prime Minister
Singh discussed intensifying efforts to boost bilateral trade and investment.
They agreed to several specific actions on the commercial dialogue between
our two countries and I would like to discuss that in some detail.
In the case of Prime Minister Singh, it is helpful for the U.S. to work
with a former Finance Minister who fundamentally understands the power
of market forces and the need to attract foreign direct investment in
promoting economic development and alleviating poverty.
THE COMMERCIAL DIALOGUE
President Bush and Indian Prime Minister Singh recognized that the time
was ripe for a new economic dynamic when they agreed to revitalize the
bilateral Economic Dialogue at their meeting in Washington last July.
To fulfill that commitment, the U.S. Department of Commerce and India's
Ministry of Commerce and Industry have taken steps with our part of the
Economic Dialogue - the Commercial Dialogue. Both sides are now fully
committed to regular contact to discuss nuts-and-bolts issues that affect
doing business in each other's markets. Under the Commercial Dialogue,
we have been holding a number of substantive public-private sessions on
standards, in which we discussed general principles on how standards are
established, administered and enforced by both countries. Both sides now
have a better understanding of these principles.
In view of the success of the President's trip and the blossoming commercial
relationship, I am pleased to announce that the Department of Commerce
has proposed to India's Secretary of Commerce S. N. Menon that the Commercial
Dialogue should be elevated, enhanced and expanded and that it should
demonstrate greater engagement by the two private sectors. We are discussing
how to proceed with this in due course and we hope to formalize this shortly.
The expanded agenda for the Commercial Dialogue will cover intellectual
property rights enforcement, antidumping and countervailing duty procedures,
and commercial opportunities for small and medium-sized enterprises.
This upgraded dialogue reflects the high level of importance we are placing
on making commercial relations with India.
The dialogue with India is one of only four such dialogues in current
progress, joining those with our NAFTA partners, the EU, and China, but
incorporating a distinctive Indian approach.
To mark this new, elevated dialogue, I will be traveling to India this
spring so that we may together tackle the challenges I have outlined.
I look forward to seeing Secretary Menon, and meeting with other Indian
officials. We have much work ahead of us in our bilateral relationship.
All of the elements of success are there but let's make sure that we take
advantage of these for immediate and long-lasting progress. We will do
our part to ensure that the recent uptick in the U.S.-Indian relationship
is not a short-term matter but an enduring relationship to our mutual
satisfaction and interest.