India Rising: Responsibility and Partnership in the Twenty-First Century
Address by Christopher A. Padilla
Under Secretary of Commerce for International Trade
The Heritage Foundation
June 9, 2008
Thank you for that very warm introduction. It is a pleasure to be here today to speak to such a distinguished group on the U.S.-India strategic partnership and our joint efforts to address the challenges and opportunities of the twenty-first century. Let me also take this opportunity to thank Director General Mitra for being here and for his leadership in advancing the U.S.-India relationship. Dr. Mitra and the Federation of Indian Chambers of Commerce and Industry have been important partners in our efforts to strengthen and accelerate U.S.-India ties.
India as a Global Power
In 1947, a small company called Western Indian Vegetable Products Limited built a factory in central India and began producing various types of oil and soaps. For the next two decades, the company expanded to other parts of India, and gradually diversified into other production areas, such as hydraulics and cylinders. And then, beginning in the 1980s, the company changed course. The company turned its sights to technology and expanded into software, computers, medical devices and IT services.
Today, Wipro is one of India’s largest IT and consulting companies. What started out as a small, low-tech manufacturing company has transformed into a global corporation with 80,000 employees worldwide. Like Wipro, India has undergone a remarkable transformation and has emerged as a major global player.
All around us, we see signs of India’s growing economic strength. India is now home to a cutting edge information technology sector, which has helped revolutionize the way global companies manage and operate their IT systems. Indian multinationals such as Wipro, Tata, Reliance, and Infosys are now global players in sectors as diverse as IT, steel, consulting, and transportation.
India has grown because India has opened its economy. The United States hopes that India will continue to liberalize and integrate with the global economy. To fully realize its economic potential, we hope India will make more progress in areas such as caps on foreign equity in retail, insurance, and financial services. We would like to see more protection for intellectual property, particularly in the life sciences, where India seeks to attract more investment.
Indeed, we hope India will propel the bilateral relationship forward by working with us on a high-standard bilateral investment treaty. A BIT would complement India’s economic reforms and create a more welcoming climate for foreign investment. We are pleased that there is an ongoing exchange of ideas, which will inform a subsequent decision on whether to launch formal BIT negotiations.
U.S.-India Strategic Partnership
We urge continued reforms in India because the United States welcomes and supports India’s growth. It is in our fundamental interest to ensure a robust and meaningful partnership between the world’s oldest and largest democracies. Our large, multiethnic countries share the fundamental values of freedom, human rights, and the rule of law. Thanks to the ever-expanding web of interactions between our peoples, we also share close cultural ties. India is the leading place of origin for international students in the United States, with nearly 84,000 arriving in the U.S. last year to study. Millions of Indians now call America home and Indian Americans, such as Indra Nooyi of Pepsi and Governor Bobby Jindal are becoming important business and political leaders in our country.
These close ties became more formalized after 2001 when our two governments abandoned decades of Cold War mistrust and set out to create a truly strategic partnership for the twenty-first century. Since then, we have reenergized the bilateral relationship at all levels. Overall bilateral trade now stands at close to $42 billion and U.S. exports to India increased nearly 75 percent last year. We continue to collaborate closely on a range of issues, from agriculture to space research to energy security to missile defense. Through the Next Steps in Strategic Partnership and the U.S.-India High Technology Cooperation Group we strengthened nonproliferation cooperation and laid the foundation for an explosion in high-technology trade and collaboration.
Addressing the Challenges of the Twenty-First Century
But we can do even more to effectively address new challenges in an increasingly complex and uncertain world. India is now a global player and the time has come for India to bear a greater share of responsibility in addressing global economic challenges. From energy security, to food shortages, to climate change, to global trade talks, India should be a constructive and proactive partner. And India will find a supportive and engaging ally in the United States. The challenges that today’s conference will discuss can only be addressed if we work together constructively.
Energy is one excellent example. Commodity prices are rising, in part because of greater demand from emerging economies. Currently, India is the world’s fourth largest energy consumer and will be the third largest by 2030. India’s high rate of economic growth and its growing middle class have placed additional demands on an already strained Indian power sector. In order to fulfill India’s expected power demand, the country will need to add about 160,000 mega watts of new capacity in the next 10 years.
Given these challenges, and the reality of high energy costs, it is critical that we cooperate to address long term energy needs. That is one reason we believe it is essential to quickly implement the landmark civil nuclear agreement with the United States and bring India into the international nuclear nonproliferation mainstream. The benefits for India are clear, and we hope that India’s government will choose to move forward as quickly as possible to fully realize the potential of this historic agreement. It would be tragic for India to forgo this opportunity for a strategic partnership with the United States.
We can also do more to develop new clean energy technology. Through the Asia-Pacific Partnership on Clean Development and Climate, we have been cooperating to tear down barriers and facilitate deployment of technologies that reduce greenhouse gas emissions. Commerce Assistant Secretary David Bohigian will be leading a third trade mission to India in September to promote U.S. sales of clean energy and environmental technologies and services.
As two of the world’s largest producers of agricultural goods, the United States and India can also help lead global efforts to address rising food prices. This means cooperating to get food aid to those who most need it. This means working together to ensure that the market is able to react and adapt to fluctuating food production. And this means refraining from the use of export quotas, which will only exacerbate food shortages and inflate prices. Export quotas don’t work. In fact, they make things worse.
As an agricultural powerhouse, India can shoulder international responsibilities in dealing with this enormous challenge. India is the second largest rice producer in the world, the third largest wheat producer, and the seventh largest corn producer. But the Indian government’s decision to impose certain export bands on non-basmati rice and edible oils has rattled international markets. While export bans are designed to increase short-term food security imposing the restrictions, these policies make the situation worse. They take food off the global market, drive prices higher, and discourage farmers from responding to market forces and investing in future production. We can only adequately address this crisis if we work together to increase the supply of food and discourage continued use of export controls that will harm India’s neighbors and drive up world food prices.
Concluding the Doha Round
A third important way we can work together is to successfully conclude the Doha Round of negotiations in the World Trade Organization. As President Bush has noted, this is a once-in-a-lifetime opportunity that we cannot let pass. A successful Doha Round will lead to worldwide trade liberalization that will spur hundreds of billions of dollars in trade and investment and will help alleviate food shortages by removing distortions in agricultural trade and production throughout the world.
But Doha is more than just about reducing tariff rates or lowering agricultural subsidies. Doha is about creating hope and opportunity for billions of the world’s poorest citizens. India is proof of the remarkable effects that opening up an economy can have on a country’s citizens. So it is disappointing that India has been a roadblock to success in the Doha negotiations. India continues to insist that it and other developing countries be protected from any real market opening in industrial goods or agriculture or services, while it asks developed countries to do ever more. The Doha Round negotiations are not a donor’s conference – they require major economic powers like India to step up and take responsible leadership, rather than working behind the scenes for Doha’s demise. We are not asking that India and others open their markets to the same extent as developed countries – far from it. Yet so far India has resisted virtually all liberalizing proposals in Doha, even those proffered by other developing countries. The latest Indian proposal for a tariff-cutting formula coefficient of 30 for developing countries and 5 for industrial nations is a complete non-starter. The time is fast approaching when India’s stance on Doha may result in the failure of the Doha Round.
In these uncertain times, we must have concerted leadership by the world’s leading democracies to address the difficult challenges ahead. India today is one of the world’s most important global economic powers. Wipro’s transformation from a small vegetable products company to a global IT powerhouse exemplifies the remarkable transformation occurring in India. But with rising economic power comes responsibility for playing a more central, constructive role in areas such as energy, food, and global trade. America is ready to be a partner in these efforts. Together, we can ensure that the twenty-first century is one of peace and prosperity.
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