of Public Affairs
Remarks of Franklin L. Lavin
Under Secretary of Commerce for International Trade
U.S. - India Business Council Meeting
March 16, 2006
A LOGICAL PARTNERSHIP
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.
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
And Government has an important responsibility in this process as well which brings us to President Bush's recent trip to India.
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
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.
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.
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