Thank-you Ajay (FIEO President Ajay Sahai) for the invitation to be here today. Having just finished my first year as Ambassador, I wanted to speak with the Federation of Indian Export Organizations since you are the vanguard of not only the Indian economy in the world, but of India itself. I also want to reiterate a point President Obama has made: an economically strong and stable India is one of the United States’ most important foreign policy priorities. Economic strength underpins almost every aspect of foreign policy, from security, to public health, to education, to our ability to address climate change, and many other issues. The fact is our collective economic strength is at the foundation of the work we do together, and our continued economic growth is not only good for our two populations, it will continue to help steady the global economy during these uncertain times. And of course, we understand that the strength of the United States economy is of great importance to not only Indian exporters, but the world as a whole… and we have some good news to report. The U.S. has returned to a period of sustained growth, with our real GDP growing at 2.4 percent in both 2014 and 2015. That growth has been driven by consumer spending, business investment, residential real estate, state and local government spending, and increased exports. Unemployment remains low at 4.9 percent – the lowest rate in 8 years — with the economy gaining jobs in several key industries like health care, manufacturing, transportation, and mining. Some 14 million jobs have been added in just the past 5 years. And U.S. companies continue their leadership of innovation in the IT, Telecommunications, Aerospace, Energy, Defense, Agriculture, and Pharmaceutical sectors.
Now let’s get back to India. As recently as 1991, exports comprised approximately 8% of India’s $500 billion dollar economy. Today, as India’s economy has more than quadrupled to over $2 trillion dollars, exports no longer comprise 5% of the economy, today they are over 23% of the economy. In other words, Indian exporters are playing a powerful role in India’s economic prosperity, which in turn gives FIEO a powerful voice to help shape India’s economy, its trade policies and its commercial engagements with third countries.
It is a good time to have this conversation today, given the slowing trends in global trade, the increasing uncertainty in the global markets, the evolving impact of slowing growth in China, and continued unrest in the middle-east that has led to the mass migration of millions.
Amid all this uncertainty stands India, leading not only the BRICS, but all the world’s major economies in economic growth.
A recent World Bank study into the global trade slowdown suggests that it is not only slowing demand, but institutional inefficiencies, weak trade finance capacities, and increasing trends towards protectionism that are driving the slowdown as well. This is concerning, but the good news is, at least with respect to India and the United States, that we are working diligently to address a wide a variety of specific factors that inhibit our bilateral trade. In fact, President Obama recently said that we would be looking into other ways to improve our trade relationship with India, including looking at our export controls to make sure Indian companies have the same access to American technology as our closest allies.
At the heart of this effort is the ongoing work of our Trade Policy Forum, where our experts engage on a variety of issues relating to market access, standards, safety, and regulations, with the goal of not only better understanding each other’s rules, but making the process of exchanging goods and services easier, and more efficient.
And I want to take a minute here to touch upon the importance of the WTO Trade Facilitation Agreement and say how much we are looking forward to India’s ratification. The United Nations Conference on Trade and Development estimates that the average customs transaction could involve 20–30 different parties, 40 documents, and 200 data elements. With the lowering of tariffs across the globe, the cost of complying with customs formalities now sometimes exceeds the actual cost of duties to be paid. Clearly we can and must do better.
In the modern business environment of just-in-time production and delivery, traders need fast and predictable release of goods. One study found that trade facilitation programs can result in the reduction of overall transaction costs by as much as 2% for developing countries. We know that in recent months, the Indian government has made significant strides in reducing the amount of paper work required for import and export, and I look forward to hearing your thoughts on how we can work together to do more.
The Future of Global Trade
When we talk about trade policy these days, there is a lot of discussion going on about the Trans Pacific Partnership or TPP and its impact on the Indian economy. Let me make two points clear about TPP and where we are headed: First, the United States remains committed to the WTO and the multilateral trading system, and we view the TPP, as well as the Transatlantic Trade and Investment Partnership with Europe (TTIP), as augments to our broader work and engagement in the WTO. But second, we are proud of the TPP on so many levels, not only for what it will do in lowering trade barriers for 40% of the world’s economy, but for its environmental chapters as well as its commitments to workers’ rights. When implemented, the TPP will include the highest set of labor standards for workers – higher and more comprehensive than any trade agreement in history. This will improve the work-safety and quality of life for millions in less developed countries. We are very proud of this component of the TPP.
The principles that form the foundation of the WTO are the same principles that underlie the TPP: those of open markets, non-discrimination, competitiveness, transparency, environmental protection, and help for the developing world. Global trade and traders have a profound impact on the lives of billions of people around the world, many of whom are economically disadvantaged and would benefit greatly from the TPP’s goals.
How does this apply to India?
In his recent remarks at the Economic Times Global Business Summit, Prime Minister Modi said that while all politics is local, in his view, all economics is global. This is really true, and becoming more and more so every day; I suspect that few organizations in India understand the country’s role in the global supply chain better than FIEO and its members.
Those who choose to cast discussions on global trade in terms of the developing world against the developed world is a false choice. As we have seen in so many Asian economies over the past two decades — and investors and global markets have affirmed — robust economic growth, greater integration with the international trading system, reducing market barriers and enhancing competiveness can have powerful ripple effects for people at all levels of the economic pyramid. Every country should see the benefits of supporting economic growth both at home and abroad, and in the United States, we certainly do. And here, I want to make a couple of points to illustrate this. Many of you are familiar with our Generalized System of Preferences (GSP) program, the United States’ largest and oldest trade preference program that eliminates duties on almost 5,000 different products to help developing countries.
India is the largest beneficiary of the GSP program. Indian exporters received $4.4 billion dollars in tariff relief through GSP in 2014 alone. You also might also be surprised to learn that India’s trade surplus with the United States is $28 billion dollars. Both our countries need to do much more to grow our two way trade and investment numbers. To put in perspective the true untapped potential of our economic relationship: In 2014, U.S. exports to India were 1.6% of our total exports worldwide, while imports from India to the United States were only 2.3% of our total. Those numbers are perhaps the most powerful indicator of how much opportunity to expand our trade relationship there is for both our countries.
But we are heading in the right direction, with two-way trade between India and the United States reaching $104 billion in 2014, and as we have often repeated, we have the goal of reaching $500 billion in the years ahead.Now, with economic headwinds gaining strength, and China’s economy transitioning to more modest growth, it is in everyone’s interest to do everything we can to ensure the global economy operates as efficiently as possible. To that end, we strongly support Prime Minister Modi’s efforts to improve India’s World Bank East of Doing Business rankings, and we applaud this year’s jump of 12 places to 130. That is quite an achievement in only one year.
We are also working closely with the Government of India through our Strategic and Commercial dialogue to address a wide variety of matters of great concern to Indian and American companies alike. In fact, this week, our Deputy Commerce Secretary Bruce Andrews is in India leading a large trade delegation across India, looking to bolster and expand partnerships, engage in substantive discussions of concern to the business community, and demonstrate our support of the Prime Minister’s Smart Cities program.
With the Prime Minister’s Make in India Week events this week in Mumbai, I want to note that the United States is proud of being one of the leading foreign investors in India, and we have been for quite some time. Let me point out that the United States as well welcomes the increasing investment from Indian companies in the United States, which reached $11 billion in 2014 and employed over 100,000 Americans. I encourage you to invest in the United States, not only to better access the U.S. market, but to serve as a base of operations for your business in all of the Americas.
As exporters and business owners, I know that you all keep a close eye on your bottom line, as you rightfully should. But I want to issue a challenge to you as well; and that is to remember the role that each one of you has, in your own way, in ensuring the economic success of India and by extension, the world. There are millions of people both in India and around the world who aspire to a better tomorrow, and you are an important part of ensuring the opportunities exist to help them achieve their dreams.
In closing, I want to thank you for having me here today. I also want to say again how much we value our relationship with India, not only for our shared values of democracy, freedom, and the rule of law, but for the potential that our two countries have to improve the lives of so many.
I look forward to hearing from you about your thoughts on how we can better realize our potential together. Thank you.