Partnership, Progress, and the Trajectory for growth in the U.S.-India Trade Relationship

Remarks by U.S. Trade Representative Ambassador Michael Froman at the University of Chicago Center in Delhi

Nearly seventy years ago, Prime Minister Nehru stood before the Constituent Assembly on the occasion of India’s independence to describe his vision of the future: a nation whose freedom, forged in its “suffering and sacrifice,” would serve as a tool for “the promotion of world peace and the welfare of mankind.”  Nehru’s vision for India was one that, through humility and willingness, would “attain her rightful place in the world” as an agent and engineer of human progress.

These words are remarkable both for their audacity and their context.  At the time, India was a newly independent country, but its vision for itself was one of consequence, significance, and contribution.  Much has changed, but the aspirations central to India’s founding are no less necessary or appropriate now than they were in 1947.

India is now clearly a central participant on the world stage, but as in the case of all audacious goals, fulfillment is a work in progress.  This is the case in the United States, as we work continuously to become “a more perfect union”, as our founders aspired, and it is the case in India as well.  Each generation’s responsibility is to influence the arc of history positively without knowing precisely its destination.

That responsibility is among the many things our nations, the world’s oldest and largest democracies share.  Our values have long been consistent and our interests increasingly aligned, whether in counter-terrorism and cyber-security, food security and public health, climate change and clean energy, or geopolitical stability.  The United States has also benefitted enormously from nearly 1 million visits by Indian citizens to the United States each year and a vibrant Indian-American population that has contributed immensely to the understanding between our two countries across business, academia, the sciences, civil society and government.

I note this for the simple reason that the issues that unite us far outnumber whatever differences we have.  This is one of the reasons why President Obama asserted that “the relationship between the United States and India – bound by our shared interests and our shared values – will be one of the defining partnerships of the 21st century.”[1]

[1] Remarks by the President to the Joint Session of the Indian Parliament in New Delhi, India, November 8, 2010.

As we come to the end of the Obama Administration, with fewer than 100 days to go, it’s useful to review some of the key developments in the U.S.-India relationship:

  • We’re advancing our collective leadership on climate and clean energy, as signatories to the Paris Agreement; through the implementation of the landmark U.S.-India civil nuclear agreement and just last week with the amendment of the Montreal Protocol to address the impact of hydrofluorocarbons on global warming;
  • We’re strengthening global nonproliferation and securing the land, maritime, air, space, and cyber domains through our Joint Strategic Vision and the United States’ support for India’s membership in the Nuclear Suppliers Group as well as a permanent seat on the United Nations Security Council;
  • We’re promoting stability through our defense cooperation under the Defense Technology and Trade Initiative (DTTI and through the most robust set of joint military exercises India has with any partner;
  • We’re building our cooperation in science and technology while deepening the people-to-people ties that bind us — like this program of the University of Chicago;
  • We’re promoting public health through collaboration on infectious diseases and the Global Health Security Agenda (GHSA) as well as joint work in the areas of HIV/AIDS, cancer and the U.S.-India Vaccine Action Program; and of course, last but not least,
  • We’re bolstering trade and investment in a mutually-beneficial way that promotes growth, drives innovation and improves the living standards of both our peoples.

This list is by no means exhaustive, but it does underscore just how far we’ve come in a relatively short period of time to broaden and deepen our relationship.  And that’s why we are here today for this Trade Policy Forum.

Economic development is foundational to all countries, whether developed, developing, emerging or frontier.  For India, with its commitment to lift hundreds of millions out of poverty and to integrate an estimated one million new entrants a month into the labor force, its importance cannot be overstated.  Prime Minister Modi has consistently recognized this in placing economic growth and rising living standards for all of India’s citizens among his highest priorities.

That focus has yielded impressive results.  India is now the world’s fastest-growing major economy. It has seen increased foreign investment in recent years, and has impressively navigated post-crisis macroeconomic headwinds to remain a bright spot in today’s mostly growth-muted world – a “beacon of hope” according to the Prime Minister.

Amidst this growth, the United States is proud to be India’s top trading partner.  In 2015, our total bilateral trade was over $109 billion.  The United States is the #1 destination for India’s exports, purchasing more than 15 percent of all Indian goods and services exports, and India has a $30 billion trade surplus with the United States, the largest surplus it has with any country.

But for economies of our size – $17 trillion for the U.S. and $2 trillion for India – there remains much potential.

Over the last couple of years, we’ve seen some important reforms, such as the landmark Goods and Services Tax, the revision of the bankruptcy code, the establishment of dedicated commercial courts, and the release of India’s first national Intellectual Property Rights Policy.

Liberalizing the food, civil aviation and business-to-consumer e-commerce sectors are important initial steps to open India’s market.

Opening the defense, rail and broadcast sectors to foreign investment has also sent a positive signal.

India has seen an improvement in its World Bank overall ease of doing business ranking, moving from 134th to 130th of 189 countries.

None of these reforms is easy, and the Government of India should be recognized for moving this agenda forward.  As we prepare to pass the baton to the next Administration, it might be helpful to focus on key elements of the agenda looking ahead.

First, there needs to be continued work on improving the business environment if India is going to attract the kind of investment – domestic and foreign – to meet its aspirations.  India has recently seen a positive trend in investment activity, but it should not be complacent.  As an Italian economist once said, “investors have the memories of elephants, the hearts of lambs and the legs of hares.”

In choosing to invest, businesses are keenly sensitive to the business environment, whether the climate is commercially friendly or whether bureaucracy and corruption make doing business difficult.

India’s efforts to renegotiate and weaken existing agreements is concerning, particularly at a time when other emerging markets, such as China and Vietnam, are working to attract investment by negotiating higher-standard agreements.

Second, to be the home of globally competitive businesses and to ensure that Indian consumers fully access the benefits the global economy has to offer, India should continue down the path of opening its economy.

India’s relatively high tariffs and continued requests for exemptions from global trade rules – the need for which has already been questioned by the Ministry of Finance – only slows India’s full participation into the global economy and the benefits that come with that for hundreds of millions of Indian citizens.

Liberalizing the retail, financial services and professional services sectors would help create an open, non-discriminatory and predictable regime that enhances the development of those markets and the quality of life of the Indian people.

Third, continuing the work of creating fairness and transparency in regulatory practices is central to building and maintaining confidence.  Measures like uniform, predictable notice-and-comment procedures within the rulemaking process can contribute significantly to the overall business environment.

Fourth is the area of intellectual property rights.  India is among the most innovative economies in the world, from the creation of the first smartphone for the blind to the development of roads made of recycled plastic.  As India continues to innovate and develop its knowledge economy, robust and comprehensive protection of intellectual property will be key.

The forthcoming reforms under the National IP policy will be fundamental to preserving and promoting the innovation that characterizes Indian industry.  While we continue to work on issues where we have meaningful differences, we look forward to India developing laws and regulations that support the intent of the National IP Policy.

Finally, there is the basic fact that the digital economy has fundamentally altered the nature of trade itself.  The digital marketplace is to play an increasingly central role in the overall flow of goods and services, and the only way to ensure the broadest possible diffusion of its benefits is to keep that marketplace open and free.

The United States and India have strong mutual interests in this regard and could together lead the world in promulgating new trade rules that benefit innovators – rules that prohibit customs duties and discrimination for digital products, ensure the free flow of data and combat localization requirements, and protect both the consumer and the integrity of the Internet.

It goes without saying that the purpose in all of this is to improve the lives and livelihoods of both our peoples.

We know that trade has played a major role in lifting hundreds of millions – indeed more than a billion – people out of poverty around the world.  Trade done right means jobs and growth, which expands our collective prosperity.  Look no further than India itself to understand how inclusive growth alleviates poverty and raises living standards.  Imagine how much further it can go by fully embracing open markets that welcome trade and investment.

The United States has a direct interest in India’s ability to achieve its economic development objectives through trade, investment and innovation.  Equally important, we believe in its ability to do so.  Ours are deeply interconnected economies.  A simple keystroke can exchange information, transfer capital, or strike agreement between New Delhi and New York, Chennai and Chicago, Bangalore and Boston.

The United States is proud to be India’s best economic partner.  We look forward to a future marked by our successes and in which we realize the full potential of our relationship.

While we have a fair distance to go to realize that potential, we should not lose sight of how far we’ve come.  Who would have imagined 30, 20, even ten years ago years ago, that we’d be sitting side-by-side in Nairobi and Paris forging together international trade and climate agreements.  Who would have imagined the scope of today’s cooperation on regional and national security issues:  defense trade, military exercises, counter-terrorism cooperation, shared  strategic orientations?  Who would have imagined the President of the United States being invited to be the chief guest at the Republic Day celebrations?

This summer, I visited the World Food Prize Hall of Laureates in Des Moines, Iowa.  I was thinking about Dr. Norman Borlaug and what he and the Green Revolution contributed to food security and poverty alleviation in India.  All of that occurred at a time when U.S.-India relations were less close, shall we say, than they are today.

Today, our countries are strategic partners.  Our interests are more aligned now than they ever have been before.  What will be the Green Revolution of the 21st Century?  How can we best achieve together the aspirations of our founders?

The Obama Administration’s goal has been to strengthen the economic component of our relationship so that it is a critical pillar of our strategic partnership.

In the process, we improve the lives of our citizens and safeguard the basic democratic principles that define countries like the United States and India.  We become the champions of mankind’s welfare that Nehru envisioned.

Thank you.