Taking US/India Trade to the Next Level
The Atlantic Council U.S.-India Trade Initiative Workshop
Remarks by Ambassador Richard R. Verma
(As prepared for delivery)
Good morning everyone. It is a sincere pleasure to be with you all here today for the inaugural U.S.-India Trade Initiative Workshop. Thank you, Governor Huntsman, for that warm welcome. Governor Huntsman began his career in public service as a staff assistant to President Ronald Reagan, and has served each of the four U.S. presidents since then in critical roles around the world, including as Ambassador to Singapore, Deputy Assistant Secretary of Commerce for Asia, U.S. Trade Ambassador, and most recently, U.S. Ambassador to China. And of course on top of being an Ambassador, he served two terms as Governor of the great state of Utah, being elected in 2008 with a record percentage of the vote. The Governor has been a long standing champion of closer U.S.-India ties and I’m honored to share the dais with him this morning.
I also want to give a special thanks to Bharath Gopalaswamy, who has done an outstanding job as Director of the Atlantic Council’s South Asia Center, and to my friends at the Ananta Aspen Center, including Kiran Pasricha, for their support of this great initiative. I‘m also pleased to see Ambassador Paula Dobriansky, whose distinguished record of public service is really extraordinary.
I would like to spend the next few minutes with you today talking about U.S.-India trade, but let me begin by spending a few minutes talking about Prime Minister Modi’s recent visit to the United States.
The POTUS/PM Summit
The recent meetings between President Obama and Prime Minister Modi helped to institutionalize our cooperation and put us on a long-term footing for close collaboration in several key areas. Let me give you a few examples.
On civil nuclear cooperation, we moved forward on a 15 year project to build six Westinghouse reactors producing power for some 60 million people. This is a deal that had been pending for 10 years, and we were pleased to see it move even closer to fruition.
On defense cooperation, our designation of India as a Major Defense Partner will bring our militaries, industries, and defense ministries even closer in the years ahead as we move India to a level on par with our closest allies and partners with regard to technology transfer. This comes on top of the 10 year defense framework already agreed to last year.
In climate and clean energy, we launched several new clean energy financing programs to support India’s 175 GW target for renewable power. The President and Prime Minister also committed to full implementation of the historic Paris climate agreement. We are in this with India for the long-term in bringing clean reliable power to the 300 million Indians who lack it and simultaneously battling to keep the Earth’s temperatures from rising to dangerous levels.
Across other sectors like space, health, and science and innovation, we continue to deepen our cooperation. And in the critical field of cyber, we agreed to enter into a new framework, which will help reinforce international norms and improve cyber security in the long run.
The President also reinforced our strong support for India’s role in global institutions, like having a seat on a reformed UN security council; we continued to welcome India’s interest in APEC; and we strongly affirmed our support for India’s accession into the multi-lateral export control regimes. We look forward to India’s imminent entry into the Missile Technology Control Regime. With regard to the Nuclear Suppliers Group (NSG), six years ago, President Obama first expressed his support for India’s membership in the NSG. Since that time, we have worked closely with our Indian counterparts and NSG members to help advance India’s case for membership. India has a strong record, and deserves to be included in the NSG. That is why the Administration, including senior White House and State Department officials, made a concerted effort to secure India’s membership in the recent NSG plenary session held in Seoul. We were disappointed India was not admitted during this recent session, but we will continue to work constructively with India and all the NSG members on India’s accession in the months ahead.
In the Joint Address to the Congress, the Prime Minister referred to the United States and India as “natural allies” and, borrowing a phrase from President Obama, called our ties “the defining partnership of the 21st Century.” He rightly noted that we have overcome the “hesitations of history” and that “a stronger and prosperous India is in America’s strategic interest.” When the Prime Minister of India states before the United States Congress, that “in every sector of India’s forward march, I see the U.S. as an indispensable partner,” it marks a profound moment in our partnership. No Indian prime minister has ever been so direct and clear. In short, the Prime Minister’s visit marked a new level of strategic convergence and consolidation in our partnership. It underscored that the world benefits when the United States and India lead together.
Let me turn more directly to your topic at hand today, and provide you with a brief assessment on where we stand on the trade and economic relationship, and where we can take it going forward. With its seven and a half percent growth rate, the Prime Minister envisions a democratic India as a driver of the global economy. Pivotal to this vision is India’s economic relationship with the United States. Thankfully, our bilateral trade continues to grow, reaching a record $107 billion dollars in 2015. This is more than three times bigger than it was only 10 years ago.
Moreover, U.S. bilateral investment to India has grown from a mere $8.5 billion dollars in 2005 to over $35 billion dollars last year. And just last week, the Government announced major investment liberalization reforms aimed at boosting greater investment flows in to the country. Under the new rules, 100 percent FDI is now allowed in the civil aviation, defense, and e-commerce sectors.
The reforms India is undertaking are not going unnoticed by American firms. During the Prime Minister’s visit, Amazon CEO Jeff Bezos announced a three billion dollar investment into India. In all, American member companies of the U.S.-India Business Council announced plans to invest $45 billion dollars in India over the next two to three years.
I’m pleased to report that the increases in trade and investment have been in both directions, not just a one-way flow into India. The number of Indian companies operating in the U.S. stands at an all-time high, and according to a recent Confederation of Indian Industries report, Indian companies have invested some $15.3 billion in the U.S. The top 100 investments now employ some 91,000 American workers.
At the recent Select USA Investment Summit held in Washington, Secretary Kerry specifically mentioned an Indian company, Aurobindo Pharma, setting up a facility in Durham, North Carolina, and how that “investment taps into the local talent pool, expands employment opportunities, forms a new hub for research and development in the medical sector, all the while opening the door to a deeper strategic partnership between the world’s oldest and largest democracies.” So, when we talk about trade and investment benefiting people in both our countries, our partnership continues to be a model.
Both governments have also taken important steps to help facilitate greater economic growth and investment. For example, we elevated our economic ties by holding our first-ever Strategic and Commercial Dialogue last year. This year’s Dialogue will be held here in New Delhi at the end of August, and our delegation will be led by Secretary Kerry and Secretary Pritzker. The Commercial track of the dialogue has several important work streams, including supporting India’s smart cities initiative, strengthening the business climate, and this year, we would like to focus on travel and tourism as well. We have also strengthened our Trade Policy Forum, our bilateral trade dialogue, which has been intensified in the past two years, and has focused on further bringing down barriers in the movement of goods, services and people across both of our national borders. This year’s Forum will also meet here in Delhi in October.
In an effort to identify and support the best innovators in both our countries, the US and India also agreed to co-host next year’s Global Entrepreneurship Summit. If you saw any of this year’s summit, this is a very big deal and a great recognition for the spirit of innovation here in India. Supporting the start-up culture and young and old innovators requires mentoring, financing and calibrating the right role for government. We look forward to our partnership with India and continuing to link up the best and the brightest in both of our countries. They are the ones who will solve tomorrow’s challenges.
India’s Reform Efforts
The Indian government under Prime Minister Modi’s leadership has also taken important steps to improve the business climate and ease of doing business. From 2014 to 2015, India climbed some 12 places in the World Bank ranking. While there is a long way to go, there has been good progress. Let me mention a few areas here.
We have made good progress on tax. We appreciate what the Prime Minister and Finance Minister have said about the end of retroactive taxation – it was an important message. We also have been able to resolve dozens of old tax cases with the Finance Ministry, and recently have entered into an advanced pricing agreement with the Government, which allows for even greater certainty and predictability from a tax perspective for companies entering India. We hope this trend, including the resolution of pending cases, continues.
On the legislative front, we appreciate the steps taken to reform the bankruptcy code which will help address not only the banking sector’s concerns about non-performing assets, but also improve the business environment by allowing companies dissolve a business in a timely and efficient manner when necessary. The passage of the commercial courts bill was also an important step to help ensure that a focused judicial bench could help resolve commercial disputes more expeditiously. This is an important part of ensuring contracts can be enforced, and when disputes arise, that they be resolved in a timely and transparent way.
With regard to enhancing IPR protection, which is a necessity for attracting greater foreign investment, we welcomed India’s recently released IPR policy as a step in the right direction towards nurturing a culture of innovation and entrepreneurship. India has always been an innovative society, with much to contribute in cutting-edge technologies and creative content. It is, after all, the society that pioneered mathematics, created Yoga, and recently launched 20 satellites into space. We look forward to continuing to make progress on IPR issues through the Trade Policy Forum.
And of course, at the state level, the competitive federalism taking place across the country has generated a healthy competition among state governments to attract investment, streamline regulations and create a more open, transparent and fair investment climate. US companies are studying closely where states rank and the steps being taken to improve the ease of doing business. There are some really important innovations taking place at the state level that could be replicated more broadly. I was in Telegana last week to help them roll-out a specialized law enforcement unit to combat on-line piracy. This kind of innovation not only protects the intellectual property of the industry, artists and thousands of workers who support the industry, it also helps attract new media, film and technology entrants into the state.
More Work Remains
For the years ahead, we have set a very ambitious goal of $500 billion in two-way trade and investment. Given the size of our respective economies, and the trajectories we are on, I’m confident we can get there. But we can do much more to accelerate the pace, to continue to liberalize markets and to improve investor confidence.
One area where I would like to see greater progress is in our ability to launch negotiations on a bilateral investment treaty (BIT). We have been on-again off-again for about 8 years in our pursuit of a treaty. And I’m afraid things have become a bit more difficult. In India’s recent model draft BIT, there were departures from the high standards that we had seen in other treaties India had negotiated, for example, with South Korea and Japan. The new model actually substantially narrows the scope of investments covered by the treaty and requires that disputes be exhausted in local Indian jurisdictions before alternative investor-state dispute mechanisms can be initiated. We will keep working to narrow our gaps, but today, unfortunately those gaps do prevent us from moving forward and putting in place the kind of structural protections that investors in both our countries have come to expect in international commerce.
As you know, the U.S. is seeking to finalize and ratify our Trans Pacific Partnership Agreement, and the hallmark of that agreement is dramatically lowering or eliminating tariffs, with higher worker and environmental standards as well. We are not alone in moving to this more liberalized trading model. I understand India is reviewing its trade posture and policies now. I also understand India must have a trade policy that addresses its unique history and developmental outlook. Similar debates are going on right now around the world. But I hope in the end, further integration into world trading markets and a lowering of tariff and non-tariff barriers is the path India chooses. That’s the best way to support worthy initiatives like Make in India, Digital India, Clean India and so much more.
The opportunities and excitement here in India are apparent as are the challenges. 60% of the population is under the age of 30; by 2030 India will be the world’s most populous nation, yet two-thirds of the India of 2030 is yet to be built. India will one day have the world’s largest middle class and the largest number of college graduates. It is a democracy, yes, noisy at times, but built on a constitutional foundation, the rule of law, respect for pluralism, minority rights and the peaceful resolution of disputes. It’s no surprise that the US is India’s largest trading partner, that some 3.5 million Americans have their roots in India, and that our two leaders have just cemented the closeness of our relationship for years to come.
We will continue to need each other in the years ahead. I’m confident that the great gains we have made strategically can be replicated on the economic front as well. Again, I think we have just scratched the surface on what we can do together economically. There will be huge opportunities for our industries to collaborate in defense, in infrastructure development and clean energy, just to name a few exceptionally promising sectors. And, yes, the structural reforms will need to occur in order to move our trade and investment levels considerably higher. I know that deeper trade and investment ties between our countries will bind us together, encourage us to play by the same rules, and enable us to do more for the world together than we would accomplish otherwise.
At last week’s Global Entrepreneurship Summit, Secretary Kerry underscored the importance of market liberalization: “On a government-to-government level, we constantly push our counterparts in other nations to enact needed regulatory reforms, to invest in their schools, to protect intellectual property, to end corruption, and to make the public sector a facilitator, not a barrier, to the creation and success of new businesses…Governments can convene the forum, make sure the coffee is hot, and get out of the way.” And that’s what we are aiming to do – create the best possible climate for trade and investment in both nations so that all our citizens can benefit.
I would like to close by going back to PM Modi’s remarks at the U.S.-India Business Council gala in Washington, where he said, “A transformed India, with one sixth of humanity, will mean a transformed world. I invite you to join us on that journey.” How true that is – and the United States is proud to say that we stand shoulder to shoulder with India on that journey towards building a better India, a better America, and a better world together. Thank you very much.