Indo-US trade relations: Damage controlling exercise

By K.N. Pandita (in USA)

Earlier this month, high profile Indian team landed in Washington to attend the annual Leadership Summit of US-India Business Council (USIBC) and US-India CEO Forum. The team sought to explore prospects of direct foreign investment in India and stimulate the quantum of Indo-US trade, which is very low keeping in sight the size of the partners in business.

Since the Indian delegation comprised top echelons of economic policy structuring module, and also since I happened to be holidaying in the US, I was naturally interested in keeping track of the details of crucial deliberations trickling down in the American print media.  

Before arriving in Washington, the delegation comprising Finance Minister Chidambaram and Minister of Trade and Industry Anand Sharma, was engaged in private probing exercise in New York to fathom the mood of the American side. From this informal exchange, the India side is reported to have received a mouthful, which indicated that the path, which the Indian delegation sought to tread, was rough and uneven. The first salvo was delivered without any reservations.

Vice Chairman of Planning Commission Montek Singh Ahluwalia tried to sell the argument of that while the Indian government was not averse to bringing in economic reforms to make smooth bilateral economic relations yet the reforms had to wait owing to the politics of Parliamentary elections slated for 2014. Chidambaram reacted that he had only heard the lament and that hardly made things intelligible to the American side. Anand Sharma reserved his clarifying narrative for the USIBC session in Washington and chose to vent ideas about trust deficit. However, at the CEO Leadership meet in Washington he was more articulate.

In Washington, Senator Mark Warner of the US made some plain speaking while reflecting on current status of Indo-US trade relations. He said the trade relations had got stuck up and no activity worth calling movement forward in widening and deepening trade relations was in sight. Casting veiled aspersions on India’s non-delivery stances, he said the US wants to finish what we had started.

The Senator projected American initiative as positive and timely, which needed to be responded to with equal earnestness. He talked of 2005 Indo-US nuclear deal that produced 2008 Nuclear Suppliers Group (NSG) exception and Obama’s rapid negotiations of reprocessing arrangements completed in 2010. He claimed these were illustrations of what could be accomplished when the two countries are working in a spirit of shared enterprise. This indirectly meant that India did not play the matching role and thus has been happening the phenomenon of a stalemate in relationship.

In the Washington roundtable, among others, six former US Ambassadors to India came together to voice their concern on lowering of the graph of trade relations between the two countries in recent years. Frank Wisner plainly said that he had noticed in the last year decline in the brand of India, which is a serious problem. Another stalwart of Indo-US policy observers, namely Robber Blackwill who saw the relationship troubled as of now, expressed similar concerns. Going a step further he warned these could get worse if the two governments did not arrest the trend.

The former Ambassadors pleaded that the sides need to get over the present hump and resurrect the momentum. In their view there was decline in the brand of India among business. India, they believe, is going through slowing growing rates, declining business confidence, and troubles in rupee.

Dismissing election pretext, the former Ambassadors argued that India could address these issues even on the eve of parliamentary elections and generate FDI.

However, one of the former Ambassadors to India, Mr. Pickering advocated for a Second Green Revolution in India as the first revolution had been brought about by the then Prime Minister Narasimha Rao when India was faced with economic recession. He strongly favoured forward movement of Iran-Pakistan-India (IPI) gas pipeline, a project stoutly opposed by the Americans. He made forceful argument in highlighting the energy need of India and called it crucial to overall movement forward of Indian economy. He called a move in this direction as creative set of leverage.

Another former Ambassador Mr. Celeste (1997-2001) seconded Pickering’s theory of “creative set of leverage” and argued that it (IPI gas pipeline) could break conventional thinking. He exhorted US businessmen to invest in India’s healthcare and education areas and advised that at least the first step of 7-year old Indo-US nuclear deal should be completed.

It will be reminded that the Indian Parliament refused to compromise on the nuclear liability law. The Ambassadors were of opinion that it was unlikely that the deal will be consummated. The two countries must move forward in Bilateral Investment Treaty (BIT). The bilateral nuclear deal should not get killed as it has been brought about with great labour.

USIBC Chairman and CEO MasterCard Worldwide, Ajay Banga also regretted cracks in Indo-US relations and said there is need to repair these. He believes that political leadership should step in and create transparent, predictable and consistent business environment. Among grave concerns to investors are India’s tax policy, local manufacturing restrictions, challenges to innovation and intellectual property rights? He thinks that the US side cannot meet the demand for IT and soft wear solutions without support from temporary additions to their skilled workforce — an area where India is their best possible partner. He thinks that it is not only in the interests of the US to open doors to more skilled workers but also to ensure that immigration reform does not discriminate against our partners nor limit US companies in choosing where their service lies.

Mr. Banga has also met with the US Commerce Secretary Penny Pritzker and conveyed to him India’s deep concern over these “killer amendments” in the immigration bill, which passed the Senate and now await House action.

Ratan Tata, the Co-Chairman of the Council also spoke of decreasing trust between the two sides and counseled the need to reconstruct it. He frankly said that the US was the easiest business partner to deal with.

In final analysis, the narrative of status and prospects of economic relations between the two countries was handled deftly by either side without raising ambiguities. It was felt that at the care both sides wanted things to move speedily. In nutshell, the US wants India to make her laws and conduct of business grounded on realities of relationship and also envision the enormous scope it could open up for both the countries. On Indian side there was ample show of willingness to bring about economic reforms notwithstanding legislative, political and other constraints. Two issues are more prominent. One is of Foreign Direct Investment and the second is carrying forward the remaining steps in connection with bilateral nuclear deal. From Indian side, the irritant of “killer amendment” to immigration rule has to be removed and the path cleared for IT and technological partnership in a manner that the enterprise becomes complimentary to just and equitable economic relationship.

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