Seize opportunities

Seize opportunitiesTrade is and should increasingly be a critical part of the Indo-US partnership. We have a window of opportunity to expa...

Seize opportunities
Trade is and should increasingly be a critical part of the Indo-US partnership. We have a window of opportunity to expand our trade exponentially and lift the prospects and standards of living of our people, but it is imperative that we seize it.

Since the conclusion of the Uruguay Round in 1994, where the US lowered its average tariff to just under 3 per cent, US imports from India have risen 71 per cent, from just over 5 billion to 9 billion. During that time, our trade deficit with India has widened, nearly doubling during that period to 5.4 billion. This makes the United States India8217;s largest single trading partner, accounting for over 12 billion in two way trade annually, and purchasing 21 per cent of India8217;s global exports. India8217;s textiles exports to the US have grown 77 per cent since we began to phase out our textiles quota in 1995. India8217;s software and related services exports have grown 10-fold since 1992, reaching 2.6 billion last year. Nearly three-quarters of those exports go to the United States. Moreover, some think the market will continue to expand exponentially over the next decade, reaching 87 billion by 1998.

Despite this growth though, our bilateral trade is still small compared to what it could be. In terms of purchasing power8217;, India already has the world8217;s fourth largest economy. However, it accounts for only 0.7 per cent of global trade. A major factor restricting trade are India8217;s tariff and non-tariff barriers, which impede its own prospects for higher growth, rising living standards and technological innovation. These barriers raise the price of goods for families, force businesses and farmers to pay higher prices for inputs and reduce India8217;s overall growth prospects as competitors in China and South-East Asia move ahead. This is not a matter of self-reliance, but a policy of self denial.

Investment and trade barriers combine to restrict FDI in India. While the United States is India8217;s largest foreign investor, India accounts for less than 1 per cent of total US global investment. We as governments need to seize opportunities not shrink them.We need to think of our trade relationship in terms of possibilities and partnership and not in the divisive and distrustful mindset of the past. We need to deal with our differences in a constructive fashion based on trust and dialogue. We did that recently in reaching our so-called Article 288242; agreement.

In fashioning its trade policy, India must take into account its highly diversified economy, which spans, as President Clinton said, from the handloom to the hyperlink. India has far ranging interests in multilateral agreements to open markets. We should support the expanding networks of our private sectors with forward looking trade policies that facilitate trade and not stand in the way of it, and in doing so, creating the conditions for success. India should raw on the fact that its most successful sectors are those that are most integrated into the world economy. In the field of information technology, India and the US agreed to the Information Technology Agreement, which eliminated tariffs in a wide range of IT products, spurring growth and exports in India8217;s critical software sector.

There is more we can do in this area, expanding and concluding the second phase of ITA II, supporting an extension of the moratorium of customs duties on e-commerce transactions, and opening services markets in a range of high technology fields, including software development services, computer services and entertainment.

The author is the Deputy US Trade Representative. These are excerpts from her speech made at a meet organised by CII last week