Obama, Modi Agree to High-Level IP Working Group, Financing, Infrastructure Initiative

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By Stephanie Cohen

Sept. 30— President Barack Obama and India's Prime Minister Narendra Modi Sept. 30 pledged to a number of new initiatives designed to boost Indo-U.S. trade and to promote a more attractive investment climate for businesses in the U.S. and India.

On the issue of intellectual property—a central point of tension between Washington and New Delhi and a top area of concern for U.S. businesses—the two leaders agreed to establish an annual high-level Intellectual Property (IP) Working Group with “appropriate decision-making and technical-level meetings” as part of the Trade Policy Forum, a joint statement released by the White House Sept. 30 said.

“They recognized in particular the contribution of the Indian and U.S. Information Technology (IT) industry and the IT-enabled service industry in strengthening India-U.S. trade and investment relations,” the joint statement said.

In May, the Office of the United States Trade Representative (USTR) maintained India's status on the so-called Priority Watch List of countries that will be subjected to intense bilateral engagement on the issue of intellectual property rights. The USTR cited India's growth in Internet piracy, problems in securing and enforcing patents, trade secrets protection, counterfeit goods and localization trends as issues of concern (85 ITD, 5/2/14).

The announcements came as the president and prime minister completed two days of meetings and discussions. Modi made the rounds in Washington this week with visits to Capitol Hill, the White House, the State Department, and the U.S.–India Business Council in what is viewed as an effort to recharge the U.S.-India relationship.

President Obama hosted the prime minister at a dinner Sept. 29 followed by a Sept. 30 meeting in the Oval Office. It is the first bilateral meeting for the two leaders. Modi's Bharatiya Janata Party rose to power in May after promising to reform India's economy. Modi has promised to boost trade and investment.

Infrastructure and Finance.

At the conclusion of their meetings, the White House said the leaders pledged to establish an Indo-U.S. Investment Initiative to focus on capital market development and financing of infrastructure in India.

“[T]he U.S. government welcomes India's offer for U.S. industry to be the lead partner in developing smart cities in Ajmer (Rajasthan), Visakhapatnam (Andhra Pradesh) and Allahabad (Uttar Pradesh),” the joint statement said. The initiative will be led by India's Ministry of Finance and the U.S. Department of Treasury.

The two leaders also agreed to establish an Infrastructure Collaboration Platform to enhance participation of U.S. companies in infrastructure projects in India. The Ministry of Finance and U.S. Commerce Department will oversee that effort.

Obama and Modi “welcomed the expansion of the partnership in oversight of financial institutions, including between Reserve Bank of India and the U.S. Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System and the Office of the Comptroller of Currency,” the joint statement said.

Additionally, Modi will host two trade missions in 2015 focused on meeting India's infrastructure needs with U.S. technology and services, according to the White House. India also has offered to host the India-U.S. CEO Forum in early 2015 and both leaders agreed to “reinvigorate” the forum.

Bilateral Meeting.

Following a meeting in the Oval Office and a visit by the two leaders to the Martin Luther King Jr. Memorial in Washington, President Obama told reporters Sept. 30 that the two leaders spent most of their time at the dinner the previous evening talking about the economy.

“We discussed issues of trade, issues of making sure that maritime rules are observed,” Obama said.

The Obama administration wants to increase trade between the two nations from $100 billion in annual bilateral goods and services trade per year to $500 billion in 10 years, a goal that dovetails with Modi pro-business desire to boost U.S. investment in India. Bilateral goods and services trade with India reached $97 billion total in 2013.

The White House issued a statement Sept. 29 that broadly sidestepped the array of trade disputes over intellectual property, steel imports, a global trade facilitation deal that hang unresolved between the two nations (188 ITD, 9/29/14).

“Open markets, fair and transparent practices will allow trade in goods and services to flourish,” between the U.S. and India, the statement from the White House Office of the Press Secretary said.

India, the third largest economy is the world and the second most populous nation in the world, represents a vast and important market for the U.S. economy. Merchandise trade between India and the U.S. has grown “rapidly” over the last five years, according to a Sept. 26 report released by the Congressional Research Service. India was the 18th largest export market for U.S. goods in 2013, and the 10th largest source of U.S. merchandise imports, according to the U.S. International Trade Commission,

U.S. goods imports from India totaled $41.8 billion in 2013. The top categories of U.S. imports from India in 2013 precious stones (diamonds), pharmaceutical products, mineral fuel (oil), organic chemicals, and miscellaneous textile products. The U.S. goods trade deficit with India was $20 billion in 2013, an 8.4 percent increase ($1.5 billion) over 2012, according to USTR.

The Washington leg of Modi's trip follows comes after stops in New York at the United Nations and meetings with U.S. business executives from Boeing Co., PepsiCo Inc., Google, IBM, General Electric, Cargill, Merck, Caterpillar, and Mastercard.

WTO Impasse.

The issue of ongoing disputes between Washington and New Delhi at the World Trade Organization was also addressed at the bilateral meeting.

Obama and Modi discussed “their concerns about the current impasse in the World Trade Organization and its effect on the multilateral trading system,” according to the joint statement. They directed U.S. and India officials to “consult urgently along with other WTO members on the next steps,” the statement said.

At the World Trade Organization, the U.S. is preparing to appeal a ruling that U.S. countervailing duties on Indian hot-rolled carbon steel flat products violated certain international trade rules (160 ITD, 8/19/14).

The U.S. also brought a WTO case in May claiming that India's Jawaharlal Nehru National Solar Mission—which promotes the development of solar power-generation facilities—discriminates against imported solar cells and modules in favor of domestic products (102 ITD, 5/28/14).

Washington and New Delhi are also at a crossroads about India's stance over the WTO's Trade Facilitation Agreement (TFA). In July, India refused to support a consensus to open the trade agreement for domestic ratification, citing concerns that the WTO was not making sufficient progress on the issue of food security (148 ITD, 8/1/14).

Economic Opportunities and Trade Barriers.

As Modi toured Washington, U.S. lawmakers and interest groups called on the Obama administration to expand its trade relationship with India.

Sen. John McCain (R-Ariz.), a member of the Senate Committee on Foreign Relations, in an article published Sept. 30 in Foreign Policy magazine called for the U.S. to “pivot” to India—a play on the Obama Administration's recent strategic focus on and “pivot” to Asia. McCain acknowledged in the article that in Washington “there is a sense” that the U.S.-India relationship “has not met our admittedly high expectations.”

McCain called for deeper economic ties and a free trade agreement between the two countries that would lower all barriers to trade, a position he has stated repeatedly recently(175 ITD, 9/10/14). The U.S. and India are negotiating a bilateral investment treaty. The senator also called for India's integration into the Trans-Pacific Partnership currently being negotiated.

“India and the United States have, or are negotiating, FTAs with every other major global trading partner, so we are on course to discriminate only against one another,” McCain wrote. “This makes no sense.”

McCain said the U.S. should be India's “preferred partner” for economic growth especially for trade and investment. “U.S. companies and capital are always looking for opportunities, and they will go where they find transparent governance, effective institutions, rule of law, and a favorable regulatory environment,” McCain wrote.

But macroeconomic uncertainties and structural constraints in India continue to concern foreign investors, according to a report by the United Nations Economic and Social Commission for Asia and the Pacific released Sept. 24. “Although restrictions on foreign investment in several sectors have been lifted in recent years, many sectors retain equity limits on foreign ownership,” the report said.

Helping India achieve economic reforms will make India a more “enticing partner,” Derek Scissors, a resident scholar at the Washington-based American Enterprise Institute said in a Sept. 30 online post.

“An India that rises to be a genuinely middle-income country, with median income say at one-sixth the American level, is an enticing partner,” Scissors wrote. “A successful India has every reason to become more cooperative in global trade, as it will be increasingly able to produce for the world and increasingly need foreign energy and food. And an India that liberalizes labor laws does far more for multinationals than any bilateral concessions the President might win.”

The Washington-based Center for American Progress also called for the U.S. to craft a more strategic relationship with India. “India has the world's second-largest population and will soon have the third-largest middle-class consumer market, behind only China and the United States,” Vikram Singh, vice president of national security and international policy at the Center for American Progress said in a column posted online Sept. 30. “Therefore, a strategic partnership on trade, innovation, security, and the environment is fundamentally important for the United States.”

To contact the reporter on this story: Stephanie Cohen in New York at scohen@bna.com

To contact the editor responsible for this story: Jerome Ashton at jashton@bna.com

The Asia-Pacific Trade Investment Report 2014 can be found at http://www.unescap.org/sites/default/files/APTIR%202014%20-%20Full%20Report.pdf.

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