Business International

‘Bullish on India despite short-term setbacks in Indo-US trade’, says Nisha Biswal

The Hindu spoke with Nisha Biswal, the president of the U.S.-India Business Council at the U.S. Chamber of Commerce. Ms. Biswal was previously the Assistant Secretary for South and Central Asian Affairs at the U.S. Department of State from 2013-2017

On whether the door for negotiations is still open, following US President Donald Trump’s letter to the US Congress stating his intent to withdraw benefits to India under the Generalized System of Preferences (GSP).

Sure. Of course, it is. In the sense that, I think, were there to be some significant developments on resolving these trade issues, I think that the administration always has the ability to reassess, to defer, delay or withdraw its intent to terminate…Within that 60 day notification, certainly there continues to be room for negotiation.

And do you have an assessment of whether or not that will happen?

I don’t have a very clear sense. From the perspective of the US India Business Council and the US Chamber, we’ve consistently said with respect to GSP that we believe that the GSP program is an important one, it’s a beneficial one. It benefits both the US side and the India side.

There has been growing frustration about the number of unresolved trade issues between the US and India. It was, I think the dairy and the medical device industries that were cited in the GSP review. But, in the last six to 10 months we’ve seen the number of issues that have caused heartburn in the US India trade corridor just continue to grow.

Do you think there was a spillover effect from India’s e-commerce policy and FDI in e-commerce and data localization policies – issues that may have not been explicitly linked to GSP and this just soured the entire atmosphere?

I don’t think that there is a specific linkage on GSP, but if you are a policy maker and everything else is going really well, but you have this one issue you tend to be feeling about it in one way…It does color the overall environment I would think.

According to you, what prevented the “fairly modest” goals from being achieved in, say, the medical devices sector, agricultural goods or ICT?

Obviously the people best positioned to try to explain where things have or have not been able to be resolved are the people who are at the negotiating table, the two governments and their trade officials. What I would say is that what I have long felt is that between the US and India, because we tend to come at these issues more individually, we have tended to not be as willing to give ground. What I think USTR therefore was trying to achieve, was …to bracket together three or four issues that could then get resolved.

In the process of doing that, it seems like partly the Indian reaction is to feel like the goalposts were moving and more issues were being brought together. I think that was not my understanding of USTR’s intention…I don’t think the Indian side perhaps viewed it in the same way and so there was a bit of a disconnect.

I think fundamentally the election timetable over the last 10 months has factored in because things like medical devices have become much more populist in terms of the government, the Indian government’s posturing, positioning of economic issues to benefit the Indian citizens. Trade is a tough sell in any country in an election campaign. The same is true in the United States and the same is true in India …

Wouldn’t June after the elections have been a better time when the next government’s hands aren’t tied?

I think that that is certainly one interpretation. Clearly the administration had a different interpretation. I think that from another perspective, perhaps this is a time of maximum leverage, I don’t know…I think there’s also a concern that if you have an administration with which you have invested the last two years to address an issue and then you’re going into an election and you don’t know what the administration coming in is going to be, whether it’s going to be the same or a different one.

What is the current mood in American industry with regard to what’s happening between the US and India? Is there an acceptance that protectionism is alive and well and in some senses originates at this time from the US, or is American industry still willing to take a longer view about the Indo-US relationship?

I think it’s not an either/or scenario. India continues to be one of the most important markets in the world. India also, for its own development and growth targets, continues to need significant investment from around the world and certainly from the United States. American technology, American capital, American know how have an important role to play in helping India develop its economy and achieve its potential. Similarly, American prosperity is increasingly going to be influenced by, impacted by, our ability to be relevant to the growth markets of Asia. US industry needs India. India needs US industry.

In the long term everyone understands that there is an extremely important and positive opportunity between the United States and India, and between American industry and India. That said, clearly industry is going to try to fight on against the forces of protectionism, be they in the US, be they homegrown, or be they in India or anywhere else in the world.

With respect to India I will note that there have been very significant strides made over the past five years, that there have been significant and palpable progress on the ease of doing business, that by and large the trajectory has been a positive one, but I would say that the positive trajectory has flattened out and then maybe even dipped a tiny bit …

Do you attribute that to the election cycle?

I do. Because I think that any, in any democracy, particularly when you head into an election, you are very focused on your domestic constituencies.

On the current Indian government’s steps to help the ease of doing business…

On the ease of doing business there has been a whole host of regulatory reforms that have made it easier and have simplified the processes. Also, the big reform is GST. Even though we haven’t seen the full impact and benefit of GST, it has greatly simplified the tax structure for bringing goods to market in India and being able to access a unified market rather than having to navigate and negotiate individually, separately across India.

There has been the bankruptcy code and many other changes that have been made and there are lots of smaller things that are being done across different industries that have also helped. I would say the overall momentum in that sense has been in a positive direction. Does that mean that industry is satisfied? No, because there’s a lot more that can and needs be done to create a much more efficient business climate, not just in the ease of doing business, or starting a business, but also in things like infrastructure. India has a massive infrastructure deficit. Yet it is not getting the kind of investment and infrastructure that it needs. Why? What can be done to really bring in that kind of investment, which is creating a much more streamlined and transparent process for infrastructure projects? Land permitting, construction permitting, and all of the other things.

Then manufacturing. India wants to be able to really try to jumpstart a manufacturing economy. What does it take to have companies bring their production capacity into India? I’m not just talking about financial or tax incentives, but also just things like the surety of labor, of power, of land. The building of a manufacturing ecosystem that allows there to be the creating hubs for example. Technology hubs or that can help create a whole manufacturing ecosystem because industries tend to locate where they can exist with a lot of other like-minded industries and you can create efficiencies, economies of scale. There’s a lot more that India can and should do to be able to attract that.

Since you mentioned GST, the twin issue, at least from a domestic perspective, is demonetization. In the course of your work have you found that demonetization impacted trade?

I wouldn’t say that we noticed a great impact one way or the other on demonetization. I think demonetization had a fairly significant impact domestically and particularly on the informal sector or on the cash based economy…I would say that the piece on demonetization that sometimes gets lost because people look at it from a corruption angle and whatnot. But the piece that gets lost is you have seen two important things that have come about in the aftermath of demonetization.

One is tax revenue collection has gone up and two is you have seen much more significant growth in the banking and digital payments sector.

Although that was not one of the stated objectives before demonetization was undertaken….

That’s what I’m saying. I’m steering clear of the debate on whether demonetization achieved its stated goal or not. I am not the one who is best positioned to talk about that. I’m just saying from an economic reforms impact, which is that as you see more and more Indians with bank accounts and using various payment mechanisms, basically moving away from dependency on cash, that that has one positive impact.

Then the second is as a result of moving some of the, into a formal economy that you have seen an uptick in revenue collection. Those are two positive aspects not belying that there may be some negative impacts as well.

In 2014 you said that trade between India and the US can go up to $500 billion. Given what’s happened in the last at least two years because of the Trump administration, do you still think that’s an achievable goal in the near future?

US-India trade is going to grow …The question is, will growth be at a pace and the potential that it can be? … It is my hope that post-election, whatever the outcome, that there will be a real reckoning that for India to achieve what it needs to achieve on behalf of its people, because the demands of the Indian people are going to spur whatever government to really make sure that they are making those choices that will allow investment to come in that will create that [growth].

I’m still very bullish on India. I’m still very optimistic about US India and US India trade. It’s not going to be smooth and linear, but then with these two behemoth economies and democracies that are very complicated, nothing is going to be smooth and linear.

On the new e-commerce policy: abstracting from the risks of government intrusion and overreach into citizens lives and these are risks that exist with all governments, isn’t it unrealistic to expect a sovereign nation to not want to regulate the flow of data outside of its borders to other sovereigns, given that, to use a cliché, data is the new oil?

I fully understand that data governance is an important issue, not just in India, but around the world. The United States is also grappling with what and how much of a regulatory frame to place along issues like privacy, issues like data security. I think what we are not saying is that India shouldn’t have a regulatory structure or even being 100% against localization of any kind of data. What I think we are saying is to caution against an over-reach or an over-regulatory approach. That would then cripple the ability for India to really grow the digital economy and for India the digital economy is going to be one of the most important drivers of economic growth.

In certain issues there have been consultations, in other issues there have not been. Policies get unveiled with little or no consultation or where consultation is done with local actors, but global investors are not at the table. If you want global capital, if you want US capital, then you have to create a level playing field and conditions for that capital to then be able to be effective and successful.

I want to move from data oil to oil oil. Are you expecting trouble with regard to the exemptions from the Iran oil sanctions? What about U.S. NSA John Bolton’s warning on Twitter to countries that are buying Venezuelan oil?

I think that there’s always going to be a dialogue between the United States and India. The US and India on the foreign policy front have many areas where there is deep and growing convergence and then also some areas where there are some significant divergences. The areas of divergences are slowly but steadily narrowing, but they are still there. The policy of both the prior administration and the current one has always been to try to work through those differences and divergences, rather than to create a crisis of confidence. That’s fundamentally because I think in both countries, across the political spectrum, there is an understanding that we are important to each other’s strategic goals as we think about the global landscape. We have more in common on the world that we want to see then we have differences.

By and large, whether it’s talking about Iran oil, Iran sanctions, whether it’s talking about Venezuela, whether it’s talking about CAATSA, the US and India have sought to find ways to have some space and some understanding. I think that will continue to be the case.

How far, within the current administration and outside of it, do you think this over-reliance on the trade balance as a proxy for the health of a trade relationship extends, how far does this understanding extend beyond the President, within the current administration and for example, beyond 2020 if there’s another administration that comes forth?

I think that the trade balance or imbalance is certainly one indicator that governments and industry look at. Even if you look at a trade imbalance, what I have tried to underscore is that while the US and India may have a trade imbalance, frankly, India is one of the only countries with whom we are actually reducing the gap on that trade imbalance and partly that’s because of the very strong and healthy energy trade that exists between the US and India and that is to the benefit of both India which is looking to enhance energy security, energy imports to fuel its growing economy and for the United States which is increasingly finding more energy resources that it’s able to put onto the global market.

What I would say is more importantly an area of potential collaboration is the fact that for both India and the US the greater concern is the trade imbalance that each country has with China.

On India benefiting from the US-China trade war and the risks India faces in this regard…

I think that from the perspective of the US Chamber we don’t think trade wars benefit anybody. It drives up costs and it creates inefficiencies and tariffs, end up suppressing trade and suppressing growth. On the other hand… a number of companies that have been manufacturing in China are looking to perhaps diversify their production capacity. India could and should make a play for some of that business. This is where I said, if India wants to really grow its manufacturing, what are the things that it should be doing? Companies that are currently looking to expand outside of China, many of them are looking right across in southeast Asia, in Malaysia, in Vietnam, in Indonesia et cetera.

Some are looking at India and are moving into India, many more could be, but I think it requires India to really make a big play for bringing that production capacity. Sometimes in a country as big as India, you might find an inclination to think, “Well, we’re so big they have to come here anyways.” You see a lot of manufacturing going to very small countries like Vietnam. Nobody is going to Vietnam because of the market it represents.

So is complacency the largest risk for India?

I think complacency is certainly something to guard against. In a globally very competitive environment, India is going to need to be globally competitive.

Some sections of the media have said that India is the next target of Donald Trump’s trade wars. Do you think that’s a fair characterization?

No I don’t think that’s a fair characterization. I don’t think that the Trump administration of the United States is looking to have a trade war with India. I think that’s just a completely overblown characterization… Trade is by its very nature an adversarial conversation when it comes to negotiations between governments. The more consequential that that trade becomes, as India becomes a more important country in the global trade regime, the issues become that much more difficult because more is at stake…That’s where I think we are between the US and India… we are in the midst of some tough negotiations on some tough issues.

Source: thehindu.com

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