Cordial Indian-U.S. trade ties essential

By Jagdish Shettigar

NEW DELHI: During President Bill Clinton's visit to India last November, the two countries signed a memorandum of understanding to promote bilateral economic relations, including technological upgrading.

The main feature of the agreement was an effort to institutionalize the exercise without merely expressing intentions towards that end.

Accordingly, it was decided to assess the follow-up actions at the highest level -- that is, involving the Prime Minister's Office in the case of India and the President's secretariat in the case of United States.

It was also decided to have at least two meetings -- one in India and the other in U.S. -- to sort out issues concerning bilateral economic relations. The current visit by Atal Behari Vajpayee is one such follow-up action.

In the meeting between the two leaders from the world's giant democracies, no doubt certain major issues are expected to come up for discussion as drawn up by the officials from both the sides.

But what are the perceptions of the general public? A attempt is made here to present what an ordinary citizen expects from such bilateral talks.

The U.S. is the most important trading partner as India depends on the American market for nearly 19 percent of its exports -- though from the American angle India accounts for not more than one percent of its total imports.

Similarly, America is the major foreign investor in India. Therefore, cordial bilateral economic relations between the two is crucial.

However, that does not mean that we should be a meek observer in the talks. Whatever may be the American position and role in bilateral economic relations, India should be an effective participant in the talks. If India is to be seen as an effective participant without compromising national interests, the following issues should be thrashed out.

The biggest irritant which needs to be sorted out is the economic sanctions imposed against India after the nuclear explosion in May 1998.

No doubt, sanctions failed to deter India's progress in any manner except having a marginal impact such as a little higher cost of commercial borrowing from the international market. Otherwise we have been able to effectively withstand the sanction effects unlike Pakistan.

Against the expected resource gap of less than U.S.$2 billion required to be bridged through external assistance, India was able to raise $4.16 billion through Resurgent India Bonds for non-resident Indians -- that too within 10 days.

Even the American investor, did not stop or curtail their ongoing projects in India as a result of stopping of financial back-up as per the sanction rules. In fact, pressure for diluting the sanctions against India was initiated by American businessmen who look at India as a major partner from the point of view of long-term economic relations.

Nevertheless, for an ordinary Indian citizen who may not be aware of what exactly sanctions meant feels disturbed as it amounts to questioning our right to safeguard national security. Therefore, easing of emotional tension at the level of common people is an important step to promote long-term bilateral economic relations.

Similarly, as per the sanctions some of our leading research organizations such as Bhabha Atomic Research Center, Indian Institute of Science and National laboratories have been blacklisted for the purpose of any assistance.

On the other hand, the memorandum of understanding expresses the intention to strengthen technological base in India. That may be possible through transfer of technology through foreign collaborations. But it is equally important to be self-reliant from the long-term view. In this context, the role of our national laboratories are crucial.

How can this be achieved without enabling these institutes to function without any hassles and handicaps. Naturally, the common citizen expects this issue also to be sorted out before any meaningful progress in the bilateral economic relations.

During the American President's visit to India, Clinton was impressed by the weaving skills of Indian carpets.

Clinton was told how many thousands of knots made each meter of carpet -- which is basically responsible for fine weaving of the world class carpet. Perhaps what was not told was that such skill would be possible only with the involvement of child labor.

Today, Indian carpets are in great demand in the international market because of the fine weaving quality -- which unfortunately or fortunately is linked with child labor. But the U.S. is very determined to integrate labor standards along with environmental issues with the WTO.

Though the U.S. failed in its attempt at the last Seattle meeting, it still is determined to push the issue. Though the MOU signed at the last meeting between the two countries appreciated India's concern, simultaneously it reiterated American stand.

It is pretty clear that the developed countries are not raising the issue of labor standards from the humanitarian angle. On the other hand, these countries are not interested in export promotion of the developing countries.

From the Indian point of view, carpet is a major export item. Mere appreciation of the skill and, at the same time, the effort to scuttle its export cannot go together. The presence of an Indian carpet at Clinton's residence -- which he bought during his visit -- no doubt enhances status of this particular Indian product.

The Indian carpet weaver should naturally feel thrilled and elated. But that alone will not help the carpet industry to thrive. For that it is crucial to expand market support.

Therefore, it is crucial to recognize the fact that while the carpet at the American President's drawing room enhances its status, for survival of the carpet weaver and his skill, it is important to enter the American market without any hassle.

Therefore, it is crucial to sort out issues such as sanctions, extending the scope of WTO to non-trade issues etc. to promote meaningful and effective bilateral economic relations between the two countries.

The author is a member of the Prime Minister's Economic Advisory Council and Convener of the BJP party's Economic Cell.

-- The Statesman/Asia News Network