USTR AMBASSADOR SCHWAB MEETS WEST BENGAL CHIEF MINISTER AND

UNCLAS SECTION 01 OF 04 KOLKATA 000129

SIPDIS

SENSITIVE
SIPDIS

DEPT PASS TO USTR - DHARTWICK/CLILIENFELD/AADLER
DEPT PASS TO TREASURY FOR OFFICE OF SOUTH ASIA - ABAUKOL
USDOC FOR 4530/ITA/MAC/OSA/LDROKER/ASTERN

E.O. 12958: N/A
TAGS: ECON EINV EAGR ETRD PREL PGOV SOCI EAID IN
SUBJECT: USTR AMBASSADOR SCHWAB MEETS WEST BENGAL CHIEF MINISTER AND
LOCAL FARMERS

REF: A) NEW DELHI 1771 B) NEW DELHI 1774

KOLKATA 00000129 001.2 OF 004



1. (SBU) Summary: On April 14 U.S. Trade Representative
(USTR) Ambassador Susan Schwab visited West Bengal (WB) to
understand local views on India's trade interests and the
conditions of its agricultural sector. During her visit, Amb.
Schwab met with WB Chief Minister (CM) Buddhadeb Bhattacharjee,
visited a successful PepsiCo/Frito-Lay factory and interacted
with farmers and villagers at a local agricultural center. In
his conversation with Amb. Schwab, CM Bhattacharjee quickly
acknowledged the importance of globalization and the need to
increase trade between the U.S. and India. He believed that
"protectionism would not work," and Ambassador Schwab encouraged
the CM, who has a close relationship with PM Manmohan Singh, to
send that message to officials in New Delhi. At the Frito-Lay
factory, Ambassador Schwab saw how U.S. investment has helped to
provide stable incomes for local farmers and has enhanced
agricultural productivity. While at an agricultural center run
by a local non-government organization (NGO) Ramakrishna
Mission, Amb. Schwab learned about the condition of local
farmers: that the average farm is less than one acre in size
and that farm incomes are marginal. Amb. Schwab's visit allowed
her to hear firsthand that state officials are more open to
trade than the position put forward by Union Commerce and
Industries Minister Kamal Nath and that potentially state
leaders like CM Bhattacharjee can be used to encourage greater
GOI flexibility on economic reform and trade negotiations. End
Summary.



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West Bengal Chief Minister Favorable to Trade and Commerce With
the U.S.

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2. (SBU) USTR Amb. Schwab led a delegation of USTR officials,
including Deputy USTR Amb. Peter Allgeier and Assistant USTR
Amb. Douglas Hartwick, to Kolkata, WB on April 14 for a one-day
visit to better understand local perspectives on trade
relations. WB has one of the fastest growing state economies
in India and is a leading agricultural producer. It is governed
by the Communist Party of India (Marxist),which supports the
national ruling United Progressive Alliance (UPA) from outside
the coalition, giving the CPM a significant degree of influence
over national policies. The state's role in agriculture, a key
issue in trade negotiations with India, and the high profile of
pro-economic reform, CM Bhattacharjee provided an excellent
opportunity to convey a pro-trade agenda that will hopefully
resonate at the national level.




3. (SBU) Amb. Schwab spoke with CM Bhattacharjee at his offices
for almost an hour, and he was very positive about the need for
promoting greater Indo-U.S. trade. The CM noted that
"globalization is a must" and that no country should avoid the
process as "protectionism would not work." He believed that
developing countries required a level playing field to compete
and added that this was a key issue for trade relations.
However, India should be responsive to expanding trade.
Bhattacharjee noted that the CPM opposed strategic cooperation
with the U.S. and questioned the civil nuclear agreement but

KOLKATA 00000129 002.2 OF 004


that close commercial relations would be beneficial. He knew
that Amb. Schwab was to visit a Frito-Lay factory and described
it as a success and added that many U.S. IT companies were also
present in WB, such as IBM, Apple and Cognizant. The CM
mentioned that WB was interested in the potential to export
mangoes and other fruit as well as leather goods. The CM
commented that he was considering traveling to the U.S. but that
he wanted to have specific business agreements to sign should he
go. He was anxious to have Dow Chemical and Boeing Aircraft
establish a business presence in WB. He was also pursing
educational cooperation with Berkeley University and the
Massachusetts Institute of Technology (MIT).




4. (SBU) Amb. Schwab asked for CM Bhattacharjee's views on the
agriculture sector in India and the fact that almost 600 million
people are dependent on agriculture, and yet it contributes just
approximately a quarter of the Gross Domestic Product (GDP).
Bhattacharjee said some effort needs to be made to help the
farmers, citing farmer suicides in Maharastra and Andhra
Pradesh. Amb. Schawb noted that Minister Nath was reluctant to
open India's agriculture market. CM Bhattacharjee saw only
three products that were problematic: cotton, sugar and ground
nuts; crops which WB and many other states did not produce to a
large extent, which meant that there was room for "give and
take" in discussions on agriculture. Amb. Schwab asked CM
Bhattacharjee to convey that message to Minister Nath and to the
Prime Minister. CM Bhattacharjee commented that Finance
Minister Chidambaram and PM Singh would push reforms forward and
hopefully bring some flexibility to the trade negotiations.




5. (SBU) Turning to financial services, Ambassador Schwab noted
that permitting greater FDI in this sector would benefit India's
ability to generate funds to step up much needed investment in
infrastructure. "West Bengal itself would benefit
significantly," she stated. The Chief Minister listened
intently but responded simply that financial sector reforms were
proceeding although somewhat slowly.



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Frito-Lay Improves Farmers' Incomes and Lives

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6. (U) Following the meeting with the Chief Minister, Amb.
Schwab and delegation visited PepsiCo's Frito-Lay factory,
located in Howrah district, about 20 km from Kolkata. The
factory has been successful in addressing the fundamental
problem of creating efficiencies of scale, in a state where the
average farm is only about an acre in size. Frito-Lay organized
cooperatives with local farmers and through formal contracts has
guaranteed incomes. PepsiCo officials led by Operations
Director Samiran Das briefed Amb. Schwab about the factory and
its experience. The delegation then took a tour of the
facilities and spoke with farmers who supply potatoes to the
factory. Amb. Schwab was briefed on the contractual agreement
between the farmers' groups and the company and how such
contracts have resulted in greater returns compared to earlier,
when they had to sell the harvest to middlemen at fluctuating
prices. Starting with 140 farmers and 700 acres in 2003,

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Frito-Lay is now working with 4,000 farmers including 1,700
under 10 cooperatives and 13,000 plots totaling 2,100 acres.
Farm practices have improved, with inputs and guidance from
Frito-Lay, helping the farmers to increase the productivity and
the quality of their potatoes.



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Ramakrishna Mission Agriculture Center Provides a Window on
Farmers' Lives

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7. (U) To better understand the plight of the average farmer
and village family and to demonstrate her interest in their
well-being to local press covering the event, Amb. Schwab
visited a 20-acre agricultural center located in Arapanch
village, about 30 km south of Kolkata in South 24 Parganas
district. The NGO Ramakrishna Mission runs the center to
provide agricultural and vocational training, as well as basic
public health and education assistance. In 2004, Mission
India's Public Affairs Office provided USD 54,000 for model
agricultural projects. Amb. Schwab spoke with the farmers, met
women's self help groups and pre-school children. The farmers
explained to Amb. Schwab that the average farm size around
Arapanch is about half an acre. These farms usually have to
support 4-5 people. The village is located on the outer fringe
of the Sunderbans delta and suffers from brackish water. As a
result, Arapanch and its surrounding areas are usually
water-stressed, yielding just a single rice crop a year. The
center educates local farmers about sustainable farming
technology, water harvesting, and multi-cropping. Due to the
training, Arapanch fields now produce sunflower, pulses and
vegetable along with its traditional rice crop. Multi-cropping
has helped to increase the farmers' meager incomes of
approximately USD 150 per month and has given them greater
security by allowing for cultivation throughout the year.



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Indian State Leaders Can Carry the U.S. Trade Message

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8. (SBU) Comment: CM Bhattacharjee's desire for more trade
with the U.S. and his view that trade negotiations between India
and the U.S. required more "give and take" reflected a greater
flexibility and positive disposition than evidenced by the GOI
position typically put forward by Minister Nath. Given
Bhattacharjee is a leading figure in the often anti-U.S. CPM and
a member of the party's Politburo, his receptive views on trade
with the U.S. further underlines the rigidity of the GOI trade
position. In addition, disputes over specific crops subsidies,
such as on sugar or cotton, do not resonate with all states in
India. Bhattacharjee intimated in his comments to Amb. Schawb
that he did not see why differences over cotton for example

KOLKATA 00000129 004.2 OF 004


should block future trade negotiations. The interaction with CM
Bhattacharjee highlighted the potential value in engaging with
state-level leaders, who take a more practical position on trade
matters, and to have them lobby the GOI leadership to moderate
its position on future trade negotiations. State leaders may
help to carry a message to the GOI that their constituencies
would suffer, if trade negotiations in the World Trade
Organization's (WTO) Doha round failed.




9. (U) This cable was cleared by Ambassador Schwab's
delegation.JARDINE