TREASURY SECRETARY PAULSON TALKS TRADE AND INVESTMENT WITH

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SENSITIVE
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E.O. 12958: N/A
TAGS: PREL ECON ETRD EAGR WTRO IN
SUBJECT: TREASURY SECRETARY PAULSON TALKS TRADE AND INVESTMENT WITH
WEST BENGAL CHIEF MINISTER


1. (SBU) Summary: On October 28, Treasury Secretary Henry
Paulson met with West Bengal Chief Minister (CM) and Communist
Party of India-Marxist (CPM) Politburo Member Buddhadeb
Bhattacharjee to discuss economic development in India and West
Bengal, and the World Trade Organization's (WTO) Doha round of
negotiations. Secretary Paulson was accompanied by his Chief of
Staff James Wilkinson, Senior Advisor Neel Kashkari, South and
Southeast Asia Office Director Andy Baukol, Public Affairs
Deputy Assistant Secretary Brookly McLaughlin and ConGen.
Bhattacharjee was appreciative of Paulson's visit, expressed
support for globalization and economic liberalization, and a
desire for greater U.S. investment and closer links with U.S.
universities. Bhattacharjee also believed that India and the
U.S. should be able to achieve some understanding on the Doha
negotiations. However, he felt that U.S. subsidies to cotton
farmers were unfair and had a very negative impact on farmers in
developing countries, especially in Africa. He added that India
was experiencing low growth in its agricultural sector and
seeing many farmer suicides, and so agriculture represented a
serious concern for India. Near the end of the meeting,
Secretary Paulson asked for a one-on-one interaction with the

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Chief Minister without others present and discussed the
Indo-U.S. civil nuclear agreement. Bhattacharjee's receptivity
to closer commercial and educational links with the U.S. is
reflective of his more practical desire to improve conditions in
West Bengal. However, his willingness to engage with the U.S.
has not resulted in him or other senior West Bengal Communist
leaders being able to temper the strident anti-U.S. policies of
his party at the national level. End Summary.


2. (SBU) Bhattacharjee warmly welcomed Secretary Paulson and
his staff. Secretary Paulson related his interest in coming to
West Bengal and to India in general, to assess aspects of the
country's economic development, including on infrastructure and
the financial sector. The CM responded that he believed that
globalization was changing the global economic dynamic and that
"Communist parties are changing" and have recognized that there
must be economic liberalization. He emphasized that the
Communists had to "reform or perish." Bhattacharjee commented
that he had been to China and Vietnam many times and in his last
visit to Vietnam in March 2007, he had seen many economic
changes.


3. (SBU) Secretary Paulson asked for Bhattacharjee's views on
the WTO's Doha round of negotiations. The CM responded that
trade was important but that India and the developing countries
needed "a level playing field" and digressed to comment that
President Roosevelt and his Treasury Secretary Morgenthau had
developed a "Lend-Lease" program during World War II to support
Churchill and Stalin, implying that the U.S. should again be
generous in supporting developing countries in the area of
trade. Bhattacharjee said that U.S. agricultural subsidies were
a serious problem and especially for cotton farmers in Africa.
However, the CM did not believe that the Doha negotiations
should remain deadlocked over agriculture and that India could
be flexible. He said that he had spoken to the Prime Minister
and the Minister for External Affairs (MEA) to encourage them to
work with Brazil and South Africa to craft constructive
alternative proposals. Secretary Paulson added India and the
more advanced developing countries should be responsive to the
Non-Agricultural Market Access (NAMA) issues as well as those
related to General Trade in Services (GATS). Bhattacharjee
agreed but added that agriculture was a great concern for India
given the number of people dependent on that sector, the low
economic growth rates in agriculture and the many farmer
suicides.


4. (SBU) Bhattacharjee then outlined how he has been seeking to
attract foreign direct investment (FDI) in West Bengal for
infrastructure and industry. He said that the state was doing
well in attracting information technology (IT) companies like
IBM and others. However, he wanted more manufacturing and U.S.
investment in the state. He had been in contact with Boeing
Company officials to suggest a maintenance facility in eastern
India. Also, in food processing, the CM expressed satisfaction
with having a Frito-Lay factory in the state. Bhattacharjee

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added that educational cooperation was another area of great
interest and that WB Finance Minister Dr. Asim Dasgupta, who was
a graduate and a former professor at the Massachusetts Institute
of Technology (MIT),was fostering collaboration between MIT,
Calcutta University and the Indian Statistical Institute. The
CM was also in contact with Berkeley University to develop
cooperation in biotechnology.


5. (SBU) Secretary Paulson commented that one of the obstacles
to greater FDI in India was uncertainty over contracts and the
legal process. He said that commercial disputes need to be
resolved fairly and quickly and mentioned as examples disputes
with Dow Chemical and McDermott International reflecting the
long legal process. Bhattacharjee said he understood and in
fact, wanted Dow Chemical to invest in West Bengal and the
state's proposed chemical hub. The CM did not understand why
Dow should be saddled with Union Carbide's liabilities from the
Bhopal accident. He assured the Secretary that if there was any
investment problem, he would personally resolve the issue. He
also encouraged Secretary Paulson to raise investment issues
with the Prime Minister and Finance Minister.


6. (SBU) Secretary Paulson finally asked to speak one-on-one
with CM Bhattacharjee and ConGen and the Treasury staff left the
meeting room. Secretary Paulson later commented to media and
others that he discussed the Indo-civil nuclear agreement with
the CM.


7. (SBU) Comment: CM Bhattacharjee was demonstrably animated
and happy to meet with Secretary Paulson, recognizing the
opportunity to highlight his desire for greater U.S. investment
and focus for West Bengal. Bhattacharjee covered the themes he
typically raises in his meeting with U.S. officials: his
acceptance of capitalist principles; the need to have equitable
development, especially for agriculture sector; the desire for
investment from large U.S. companies like Boeing and Dow; and an
interest in educational cooperation. Bhattacharjee clearly is
receptive to engagement with the U.S. However, his ideological
flexibility and that of some of the West Bengal Communist
leadership has not resulted in the West Bengal leaders being
able to temper the national CPM leadership in its hard-line
opposition to the U.S. and to growing Indo-U.S. cooperation


8. (U) This message was cleared by Secretary Paulson's Staff.
JARDINE