COMMERCE UNDER SECRETARY MANCUSO DISCUSSES TRADE

UNCLAS SECTION 01 OF 02 NEW DELHI 000645

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TAGS: ECON ETRD MTCR PARM PREL IN
SUBJECT: COMMERCE UNDER SECRETARY MANCUSO DISCUSSES TRADE
EXPORT CONTROLS WITH COMMERCE MINISTER NATH


1. (SBU) Summary: In their February 28 meeting, Commerce
Minister Nath stressed to Under Secretary Mancuso the
importance of progress on all of the U.S.-India economic
dilaogues, including the HTCG, to ensure continued interest
in the government-to-government engagement and forward
progress in the bilateral economic relationship. U/S Mancuso
said that he and his staff were committed to improving Indian
access to U.S. high technlogy goods through the validated
end-user program and other means, noting the significant
progress made in this area since the HTCG was created. Both
sides agreed that more engagement on HTCG was needed between
BIS and the Ministry of Commerce and Industry. Mancuso
reiterated the importance to the U.S. of finalizing the civil
nuclear agreement this year. End Summary.



2. (SBU) Under Secretary of Commerce Mario Mancuso,
accompanied by the Ambassador and Commerce Assistant
Secretary Borman, met February 27 with Indian Minister of

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Commerce and Industry Kamal Nath prior to February 28-29
meetings of the High Technology Cooperation Group (HTCG).
Mancuso told Nath that the U.S. views India as one of its
most important relationships, involving many people at many
levels. Nath said that India too highly valued its
relationship with the U.S., adding, "let me tell you what
others aren't saying." Nath noted that, when he met former
Secretary of State Schultz in 1988 and they discussed

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regional terrorism, Schultz described it as a bilateral issue
between India and Pakistan, while India saw it as a global
problem. Nath said that when he again saw Schultz recently,
the latter commented how much has changed with respect to
terrorism.


3. (SBU) Shifting to economics, Nath said that it was
important for the U.S. to recognize that "one size does not
fit all", adding that India's size and markets make it very
different from Peru or Colombia. Contrasting India with
China, Nath said that the U.S. has not had the same trade
issues with India as with China; when the MFA ended, it was
China, not India, that flooded U.S. markets with textiles.
Nath said it was in the interest of the U.S. that its
leadership look at India uniquely.


4. (SBU) U/S Mancuso thanked Nath for his candor, agreed
that India was unique and, therefore, he and his staff were
trying to think out of the box and how to move forward on
strategic and high tech trade. Mancuso said that the U.S. is
now having great success on this front: when the HTCG began
in 2002, 25 percent of all US exports to India required an
export license; now that number is 0.2 percent. Mancuso said
that part of the problem today for some Indian companies is
that they don't understand the process and benefits under the
new Validated End User (VEU) program, and Commerce will
continue to work with these companies and the GOI under the
HTCG to fix this.

5.(SBU) Nath said that undoubtedly there had been movement
and progress, but it must continue. India is now engaging
globally both commercially and politically and this will be a
continuous process as well between the oldest and largest
democracies. Nath added that India, as a stable country with
the second largest Muslim population, exists in a tough
neighborhood surrounded by neighboring states in turmoil with
mounting terrorism everywhere, presenting huge polity
challenges to the GOI. This is another major reason why the
U.S.-India relationship is so important. Nath noted that to
keep the relationship strong, the two countries had to
preserve and move forward on their economic engagement
through the Trade Policy Forum (TPF) and its new Private
Sector Advisory Group (PSAG),the Commercial Dialogue, CEO
Forum, and HTCG. He added that he told this to USTR Susan
Schwab over coffee at the February 19 TPF in Chicago.


6. (SBU) Mancuso responded that, while the U.S. has
constraints like India, the two countries' trajectories are
converging so "let me know what we can do and I will take it
back to Washington." Nath said that the most important thing
was for the bilateral economic groups we have established to
continue and thrive. He noted that when he was Environment
Minister and Bill Reilly was EPA Administer, the challenge
was making the Rio Conference and Montreal Protocol on
Climate Change successful despite wide divergences among
countries. He said that the U.S. and India succeeded

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together in getting a good outcome and we must do the same
with our bilateral economic groups: "we must show results or
everyone will lose interest." Mancuso agreed, noting that
the U.S.-India relationship enjoyed broad bipartisan support
ever since former President Clinton began the move to
accelerate the relationship that has continued under
President Bush. Nath said that, in his view, the turning
point started even earlier under the Bush one presidency,
when President Bush upgraded the relationship, despite
misgivings in the Washington bureaucracy. Mancuso said that,
although it is not in his bailiwick, he did want to reiterate
the U.S. strong desire to see the civil nuclear agreement
completed this year, adding that, while our relationship is
now very broad, some of the wind will go out of the sails in
our relationship if the agreement is not completed.


7. (SBU) Nath asked what was the significance of the current
election rhetoric on job loses under FTAs and outsourcing.
Mancuso said that every country has a vein of protectionism
that became more prominent in election years, but that it
will eventually pass. The Ambassador noted that, given that
the NAFTA has become prominent target in the Democratic
campaign thus far, the outsourcing issue may have life for
awhile, but it will not last, given the clear economic
benefits from globalization. He added that Indian investment
in the U.S. is a greater story. Nath agreed, citing as an
example India's acquisition of the failing Essar steel mill
in Minnesota that saved many U.S. jobs. Ambassador noted
that it would be useful to get the Indian investment in U.S.
numbers and Nath agreed. Nath also noted that Indian
companies were outsourcing to countries like Sri lanka as
well, where it as easier for Indian companies to set up and
export to India under zero duties. The Ambassador noted that
Indian IT companies are also hiring U.S. graduates.


8. (SBU) A/S Borman suggested that, to further the HTCG
dialogue, it would be useful to have more interaction with
the Commerce Ministry, recognizing that MEA has the lead.
Nath agreed that more coordination would be better and
Mancuso said that his staff would brief Nath's staff before
they depart on February 29 following the conclusion of the
HTCG.


9. This cable was cleared by Under Secretary Mancuso's
delegation before departing Post.
MULFORD