DUSTR Marantis Visit to Re-energize Trade Policy Forum

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SUBJECT: DUSTR Marantis Visit to Re-energize Trade Policy Forum
Government Meetings

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USE ONLY; NOT FOR INTERNET DISTRIBUTION.


1. (SBU) Summary: Deputy U.S. Trade Representative (DUSTR)
Demetrios Marantis visited New Delhi August 11-13 to meet with GOI
officials and private sector representatives to prepare for USTR
Ambassador Kirk's participation in a bilaterl Trade Policy Forum
(TPF) ministerial in Delhi later this fall (subsequently confirmed
for October 26). GOI officials stressed the need to focus on a few
issues per sub-group where both sides could press for resolution
before the next TPF, the need to select participants in and
establish an agenda for the CEO Forum, and India's goals for the
September 3-4 Doha mini-ministerial. They also called for the
avoidance of protectionism in the United States and stressed the
benefits of economic cooperation with India, made a pitch for
India's continued benefits under the U.S. Generalized System of
Preferences (GSP) program, and raised many long-standing issues,
including H1-B visas and social security totalization. Marantis'
visit coincided with visits to Mumbai and Delhi of a Senate Foreign
Relations Committee staffdel focused on India's use of GSP
(septels),with which he met informally, and the first round of
Bilateral Investment Treaty (BIT) talks in Delhi, for which he
delivered concluding remarks (septel). End Summary.


2. (SBU) During his visit, DUSTR Marantis met with Deputy Chairman
of the Planning Commission Montek Ahluwalia; Ministry of External
Affairs Secretary Nirupina Rao; Minister of Commerce and Industry
Anand Sharma and Commerce Secretary Rahul Khullar; and Ministry of
Micro, Small and Medium Enterprises Secretary Dinesh Rai. Private
sector meetings will be reported septel. DUSTR Marantis was
accompanied to all meetings by USTR South Asia Director Adina Adler
and Econoff. Econ M/C and Deputy M/C, accompanied to several
meetings, and FCS SCO accompanied to the meeting with Secretary
Khullar.

Re-energizing the Trade Policy Forum
--------------


3. (SBU) In a meeting with Commerce Secretary Rahul Khullar, joined
by the Joint Secretaries for Americas, WTO, Services, Agriculture
and NAMA, DUSTR Marantis explained Ambassador Kirk and Minister
Sharma's common desire (as discussed during Sharma's visit to
Washington in June) for the TPF to both be a mechanism for resolving
thorny issues and collaborating in new areas. Khullar also referred
to a letter which had been sent by AUSTR Mike Delaney to Joint
Secretary Anil Mukim suggesting some possible modifications.
Khullar was enthusiastic about convening a TPF ministerial and
wanted to focus the agenda on a few achievable issues per focus
group rather than just a long laundry list of intractable ones. He
looked forward to receiving more details on USTR proposals to
strengthen the effectiveness of the TPF and the Private Sector
Advisory Group (PSAG),and agreed to intervene with the Ministry of
Agriculture to reengage in the Agriculture Focus Group and ensure an
appropriate GOI counterpart to USDA U/S James Miller. (Note: Mukim
confirmed in an August 28 meeting with visiting Commerce DAS Holly
Vineyard that Additional Secretary Shri Pati would lead the group on
the Indian side. End note.)


4. (SBU) GOI feedback on specific USTR proposals:

--Combine the Services and Investment Focus Groups: Khullar said he
preferred to get the investment group active first and look at
merging the groups later. While the U.S. lead would be the same for
both (AUSTR for Services and Investment Christine Bliss),India's
side would not (J/S Bharti Sihag for Services, and a Department of
Industrial Policy & Promotion or Finance Ministry J/S for
Investment),creating an internal turf battle. Regarding U.S.-India
collaboration on specific service sector market access issues, J/S
Sihag said real progress on most sectors, such as retail, would be
difficult since it would require legislation. She believed
education and health services to be outside her scope, but she
committed to discussing these issues with AUSTR Bliss.

--Create Additional Focus Groups: DUSTR Marantis proposed
additional Focus Groups, such as on small and medium enterprise
(SME) development and environment/clean energy. Khullar said adding

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more groups simply would add confusion, as work would cross over
into other line departments. For example, environmental issues
would be covered by India's Ministry of New and Renewable Energy and
Ministry of Power. Khullar also wanted to avoid the TPF being
caught up in controversy over cap and trade. Regarding possible SME
work, Khullar requested USTR send him a proposal.

--Revamp the Private Sector Advisory Group (PSAG): DUSTR Marantis
said USTR was looking at reformulating the U.S. side, including
adding West Coast representatives to make the PSAG more
geographically-balanced, and would soon share details with the GOI.
He also proposed creating a formal link between the PSAG and CEO
Forum to improve follow-through. Khullar said it would be an
"institutional nightmareQ if the PSAG were formally linked to the
CEO Forum; neither could be subordinate to the other and the CEO
forum was a "hoity-toityQ gathering whereas the TPF was much more
practical. However, he agreed that both PSAGs could exchange the
studies they had concluded but not yet shared, and then he would
consider discussing the linkage idea with Deputy Chairman Ahluwalia
-- or we could unilaterally create an informal link. (Note: In a
separate meeting, Alhuwalia, noting that his wife, a think tank
chair, was a member of the Indian PSAG, told DUSTR Marantis he was
not sure the CEOs would be comfortable with any link to the "think
tank natureQ of the PSAG. DUSTR told Ahluwalia that the U.S.-EU
transatlantic business dialogue could be a model. MEA J/S Gaitri
Kumar supported the idea that the PSAG and TPF could help to push
forward the work of the CEO Forum throughout the year, but Ahluwalia
remained skeptical, saying the CEO Forum was more of a photo op.
End Note.)

--Creating an Annual Work Plan: DUSTR Marantis proposed that the
United States and India agree to sign a "Bilateral Cooperation
Agreement,Q essentially a non-binding, "aspirationalQ work plan that
would set specific goals with timelines for the TPF. Mukim and
Khullar welcomed the idea and asked USTR for a proposed outline of
such an agreement, noting that they would be able to finalize terms
of reference for such an agreement through an internal process
called a "Joint Consultative Mechanism.
Cooperating on Trade Bilaterally and Multilaterally
-------------- --------------


5. (SBU) Commerce Minister Sharma explained that the intention of
the September 3-4 Doha mini-ministerial was to generate a "rainbow
coalitionQ of countries whose positive message would carry forward
to the G-20 summit in Pittsburg. He said he hoped USTR Kirk would
visit India both for the mini-ministerial and the TPF. DUSTR
Marantis noted that at times, our bilateral trade relationship had
been so dominated by Doha that it often overshadowed the dynamic
bilateral collaboration between the U.S. and Indian private sectors.
Sharma said he did not subscribe to the negative perceptions
regarding Doha, adding that it was natural that two large
democracies would have differences of opinion; otherwise there would
be no need to talk. He opined that the Doha mandate for development
was the core goal. DUSTR stressed that multilateral and bilateral
tracks were both important. Sharma said now was the time to reach
out and not look inward; protectionism would deepen the recession
and delay the recovery.


6. (SBU) Minister Sharma also raised the importance of H1-B visas
and India's GSP exports, commenting that China would move in if
India lost GSP. DUSTR Marantis explained that the Congressional
review of U.S. trade preference programs was likely to spill over
into 2010 since difficult questions would be raised on eligibility
requirements such as rules of origin and taking into consideration a
country's level of development. He acknowledged that India's
situation was complex because it had both highly developed and less
developed sectors. Sharma asked for U.S. sensitivity of sectors
like gems and jewelry that were labor intensive and employed
low-skilled workers. Sharma noted he would be in Washington in
October and might try to meet with some members of Congress on the
GSP program during his visit. (Note: we later confirmed with his
staff that Sharma plans to attend the October 13-14 Coalition of
Service Industries Global Services Summit in Washington, DC. End
note.)

Foreign Secretary -- Trade and Investment Important

NEW DELHI 00001902 003 OF 004


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7. (SBU) Foreign Secretary Nirupama Rao and Joint Secretary Gaitri
Kumar told DUSTR Marantis, along with DCM and Econ M/C, that trade
and economics are the central pillar of our partnership. Rao said
we should be ambitious about the relationship and use the CEO Forum
as a catalyst. India had submitted a list of CEO names for approval
after instituting a process less ad hoc than in the past. DUSTR
Marantis said he would like to establish a link between the PSAG and
CEO Forum that would inform the CEO Forum of TPF activities. Both
agreed that conclusion of a BIT would bring our economies closer
together. DUSTR Marantis also expressed appreciation for the
Ministry's role in securing the Technology Safeguards Agreement and
looked forward to getting work started on a Commercial Space Launch
Agreement (CSLA).


8. (SBU) Rao commented that U.S.-India bilateral trade was $70
billion in 2008, including trade in services. (Note: this is
according to Indian data; U.S. 2008 services data is not yet
available.) Drawing on her recent posting as Indian Ambassador to
China, Rao said India-China two-way trade was $51.8 billion last
year, but trade figures had dropped due to the global recession,
which had badly affected China. India has a trade deficit with
China, exporting primarily commodities to China while importing
major hardware. Rao commented that the anti-dumping cases and
countervailing duties that India has levied against China have
raised the decibel level in bilateral discussions; a joint economic
group at the Secretary-level meets only every three years. Turning
to a perennial trade topic, Rao stressed that on social security
totalization, "we need to sort that out.Q DUSTR Marantis explained
candidly that the U.S. and Indian systems are not compatible, which
makes a totalization agreement impossible under U.S. law. He agreed
to continue to consider options.

Plannng Commission on CEO Forum and Totalization
-------------- --------------


9. (SBU) DUSTR outlined his visit to India for Deputy Chairman of
the Planning Commission Montek Singh Ahluwalia, who was joined by
MEA Joint Secretary Gaitri Kumar. Ahluwalia recommended DUSTR
Marantis visit a farm in India, as the unique characteristics of
India's agricultural sector are a big part of India's position in
the Doha round. Ahluwalia asked about the BIT negotiations, the
first round of which Ambassador Marantis reported had been concluded
earlier that day. Ahluwalia also raised social security
totalization (comment: at J/S Kumar's prodding),asking if the
United States would consider an arrangement similar to that which it
has with Israel. DUSTR Marantis explained that there are no groups
in the United States exempt from the tax and the USG was trying to
think creatively about how to work with India on this issue.
Perhaps, once India implements its new system of pension reform,
there would be a greater possibility, he added. Regarding the CEO
Forum, Ahluwalia said it would be important for the CEOs to craft an
agenda well ahead of the PM's November visit to the United States.
In response to questions about the process to select U.S.
participants, Adler explained the Federal Register process (Note:
published on September 10. End note) and DUSTR Marantis agreed to
convey to Washington agencies the desire to constitute an agenda
soon. Kumar said it would help for the two leaders to sanction a
list of concrete deliverables on which both sides could focus.

SME Cooperation Promising
--------------


10. (SBU) Secretary Dinesh Rai and Joint Secretary Pravir Kumar of
Ministry of Micro, Small, and Medium Enterprises Ministry described
their role creating an enabling environment for SME growth,
including skills development and banking links. They explained that
GSP had helped artisans, and they requested it not be withdrawn.
DUSTR Marantis explained the status of the program and the review
process. Rai referred to a letter of intent that his ministry had
signed with the U.S. Small Business Administration (SBA) in January
2007 for one year of cooperation and said he would like to extend
that agreement and broaden cooperation with the SBA. DUSTR Marantis
said his staff would consult with SBA and get back to Rai. H.P.
Kumar of the National Small Industries Corporation (NSIC),a

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government enterprise, noted NSIC had 250,000 SMEs as members, which
it showcased on its portal (www.nsicindia.com). He said NSIC would
like to arrange meetings with U.S. companies. Secretary Rai
indicated the National Commission for Enterprises in the Unorganized
Sector, which had a five-year mandate to study and make
recommendations for economic development in the informal sector, had
completed its work and published a report recommending creation of a
fund for which the Finance Ministry had provided INR 4,000 crore
(about $8 billion).


11. (U) USTR's Adina Adler cleared this cable.


12. (U) Visit New Delhi's Classified Website:
http://www.state.sgov/p/sa/newdelhi.

ROEMER