Industry, GOI on WTO, Government Procurement, SAFTA

UNCLAS SECTION 01 OF 03 NEW DELHI 002558 SENSITIVE SIPDIS USDOC FOR ITA/MAC/OSA/LDROKER/ASTERN/KRUDD DEPT PASS TO USTR MDELANEY/CLILIENFELD/AADLER/JGRIER TREASURY FOR OFFICE OF SOUTH ASIA MNUGENT USDA PASS FAS/OCRA/RADLER/BEAN/FERUS STATE for SCA/INSB, EEB/TPP, EEB/MTA E.O. 12958: N/A TAGS: EIND ETRD ECON EINV IN SUBJECT: Industry, GOI on WTO, Government Procurement, SAFTA REFS: A) STATE 123787, B) NEW DELHI 2280 ¶1. (SBU) Summary: The Federation of Indian Chambers of Commerce and Industry (FICCI) Assistant Secretary General Manab Majumdar, who is responsible for trade policy, said FICCI is a strong believer in the World Trade Organization (WTO) and understood that India would be poorer without a Doha Development Agenda (DDA). He sounded a familiar theme, saying all countries were looking for the United States to take a leadership position on DDA, feeling that trade issues are not a priority for the Obama Administration. Majumdar suggested the United States announce a concrete trade policy early in the new year and confirm Michael Punke soon as U.S. Ambassador to the WTO. He expressed skepticism about progress on sectorals but it appears the GOI is examining the possibility in certain sectors. Majumdar explained that FICCI planned to take action in the next two months to work on the WTO Government Procurement Agreement (GPA), perhaps by starting a working group that includes domestic IT companies. He opined that the GOI is more likely to sign the multilateral GPA than just include government procurement in a free trade agreement with the EU. Majumdar said the business community is not the problem inhibiting efforts to deepen the South Asia Free Trade Agreement (SAFTA). Separately, the Indian auto industry expressed interest in creating a South Asia Association for Regional Cooperation (SAARC) automotive forum, noting that U.S. companies could help to overcome Pakistani opposition. End summary. How to Make Progress on Doha -------------- ¶2. (SBU) On December 17, FICCI Assistant Secretary General Manab Majumdar told Econoff and Econ Specialist that he had joined the Indian delegation to Geneva for the November 30 to December 2 WTO Ministerial. Majumdar said the FICCI WTO task force was launched last year, because FICCI is a strong believer in WTO and understood that India wouldbe poorer without a DDA. Econoff made some of the points in Ref A about the USG desire for an ambitious and balanced Doha agreement. Majumdar confirmed that Secretary Khullar had chaired the FICCI-hosted National Stakeholder Consultation on WTO Negotiations (8-9 December 2009),in conjunction with the United Nations Conference on Trade and Development (UNCTAD) and the Centre for WTO Studies, which publishes the schedule for such consultations on its website (http://wtocentre.iift.ac.in/). He said that diplomats had not been invited to the meeting, as it was more intended for domestic stakeholders. ¶3. (SBU) Majumdar said all countries were looking for the United States to take a leadership position on DDA, feeling that trade issues are not a priority for the Obama Administration. He added that the perception is that the United States is not doing much other than asking for concessions from Brazil, India, and other developing countries. While no one expects the United States to be the only country making concessions, the United States and India should both agree to no special exceptions. Majumdar was not very hopeful for conclusion of the DDA in 2010. To make progress on Doha, the United States would need to bring trade issues to the center stage and announce a concrete trade policy early in the new year. It would also help in terms of optics if Michael Punke were confirmed soon as U.S. Ambassador to the WTO. Majumdar noted he believed that the U.S. should make clear offers on agricultural subsidies, come to convergence on the Special Safeguards Mechanism (SSM),and push along services negotiations. He recognized that the United States may not be in a position to offer many concessions on services because of security concerns. Majumdar added that observers understand that India will probably accept a coefficient (for cutting tariffs based on a WTO formula) of 20-22, which is a big improvement on the earlier offer of 35. On agriculture, SSM is the big problem not tariffs. India would take two-thirds of the tariff cut that is offered by developed countries, which would not be an issue in negotiations, Majumdar opined. Sectoral WTO Agreements -------------- ¶4. (SBU) Majumdar said that sectorals are a serious roadblock to progress in the DDA that FICCI had discussed with the U.S. National Association of Manufacturers and EU industry groups, but he lamented they could not come to agreement. Econoff raised that the media had reported that Commerce Joint Secretary Amarendra Khatua had said India might consider sectorals in certain areas during the stakeholders meeting at FICCI, which Majumdar acknowledged was true. NEW DELHI 00002558 002 OF 003 Separately, on December 18, Sachin Sharma, Consultant at the Centre for WTO studies, mentioned to Econ Specialist that the Centre had recently been tasked to draft papers on some (unspecified) sectors. Then, on December 21, in another meeting Econoff asked Khatua if he had raised the prospect of sectorals in gems and jewelry and certain chemicals, where India is competitive (implying that he would also have to give on other sectors). He offered to discuss this in detail in early January and passed Econoff a paper with GOI analysis on the WTO Information Technology Agreement. WTO Government Procurement Agreement -------------- ¶5. (SBU) Majumdar said that focus on the GPA came to the forefront with the global economic crisis, when India could not get access to "Buy American" and other buy local programs. But he asserted it is losing momentum now, nevertheless, FICCI would like to take some action in the next two months. FICCI coincidentally had an internal discussion on this very topic the day before, Majumdar added. Econoff explained some of the benefits of joining the GPA, including gaining access to $800 billion in U.S. federal procurements. Majumdar acknowledged that India stands to gain more than the United States if it signs up for the GPA. Large Indian information technology companies would be some of the biggest beneficiaries. No domestic companies had reached out to FICCI about GPA, but FICCI planned to reach out to IT companies to perhaps form a working group. Majumdar agreed that if a U.S. multinational corporation decided to fund an independent study on the benefits of the GPA, it would be helpful. (Note: local Microsoft staff told Econoff on December 8 that Microsoft planned to fund such a study at a think tank, like the Centre for Policy Studies; Majumdar was clearly aware of this.) But he added that a local law firm would do a better job than a think tank, because of the technical expertise needed. The EU has put a lot of pressure on India in free trade agreement (FTA) negotiations to include aspects of government procurement. Majumdar thought the GOI would probably implement a government procurement agreement multilaterally, rather than just bilaterally with the EU. But he added that including sub-national procurement in any GPA would "never work." Majumdar was not aware that the GOI had started consultations with the states on GPA, as he thought India could request exceptions to much of the agreement below the federal level (Ref B). Econoff indicated that it seemed unlikely to be able exempt such a large part of domestic procurement. SAARC/SAFTA: Private Sector is Not the Problem -------------- -- ¶6. (SBU) Majumdar said the business community is not the problem inhibiting efforts to deepen SAFTA. He confirmed a statement made by Tariq Sayeed at the SAARC Economic Summit on December 11 that Sayeed had helped smooth out problems with Pakistan after a FICCI report came out recommending economic sanctions against Pakistan in the wake of the November 2008 Mumbai terrorist attacks. Majumdar noted that it makes sense to view India as South Asia's gateway to the rest of Asia from a purely geographical perspective. India is the best hub or starting place for any company wanting to do business in the region, because of its central location. Separately, on December 15, Dilip Chenoy, Director General of the Society of Indian Automobile Manufacturers (SIAM),told Econoff he would like to establish a SAARC automotive forum like the one in the Association of Southeast Asian Nations (ASEAN),but it was not yet possible because of Pakistan. Outside help, from U.S. companies for example, to establish this would help, he added. Chenoy said U.S. companies stand to gain a lot from the South Asian market. He said India exports no cars to Pakistan (not even through Dubai) and that he had tried to work with the Pakistani auto association but they did not take his advice, and he did not want to appear too pushy. Comment -------------- ¶7. (SBU) FICCI is known to be very skeptical of the benefits of the DDA, but the organization has been making a number of efforts lately to try to promote constructive engagement on the issue. It hosted WTO Director General Pascal Lamy during the September 3-4 Doha "Mini-ministerial" conference in New Delhi. FICCI also hosted a December 4 International Chamber of Commerce Regional CEO Forum, where there was extensive discussion of Doha and the relationship between trade and employment. It is also promising that FICCI plans NEW DELHI 00002558 003 OF 003 to work with domestic industry to promote the GPA. Recent press reports that Infosys, Wipro, and other Indian IT companies are setting up operations in the United States to take advantage of the government procurement market will also bolster the case for GPA with domestic Indian industry. Roemer