 Let's kick it off. It's great pleasure to be here. I'm Edward Loos from the Financial Times US columnist for the FT here in Washington, but I was based in India several years back and Maintain an abiding interest in it. So thank you very much to Ashley for asking me to moderate this Before I very briefly introduce each of the panelists because they're all well known to you Let me just give a little framing for this discussion, which is about the the strategic importance of the US India trade relationship Now, of course, this is this isn't just a week of the Pope and Xi Jinping. It's a week of the Indians And we shouldn't forget that this is a very very critically important Bilateral relationship. It's also as you've heard. I think this morning the first week of the the India US Strategic and commercial dialogue named follows on from the strategic and economic dialogue that the US and China have so it's a Really important week, and of course we have the Twitterer in chief the Indian superstar Narendra Modi in the US again addressing an enormous gathering This time the other side of the country in San Jose of 20,000 people the kinds of Crowds that you can't the foreign leaders Can't get at home, but he commands quite naturally amongst NRIs here in India and at Wembley Stadium next month I believe in London So the expectation around Modi is extraordinary But I think the delivery and this is so often a conversation within the gap between expectations and Implementation is large and it's 18 months almost into his administration beginning to get rather worryingly large not much is happening So we have huge trade talks huge trade aspirations, and I think we're going to hear three different but very compelling cases for the importance of the trade relationship between the US and India, but Just as a backdrop to that Let me mention a story that really caught my eye last week in the times of India And the government of Uttar Pradesh the largest state in India one of the poorest Advertised 368 jobs in the state government low-level bureaucratic jobs pay-ons teaboys and that the qualifications specified were Five years of schooling and the ability to ride a bike They got 2.3 million applications Including hundreds of thousands of people with undergraduate degrees 25,000 people with postgraduate degrees and 255 people with doctoral Degrees so I want to keep this perspective in mind that the Modi promise his central promise is Not to have bilateral investment treaties with the US. It's to create jobs for Indians skilled and unskilled Now of course trade investment technology transfer is a huge motor of job creation But until he can start creating jobs All these other questions that are off huge strategic importance that we're about to hear of will pale into Insignificance, so I think that's really worth and I'd ask the panelists to keep that as a backdrop So that that's enough from me. I should mention each of the panelists are going to talk for seven minutes or they're about I'm a little bit of a fascist of timekeeping So they were talking about India like you to think of this stage as being sort of sovereign Swiss territory I will keep I will keep time we'll start with Praveen who's a scholar and a distinguished professor here at the Johns Hopkins School of Advanced international studies and a trade expert. We'll go on to Fred who needs really no introduction The emeritus this that Eminon screeds this that International Institute now Peterson of economics Ashley also needs no introduction I first got to know Ashley when he was working with Bob Blackwell and Bush's ambassador in Delhi when I was based in There, you know one and read his wonderful book on India's nuclear India's nuclear program So With without more from me, let's kick off with Praveen and you have several minutes. Don't don't feel pressured great Well, thank you. Thanks very much add for that introduction. Thank you Ashley for inviting My participation in this panel I was asked to provide a brief history of Indian trade policy in five minutes or less And I'll try and do that and maybe make a point or two of my own so Indian trade policy having sort of started its post-independence years with a relatively liberal trade regime a series of balance of payment shocks and other economic shocks compelled Indian authorities to progressively restrict imports to ever-greater degree And they did so by imposing tariffs quotas tariffs and quotas import licenses and so on so forth until through the 1950s and 1960s until the time when you had mid 1970s where India Was a kind of a near total autarky Imports as a fraction of GDP had fallen to something as low as 3% There was a domestic reaction to that Domestic industrialists felt the pinch of not being able to import capital intermediate goods for example There was some relaxation in terms of external reserves because of the higher earnings of Workers Indian workers in the Gulf that were being remitted back to India as well and that opened the Possibility for India to start liberalizing kind of in the mid to late 1970s And they did so through the 1980s mostly by allowing a kind of a more liberal Licensing regime although tariffs remained very very high Time you got to the late 1980s you had sort of many years of large fiscal spending large domestic borrowing that combined with a kind of a BOP shock in the early 1990 In early 1990 or mid 1990s led to mid 1990. I should say led to the 1991 crisis Which the Indian government impressively used at that time impressively used as a kind of an opportunity To start a process of domestic and external reform which continues until today So much has actually been achieved in this process if you look in 1990 And say what were the what were the tariff rates at that time on some of the trade policy? The highest tariff rate was in excess of three hundred percent three hundred thirty five three hundred fifty percent The average tariff rate was over a hundred percent. You've gone from that level of protection to sort of a reduction starting in 1991 to about 35 percent average tariff by the year 2000 to about 10 percent now Which is which is a reasonable figure much more reasonable than what it used to be for sure With some exceptions allow for automobiles and other sectors agriculture and so forth in Services as well There's been tremendous liberalization especially of sectors that were very heavily restricted in the past banking telecom Insurance infrastructure and so forth. So that's the kind of the broad arc of Indians of trade policy evolution Have it's changed over time from a very highly restricted state about 20 years ago 25 years ago to where it is today As we think about kind of future evolution of Indian economic policy, I'd like to make two points one Is just in terms of its trade policy trade liberalization strategy Any country has multiple contexts in which it could liberalize trade it could do so unilaterally By sort of liberalizing by itself It could do so in multilateral contexts negotiations of the WTO and so forth It could do so in bilateral settings free trade agreements that it might negotiate with any number of trade partners What's very important to note especially in the Indian context is that most Indian liberalization Has actually been unilateral liberalization There's very little India has a set of bilateral trade agreements But very little has been actually achieved in terms of genuine liberalization through these bilateral agreements and in my judgment a Small fraction of actual liberalization could be seen as sort of quid pro quo outcome of multilateral negotiations as well So unilateral liberalization has actually been has been key for India It's very important because unilateral reforms in my view reflect to a far greater extent the domestic political economy And that's Indian reforms in my view again Rust on a stronger foundation of domestic support then would be agreements that the Indian government signs in some foreign capital and brings back home For approval that that was my first point about the kind of the relevancy Historically if unilateral liberalization in the Indian context second point has to do with Indian trade policy and Indian growth As we look at the evolution of the Indian economy and its manufacturing sector in particular manufacturing production manufacturing exports it is an important fact that we should note that The fraction Manufacturing fraction of kind of overall GDP Has stayed constant through this whole period Okay, so as you've gone from the 1990s until now with all of this liberalization all of these reforms Presumably all of these efficiency enhancing reforms the fraction of GDP that is out to manufacturing has stayed fixed There's a number of reasons for that This is dramatically different as well from what we've seen in other countries like China But there's a number of reasons for those well-known reasons in the Indian context labor regulations difficulties land acquisition for industrial expansion Infrastructure issues and so forth The point I'd like to make is that as much as these are kind of well appreciated as kind of broad factors Quantitatively these have had huge significance as well. So if you look for example at the apparel sector in India 85% which is an important sector for India 85% of Indian firms are less employ less than 10 workers It's very very small if you said what's the industrial structure in China in the same industry similar labor force? It's just 2% of Chinese firms that are less than 10 workers in size and the reasons it is this way in India is obvious Because once you get beyond 10 workers in size Indian labor regulations start to kick in So my point here is that as far as kind of Indian economic growth manufacturing growth and so forth My view is that it's domestic Sort of policy and domestic constraints that are really the binding constraints at this point Trade agreements and trade expansion through the form of trade agreements would be great to have But the key constraints as I see them now are more domestic in nature rather than kind of in the international International side and let me let me stop there and I hope I kept to myself in minutes You did better Chance to talk thanks for that probably never a good introduction to where we are Fred. I could use his extra minutes I Want to start with Ed's own key first point which was about jobs and Suggest that there's an intimate relationship between the jobs question and the trade question The Prime Minister set a goal of growing at 8 to 10 percent And he's absolutely right India must grow at that rate to create the number of jobs needed to reduce poverty as needed And that's going to I think probably require some increase in the share of manufacturing in the economy a Target he's also set But the fact is that no country repeat no country Has ever grown at 8% or more on a sustained basis without substantially expanding its international trade without increasing its globalization looking to expand that exports to create a number of those jobs and Thereby provide a crucial element at the margin for the whole growth strategy So I think India in contemplating how to achieve its goals and all the CEO say potentials huge It can do it, but how to do it is the question and it's got to include this increased globalization dimension Oh, I think my predecessor was absolutely right. That's going to require primarily domestic reforms Most of which the Prime Minister has proposed but not yet seen through India faces in my view two huge problems in achieving the trade share of this Economic policy goal first India is losing competitiveness if you look at every relevant metric India has actually lost trade competitiveness the last three or four years after doing well a decade ago It has stagnated and that's a huge problem secondly, it's trade problems going to get worse because the US and Practically every other major trading partner is going to increasingly discriminate against India When the trans specific partnership comes into place India is losing out to Vietnam to Malaysia in terms of its textile exports to the US to Japan to Everybody else and even when the transatlantic agreement comes into place Between the US and Europe those are India's two biggest markets and it's going to take some trade diversion losses there in my new study We quantify that and India is going to lose at least 50 billion dollars a year of exports at least a percent of GDP from trade diversion to these new agreements by contrast If India gets itself engaged in those agreements Hold on to your hat. It could expand its exports by over five hundred billion dollars per year and be the biggest beneficiary Now what am I talking about? When trans specific partnerships starts up in a year or two as it will The interesting question is going to be what next because remember already half a dozen other Asian countries want to get in TPP China is raising it with the US officials every week So it's quite realistic to imagine that the initial TPP becomes much bigger over the next five to ten years Encompasses most of APEC may be called a free trade area the Asia Pacific But if India remains outside that framework is truly going to be left behind The trade minister said earlier this morning. We're not going to be left behind. We've got our set. Well, good luck minister RCEP probably ain't going to happen if so it's going to be very weak like all of India's other trade agreements and India is going to take most if not all of those losses I possibly So India really faces a fundamental policy choice The two panels before us this morning have been very cogent very interesting very important But they've all talked about very micro matters bankruptcy courts are important commercial codes are important Customs facilitation is important, but they're not going to get you eight to ten percent growth And that requires going to the broad scope of the trade policy question. Indeed. It's probably Getting into the liberalization pressure from those broad trade policy initiatives that will finally catalyze the internal Changes that are needed in India to make its reforms happen How did China get 10% growth a year? Well an important part of it was it joined the WTO? use the international rules to force the provincial party chiefs to do domestic reforms and that was Consciously the Zhu Rongji Zhang Jiumin strategy out in Mexico stop having Financial crises every decade joined NAFTA and the GAD at the time and began to open its economy to the world Why is Abe desperately trying to end Japan's two lost decades by joining the TPP to get External pressure guy out through they call it in order to promote domestic reform Jim Mcnerney chaired the last panel said kind of jokingly Can you guys blame us foreigners for helping to make the domestic changes? Well, that's not such a joke Because country after country has in fact used the external pressure to galvanize Catalyze promote politically enable the domestic reforms to happen And I think India is in fact one of the very few countries Which has not pursued that strategy which I dubbed a long time ago competitive liberalization They need it if they don't do it They're not going to get the kind of economic outcome They want they're in fact going to take losses and slide backwards the US can be very helpful in this Remember if India joins the next stage of the TPP Part of that expanded TPP then becomes a free trade agreement between the United States and India Remember that the first TPP is in large part a free trade agreement between the United States and Japan That makes up two-thirds of the economic impact of the TPP But doing it through regional devices is a very clever political economy device to Minimize domestic opposition to what otherwise on a purely bilateral basis much be might be a much harder sell But in economic terms it does mean opening up including for the US Now when President Obama went to New Delhi in January He did a partial reversal of US policy the US has always opposed getting India into APEC and therefore a stepping stone To the TPP on the grounds that India would block everything. Is that a negative trade policy? So India is going to have to demonstrate that his trade policy has changed It's going to do the Modi reforms. It's going to add a trade dimension It's going to be serious about expanding its role in the world economy in the world trading system Obama said in January, we're we're willing to consider India's interest in we welcome to be precise. We welcome India's interest in joining APEC If India would take the next steps and indicate it was serious and began to take some policy actions Like the CEOs were mentioning before to demonstrate its bonus fee days Then I think the US should Go hand in hand with Prime Minister Modi with his close relationship with President Obama and help propel India into APEC which then would be the stepping stone to the Trans-Pacific Partnership and this kind of new trade world In which India has to enter. I think it's essential for India on economic grounds It's certainly essential on foreign policy grounds to kind of play the role in the world that it has to What made China a great world power was not nuclear weapons It was 10% a year economic growth for 30 years India could be the next economic miracle if It adopts a strategy along these lines Thank you very much, but you're just about with the time Ashley Thank you Ed It's a pleasure to be here with my friends whom I've known for many years in this panel Let me also riff off Ed's opening remarks when he talked about Prime Minister Modi's ambition To grow the economy and in particular to focus on employment the one thing Prime Minister Modi cannot be accused of is being unambitious and if Enlarging employment was all there was to his economic agenda. We could have ended them with friends remarks Prime Minister Modi is trying to do two things simultaneously He's trying to engineer a large-scale domestic transformation of the Indian economy Particularly reaching out to those who are marginalized poor and have not been part of the market process While at the same time, he's trying to build India into a truly globally relevant power And so what I want to spend a few minutes talking about this morning is the fact the Relationship between trade external openness and the rise of India as a major power This is extremely important to the United States the US has made a major bet on India The reason it has done so is not entirely out of altruism, but I would argue quite substantially out of American self-interest There are two geopolitical objectives those of the United States in India, which luckily for all of us Turn out to be utterly complimentary The United States seeks to preserve its global primacy for as long a period as possible India seeks to break out of the confines of the Indian subcontinent and become an Asian great power The US Audently desires that India achieve its objective Because if India does it ends up balancing China in Asia and Preventing in Asia that succumbs to Chinese domination If you can get a robust balance of power system in Asia where Japan China India Russia Become capable countries Each able to look after their own interests vis-a-vis the other the net result is that it prevents Asian challengers from one day rising to the point where they challenge American primacy so from Washington's point of view The idea of strengthening the Indian economy and Enabling to move up the growth path for as long a period of time as possible Makes complete sense. It turns out to be in India's interest It turns out to be in America's interest simultaneously Now there are two ways to do this One is to build the patterns of cooperation in the strategic arena We've started doing this over the last 20 years and made great progress But there is another way to do it and it's a complementary way and that is deepening economic Interdependence between the United States and India that pillar of cooperation has not grown as Rapidly and has not deepened as substantially as one would like to see it happen It's quite clear that if that interdependence were to grow both countries would benefit US competitiveness US growth US markets would be enlarged and Indian economic growth would also Accelerate because of expanded access to US capital technologies and services So the complement complementarity at the economic level is quite clear and obvious the big challenge as Fred pointed out and as Praveen provided historical context is that India's comfort With pursuing more open trade strategies Has still not reached the point where India is willing to take the risks that come From external expansion in order to stimulate domestic growth Now India can persist With the old strategy that perhaps for a while served it well since independence But the risk as Fred I think pointed out quite clearly is that at a time when the global system is Now moving towards new mega regional agreements like TVP and TTIP India loses out not only vis-a-vis the United States, but also with respect to other partners and It ends up in the very awkward situation where although the United States and India Consciously think of themselves as strategic partners They end up pursuing economic policies where they discriminate mainly against each other This would be the strangest kind of strategic partnership if two countries are cooperating actively at the geopolitical level only to discriminate very energetically at each other at the economic level so we have to find a way of breaking out of the skull the sack and Because if you compare the United States and India synoptically the US is still the more open of the two economies The challenges with respect to Indian trade openness will be greater on the Indian side India will have to make some tough decisions with respect to re-equalibrating the degree of asymmetry in openness between our two societies But there are gains for India They will of course be adjustment costs There will be challenges that the Indian government will have to manage with respect to its own domestic politics But as Fred pointed out there are very substantial gains from making such a shift and if the shift is actually to be Institutionalized and successful then India will have to do two things simultaneously first it will have to take trade reform very seriously in ways that it has not done before India has pursued trade reform in the past primarily in order to increase export performance But it has never pushed export performance to the point where it has created flexibility for shifts in its own factors of production at home This is the first task that India faces not simply move to expand export performance or improve export performance But create flexibility within its own domestic markets so that they can be internal reallocation of the factors of production in order to support This improved export performance and the second is that India will have to look very seriously at building safety nets Because to achieve the kinds of gains that Fred is talking about there will be domestic dislocations and in a democratic country domestic dislocations have political costs and so as India moves smartly to integrate itself More generously with the global economy. It will start it will need to build those safety nets to allow people To survive the transformations that are taking place in the economics field Let me just end with one important point If India begins to move along this way The net result is not only economic gains, but deeper political partnership between the United States and India To the degree that the US-India economic relationship deepens The United States begins to have ever greater stakes in India's success And to the degree that the United States has greater stakes in India's success The incentives for the United States to walk the extra mile on issues of high politics where India have has an interest only improves and So you get a wonderful virtuous circle where? greater growth Through trade for both countries ends up strengthening American primacy globally Which is indispensable for improving Indian security within the subcontinent and outside while the same Virtuous circle also ends up increasing Indian power Which is extremely valuable for buttressing American primacy in the global system Let me end in that note, and I hope I've kept your time sketch. You have you will have thank you And each in your different ways have made I think you know something close to being an unanswerable case in the abstract For Indian reform and openness and close-up economic cooperation between the US and India what I'd like to focus on is The likelihood of this happening and the obstacles in its way And I'd like to start just on the Indian side with Praveen and Ashley both of you have been to India recently To Daly and talk to people in the Modi government. What's what's what's going wrong there? Why is reform stalled? Why is export pessimism creeping back into the Indian psyche? What what's going wrong in each of you? Could answer that Praveen sure. I Think even maybe six months ago. There was a great sense of Optimism as to what this government wanted to achieve and what it could achieve given The political constraints and I think as we've kind of as time is passing As the summer has gone by recent visit to Daly had a chance to Speak with a number of people there senior government officials and so forth There's a certain lack of clarity. I perceive Is it the case so questions have started to be asked is it the case that the government Seeks transformation with the same level of enthusiasm as we thought that it did does it actually truly want it Is it the case that it's blocked by politics or maybe it's a case that it does never really wanted it to the same extent as we thought that it did so these are these are questions that are starting to be asked I'm not quite sure what the answer is But there's certainly a shift in the mood It's very clear that The government has faced a number of political obstacles was it just bad strategy? Was it something else could things have been done differently and pushing through the land acquisition act and pushing through various other things? The GST Harmonized stock system within within India. It's not completely clear, but I think It's at least one thing is clear is that if one still expects to see Sort of rapid Transformation rapid implementation of all of these policy policy initiatives I think those hopes are probably misplaced at this stage So actually I mean you have with your experience of the one two three agreement and helping initiate it You have direct knowledge of what it takes to get the Indian system to jump through very difficult hoops seemingly improbable ones And and arrive in a place a US India nuclear agreement that few people would have thought possible What what do you think it's going to take? I know you've been to Delhi a lot recently as well What do you think it's going to take given the situation politically there? to Follow some of the recommendations each of you so so forcefully made the case for You know the great thing about transformations in India is that they are intimately linked to crisis absent crises Transformations rarely take place because democratic politics puts a premium on policy conservatism If the current trends in India really begin to reach crisis proportions I think the imperatives for jump-starting reform will only increase The other dimension of crisis is political crisis if the Prime Minister begins to sense that The continued pessimism about India's prospects Begins to have a corrosive impact on his own Political interests that opens another door with respect to a new round of reform But let me go back to the question that you started asking at I think there are three elements that have come together Somewhat unhelpfully to account for the current pessimism that Praveen described First is the global economy has slowed down and particularly for the Indian export sector That is the export performance is so intimately linked to the robustness of global economic performance The second is domestic politics in India unfortunately have gone back to a very corrosive cycle Where political opposition is mounting for the sake of opposition Rather than opposition based on differences genuine differences about principle and third Because these two have come together sort of unhelpfully The natural tendency of policy conservatism has only been reinforced and so the question is does this sort of I don't want to use about crisis, but does this pessimism Become something that is long-drawn, but still manageable if you get that kind of a trend line I think the incentives for reform remain weak If the pessimism deepens in ways that there are serious political consequences for the government then the incentives for Remedial reform actually increase Aren't you over I'll get to you in one second just as a follow-up I mean over stating the rhetoric of passive pessimism because India as you know this year 2015 It's the first year ever. It's faster growth Than China and that's probably gonna remain the case for the next couple of years looking at the Chinese picture Now, of course, I know that all three of you are making the case that India needs to take the steps to ensure It's the case for the next 30 years not two or three years But are you ever staging with the degree of pessimism? There's a lot of there's a lot of India shining talk coming out of Delhi as well What well the yeah, so the one statistic that many of you probably heard is the number of kind of workers that now need to be the kind of Youth that are entering the labor force that need to be employed And that number is about one million workers a month So about 10 to 1 million workers a year and so the growth rates might be a little higher than we might have expected But they're not anywhere close to what we need in order to absorb These workers the manner that we would like for them to be dropped into the workforce And they're not close to will not achieve for Prime Minister Modi the goals that he has set for himself Yes, if I could just add as my colleagues know There are alternative views of what? politics best promote economic reform One concept is what actually said it's crisis when you're forced to do it but an alternative thesis is that when times are better and You're not under such a gun. You can take structural reforms requiring for example Adjustment and dislocation because you're in a more favorable economic environment If you could build on a seven percent growth rate and push it to eight to ten Then you might not have to do too much by way of dedicated Adjustment programs because eight to ten percent growth lifts a lot of boats and avoids most of the kind of dislocation you're talking about so it does I think get back to leadership An adroit political leader can build on his reasonable success so far but note that we have to do better for the reasons we're all saying and segway into a more ambitious program in a sense having a Positive outlook better than China fastest growing big economy in the world Only demographic dividend among all the big countries as you look out five ten twenty years In a way, that's a propitious Political economy to carry out the kind of reforms that are needed here So if you're convinced you need to do that I think you can certainly spin things that way and there's a lot of a lot of merit and a lot of empirical evidence That that in fact is conducive to you before Fred. Let me stick with you for a second Let's look at it from here from the Washington perspective now the president managed to get through fast track for a trade promotion authority And now that of course isn't just for TPP or t-tape it's for whatever he choose exactly Let's just suggest how to hypothesize he chooses Because the Modi government responds well to his half overture on joining a pack And launches a an FTA bilateral trade deal between India and the US Will the political traffic bear a little bearing in mind, you know, what what what the sentiment is on China? And what the unions think about trade deals with countries that have substantially lower The country that's a very interesting question and I address it explicitly in my new study, which their copies outside for all of you to pick up In the TPA debate the big trade policy debate we just had there was a lot of discussion of China and A lot of the members of Congress Expressed great doubts about any future US trade agreements with China certainly about China joining TPP Etc. There was zero discussion of India Now on the one hand I've checked this out with the people in the hell who were monitoring the debate minute by minute There was my own observation on the one hand you say well that means nobody's paying attention India nobody cares on the other hand At least there were no negatives And there was nothing in there that said don't do India and there's good reason for that In terms of even the concerns of our labor unions India and China are very different as private pointed out The share of the Indian economy which is in manufacturing is very very small It is not like China. This would not be NAFTA on steroids as an FTA with China might be viewed because there's very little likely competition in the manufacturing sector low skilled jobs from India compared with China Secondly all the anxiety you may remember a decade ago Outsourcing all the services jobs. We're going to go to India. We weren't going to be out Alan blind or others saying All of our services the one thing we can still do services all gonna go to India all that of course has been proven to be false It has not happened indeed. There's been some reshoring as it's called. So the I'm not saying it would not be concerned. There would be concerns and it would require a major sales job Largely on Ashley's foreign policy ground remember That every I'm going to repeat this every major US trade policy initiative in the post-war period Has been motivated not by economics and trade but by foreign policy Okay, so let's let's stay and therefore if you buy Ashley's arguments, which I do you've got a powerful case And maybe even I talked about all of APEC may be going to a next stage of TPP putting India ahead of China in the queue and Making friends so that's why from an India standpoint. They ought to move as quickly as possible to get in the TPP Start qualifying of course traditionally been qualified to get into this trade nexus and maybe steal a march on China That was actually going to be stolen my next question because I was going to ask Any of you but Ashley in particular What Would that Mean as a as an offer how tempting would that be in terms of India and Modi's worldview in particular To see TPP purely from it in India's membership of it purely from a geopolitical perspective and probably also please feel of getting in ahead of China I Think the question that be leverage in other words. Well, there are two parts to that question, right? I mean first the United States has to Find a way of reconciling It's strategic policy in Asia which includes India with its economic policies towards India The honest truth right now is that the two are disconnected There is a strategic policy towards India which has focused very much in elevating India's rise in power But that message somehow has not been coordinated with other parts of the US government which deal with trade issues Because we think of trade issues with India primarily in terms of just simply IPR and market access So there has to be a rethinking in how we frame the question these of India from Modi's point of view There is certainly increasing interest in membership in these Pan Asian institutions and Modi's interest in trying to get closure on a US roadmap for a peck membership is very good evidence But the challenge that Modi is going to have is to bring something More to the table then simply a preference for membership That is it has to be accompanied by a willingness to at least undertake some minimal policy changes With respect to India's trade where would this be I mean any of you answer for it included? Well, I would this be a bit would be a good place to start. Yeah This is the crucial point Ashley's absolutely right about this disconnect between the economic and security dimensions of US policy toward India and US does have to rethink that and put it in the broader context But having said that is actually said at the end India's got a decisive role in that itself. I went around I briefed most of our top government officials on this new study I just put out and one of them very high level won't name but in the White House said Well, you know Fred India still says no to everything Susan I still thinks that yeah, and and therefore and therefore I tried India is gonna have to make some significant changes if it were willing to Step up accelerate and move the bilateral investment treaty. That would be a good one Take some unilateral actions on some of these long-standing irritants like intellectual property local content Retroactive tax treatment. There are a whole bunch of things So I go ahead the province said at the start about the importance of unilateral changes I think India is going to have to take some unilateral measures If it goes down this reform path to demonstrate that it's serious incredible I can't just talk about it because there's a lot of skepticism about more talk if it does a few things However, I would say then the US should meet it halfway and should then go hand in hand Into a pack into WTO agreements various things, but particularly down this Geopolitical path. I'm glad you mentioned probably into the actual point because bigger pretty yeah, oh, I mean, I'll just say this I'm a little You know given the opportunity to join the US and the TPP ahead of China and so forth how much political support Will there be in India for such a move? I'm not sure that as a country that we've gone through that kind of Discussion introspection as to what it is that we actually want how much globalization do we want on what terms? Do we want it? What are we willing to give up in order for this access and so forth a lot of the liberalization that's taken place starting the 1990s has been you know bits and pieces fits and starts and it's just happened right But if you're if it's kind of a one-shot deal. Here's an agreement. These are all the big changes that are gonna have to take place Is there the kind of domestic support that you would need for something like that? I'm not so sure this is kind of related to Ashley's point of it I mean is it gonna take a crisis to achieve that perhaps is it gonna take something else perhaps But I but I don't see it as kind of Immediately attractive in the sense that that maybe one might help in order to get kind of an agreement of that sort through And let me go because this goes right to the heart of the political economy of the issue Providence said rightly in his early remarks India has done a lot of unilateral liberalization So it's China lots of people but what the international record shows is That you can do a lot of unilateral liberalization Early in your liberalization patterns when there's still a lot of water in the tariff and Restrictions you have don't buy you can you can go quite a ways But when you get down to the last 10 15 percent or so the experiences of even the Big trade reformers like Chile like Mexico like Korea show that when you get down to that last 10 to 15 percent Which is really the important part Then you can't do it unilaterally the opposition is too strong. So then you mobilize the export interests to overcome the import competing interests By negotiated liberalization opening markets and demonstrating this as benefit of the country I gave some numbers that I hope stunned you India could gain 500 billion dollars a year of exports If it participated in this kind of broader Pan-Asian trade agreement, that's a huge benefit But to mobilize the domestic support for that those are the exporters the people who gain the import Computers of course gain as well because they get into supply chains. They reduce their cost of inputs and all that So all that's good and they should support it too, but it's mainly mobilizing the export interest and I think in the Political economy if you're going to go down his road That's what you have to do and that's why these agreements which have this Tremendous potential payoff are much better than WTO much better than anything else that you might that you might considerably envisage I'll just say that faced with the sort of the US TPP template What are what are the changes that India is kind of willing to undertake on intellectual property protection on the role of state on? enterprises in the economy on labor unions labor standards environmental standards and so forth I'm a little skeptical that they would be sort of across the board support of the sort that would be necessary to sign on to Something like the TPP which has all of these issues built in now if Exceptions are going to be made and exceptions can be made that be a different discussion But looking at it from from where things appear to be with respect to TPP right now That's a lot for India to be signing on to and whether it's good or bad I'm a little skeptical as to whether it will actually happen Let me just two sentences when you actually see TPP It's not going to be quite as fearsome as it's been portrayed in some quarters Because there's been a lot of watering down and it's not 21st century standards on every issue and all that So it's not going to be quite so fearsome having said that sure if India comes in if India and China come in If the rest of APEC comes in Indonesia, we got some other big countries We're talking about sure there's going to have to be another negotiation and there's going to have to be some Accommodation if you want a deal which certainly on the geopolitical grounds you really want I'm not going to hug any more of the questioning because we've got I guess 12 13 minutes left and Several hands already up. Do we have a mic? Are we doing we don't we have a mic system as one of the back other is one of the back So since there are there are no men or women on the panel there's a lady lady there with a hand up about Hi, I'm Julio Katakarn. I'm from Kerala in the south of India. I also work at the Carnegie Endowment Here so I should preface my question by saying that it is my own So This panel and the panel and the previous panel have spoken about increasing investments in India as a way for the US to engage strategically and economically with the country and I'm just wondering whether we as academics and Perhaps also as industrialists in the United States should be concerned about whether these investments are reaching the grassroots level workers in India and More importantly, whether these investments are safe Having worked in the Bhopal gas tragedy having worked with the victims of the Bhopal gas tragedy This is something that's always been on my mind This is you know, we've had tragic instances ten years back But increasingly we also see such events in Bangladesh a couple of years back where a factory collapsed. So do you think? Questions such as safety and equitability of these investments should factor into the discussions we had On perhaps in events like the ones we had today. Yes, of course And that's why you want high standards governing your investment relationship And that's the objective of a bio investment treaty or a trade agreement It's to set high standards to deal with exactly that kind of problem And I would add one more Thought to what Fred said you also need and effective state We had a lot of discussion the previous panel by the pernicious influence of bureaucracy and you know That's almost in the category of self-evident truths But the fact of the matter is India's bureaucracy is actually woefully small relative to the tasks that the state sets for itself and So even if you get the standards that Fred would like to see if you don't have a regulatory mechanism That is robust enough to be able to play its role. The standards will be honored only in the breach Right, so even as India begins to increase its markets and open its markets The idea of having an institutional capacity To regulate the terms in which market entry and market participation takes Place I think is extremely important and this has to go hand-in-hand Sure for what it's what let me also say that I wouldn't want to automatically attach building collapses just to globalization buildings Collapse Which have nothing to do with globalization as well This is just a weakness of the state regulations building standards and so on so forth And so yes all of that ideally should be fixed Next question the gentleman here in the front. Yeah Hi, my name is Kunal Rawal. I am a student at George Washington University. This is for mr. Fred and Ashley It has two component my question one is economic and second is political from economic point of view all the examples That's how you have given China Mexico Chile. They all were Export late economies and as we see that the global economy is slowing down the US Middle-class is shrinking So how does that same model can apply to India? that is one first question and Especially when you you have your own middle-class your own consumer base that you can tend to and Politically is not not everyone in this country if we follow the discourse From political angle here in this country not everyone is convinced that all this Treaties have helped American middle-class. So what you are trying to sell to India is not everyone even in US is not buying it So can you please? answer to one step well just on economics With all due respect your premises wrong China was not an export-led economy Until it joined the WTO and began to push its trade reforms about 15 to 20 years ago China started from a state of autarky when it is reformed China is an even bigger continental Potentially self-contained economy than India is it didn't have to go down the export route It chose to do it and by choosing to do it It got 10% growth instead of 7 or 8% growth. That was a choice Mexico Before it reform was one of the most closed economies in the world the share of trade in Mexico's economy was less than that The United States if you can believe it before Mexico went into NAFTA join finally the GATT became the WTO No, these are relatively closed economies Which chose to internationalize to get the extra? Growth impetus that I'm talking about in it as I point out of my study the Analogy between India today and China 20 years ago Mexico 20 25 years ago are in fact very apt and Give kind of a precedent kind of a roadmap for what you can do Slowing down how at this point, how does that same model can apply to India? We shouldn't India be looking for some other model, which is just catering to its own middle class I would see it the other way if the world economy is slowing down. It's more important to increase your market share India look at the data. I've got a chart in my book in my little study India's exports have been incredibly responsive to global economic growth until about five years ago They they grew by three or four times three or four times the rate of global growth up until a few years ago The last five years they flatline their responsiveness to global growth is the client It's not just that the global growth declines their responsiveness They got to get that back up and then they can offset the slower growth in terms of their own payoff The gentleman in that blue turban at the back Thanks very much. Very very interesting remarks My question actually relates to what has just been said, you know, the global growth may be slowing down You know global trade is not going to be expanding anywhere near at the race as it has over the last You know two decades or three decades and Fred your point then you know We need to increase India needs to then increase its share Which means that it has to improve its competitiveness now to improve the competitiveness you need to undertake all these reforms Which you know people have talked about now the point was made that you know You might need to make site payments might need to you know Initially, we know that when these reforms are undertaken whether it's in labor market or in product markets There are costs involved now given India's fiscal position The probability or the likelihood that you could actually provide enough of a safety net Small so doesn't that then sort of create a little bit of a dilemma that you know You can't provide the safety net you can't then you don't then have the reforms and you don't have the reforms And you don't have the competitiveness and then the trade growth. I don't think so look Remember the objective of the exercise is to get your growth up to 8 to 10 percent if you get growth at that level a lot of your fiscal problem disappears Economic growth as you know is the great stimulus to budget revenue increases and solution to budget problems, so in fact one reason one reason to get your growth up is to help deal with your fiscal problem And you use some tiny it's tiny some tiny fraction of the growth payoff from those reforms To take care of the losers. I mean, that's the standard side payment formula in again political economy world wide That's been done in country after country. We don't do it much in the United States Europeans have done it beautifully Probably overdone it, but most countries view it that way at an economic term That makes total sense. We've got time for a couple a couple more questions of the gentleman in the glasses there With the red tie, yeah, Dave Ramos. So me with Africa agribusiness magazine now it's increasingly clear that food security underpins national security and also how political stability is Driven by food security recently in India. There's a huge run-up in onion prices and We just cause panic in the government and governments have fallen in the past So India has a very high cost of food for the average person compared to the US 53% So unless India Improves its competitiveness in the nutritional intake of its population It cannot have sustained economic growth So the question is and also India being a tropical country can competitively produce the lowest cost food and pretty much any commodity So what is the economic incentive which needs to be put in place? To dramatically increase agricultural productivity and reduce cost of food. Thank you Well, there was a lot there were a lot of things you said some that I agree with some that I might disagree with a bit but Overall, I mean this this will have to be a longer discussion. I'm afraid I just on agricultural productivity There's just a whole range of factors I I can quickly say one thing which is that India's reticence at Doha on agricultural policy is Understood at least in part by the kind of issues that you've raised about food security about what a change in agricultural prices Is going to do to farmers relative to consumers and so forth. And so it's a complicated Space and I fear we won't be able to do justice to the question Presumably Friday you would if you didn't sequencing which sectors are dealt with by trade deals agriculture would be lost Well, it would have long phase-in periods The way to deal with adjustment problems of that type and also what Ashley mentioned applies in agriculture as well Is long phase-in periods some of the US tree agreements like with Australia have 20 year phase-in periods particularly in the agricultural sector so as to cushion the Pressure that is felt and give plenty of time. The Korea is a fascinating case Korea's has done Free trade agreements with every country in the world for the last 10 years to get out of the middle-income tract. It's a brilliant strategy When they did their first agreement with Chile It was turned down twice by their National Assembly on the grounds that it was killing agriculture Korean government realized that if it was going to be serious about trade It had to do a big adjustment to get rid of its inefficient agriculture. They did a 200 billion dollar Readjustment program phase in over 10 years and it enabled them then to go on to a to a sensible strategy Remember, I can't he's just saying sound like a broken record. Remember if the problem in India is high-cost food high-cost food One way to do it is improve productivity Another way to do it is to import some of that food That's a lot cheaper and again China which used to will go for self-sufficiency and food has decided to do that Mexico has decided to do it many countries have decided trade is a part of the solution Not a part of the problem. We have time for one final question the late the lady there So I'm sorry to Gaki from the National Babies and Research I have one question a little bit different but in terms of the political geopolitical balancing for of India as There's more increase of Asian regionalism in trade agreements How do you think the possibility of a trade agreement that excludes United States income would mean to the US and India economic relationship? Right Is that a question about our step? Well at a purely symbolic and political level obviously it's undesirable For countries to be creating agreements, which do not have the United States. That's an American perspective It's a parochial perspective, but it's the truth having said that however if the agreements that are being negotiated are relatively low quality agreements Then the fact that the US is excluded has very modest material consequences for our interests If anything, I would hope that these that these agreements that are being negotiated would actually elevate their quality in competition with other agreements of the US as part of if Our step turns out to be the truly low hanging fruit agreement, which it seems to be Converging towards then I would think the fact that the US is out of that really should not cause us Very much of a sleep sleepless night There's way too much here for me to even begin to attempt to summarize so let me just say you all three Excellently presented a lot of questions and arguments and food for thought and thank you so much for doing that I