Opening Statement - U.S.-India Relations: Democratic Partners of Economic Opportunity

Mar 15, 2016
Remark

Chairman Salmon’s Opening Statement
As Prepared for Delivery
Committee on Foreign Affairs
Subcommittee on Asia and the Pacific
“U.S.-India Relations: Democratic Partners of Economic Opportunity”
Tuesday, March 15, 2016 | 2:00 pm

The U.S.-India relationship can be characterized simply: one of enormous potential. It is in the interest of this Subcommittee and the United States to see democratic societies prosper, and it is because of this we view India as a natural partner for the United States. The 1.3 billion-person nation is has become the focus of the U.S. trade and business community. People-to-people connections between the two countries undergird and bolster the relationship. As a growing military power, India is also a critical global security partner, with the potential to help avert military confrontation and conflict in the Indo-Pacific region.

Indeed, both the United States and India recognize the potential partnerships between the world’s fastest growing large economy and the world’s most powerful economy. In light of this, we should expect that bilateral trade has much more room to grow. We convene this hearing today to discuss the U.S.-India economic relationship.

Trade in goods and services have ballooned between 2005 and 2015. Both countries have prioritized the economic relationship, aiming to reach $500 billion in bilateral trade in goods and services by 2024, a five-fold increase from the 2014 level. To achieve this, it is greatly important that India continue substantive economic reform by opening its markets.

But substantive challenges remain, including speculation about India’s domestic growth prospects, limits to market accessibility, and concerns about intellectual property rights protection. When Prime Minister Modi came into power in 2014, he shouldered high expectations for an economic transformation. While his leadership continues to hold the promise of a new economic era for India, observers have become frustrated with the slow pace of reform. India’s economic growth rate, at 7.6 percent, will not be enough to generate sufficient jobs for India’s exploding population of young people.

On top of that, these issues are exacerbated by an overbearing and corrupt bureaucracy, insufficient infrastructure development, heavy regulation, and high social spending. Meaningful reform has been hindered by domestic politics and parliamentary gridlock.

A critical component of India’s economic reform will be its involvement in multilateral economic institutions. India has for twenty years shown an interest in joining the Asia Pacific Economic Cooperation, or APEC, a regional organization that supports economic growth through free and open trade and investment, promoting regional integration, and encouraging economic cooperation, among other things. This has been an ambition that our executive branch has welcomed and encouraged. To assist in accelerating the relationship towards this goal, I plan on introducing a bill to support India’s membership in APEC this week.

Our two countries are also in the midst of discussions on a high-standards bilateral investment treaty, or BIT. If achievable, the BIT would deepen our economic relationship and support economic growth and job creation in both countries.

These sorts of positive currents and potential achievements for Indian economic policy would illustrate a movement towards greater openness and harmonization with global free market principles that will be beneficial to India and the U.S.-India relationship and both our economies. Such reforms would pave the way to the accelerated growth India needs, and the increased openness would allow our countries to exploit our comparative advantages. Experts estimate that a successful BIT, for example, could increase U.S. goods exports to India by 50% or more, and could double services exports. A successful BIT could even pave the way forward towards a free-trade agreement with India.

Despite the slow pace of reform, India’s economy remains a bright spot amidst global economic troubles, particularly for developing nations. It is still the world’s fastest growing large economy. I look forward to hearing about the U.S.-India economic relationship, and the opportunities and challenges that encompass it, and how the United States can best support and nurture the bilateral economic relationship.