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US needs to launch FTA negotiations with India: Expert

March 14, 2013 14:38 IST

The US needs to start negotiations with India on free trade pact and help it become a member of the Asia Pacific Economic Co-operation, which will also enormously benefit America, said an expert.

Testifying before a Congressional Committee on Wednesday, Dan Twining, Senior Fellow for Asia at the German Marshall Fund of the US, told lawmakers that regrettably the Barack Obama administration's signature trade initiatives, TPP (Trans Pacific Partnership) and TTIP (Transatlantic Trade Investment Partnership), do not include India.

He added that a primary economic initiative between the two countries has been a modest bilateral investment treaty, which has been stuck in the bowels of the bureaucracy for years.

"At the same time, India has enacted or is negotiating trade agreements with Japan, the EU, ASEAN and a number of other partners, but not the United States," Twining said.

Although India is part of Asia's security architecture, it's not part of Asia's economic architecture, he said, adding that the country's exclusion from APEC makes little sense for a country that sits in the middle of Asia. Besides, it is an important trading partner to America, China and Japan, and has an economy that will comprise nearly 20 per cent of global GDP by 2060 according to the OECD.

Twining said that so as to elevate the bilateral economic relations to the strategic level, he believes America and India should launch negotiations for a Free Trade Agreement.

"India will have to undertake far-reaching domestic reforms to qualify. New Delhi might find it easier to undertake these reforms if it can do so as part of a process of acceding to APEC.

"This will take time, but the requirements of membership could incentivise an Indian system wary of reform, the political costs of reform, to pursue aggressive liberalisation," Twining argued.

The prize of eventual APEC membership, coupled with an eventual FTA with America can

empower economic reformers within the Indian system and mobilise the Indian private sector, which is frankly quite fed up with the government's slow pace of reform, Twining said.

Skeptics will argue correctly that Indian officials have been among the most obstreperous opponents of the US trade agenda in venues like the WTO. "This is true," he said.

Twining said: "Stepping back, however, and looking strategically at India's deepening involvement in international institutions, we see that India behaves quite differently once it's inside a club than when it is excluded from it. Rather than throwing bombs from the outside, India has acted more responsibly in institutions like the IAEA and the UN Security Council."

He said Indians crave the status of full membership in an international order they believe has excluded them for too long. "Once seated at the high table, they're more inclined to help enforce global rules. I think the same would be true if India should accede to APEC."

Twining said India needs to grow in order to underwrite its security in a very tough neighbourhood and to uplift more poor people than exist in all of sub-Saharan Africa. The country has implemented massive rural welfare schemes, but government welfare alone will never build the world's largest middle class; only a dynamic private sector will do that.

"The US can help accelerate this process by incentivising our Indian friends to open up their economy to again produce growth rates approaching 10 per cent. China grew at this pace for several decades, as did Japan and South Korea before it. There's no cultural or historic reason India can't deliver a South Asian miracle to match the East Asian miracle we've seen in the Pacific," he said.

"India should ultimately find it has no stronger partner in economics than the United States. It's time to put in place an agenda for economic cooperation between our countries  that mirrors the ambitions of our strategic partnership, catalysing enduring prosperity for both our peoples," the American scholar said.

Lalit K Jha in Washington
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