The intense dialogue involving some contentious issues related to trade and investment matters helped both sides, while venting their respective concerns, to gain a better perspective on how to further strengthen policies and mechanisms to enlarge Indo-US economic cooperation and expand opportunities for private capital flows needed for investment and innovation.

What emerged at the end of it all was an agreement to begin talks on a bilateral investment treaty, which US strongly advocates, apart from revising at an early date the defunct US-India Trade Policy Forum, which could take up issues like a positive innovation climate for all sectors including green technology, pharmaceuticals and IT.

The outcomes certainly do not correspond to the sense of urgency for capital flows, at the back of the Ministers’ visits, given a very difficult external situation and the magnitude of investment requirements for building India’s infrastructure. However, Mr Chidambaram and Mr Anand Sharma in their layers of meetings effectively met US criticisms on both compulsory licensing and patent registration policies, all WTO-compliant and subject to judicial review.

But a more serious concern that Mr Chidambaram and Mr Sharma conveyed to US Congress and other leaders separately was provision in the immigration bill which linked the issue of temporary relocation of knowledge workers (H1 B visa holders) to the larger issue of immigration. Such restriction, he said, amounted to raising non-tariff barriers, he said. The House and Senate leaders assured the Finance Minister of their deep interest in promoting India-US relations and strategic partnership.

US businessmen equally share the discomfort over the provision targeting global technology providers and recognise it hurts US companies in deriving competitive advantage through innovative applications of IT on which India has been their “best possible partner”. There is no immediate prospect of the impugned immigration legislation getting through the Congress, with most Republicans stubbornly opposed to the bi-partisan Senate bill sent to them.

The Ministers visit to Washington came during a hectic week of intense top-level bilateral discussions - the fifth US-China Strategic and Economic Dialogue – as well as the first round of US-EU talks on an ambitious Transatlantic Treaty on Trade and Investment Partnership, a high priority for President Obama set for conclusion by the end of 2014, provided numerous glitches are overcome.

A major breakthrough came in the US-China economic dialogue on July 12 with China’s agreement, for the first time, to negotiate a Bilateral Investment Treaty (BIT), hailed by US Treasury Secretary Mr Jacob Lew as “significant” for it would include all sectors and stages of investment with another country. US Trade Representative Mr Michael Froman said BIT would be “critical” to achieving access to China’s market and “leveling the playing field for American firms” that would bring home the benefits of more exports and more American jobs.

Indeed this set the stage for Americans to step up the plate and urge Indian leaders for a similar move. It is an old idea, mooted several years back, but allowed to languish as other urgent concerns and trade frictions in bilateral relationships emerged since then. Both sides recognized potentialities for such a Treaty for India on a course of reforms to further open up economy. The two-way trade has slowly picked up to 100 billion dollars but US investments lag and total a mere 28 billion dollars over a decade.

Strengthening Indo-US cooperation on strategic issues was the focus at the meeting between Mr Chidambaram and US Treasury Secretary Mr Jacob Lew, where the BIT surfaced and found favour with Mr Chidambaram as it would be providing equal protection for Indian companies as they expand investments in USA. BIT gained traction later at the US-India CEO Forum, hosted by the State Department. This was attended by the Ministers along with their US counterparts and CEOs of select Indian and American companies.

At the CEO Forum, greater emphasis was on India lowering barriers for foreign direct investment, and the Deputy Secretary of State Mr William Burns said proposed raising of FDI caps in India and concluding the bilateral investment treaty would be instrumental in taking innovation, economic growth, and job creation to a new level in both our countries. Indo-US defence trade relationship also needed to be transformed, he said.

Commerce Minister Mr Anand Sharma later confirmed that India has signalled acceptance of a BIT though no date had yet been set for the first round of talks. In such treaties, governments commit to protect investments in their territory by the other country nationals and there are provisions for fair and equal treatment and substantive protection for them against discrimination or expropriation without due processes. US-India Business Council (USIBC) says such a Treaty could help facilitate additional US investments in infrastructure and other areas in India, so badly needed while also it provides protection to Indian investors in USA.

It was indeed in a less propitious setting, with a challenging economic situation at home with much of the hyped reforms yet to take off, that the two ministers embarked on their journey to USA. They certainly hoped, and have been successful to some extent, to dispel growing concerns on Indian policies at the levels of both Government and business in USA.

At least one of the major hurdles that Americans would have raised in the discussions, India’s preference for domestically manufactured electronic goods (PMA Policy), had been cleared at a meeting in PMO two days before Mr Chidambaram left for Washington. That policy is for review and modification. And this was greatly welcomed by US Government leaders and American CEOs and thus it removed one major grievance off the table.

In his discussions with US Congressmen as well as policy-makers at Government level, Mr Chidambaram dealt with issues such as compulsory licensing, patent protection, preferential market access and increase in FDI in defence and financial services. On intellectual property protection, a major area of discord, the Finance Minister pointed out that the Indian law affirmed these rights (IPRs) rights and that the process of granting compulsory license and patent registration were WTO compliant and subject to judicial review.

At the same time, Mr Chidambaram emphasized the importance of India becoming a manufacturing hub for meeting its own domestic needs and for rebalancing the global economy. The US Treasury Secretary welcomed the Finance Minister’s efforts to engage with US investors in Washington and encouraged the Indian government to continue to implement economic reforms that would “further deepen our bilateral trade and investment relationship”.

In a similar vein, the US Trade Representative Mr Michael Froman spoke of current efforts in India to improve the investment climate as well as proposed reforms to lift foreign direct investment restrictions. In his meeting with Mr Anand Sharma, he welcomed India’s decision to review the Preferential Market Access policy and modify the domestic manufacturing requirements in regard to private sector procurement of electronic products but said there were other “localisation barriers” in IT.

Both Mr Chidambaram and Mr Anand Sharma were earlier keynote speakers at the US-India Business Forum, the largest bilateral trade association in USA, representing over 350 top-tier U.S. and Indian companies. Mr. Chidambaram alluded to the challenges still faced by India in bringing millions of people above the poverty line, saying at one point: “We are a country where we are building our economy brick by brick, and in that process we seek your help.”

Mr Anand Sharma said India’s National Manufacturing Policy opened up immense commercial and investment opportunities for US investors. While welcoming India’s proposed reforms, Mr. Ajay Banga, Chairman of USIBC, recognized that “radical changes” could be difficult at a time of electoral politics in India and polarised political systems in both countries. (IPA Service)