November 9, 2016
President-Elect of the United States of America
Washington, DC 20007
Subject: Strengthening the U.S.-India Strategic Partnership
Dear President-Elect Donald Trump:
On behalf of U.S.-India Business Council’s Chairman John Chambers, Executive Chairman of Cisco, the USIBC’s Board of Directors, and over 350 of our member companies, we congratulate you on your election to be the 45th President of the United States of America. We write to you in order to highlight actions that your administration should take in the first months of your administration to deepen and expand commerce between the United States and the Republic of India.
Over the past forty one years, USIBC worked with elected officials in both governments and leaders of American and Indian industry to transform the bilateral commercial relationship. To the great benefit of America and India, our bilateral business ties have never been deeper. But there is much more that can and should be done. Since the historic parliamentary election of 2014, which ended 30 years of successive coalition-led governments in New Delhi, we have seen new vitality in the bilateral relationship.
This is evident in our ongoing Government-to-Government dialogues with India such as the U.S.-India Strategic and Commercial Dialogue, the U.S.-India CEO Forum, the U.S.-India Trade Policy Forum, the U.S.-India Information and Communications Technology Dialogue, and the U.S.-India Higher Education Dialogue, among others. Other positive developments in our relationship include the U.S.-India Partnership to Advance Clean Energy Deployment, the renewal of the Defense Framework Agreement, President Obama’s designation of India as a “Major Defense Partner,” the Framework for the U.S.-India Cyber Relationship, and the increase of two-way trade and investment to over $110 billion. India is a natural partner of America. No other democracy possesses the combination of deep cultural linkages to America, economic dynamism, demographic weight and geopolitical influence.
We encourage you to prioritize this relationship through consistent engagement with India at the highest levels of your administration. Towards this end, we provide below a series of recommendations for actions that your administration can take to propel the U.S.-India partnership to new heights.
Dr. Mukesh Aghi
President U.S.-India Business Council
The U.S.-India Business Council (USIBC) facilitates an inclusive bilateral trade environment between India and the United States by serving as the voice of industry, linking governments to businesses, and supporting long-term commercial partnerships that nurture the spirit of entrepreneurship, create jobs, and grow the global economy. The Council believes that pro-growth policies can expand commercial partnerships from $100 billion to $500 billion in the coming years. USIBC respectfully submits the following recommendations based on input from our over 350 member companies – both American and Indian.
Start with a State Visit
Invite Prime Minister Modi for a state visit within your first year in office. This will send a clear signal about the importance of the bilateral relationship.
Continue Government to Government Dialogues
The United States has more government to government dialogues with India than with any other country. Prior administrations recognized the forcing function that official dialogues serve. The Council encourages your administration to continue this practice and strengthen these dialogues. These dialogues generate policies to improve the ease of doing business, level the playing field through fair competition, expand access to finance, promote strong labor law reforms and infrastructure investment, challenge counterproductive trade practices like price controls (a significant issue for the life sciences industry) and foreign direct investment (FDI) restrictions in the agriculture (including tobacco) and insurance sectors, and synchronize regulatory standards with global norms such as India’s food safety standards. These dialogues are increasingly important to American industry as India becomes a global economic powerhouse. Ongoing dialogues serve as a platform to address market access barriers faced by American companies. These barriers include tariff increases on the importation of ICT (Information & Communications Technology) products, FDI barriers in insurance – especially with respect to ownership and control, inequitable FDI restriction in tobacco, and price controls in the pharmaceutical and medical device industry. These dialogues also help both countries remain coordinated on a broader range of commercial issues such as in-country security and safety testing requirements for ICT products; partnership in cybersecurity; regulatory collaboration on biosimilars and clinical trials; capacity building to promoting bilateral public-private partnerships in agricultural technology; leveraging innovation to address healthcare challenges; strengthening intellectual property rights in India; encouraging India to operationalize its proposed copyright board, and promoting education and enforcement against piracy. Dialogues give American companies a voice as India moves forward with bold reforms such modernization of India’s bankruptcy codes and implementation of the Good and Services Tax (GST). It is also important for American companies to hear about the priorities of the Indian government, which include expanding access to finance and providing a social safety net for its rising middle class, because this facilitates infrastructure investing and American participation in India’s long term capital market development.
Negotiate a Bilateral Investment Treaty. In September 2015, President Obama and Prime Minister Modi affirmed their shared interest in concluding a BIT. India has signed bilateral investment treaties (BIT) with eighty countries and a treaty remains a high priority for American investors. A BIT would provide protection for investors from arbitrary, discriminatory or confiscatory government measures by establishing recourse to independent international arbitration. Both governments set an ambitious but reasonable goal of increasing two-way trade and investment to $500 billion. USIBC urges your administration to put the time and resources behind renewed efforts to establish the policy parameters that can make this goal a reality.
Support India’s admission into the Asia Pacific Economic Cooperation Forum.
This accords with the January 2015 U.S.-India Joint Strategic Vision for the Asia-Pacific and Indian Ocean Region document and sends an important message to India about the value of its partnership with the United States. USIBC recognizes that participation in Asia Pacific Economic Cooperation (APEC) forum is a two-way street and continues to encourage the government of India to productively participate in APEC discussion groups as an observer in order to better understand the requirements of membership. It’s important for any new member in APEC to become familiar with the standards necessary for membership in the organization.
U.S.-India Defense Trade
Order a comprehensive review of the policies and procedures that weaken U.S. competitiveness in the Indian defense and aerospace market. The U.S. export control and licensing processes puts Americans at a competitive disadvantage compared to foreign competitors like the Russians. The U.S. has refused to sell to India advanced defense equipment on counter proliferation grounds despite the fact that India can now purchase comparable systems from foreign suppliers due to the proliferation of advanced defense technologies. The U.S. does not have the monopoly it once did in many defense technologies and its policies need to adapt to this reality. From both a commercial and national security perspective, it is better that a country like India purchase advanced defense equipment from America than from its foreign competitors.
Continue engaging the Government of India to enhance intellectual property protections emphasizing the benefits of providing a framework that is transparent, predictable, and one that adheres to international norms and standards. The Council has seen the Government of India take time and effort to engage with the U.S. Government in a constructive dialogue on intellectual property, including the Trade Policy Forum (TPF) and commitment to a high-level IP Working Group within the TPF framework. However, much work remains to be done. A strong commitment to promoting innovation will accelerate domestic manufacturing, increase economic growth and, improve health conditions for millions of people.
Totalization and Mobility
Work to eliminate outdated and unfair tax for Indian workers by concluding an executive agreement with India on social security totalization. The Council urges you to work with Congress to exempt India from the “general applicability” requirement of Section 433 of title 42 of the Social Security Act. Approximately 500,000 U.S.-based Indian workers pay the 6.2% Federal Insurance Contributions Act (“FICA”) payroll tax on an ongoing basis. Despite their contributions, which add up to $1 billion per year, they will never receive the benefits because they return to India before they have worked at least 40 quarters (approximately 10 years). Indeed, Indians on H-1B visas cannot work more than six years in the United States, and—as a result—they cannot vest.
As the Social Security Administration notes, one of the policy reasons for reaching totalization “… agreements is to help fill gaps in benefit protection for workers who have divided their careers between the United States and another country.” In the context of U.S.-India commercial relationship, this pro-worker policy has been hampered by the Social Security Act, which provides that “agreements may only be negotiated with foreign countries that have a social security system of general application in effect.” The term “general application” has been defined to be at least 50% of the population is covered by social security. While India has made strides to cover more people, approximately 90% of its workers are in the informal sector. As such, even if it mandated universal social security coverage, it would not reach the 50% level for decades.
In addition to totalization, the issue regarding the free movement of high-skilled workers disrupts the U.S.-India bilateral relationship unlike any other, and it can be fixed with pragmatic reforms. The December 2015 Omnibus Appropriations law’s so-called 50:50 fees are clearly discriminatory and should be eliminated by the U.S. Congress. We would welcome your efforts to advocate for the same with the U.S. Congress.
November 9, 2016