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Facilitate, Don’t Complicate, U.S.-India Trade | Commentary

Vice President Joseph R. Biden Jr., during his recent visit to India, addressed the key issues that stand out for policymakers on both sides of the U.S.-India relationship, noting that protection of intellectual property, limits on foreign direct investment, inconsistent tax dues and barriers to market access are the “tough problems” between the two countries. He went on to add that they will “have to be negotiated and worked through in order to meet the potential of this relationship.”

In working through these current disputes, both countries should not lose perspective of the rapid expansion and future trajectory of the full bilateral trade and investment relationship. The goal should be to facilitate, not complicate, this key pillar of the deepening U.S.–India partnership.

The overall U.S.-India economic and trade relationship is steadily growing. Business ties have already achieved a nearly fivefold increase in bilateral trade since 2000. In 2009 alone, California’s farm exports to Asia topped $3 billion, with more than $275 million going to India. Annual two-way trade is nearly $100 billion.

Equally important is the growth of two-way investment. While Indian authorities must tackle the mounting concerns of international investors in their country — the subject of a recent hearing before the House Ways and Means Committee — U.S. policymakers should also encourage the rapid growth of investments that Indian-based companies are making on American soil. India is now the third-fastest-growing source of foreign direct investment in the U.S., and the U.S. is among the top five of India’s preferred FDI destinations. FDI plays an important role in the growth and vibrancy of the U.S. economy. Foreign-based companies directly employ 5.6 million U.S. workers.

However, from 2000 to 2011 the U.S.’ share of global FDI has decreased from roughly 37 percent to just over 17 percent. The U.S. needs more companies from partner countries like India to set up shop in our cities and towns.

The growing flow of capital from India has brought many benefits to the U.S. economy. Indian investment in the U.S. recently touched $11 billion and has helped create 100,000 jobs. India-headquartered companies support 32,000 jobs, $1.6 billion in capital expenditures and $487 million in exports in 2010, according to the Department of Commerce. Indian-based Apollo Tyres recently announced the largest acquisition of a U.S. firm by an Indian company, with its purchase of Cooper Tire and Rubber Co. for $2.22 billion. This follows the Tata group’s acquisitions of Eight O’Clock coffee (with manufacturing facilities in Maryland) and investments in soda ash mining in Wyoming and Utah, among others.

Members of Congress recognize the contributions these investments have made to their states. Sen. Amy Klobuchar, D-Minn., has said: “Essar Steel’s $1.3 billion investment in an iron ore pellet mine in Minnesota helped save the mine where my grandfather worked.” Former Rep. Jean Schmidt, R-Ohio, has noted that investments made by Tata Consultancy Services in Cincinnati generated 450 jobs, saved a building from being demolished and improved the local tax base.

Twenty years ago it was unimaginable that our two economies would become as intertwined as rapidly as they have. Today the need of the hour to see this upward trajectory continue is to address investment barriers in India, as well as legislation proposed in U.S. immigration reform — including provisions relating to H-1B dependent companies, which indeed are mostly headquartered in India. Our governments ought to be facilitating greater economic interaction, not complicating it.

Growing trade and investment continue to drive the U.S.–India partnership forward, stimulating innovation, economic growth and job creation for both countries. While addressing current difficulties in bilateral trade relations is always important (and indeed a normal part of any trade relationship), U.S. and Indian policymakers need to keep their “eye on the prize” of unleashing the full potential of our economic relations. In this, we’ve only just started.

Rep. Ami Bera is a Democrat and doctor representing Sacramento County and the only Indian-American currently serving in Congress. Karl F. Inderfurth holds the Wadhwani Chair in U.S.-India Policy Studies at the Center for Strategic and International Studies. He served as assistant secretary of State for South Asian affairs in the Clinton administration (1997-2001).