117. Telegram From the Embassy in India to the Department of State1
18588. Pass Commerce. Moscow for Secretary Kreps. Pass STR. Subject: Secretary Kreps’ Visit to India, November 29–30.
Summary: In three-day visit to India, Secretary Kreps sought to allay Indian fears that the U.S. is going protectionist, urged the Indians to participate fully in MTN, and heard repeated pleas for greater long term access to the U.S. market in the longer term for Indian handicrafts, especially textiles. Still, Indians were clearly satisfied with and were [Page 323] not seeking to reopen recent textile arrangement.2 Secretary pointed out that if India wished to resort more to American foreign investment, India would have to take steps to attract investors and improve investment climate. End summary.
1. During her visit to follow-up on the President’s earlier commitment to Desai,3 Secretary met with Prime Minister Desai, Minister of Commerce Dharia (her host), Minister of Finance Patel, and Minister of Foreign Affairs Vajpayee. She also met with leading Indian business leaders and addressed the Indo-American Chamber of Commerce.
2. Topics raised during trade talks included MTN, GSP, handloom textiles, new U.S. export policy and US-Indian trade policies. The Secretary reaffirmed our commitment to oppose protectionism at home and abroad. She described the President’s new export policy4 and the role of this policy in U.S. efforts to strengthen our trade balance as opposed to using import restrictions.
3. In discussing U.S. import measures that impact on Indian exports to the U.S., such as countervailing and anti-dumping duties, the Secretary explained that these were internationally recognized remedies designed to counter unfair trading practices and were indispensable to the maintenance of an open market in the United States. She pointed out that these have been utilized with great discretion. She also pointed out that the President only approved import relief in five of the twenty-three cases recommended to him by the ITC.
4. She urged the Indians to negotiate on a contribution to the MTN and to support the formulation of the MTN codes, stressing the importance of LDC participation in MTN to the fight against protectionism. The Indians announced that a Cabinet decision had been made to make an offer in the MTN. The Secretary expressed pleasure that the Indians had decided to take this important step. The Secretary also noted that the US appreciated the recent Indian import liberalization [Page 324] measures and expressed the hope that India would pursue further liberalization.
5. Minister Dharia raised the issue of handloom textile exports. He discussed the widespread unemployment and massive property [poverty] in India and indicated that the development of handicraft and cottage industries was a primary government goal for correcting this problem. The Secretary responded that she understood that we had just reached an agreement in the textile field with which the Indians were satisfied. Minister Dharia agreed and made clear that the Indian Government was not seeking to reopen the agreement. His remarks, which were repeated on the four occasions he met with the Secretary, were meant to obtain awareness of and sympathy for India’s longer-range objectives in the handicraft area. It is clear that at an appropriate time, the Indians would like a more liberal arrangement for their handloom exports.
6. The Indian side proposed the establishment of trade promotion centers in India and the U.S. for the purpose of market surveys, promotion and trade problem resolution. The Secretary explained that we had no authority to engage in joint governmental operations such as this. She suggested that we seek ways to promote trade on both sides through the facilities that we already have. It was understood that the Commerce Secretary Khrisnaswamy Rao Sahib will probably visit Washington early next year to discuss this matter further.
7. On GSP, both Dharia and the businessmen expressed strongly the view that as presently constituted GSP did not allow Indian enterprises to make plans with certainty. The Secretary made clear that competitive need and graduation were essential to have and maintain a GSP and that although there are provisions for dropping GSP items, there are also provisions to add items, a provision which India has used effectively. She pointed to the excellent record of India’s utilization of GSP and expressed the hope that this would continue.
8. With Minister Patel, the Secretary discussed Indian investment policy and policy towards foreign pharmaceutical companies. She requested clarification of Indian policies and some indication of areas in which the Indians felt foreign participation might be useful. The Secretary stressed that although investment policy was a matter for the Indian Government to determine, foreign investment can make a major contribution to a developing country and exert a positive influence on employment and growth. She pointed out US position was one of neutrality on foreign investment although we were willing to facilitate investment to LDCs through OPIC. The Indians responded that their investment policy was clear, and included room for foreign companies in industries where technology was needed and was not available indigenously, or through licensing arrangements. Desai, Patel [Page 325] and Dharia insisted that India’s policy is now predictable and constant, and that once foreign investors comply with the rules, they are treated equally with domestic investors. The Indians expressed surprise over the climate of concern which the Secretary said existed among American investors in the Indian drug industry. The Secretary urged the Indians to exercise their drug policy with flexibility and fairness and the Indians responded that they intended to do so. She added that even one firm which felt disadvantaged cast a long shadow on the investment climate. In response to the Secretary’s question, the Indians said the government had no plans to attract investment or to identify the specific industry in which foreign investment would be welcome. She pointed out to Dharia that from her contacts with the business community India ranked low in terms of climate attractive to potential investors. In the event the Indian Government wished to send a Minister or officials to the United States to explain Indian policy on the areas in which India sought investment, Commerce would facilitate the visit in the United States.
9. The Indians raised the issue of UNCTAD V,5 Common Fund6 and resource transfer. The discussions were cordial, the Indians said that they wanted UNCTAD V to be noncontroversial and productive and the Secretary responded that the U.S. was prepared to negotiate pragmatically and realistically for results that would be truly beneficial to developing countries. On the Common Fund, the Secretary indicated that U.S. could accept a second window with voluntary contributions. The Indian side explained their position on the second window as being integrally related to the Common Fund, and termed it essential to the success of UNCTAD.
10. Minister Patel raised the issue of resource transfer. He discussed the plight of developing countries and stressed the poverty and unemployment that seem intractable in these countries. He urged the United States and other DCs to do everything possible to assist in the development goals of the LDCs. On IDA replenishment, Patel expressed the hope that the US would not question the 40 percent share which India [Page 326] takes.7 The Secretary discussed the U.S. commitment to helping the neediest and our satisfaction with the stress in India programs to help the poor and rural areas, our own bilateral aid program for India, and our support for the role of the international financial institutions.
- Source: National Archives, RG 59, Central Foreign Policy File, D780497–0591. Limited Official Use; Immediate. Sent for information to Moscow.↩
- Telegram 230994 to New Delhi, September 12, relayed the text of an Indo-U.S. textile memorandum of understanding reached after meetings in Washington September 5–9. The MOU modified categories and quantities of textiles that either country could export to the other. (National Archives, RG 59, Central Foreign Policy File, D780371–0563) The need for increased flexibility in the categorization of textile imports from India arose from an earlier trade embargo against India imposed by the United States. According to telegram 168715 to New Delhi, July 4, India erroneously certified approximately 14 million square yards of handloom fabric as mill-made. As a result, the quota for mill-made apparel was exceeded and subsequent shipments were subject to U.S. embargo. (National Archives, RG 59, Central Foreign Policy File, D780274–1023)↩
- See Document 90 and footnote 7, Document 96. No memoranda of conversation of Kreps’s meetings with Indian officials were found.↩
- Carter announced his administration’s new export policy on September 26. The policy was designed to encourage U.S. firms to increase overseas exports. (Public Papers: Carter, 1978, Book II, pp. 1630–1635)↩
- UNCTAD’s fifth session (UNCTAD V) took place in Manila May 7–June 3, 1979.↩
- At the end of UNTCAD’s fourth session (UNCTAD IV) in Nairobi in May 1976, it agreed to consider the establishment of a Common Fund to finance a buffer stock program designed to smooth out primary commodity price fluctuations. See Foreign Relations, 1969–1976, vol. XXXI, Foreign Economic Policy, 1973–1976, Documents 304–306.↩
- See footnote 2, Document 66, and Document 68.↩