What should Treasury secretary tell Indian officials?
Saturday, April 3, 2010
Treasury Secretary Timothy F. Geithner departs for India on Sunday for his first visit to the country as a Cabinet member. A host of issues are at stake between the nations: two large democracies that have become important trading partners and strategic allies as well, with a common interest in stabilizing a volatile part of the world. India is a key emerging economy, with more than 1.1 billion people and a strong technology sector. The United States runs an annual trade deficit with India that has reached as much as $12 billion, but foreign direct investment between the two countries was about even last year, at roughly $11 billion each. India is a potentially important market for U.S. companies but retains significant restrictions on business ownership and the control of capital. It is also a possible partner with the United States in discussions over China's economic policies but has been hesitant to criticize its large and economically influential neighbor.
Treasury officials spoke in general terms this week about the issues that are likely to come up as Geithner launches what is being billed as the "U.S.-India economic and financial partnership."
What should the treasury secretary say to Indian officials during his two-day trip? Here are four opinions:
Arvind Subramanian, senior fellow, the Peterson Institute for International Economics and the Center for Global Development:
The Chinese are the competition -- don't forget it
"The fact that the visit is taking place at all is important. This is the Obama administration's effort to elevate the relationship. India is not the economic powerhouse that China is, but this signals that India is getting there.
"For both sides it is important. For the U.S., one can detect a kind of frustration with China."
The India trip "is not necessarily a deliberate playing off, but it is good to have a balance. And for India, it does not want to be seen as playing second fiddle on everything to China."
Subramanian said the United States could find a natural partner in India if it wanted to build a coalition to encourage China to let its currency appreciate, a move that would make China's goods more expensive and help alter some of the trade imbalances around the world.
"In the developing world, there is huge overlap," among the types of goods produced, making countries such as India and China direct competitors and making the Chinese currency issue "a global, multilateral issue, not a U.S. issue alone. The Chinese have trapped the whole region.
My advice to Geithner is be skillful and try to tap this and convert it into something that affects the global economy."
Ron Somers, president, the U.S.-India Business Council: