Transcript of Remarks by Agriculture Secretary Mike Johanns to the Federation of Indian Chambers of Commerce and Industry Regarding U.S.-Indo Agricultural Trade and the DOHA Round: Reaping the Benefits of Partnership - New Delhi, India - November 21, 2006 | USDA Newsroom
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Release No. 0452.06
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Transcript of Remarks by Agriculture Secretary Mike Johanns to the Federation of Indian Chambers of Commerce and Industry Regarding U.S.-Indo Agricultural Trade and the Doha Round: Reaping the Benefits of Partnership - New Delhi, India

November 21, 2006

Good afternoon. Thank you, President Poddar, for that kind introduction and for making us welcome in your wonderful country.

I am pleased to be in New Delhi to meet with our partners and friends who are dedicated to strengthening the political, economic, and cultural ties between India and the United States. President Bush and Prime Minister Singh are committed to this partnership.

We are here to reinforce the bonds between our two nations and to create a more collaborative environment for trade. We view India as a strong partner, and a proven leader in the expansion of trade and economic ties among the southern Asian countries. We share common values based on democratic, multicultural societies, and our citizens

share a tremendous entrepreneurial spirit. Both of our countries are committed to the mutual benefits of globalization. But we are at-risk of letting those benefits slip through our fingers if we allow Doha to slip away.

We have a once-in-a-generation opportunity before us to lift out of poverty millions of farmers around the world. We have an opportunity to improve the economic health of India and many nations. But that opportunity is locked-away in the stalled Doha negotiations.

Trade is the most powerful engine of economic growth. Trade increases rural income and offers developing countries access to markets, to new technologies, and to partnerships and opportunities for employment and investment.

You have seen for yourselves how opening your information technology, services, and manufacturing sectors to trade has benefited the economy of your country and the fortunes of your citizens. Doha presents a similar opportunity.

I want to talk about what the United States has advocated in the Doha negotiations. We made an ambitious offer to reform our domestic support program. We are willing to cut trade-distorting domestic support by three times the level of the Uruguay Round reductions.

But, our ambition has not been matched. You could lead the way toward unlocking the Doha negotiations by offering real market access.

Your producers and exporters will benefit substantially from lowered trade barriers and greater access to the U.S. and European markets. Just as importantly, you would gain access to markets of other developing countries. Your exports of fruits and vegetables to nearby destinations in South Asia and the Middle East will benefit from reduced tariffs in these countries.

Trade in processed food products would benefit from lower tariffs, as well. Increased market access will enable development of more world-class producers and increase your exports of cotton, rice, tea, milk, beef, mangoes, and value-added products.

India has done well competing in the open American market. Your country has a $600 to $700 million agricultural trade surplus with the United States. You export five times the amount of agricultural products to the United States as we do to you.

Your country's thriving agricultural exports show how domestic improvements and lower tariffs in neighboring countries create opportunities for increasing exports in South Asia.

Your increased meat exports to the Near East and South Asia have been the result of significant improvements in your production, coupled with lower tariffs in South Asia.

We have been impressed with your success at exporting fruits, nuts, and vegetables like grapes, mangoes, cashews, and walnuts. You enjoy a trade surplus of almost $1.4 billion annually for these products.

Trade with your neighbors is just the beginning. Trade between developing countries is growing at an annual rate of 10 percent and "South-South" trade accounts for 40 percent of developing country exports.

India and other developing countries will not receive the benefits of trade from the Doha Round if the three S's – special products, sensitive products, and the special safeguard mechanism - exclude large numbers of tariff lines from reductions.

We understand that some products may require protections during the reform process. However once the reforms are fully implemented, the relief mechanisms would no longer be needed.

Under the G-20 formula, only 14 percent of tariff lines would fall below current applied rates. That leaves 86 percent with no new market access. It is important to remember this when discussing which lines really need special treatment from the 3 S's. If no new trade is generated, there is no need for additional protection. The Doha Round

is about reducing barriers, not building them.

I know that some influential voices in India have strong concerns about trade liberalization and increased market access. They worry that outside competition might hurt their producers. However, there are other compelling reasons for embracing market-oriented reform.

India and other developing countries stand to gain the most from multilateral trade reform. Two-thirds of the WTO member countries are developing countries; 32 are considered least developed countries, truly the poorest of the poor in the world. In these countries, over 70 percent of the poor live in rural areas where agriculture is the only

employer.

Look at the tremendous growth in China and other Southeast Asian countries in the last 10 years and you can easily see the benefits of opening markets to trade.

As further proof of the benefits of free trade, a study by the Institute for International Economics and the Center for Global Development documented the long-term economic benefits of global free trade for developing countries. They found that a move toward global free trade could lift 500 million people out of poverty, increase the

income of developing nations by about $200 billion annually, and cut global poverty by 25 percent over 15 years.

I have quoted a World Bank study on a number of occasions, but it's an important study. It indicates that agriculture around the world has the most to gain from reducing trade-distorting import tariffs. According to the World Bank, 93 percent of the benefits to developing countries come from reducing tariffs.

The people of India have much to gain from a successful conclusion to the Doha Round negotiations, especially the 650 million who depend on agriculture for their livelihoods.

Removal of import barriers would benefit both farmers and consumers. An open door for trade liberalization would spark more development. A more open business climate attracts investment in agribusiness. Increased market access will enable development of new world-class producers and increase exports of cotton, rice, tea, milk,

beef, mangoes, as well as value-added products. Export growth and investment will lead to job creation in the agricultural sector.

Trade liberalization will promote the development of more agricultural industries that can grow and compete in the world market. The growth of your cotton sector has been impressive, as have your increases in production over the last seven years.

Cotton is now a leading agricultural export at nearly $1 billion in 2005-06. This is primarily due to your ability to double production in just four years due to the introduction of improved varieties, including biotech cotton. Exports have grown because of improved cotton quality as a result of better ginning practices needed for the

export market.

We know from experience that open markets lead to investments that support a growing, efficient agriculture sector. Though recent reforms in India have enabled foreign direct investment in agriculture and food processing, foreign investment in the retail sector remains banned.

This is an obvious disincentive to global trade and investment. However, we are seeing more integration, and more linkages by large Indian firms, such as Reliance, in the supermarket and food-processing sectors.

Agriculture needs an infrastructure that enables farmers not only to grow the best crop, but also to get that harvest to market for a competitive price. Indian entrepreneurs are creating world-class distribution and cold chain facilities where none existed before. The creation of viable marketing chains, reliable transportation, and cold

chain facilities are critical for farmers.

If government policies create a favorable free market environment, investors will come, and they will support a growing, prospering agricultural community. Transparent and uniform government regulations and policies encourage domestic and foreign companies to invest in people and facilities.

To take full advantage of trade liberalization and attract investors, India would benefit from establishing regulatory frameworks that are based on sound science - especially for sanitary and phytosanitary issues. That means developing institutional market infrastructures that strengthen market information systems, grades and

standards, and the cold chain supply networks. It also means developing the needed human and organizational capacity to effectively implement international standards and promote science-based decision-making.

We all know that efforts in these areas are neither easy or quick, but I want you to know that we are here to assist you. I'd like to highlight one step that India has taken towards developing transparent regulations. I am talking about the newly adopted food law - formally called the "Food Safety and Standards Act 2006."

It will be a challenge to implement, but this legislation aims to consolidate India's food laws and ensure a better food safety system. At the US Department of Agriculture, we stand ready to partner with India in this effort. We are prepared to share our regulatory expertise as you work to build an effective, science-based food safety

system.

I do not want to diminish the difficulties of transitioning to a global market-oriented system. These difficulties are very real. But the rewards are enormous, and there are mechanisms that can be put in place to help ease any hardships.

Development of social safety nets for farmers is crucial during economic transition. Recent studies by the International Food Policy Research Institute show that investments in research and development have the greatest impact on agricultural growth.

Our two countries recently committed to the far-reaching goals of the U.S.- India Agricultural Knowledge Initiative - known as the AKI. The initiative recognizes that research, education, and international partnerships can all come together to strengthen our agricultural sectors.

This unique partnership is already producing tangible results. Our collaborative activities will continue to provide a wide array of benefits to Indian producers and consumers. AKI's focus on capacity building, food processing and marketing, water management, and biotechnology will give your farmers tools to compete in national and

global markets.

I am confident that with the right tools, an entrepreneurial spirit, and open markets, India's farmers will be able to compete successfully throughout the world.

Let me wrap-up my comments by assuring you that the United States remains committed to our partnership with India and to the Doha Round.

It is my sincere hope that our ambitious offer tabled about a year ago will be matched, unlocking the true potential of the Doha Round.

We are counting on you to help us make this happen. We believe that India must play a leading role if we are to achieve a successful outcome for the Doha Round negotiations. Your leadership is influential, and other nations will follow your example.

Today, India and the United States enjoy a stronger bilateral partnership than at any time in history. Our companies work together to develop new information technologies. We explore space together. We combine our research and development capabilities to better the lives of our citizens.

Together, we must move forward and promote a fair trade agenda that will strengthen our relationship and transform our world. I am encouraged by the progress I see; our partnership has a bright future. Together we can make a difference and make Doha's potential a reality.

Thank you.