80th Annual General Meeting
February 15-16, 2008

Special Luncheon Address by Mr Kamal Nath, Minister for Industry, Trade and Commerce

Ladies and Gentlemen:

I am delighted to be here because it is your AGM. 80 years is a long time in the life of an institution. It is long time to be able to reflect, to be able to project, to be able to stimulate what the future of an association is and when you meet on the occasion of your 80th Annual General Meeting, you meet when we are looking at possible global economic slow down, we are seeing the turmoil in United States and we are seeing the tremors coming out of USA economy impacting some countries more, some countries less but, United States is the largest economy and its tremors will be felt by everyone, some more, some less. We also meet at the 80th General Meeting of FICCI when this is the last year of the 14th Lok Sabha. It is also moment for reflection when we look around and see what is happening in the United States, what is happening in the global economy. When we see what is happening in the United States, we cannot forget that it is the same United States who was telling the world about best banking practices and I had occasions in Davos to tell some of my US friends that you told us about the best banking practices, best primary practices have led to your sub prime prices, we don't have any sub prime prices. Our regulatory ratios are much better than what you have in United States. We normally do not have sub prime prices, we don't have any home loans foreclosures and I don't see any credit card defaults. So India, it is not only the best practices we are looking at, the next practices which is going to give shape, the new economic architecture. In these best practices, it is going to be so different to the global economy in the 20th century. If we were to go back and see post World War II, the 20th century totally saw great economic build up and also saw the greatest wars, saw the greatest amount of arms and ammunition, killings, but the 20th century's architectural shape was very different to what it was going to be in 21st century. The economic build up in Europe with the Marshal plan which lead to the build up of Europe after the World War, the setting up of the Britain's world institutions which in the 21st century is crying out for reforms, where the IMF is losing its relevance where the World bank is looking to reforms itself to look at new ways of stimulating development. These were not the issues of 20th century and 20th century only saw a few trade agreements. The way world did the business. The way economies were stimulated across Europe, the rebuilding of economy in Japan, were events of major milestone of the 20th Century.

The 21st century saw the emergence of other engines of growth, looking at the rules of trade, rules of global trade became the WTO of trade agreements and that is going to shape the economic architecture in the 21st century with the engine of growth, when it was just United States and some of the European countries. Today United States is an engine of growth but we have an engine of growth - China, India and if we were to have the same economic indicators coming out of the United States, the world economy may go crashing down. But the world economy today also have in support the economies of China, the economies of India. Who had thought on your 50th or 60th AGM that we will be talking of China or India, we ill be talking of trillion dollar GDP of India. I am sure the text of your speeches would be very different. I do hope in next 20 years what we talk today is also irrelevant and that is our challenge. That is the challenge before India as we engage more and more with the global economy. What is the rule we should follow in engaging with global economy. Until 1991-92, we were very concerned. India was Founding Member of GATT . I went in Uruguay Round as Textile Minister. We had the Multi Fiber agreement and I kept saying this is a great thing. When Multi Fiber Agreement ended, I was the Commerce Minister. I could reflect on the challenges at that time, the lack of understanding at that time. We did not have FICCI understanding at that time, what the WTO was so engaged. That time we never had FICCI giving us inputs which you have now so usefully given me and government during the last several years. FICCI itsel did not have the wherewithal to do this.

As being gearing up for the global economy, we were looking at being a part in framing the rules of the game of global trade which is WTO but then India as a the large country in this region, could we isolate ourselves. Can we isolate ourselves from the ASEAN countries or other economies and what do we see in the 20th century? We saw the biggest trade agreement, the European Union. We must remember that European Union started off as trade agreement and then went on and became European Union. We saw the NAFTA the North American Free Trade Agreement nectar where trade for NAFTA countries was stimulated by it. We had two huge trade agreements. That was in the last part of the 20th century.

But India could not standalone and be isolated in the region or globally. Whom did we have trade agreements with? Nepal and Bhutan, that was our story. So when we reach out and have trade agreements, when we saw the countries who have trade agreements, much of their trade was happening on North American basis. It was happening by virtue of trade agreements whereas in India even today we have one of the highest ever trade agreement figures in the world because most of our trade is not because of trade agreements whereas you see in the ASEAN countries, the trade is not among the ASEAN countries which is stimulating the economy. They are synergising each one's strength. Indonesia is synergising the strength of Thailand economy and they are engaging with other countries like China. So were we to be left behind, that was our challenge.

India is moving forward and engaging with global economy. Of course we want to have our ways.

Today is different. No ten countries can decide and India's voice is loud whether it is WTO or other global forum trade. In India, we move towards negotiating trade agreements. Some of you don't like it, I know, but, if you look at it from similar point of view and when somebody says how China goods are coming, I tell them that you can't compete with China and India how do you compete with them in other parts of the world. Of course, China is now market economy, I agree with you but when we are competing with other market economies, if we can't compete in India, how will we compete in other countries. As a heart of India's globalisation effort, was India becoming globally competitive, globally cautious with quality, with technology, if you look at any of our industries, we never reached out to technology, we never looked at monitising but when we are becoming global economy we became hungry for technology. Much more hungry. Previously everything worked in India, every technology worked because we have a huge domestic market, even then we were going at 3-4-5% our domestic market was huge. So we started getting hungry for technology, hungry for cost control, we started getting hungry for competitiveness and it is this hunger for competitiveness which led us to engage more and more with global economy and that is what is happening today. You are saying some of the most hi-technology products are being produced in our country, you are saying that we are most competitive when we talk about global slowdown, US slowdown. Of course there are going to be other effects of the valuation of the dollar etc but that is happening because of other reasons and the adaptability of Indian business. India's ability to adopt and adapt was at the heart and that is your story because the success story of India is no story and your story is the story of adopting and adapting. When sometimes I hear that we don't want to have trade agreement, I say, well this is what you are saying today, 3 years later you come back and say what you did because you are getting access to new markets, access to technology, of course there is transformation process. Some industries are going to feel the bite, so and so country will do this. When we are negotiating the agreement with ASEAN, we are far ahead in our agreement with Japan. We are moving ahead with the agreement with Europe Union. In the agreement with Europe Union, we are going to have with India on trade and investment. This will be perhaps largest agreement the Europe Union has had and with EU we find it easier to have trade agreement with India than with United States.

That is the way Indian economy is integrating. I think in next one year we should have all these agreements which help us to engage regionally and by this we are now seeing that more cars will be made in India than the Detroit. When we hit 2020, we are going to see much more production. That is why it is necessary to push towards engaging with the global economy. Why should we not push? Don't we have the entrepreneurship? Don't we have the talent? Don't we have the capital, the skills ? When we have it all, India should be the one pushing the most. Yes we want to put some of our acts together, our own acts in terms of fiscal policy, in terms of our taxation structure so that you have level playing field when somebody says that you go to Vietnam and government gives you land free, the government gives you the land free but they can't give you the market of 300 millions people, India's middle class, that is the big difference. They can't give you those skills, they can't give you English language, they can't give you the entrepreneurship which India can give you. That is the story I have been telling the world for the last 3- ½ years in all parts of the world that some of the governments will give you tax concession, what is this tax concession? They give you land. When I asked Intel that why you are going to Vietnam, he told me they gave us land free. I said, you are going to a country because they are giving land free, what kind of company are you? He said we are also doing that in India, and I am sure one day he is going to think that why didn't he do in India what he did in Vietnam. When we have this world for us we need to be engaged with global economy, we need to be engaged with regional economy.

Let me talk about engaging with global economy, we talk of WTO. Most important for us is India to occupies that space in the new economic architecture. We need to find our space whether this space is for cell phone connection, whether this space is for shirt whether this space is for car and other countries that are going to move ahead by virtue of trade agreements they have occupied the space, we will never have that space left for us. So we are finding for that space. To occupy that, we proceed that the global rules of trade are fair. I have seen myself how negotiations are changing? How United States, European Union have issues with one issue 10 years ago. In WTO we look at agriculture. Of course, India's agriculture is not commerce. We have small agriculture land holdings. Last 20 years, somebody says we should have invested more in agriculture. Yes we should have. There should have been private sector. Why should private sector invest in agriculture? When you have subsidies in United States and European union. How will you compete with the subsidies ? So, first subsidise, distort price and when they distort price they also lead to no investment arrangement. Why would somebody invest in a huge land traps of agriculture which are fertile also because if we subsidise wheat, it can come in from the United States. We will never be able to compete with US subsidies. What we have been doing for the last 3 years? Did we say that please remove these distortions ? We want to see that rules of the game are fair. We are not going for any deal. Time lines are important but headlines are more important. We are grappling with it and India, for the first time, we find in global negotiations there are coalitions. There are coalitions of countries. There are coalitions of countries even when their interests are not necessarily the same. The only interest is to have free and fair trade. Should we have tariff capping? Some countries have tariff of 900%, some countries in Europe have high tariffs. They have specific tariffs. How do you calculate ? They are not transparent ? How you address these issues ? I said I am ready to put on table. 100% of all our tariff structure will be ad valorem. Will every country come forward and do the same thing? They are not willing to come forward. Then there is the question of sensitivity. Europe says we are sensitive. We want to have our food security. We want to keep our landscape alright. But there are markets for me. If not now, then 10 years later. Why can't? I will be selling my fruits & vegetables to Europe. I went along, looking for agriculture, I told Mendelson one day, come I want to see what European agriculture is all about . they don't understand it. We sat in a train from Paris to Brussels to go and have a look at European agriculture.

These challenges have to be met with WTO. Tthen with industrial goods. For how long ? For the last 4 years, we reduced our tariff, as you know, on industrial goods we were 60-70-80%, we unilaterally reduced it. I don't want credit for what I have done unilaterally. What I have done cannot be forgotten, what I have done I must give credit for. Industrial goods I have to ensure that the tariff beats tariff escalation, today in leather when I want to sell raw leather in United States it is zero duty. Processed leather is little bit more. By the time I get to a leather jacket, the duty is 33%. That is not acceptable. When we want to sell leather handbag, leather shirt the duty is less but when I want to sell a suit, duty is much higher. So these are the challenges. Last week we had new tax introduced by the Committee's Chairman, the Industrial Products Committee. They produced tax in agriculture, we are looking at it, forming the basis of some negotiations. We are not looking for charity. We are saying that since our agriculture is subsistence, its livelihood security, our agriculture is not commerce. I cannot have any lowering of tariffs on agriculture where it impinges on my livelihood security because your products are subsidised . I cannot dislocate my farmers. So that is the consideration we have built it. Two years ago, we have built that in our framework agreement. We have built this in Hong Kong. On the other hand, what the United States is asking for? I have told USTR, my counterpart, I said you reduce your tariff what you are giving today by one single dollar consisting of 100 cents and we have a deal. But the United States, forget about reducing the subsidies, want to have the right to increase their subsidies by $2000 million and want to call this developed economy. That is what is on the table. That is going to be the part of negotiations but I want to assure you that the government is seized with this in the last 3- ½ years. We work towards India's credibility negotiations. We work towards making India credible country with people coming to invest and with due diligence of the country. We have endeavored that when world looks at India, India must be a country which is reaching out, India is a country which is a credible country and India is a country to do business with because it has a market, perhaps which no other country has and the skills which no other country has and, most important, it has the business community which no other country has.

Thank you