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Diplomacy in Action

Remarks at the Business Council for International Understanding (BCIU) Luncheon


Remarks
Robert O. Blake, Jr.
Assistant Secretary, Bureau of South and Central Asian Affairs
St. Regis Hotel
Washington, DC
February 2, 2012

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 Mr. Nahas, thank you and Cheniere Energy for sponsoring this event today. Let me also thank our friends and partners at the Business Council for International Understanding for arranging this discussion. We at the State Department appreciate all the great work BCIU does every day to help U.S. business and we are very pleased to work closely with you.

I am delighted to be here to discuss the priorities that we are working on in the Bureau of South and Central Asian Affairs and what we are doing to support the business community.

In a word, we seek to strengthen the American economy, create more export and business opportunities in the region for our companies, and advance stability and prosperity in South and Central Asia. We believe private sector participation and investment in this region not only makes good business sense, but is central to the success of our regional foreign policy objectives.

Today, I’d like to spend a bit of time discussing Secretary Clinton’s vision for a New Silk Road, which seeks to establish energy, trade, transit, and people-to-people linkages between South and Central Asia, with Afghanistan at its heart. I will then turn to economic developments and opportunities in the Asia-Pacific and South Asia, after which I will happily take any questions.

The Promise of Central Asia


Today, Central Asia is one of the least integrated, and not coincidentally, poorest areas of the world. According to IMF statistics, trade between Central Asian states accounts for less than 5 percent of the total trade in the region.

But that hasn’t always been the case. Central Asia lies at the crossroads of Europe, Asia, and the Middle East. By virtue of this geography, the region historically served as a hub of interlinking trade routes through which ideas, goods, and people passed from one continent to another. There are encouraging signs these routes are now being reinvigorated.

The broader South and Central Asian region is home to over one-fifth of the world’s population, and provides a vast potential market for U.S. goods as well as investment opportunities for American businesses. India alone has risen to become our 12th largest goods trading partner. Bilateral trade in goods and services has risen $60 billion at the end of 2009 to an expected level of $90 billion when the 2011 figures comes in.

But Central Asia is also of growing interest to the U.S. business community. Central Asia boasts some of the most significant energy and mineral resources in the world and welcomes a greater role for U.S. business.

Broadly speaking, total trade between the U.S. and the SCA region increased by 9% from 2008 to 2010 while U.S. exports to the region increased by 7.5%.

Recognizing this region’s strategic importance, Secretary Clinton has outlined the vision of a “New Silk Road,” designed to bolster economic linkages between South and Central Asia, with Afghanistan serving as a land-bridge between the two.

In essence, this New Silk Road vision seeks to strengthen regional economic integration through two primary means. First, through energy and infrastructure – which includes roads, bridges, electrical transmission grids, railways and pipelines – to connect goods, services, and people.

And second, through trade liberalization – which includes the reduction of non-tariff trade barriers, improved regulatory regimes, transparent border clearance procedures, and coordinated policies – to accelerate the flow of goods, services, and people throughout the region.

The New Silk Road Expands


As international trade theory and history suggest, trade with neighbors makes good economic sense - just look at the United States, where two of our top three trading partners are on our borders. Countries in South and Central Asia know trade is one of the best mechanisms for development, and many have welcomed the Secretary’s New Silk Road vision. And progress in regional economic integration in South and Central Asia already is well underway:

· In 2010, Afghanistan and Pakistan concluded a historic transit agreement, the Afghanistan-Pakistan Transit and Trade Agreement.

· In 2011, Afghanistan joined Tajikistan and Kyrgyzstan in agreeing to a Cross-Border Transport Accord.

· Just last month a U.S. joint venture secured a $477 million contract, funded by the Asian Development Bank, to complete the final section of the ring road in Afghanistan, which will help that country increase commerce and connectivity with its northern neighbors.

· In South Asia, an Indian-led consortium won a competitive bid on the Hajigak iron-ore deposit in Afghanistan, while Pakistan declared that 2012 would be the ‘Year of Regional Trade and Economic Activity.’

· Last year Bangladesh’s annual exports to India grew more than 60 percent, while Burma began exploring bold programs of political and economic reform.

India & South Asia
 

In this increasingly integrated global economy, any focus on promoting American prosperity means a greater focus on trade and economic openness in the Asia-Pacific. The region already generates more than half of global output and nearly half of global trade. So as we strive to meet President Obama’s goal of doubling exports by 2015 through the National Export Initiative, we are looking for opportunities to do even more business in South and Central Asia.

Here in the United States, the outdated perception that South Asian economies detract from U.S. production and output is seen as an anachronism. India - with its 1.2 billion consumers - is an enormous market for U.S. goods and services. We want to be India’s partner in building the railroads, airports, power plants, and fiber optic networks needed to sustain India’s impressive economic pace.

Eighty percent – 80 percent! – of the infrastructure of India of 2030 has yet to be built. Between 2002 and 2010, U.S. exports to India quadrupled, growing from $4.1 billion in 2002 to more than $19.3 billion in 2010. From 2002 to 2010, U.S. services exports to India more than tripled, rising to more than $10.3 billion in 2010.

And this isn’t just a one-way street - increasing Indian FDI in the United States has aided the turnaround of a number of struggling U.S. firms, saving jobs and stimulating innovation and production. A few examples:

· The Tata Group has invested more than $3 billion in the United States, and now employs nearly 19,000 throughout the United States.

 Jubliant Organsys Total Capital invested $246 million in the United States and now employs nearly 900 employees throughout the United States.

 Crompton Greaves, an entity of the Indian conglomerate Avantha Group, has invested and partnered on a $20 million project to launch a Center for Intelligent Power with the University of Albany. The deal will create 100 high-tech jobs in upstate New York.

Prospects for regional integration in South Asia are better than they have been in years. The Governments of Bangladesh and India recently made historic improvements in bilateral relations, enhancing trade and resolving longstanding conflicts. Prime Minister Hasina’s landmark visit to New Delhi in January 2010 and Prime Minister Singh’s visit to Dhaka in September 2011 are but the most visible examples of the two countries’ remarkable efforts to cooperate and build new bridges. A “Friendship Train” connects Dhaka with Kolkata, and both governments have committed to increasing trade along and across their borders.

On the multilateral side in South Asia, the South Asian Association for Regional Cooperation or SAARC has charted a path for increasing regional trade, and provides the region with a platform for discussing the technical agreements that will allow regional commerce to fulfill its potential.

Through SAARC, we see the South Asian Free Trade Area as an important avenue for fostering increased trade flows and prosperity throughout the region that can provide increased opportunities for U.S. business.

We also must do everything we can to achieve balance in our trade relationships. So we are working through APEC, the G-20, and our bilateral relationships to advocate for more open markets, fewer restrictions on exports, more transparency, and an overall commitment to a level playing field.

Indo-Pak Trade
 

Turning to one of this region’s most critical relationships, I want to highlight the great strides that India and Pakistan made during the meeting of the Indian and Pakistani Commerce Ministers in New Delhi this past September to normalize trade.

The doubling in cross-border trade envisioned by Indian and Pakistani Commerce Ministers within three years is certainly within reach – India’s current global imports are over $328 billion, less than one percent of which come from Pakistan.

This process of normalization in both directions, including the eventual extension of Most Favored Nation status by Pakistan and the reduction of non-tariff barriers by India, will lead to expanded economic opportunity and stability for the people of both countries.

Indeed, a 2007 World Bank study estimated that if all these barriers were removed, trade could jump to $5-$10 billion per year. This will be a long-term, step-by-step process that if fully executed, will establish India-Pakistan ties as a driver of region-wide growth.

Conclusions
 

The United States continues to support and work toward a future where the countries of Central and South Asia work together and with the international community to achieve greater economic integration, and the prosperity that will come with it. Although the pace of change is often slow and the challenges substantial, U.S. engagement can and will focus on long-term, meaningful results.

For us, the task ahead will be to continue to open doors for greater private sector engagement. Now more than ever, your involvement as leading business participants in this collaboration is critical not only to the success of our foreign policy objectives, but to the growth and recovery of our economy right here at home.

I’ll end my remarks there. Thank you again for your time. I’m happy now to take some questions.




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