The global economy has come a long way since the
financial crisis. The US economy was losing around 700,000 jobs a month and was shrinking at an annualised rate of around eight per cent. Many indicators, from household wealth to the stock market, were falling faster than they had during the Great Depression. Since 2010, American businesses have created 14.8 million jobs and the US economy is now 10 per cent above its pre-crisis level.
Private sector forecasters expect the United Kingdom's decision to leave the European Union to have a negative impact on global growth. An acceleration of global protectionism and isolation is a threat. History teaches us that protectionism leads to lower gross domestic product (GDP), higher unemployment, and less prosperity.
The US and India, as part of G-20, must work to advance an integrated global economy that boosts growth, but also addresses concerns that globalisation, digitisation, and integration may not be leading to shared prosperity, and should help make economic growth more inclusive and sustainable
Do you think countries like India that are not part of TPP and TTIP would be affected adversely? Do you think that such arrangements would deal a deadly blow to WTO?
Fundamentally, free trade must be about creating a level playing field for our workers and firms. The US is deeply committed to sustaining and building on the strengths of the multilateral trading system. There is simply no substitute for the WTO, whose framework and principles are woven deeply into every free trade agreement that the US has ever negotiated. We trust other members, including India, feel the same way. The finalisation of the Trade Facilitation Agreement (TFA), the first multilateral agreement since the WTO was founded in 2013 was an important milestone. The successful conclusion of TPP strengthens our economic security and deepens our strategic relationships in the Asia-Pacific region.
US and Indian businesses and entrepreneurs have driven the bilateral trade relationship from around $30 billion in 2005 to $104 billion in 2015, but we can do much better. Companies want to invest where they can earn the greatest returns. The positive momentum will slow, and investments will move to other countries, if we don't take steps to liberalise trade between the US and India. We also want to bring more Indian investment to the US and provide Indians with the opportunity to purchase US goods and services. We continue to hold technical discussions to expand our trade by reducing bilateral barriers. A high standard bilateral investment agreement or regional agreement would certainly help, but we aren’t there yet.
How do US investors see the pace of reforms in India? Recently the US State Department said this has slowed, and it also said GDP growth in India looks overstated.
India is one of the fastest growing emerging economies today with a GDP growth rate around seven per cent. One of the encouraging aspects of this is that the vast majority of India's leaders know this is not enough. India needs to create many jobs every year for the next decade just to provide enough for new entrants to the labour force. I agree with the government's sense of urgency.
The efforts of Prime Minister (Narendra) Modi to open sectors of the economy to increased foreign direct investment and measures to make doing business easier has helped. Regardless of the varying opinions on the pace of reforms, I think most agree that they need to move faster. Additionally, India has vast potential to grow at a much quicker pace, especially if it can integrate much more closely with the dynamic supply chains around the world. For this, India needs to bring down barriers to trade and investment. Finally, as recent events show, governments will need to concentrate on growing the incomes of working families and the middle class and reducing income inequality.