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US's O'Neill urges India to lower tariff barriers

US Treasury Secretary Paul O'Neill on Friday urged India to lower its tariffs, peel back unneeded regulation and fight corruption in order to boost economic growth.

"To unleash the potential for higher living standards and job creation, a nation's leaders must make an unflinching commitment to good governance, economic freedom and investment in people. Without these principles in effect, even people as capable and aspiring as the Indians cannot succeed," said O'Neill in prepared remarks to be delivered to the Confederation of Indian Industry and the American Chamber of Commerce in New Delhi.

A copy of his remarks was released in Washington.

O'Neill is on a week-long trip that has taken him through Afghanistan, Pakistan and India. On Thursday, he said he wanted to pursue freer trade between the three southwest Asian countries.

O'Neill said India's tariffs are on average more than three times higher than those of many other Asian economies, and that other "hidden" barriers also block trade.

"Just as Canada and Mexico are the largest trading partners of the United States, India's trade with its closest neighbors should be equally strong," he said.

The Treasury secretary also took aim at what he called "unreasonable regulation."

"No one wants to spend time and capital fighting a system that is unfriendly to success and fears competition," he said.

Improved governance would also help attract foreign and domestic investment, he said. "While several large companies have invested in India, many more have stayed away. Respect for property rights and protection against public or private thievery is an essential requirement for economic success," he said.

O'Neill said if all countries lift barriers, the world GDP would grow by $2 trillion.

While asking India to lift trade barriers, he justified the anti-dumping duties imposed by US on steel saying exporting countries dumped steel at below total cost and in some cases even below the variable cost.

Pointing to investment barriers, he said many large companies have shied away from India due to lack of respect for property rights and protection against public or private thievery, which are required for economic success.

"Good governance means ruling justly, enforcing laws and contracts fairly, respecting human rights and property rights and fighting corruption," he said.

"Fiscal policy is weak with a federal deficit exceeding 5 per cent of India's GDP last year, and state deficits another 4.5 per cent of GDP," he said.

The failures were most prominent in the largest sectors of the Indian economy, such as agriculture, where entrenched interests resist changes that would benefit the nation, he added.

The US Treasury Secretary said the key to economic growth in India was to spread accelerating productivity. "Trade and tariff barriers are tax on people" and there was no rationale in continuing with the subsidies to depress prices.

Additional inputs: PTI

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