UPDATE 2-U.S. concerned over Indian trade barriers

Mon Feb 7, 2011 7:07am EST

Related Topics

* U.S. says India needs to work harder to free up trade

* India welcomes U.S. ease on technology export restrictions

* U.S. wants "level playing field" for trade with India

(Recasts, adds quote in paragraph 15)

By Matthias Williams and Rohan Dua

NEW DELHI, Feb 7 (Reuters) - U.S. commerce secretary Gary Locke expressed concern on Monday over India's restrictive trade policy, saying it impeded investment despite growing economic and security ties between the two nations.

Despite its growing global weight, India is still only the 14th biggest trading partner for the United States, and obstacles from outsourcing controversies to the Doha world trade round and market access have put the brakes on faster integration.

"Even though India has made tremendous strides to open up its economy, there is much more work that is left to be done," Locke told a conference in New Delhi after a meeting with Indian trade minister Anand Sharma.

The two reviewed progress on some thorny issues such as market access and non-tariff barriers.

"While many tariffs have come down, others remain. Even when there are not outright tariffs there are non-tariff barriers that limit trade and investment," said Locke, alongside Sharma.

The stakes on trade are high as the United States and India need each other to meet ambitious export targets amid a sluggish U.S. economic recovery, yawning trade deficits with China and fears of global imbalances sparking a standoff.

EASING RESTRICTIONS

As part of its efforts to boost trade with India, the United States has said it would ease restrictions on exports of high-technology goods to India in recognition of stronger economic and national security ties.

On Monday, Sharma welcomed that move.

"There will be full cooperation in space technology, nuclear technology and other high-end technologies between the U.S. and India," Sharma told reporters.

A bilateral trade boom has seen total flows treble to $36.5 billion in goods in the decade to 2009/10, but the United States slipped from number one to three in India's trading partners. India lags China, the United States' third biggest trading partner.

The Obama administration wants to double its exports to bolster domestic growth and create jobs.

But both sides have accused each other of policy foot-dragging, especially over the Doha trade talks. In India there is a sense that New Delhi is much keener to push for a deal than Washington.

The United States has criticised India for not assuming the responsibility that comes with its growing economic clout in the world and for insisting on shielding many of its sectors.

Locke reiterated this stance on Monday, saying U.S. companies should have the same opportunities as Indian firms.

"Ultimately, all that America seeks is a level playing field for its companies, where the cost and the quality of its products and services determine whether or not they secure business," Locke said.

Temperatures have also risen recently over a U.S. visa fee hike that is expected to hit India's IT industry, as well as proposed tax changes that would end breaks for U.S. firms that create jobs and profits overseas.

But Indian trade secretary Rahul Khullar said on Monday India would not go rushing to the World Trade Organisation (WTO) to settle the dispute over an increase in U.S. visa fees.

(Additional reporting by Jonathon Burch; editing by Malini Menon and Yoko Nishikawa)

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