VZCZCXRO4941
PP RUEHBI RUEHCI
DE RUEHCG #2580/01 3380533
ZNR UUUUU ZZH
P 040533Z DEC 06
FM AMCONSUL CHENNAI
TO RUEHC/SECSTATE WASHDC PRIORITY 0456
INFO RUEHNE/AMEMBASSY NEW DELHI PRIORITY 2100
RUEHBI/AMCONSUL MUMBAI 4911
RUEHCI/AMCONSUL CALCUTTA 0651
RUEHLM/AMEMBASSY COLOMBO 1278

UNCLAS SECTION 01 OF 02 CHENNAI 002580 
 
SIPDIS 
 
SENSITIVE 
 
SIPDIS 
STATE PLEASE PASS TO USTR 
 
E.O. 12958: N/A 
TAGS: ETRD EINV ECON PGOV IN
SUBJECT: D/USTR AMBASSADOR BHATIA VISIT TO CHENNAI 
 
SUMMARY 
------- 
 
¶1. (SBU) Ambassador Karan Bhatia's visit to Chennai was a full 
morning to evening schedule on November 29.  He spoke with 
Chennai-based business people and journalists on a range of topics. 
At the Ford Factory, the issue of excise tax concessions for small 
cars, piqued his interest.  With members of the the American Chamber 
of Commerce, he discussed their concerns about why Indian banks are 
not being allowed to expand operations in the U.S.  They also 
discussed whether the political left will pose a formidable 
opposition to the success of the new Wal-Mart/Bharati deal.  At an 
off the record roundtable with journalists from The Hindu, he 
responded to numerous questions from everything ranging from the 
Civil Nuclear Agreement to the import and export of U.S. wheat and 
Indian mangos.  Bhatia spoke with health care representatives from 
medical colleges and hospitals about the latest trends in their 
industry.  He also held a one-on-one interview with The Hindu's 
Business Line, which covered all the topics of the day.  Chennai 
offered Bhatia and his delegation the opportunity to hear from 
business leaders and journalists regarding their concerns on trade 
issues and explain U.S. trade policy to all participants.  END 
SUMMARY 
 
 
FORD CAR FACTORY 
---------------- 
 
¶2. (SBU) Ford India Managing Director Arvind Matthew and his team 
briefed Ambassador Bhatia on the history and the structure of Ford 
in India. It is a comprehensive operation, not just restricted to 
the manufacturing of cars, but includes a software production 
component as well as a philanthropic arm, to name a few.  Matthew 
was proud that Ford maintains international environmental standards 
on waste disposal.  He also emphasized the number of women employed 
at the company, a little over 8 percent.  Matthew did not appear 
concerned about the existence of a "spurious parts market."  He said 
they have worked with law enforcement authorities to raid a couple 
of these outfits, but that violation of intellectual property rights 
is not one of his key concerns.  His primary issue at the moment is 
working to convince the GOI to repeal an excise tax concession 
granted to automobile manufacturers making small cars.  Matthews 
told us that most car manufacturers, including Toyota, Tata, Honda, 
and Maruti are opposed to the tax, although Hyundai is on the fence. 
 Mathew specifically asked for USG assistance on the excise tax 
matter.  Matthew was scheduled to have a meeting with GOI Minister 
of Finance on November 30, to discuss the matter; Bhatia was very 
interested in hearing the results of that meeting. 
 
CHATING WITH THE CHAMBER OF COMMERCE 
------------------------------------- 
 
¶3. (SBU) A lively conversation with American Chamber of Commerce 
representatives from the IT and banking sectors raised a range of 
issues in an informal, collegial setting.  A Citigroup official 
noted Indian banks frustration over their inability to expand 
operations in the U.S.  Bhatia explained that this is an unintended 
consequence of stronger money laundering laws on foreign banking 
institutions in the U.S. after September 11.  Bhatia asked the 
businessmen if Wal-Mart should be afraid of the political left 
parties and their opposition to the deal with Bharati.  The group 
indicated that while there is a risk, the GOI strongly wants to 
continue opening markets.  Bhatia made a comparison to the insurance 
industry, where the GOI promised the companies they could hold more 
and more equity, which did not end up happening.  So, although 
conversations with Minister for Commerce and Industry Kamal Nath 
indicate Wal-Mart will be able to open their own branches, there is 
a bad track record from the past. 
 
THE HINDU ROUNDTABLE 
-------------------- 
 
¶4. (U) Another informal, off the record, gathering of around 20 
members of the editorial board of The Hindu, South India's leading 
English language daily and a respected national voice, gave Bhatia 
the opportunity to respond to a slew of questions and clarify US 
Trade Policy.  Bhatia opened by explaining two institutions, the CEO 
Forum and the Trade Policy Forum were created to develop the 
bi-lateral relationship between India and the U.S.  On controversial 
amendments to the U.S.-Indo Civil Nuclear Agreement, Bhatia 
highlighted that positives to having the agreement, far outweigh not 
having an agreement at all.  On Doha and what will happen next, 
Bhatia reaffirmed the President's commitment to a multi-lateral 
deal.  When pushed on a possible U.S.-Indo Free Trade Agreement, 
Bhatia commented that the idea as "intriguing."  He stated that the 
area of agriculture would be very difficult but through 
infrastructure like the CEO Forum and the Trade Policy Forum, India 
 
CHENNAI 00002580  002 OF 002 
 
 
and the U.S. can begin to work through some of these issues and make 
it easier for a FTA to happen. The journalists also asked him 
questions about shrimp bonding, intellectual property rights, and 
U.S. wheat and Indian mango import/export issues. 
 
BOOMING HEALTH CARE INDUSTRY 
---------------------------- 
 
¶5. (U) A meeting over tea with health care sector representatives 
revealed their high regard for U.S. medical equipment, but also 
frustrations with GOI restrictions.  The representatives asked the 
U.S. to push the GOI to reclassify medical equipment so they will 
not have to pay tariffs on the equipment for being infrastructure, 
which carries a high tax.  They also said Tamil Nadu restricts the 
number of nurses they can train every year, so although one of the 
participants has a facility where he could train 200 nurses, he can 
only train 50/year.  There are a whole host of local issues, similar 
to this one that inhibits their ability to expand.  One of the 
representatives told us that the World Health Organization 
identified 15-20 procedures where the U.S. could save $1.5 billion 
if these were conducted in India.  India health procedures cost 
1/10th of the price they do in the U.S., these companies could save 
a significant amount of money.  The representatives also asked if 
there was a way to expedite nurses going to the U.S. after being 
trained.  It is taking over a year for their U.S. visa petitions to 
be approved and by that time they decide to go elsewhere.  India 
does not provide competitive salaries for nurses when they can go 
abroad. 
 
¶6. (U) D/USTR Ambassador Karan Bhatia cleared on this cable 
 
HOPPER