Secretary Paulson asked for Bhattacharjee's views on the WTO's Doha round of negotiations. The CM responded that trade was important but that India and the developing countries needed "a level playing field."

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SENSITIVE SIPDIS

E.O. 12958: N/A TAGS: PREL, ECON, ETRD, EAGR, WTRO, IN

SUBJECT: TREASURY SECRETARY PAULSON TALKS TRADE AND INVESTMENT WITH WEST BENGAL CHIEF MINISTER

1. (SBU) Summary: On October 28, Treasury Secretary Henry Paulson met with West Bengal Chief Minister (CM) and Communist Party of India-Marxist (CPM) Politburo Member Buddhadeb Bhattacharjee to discuss economic development in India and West Bengal, and the World Trade Organization's (WTO) Doha round of negotiations. Secretary Paulson was accompanied by his Chief of Staff James Wilkinson, Senior Advisor Neel Kashkari, South and Southeast Asia Office Director Andy Baukol, Public Affairs Deputy Assistant Secretary Brookly McLaughlin and ConGen. Bhattacharjee was appreciative of Paulson's visit, expressed support for globalization and economic liberalization, and a desire for greater U.S. investment and closer links with U.S. universities. Bhattacharjee also believed that India and the U.S. should be able to achieve some understanding on the Doha negotiations. However, he felt that U.S. subsidies to cotton farmers were unfair and had a very negative impact on farmers in developing countries, especially in Africa. He added that India was experiencing low growth in its agricultural sector and seeing many farmer suicides, and so agriculture represented a serious concern for India. Near the end of the meeting, Secretary Paulson asked for a one-on-one interaction with the SIPDIS Chief Minister without others present and discussed the Indo-U.S. civil nuclear agreement. Bhattacharjee's receptivity to closer commercial and educational links with the U.S. is reflective of his more practical desire to improve conditions in West Bengal. However, his willingness to engage with the U.S. has not resulted in him or other senior West Bengal Communist leaders being able to temper the strident anti-U.S. policies of his party at the national level. End Summary.

2. (SBU) Bhattacharjee warmly welcomed Secretary Paulson and his staff. Secretary Paulson related his interest in coming to West Bengal and to India in general, to assess aspects of the country's economic development, including on infrastructure and the financial sector. The CM responded that he believed that globalization was changing the global economic dynamic and that "Communist parties are changing" and have recognized that there must be economic liberalization. He emphasized that the Communists had to "reform or perish." Bhattacharjee commented that he had been to China and Vietnam many times and in his last visit to Vietnam in March 2007, he had seen many economic changes.

3. (SBU) Secretary Paulson asked for Bhattacharjee's views on the WTO's Doha round of negotiations. The CM responded that trade was important but that India and the developing countries needed "a level playing field" and digressed to comment that President Roosevelt and his Treasury Secretary Morgenthau had developed a "Lend-Lease" program during World War II to support Churchill and Stalin, implying that the U.S. should again be generous in supporting developing countries in the area of trade. Bhattacharjee said that U.S. agricultural subsidies were a serious problem and especially for cotton farmers in Africa. However, the CM did not believe that the Doha negotiations should remain deadlocked over agriculture and that India could be flexible. He said that he had spoken to the Prime Minister and the Minister for External Affairs (MEA) to encourage them to work with Brazil and South Africa to craft constructive alternative proposals. Secretary Paulson added India and the more advanced developing countries should be responsive to the Non-Agricultural Market Access (NAMA) issues as well as those related to General Trade in Services (GATS). Bhattacharjee agreed but added that agriculture was a great concern for India given the number of people dependent on that sector, the low economic growth rates in agriculture and the many farmer suicides.

4. (SBU) Bhattacharjee then outlined how he has been seeking to attract foreign direct investment (FDI) in West Bengal for infrastructure and industry. He said that the state was doing well in attracting information technology (IT) companies like IBM and others. However, he wanted more manufacturing and U.S. investment in the state. He had been in contact with Boeing Company officials to suggest a maintenance facility in eastern India. Also, in food processing, the CM expressed satisfaction with having a Frito-Lay factory in the state. Bhattacharjee KOLKATA 00000331 002 OF 002 added that educational cooperation was another area of great interest and that WB Finance Minister Dr. Asim Dasgupta, who was a graduate and a former professor at the Massachusetts Institute of Technology (MIT), was fostering collaboration between MIT, Calcutta University and the Indian Statistical Institute. The CM was also in contact with Berkeley University to develop cooperation in biotechnology.

5. (SBU) Secretary Paulson commented that one of the obstacles to greater FDI in India was uncertainty over contracts and the legal process. He said that commercial disputes need to be resolved fairly and quickly and mentioned as examples disputes with Dow Chemical and McDermott International reflecting the long legal process. Bhattacharjee said he understood and in fact, wanted Dow Chemical to invest in West Bengal and the state's proposed chemical hub. The CM did not understand why Dow should be saddled with Union Carbide's liabilities from the Bhopal accident. He assured the Secretary that if there was any investment problem, he would personally resolve the issue. He also encouraged Secretary Paulson to raise investment issues with the Prime Minister and Finance Minister.

6. (SBU) Secretary Paulson finally asked to speak one-on-one with CM Bhattacharjee and ConGen and the Treasury staff left the meeting room. Secretary Paulson later commented to media and others that he discussed the Indo-civil nuclear agreement with the CM.

7. (SBU) Comment: CM Bhattacharjee was demonstrably animated and happy to meet with Secretary Paulson, recognizing the opportunity to highlight his desire for greater U.S. investment and focus for West Bengal. Bhattacharjee covered the themes he typically raises in his meeting with U.S. officials: his acceptance of capitalist principles; the need to have equitable development, especially for agriculture sector; the desire for investment from large U.S. companies like Boeing and Dow; and an interest in educational cooperation. Bhattacharjee clearly is receptive to engagement with the U.S. However, his ideological flexibility and that of some of the West Bengal Communist leadership has not resulted in the West Bengal leaders being able to temper the national CPM leadership in its hard-line opposition to the U.S. and to growing Indo-U.S. cooperation

8. (U) This message was cleared by Secretary Paulson's Staff.

JARDINE