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India-US Relations Blog

Back to Basics

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With the intergovernmental drivers of the US-India partnership now in a period of languor, it is time for the economic relationship to return to the forefront. This is the moment for business leaders in both countries to once again step forward.

As earlier posts have argued, relations between Washington and New Delhi – which not too long ago seemed destined to reach for the stars – are now feeling the heavy tug of gravity. In place of soaring rhetoric and high-profile undertakings, ties between the two capitals are weighed down by bureaucratic inertia and small-bore ideas.

Image back to basicsTwo recent episodes confirm this downward trajectory. The annual US-India economic and financial partnership talks took place this past June in Washington, though few beyond the personal staffs of Treasury Secretary Timothy Geithner and Finance Minister Pranab Mukherjee took any notice. The anodyne communiqué that was issued highlighted the deepening of “institutional relationships” as a major achievement of the talks, but the lack of specific commitments contrasted unfavorably with the detailed work plan that emanated from the US-China economic dialogue occurring just six weeks earlier. Indeed, the Washington-Beijing nexus has a way of upstaging US-India economic exchanges. When Geithner traveled to New Delhi in April 2010, for the launch of the bilateral economic partnership, all of the media attention was focused on whether he would fly off on a spur-of-the-moment trip to China, to engage in talks over the relative value of the yuan. (To nobody’s surprise, he subsequently did end up in Beijing.)  Similarly the US-India Strategic Dialogue that took place six weeks ago in New Delhi was an exercise in modest output and mutual frustration.

Given the serious domestic problems diverting the attention of both capitals, it is difficult to imagine how the government-to-government relationship can be advanced significantly in the next few years.  Nonetheless, the outlook for bilateral affairs is not entirely dim.  One exceedingly bright spot is the accelerating pace of economic engagement.  A decade ago, then-U.S. ambassador to India Robert Blackwill lamented that the volume of bilateral trade was as “flat as a chapati.” But trade levels have risen markedly in the years since.  Indeed, even with the global economy in the doldrums and the torpor in official ties, 2010 was a banner year for the trade relationship, with two-way goods exports surging nearly 30 percent to $48.8 billion. Merchandise exports are also up significantly in the first half of 2011 compared to the same period last year. All told, India is now America’s 12th largest good trading partner and the country constitutes one of the fastest-growing destinations for U.S. exports.

It is true that the economic relationship is very far from achieving critical mass and that US-China trade flows eclipse the US-India figures many times over. Still, the trend lines are quite hopeful and they illuminate the vital role that economic engagement plays in securing the growth of a resilient partnership over the long term.  This last point is persuasively set out in a new book, The Eagle and the Elephant, by Raymond E. Vickery, Jr.  A former U.S. Assistant Secretary of Commerce in the Clinton administration and now a leading figure in the US-India Business Council, Vickery argues that “economic engagement is fundamental to the ability of the United States and India to cooperate politically.” He demonstrates in great detail how over the past decade the private sectors on both sides forged the foundation for the diplomatic rapprochement that eventuated in the path-breaking civilian nuclear accord and an ever-closer security relationship. (Importantly, too, the book illustrates how mismanaged episodes of economic interaction can have far-reaching negative impact, such as the Dabhol debacle in the mid-1990s that continues to impede bilateral cooperation on energy and environmental matters, as well as impairing India’s international credibility as a respecter of contractual rights.)

So how can policymakers in Washington and New Delhi leverage the vitality of the economic relationship in order to re-energize the overall partnership? Two of the usual answers – concluding a broad-based free trade agreement and an investment treaty – are problematic, at least for the next few years. Considering that the two countries are at loggerheads in the Doha Round of multilateral trade negotiations, plus the neuralgic agricultural issues that must be dealt with, the prospects for a comprehensive trade accord are well off in the distance. And although U.S. and Indian policymakers recently agreed to accelerate discussions over an investment treaty, its full value is really contingent upon additional reforms within India – such as liberalizing foreign direct investment in the retail and financial sectors, deregulating labor markets, regularizing the land acquisition process, and dramatically addressing infrastructure bottlenecks. With decision-making in New Delhi all but paralyzed these days, it is anyone’s guess when these key reforms will be enacted.

There are several initiatives that have more promising prospects, however. As spelled out in earlier posts, Washington and New Delhi should aim to build upon their striking record of engagement in the innovation economy sectors by crafting a free trade mechanism relevant to advanced technology products and drafting an immigration accord that allows high-skilled Indian professionals to work in the United States. Both undertakings would capitalize on important economic complementaries and would build up economic capacities that are so significant to the long-term prospects of both countries.

Continuing to think outside the box, negotiators also might explore whether India would be willing to address manifold U.S. concerns about its regime for protecting intellectual property in exchange for a totalization agreement covering Indian technology workers posted to the United States on temporary assignments (as Derek Scissors suggests, or for the special restoration of trade privileges (amounting to $3.5 billion in value in 2010) that expired when the U.S. Congress failed to reauthorize the Generalized System of Preferences at the end of last year.

Finally, taking page from its successful campaign several years ago to bring India into global nonproliferation institutions, the United States should use the upcoming APEC Summit, which takes place this November in Honolulu, to lobby for New Delhi’s admission into the group.  Given that India is poised to become one of the world’s top economies in the coming years, its absence is a serious lacuna for the organization.  (My next post will deal with this issue in greater detail.)

With the intergovernmental drivers of the US-India partnership now in a period of languor, it is time for the economic relationship to return to the forefront.  This is the moment for business leaders in both countries to once again step forward.

India-US Relations Blog

Readout of a Readout

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One of the useful things about summit level meetings such as the Strategic Dialogue is that they provide occasion for a vast cornucopia of information on bilateral relations to come into the public domain, there are pre and post summit briefings, factsheets on various aspects of the Dialogue, press conferences, and the all-important Joint Statement. But, as has been the case increasingly in recent years, there is much less coming out of the Indian side, either because they are so short-staffed or because the various departments are unable to give intelligible inputs, or for some other reason. There was a pre summit briefing to the press (with no questions taken, apparently), but nothing after the summit. In contrast, the Assistant Secretary of State for South and Central Asian Affairs gave a speech on India U.S. relations at a think tank after the summit, and also made himself available to the Press after his return to Washington. At a time when glasnost has spread to foreign policy establishments around the world, the reticence from South Block is unfortunate and ends up with only one side of the story being told.

So, what did Blake have to say about the summit? To paraphrase the more interesting parts of his press conference, much of it in response to questions, Secretary Clinton was as taken in by the voluminous factsheets produced by her Department as everyone else and pointed to them as proof that the Relationship had achieved an irreversible momentum. At the same time, even if the stalemate over nuclear liability was not yet an irritant, it had the potential to become the Damocles Sword of the relationship.

The decision to resume technical discussions on a bilateral investment treaty was highlighted as one of the key deliverables of the visit even though as a journalist present pointed out, a model treaty had been worked out by the U.S. side some time back, and even an interagency review undertaken after which it had been put back in the deep freeze.

On the long-pending Totalization Agreement, as Blake made clear in his remarks, this did not even come up for discussion. According to Blake, this can realistically be taken up only when there were as many Americans working in India as Indians in America. Blake also chided the Indian government for repeatedly raising the issue of H1B visas, noting that Indians had received over 65% of the H1Bs issued last year and that if anything, the Indian government should be “praising” the program.  On the Tri-Valley University issue, Blakes said that it had nothing to do with the American government, implying that the students were at fault for not doing their due diligence before applying in these universities.

Blake was also at pains to point out that the Dialogue was not about deliverables, but more about assessing progress of the many joint Initiatives   entered into and proposing new areas of partnership. This was a bit rich, considering, that at the last Dialogue, the Secretary of State was hell-bent on achieving at least one deliverable and the Indian side was virtually brow-beaten into signing the Technology Support Agreement and the End User Monitoring Agreement (EUMA) after demurring from signing other agreements such as the Basic Exchange and Cooperation Agreement for Geo-spatial Cooperation (BECA), the Logistics Support Agreement (LSA) and Communications Interoperability and Security Memorandum of Agreement (CISMOA).

On Afghanistan, he clarified that Washington was supportive of India’s plans to pour more money into Afghanistan and invest in its infrastructure and private sector development while India was supportive of Washington’s vision for Afghanistan as a gateway into Central Asia and the integration of the South and Central Asian economic blocs.

Reading between the lines of Gates debrief, one get the sense that there is increasing exasperation that the strategic relationship is not moving forward according to the American script. In fact, it is cooperation in areas such as science and technology, education, and renewable energy  that has picked up momentum but remains confined to the factsheets since the U.S. focus is on the strategic and economic aspects of the relationship.  A debrief on the Indian side would give officials a chance to put forward their perspective of the relationship, and quell the disquiet over a presumed downtick in relations.

Tailpiece: The only indication that the Consular Dialogue announced for July 25 did indeed take place was the official photograph from the State Department. Other than that, nary a word from either side about what was discussed. Perplexing, especially when another fake University has been discovered on American shores.

India-US Relations Blog

America-India – Did the Bush Administration Oversell or Did the Obama Administration Botch It?

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This week Michael Green and Daniel Twining wrote an opinion article in the Washington Post titled Why aren’t we working with Japan and India? It is an attempt to discuss the reasons for, what they call, the current “listlessness in our two biggest strategic partnerships in Asia.” This is a serious article but deeply flawed.

The article’s key paragraph on India begins with “India has also disappointed.”. It ends with the statement “The refrain in Washington is that the Bush Administration oversold the potential for strategic partnership with New Delhi.”

We disagree. The Bush Administration established the Strategic Partnership with India. It was the most far-reaching step taken by any American President regarding India. President Bush viewed China and India as two huge countries that would play a global role in the 21st century. In his simple yet profound way, he asked which of these two countries would be a better partner for America? The answer was simple, India.

So President Bush in his direct, decisive manner made India a Strategic Partner of the USA. The Bush Administration threw away the old, failed strategy of trying to balance India with Pakistan and looked at India as a key ally, an emerging power on par with China and the only counterweight of size to China.

This is exactly how India perceives itself. This congruence of vision was the sound long term basis for the America-India Strategic Partnership implemented by President Bush. Nicholas Burns, Under Secretary to Secretary of State Condoleezza Rice, expressed the view of the Bush Administration at that time: “Within 20 years, the rise of the new U.S.-India partnership will be considered among the most important developments in U.S. foreign policy in our time.”

Then came President Obama. His framework for the world was completely different than that of President Bush. The Obama Administration spent its first year in trying to woo China. The Obama Administration was convinced that President Bush had gone too far in favoring India and they restored the old policy of maintaining a balance of power between Pakistan & India.

This was not just rhetoric. This has been the consistent policy of the Obama Administration since the inauguration. Witness the clear statement from Secretary Hillary Clinton in April 2010 that the manner in which India & Pakistan have pursued atomic weapons has “upset the balance of nuclear deterrence”. The Bush Administration had realized and accepted the fact that India was going to build a nuclear deterrence against China. The Clinton statement showed that the Obama Administration considered India only from the old Pakistan-India balance of power framework.

In short, the Obama Administration unilaterally destroyed the very foundation on which President Bush had built his America-India strategic partnership. But neither Government was willing to publicly accept this reality.  So both America and India continued to pay lip service to the concept of the America-India strategic partnership.

The sudden u-turn in America’s framework stunned the Indian Government and the entire Indian Establishment. In their naivete, they had assumed that America as a whole had finally understood India and embraced India’s vision of its role in the world. But where foreign policy is concerned, there may be only one India but there are two Americas. It took the Indian Government a year to realize that the America-India strategic partnership they had accepted was only with Bush’s America and not with Obama’s America. Then the Indian Government began hedging its bets and moving away from the Obama Administration. Since then, the relations between America and India have remained “listless”.

Another factor in the decay of India-US relations has been Washington’s definition of “partnership”. This is borne out by the Washington Post article which assumes a partner of America should not oppose American initiatives but align with them regardless of how the initiatives impact the partner:

Yet, in the first two years of the Obama Administration, the Indians have opposed the United States on climate and trade initiatives (the initiatives were in direct conflict with Indian objectives), failed to enact liability legislation needed for American companies to develop India’s nuclear industry (a political and ethical impossibility in democratic India), resisted meaningful economic reforms (true), cozied up to Burma’s junta with gas and arms deals (a strategic necessity for India just like cozying up to Saudi Arabia is a strategic necessity for America) and rejected U.S. combat aircraft in India’s biggest defense deal to date (the last generation aircraft offered by the U.S. were judged as inferior by the Indian Military).

President Bush had astounded the Indian Government by treating India as a real partner. He understood what India could and could not do. He focused on what was achievable which was plenty. India responded in return and we are convinced that every major Indian deal would have been won by the Bush Administration. In contrast, the Obama Administration kept imposing its own initiatives on India and expected India to to follow. This pressure backfired.

Today, the Obama Administration is facing the virtual collapse of its framework. They have realized that China is a major strategic competitor and perhaps an adversary. So the Obama Administration has gone from wooing China to building a network of allies to contain China. This is the main purpose of Secretary Clinton’s trip to India and Asia.

The Obama Administration’s cherished policy of making Pakistan stronger and more stable has collapsed. But the Administration’s tactical objective has not changed. The Obama Administration still considers Pakistan as their most reliable ticket to exit Afghanistan.

America’s rapid exit from Afghanistan and the Obama plan to give Pakistan all the aid necessary to facilitate this exit remains the most difficult barrier between America and India. Secretary Clinton is trying to get India to steer away from Af-Pak and to get more active against China in the Pacific. The immediate strategic objective of India is to maintain and increase its presence in Afghanistan.

When strategic objectives are in such conflict, how can a strategic partnership make sense? This is the main reason for the current “listlessness” in America-India relations.

(This post originally appeared on Macro Viewpoints and has been republished with the approval of the author.)

India-US Relations Blog

The New Normal

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US – India relations have now settled into a stubborn pattern of routine interactions and small-bore ideas.

The inaugural session of the annual US-India Strategic Dialogue in Washington last summer imparted new energy to bilateral affairs following a period of treading water.  President Obama used the occasion to announce his visit to India and emphasized that partnership with New Delhi was one of his “highest priorities.”  In the meeting’s warm afterglow, Under Secretary of State William J. Burns (now nominated as Deputy Secretary of State) remarked that “even the sky is not the limit for our ambitions and our possibilities.”

Clinton-Krishna_photoThe Strategic Dialogue had its second convocation last week in New Delhi, co-chaired by Secretary of State Hillary Rodman Clinton and Indian Foreign Minister S.M. Krishna.  Judging by its modest output, bilateral relations are now on a low-flying trajectory.  Not too long ago, soaring rhetoric and visionary initiatives were the staples of such high-level confabs.  But ties between the two capitals have now settled into a stubborn pattern of routine interactions and small-bore ideas.  In its wrap up of the Dialogue’s events, the Hindustan Times observed that “There is a clear and obvious sense of drift in relations” and that the bilateral exchanges the countries have established in a myriad of fields “don’t seem to generate much in tangibles.”  Call it the new normal in US-India relations.

Secretary Clinton noted that her meetings with Krishna “felt like we were in a monsoon with all of the many issues and reports that were being made by our officials outlining the extraordinary progress that has occurred.”  But it was hard to avoid the monsoon-sized cloud of mutual frustration hanging over the proceedings.  Even the Bush-Singh nuclear deal, intended to be the capstone of a new partnership, has now become a source of acrimony, with both sides accusing the other of breaches of faith.

From the U.S. perspective, India’s nuclear liability law is inconsistent with global norms and has the effect of all but blocking the involvement of U.S. companies in the country’s lucrative nuclear energy sector.  Washington wants New Delhi to ratify the Convention on Supplementary Compensation (CSC), a multilateral accord regulating liability for nuclear accidents, apparently in the belief the Indian government will submit to the notion that international law should somehow override the strictures of newly-enacted domestic legislation.  Mrs. Clinton even went so far as to suggest that the International Atomic Energy Agency vet the liability law for its compliance with international practice.  Both ideas are quixotic, as they represent a severe misreading of what the political market will bear in India’s sovereignty-conscious democracy.  Moreover, since the CSC is far from gathering the requisite number of ratifying countries to trigger its entry into force, it is unclear why Washington thinks New Delhi’s ratification will have any practical result.

For its part, New Delhi is peeved about U.S. sponsorship of restrictions just promulgated by the 46-nation Nuclear Suppliers Group, an informal cartel regulating global nuclear commerce, regarding the export of uranium enrichment and spent-fuel reprocessing (ENR) technologies. Much of the future expansion of India’s nuclear energy sector is premised upon access to such equipment, something which many in the country thought was secured via the nuclear accord.  The United States has assured New Delhi that the new restrictions will not undercut the special status India now has in the international nuclear order.  But the Bush-Singh deal never extended to the delivery of ENR technology, a point that Prime Minister Singh’s government found expedient to obscure during the tumultuous vote of confidence three summers ago. Mrs. Clinton departed India hinting that unresolved problems still plague the issue.

The discussions also did little to assuage Indian concerns about the impact of the U.S. troop drawdown in Afghanistan, or persuade New Delhi that it should assume a greater leadership role in Asian security affairs as a bulwark against China’s growing power. Of course, the two issues are linked: New Delhi is very unlikely to be more active further afield when its security position in the subcontinent is under mounting threat. The assassination of two of Hamid Karzai’s closest confidants – one of whom his half-brother – just days prior to the Dialogue’s convening rattled New Delhi, and the Obama administration’s progressive disengagement from Afghanistan will only complicate Indian security calculations.

Although the Clinton visit produced an announcement of a new trilateral dialogue involving New Delhi, Washington and Tokyo – as well as the establishment of formal bilateral exchanges on the Middle East and Central Asia – the innate caution of India’s foreign policy elites will most likely disappoint American expectations about what the Indian government brings to the table.

Two items involving the itinerary of Mrs. Clinton’s traveling party illustrates the US-India policy disconnects.  First, a few months ago New Delhi rejected Washington’s efforts to broaden the Dialogue by involving the two countries’ defense ministers. U.S. Defense Secretary Robert Gates was reported all set to accompany Clinton to New Delhi in April when the Dialogue was originally slated to take place. And as it turned out, Gates’ successor, Leon E. Panetta, was in Kabul just a week before the Dialogue and could presumably have rearranged his schedule to attend the gathering in New Delhi had the Indians wanted to expand the forum’s remit.

Second, Mrs. Clinton gave public emphasis to her point about India stepping up its security role in Asia in an address in Chennai (formerly Madras). According to U.S. officials, Chennai was chosen as the ideal platform for this message given its strong commercial ties to Southeast Asia.  But The Telegraph reports that, due to Washington’s desires to expand U.S. commercial interests in West Bengal, Clinton had at first wanted to visit Kolkata (Calcutta). This proposal was nixed by the Indian government, however, fearful that it would be seen as a provocation to the Indian Left.  Clinton’s second choice of Amritsar was quickly dropped due to a lack of local enthusiasm. The decision to go to Chennai was hastily done and came as a surprise to U.S. diplomats in India.

In the run-up to last week’s meetings, some experts in Washington (see here and here) exhorted the Obama administration to use the gathering as a means of expanding strategic engagement with India. But the opportunities for doing so are quite constrained by the domestic distractions both governments confront. In India, the Singh government is engulfed by various corruption scandals that have all but paralyzed decision making. The titanic political struggle to push the nuclear accord through parliament has resulted in “Washington fatigue,” sapping any readiness to undertake similar high-profile initiatives. And despite Singh’s personal commitment to furthering bilateral ties, he is neither the master of his own government nor of his party.  Many of his Congress Party colleagues are not fully invested in the future of the relationship.  Even in the foreign policy area where he once had some latitude, Singh cuts an increasingly isolated figure. The recent WikiLeaks revelations have added to his political problems, as some interpret the cables as depicting him being excessively accommodating of U.S. interests.

In Washington, predicaments at home and abroad have combined to push India fall down the Obama administration’s priority list.  A reciprocal sense of “India fatigue” is also spreading. New Delhi’s rejection of Boeing and Lockheed Martin’s bids in its $11 billion fighter aircraft competition and the prolonged inability of U.S. companies to cash in on the nuclear deal have made Washington policy elites increasingly weary of India’s capacity for strategic engagement. It is no coincidence that Secretary Clinton arrived in New Delhi just as a debate erupted about whether India was or could ever be a genuine “ally.”

Given the state of things in both capitals, the “new normal” looks to be with us for the next few years, at least.

India-US Relations Blog

Yesterday, once more?

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And just like that, the much awaited, once postponed India-US Strategic Dialogue came and went, with not even the the tiniest frisson of excitement of that had accompanied previous Dialogues. Minders on both sides must have been secretly pleased that the Murdoch slugfest in London came in as a suitable excuse to explain away the limited interest and analysis of the Strategic Dialogue in the media. With new lists of grievances building up on both sides to replace the long-drawn out lists of the Cold War era, the Strategic Dialogue process has had the unintended consequence of focusing attention on these issues for which all available political capital has been expended or there is no solution even at the highest political levels.  Given this reality, the reports of half-hearted wagging of fingers and admonishments behind closed doors were more for the benefit of respective constituencies than to move the process forward. The overriding urge to prevent any SNAFUs meant that Mrs. Clinton proposal to visit Kolkata as part of itinerary was shot down by the hosts. And whilst Mrs. Clinton broke bread with all her leading interlocutors, from the Prime Minister downwards, the glaring exception was Defence Minister A K Antony, for whom the Dialogue that was to take place in April had been postponed since he was ostensibly busy with the Kerala elections.

01-1The U.S. side, in particular, has become a master at the art of coming out with comprehensive factsheets laying out the massive advances in joint projects, emphasizing the width and breadth of the partnership.   With many of the bilateral agreements signed over the years stuck at various stages of implementation, it is almost as if both sides were virtually scrapping the bottom of the barrel this time around to come out with agreements on cyber security cooperation and cooperation in aviation safety. This is not to belittle the importance of these agreements, and particularly the one on cybersecurity. However, the impression one gets is that there is still a sufficient amount of mistrust on both sides to ensure that even this initiative will live uptoits potential for some time to come. By way of comparison, the agreement between cyber adversaries Russia and the United States on cyber security cooperation signed just the previous week is much more specific on actions and timelines.

But it is not as if Mrs Clinton would be particularly disappointed by either the dampened expectations or outcome of her visit. From an American perspective, given the flux in the wider Asian region, accelerating the strategic partnership with India in the security and defence realms, especially if it is only on the back of unilateral concessions, will only fetch diminishing returns. One only needs replace India with the U.S. in the previous sentence to come up with the Indian view. On the American side, there is reasonable confidence that an increasingly powerful and belligerent China will eventually drive India into U.S. arms. In the meantime, there is plenty of other fish to fry, particularly when it comes to pushing the economic and people-to-people aspects, part of larger initiativesthat Mrs. Clinton has focused on since taking up stewardship of the State Department.  And therefore it is not surprising that out of the many factsheets brought out by the Department at the end of the visit, it is those on economic ties and education and people-to people ties that have the most substance. While the former leads with talks on a Bilateral Investment Treaty, there is a consolation prize in the establishment of the first ever Consular Dialogue to take place on July 25 “for a full discussion of visa and other consular matters”. From Tri-Valley to the harassment of H1B visa holders and diplomatic pat-downs, there will be much to discuss at this Dialogue. Considering that a similar Consular Dialogue has been part of the EU-IndiaStrategic Dialogue since 2000 and the India-Australia Dialogue more recently,one wonders why this did not come into being earlier even earlier.

On the education and people-to-people front, the noteworthy developments are the publication of the first request for proposals under the aegis of the Obama-Singh Knowledge Initiative with the fields of focus being Energy Studies, Sustainable Development, Climate Change, Environmental Studies, Education and Educational Reform, and Community Development and Innovation. How different this Initiative is from existing programs being carried out under the India U.S. Science and Technology Forum remains to be seen.  The other interesting program to watch out for would be the newly launched Passport to India which will facilitate increasing number of American students to come to India for periods ranging from three weeks to six months, to match the 100,000 odd Indian students in the United States. This, too, has an economic focus since the students will be here on internships with companies rather than for study programmes.

The silver lining in this particular cloud might be this; with both sides forced by exigencies to dial down the relationship a notch, this provides some breathing space to consolidate the initiatives that have been taken up in previous years. The U.S. State Department Inspector General’s office  has recommended that a separate office be established for India since “nations of comparable importance and with important bilateral relationships, such as China, Russia, Cuba, Canada, Japan, Korea, Mexico, Afghanistan, and Pakistan, have their own offices”. A similar initiative on the Indian side would go a long way in implementing the many worthy initiatives of the Strategic Dialogue and make it less of the annual junket that it is being perceived to be.