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India-US Relations Blog

Taking the Long View

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Over time, the expansion of Chinese strength will undoubtedly push New Delhi to tighten its security relations with Washington, though the process will neither be as smooth nor as speedy as many would like.

Just as US-India ties were at a nadir following New Delhi’s nuclear tests in 1998 – and just as the United States and China were declaring their own strategic partnership – Prime Minister Atal Bihari Vajpayee famously characterized Washington and New Delhi as “natural allies” who would form “the mainstay of tomorrow’s stable, democratic world order.” Two years later, Vajpayee reaffirmed this description.

Judging by the dense bilateral links the two countries have crafted over the past decade, Vajpayee phrase seems to have been vindicated. Not only have a landmark civilian nuclear accord and a spate of defense contracts been concluded, but the two countries have established some 30 bilateral dialogues and working groups on a wide gamut of issues, and the United States holds more bilateral military exercises each year with India than with any other nation.

Yet U.S. elites are suddenly shying away from the term “ally.” Assistant Secretary of State for South & Central Asia Robert Blake, for instance, states that “India and the United States will never be allies in the traditional sense of the term.”  Strobe Talbott, who as Deputy Secretary of State in the Clinton administration began the first institutionalized dialogue between Washington and New Delhi, contends that the countries “are not now, and may never be, allies.” Stephen P. Cohen, dean of U.S. South Asianists, likewise maintains that “India is a friend, not an ally” and the new US-Indian strategic alliance is “still more symbolic than real.”

All three underscore the distinction between long-standing U.S. allies, such as the United Kingdom, Japan and South Korea, and partners like India that are not bound by formal security commitments. And Blake’s statement was undoubtedly in deference to Indian sensitivities about being sucked into America’s strategic orbit, although he adds that India can no longer be considered a non-aligned country given the “increased convergences in strategic outlook” between Washington and New Delhi. But Talbott and Cohen are less sanguine on this count. The former argues that:

“One reason we may never be [allies] or not in the any foreseeable future, is because there is still a huge constituency in support of India’s non-aligned status, despite the fact that I would say that non-alignment and the non-aligned movement is very much an artifact of the Cold War. I remember having a conversation with Natwar Singh [retired Indian diplomat and Manmohan Singh’s first foreign minister] when Congress was out of power and him saying to me that the proudest moment of his career was being secretary general of the non-aligned movement. That sticks in my mind. I took that as a sign that there are still a lot of Indians who take non-alignment seriously.”

Cohen strikes a similar note: “New Delhi has a deep commitment to strategic autonomy, as indicated by its insistent use of the moderating prefix ‘natural’ to describe its U.S. relationship. In the end, India got what it needed from Washington, including recognition of its nuclear weapons program and support for its permanent membership on the United Nations’ Security Council, at little or no cost.”

Believing that strategic ties remain, at best, “aspirational,” Michael Auslin, at the American Enterprise Institute, likewise notes that the

“continued adherence to Jawaharlal Nehru’s non-aligned strategy clearly animates the worldview of most thinkers [in India], even if the language used to describe it no longer partakes of such Cold War imagery. There is a firm commitment in New Delhi not to have any firm commitments to any one state. It seems the Indians have taken to heart, far more than the Americans, George Washington’s warning against entangling foreign alliances.”

All of these comments come at a time of widespread disappointment in Washington that the bilateral relationship has not lived up to the strategic and economic possibilities that seemed so alive just a few years ago. As my last post noted, some observers are even questioning whether the Bush-Singh nuclear deal has succeeded in its primary aim of invigorating US-India geopolitical cooperation in the face of a rapidly growing and more assertive China.

The Bush administration devoted singular energy to courting New Delhi as a key part of its strategy of strengthening security links with China’s neighbors. In a widely-read article, Condoleezza Rice, then serving as chief foreign adviser to the George W. Bush presidential campaign, observed that Washington “should pay closer attention to India’s role in the regional balance.” She pointedly noted that “India is an element in China’s calculation, and it should be in America’s, too.” In his first major foreign policy address as a candidate, Bush argued that “we should work with the Indian government, ensuring it is a force for stability and security in Asia.”

Once the nuclear deal was unveiled at a July 2005 summit between Bush and Prime Minister Singh, Rice justified it by calling India “a rising global power that we believe could be a pillar of stability in a rapidly changing Asia.” At the summit, a senior Indian diplomat was quoted as saying that “Bush has a vision that we in India often don’t have. With Europe in decline and China rising, the U.S. sees India as a future global power with the ability to maintain [the] power balance in the 21st century.” A Bush administration official closely involved in the making of policy toward New Delhi commented that “China is a central element in our effort to encourage India’s emergence as a world power. But we don’t need to talk about the containment of China. It will take care of itself as India rises.”

Singh-Wen_PhotoIn the years since, has the growth of Chinese strategic power nudged Washington and New Delhi into tighter security collaboration, as many in the Bush administration expected? Or is Michael Krepon, one of the nuclear deal’s prominent detractors, correct in arguing that “New Delhi continues to titrate improved strategic cooperation with the United States” and that it “continues to improve ties with Beijing.  It is folly to presume that Washington can leverage New Delhi’s dealings with Beijing.”

There’s no denying the American disillusionment caused by India’s rejection of Boeing and Lockheed Martin’s bids in its $11 billion fighter aircraft competition and by the prolonged inability of U.S. companies to capitalize on the nuclear deal due to an Indian liability law that does not conform to international norms. It is also true that India and China have aligned to thwart U.S. objectives in global negotiations on trade and climate change, and that they often take the same side in UN deliberations.

But stepping back a bit in order to take in the wider perspective, it is clear that some fundamental geopolitical forces are at work in spurring India-China strategic frictions.  Instead of being the fraternal titans that drive the Asian Century forward, as envisioned in the “Chindia” chimera, it is more likely that their relationship in the coming years will be marked by increased suspicion and rivalry. The relationship has never really recovered from the trauma of their 1962 border war, and the strains have only increased over the past five years or so. Beijing is now taking a much more hawkish line on territorial disputes in the Himalayans, including asserting a brand new claim that the Indian state of Arunachal Pradesh is actually “Southern Tibet.”  It is also expanding its presence in territory controlled by Pakistan, and trying to block New Delhi’s efforts to play a greater role in regional and international institutions.

Much is made of the fact that China is now India’s largest trading partner and that two-way trade soared from $12 billion in 2004 to $60 billion in 2010, and that the countries are on track to reach $100 billion in 2015. When Premier Wen Jaibao visited New Delhi last December, he brought along a larger business delegation than President Obama did a month earlier, and the $16 billion in resulting trade deals eclipsed the $10 billion-mark struck by the Americans. Yet compared to US-India economic links, there are far more competitive elements, and far fewer complementary features, operating in India’s business interactions with China.

All of these developments have not gone unnoticed by the Singh government.  Famous for his cautious, taciturn nature, Singh has caused a stir with his public expressions of disapproval regarding what he terms Chinese “assertiveness.” In a September 2010 interview he complained that Beijing sought to “keep India in a low-level equilibrium” and that “it would like to have a foothold in South Asia.” Three months later, he shocked his Chinese guests during the Wen visit by refusing to reiterate India’s traditional endorsement of the “One China” policy or customary recognition of Tibet being an inviolable part of the People’s Republic.

Indian military planning is also increasingly focused on the threat from its northern neighbor, from taking major steps to fortify its northeastern border to accelerating the development of the Agni-V ballistic missile. With a reach of over 5,000 kilometers, and capable of carrying multiple warheads, the missile puts China fully within range of a retaliatory nuclear strike.

The strategic entente with India is Washington’s first geopolitical partnership to be forged in the post-Cold War era, meaning that its rhythm is bound to be quite different from the security alliances the United States rapidly created in the aftermath of World War II. Back then, the national power of Washington’s new-found allies was in stark decline, while India’s current power trajectory is visibly upward. The structural dynamics of a bipolar global order also were simpler than today’s messy multipolarity.  Over time, however, the expansion of Chinese strength will undoubtedly push New Delhi to tighten its security relations with Washington, though the process will neither be as smooth nor as speedy as many would like.

India-US Relations Blog

Gary Locke’s Missed Opportunity

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U.S. Commerce Secretary Gary Locke traveled to India earlier this month for a six-day tour focused on enhancing bilateral high-tech trade and cooperation. The first U.S. Cabinet officer to come to India since President Obama’s state visit last November, he brought with him representatives from 24 U.S. companies, including Boeing, Lockheed Martin and Westinghouse.  The trip resulted in an agreement on closer collaboration in the area of energy technology as well as an announcement about the further easing of U.S. export controls on India. As one senior U.S. official accompanying Locke stated: “We have agreed to an unprecedented level of technology transfers to India and we can go even further.” Judged by the usual standards of such trade missions, the visit was not unproductive. Yet by the time Locke’s sojourn ended, one had the feeling that he nonetheless missed a good opportunity to significantly advance the bilateral economic agenda.

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Just how large a miss this was became clear a few days later, when Indian and Japanese Cabinet officials gathered in Tokyo to sign a comprehensive economic partnership agreement (CEPA). This accord provides a stark counterpoise to Locke’s visit, exemplifying the imaginative initiatives that should have been on his brief. The Indian-Japanese pact not only eases the movement of goods but also the flow of services, capital and labor.  It promises to increase the value of bilateral trade 150 percent over the next few years and has been received with great enthusiasm by the Indian business community. Indeed, the agreement is an apt economic expression of the growing partnership that the two countries are forging in the geopolitical realm.

Indian trade diplomacy is on a tear. Just days after the deal with Tokyo, New Delhi signed a similar arrangement with Kuala Lumpur, which will further deepen India’s involvement in Southeast Asia’s dynamic economy. And Commerce Minister Anand Sharma has raised expectations that trade negotiations with the 27-nation European Union will soon be concluded.  India has also concluded free trade accords with South Korea, Thailand and the ten-country Association of Southeast Asian Nations (ASEAN) in recent years, and has launched bilateral trade negotiations with China and Canada.

Suggestions have been floated about crafting a U.S.-India free trade agreement (FTA), an idea that would certainly result in significant economic gains for both countries. Despite dramatic increases over the past decade, the bilateral economic relationship is far from achieving critical mass and will require purposeful nurturing to reach its full potential.  Trade and investments flows between the two countries remain a small fraction of the U.S.-China level, and China recently eclipsed the United States as India’s top trading partner. Indeed, it is a telling indicator that President Obama’s visit to India netted trade deals worth some $10 billion, while Chinese Prime Minister Wen Jiabao’s trip just a month later resulted in $16 billion in business deals – this despite the increased diplomatic tensions that color India-China relations. Moreover, the two countries used the Wen visit to announce an ambitious effort to nearly double their trade in the next five years to $100 billion annually. For all of the spectacular improvement in U.S-India ties, India is still only the 14th largest trading partner for the United States and India remains a comparatively minor destination for U.S. investment flows.

So a far-reaching multi-dimensional U.S.-India FTA deserves an important spot on the bilateral agenda, though one must also admit the difficulties in forging one. Given that Washington and New Delhi are at loggerheads in the Doha Round negotiations, as well as the unpromising political climate in the United States regarding trade policy, the prospects for a broad-based bilateral FTA are not strong in the foreseeable future.  Moreover, the agricultural access issues that will need to be included are highly problematic for both sides. Consider, for example, that India’s negotiations with the European Union have lasted nearly four years and since the EU is not a large exporter of farm products, agricultural issues have not been the major obstacle in the EU-India FTA talks that they would be in an U.S.-India negotiation. At best, Washington and New Delhi should announce a commitment to signing such an accord by 2015, even if it is one whose provisions take effect over an extended period. An excellent opportunity to make such an announcement is in early April, when the next round of the U.S.-India Strategic Dialogue convenes in New Delhi.

But even as Washington and New Delhi hash out the terms of a broad-based FTA, trade officials should focus the bulk of their energies on an accord that promises a large payoff in the immediate term. A sweeping initiative aimed at capitalizing on mutual synergies in the area of high-technology trade would do just that.

The high-tech sector plays a critical – and largely complementary – role in the economies of both nations, and the United States has been a prominent factor in the spectacular development of the Indian IT sector. Yet overall bilateral trade in advanced technology products is surprisingly low and important synergies remain untapped. And unlike a more comprehensive FTA – entailing prolonged negotiations, unwieldy bargaining tradeoffs and protracted coalition-building at home – an arrangement with a limited but sharp focus on the innovation economy could likely be formulated relatively quickly, and its self-evident “win-win” features would override bureaucratic timidity and domestic opposition.

A model for such an initiative exists in the 1997 Information Technology Agreement (ITA), which eliminated tariffs on a range of capital goods, intermediate inputs and final products in the information and communications technology sector. The agreement was negotiated by 29 original countries (then representing about 80 percent of the global IT trade). Although conducted under the auspices of the World Trade Organization, the agreement was formulated quickly outside of its normal (and cumbersome) negotiating process. The final agreement was quickly joined by other countries (including India) and currently has over 70 participants (collectively representing 97 percent of the global IT trade). The ITA is credited with spurring world trade in IT products, currently estimated at $4 trillion annually, and remains the only industry-specific comprehensive free trade agreement ever signed.

While the ITA is still in effect, its value has been significantly diluted by a series of technological developments in the period since its creation. Specifically, disputes have arisen among the signatories over how to apply the agreement to hundreds of new IT products that were not foreseen a decade ago and on addressing the issue of non-tariff barriers. Moreover, multi-party negotiations to update the ITA have been stalled for years.

In light of these problems, the United States and India should launch a bilateral effort to further liberalize trade and deepen engagement in the IT field or, even more one that covers the entire range of advanced technology products and services.  This agreement could then be opened to the participation of other like-minded countries.  Given the vital role of the high-tech sector in the American and Indian economies, not to mention the broader world economy, such an initiative would pay robust commercial dividends.  Additionally, with Washington and New Delhi at odds in the Doha Round talks, this initiative would have great political value, further solidifying the U.S.-India partnership and providing an important example of joint leadership in the global economy between developed and emerging nations.  Finally, it would be a good down payment on the Obama administration’s pledge to double U.S. exports over the next five years, as well as India’s effort to double its own trade levels.

An effort focused on crafting a bilateral free trade mechanism relevant to the advanced technology sectors would instill a level of momentum in bilateral ties that has been noticeably missing since George W. Bush left the White House. The Obama state visit succeeded in righting a relationship that had been adrift for the better part of two years.  But with the civilian nuclear accord now a done deal, officials in both governments are still searching for a bold, creative initiative capable of driving relations forward.  An exchange that occurred at the start of the Obama administration is instructive. In January 2009, Richard Boucher, then U.S. Assistant Secretary of State for South Asia, suggested to Shivshankar Menon, then India’s Foreign Secretary and now Prime Minister Singh’s National Security Advisor, that both capitals needed to find “the next big idea” to animate bilateral affairs. Menon concurred, noting that in the absence of something that captures the imagination “Indians were beginning to view the relationship with the U.S. as only about political-military and nuclear issues.”

Focusing on the high-tech agenda would be a very good way to stir imaginations in both countries. It would underscore the critical role that economic engagement has played in launching the new era in U.S.-India affairs.  Indeed, increased private-sector ties will be one key in securing the growth of broad-based, resilient relations over the long term, since they work to limit the risk that momentary political and diplomatic frictions could escalate and disrupt the overall bilateral partnership.

Defence And Strategic Affairs Blog

How long will India play to maintain status quo?

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It was like just another formality in the Sino-Indian relationship being fulfilled, as the Chinese Prime Minister Wen Jiabao concluded his “significant” “trust-building” India visit on Friday. The Chinese Premier brought along a huge entourage of 400 business leaders to India, signaling the only purpose of his visit – more business. India and China signed six business deals, announced plans to increase business to $100 billion by 2015 and established a Strategic Economic Dialogue. PM Wen Jiabao also announced that Indian and Chinese companies would be signing deals worth $16 billion. But at the end of three day tour, the fact remains that there is a huge trade deficit and imbalance between India and China, and no concrete announcements to reduce or eliminate it were made.

The trade between the two countries has almost tripled since 2005 and today stands at $60 billion. But India’s trade deficit with China is about $19 billion this year alone. This is explained by the two fold increase in Indian exports to China between 2005 and 2010($11.6 billion) and three-fold increase in Chinese exports to India ($30.8 billion). India has been largely exporting raw materials to China, and importing finished goods made mostly from the same raw materials. This pattern of trade, even if it results in large numbers for cumulative trade, is not good for Indian interests and business. Not to mention the large dumping of Chinese goods into India that damages local manufacturing, and against which India has launched various complaints with the WTO. Further, Chinese FDIs in India are only $52 million, whereas since 2005 Indian FDIs into China have been $879 million.

In the backdrop of this trade imbalance it would have been expected that the Indian side would demand and negotiate constructive mechanisms to reduce the trade deficit and balance out the balance sheet. However, the joint statement by the two leaders only made ambiguous references to working towards improving trade. Neither were there any signs of China conceding ground or supporting Indian in case of some of the other contentious issues such as the stapled visa for Kashmiri residents, terrorism emanating from Pakistan, China-Pak nuclear deal and dam on the Brahmaputra. Even during the Foreign Secretary’s Press Briefing her answers to these questions were full of diplomatic jargon and ambiguity, leaving one to conclude that India could not squeeze out even one favorable comment on contentious issues from China.

Wen Jaibao’s visit was symbolic of the ‘cordial’ imbalanced relationship between the two countries. The Indian government’s reactions and remarks showed more a willingness and desire on its part to not antagonize the Chinese and maintain status quo, rather than stand up for its rightful claims and risk retaliatory actions by the Chinese in international forums or along the borders. It is unfortunate that in spite of the much touted personal rapport between Manmohan Singh and Wen Jiabao, home-ground benefit, India’s growing clout in the world, and two recent successful visits by President Obama and President Sarkozy, India could not stand up for its demands and make its  presence felt during this Chinese visit. It is time, after 60 years of being together, that India steps up its game, and works towards not improving relations, but developing a mature relationship with China where it does not play second fiddle and pussyfoot around it.

(This post originally appeared at the FPA’s India blog.)

Defence And Strategic Affairs Blog

India China Economic Union – An open letter

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Dear PM Wen Jiabao and PM Manmohan Singh,

Only a sixth sense of mutuality and common sense can help China-India relations today. While the realities are being resolved and negotiated, we simultaneously and urgently need a powerful new idea of joint interest to both countries.

Economic entanglements are the surest guarantor of peace and development. India and China must start exploratory discussions of any variation of an economic union between the two countries. Working towards such a framework will ensure peace and economic development between both countries.

* The reality of the India China Economic Union may happen in 50 years or 100 years, but by progressing towards such an objective both countries will accelerate friendship and socio-economic development of one-third of global population.
* It is but obvious that in 20-30 years or by 50-100 years the relationship and economics will be so different that we cannot even imagine today. But one thing will be sure – the two countries and our people will be far deeply integrated and inter-connected in their economies, cultural understanding, people-to-people linkages, and global challenges.
* Sirs, you can see the future – kindly seize the moment and take a bold step.
* In advance of this summit in Delhi, we had been researching and modeling various thoughts to protect and advance the national interest of each country, as well to make a generational change towards friendship, peace, socio-economic and cultural relations between both countries.
* Our research shows that the first thing both our countries need today, is a sixth sense. The current and historic issues are too deep and will take time to resolve. While these issues are being resolved, it is now time to introduce, in parallel, a sixth sense in our relationship and to create a vision for an India China Economic Union.
* Other research, including a small web-based sample, shows that the topmost problem in relations between China and India is of mutual images, and mutual trust. Apart from the government in each country, this is the top concern in the publics too.
* Therefore the top priority of our leaderships today must be to find a solution to these two problems. By promoting this sixth sense of the imminence of an economic union, our leaders will guide the policy and publics of both countries towards peace, people-to-people relationships, and socio-economic development.
* Such a vision will lay the foundations for harmonious growth for hundreds of years ahead. Both countries should set up a joint working group and think-tank, funded with US$ 10 million by each country, as first step. This economic union may be modeled after the example of European Union or any variation, and the working group should present reports of the progress on sidelines of annual PM level meetings.

Premier Wen Jiabao is visiting India along with a business delegation of over 300 businessmen. Geopolitics, business and people-to-people linkages are all on the agenda. In all these meetings and discussions, the key underlying dynamic will be mutual images and trust.

Mutual Imagery and Trust

To improve mutual imagery and trust, both countries need to take several urgent steps. Each country should take responsibility to take 3 specific steps to build trust and image. These steps should be reflected in the joint communiqué which shall be issued during the visit.

* India has already announced introduction of Mandarin as an optional subject in schools. China must similarly introduce Hindi language in its school system. Also, China must ramp up English speaking skills among its citizens. Lack of English is proving an obstacle to better understanding and business with China.
* Both countries must promote people-to-people linkages. Through tourism, even a weekly flight with free seats; through cultural exchanges, even promoting film shoots in each other; and through youth and business exchange programs. The expatriate communities in each country must be guided by embassies to engage more with the host society.
* India must encourage its communist parties to act as a bridge in building relations with China. U.S.-India relations improved in large part due to a unique presence of an over 3 million strong Indian-American community. Similarly, with China, the communists of India can play a unique role in building image and trust between both countries.
* Any delegation which travels to the other country must be provided a three hour orientation and cross-cultural understanding of the country they will visit. The embassies should provide this service to their host country government. The chambers of business must provide this service to the business delegations they take.
* More Chinese students must be given generous scholarships to come and study journalism and MBA in India, and similarly Chinese government must attract Indian students to China. These future businessmen and media leaders will help to promote understanding and economic activity between the two countries and many may settle down in host country.

India China Economic Union

Improvement in mutual images and trust shall further pave the way for reducing fears and concerns of each country, and for creation of the India China Economic Union. India fears China’s “string of pearls” strategy, and China fears India is ganging up with the U.S. to restrain its growth. China is troubled by India’s stance on Tibet and Taiwan, and India is concerned with China’s behavior on its Western and Eastern borders.

Both countries also need to take fresh confidence building measures. China must vacate the portion of Kashmir which Pakistan ceded to it. India must clarify and settle the Tibet and Taiwan issue with China.

Thus a sixth sense of Indo-China relations will need a troika approach – all in parallel:

* Improvement of mutual imagery and trust,
* Fresh confidence building measures, and,
* A vision for creating the India China Economic Union.

Much of these may not happen in our lifetimes, or even for several generations. But some such framework will be a reality 100-200 years from today. By taking this visionary step, Sirs, you will leave an imprint on history for ever.

Sincerely,

Robinder Sachdev