If the current state of bilateral and multilateral economic relations persists, we might end up in a position where India bolsters American strategic primacy with little to show in return.
At the end of his address to the US Congress, Prime Minister Narendra Modi stated that the “constrains of the past are behind us” and that “there is a new symphony in play”. This elegant formulation rightly suggests that there has been a qualitative change in India’s relations with the US since the advent of Modi. In the two years that he has been in office, Modi has gone further than any previous prime minister in positioning India in the strategic orbit of the US. Indeed, the joint statement issued after his meeting with US President Barack Obama begins by noting the “increasing convergence in their strategic perspectives”.
The prime minister’s fourth visit to the US was aimed at consolidating and accelerating the shifts in bilateral ties over the past year and a half. New Delhi was aware that Obama was now focused on cementing his legacy and that India would feature among the few bright spots in his foreign policy. This was, then, the right time to lock-in gains that would take much longer to fructify, if at all. The timing was also important owing to the uncertainties thrown up by the bewildering US primaries and the upcoming presidential elections. In this context, Modi’s address to the joint session of the US Congress was doubly significant. Not only was it an opportunity to engage with a political body that has been supportive of India’s strategic aspirations, but also to ensure continued bipartisan consensus on India when a new administration takes office.
The sheer length of the latest joint statement attests to the extraordinary expansion of Indo-US relations in recent years. This is true even if the statement has more than the usual dose of diplomatic twaddle, including references to the need to control the intake of salt and sugar and, inevitably, yoga. Equally important is the clear commitment to some key steps ahead and specification of the time by which these would be completed. This was essential to ensure that the bureaucracies on both sides have clear targets to work towards. Such a push from the top should ensure some momentum even in a distracting presidential election cycle.
The price to be paid
Despite the verbosity of the joint statement, the main developments are evident. As is the quid for which India has to pay the quo. For starters, there has been further progress on the one issue where the Americans felt they were hard done by. New Delhi addressed their concerns about the liability of suppliers of nuclear power equipment, the countries agreed that Westinghouse will now build six AP 1000 reactors in India. The contractual agreements will be negotiated and finalised by June 2017. The key issue for India will be, of course, the commercial terms on offer. In the meantime, the US can be satisfied that India has watered down its law to ensure that they are provided legal safeguards of a kind that their own law does not afford them. New Delhi, for its part, should get used to the fact that such asymmetric outcomes are par for the course if we want to tee off with the US.
The government would point out that this was the price to be paid for revivifying our ties with the US: the immediate benefits of a close strategic partnership should be weighed against the remote possibility of a nuclear accident in India. What, then, are the benefits awaiting us? The US has designated India as a “major defence partner” and will allow technology transfer at par with its “closest allies and partners”. The terminology appears to be specially tailored for India. The usual phraseology of a “major non-NATO ally” would be problematic not just for suggesting an alliance, but also for the invidious comparison that would be drawn with Pakistan, which was bestowed this honour a decade ago. At the same time, the current formulation has enough wiggle-room for subsequent administrations to pace their defence relationship with India.
Nevertheless, this prepares the channel for the flow of dual-use technology that could bolster the ‘Make in India’ programme – so long as we bring our export control laws in line with American requirements. This requirement may sound innocuous, but it is important inasmuch as the creation of a defence industrial base in India will depend on our ability to export. Similarly, the current state of play on co-production and co-development of weapons systems falls well short of what India has done with countries like Russia. Still, we should take comfort from such things as the “finalisation of the text of an Information Exchange Annex under the Joint Working Group on Aircraft Carrier Technology Cooperation”. At least we are talking about talking.
The two sides have also agreed on the text of the Logistics Exchange Memorandum of Agreement (LEMOA) – a modified version of the Logistics Support Agreement that the US has with its allies and close partners. This will allow – with some caveats that remain unclear – US forces to repair, refuel and replenish at Indian air and naval bases, thereby facilitating the projection of American power. Contrary to some claims, previous Indian governments did not back away from this simply because of the “optics” but owing to genuine concerns expressed by our defence establishment. These have clearly been finessed. The signing of the LEMOA is but a first step. Washington will continue to insist that technology sharing will depend on India’s signing two more “foundational agreements”: the Communications, Interoperability and Security Memorandum of Agreement, and the Basic Exchange and Cooperation Agreement on sharing of geo-spatial information. Here too, India has desisted so far with good reason – not least the potential concerns of a close defence partner like Russia. But the route ahead is quite clear.
If the strategic side of this relationship is progressing as intended by New Delhi and Washington, the same cannot be said for the economic side. The joint statement makes it clear that there has been no significant progress on negotiations of the Totalisation Agreement. There is deathly silence on the Bilateral Investment Treaty – an area of priority for American businesses, but a thorny one for the Indian government, especially on taxation and investor state dispute settlement. India also continues to remain on the US government’s intellectual property rights watchlist.
As for India’s wider economic aspirations, the joint statement only says: “The United States welcomes India’s interest in joining the Asia Pacific Economic Cooperation forum”. This is the exact formulation used in the “US-India Joint Strategic Vision for the Asia-Pacific and the Indian-Ocean Region” released during Obama’s visit to India in January 2015. Eighteen months on, India’s quest for APEC membership remains in the realm of vision. Let’s be clear: my neighbour may welcome my interest in his banquet, but that doesn’t mean he is holding out an invitation for me to join.
Beyond the APEC lies the elephant in the room: the Trans-Pacific Partnership (TPP). By pressing ahead with the TPP, the US is not only undermining the WTO (while conveniently blaming India for the impasse there) but effectively cutting India out of the most dynamic economies in the Asia-Pacific. The regulatory requirements of the TPP are well beyond what India can accept in the foreseeable future. The best hope for India may be that the next US president will paddle back from the TPP.
In short, India’s emerging partnership with the US in the Asia-Pacific will stand on a weak economic leg. This is bound to impose constraints on what the two countries can do together. More importantly, New Delhi should ponder the limits of such a misshapen relationship. The engagement with the US of every Indian government since 1991 has been premised on the idea of leveraging these ties for the internal transformation of India. If the current state of bilateral and multilateral economic relations persists, we might end up in a position where India bolsters American strategic primacy with little to show in return.
Relations with China
The argument that India needs such a relationship with the US in order to deal with China is specious. China’s rapid military modernisation and assertive behaviour are evident. But there is little to suggest that we needed to cozy up to the US on such terms. Indeed, by echoing the US line on “freedom of navigation” in the South China Sea – starting with Mr. Modi’s visit to the US in September 2014 – India has unnecessarily muddied the waters. An overwhelming amount of China’s own trade flows through the South China Sea, so how is it in Chinese interests to impede freedom of navigation there? The phrase “freedom of navigation” is a euphemism for the freedom of the US navy to patrol close to Chinese coasts. By embracing it so enthusiastically, we are signalling our willingness to help uphold US naval dominance in the Asia-Pacific. The claims by some Indian analysts that the US will help ensure a multipolar Asia is naïve. The US is committed to only ensuring its own unquestioned primacy. And there are ways of leveraging American power to our own purposes without going down the current path.
It is hardly surprising that China has taken unkindly to our strategic embrace of the US in this way. Beijing’s behaviour on a range of issues from NSG to Nepal is clearly an indication of the toughening Chinese stance towards India on things that they would otherwise have let pass. It is curious that New Delhi seems to have been caught off-guard by these moves: a bit like a man who is surprised that his neighbour, whom he expected to punch him in the face, has actually punched him in the face.
The government has claimed that unlike its predecessors, it will not allow its relations with the US to be shaped by China’s concerns. But for a weaker player it makes eminent sense to factor in the likely reactions of adversaries to every move that it makes. Any government that imagines that choices can be made without reckoning with consequences is clearly out to lunch. Ultimately, Modi’s policy towards the US will be judged not just on its own terms but also by his ability to manage these inevitable consequences.
Srinath Raghavan is a senior fellow at the Centre for Policy Research, New Delhi.