India and US - III

[Guest]

Email from Ram Narayanan's US India Friendship site.
<!--QuoteBegin-->QUOTE<!--QuoteEBegin--><b>US-India Strategic Partnership: Where is it Headed?</b>

Presentation made on January 16, 2007 by Ram Narayanan at the India International Centre,  New Delhi, under the auspices of SAPRA India Foundation.
                                                         
In a talk I had the honor to deliver here at the IIC, under the auspices of SAPRA India Foundation, almost exactly two years ago, I focused attention on why I thought a solid and comprehensive US-India strategic partnership was inevitable. It was inevitable because of the compelling geo-political and geo-economic global scenario that is emerging in the 21st century.

In that talk, I made ten key points:

Point number 1. Among the major powers of the 21st century -- the US, China, India, the EU, Russia, Japan and Brazil -- China is the only aggressive competitor of the United States, and further, it is determined to win that competitition, come what may!

Point 2. As the 21st century advances, China will forge ahead of the United States in GDP.  It will become the number one superpower -- economically, perhaps militarily too. Even in the realm of technology, it's likely to seriously challenge the United States. All this may take 20 years, 30, 50, perhaps 70 years. But it appears inevitable.

Point 3. All the demographic indicators are in favor of China. The US, therefore, will find itself at a disadvantage as it tries hard to retain its current economic, military and technological position. 

Point 4. India's importance lies in the fact that it brings to a US-India partnership exactly the attributes the US lacks, and desperately needs, namely  India's demographics which, over the longer run, are even more favorable than China's.

Point 5. India will never be an aggressive competitor of the United States, the way China is.

Point 6. The only way the US can in fact win the global competition -- and stay first among equals -- is by teaming up with India. IT HAS NO OTHER OPTION. I repeat, THE US HAS NO OTHER OPTION. A US-India partnership -- is a WINNER. It's the only possible partnership with the ability to balance the surge in China's geo-political and geo-economic and, by extension, geo-military, power.

Point 7. When I spoke of a partnership, I did not speak of a military alliance between the US and India. There is no logical possibility of war between the US and China, or between India and China. War there is, and war there will be -- but it is, and will be, a war fought on the battlefields of the economy, and of technology. And it is here that the US and India stand out as natural, logical -- inevitable -- partners. Standing alone, each nation has its own limitations -- but together, they quite simply CAN NOT be beaten.

Point 8. There is, therefore, no question of a US-India partnership being directed AGAINST China, or, for that matter, against any other country or region. Because of the substantial and ever growing magnitude of US-China and India-China economic and commercial interaction, that's a totally unthinkable course of action. I may now add, the CPM in India can lie back and relax.

Point 9. What then will be the logical end of a US-India partnership? It will be to systematically leverage their respective, unique, comparative advantages -- which will, over a period, help maintain a global balance of economic, technological and military power that will go well into the latter half of the 21st century and beyond.  This is something neither will achieve on their own.

And finally, point 10. Having said all that, I brought up the inescapable question: Will the two countries actually move toward such a partnership, given that it needs a strong commitment and vision? I answered:  "Yes", because "No" is too illogical to contemplate in the emerging world of the 21st century.

Along with these ten points, I also raised two issues for policy action:

Number 1. That an overriding, absolutely essential precondition to a successful US-India partnership is the establishment of a climate of total trust at all levels. What's necessary is a trust that binds the top political leadership, the bureaucracy at senior, middle and junior levels and, of course, the R&D establishments in both nations. It has to be a trust that can comfortably survive the irritants that may crop up from time to time, and ensure a deeper understanding of each other’s real politik.

Number 2. The US will have to help India get around NPT, NSG and other alphabet-soup obstacles to full-fledged technological cooperation . Let's not beat around the bush. The proof of the pudding -- viz. the granting of licenses by the US administration for export to India -- will be seen only when the US can make the case to treat India as an exception. The next step will be passage of new regulation in Congress. That's where action is required. 

I had concluded my talk with two basic postulates:

One -- make no mistake, that, as the 21st century moves ahead, China will mount a serious challenge to the present US status as the world's economic and military superpower, and as the leader in technology.

And two -- if the US does not wish to end up playing second fiddle in a global orchestra, it is very, very clear what she needs to do. And who she needs to do it with. 

WELL, as it so happened, two months later, in March 2005, Secretary of State Condoleeza Rice paid a visit to India. The significance of that visit was explained in an official briefing at the State Department on March 25, 2005. It signified a radical change -- a historic shift -- in Washington's policy toward India. For the first time the US made it clear that “its goal is to help India become a major world power in the 21st century.”  It meant developing an enduring strategic partnership with India that would embrace the whole gamut of the relationship, including long-term defense industrial partnership, lifting the nuclear blockade, revitalizing India's economy and creating a greater role for India in global institutions.

NOW, no country can really make another country great, but it certainly can put obstacles in the latter's way if it so chooses. The US has chosen not to. It has decided to do everything possible to assist in the process of India becoming a major world power. As Tom Donnelly & Vance Serchuk have said: "Since 2005, the constellation of power in the two capitals -- Washington and New Delhi -- has been almost perfectly aligned".

The knotty core that weighed down a dramatic recasting of the US-India relationship, however, was the existence of apparently insuperable legal obstacles in the way of technology cooperation. And, thus, the June 2005 visit to Washington of India’s then Defense Minister Pranab Mukherjee established the framework for a 10-year defense agreement -- an agreement that will pave the way for joint weapons production, cooperation on missile defense and lifting of US export controls for sensitive military technologies.

This was followed by the even more significant visit of Prime Minister Manmohan Singh, when the US and India, as one commentator said, "entered into a geo-strategic and economic embrace that will set the course for the 21st century equations in Asia and beyond". On July 18, 2005, came the momentous announcement -- something that electrified the world -- an agreement aimed at enhancing cooperation in civil nuclear energy, space, and hi-tech commerce. This accord was reaffirmed with more details in a joint statement issued on March 2, 2006 during President Bush's visit to New Delhi.

Since then, the US-India nuclear legislation -- known as the Hyde Act -- has been passed with overwhelming bipartisan support in both House and Senate. There is concern in India about the extraneous and prescriptive parts of the Hyde Act. But as one American expert told me, they constitute nothing more than "the US talking to itself." For example, "if the US, China, and others start testing, then no one is going to beat up on India for doing the same, and in fact from a weapons perspective India probably needs to test the most".  As President Bush himself said in a statement issued after signing the nuclear bill into law, he did not endorse all its contents. "My approval of the Act does not constitute my adoption of the statements of policy as U.S. foreign policy. Given the Constitution' s commitment to the presidency of the authority to conduct the Nation's foreign affairs, the executive branch shall construe such policy statements as advisory".

Therefore, one hopes that the two governments will be able to finalize a 123 agreement that will satisfy India. And also get the needed approvals or agreements of the NSG and IAEA. As Nicholas Burns said: "There is a 'larger story' to the nuclear deal than what meets the eye; the agreement is a strategic move to build a new relationship with India. This has always been the ultimate unfulfilled relationship since partition in 1947. I think every American administration since then, beginning with President Truman, has had the ambition to have a full relationship with India. It's never been - it's never materialised. We think it's materialising now."

Thus, the nuclear initiative is just one facet of a many, many sided, fast developing, and fruitful US-India interaction. What has been accomplished so far is emblematic of the transformed relationship the two nations now enjoy -- a relationship that spreads across a large and varied spectrum: top leadership meetings and telephonic conversations, economics, trade, energy, agriculture, defense, space, S&T, health, education -- you name it. 

How does India view its relationship with the US and other powers in a globalized world? India's goal undoubtedly is to create, to quote the Indian Prime Minister, “an international environment supportive of her development efforts” -- to ensure that she emerges as a major global power. To achieve this purpose, India will strengthen her political and economic ties and PARTNER with EVERY nation that offers opportunites.

No nation or region, certainly not the US, nor Russia, nor China, nor the EU, nor Japan, nor Southeast Asia, nor the Middle East, nor Latin America, nor Africa, nor any other nation or region will be excluded.

What will vary -- and this is VERY, VERY IMPORTANT -- is the DEGREE of partnering.

In this PARTNERING game plan, the US inevitably gets pride of place.

Why?

Because of FOUR reasons:

a) Demographics; economist Bibek Debroy says by 2015, 32 percent of China's population will be over 50, while 31 percent of India's population will be under 15; 

b) the US is the ONLY world leader in technology and services, both in terms of know-how and markets;

c) the US ALONE offers scope for large-scale immigration; and, thus,

d) the US ALONE, among the major nations, has a large and growing population of Indian heritage, whose influence is rising, and who work hard to build bridges of understanding and enduring links between the two nations.

Therefore, in this century, the US and India will have the maximum space to develop by way of collaboration and partnership, simply because their resource endowments are the most complementary between any two major nations on this earth.

I would NOW like to focus on how I visualize the future development of the US-India strategic partnership.

Are US and Indian viewpoints converging on crucial global issues of the century, or if they diverge on some issues, can they be managed without hurting the rapid onward march of the relationship? Those are the critical questions that will face us in the years to come.

Let's look at NINE of the more important issues:

1) First and foremost -- economics and trade. Is it healthy for America to continue to over-depend on China for low-priced, quality consumer products? Isn't it in America's vital interest to diversify and look to India, among other countries, as an alternative dependable source? House speaker Nancy Pelosi has called the US trade relationship with China a 'disaster'.  To an extent, India is competing with China in the US market for products such as apparel and footwear. And she may achieve some success in other items like consumer electronics and computer equipment.

But the main thrust for India, as a McKinsey article forecasts, will be in "skill-intensive industries requiring advanced technical expertise—areas in which India is likely to become a primary sourcing and manufacturing base". McKinsey research supports the view that the next wave of global outsourcing in manufacturing will take place in just these kinds of industries. In addition to auto components and assembly, they include fabricated metal products, machinery, pharmaceuticals, specialty chemicals, electrical and electronic products, and telecom equipment. 

Presently, China's product exports to the US are seven or eight times that of India. I expect that huge disparity to narrow considerably over the next 20 or 30 years. Also, with the development of high tech exports from the US to India, I expect the US-India balance of trade to be less imbalanced vis-a-vis US-China trade.

In information technology, software, BPO and KPO, R&D and other high-skilled service sectors, in all probability, India will maintain its primacy in outsourcing for the US market, notwithstanding heroic Chinese efforts to catch up. To stay competitive, American industry and business will increasingly leverage Indian brains.

Knowledge Initiative on Agriculture was announced in July 2005. This is a US-India program for expanding cooperation in agricultural science and technology aimed at reducing rural hunger and poverty. It seeks to focus on agricultural production, food processing, marketing, biotechnology and water management in India. The expectation is that the US and India will work together as they did in the 1960s -- this time to usher in a second green revolution.

Looking at the broader canvas of economic growth, China will probably continue to grow faster than India over the next five years, perhaps, ten, as it has in the preceding decade and more. India has a lot of catching up to do -- especially in infrastructure, literacy and health-care.

However, India gets a much better return for the investment it makes in its economy than China. A Merril Lynch report estimates that China needs to invest $3.50 to produce an additional dollar of output. India only needs to invest $2.50.

This combined with India's clinching demographic advantage -- i.e. an increasing surplus of the working age group vis-a-vis China's expected shortage of workers as the century advances  -- plus, VERY IMPORTANT, a dynamic and outgoing private sector, unmatched by China's, will probably push India ahead of China in growth rates as we move toward and beyond the first quarter of the current century.

2) The second most important issue, again related to economics and trade, is the Doha round of global trade negotiations, stalled since July 2006, on the issue of farm subsidies. This is not going to be an easy thing to resolve. Meanwhile, an area not yet adequately explored, but which looks feasible, is the opening up of US and Indian economies for a free trade agreement in services which will benefit both the nations. It's not clear why nobody is talking about it.

Again, related to the same issue of services. A question: Does India provide part of the answer --  a longer term answer -- to America's spiralling health care costs? Here is a thought: If over the next 5-10 years, American corporates invest in setting up, say, 500 large world-class hospitals in India, and if 50 percent of the beds are occupied by Americans while a sizable proportion of the remaining beds is reserved for low-income Indians at nominal or no payment, will it not be a win-win situation? Let's think about it.

3) A third major issue that will define the relationship between the US and India has to do with energy needs over the medium and long term.  As we speak, China is maneuvering to secure its future energy needs by gaining privileged access to crude oil and gas reserves in the Middle East, Africa and Latin America. India is far behind.

The US and India will probably focus a great deal in the area of clean coal technology, alternative fuels, joint research and development of bio-fuels, solar, fusion, wind and, hopefully, nuclear, energy.

4) A fourth major issue is migration of skilled people. America is increasingly likely to face shortages of skilled personnel in many professions, not merely in R&D and high-tech. As India's economic development acquires greater depth, width and pace, she will absorb more and more of her own educated manpower, but she will also help fill a large slice of US manpower needs, simply because of India's more favorable demographics vis-a-vis other large populated nations.

The US will, thus, continue to attract many of India's best and brightest brains, in a wide range of fields, including science, technology, medicine, finance and  management.

5) A fifth major issue is terrorism. While India and the US share a common interest in ridding the world of terrorism, there is one -- at this time apparently irreconcilable -- difference in the way the two countries look at the issue.

For America the prime goal is to prevent any future terrorist attacks on the United States and/or US interests in other parts of the world. While America recognizes Pakistan as a fountainhead and training ground of worldwide terrorism, so far as the US is concerned Pakistan has always been willing to cooperate in destroying terrorist cells operating in that country against America (or, for that matter, against Europe). All for a price, of course. And that's about it so far as America is concerned.

India is a different kettle of fish. For India, terrorism means only one thing -- a Pakistani inspired, relentless, single-point objective to destabilize the world's largest multi-cultural, pluralist democracy. India has been fighting this menace single-handedly long before 9/11 and well after 9/11. Presently India and Pakistan are pressing ahead with a fresh, unconventional initiative to address the difficult Jammu and Kashmir issue. Not many are optimistic about its success. Even assuming that the J&K issue is settled to the satisfaction of both India and Pakistan, will, to use B Raman's expression, "Pakistan's perceptions and mindsets towards India" change dramatically? Will Pakistan uproot all the terrorist networks operating in that country against India?  We don't know. And what about the open support extended by Pakistani military and intelligence outfits to the Taliban to destabilize Afghanistan?

There could be a congruence between the US and Indian viewpoints on the issue of terrorism if and when the American administration grasps the point as the American media, the American think tanks and, of course, the rest of the world have, that it's Pakistan which is standing in the way of stabilizing democracy in Afghanistan. The coalition forces there are facing a well armed and well trained jihadi Taliban force and suffering casualties only because Pakistan is running with the hare and hunting with the hounds. But will America call a spade a spade or will it take the line of least resistance, turn tail and arrive at a compromise with the Taliban? That's a question for the future.

6) The sixth major issue is Defense. The New Framework for the US-India Defense Relationship signed on June 28, 2005 commits Washington and New Delhi to cooperation in thirteen substantive areas including expansion of two-way defense trade, enhanced opportunities for technology transfer, research and development, co-production and collaboration in missile defense.

While India will continue to secure military supplies from countries like Russia, Israel and France, the growing technological gap between the American defense industrial base and the rest of the world will trigger an expanding US-India collaboration in joint research, designing and co-production of new generations of weapons systems.  However, the pace of progress will depend a lot on the extent to which the Indian government will induce India's dynamic private sector to get involved.

India will maintain its historic defense relationship with Russia. Strategically, it's not in India's interest to see Russia move away from India and and get even closer to China. But it's clear that US-India co-partnership in the defense area, especially in cutting edge technologies, is set to take off.

7) The seventh major issue -- again a defense-related area -- is security in the maritime domain.  The US sees India as a close partner in enhancing security cooperation against maritime threats in the Indian Ocean area, preventing piracy, carrying out search and rescue operations, responding to natural disasters, and enhancing cooperative capabilities, including through logistical support.

The Indian navy is expected to assume a substantive role in this joint effort to ensure security of the Indian Ocean. Since protection of the sealanes is of vital importance to countries such as Japan, Australia, Singapore and Indonesia, it may well become a six-nation cooperative effort. But the question is : Will the Indian navy get the needed budget and support required to build up its fleet strength rapidly enough? A further question: Will China try to push itself in by using the CPM's influence to lobby for it? Will it be in the interest of India or the US to accommodate China?

8) The eighth major issue -- is an area wherein American and Indian viewpoints
may diverge, viz. policies toward third countries like Venezuela, Cuba and, especially, Iran.  While India shares America's view that Iran should comply with international agreements and should not develop nuclear weapons, India has economic and cultural interests in Iran. India is keen that the Iran nuclear
issue is resolved through peaceful means. China and Russia -- both enjoying veto power in the Security Council -- take the same view. Does the Iran imbroglio have the potential to sour US-India relations? It does. If the US-Iran confrontation worsens, India may get terribly hurt as some 4-5 million of her citizens are working in the Gulf, apart from the fact that a major proportion of India's oil supplies come from that region. However, considering all eventualities, the Iran nuclear issue is unlikely to reach a point of no return.

9) And last, but not the least, the ninth major issue is people-to-people relations and the bridging role of Indian Americans in cementing US-India cooperation in a wide range of fields. The findings of the Pew Global Attitudes Survey released last September reveals that 70% of urban Indians believe relations between India and the US have improved in recent years, and among them, an overwhelming 91% consider this to be a good thing.

It's a fact that Indians feel a much greater affinity to the US than to any other country because they have far better opportunities in the US than anywhere else in the world. Every second or third middle class family I meet in any large city in India has some one or other living in the United States.

Also, as per the PEW survey, more Americans have started rating India favorably -- while they rate China less favorably and America's "ally" -- Pakistan -- even less favorably. The "Global Thermometer survey" by Boston-based Quinnipiac University released end-November last disclosed that Americans are increasingly feeling positive about India even as their warmest feelings are reserved for England, Canada and Israel.


With the rising socio-economic status of Indian Americans, many have achieved
leadership positions in the US. Indian Americans as a group play a dominant role in the hospitality industry, among other sectors. A study released this year, supported by two prestigious American universities, Duke and Berkeley, revealed a significant contribution by immigrants of Indian origin to America's leading edge entrepreneurial economy. Indian immigrants have founded more engineering and technology companies in the US during the decade 1995-2005 than immigrants from the UK, China, Taiwan and Japan combined. Of all immigrant-founded companies, 26 percent have Indian founders.     

Both governments, therefore, are engaging the community. Indian American lobbying groups have gained formidable influence and are quite effective in pushing their agenda on Capitol Hill. Also, American  businesses not only lobby for India in Washington but often select Indian Americans to lead projects to set up or expand operations in India.

TO SUM UP, striking a balance sheet of the few points of divergence with the overwhelming and far-reaching points of convergence between US and Indian interests in the 21st century, I would confidently assert that nothing can really stop the inexorable march of "a vibrant and exciting relationship between our two great democracies, " to borrow Senator Lugar's pithy expression. As the new Chairman of the Senate Foreign Relations Committee, Senator Biden, affirmed in a recent interview, "My dream is that in 2020 the two closest nations in the world will be India and the United States. If that occurs, the world will be safer."

I am glad my "prediction" of two years go, on inevitability of the emergence of a solid and comprehensive US-India strategic partnership, which Indian ambassador to the United States, Ronen Sen, seven months later opined in an email to me, as "very perceptive, indeed prophetic," is  coming true.

I have no doubt that the expectations spelt out in this talk, will be substantially fulfilled and, as the century moves ahead, the US-India strategic partnership is destined to reach heights unparalleled, perhaps, never ever witnessed in world history.

Thank you.<!--QuoteEnd--><!--QuoteEEnd-->