India-US: The Big Strategic Shift?

1 | P a g e India-US: The Big Strategic Shift? By Edelman India - Public Affairs

February 4th, 2015

India-US: The Big Strategic Shift?

Overview

The Republic Day visit of the President of the United States of America, Barack Obama, was significant in multiple ways. The symbolism of the coming together of the two largest democracies of the world was complemented by the efforts to re-energise and affirm the diversified bilateral strategic partnership. Internationally, the message has gone out on India and the US’s commitment to democratic freedoms, as well as on the two countries strengthening their mutual cooperation, for the promotion of trade, regional and global peace, and progress.

The summit seems to have rendered a “qualitative reinvigoration” of India-US ties and paved the path for the deepening of their strategic partnership. Some of the areas that have been discussed during the Presidential visit are civil nuclear, defence, security, energy and economic as evident from the Joint Statement, the Joint Strategic Vision Statement on Asia Pacific and the Indian Ocean Region, and the Delhi Declaration of Friendship issued by both governments.

While it has been argued that the progress in relations with the US was one of the previous government’s achievements, it has also been said that the relationship was slumbering. President Obama had visited India early in his tenure and was upbeat when he talked about India and the US developing “a defining partnership for the 21st century” but there had been little to show for it since. The ambiguities of India’s Nuclear Liability Act, the stonewalling of proposals for closer ties, the retroactive tax policy announcements and the economic slowdown in India, coupled with Mr. Obama’s other growing preoccupations, both domestic and foreign, meant that the partnership was languishing in the last few years. The strategic shift seen between the two countries in the eight months of the new government has been “historic”. The real challenge for the two nations was the expansion of the scope of the relationship, deepening strategic and economic cooperation and setting newer and bigger goals for the relationship,

which analysts believe has been addressed by this visit.

The three-day visit of the President has received prominent attention in both countries and the international media. It has been said that this might be the moment when India and the US may find the necessary political will to turn opportunities that have been at hand for years into tangible agreements. The challenge in transforming the opportunities has been their implementation. The ‘India-U.S. Delhi Declaration of Friendship’ has been proclaimed to be a watershed for the ties between the two countries. With Prime Minister Modi’s readiness to move forward and negotiate a solution on differences, it is being expected that the India-US ties will not be allowed to drift again and will succeed in achieving desired outcomes.

Key Takeaways from the visit

Impasse over the civil nuclear deal has been

broken and understanding developed between India and US for operationalisation

Renewal of the defence framework agreement for the next ten years as well as operationalise Defense Technology and Trade Initiative

On clean energy, the US has agreed to share

experience on innovative financing mechanisms as well as cutting edge technologies

President Obama and PM Modi have agreed to cooperate on combating terrorism

The two governments issued a joint strategic

vision for Asia Pacific and Indian Ocean which is being seen as an eventual amalgamation of India's Act East and US's Asia pivot

The India-US Declaration of Friendship strengthens the relationship between India and the US and envisages regular summit meets


Highlights of the Summit

The visit has injected confidence in India-US ties, which was also expressed by Prime Minister Modi and President Obama in their joint statement. At the heart of this partnership is the bilateral collaboration, which is likely to increase opportunities for investment, improve trade and investment, and lead to the creation of jobs and prosperity in both economies. In this regard, the Leaders agreed to continue to strengthen their broad-based partnership for development through stronger trade, technology, manufacturing, and investment linkages between the two countries and tri -partite cooperation with partner countries, and continued efforts to make linkages more durable. Some of the highlights from the visit are set out below India-US Nuclear deal For the past few years the lack of progress on the operationalisation of the Indo-US Civil Nuclear Agreement had been a major obstacle in the efforts to strengthen bilateral ties between the two countries. The issue, described by PM Modi as the “centre piece of the transformed relationship”, dominated the discussions at the recent Summit and substantial progress on it seems to have been made. Prime Minister Modi said that “we are moving towards commercial co-operation, consistent with our international obligations” and the joint statement “welcomed the understanding reached”. The core issue of the logjam was the liability, if any, of the suppliers in the event of a nuclear accident. Another contentious issue was the US insistence on “tracking” the materials and equipment supplied by them so as to ensure that they are not misused. Although it is being claimed that an understanding has been reached, details are yet to be made public. The US seems to have softened on its insistence on amending the liability law and has shown willingness to proceed to work out the necessary administrative arrangements for operationalising the deal. It is still to be seen whether these agreements and efforts lead. Experts believe the best result would be when a contract is actually negotiated between a US supplier

and an Indian operator. As of now, the position in this regard is not clear.

Clean Energy Clean energy cooperation is being seen as the new big idea in US-India relations. Since 2009, clean energy collaborations have mobilised more than $2 billion in financing. When PM Modi visited Washington last September, the only big announcement was a $1 billion memorandum between the US Exim Bank and the Indian Renewable Energy Development Agency (IREDA) for clean energy. The recent summit has gone even further with the announcement of $4 billion in financing, which includes $2 billion in US Trade and Development Agency support, and $1 billion from the Overseas Private Investment Corporation, dedicated to clean energy. The US has expressed its support to broaden the areas for undertaking research in clean energy, addressing urban air quality, expanding policy dialogues and technical work on clean energy and low greenhouse gas emissions technologies, undertaking demonstration and pilot clean energy projects. President Obama has also expressed interest in participating in India’s ambitious 100 GW solar energy programme.


Climate Change On climate change, the two leaders stressed the importance of enhancing bilateral cooperation on adaptation measures, as well as joint R&D and technology innovation, adoption and diffusion for clean energy and efficiency solutions that will help achieve the goals of transitioning to a climate resilient and low carbon economy. The President and the Prime Minister reaffirmed their prior understanding from September 2014 concerning the phasing out of HFCs and agreed to cooperate on making concrete progress on the Montreal Protocol this year. On emissions, it is being said that India’s hesitancy to accept a peak year along the lines of the US-China agreement prevented both leaders arriving at an agreement. An agreement on emissions could have injected the momentum required for India and the US to cooperate at the global conference on climate change in Paris. Defence The two countries renewed the 10-year framework for the U.S.-India Defence Relationship, which will expand maritime cooperation and upgrade the bilateral naval exercise. The two leaders emphasised the need for the two-way defence engagement to include technology cooperation and collaboration, and co-production and co-development, which is likely to be furthered under the Defence Technology and Trade Initiative (DTTI). The announcement of joint projects, including the co-production of unmanned aerial vehicles (UAVs) and specialised equipment for military transport aircraft are being said to be substantive steps towards defence partnership. The establishment of a hotline between the two leaders and their national security advisers are also being seen as indicator of the two countries taking ties to a deeper, strategic level. While the defence deal between the two countries has received appreciative headlines, celebrations might be premature. The terms of the defence framework have not yet been released. In 2005, the agreement on defence collaboration had received similar headlines, but it didn’t see much progress. Further negotiations are expected for a robust implementation of plans and strategic cooperation in technology exchange.

Bilateral Trade While the Obama administration’s goal is to increase bilateral trade to $500 billion a year from about $100 billion, the India-US relationship has been dotted by trade disputes in the recent past. The joint statement has sought to address the issue and the two countries have agreed to work together at WTO and in other forums. The two sides have committed to continuing to cooperate on the finalisation of the Post-Bali Work Programme in the spirit of the Doha mandate. The Trade Policy Forum is likely to pave the way towards resolving commercial impediments in both markets, which will enable better bilateral trade in goods, and promoting investment and manufacturing. Further, India and the US have agreed to work closely on issues such as labour standards and also to pursue increased bilateral investment flows. The much talked about bilateral investment treaty is still being assessed and discussions at official level will take place to judge its prospects.

Intellectual Property Rights

Recognising the progress made on Intellectual

Property under the last round of the India-U.S. Trade

Policy Forum held in November, 2014, the Leaders are

looking forward to enhancing engagement on Intellectual Property Rights (IPR) in 2015 under the

High Level Working Group. The discussions are likely

to broadly cover areas such as copyright, traditional

medicine, trademarks, patents and access to


healthcare. The two leaders have affirmed their interest

in sharing information and best practices on IPR

issues, and their commitment to stakeholder

consultations on policy matters concerning intellectual

property protection.

Counter-terrorism and Security

The two sides advanced their counterterrorism

dialogue and recommitted to cooperating against

groups such as the Lashkar-e-Taiba (LeT), Jaish-e-

Mohammad, D Company and the Haqqani Network.

Efforts towards this will continue through the Homeland

Security Dialogue as well as the next round of the U.S.-

India Joint Working Group on Counter Terrorism. The two countries have proclaimed a ‘zero tolerance’

approach towards transnational terror outfits, and

called for eliminating terrorist safe havens and

infrastructure. They are likely to co-operate on

developing counterterrorism best practices, disrupting

terrorist networks and their financing, and stopping

cross-border movement of terrorists.

China One of the undercurrents of the visit was the China

factor. Delhi’s closeness to President Obama was

being seen as a function of its strategic distance from

Beijing. Some of the apprehensions have been

dispelled by the visit of External Affairs Minister Ms.

Sushma Swaraj to Beijing and the Prime Minister’s

affirmation of a forthcoming visit to the country.

The progress on India-U.S. defence and strategic ties has also been viewed as a response to the military and

economic rise of China. The Joint Statement’s call for

freedom of navigation and overflight, especially in the

South China Sea, has also been seen as a veiled

reference to Chinese assertiveness in the region.

China’s adventurism at the border seems to be a major

concern with the Prime Minister and co-operation with

the US is being seen as a strong deterrent to China.

Women’s rights and religious tolerance

President Obama noted the importance of women’s

rights during his parting speech to students and also

during the ‘Mann ki Baat’ radio programme with Prime

Minister Modi. He stressed the importance of women

empowerment, equality in opportunity and that “nations

are more successful when their women are

successful”. His parting speech also referred to

religious freedom and tolerance, where he said that “India will succeed so long as it is not splintered along

the lines of religious faith”. These sentences have been

seen as cautionary by both the mainstream and social

media.

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India-US: The Big Strategic Shift?