FPI Analysis: Overcoming Obstacles to Accelerate the U.S.-India Strategic Partnership

June 11, 2012

As officials from the United States and India meet for a Strategic Dialogue this week in Washington, D.C., the Obama administration is continuing efforts to “rebalance” America’s foreign and defense policies more towards the Asia-Pacific.  Towards that end, the United States has publicly stated its desire to increase cooperation with India—the Asia-Pacific’s largest democracy—on a wide range of issues, including regional security, the rule of law, and economic trade.  Indeed, Secretary of Defense Leon Panetta stated during his visit to India last week that “for this relationship to truly provide security for this region and for the world, we need to deepen our defense and security cooperation.” 
 
The U.S.-India annual Strategic Dialogue—the third of its kind—provides an important opportunity to further strengthen Washington and New Delhi’s critical “long-term strategic partnership.”  Yet despite the Obama administration’s desire to expand U.S.-India ties, election-year politics and the inability of decisionmakers in both countries to implement needed legislative reforms are hindering progress on key bilateral issues.  In the near term, President Obama and Prime Minister Singh should therefore move forward on an achievable agenda to further enhance U.S.-India ties.  Specifically, the United States should seek to:

  • Work with India to bolster military-to-military cooperation by expanding and intensifying joint training opportunities, particularly in the area of maritime security, and by increasing the number of base visits for the U.S. Navy.
  • Encourage India to expand cooperation with existing U.S. allies and partners to promote Washington and New Dehli’s increasingly-aligned regional interests and values.
  • Consolidate counterterrorism efforts with India in order to communicate best practices and better coordinate against emerging threats.
  • Conclude negotiations for a Bilateral Investment Treaty (BIT), as part of a long-term strategy towards a U.S.-India free-trade agreement, to expand investment opportunities for businesses in both countries.
  •  
Security Cooperation

RECOMMENDATION:  Work with India to bolster military-to-military cooperation by expanding and intensifying joint training opportunities, particularly in the area of maritime security, and by increasing the number of base visits for the U.S. Navy.
 
Security cooperation stands increasingly at the forefront of the U.S.-Indian ties.  Under the June 2005 New Framework for the U.S.-India Defense Relationship, the two governments agreed to move over a ten-year period towards a strategic partnership based upon “common principles and shared national interests.”  Although the agreement did not elevate ties to a formal alliance status, the document outlined areas to expand and deepen military-to-military cooperation, with the aim of advancing issues of mutual concern.  Particular emphasis was placed on maritime security, counterterrorism, and humanitarian assistance.  Additionally, the agreement implemented annual defense dialogues, personnel exchanges, and non-binding commitments to increase sales of defense hardware.
 
As a result, the defense relationship has progressed dramatically since 2005.  India now holds more military-to-military exchanges with the United States than it does with any other nation.  Last year, the two nations held 50 cooperative defense events, including the expansive ten-day MALABAR naval exercise in the Bay of Bengal that included U.S. aircraft carriers, destroyers, nuclear submarines, and other advanced vessels.  These exchanges are yielding tangible, real-world results as military leaders now share expertise, intelligence, and high-tech equipment. 
 
As India’s economy continues to expand and mature, so too will its role in preserving and enhancing peace and security in the Asia-Pacific region.  India is embarking on a massive military modernization effort, and is expected to spend $80 billion in the coming years to refurbish and upgrade its aging military forces.  The Obama administration’s “rebalance” towards the Asia-Pacific further highlights India’s potential role in regional dynamics in the coming years.  As the Department of Defense’s 2012 strategic guidance noted: “The United States is also investing in a long term strategic partnership with India to support its ability to serve as a regional economic anchor and provider of security in the broader Indian Ocean region.”
 
Washington and New Delhi should further expand maritime cooperation, particularly to combat piracy and terrorism.  U.S. officials should also push New Delhi to allow more frequent visits of U.S. naval ships to Indian naval ports.  Although India currently has three naval bases—Mumbai, Vishakapatnam, and the newly opened base in Karwar—U.S. visits remain too few and far between.  More frequent visits would increase interaction and training opportunities between two of the world’s foremost maritime powers.  Additionally, India’s strategic location would greatly enhance U.S. naval operations across global shipping lanes in the Arabian Sea and Indian Ocean by reducing distances of forward deployed bases in Bahrain (U.S. Fifth Fleet) and Japan (U.S. Seventh Fleet).

Foreign Policy

RECOMMENDATION:  Encourage India to expand cooperation with existing U.S. allies and partners to promote Washington and New Delhi’s increasingly-aligned regional interests and values.
 
India’s diplomatic, economic, and military rise is potentially beneficial for Washington, as New Delhi’s foreign policy and regional interests are increasingly coinciding with those of the United States.  That said, there are issues—in particular, Iran’s troubling march to nuclear weapons-making capabilities—where the two countries can and should work to arrive at even greater consensus.
 
Afghanistan
 
In Afghanistan, the United States and India both seek a stable democratic government, the elimination of terrorist safe havens, and the defeat of the Taliban-led insurgency.  In October 2011, New Delhi signed a Strategic Partnership Agreement with Kabul, in which India agreed to help train Afghan National Security Forces, bolster economic aid (India has already spent $1 billion in foreign aid since 2002), and establish a strategic dialogue between their respective national security councils. 
 
However, Indian officials remain concerned about President Obama’s decision to remove “surge” forces from that country in 2012.  Moving forward, Washington and New Delhi should continue to cooperate in efforts to improve Kabul’s fragile democratic government.  As the United States draws down from Afghanistan, it should keep India’s strategic goals in mind, and further urge New Delhi to play a more active role.  Secretary Panetta recently stated: “I urge India's leaders to continue with additional support to Afghanistan through trade and investment, reconstruction and help for Afghan security forces.  We both realize how important it is to ultimately have a stable Afghanistan if we are to have peace and prosperity in this region.”
 
Stopping Iran’s Nuclear Program
 
Iran has been a source of tension between the United States and India.  New Delhi views Tehran as a pathway to Central Asia and Afghanistan, and a critical source of energy to fuel its growing economy.  However, India has made progress—however slow—in recent months to reduce its reliance on Iranian crude oil.  Indian Ambassador Nirupama Rao recently stated that “crude imports from Iran have a steadily declining share in India’s total oil imports,” falling from roughly 16 percent in 2008-2009 to roughly 10 percent in 2011-2012.  However, India will continue to import approximately 310,000 barrels per day of Iranian crude this year, a reduction of approximately 11 percent from last year.  The Obama administration should continue to push India for greater reductions, further contributing to isolation of the Iranian regime.
 
China and the Asia-Pacific
 
Both India and the United States hope that China’s rise will be peaceful, if not also democratic.  However, New Delhi views China’s assertive regional foreign policy and military capabilities as a growing threat to both its national and regional interests.  As Director of National Intelligence James Clapper told Congress in February 2012:  “Despite public statements intended to downplay tensions between India and China, we judge that India is increasingly concerned about China's posture along their disputed border and Beijing's perceived aggressive posture in the Indian Ocean and Asia-Pacific region.”
 
India is thus enhancing diplomatic relations not only with regional institutions—such as the Association of Southeast Asian Nations Regional Forum, the East Asia Summit—but also with key U.S. allies and partners in the Asia-Pacific.  In 2010, India and South Korea signed a five-year Memorandum of Understanding that will increase military exchanges and defense-related technology transfers.  In 2011, relations between India and Australia received a boost after Australian Prime Minister Julia Gillard announced a decision to reverse her country’s uranium ban to India, a major concession to New Delhi that signaled Australia’s desire to expand bilateral ties.  Shortly thereafter, the two nations held a high-level dialogue between Australian Defense Minister Stephen Smith and Indian Defense Minister A. K. Antony.  Moreover, the United States, India, and Japan held in December 2011 the first of a series of trilateral discussion in Washington designed to improve coordination and clarify common principles on maritime security issues.  This past weekend, India and Japan held their first-ever bilateral naval exercise off the coast of Tokyo.
 
The United States should continue to encourage India to expand diplomatic and military cooperation with key American allies and partners in the region, most notably Australia.  Last year, Canberra expressed a desire to begin a trilateral dialogue with Washington and New Delhi to discuss regional security matters.  India’s Ministry of External Affairs was quick to rebut the notion that a three-nation partnership was in the works, but this should not preclude the United States from encouraging India to continue engagement.  Enhanced cooperation among the United States, India, and Australia would greatly benefit U.S. regional interests.  Over time, this could formally lead to values-based cooperation through the creation of a four-nation dialogue among the United States, Australia, India, and Japan—the Asia-Pacific’s four leading democracies.  At the same time, the United States and India should jointly revisit President George W. Bush's concept of an Asia Pacific Democracy Partnership, first broached in 2007.
 
Human Rights
 
At the forefront of greater values-based cooperation between the United States and India should be Tibet.  Although Beijing has deemed control of Tibet to be a “core interest,” Washington and New Delhi should view the issue as a moral interest of both nations.  As Indian Ambassador Lalit Mansingh, a former Indian Foreign Secretary, recently remarked at an FPI event on Tibet’s future:  “After all, the Indo-U.S. strategic partnership is based on shared values and shared interests and I can see no other issue on which there is a coincidence of shared issues and shared interests as in the case of Tibet.”  As a result, Tibet must be a key aspect of this week’s  Strategic Dialogue in Washington.

Counterterrorism

RECOMMENDATION:  Consolidate counterterrorism efforts with India in order to communicate best practices and better coordinate against emerging threats.
 
The United States and India face the continued threat of violent extremism and international terrorism, as terrorist groups have orchestrated a string of highly visible attacks against India—and its interests abroad—in recent years. For example, Iranian nationals are believed to have orchestrated a February 2012 car bomb attack against an Israeli diplomat in New Delhi.  In addition, international terrorist groups, particularly those linked to Pakistan such as Lashkar-e-Taiba (LeT), pose grave risks to India and U.S. interests. 

In an effort to aid New Delhi’s counterterrorism efforts, the United States and India signed a Counterterrorism Cooperation Initiative in 2010 to increase government-to-government cooperation.  As a result, Washington is now sharing with New Delhi expertise and best practices for transit and rail security, forensics evidence, money laundering, and intelligence gathering.

However, counterterrorism coordination efforts between the United States and India continue to face serious challenges.  Washington’s initial refusal to share information regarding David Coleman Headley, arrested in 2009 for conspiring with the LeT to orchestrate attacks in India, underlines aspects of the relationship’s mistrust.  As Lisa Curtis of the Heritage Foundation notes:

“It took almost nine months before Indian authorities were given direct access to Headley. The U.S. failure to pursue arrest and prosecution of Pakistani intelligence officers named by Headley as being involved in the 2008 Mumbai attacks has also reinforced Indian beliefs that the U.S. will gloss over Pakistani involvement in attacks in India, so long as Pakistan continues to cooperate with the U.S. against groups that attack the American homeland.”

At a House Foreign Affairs Committee hearing in September 2011, Dr. Sahibzada Amer Latif outlined a myriad of bilateral working groups and U.S. government agencies—including Homeland Security, State, Treasury, and Defense—tasked with aiding joint counterterrorism efforts, but lacking strong overall coordination.  In turn, India—widely criticized for its response to the 2008 Mumbai attacks—has failed to implement key counterterrorism measures due to turf battles between state and federal government officials.
 
Washington should build upon the progress of the May 2011 U.S.-India Homeland Security Dialogue, and further assist New Delhi in implementing key counterterrorism reforms.  India continues to face challenges coordinating between agencies, state governments, and federal authorities.  Washington should advise New Delhi on best practices and protocols that have helped to streamline efforts in the United States.

Economy and Trade

RECOMMENDATION:  Conclude negotiations for a Bilateral Investment Treaty (BIT), as part of a long-term strategy towards a U.S.-India free-trade agreement, to expand investment opportunities for businesses in both countries.
 
Bilateral trade between the United States and India is expected to surpass $100 billion for the first time in 2012.  The United States has become India’s third largest economic partner, and in just ten years, U.S. exports to India have quadrupled to $19 billion. 
 
However, India’s once-vibrant economy is now showing signs of strain.  Recently released economic growth figures for the last fiscal year showed the economy grew at 6.5 percent, down from 8.4 percent the year prior—the lowest rate since 2002-2003.  Moreover, New Delhi’s coalition government failed to pass legislation in recent years to further liberalize India’s economy.  For example, the government shelved prospects in 2011 to open India’s multi-brand retail sector to foreign direct investment under pressure from coalition allies and opposition parties.  The cabinet-level decision—strongly supported by the U.S. business community—would have allowed 51% foreign direct investment into the retail sector by multinational companies such as Wal-Mart Stores and Tesco.
 
Government paralysis in the United States and India continues to inhibit closer economic ties.  Lawmakers in Congress correctly note that U.S. companies have yet to benefit from the landmark 2008 civilian nuclear cooperation agreement, as India’s current nuclear liability legislation—as passed in August 2010—fails to adequately cap damages to protect U.S. nuclear suppliers in the event of an accident.  Meanwhile, lawmakers in India object to Washington’s refusal—or inability—to reform export controls on high-technology transfers and immigration visas.  New Delhi is specifically concerned with increased levels of rejection and higher application fees for both H1B temporary work and L1 intracompany transfer visas.  The Obama administration should work with Congress to increase the number of visas and avoid shortsighted election year legislation that disproportionally targets Indian companies.  For example, in the run up to the 2010 midterm elections, Congress passed legislation—later signed into law by President Obama—that imposed a 200% fee on visas for Indian companies. 
 
The Obama administration has also showed itself to be an obstacle to greater economic ties.  In 2008, Washington and New Delhi first agreed, in principle, to negotiate a Bilateral Investment Treaty (BIT) under the Bush administration.  The BIT Treaty would provide a predictable investment environment for companies in both countries by expanding legal protections and rights for investors abroad.  But upon taking office, President Obama froze discussions in order to implement a three-year long review of the U.S. model bilateral investment treaty, despite the fact that the United States has already negotiated investment treaties with 48 other nations.
 
The Obama administration should make concluding negotiations for a BIT Treaty a priority; leading the way towards establishing a comprehensive free trade agreement.  Former U.S. Ambassador to India Tim Roemer wrote in the Washington Post this week that “the next big idea should be a fair-trade agreement, linking the world’s largest economy in 2012 with what is projected to be the world’s largest economy in 2050. A ‘new type’ of agreement might eventually promote democracy and social mobility throughout Asia and the world.”
 
Failure to do so would leave U.S. companies at a competitive disadvantage, as New Delhi is concluding trade agreements with U.S. global competitors in Europe and Japan.  As Indian Foreign Secretary Ranjan Mathai recently stated:  “The United States is the only advanced economy in the world with which India has not concluded or is pursuing a Comprehensive Economic Partnership Agreement.”

Conclusion

Ties between the United States-India have progressed dramatically over the past decade, as the two nations now cooperate on a wide range of regional, global, and economic issues.  Moving forward, the Obama administration has correctly noted that India will play a greater—and positive—role in the Asia-Pacific.  However, in order to achieve a more robust and cooperative partnership, leaders in Washington and New Delhi must continue to move this relationship forward.  India must address U.S. concerns regarding liability reforms related to the 2008 civilian nuclear agreement—a critical obstacle to further bilateral progress.  As leaders from both nations meet in Washington for the third annual Strategic Dialogue, the Obama administration should thus seek to expand cooperation not only in the long term, but also in the near term through achievable initiatives and strategic goals.

- Download a copy of this Analysis in PDF format

Mission Statement

The Foreign Policy Initiative seeks to promote an active U.S. foreign policy committed to robust support for democratic allies, human rights, a strong American military equipped to meet the challenges of the 21st century, and strengthening America’s global economic competitiveness.
Read More