FPI Bulletin: Modi’s Visit and the Future of U.S.-India Relations

June 9, 2016

Indian Prime Minister Narenda Modi’s visit in Washington this week marks another step forward in the growing strategic and economic ties between India and the United States. For the past two decades, leaders from the political right and left in both countries have established a flourishing partnership, one rooted in their shared democratic identities and security interests. This progress is all the more remarkable because of the legacy of India’s non-aligned foreign policy during the Cold War. If America and India fully realize the promise of their shared vision, then the future of security and prosperity in the Asia-Pacific region will be much stronger.

Growing Economic, Security Ties

In recent years, economic and security ties between India and the United States have dramatically deepened. As Nisha Desai Biswal, the Assistant Secretary of State for South and Central Asian Affairs, recently reported to Congress, bilateral trade in goods and services has grown from $60 billion in 2009 to over $107 billion in 2015. U.S. exports to India increased by nearly 50 percent over the same period. Also, Indian foreign direct investment (FDI) in the United States nearly tripled between 2009 and 2014—making it the fourth-fastest growing source of FDI into the United States—and U.S. FDI in India increased by nearly 30 percent over the same period. Overall, India is America’s 10th-largest trading partner, with more than $65 billion traded in goods.

The military relationship between America and India is also developing. Biswal reports that India now conducts more military exercises with the United States than with any of the other 23 countries that it holds bilateral exercises with, and these are becoming increasingly complex. Likewise, the United States has become one of India’s top defense suppliers, now totaling as much as $14 billion in sales. This includes C-130 and C-17 transport planes, Poseidon (P-8) maritime reconnaissance aircraft, and Apache attack and Chinook heavy-lift helicopters. The United States and India have also agreed in principle to a deal that would allow their armed forces to use each other’s bases for replenishment and repair. As Biswal noted, “These deals not only increase interoperability between our armed forces, they also help buttress the growing economic ties through partnership and cooperation between our nations.” On Tuesday, President Obama designated India a Major Defense Partner, which will allow India license-free access to a wide range of dual-use technologies.

President Obama and Prime Minister Modi also succeeded in moving forward on one of the most contentious aspects of the Washington-New Delhi relationship: the sale of nuclear reactors and fuel to India. Even though the United States and India approved a landmark nuclear cooperation agreement in 2008, it was never fully implemented because U.S. companies feared that they would be held fully liable in the event of a disaster. But in the President’s January 2015 visit to India, Obama and Modi declared “a breakthrough understanding on two issues that were holding up our ability to advance our civil nuclear cooperation,” and yesterday that achievement was fulfilled when the United States announced that work would begin on six Indian nuclear reactors to be built by the U.S. company Westinghouse.

A Shared Vision for Security

Expanded U.S.-India relations can have a decisive influence on the security environment of the Asia-Pacific region. Former U.S. Secretary of Defense Leon Panetta called defense cooperation with India a “linchpin” of the administration’s Asia Rebalance policy. Likewise, current Secretary of Defense Ashton Carter hopes the U.S.-India defense relationship will become “an anchor of global security.”

This vision is shared by the two countries’ leaders. During President Obama’s visit to New Delhi last year, the United States and India released their Joint Strategic Vision for the Asia Pacific and Indian Ocean Region, which stated their belief that “a closer partnership between the United States and India is indispensable to promoting peace, prosperity and stability in those regions.” During his address to a joint meeting of Congress on Wednesday, Prime Minister Modi expanded on this message. “A strong India-U.S. partnership … can also help ensure security of the sea lanes of commerce and freedom of navigation on seas,” he said.

Although Modi’s words may seem measured or even anodyne, they are actually revolutionary for an Indian Prime Minister. As Ashley Tellis of the Carnegie Endowment for International Peace notes, India’s non-aligned foreign policy throughout the Cold War was designed to protect the country’s young democracy and development from the U.S.-Soviet global competition. In the 1990s, India pursued strategic partnerships with as many as 30 countries to help bolster its power and accelerate its rise. Now, Modi has decided that his country should aspire to become a “leading power” in international affairs, not just a balancing power. The Prime Minister’s “daring decision to collaborate wholeheartedly” with America, Tellis says, demonstrates his recognition that “the United States holds the most important keys for India’s long-term success outside of its own domestic policies.”

Next Steps for the Partnership

It is vital that the next President continue the efforts that the Obama and Bush administrations have made in bolstering India’s role in Asian and international affairs. Although the key task of making the country a great power—fully transforming India into a market-oriented economy—is solely New Delhi’s, and India’s history and domestic politics will likely prevent the country from becoming a formal U.S. ally, the United States can and should continue to support India’s economic and strategic growth.

As a first step, the United States should formally endorse Indian membership in the Asia-Pacific Economic Cooperation (APEC) forum. The 21-nation group is the world’s largest trading bloc, accounting for some 44 percent of global trade. Although India initially applied for membership in 1991, its bid was rejected and new members were not allowed to join as recently as 2010. As Alyssa Ayres of the Council on Foreign Relations notes, “APEC is not a binding negotiating forum, but rather a norm-setting organization with a commitment to transparency and continued work to further open trade goals. India would benefit from inclusion in ongoing consultation with Asia-Pacific peers on how the economic region can further trade.” Sadanand Dhume of the American Enterprise Institute recently told Congress that supporting Indian membership in APEC is a “low risk gambit for the United States and carries potentially large rewards,” including more fully integrating the country into the global economy, and preparing the way for membership in the Trans-Pacific Partnership.

America should also redouble its efforts to secure a high-standard bilateral investment treaty with India. As Biswal said, doing so “would send an important signal to U.S. investors that India is not only open for business, but also open to liberalizing its trade and investment practices.”

An important opportunity to forge deeper strategic ties with New Delhi will likely come later this month when the United Nations’ Permanent Court of Arbitration issues its ruling on Beijing’s actions in the South China Sea, including the 2012 seizure of the Scarborough Shoal and its expansion of islands in the waters to host major Chinese military facilities. As the Wall Street Journal editorial board recently noted, the panel “will rule on what maritime rights derive from certain shoals, artificial islands and other land features, no matter their owner.” It is expected to confirm that “even if Beijing owns the tiny spits of land and rock it claims, it still isn’t entitled to control all the surrounding waters.”

If this is indeed the tenor of the court’s decision, then China will no doubt react angrily. In keeping with the 2015 U.S.-India Joint Strategic Vision, Washington and New Delhi should urge Beijing to accept the panel’s decision, and resolve the territorial dispute peacefully. In so doing, the two countries would be taking an important step towards cooperatively upholding peace and security in East Asia. At the heart of the matter, the Journal says, is a simple question: “Are we going to live in a rules-based world—and is the U.S. prepared to enforce the rules when they’re flouted?”

Conclusion

The deepening U.S.-India strategic and economic ties over the past two decades is a commendable bipartisan accomplishment and an important foundation for further growth. As the oldest and largest democracies, the United States and India have an interest in upholding their shared values in the face of common security challenges. Washington and New Delhi have taken vital steps in recent years toward ensuring that their partnership can serve as a pillar of peace and prosperity in the Pacific region. The two countries’ leaders should ensure that this progress only continues.

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.
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