Context:

India, US will discuss a wide array of issues spanning the regional to the bilateral during the first visit by Rex Tillerson to New Delhi as part of his week-long five-nation tour that would also take him to Saudi Arabia, Qatar and Switzerland.

Introduction:

  • US President Donald Trump surprised India last August with a major departure from America’s South Asia policy by asking Delhi to play a larger role in Afghanistan and demanding that Pakistan immediately shut down the terror sanctuaries on its soil.

India-U.S relations:

Economic dimensions:

  • India ranks just 130th on the World Bank’s annual survey on the ease of doing business. Yet Tillerson cited the growth of the two countries’ economic partnership, saying 600 American companies work there and that U.S. investment in the country has risen 500 percent in two years.
  • Bilateral trade will climb beyond the record $115 billion reached last year, noting that a U.S. shipment of crude oil arrived in India this month for the first time.
  • Citing India’s role as the world’s most populous democracy, Tillerson said the two nations “share a vision for the future.” He called for closer defense ties, referring to a range of hardware the U.S. is prepared to sell India

Trade relations:

  • The U.S. is India’s second largest trading partner, and India is its 11th largest trading partner.
  • In 2015, the US exported $ 21.5 billion worth of goods to India and imported $ 44.8 billion worth of Indian goods.
  • Major items imported from India include information services, textiles, machinery, gems, and diamonds, chemicals and iron and steel products, coffee etc.
  • Major items imported by India include aircraft, fertilizers, computer hardware, scrap metal and medical equipment.
  • The U.S. is also India’s largest investment partner, with a direct investment of $9 billion (accounting for 9 per cent of total foreign investment)

Civil Nuclear Partnership:

The bilateral civil nuclear cooperation agreement was finalized in July 2007 and signed in October 2008. During Prime Minister Modi’s visit to the US in September 2014, the two sides set up a Contact Group for advancing the full and timely implementation of the India-US Civil Nuclear Cooperation Agreement, and to resolve pending issues. The Group has held five meetings so far, and reached agreement on the compatibility of India’s nuclear liability law with relevant international conventions and creation of an insurance pool drawing experience of best practices to take care of nuclear liability risk. Currently, company-level discussions are on with two U.S. companies — M/s Westinghouse and GE Hitachi — regarding techno-commercial viability of their reactors in sites in Gujarat and Andhra Pradesh respectively.

The India-United States Civil Nuclear Agreement also referred to as the “123 Agreement” signed  in 2008 is a bilateral agreement for peaceful nuclear cooperation which governs civil nuclear trade between American and Indian firms to participate in each other’s civil nuclear energy sector.  For the agreement to be operational, nuclear vendors and operators must comply with India’s 2010 Nuclear Liability  Act which stipulates that nuclear suppliers, contractors and operators must bear financial responsibility in case of an accident.

Counter terrorism:

Cooperation in counter-terrorism has seen considerable progress with intelligence sharing, information exchange, operational cooperation, counter-terrorism technology and equipment. India-US Counter-Terrorism Cooperation Initiative was signed in 2010 to expand collaboration on counter-terrorism, information sharing and capacity building. A Homeland Security Dialogue was announced during President Obama’s visit to India in November 2010 to further deepen operational cooperation, counter-terrorism technology transfers and capacity building.

Energy and climate change:

The U.S.-India Energy Dialogue was launched in May 2005 to promote trade and investment in the energy sector, and held its last meeting in September 2015 in Washington DC. There are six working groups in oil & gas, coal, power and energy efficiency, new technologies & renewable energy, civil nuclear co-operation and sustainable development under the Energy Dialogue.

Recently, Indian Oil Corp. Ltd received its first crude oil shipment from the US on Monday, after Washington re-entered the export market last year, increasing competition in an already depressed oil market.

What is LEMOA?

Logistics Exchange Memorandum of Agreement (LEMOA) will ensure that both militaries can share logistical support, supplies, and services on a reimbursable basis, and provides a framework to govern them. This may include food, water, billeting, transportation, petroleum, oils, lubricants, clothing, medical services, spare parts and components, repair and maintenance services, training services, and other logistical items and services. It will also facilitate opportunities for “practical engagement and exchange”.

How does this agreement work?

For example, during a bilateral exercise with the US, the participant country’s unit requires fuel for its equipment.

  • The unit cannot make the purchase unless it can pay directly and immediately.
  • LEMOA agreement allows for the purchase by establishing a value for the purchase and the terms for payment, which could be replacement-in-kind or an equal-value exchange.

India-US Defence Relations

  • The declaration to implement the decision that was taken in principle when Prime Minister Modi visited Washington in June 2016 to designateIndia as a trusted, favoured defence partner. The defence partnership has been blossoming, growing and expanding over the last many years. In 2005 India-US framework agreement on civil nuclear cooperation was signed. This was renewed in 2015.
  • Recently India was designated as “a major defence partner”.This is a designation that the US provides to its NATO members, to its allies like Japan, Australia, New Zealand and South Korea. India will also be stepping into these ranges of countries.
  • There are large numbers of initiatives on defence cooperation and one of them isDefence Technology and Trade Initiative (DTTI). The idea is that the partnership between India and US should no longer be a transactional buyer seller relationship, but it should also have elements of progressive manufacturing of components in India.
  • Starting from the base level of zero in 2005 where there was no exchange,today US has become the second largest supplier of defence equipments to India with orders more than $15 billion.    
  • There is scope of making it trilateral by bringing in India-US-Japan or India-US-Australia. TheMalabar exercise is in good progress. There are talks about having bilateral exercises with Australia. India has more exercises with US than with any other country. Similarly US also have more exercises with India whether it is on land, on air, on water, mountainous terrain or desert terrain. This speaks about the level of confidence and the comfort level we have come to have with each other. There are so many indicators to prove that our relationship in defence and also in other areas like science, knowledge, culture is in bright spot for both the countries. There are talks about Counter terrorism where we see prospects of greater relations.
  • In 2016, India and United States signed the LEMOA

Significance of Present visit for India-U.S bilateral relations:

  • The visit set the course for India-U.S. relations going ahead, mapping convergences in connectivity, trade and economics and counter-terrorism cooperation.
  • Tillerson said America wants to be India’s most “reliable partner” in an increasingly uncertain world.
  • The U. S. put India at the very heart of America’s efforts to balance an increasingly assertive China.
  • Tillerson affirmed that India and America “are two bookends of stability on either side of the globe” with shared political values and converging economic interests.
  • The meeting will lead to more intensive regional collaboration between the US and Asian democracies- India, Japan and Australia — to ensure peace and promote prosperity in the Indo-Pacific.
  • In facing up to India’s concerns about Pakistan’s use of terror as an instrument of foreign policy and China’s quest for hegemony in the Indo-Pacific, Trump and Tillerson have raised hopes for a closer regional alignment between Delhi and Washington.
  • Tillerson sketched out a crucial role for India in maintaining in stability in the Asia Pacific region—along with partners like Japan and Australia besides the US. This was against the backdrop of the unpredictable rise of China.
  • Tillerson also pointedly criticised China, which he accused of challenging international norms needed for global stability.
  • “China’s provocative actions in the South China Sea directly challenge the international law and norms that the United State and India both stand for,” he pointed out.
  • Tillerson also called out China, saying that its rise as a global power had been carried out “less responsibly” than India’s and that the country’s leaders had undermined the “international, rules-based order.”
  • “India and the United States should be in the business of equipping other countries to defend their sovereignty, build greater connectivity, and have a louder voice in a regional architecture that promotes their interests and develops their economies,” Tillerson added.

Pakistan critical to regional stability:

U.S. South Asia policy has, mixed up it carrots and sticks in the Afganistan-Pakistan region:

  • As the U.S. forces resume drone strikes in the Af-Pakistan region, their big kill was Omar Khalid Khorasani, the leader of the Jamaat-ul-Ahrar, which targets Pakistan, not Afghanistan.
  • S. rejoined the Pakistan-led Quadrilateral Coordination Group along with Afghanistan and China that seeks to bring the Afghan Taliban to the table for talk, a group that’s carried out deadly attacks across Afghanistan last week.

U.S’s Iran strategy:

  • The U.S. will increase sanctions on Iran to ensure it can no longer “finance terror”, while refusing to certify its nuclear programme as required.
  • It will have three-fold effect:
  • Trade with Iran, which is already constrained by previous U.S. sanctions and diktats, will be very hard to enlarge. Presently, only a couple of Indian banks and almost no European banks can be used for non-oil trade. Indian oil imports from Iran also were decreasing, mainly due to American pressure.
  • Chabahar question:
  • If Iran is unable to conduct more trade, it will have less incentive to focus on the new Chabahar port over the pre-existing trade through Bandar Abbas.
  • This would impact India’s plans for connectivity to Afghanistan and Central Asia.
  • The U. S is also willing to overturn the Iran nuclear deal.

What are the challenges before India?

As Mr. Tillerson touches down in Delhi for his first visit to the region as Secretary of State, New Delhi must prepare for the challenges ahead with this wobbly compass in hand. Some of these challenges are given below:

  • Trade is one of the biggest road blocks where US wants reciprocation by increased India’s contribution
  • WTO agricultural issues and farms subsides issues.
  • Iintellectual Property rights and pharmaceutical industry issues.
  • The government has a multi-fold challenge before it, to address the issues like mapping convergences in connectivity, trade and economics and counter-terrorism cooperation.
  • One of the major challenge is keeping the focus on the India-U.S. bilateral relationship, which is largely more beneficial for India
  • However, this will be more complicated as Delhi hosts Afghan President Asharaf Ghani on the same day that Mr. Tillerson arrives and the talks could give the appearance of a trilateral.
  • Increasing dominance of China is also a major challenge for India.

Conclusion:

India should resist the temptation for an endless debate on whether America can move away from China and Pakistan and be India’s reliable partner. Delhi should focus, instead, on strengthening practical cooperation wherever possible with Trump’s Washington.

In the talks with Tillerson this week, Delhi must seek to stiffen America’s resolve to confront the Pakistan Army’s sponsorship of terror, encourage him to discard the residual bureaucratic hesitations in Washington about supporting India’s rise and delineate the pathways for constructing a stable balance of power system in the Indo-Pacific.

 

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