FOR IMMEDIATE RELEASE
29 JANUARY, 2014
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29 JANUARY, 2014
1. It is a great pleasure to be back at the Carnegie Endowment, as indeed
in Washington itself. I was last here more than six years ago, speaking
at this very institution as our nuclear agreement was nearing
conclusion. Since then, I have watched the India-U.S. relationship
evolve with great interest and some sense of ownership. The size of the
briefing books they gave me as I was preparing to come to Washington
led me to believe that we have a good story to tell. Sentiment, as they
say in the markets, however, seems less positive than I would have
hoped, for a variety of reasons. What is clear is that there is much
work to be done.
2.
Looking back at the growth of Indo-U.S. relations in the last decade
and a half, it is as if we were fated to come together. Now, that has
not always been our history. If we closely examine the three key drivers
of our ties today, the reality is that each one has a specific context.
First & foremost is our geo-strategic and political convergence,
something that could only manifest itself after the Cold War. The
second is our intersecting economic interests. These are the consequence
of higher Indian economic growth rates as well as the broader rise of
Asia. The third is a mix of our shared values and societal contacts.
These reflect the expanding Indian-American community and the growing
middle class in India. Each one of these factors evolved over a period
of time. But their coming together created the basis for the current
phase of our ties. It is not as if all of this happened on its own. On
the contrary, the new level of our relationship was animated by
strategic vision in both nations. Prime Minister Manmohan Singh only
recently singled out the coming together of the two countries, in the
form of the civilian nuclear agreement, as the best moment of his whole
tenure. This vision became reality due to the commitment and diligence
on the part of many - on both sides. I stress this to drive home the
point that our ties can neither afford dilution of attention nor
weakening of faith.
3.
So, where are our relations today? Politically, there is no question
that our comfort levels are higher than they have ever been before.
From the highest levels of the Government to the legislature and
bureaucracy, we see a frequency, intensity and candor of contacts that
speak for themselves. Our dialogues have moved well beyond orthodox
stocktaking of bilateral issues and an exchange of views on global ones.
We are now talking defense cooperation, counter-terrorism and homeland
security with as much ease as we are energy, education or health. That
we discuss East Asia regularly reflects our confidence levels as much as
our doing trilateral dialogues with Japan and with Afghanistan.
Expanding such conversations to cover the Indian Ocean region is the
next step in this direction. Our economic interactions have similarly
undergone a transformation. A greater sectoral focus and engagement on
specific policies and regulations underline that this is for real.
Where civil society is concerned, the physical flow of people has been
magnified by virtual communications. There is truly cause for
satisfaction about the level our ties have reached.
4.
Why then is there a problem of sentiment? The fact is that to a
considerable degree, we are victims of our own success. The India-US
relationship arrived - some would say, at last - and by doing so, ended
the romance of the phase of courtship. The change is visible in the less
integrated approach we take, leaving each department or agency to
handle its counterpart. That no longer allows the luxury of cutting some
slack on an account that matters, expecting to make up elsewhere. The
willingness to take risks also decreases as there is no longer a great
cause to pursue. And grand strategy, once achieved, quickly changes from
rocket science to a no-brainer! As we settle into the partnership, it
takes a different mindset to address the less exciting chores of
maintenance, upkeep and progress. The danger here is that individual
problems that may well have been dismissed in the earlier era can now
dominate the narrative.
5.
This explanation, however, does not suffice in itself. There is also
the reality, often glossed over when it comes to our ties, that the
world situation changed profoundly even as the relationship was in the
making. I refer here to the 2008 financial crisis and its aftermath.
This had a particularly sharp impact on American priorities, and with
some time lag, on India as well. Conversations changed from grand
strategy and geo-politics to more mundane issues of market access and
investment conditions. Economic concerns assumed centre stage and every
business dispute acquired a greater resonance. As it was bound to
happen, this also created fertile ground for sometimes exaggerating the
nature of problems and their implications. The big change that I see
returning to this account is the salience of tax disputes, localization
and IP concerns on the US end and immigration reform, market access,
protectionism and totalization on the Indian one.
6.
I am also aware that there is considerable disappointment that our
nuclear understanding has not translated into substantial business for
US companies so far. The debate, as many of you know, revolves around
our civil nuclear liability law and its implications. There are
discussions underway on how this issue can be addressed to the
satisfaction of suppliers and recipient alike, taking into account the
Indian legal and regulatory framework as well as the international
convention. The nuclear initiative has surmounted past challenges and
speaking from experience, it must be approached with a positive
spirit. Let me make another point in this context that is often
overlooked. I recall our Prime Minister telling Secretary Kerry - then a
U.S. Senator - that our nuclear differences were a thorn stuck in the
throat of our relationship. By reaching an understanding, the way was
cleared for a much warmer relationship between us. To my mind, the
indirect benefits flowing from the Indo-U.S. civil nuclear agreement far
outweigh the direct ones.
7.
Another issue that dampened sentiment somewhat was our not choosing an
American supplier for our medium multi-role combat aircraft. As someone
involved in the initial phase of that exercise, let me testify to the
process difficulties at the US end and the challenge of creating a
template for a country like India. There was also a sense of entitlement
on the American side, which the last time I checked, is the prerogative
of the customer. Subsequent events have disproven the political
inferences that many drew from that episode. The Indian Air Force is
today second only to the USAF in its fleet of C17 Globemaster heavy lift
aircraft. The Indian Navy introduced the P8 Poseidon maritime
surveillance aircraft at the same time as did the US Navy. We have just
cleared an additional order of C130J Super Hercules aircraft. Unlike
many other recipients of American military hardware, India actually pays
for these acquisitions. Nor does India ever given cause for technology
protection concerns. It is also encouraging that an India-specific
acquisition and co-production template is now under development in the
Pentagon. The rest of the defense relationship is doing well too. The
United States is the country with which our Armed Forces conduct the
maximum number of exercises. These, I might add, have been growing in
complexity. This year, India would be a full participant in the RIMPAC
exercises for the first time, deploying naval assets in that regard. .
Our policy dialogues and military exchanges have also grown in their
frequency and comfort level.
8.
Geo-strategic convergence is still the core of our relationship even
if it is more circumspectly expressed in day-to-day diplomacy. Looking
across the global expanse, our concerns overlap to a large extent as do
sources of our threat. As a result, our national security structures
are engaged in the broadest possible sense. Even as the U.S. recovers
economically and strategically, the case for working with India has only
gotten stronger. There is a broad consensus in this town that any
future security strategy has to be more partnership based. To our West,
there are uncertainties arising out of the 2014 draw-down scenario from
Afghanistan and its consequences. To our East, maritime claims and
disputes have heightened tension in the Indo-Pacific region. Overall,
Asia has become politically more volatile, yet economically more
central. How India's 'Look East' policy meets the United States'
rebalancing will have a significance beyond our individual interests. In
addressing that and other pressing challenges, we would serve each
other's interests best by being ourselves. After all, India and the
United States do have a common commitment to a peaceful, pluralistic and
progressive world. And no one should dispute that, as a liberal
democratic society, India's rise poses no challenge to American values.
9.
In the nearer term, our diplomats and strategists are naturally
confronted with a myriad of issues of international politics. We seem
to agree on many of these issues but differ on some. That should not be
surprising as our broad political and security goals are not
in contradiction. At the same time, we must also acknowledge that our
experiences, understanding and interests are not identical. Differences
can, of course, be played up by a constituency pushing a particular
cause. There is also the temptation to be transactional under pressure.
On issues of economic development, we cannot ignore the plain truth
that we have very different situations at home. This makes us often sit
on opposite sides of the table. It is important to understand that
negotiations on some of the more difficult issues are independent of our
bilateral ties. At the end of the day, our overall relationship is
larger than the individual problems we examine and debate. Having said
that, it is also important that we resist calls to return to arguments
of the past. The current phase of our ties came about precisely because
there was a more acute understanding of the growing weight and
potential of India by the United States. That must continue if we are
to forge ahead.
10. Our
economic cooperation is based on a counterpart of this broad vision.
This has allowed the relationship to foster an exchange of goods,
capital and services and build new constituencies of support. Trade has
quadrupled to $100 billion in the last seven years. Investments have
crossed the $ 50 billion mark. While putting behind us the famous
description of economic cooperation being as flat as a chapati, we
do have to contend today with the compulsions of the post-2008 era. As
a result, we are now entering a period that established partners of the
U.S. are more familiar with but which is still a novel experience for
us Indians.
11.
Let me make four big points here. One, we do recognize that the
slowdown in India is not just the result of the global crisis. Reviving
growth through increasing investment is our foremost priority. An
empowered committee has cleared 286 stalled infrastructure projects
worth $ 97 billion last year. Our government's fiscal deficit, a serious
source of concern, has also been brought down sharply. An improvement
in the economic mood back home will surely lift our bilateral
interactions. Two, India is concerned about its reputation, and we mean
to act to show that we are open to international business. That is
evident from the recent announcement of "Safe Harbor" rules, the
clarification of transfer pricing regulations, efforts at limiting the
impact of the 'Preferential Market Access' policy for IT and
telecommunications on the private sector, and maintaining the 100% FDI
limit on brown field pharmaceutical acquisitions. An important mechanism
to discuss and resolve tax disputes has been reactivated and will be
meeting in Washington next fortnight. And discussions on the Bilateral
Investment Treaty are also set to resume very shortly. Three, we could
continue a public argument on trade and investment issues - both sides
have their own narrative of woes - or move to a more constructive, if
less public, dialogue. In my early contacts with the Administration, I
have made clear our preference is for the latter. But if presented with
the former, I fear that as naturally argumentative people, we could be
well be tempted to respond in kind. Four, on some issues, we need to
find an acceptable compromise because the fact is that we are coming at
it from different places. The pharmaceutical business is a good example
and triangulating affordability, profits, and respect for intellectual
property is a challenge that merits more consideration.
12.
Since the economy is now so central to our ties, I would also like to
make it very clear that India's interests warrant supporting an early
American recovery. Not enough credit has been given to the investments
that Indian companies have made here since 2008. A recent study of 68
Indian companies revealed that their collective investments in the US
exceed $ 17 billion. One third of them are actively engaged in R&D
here, spending about $ 350 million in that respect. Similarly, the
Indian aircraft orders that I spoke about earlier alone support 40,000
jobs in the defense industry. A fair dialogue should also take into
account Indian priorities and concerns. Here, the bottom line is that
the costs of doing business in the United States are systematically
under pressure from competitors. A worrying sign is the tendency by some
to demonize the business climate in India. This tactic could well end
up being counterproductive.
13.
You could reasonably ask what I would say about our ties to an Indian
audience. To them, I would make two basic points. One, that to realize
India's four key priorities - energizing the economy, raising our
technology and management capabilities, securing the homeland, and
ensuring a favorable balance of power - the United States is the
indispensable partner. Two, these big Indian goals are not at odds with
the interests of the US. In fact, these could even be complementary.
14.
Relationship building is never without challenges. Some of it is
structural; the rest emanates from our different histories. The U.S.
has to overcome its inclination to view ties through the lens of
alliance practices. Indians perhaps have to indulge themselves less in
compulsive ambiguity. Ironically, American complaints on that score
usually come when it too is considering hedging. Building ties requires
a degree of give and take that can test officialdoms. Appreciating each
other's interests can be more difficult than we generally assume. And
contrary to what many seem to believe here, domestic politics is not
just the prerogative of the United States.
15.
In going about my task as Ambassador, I draw support from the vast
goodwill that now characterizes the attitudes of our societies to the
other. The grand strategy underwriting our ties is fundamentally sound.
It needs maintenance and from time to time, an upgrade. That puts the
emphasis on detailing and problem solving.
16.
For those of us who have devoted time and energy to building Indo-U.S.
ties, the last few weeks have been truly distressing. What I have
encountered since my arrival is the sense that this situation should
never have happened. But since it did, we will now have to work through
this problem. That is part of the conversations underway. But what
the issue does highlight is the need for greater sensitivity, for better
understanding and for stronger oversight of our ties. I rest my case on
that note.
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