Due to a dodgy rudder, commercial ties between the two continue to snake their way erratically across the geo-political seas. The Asia-Pacific Economic Cooperation forum could help bring them back on track
Almost four months into the second Obama Administration, what can be said about the prognosis for the US-India strategic relationship for the next few yearsIJ As policy makers in both countries search for its guiding motifs beyond the high-level rationales of common values and shared interests, it has become the settled view that the search for the next US-India cause célèbre, or the next big thing, is unnecessary.
‘Routinisation’ is the word of currency, rather than ambition. What is perceived as the sheer difficulty of major initiatives on India has created an environment where, for the American bureaucracy, small steps are preferred to large ones. Also, communication between mid-levels of the bureaucracies in Washington and New Delhi remains sketchy — and sometimes contentious. Instead of a modus operandi, the US-India strategic relationship has settled at a modus vivendi. Without consistent mid-level communication, this is a relationship with a destination but a dodgy rudder that continues to snake its way erratically across the geo-political seas.
For instance, while the US and India grow closer on the ‘strategic’ front, there is an ironic divergence in how they view each other on the trade front. What should be two sides of the same coin are essentially functioning in parallel, not tandem.
Disagreements about bilateral trade issues, such as the sale of pet food and milk products to India and frequent head-butting at the WTO have bred a legion of US trade officials who view India not as an ally, but a pseudo-adversary. While some disagreements about trade are to be expected between even the closest partners, the points of contention between India and the US come from gut-level differences that are harder to resolve.
Yet, any slump in India’s economic performance, as currently is the case, has clear ramifications in the US. Despite the differences, the US is India’s top trading partner in both goods and services. In its Global Trends 2030 study of 2012, the National Intelligence Council suggested that India will be the world’s largest driver of middle class growth by 2030. Conversely, if things don’t go right, India could be the biggest contributor to a global middle class slump by 2030.
So, what if there was a US-India initiative which satisfied all these compulsions at once — one that could contribute to raising India’s GDP growth, boosting US exports to India, boosting India’s overall exports and also speak directly to the Obama Administration’s ‘Asian rebalance’, without being implicated of putting India in the ‘US camp’IJ There is. The US could support India to become a member of the Asia-Pacific Economic Cooperation.
The 21 APEC countries account for about 44 per cent of global trade, and have a per capita income of around $31,000. APEC membership for India would thus permit easier access to a large and rich potential market, including latin America. Indian businesses would be able to directly interact with 30 major APEC working groups, in order to boost India’s economic participation in the Asia-Pacific.
APEC membership is also a pre-requisite for membership to the huge Trans-Pacific Partnership free trade agreement. While an FTA with the US remains a remote prospect, India could eventually be a part of a free trade multilateral that includes the US, creating a theatre where India’s ‘look East’ meets the US ‘Asian rebalance’.
If India is interested in joining APEC — and it has reportedly signalled that it is ready — then it must realise that not only is US support essential, it is also a major roadblock for India’s membership. This process, which will be largely run by the office of the US Trade Representative, will by default work on different imperatives than the overarching strategic themes.
In the transactional paradigm that underwrites trade discussions, for the US, support for APEC membership is a huge carrot to offer India. It will probably not be had without some measurable reciprocity. For India, the age of relying on US largesse with major policy initiatives is over.
At the transactional level, there isn’t a lot of sentiment to do India any favours. If India wants US support to get into APEC, it has to go get it by putting something on the table — acceptable to its own constituencies — that the USTR will be interested in as a policy-win.
The process of the US enabling India’s membership in APEC is thus a two-way street. The US has to decide if it wants its India-trade relationship to be defined by the ability to sell pet food. India must decide if it wants its US trade relationship to be defined by the ability to resist American milk products.
If Purina versus Amul is the title fight, then the trade relationship’s contribution to the overall strategic relationship would be akin to that of American showman and scam artist PT Barnum to reality. On the other hand, a US move to support India’s membership of APEC, a process in which India could help itself, would show ambition in the broader strategic relationship. and help it move from a modus vivendi to a modus operandi.