A Crucial Six Months for India-U.S. Ties

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Context: This article highlights the recent appointment of Eric Garcetti as the U.S. Ambassador to India after a gap of two years and the planned visits of the Indian Prime Minister to the U.S. and the U.S. President to India for the G20 summit later this year. It also mentions the importance of increased engagement between the two countries on forums such as the G20, Quad, and I2U2 in the era of changing geopolitics.

A Crucial Six Months for India-U.S. Ties Background

Evolution of India-US Relations:

The relationship between India and the United States has evolved significantly over the years.

During the Cold War, India pursued a non-aligned foreign policy and maintained a distance from both the US and the Soviet Union.
However, in the early 1990s, India began to open up its markets to foreign investment, including from the US, and undertook significant economic reforms. This led to a gradual improvement in relations between the two countries.
The two countries have also increased their defence ties, with the US becoming India’s second-largest arms supplier after Russia.
In recent years, India’s growing strategic importance as a counterweight to China has led to closer ties with the US, particularly in the security and defence domains.
The US and India have also cooperated on climate change, with both countries announcing ambitious targets to reduce greenhouse gas emissions.

Overall, the relationship between India and the US has moved from a period of estrangement to a strategic partnership based on shared interests and values. While there have been occasional bumps in the road, both countries are committed to deepening their ties in the years to come.

Important Areas of Cooperation:

Trade & Investment:
- The total value of trade in goods and services between the two countries was $146 billion in 2019.
- In 2020, U.S.-India merchandise trade accounted for about 2% of U.S. merchandise trade and approximately 12% for India.
- The U.S. is the largest destination for India’s merchandise exports, while it ranks as India’s third-largest merchandise import supplier, after China and the European Union.
- During 2020-21, the U.S. replaced Mauritius as the second-largest source of foreign direct investment into India, with inflows of USD 13.82 billion.
- India is one of the top five investment destinations for Indian FDI.
Defence Cooperation:
- India and the US have strong defence cooperation, which is based on the “New Framework for India US Defence Cooperation” that was renewed in 2015 for a period of ten years.
- Since 2008, India has procured defence items worth around US$ 21 billion from the US.
- In 2016, the US recognized India as a “Major Defence Partner”.
- Several defence agreements have been signed, such as the Logistics Exchange Memorandum of Association in 2016, the Communications Compatibility and Security Agreement in 2018, the Industrial Security Agreement in 2019, and the Basic Exchange and Cooperation Agreement in 2020.
- The two countries conduct a number of bilateral military exercises such as Yudh Abhyaas and Vajra Prahari, and also participate in defence exchanges to deepen their military-to-military cooperation.
  - In 2019, the two countries conducted a tri-services exercise called Tiger Triumph.
International Forums: India and the United States work together extensively at international organizations such as the United Nations, G-20, ASEAN Regional Forum, IMF, World Bank, and WTO.
- During the inaugural Quad (India, Japan, US & Australia) Leaders’ Summit 2021, the two nations reaffirmed their shared vision for a free, inclusive, and open Indo-Pacific region.
Science and Technology: The India-US Science and Technology Cooperation Agreement was signed in 2005, which was renewed in 2019 for another ten years.
- India and the U.S. have a rich history of collaboration in civil space-related activities such as Earth Observation, Satellite Navigation, Space Science, and Exploration.
- The Indian Space Research Organisation (ISRO) and NASA have worked towards the development of a joint microwave remote sensing satellite called NISAR, for Earth observation purposes.
Indian Diaspora: The Indian diaspora in the US is one of the largest and most successful ethnic communities in the country. According to the US Census Bureau, there were over 4 million people of Indian origin living in the US in 2019, making them the third-largest Asian group in the country after Chinese and Filipino Americans.

Major Challenges

CAATSA:
- The Countering America’s Adversaries through Sanctions Act (CAATSA) poses a challenge to India-US defence cooperation as it prohibits defence purchases from Russia, Iran and North Korea, all of which are considered adversaries by the US.
- The US views expanding defence ties between India and Russia as a complicating factor that could limit its own defence cooperation with India.
- The US has expressed its concerns over the procurement of the S-400 air defence system by India as it hampers interoperability and secure communication between the forces of the two countries, and restricts the sharing of sensitive weapons technologies.
Economic Challenge and Patent Rights: In the economic sphere, there are several differences between India and the US, including pharma patents, data flows, e-commerce, and regulatory precision.
- Specifically, the US prioritizes long-term protection for investments in pharma, while India prioritizes low cost and greater access.
- The US takes a light approach to data privacy with basic consumer protections, which differs from India’s approach.
- The US 2021 “Special 301” report listed India on the Priority Watch List, citing concerns about India’s patent treatment, high rates of intellectual property theft, and weak trade secret protection.
- The US and India are currently in a “low-intensity trade war,” which involves imposing tariffs that restrict trade.
- The US has concerns about India’s tariff regime, especially in agriculture, while India opposes the US steel and aluminium tariffs that have been in place since 2018.
- Additionally, in 2019, the US cancelled India’s developing country status under the Generalized System of Preferences (GSP).
Negotiations at the WTO: The US and India have diverging views on several issues concerning the World Trade Organization (WTO).
- Both countries have used the WTO to enforce trade rules and resolve trade disputes against each other.
- The US and other developed nations have criticized India, China, and other countries for claiming special and differential treatment under WTO rules by self-designating as developing countries.
- In 2021, the US supported a waiver of certain WTO intellectual property rights obligations for COVID-19 vaccines, while India and some other nations called for a broader IPR waiver for COVID-19-related health products and technologies.
- Other issues under negotiation, such as customs duties for e-commerce and subsidies for fisheries, also remain contentious between the two nations.

Decoding the Editorial

The article highlights the areas of convergence and divergence between India and the US and the potential for greater partnership between the two Nations.

Divergence between India & the US: It also highlights that there are differences in opinion that need to be addressed between the two countries, such as:
- The U.S.’s desire for India to change its stance on the Ukraine crisis and
- India’s push for the U.S. to take a stronger stance against China.
- Also, while India is seeking to strengthen its partnership with the U.S., it is also keen to maintain its longstanding relations with Russia, which is identified as one of its main allies in its foreign policy strategy.
India and SCO:
- India is currently the president of the Shanghai Cooperation Organization, which includes China and Russia, and that India’s relationship with NATO will be closely watched as the organization seeks greater participation from India.
- Therefore, the complex and nuanced India’s foreign policy should be assessed and the challenges and opportunities that lie ahead in its relationship with the U.S. and other key global actors should be taken into account in each of India’s association with the world powers.
Convergence between India & the US: The statement highlights the areas of convergence between India and the U.S. in their strategic partnership, particularly in the areas of technology, defence industrial cooperation, and the Indo-Pacific partnership.
- The Indo-Pacific partnership: It is aimed at promoting security and economic growth, increasing trade and investment, and enhancing connectivity in the region.
  - The partnership is based on the shared vision of a free, open, and inclusive Indo-Pacific region that is respectful of the sovereignty and territorial integrity of all countries.
  - The partnership involves a range of initiatives, including joint military exercises, information-sharing on security issues, and collaboration on economic and infrastructure development projects.
  - One of the key objectives of the Indo-Pacific partnership is to counter the growing influence of China in the region.
  - The U.S. and India share concerns about China’s aggressive actions in the South China Sea, its expanding military presence in the region, and its efforts to establish economic dominance through its Belt and Road Initiative.
- The India-U.S. Initiative on Critical and Emerging Technology: This was launched in 2022 and is expected to expand the partnership between the two countries in the field of strategic technology and defence industrial cooperation.
- Diversifying Supply Chains away from China:
  - There has been a growing interest in diversifying supply chains away from China and towards India due to geopolitical tensions, trade disputes, and concerns about over-reliance on a single country.
  - India’s growing consumer market and relatively low-cost labour force make it an attractive destination for U.S. businesses looking to expand their customer base.
  - However, there are challenges to realigning supply chains to India, such as underdeveloped infrastructure, logistics, and regulatory systems, as well as a complex legal and bureaucratic system.
- U.S.-India Strategic Energy Partnership: To address these challenges, the U.S. and Indian governments have taken steps to promote closer economic ties and facilitate investment, such as the U.S.-India Strategic Energy Partnership launched in 2020.
  - The partnership aims to enhance cooperation in areas such as energy security and access, and climate change.
- Other Areas of Engagement: Though India-U.S. relationship has had its ups and downs over time, there have been some key moments in their ties such as the nuclear deal, liberalisation of markets, and outsourcing of Indian tech workers to the U.S.
  - Indian Americans are among the most successful immigrant groups in the U.S.
  - India can benefit from the knowledge, skills, and investment of the Indian diaspora in the U.S. to regain its global position.
  - This could include leveraging the expertise of Indian American professionals in fields such as technology and finance, as well as attracting investment from Indian American entrepreneurs and businesses.
- U.S.-aided Green Revolution: The article notes that the U.S. has played a significant role in India’s development in the past, specifically through the U.S.-aided Green Revolution, which transformed India from a shortage economy to one with surplus food.
- Combating Climate Change: United States and India have partnered to combat climate change through various initiatives such as promoting the use of renewable energy, conducting joint research and development projects, and investing in renewable energy infrastructure.
  - The two countries also agree on the significance of space technology in addressing global challenges.

Historical Trust Deficit between the two Nations:

The article highlights the historical trust deficit between India and the U.S.

India is of the view that the U.S. has not always been supportive and has instead favored Pakistan.
The recent American pull-out from Afghanistan has also raised doubts about the U.S. as a trusted partner.
On the other hand, the U.S. has raised concerns about terrorism, human rights, and democracy in India.

Despite these challenges, there is a need to take the relationship forward constructively, look for positive areas of collaboration, and make the partnership reach its full potential.

Beyond the Editorial

Dealing with the US in the changing world order:

India should continue to pursue its own foreign policy based on its national interests and strategic objectives.
While maintaining its traditional policy of non-alignment, India should also seek to deepen its partnerships and collaborations with various countries, including the United States, on issues of mutual interest and concern.
India should focus on building strong economic, political, and security ties with the US, while also engaging with other major powers such as China, Russia, Japan, and European countries.
India should also continue to play an active role in multilateral institutions such as the United Nations, G-20, and BRICS, and seek to shape the global agenda in a manner that reflects its interests and values.
India should also work towards enhancing its soft power by promoting its rich cultural heritage, technological advancements, and democratic values on the global stage.

This would enable India to have a greater influence in shaping the evolving world order and safeguarding its national interests in the changing geopolitical landscape.