Issue

Context

Prime Minister will visit the U.S. during which he will address the annual U.N. General Assembly session and have a series of bilateral and multilateral engagements in New York.

 

Background

• India-U.S. bilateral relations have developed into a "global strategic partnership", based on shared democratic values and increasing convergence of interests on bilateral, regional and global issues.
• Regular exchange of high-level political visits has provided sustained momentum to bilateral cooperation, while the wide-ranging and ever-expanding dialogue architecture has established a long-term framework for India-U.S. engagement.
• India-U.S. bilateral cooperation is broad-based and multi-sectoral, covering trade and investment, defence and security, education, science and technology, cyber security, high-technology, civil nuclear energy, space technology and applications, clean energy, environment, agriculture and health.

Analysis

Bilateral Relations

• Political Relations: The frequency of high-level visits and exchanges between India and the U.S. has gone up significantly of late. Delhi Declaration of Friendship is been adopted as Joint Strategic Vision for Asia-Pacific and the Indian Ocean Region. There is frequent interaction between the leadership of the two countries, including telephone calls and meetings on the sidelines of international summits.
• Strategic Consultations: There have been regular contacts at political and official levels on bilateral, regional and global issues. There have been regular contacts at political and official levels on bilateral, regional and global issues. Foreign Office Consultations, at the level of Foreign Secretary of India and U.S. Undersecretary for Political Affairs, are an important part of the dialogue structure.
• Civil Nuclear Cooperation: The bilateral civil nuclear cooperation agreement was finalized between both the countries. The two sides set up a Contact Group for advancing the full and timely implementation of the India-U.S. Civil Nuclear Cooperation Agreement, and to resolve pending issues. Culminating a decade of partnership on civil nuclear issues, the two sides have started the preparatory work on site in India for six AP 1000 reactors to be built by Westinghouse. Once completed, the project would be among the largest of its kind.
• Defence Cooperation: Defence relationship has emerged as a major pillar of India-U.S. strategic partnership with the signing of ‘New Framework for India-U.S. Defense Relations’, the resulting intensification in defence trade, joint exercises, personnel exchanges, collaboration and cooperation in maritime security and counter-piracy, and exchanges between each of the three services. The two countries now conduct more bilateral exercises with each other than they do with any other country. Bilateral dialogue mechanisms in the field of defence include Defence Policy Group (DPG), Defence Joint Working Group (DJWG), Defence Procurement and Production Group (DPPG), Senior Technology Security Group (STSG), Joint Technical Group (JTG), Military Cooperation Group (MCG), and Service-to-Service Executive Steering Groups (ESGs). U.S. recognised India as a "Major Defence Partner", which commits the U.S. to facilitate technology sharing with India to a level commensurate with that of its closest allies and partners, and industry collaboration for defence co-production and co-development.
• Counter-terrorism and internal security: Cooperation in counter-terrorism has seen considerable progress with intelligence sharing, information exchange, operational cooperation, counter-terrorism technology and equipment. India-U.S. Counter-Terrorism Cooperation Initiative was signed to expand collaboration on counter-terrorism, information sharing and capacity building. The two sides have agreed on a joint work plan to counter the threat of Improvised Explosives Device (IED). In order to further enhance the counter terrorism cooperation between India and the U.S., an arrangement is concluded to facilitate exchange of terrorist screening information through the designated contact points.
• Trade and Economic: The United States seeks an expanded trade relationship that is reciprocal and fair. Bilateral trade in 2018 was $142 billion, a 12.6 percent increase from 2017. S. energy exports are an important area of growth in the trade relationship.  In 2018 India purchased 48.2 million barrels of U.S. crude oil, a significant increase from 9.6 million in 2017.  Last year, Indian students enrolled at U.S. colleges and universities contributed over $7 billion to the U.S. economy.  The total number of Indian students in the United States has more than doubled over the last decade, from 81,000 in 2008 to a record high of 196,000 in 2018.
• Energy and Climate Change: The U.S.-India Energy Dialogue was launched to promote trade and investment in the energy sector. 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. Investment by Indian companies like Reliance, Essar and GAIL in the U.S. natural gas market is ushering in a new era of India-U.S. energy partnership. The U.S. Department of Energy has so far given its approval for export of LNG from seven liquefaction terminals in the U.S., to countries with which the U.S. does not have a free trade agreement (FTA).

Challenges/Obstacles in the bilateral relations

• Now, India has chosen to wage battle against U.S. companies on a completely new front - Data localization.
• Reserve Bank of India told all payments companies to “store the entire data related to payments systems” solely in India.
• The government followed up with draft policies, one of which ordered e-commerce companies to store user data in India and one which tells all internet companies to store personal data of Indians in India.
• E-commerce has also been a major flashpoint. The government is going after foreign-owned e-commerce web sites such as Amazon, telling them that they can’t hold any inventory or allow their platform to be used by companies they’d invested in.
• In other words, Amazon needs to find a middleman to sell Kindles or Echos on its Indian website.
• Local companies face no such restrictions.

Intellectual Property (IP): The two sides differ on how to balance IP protection to incentivize innovation and support other policy goals, such as access to medicines. India’s IP regime remains a top concern for the United States, which designated India again on its “Special 301” Priority Watch List, based on such concerns as its treatment of patents, infringement rates, and protection of trade secret.

 Agriculture: Sanitary and phytosanitary (SPS) barriers in India limit U.S. agricultural exports - The United States questions the scientific and risk-based justifications of such barriers. An ongoing issue is India’s purported compliance with a WTO decision against its ban on U.S. poultry imports and live swine due to avian influenza concerns; the WTO held that India’s measures violated WTO SPS rules. Each side also sees the other’s agricultural support programs as market-distorting; India’s view of its programs from a food security lens complicates matters.

Localization Trade Barriers: The United States continues to press India on its “forced” localization practices. Initiatives to grow India’s manufacturing base and support jobs include requirements for in-country data storage and local content for government procurement in some sectors.

Services: The United States and India are competitive in certain services industries. Barriers to U.S. firms’ market access include India’s limits on foreign ownership and local presence requirements. For India, a key issue is U.S. temporary visa policies, which affect Indian nationals working in the United States. India is challenging U.S. fees for worker visas in the WTO, and monitoring potential U.S. action to revise the H-1B (professional worker) visa program. India also continues to seek a “totalization agreement” to coordinate social security protection for workers who split their careers between the two countries. The U.S. can be faulted for not seeing the bigger picture. It’s China that’s distorting the global playing field, and U.S. trade policy should be focused on finding and building alliances with countries such as India to combat that larger problem. India has the potential to be a giant market, which U.S. companies might need if they’re slowly squeezed out of China.

Conclusion

India’s relationship with the United States remains crucial to its own objectives, but is also ambiguous. The asymmetry of power between the two countries is such that the relationship, if potentially useful, is not necessary for the United States while potentially risky for India. Moreover, the shift of the political centre of gravity of Asia — resulting from the growing rivalry between China and the US — is eroding the foundations of India’s policy in Asia, while prospects for greater economic interaction is limited by India’s slow pace of reforms. The future of India-US relations lies in their capacity to evolve a new quid pro quo in which the US will formulate its expectations in more realistic terms while India would assume a larger share of the burden of Asia’ security.

Learning Aid