Obama in India
|Our Correspondent||Oct 28, 2010|
With US President Barack Obama's state visit to India beginning just days after the mid-term Congressional elections, critics may be tempted to see the trip as his way of seeking refuge from storms at home. After all, Mr. Obama remains popular among the Indian people and is sure to receive a rousing welcome. But cynicism aside, the trip provides Obama with a key opportunity to instill a level of momentum in bilateral relations that has been noticeably missing since George W. Bush left the White House.
To make the most of the occasion, the president must come armed with bold, creative ideas. Lackluster initiatives characterized last November's summit meeting between Obama and Prime Minister Manmohan Singh, which is remembered more for the antics of its party-crashers and the eventual ouster of the White House social secretary than for any substantive achievement.
To avoid a similar fate, Obama needs to put a few high-profile proposals on the table, which even if they cannot be implemented immediately will at least re-galvanize bilateral relations and impart an overarching vision that is now lacking. In particular, he should lay out a sweeping initiative aimed at capitalizing on mutual synergies in the area of high-technology trade.
In the decade since US economic sanctions against India were rolled back, bilateral trade levels have skyrocketed. Nonetheless, important areas of cooperation are unexplored and significant frictions, on prominent display in the US-India impasse that led to the breakdown of the Doha Round of multilateral trade talks, remain between Washington and New Delhi.
Despite growing geopolitical tensions between New Delhi and Beijing, India-China trade has risen sharply over the past few years, so much so that China is poised to overtake the United States as India's leading trading partner. India has also recently concluded important trade agreements with Japan, South Korea and the 10-country Association of Southeast Asian Nations, is reportedly on the verge of concluding a trade pact with the European Union, and has launched bilateral trade negotiations with China and Canada.
Given that trade policy is a highly contentious political issue in both countries, negotiations aimed at producing an US-India accord – especially one that deals with agricultural access and subsidy issues – will almost certainly be futile. A more imaginative and viable approach, however, would be to concentrate on further liberalizing two-way trade in advanced technology products and services, including the critical information technology field.
The high-tech sector plays a critical and largely complementary role in the economies of both nations, and the US has been a prominent factor in the spectacular development of the Indian IT sector. Yet overall bilateral trade in advanced technology products is surprisingly low and far below potential. And unlike a more comprehensive arrangement – which would entail prolonged negotiations, unwieldy bargaining tradeoffs and protracted coalition-building at home – an initiative with a limited but sharp focus on the innovation economy could likely be formulated relatively quickly, and its self-evident "win-win" features could override bureaucratic timidity and domestic opposition.
A model for such an initiative exists in the 1997 Information Technology Agreement (ITA), which eliminated tariffs on a range of capital goods, intermediate inputs and final products in the information and communications technology sector. The agreement was negotiated by 29 original countries (then representing about 80 percent of the global IT trade). Although conducted under the auspices of the World Trade Organization, the agreement was formulated quickly outside of its normal (and cumbersome) negotiating process. The final agreement was quickly joined by other countries (including India) and currently has over 70 participants (collectively representing 97 percent of the global IT trade). The ITA is credited with spurring world trade in IT products, currently estimated at $4 trillion annually, and remains the only industry-specific comprehensive free trade agreement ever signed.
While the ITA is still in effect, its value has been significantly diluted by a series of technological developments in the period since its creation. Specifically, disputes have arisen among the signatories over how to apply the agreement to hundreds of new IT products that were not foreseen a decade ago and on addressing the issue of non-tariff barriers. Moreover, multi-party negotiations to update the ITA have been stalled for years.
In light of these problems, the US and India should launch a bilateral initiative to further liberalize trade and deepen engagement in the IT field or, even more one that covers the entire range of advanced technology products and services. This agreement could then be opened to the participation of other like-minded countries. Given the vital role of the high-tech sector in the American and Indian economies, not to mention the broader world economy, such an initiative would pay robust commercial dividends.
Additionally, with Washington and New Delhi at odds in the Doha Round talks, this initiative would have great political value, further solidifying the US-India partnership and providing an important example of joint leadership in the global economy between developed and emerging nations. Finally, it would be a good down payment on the Obama administration's pledge to double US exports over the next five years.
By setting sights high in Washington and New Delhi, Obama's trip could inject much-needed impetus into U.S.-India ties. And his administration would finally be able to answer critics by placing its own stamp on bilateral affairs. Focusing on the high-tech agenda would be a very good place to start.
David J. Karl is president of the Asia Strategy Initiative, a consultancy based in Los Angeles. He recently served as project director of the Task Force on Enhancing India-U.S. Cooperation in the Global Innovation Economy. He blogs on India and U.S.-India relations at http://india.foreignpolicyblogs.com.