Turning the U.S.-India Alignment into an Alliance

by WILLIAM R. HAWKINS June 29, 2017

"Our robust strategic partnership is such that it touches upon almost all areas of human endeavor....We consider the USA as our primary partner for India's social and economic transformation in all our flagship programs and schemes," proclaimed Indian Prime Minister Narendra Modi on June 26. The venue was the joint press conference with President Donald Trump following their lengthy meeting at the White House. This is a sentiment that America must strengthen and build upon to contain the expanding ambitions of China.

Of course, diplomatic niceties prevented any actual public mention of the Communist regime as a common threat to the world's two largest democracies. Nor was China's ally Pakistan mentioned, even as the two leaders talked about defeating terrorism in the region. President Trump noted "Both our nations have been struck by the evils of terrorism, and we are both determined to destroy terrorist organizations and the radical ideology that drives them. We will destroy radical Islamic terrorism." In the case of India, terrorism has been linked directly to Pakistan which has been supporting an insurgency in Kashmir ever since that Muslim province was incorporated into India when the British Raj was partitioned in 1947.

Pakistan was founded as an Islamic state with the mission to unite all Muslims in the region. India was founded on a more tolerant, multicultural democratic standard and counts 175 million Muslims among its 1.3 billion citizens. In must be remembered that it was Pakistan that blocked a UN plebiscite on Kashmir's fate because it feared too many Muslims would vote to live in the more attractive society of India than in a militant regime. Pakistan failed in its bid to seize control of Kashmir but has continued to stir up jihadist movements in the province. Vice President Mike Pence, speaking to the U.S.-India Business Council on June 27, mentioned how "barbarians have struck on Indian soil too many times over the decades, including the horrific attacks in Mumbai nearly a decade ago, claiming the lives of more than 160 innocents, including six Americans." That attack was traced to Pakistan. Hours before Modi's arrival, the State Department imposed sanctions on Syed Salahuddin, the Pakistan-based leader of Hizbul Mujahideen, the main Kashmir terrorist group.

PM Modi stated, "Fighting terrorism and doing away with the safe shelters, sanctuaries, and safe havens will be an important part of our cooperation," clearly with Pakistan in mind; not only regarding Kashmir, but also Afghanistan. The U.S. and its coalition (which includes India, for whose contributions President Trump thanked Modi) cannot end the war in Afghanistan as long as the Taliban (and now ISIS) can lick their wounds and rebuild their forces in Pakistan; free to cross the border at times of their own choosing. 

The threat from China was alluded to when President Trump mentioned how Indian forces "will join together with the Japanese navy to take part in the largest maritime exercise ever conducted in the vast Indian Ocean." What links Japan and India is concern over Beijing's expansion across the Pacific Rim and into the Indian Ocean. Beijing's ambitious "Belt and Road" development initiative which is designed to impose a "common destiny" on Eurasia is opposed by both India and Japan. The Chinese plan will build on programs hat have already been underway in Pakistan and Sri Lanka, posing direct threats to Indian security.

The U.S. and Japan can and must counter the Chinese initiative by increasing their role in developing the Indian economy, which can truly be a "win-win" relationship. China's rise has been fueled by short-sighted American business firms willfully ignorant of the true nature of the Beijing regime. They have transferred technology and production capacity to a strategic rival of their home country. The pursuit of private profit without adequate supervision by a Washington establishment blinded by naive liberal hopes and corrupted by corporate cash has helped to create a threat Americans will have to face for decades to come. It would be a much better world if all the Western capital sent to China had gone to India instead. Trade is properly conducted among friends, not adversaries where the "gains from trade" are used to create menacing capabilities.

With the world's largest population, India presents a massive market for American goods of all kinds. President Trump, however, concentrated his remarks on energy and security. We are "looking forward to exporting more American energy to India as your economy grows, including major long-term contracts to purchase American natural gas." To the extent that imported gas replaces Indian coal, it will help New Delhi clean up the air pollution that makes its cities look as bad at those in China. VP Pence added nuclear power and clean coal to the list of energy sources the U.S. could help New Delhi develop. President Barack Obama had carried his "war on coal" overseas with a ban on any U.S. aid to the Indian coal industry. But India is not going to abandon its massive coal reserves; their use can, however, be improved.   

Modernizing India's military is central to the strategic alignment. VP Pence mentioned to the USIBC that "the United States will sell Sea Guardian UAVs, Apache attack helicopters, and C-17 transports to India." A larger program on the table is the sale of 126 fighter jets to India. The Lockheed F-16 "Viper" is the leading candidate, but the Saab JAS-39 "Gripen" is also in the running, though a strategic link to Sweden makes little sense in an Asian setting. India, however, is moving from being a consumer of military hardware to a producer, as any Great Power must do. Modi has a "make it in India" policy and Lockheed is willing to set up an F-16 production line there. The question is whether this will be considered "outsourcing" by the Trump administration. It should not be as long as the production is for Indian service and does not replace jobs in U.S. industry supplying the Pentagon. The F-16 is long out of production for the USAF. The new F-35 "Lightning II" is coming into service (also built by Lockheed).

Indian production should be seen as "market extension" which will create additional work for American factories and maintenance services, not only for this order of warplanes but for future orders of military equipment of many kinds as the strategic relationship deepens. It should be noted that the first European production line for the F-16 opened in 1978; so India is not asking for anything novel.

The need to offer "co-production" to win military contracts is a subject not often discussed in public debates over arms sales, but it is a part of many transactions. Offset arrangements can also involve local purchasing, subcontracting, investment, and technology-transfer requirements on U.S. exporters that benefit foreign firms in the purchasing country. The U.S. defense industry is the world's leader, but its comparative advantage does not yield the full returns economic textbooks promise because of real world practices like offsets. These are negotiated between foreign governments and corporations in virtually every deal. The state authorities have the greater leverage, as it is generally a buyer's market; but strategic considerations also play their part. Our officials must keep a close eye on such deals to keep a proper balance between risks and rewards to the U.S. defense industrial base.

India's offset requirements have been at the low end of the international scale. Caught between two allied nuclear powers, China and Pakistan, New Delhi needs to modernize its forces; but it also needs a domestic industrial infrastructure to support its armed services. This is why offsets, though generally banned in the commercial sector under the World Trade Organization, are allowed for national security reasons. What is truly important cannot be left to the "invisible hand"--- which means the hands of others.

President Trump and Prime Minister Modi are both nationalists in a dangerous world. As Modi put it, "I am sure that the convergence between my vision for a 'new India' and President Trump's vision for 'making America great again' will add new dimensions to our cooperation." Let us work to make it so in a positive way.

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William R. Hawkins is a consultant specializing in international economic and national security issues. He is a former economics professor and Republican Congressional staff member.


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