Joint VIF-Heritage Interaction on “Future Trajectory of Indo-US Relations”

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The Vivekananda International Foundation and The Heritage Foundation, USA jointly organized a web-based interaction session to deliberate upon the future trajectory of Indo-US relationship in the post-COVID era. The discussion centered around three major themes: (i) US-China Decoupling and its Implications on the Global Economy; (ii) Impact of Covid-19 in further Enhancing the India-US Partnership in all fields; and (iii) US Concept of a Second Marshall Plan. While Dr. Arvind Gupta, Amb. Kanwal Sibal, Amb. Ashok Kantha and Amb. Arun K. Singh made presentations on behalf of the VIF the Heritage Foundation was represented by Dr. James Carafano, Mr. Riley Walters, Mr. Dean Cheng and Dr. Jeff. M. Smith.

The discussion opened with stressing the need for forging a Multinational Economic Recovery Partnership between like-minded countries, based on shared set of fundamental principles namely – freely elected governments, human rights, and free enterprise systems. While the pandemic and lack of a coordinated international response has brought to surface the cracks in the multilateral world order, experts believe that the time is right for world leaders to come together and focus on a recovery plan for lifting all boats. India, on its part, has been constantly engaging with rest of the world during the Pandemic, both through high-level communication by the Prime Minister and External Affairs Minister, and by stepping-up to supply essential medicines and other supplies to the World.

Quad to lead the New Global Economic Recovery Partnership

In the post-pandemic era, the world is faced with twin challenges: recovering from the economic disruption brought on by COVID-19; and dealing with an increasingly aggressive China. In order to mitigate this, experts believe countries need to come together for doubling down efforts for enhancing competitiveness and strengthening economic freedom. The members of the Quadrilateral Strategic Dialogue (Quad) should take the lead in this direction and make economic freedom a priority on its agenda. The Quad is uniquely positioned for leading this effort due to the economic weight that lies behind it with the member countries accounting for a quarter of the global GDP. The quad countries’ engagement in global trade is massive and amounts to $6 trillion. Among the quad countries, total trade measured up to $440 Billion in 2018 alone.

Charting a new partnership for sustainable economic recovery among the quad would entail putting in place long-term reforms and: (i) lowering of tariff and non-tariff barriers for goods & services; (ii) easing tax burdens on consumers & businesses; (iii) easing regulations on movement of labour and job mobility; (iv) reducing regulations that inhibit business activity and (v) facilitating access to price-competitive goods for consumers. As the Quad collectively progresses on this agenda, efforts should focus on subsequently bringing other like-minded countries such as Vietnam, Taiwan, and Indonesia under this economic framework.

Resolution of Strains in the US-Europe Relationship

Creation of a global economic recovery package would also require addressing the tensions between US and EU on critical strategic and technology related issues spanning from climate change, disagreement over the Iran nuclear deal, withdrawal of US troops from Iraq, et cetera. Failing to resolve these differences could provide China ground to make inroads and increase its influence within Europe, leading to further weakening of the rules-based economic order. Further, the United States has been skeptical of China’s underlying intentions behind setting up 5G infrastructure and other critical technology under its digital BRI project. Resolution of US-EU differences would be crucial to thwart dubious Chinese efforts and maintaining digital sovereignty.

Diversification of Supply Chains

In order to compete with China, an approach based on limited-decoupling can be anticipated in the time to come. Enterprises would be looking at shifting their next investments out-of China, and it is here that India should look at creating conducive conditions for emerging as an alternative destination. Further, Enhanced need for a collaborative effort towards building alternative, more resilient value-chains that are less malleable to political manipulation is crucial for global economic recovery. Like-minded countries need to work together to adopt a new model that is not only centered around cost efficiency, but also guards national and regional security, especially in critical sectors such as emerging technology, defence, electronics and pharmaceuticals.

Managing Differences over Afghanistan

On the Indo-US relations front, the developments in the Afghan peace process in the days to come would be crucial to monitor. A precipitous withdrawal of US troops from Afghanistan would not only threaten the stability of the neighbourhood and pose significant threats of increased terrorism for India; it would also not be conducive to American interests in the region.

Negotiation over the India-US Trade Deal

In order to revive and strengthen economic partnership between the two countries, the conclusion of the long-overdue limited trade agreement needs to be expedited. This would pave the way for deeper collaboration in areas such as digital technology and pharmaceuticals in the post-COVID era. Moving beyond transactional trade frictions and enhancing mutual-understanding and complementarities in issues relating to regulatory and market-access needs to be the prime focus for policymakers on both sides.

Progress over Defence Relations

The United States and India have undertaken several discussions for enhanced military cooperation in the past few months. Discussions over concluding the Basic Exchange and Cooperation Agreement (BECA) that would enable greater information-sharing have been expedited. This is especially crucial in light of China’s increased aggressive posturing in the region.

Both countries need to enhance efforts towards operationalizing the Defence Technology and Trade Initiative (DTTI) in order to boost bilateral defence-trade. Smaller steps such as co-development of low-technology defence articles would be a significant progress in this direction.

The US political leadership needs to rethink its approach to CATSAA regulations with respect to India, in order to avoid any potential disruption in the bilateral relations between the two countries. The US should also consider amending the Arms Export Control Act to consider India as a key non-NATO defence partner and easing restrictions on US arms exports. The United States must also continue its support for India’s membership of the Nuclear Suppliers Group.

Infrastructure Cooperation

India and the US need to build upon their complementarity for ensuring fair, transparent and sustainable infrastructure development in the indo-pacific region. Operationalizing the Blue Dot Network should be a priority, and India should consider getting on-board.

The presentations were followed by a Q&A round, which further added to the timely discussion.