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Indo-US Business
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Issue: Jun-Jul 2006
 
   
 

Forging Global
Strategic Partnership
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A Momentous Year For Indo-US Ties

It has been a year since India and the United States issued a historic joint statement on July 18, 2005. The defining document, built upon foundations of mutual trust and confidence and signed by Prime Minister Manmohan Singh and President George Bush, laid down the framework for future relations between the two countries. The last 12 months have been hectic with both sides moving at breakneck pace to set up mechanisms to undertake tasks and achieve targets across a wide spectrum of industries and services, trade and commerce, science and technology, research and development, agriculture and aerospace. The highpoint of all achievements was the epoch-making visit to India of US President George Bush in March 2006, which culminated in the signing of a momentous treaty on civilian nuclear energy, that could fully meet India's growing power needs in the long run. In the last 12 months, the world's richest and most powerful democracy and the world's largest democracy, which is also an emerging economic power, have further forged their alliance as strategic global partners.

 

Clearance for N-Deal
The results of the Indo-US strategic Partnership have started showing. On July 26, 2006, the US House of Representatives passed landmark legislation approving the US-India nuclear agreement by a massive 359-68 margin, rejecting several 'killer amendments' on the way. About the only significant amendment that was passed without contest was one that enjoins the United States to only support India's civilian nuclear program, and not any nuclear weapons capability enhancement. At the end of almost five hours of marathon arguments and legislative procedures, the United States and India Nuclear Cooperation Promotion Act of 2006, to be renamed the Hyde Amendment after the lawmaker who engineered it, was passed by a handsome 369-58 margin. The Act will permit a certifiably nuclear-armed India to buy reactors and fuel from the international market for the first time in more than 30 years (subject to final approval and international consent), despite the fact it has still not signed the nuclear Non-Proliferation Treaty. It will in effect mark the end of India's nuclear isolation and possibly rearrange the global strategic architecture.
''We are at the hinge of history, building a fundamentally new relationship with India... historians will regard this as a tidal shift in ties between the US and India when Congress signaled definitively the end of the cold war paradigm,'' Tom Lantos (Democrat-California) co-author of the legislation said while introducing the bill. The very fact that the legislation received overwhelming support from both Republicans and Democrats has vindicated America's new-found trust and confidence in India.

Trade Front India Business Forum
At the recently concluded third ministerial-level meeting of the US-India Trade Policy Forum (TPF) held in Washington DC India and the United States have agreed on a number of initiatives to strengthen and deepen the bilateral trading relationship. India's Minister for Commerce and Industry Kamal Nath and US Trade Representative Susan C. Schwab attended the meeting. With India already among the United States' fastest growing major bilateral trade relationships, the cooperative steps endorsed by Kamal Nath and Schwab are expected to further boost trade and investment, with the goal of doubling two-way trade in three years. The two ministers also discussed the Doha negotiations, agreeing that the US and India share a commitment to conclude a successful, far reaching Doha Round by the end of 2006.
“Under the Trade Policy Forum we continue to make steady progress on key issues to improve the bilateral trade and investment climate,” said Ambassador Schwab. “We remain committed to doubling bilateral trade over the next three years, and improving the regulatory, customs and intellectual property protection climate is key.” Kamal Nath said, “The Trade Policy Forum has, within a short time emerged as a very effective forum for the two sides to enhance bilateral trade and investment. It was encouraging to see both sides engaged in intensive discussions at the expert level on a variety of issues of mutual interest.”
During his hectic schedule in the US, Kamal Nath inaugurated a new, broad-based organization called 'India Business Forum' in New York to further boost bilateral trade and economic relations between the two countries. Structured at the initiative of the Confederation of Indian Industries (CII), the Forum comprised 51 organizations and corporations which participated in the event. Addressing the Forum, Kamal Nath called for establishment of a Trade Promotion Council in the US.

India-US CEO's Action Plan for 15 Business Sectors
Another heartening development has been the work done by the India-US CEOs Forum during the last one year. The Forum has drawn up priority initiatives and identified six major areas of cooperation and recommended specific action in 15 business sectors with the potential for significantly enhancing trade and investment by policy initiatives by the two governments. “These Areas would have the greatest impact on Economic Cooperation, as they impact multiple sectors,” the Forum said in its a report.
Priority Initiatives drawn up for expeditious implementation are:
•Promotion of Trade and Industry encompassing greater freedom to invest in services sectors, freer movement of people. Removal or reduction of tariff and non-tariff barriers and subsidies in agriculture and manufactured goods, on both sides. India and the US can partner to make the Doha Round of the WTO a success by showing leadership to support an ambitious outcome and making strong offers in all the key areas of negotiations.
•Creation of an Infrastructure Development Fund This could act as a vehicle for US investment into Indian infrastructure. It is proposed that a corpus of $ 5 billion be targeted, with minority Indian Government participation, and leveraging the expertise of the World Bank/ IFC/ ADB and other financial institutions in the selection and monitoring of investments.
•Promote Technology Exchange in Agriculture, Biotechnology and Nanotechnology through a combination of exchange of scientists between Universities/Labs in the two countries and by setting up Centres for R&D in these fields supported by the two Governments.
• Partner in Skills Development, US and Indian companies could work together for joint sponsorship of select Industrial Training Institutes (ITIs) in India and/or in the setting up of new institutes.
• Set up an Indo-US Centre for Industrial R&D in product design and development with support from US and Indian industry and government.
•Establish a Dispute Resolution Mechanism - a dispute settlement mechanism that has the power and jurisdiction to resolve commercial and contractual disputes quickly could be set up by India. Continued government focus at both center and state levels is also required to resolve legacy issues.
The Forum, Co-chaired by Ratan Tata and William Harrison, representing the CEOs of India and the US respectively, was set up jointly by President George Bush and Prime Minister Manmohan Singh, during the latter's visit to the US in July 2005. The Forum was one of the several initiatives aimed at opening a new era of closer economic cooperation and strategic partnership between the two countries at both government and industry levels.
The Forum, which was given a mandate to develop a road map for increased partnership between the two countries at a business level, identified issues to be included in the agenda that came up for consideration during the latest talks between President Bush and Prime Minister Singh.
In its report, the Forum said that the US and India shared common values based on their democratic, multicultural, multi-ethnic and multi-religious societies, as well as a strong entrepreneurial spirit, all of which supported the bilateral Strategic Partnership.
It said: “Both the US and India are committed to full exploitation of the mutual benefits of globalization, which is an irreversible process driven by technology and the development of human resources in an increasingly knowledge-based world. Through mutual harnessing of technology and human capital, the US and India can forge a unique partnership to achieve greater competitiveness and prosperity for the citizens of both nations.”
The report said: “The new Economic Partnership will present the US and India with substantial opportunities to increase trade and investment activity, enhance market access for goods and services and develop greater competitiveness in both countries by leveraging their respective strengths.
It further said: “The US and Indian economies continue to show strong growth despite facing complex challenges. The new Vision of Economic Partnership is one of promise and mutual benefits combined with challenges which can be met, squarely, and overcome.” The report has also suggested measures to create an “Enabling Environment”.
Looking back at the July 18, 2005 agreement, as India's Foreign Secretary Shyam Saran recently observed, there were certain key developments that merged to create the basis for July 18, 2005. Foremost among them, an India growing at the rate of 8.0 percent per annum had led to a very different attitude on the part of the US towards India. Bilateral trade, in fact, has been growing at a healthy 20 percent plus annually and India is now the fastest growing export market for the US, with an estimated 300- million strong middle class with constantly growing purchasing power.
An India of high growth rates creates new demands for goods, services and technologies that a global trading nation like the US has to note of. The experience of US companies operating in India has been positive, as indeed has been their profitability. Those already in are expanding, while those still not in are clamoring for an entry. Global US companies now require a mandatory 'India strategy'. The enormous orders placed on the US aircraft industry in 2005 by India's state-owned airlines was an example of India's needs.
A key element in the US approach to India has been its awareness of the potential that partnership with India holds in respect of the knowledge economy. A majority of current initiatives, in one form or the other, are strongly knowledge-based be it S&T, agriculture research, energy issues, space, atomic energy, health or high-technology.
India, which has opened up its economy, has begun to integrate with the global economy. Indians are making a visible impact on the rest of the world and certainly in the US as symbolized by the success of the Indian-American community. Two million Indians have not only established an enviable professional reputation but earn 50 percent more than the US national average.
Another significant factor that further strengthens India-US relationship is the commitment of both countries to adhere to democratic values. As a pluralistic and secular democracy in a world where fundamentalist violence is on the rise, India's emergence as a model of stability, modernization and predictability, has begun to impact on the process of US thinking. The new American awareness found its reflection in the observation made by President Bush during his March 2006 visit to India.
“The US and India, separated by half the globe are closer than ever before and the partnership between our free nations has the power to transform the world,” he said.