Frank G
Washington needs New Delhi to remain a welcoming partner.
By Frank G Wisner and Ravi Venkatesan
India and the US have come a long way over the past two decades. A once fraught relationship has developed real strategic significance, especially as both nations face major security challenges in Asia. Much of this progress has been fuelled by the enthusiasm of US businesses, who recognise that to be successful in a globalised economy, they need access to Indian talent and the giant subcontinental market. India also understands that to lift itself out of poverty and become globally competitive, it needs access to US markets and the capital and technology of American firms. As a result, bilateral trade has quadrupled to nearly $100bn since 2006 and, with this, cooperation has blossomed in many other areas — including intelligence and security.
However, with US Vice President Joe Biden visiting Mumbai and New Delhi this week, it’s worth noting that over the past three or four years, the business environment for US firms in India has deteriorated, and tensions have grown over trade and investment matters.
American pharmaceutical firms and multinational companies are concerned about how policies and regulation compromise their business model. Many others face nightmarish tax challenges. For their part, Indian IT companies are very concerned about proposed changes in the US Senate’s immigration bill to the rules on skilled Indian workers who want to emigrate to the US.
Lack of progress on improving infrastructure, a rapidly slowing economy and a rapidly depreciating currency raise further concerns about India’s economic progress. For multinational companies eager to enter the Indian market, the mounting list of issues is causing frustration and annoyance to mutate into anger as more and more CEOs fear that India is discriminating against US firms and failing in its obligations as an emerging economic power.
US government officials expect India to collaborate with them in multilateral trade negotiations to shape the global trading system rather than setting dangerous precedents that other countries might emulate. This would drive a stake through the heart of the global expansion of American firms. It is a matter of paramount importance and urgency therefore to get India to act responsibly.
From India’s standpoint, the most urgent and lethal threat is that some of the provisions of the US immigration bill currently being considered by Congress would create a huge problem for the country’s flagship IT industry, not to mention the American companies that are its clients. The most onerous proposal is one that prevents US technology firms from placing personnel at client’s sites if more than 15 percent of their employees are on H1-B visas. This destroys the business models of many global IT service providers and is also extremely problematic for US companies that have become dependent on the amazingly competitive, 24/7 capability provided by Indian firms.
For Indians, it seems as if US officials only criticise protectionist policies when other countries put them in place. From their point of view, India’s Preferential Market Access policy is simply a way to encourage electronic hardware firms to manufacture locally in India. Such incentives are essential to creating jobs and reducing the huge balance of payments problem faced by the country.
The policy is compliant with World Trade Organisation rules and, anyway, how is this different in principle from the provisions of the immigration bill which aims to create more IT jobs in America, they wonder? How can a country which has a Buy American Act, which requires that the US government give preference to US-made products in its purchases, criticise the PMA?
In a country with a legacy of colonial rule and socialism, where many Indians are still distrustful of businesses in general and foreign companies in particular, the vigorous approach of American firms and the US government smacks of economic imperialism and awakens protectionist instincts.
The list of issues is mounting and emotions are rising on both sides. Left unchecked, this dynamic could trigger a spiral of finger pointing and retaliation that will damage the hard-won gains in trust and trade between the two countries.
Moreover, it threatens to get in the way of the strategic cooperation between the countries as they address complex issues ranging from withdrawal in Afghanistan to simmering problems in Pakistan to China’s rise. As Mahatma Gandhi famously said, “An eye for an eye will only make the whole world blind.”
The reality is that India and the US are natural allies and clear strategic partners. In addition to being enormous markets for each other’s goods and services, the US and India both stand to benefit from a more stable, less dangerous Asia. New Delhi needs Washington to stay engaged, focusing its attention and resources on the region. And Washington needs New Delhi to remain a welcoming partner, happy to share both its strategic location and deeper cultural understanding of an enormous turbulent swath of the world. It is vital therefore that the leaders of both countries take a strategic rather than tactical, short-term, and commercial approach to resolving their differences.
Unfortunately, the timing of the negotiations couldn’t be more challenging. In both countries the political system is polarised. There is also an asymmetry to the dialogue. The US economy and business confidence is recovering. And with new US Trade Representative Mike Froman at the helm, the administration is approaching these matters forcefully.
With the August session of the Indian Parliament about to commence, Prime Minister Singh has a final window of opportunity to reach across party lines — especially to the opposition BJP — before next year’s election and forge a consensus on how to revive the economy. The passage of just a few important bills could restore optimism and trigger several billion dollars of much needed investment to jump-start the economy. This opportunity must not be wasted.
Leaders in Delhi and Washington find themselves at a critical moment. They must decide whether they will make the relationship into a truly strategic and valuable partnership or allow it to deteriorate into a welter of finger pointing. Despite the political constraints on both sides, it is worth remembering what is at stake here, and how far we’ve come already.
WP-BLOOMBERG
Washington needs New Delhi to remain a welcoming partner.
By Frank G Wisner and Ravi Venkatesan
India and the US have come a long way over the past two decades. A once fraught relationship has developed real strategic significance, especially as both nations face major security challenges in Asia. Much of this progress has been fuelled by the enthusiasm of US businesses, who recognise that to be successful in a globalised economy, they need access to Indian talent and the giant subcontinental market. India also understands that to lift itself out of poverty and become globally competitive, it needs access to US markets and the capital and technology of American firms. As a result, bilateral trade has quadrupled to nearly $100bn since 2006 and, with this, cooperation has blossomed in many other areas — including intelligence and security.
However, with US Vice President Joe Biden visiting Mumbai and New Delhi this week, it’s worth noting that over the past three or four years, the business environment for US firms in India has deteriorated, and tensions have grown over trade and investment matters.
American pharmaceutical firms and multinational companies are concerned about how policies and regulation compromise their business model. Many others face nightmarish tax challenges. For their part, Indian IT companies are very concerned about proposed changes in the US Senate’s immigration bill to the rules on skilled Indian workers who want to emigrate to the US.
Lack of progress on improving infrastructure, a rapidly slowing economy and a rapidly depreciating currency raise further concerns about India’s economic progress. For multinational companies eager to enter the Indian market, the mounting list of issues is causing frustration and annoyance to mutate into anger as more and more CEOs fear that India is discriminating against US firms and failing in its obligations as an emerging economic power.
US government officials expect India to collaborate with them in multilateral trade negotiations to shape the global trading system rather than setting dangerous precedents that other countries might emulate. This would drive a stake through the heart of the global expansion of American firms. It is a matter of paramount importance and urgency therefore to get India to act responsibly.
From India’s standpoint, the most urgent and lethal threat is that some of the provisions of the US immigration bill currently being considered by Congress would create a huge problem for the country’s flagship IT industry, not to mention the American companies that are its clients. The most onerous proposal is one that prevents US technology firms from placing personnel at client’s sites if more than 15 percent of their employees are on H1-B visas. This destroys the business models of many global IT service providers and is also extremely problematic for US companies that have become dependent on the amazingly competitive, 24/7 capability provided by Indian firms.
For Indians, it seems as if US officials only criticise protectionist policies when other countries put them in place. From their point of view, India’s Preferential Market Access policy is simply a way to encourage electronic hardware firms to manufacture locally in India. Such incentives are essential to creating jobs and reducing the huge balance of payments problem faced by the country.
The policy is compliant with World Trade Organisation rules and, anyway, how is this different in principle from the provisions of the immigration bill which aims to create more IT jobs in America, they wonder? How can a country which has a Buy American Act, which requires that the US government give preference to US-made products in its purchases, criticise the PMA?
In a country with a legacy of colonial rule and socialism, where many Indians are still distrustful of businesses in general and foreign companies in particular, the vigorous approach of American firms and the US government smacks of economic imperialism and awakens protectionist instincts.
The list of issues is mounting and emotions are rising on both sides. Left unchecked, this dynamic could trigger a spiral of finger pointing and retaliation that will damage the hard-won gains in trust and trade between the two countries.
Moreover, it threatens to get in the way of the strategic cooperation between the countries as they address complex issues ranging from withdrawal in Afghanistan to simmering problems in Pakistan to China’s rise. As Mahatma Gandhi famously said, “An eye for an eye will only make the whole world blind.”
The reality is that India and the US are natural allies and clear strategic partners. In addition to being enormous markets for each other’s goods and services, the US and India both stand to benefit from a more stable, less dangerous Asia. New Delhi needs Washington to stay engaged, focusing its attention and resources on the region. And Washington needs New Delhi to remain a welcoming partner, happy to share both its strategic location and deeper cultural understanding of an enormous turbulent swath of the world. It is vital therefore that the leaders of both countries take a strategic rather than tactical, short-term, and commercial approach to resolving their differences.
Unfortunately, the timing of the negotiations couldn’t be more challenging. In both countries the political system is polarised. There is also an asymmetry to the dialogue. The US economy and business confidence is recovering. And with new US Trade Representative Mike Froman at the helm, the administration is approaching these matters forcefully.
With the August session of the Indian Parliament about to commence, Prime Minister Singh has a final window of opportunity to reach across party lines — especially to the opposition BJP — before next year’s election and forge a consensus on how to revive the economy. The passage of just a few important bills could restore optimism and trigger several billion dollars of much needed investment to jump-start the economy. This opportunity must not be wasted.
Leaders in Delhi and Washington find themselves at a critical moment. They must decide whether they will make the relationship into a truly strategic and valuable partnership or allow it to deteriorate into a welter of finger pointing. Despite the political constraints on both sides, it is worth remembering what is at stake here, and how far we’ve come already.
WP-BLOOMBERG
