Obama Drops the Ball on India

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The White House took great pains to brand President Barack Obama’s 2010 visit to India as a jobs trip. At every turn, it seemed, the White House press machine rolled out a new advisor to speak about the president’s efforts to “expand U.S. export opportunities and jobs” for American workers. And Obama himself stated that: “As we look to India today, the United States sees an opportunity to sell our exports in one of the fastest-growing markets in the world. For America, this is a jobs strategy.”

Yet, when it comes to India, the administration is dropping the ball. Although trade between the United States and India has increased, the economic relationship hasn’t yet reached its full potential. To do so, the administration should finalize a mutually beneficial investment treaty with India, and move forward on steps to negotiate a comprehensive Free Trade Agreement. These pacts would link American companies – and American workers – to important opportunities presented by India’s growing economy. In turn, this would lead to new jobs, and further link the United States to a critical Asia-Pacific partner.

To be sure, trade with India is on the upswing. Bilateral trade reached $48 billion in 2010, according to data from the Commerce Department, and the United States has become India’s third largest economic partner. With the exception of the global recession in 2009 and the burst of the dot-com bubble in 2001, total trade between the two countries has increased every year since 1991.

India’s economic transformation has been a boon for American companies and workers. In less than a decade, U.S. exports have quadrupled to $19 billion. While a broad array of American businesses now trade with India, few have benefited more from the relationship than U.S. manufacturers. The Office of the U.S. Trade Representative says that three manufacturing sectors – namely, machinery, electrical machinery, and aircrafts – account for three of the top five export categories to India. In the past two years, for example, India’s low-cost carrier, SpiceJet Airlines, purchased 33 new generation 737s from Boeing; India’s Ministry of Defense bought 10 Boeing C-17 Globemaster III airlifters; and Reliance Power ordered six turbines from General Electric Co. as part of a deal worth $750 million.

Equally important, yet seldom noticed, are the investments that Indian companies are making inside the United States. From 2000 to 2010, India was the United States’ second fastest growing foreign investor, with an annualized growth rate of 53 percent. In 2009 alone, Indian companies invested $4.4 billion into wide-ranging American sectors like pharmaceuticals, oil and coal, iron and steel, and telecommunications.

The tangible results of these investments can be seen across the United States. In Ohio, for example, subsidiaries of TATA, India’s largest company, employ over 1,200 people at diverse production facilities that manufacture steel products in Warren, and develop and deliver software technology in Milford. The same can be said in northeast Minnesota, where in 2008 India’s Essar Steal broke ground on a $1.6 billion steel plant on the state’s Mesabi iron range.

Comments
9
TrueBlueSea
April 27, 2012 at 00:09

After 10 years, the silicon valley can not wait to lay off all those inexpensive turned expensive H1Bs from you know where.
Americans are not that dumb especially in silicon valley.
Many H1Bs had teamed up together to threaten Cisco Systems and other companies.
If Cisco Systems lays off one or more those H1Bs from you know where, the whole group or section of those H1Bs will leave at the same time.
Cisco Systems had layoff more than 5000 employee not too long ago.
AMD had layoff 10000+ employee.
Yahoo is letting go about 5000 employee.
Even the H1B pioneer (HP) is laying off those H1Bs too.
Obama may have known about the you know where H1Bs blood bath in silicon valley.

Hugo Chavez
April 2, 2012 at 06:24

Indians from India steal American jobs both in the US and via outsourcing. It is time for Americans to wake up. I believe occupied wall street is right about this; and not just in USA but also in England, Europe and other countries we Indians are smarter than the rest of the world. We are superior, that is the reason why all the jobs come to us and more will come until we dominate the world. Look at Citi group with an Indian CEO. IBM, Pepsi, this is just the beginning.

Peter Parker
March 31, 2012 at 02:34

William Thomson hit it on the head. The relationship between US and India is going to grow to its full potential gradually. Let me at the outset say that both US and India are facing the threat of Muslim Extremism. However when it comes to the world there are wide ranging differences
a. Iran v/s Saudi Arabia. To india iran provides oil, counterbalances sunni extremists and provides a gateway to Central Asia. Even with the Mullah regime, they still have some elections. Saudi on the other hand promotes sunni extremism, financed the Pakistani nuclear bomb. India will always chose iran over saudi-arabia.
b. China: India faces a disputed border with China, while US issues with china are largely ego-related. Here is where William hit it the nail on the head, India does not want to be an ally with the US with regards to the Chinese. The indians are of the opinion that when push cones to a shove, US will chose chinese over the indians. Primarily because US has huge financial interests in China and stand to lose substantially if china is disrupted.
c. Pakistan: After all that this country has done, US still increases its war making capability. There is a very clear soft spot in the US with regards to Pakistan. No arms will be bought from the US as long as pakistan is an ally of the US.
d. Russia: Clearly russia has helped us out when no one has, what makes you think we are going to give up on that so easily?
e. State Department: Clearly anti-india most often, till the culture is not cleaned up nothing is going to change.
f. US Lackey / Poodle : Not going to happen
g. Nato expansion to Central Asia: India is not a big fan of this move
h. Technical Sanctions: India still subject to technical sanctions from the US. And yet some people expected the Indians to buy warplanes from US. I am still amazed at the stupidity of these analysts.

The author is right in that the best way to move this relationship forward is through strengthening economic and cultural ties. With changing geo-political situation maybe things will change. But the groundwork has to be laid through economic and cultural ties.

William Thomson
March 27, 2012 at 20:12

This was a well intentioned article, that certainly captures the American view perfectly but misses the Indian view and with FP a two way analysis is always necessary Sure, Obama has dragged his feet and sure America could be doing more to improve this vital relationship but it goes both ways. The Indian political scene is currently a very difficult one to accomplish anything in, the Congress party struggles to maintain control over and direct a fairly difficult coalition government and the BJP and their allies act obstructionist.

More importantly the hangover of Nehruvian non-alignment still exists, India has no interest in becoming a US ally, they do have interests in a pragmatic and national interest-directed relationship with the US. At the moment their FP logic is against free trade with the United States. Crawl-Walk-Run is the best approach with India, India watchers in the United States are all looking for the next big agreement with India that will move the relationship forward, forget about it, lets work on lesser bilateral issues, lets increase some trade in specific sectors, lets help them with food-supply chain management, the root cause of India malnourishment issues, lets pry some more of their defense spending dollars away from Russian arms, etc, lets build a relationship on many successful easy to accomplish issues. If a Free Trade agreement follows, fantastic, if not we keep improving the relationship despite the lack of a major agreement.

It would also seem important to point out that the greatest success in the US-indian relationship stems not from government to government action but from private citizens reaching out to each other and working with each other. The private sector is the strongest US-India linkage, having recorded far more success than the US-Indian Government relationship. And finally before we move on to the next big agreement, we best make sure the last big agreement (US-India Civilian Nuclear Agreement) is all it is cracked up to be, as of yet it has not been implemented and acted on as one would have hoped, a result of caution and reluctance on both sides.

I appreciate this articles sentiment, and believe strong that the Author is correct in suggesting that Obama has dropped the India-Ball but what it proposes is simply not possible at this time. As easy as it sounds, and as profitable and economically beneficial for all sides as it may be, it seems unlikely based on more holistic reading of the US-India relationship and its constraints.

Tum.
March 27, 2012 at 13:09

Re: food security.

By ‘simply no position’ I mean they can’t just open the gates and let international markets bring it to a price that locals cannot afford. The entire world is looking for food, and this will be in demand regardless of if there are trade protections.

Countries ‘supplying food’ would like to get access to markets as easily as possible, because demand is so large that you can choose who to sell too: those with less barriers for entry get easier access. Collectives seem to work better than outright monopolies, as it ensures competition in the domestic economy but purchasing power at the international level. These can be ensured by placing limits on the maximum number of farms an entity can own (direct or indirect).

Countries ‘demanding food’ take a much more strategic outlook: they make alliances and strategic investments to ensure stable supply. Diversification smooths out price and supply fluctuations.

So, free trade dynamics for necessities (i.e. food, water, energy):
– Supply countries make free trade agreements with demand countries
– Demand countries make restricted trade agreements with demand countries
– Supply countries make restricted trade agreements with supply countries

So, this means that countries really, really like providing global ‘necessities’. This explains why there is such a massive push in the clean energy sector: countries want to be the providers of next generation energy.

Tum.
March 27, 2012 at 12:30

The India-US relationship has quite difficult negotiation dynamics: their relationship is tightly wound with interconnected (and, in many cases, conflicting) interests: this makes negotiations extremely difficult.

In the broadest economic sense, a free trade agreement would make sense: India has past the point of development where they depend only on low grade goods; they have a rapidly expanding middle class that wants high grade goods, and developed countries can provide that.

A major sticking point between the two countries is, yet again, intellectual property protection. Developed countries are becomingly increasingly intolerant of developing countries stealing their intellectual property, and this is a very big deal in India – who has a rapidly developing IT industry. Although probably reluctant to admit it, they desperately need better systems and technology to accommodate for the enormous demands of their population; but risk crippling one of their most promising industries by turning a blind eye to illegally obtaining them.

However, agriculture is probably the largest sticking point between the two: India is just in no position to negotiate with the food security of over 1 billion people.

A (nearly) free trade agreement is possible between the two; it’s just a very difficult deal to negotiate.

First Advisor
March 27, 2012 at 10:17

An ordinary observer can only conclude that Patrick Christy doesn’t ever read Indian newspapers. The US government, and the American people, are regarded with extreme suspicion and deep hostility by a significant percentage of the Indian electorate. These are the political parties and religious organizations on the leftist side of social attitudes, often openly Communist or Socialist, or caste, tribal, or regional parties sympathetic to the deprived, downtrodden poor, and antagonistic to the rich and successful. They honestly, sincerely view Americans as imperialists and colonialists, in the US attempts to open up other nations to freer trade and investment, especially in the domain of financial services. For better or worse, both the Congress party and the BJP need some of those fringe parties as coalition partners, to form a majority in any national government, and often in state governments as well.

Combined with the truly egregious overhead that must be paid in bribes to do any business in India, that Europeans can conceal much more casually in creative accounting than American companies can, plus the constantly changing, unreliable laws, regulations, taxes, tariffs, insurance procedures and premiums, with the severely limited skilled labor force of India, the constant wars with farmers to buy land and contruct buildings anywhere outside a city core, the very thinly veiled hostility and contempt of the Indian people everywhere an American goes, including from a company’s own work force, investing in India has become the very last thing any US company would ever consider doing.

The Obama Administration isn’t to blame for this obstruction. The Indian people and the Indian government are responsible for the restrictions in trade and investment, and that’s the way they want relations to remain.

Leonard R.
March 27, 2012 at 08:59

I agree with this article completely.
India is a big part of the strategic picture for the US.
And it’s a big part of the economic picture.

Anjaan
March 27, 2012 at 06:51

To put it simply, the Americans have unrealistic expectations from India, a nation that has the potential to rival China by any yardstick of measure.

Obama hopes for an India that would fall in line, give up its strategic autonomy and put American interests ahead of its own, just like any other American ally.

Mr Obama, that is simply not happening …… trade or no trade …. !

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