The Debate

The US-India-Japan Trilateral: Economic Foundation for a Grand Strategy

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The Debate

The US-India-Japan Trilateral: Economic Foundation for a Grand Strategy

What happens when the world’s oldest, largest, and most responsible democracies meet?

The US-India-Japan Trilateral: Economic Foundation for a Grand Strategy
Credit: Flickr/ MEAIndia

What happens when the world’s oldest, largest, and most responsible democracies meet? Six years ago, the United States, India and Japan set up their first official trilateral meeting and decided to meet annually. Together, they represent 25 percent of the world’s population and 35 percent of global GDP. Common goals of economic development, managing China’s territorial aggression in South and East Asia, and preservation of the liberal democratic order bind them together. Undoubtedly, they make a compelling strategic logic to come forward and work together to ensure peace and stability in the Indo-Pacific region.

But so far, this trilateral has failed to graduate from constructive symbolism to actual substance. The absence of a robust economic foundation is stunting its strategic potential. A deeper economic engagement will enmesh each other’s priorities, giving shape and form to their strategic goals in the Indo-Pacific region.

Skeptics are right when they question the real value of this partnership: The Obama Administration’s “pivot to Asia” is arguably dead and Asian allies and partners are rethinking their reliance on the United States. In a last-ditch effort, despite his unpredictability, hopes are pinned on President Trump’s promise of standing up to China’s belligerence.  In India, one wonders if Prime Minister Modi’s “Look East” policy involves the United States, or is a strategy to exclusively strengthen East Asian camaraderie. India is still a developing country, remains uncomfortable with any labels of “alliances,” and its relationship with Japan is largely defined by development assistance rather a trade partnership. Meanwhile, the U.S. withdrawal from the Trans Pacific Partnership and Trump’s inward-looking trade policies signal a huge blow to Prime Minister Abe’s attempt at addressing Japan’s economic woes.

China unites them. Its military continues to encroach on India’s northeastern border; while refusing to scale down its territorial infringement on international waters in the East and South China Sea. But China also divides them: The trio flirted with establishing a “democratic quadrilateral” with Australia in 2007, which was quickly dismantled for fear of ruffling China’s feathers. The combined trilateral trade of $400 billion pales in comparison with U.S.-China trade of $660 billion alone.

Yet this combination — America’s commitment to democracy and robust military capabilities, the promise of India’s rapid economic growth and strategic location in the Indian Ocean, and Japan’s initiative to protect the collective freedom of navigation for trade — cannot be squandered away. For the trilateral to succeed and mount the pinnacle, economic goals should drive the relationship to move from symbolism to functionality, and eventually substance. It will also help assert India’s foreign policy posture in the region.

First, the trilateral should be used to strengthen the respective bilateral relationships. The United States and India have never been closer but need to act on a clear plan to rise from their goal of $100 billion to $500 billion in bilateral trade. They need to prioritize the free trade deal and operationalize the nuclear deal that marked the peak of their relationship.

The shifting dynamic of the revered U.S.-Japan alliance should be addressed. In their upcoming bilateral summit, both Trump and Abe need to resolve  qualms on trade and tariffs, cost of basing U.S. forces, and a renewed Japanese commitment to stand up for the United States with the reinterpretation of the Constitution on collective self-defense. While the India-Japan relationship enjoys an enviable bonhomie, their bilateral trade currently hovers just around $15 billion. Leadership chemistry could tie the partnership well together. For instance, the indomitable kinship between Modi and Abe, and their respective optimistic beginnings with Trump, should be leveraged for the upcoming dialogue in Delhi this summer.

Second, the United States and Japan should double down to propel economic reform in India. As a non-ally of the United States, India is the odd man in the relationship. As a developing country, joint strategic goals also mean opportunity costs when capital is deployed to scale up economic prowess. At the government level, the United States and Japan are best placed to work together to share recommendations with India on ease of doing business and global best practices on trade facilitation. Modi is competitive and wants India to rise up the ranks of global indices measuring business friendliness. The United States and Japan should also help develop India into a major logistics hub in the Indian Ocean region – witness to 40 percent of global trade – and help design the criteria for their new ranking on logistics performance for states. They should also work as partners to improve India’s innovation and intellectual property environment to enable defense technology transfer as well as address liability issues with regard to their respective nuclear deals with India.

Third, the government-level dialogue should create a forum on the sidelines to involve the private sector. This will inject the missing ingredient to pivot the economic relationship forward. The three countries could start with a shortlist of jointly investable projects and exclusively identify special economic zones. For example, the Delhi-Mumbai Industrial Corridor currently being developed by Japan offers several opportunities for U.S. companies. As India moves into a cashless economy, already well-established U.S. financial services companies could help set up payment systems for the Japanese high speed rail project between Mumbai and Ahmedabad in India. The United States and Japan could also adopt a Smart City in India to develop urban infrastructure.

In light of Trump’s deal-making nature, Modi’s incremental shift away from a nonaligned foreign policy, and Abe’s vision of a more assertive Japan, a stronger trilateral partnership makes sense. It is heartening to see their annual Malabar naval exercise graduating from a relationship of trust and goodwill to that of building joint capabilities. Japan’s emphasis on a long term Asia strategy and patience with India can help neutralize America’s impatience to socialize India to play a bigger role in regional strategic affairs, and ultimately use the platform to reaffirm the liberal world order. A strong economic foundation would best dictate the grand strategy of this trilateral partnership.

Hemal Shah is Manager for Policy Advocacy at the U.S.-India Business Council in Washington, D.C. and recent participant at the German Marshall Fund’s Young Strategists Forum in Japan.