Hyde Act: An ‘all win’ agreement
FTA will enhance trade relations

IF the U.S.-India Civilian Nuclear Agreement (or Hyde Act) process fails, the U.S.-Indian relationship is certainly not going to backslide but surely it will slow down the pace of the deepening of the relationship, so feels Sanjay Puri, Chairman of the US India Political Action Committee (USINPAC). “It will be negatively impacted and India’s image will clearly suffer in the eyes of American business interests and foreign policy elites, however, the shared values, the converging interests, the strategic imperatives will all remain,” he said in an interview with Amitabha Sen.

On US-India trade relations Puri who is also the Chairman of the US India Business Alliance said: “Positive trends and policies notwithstanding, there are a number of ways USINPAC believes U.S.-India trade relations can still be enhanced. One of these areas is to open discussions on forming a Free Trade Agreement (FTA) between the two countries.”

NEED FOR CLOSEST INDO-US ALLIANCE

The shared values of the United States and India should be obvious to anyone. Here we have the oldest democracy and the largest democracy in the world. Both societies are multi-ethnic, multi-lingual, and multi-religious. Some of the closest-knit relationships in the world today are those that exist between democratic, pluralistic societies with liberal economies. Just on these bases alone, the U.S.-Indian relationship should have always been one of the closest. As we know, however, for the better part of the 20th century the Cold War subsumed all of international politics and so too it prevented a closer alliance and deeper cooperation between the United States and India.

Many observers see the U.S.-India Civilian Nuclear Agreement (or the Hyde Act) as the linchpin in U.S.-India relations. Although clearly the focal point these days, this agreement does not represent a linchpin. Despite the monumental importance and historic nature of this agreement, it would never have come about if shared values, converging interests, and strategic imperatives had not already existed between the two countries. Stating this, however, does not diminish the critical importance of the U.S.-India Civilian Nuclear Agreement and the fundamental alteration in the global nuclear nonproliferation regime it represents. Nor does this minimize the extent to which this agreement is capable of accelerating the positive evolution of U.S.-India relations.

Most commentators agree these days that the greatest challenges we face globally in the near term are transnational in origin, e.g., global climate change, weapons of mass-destruction, terrorism, trafficking in people and narcotics, and international crime. None of these problems can be effectively approached unilaterally by any one country. Confronting these problems requires partners who can function on a global basis. India represents such a strategic partner for the United States. These shared values also make it easier to build and maintain a consensus in dealing with these transnational challenges. Lastly, India clearly has a stake in helping alleviate these problems in conjunction with the United States.
The U.S.-India relationship did not begin with the U.S.-India Civilian Nuclear Agreement, but rather this process was borne out of the already frequent and strong cooperation that existed between the two countries. As all of this did not begin with this process so too it will not end with this effort if that is the final outcome here.

Strategically-speaking, the United States and India share concerns about the rise of China. Sharing a northern and an eastern border and having fought a border war with China in 1962, India does not require any cajoling to be attentive here. India’s million-man army, the world’s fourth largest, and its blue-water navy make it a natural buffer. By the middle of the 21st century, a demographically and economically vibrant India can serve as a counterweight not only to expanding Chinese influence in Southeast Asia but also to China’s great-power ambitions in other locations around the globe.

As hinted at initially, however, most current questions about U.S.-India relations center on whether the process began by the U.S.-India Civilian Nuclear Agreement will move forward to completion or not. In order for this to happen, the United Progressive Alliance government of Prime Minister Manmohan Singh must successfully weather the domestic dissent surrounding this process and conclude a safeguards agreement with the International Atomic Energy Agency (IAEA). After the IAEA agreement, the 45-nation Nuclear Suppliers Group must agree to modify its export control standards to permit nuclear cooperation, and then the Section 123 Agreement implementing the cooperation between the United States and India can be sent to the U.S. Congress for its endorsement.

SHELF-LIFE & TIME CLOCK

Under the circumstances, predictions of success or failure here are probably not very helpful. It is important to note, however, that the historic nature of this process, the tremendous effort for its passage by the Indian-American community and others in the United States, the intensity of the political opposition in India, and the election-year focus in the United States all contribute to the assessment by many that

Not only have trade flows more than doubled, but – with the creation of the Trade Policy Forum (TPF) and the CEO Forum – we have created the architecture of a trade relationship that should serve both countries well in the years ahead.
the agreement as it currently exists has a shelf-life and a time clock operating both in India and the United States. Aside from this observation, perhaps a more meaningful question would be what happens to U.S.-India relations if this agreement process as currently envisioned fails? Will the U.S.-Indian relationship backslide? Absolutely not. Will the pace of the deepening of the relationship slow? It will be slowed, yes. It will be negatively impacted and India’s image will clearly suffer in the eyes of American business interests and foreign policy elites, however, the shared values, the converging interests, the strategic imperatives will all remain.

The U.S.-Indian relationship did not begin with the U.S.-India Civilian Nuclear Agreement, but rather this process was borne out of the already frequent and strong cooperation that existed between the two countries. As all of this did not begin with this process so too it will not end with this effort if that is the final outcome here. Who benefits if the U.S.-India Civilian Nuclear Agreement succeeds? Well clearly, energy and defense interests in India and the United States benefit, but are they the only winners here? Not really, truthfully we all win, even the critics and the opponents, because the U.S.-India relationship is one that makes sense on all levels. This is not to say that both partners and all interests and individuals in both countries will always win equally, just as they will not always agree on everything in either society for that matter, but rather the undeniable underlying dynamic here is quite logical and should not be fought. It should in fact be cultivated, facilitated, and nurtured resulting in a relationship where both the United States and India continue to grow in what they gain positively from one another. This is the kind of relationship that the Indian-American community desires. This is the kind of relationship that the U.S.-India Political Action Committee (USINPAC), an organization I founded five years ago and still lead, will continue to support.

ARCHITECTURE OF TRADE RELATIONSHIP

One area of the U.S.-Indian relationship deserving of special attention is trade. Bilateral trade has developed enormously in the past six years. Not only have trade flows more than doubled, but – with the creation of the Trade Policy Forum (TPF) and the CEO Forum – we have created the architecture of a trade relationship that should serve both countries well in the years ahead.

Today the U.S. is India's largest trading partner and foremost export destination accounting for 17 percent of Indian exports and around 6 percent of Indian imports. India accounts for only less than one percent of total U.S. exports and imports. While U.S. exports to India have grown by over thirty-five percent in 2005-06, India's exports to the U.S. have shown a growth of over twenty-six percent. With the trend of increased trade volume continuing, the governments of the United States and India are confident of achieving the TPF objective of doubling U.S.-India trade in 2009.
“…the United Progressive Alliance government of Prime Minister Manmohan Singh must successfully weather the domestic dissent surrounding this process (of Civil Nuclear Cooperation Agreement) and conclude a safeguards agreement with the International Atomic Energy Agency (IAEA).”

NEED FOR FTA

Positive trends and policies notwithstanding, there are a number of ways USINPAC believes U.S.-India trade relations can still be enhanced. One of these areas is to open discussions on forming a Free Trade Agreement (FTA) between the two countries. This suggestion gained momentum recently with Congressman David Dreier’s (R-CA) announcement at the World Economic Forum held in December 2007 of his intent to introduce legislation in the U.S. Congress calling for FTA talks.

Other areas requiring enhancement are:

Encouragement of greater Foreign Direct Investment (FDI) in India by removing limits on majority foreign ownership, particularly in the manufacturing and retail sectors.
An easing of entry by American and Indian firms into various fields in both countries including insurance, banking, private equity, and venture capital.
Supporting the Indian government's current emphasis on investment in physical and human infrastructure including energy, road and rail, and primary education.
Harmonizing legal protection of intellectual property rights, tighter Indian enforcement of laws against piracy of intellectual property and expanded U.S. enforcement of laws against piracy of intellectual property.
Promoting cooperation in research and development of new technologies in key sectors including agriculture, energy, life sciences, waste management, and information technology.

January 7, 2008