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President Obama has called the U.S. relationship with India a “defining partnership of the 21st century.” So it’s no coincidence that the president begins his 10-day trip to Asia in the land of the tiger. With nuclear agreements in flux and major business deals on the table, lawmakers, allies and U.S. workers alike will be watching the visit closely. We explore what’s at stake.
- Arvind Panagariya Professor of Economics at Columbia University and a non-resident senior fellow at the Brookings Institution; Author of "India: the Emerging Giant"
- Simon Denyer Washington Bureau Chief, Reuters
MR. KOJO NNAMDIFrom WAMU 88.5 at American University in Washington welcome to "The Kojo Nnamdi Show," connecting your neighborhood with the world. Later in the broadcast, the Edinburgh Fringe Festival comes to the Kennedy Center. But first, President Obama has called the U.S. relationship with India a defining partnership of the 21st century, but when he lands in the land of the tiger on Saturday to start a 10-day visit to Asia, he'll have a lot of convincing to do and some big shoes to fill.
MR. KOJO NNAMDIUnder President George W. Bush, India got a landmark nuclear power deal that was seen as a watershed in U.S. India relations. And while the Obama administration has warmly courted India, remember that infamous state dinner for the prime minister? This month's visit doesn't have the so-called deliverables that the president would like to bring on his first state visit. But with a job-strapped electorate at home, the president will be angling to bring some commercial contracts back that will expand jobs and exports.
MR. KOJO NNAMDISo what can we expect from the president's trip? And what will the backroom conversations be about? Joining us to help us decipher this is Simon Denyer. He's Washington bureau chief for Reuters. He spent seven years as Reuters' bureau chief in Pakistan, Afghanistan and India. Simon, thank you for joining us.
MR. SIMON DENYERThanks, Kojo.
NNAMDIAnd joining us from New York is Arvind Panagariya, professor of economics at Columbia University and a senior fellow at the Brookings Institution. He's also author of, "India: the Emerging Giant." Arvind, thank you for joining us.
PROF. ARVIND PANAGARIYAMy pleasure to be here.
NNAMDIIt's a conversation you, too, can join at 800-433-8850. Do you think the U.S. needs to forge closer ties with India? 800-433-8850. Simon, President Obama's trip starts Saturday and includes visits to India, Indonesia, South Korea and Japan. What kind of message is he sending by starting in India?
DENYERWell, I mean, you mentioned he said that India is one -- the U.S./India relationship is one of the defining partnerships of the 21st century. That's something that we -- that they really felt under President Bush. I mean, he had a vision for the U.S./India relationship and arguably that was one of this greatest foreign policy triumphs was putting the U.S./India relationship on to a new footing and really in a new way.
DENYERHe had a vision that the world's two biggest democracies should be natural allies and partners. And unfortunately, we've seen that relationship stall a little bit under President Obama for a variety of reasons. And I think the president really wants and needs to get that back, get that sense of trust and partnership back in the U.S./India relationship because the two countries have an awful lot in common. They have a lot of differences, too. But I think if they can find common ground, it's very powerful for both the U.S. and India.
NNAMDIArvind, over the past few months, a mixed picture of U.S./India relations has emerged. On the one hand, there have been a lot of warm overtures and compliments about India by U.S. officials. On the other hand, commentators in India have complained that the U.S./India relationship has drifted or stalled altogether. Can you explain those two sides of the coin?
PANAGARIYARight. No. I think it's true, actually, you know. And this happened at the very beginning when President Obama, in China, kind of -- the communicator sign said something about China having an interest in South Asia. And that was seen rather badly in India because India really sees South Asia as its part of state territory. And I think it was subsequently when Prime Minister Manmohan Singh came to the White House -- again, you know, it was a great reception, but ultimately nothing concrete sort of came out of it.
PANAGARIYAAnd that has been lately followed by the kinds of protectionist rhetoric on outsourcing which really has -- gets received rather badly in India. So all those factors have sort of combined, even though the fact is that, you know, China being relatively a more belligerent and rival power the U.S. would ultimately perhaps would want a closer relationship with India.
NNAMDIWhat do you mean by the protectionist rhetoric?
PANAGARIYAYou know, the increase that happened in the visas for H1 and L1 visa holders, which basically -- you know, although it was a gentle change in the rules, only the Indian firms were going to be impacted by that increase in the visas by almost $2,000 per individual hired in each one. That, I think you know, was seen as an action that was sort of you know -- even if facially it was not targeted to India, it was seen in India to be targeted on India.
PANAGARIYAAgain, then Ohio, the state government took off its list India for any kind of contracts that might result in outsourcing. So that again, these are small matters, but apparently in India, this has a lot of negative press resulting from it.
NNAMDISimon, as Arvind just mentioned the president signed into law a bill that would raise the fees on certain H1B and L1 temporary worker visa holders by $2,000 and more. There's also a proposed new tax code that would end tax breaks for firms that create jobs and profits overseas. Is there any way for Obama to make these admittedly small protectionist moves easier on Indians, especially at a time when he faces what seems to be a fairly angry electorate at home?
DENYERYeah. I mean, it's a tough balancing act for the president obviously, but I do think that, you know, the relationship, the business relationship with the U.S. and India does benefit the U.S. as well. I mean, there's firms like Microsoft doing top-end research in Bangalore. There's a symbiotic relationship in the IT industry which helps keep American IT competitive. There's a shortage of software engineers here and Indians are coming to fill that shortage and to keep American firms competitive.
DENYERSo I think if you see the U.S./India business relationship as one where both countries can invest in each other and where the U.S. ultimately can gain access to a huge market in India as India opens up more and more, I think, you know, you need to keep your eye -- the president needs to keep his eye on the business leaders who are travelling with him. It's a very big business delegation, 200 business leaders, one of the biggest business delegations ever to travel with the president.
DENYERSo they clearly see the potential of that relationship. So instead of these small measures -- which really don't make a lot of difference to anybody, but they annoy people. You know, they don't really help anybody. They're not big changes in the law, but they just -- they create that sense of mistrust. And I think the president really has to show that there's a long term relationship of trust between the U.S. and India which is growing and developing. That's the most important thing. And that's the thing that's been slightly lost under this president.
NNAMDISimon Denyer is Washington bureau chief for Reuters. He spent seven years as Reuter's bureau chief in Pakistan, Afghanistan and India. He joins us in our Washington studio. You can join the conversation by calling 800-433-8850. Do you agree with the recent moves to raise fees on temporary worker visas? You can also go to our website kojoshow.org and ask a question or make a comment there. You can send us a tweet at kojoshow. Joining us from studios in New York is Arvind Panagariya, a professor of economics at Columbia University and a non-resident senior fellow at the Brookings Institution, author of the book, "India: the Emerging Giant".
NNAMDISimon, this seems to be a largely symbolic visit, but one of the elephants in the room is China. Is this visit also a kind of insurance policy against China's increasing assertiveness?
DENYERWell, yeah. I mean, I think that the U.S. isn't going to get much out of China if it sees -- if it goes into the U.S./China relationship as a confrontational relationship. It really needs to work around China. It needs to get consensus among other Asian nations so it's got to find common ground with India. If it's going to balance Chinese influence in Asia, it has to find that common ground on India, whether it's on trade, whether it's on climate change, whether it's within the G20. All of these issues, I think that the U.S. somehow will find it slightly easier to find that common ground with India. And if it does, then it balances the China influence.
DENYERThe Chinese won't want to be left out of an emerging consensus. They're not going to do what the U.S. wants them to do. If the U.S. says you've got to do this, they're going to say no. But if there's an emerging consensus, the Chinese are more likely to go along. So this is really important. It's not a military balance of power game, but it is a balance of power game within Asia and increasingly at the G20 and fora like that.
NNAMDIArvind, is India willing and able to play this counter-weight role to China?
PANAGARIYAIndia has a very, very long border with China so India certainly doesn't want to get into a relationship of rivalry with China so it will try to maintain friendly relations. But on the other hand, of course, you know, from the U.S. perspective, it seems to me that India doesn't have any territorial ambitions. It is basically interested in economic growth, elimination of poverty and in this sense, it is a democracy as everybody loves to repeat. So all those characteristics and factors actually make India potentially a much friendlier country, a country which will play by the kinds of rules that the United States likes to play by.
PANAGARIYAThere is, at least -- you know, from the moment that it happened -- lately, China seems to see itself more as a kind of, you know, rival power. On occasions and occasions, you see some belligerence out of it in dealing with Japan, for instance, the South China Sea and so forth. So I think this balancing act, as Simon has said, is a very important one and something needs to be salvaged back with the kind of unease that has come to exist within India with the U.S. under the president -- under the current president. I think that needs to be kind of rolled back a bit.
NNAMDIYou mentioned the democracy and everybody talks about, as you said, the two largest democracies. Are you suggesting that there's more of a natural congruence or natural harmony of interests between India and the U.S., rather than China and the U.S.?
PANAGARIYAI think in the long run it is. I mean, it also depends ultimately, you know, on how China itself evolves. You know, if ultimately whether China would, you know, 15 years, 20 years down the road, itself become a democracy, that would be a different thing. But from, you know, all signs, it seems to me that the party dominance within China and one-party rule within China is here to stay.
PANAGARIYASo with that, I certainly think that, you know, India, in this sense, is much more like, you know, America is. It's a very -- all the institutions within India are very much, very much Western institutions, the democracy, the judiciary, the role of NGOs. They really are the kinds of institutions that we see here.
DENYERYeah, having lived in both countries, I have to say there's something -- you know, there are some things in the spirit of both countries which is similar. It's democracy. It's the separation of church or religion and the state. It's freedom of speech. It is innovation and enterprise and opportunity, that kind of philosophy. And it is diversity, diverse peoples making up a single nation. So I think there are a lot of differences -- there are differences on a whole range of issues, but you look at the PEW surveys of global opinion. You get very positive pro-U.S. comments from the Indian people.
PANAGARIYAYeah, Indians love Americans...
NNAMDIHere is Walter in Stirling, Va. Walter, you're on the air. Go ahead, please.
WALTERWell, thank you very much for taking my question. I have a problem with this discussion right now, with the outsourcing and the shortage of software engineers in the United States. Who is kidding whom? When I know so many of those engineers without jobs, I think this is nothing more than cheap labor and this is what bothers everybody in the U.S., outsourcing when we have plenty of qualified employees. But can you explain me on that?
NNAMDISimon, the Obama administration is emphasizing that outsourcing to India is part of a broader economic trade-off between our two countries. What is the U.S. getting in return? You mentioned Microsoft earlier.
DENYERRight. I mean, there is that and there is that IT relationship. But, you know, there's every chance that India is going to open up its retailing business soon and that's a big opportunity for companies like Walmart to get involved. There's a lot of money here. And I think the U.S. companies, if they can get access to the growing Indian middle class, which they are doing, but the more access they get, that means a lot more jobs and opportunities and a lot more trade.
DENYERU.S. India trade is tiny compared to U.S. China trade. It's about a tenth of U.S. China trade. But there is real potential. Look, in globalization, there are always winners and You know, people will lose their jobs in one place and gain jobs elsewhere. But, I think, the overall potential for the U.S./India relationship is one that will grow jobs in this country and grow jobs in India.
WALTERAll right. Let me just reinforce a little bit of that.
WALTERYou know, India is going to be growing -- has been growing a lot, you know, in dollar terms, 10 percent, a year or more. And it's going to continue for the next 10 to 15 years. And it'll grow from one trillion to about five trillion dollars economy in next 15 years. So this is a big huge market out there, particularly in terms of growing market and there are plenty of deals for the United States, you know. Even on this visit, they're talking about Boeing getting deals, what, about five to six million dollars. There's these (unintelligible) companies that our companies are going to be investing in, the different contracts that we will be getting for the United States so there is plenty for both sides to gain.
NNAMDIWalter, thank you very much for your call. We'll be taking a short break. When we come back, we'll continue this conversation on President Obama's upcoming trip to India. But you can still call us, 800-433-8850. What do you hope to see from the president's trip to India? You can also send us an e-mail, email@example.com or tweet at kojoshow or go to our website, kojoshow.org, and join the conversation there. I'm Kojo Nnamdi.
NNAMDIWe're discussing President Obama's upcoming trip to India with Arvind Panagariya. He is a professor of economics at Columbia University and a senior fellow at the Brookings Institution. And Simon Denyer, Washington Bureau Chief for Reuters who spent seven years as Reuters bureau chief in Pakistan, Afghanistan and India. Simon, George W. Bush was able to develop strong ties with New Delhi by giving India a civilian nuclear power deal. But President Obama doesn't exactly have that kind of deliverable, certainly not along the magnitude of the nuclear deal on his first visit to India. What does he bring to the table? Arvind already mentioned the deal involving Boeing. Anything else?
DENYERWell, there are a bunch of business deals that are there. And I won't list them, but, I mean, you know, as I said to you earlier, 200 business leaders, that's a pretty impressive business delegation. It shows you something about the potential for the relationship and the amount that U.S. companies want to get involved in the Indian market. It would be great. I mean, the nuclear deal has actually stalled a little bit because the Indian parliament has passed a law which would have given liability for any future accidents to suppliers of nuclear equipment.
DENYERSo if a U.S. company supplied equipment to a nuclear plant in India and there was an accident 10, 20 years down the line, the U.S. company might be liable for some of the damages. And that is not in accordance with international norms on liability and that is a bit of a problem. So I think the president would like to address that with the Indian Prime Minister and see if there's any way that can be changed.
NNAMDIIt's my understanding, though, that India has sent signs that it's willing to sign an International Convention that would allow it to tap into a pool of foreign money to pay out any claims in the event of a nuclear accident. That's conceivably, presumably, one of the things that the President will be discussing.
DENYERAbsolutely. That, you know, he wants to find a way through that, which would allow companies like G.E. and Westinghouse to actually invest in India and not -- you know, this all dates back to Bhopal. The Bhopal gas..
DENYER...you know, and there's a lot of resentment still in India. That's a wound which hasn't healed, you know. And...
MR. ARVIND PANAGARIYARight. And remember that the BP spill here didn't help, either. You see, because their -- we subjected BP to a very high -- liability also. So I think that was -- the timing of that incident was such that -- this is precisely when the liability bill was being discussed in the Indian Parliament so hard liners kind of got an edge as a result, that -- we're looking at here, you got the U.S., a big power, it asks for $20 billion of liability. How come we don't? So that timing kind of didn't help either.
NNAMDIArvind, you've written that there's a lot of trade and business deals that the U.S. would like to see from the trip, but not so many from the Indian side. What are some examples of that?
PANAGARIYAYeah, you know, India, big thing that it has been really pushing for hard, and I read that maybe there was some movement on this, has to do with the dual-use technologies. Technologies that have also been in military use. India's on the list of these countries which are not allowed to buy these technologies from the United States. So that's one of the big things that it's kind of pushing for. It also wants membership in the nuclear suppliers group. It's wants support from the United States for a permanent seat on the security council, those are the kinds of things.
PANAGARIYABut on the economics side, I really think that, you know, Indian side pretty much sees this as something that'll happen on its own, through business to business contacts, business to customer contacts and so forth. So on the economic side, I don't see big demands kind of, you know, other than the fact that the dual use technology does have economic implications.
NNAMDIHere's an e-mail we got from Carl, in Gaithersburg, Simon. "Do your guests expect" -- and this for you, too, Arvind, "Do your guests expect that the president will make any under the radar moves to deal with the rivalry between Pakistan and India? It seems that the situation in Kashmir is standing in the way of a lot of American security interests in the region. Both the economic relationship between India and the U.S. seem to be what the White House is emphasizing." But first you, Simon, and then you, Arvind. What will be the subject of the behind-the-scenes talks?
DENYERThis is an incredibly tricky part of the relationship, actually. I mean, I do think that the India/Pakistan rivalry is something that -- and the Kashmir dispute, which at the core of that is something which poisons the region and it spills over right into Pakistan support for Islamic militants, Pakistan's support for the Taliban in Afghanistan to counter Indian influence. The rivalry really is a poison at the heart of the region. And if, you know, India and Pakistan were at peace, the whole of South Asia would be a so much more secure place for the whole world.
DENYERSo the president would like to push India towards, you know, making the situation in Kashmir better. It's flared up again this year. There's been a lot of protests and a lot of unrest. But the Indians are very, very sensitive about this. They really don't like outside interference in the Kashmir dispute. Talk of appointing a Kashmir envoy, which Obama talked about during his campaign, really went down incredibly badly in India at the time. And I was there and I saw how people really bridled at that. So it's one to -- the president will try not to say anything publicly or say as little as possible publicly. Behind the scenes, it's going to be very tough. It's going to be very tough.
DENYER'Cause the Indians don't want to be pushed, but the President clearly wants them to take a more soft -- a softer approach, let's say, to the problems and the aspirations of the Kashmiri people.
NNAMDIArvind, your colleagues at -- colleague at Brookings, Bruce Riddell, says that, "It will be Pakistan that dominates the private conversations between the Prime Minister Manmohan Singh and Congress Leader Sonia Gandhi with President Obama." Do you agree?
PANAGARIYAI think so. I think so. I think one of the things, at least on the Indian side, that's going to raise is, you know, what role India will have in Afghanistan after the United States kind of leaves, at least, you know, the army presence are reduced considerably. Because India, you know, under the current situation, has gone in, in a big way. There is about a billion dollar a year aid program in Afghanistan and lots of Indians doing civilian aide work. So there is a lot of uneasiness that -- what role does India have left after the U.S. military essentially leaves.
NNAMDIIndeed, Simon Denyer, how can President Obama address the widespread concern that it's India that will be left holding the bag as U.S. forces begin withdrawing in 2011?
DENYERLook, everybody's worried about this. The Pakistanis are desperately worried about it and they're positioning for the U.S. to leave, too, and not in a way which is productive or in the world's interest. I mean, by continuing to support the Taliban urgently so it is a concern. You know, India is looking to -- maybe it should be reaching out to Iran. If the U.S. is gone, maybe it should have -- it should continue to have traditional ties with Iran to make sure they aren't undermined because they have to be partners in stabilizing Afghanistan.
DENYERThe problem is, this deadline that President Obama has set for the start of withdrawal of U.S. troops in Afghanistan is being seen by everybody in region, really, as a signal that the U.S. is leaving. And therefore we have to start looking for, you know, the game after the U.S. is already gone. So people have turned their attention from the U.S. presence to the U.S. absence, the U.S. withdrawal. And everyone's positioning for -- and it's not -- it's something that I think has rebounded quite badly because, you know, the U.S. needs to show people that they're committed to the region and not that they're desperate to leave.
NNAMDIOn to the telephones. Here is Jose in Washington, D.C. You're on the air, Jose. Go ahead, please.
JOSEGood afternoon, gentlemen. I just wanted to make a comment, since you were talking about sending jobs offshore to India. I've worked for Microsoft for over a dozen years and had over 50 IT professionals and software developers that work for me. And we began outsourcing jobs and bringing folks from Microsoft India to work on projects in the U.S. for fortune 500 companies and we were paying, on average, $10 to $20 an hour for those resources. I've seen that since 2002, Microsoft and IBM and most of the leading technology companies of the United States lay off thousands of IT professionals and software developers.
JOSESo to the statement that we have a shortage of engineers and software developers in the U.S. is hogwash. What we may have a shortage of is of engineers that would work for $10 an hour. And what we need the Obama administration to do is to provide some tax law changes and incentives to keep those jobs here in America.
NNAMDIThat would not sit well in India, would it, Arvind?
PANAGARIYAYeah, look, you know, I mean, trade is a two-way street. If we say here that, no, we are getting out of any outsourcing, whatever, the same actions will happen against us by the other countries as well so we will lose our export markets, too. And remember that ultimately the U.S. and India and China, everybody is gnawing the global market place.
PANAGARIYAAnd if we withdraw out of, let's say, outsourcing because we are to support the high raises here, in the ultimate, we are going to end up making many of the companies uncompetitive in the global marketplace. And therefore, while you try to save 5,000 jobs here, you might actually lose another 50,000 by becoming uncompetitive and some of the business may have to go under as a result. So it's not as simple as we would like it to be.
NNAMDIAnd Simon Denyer, how about the complaint that you hear from some businesses that opening a business in India can be pretty difficult because of the laws there? Is that one of the things that the president is likely to be discussing with Indian officials?
DENYERI would hope so, yes. I mean, I certainly share that. I've spoken to a lot of foreign businessmen in India over the years and they really complain that getting they're -- finding their way through the Indian bureaucracy and the Indian rules is tremendously difficult and much more difficult than it is in China, where you can deal with one or two officials and just get through much more easily. So, you know, India makes these noises about the globalization and the global marketplace, but actually bureaucracy is still living a few decades, you know, in the past.
DENYERAnd I do think it's something that India needs to address. But somehow with India, you know, it does get there in the end as a country. Through this bureaucracy and through the inefficiencies of India, somehow it's still growing pretty fast. And I think that it's the same for U.S. companies or foreign companies working there. If they can negotiate their way through the bureaucracy, then eventually they get a place in the Indian market.
DENYERThen they're in a market which is growing at, you know, 8, 10 percent a year. And where would the global economy be, frankly, now if it wasn't for the fact that the India and China were growing? I mean, we'd all be in a worse mess than we are now.
PANAGARIYABut also into the, you know, bureaucracy, what -- one thing that has been happening is that lot of the states are competing for investments and, you know, the some of the states are very forward-looking so they're -- take the state of Gujarat. Doing business is relatively easy entry and all the clearances you need are very quick, which is Minister himself takes the matter in his hands and moves forward. So this competition has now finally begin among the states. So I'm fairly optimistic that, you know, what we see in terms that if there's still remaining restrictions, they will go, as a result of this competition, pretty rapidly.
NNAMDIJose, thank you very much for you call. We move on to Joann in Shenandoah Valley, Va. Joann, you're on the air. Go ahead, please.
JOANNYour show is really quite interesting and I'm glad I have the opportunity to ask this question. I've noticed a pattern where a lot of gas stations and motels in the United States are being acquired by individuals from India or Pakistan. Is there some type of incentive being offered by the U.S. government or their governments for them to open this type of facility in the United States?
NNAMDINot that I am aware of.
PANAGARIYANo. Not true, actually. This is market driven. It's a -- and, you know, and then a network. There are, you know, national networks, I mean, individuals privately, family ties and so forth that lead to expansions. Similar thing had happened in the hotel industry, the motels in particularly. You know, the patels which is a kind of, you know, community from India, they really acquired, in a big way,, the motels in the United States. And a lot of the people kind of came to call them in a funny sort of way that -- that these were turning in patels. So this is all market driven. It's all market driven.
NNAMDIThank you. Thank you very much for your call, Joann. We're almost out of time. But President Obama is making it a point to stay at the Taj Mahal Palace in Mumbai, which is the site of the November, 2008, terrorist attacks, yet his handlers have ruled out a visit to the Golden Temple because he would have had to cover his head. Is this just a bungled move on the part of the president's handlers or is this saying something more serious to Indians on the eve of his visit, Arvind?
PANAGARIYAWell, I, you know, my view is that generally Indians are good sports in these matters so they'll forget about it. I really don’t think it's going to have any serious backlash. It's just that the president's handlers did bungle it up a bit, you know. The decision in the beginning to take him to the sick holy place, have -- because the current Prime Minister happens to be sick was probably not a good one. I mean, India is a very diverse country and you've got Christians and you've got Hindu and then you have Muslims and you got Buddhists and so forth. So, you know, to particularly pick the sick holy place is probably a mistake to begin with.
NNAMDIAll politics as they say, Simon, is local and the president probably -- his people didn't want that photo op with the president wearing a Sikh turban on his head.
DENYERI think that's the reason, absolutely, Kojo.
NNAMDISimon Denyer is Washington bureau chief for Reuters. He spent seven years as Reuters bureau chief in Pakistan, Afghanistan and India. Simon, thank you for joining us.
DENYERThanks, it's great to be here.
NNAMDIArvind Panagariya is professor of economics at Columbia University and a senior fellow at the Brookings Institution, author of the book, "India: the Emerging Giant." Arvind, thank you very much for joining us.
PANAGARIYAThank you, my pleasure.
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