What to take away from Obama’s Trip to India

02.10.15

What to take away from Obama’s Trip to India

02.10.15
Barack Obama

By Sam Cho for Global Risk Insights

President Obama’s three-day trip to India proved to be a major turning point for US-India relations. Aside from the symbolism of attending Republic Day, the trip resulted in some major agreements that helped to cement a firm foundation for future cooperation between the two countries.

The United States views India as a major potential market for US goods and both countries find the current geopolitical environment to be in favor of mending bilateral relations. This turnaround comes after the controversy surrounding the arrest of an Indian consular official in January 2014 which led to a complete breakdown of relations.

As expected, the first major agreement to come out of the trip was in the realm of security and defense. The two countries renewed the 10-year defense agreement that would continue the exchange between the world’s largest importer of weapons in India and the world’s largest supplier of arms in the United States.

Furthermore, the US-India defense partnership was elevated to the next level as the two countries agreed to jointly develop military hardware including Raven drones, jet engine technology, and systems for transport planes.

The continued defense cooperation is directly in line with Secretary of Defense Nominee Ashton Carter’s vision to take US-India beyond just a buyer-seller relationship.

The push for further defense cooperation mainly stems from the recognition of China’s increasing role in the region. A strong India provides to some extent a counterbalance to an increasingly aggressive China in the Indo-Pacific region. At the very least, it will ensure that no single power is dictating all the terms for the region in the years ahead.

New horizons in the Indo-American strategic partnership

The second major feat of the visit came when President Obama and Prime Minister Modi announced a strategic partnership on nuclear trade. The agreement would make it easier for foreign firms to invest in Indian nuclear power plants.

Previously, US firms were hesitant to invest in Indian nuclear plants because Indian law holds suppliers, builders, and designers liable for any accidents.

In addition, the US has traditionally demanded the tracking of nuclear materials. These were the two points of contention that prevented the progress on a number of nuclear-related issues under the Bush Administration.

The liability issue was addressed through an insurance pool risk-transfer mechanism that would reduce liability for US suppliers, while the US has agreed in return not to track nuclear materials. This agreement opened the door to continued and future cooperation between the two countries on the nuclear front.

Issues remain around trade relations

The trip, however, was not without its disappointments. There were no major breakthroughs on the trade front, which is likely due to the slow pace of domestic reforms that would create for a more favorable business environment. Two-way trade has stagnated at a $100 billion level since the year 2012, and it seems the Obama Administration’s goal of reaching $500 billion will be far-fetched without India’s much-needed reforms.

Further, India’s commitment to addressing climate change was modest. India agreed to phase down hydroflourocarbons (HFC) in accordance to the Montreal Protocol but set no specific deadlines or goals. It seemed as though talks of specific goals were being pushed off until the climate change conference in Paris later this year. India is currently the world’s 3rd largest carbon polluter and is expected to increase its use of coal as its demand for energy increases.

The success of President Obama’s trip seems to be largely in part due to the personal kinship and chemistry between two leaders. The two men appear to have a relationship that goes deeper than just national interests as Prime Minister Modi broke protocol and proceeded to hug President Obama upon his arrival.

In some ways, Modi being the leader to make progress in the way of US-India relations is ironic given that in 2005, the State Department revoked Modi’s visa and prohibited his entry into the United States for his suspected involvement in the Hindu-Muslim riots in 2002 where over 1,000 people were killed.

Whether or not the personal relationship between the two men will lead to progress on the issues of bilateral trade and climate change remains to be seen, but it is safe to conclude that President Obama’s trip has successfully turned the page to a new chapter for US-India relations.

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