Transforming the US-India Relationship

Released by the United States Embassy

Honored guests, ladies and gentlemen.

In my office in Roosevelt House - the US Ambassador's residence in New Delhi -- before first light each morning I prepare for the coming day by reading online newspapers and analytical websites first from the United States, from around the world, from the rest of Asia, and finally from India. This sequence is conceptually purposeful. I initially review the latest policy developments in the United States, as described in the major American newspapers and political websites. This provides me with an overview of the progress of President Bush's policy agenda at home, and highlights any US domestic events that might affect the pursuit of the Administration's objectives regarding India.

By next scanning newspapers and analyses from elsewhere in the world, I can better appreciate the international setting in which the President is developing and implementing his general foreign and defense policies and, again, how those events relate to US-India relations in a global context. Then, I narrow my e-focus to Asia, and then to South Asia. Finally, I look each morning at seven or eight Indian newspapers online for developments in India that could affect Indian policy and especially the President Bush's objectives with respect to the US-India relationship. I went through this daily ritual in my hotel room here in San Jose early this morning.

My e-methodology is a small example of the transformed global character of the US-India relationship. The organizing theme is not as narrow as America, India and South Asia. Rather, it is the United States and India in the world. And it is fitting that I study these matters early each day through information technology and the Internet, that exquisite global exhibit of American and Indian invention, energy and function.

I have given many speeches in India since my arrival there, although none of them are as eloquent as those given forty years ago by my predecessor and Harvard faculty colleague John Kenneth Galbraith. Here is one of my favorites of his many trenchant observations, "There are few ironclad rules of diplomacy but to one there is no exception. When an official reports that talks were useful, it can be safely concluded that nothing was accomplished."

Hoping that you will not find my presentation today "useful" in Galbraith's terms, in the next few minutes I want in a composite way to reinforce preeminent themes that I have enumerated in formal remarks while American Ambassador to India.

A Big Idea

President George W. Bush for the past 24 months has been busy implementing a radically new big idea about US-India relations. He took office determined to move US-India ties to new heights. He saw that our bilateral interaction was still essentially weighted down by Cold War concepts and baggage, still defined largely by disagreements, still limited by infrequent contact. Neither side gave the relationship the high priority it deserved, and efforts to improve it lacked urgency and stamina. The President was determined to change that disjunctive pattern.

His big idea is that by working together more intensely than ever before, the United States and India, two vibrant democracies, can transform fundamentally the very essence of our bilateral bonds and thereby make the world freer, more peaceful, and more prosperous. In short, President Bush has a global approach to US-India relations, consistent with the rise of India as a world power.

I was present at the creation, or at least at one of the earlier expressions, of this big idea when I worked for Governor Bush during his presidential campaign, and witnessed first-hand his respect for and fascination with India. When I asked then Governor Bush in Austin, Texas, in early 1999 about the reasons for his obvious and special interest in India, he immediately responded, "a billion people in a functioning democracy. Isn't that something? Isn't that something?" The concept of democratic India, a billion-strong, heterogeneous, multilingual with its vibrant press and respect for the rule of law, has a powerful attraction for this American President.

He made many of these same points to me when I saw him in New York last September 12, just after his speech to the General Assembly and before he met Prime Minister Vajpayee. It was crucially because of President Bush's powerful vision regarding US-India relations that, when he asked me what I would like to do in the new Administration, I said that my first choice was to be American Ambassador to India. Fortune smiled. He agreed.

Zero Tolerance for Terrorism

This speech today is not primarily about international terrorism, but I do want briefly at the outset to emphasize that some say that with respect to identifying terrorism, "it depends." To the contrary, I say that defeating terrorism for the United States and India is a matter of survival for ourselves, for our democratic values, for our religious freedom, for our children, for everything that we hold dear. Socrates thought that, "the beginning of wisdom is the definition of terms." So let us please name those for what they are, who murder innocents for political motives and who seek to bring down the very pillars of our democracy -- in New York, in Washington, at the Assembly in Srinagar, at the Parliament in New Delhi.

These murderers are not misunderstood idealists. They are not disadvantaged dissidents. They are not religious perfectionists. And they are not freedom fighters.

They are terrorists, and we should always be sure to call them exactly that. .

Working with dozens of like-minded nations, the United States and India will win the war on terrorism. And that war will not be won until terrorism against India is ended once and for all. To quote my Harvard Kennedy School colleague and Ambassador to India 1973-1975, Daniel Patrick Moynihan, "reason and careful moral reflection…teach us that there are times when the first and the most important reply to evil is to stop it."


US-India Relations in the Past Two Years

Two years ago, under the 1998 US sanctions regime, the United States and India seemed constantly at odds. Today, President Bush has this to say about India, "The Administration sees India's potential to become one of the great democratic powers of the twenty-first century and has worked hard to transform our relationship accordingly." The President waived the 1998 sanctions against India, and drastically trimmed the long "Entity List" which barred Americans from doing business with certain Indian companies from over 150 Entities to less than 20.

Two years ago, the American and Indian militaries conducted no joint operations. Today, they have completed six major training exercises. Two years ago, American and Indian policymakers did not address together the important issues of cooperative high technology trade, civil space activity, and civilian nuclear power. Today, all three of these subjects are under concentrated bilateral discussion, and both governments are determined to make substantial progress.

Two years ago, American sanctions against India undermined bilateral diplomatic cooperation on regional and global issues. All that has changed.

President Bush and Prime Minister Vajpayee champion this powerful and positive bilateral interaction with top down direction, reinforced by an unprecedented stream of Washington policymakers who have traveled to India. The Prime Minister has spoken of India and the United States as "natural allies." He is right. Since Sept 1, 2001, five members of the Bush Cabinet have come to India, some more than once -- Secretary of State Colin Powell, Secretary of Defense Donald Rumsfeld, former Secretary of the Treasury Paul O'Neill, US Trade Representative Robert Zoellick, and Director of the Environmental Protection Agency Christine Todd Whitman.

Their efforts have been underpinned by nearly 100 US official visitors to India at the rank of Assistant Secretary of State or higher, including Chairman of the Joint Chiefs of Staff General Richard Myers, and Director of the FBI Robert Mueller. Robustly engaging with their Indian counterparts, these US policymakers give attention to diplomatic collaboration, counter-terrorism, defense and military-to-military teamwork, intelligence exchange, law enforcement, development assistance, joint scientific and health projects including on HIV/AIDS, and the global environment.

In my view, close and cooperative relations between America and India will endure over the long run most importantly because of the convergence of their democratic values and vital national interests. Our democratic principles bind us -- a common respect for individual freedom, the rule of law, the importance of civil society, and peaceful inter-state relations. With respect to overlapping vital national interests, my "Big Three" for the next decade and beyond are to promote peace and freedom in Asia, combat international terrorism, and slow the spread of Weapons of Mass Destruction.

Indeed, it is difficult for me - and this is a momentous strategic constant -- to think easily of countries other than India and the United States that currently face to the same striking degree all three of these intense challenges simultaneously - let me repeat them -- advancing Asian stability based on democratic values; confronting daily the threat of international terror; and slowing the further proliferation of WMD. This daunting trio will be an encompassing foundation for US-India strategic cooperation for many years to come.

Afghanistan

With respect to diplomacy, India and America are committed to encouraging a stable, free and peaceful Afghanistan -- one with a representative central government that can provide physical and economic security for its people. We want an Afghanistan that has good relations with all its neighbors and with the international community -- and one that will never again export terrorism.

Iraq

In the context of numerous US-India high level exchanges in recent months, the Government of India stoutly believes that Iraq should fully comply with UN Security Council Resolution 1441, which orders Iraq to give up its Weapons of Mass Destruction. India earnestly hopes that Iraq will disarm peacefully. The Bush Administration steadfastly agrees with both these crucial propositions advanced by India.


Defense Policy

Defense cooperation between Indian and American armed forces builds military capacities on both sides for combined operations. In May, the US Air Force from 353rd Special Operations Group deployed from the American airbase in Kadena, Okinawa to Air Force Station Agra to take part in the largest-ever airborne joint exercise between the United States and India. During the exercise, an elite brigade of Indian paratroopers jumped with US Special Forces in the "Balance Iroquois 02-01."

In June and July 2002, the Indian Navy Ships Sukanya and Sharda conducted escort patrols for American ships through the Malacca Straits in support of Operation Enduring Freedom. Knowing what they would be up against if they had to deal with the Indian Navy, the pirates sensibly stayed away.

The US Army 1st Battalion, 501st Parachute Infantry Regiment welcomed 80 soldiers from India's 50th Independent Parachute Brigade to conduct "Geronimo Thrust" in September, the first-ever live fire exercise between American and Indian paratroopers. The jawans flew to Alaska in an Indian Air Force IL-76. This marked the first time that an Indian Air Force combat aircraft has landed on US soil.

With American warships now routinely refueling in Chennai and Mumbai, we saw in September and October the largest-ever US-India naval exercise, called "Malabar." Over 1,500 American and Indian naval personnel participated during this four-day event, which featured flying operations, anti-submarine warfare exercises, and replenishment at sea.

In October 2002, again in Agra, an air transport exercise named "Cope India-02" developed a baseline for future interoperability that will lead to a fighter aircraft exchange. USAF personnel, on board Indian aircraft, observed the drop of Indian paratroopers and heavy equipment. By the end of the exercise, Indian paratroops dropped from US C-130 Hercules transporters.

During the same period, there have been a number of breakthroughs on defense sales that have put the United States and India on the road to a stable, long-term defense supply relationship.

US Investment

Americans hesitate to invest in India because of the uncertainty over India's economic reforms. The recent disinvestment debate is only the latest example. Potential US investors stress to me that Indian taxes and tariffs here are still too high, and there remains too much government interference over business decisions. With respect to intellectual property rights, US pharmaceutical and biotech companies would expand their presence here if India had a modern legal framework to protect product patents. The need to raise the FDI caps is a theme I also hear frequently. No FDI is permitted in retailing.

You all are more than familiar with what needs to be done regarding Indian domestic infrastructure and the power sector. Within the US business community there is an erosion of confidence about whether the sanctity of contracts will be honored in India. And there is also no question that tensions between India and Pakistan and communal violence further dampen investors' urge to come into the Indian market.

It is in this problematical context that commercial exchange between the United States and India languishes. Last January, I gave a speech on the state of US-India economic relations. In it, I described US exports to India and investment flows as being "flat as a chapati." Sadly, nothing much has changed. Our commercial ties remain far below their full potential. Two-way trade between India and the United States is less than that between America and Ireland, a country of less than four million people.

Disinvestment Minister Arun Shourie said this last October 26, "Labour reforms, privatisation, reforms of the power sector…what have we not announced in the last decade? For which of them have we not in the last decade pledged ourselves to time-bound targets? Yet on everything a 20-metre sprint and inertia overwhelms us." Or, as I put in my speech a year ago in New Delhi, "The reform rabbit can become a turtle, which can become a rock."

India and China

Indian entrepreneurs and officials often raise with me comparisons between the respective economic performances of India and China. The two countries launched their economic reform programs from different historical experiences. Nonetheless, the fact remains that in the last 10 years, China has forged ahead on most economic measures.

The following statistics do not say everything about the Indian economy. They do not address India's comparatively high GDP growth rate over the last decade, its impressive foreign reserves, its low inflation, and its high savings rate. And these numbers do not describe the serious and well-known structural problems in the Chinese economy. But I think you will agree that these data do tell us something important and worth thinking about. Over the last 20 years, China's GDP has increased at about 10% a year, compared with India's 6% growth rate.

A decade ago, India and China had close to the same per-capita income. Today China's per-capita income is about $900, roughly twice that of India.

Cellular phone penetration in India is less than one percent of the population, compared to over 11% in China.

In 1991, India and China started off from about the same base, with less than one computer for every thousand individuals. By 2000 China's rate is three times India's, with more than 15 computers for every thousand persons, compared to 4.5 in India.

In 1990, manufacturing in China was about 37% of the economy; today that relative weight has increased to about 45%. China now produces 50 % of the world's cameras, 30 % of the air conditions and televisions, 25 % of the washing machines and 20 % of the refrigerators. In the last 12 years, manufacturing as a percentage of the Indian economy has decreased, falling to about 24% of the economy from 30%.

Since 1980, China has welcomed over $336 billion in foreign investment; India has received only $18 billion.

And we all know what an enormous investment China is putting into its domestic infrastructure - airports, roads, port facilities, telecommunications, and so forth.

India's large and talented labor pool makes it possible for it to become yet another "Asian miracle." Indeed, it already has shown its mettle through the information technology and software accomplishments. As President Bush remarked to the Prime Minister in New York on Sept 12, human resources and intellectual capital are India's greatest asset. This advantage will have a multiplier effect on the economy when second-generation policy reforms present businesses and consumers with the right incentives. There is so much pent-up dynamism at the micro level of India's economy that Indian entrepreneurs and workers will amplify the benefits of these reforms as they are introduced.

An India that tosses its License Raj and red tape into History's dustbin would be ever more competitive in the international capital markets, and that would bring increased American investment. An India that vitalizes its economy would buy more US goods and services. And finally, an India that brings its people out of poverty through economic growth at a more rapid rate would be an inspiration to democracies everywhere, and to the international community as a whole. This modernization of US-India economic interaction based on Indian economic reform is the missing piece in our transforming bilateral relationship.

Geopolitics and India's Economic Performance

You might ask, why should Washington policymakers care about the vitalization of our bilateral economic relationship, and more broadly about the future of the Indian economy? After all, there are over 190 nations in the world. What is so special about India in this regard? The Bush Administration recently issued "The National Security Strategy for the United States of America," which sets forth our diplomatic and security approach to the current openings and dangers within the international system, an approach based on America's democratic values. This report, which bears President Bush's personal stamp, describes India as one of the "great democratic powers of the 21st century."

I now want to make a point central to my presentation today. As I used to teach students in my course on strategy at Harvard University, national economic strength is a prerequisite for sustained diplomatic influence and military muscle. The close US-India collaboration that I have just enumerated would be made more wide reaching and successful by a fundamentally reformed and globalized Indian economy. I openly admit, therefore, that there is a certain amount of American self-interest at work as we hope for the best for India's economic performance in the years ahead.

On the geopolitical side, an India that takes full advantage of its extraordinary human capital to boost its economy would be a more effective strategic partner of the US over the next decades, including in promoting peace, stability and freedom in Asia. An India that enters into a full fledged series of second generation domestic economic reforms would inevitably play an increasingly influential role in international affairs across the board, and that too would be beneficial for the United States.

Fighting HIV/AIDS

Bill Gates' visit to India at the end of last year is but one high-profile example of the thousands of non-governmental contacts between the United States and India. During that trip, he announced in New Delhi that the Bill and Melinda Gates Foundation would establish a long-term HIV/AIDS program in India, with an initial commitment of $100 million. What a terrifically generous thing for him to do.

With the United States remaining the largest global donor for HIV/AIDS prevention and control, the US Government's total contribution in India over the next five-year period is roughly $120 million. All of us - Americans and Indians alike -- must fight the HIV/AIDS scourge shoulder to shoulder.

There must be no denial. No deflections. No discrimination. No excuses.

Citizen-to-Citizen Exchanges

The Indian-American community in the United States has doubled in the past ten years, and is now about two million strong. India recently passed China to become the second largest country for legal migration to the United States, only behind our next-door neighbor Mexico. Each year more than 18,000 Indian students are issued visas to pursue their education in the United States, and there are 22% more Indians studying in the US this year than last. With the total number of Indian students now more than 66,000, this country has become the number one source of foreign students for American colleges and universities.

Since India became a software giant, almost the same number of "H1b - temporary worker visa petitions" has been approved for Indian citizens as for the rest of the world combined. During the past year, our consular sections in Kolkata, New Delhi, Mumbai and Chennai issued more than 275,000 tourist and business visas. It is estimated that more than 400,000 Indians visit the United States for business or pleasure each year. Although there have been some delays in visa processing since 9/11, for the vast majority of applicants from India new security measures should have no effect on either their ability to qualify for a visa, or the time it takes to have it issued. Indeed, the overall visa issuance rate for India is the same today as it was before 9/11. And, there are no more long visa lines at US diplomatic facilities in India.

India and Pakistan

Let me now address briefly Indo-Pakistan relations by drawing on recent remarks in Hyderabad by Ambassador Richard Haass, head of policy planning at the State Department. He stressed on that occasion that neither the United States nor India want our bilateral relationship to be conducted through the optic of India's relationship with Pakistan.

A more normal relationship between India and Pakistan is not impossible to envision. Normalcy does not mean an absence of disagreement. Rather, normalcy means a resilient relationship that would allow India and Pakistan to weather inevitable shocks and setbacks without the risk of violent conflict or a nuclear crisis.

A resumption of diplomatic dialogue between India and Pakistan could facilitate people-to-people contacts and lay the groundwork for greater bilateral cooperation on a range of common interests. Indians and Pakistanis from all walks of life should be able to easily travel to the other country for family visits, tourism, sports or business. It should not take more time to fly from New Delhi to Islamabad than it does to fly from Delhi to London.

Today, legal trade and investment between the two countries is virtually non-existent. Developing commercial links could bring greater prosperity to both countries and, in the process, build constituencies for normalization and increase the stake that each country has in the peaceful resolution of disputes. In this regard, it is time to take practical steps to bring about a South Asian Free Trade Area.

Finally, the issue of Jammu and Kashmir must be addressed peacefully. Now is clearly a moment of optimism in J&K -- one that New Delhi, the Mufti government in Jammu and Kashmir, and the people of the region can collectively translate into tangible political and economic benefits. Such efforts will not solve the complex issues of Indo-Pakistan differences, terrorist violence, human rights, and governance that converge in J&K. But they are important steps in the right direction. They will bring Kashmir closer to a solution that will be peaceful and honorable for all sides, one that will permit Kashmiris to live their daily lives in safety, with dignity and hope for the future.

Sadly, this extraordinary opportunity continues to be narrowed by terrible acts of terrorist violence in Jammu and Kashmir. The Line of Control cannot be changed by violence. To the contrary, in the absence of a jointly agreed Indo-Pakistani alternative, everyone should act to ensure the continued sanctity of the Line of Control. For its part, the United States will continue to urge President Musharraf to do everything in his power to end permanently terrorist infiltration into Jammu and Kashmir.

Conclusion

As I draw to a close, I am reminded of my former boss Henry Kissinger's observation in his book Diplomacy, that "Intellectuals analyze the operations of international systems; statesman build them. And there is a vast difference between the perspective of an analyst and that of a statesman. The analyst can choose which problem he wishes to study, whereas the statesman's problems are imposed on him. The analyst can allot whatever time is necessary to come to a clear conclusion; the overwhelming challenge to a statesman is the pressure of time. The analyst runs no risk. The statesman is permitted only one guess; his mistakes are irretrievable. The analyst has available to him all the facts; he will be judged by his intellectual power. The statesman must act on assessments that cannot be proven at the time he is making them; he will be judged by history on the basis of how wisely he managed the inevitable change, and above all, how well he preserves the peace."

As we meet here today, the transformed US-India relationship, led by President Bush and Prime Minister Vajpayee, is in steep assent based on their statesmanship. And I am convinced that India and America will together increasingly help preserve the peace in the years and decades ahead.

Thank you for inviting me to be with you at your conference, and for your attention this morning. I look forward to your comments and questions.