In­dia-US ties and the emerg­ing par­a­digms of geo-eco­nom­ics in Asia

FICCI Business Digest - - In Focus -

Am­bas­sador Kan­wal Sibal is former For­eign Sec­re­tary to the Gov­ern­ment of In­dia and has served as In­dia's Am­bas­sador to a num­ber of coun­tries. He writes and speaks ex­ten­sively on for­eign pol­icy is­sues, an­a­lyz­ing them rig­or­ously from the view point of In­dia's in­ter­ests, with­out re­course to diplo­matese. The fol­low­ing is a gist of his key­note speech at a Round ta­ble dis­cus­sion or­gan­ised by FICCI's Fo­rum of Par­lia­men­tar­i­ans.

The Asia-Pa­cific Eco­nomic Co­op­er­a­tion (APEC) was set up in 1989 with a mem­ber­ship of 21 Pa­cific Rim coun­tries for pro­mot­ing free trade through­out the Asia-Pa­cific re­gion. In­dia ex­pressed in­ter­est in mem­ber­ship 20 years ago but is still ex­cluded. In­dia would look for more ac­tive US sup­port for its mem­ber­ship. By join­ing APEC that pro­motes free trade in Asia and sets norms that the US sup­ports, In­dia's eco­nomic lib­er­al­i­sa­tion would be fur­ther stim­u­lated and some of the bi­lat­eral trade fric­tions and mar­ket ac­cess is­sues be­tween In­dia and the US could be ad­dressed.

APEC's en­ergy work­ing group pro­motes elim­i­na­tion of bar­ri­ers in clean en­ergy trade and ser­vices, in­clud­ing the re­moval of lo­cal con­tent re­quire­ments, which is an is­sue be­tween the US and In­dia. All APEC mem­ber economies pre­pare an­nual ac­tion plans cov­er­ing tar­iffs, non-tar­iff bar­ri­ers, ser­vices, in­vest­ment, stan­dards, in­tel­lec­tual prop­erty rights, and other is­sues, which are sub­ject to

The US pres­ence in this re­gion is weak and will be­come weaker with with­drawal from Afghanistan. It is a prob­lem for In­dia that the US and China are col­lab­o­rat­ing in open­ing doors for the Tal­iban to en­ter into the power struc­ture in Afghanistan un­der the aegis of Pak­istan.

peer re­view by mem­ber economies. For In­dia, such a bi­lat­eral ex­er­cise would be dif­fi­cult, but it would have no choice but to ac­cept an agreed mul­ti­lat­eral prac­tice. APEC mem­ber­ship could also open the way for fu­ture In­dian mem­ber­ship in the Trans-Pa­cific Part­ner­ship (TPP).

The US has taken the lead­er­ship role in the TPP ne­go­ti­a­tions in­volv­ing 12 coun­tries, with the eco­nomic rise of China in view. The ob­jec­tive is to lower trade bar­ri­ers such as tar­iffs, es­tab­lish a com­mon frame­work for in­tel­lec­tual prop­erty, en­force stan­dards for labour and en­vi­ron­men­tal laws, and es­tab­lish an in­vestor-state dis­pute set­tle­ment mech­a­nism. Par­tic­i­pat­ing coun­tries wanted to com­plete ne­go­ti­a­tions in 2012, but con­tentious is­sues re­lat­ing to agri­cul­ture, in­tel­lec­tual prop­erty, and ser­vices and in­vest­ments re­main un­re­solved, with the lat­est round of ne­go­ti­a­tions in July 2015 prov­ing un­suc­cess­ful.

The most no­table coun­try ex­cluded from th­ese ne­go­ti­a­tions is China. While it may be in­ter­ested to join the TPP even­tu­ally, so far it has re­acted by ac­cel­er­at­ing its own trade ini­tia­tives in Asia. It is back­ing the es­tab­lish­ment of the ASEANled Re­gional Com­pre­hen­sive Eco­nomic Part­ner­ship (RCEP). The dis­tinc­tive fea­ture of TPP is that China is ex­cluded, and that of RCEP is that the US is ex­cluded.

The RCEP is a pro­posed free trade agree­ment (FTA) be­tween ASEAN and the six states with which ASEAN has ex­ist­ing FTAs (Aus­tralia, China, In­dia, Ja­pan, South Korea and New Zealand). RCEP ne­go­ti­a­tions, for­mally launched in Novem­ber 2012, will cover trade in goods and ser­vices, in­vest­ment, eco­nomic and tech­ni­cal co-op­er­a­tion, in­tel­lec­tual prop­erty, com­pe­ti­tion, dis­pute set­tle­ment and other is­sues. ASEAN will be in the “driver's seat” of this mul­ti­lat­eral trade ar­range­ment which In­dia en­dorses.

The other geo-eco­nomic group that China is back­ing as a ri­poste to the TPP is the Free Trade Area of the Asia-Pa­cific (FTAAP). At the 2014 APEC Sum­mit in Bei­jing, China pro­posed a more am­bi­tious goal: an Asia Pa­cific trade group­ing in­cor­po­rat­ing both China and the US. The in­ten­tion was to pre­vent the TPP from be­com­ing the fo­cal point of eco­nomic in­te­gra­tion ef­forts that would con­sol­i­date US lead­er­ship as a Pa­cific power. This way China ex­pressed its am­bi­tion to par­tic­i­pate in draft­ing the new rules of the eco­nomic or­der in equal stand­ing with the United States. The sum­mit de­liv­ered a care­fully worded com­pro­mise be­tween the US and Chi­nese ini­tia­tives in agree­ing to the re­al­i­sa­tion of FTAAP as early as pos­si­ble (ad­vo­cated by China), but only af­ter the com­ple­tion of on­go­ing path­ways (code for TPP). The US ef­fec­tively elim­i­nated any ref­er­ence to a spe­cific time­line for FTAAP con­clu­sion.

One Belt One Road (OBOR), China's other geo-eco­nomic ini­tia­tive un­veiled by Pres­i­dent XI Jinx­ing in Oc­to­ber 2013, fo­cuses pri­mar­ily on con­nec­tiv­ity and co­op­er­a­tion amongst Eurasian coun­tries and con­sists of the land­based "Silk Road Eco­nomic Belt" and the ocean­go­ing "Mar­itime Silk Road". The One Belt com­po­nent of the OBOR ini­tia­tive rep­re­sents China's am­bi­tion to dom­i­nate the land mass of Asia by in­te­grat­ing it into a co­he­sive eco­nomic area through build­ing in­fras­truc­ture, in­creas­ing cul­tural ex­changes, and broad­en­ing trade, un­der Chi­nese lead­er­ship. It will com­pen­sate for the lim­its im­posed on China's ex­pan­sion in the western Pa­cific be­cause of the strong pres­ence of the US power there. While the strat­egy un­der­lines China's push for a

big­ger role in global af­fairs, the need to ex­port China's sur­plus ca­pac­ity in sev­eral sec­tors is a cru­cial el­e­ment. Es­sen­tially, the 'Belt' in­cludes coun­tries sit­u­ated on the orig­i­nal Silk Road through Cen­tral Asia, West Asia, and Europe, with ex­ten­sion to South Asia and South­east Asia also in view.

The Mar­itime Silk Road is a com­ple­men­tary ini­tia­tive aimed at in­vest­ing and fos­ter­ing col­lab­o­ra­tion in South­east Asia, Ocea­nia, and North Africa, across the South China Sea, the South Pa­cific Ocean, and the wider In­dian Ocean area. The Chi­naPak­istan Eco­nomic Cor­ri­dor (CPEC) and the BangladeshChina-In­dia-Myan­mar (BCIM) Eco­nomic Cor­ri­dor are of­fi­cially clas­si­fied as "closely re­lated to the Belt and Road Ini­tia­tive”. Sev­eral coun­tries that are part of OBOR are also mem­bers of the China-led Asian In­fras­truc­ture In­vest­ment Bank (AIIB).

China is al­ready the dom­i­nant eco­nomic player in the SCO; it has al­ready ac­cessed the en­ergy resources of Cen­tral Asia. It has es­tab­lished it­self firmly in Iran. It has de­vel­oped close ties with Rus­sia, whose en­ergy sources it is now har­ness­ing for its needs. The China-Pak­istan Eco­nomic Cor­ri­dor will con­sol­i­date its strate­gic hold over the re­gion.

The US pres­ence in this re­gion is weak and will be­come weaker with with­drawal from Afghanistan. It is a prob­lem for In­dia that the US and China are col­lab­o­rat­ing in open­ing doors for the Tal­iban to en­ter into the power struc­ture in Afghanistan un­der the aegis of Pak­istan.

The US is a strong player in the geo-eco­nom­ics of the Asia-Pa­cific re­gion but is los­ing out in Eura­sia and in our re­gion. This con­sti­tutes a weak­ness in the In­dia-US strate­gic part­ner­ship.

Kan­wal Sibal Former For­eign Sec­re­tary to the Gov­ern­ment of In­dia

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