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21 June 2013, Gateway House

India-U.S. revive lingering ties

The upcoming India-U.S. Strategic Dialogue offers an appropriate platform to move past complaints both sides have against each other in the trade and economic spheres. The stage can be used to re-apply emphasis on strategic relations and reach levels of goodwill established during the time of former U.S. President George W. Bush and Manmohan Singh

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The fourth round of the India-U.S. Strategic Dialogue to be held June 23-24 in New Delhi offers a good opportunity to leaders on both sides to clear the cobwebs and give a strong political direction to the relationship currently stymied by complaints and doubts. A belief has taken hold on both sides that relations have “plateaud.”

The top leadership in both countries is otherwise occupied, leaving this crucial bilateral on the desk of bureaucrats who have fallen back on trading charges or ducking them. It is worth remembering that the India-U.S. equation changed radically not because of diplomats but because of the political push and vision of George W. Bush and Manmohan Singh. That push is absent today. Singh is expected to meet Obama in September and optimists are waging bets on some clear announcements. The strategic dialogue can help to work out the wrinkles and give the leaders something to take forward.

So far, the public discourse in Washington has been dominated by complaints against India. A host of issues, which ultimately are small in terms of strategic relations, loom larger than they should. They have even triggered some of that old acrimony which lies just below the surface in both capitals.

Washington is awash in anger against India over a host of economic and trade policy issues while New Delhi is worried about the narrow issue of its IT industry getting a death blow with the new restrictions on H1-B visas contained in the impending U.S. immigration reform bill.

Over the past month, the U.S. industry has mounted a loud letter campaign against India’s intellectual property law, preferential market access policies, and corporate taxation. India’s first-ever compulsory license issued to Natco Pharma for the generic manufacture of Nexavar, which overrode Bayer’s patent on grounds that the anti-cancer drug was unaffordable for most Indians, had US pharma seeing red. The intellectual property complaints center around the revocation last year of Pfizer’s patent on the anti-cancer drug Sutent. Earlier this month India’s appellate board reversed the decision and asked for a fresh review. It even mandated that a different controller should be in charge, not the one who ordered the revocation. U.S. companies cannot hope for a better response. But Pfizer’s lawyers have blanketed Capitol Hill and roused Congressmen into battle.

Charges are flying fast and thick from the American sides but the answers are missing. This will be U.S. Secretary of State John Kerry’s first visit in his current position. Since his appointment he has been kept overly busy with the Middle East peace process, the situation in Syria and withdrawal of U.S. troops from Afghanistan. He has had little time to focus on India. However, he struck a good first note with a video message on the eve of his departure, calling the India-U.S. strategic dialogue “critical.” He went on: “It’s one that demonstrates our firm belief that a strong India is in America’s national interest. The United States not only welcomes India as a rising power; we fervently support it. And that’s why President Obama and I support India’s inclusion as a member, a permanent member, of a reformed and expanded United Nations Security Council.”

It is as auspicious a beginning as any. He, with one deft stroke, won the public diplomacy battle. Those words will ring on India’s multiple television channels for the duration of his visit. To “fervently” support India’s rise is a direct arrow aimed at another country’s “peaceful” rise. His statements will go some distance in removing doubts about his tepid responses thus far about India and his enthusiasm for Pakistani generals.

The strategic dialogue will also be a test for Indian foreign minister Salman Khushid whose most memorable public statement on foreign policy has been comparing the recent Chinese incursion into the Depsang Valley in Ladakh to “acne” which will disappear. As we know it took an awful lot more than vanishing cream to remove that acne outbreak. Without ceding any ground, he will have to convince the Americans that recent Indian economic policies are not anti-American.

On their part, the Americans have made clear that economic issues are a priority. Assistant Secretary of State Robert Blake, said in Washington on June 19 that the “overhang” of the complaints against India by U.S. businesses is such that Indian efforts to seek relief on H1-B visas from the U.S. Congress are unlikely to have an effect.

But view the complaints in context, which is missing from the letters sent out by U.S. industry and their lobbyists. The fevered letter campaign — enthusiastically embraced by U.S. politicians — is clearly a pressure tactic to extract new concessions. It guarantees failure.

One compulsory license and one revocation do not prove that India’s intellectual property protection is inadequate. So far the system has proved efficient and responsive. Of all the patents granted in India, nearly 30 percent have gone to U.S. nationals. This does not spell an unfair regime. Yes, it is not as lenient as the U.S. system, which grants patents a tad too easily, especially to drug companies. Indian companies are active all through the U.S. and have invested $11 billion in various sectors. This has happened without a Bilateral Investment Treaty and the Trade Policy Forum.

India-U.S. watchers say some officials in the U.S. Trade Representative’s (USTR) office want a trade war. USTR, they say, is furious at the loss of the medium multirole combat aircraft contract worth $11 billion and the less-than-satisfactory progress from the fallout of India’s nuclear liability law, which has shut American companies out of the nuclear reactor market.

The last one is a real complaint and Indian mandarins would do well to move fast on fixing it whichever way they deem fit. It is true that the UPA government made mistakes while shepherding the law through the parliamentary process. Americans are right to feel betrayed after they broke the international nuclear regime for India’s sake.

An Indian ambassador once told me that India “never forgets its friends.” But India’s not resolving the liability issue quickly means strengthening the hands of those in Washington who question the value of the transformed relationship. Similarly, like naked U.S. pressure on India on trade issues emboldens the camp in Delhi that is ever ready to denounce America and everything American – even as their children rush to study in US colleges.

Hopefully, Kerry knows both sides of the story and takes U.S. corporate complaints with a measure of caution. The two countries have already wasted decades not seeing the big picture, which clearly indicates a convergence of strategic interests. Kerry and Khurshid must spend time on geopolitical issues, including clarifying America’s pivot/rebalance to Asia. Manmohan Singh’s visit to Japan ought to nudge Americans to think of Shinzo Abe differently and not through the Chinese prism.

The U.S. side must also use the strategic dialogue to explain exactly what is happening with talks with the Taliban in Doha. Afghan President Hamid Karzai has already raised a furore over Taliban acting as an alternative, established Afghan government in exile, and which in the short span of a day, gave the world a signal that it considers itself the rightful ruler of Afghanistan. The scheduled talks appear to be taking place without the Taliban sticking to the so-called red lines — breaking ties with Al Qaeda, renouncing violence and respecting the Afghan constitution. The outcomes of these are in India’s strategic interests – especially given that both India and Afghanistan go to the polls next year. The stakes are high and the relationship needs to get over the hump of complaints to tackle the difficult road ahead.

Seema Sirohi is a Washington-based analyst and a frequent contributor to Gateway House: Indian Council on Global Relations. Seema is also on Twitter, and her handle is @seemasirohi

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