On September 6, 2018, India and the United States will meet for their first “2+2 dialogue” in New Delhi. The dialogue is designed to bring together the defense and foreign ministers of the world’s largest and oldest democracies as they explore deeper integration on issues of strategic importance. The “2+2 dialogue” as the name suggests will therefore see Sushma Swaraj India’s External Affairs Minister meet with Mike Pompeo, the U.S. Secretary of State and Nirmala Sitharaman, India’s Defense Minister meet with Jim Mattis, U.S. Secretary of Defense. The ministerial level meeting is expected to be the stepping-stone towards a grand vision of a highly engaged bilateral defense and security partnership that will bolster India’s defense capabilities while providing the United States with a reliable ally to counter China’s influence in the Indo-Pacific region.
The India- U.S. bilateral defense partnership has been on an upward trajectory for some years now, getting solid thrust most notably during the Obama years when the then U.S. administration designated India as a “Major Defense Partner” and reinvigorated the Defense Technology and Trade Initiative (DTTI). The Major Defense Partner tag allowed India access to U.S. dual-use technologies on a level commensurate with its closest allies while the DTTI provided an impetus to Prime Minister Modi’s vision of Make in India by expanding technologies that were available for co-production and co-development between U.S. and Indian defense firms. For its part, India agreed to shore up its legal framework by tightening export control norms in accordance with international export control frameworks such as the Wassenaar Arrangement (WA), the Missile Technology Control Regime (MTCR), the Australia Group (AG) and the Nuclear Suppliers Group (NSG). These international agreements enhance regional and international security and prevent the proliferation of conventional weapons as well as weapons of mass destruction by requiring member countries to implement a strong non-proliferation infrastructure in the form of export controls. Thus far, India has been admitted to three of the four export control regimes, namely the WA, AG and the MTCR. Its membership to the NSG is pending.
The Trump administration has built upon the momentum generated by the previous administration’s favorable position on strategic relations with India. For instance, India’s admission to the WA recently led to India being eligible for “Strategic Trade Authorization” by the U.S. Department of Commerce. This means India will now be placed in a rather exclusive group of countries – those that are considered U.S. allies, thereby enabling exports of military items from the United States to India without the need for a license.
The recent bonhomie on US-India defense ties was almost undone by the looming specter of sanctions on India by virtue of the Countering American Adversaries Through Sanctions Act (CAATSA) which is a U.S. law that sanctions Russia for its interference in the 2016 Presidential elections. There was overwhelming support for CAATSA in both houses of U.S. Congress, which in addition to imposing sanctions on Russia also imposed sanctions on any person doing business with Russia’s defense sector. India unwittingly got caught in the crosshairs due to its longstanding negotiation with Russia to buy the S-400 air defense missile system reportedly at a price tag of about $6 billion. The S-400 is a critical need of India’s Air Force as it is capable of destroying missiles and unmanned aerial vehicles at a range of 400 km.
Indian lawmakers with support from senior and credible members of Trump’s cabinet such as Jim Mattis made the case to both houses of U.S. Congress to allow the President to waive sanctions on countries like India. Their case rested on the fact that countries such as India, which have traditionally relied on Russian made defense systems need to be weaned from the bad actor and a threat of U.S. sanctions will only serve to drive them further into Russian arms. U.S. lawmakers from the Senate and House agreed and passed a bill, which among other things has a built in CAATSA waiver provision. The bill is awaiting the President’s signature to become law.
The immediate threat of sanction has therefore receded, somewhat. The waiver however comes at a steep price- namely evidence that the country seeking the waiver has taken steps to reduce its dependence on Russia or significantly increase its defense cooperation with the United States. In simple terms, India must systematically reduce its defense spending in the purchase of systems from Russia. India has traditionally relied on Russia to build its defense arsenal so much so that it accounts for almost 60% of all Indian defense supplies, making it the largest beneficiary of India’s huge defense market. India is cognizant on the need to diversify and has over the last decade made a concerted effort to have its defense needs met with supplies from the United States such that the U.S. has emerged as the top arms supplier to India over the past 10 years. Given the evolving configuration of India’s defense supplies an imminent CAATSA waiver premised on India reducing its dependence on Russia may indeed have the intended effect, though the timeline may be more long-drawn-out than the United States might hope. After all, it is not just about a one-time sale of defense equipment but continued after-sales support for supplied equipment which will keep India and Russia engaged over the medium term. India needs to ensure that its long term supply and defense needs are secured without the threat of sanctions hanging over its neck and the 2+2 dialogue will provide the right opportunity to secure that commitment.
All of this progress sounds laudable and yet the 2+2 dialogue is missing one important component. Absent from the vision for a deepened bilateral engagement is the issue of “trade”. Some may recall that the current “2+2 dialogue” is actually a remnant of the erstwhile “US-India Strategic and Commercial Dialogue” (SCD) initiated in 2015 under President Obama and Prime Minister Modi. The SCD had a broader mandate of elevating not only defense ties but also the commercial and trading relationship between the two countries. Towards this end the U.S. State and Commerce Departments met with their Indian counterparts in the Ministry of External Affairs and Ministry of Commerce to advance shared security and commercial objectives. By cleaving the commercial relationship from the strategic framework in the 2+2 format, India may have given up a critical leverage, i.e. leveraging the size of its defense market to secure market access for Indian goods and services in the United States. At no time is this more important than now, with the U.S. imposing unjustified tariffs on steel and aluminum exported from a host of countries including India in the guise of national security concerns, threatening India with the loss of preferences under the generalized system of preferences program (GSP), filing WTO cases against India’s subsidy programs, stalling the appointment of judges at the WTO thereby single handedly undermining the multilateral trading system and threatening to dramatically cut H1B visas. To be clear, India and the United States discuss trade in a separate “US-India Commercial Dialogue”, but without the underpinnings of a “strategic” vision.
By allowing the defense dialogue and the commercial dialogues to run on parallel tracks, India appears to have agreed that its strategic goals will be met through a successful US-India partnership in defense, while the trading relationship languishes in the background. A successful commercial relationship is in the mutual beneficial interests of India and the United States as it has the potential to provide an effective counterbalance to China’s ambitions on the global trading front. And yet that opportunity will be lost. For while India opens its purse strings to buy U.S. fighter jets, armed drones and guns, the United States will be packing-off Indian engineers back to their homes and levying tariffs on Indian steel and aluminum.