Tuesday, November 11, 2008

Engaging with Obama: Opportunities and Challenges

After the initial euphoria of Obama’s victory had mellowed down, the foreign policy pundits began to analyse the implications of the win. Some Indian experts especially the ardent supporters of the Indo-US Nuclear Deal were sounding grave and extremely pessimistic about India-USA relations under the new President. This pessimism is unfounded. India-USA relations are no determined by individual leaders, though it was so as late as the later part of 1990s. Now India- USA relations are based on strong structural and systemic factors. The rising power of India, the declining eroding of USA, the changing security dynamics in Asia and the need to build a new world prompted Bush administration to engage with India as ‘strategic partner.’ Bush just walked on the path already determined by the changing nature of world politics.

While it is a bit too early to speculate about India-USA relations under Obama, as we still do not know his team in Washington; we still have a fair idea of what to expect and a possible response from India. The following are the areas which represent the new challenges and opportunities for the two nations:

Terrorism: If the nuclear issue was the main bonding factor between India and USA during the Bush administration, terrorism could well be the main area of strategic cooperation. As Obama will take charge on 20th January, he faces two major tasks- the financial crisis and the war against terrorism. He has already indicated that the ongoing war against terrorism will be introspected thoroughly. The focus will now shift from Iraq to Afghanistan. India is involved deeply in the nation- building process in Afghanistan. The attack on Indian embassy has raised stakes and threat perception for India there. Obama administration will need to take India onboard as it drafts a new policy of counter-terrorism in Afghanistan.
Linked to this is the comment made by Obama on Kashmir and the possibility of sending an envoy to resolve the dispute. India must firmly oppose this possibility. It must also the fact over the last few India Pakistan relations have improved and India is playing a responsible role in the region to maintain the security in the subcontinent.

The Nuclear Issue: This was another area of concern cited by the experts. Obama and the Democrats will surely push for conclusion of the Comprehensive Test Ban Treaty (CTBT) and Fissile Material Cut-Off Treat (FMCT). While India is has always opposed the CTBT for its discriminatory nature, India supports the larger agenda of non-proliferation. India must impress upon the new administration in Washington that it is a responsible nuclear power and its recent inclusion in the nuclear order will strengthen the non-proliferation efforts.

The Economic Dimension: This could prove to be the toughest challenge. We have to see Obama’s stand on economic issues in the context of the current recession.

The first issue of concern is outsourcing, Obama has announced during his campaign that he will remove the tax cuts enjoyed by companies that outsource their work, and give those tax incentives to companies creating jobs within USA. The working class and the unions were among the most ardent supporters of Obama, so they would expect some policy curbing outsourcing. But the act is outsourcing is an innovation that makes businesses efficient. It is expected that the US corporate giants like GE, IBM will impress upon Obama on the need not to disincentivise outsourcing.
Out if the total outsourcing business that India gets, 60 per cent comes from USA, hence the concern of Indian IT firms is justified. They are already hit due to the recession and face intense competition from new players like China and Thailand. Indian firms will now have to look at Europe more actively for getting outsourcing business. And other important task would be to move up the technology ladder, i.e. to invest heavily in research and development of new technologies.
The second and related issue is of H1B visas. Here we need not worry much. The US economy is not able to meet its demand for skilled professionals from its own workforce, and it will continue to draw skilled professionals from other countries, with India being a major supplier. But one should expect a slowdown in the demand for Indian professionals basically due to the recession.
The third issue, though not prominently discussed, is that of protectionism. The Democrats are known for their protectionist views. With them occupying a majority of seats in the US Congress, Obama will face intense pressure from his party colleagues. A protectionist USA would does not augur good for the early conclusion of the Doha Round of the WTO talks. Ironically, the recession will prevent Obama from implementing his proposal of hiking the ‘capital gains tax’ (from 15 % to 20 %) on the US corporate companies.
The fourth and the most crucial issue is that of the current global recession. The G-20 meet next week will be embark on the path of building a new international order. Whatever is the shape of the new international order, one thing is clear that it will be decisively shaped by China, India and other emerging countries like Brazil and South Africa. The previous two economic orders Bretton Woods (1945-1975) and Washington Consensus (1975-2007-08) were essentially dictated by USA and the Western European countries. This is the first time that India will be involved in the making of a international order and it must contribute to it utmost seriousness, as it will have high stakes in the in the new order.

Climate Change: Obama’s views on Climate Change and response to it, broadly has three features: he believes in the ‘cap and trade system’, he has also called for a massive push for ‘clean technologies’ and finally he wants China and India to share more responsibility in tackling climate change, specifically in terms of curbs on emissions.
India should be perfectly ok with these three features. India is already a major beneficiary of the cap and trade system. The National Action Plan on Climate Change announced recently by Indian Prime Minister also calls for increasing investments in ‘clean technology.’ And most importantly, it is time that India assumed greater responsibility at the global level in efforts to tackle climate change. But this has to be done in the existing framework of ‘common but differentiated responsibilities.’

India should now stop worrying about how newly elected leaders of other global powers will impact her. Rather the aim should be to create opportunities to assume a responsible role at the international level. This is our first crucial step in our quest to become a global power.

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