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Toward Strategic Cooperation between India, the United States, and Europe

Toward Strategic Cooperation between India, the United States, and Europe

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This policy brief recounts discussions from the September 2012 India Trilateral Forum.
This policy brief recounts discussions from the September 2012 India Trilateral Forum.

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Published by: German Marshall Fund of the United States on Oct 24, 2012
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Summary: The fth India Trilat
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eral Forum identied severalareas of convergence betweenIndia, the United States, andEurope. These included ashared sense of stability despitecontinuing political paralysis,guarded optimism about India’seconomic future, a commitmentto Afghanistan’s developmentbeyond 2014, a desire for stablerelations with China despite con
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cerns about its unfair economicpractices, the necessity of Myan
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mar’s gradual democratizationand regional economic integra
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tion, and the need for strongerinternational regimes to enablecontinued access to space andan open Internet.But the Forum also highlightedimportant areas of divergence,provoking questions deserving of further discussion. Thesepertained to the importance of Indian economic reforms forfuture cooperation, the pros
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pects of deeper trade relations,ways to alter Pakistan’s strategiccalculus, the effects of greatereconomic interdependence withChina, and the importance of Bangladesh to India’s integrationwith Southeast Asia.
Asia Program
Policy Brie 
 Toward Strategic Cooperation betweenIndia, the United States, and Europe
Consensus and Debate at the Fifth India Trilateral Forum
by Dhruva Jaishankar 
1744 R Street NWWashington, DC 200091 202 683 2650F 1 202 265 1662E ino@gmus.org
October 2012
Introduction: Policy Progress despitePolitical Paralysis
India, Europe, and the United States— the three largest democratic polities— are today acing crises o con-dence. Recent liberalization attemptsby the incumbent United Progres-sive Alliance (UPA) in New Delhihighlight the inevitable diusion o power to regional parties in the statesand the ractionalization o politicsat the center. India’s political leaders,constituting a new and emerging classo politicians whose views are oen atodds with public sentiment, may bemissing a chance to positively impacta promising young population. Mean-while, Europe conronts serious ques-tions about the uture o its commoncurrency and the viability o urtherintegration, issues about which ocialsexpress greater concern in private thanin public. And the United States — inan important election year — aceskey choices about how to curtail risingnational debt and overcome highunemployment as its political partiesadapt to the country’s ast-changingdemographics. All three entities alsoappear to be suering rom politicalparalysis and an absence o clear lead-ership. Combined, this would spell acrisis o democratic governance — i only major authoritarian states such asChina and Russia were not conrontingsimilar challenges today.And yet, there are silver linings. TeUnited States promises broad conti-nuity in its oreign policy regardlesso the outcome o the November 2012elections, particularly as it mightaect India and Europe. Europe’s crisishas been stabilized — although notentirely averted — by several recentdevelopments, including EuropeanCentral Bank President Mario Draghi’splan to buy unlimited Spanish andItalian bonds, the German constitu-tional court’s decision to uphold theEuropean Stability Mechanism, andthe poor perormance o extremistparties in the Dutch general election.And while regional parties in Indiawill remain vital stakeholders, the twomajor national parties can be expectedto continue providing a modicum o political stability at the center, whichcould lead in time to a renegotiationo the relationship between the centralgovernment and the states.
 
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Asia Program
Policy Brief 
Such were the emerging contours o consensus at theopening session o the h India rilateral Forum, held inGurgaon on September 14-15, 2012, and organized by theGerman Marshall Fund o the United States (GMF) and theAspen Institute India. But there remained important pointso dierence among discussants, who included representa-tives rom the U.S., Indian, Swedish, French, German, andPolish governments; media commentators rom leadingIndian and international publications; business executivesrom the banking, automotive, pharmaceutical, and inor-mation technology sectors; and academic and think tank scholars rom over a dozen institutes. Some, or example,disputed suggestions that political and policy continuity inthe United States would extend beyond November 2012,pointing to President Barack Obama’s continuing domesticunpopularity and his reluctance to be proactive in certainkey areas o oreign policy. A ew Indian participants alsoquestioned assumptions that their country’s weak economicperormance would necessarily translate into a setback orthe current government in the next general election.In addition to domestic politics in India, the United States,and Europe, economic developments in the three poli-ties and their implications were also discussed at the Indiarilateral Forum, as were several areas o potential trilateralcooperation on regional and global issues.
Economic Developments and their Implications
Coinciding with the Indian government’s announcementthat it would carry through with liberalization reorms —including an easing o restrictions on oreign direct invest-ment in the multi-brand retail sector — the India rilateralForum witnessed discussions on several important aspectso India’s economy. Tere was a consensus among partici-pants that the measures taken on oreign investment andpricing were long overdue, and that their impact mightonly be elt with the passage o time. Tere was also agree-ment that such liberalization was nonetheless positive andnecessary, and would resurrect condence in the Indianeconomy. Some discussants agreed that the implementationand execution o policy oen presented as much — i notmore — o a challenge in the Indian context as its articula-tion, and that the Indian system was prone to respond only in times o crisis.It was also noted that a trust decit continued to bedevil theIndian private sector, preventing it rom assuming a moreinfuential role as an agent o liberalization. While corporatecondence in the Indian economy remained low, consumercondence still ran high. Participants were divided on thedegree to which labor reorm in India would prove instru-mental: while some argued that it was not a top priority,others cautioned that its absence contributed to capitalsubstitution and corruption. Tere was, however, broadagreement that such reorm was not imminent. Othersnoted that an important and path-breaking uture stepwould be the easing o oreign direct investment constraintsin the deense sector.Te Forum also saw a debate on the importance o educa-tion, training, and employment to the Indian growthstory. Despite a recognition that better vocational trainingand apprenticeships were necessary, the scale o India’sdemographic dividend means that the country’s challengeis unique. While India has made important progress inensuring access to primary and secondary education atlow cost — with enrollment rates in schools now muchhigher — quality has oen been sacriced, and that is now an issue deserving o urgent attention. New technologies —in particular, Internet technologies — provide only partialanswers to this problem.Another aspect o the Indian economy discussed in consid-erable detail was whether the explosion in India o smalland medium enterprises and mid-market companies— relatively immune to the vicissitudes o internationalinvestment and macroeconomic reorm — represented thebasis o uture growth, and whether their success was oenoverlooked by oreign governments ocused on big ticketreorms. India’s mid-market companies were protable andoen keen to acquire oreign companies or technology,but generally ound it easier to operate in the United Statesand Britain (rather than in continental Europe) due tothe perceived ease o doing business and actors such aslanguage, culture, and legal regimes.In addition to India’s economy, participants at the Indiarilateral Forum ocused on the continuing allout o theglobal nancial crisis. Tey noted its severity, the possiblelong-term eects o the crisis lasting eight to ten years, andthe choices acing various governments to either infate
 
3
Asia Program
Policy Brief 
their way out o the crisis, deault, or urther regulate. Somediscussants argued that while the immediate causes o the crisis were known, there was a lack o political will toaddress them. But it was generally agreed that the nancialcrisis did accelerate the transer o power rom the Westto states such as China and India, and showed that thoseemerging economies were largely decoupled rom the West.While it was elt that India had initially responded well tothe nancial crisis aer 2008, several participants notedthat it had missed a unique opportunity to lure U.S. andEuropean investors seeking aster-growing markets. Instead,Indian leaders opted to ocus much more on the corrosiveeects o infation at home. Participants also discussed theG20 as a mechanism, in particular the role o the BRICScoalition in providing political cover or emerging econo-mies to assist developed countries. Tey also pointed toIndias active trade engagement with the likes o ASEAN,Japan, and South Korea standing in contrast to a muchmore mixed picture in the United States, which hadremained ambivalent about embarking upon urther reetrade initiatives. Participants also debated the eectivenesso India’s new trade agreements, whether FAs provided a“back door” or urther economic reorms India, the pros-pects o nalizing the EU-India ree trade agreement, andthe long-term easibility o U.S. trade agreements with boththe European Union and India.
Cooperation on Afghanistan, China, Myanmar,and the Global Commons
Although the United States retains its position as an inter-nationally infuential actor, India and the countries o Europe (either individually or collectively) play importantroles in relations with several states and on globally-relevantissues, presenting opportunities or enhancing trilateralcooperation and coordination.
 Afghanistan
Aghanistan — a country in which the United States,Europe, and India all have important presences and vitalsecurity interests — represents an obvious opportunity or trilateral collaboration. Participants at the India rilat-eral Forum shared a certain amount o cautious optimismabout developments in Aghanistan and agreed that theannounced transition in 2014 did not represent the end o the road or international engagement. Te counterinsur-gency strategy, it was elt, had proved partly successul butthe training o Aghan security orces, while on track tomeet its numerical target, suered still rom inconsistenciesin quality. raining was nonetheless expected to continueaer 2014 in a bid to limit damage and prevent Aghani-stan’s collapse. More importantly, the Aghan people had yetto express a loss in condence despite announcements o withdrawal by the United States and NAO. Additionally,long-term commitments to Aghanistan’s economic devel-opment and the important symbolism attached to strategicpartnership agreements with Kabul were emphasized, aswas India’s centrality as a model or Aghanistan.Participants also expressed interest in Aghanistan’s emer-gence as a commercial hub, with Pakistan acting as animportant conduit or trade with India. India’s role indeveloping Aghanistans inchoate markets was discussed,particularly the employment that could be generated by urther investments, tari reductions, and technical assis-tance in such sectors as mining, textiles, and even inorma-tion technology. Yet there was disagreement about how to achieve that end state, and how to change the calculuso the Pakistan army, which remained a barrier to deepercommercial linkages with Aghanistan. Some participantscautioned against overestimating India’s role in Aghanistan— despite the eectiveness o its aid and public outreach —noting the limits presented by adverse geographic circum-stances. Several Indians noted their country’s reconciliationto new realities on the ground, adding that greater clarity on the part o the West would be benecial. Finally, partici-pants debated the role o Iran, noting the absence o opposi-tion by the United States to India’s use o that country as aconduit. However, some participants cautioned that therewas “less than meets the eye” on India’s relations with Iran,and that ehran had larger stakes in appearing to cooperatewith India than the outcome o the Aghanistan confict.
China
Te Indians, Europeans, and Americans present alsoexpressed similar views about China, pointing to the innatetension between greater interdependence and their indi- vidual security and economic concerns. Much dependedon whether Chinas rise would be inexorable, revisionist,

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