The Eagle and the Elephant: Strategic Aspects of U.S.-India Economic Engagement
According to Raymond E. Vickery, U.S.-India economic engagement—trade, investment, lending, aid, and macroeconomic cooperation—has a "fundamental" impact on the bilateral strategic relationship. Vickery, speaking at an April 22 event organized by the Asia Program and cosponsored by the Program on Science, Technology, America, and the Global Economy (STAGE), asserted that these economic ties influence not just defense cooperation, but also the "political ability to cooperate" on a range of issues "of broad transnational concern."
Vickery's presentation highlighted the book project he has worked on while at the Wilson Center. The book will feature 12 case studies, ranging from nuclear cooperation to food security and from multilateral trade to child labor and human rights. On April 22, Vickery focused on three of these cases: Indo-American civil nuclear cooperation, H1B visas, and the December 13, 2001, terrorist attack in New Delhi.
The Hyde Act—passed by Congress and signed into law by President George W. Bush in 2006—authorized civil nuclear cooperation between India and the United States, and demonstrated Washington's commitment to a deeper strategic relationship with New Delhi. Yet in fact, Vickery noted, the Hyde Act evolved from earlier efforts to strengthen bilateral economic relations. Soon after September 11, he explained, New Delhi and Washington formed a High Tech Cooperation Group, which promoted trade in high-tech goods. This arrangement led to the Next Steps in Strategic Partnership initiative, which was launched by India and the United States in 2004. Then, in July 2005, the two countries' leaders announced a formal agreement to pursue a civil nuclear accord.
H1B (non-immigrant) visas enable Indians to work temporarily in the United States, thereby facilitating the delivery of services in America and helping sustain India's vast global services sector. However, Vickery stated, the U.S. stimulus bill may imperil this arrangement. The Employ American Workers Act stipulates that to receive Troubled Assets Relief Program (TARP) funds, firms must prove that they will not displace American workers. In other words, Vickery explained, the mere presumption that the United States needs temporary workers in the services field is no longer sufficient justification to hire employees from abroad, including Indians on H1B visas. This is "not a small issue," he warned, and "will continue to reverberate on the politics of both sides."
Three months after September 11, gunmen attacked India's Parliament. Consequently, tensions between India and Pakistan increased, and fears abounded that the nations would go to war. However, an unlikely interlocutor soon entered the scene—the GE corporation. The firm "thought war would be bad for business" and "bad for economic engagement," Vickery stated, and GE conferred with "its friends down in Bangalore." War was eventually averted. And while he contended that the New York Times columnist Thomas Friedman's wry comment—"This cease-fire is brought to you by GE—and all its friends here in Bangalore"—is exaggerated, he posited that GE's actions are instructive. In essence, they underscore—quite starkly—the strong linkages between U.S.-India economic engagement and the broader strategic relationship.
Drafted by Michael Kugelman, Asia Program Associate
Robert M. Hathaway, Director, Asia Program, Ph: (202) 691-4020