China’s Economic Reckoning
The Price of Failed Reforms
For two decades, Washington has had high hopes for India on the global stage. Gigantic, populous, and resource rich, India is, by all appearances, a superpower in waiting. And as the world’s largest democracy, it promises—according to those hopes—to be a crucial U.S. partner at a time of rising competition from authoritarian challengers.
Almost 20 years ago, acting on such expectations, Washington began resolving the disagreements that had held U.S.-Indian relations back through the Cold War and into the 1990s. During George W. Bush’s presidency, U.S. officials gave up their long-standing insistence that India relinquish its nuclear weapons, allowing Washington and New Delhi to sign a landmark nuclear accord and opening the way to heavy U.S. investments—diplomatic, economic, and military—to facilitate India’s rise. Successive U.S. administrations provided liberal access to military technologies and promoted India’s role in international institutions, culminating in President Barack Obama’s endorsement of Indian aspirations to permanent membership in the UN Security Council. Albeit imperiled by the Trump administration’s disregard for allies and partners, this basic U.S. approach continues to this day.
Yet the logic of the U.S.-Indian partnership remains misunderstood by many, especially in the United States. The transformation of U.S.-Indian ties since the early years of this century has given rise to expectations that, sooner or later, the two countries would become allies in all but name, closely aligned on virtually every major foreign policy issue. That such an accord has not materialized has brought creeping disappointment and doubt about the relationship’s long-term viability.
Critics carp that the United States has overinvested in India—that the favors accorded to New Delhi have not been worth the return. They point, for instance, to India’s failure to select a U.S. fighter for its air force or to its inability to conclude the nuclear reactor purchases promised under the breakthrough nuclear agreement. Even supporters of the partnership occasionally chafe at how long bilateral engagement has taken to produce the expected fruits. The Trump administration has taken such frustration further, focusing less on India’s potential as a partner than on its unbalanced trade with the United States. It recently withdrew India’s privileged trade access to the United States under the Generalized System of Preferences program, churlishly announcing the decision just hours after Indian Prime Minister Narendra Modi was sworn into office for a second time following his spectacular victory in elections this past spring.
If the United States’ aim is to turn India into a close ally, formal or otherwise, it will come to grief.
Both critics and supporters of the U.S.-Indian relationship seem to agree that the new engagement between the two democracies has not yielded the alliance-like bond once hoped for. These complaints are off the mark. Since the turn of the century, India has become a strong supporter of the U.S.-led international order, despite showing no interest in an alliance with Washington. If the United States’ aim is to turn India into a close ally, formal or otherwise, it will come to grief. Instead, Washington and New Delhi should strive to forge a partnership oriented toward furthering common interests without expecting an alliance of any kind. Simply put, the success of U.S. efforts in India should be measured not by what India does for the United States but by what India does for itself: if New Delhi puts in the economic and political work to make itself a major power—especially at a time of growing Chinese influence—Washington’s ambition to sustain what then National Security Adviser Condoleezza Rice once called “a balance of power that favors freedom” will have been satisfied in Asia.
To achieve that goal, U.S. and Indian officials alike must think about the relationship differently. Ultimately, the greatest obstacle to a deeper partnership is wishful thinking about what it can achieve.
U.S.-Indian relations underwent a dramatic change soon after Bush assumed the presidency, in 2001. After decades of alienation, Bush’s predecessor, Bill Clinton, had already made some headway with a successful visit to New Delhi in March 2000. But a major point of friction remained: the insistence that relations could not improve unless India gave up its nuclear weapons, first developed in the 1970s, in the face of opposition from Washington.
Bush sought to accelerate cooperation with India in ways that would overcome existing disagreements and help both sides navigate the new century. Although the war on terrorism provided a first opportunity for cooperation (since both countries faced a threat from jihadist organzations), a larger mutual challenge lay over the horizon: China’s rise. Considering its long-standing border disputes with China, Chinese support for its archrival Pakistan, and China’s growing weight in South Asia and beyond, India had major concerns about China. In particular, leaders in New Delhi feared that a too-powerful China could abridge the freedom and security of weaker neighbors. The United States, for its part, was beginning to view China’s rise as a threat to allies such as Taiwan and Japan. Washington also worried about Beijing’s ambitions to have China gradually replace the United States as the key security provider in Asia and its increasingly vocal opposition to a global system underpinned by U.S. primacy. Where China was concerned, U.S. and Indian national interests intersected. Washington sought to maintain stability in Asia through an order based not on Chinese supremacy but on security and autonomy for all states in the region. India, driven by its own fears of Chinese domination, supported Washington’s vision over Beijing’s.
For India, neutralizing the hazards posed by a growing China required revitalizing its own power—in other words, becoming a great power itself. But Indian Prime Minister Atal Bihari Vajpayee and his successors recognized that, in the short term, they could not reach this goal on their own. India’s fractious democracy, institutional weaknesses, and passive strategic culture would impede the rapid accumulation of national power. Concerted support from external powers could mitigate these weaknesses—and no foreign partner mattered as much as the United States. American assistance could make the difference between effective balancing and a losing bet.
The Bush administration appreciated India’s predicament. After many hard-fought bureaucratic battles, it came to accept the central argument we had been articulating from the U.S. embassy in New Delhi: that the United States should set aside its standing nonproliferation policy in regard to India as a means of building the latter’s power to balance China. Washington thus began to convey its support for New Delhi in ways that would have seemed unimaginable a few years earlier. The United States started to work with India in four arenas in which India’s possession of nuclear weapons had previously made meaningful cooperation all but impossible: civilian nuclear safety, civilian space programs, high-tech trade, and missile defense. That step laid the foundation for the achievement of Bush’s second term, the civilian nuclear agreement, which inaugurated resumed cooperation with New Delhi on civilian nuclear energy without requiring it to give up its nuclear weapons.
Skeptics in and out of government argued that the United States ought to offer its support only to the degree that India would reciprocate by consistently aligning its policies with Washington’s aims. But such a demand would have been a recipe for failure. India was too big to forgo its vital national interests when they collided with U.S. preferences, and it was too proud a nation to be seen as Washington’s minion. It was also much weaker than the United States and could not often make substantial direct contributions toward realizing U.S. objectives.
Generous U.S. policies were not merely a favor to New Delhi; they were a conscious exercise of strategic altruism. When contemplating various forms of political support for India, U.S. leaders did not ask, “What can India do for us?” They hoped that India’s upward trajectory would shift the Asian balance of power in ways favorable to the United States and thus prevent Beijing from abusing its growing clout in the region. A strong India was fundamentally in Washington’s interest, even if New Delhi would often go its own way on specific policy issues. Both Bush and his successor, Barack Obama, turned a blind eye to India’s positions in international trade negotiations, its relatively closed economy, and its voting record at the United Nations, all of which ran counter to U.S. preferences.
A strong India is in Washington’s interest, even if it often goes its own way on specific issues.
The U.S.-Indian partnership was built on a careful calculation by each side: Washington, unsettled by the prospect of an ascendant China, sought to build up new power centers in Asia. New Delhi, meanwhile, hoped to balance China by shoring up its own national power, with the United States acting both as a source of support and, more broadly, as a guardian of the liberal international order. Under these terms, the partnership flourished. The two countries concluded a defense cooperation agreement in 2005—a first for New Delhi, with any country—and went on to sign the U.S.-India Joint Strategic Vision for the Asia-Pacific and Indian Ocean Region in 2015; Indian policymakers, breaking with their past reluctance, supported the U.S. goal of “ensuring freedom of navigation and over flight throughout the region, especially in the South China Sea,” and agreed to a road map toward, among other things, bilateral military cooperation in the Indo-Pacific region. Indian defense acquisitions of U.S. military equipment substantially increased, as well—from none in 2000 to over $18 billion worth in 2018—as New Delhi began shifting away from Russia, traditionally its principal arms supplier. U.S.-Indian cooperation intensified in a number of areas, including counterterrorism, intelligence sharing, military-to-military relations, and cybersecurity, as well as such sensitive ones as climate change and nuclear security. For two countries that had been at loggerheads for much of the previous three decades, this was a remarkable achievement.
U.S. President Donald Trump has complicated this relationship. His administration has shifted from strategic altruism to a narrower and more self-centered conception of U.S. national interests. Its “America first” vision has upturned the post–World War II compact that the United States would accept asymmetric burdens for its friends with the knowledge that the collective success of democratic states would serve Washington’s interests in its struggle against greater authoritarian threats. India, of course, had been a beneficiary of this bargain since at least 2001.
In some ways, U.S.-Indian relations have changed less in the Trump era than one might expect. There are several reasons for this continuity. For one, New Delhi saw foreign policy opportunities in Trump’s victory—such as the possibility of improved U.S. relations with Russia, a longtime Indian ally, and more restraint in the use of force abroad, giving India more sway to advance its vision of a multipolar global order. It was also believed that Trump might put less pressure on India regarding its climate policies and its relations with Pakistan.
Above all, India’s fundamental security calculus hasn’t changed. Leaders in New Delhi are still convinced that China is bent on replacing the United States as the primary power in Asia, that this outcome would be exceedingly bad for India, and that only a strong partnership with the United States can prevent it. As one senior Indian policymaker told us, China’s rise “is so momentous that it should make every other government reexamine the basic principles of its foreign policy.”
New Delhi particularly worries that China is encircling India with a “string of pearls”—a collection of naval bases and dual-use facilities in the Indian Ocean that will threaten its security. A Chinese-funded shipping hub in Sri Lanka and a Chinese-controlled deep-water port in Pakistan have attracted particular concern. China has also invested $46 billion in a segment of its Belt and Road Initiative that crosses through Kashmir, which is claimed by both India and Pakistan. China’s economic, political, and military support for Pakistan, India’s enemy of seven decades and adversary in three major wars, suggest that China is working to establish a local counterweight to India.
India has also watched with growing alarm as China has illegally militarized its artificial islands in the South China Sea, opposed Indian membership in the UN Security Council, and blocked India’s entry into the Nuclear Suppliers Group, an international organization of nuclear supplier countries committed to nonproliferation. China claims a huge swath of Indian territory in the Himalayas, questions Indian sovereignty over Kashmir, and last year triggered a military standoff with Indian troops in Bhutanese territory. In Tibet, China has been constructing dams that could potentially limit the flow of water into India, which would exacerbate water scarcity and complicate flood control in India’s plains.
India’s response to the growing Chinese threat has been to develop its own capabilities, including military ones. But the Indian government recognizes that only the United States has the power necessary to prevent China from becoming an Asian hegemon in the decades ahead. As a result, fostering ties with the United States remains India’s topmost foreign policy priority. This openness to U.S. influence stands in sharp contrast to Chinese President Xi Jinping’s calls for “the people of Asia to run the affairs of Asia, solve the problems of Asia, and uphold the security of Asia”—a security vision for the region that excludes the United States.
Indian leaders are convinced that only the United States can prevent Chinese dominance in Asia.
Buoyed by its hope that Washington will continue to serve as a steadfast security guarantor in Asia, India has begun to take a much tougher stance against China. It has condemned China’s claims to and militarization of islands in the South China Sea and its efforts to undermine the unity of the Association of Southeast Asian Nations, emphasizing the importance of “ASEAN centrality” in its own Indo-Pacific policy. New Delhi has also begun to engage more in the Quadrilateral Security Dialogue, an informal group in which Australia, India, Japan, and the United States discuss how to protect the Indo-Pacific region in the face of Chinese ascendancy. And New Delhi has doubled down on its opposition to Beijing’s Belt and Road Initiative by collaborating with Japan on infrastructure investments in South and Southeast Asia and Africa.
Most important, India began, in the last years of the Obama administration, quietly cooperating with the U.S. military through intelligence sharing, while continuing to expand its military exercises with the United States. The Trump administration, for its part, has started to resolutely confront China, much to New Delhi’s satisfaction. It has also articulated both a South Asia strategy and an Indo-Pacific strategy that stress India’s pivotal role in the region, has allowed India to buy drones and other advanced weapons systems, and has put India on a par with NATO allies in terms of trade in sensitive technologies. Other defense projects, such as India’s acquisition of advanced military technologies to counteract the expanding Chinese presence in the Indian Ocean, are still in the planning stage, but they nonetheless are noteworthy for a country that long preached the value of nonalignment.
Still, U.S.-Indian relations have hardly been spared from the fallout from the Trump administration’s disruptive and often counterproductive foreign policy. Indian leaders want Washington to sustain the traditional strategic altruism displayed toward New Delhi while doing whatever is necessary to protect a liberal international order that will be open to a rising India. On both counts, Trump’s actions have left them jittery.
Trump has questioned the value of U.S. alliances and raised doubts about whether the United States would defend its NATO allies against a Russian attack, leaving even staunch pro-U.S. stalwarts such as Modi wondering whether India could ever count on the United States to come to its aid in the event of a major crisis with China. These worries are compounded by the suspicion that the United States under Trump is too internally divided to muster the strength, unity, and resolve necessary to compete with China in the long term. Trump has also initiated trade wars with allies such as Japan and the EU, and Indian policymakers are now grappling with Trump’s punitive trade measures against India; in late 2018, Trump labeled India “the tariff king.” Likewise, given that the Trump administration has taken crucial policy decisions regarding North Korea’s nuclear program without consulting South Korea or Japan, who is to say that Washington will be forthcoming on issues of vital interest to India? The administration’s approach to peace and reconciliation in Afghanistan, which has failed to consider Indian interests, has already driven this point home in New Delhi. Trump has largely ignored the imperative of protecting U.S. alliances in Asia in the face of China’s rise—despite the continent’s centrality in the policy documents issued by his own administration. Trump, it appears, cares for little beyond major Asian nations’ trade balances with the United States. He has opted instead to invest heavily in personal relationships with autocrats such as Xi and North Korean leader Kim Jong Un. Trump’s mercurial personality, which leaves the credibility of his commitments in doubt, and the departure of India’s supporters, such as former Defense Secretary James Mattis, from the administration have only made matters worse, despite recent efforts by Secretary of State Mike Pompeo to correct the drift in U.S.-Indian relations.
Trump’s actions have left leaders in New Delhi jittery.
The uncomfortable question facing Indian policymakers is whether they can continue banking on the cooperation of a Washington that appears to have abandoned the liberal international order and evinces little enthusiasm for continued strategic altruism toward New Delhi. Although they want a stronger relationship with Washington—in part because Modi has already expended much capital on this cause—they have already started diversifying India’s international portfolio and repairing New Delhi’s relations with Beijing and Moscow. In June 2018, Modi himself used a major international address to revive the concept of “strategic autonomy,” a hoary Indian locution that has traditionally stood for seeking good relations with the United States without alienating China or Russia. The fact that Modi has opted for such geopolitical hedging, knowing full well that the strategy would not protect India in the face of increased Chinese hostility, speaks volumes about India’s crisis of faith in Trump’s America as a security partner.
Strong and enduring policy differences on trade, Iran, and Russia have complicated the relationship even further. Last September, in response to a decline in the rupee’s value against the dollar, the Modi government announced tariffs on various imports, such as jet fuel, plastics, gemstones, and shoes. After many delays in reaching a settlement in its trade dispute with the United States, it also imposed retaliatory duties on U.S. agricultural products and metals in response to U.S. tariffs on steel and aluminum imports. New Delhi is also concerned about the increased difficulties that Indian nationals face when applying for H1-B visas, which allow workers to take specialized jobs in the United States. Washington, for its part, would like to reduce barriers to U.S. access to the Indian market, which has been hampered by tariffs on agricultural and manufactured goods, the latter stemming from the “Make in India” initiative, designed to spur domestic manufacturing. U.S. companies in India also face restrictions on data collection and price constraints on medical products.
The United States and India are currently discussing how to resolve these issues, but the structure of a potential deal remains unclear. Washington could grant New Delhi a lasting exemption to its steel and aluminum tariffs, perhaps in exchange for specific concessions on the pricing of medical devices and information technology imports. But the Trump administration is unlikely to end its trade confrontations anytime soon. And India is unlikely to open its markets significantly in the near future: trade liberalization remains at the bottom of India’s list of future economic reforms, largely because of the country’s desire to protect its economy from foreign competition for as long as possible. Modi, for all his other economic reforms, has actually taken India a step backward on trade by raising tariffs to generate revenue. Despite the danger that increased protectionism could undo the country’s progress since it liberalized its trading regime in the early 1990s, imperil Modi’s dream of India’s becoming a “leading power,” and exacerbate the trade frictions with Washington, there appears to be neither the vision nor the appetite in New Delhi to liberalize trade.
Iran is another major point of contention. India, whose ties to Iran go back centuries, strongly supported the 2015 Iran nuclear agreement; it had previously worried that a Shiite nuclear power would inevitably set off a cascade of proliferation in the Sunni Arab world, leaving India with many more Muslim nuclear powers to its west. After the Trump administration withdrew from the Iran deal, in May 2018, India joined many other states in trying to keep elements of the agreement alive and find ways to avoid U.S. sanctions against Iran, especially on oil. When the United States reimposed oil sanctions in November 2018, India was one of eight countries to secure a six-month waiver from Washington. Subsequently, in an effort to appease Washington, India reduced its oil imports from Iran drastically, despite the importance New Delhi places on its partnership with Tehran (in part because Iran gives India land access to Afghanistan that circumvents Pakistani territory). The Trump administration wants Indian cooperation in its confrontation with Iran, but New Delhi is reluctant to clash with Tehran at a time when it has already gone beyond the original U.S. demands to minimize its Iranian energy imports. Iran is thus likely to remain a source of irritation in U.S.-Indian relations for the foreseeable future.
Relations with Russia form another stumbling block. India worries that despite Trump’s apparent desire to improve relations with Russian President Vladimir Putin, the U.S. administration is pushing Russia into an ever-closer relationship with China, including intensified military-to-military cooperation. New Delhi is at the same time determined to protect its ties with Moscow, including its decades-long defense collaboration. In October 2018, India announced a deal to purchase a $6 billion S-400 air defense system from Russia, and the two countries reaffirmed their military partnership. Unless the Trump administration issues a waiver for the sale, the deal will trigger secondary sanctions against India under the 2017 Countering America’s Adversaries Through Sanctions Act, or CAATSA. Yet Nirmala Sitharaman, at the time India’s defense minister, stated in July 2018 that India would not change its long-held position on the S-400 based on U.S. domestic laws alone. (Senior administration officials apparently promised India a waiver for the S-400 purchase if New Delhi cooperated by reducing its Iranian oil purchases—which it did—but the administration now seems to have changed its mind.) So far, neither side seems to be budging, and if the issue remains unresolved, there will be significant collateral damage.
On all these issues, Washington has taken a hard line, at least in public. This is because under Trump, strategic altruism toward India has taken a back seat to demands for specific acts of reciprocity. Yet this American expectation, which even U.S. treaty allies have trouble satisfying, is several bridges too far for what is nevertheless a U.S.-friendly Indian government. New Delhi is content to cooperate when there are common national interests at stake, as in the case of balancing China, but seeks the right to go its own way without penalty when U.S. and Indian interests diverge.
Ultimately, neither the American nor the Indian approach provides a stable basis for long-term cooperation; both will instead produce only acrimony and frustration. The United States must recognize that India is not an ally and will not behave like one, even though there are issues on which the two countries’ vital national interests align. Strengthening those convergences should be a priority in Washington. Toward that end, the United States should desist under certain circumstances from levying demands on India that could threaten New Delhi’s relations with its other partners: when vital U.S. interests are not at stake, when the demands would undermine progress toward collectively balancing China, and when they relate to peripheral differences in the bilateral relationship with India. And India should stop taking the United States’ strategic altruism for granted and assuming that it can rely on continued U.S. generosity even in the absence of any attempts by New Delhi to make it worth the cost. For India, this means contributing to the liberal international order at a time when Washington’s commitment to bearing those costs is wobbly, accelerating defense cooperation with the United States, and pursuing economic reforms that would allow U.S. businesses more access to the growing Indian economy.
Both sides should prioritize practical cooperation to balance China’s rise. They should start by routinely sharing intelligence on China’s military modernization and real-time information about Chinese military movements in the Indian Ocean. Each could allow the other’s military to use its facilities for rotational access. And by working together on antisubmarine and antisurface warfare, air and missile defense, and cyber- and space technology, they could erect a joint anti-access/area-denial system that constrains Chinese military operations in the Indo-Pacific.
“Forgetting our intentions,” Friedrich Nietzsche observed, “is the most frequent of all acts of stupidity.” Washington and New Delhi should remember that their most pressing objective by far is not to agree on trade or Iran or Russia; it is to cope with the power of a rising China in the coming decades. If balancing China in the context of protecting the liberal international order remains the lodestar, the actions that both sides take toward that goal, both unilaterally and bilaterally, will be more than worth all the inevitable disagreements on other issues.