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Obama promised a number of policy initiatives other than “stimulus packages.” Of this huge list, three important issues will affect the world outside the United States.
First is financial market reform. Obama will not undertake any significant reforms to prevent the recurrence of another financial market meltdown. Soon the recession will be over and the old commissions and bonuses will be back. Failure to control financial markets will result in another financial crisis seven to nine years down the road.
The only reform Obama will undertake is to deny overseas tax shelters to control the U.S. version of “black money.” He wants money to pay for two huge stimulus packages and bringing home the black money will give him additional cash.
Second is handing over another US$1.5 billion in aid to Pakistan. Without demanding full accounting this does not make sense. Pakistan received a staggering US$10 billion in aid in the last seven years, but it did not bring development and peace. Instead, Pakistan is fighting the Taliban, which is trying to seize control of the state.
Pakistan has 600,000 soldiers waiting to settle old scores with India. If these were redeployed to trouble spots, they could stamp out terrorism. But Pakistan will not do that; instead it sent ten terrorists to Mumbai to kill Christians, Jews, Hindus, Sikhs and Muslims alike.
Third, the Obama administration has served notice to India that eight years of friendly relations under former U.S. President George W. Bush are under review. This again does not make sense, although India is lucky that its nuclear deal with the United States is done. Still, Obama’s administration is putting up roadblocks to prevent it from becoming a reality. An official in the U.S. State Department has starting asking whether India should be slapped with the Nuclear Proliferation Treaty condition, which entails complete nuclear disarmament.
Also, under pressure from fellow Democrats, Obama has begun cracking down on India’s information technology and business processes outsourcing services. This includes limiting H1B visas, which allow many Indians to work in the United States. In short, Obama is sidelining India.
All other Obama initiatives like energy, healthcare and education are more local in nature, which will not impact the international scene. Shutting down the war in Iraq is a foregone conclusion. In Afghanistan, the triumvirate U.S.-Afghan-Pakistan policy will yield nothing but a loss of face for the United States. The only way to deal with this situation is to deny Pakistan spare parts and other supplies. Until then, it will not mend its ways. One heartening outcome is that Pakistan’s nuclear arsenal has come under the U.S. scanner and will be carefully watched.
What impacts India negatively benefits China. Preventing India from becoming a powerful nation serves China’s purpose. An independent observer recently said, “Those good old President Clinton days are back.” Clinton was always twisting India’s arm during his first seven years in office. It was not until the eighth year that he began to talk to India – and in those seven years he guaranteed China’s prosperity. Some day China will face off with the United States in the South China Sea. At that time, there will be no backing out of benefits China has already received.
What has gone wrong in U.S.-India relations? Although U.S. Secretary of State Hillary Clinton is known to be an India supporter, since taking office she has gone quiet. She no longer meets her Indian campaign supporters. India is no longer important to the United States, which would rather concentrate on China.
It would be reckless to use U.S. laws to hurt India’s interests – in outsourcing and nuclear energy for example – and expect India to do nothing. India may delay by a few years partnering with the United States in building nuclear power plants. In the meantime France and Russia can proceed. Also, India could opt for Russian or European military equipment in a US$10 billion contract, which might cost more if it wrangled with the United States.
India does not need much from the United States except to ensure that there are no roadblocks in its burgeoning IT and BPO services exports. Although for the United States this is a small sector worth US$45 billion, for India it is a huge breakthrough on the world stage. India wishes to be recognized as an educated, sophisticated and capable service provider and its IT and BPO services are letting it achieve that goal.
An additional U.S. demand that India withdraw troops from its border with Pakistan without a similar response from Pakistan is reckless. All these issues point toward Indo-U.S. relations entering a tumultuous phase.
Where do U.S. - China relations stand? China in the last 20 years has dealt itself a trump card – U.S. dependence on Chinese money. In fact this is U.S. money earned by China through unequal trade practices. Now this money is coming back to haunt the United States. It is part of this surplus cash that was given away as subprime loans. It has brought down the whole financial structure of the world. Had China-U.S. trade been balanced, there would have been no surplus Chinese cash with the United States and the excesses of subprime loans could have been avoided.
The Chinese have the Americans by the tail. Their US$1.8 trillion cash reserve is their greatest foreign policy bargaining tool. China sees itself as the sole power in Asia, which the United States has passively winked at. Now China is telling Asia, including India, to acknowledge its supremacy. The world is back to 1955 when, after defeating the United States in Korea, Chinese leader Mao Zedong enunciated the Chinese supremacy policy. To make his point, he first picked on India for a fight from 1957 to 1962. That could happen again.
Will China-India relations ever mature? It is unlikely given the above scenario. China’s US$1.8 trillion cash reserves are making it overconfident. China asked for a postponement of an Asian Development Bank board meeting on March 26 and 27, which was to discuss the 2009-12 strategy for India. On the table was India’s loan request for US$2.9 billion. What probably irked the Chinese was the inclusion of a US$60 million flood management, water supply and sanitation project in India’s northeastern state of Arunachal Pradesh, parts of which China believes is “disputed territory.”
Competition between the two Asian giants is getting ugly. China hates to see India emerge as a sea power in the Indian Ocean, so it invented a virtual encounter of their navies off the Somalia coast. India’s navy is no pushover; it is a mighty force in the Indian Ocean while the Chinese away from their home ports are very vulnerable.
China is also upset that India is not allowing trade to pass through its Northern Himalayan passes. It is looking for an excuse to start a fight. A large Chinese military buildup in the area has been noticed. It has one purpose – to intimidate India. Unfortunately for the Chinese, India is preparing well for this eventuality.
India wants to befriend the United States, but feels the United States does not reciprocate. Instead, the United States seems to be allying more with China while keeping India waiting on the sidelines. It is an unfortunate situation.
India is a nation of 1.1 billion and a US$1 trillion economy. Its population demographics virtually guarantee future economic success. It is unlike China, whose aging labor base will turn counterproductive. It is in the interest of the United States to pay more attention to India. All minor ideological matters must be dumped to pave the way for a greater strategic partnership.
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(Hari Sud is a retired vice president of C-I-L Inc., a former investment strategies analyst and international relations manager. A graduate of Punjab University and the University of Missouri, he has lived in Canada for the past 34 years. ©Copyright Hari Sud.)
