U.S.-India Relations: Swayed by Gains and Losses

After U.S. Treasury Secretary Timothy Geithner visited India for the first time since he came into office, he met with Dong Jianhua and Ren Zhigang in Hong Kong, preparing for his visit to Beijing. In other words, after Geithner won India’s trust, he wants to win more to deal with China. Although it seems irrelevant to U.S.-India relations, it shows America’s swayed attitudes toward India.

From Geithner’s ambiguous speeches about trade between the U.S. and India, the U.S. wants India to develop its electronics industry, not other industries. In some big topics, such as building a global economic cooperation system, improving bilateral cooperation in the macro-economy, finance and infrastructure, the U.S. has signed some high-sounding treaties to accommodate India’s aspirations. But when it comes to the distribution of profits, the U.S. would tighten the rope and not give up its position.

Unequal Profits

A good example could show their different interests in economic issues. Although the U.S. and India have entered into their “honeymoon” in creating a new dialogue mechanism, their interests, demands and economic focuses are totally different, and the difference is insurmountable. India wants the U.S. to invest more in its infrastructure construction and to give more support to building its financial system. However, the U.S. doesn’t want India to gain more power in Asia due to development in these two fields. Therefore, the U.S. asks India to further open up to foreign investment, especially in the insurance field. In this way, American insurance companies could get more wealth from India, the country with the second biggest population. The reason the U.S. gives is that India has different social systems from China while sharing the U.S.’s values. But some Indian media sources point out that the Indian government must further consider the cost when it comes to unequal interest distribution.

India has made progress in “cooperation” with Geithner. Indian Finance Minister Mukherjee clearly says that India would explore the use of public-private partnership with the American enterprise system and attract the U.S. to invest in Indian infrastructure construction. He also shows that it would take an investment of US$600 billion to build up infrastructure in the next five years. This passes the problem along to Geithner again and India wants a reply. However, it’s common for the U.S. not to give a ready reply. The U.S. expected to invest more in the Indian insurance industry, but India insists that foreign investment should not exceed 26 percent. This leads to polarities of serious differences behind beautiful speeches. Geithner says there are still ample opportunities to cooperate with India, pointing out that the U.S. is India’s third trading partner and third source of direct investment. But other parties are not that optimistic about U.S.-India relations.

In fact, the United States has complete control of the Indian attitude toward the U.S. Therefore, when Geithner visited India, the White House announced that Obama was very interested in visiting India. In other words, if Geithner’s visit were to make concrete progress, Obama would gain more from India on his trip; if Geithner’s visit were unsuccessful, Obama’s visit would further pressure India. Both results would make India compromise and turn to the U.S.

The Only Way Out

India is falling into the American trap because, first, it thinks it could depend on the U.S. to expand its power in Asia and to form strength and momentum against China; and second, it looks down on China’s economic development pattern because its high technology is integrated into the world. However, India has ignored two important political and economical factors related to Asia. The U.S. is more politically trusting of Japan and South Korea, not only due to historical reasons, but also because the U.S. doesn’t think Japan or South Korea would have the power to rule Asia. Even if Japan had the ambition, it is moving further and further from this goal. This gives the U.S. a good opportunity to use Japan, South Korea, and even Taiwan, the Philippines and Indonesia to circle China and act as American spokesmen in Asia against China. Therefore, no matter what India does in Asia, the U.S. would only show understanding without much significant support.

Economically, the U.S. thinks that India could not develop as fast as China and it adopts a pulling and pushing attitude toward India: neither refusing nor welcoming. The Indian finance minister said complacently that meeting with Geithner would help to build a strategic partnership between the U.S. and India economically and financially. The potential for a strategic partnership is predicated on whether the U.S. will be permitted to invest more in Indian financial industries, especially in the insurance industry. If India understands this, it would not be tempted by American sweet-talking. Instead, it should cooperate with other Asian countries as soon as possible, which is the right way for India to develop.