The US-India-China Triangle

Updated: Aug 26 2002, 05:30am hrs
Any Indian visiting the cities of Sunnyvale, San Jose or Palo Alto in Californias Silicon Valley feels completely at home. He runs across fellow countrymen at every street corner and finds Indian shops and restaurants at virtually every marketplace. Monsoon Wedding draws large crowds across the US, film makers like Shyamlan are fast becoming household names and new blends of pop music embodying large amounts of Indian melodies are popular features on radio programmes. Despite the economic downturn and growing unemployment across the country, Indian IT professionals are still the flavour of the day in Silicon Valley. All this has naturally led to interest in India about suggestions emerging from sections of the Bush Administration about an Indo-US Strategic Partnership to deal with the growing power and potential of China. While this excites many strategic pundits in India, it would be dangerous to overlook the growing cooperation between the US and China while dealing with the triangular relationship.

Successive US Administrations have veered between a quest for strategic partnership with China, as President Clinton sought to do, and a policy of containment, as some strategists in the Bush Administration advocate. But there is a coalition within the US, ranging from Colin Powell and his State Department mandarins on the one hand, to business circles, academics and old-time missionaries on the other, who believe that the US should acknowledge that China is destined to be a great power. This, despite the knowledge that China has purloined nuclear weapons designs from the Lawrence Livermore nuclear facilities in California and is using missile and nuclear transfers to keep the US on edge. It is in this context that one has to view the recommendations of a Congressional Commission that has recently reviewed the security implications of current US policies towards China.

The Commission advocates development of mutually beneficial military-to-military Confi-dence Building Measures with China, but urges careful monitoring of high technology transfers. It advocates measures to compel China to open up its markets and urges restrictions on cooperation in the space industry. It also expresses concern at growing American dependence on Chinese units manufacturing critical weapons-related systems and urges caution in transfer of weapons-related technologies.

China is today respected in the US as an economic dynamo. The US trade deficit with China has grown from $20 billion in the late 1970s to $85 billion in 2000. The Chinese trade surplus with the US exceeds Indias global exports. Its global exports are nearly six times that of India. More importantly, China remains an irresistible magnet for US companies wanting to set up manufacturing plants abroad. Only a few weeks ago, the California-based National Semiconductor announced an investment of $200 million to set up an assembly and test plant near Shanghai in an industrial park built with Singaporean collaboration. China has today assumed a dominant role in the manufacture of computer hardware, calculators and a vast range of high technology electronic and electrical products. It is becoming the export hub for such manufactures.

Even members of the Indian diaspora acknowledge that it is China that they regard as a natural place to set up manufacturing units. Arun Bhimani an IIT-educated structural engineer, a long-time resident in the USA, owns a company that designs heavy duty cranes that are manufactured in China and exported worldwide. He acknowledges that it is the presence of disciplined labour and first rate infrastructure that enables China to compete internationally. He acknowledges with some sadness that Indias labour laws and the low productivity of Indian labour inhibit such investment in India, despite the fact that the same Indian workers rapidly enhance their productivity when employed abroad.

Analysts in the USA cite a number of reasons for Indias marginalisation in the flow of venture capital for industrial units. The Chinese economic reform process started 12 years before India. While life expectancy in the two countries is comparable, China has an impressive domestic savings rate of 38 percent of GDP against barely 22 percent in India. Even if one were to somewhat discount exaggerated Chinese figures of an annual 10 percent rate of economic growth, Indias performance of a 6 percent growth rate has to be improved. While India has seen an actual fall in the rate of industrial growth in the past decade, China has seen a consistently high rate of industrial growth. Massive public investments in physical infrastructure like roads, power, railways and ports has produced an economic environment conducive to economic growth. While American analysts acknowledge that agricultural reforms are going to be difficult and time-consuming, they note that in the long term it would be counterproductive for India to ignore its industrial environment and depend exclusively on its service sector as an engine for growth. It is also recognised that till India gets its economic house in order and its infrastructure made world class, it is going to be on the margins of global industrial investment interest. Unfortunately, the political class in India regar-ds economic reform as an evil to be reluctantly accepted, rather than a necessity for prosperity in a globalised world order.

In these circumstances, it would be unrealistic to expect that Indian interests would somehow be served by joining in some grand American design to circumscribe Chinese influence. There is no national consensus in the USA on pursuing such a path in relations with China, though it is obvious that the Americans will be more cautious in future on technological and other transfers to China on items involving national security. Despite all the rhetoric of the Bush Administration about India and the US sharing common values as the two largest democracies in the world, American restrictions on the export of high and dual use technology are far more stringent for India than for China.

China is set to join the countries of South East Asia in a common market within the next two decades. The real challenge that India faces today is how it should deal with an economically resurgent China. Those in charge of trade policy with our neighbours in South and South East Asia in our Commerce Ministry, however, lack the vision to meet such challenges and seem scared to open up our economy to genuine free trade agreements with even countries like Sri Lanka, Bangladesh and Singapore. A country aspiring to be a regional power cannot afford to behave like a protectionist economic pygmy.

The debate on relations in China in India is marked by resort to extreme points of view. There are those in our political, diplomatic and academic establishments who believe that China can do no wrong and is our great friend. Then there are those who believe that China is a grave military threat that has to be contained, even if it involves allying ourselves with distant powers. China is, however, a country that naturally seeks to be the predominant power in Asia and play a pre-eminent role in the Councils of the world. In discussions with their counterparts in countries like the USA and France, the Chinese invariably speak about India in condescending, even contemptuous, terms. This, coupled with their transfer of missile and nuclear capability to Pakistan and their growing presence in Myanmar, only confirm that the Chinese are committed to a policy of containment and marginalisation of India. The correct way to meet this challenge is not by alliances with distant powers, but by setting our economic house in order and strengthening our military muscle.

The writer is a former Indian High Commissioner to Pakistan