Formalize
Trade Ties to Enhance Security: A Case for Greater Cooperation with India
by Anku Nath
Through the formalization of alliances with India, best realized through the passage of the "123 Agreement" to put into effect civilian nuclear cooperation and a comprehensive free trade agreement, the US and India can turn their partnership into an engine by which to enhance security through trade.
In a post 9-11 world,
the term "security" conjures up images of color-coded threat level
boxes and armed guards at airports. Inherent in this new environment is a
sense that we have lost control over our own safety. Even our children's toys,
our toothpaste and pet food now pose dangers as quality control lies not with
our trusted American brands, but with overseas manufacturers competing purely
on cost. With these seeming threats surrounding us, many will want to shut
the doors and look inward - live and let live. And yet, shutting the door
to the world at this time of rapid globalization of companies, products, supply
chains, politics and ideas is not feasible. Instead, looking to our allies
- those who are our partners today and who can become even stronger partners
tomorrow - offers the greatest promise to increasing our own safety and security.
Allies like India - a country rooted in democracy, who has one of the highest
approval rates of the US in the world, and whose economy complements our own
so well and with such potential - should be invited into our trade framework
as a partner in our quest to secure ourselves against threats of all kinds.
Strategic Security
In August, the US and India agreed on the text of a 123 Agreement to implement the Henry J. Hyde US - India Peaceful Atomic Energy Act which will allow for civilian nuclear cooperation and the trade of these technologies. Some have argued that India, whose leaders have not signed onto the Nuclear Non-Proliferation Treaty, should not be given legitimate status amongst a nuclear club that has pledged commitment to the NPT. Following that route, however, will only keep India outside of the non-proliferation regime and make security assessments more difficult for the US.
Creating a secure global nuclear environment is of the utmost importance; the 123 Agreement offers a unique opportunity by which America can bring heightened transparency and safety to this regime. India has proven itself a responsible owner of nuclear technologies and formalizing a trade relationship through the agreement will illustrate the rewards that positive actions can receive, setting an example for other nations who either already possess or wish to possess the same technologies.
Under the agreement, 65% of India's current and prospective civil power reactors will come under IAEA safeguards, a proportion that could rise to as high as 90% in the future as India imports new reactors. This agreement will also effectively enlist India as a supporter of the international nonproliferation regime and increases the likelihood that the country will partner with the US in addressing the problems of nuclear rogue states. Furthermore, the 123 Agreement lends support to India's unilateral decision to impost a ban on nuclear weapons testing.
With the second largest population in the world, India is in need of energy to maintain its impressive growth rates, in excess of 9% per year. Passage of the 123 Agreement will not only provide a secure path to the safe use of nuclear technologies, it will involve the US in India's expansion of its energy output capabilities, leading to a more robust bilateral economic and strategic relationship. The country has already announced its intentions install additional nuclear energy capacity to increase from 3,500 MW to 60,000 MW over the next 30 years - an expansion valued at $150 billion. Doing so under the safeguards provided through the 123 Agreement will prove the most secure way in which to accomplish this growth.
Physical Security
Much has been made of the vulnerability of America's supply chain and port security, with approximately 5% of imported cargo containers currently inspected for safety. In August, President Bush signed into law the Implementing Recommendation of the 9-11 Commission Act of 2007, which requires inspection for 100% of the cargo that enters the US. The Department of Homeland Security is responsible for implementation of the new law, which must be in full compliance by the year 2012. The requirement will likely be deemed a non-tariff barrier to trade by the WTO, and thus violate WTO laws, possibly leading to retaliatory measures in an already tense multilateral environment.
Rather than resort to expensive inspection measures, a wiser tactic is to focus on the use of risk assessment and management to increase supply chain security, as advocated by the World Customs Organization. US Free Trade Agreements already embody this approach through the application of Risk Assessment and Cooperation Articles in the Customs Administration chapter of the FTA. The chapter typically calls for the joint adoption of risk management systems that charge each country's customs authority to "concentrate inspection activities on high risk goods." More importantly, however, the agreements also call for the sharing of technical assistance for the improvement of these risk management systems.
An FTA with India, in addition to presenting the many other benefits these types of agreements are capable of, can attract much needed investment to develop a world class supply chain to India's benefit and our own. Already overburdened, transport and supply chain demand in India is growing at 10% per year without an equal growth in supply, thus potentially allowing for security breaches where Indian technology is unable to keep up with growth. Technical assistance to improve supply chain safety will flow more freely under the auspices of an FTA so that our cross-border supply chain safety operations can function more smoothly and effectively.
The US is India's largest export market, valued at nearly $22 billion in 2006. Its economy is growing at rates in excess of 9% per year, and the manufacturing sector, driven in large part by exports, is growing even faster at 11%. Given these impressive rates, our trading relationship with India will only increase in the future, with growth in bilateral trade is already hovering around 20% per year. Ensuring the country's supply chain security through risk management via an FTA represents an efficient, effective and sustainable way by which to enhance our own security moving forward.
Why Now?
US trade with India is
on an irreversible upward path, though there is still a long way to go before
our bilateral economic relationship reaches its peak. With a population just
slightly behind that of China, US-Indo bilateral trade is only one-tenth that
of US-China trade levels. India has just begun its economic evolution, and
the time is right for cementing its partnership with the US, not only for
the financial synergies and benefits that will be created, but for those of
security, as well. Already, India is in talks with the likes of Australia,
Japan, Canada, the European Union and the 10-member ASEAN group for future
Free Trade Agreements. We, however, have the unique opportunity and ability
to invite India into an even greater level of partnership to our mutual benefit.
The US can offer that rich economy not just an FTA for economic gain which
will also enhance our own supply chain security, but also the chance to collaborate
on nuclear technologies that will also underscore the global effort to create
a secure nuclear non-proliferation regime.
Anku Nath is the Director of Trade Policy Advocacy for the US-India Business Council. She can be reached at anath@uschamber.com.