All entries for Thursday 15 September 2005

September 15, 2005

Britain, Europe Come Courting India

SAAG Paper 1539, 15.09.2005

On the second leg of his visit to China and India, two of the world’s fastest growing economies and emerging political powerhouses, British Prime Minister and President of the European Council of Ministers Tony Blair arrived in New Delhi earlier this week. He pledged to ink and cement “trade deals, educational and cultural partnerships” with India during his stay. With Britain traditionally enjoying close relations with India , the bigger challenge for Mr. Blair was to forge a new chapter in relations between India and the European Union. He has been largely successful.

Prior to Mr. Blair's visit a spokesman for the British High Commission in Delhi explained why Europe was so keen to take the relationship to the next level- “ India is the fastest growing democratic country in the world.” In a world laden with arbitrary governments, the EU wants to be seen as helping not hindering the progress of the world’s largest democracy. Moreover, apart from being a good public relations exercise, it also generates rich dividends for companies and investors on both sides.

While in Delhi, Mr. Blair signed a “strategic partnership” between India and the EU, which will foster closeness in many aspects including trade, education, climate change and energy co-operation. The EU is already India’s largest trading partner, and as EU Trade Commissioner Peter Mandelson recently remarked, boosting of economic ties between the two power blocs could only lead to closer relations and increasing prosperity on both sides. Mr. Blair too urged Europe to “embrace the economic powerhouse” and not look at it as a job stealer, as many not well versed in the benefits of free trade do.

In a related development, the Hindujas, Indian-turned-British entrepreneurs, announced a $15 billion “India Fund” which they would be raising in liaison with investors from around the world for the core sectors of India’s economy. Incidentally, Britain is already the largest foreign direct investor in India . During his stay in Delhi , Mr. Blair, this time in his avatar as the British Prime Minister, met up with eminent Indian industrialists and visited the UK Trade & Investment meeting to gauge the importance of the economic relationship between India and his country.

Undoubtedly, Mr. Blair had a big role to play in the inking of the £1.2 billion deal signed for the purchase of Airbus jets by India . He would also be lobbying for the quickening of the deal where India is considering buying 12 Scorpene submarines from France, and 125 front line fighters, for which French companies Mirage and Rafale are in the race with America ’s Lockheed Martin and Russia’s MIG.

However, there was uncomfortable ground for Mr. Blair to tread on as well. Indian Prime Minister Manmohan Singh called upon the EU to lower or drop duties and non-tariff barriers on Indian exports to the bloc, and stop unwarranted subsidies in a range of sectors, primarily agriculture. Although Mr. Blair did support the idea of systematic opening up of markets on both sides, he is reading from a different page of the book than Herr Schroeder and Monsieur Chiraq. Acknowledging that “protectionism was simply outdated and no longer sustainable”, Mr. Blair is, however, unlikely to find accord in this from his continental or trans-Atlantic colleagues, as an acrimonious dispute between the Quad (US, EU, Japan, Canada) and the G-20 (group of developing countries) ala Cancún looks imminent to erupt at the Hong Kong ministerial summit of the World Trade Organisation in November.

Nevertheless, the two biggest news items to come out of Mr. Blair’s brief Indian summer were the declaration of increased co-operation in civilian nuclear energy and the re-aligning of Britain’s position on terrorism in Kashmir . He said, “I have always condemned terrorism in… Kashmir . But I think there has been a reluctance- not confined to the UK alone- to see this terrorism for what it is…but the world has woken up.” For years, many of the perpetrators of attacks on security forces and civilians in the valley got asylum in Britain as “freedom fighters” escaping state repression. With Britain having woken up by its home grown breed of this terror, 10 Downing Street finally branded the insurgency in Kashmir as terrorism, and called upon concerned parties (no guessing who) to end the infrastructure of this menace. Equating the dangers faced by people from both countries, he said- “[T]his global terrorism we face in India [and]…in Britain …comes from a perversion of the true faith of Islam.”

On his recent visit to Washington, PM Singh managed to secure US co-operation in civilian nuclear technology, and supply of fuel for the Tarapore Nuclear Plant. He also got the Bush administration to assure India of allowing freer access to nuclear technology from all nuclear suppliers. Now Mr. Blair, speaking both on behalf of the British Government in London, and the European Union in Brussels, agreed to the same.

He “promised to bring about the required changes in policy” for Britain to be active in the Nuclear Suppliers’ Group, and pledged to transfer to India civilian nuclear energy and other dual-use technologies. The EU has also acknowledged India ’s need for “clean energy” to ensure its energy security, and backed Delhi to be a part of the International Thermonuclear Reactor Project, which was a “recognition of India’s nuclear and scientific capabilities”. Arguably, this will be more effective than the American pledge, as unlike President Bush, Mr. Blair does not need any parliamentary ratification to bring about this policy change. This is because after the 1998 nuclear detonation by India, the Clinton administration passed a law through Congress preventing transfer of such technology to India- Britain had merely made a policy statement.

In other, albeit minor, agreements, the two sides agreed on greater co-operation in combating HIV Aids, hydrogen carbon, a new air service agreement, intellectual property rights and climate change. They also agreed for greater co-production of films. A recent report by the BBC showed the interest among film circles in Britain to tap the potential of the Indian film industry- the largest in the world. The 1 million strong British-Indian population also helps to cement this cultural relationship.

Although Mr. Blair did pledge to transfer most of what was signed on paper into actual developments, it is relatively easy to undermine the importance of the EU-India mini-summit ahead of next Wednesday’s United Nations Assembly in New York as mere empty rhetoric. To gauge the long-term significance of the same, we need only to look as far as China , where Mr. Blair was before his India trip. It could be argued that his visit was primarily for “damage control” over the “bra wars” between the EU and China. Moreover, he also raised the usual questions over human rights abuses in the country. Although driving clear of indicating any conflict of interests between the West and China , Mr. Blair did say that “It’s not that people resent China, but they’ve got a question mark”.

No such qualms about India though- it is looked upon as a far more benign power vis-àvis China. As Mr. Blair and Mr. Singh strolled through the gardens in the Lake City of Udaipur, he summed up the outcome of his trip “The result of these two days is to cement a new modern relationship between India and the United Kingdom for the 21st century”. Now his challenge will be to get the Franco-German sphere on board.

The author is based at the University of Warwick and takes a deep interest in the political economy of the Indian sub-continent

September 2005

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