Hillary's Asia Visit and the lessons for India

HIllary Clinton’s visit somehow has gone un-noticed in the large Desi press, which is surprising.  For, this visit revealed more than all the eloquence of Obama did.

It fundamentally underscores that the geo-political and economic considerations of post-Bush era may be pushing the Indo-US relationship on the back-burner.  The countries visited were Japan, Indonesia, South Korea, and China.  All important countries (Indonesia for the Islamic relationship), but India was missing.  And many commentators are pointing that out.

Begging in China?

But it is not where she went that is of importance.  But what she said.  In China, you could see her almost servile statement bordering on begging the Chinese to keep the US treasuries in hand and not to “rock the boat”.  This came at a time when the US Dollar is rising.. and is considered a “safe haven”.  At least for now.  If I were an investor, and listened to Hillary, I would start shorting the US Dollar.  Because you don’t go to an investor to make a case for a “blue chip”.  You make a case for a thing that is not really strong fundamentally.

This is one aspect.  But it also speaks volumes of where that relationship between US and China may go towards.  The “India as a China counterweight” policy is probably safely out of the window in the Obama echelons by now.

Indo-US Nuclear Deal?

This is also shown in the dragging of feet on the 123 Agreement (Indo-US Nuke deal).  The urgency of the Bush team is gone.  And the fact that the administration is reviewing all the agreements afresh could lead to further complications on that front.  Obama has also appointed Robert Einhorn as the Under Secretary for International Security Affairs and Non-proliferation.

In 2005, on the Indo-US Nuclear deal that the previous Indian Government was working on, Robert Einhorn made a statement Before the House International Relations Committee on October 26, 2005, where he asserted the following:

The damage can be minimized – and the deal transformed from a net nonproliferation loss to a net nonproliferation gain – if several improvements are made in the course of implementing the July 18th Joint Statement, either by the governments of India and the U.S. themselves, by the U.S. Congress in adopting new legislation, by the Nuclear Suppliers Group in modifying its guidelines, or by a combination of these.

The most important improvement would be an Indian decision to stop producing fissile materials for nuclear weapons. India need not stop such production unilaterally, but as part of a multilateral moratorium pending completion of an international fissile
material cutoff treaty. A multilateral production halt would make a major contribution to fighting nuclear proliferation and nuclear terrorism by capping stocks of bomb-making materials worldwide and thereby making those stocks easier to secure against theft or seizure – in India, Pakistan, or elsewhere.

Without a moratorium on fissile material production, the U.S.-India deal could actually facilitate the growth of India’s nuclear weapons capability. India’s indigenous uranium supplies are quite limited. Under current nonproliferation rules – with India
unable to buy natural uranium on the world market – India must use those limited supplies for both civil power generation and nuclear weapons, and the trade-off will become increasingly painful. Under new rules, India could satisfy the needs of the civil
program through imports, freeing up domestic uranium supplies for the weapons program and permitting, if the Indian government so decided, a continuing and even major increase in bomb-making material. A production moratorium would preclude such an
increase.

With such a person as the guy leading the International security charge, it is pretty obvious that the 123 Agreement will undergo massive changes from the US standpoint.  And the only way, as Einhorn clearly enunciates, this deal may go ahead will be if all those changes are made, which the BJP was pointing to in its opposition of the deal.  So, it might be a “No Deal” in Obama’s rule.

Pakistan & Afghanistan

Due to the relationship already in place, China has a greater leverage with Pakistan than India and the US have.  And although Obama and his administration has been talking of sending troops to Afghanistan and the war in that country, it is just a euphemism for Pakistan.  At least I hope it is.  Or Obama would do with Afghanistan what Bush did with Iraq – sidestep the main war!

There is bound to be that understanding that the leverage which China provides in both economic stability and in Pakistan stability is indeed critical to Obama’s future goals and hence India’s importance may dwindle in the coming months and years.

India needs to open up

Despite my liking of US as a practical nation and a great place to live, I am convinced that US can never be a long term ally for any country.  Its policies and alliances are the most fickle in the world.  In fact, despite the fact that continuity in policies is supposed to be a strength of a democracy versus say, a dictatorship or a monarchy, the truth is that Democracies have the most fickle and short lived alliances.  And US is no exception.  I believe it will be much better for India to make better alliances with Scandinavian countries and other major European countries and make a BIG headway into Latin America.

Blind begs the Blind

Hillary’s servile suggestions to China on US treasuries are hillarious (no pun intended – Hillarious Hillary!) because it is a case of one blind begging another.  China, despite what the analysts keep telling us, is a house of cards.

Its production and manufacturing success was NOT due to the business acumen of some smart business geniuses, but due to amazing levels of Government subsidies and “manufacturing leadershiip at any cost” policies.  When the world stops in its tracks, the new sources of funds that were hitherto paying for the past subsidized production, are no longer available.  To put it another way, Chinese Production Success was a “Ponzi Scheme”!  Chinese Government made it look like a success EXACTLY as Madoff made his scheme look like a miracle!  The truth is that there is NO basis for Chinese business ascendancy.

Low Labor Cost and Blind Government subsidies may do the trick for quite long, but they do not constitute “business strategy”.

So, palling around with the Chinese (to borrow from Sarah Palin), will lead Obama’s team nowhere.  If this strategy is to hold the fort until “reinforcements come in” to stabilize the economy and then they could get back to “normal business”, even then I see it as a rather useless tactic.

The need of the hour right now is to hit at the causes of this… now “Great Depression of 2010s” in the most fundamental ways.  Proping up US Dollar and Increase in Consumption (public works projects, Government Jobs, and tax refunds lead you to higher consumption) sans any manufacturing increase is a recipe for disaster.  It is like jumping from a ditch into a 10,000 foot deep gorge!

It is CRITICAL to look OUTSIDE for consumption of something that US can produce.  Say, for example, if US can provide the world with all the Solar Energy panels that any country requires.  THAT is a win.  Say, US provides food to entire continent of Africa where it PAYS the US back in a reliable currency.  THAT is a win.

Consumption in US, and Manufacturing in other countries.. is EXACTLY what brought this country to this stage!  It is backwards.

Between US and China, the only thing of academic interest to any intelligent analyst is who will fall deepest into the Depression and how fast.  Other than that, if one feels that the other can extricate one, then it is sad naivette!

Reference Links:

1. Robert Einhorn statement on US-India Nuclear Deal