PacNet #35 – India: The Solution to Australia’s Reliance on China?

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An earlier version of this article was published by the Australian Institute for International Affairs.

Australia would benefit from an increase in both economic and strategic ties with India. Strong trade and closer ties with India would help ease Australia’s economic and political vulnerability to China. Indeed, Prime Minister Scott Morrison’s 2020 plan was initially to travel to India to revitalize negotiations for an Australia-India economic agreement, however the bushfire crisis put a halt to the trip. According to DFAT, two-way trade between Australia and India has grown in value from $13.6 billion in 2007 to $30.4 billion in 2018. Negotiations for a bilateral agreement between the two countries started in May 2011 and there have been nine rounds of negotiations so far, the latest of which was held in September 2015. While there are no concrete plans yet to reschedule the meeting between Morrison and Indian Prime Minister Narendra Modi, given the travel challenges presented by Covid-19, the governments should look to restart negotiations as soon as possible.

Australia’s China Vulnerability: How India Can Help

Australia’s economy is heavily reliant on China, which continues to be Australia’s largest two-way trading partner, accounting for around a quarter of total trade. While Australia has benefitted from Chinese demand, such large dependency has also left it in a vulnerable position. Whenever China is negatively impacted by a global economic shock, Australia is exposed to such impact.

This became evident with the ongoing US-China trade war. In August 2019, the Australian stock market slumped because of the trade war. Even though Australia was not involved, it still felt the effects of the trade war. It should be noted however, that at times the Australian economy has been able to benefit in certain areas from the ongoing battle. Nonetheless, this is only a short-term benefit, in comparison with the more serious long-term consequences to come. Former senior economic officials from both Australia and the US believe that the Australian economy will further have to suffer because of the trade hostilities.

Politically, the economic dependency also puts Australia in an awkward position in confronting the US-China dilemma. Australia is forced to take sides between economic and defensive dependency, in which both choices alone present considerable disadvantages. Australia must balance its relationships with a country on which it is heavily reliant economically for crucial exports (China) and a country on which it has relied for security and defense since the fall of Singapore in 1942 (the US). Both security and economic wellbeing are vital components of a state’s survival, so being forced to choose one inevitably means missing out on the other.

To counter this, Australia needs to increase its competitiveness by expanding its export market opportunities. Currently, Australian trade relies on a minimal number of commodities to a small number of critical trading partners. Australia needs to diversify its trade partners and expand its export base, which is where India can help.

India is currently Australia’s fifth largest export partner and presents a lucrative option for Australian exporters to diversify. By 2027, India’s population is projected to overtake China’s. By 2030, India is expected to become the world’s third largest economy, and the second largest by 2050. At the end of this decade, India and China will be on par when it comes to potential export markets.

While Australian trade with India has grown steadily, there is much more potential for export market access. However, India has notably high trade barriers and low ease of doing business, especially in areas such as contract enforcement and property registration. An economic agreement would help to reduce obstacles for Australian exporters.

Strategic Benefits of Closer Ties with India

Economic relations aside, closer ties also present strategic political benefits. India shares more in common with Australia than China. India and Australia are federal democracies, former British colonies, and English is the primary language of both foreign ministries. These similarities go a long way in ensuring smooth diplomatic communication between both governments, something which has been an obstacle in the Australia-China relationship.

India has a strong relationship with the US, as was evident in the recent state visits by Modi to the US and President Trump to India. Australia wouldn’t have to worry about taking sides should India be in the picture. Instead Australia could use this to their advantage and work in a collaborative relationship with both countries.

Despite the clear importance of India to Australia, Australia is still very much focused on China. China accounts for over 30% of Australian exports, whereas India accounts for just 5. China was mentioned 112 times and had its own sub-chapter in the 2017 Foreign Policy White Paper. By comparison, India was mentioned just 60 times. The Australian foreign policy community commonly cites the “Rise of China” but India too should be viewed in the same way. India is experiencing a geopolitical rise in the Indo-Pacific. Similar to the increase in Chinese influence within Pacific Island countries, Australia tends to forget India too is playing this game with other countries in region, much to the displeasure from Beijing.

The decade ahead will see increased importance in the space race and cyber-security, both of which India looks to play an active role. India has demonstrated its similarity with China in terms of its rising power status and strategic importance. Australia has yet to recognize this and its low prioritization of India, in favor of China, is not in Australia’s strategic interest. India’s global rise presents Australia a pivotal opportunity to change economic and strategic dependence for the better.

Adil Cader (adilacn1@gmail.com) is a Pacific Forum young leader and is on the Perth US Consul General’s alliance managers committee. He has previously worked at the Australian Mission to the UN in New York and has been involved with various think tanks. He holds two masters degrees in international relations and international law from UWA. His interests are Australian foreign policy and the impact of soft-power diplomacy.

PacNet commentaries and responses represent the views of the respective authors. Alternative viewpoints are always welcomed and encouraged. Click here to request a PacNet subscription.

PacNet #17 – Modi, Trump and Strategic Convergence in the Indo-Pacific

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President Donald Trump’s visit to India from Feb. 24-25, his first, represents an important moment in United States-India relations. Potential fracture lines were avoided and the way cleared for ongoing convergence. Having secured re-election with a strong majority in May 2019, Indian Prime Minister Narendra Modi represents an important ongoing feature for US strategic calculations. Good personal chemistry between the two leaders remains evident.

One noteworthy aspect of Trump’s trip is that the US president did not go off script, sticking to a measured line of drawing India into convergence on the Indo-Pacific. Limits remain clear, in the shape of India’s much vaunted “strategic autonomy,” which makes any formal alliance a non-starter. Nevertheless, India is of high value for US strategy, as expressed in the Robert Blackwell and Ashley Tellis article in Foreign Affairs Sept-Oct. 2019 titled “The India dividend,” where “New Delhi remains Washington’s best hope in Asia” for constraining China, on account of India’s sheer size and weight.

Trump’s trip to India showed continuing Indian convergence with the US over delicate but deepening constraint of China, and opportunities for further development. This was evident in the joint statement released in February, entitled “Vision and Principles for the United States-India Comprehensive Global Strategic Partnership.” To what extent did this represent the US drawing India into its fold? What was Modi signing up to?

On the economic front, while no overall trade deal was announced, the two leaders agreed that good progress was made and that they expected an early signing. Extended military cooperation was flagged in the joint statement, where Modi and Trump “pledged to deepen defense and security cooperation, especially through greater maritime and space domain awareness and information sharing; joint cooperation; exchange of military liaison personnel; advanced training and expanded exercises between all services and special forces; closer collaboration on co-development and co-production of advanced defense components, equipment, and platforms; and partnership between their defense industries.”

In that vein, specific sales were announced: around $3 billion worth of American military helicopters, mostly for the Indian Navy. Its significance was not in the amount, but that it continues India’s slow move away from dependency on a pro-China Russia towards increasing military sales with the United States, and strengthens maritime cooperation between the US and India. The statement formally noted an “early,” i.e. impending, signing of a Basic Exchange and Cooperation Agreement (BECA), which will enable exchange of geo-spatial information, and complete the foundational military agreements already made.

The key significance of the visit was “Strategic convergence in the Indo-Pacific,” an extended section of the joint statement. This is the first time a joint summit has had an explicit “Indo-Pacific” underpinning. The strategic imperative remains evident: the US feels threatened by China’s advance into the West Pacific and India feels threatened by China’s advance across the Indian Ocean. Strategic logic is simple; this common Indo-Pacific challenge posed by China is driving India-US strategic cooperation.

In the Indo-Pacific section of the joint statement, a close alignment of values was evident, in its affirmation that “a close partnership between the US and India is central to a free, open, inclusive, peaceful, and prosperous Indo-Pacific region. This cooperation is underpinned by recognition of ASEAN centrality.” The inclusion of the moniker “inclusive” nods toward not appearing as overt containment of China. Still, the statement went on to pinpoint China-centred concerns: “adherence to international law and good governance; support for safety and freedom of navigation, overflight and other lawful uses of the seas; unimpeded lawful commerce; and advocacy for peaceful resolution of maritime disputes in accordance with international law.”

The advocacy by both leaders of “freedom of navigation and overflight” was a clear reference to the South China Sea, and indicated tacit Indian acceptance of the legitimacy of United States’ freedom of navigation exercises in the South China Sea, increasing in frequency, which China of course objects to.

In a shot against China’s Maritime Silk Road (MSR) infrastructure initiative, the joint statement noted that “India and the United States remain committed to sustainable, transparent, quality infrastructure development in the region.” More specifically, and perhaps most significantly, Modi recorded India’s “interest” in the US Blue Dot Network (BDN) infrastructure initiative, a counter to China’s MSR initiative in the Indo-Pacific, which already has Australia and Japan on board. Both India and the US are now boycotting China’s MSR initiative.

Modi and Trump also agreed in the joint statement that “India and the United States took note of efforts towards a meaningful Code of Conduct in the South China Sea and solemnly urged that it not prejudice the legitimate rights and interests of all nations according to international law.” We can note their caveat on it being a “meaningful outcome,” as well as not being an agreement in which China restricts the involvement of outside countries like India and the United States.

The US can be happy with Modi’s agreement in the joint statement to “strengthen” three  mechanisms; namely the 2+2 foreign and defense ministers mechanism (started in 2018), the India-US-Japan trilateral summits (a format started in 2011, but in 2015 upgraded to foreign ministers level and with trilateral naval exercises also initiated), and the India-US-Australia-Japan Quadrilateral consultations (restarted in 2018) over which some Indian hesitations have been apparent. Further India-US cooperation was on show with their convening, from March 20 onward, of weekly Quad-plus discussions, in which the four Quad members were joined by New Zealand, Vietnam, and South Korea (but not China) to coordinate responses to the Covid-19 virus.

Finally, the statement said that “Prime Minister Modi and President Trump looked forward to enhanced maritime domain awareness sharing among the United States, India, and other partners.” This is indicative of India’s and the United States’ naval relationships with countries like Australia and Japan, but also France, Vietnam, and Indonesia—all of whom have concerns about China and are strengthening defense links with both India and the US. This is all part of an emerging cross-bracing strategic geometry in the Indo-Pacific.

Chinese state media’s attempts to undermine such US-India convergence were evident. Its state-run Global Times on Feb. 23 said that“Modi must maintain strategic independence of Trump pressure tactics.” The next day, as Trump arrived in India, it stressed continuing divisions. On Feb. 25, as the trip concluded, the Global Times was somewhat dismissive, claiming India “won’t do US bidding against China.” Indian opinion was very different, with the New Delhi Times reporting that “China’s intransigence drives India to US fold.”

In retrospect, Trump’s visit and the agreements made represent not so much the US getting India to do its “bidding,” but rather this ongoing and mutually recognized “strategic convergence in the Indo-Pacific” directly acknowledged for the first time at this summit level. Washington now has a good opportunity to further deepen strategic cooperation with India during 2020.

David Scott (davidscott366@outlook.com) is a prolific writer, Indo-Pacific analyst for the NATO Defense College Foundation, member of the Center for International Maritime Security, and Associate Member of the Corbett Centre for Maritime Policy Studies.

PacNet commentaries and responses represent the views of the respective authors. Alternative viewpoints are always welcomed and encouraged. Click here to request a PacNet subscription.