Trump should champion India for Asia-Pacific economic pact

Trump should champion India for Asia-Pacific economic pact
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Leaders from 21 major Asia-Pacific economies will gather in Vietnam this week for the 2017 Asia-Pacific Economic Cooperation (APEC) summit.

All major regional economies, that is, except for one. Despite being Asia’s third-largest economy and one of the fastest growing major economies in the world, India is once again outside the annual APEC jamboree looking in.

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During his current trip to Asia, President Donald Trump is set to outline a “free and open Indo-Pacific” policy, and in his first major address as secretary of State last month, Rex TillersonRex Wayne TillersonDecline in US travel spurs business push for visitors Overnight Defense: GOP chair blames Dems for defense budget holdup | FDA, Pentagon to speed approval of battlefield drugs | Mattis calls North Korea situation 'sobering' Mattis: North Korea situation 'sobering' MORE identified India as a vital partner that, alongside the United States, could be a “bookend for stability” in the region. Why, then, will this critical piece of the strategic puzzle be missing when Trump addresses APEC later this week?

 

If the Trump administration is serious about its new strategy, the United States needs to change tack and finally endorse India’s accession to APEC. Two of the United States’ closest allies in the region — Japan and Australia — have already done so. India’s continued exclusion is not only bad for India and the region, it is counterproductive for a United States that wants India to play a greater role in the Asia-Pacific.

When President Obama and Prime Minister Modi signed the January 2015 U.S.-India Joint Strategic Vision for the Asia-Pacific and Indian Ocean Region, they opened a window for India’s bid. The U.S. government officially took note of India’s interest in APEC, paving the way for the two countries to have further discussions on the issue.

However, despite repeated pronouncements by Indian leaders on India’s interest in gaining membership throughout 2015 and 2016, the Obama administration did not ultimately change its stance.

Were the Trump administration to change course and support India’s accession to APEC, it would be seen as a major gesture to the Modi government. The move would be a boost to India’s economy and to long-term regional economic integration, which is in limbo after the U.S. withdrawal from the Trans-Pacific Partnership.

Most importantly, it would be a step toward realizing the United States’ strategic objective of involving India more fully in the region.

This is urgent given the Trump administration’s exhaustion with the U.S. bearing the burden of upholding the regional order alone and the fact that China, coming out of the 19th Party Congress, has signaled that it will now act more confidently in the region to secure its interests.

APEC and the United States have repeatedly rebuffed India’s bid to join the forum since the mid-1990s. This resistance stems from the perception that India is uninterested in liberalizing or in integrating with the global economy.

While this was certainly true in the past and remains a valid concern, the India seeking membership today is drastically different from the India that initially applied in the mid-1990s. Under Prime Minister Modi’s leadership, India is thirsty for foreign investments and eager to access the global value chains driving global commerce, in order to create new jobs for its large and aspiring workforce.

While India’s obstinacy in trade talks (at the WTO and in bilateral negotiations) has hardened views on its willingness to change, the reality is that India has become far more open to trade over the past decade. Today, India’s trade-to-GDP ratio stands at 40 percent, higher than China’s and an indication of how important trade has become to the Indian economy.

The Modi government has pushed through reforms to open India to investment, modernize the economy, and make it easier for businesses to function. The government has significantly liberalized India’s investment regime, removing or raising caps in critical sectors.

Earlier this year, India also passed the Goods and Services Tax (GST), replacing a number of complex, indirect and inefficient taxes with a single regime.

The efforts to make India a more welcoming place to do business have started to gain traction. In the latest World Bank Ease of Doing Business rankings, India improved from 130 last year to 100 this year.

While being ranked at 100 may not be something to brag about, the rankings reflect that India is headed in the right direction and that it has advanced its policy mix to a level similar to that of some APEC economies. For instance, two APEC members — the Philippines and Papua New Guinea — now rank below India.

If India were to become an APEC member, these positive changes would pick up pace. APEC’s modus operandi is to assist economies out of their protectionist shells and help them reform themselves in order to better compete globally.

APEC, which represents nearly 60 percent of the global economy and 50 percent of world trade, has had real success in enhancing regional trade and investment by lowering tariffs and trade transaction costs, spreading best practices on competitiveness, improving its members’ business environments and enhancing business-to-business ties across the region.

India’s entry into the forum will certainly require adjustment and cause some short-term discomfort, but it would also give APEC a tremendous opportunity to push forward its core mission — regional economic integration.

APEC’s broader agenda complements Prime Minister Modi’s economic concerns. In addition to strengthening regional economic integration, this year’s host country Vietnam identified three additional priorities for the 2017 summit: promoting sustainable and inclusive growth; making small and medium enterprises more competitive in the digital age and enhancing food security and agriculture in the era of climate change. These are all critical challenges for India and priorities for the Modi government.

On the foreign policy front, APEC membership would dovetail well with India’s Act East policy, immediately enhancing India’s commercial, diplomatic and bureaucratic engagement with countries in the region while increasing India’s regional interdependence in the longer term.

Put simply, APEC membership for India progresses both India’s strategic objectives as well as the Indo-Pacific doctrine being championed by the Trump administration.

This is a critical time for the United States in the Asia Pacific region. It needs committed partners in the region to buttress a rules-based order and ensure that China grows its influence in a stable and responsible fashion. Tillerson has identified India as that indispensable partner.

However, New Delhi and policy elites across the region are skeptical as to how much Tillerson drives U.S. foreign policy, as well as whether President TrumpDonald John TrumpDems flip Wisconsin state Senate seat Sessions: 'We should be like Canada' in how we take in immigrants GOP rep: 'Sheet metal and garbage' everywhere in Haiti MORE truly subscribes to this new Indo-Pacific vision. Washington, therefore, has its work cut out for it in persuading New Delhi to take on a larger strategic role alongside Washington.

APEC membership is a tangible way for the Trump administration to signal to India that it is serious about the Indo-Pacific doctrine and India’s critical role in realizing it. Tillerson’s speech on India suggested that strategic concerns would supersede all else in the United States’ policies toward India.

This logic dictates that the Trump administration grant its support for India’s membership in APEC.

Anubhav Gupta is the assistant director of the Asia Society Policy Institute in New York, which tackles major policy challenges now confronting the Asia-Pacific in security, prosperity, sustainability and the development of common norms and values for the region.