When the President hosts India's Prime Minister in Washington, the agenda will include the recession, trade, farm prices, and terrorism
After spending over a week crossing Asia, President Barack Obama might be ready to take a well-earned break from the region. Instead, Obama is about to get out the dinner jacket and meet yet another Asian leader. The President and First Lady Michelle Obama host their first state dinner in a giant tent on the White House lawn on Nov. 24 for the Prime Minister of India. Thanksgiving might be just days away, but you can bet turkey won't be on the menu: The guests of honor, Manmohan Singh and his wife, Gurcharan Kaur, are both vegetarians, The dinner table conversation will probably be erudite: Singh studied economics at Oxford, and having rescued India from the brink of financial ruin in 1991, might just have a tip or two for Obama. But it's the behind-the-scenes negotiations that will decide whether this high-powered summit between the two leaders of the world's biggest democracies will be a gab fest or a meaningful engagement. Indians will be watching closely to see how their leader's visit compares with Obama's meeting with Chinese President Hu Jintao. For Obama, the China visit didn't yield any immediate fruit. Critics blasted him for not making any progress in getting Beijing to allow its currency, the yuan, to appreciate against the dollar, although the Administration's defenders argue the President sowed the seeds for future progress on issues such as trade, currency, and the environment. Placating Pakistan
Relations with India are potentially just as fraught politically, given the double-digit unemployment rate in the U.S. and American unhappiness about jobs getting outsourced to Bangalore and other Indian cities. In his meeting with Singh, Obama will also likely try to deepen a relationship with India without alienating Pakistan, an ally in America's fight against the Taliban and al-Qaeda. Both leaders might be more than a little preoccupied, though. Indian media reported that Singh spent two hours on the phone on Nov. 23 dealing with a crisis back home, where the leaked results of a 17-year judicial inquiry into the 1992 destruction of an historic mosque by Hindu right-wingers seemed to damn his opposition, the Bharatiya Janata Party. The leak of the report is illegal, and has caused a furor in India's Parliament. Meanwhile, Obama faces the health-care debate in the Senate and a decision on whether to send more troops to Afghanistan. India's Singh, speaking at the Council of Foreign Relations on Nov. 23, said the U.S. should show resolve. "It is vitally important that all major regional and international players put their weight behind the government of Afghanistan," Singh said. "This is the only way Afghanistan can meet the daunting challenges it faces." The state visit also comes just before the anniversary of the Nov. 26, 2008, siege of two luxury hotels and a Jewish center in Mumbai by 10 Pakistani terrorists, an occasion that has forced Singh to reassure Indians that the country is engaging profitably with Pakistan. Islamabad so far has refused to arrest some of the men who New Delhi says are responsible for the attack. "[The Pakistanis] have not done enough," said Singh in a televised interview on Nov 22. "Terror elements…are moving around freely." Agricultural Tariffs
Still, American and Indian officials are hoping for progress on such issues as bilateral trade. The meetings in Washington will cap off months of talks between U.S. Trade Representative Ron Kirk and Indian Commerce Minister Anand Sharma over intellectual-property rights and tariffs in areas like agriculture. "There's no deadline, but we certainly hope to sign something soon," says Sharma. "Without these agreements, there is always the danger that the [global] recession could continue longer." Those tariffs on agriculture could prove to be a major obstacle. India's farmers, loosely organized, are still a formidable vote bank, and the Doha round of World Trade Organization talks on free trade fell apart last year as India refused to give up minimum support prices for its cotton farmers, something that the U.S. had insisted upon. Just before he left for Washington, Singh got a reminder of how powerful those farmers can be: Some 40,000 of them took over Delhi's streets and monuments on Nov. 19-20 to demand the government raise its support price for sugarcane. "We put him in that chair," says Ummesh Shankar, a 42-year-old farmer who said he would lose his farms if forced to sell at the state-issued price of $2.70 for every 100 kilos. "If he doesn't agree to twice as much, we can take the chair away from him." India's business community could also get in the way. The U.S. is a key market for its fastest-growing exports, textiles and IT. But alarmed by the 33% drop in its exports in 2008, mostly due to the recession in U.S. and European economies, Indian companies are expanding in emerging markets in Africa and Latin America. A free-trade agreement with Argentina, Brazil, Paraguay, and Chile came into effect this June, and Tata Consultancy Services, India's largest IT company, now has 7,500 employees in Latin America. The company wants to add more. "From a long-term point of view, we have to remember that the U.S. is not the only market in the world," says TCS CEO Natarajan Chandrasekaran. That's not exactly what Washington needs to hear. With an ever-deepening trade deficit with China, India is a critical market where U.S. companies can sell to both the government and to the consumer middle-class. Indeed, when Assistant Secretary of South Asian Affairs Robert Blake prepped media for the trip on Nov. 18, he pointed out at least $18 billion in proposed sales to India—including to the Indian military. "There are significant new sales on the horizon," said Blake. To help complete those sales, the U.S. wants the Indian government to lift the cap on foreign equity in Indian defense firms from 26% to 49%. One risk for the U.S. is that India might decide it has a very different set of priorities. Take, for instance, global trade. While New Delhi and Beijing were instrumental in throwing a wrench into the Doha talks, India has rushed forward to sign similar agreements with some of its biggest trade partners. On Nov. 6, for instance, South Korea's Parliament approved a free trade agreement with India. Bilateral trade has grown to $15.6 billion in 2008, from $2.6 billion in 2002, mostly from Korean companies like Hyundai and Samsung using India as a cheap manufacturing base for exports. Over the past few months, India, Asia's fourth-largest economy, has been steadily inking similar deals. It has signed a free-trade agreement with the 10-member Association of Southeast Asian Nations (ASEAN) and aims to sign similar deals with the European Union and Japan, making it far less urgent that it reach an agreement with the WTO.