Shaping the Future of Trade and Connectivity in the Indo-Pacific
Deputy Assistant Secretary, Bureau of South and Central Asian Affairs
Thank you so much, Aloke, for that warm introduction. I want to thank the Confederation of Indian Industry (CII) for its hospitality, and for its tireless work growing the economies of the Indo-Pacific region. From sponsoring a transnational car rally that showcased historic trade routes from Kolkata to Kunming, to guiding Indian industry into every global market of consequence, CII has been at the forefront of advancing economic ties between India and world. I’d also like to thank the Park Hotel for hosting this gathering today.
The ties between Kolkata and the United States date back to 1792, when our first President, George Washington – recognizing its strategic location and bustling commercial opportunities – created a U.S. consulate in Calcutta. It was first U.S. diplomatic post in India and the second in all of Asia!
For centuries, Kolkata has been a place synonymous with global commerce. And our two nations have benefitted from vibrant trade ties for centuries. Starting in 1833, the United States used to deliver ice here all the way from New England as a means of refrigeration! Some 180 years later, we are no longer shipping ice; but the United States and India – inspired by our extraordinary commercial and people-to-people ties – collaborate on nearly every area of human endeavor.
Today, I’d like to share with you some thoughts on how our two countries and private sectors can further partner to promote broader regional stability and prosperity through economic opportunity. Like India’s Look East Policy, the United States envisions an Indo-Pacific Economic Corridor that can help bridge South and Southeast Asia – where the Indian and Pacific Oceans converge and where trade has thrived for centuries. Fostering these types of connections – physical infrastructure, regulatory trade architecture, and human and digital connectivity – will create linkages all the way from Central Asia to Southeast Asia, via South Asia. This is not just strategically important for India and other South Asian countries, but for the United States. We have a vested interest in a more stable and prosperous South Asia. A more integrated South Asia whereby markets, economies, and people connect is more likely to thrive and prosper. The United States is firmly committed to the security and prosperity of the Asian continent, and we think connectivity, energy security, and open markets can help to realize that objective. That’s a main thrust of our Asia rebalance, as President Obama noted on his recent trip to Asia.
Opportunities for Greater Regional Engagement
To be sure, promoting greater regional economic connectivity in this part of the world is challenging and will require strategic partnerships among governments in the region, international financial institutions, the private sector, and friends like the United States. By some measures, this is the least economically connected region in the world with less than five percent of intra-regional trade flows and less than one percent of intra-regional investment flows.
But there are enormous opportunities to be realized. Energy trade alone holds enormous potential. Thanks in part to USAID’s South Asia Regional Initiative in Energy (SARI/Energy), a 500-megawatt grid interconnection between India and Bangladesh has been established. This is an important start, but the potential for significant expansion of hydropower “wheeling” and trading during summer peak months and winter deficits can fundamentally reshape how Nepal, Bhutan, Bangladesh, India and Burma deal with their energy needs.
Burma is another area of significant opportunity. It has reaped economic benefits from its political transition with foreign investment more than quadrupling since Burma’s political reforms of 2011. While challenges remain, Burma’s improving economic climate illustrates the importance of political support to ensure goods and services can freely cross borders. The India-Myanmar-Thailand Trilateral Highway, slated to open in 2015, creates additional opportunities to increase investment, trade, and people-to-people contact.
Of course, I don’t need to tell this audience how important India is to forging a more interconnected Indo-Pacific region. Consider the geography: Northeast India alone shares a border with five South and Southeast Asian nations while the rest of India offers land and sea connectivity to Central Asia, the Middle East, and beyond.
Over the last several years, India has leveraged an “enhanced” Look East Policy to connect across the Indo-Pacific through summit-level engagements with the governments of Asia’s largest powers and its most prominent multilateral fora. India’s engagement includes strategic investments meant to open new markets in the region. India is supporting the Trilateral Highway project that, when completed, will span all the way from Thailand to India’s Northeast and potentially down to Kolkata and the rest of India. Its investment in the Kaladan multi-modal transit project has the potential to increase economic linkages with Burma and the rest of Southeast Asia, particularly for the landlocked northeastern Indian states. The Mekong-India Economic Corridor Initiative will provide connectivity between deep-water ports in India and Burma, connecting to land routes that would carry goods manufactured in Chennai all the way to Bangkok. India’s ambitious rail expansion plans have caught the eye of top U.S. firms, who would offer India unmatched quality and technology for this key aspect of Indo-Pacific connectivity.
And, connectivity is a major piece of India’s expanding ties with ASEAN, which the United States fully supports. Dialogue partners for over two decades and Summit partners for the last 12 years – India and ASEAN have cultivated a lasting bond. Let me say that the United States sees great complementarity in India’s increasingly close ties with the ASEAN community, to that of our own strong bond with the 10-nation bloc. To give you an idea of what’s at stake, India and ASEAN account for 1.8 billion people and $3.8 trillion in GDP, with their goods trade increasing nearly 40% in 2012.
Challenges to Overcome
We are encouraged by this progress. But the region still faces significant barriers to growth and adequate access to global markets. Despite its geographic centrality to the Strait of Malacca, where 65,000 container vessels pass through each year, there are still acute energy, physical infrastructure and trade challenges.
A recent Asian Development Bank report noted several key impediments to developing connectivity in the Indo-Pacific region.
- First, diverse geographic terrain requires different means of transport, including roads, railways, seaports, inland waterways, and airports;
- Second, there are barriers to energy trading—including incompatible energy subsidy regimes and security concerns;
- Third, there is limited cooperation in the region between trade facilitation agencies;
- Fourth, financial capacity in the region varies widely, making project financing difficult; and
- Finally, there is limited institutional capacity to coordinate policies.
In addition, climate change will dramatically affect the Indo-Pacific, with food security, rising sea levels, and the threat of catastrophic weather events virtually certain as the region’s temperature rises. The United States is committed to working with the region on these critical issues.
We must also collaborate to ensure that global markets remain open and free, facilitating the trade and investment needed for growth and development. U.S. companies seek to expand in places whether there is an investment ecosystem that supports strong intellectual property protections, rule of law, and transparency. By redoubling its own efforts to attract foreign direct investment through open market principles, India can set a positive example for the region and drive regional prosperity.
Role of the United States
So what’s the role of the United States in supporting the Indo-Pacific Economic Corridor? We want to foster inclusive energy cooperation that lights cities and powers economic hubs; we want to see roads and rail links coursing across this region’s vast landscapes, delivering goods and people to new markets; we want to see cutting-edge airports, linking the cities of South Asia to global cities around the world; we want to remove trade impediments and streamline customs modernization; and we want seaports and landports to utilize advanced digital technology to improve efficiency and global competitiveness.
We see our role as a convener, partner, and supplier.
The United States is committed to bringing together the countries of the region, private sector firms, and prominent international financial institutions to identify where U.S. engagement could make the most difference. Our cutting-edge private sector firms are a natural fit to make this vision a reality. For example, U.S. firms – with the support of innovative partnerships between government, industry and even international financial institutions – have a particularly important role to play in providing advanced technology. By utilizing U.S. technology, our customers get the best quality products, made with the most advanced technology and procured with fairness and transparency.
There are also many ways U.S. and Indian firms can co-innovate, to address the region’s most pressing challenges. We’re particularly excited about the CII-sponsored U.S.-India Technology Summit in November, which will offer a key opportunity to increase business- to-business cooperation.
Finally, the United States can play a critical role connecting people across this region, which ultimately is the heart of connectivity. Already, our programs have brought women entrepreneurs together across South and Central Asia along with other programs aimed at government officials, business leaders, and civil society. We can expand these types of linkages and partnerships, which are the anchors for new economic connections and opportunities.
All told, there should be no doubt about the United States commitment to this vision. Indeed, Secretary Kerry voiced strong U.S. commitment to “realizing the potential of the Indo-Pacific Economic Corridor” during his visit to New Delhi last summer. The strong economic connections between the United States, India, and the Indo-Pacific region harken back to the words of Tagore, who expressed hope for a world that “had not been broken up into fragments by narrow domestic walls.” Together, we must stand up for the values that will ensure the region will be one of open markets and open societies. Thank you.