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Can USA and China avoid the Thucydides trap?

In a recent interview with The World Post, Chinese President Xi Jinping set out his outline for the future of China and the world and why peaceful world environment is necessary to develop China in the long term. One particular significance of this interview was his usage of the term “The Thucydides Trap”.

“The Thucydides Trap” was coined by the Belfer Center Director Graham Allison whereby an established power becomes wary of an emerging power and ultimately leads to war and confrontation among them. The Greek Historian Thucydides blamed the war between Athens and Sparta on Sparta’s fear of Athens growth and its own diminishing influence and hence went to War with Athens to thwart its rise.

Even though The United States and China are the world’s largest economies, their relationship is very complex and based on mutual fear and suspicion.  China’s rapid defence modernisation coupled with increasing assertiveness with its neighbours over various territorial disputes has caused US policy makers off guard in Asia. What worries the policy makers the most is what will be the US response in case of conflict between say China/Japan or China/Philippines and to what extent will the United States go to protect its allies in the region?  Even though China advocates a multi-polar world, its actions speak differently about the role it is going to take in future. China is playing a game of cat and mouse in the region and is checking USA’s capacity to deliver in case of a conflict.

United States has clearly outlined its intention after long wars in Afghanistan and Iraq that it will be concentrating on Asia with its Asia Pivot policy.  The wars in Afghanistan and Iraq proved too big a financial burden on the American economy and allowed China to leapfrog it and become the world’s largest trading nation. As the US troops withdraw from the region post 2014, the US plans to concentrate on Asia-Pacific region to check the growth and influence of China in the region. Post World War II, United States has been a dominant power in the region and most of its trade goes through this route and any effort by China to subvert its influence will be met by strong US response.

Current President Xi and Former President Hu Jintao, both laid out a vision for China’s global role in international politics wherein both Countries will form a “new type of great power relationship”. To what extent the United States is going to share power with China and what will be its impact on International geopolitics remains to be seen. Skeptics argue that confrontation between the two countries is more of a reality in the coming decades then in the past.

American foreign policy which was clearly focused on terrorism and Middle East post September 11 attacks have once again started concentrating on China after the economic recession of 2008. America’s Asia pivot is aimed clearly at China and focuses on containing it in the region without harming its interests or its allies. Japan is increasingly trying to change its pacifist Constitution in order to prep up its military in case of a conflict with China. Japan is concerned that US will not come to its rescue in case of conflict even though the US-Japan Treaty 1971 provides so and hence is becoming increasingly insecure about China’s intentions in the region. In his book On China, Henry Kissinger states that China wants a complete revamp of the current world order wherein it has greater say in the happenings around the world and is not discriminated against whereas the United States stands for the existing rule based order, freedom of navigation of seas and skies. The opaque system of Chinese decision making makes it much more difficult for America to solve disputes or tone down the tensions in case of a miscalculated Conflict.

US policy makers believe India can be a trump card against China in the Asian power dynamics. Based on the principle of democracy and rule based order, United States believes that in the long run India can become a possible alternative to China in Asia and on one on which it could depend on. India is being increasingly courted by Japan, Australia and the US to seek a dominant role in Asia Pacific to subvert Chinese influence.  However they forget that India has its own sets of problems with China and will not join any US led camp against China. India’s current focus right now is economic growth and liberalisation and lifting millions out of poverty before it can match China tooth for tooth militarily in Asia and the world.

In the last 500 years, whenever an established power has been faced with an emerging power, the result was war in 11 out of 15 cases. The US has slowly and steadily built up its largely dominant role now since 1890, when it surpassed United Kingdom as the world’s largest economy and has enforced itself as the sole World Super Power through the two World Wars and its rivalry with Soviet Union during the Cold War years. What will be the US approach to China’s rise and whether it is going to make any concessions to China remains to be seen? China on the other hand will try to gain its status as the Middle Kingdom in the Confucian concept of “All under Heaven” and regain its previous glory as the world’s largest economy prior to 1750’s.

Piyush Singh is a law student with an interest in India-China relations and nuclear law and energy. He completed his internship at the Takshashila Institution.

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The significance of Asia’s democratic security diamond

Asia’s security is best laid out in the hands of Democratic countries that follow rule-based order, have respect for the current international order and international law.

Just days after being selected as the new Prime Minister of Japan, Shinzo Abe in his first public address stated his future for Japan and the Indo-Pacific region in general. The title of the address “Asian Democratic Security Diamond” was quite apt considering the lingering tension in the region.

This piece focuses on strengthening Japan’s relation with democratic forces in Asia namely India, Australia, United States of America and Japan itself. The principle argument of this is that Asia’s security is best laid out in the hands of Democratic countries that follow rule-based order, have respect for the current international order and international law. After Japan’s recent skirmishes with China over a small set of islands in the East China Sea, Japan has become wary of China’s growing disrespect for international law and order and the current status quo. Japan wants the democratic countries to come together and counter China over such misappropriated claims.

In a carefully planned address Shinzo Abe stated “The ongoing disputes in the East China Sea and the South China Sea mean that Japan’s top foreign-policy priority must be to expand the country’s strategic horizons. Japan is a mature maritime democracy, and its choice of close partners should reflect that fact. I envisage a strategy whereby Australia, India, Japan, and the US state of Hawaii form a diamond to safeguard the maritime commons stretching from the Indian Ocean region to the western Pacific. I am prepared to invest, to the greatest possible extent, Japan’s capabilities in this security diamond.”

Japan’s struggle against a growing and increasingly assertive China will be at the forefront of a new rivalry between the West and China. Even though Chinese Leaders repeatedly convey that China’s rise will be peaceful and not cause harm to anyone, analysts believe that China is going the way of Germany before World War I and II. Japanese repeatedly point out that China is making the same mistake that Japan made during World War II. Prime Minister Shinzo Abe went as far as to compare the recent tension between the two countries to the one existing between Great Britain and Germany prior to World War I at the recently concluded Davos Summit in Switzerland.

Japan is positioning itself to defend its interests in Asia. Japan has been largely dormant since World War II, concentrating mainly on its economy and has been a model US ally in the region. Japan is becoming increasingly fearful that South China Sea is becoming “Lake Beijing” and it will surely harm its economy and its very existence in the future. If implemented, Abe’s policies will inject Japan into the heart of the intensifying Pacific struggle between Beijing and Washington for maritime regional maritime dominance and stir new concerns, especially in China, over a possible reemergence of Japan’s militaristic past.

Japan is increasingly courting countries such as India and Australia with huge interest in the Indo-Pacific region to ward off the China threat. Joint Maritime exercises with these Countries have become a calendar marker each year. The Malabar Exercise between India, United States, Japan, Australia and Singapore have seen strong diplomatic response from China which sees such exercise being directed against it.

Australia issued a strong response in support of Japan when China declared an expanded ADIZ covering the Senkaku Islands in the East China Sea. Even Kevin Rudd, Former Australian Prime Minister and a sinologist suggested that rise of China as a singular naval power in the region will harm the interest of all the countries in the region and said that it will be the policy of successive Australian governments to see to it that Australia, along with The United States and Japan try to strive to prevent such a future.

India on the other hand is watching these developments very closely and approaching the situation very cautiously. Even though India did not issue a official statement condemning China’s ADIZ, many believe that Japan will have the support of India in any future conflict. India too is fearful that China is not expanding only into the Pacific but also its own backyard, the Indian Ocean. There have been cases of skirmishes and stand-offs between the Indian Navy and its Chinese Counterpart in the area. The inductance of INS Arihant and other ships such as Aircraft Carrier and Frigates are a step in the right direction to achieve its Blue Water Naval ambitions and to counter China’s formidable navy.

The United States with its 6 Carrier Groups in the Indo-Pacific region is keeping a check on China’s naval ambitions. Joint Naval exercises with Countries in the periphery of China and at times, at the receiving end of China’s gun-boat diplomacy are being assured of all financial help to perk up their own capabilities to counter China. US has time and again empathised on the role of regional organisations to sort out disputes between the concerned countries. The role of United States is critical and extremely crucial in maintaining order in the region. However many countries are concerned to what extent the United States will go to safeguard the territorial integrity of its allies in the region especially after last year’s Scarborough Shoal, where after US intervention, China backed off but within a month again occupied the islands and with very little response or retaliation by the United States.

Japan’s emphasis on “open and stable seas” and maritime security is the taking point in the policy circles and to what extent the Democratic Security Diamond initiative is able to ward off the China threat remains to be seen. One thing is guaranteed that Shinzo Abe will go down in history  as the one man who stood up against the China threat well before anyone else.

Piyush Singh is a law student with an interest in India-China relations and nuclear law and energy. He completed his internship at the Takshashila Institution.

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Amending Japan’s peace Constitution

To maintain regional security balance in East Asia it is necessary that Japan moves for amendment of Article 9 only when it faces grave national security threat. 

Over the Course of past few months, after assuming office, Japanese prime minister Shinzo Abe has vowed to amend the Japanese Constitution specially Article 9 and Article 96 of the Constitution which was enforced by the victorious American Forces led by General Douglas MacArthur after World War II. Article 9 calls for Japan to maintain a self defence force for protecting its territorial integrity and disbanded the Imperial Japanese Army for the fear of rise of Japan as a military power after World War II. Article 96 is first in line to amendment because it would allow the Japanese Diet to pass any constitutional amendment through a simple majority for further national ‘special’ referendum.

What is Article 9?

Article 9 of the Japanese Constitution (the famous peace clause) renounces war as a means of settling international disputes and prohibits the maintenance of armed forces and other war potential and also renounce threat or use of force as a sovereign right in order to maintain international peace and security. Japan after the end of World War II accepted these provisions so as that it wont ever become a military leader and indulge in genocide and war crimes. To overcome the Constitutional restraints in maintaining the armed forces, Japan has used Article 51 of the UN charter which recognises the right of self-defence as an inherent right of every nation and thus it has named its defence forces as Self Defense Force. Japanese forces cannot invade nay other country and if they do so then it will be a gross violation of its Constitution. When the language of Article 9 was being debated in the Diet in 1946, it was argued that Article 9 would put Japan in the vanguard of a new movement toward international peace. Constitutional change has been the primary goal of Shinzo Abe led Liberal Democratic Party that says that Japan needs to build a constitution with Japanese characteristics and enforces Japanese tradition and culture and not western ideals. He wants “to reclaim Japanese Sovereignty” by getting rid of the Constitution which fails “to provide a necessary condition for an independent nation”. Abe government’s initiatives through the LDP’s draft constitution of April 2012 assume broader scope with far reaching consequences. The arguments put forth for the revision are: (a) the present constitution should be changed as it was imposed during the US occupation; (b) should be changed as its time has passed; and (c) Japanese people are sovereign and should be entitled to revise their constitution.

The preferred modus operandi appears to amend Article 96 at first, by “lowering the bar from two-thirds or more of all the members of each house of the Diet to just more than one-half of both chambers” required for constitutional amendment.

Regional Security Dilemma-Maintaining Status Quo?

Japan has for the first time in 2012 increased its defence budget in more than 10 years and seeks to spend nearly US $ 240 billion over the course of the next 5 years in buying up submarines, drones, and stealth fighter aircrafts. Japan contends that China is becoming increasingly assertive and flexing its military muscle in the East China Sea and the Pacific Ocean where its interest collide. The recent flaring up of the Senakau/Daioyu islands dispute has further added to the tension between the two countries. China had recently created an Air Defense Identification Zone (ADIZ) over the Senakaku Islands whose control lies clearly with the Japanese.

Neighbouring countries such as China and South Korea have over time raised concerns over such a Constitutional Amendment fearing the rise of a Nationalist Japanese Army with Pre World War II intentions. China-Japan relations have never been solid and they have always been on the warpath. War crimes committed by the Japanese Forces during World War II still on Chinese nationals have been egged on their memory and greatly fear the revival of Japanese Army if the Constitution is amended. China has increased its defence budget largely in the past 10 years and after the Economics crisis in 2008 has come to the forefront of global power politics and has been asserting its authority over disputed territories with various countries including Japan.

Even though Japan has a security treaty with the United States of America that states US would come to protect the territorial sovereignty incase Japan is attacked, many argue that the Treaty Of Friendship, 1951 would not be enforced by US citing its own complex relationship with China and hence Japan would be left on its own to protect itself.

Amending Japan’s Peace Constitution-Increasing Regional Security Imbalance in Asia?

Over the Course of past few months, after assuming office, Japanese prime minister Shinzo Abe has vowed to amend the Japanese Constitution specially Article 9 and Article 96 of the Constitution which was enforced by the victorious American Forces led by General Douglas MacArthur after World War II. Article 9 calls for Japan to maintain a self defence force for protecting its territorial integrity and disbanded the Imperial Japanese Army for the fear of rise of Japan as a military power after World War II. Article 96 is first in line to amendment because it would allow the Japanese Diet to pass any constitutional amendment through a simple majority for further national ‘special’ referendum.

What is Article 9?

Article 9 of the Japanese Constitution (the famous peace clause) renounces war as a means of settling international disputes and prohibits the maintenance of armed forces and other war potential and also renounce threat or use of force as a sovereign right in order to maintain international peace and security. Japan after the end of World War II accepted these provisions so as that it wont ever become a military leader and indulge in genocide and war crimes. To overcome the Constitutional restraints in maintaining the armed forces, Japan has used Article 51 of the UN charter which recognises the right of self-defence as an inherent right of every nation and thus it has named its defence forces as Self Defense Force. Japanese forces cannot invade nay other country and if they do so then it will be a gross violation of its Constitution. When the language of Article 9 was being debated in the Diet in 1946, it was argued that Article 9 would put Japan in the vanguard of a new movement toward international peace. Constitutional change has been the primary goal of Shinzo Abe led Liberal Democratic Party that says that Japan needs to build a constitution with Japanese characteristics and enforces Japanese tradition and culture and not western ideals. He wants “to reclaim Japanese Sovereignty” by getting rid of the Constitution which fails “to provide a necessary condition for an independent nation”. Abe government’s initiatives through the LDP’s draft constitution of April 2012 assume broader scope with far reaching consequences. The arguments put forth for the revision are: (a) the present constitution should be changed as it was imposed during the US occupation; (b) should be changed as its time has passed; and (c) Japanese people are sovereign and should be entitled to revise their constitution.

The preferred modus operandi appears to amend Article 96 at first, by “lowering the bar from two-thirds or more of all the members of each house of the Diet to just more than one-half of both chambers” required for constitutional amendment.

Regional Security Dilemma-Maintaining Status Quo?

Japan has for the first time in 2012 increased its defence budget in more than 10 years and seeks to spend nearly US $ 240 billion over the course of the next 5 years in buying up submarines, drones, and stealth fighter aircrafts. Japan contends that China is becoming increasingly assertive and flexing its military muscle in the East China Sea and the Pacific Ocean where its interest collide. The recent flaring up of the Senakau/Daioyu islands dispute has further added to the tension between the two countries. China had recently created an Air Defense Identification Zone (ADIZ) over the Senakaku Islands whose control lies clearly with the Japanese.

Neighbouring countries such as China and South Korea have over time raised concerns over such a Constitutional Amendment fearing the rise of a Nationalist Japanese Army with Pre World War II intentions. China-Japan relations have never been solid and they have always been on the warpath. War crimes committed by the Japanese Forces during World War II still on Chinese nationals have been egged on their memory and greatly fear the revival of Japanese Army if the Constitution is amended. China has increased its defence budget largely in the past 10 years and after the Economics crisis in 2008 has come to the forefront of global power politics and has been asserting its authority over disputed territories with various countries including Japan.

Even though Japan has a security treaty with the United States of America that states US would come to protect the territorial sovereignty incase Japan is attacked, many argue that the Treaty Of Friendship, 1951 would not be enforced by US citing its own complex relationship with China and hence Japan would be left on its own to protect itself.

Conclusion

Many Argue that Article 9 should be amended to allow Japan to protect its economic interests in its periphery and since they are already engaged in peace keeping operation under the Command of UN forces the very basic nature of the Article is nullified. However in order to maintain regional security balance and stability in East Asia it is very much necessary that Japan maintain the status quo and move for amendment of Article 9 only in time when it faces grave national security threat. Japan’s amendment will obviously bolster its security and army but it will become a point of insecurity for surrounding states such as China and South Korea. Japan should not take the first step in arms race buildup in East Asia and should show restraint of the outmost nature.

Piyush Singh is a law student with an interest in India-China relations and nuclear law and energy. He is completing his internship with the Takshashila Institution. 

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Look before you repo

Sneha Shankar

The Indian economy needs a mechanism to curtail inflation rates and at the same time give a boost to businesses and in extension, the economy. 

Last Wednesday came as a bit of a surprise to most of us that follow the RBI’s moves. The Raghuram Rajan-led inflation-fighting squad did not increase the repo rate by the 25 basis points it was predicted to. Rajan attributes his move, or a lack thereof, to insufficient data and ‘noise’ in the available set: Given the wide bands of uncertainty surrounding the short term path of inflation from its high current levels, and given the weak state of the economy, the inadvisability of overly reactive policy action, as well as the long lags with which monetary policy works, there is merit in waiting for more data to reduce uncertainty.”

The animadversion to this has been plenty with many bringing to question his hardboiled inflation-fighting reputation.  Increasing repo rates would have been the next logically sound move: it would have increased the cost of borrowing for banks, which in turn would have resulted in an increase in interest rates, and thus reduced spending within the economy. With a pause on market consumption, aggregate demand would have reduced to soothe inflationary pressures. While I agree with these folks to a large extent, they have failed to take into account that we aren’t undergoing just inflation; it’s stagflation – a precarious combination of high inflation, high unemployment, and poor growth. By hiking repo rates right now, the cost of debt for businesses would have increased, only exacerbating growth, resulting in an economic zugzwang.

What the Indian economy needs is a mechanism to curtail inflation rates and at the same time give a boost to businesses and in extension, the economy. Maybe the move was a good, calculated one at that.

How does that work?

Let’s take a look at what’s causing the inflation. The high rates (11.24 percent yoy increase in November) have predominantly been attributed to supply shocks in the food and fuel sectors. The food Consumer Price Index (CPI) has been indicating a month on month increase 1.38 percent from October to November, and increase of 2.42 percent from September, and fuel prices reflect similar rises, having grown from 136.1 in September to 137.5 in November.

This food-price driven inflation could, if the RBI is right, subside with the introduction of the recently-harvested kharif crops into the market, but even that might be being a tad quixotic. CPI data over the past few years doesn’t reflect that. The last time we saw a decline post-November in food CPI was November 2011 to February 2012 (a decline from 113.9 in November to 112.4 in December, but an increase then on to 113.4 in February), but even that reduction was not sufficient to bolster the RBI’s current stand.

Also, there hardly seems to be any evidence to indicate a fall in fuel prices. The CPI in the fuel sector indicated an increase from 136.1 in September to 137.5 in November, despite the fall in petrol prices in both September and October.  Also, interestingly enough, Diesel prices have increased by Re.1 (pre-tax) from September to November, and almost all agricultural equipment run on diesel. There is nothing to indicate the extent of impact that this fuel price hike could have had on the aforementioned inflation in the food sector, but one can’t entirely discount it either. Are there other indications that fuel prices will fall in the near future? None, really, but some hopefuls state that with the Rupee having stabilised, fuel inflation should moderate soon.  But then again, they are hopeful about it, and there seems to be little evidence to corroborate that.

Although everything seems to be pointing at a continued inflation, there is a lack of clarity about the possible outcomes. This was probably the ‘noise’ Rajan was talking about. It could either flip either way, and if they do occur, we do not know if one will offset the other.  On a slightly-off note, many Keynesian analysts have repeatedly stated that this is a supply-side related inflation and tightening the monetary policy would not suffice to address it, but might actually worsen the growth rate.

What about ‘growth’?

Wednesday’s lack of a move, gave the equity market, and businesses in general, a lot to rejoice about. It went a little something like this: By not changing the CRR and the repo rates, businesses that were earlier expecting a more expensive cost of borrowing found that it is now cheaper to borrow than anticipated over the past couple of days. This illusion of a cheaper cost of borrowing has greatly improved business sentiment in the economy, causing most to rejoice and calling this Rajan’s “Christmas gift”. In fact, some banks like SBI, with the same psychological thrust, are reducing home loan rates. This indicates that personal borrowing might also increase. With high liquidity, low CRR, and low IBLR (Inter Bank Lending Rate), this retention of status quo has fuelled credit demand.

So not doing anything has actually done something to boost growth.  But the big, fat concern now is that it results in a surge in the aggregate demand of the economy that could aggravate and contribute to the existing inflationary pressures.

But Rajan and co. claim to be at the ready: “The Reserve Bank will be vigilant… If the expected softening of food inflation does not materialise and translate into a significant reduction in headline inflation in the next round of data releases, or if inflation excluding food and fuel does not fall, the Reserve Bank will act, including on off-policy dates if warranted.”

So what does this mean?

It’s all a waiting game now. Some of it looks promising: Baig and Das, economists at Deutsche Bank, in a note dated December 18, 2013, said “vegetable prices, key driver of inflation in recent months, have started falling in the last couple of weeks (daily prices of 10 food items tracked by us are down by about 7 percent month on month(mom) on an average in the first fortnight of December).”

If the inflationary pressures are cordoned off on the food front, they could be exacerbated by the increase in aggregate demand. But to control that, there are measures in place with the contractionary fiscal policy and a growing trade deficit. The extent of the effects of each can only be concluded over time. For now let’s safely say that Wednesday’s move was not as bad as the online chatter says, and fervently hope the RBI gets rid of the ‘noise’ in the meantime.

Sneha Shankar is a research associate at the Takshashila Institution

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“Chinese dream”- return to the concept of Middle Kingdom?

By Piyush Singh

China wants to be the sole regional power in the Asian region and is clearly projecting the same, militarily and through its economic clout.

The recent declaration of Air Defense Identification Zone (ADIZ) by China over Senkaku/Diaoyu Islands was a reminder by the Chinese government to the world of its growing role as a regional power and in future a ‘superpower’. Over the course of last year after President Xi Jinping took helm as the leader of the country, Chinese assertiveness has increased in the Asia-Pacific region. It has proactively started claiming the whole of South China Sea and Diaoyu islands in the East China Sea. The Chinese government has already declared these zones as its “Core Interests”, putting it at the same stature as the issue of Taiwan, Tibet and Xinjiang. Its Boundary dispute with India is one of a more complex nature and in the past one year there have been more than 300 instances of incursions by the Chinese troops and occupying Indian Territory.

President Xi Jinping’s Speech about the great Chinese Dream was focused on “rejuvenation of the Chinese nation” and “combines the spirit of the nation with patriotism as its core”. Skeptics around the world have linked the nature of this so called “Chinese Dream” to a more military form of dream. China’s increasing assertiveness in South and East China Sea has created ripples in various countries. President Xi’s interpretation of the Chinese Dream as a strong nation for the Chinese people and a strong military dream for the military has further more alarmed the neighbouring countries, in particular Japan, India and Vietnam. This is a stark difference from President Hu Jinatao’s “Peaceful Rise” concept whereby he emphasised on the peaceful development of the “Chinese nation”. After assuming power President Xi has issued orders to focus on “real combat” and “fighting and winning wars”.  China’s official defence budget has increased 10.7 percent from 2012 to 117 Billion Dollars.Unofficial Spending is estimated to be much higher, around 150 Billion Dollars.

What Is the Dream About? However, the main concept behind President Xi’s Concept of “Chinese Dream” is to restore China to its former glory of more than 5000 years of proud civilisation which it had lost after more than 200 years of foreign rule and oppression starting in 1750’s through Opium Wars and ultimately Japanese Occupation culminating into World war II. His dream is directly related to the old Confucian concept of the “Middle Kingdom” whereby China was at the centre of the world affairs and different countries paid homage to it. China no longer needs to “bide its time and hide its capabilities” as propounded by the great reformer Deng Xiaoping. For President Xi, the time for the Chinese nation to reclaim its former glory has come. He has even outlined the year 2049 as the time when the Country would have truly arrived at the world stage, which is on the 100th anniversary of the Communist Party of China. Even though many argue that the so called “Chinese Dream“ is for the development of the Chinese people and to achieve economic growth, reduce poverty etc drawing parallels with “American Dream” of economic prosperity, liberty and basic human rights they clearly forget that China has always been a very opaque society in terms of its functioning and decision making. Who calls the shots in China has always been disputed. Many argue that the military has a firm control over the politburo and largely influences its decision making process.

Indian and Japanese Concerns-Time for Strategic Partnership? The other two aspiring regional powers in the Asian region, India and Japan have clearly taken the proactive Chinese military Posture with a pinch of salt. India in response to repeated Chinese incursions has raised a new mountain corps division of near about 85,000 soldiers and is simultaneously strengthening its fledging navy to maintain its dominance over the Indian Ocean region and also to secure its economic interests in the South China Sea. Japan has for the first time in ten years increased its defence budget and aims to spend around US$239 Billion over the course of next five years on buying up military hardware to counter China. Since assuming office, prime minister Shinzo Abe has vowed to protect the territorial integrity and sovereignty of Japan. The Japanese Self Defense Forces(SDF) have been rapidly undergoing modernisation drive and it is being widely assumed in policy circles that it will soon lose its “pacifist” tag forced upon it after the horrors of World War II.

Both India and Japan share common concerns regarding the rise of China and how it is going to impact the regional balance in Asia and its periphery. The recent visit of the Japanese Emperor Akihito and Empress Michiko signify the importance the Japanese give to India-Japan Relations. Both India and Japan in recent years have increased defence cooperation and financial engagements. Abe’s government has also vowed to review Japan’s ban on weapons exports and is aggressively pursuing options of arming the militaries of India and Vietnam. Even the United States of America, the sole super-power after the end of Cold War has started prioritising itself in Asia-Pacific with its “Asia Pivot” program whereby it seeks to limit China’s growth as a super power and keep it mingled on the Chinese Mainland through repeated poking at its dismal Human Rights record, environment pollution and more rights for its citizens. Many analysts have linked this concept of “Chinese Dream” to the USA’s “Monroe Doctrine” which it adopted in the early 19th Century whereby it restricted the meddling of European powers in the Americas. China wants to be the sole regional power in the Asian region and is clearly projecting the same, militarily and through its economic clout.  The best way to contain China is to engage it more in international issue through the rule of law and not arbitrarily through its own set of rules.

Piyush Singh is a law student with an interest in India-China Relations, Nuclear Law and Energy. He is completing his internship with the Takshashila Institution. 

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An idea to solve the hung assembly in Delhi

Parties should work together to avoid president’s rule in Delhi, especially after such a vibrant election campaign. May be top two parties can force reelection in fraction of seats where margins were small.

As we witness a fierce competition to sit in the Opposition benches of Delhi assembly, psyche of our politicians is difficult to comprehend. This election has once again shown what votes can do. Aam Aadmi Party (AAP) led by Arvind Kejriwal certainly broke new grounds with a focused campaign against Sheila Dikshit’s government. The results, of course, reflect all their hard work. But voters did not give complete majority to any party.  BJP emerged as largest party, but short of 4 MLAs while AAP needs 8 more to reach the magic number of 36. If it was any other election, this may not have been an issue. However, this is an election with heavy focus on honesty, a clean image and transparency among other moral issues. So, to think that the BJP will resort to same old tactics might be wrong this time. With 2014 Lok Sabha elections round the corner, why would they risk?

There is news of Congress’ open invite for outside support to AAP, and then there is a coalition option, power sharing agreements etc. So far BJP and AAP have been tight on not opting for any of these. Does that mean that the Delhi voters, after such a vibrant election season, will get President’s rule for the next 6 months and have to witness assembly elections again? Other than commonly heard ideas, are there any new ones to solve this impasse?

How about if AAP and BJP agree to go for reelection on 8 (or some other number around this) constituencies where these parties were at the first or second position? This is not a complete assembly reelection, so Election Commission should be able to arrange it much faster. AAP can start the conversation. If BJP truly believes that the ‘wave’ is towards them, it will take up this offer. There can be several ways to select these 8 or 9 constituencies. There are 17 constituencies now (9 won by AAP and 8 by BJP) which have a victory margin below 10 percent. Both parties can come up with 8 from this lot.

Second method is for parties to ask for volunteer MLAs. It would not be a good idea for Dr Harshvardhan, Mr Kejriwal or the likes to volunteer here. The concept of Dharma Yuddha will automatically apply in such circumstances. Those MLAs will resign immediately; Delhi will get an opportunity to decide the full majority. I do not think there is any issue with constitutionality of this idea. If there is hung result again, the President will have to manage the state for the next 6 months (The question I have now is can an elected MLA resign before taking oath. Who will he/she resign to? Article 190 does not give any details of these circumstances)

Since both the parties have already announced that they are ready to be in opposition, risk of losing seats doesn’t affect. This also shows how much risk a party is willing to take. Also, if this idea works, probably we have found a way to avoid hung assemblies and parliaments.

Vikas Argod is an active volunteer at IndiaGoverns Research Institute, a Bangalore based public policy data analysis organisation. He works as a management consultant in Atlanta, US. Views expressed here are personal.

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India’s response to the UN Arms Trade Treaty (ATT)

By Piyush Singh

India urgently needs to reduce its dependence on arms export and needs to develop its indigenous nascent defence industry to protect its borders. 

The road to the UN Arms Trade Treaty (ATT) has been long and convoluted. In 2006, under Resolution 61/89, the Assembly had recognised that the absence of common international standards on the import, export and transfer of conventional arms was a “contributory factor to conflict, the displacement of people, crime and terrorism” and that it undermined peace, reconciliation, safety, security, stability, and sustainable development.

It called on the UN Secretary-General to establish a group of governmental experts to examine, beginning in 2008, “the feasibility, scope and draft parameters for a comprehensive, legally binding instrument establishing common international standards for the import, export and transfer of conventional arms”.

On April 2, 2013, the United Nations General Assembly (UNGA) passed the draft text of the Arms Trade Treaty (ATT). 154 Countries voted for the treaty, 3 voted against and 23 Countries abstained including India, Russia and China. Countries like China and Pakistan made a fuss about linking the Arms sale to human rights issue. China which is already suffering a major European Union (EU) arms sale ban after the Tiananmen Square massacre in 1989 said that linking arms sale to human right violations would be a caveat of the treaty because it will put into question who is going to decide what are basic human rights and who is going to decide who is violating human rights of whom?

India’s point of contention with regard to the treaty is that it does not regulate the sale of arms to terrorist organisation and non-state actors. As Sujatha Mehta, head of Indian delegation at the UN, argued that the ATT is “weak on terrorism and non-state actors and these concerns find no mention in its specific prohibitions.” Mehta insisted that the ATT does not contain any provision as to how to curb arms flow to religious extremists.

If the wordings of the treaty are read then India, which is one of the largest arms importer in the world, would be at the mercy of the exporting states who will decide whether India has the right to buy the arms or not. This will be gross violation of Article 51 of the UN charter which states that each state has the right to individual and collective defensive action and includes right to import and retain legitimate arms for self-defence and security needs. What if a proxy war is being staged by non-state actors as in the case of Mumbai Attacks of 26/11? India contends that arms trade has been and will always remain a bilateral issue and their enforcement through an international regime will be a very tricky point.

India also objects to Article 6 read with Article 7 of the treaty which says that export of weapons not prohibited are subject to assessment by the exporting states. This gives the exporting states the right to verify the weapon systems they have sold to the importing states at any point and if found to be in contravention of the obligations of the treaty’s basic principles, stop such exports in future and not provide after sales necessary back end technical support. India has always resisted any sort of interference by exporting states into how we use our weapon systems and for what purpose. Providing a backdoor access to the same will be a gross violation of India’s sovereignty and will be highly intrusive.

Moreover illicit arms trafficking across South Asia is posing a great internal security challenge to India. Arms from Pakistan and China are landing up in the hands of Naxals and Rebel groups in North East India which is one of the major areas of conflict for the Country. The Treaty in its current form does not have any provision for sale of illicit arms to non-state actors. The ATT should maintain a database of all international transfer of conventional arms and weapons. This would be of enormous benefit to India, as presence of ATT would keep a check on such transfer and thus help in better tackling the unregulated arms market in South Asia. The treaty also invariably brings into the concept of arming of good terrorists and denying arms to hostile governments like Iran, Syria And North Korea. The recent arming of rebel groups in Syria by USA and UK is a case in point.

The treaty also does not include all arms transfers but only arms sales which means that it does not apply to cases where the arms are being loaned, leased or transferred as gifts. India contends that such a loophole can be used by countries to look for underground arms sales and transfers and further increase the frequency of illicit transfer under different guises.

India along with the USA has objected to Article 12 of the treaty which paves way for record keeping and maintenance of national records of conventional weapons. National Rifle Association of USA said that the treaty violates the basic fundamental right of US citizens to bear arms as provided under the Second Amendment of the US Constitution and will not allow the treaty to be ratified in the US Senate.

India agrees on principle to regulate arms trade in the world but has put its national security and interests to the forefront. India can be held to ransom through certain provisions of the treaty during a crisis which would hamper its security interests and will be left at the whims and whips of the exporting countries. There needs to be a proper balance of obligations between exporting and importing states whereby they both share certain responsibilities and duties. India urgently needs to reduce its dependence on arms export and needs to develop its indigenous nascent defence industry to protect its borders.

Piyush Singh is a law student with an interest in India-China Relations, Nuclear Law and Energy. He is completing his internship with the Takshashila Institution. 

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Manning the ATM

Sub-optimal usage of limited resources is hindering the pace of India’s progress.

The recent order from Bangalore police mandating all banks running an ATM, to have a guard posted at the outlet to ensure security to the ATM users has already been criticised for multiple reasons. People have questioned the wisdom of the state shirking the responsibility of public security. I guess the order may not even stand the test of legality if challenged in a court. However legalities aside, the order clearly fails the test of maximising productivity for the resources deployed, thereby improving the welfare of the society.

Gregory Mankiw in his book Principles of Macroeconomics provides a simple reason why rich countries are rich and poor countries are poor. Mankiw explains in very simple terms that the reason some countries are rich is because the people in these countries are more productive than the people in the poorer countries. One can argue about the reasons why people in some countries are more productive than those in other countries. However drilled down to the most basic level, Mankiw’s definition provides us with a compass for measuring the efficiencies in public policy. Is the public policy designed to maximise the productivity in terms of goods and services for the resources deployed?

As per police estimate, Bangalore has around 2,900 ATMs. Assuming a security guard works 8 hours a day and 6 days a week, each ATM would need on an average 3.5 security guards to comply with the order of the Bangalore police. That means we would have deployed about 10,150 security personnel guarding the ATMs in Bangalore. The total sanctioned strength of police personnel in Bangalore is approximately the same as the above number. What this means is if the persons guarding ATMs were redeployed into the formal police force, it would double the total police strength in the city. It will halve the ratio of police personnel to population from the current one police personnel per 1,000 people to about one per 500 people. This is close to what is considered the ideal police-population ratio. Therefore without much extra demand on the society, we would have taken a big leap in improving the overall policing in Bangalore.

As per the banks, the cost of each guard is about ₹10,000 per month. Considering that the TCO for a police constable is about twice this cost, we will still be able to increase the police force strength by 50 percent without any additional cost incurred by the society. A private security guard sitting in front of an ATM kiosk for 8 hours a day is clearly not a means of achieving maximum productivity from the resources deployed. The same capacity can be used in a more efficient manner by bringing it into the framework of formal policing with all the associated training, access to resources and wider remit.

Extending this to Karnataka, there are about 20,000 ATMs. The police strength in Karnataka is 94,762. Applying the above math, we are looking at increasing the police strength at state level by 75 percent, bringing the police-people ratio to 400, or at neutral-cost redeployment to 450. Mr Vijay Kelkar in a session to the Takshashila GCPP students said that money is not a big constraint in India. It is the sub-optimal usage of the limited resources that is hindering the pace of India’s progress. The knee-jerk reaction for the recent ATM mugging incident proves this point.

(This post does not mean to say that the same 10,150 personnel can be moved from private security to the police forces. It does not intent to trivialise police reform to just police-population ratio. There are also other systemic issues to tackle like effective training, adoption of technology and avoidance of political interference. But it is safe to say that this will be a significant step in itself.)

Karthik Bappanad is a student of Takshashila’s GCPP programme. 

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Dealing with the deal

There’s a chance at a diplomatic solution for the longstanding impasse with Iran. It needs to be given a chance

President Hassan Rouhani of Iran has had a tumultuous three months in office. After campaigning on a moderate plank and eking out a shock victory, he garnered enough support within the country for negotiations with the P5+1. He even managed to get the grudging support of the Ayatollah. He and his team of negotiators have hammered out a historic deal where Iran would cap its uranium enrichment at 3.5 percent, and in return, the US would relax sanctions worth USD 7 billion against the economically-stricken country. To emphasize the magnitude of this deal, every US president since Carter has been trying to hammer out a deal with the Iranians; President Obama is the only one who has got a deal. Wide-ranging sanctions have cut deep into the Iranian economy, and it has had a telling impact on the political landscape of Iran. The deal struck Sunday in Geneva will allow countries to buy more Iranian oil, and releases USD 4.2 billion in cash from oil sales, ends the limits on gold and Iran’s auto sector, and comes as a much-needed reprieve for the Iranian economy. This agreement wasn’t well received by US allies in the region, with Israeli Prime Minister Bibi Netanyahu calling it a ‘historic mistake’, and long-time ally Saudi Arabia shifting nervously. But the sentiment back in the US is still that of distrust, with renewed calls for further sanctions in spite of the deal. They argue that the sanctions have brought Iran to the negotiating table; they need to strike now and impose further sanctions to get Iran to halt its nuclear program completely. Senator Mark Kirk (R-IL) encapsulated this, when he said “How do you define an Iranian moderate? That’s an Iranian who’s out of bullets and money.”

The Geneva deal was the result of a year-long diplomatic effort, with both sides playing a high-stakes, high-risk game. Reports had emerged that the Iranian negotiators had come close to walking out, and the mood was only worsened with French diplomats refusing to cede ground, aided by the occasional inflammatory comment by the Ayatollah back home. But it was under the sceptre of further sanctions by the US Congress – which Obama and Sen. Kerry stalled – that the agreement finally came through. Russia and China – Iran’s strongest allies – worked alongside Germany to bring about this deal, and the international community hopes that this will be the first step towards a significant reconciliation between Iran and the West.

But is it possible for the US Congress to undo all of this work? Economic sanctions against Iran have mostly been executive decisions by the President, and it is the relaxation of these that the US administration has promised – Congress has little say in these matters. The US Congress does have the power to regulate foreign commerce, as granted by the Constitution. Reversing sanctions imposed by them would require the administration to go through both the Republican-controlled House of Representatives (R:D::234:210), and the Senate (R:D::45:53). There has been vocal support from both sides of the aisle for this move. The Obama administration has had an unspectacular few months, and faces low approval ratings among the public and in the corridors of power. The inefficiency in implementing Obama’s landmark Affordable Healthcare Act has become a central talking point, and the criticism for Sen. Kerry’s arbitrary red line for the Syrian chemical weapons incident hasn’t waned. It’s fair to say that that the Obama administration doesn’t have the political mileage to reverse these congressional sanctions if they go through.

The impact of further sanctions on the negotiations might be far-reaching. The Obama administration would suffer a great loss in credibility, and it might test the resolve of the other members of the EU, lending greater strength to Netanyahu and other opponents of the deal. Any future negotiations would be happen under the looming shadow of this setback, and it would present a massive obstacle for any diplomatic solution. From the Iranians, it would grant further ammunition to the hardliners, and serve to further isolate them from the international stage. Rescinding this agreement might even disincentivize them from accepting any form of international regulation of their nuclear program in the future. It may drive the program underground, and that would be a major setback for the international community.

The US House of Representatives passed the last round of Iranian sanctions in July, by a vote of 400-20. The Bill has stalled in the Senate though, where the Democrats have a slim majority; it bought the administration valuable time and created the pressure environment to hammer out this exploratory, yet significant deal. Both parties have worked on putting aside decades of distrust to come to the negotiating table and actually agreed on something. Rouhani was elected to office on the promise to restore Iran’s economy and improve relations with the West. His victory indicates the growing resentment of the Iranian people to Ahmadinejad’s brand of provocative politics and the Ayatollah’s anti-West rhetoric. There is an appetite for change in Iran, and Rouhani has made overt moves towards the West for international acceptance – cue his speech at the UN General Assembly. Lawmakers in the US need to recognize and acknowledge this, and not do anything that could potentially sabotage this fragile solution. There’s a chance at a diplomatic solution for this longstanding impasse. It needs to be given a chance.

Adarsh Mathew is an intern at the Takshashila Institution. 

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Skill development in India

Skill development in India is a cross-departmental issue that needs concurrent engagement in multiple dimensions.

Many factors are attributed to the sluggish growth of skill development sector in India. But this is not an India-centric phenomenon. Industry experts and policy academicians have been forewarning the world governments for long about an impending skills mismatch epidemic. There are two reasons, which are of primary concern. First, the demographic dividend is becoming unfavourable and second, there is an employability deficit in terms of what the education institutions provide in the curriculum and what the industry actually requires. The former is prevalent in developed nations while the latter is prevalent in developing nations.

A McKinsey report released last year projected that global labour force strength will be 3.5 billion by 2030. The report states that India could face a surplus of low-skilled workers in the tune of 27 million and deficit in the medium-skilled workers to the tune of 13 million. This implies that more people could be trapped in subsistence agriculture or in urban poverty as we move into the mid-term review of our 12th Five year plan. India’s workforce today stands at nearly 472.9 million. India and has nearly 340 million adults without work-relevant skills and in need of training. Between 2010 and 2030, India would have 27 percent of the world’s share of tertiary educated labour force.

The story is that we are going to have a deficit of medium skilled labour and surplus of low skilled labour. A developing country like India needs both the export-oriented manufacturing sector and consumption-driven domestic market for a balanced economic growth. Both, though are related. Domestic markets become resilient with increased consumer expenditure, which in turn increases with a rise in real wages. Real wages will increase, among other factors, with greater labour mobility towards high-value sectors.

For India, that would mean a massive movement from agricultural to industrial jobs. But the manufacturing sector, which is usually the largest consumer of medium-skilled workers, saw an employment growth of only 4.4 percent between 2004-05 and 2011-2012. This is just one-fourth that of the services sector and one-sixth that of construction sector during the same period. According to the 12th Plan, employment in manufacturing fell by five million between 2005-06 and 2009-10, after adding about 12 million jobs between 2000-01 and 2004-05. The McKinsey report adds that the trend in manufacturing has to be reversed, as 183 million job seekers are expected to join the workforce through the next 15 years.

What does this mean for the skill development sector in India? The National Policy on Skill Development is an attempt to increase labour mobility from low-skill to medium-skill segment. There are two probable scenarios that arise now. One is that job growth is greater or keeps pace with labour skill-upgradation and the other, where it does not. No significant issues are foreseen in the former scenario but if it is the latter, then the question is, what are the alternative employment opportunities for the upgraded labour? The emigration of low-skill labour from India to Middle-East and high-skill labour to USA and other developed countries is already prevalent. But what will have to be facilitated in the future is the emigration of medium-skill labour from India to the global market.

This will require in return two issues to be resolved. Are the standards of training and certification in Skill Development in India comparable to that of the global standards, hence facilitating labour mobility without cost of additional certification or assessment? And are the immigration regulations of the different countries liberal enough to facilitate easy labour mobility? If our certification standards aren’t global then the cost of certification per capita would significantly increase, the magnitude of increase remains to be calculated. This would in turn mean that the government’s reimbursement of INR 10,000 per student in vocational training might need to be revised.

The status quo today is that while we have achieved globalisation in capital and goods, globalisation in labour is strongly resisted by local political economy and vested interests. For Indians to be able to push for liberal immigration rules in other countries especially those that will need medium skill labour such as the developed nations, a pro-active foreign policy is essential. All of this points to the simple fact that skill development in India is a cross-departmental issue that needs concurrent engagement in multiple dimensions. But unfortunately the policy debate today is predominantly unidirectional and linear. This will require us to go back to the drawing-board. While the need is imminent, the interests lie more with the business community to push the political establishment to approach the issue with greater concern.

Arvind Ilamaran works as Research Associate at Centre for Civil Society. He is a graduate of Takshashila’s GCPP and worked with ONGC for more than two years before becoming a policy enthusiast. 

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