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Bush team must avoid pitfalls in emerging ties with India

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Pantech Fellow and San Jose Mercury News foreign affairs correspondent Daniel Sneider considers three pitfalls to avoid in Indo-U.S. relations.

The United States and India have gone a long way from Cold War days of wariness and suspicion to genuine friendship and incipient global partnership. The visit of President Clinton to India in 2000 marked a breakthrough in Indo-U.S. ties, which had been set back by India's decision to conduct nuclear weapons tests in 1998.

President Bush, to his credit, broadened the road opened by Clinton and paved it with a more solid foundation. Cooperation in a range of areas, from military ties to joint scientific work, is well established. A presidential visit puts a personal seal on that budding partnership -- even if it is a couple of years late.

When it comes to Indo-U.S. relations, however, there are three pitfalls to avoid: the India card; democracy matters; and it's the economy, stupid!

The India card

Washington has a surplus of geo-strategists. As Kissinger famously played the "China card'' against the Soviet Union, the strategists imagine cleverly using an India card against a rising China.

There is one small rub in that grand design -- India isn't interested in being an instrument of an American containment strategy against China. As Robert Blackwill, former Bush administration ambassador to India, put it recently: "There's no way better to empty a drawing room in New Delhi of Indian strategists than to start talking about this idea.''

Indians eagerly compete with China for economic leadership in Asia. They have a legacy of tensions, from border wars to nuclear rivalry. But Indian policy is to engage China and create the best relationship possible.

The president is avoiding India card talk. But it is no secret that some inside the administration harbor these illusions. Let's hope they keep their mouths shut for at least this week.

Democracy matters

Beyond cliches about the world's two largest democracies, both governments have a habit of forgetting that democracy really matters. Witness the up-to-the-last-minute effort to salvage a deal from July to open India's civilian nuclear program to international inspection in exchange for access to nuclear energy technology and fuel.

The Bush administration did little to sell that deal in Congress, either ahead or afterward. Opposition has mounted on both sides of the aisles from those who fear it would undermine nuclear proliferation controls, particularly when Iran is claiming its own right to pursue peaceful nuclear technology.

The United States has now toughened its requirements. But the coalition government of Prime Minister Manmohan Singh faces rising resistance in parliament, encouraged by the prestigious nuclear establishment, to any deal that would significantly restrict India's ability to develop and build nuclear weapons.

I favored the July deal and support any reasonable new agreement that would separate a significant part of India's civilian nuclear program from its military one. Hopefully, the negotiations will succeed, but even if they do, both governments need to do a much better job selling it in their feisty democratic systems.

It's the economy, stupid

The biggest threat to this emergent partnership is to forget what brought the two countries together -- not geopolitics but shared interests. Some of those are security-driven, not least a common foe in Islamist terrorism. But the real driver has been economics.

Since India decided to open its protected economy in the early 1990s, the country has taken off, producing sustained growth rates nearing double digits. Led by the high-technology industry, foreign investment and trade with India is rising rapidly. The Indo-Americans who thrive in Silicon Valley form a powerful cultural and economic bridge between our two countries.

India's billon people include a middle class of 200 million to 300 million, equal to the population of this country, with an increasingly sophisticated appetite for Western consumer goods. In contrast to China, India has a young population, half of them under 25 years old.

For the United States, there are added opportunities -- and competitive challenges. As is evident from the Saturday morning phone calls from telemarketers in Chennai trying to sell me a new mortgage, India has a great resource in its English-speaking educated elite. That has meant job loss in the United States but also openings to create new businesses and new jobs.

Both governments need to focus on what is needed to accelerate the kind of virtual integration between India and the United States we see in Silicon Valley. If we do that right, the geopolitics will follow naturally. If we mess that up, all the strategic castles in the sky will come crashing to Earth very soon.

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From Marx and Mao to the Market: The Economics and Politics of Agrarian Transition

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The emergence of China as a global economic powerhouse, the uncertain path of Russia towards a market economy, and the integration of ten Central and Eastern European countries into the European Union (EU) have occupied the minds and agendas of many policy-makers, business leaders and scholars from around the world at the end of the twentieth and the beginning of the twenty-first century. Twenty years ago these developments were unimaginable. The impact of these changes is so vast that the importance of understanding the forces that unleashed this process, how these changes became possible, and what the lessons are for other developing countries, cannot be overestimated.

This book is the first effort to analyze the economics and politics of agricultural reforms by comparing the reform processes, their causes and their effects across this vast region. The authors draw on a vast set of studies and new data, which compare reforms and economic impacts in more than 25 countries, to come up with a series of conclusions and implications on the role of economic reforms in growth, and the importance of initial conditions and political constraints in explaining the choices that were made and their effects.

The book analyzes some of the most successful sets of agricultural policies in history that have lifted people out of poverty, raising productivity and incomes by staggering amounts. At the same time the book explains the reasons behind dramatic failures in policy processes and reforms that caused hunger, poverty and which had devastating effects on economic growth and development for millions of other people.
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Oxford University Press USA
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Scott Rozelle

Vegetables in China

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In this report I provide a summary of the work that I have been doing on China’s vegetable economy over the past year. This work, in part, was supported financially by the Western Growers Association (WGA). The funds provided by the WGA were mostly used to support a survey of vegetable producers and wholesale procurement traders in rural China. It also went to support the procurement of a data set that could aid in the analysis of the productivity of China’s vegetable producers. The work that I summarize here, however, is from far more different sources. I greatly appreciate the support of WGA and look forward to continuing to interact with the management and members in the coming years.

To make the material more accessible, I plan on organizing this report by asking a question and then summarizing the answer. In this way I can cover a lot of ground without getting lost in the details. I am more than willing to try on any given aspect of the final report to expand on the issues.

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Scott Rozelle

Chinese Agricultural Transition: Trade, Social and Environmental Impact

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The project studies the impact of China's current economic transition on its agricultural economy with special reference to the consequences of trade liberalization and of changing trade flows. The project will track impacts on social conditions and on the environment in China's rural areas as well as on markets in the rest of the world, with particular emphasis on the EU. For this, the research considers (a) the dynamic, rapid pace of the transition; (b) the size and geographical diversity of the country; and (c) the effect of the changes on the rest of the world. The research opts for a quantitative approach, supplemented by qualitative investigations, and focuses on three themes: trade, social conditions, and environment. On trade, the research aims to account for the size of China's trade and take a closer look at trade between the EU and China with scenario simulations over the period 2000-2030, by establishing a linkage between (a) the Chinagromodel, a spatially explicit equilibrium model that comprehensively depicts China's farm sector in 2433 counties, while connecting these through trade and transportation flows; (b) the GTAPmodel of world trade; (c) FEA-27, a model of EU-agriculture for 27 members states. The research on social conditions proceeds by linking geo-referenced household surveys to a population census of China and a detailed geographical data set, relying on a suitable adaptation of poverty mapping methodology, so as to trace impacts at household level. Finally, we use agro-ecological assessment tools to quantify the environmental pressures resulting from intensified livestock industry as well as from intensified horticulture production. Findings on the three themes are subsequently integrated to arrive at policy suggestions that account for efficiency, equity and sustainability considerations. Throughout the project, a policy dialogue and dissemination program, conducted in both China and the EU, maintains communication with policy makers.

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Scott Rozelle

Small Traders and Small Farmers: The Small Engines Driving China's Giant Boom in Horticulture

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The supermarket revolution has arrived in China and is spreading as fast as or faster than anywhere in the world. As the demand for vegetables, fruit, nuts and other high valued products have risen, urban retailers are finding new venues from which they can sell to the increasing prosperous city residents. However, the experience of many developing countries suggests that there could be serious distributional impacts of the rising of supermarkets. There is concern among policy makers and academics that poor, small farmers might be excluded from market. The main goal of our paper is to understand what types of farmers have been able to participate in the horticultural revolution, how they interact with markets and how supply chains affect their production decisions. Using a unique set of spatially sampled communities in the Greater Beijing area, in contrast to fears of some researchers, we find small and poor farmers have actively participate in the emergence of China's horticulture economy. Moreover, there has been almost no penetration of modern wholesalers or retailers into rural communities. In the paper we document seven characteristics of China's food economy that we believe account for this set of findings.

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Scott Rozelle

Chinese Cultural Revolution as History, The

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Based on a wide variety of unusual and only recently available sources, this book covers the entire Cultural Revolution decade (1966-76) and shows how the Cultural Revolution was experienced by ordinary Chinese at the base of urban and rural society. The contributors emphasize the comple interaction of state and society during this tumultuous period, exploring the way that events originating at the center of political power changed people's lives and how, in turn, people's responses took the Cultural Revolution in unplanned and unanticipated directions. This approach offers a more fruitful way to understand the Cultural Revolution and its historical legacies.

The book provides a new look at the student Red Guard movements, the effort to identify and cultivate potential "revolutionary" leaders in outlying provinces, stubborn resistance to campaigns to destroy the old culture, and the violence and mass killings in rural China.

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Stanford University Press: Studies of the Walter H. Shorenstein Asia-Pacific Research Center
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Andrew G. Walder
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9780804753500

The Six-Party Talks: Seeking a Solution to a Complicated Nuclear Issue

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The nuclear issue on the Korean Peninsula is one of the greatest challenges facing the global non-proliferation system. Yet the very root of that issue reaches far beyond the non-proliferation system. The Six-Party Talks, involving North Korea, South Korea, the United States, Russia, Japan, and China, bring hope for a peaceful solution between these nations. However, the continued strategic mistrust between the United States and North Korea casts an uncertain light on the struggling negotiations. Yang Xiyu will speak about the challenges of the nuclear issue on the Korean Peninsula, the profound mutual mistrust between the US and North Korea, and China's role in the Six-Party Talks. He will also discuss a possible solution.

Before coming to Shorenstein APARC as a visiting scholar, Yang Xiyu was Director of the Office for the Korean Peninsula Issues in Chinese Foreign Ministry. The office was set up in January 2004, when Dr. Yang was its first director to deal with the nuclear issue on the Korean Peninsula, as well as, affairs relating to the Six-Party Talks. He began his involvement in issues related to the Korean Peninsula in 1994, when he worked in the Chinese Embassy in the United States. During the following years, he took part in the launch of the Four-Party Talks, and was the representative for the Chinese side in the working level meeting of the talks, as well as, a member of the Chinese Delegation in the Four-Party Talks that were held in New York and Geneva.

He was awarded the National Award for Outstanding Contribution to Social Science Studies by the State Council of China, and the Honorable Allowance for National Distinguished Experts.

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Xiyu YANG Visiting Scholar Speaker Shorenstein Asia-Pacific Research Center
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Adversaries and Partners: The Impact of the Cross-Straits Economic Relationship on the Development of the Taiwanese and Chinese Economies

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The Chen administration has attempted to deal with the growing economic and technological links across the Taiwan Straits through confrontation with and coercion against Taiwanese businesses with investments in the People's Republic of China. These attempts have done little to stop the flow of capital and knowledge from Taiwan to China, but this failure is not necessarily bad for Taiwan even as it is a boon for China. This talk will address in which sectors and in what ways the flow of Taiwanese business activities to China have been beneficial or detrimental to each economy. Looking forward, the talk will also attempt to answer how further integration will benefit each side.

Douglas Fuller has spent over ten years researching technological development in East Asia. Most recently, he completed a doctorate at MIT in political economy. The topic of his thesis was technological development in China's IT industry. For this and previous research, he has interviewed IT firms in Malaysia, Japan, Korea, Taiwan, the People's Republic of China and the US. He has published articles in Industry and Innovation and other peer-reviewed journals.

A wine and cheese reception will follow the seminar.

This is the inaugural seminar of the CDDRL Taiwan Democracy Program and it is co-sponsored by the Walter H. Shorenstein Asia Pacific Research Center.

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Doug Fuller SPRIE Postdoctoral Fellow Speaker
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Sino-ROK-US Triangular Relations and North Korea: Strategic Choices Beyond the Nuclear Crisis

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Diplomatic maneuvering in response to the North Korean nuclear crisis has presented the United States, South Korea, and China each with strategic dilemmas that go beyond the issue of how to address the prospect of a nuclear North Korea. In response to the immediate question of how to denuclearize the Korean peninsula, a complicated triangular relationship between China, South Korea, and the United States has emerged that reflects longer-term strategic anxieties about the future of a revamped security order in Northeast Asia following the resolution of the North Korean nuclear crisis.

Increasingly, these three countries perceive that how the crisis is resolved, and the policies that each member of the triangle is likely to pursue as steps toward resolving the crisis, may influence their relative positions and regional influence after the immediate issue of North Korea's denuclearization--or North Korea's future--has been resolved. Strategic anxieties about the future of Northeast Asia may be emerging as an obstacle that is as serious as apparent North Korean intransigence in explaining the lack of progress in diplomatic efforts thus far. Based on interviews with foreign policy analysts representing each actor in the triangle, the presentation will attempt to explain how each country in the triangle perceives its respective foreign policy choices and how those choices might influence the interests of its neighbors in Northeast Asia.

Scott Snyder is a Pantech Fellow at Stanford University's Shorenstein Asia-Pacific Research Center during 2005-2006 and is concurrently a senior associate in the International Relations program of The Asia Foundation and Pacific Forum CSIS. He spent four years in Seoul as Korea Representative of The Asia Foundation during 2000-2004. Previously, he has served as a program officer in the Research and Studies Program of the U.S. Institute of Peace, and as acting director of The Asia Society's Contemporary Affairs Program. Past publications include Paved With Good Intentions: The NGO Experience in North Korea (2003), (co-editor with L. Gordon Flake) and Negotiating on the Edge: North Korean Negotiating Behavior (1999). Mr. Snyder received his B.A. from Rice University

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Scott Snyder

Shorenstein APARC
Stanford University
Encina Hall, Room E301
Stanford, CA 94305-6055

(650) 723-6530
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Pantech Fellow
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Scott Snyder is a senior associate in the International Relations program of The Asia Foundation and Pacific Forum CSIS, and is based in Washington, DC. He spent four years in Seoul as Korea Representative of The Asia Foundation between 2000 and 2004. Previously, he served as a program officer in the Research and Studies Program of the U.S. Institute of Peace, and as acting director of the Asia Society's Contemporary Affairs Program. He has recently edited, with L. Gordon Flake, a study titled Paved With Good Intentions: The NGO Experience in North Korea (2003), and is author of Negotiating on the Edge: North Korean Negotiating Behavior (1999).

Snyder received his BA from Rice University and an MA from the Regional Studies East Asia Program at Harvard University. He was the recipient of an Abe Fellowship, administered by the Social Sciences Research Council, in 1998-99, and was a Thomas G. Watson Fellow at Yonsei University in South Korea in 1987-88.

Scott Snyder Speaker
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Korea Program

MNC R&D Labs in China -- IP Protection and Innovation for the Global Market

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George Krompacky
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The following is a short summary of the November 29, 2005 presentation by SPRIE Fellow Dr. Xiaohong (Iris) Quan on her study of the research and development done by multinational corporations in China.

Multinational corporations (MNCs) have increasingly located research and development (R&D) in developing countries such as China and India since the 1990s. On the one hand, governments in developing countries are eager to attract R&D to their local economies; on the other hand, developed countries are concerned about losing their competitive advantage due to R&D offshoring. At the same time, intellectual property protection is a growing concern.

What are the MNC R&D labs actually doing in China? Quan noted that her 2004 survey of MNC R&D labs in information technology industries in Beijing found that these MNC R&D labs are not just providing technical support, product localization, or product development for the local market; rather, they are developing products for the global market. Her study documents an emerging spatial division of labor in R&D based on the increasing specialization of R&D activities.

Ensuring returns appropriation

Appropriating returns is essential to continuous R&D investment. However, returns appropriation is not necessarily realized through formal IP protection institutions such as the patent system. As the growing trend of globalization of R&D has evolved to this new stage characterized by MNCs locating R&D labs in developing countries, it provides a good test bed to further explore more theoretical mechanisms of IP protection. Considering the weak intellectual property rights regimes these developing countries typically have, it is crucial for MNCs to find an effective way to protect their valuable technologies thus facilitating returns appropriation from their R&D activities in host developing regions. It is in fact the effective means of IP protection that can greatly assist MNCs' location of R&D offshore, in addition to other well-known incentives such as low cost R&D labor and market attraction.

R&D specialization essential

Using evidence from MNC R&D labs in Beijing and Shanghai, Quan's study proposes that R&D is further specialized within MNCs' global R&D network. Furthermore, IP protection and returns appropriation can be realized through such R&D specialization. The key proposition is formulated as below: 'Hierarchical modular R&D structure can be an effective way for MNC R&D labs to protect their intellectual property and thus facilitate returns appropriation in weak IPR regime developing countries'. This 'hierarchy' includes 'core R&D' and 'peripheral R&D', based on two dimensions--technology value-added, desire and ease of IP protection. While 'core R&D' is mostly done in developed countries, 'peripheral R&D' is conducted in developing countries. Dr. Quan's study suggests that this hierarchical modular R&D structure facilitates the global configuration of MNC R&D labs.

Slides from this presentation can be found at the event link below.

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