Europe Comes Calling

Kanwal Sibal 

(Member, VIF Advisory Board)

The successive visits of French President Hollande and UK Prime Minister Cameron to India this month can be viewed from different angles. Both countries clearly attach increasing importance to the India relationship. Opportunities in India are considerable even now despite the current economic slowdown, and will grow vastly as India continues to rise. Interest in India is also part of the wider reality of economic power shifting steadily towards Asia, with France and the UK, therefore, needing to retain and expand their share of a market that is fostering linkages eastwards. UK’s share of the Indian market has dropped to 2 1/2 % from 10% at one time because they have admittedly not been pro-active enough. The fact that Europe is in crisis and the French and British economies are in trouble explains also the enhanced attention to India.

For India too, relations with France and the UK are of major importance bilaterally and within the framework of our relations with Europe, which remains India’s largest trade and investment partner. The Eurozone crisis has impacted more on the Indian economy than the US financial crisis. France and the UK as the fifth and sixth largest economies in the world with advanced technologies to offer are very valuable partners for India. We are appealing to both to ensure a “fair, balanced and forward looking” India-EU Trade and Investment FTA.

Both leaders were accompanied by large business delegations, 45 with Hollande and over 100 with Cameron- the largest delegation to leave UK’s shores. The target of doubling bilateral trade with France set up in 2008 (Euros 12 billion by 2012) has not been met. That set up with Britain in 2010 (Pounds 24 billion by 2015) is not likely to be met either given present conditions.

On the investment side, the UK is well ahead of France, with Cameron pointing out that 50% of Indian investment in Europe was in the UK and the latter was the biggest European investor in India. He promised to remove barriers to Indian investment in the UK further, asking in return that India remove its barriers too, especially for British legal, accountancy, architecture and other services.

India wants investment for upgrading its infrastructure. Hollande laid stress on cooperation in sustainable urban planning, including infrastructure, transport, water, waste management as well as railways. The UK has shown interest in the Bangalore-Mumbai industrial corridor, but the joint statement on this is couched in very tentative language, with the leaders agreeing “to examine and evolve the modalities and content of a feasibility study of this project concept through mutual discussions and to work out a roadmap for a possible partnership in this area”. British participation in India’s National Manufacturing and Investment Zones has been mooted. This, it is felt, would attract British SMEs to India. A lot of focus during Cameron’s visit was actually on potential opportunities for them.

Cameron singled out health care and education as highly promising areas. In education, the especially strong India-UK relations have been impacted by changes in the UK visa regime. However, Cameron has indicated these will be reversed- there will be no limit on visas and graduate jobs, he said. He has promised the same day visa service to Indian businessmen. France is far behind in education, but is keen to expand student exchanges through an ambitious education plan, including twinning of higher education institutions, mutual recognition of degrees, exchange of doctoral students, along with an enabling agreement on “people mobility and migration”.

Second, there is the advanced technology angle. France, unlike the UK, is a privileged partner for cooperation in nuclear energy with India. The agreement on the Jaitapur nuclear power project could not be signed during Hollande’s visit but the commitment of both sides to its early implementation “as soon as the commercial and technical negotiations, which have made good progress, are completed” was reiterated. India and the UK have now decided to open talks for a civil nuclear cooperation agreement. In space, cooperation with France has been longstanding and an agreement to launch a jointly developed satellite was announced during Hollande’s visit, but this area is absent from the gamut of India-UK ties. India concerns about easier access to hi-technology were addressed by Hollande by the signature of several memorandums of understanding between institutions to broaden the scope and depth of future engagements in science, technology and innovation. Cameron too stated UK’s commitment to make available to India the cutting edge British technologies, civil and military, that the UK currently shares with its top international partners, but in accordance with “international obligations”. Cameron supports greater cooperation betwen DRDO and the UK Defence Science and Technology Laboratory. Both Hollande and Cameron supported India’s membership of the NSG. MTCR, Australia Group and Wassenar Arrangement, the four non-proliferation and technology control regimes.

Third, there is the defence angle. Both France and the UK have been longstanding defence partners of India, but France has a record untainted by participation in sanctions. Cameron has expressed his disappointment publicly at losing the contract for the Medium Multi-role Combat Aircraft (MMRCA) to France. During Hollande’s visit it was noted that “the projects for the Scorpene submarine and upgrade of the Mirage 2000 are moving forward and steps are being taken for early finalization of the Short Range Surface to air Missile project. Both sides noted the progress of ongoing negotiations on the MMRCA programme and look forward to their conclusion.” This should dampen speculation that the Eurofighter might re-enter the fray if the negotiations with Dassault run into difficulty. The Augusta-Westland controversy cast its inevitable shadow on the Cameron visit.

Afghanistan, Iran and Syria figured in discussions, as well as enhanced counter-terrorism and cyber-security cooperation. Both leaders called for an expeditious trial of those responsible for the Mumbai terrorist attacks. Both reiterated support for India’s United Nations Security Council permanent membership.

The recent tendency in India to belittle the importance of Europe in our external ties is ill-considered and ill-informed, suggesting a discomforting hubris on the part of some of our opinion-makers.

Giving Delhi Some Parisian Delight

Kanwal Sibal 

(Member, VIF Advisory Board)

France was first to offer a strategic dialogue after our 1998 nuclear tests, forswear sanctions and announce a “business as usual” policy towards India. This remarkably pragmatic position, surpassing the acute international anxieties of the moment, demonstrated its longer term strategic view of India’s role in the world. It is this solid investment in a strategic relationship with India that gives particular value to president Hollande’s visit that begins today.

India is the first Asian country that he is visiting and he wishes to maintain the momentum imparted to bilateral ties by his predecessors from a different political camp, more so as global economic and political power is steadily shifting towards Asia. India, despite the current slump in its growth, remains a choice partner because of the size of its economy, future growth projections, entrepreneurial talent and opportunities materializing from external capital, technology and flow of know-how.

Indo-French bilateral trade at almost Euros 8 billion remains considerably short of the targeted figure of Euros 12 billion by 2012, but the overall economic relationship appears larger than what official statistics indicate. If the total investments of French companies from all sources are calculated, the figure jumps from $3.5 billion to an impressive $ 17 billion. French companies employ 250,000 Indians, with several doing extensive R&D in India, a fact insufficiently known. Infrastructure, energy, food-processing, urban development, hi-tech and green technologies provide untapped business opportunities, as do cooperative ventures with French companies that are global private public partnership leaders in the field of highways, water and waste water, ports, airports and power, which are areas of focus for the Indo-French CEOs Forum.

All such high level visits raise expectations about “deliverables”- in this case the finalization of the contracts for 126 Rafale aircraft and for French-supplied nuclear power reactors at Jaitapur. Commercial negotiations in both cases will take time, but not inordinately, so the president would hope. The Rafale contract tops 60 years of a prolific bilateral defence relationship, with supplies of aircraft, tanks, helicopters and missiles in the past, a current submarine project, and joint development and manufacture of the surface to air missile Maitri in the offing, all proving that France is considered a reliable partner.

France’s willingness to work within the rules framed under our nuclear liability act is important as an inducement to other suppliers. France has confirmed publicly its readiness to transfer enrichment and reprocessing technologies, underlining that amongst western countries France is the least restrictive in terms of transfer of sensitive technologies. In space, an area in which we have benefited from French cooperation, an agreement has been reached to launch another jointly developed satellite, “Saral”.

India values its friction free relationship with France that raises no concerns about being dominated or clapped into unequal obligations. Remarkably, India’s relations with France have higher comfort levels than those with other western powers despite its strong support for the controversial doctrines of humanitarian intervention that was demonstrated by its activism in Libya and now Syria. On these countries and Iran, India’s views and interests differ, but without any contentiousness. A strategic partnership does not, of course, mean a commonality of views and interests across the board, more so between a developing country like India and a highly developed, industrialized country like France which has enjoyed great power status for long and is a permanent member of the UN Security Council, a Nato member and a pillar of the European Union. On climate change and WTO issues Indian and French positions, understandably, differ.

Watching Islamic extremism in Libya, with spill-over into Mali, and polarization in Egypt caused by the Muslim Brotherhood, India doubts the wisdom of encouraging extremist religious forces to overthrow Syria’s secular regime. The strategic vision of India and France in this regard has developed a gap which needs closing as the epicenter of such forces, backed by nuclear capability, is still in our region, and the gravity of the threat can escalate all round with efforts to accommodate the Taliban in Afghanistan, an enterprise that France too is discreetly encouraging. All these issues, along with the implications of China’s rise and the situation in Pakistan, would undoubtedly get discussed usefully during the president’s timely visit.

The Normal Socialist

Kanwal Sibal

Member Advisory Board, VIF

What does Francois Hollande’s victory in the French presidential election mean for India, Europe and the rest of the world?

We know very little about him in India. Hollande’s political career has been confined to domestic politics, but without any governmental experience even though he has headed the French Socialist Party from 1997 to 2008. Foreign affairs have not been his forte so far, though now he will be deeply involved in them as the French President has traditionally a privileged role in conducting the country’s foreign policy. It is not too important if we do not know his views about India because Indo-French relations have matured sufficiently and do not await new leaders to discover mutualities of interest hitherto indiscernable. Personalities can make some difference in increasing levels of engagement with specific countries based on personal inclinations and judgment, but we may not expect notched-up attention to India from Hollande.

Nicolas Sarkozy, who had no known interest in India before becoming President, turned out to be very good for India-France relations. He consolidated the positive momentum of bilateral ties under Jacques Chirac, reinforcing French support for India’s membership of the UNSC and international civilian nuclear cooperation with India and fortifying the strategic dialogue between the two countries. India may have selected the Rafale jet fighter for technical-commercial reasons, but Sarkozy’s contribution to creating a congenial political atmosphere for the deal cannot be disregarded. Given Hollande’s background, it is enough if he maintains Sarkozy’s level of interest in India.

In the case of France the perception is that the Gaullist political spectrum is better for India than the Socialists. This is partly because, barring Mitterand, no Socialist has been president in the Vth Republic. When the socialist Lionel Jospin was Prime Minister in the “co-habitation” period from 1997-2002, it is President Chirac’s empathy for India that guided the conduct the Jospin government. Hollande’s success may not therefore automatically comfort India because an unknown entity succeeds a known one, but the strong foundations of existing bilateral ties provide sufficient reason to be at ease about the electoral result.

Naturally, we should establish contact with Hollande quickly at high level and invite him to India, with a halt by our Prime Minister in Paris on one of his westwards journeys in the interim, not to mention early visits by our Foreign and Commerce Ministers to France.

Evidently, Hollande’s election has the greatest significance for Europe because France, along with Germany, has been at the centre of the European project, and this project is in crisis, to the extent that the survival of the Euro is threatened and the weaknesses of the much-vaunted European enterprise are being openly acknowledged. Hollande is questioning the German nostrum of austerity and strict budgetary balance to address Europe’s sovereign debt malady. He is proposing instead a strategy of growth, investment and job creation that would involve higher spending and budget deficits. German Chancellor Merkel’s preference for Sarkozy over Hollande and the latter’s frontal challenge to German financial prescriptions for Europe and his intention to re-negotiate the EU’s fiscal discipline pact sets the stage for crippling policy tussles between the two key pillars of Europe. France and Germany will eventually find a modus vivendi as both have vital stakes in Europe, but any prolongation of the Eurozone crisis because of basic policy differences that Hollande is signalling would be costly for Europe and others.

The hyperactive Sarkozy, always looking for a leadership role, increased France’s visibility on the international stage. He made mediatory moves in the Russia-Georgia conflict, punched Iran diplomatically, led the military action against Libya and adopted an uncompromising language against Syrian President Bashar al-Assad. He stood by his obligations in Afghanistan and has been forthright on terrorism, including on Pakistan’s role.

Hollande’s more moderate personality may temper this hyper-activism. His intention to withdraw all French troops from Afghanistan by 2012-end may require some US-France parleys. On Islamic radicalism his stance may reflect his party’s softer view on France’s Muslim problem. His misgivings about globalization and unfair external competition may incite more protectionist tendencies in Europe which worry India and others. His lack of enthusiasm for nuclear energy may impact on the scope of Indo-French plans in this area.

Hollande has won as expected, but with a margin narrower than anticipated. Sarkozy lost more because of his personality flaws than his performance failures. Hollande will be, as he says, a more “normal’ president.