Carter Urges Closer U.S.-India Defense Cooperation
NEW DELHI, July 23, 2012 – Deputy Defense Secretary Ashton B. Carter today offered what he called “practical steps” to improve U.S-India defense cooperation.
During remarks at an event hosted here by the Confederation of Indian Industry, Carter noted President Barack Obama has called the two nations’ relationship “one of the defining partnerships of the 21st century,” adding that defense cooperation is central to that tie.
India, along with Brazil, Russia and China, is one of the “Big Four,” or BRIC, nations that economists have identified as being at a similar level of recently advanced economic development. Carter said partnership with India is a key part of the U.S. strategic emphasis on the Asia-Pacific region and its focus on broader security and prosperity.
“You are an economic power with an increasing military capability,” the deputy secretary said. “Your leadership in civil discourse and democracy is critical to the political stability of South Asia, and a beacon to the world.”
The United States and India have built their military-to-military engagement steadily through dialogues, exercises, defense trade and research cooperation, Carter noted. He added that U.S. defense leaders want to expand that linkage even further.
“We want to develop a joint vision for U.S.-India defense cooperation,” he said. “That’s why I’m here, at the request of Secretary of Defense [Leon E.] Panetta.”
U.S. defense leaders’ goal is to strengthen the relationship, Carter said, “to get to a place where we discover new opportunities continuously, making new and innovative investments that benefit both countries for generations to come.”
“We want to knock down any remaining bureaucratic barriers in our defense relationship, and strip away the impediments,” he added. “And we want to set big goals to achieve.”
The deputy secretary noted the United States has begun to prune back bureaucratic restrictions hindering defense trade and joint development between the two countries. The United States’ export control system is designed to prevent high-end technology from getting to states that shouldn’t have it, Carter noted.
“But our system can be confusing, rigid, and controls too many items for the wrong reasons,” he added. “We know we need to improve it,” and the president’s 2010 Export Control Reform initiative is guiding those improvements, he said.
The Defense Department’s internal procedures also can erect barriers, the deputy secretary acknowledged. He added that he and Panetta are committed to reforming those processes. For example, he said, the United States has moved India’s Defense Research and Development Organization and the Indian Space Research Organization off the Commerce Department’s entity list. The list sets restrictions on foreign end-user nations involved in proliferation activities.
“We trust India and know that India is not a re-exporter or exploiter of our technologies,” Carter said.
U.S. leaders consider India a top priority in the nation’s export considerations, and want the United States to be India’s “highest-quality and most trusted long-term supplier of technology – not a simple seller of goods -- in such fields as maritime domain awareness, counterterrorism, and many others,” the deputy secretary said. In addition, he said, the United States is committed to India’s military modernization.
Even as they work to increase bureaucratic speed, Carter said, U.S. defense leaders also are taking a more strategic approach to export decisions.
“We’re making decisions more anticipatory, looking at what partners are likely to want in the future, and beginning our thinking and processes earlier,” he said. “In a terrific new initiative, we’re building exportability into our systems from the start, so it doesn’t consume time and money to do it later.”
U.S. leaders also are fast-tracking priority sales, Carter said.
“All these steps will be felt here in New Delhi. … These and other efforts will help us respond more rapidly to India’s requests for U.S. equipment and systems – particularly for more advanced technologies,” the deputy secretary told Indian defense industry representatives.
Defense Department leaders also are working to improve the Foreign Military Sales program, or FMS, he said.
“India was our second-largest FMS customer in 2011, with 4 and a half billion [dollars] in total FMS transactions,” he noted. “And we delivered six C-130J’s on time.” The C-130J, produced by Lockheed Martin, is the "Super Hercules” four-engine military transport aircraft.
“We think our defense technology is the best quality on the market. … Buying American, whether through direct commercial sales or Foreign Military Sales, will get India exceptionally high-quality technology, a high degree of transparency, and no corruption,” Carter said.
Defense leaders also are working to make their acquisition process clearer and more export-friendly, he added.
“I used to be undersecretary of defense for acquisition, technology and logistics,” he said. “There was a chart on my wall, outlining the 250 … steps it takes to move a program from development to delivery. It read like hieroglyphics.”
The department is working to make that system more export-friendly, and also has a new fund that allows the Pentagon to procure long-lead, high-demand items in anticipation of partner nations’ requests, he said. Officials also have developed a cadre of acquisition experts to help other countries define their requests and to streamline DOD’s response, he noted.
“That should help India significantly,” Carter added.
The deputy secretary said most importantly, DOD leaders want to move beyond defense trade, toward cooperative research, development and co-production with India.
“I’m a scientist,” said Carter, who holds a doctorate in theoretical physics from Oxford University, where he was a Rhodes Scholar. “I know this is the critical part.”
Carter noted he will travel south tomorrow from New Delhi to Hyderabad, India’s technology corridor. There, he said, he will visit the facilities where India’s Tata Advanced Systems Limited and Lockheed soon will begin producing parts for the C-130J.
“From now on, every [C-130J] around the world will contain parts made in Hyderabad,” he added. “That’s an example of the kind of co-production that is the future. It highlights what can be achieved when we unleash the potential of our private industries. It shows what’s possible when there’s a common strategic view, when the bureaucratic barriers are down, and importantly, when our strategic interests and genuine economic and business interests are aligned.”
Carter said such joint efforts can and should expand further. “The only question for us is: Where does India want to expand and grow?” he added.
India also is adapting its bureaucratic processes for the global marketplace, the deputy secretary said.
“We want to cooperate with you on high-value technologies,” Carter said. “To get where we both want to be, India can make some changes too, to increase U.S. investment.”
If India raises its foreign direct investment ceiling to international standards, he said, commercial incentives to invest would be greater. India currently limits foreign investment in its defense sector to 25 percent. A Washington-based nonprofit research group, the Center for Strategic and International Studies, recommended in a report last week that India increase its defense FDI cap to above 50 percent.
"An arrangement where U.S. companies invest in [the] Indian defense industry could provide a win-win for both the United States and India by improving India's defense industry while providing U.S. companies a potential source of lower-cost manufacturing for defense products," the report’s authors wrote.
Carter said the Indian government also could adjust offset agreements to increase U.S investment opportunities. Offset agreements typically involve a foreign supplier agreeing to buy products from a government acting as buyer, to offset the buyer's investment.
“Offsets can be tremendously helpful to growing industry capabilities – if you have the right companies, and the right absorptive capacity,” Carter said. “If offsets are calibrated correctly, they work. But if offset requirements are too onerous or too narrow, they deter a company’s interest, and you lose that alignment of economic interest and strategic intent. For companies to participate, our arrangements must make good economic sense as well as good strategic sense.”
Third, he said, projects integrating technology development, production and acquisition require administrative structures that can accomplish that integration, he said.
Foreign direct investment limits, offset agreement restrictions and integrative administration structures are “just three points where change could be a real help in Indian-American cooperation,” the deputy secretary said.
“The point is that on both sides we need to change, reform, and push ourselves to get to a place where U.S.-India defense relations are only limited by our thinking, not by our capacity to cooperate,” Carter said.
Cooperation is the norm in technology and industry, he said.
“The leaders of industry globally, such as those in this room, know that,” the deputy secretary added. “Sometimes, we in the security community lag behind them in our ability to cooperate and advance technology.”
Carter’s visit to India is part of a 10-day Asia-Pacific tour that has included stops in Hawaii, Guam, Japan and Thailand. The deputy secretary will conclude the tour with a trip to South Korea later this week.