Tag Archives: CEPA

Namaskar, Abe-san!

11 Fri Dec 2015

Posted by in India, South Asia

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Japan’s Shinzo Abe is in India for his third prime ministerial visit and it has the feeling of a meeting between friends rather than between the leaders of two major states. On the morning of his arrival, the Times of India ran an article by the Japanese prime minister in which he briefly outlined the history of India-Japan relations. Calling India a key international player and a natural partner who shared Japan’s values, Abe stated his belief that the two countries held the greatest potential of any bilateral relationship in the 21st century and declared his intention of “dramatically developing” the bonds between India and Japan. Not to be outdone in a show of warmth, the Indian prime minister tweeted, “India is all set to welcome its great friend & a phenomenal leader, PM @AbeShinzo. His visit will further deepen India-Japan relations.”

The rise of Abe in Japan and of Narendra Modi in India tells an interesting tale. Both men are nationalists leading nations that had retreated from the international spotlight during the Cold War, Japan via its pacifism and India through its non-alignment. Both nations have seen a generation pass and the younger crowd does not share the sentimentality of the old, though vast numbers yet remain unsure whether the risks of a more dominant global role are worth taking. Both leaders seek to remake their countries but face substantial opposition at home.

Relations between the two prime ministers go back to Modi’s chief ministerial days. This is the fifth meeting between the two men, the initial one being in 2007 when Abe was in his first term as prime minister. Modi and Abe connected well, or at least understood that they needed each other as the post-Cold War honeymoon drew to a close. Their personal chemistry has certainly helped Modi domestically: at a time when the West was trying to isolate him over the 2002 Godhra riots, Japanese firms made major investments in Gujarat’s infrastructure and industry. It is partly the successful outcome of these projects that propelled Modi to the top position in the country in May 2014.

Abe is in India for three days to attend the ninth annual India-Japan Summit talks. These talks broadly encompass three shared strategic interests: Indian infrastructural and economic development, civil nuclear cooperation, and defence ties. Expectations of the summit are big this year, something to top Japan’s promise in August 2014 to invest $34 billion in the Indian economy over five years. And Abe might deliver – it has been reported that the summit will likely see India and Japan seal an agreement for the latter to provide the former $15 billion at 0.5 per cent interest over 50 years to construct India’s first high speed rail line connecting Bombay to Amdavad. India is expected to adopt Japan’s Shinkansen technology and invest at least 30 per cent of the soft loan back into the Japanese economy. Construction is expected to start in 2017 and service by 2024; it has even been suggested that the line might, at a later date, be extended to Delhi as part of India’s Diamond Quadrilateral scheme to link its four metropoles with 10,000 kms of track. Besides this big ticket item, Japan has taken a role in developing the Amdavad and Madras metro projects and is negotiating its involvement in several highway undertakings, airport construction, industrial townships in Tumkur, Ghilot, Mandal, and Supa, and other infrastructural ventures.

An issue that has received less attention in the press is the Comprehensive Economic Partnership Agreement (CEPA) between the two nations. For several reasons, the full potential of this agreement has not been realised and the Indian and Japanese delegations would do well to ponder this. India is eager to enter the services sector in Japan, not just in information technology; meanwhile, it wishes Japan to give Indian Small and Medium Enterprises a closer look. The individual transactions may not be as headline worthy as nuclear cooperation or bullet trains but the impact over the entire economy will be greater. As India continues to grow and develop into a manufacturing hub as well, its markets promise to revitalise a flagging Japanese economic story.

While there are few hurdles on the economic front, civil nuclear cooperation is much more complicated. The Indo-US nuclear deal in 2008 readmitted India to international nuclear trade circles after four decades of nuclear apartheid and the South Asian country has since concluded several agreements for supplies of uranium for its small fleet of nuclear reactors. It had been hoped that Japan would also promptly begin to engage in nuclear commerce with India but that has not been the case. Tokyo has strict policies governing nuclear commerce, and one of them prohibits any such relations with a country that is not a member of the Non-Proliferation Treaty. Delhi will not sign the NPT as a non-nuclear weapons state and allowing it to join as a nuclear weapons state will in all likelihood mean the collapse of the international non-proliferation regime. Over the years, India has worked to persuade Japan of its trustworthiness and it is rumoured that Abe is closer to accepting the Indian view.

Truth be told, the value of a nuclear agreement between the two countries has been blown out of proportion. This is entirely because of the symbolic significance India has placed on international recognition of its nuclear credentials as a safe and reliable state. However, even if Abe and Modi were to be able to come to an agreement on this issue, it is unlikely that India will gain anything owing to its unique interpretation of nuclear liability. Japan has become an important manufacturing node in the international nuclear supply chain with major nuclear vendors in France and the United States depending upon vital components from the island. Yet the Civil Liability for Nuclear Damage Act (CLNDA) has brought India’s nuclear renaissance to a screeching halt and GE has refused to enter the country’s nuclear sector. Westinghouse has been silent too and Areva has slowed down its activities in Jaitapur, awaiting clarification on some of the problematic clauses of the CLNDA. If Modi successfully closes a nuclear deal with Abe, the only possible benefit to India in the near future is access to the high quality forging of reactor pressure vessels by Japan Steel Works. This will not bring back the foreign vendors but will at least indigenous nuclear industry the option to accelerate its expansion.

The third leg of the India-Japan relations triad is defence ties. This is a difficult subject for Japan: since World War II, the country has been avowedly pacifist – albeit under a US nuclear umbrella – and has abjured from any military activity outside Japan’s boundaries. Tokyo also forbade itself from selling defence equipment to other countries, even allies. It is only recently that there has been a thaw in this position: in 2011, Abe managed to pass several amendments to Japanese law that now allow him to engage in defence trade. This allowed Japan’s ShinMaywa to respond to Delhi’s Request For Information for nine amphibious aircraft capable of search and rescue operations, radar surveillance, and transportation of cargo. India and Japan set up a Joint Working Group in 2013 to explore the possibility of manufacturing the US-2 ShinMaywa together. Though a new era has begun for the Japanese defence industry, it is still early days and Abe faces strong domestic opposition to his reforms. Even an agreement on joint manufacture of the US-2 will not herald a rapid expansion of Indo-Japanese defence trade in the near future. However, such a deal is to be welcomed as a step in the right direction.

It cannot be ignored that the urgency motivating closer relations between two of Asia’s largest economies is the mutual perception of the threat of a more powerful and assertive China. Both Delhi and Tokyo have looked on with concern as Beijing strengthened its military on the back of a booming economy over the last two decades. China’s show of muscle in the South China Sea, its noxious relations with Pakistan, the quest for assets around the Indian Ocean, and the rapid modernisation and expansion of its military have not only pushed the nations of Southeast Asia together but also raised warning flags for the United States. However, neither Delhi nor Tokyo wish to antagonise Beijing too much just yet for both have substantial economic relations with their troublesome neighbour. An open and aggressive alliance is to neither country’s benefit, at least just yet, and both India and Japan hold out hope that their blossoming security relations will dampen the Middle Kingdom’s impetus for expansionism.

The silent partner in Indo-Japanese security relations is the United States. Washington indicated its willingness to pivot to Asia in 2011 but found little local support for it for no South, East, or Southeast Asian mouse wanted to bell the Chinese cat. Robust ties between Delhi and Tokyo offer the most viable foundation for a quiet US pivot to Asia and the several recent naval exercises between these three nations indicates the substance of this invisible partnership. Australia has been another quiet comrade, making the troika into a quartet. Before the guns start roaring, however, Modi and Abe have astutely chosen to strengthen economic and military ties, coordinate policies, and support regional security architecture as a hint to Beijing to desist from its threatening behaviour.

The outcome of this summit appears positive on the economic front, cautiously optimistic in the security arena, and uncertain in the nuclear field. Yet what still makes it pleasing for Modi to engage with Abe is the shared values and intellectual framework between Indians and Japanese. As the inheritors of a similar set of ancient Asian cultural values, the two countries make ready partners in an Asian century. Mutual security concerns and economic complementarities only further highlight the logic of a close relationship between India and Japan, even if this summit does not deliver all that observers expect of it. There may be no permanent friends in international affairs, but Shnizo Abe and Japan are probably as close to it as India can get in the short and medium term.

The Peacock and the Crane

28 Fri Dec 2012

Posted by in India, Nuclear, South Asia

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The victory of Shinzo Abe in Japan’s recent general elections has evinced approving murmurs in many corners. Obviously, one corner is the Japanese nuclear industry. Another nook is India, where Abe’s victory has raised hopes of closer relations between two of Asia’s largest economies. Of course, the hopes don’t just stop there – the two states are both equally concerned about the rise of a large, mutual neighbour intent of flexing its economic and military muscle in the region, and strategic thinking would suggest ties beyond tea and spices.

Neither New Delhi nor Tokyo have overtly demonstrated a desire for close strategic relations, but relations have been steadily becoming stronger between the two Asian powers. Though the two states have always enjoyed cordial relations and Japan has been the single largest provider of aid to India since 1986, relations warmed after Indian Prime Minister Atal Behari Vajpayee visited Japan in 2000 and established the “Japan-India Global Partnership in the 21st Century.” More recently, Japan supported the US-India civilian nuclear cooperation agreement in 2008, and agreed with the consensus view, albeit reluctantly, in the Nuclear Suppliers Group later that year that India’s nuclear record warranted a special case for India to be brought in to the nuclear commerce fraternity. India and Japan signed a security cooperation agreement in 2008, and a Comprehensive Economic Partnership Agreement in 2010, and have also been conducting regular joint naval exercises.

Japan’s importance to India cannot be overstated. Undoubtedly, Indo-Japanese relations make a lesser splash in the media than a multi-billion dollar Indo-Russian or Indo-American treaty, but this should not blind us to the extraordinary potential of the former. The immediate benefits are obvious – Japan imports large quantities of natural resources and exports high-end finished goods, while India is a source of natural resources and desires the high-end goods Japan produces. The island nation is also a source of technical expertise in infrastructure and technology, both of which India sorely needs. While Japan serves as a market for cheaper Indian goods, India is a closer base of operations for Japanese factories to markets in the Middle East, Europe, and Africa. Presently, Japan is the third largest investor in India, and trade between the two states is expected to double from its present level to $25 billion by 2014.

Beyond the obvious economic benefits for both countries, there are strategic reasons for closer relations between the two. India sits strategically close to Japan’s lifeline, the sea lanes between the Middle East and East Asia. The recent increase in piracy has put Japanese shipping in danger, as has increasing Chinese muscle in the waters around Japan. Abe sees a loose fraternity of littoral nations – India, Australia, and Indonesia – supported by the United States and Japan as a force for stability on the seas. Another strategic windfall could be nuclear commerce – Japan is an important manufacturer of reactor components and has technology that could help India with its nuclear fuel reprocessing. Furthermore, as Japan holds controlling interest in the originally US firms GE-Hitachi and Toshiba-Westinghouse, and is a supplier of components for France’s Areva as well, Japan is an important node in international nuclear commerce.

While there is reason for optimism, there are also hurdles. The nuclear issue has been a major bone of contention between New Delhi and Tokyo. Although India has signed a special protocol with the International Atomic Energy Agency and the NSG has issued it a waiver, Japan’s strict nuclear and high-tech export controls prohibit the sale of equipment and technology to states that are not signatories to the Nuclear Non-Proliferation Treaty. Japan has also insisted so far that India sign the Comprehensive Test Ban Treaty. However, signing the NPT as a non-nuclear weapons state is a non-starter for India; regardless of the merits and demerits of the treaty, it would be political suicide for the government that did so, and the Comprehensive Test Ban Treaty is not much easier. Publicly, signing a treaty that India has railed against for decades as unequal would be almost as toxic as ceding Kashmir to Pakistan. In addition, Indian strategists see Japan’s views on nuclear disarmament as deeply hypocritical, delivered from the safety of an extended nuclear deterrence umbrella of the United States.

So far, Tokyo has tried to work around this insurmountable logjam by expanding cooperation in other areas and reducing tariffs on trade. This suits Japan’s agenda quite well since a nuclear deal would mean a lot more to India than it does to them. As James Acton has pointed out, Japan provides at least one component to three out of four nuclear reactors made by either France or the United States that cannot presently be produced anywhere else. Secondly, since Japan is unlikely to become a major nuclear partner for India, it will in essence remain a components supplier during the life of the reactors; there is little profit in this and the additional Indian orders it will not result in any significant expansion in Japanese manufacturing. Furthermore, India’s inane nuclear civil liability laws have deterred investors from entering the Indian nuclear market, and a deal in this climate is improbable to have any benefits for Japan. On the other hand, if Japan plays spoil sport, it creates an incentive for other vendors to set up production lines for components supplied by the Japanese, essentially hastening the end of Japan’s nuclear monopoly. To top this consideration is the immense pressure Foggy Bottom and the Élysée Palace are putting on Japanese leaders to conclude a nuclear deal with New Delhi.

While it would be an exaggeration to say that Sori Daijin Kantei is isolated in its reluctance to change Japan’s nuclear commerce laws, there is nonetheless much support for such an amendment from the Japan Atomic Energy Commission and from industry, both of whom are interested in promoting large infrastructural projects to India and other countries and are fully aware that their loss of the Indian market is to Russia’s and South Korea’s gain. However, ordinary Japanese are resistant to the idea of their country trading with states they see as nuclear outlaws. Leading Japanese periodicals have voiced their concern at the dilution of Japanese non-proliferation standards, even though they have welcomed closer ties with India. How malleable this opinion is remains to be seen, but Abe’s victory indicates that the rising prices of energy, a muscular North Korea, and an increasingly shrill China might finally tip the balance in India’s favour.

Abe’s return to Japan’s most powerful position is a golden opportunity for South Block. Generational shifts in thinking, increased militarisation of its neighbourhood, and a more dubious US nuclear umbrella have made some Japanese question their decision to eschew nuclear weapons. Shintaro Ishihara, the former mayor of Tokyo who has recently been elected to the lower house of Japan’s Diet, and Toru Hashimoto, the mayor of Osaka, have been calling for nuclearisation repeatedly. Ichiro Ozawa, another parliamentarian, has publicly argued that Japan needs nuclear weapons as insurance against China. Abe is not unsympathetic to this view, and has himself argued in the past that the Japanese constitution does not prohibit nuclear weapons as long as they are for defensive purposes only (India, 1974?). This is wildly divergent from the traditional understanding of Japan’s nuclear and defence polices. These are not isolated voices – in a 2011 poll by the Sankei Shimbun, a newspaper widely presumed to be Right pulse, 86.7% of respondents favoured an open debate about nuclear weapons in the Diet. What was considered the discourse of the fringe Right has today become mainstream in Japan. Abe’s appointment of advocates of nuclear energy, if not weapons, to key cabinet positions – Fumio Kishida as Foreign Minister, Itsunori Onodera as Defence Minister, Akira Amari for Economic Revitalisation, and Toshimitsu Motegi as Economy, Trade, and Industry Minister – reveals that little has changed in his thinking since the last time he was prime minister.

It is not clear whether the Japanese are ready to have a mature discussion about their security, and some politicians are not willing to wait for their countrymen. India serves as a useful counterbalance to China not only for Japan but the whole Southeast Asia region as well. This is very similar to the situation in the 1950s – in 1958, a Thai diplomat had approached India to create a self-defence pact in Asia. Though not overtly so, the grouping was aimed containing Communist China. India was in no position to be part of such an alliance then, nor was it Jawaharlal Nehru’s ideological inclination to do so. In 2012, India is materially much more capable in playing a constructive role in the Indian Ocean region, and Abe is counting on an India unashamed to defend its interests.

A large part of this is due to the myth created around Japan’s high-tech prowess and its large stockpile of fissile material. It is commonly assumed that Japan is a threshold nuclear state which can go nuclear within a six month – one year time frame. However, as Toshi Yoshihara and James Holmes argue in Strategy in the Second Nuclear Age, this may not be the case: Japan can in all likelihood make a crude device in that time, but any sort of battlefield usable weapon will take longer. A credible deterrent requires miniaturisation of warheads and the islands’ lack of strategic depth necessitates sea-launched missiles. As the authors argue, a full nuclear-propelled submarine fleet with ballistic missiles is certainly not out of Japan’s reach, but it would take some time to assemble. Even if Japan leans on nuclear-tipped US Tomahawks in the interim, it would still be a few years before a deterrent took shape.

None of this is to say that there will be a war in Asia tomorrow. However, sound sleep bears an inverse correlation to a neighbour’s war-making capabilities, and Asians, like others, have long memories too. As Abe said on a visit to India in 2011, China represents an opportunity, but also a risk. In the novus ordo seclorum, Japan and India make ideal partners – they share common interests and common concerns with no discernible conflicts. Troubles over the treaties of the nuclear non-proliferation regime may well be a matter of public and not government concern – Japan needs a muscular India to balance China, but it is unable to countenance such a position overtly. The Japanese public is uncomfortable with India’s nuclear status, and many Indians are concerned about the sort of big projects closer relations with Japan will bring. Yet given Abe’s known inclinations, New Delhi now has an excellent chance to push for a series of major treaties on technical and military cooperation. To miss one such opportunity – 1958 – may be considered misfortune, but to miss two looks like carelessness.

This post was published at Niti Central on December 28, 2012.