I’ll start off by giving some regional context and expanding on Secretary Kerry’s strong belief that, now more than ever, “foreign policy is economic policy and economic policy is foreign policy.”
We know that the Indo-Pacific region will be a major driver of global economic growth in the coming decades. While our relative positions may alternate over the next 50 plus years, the United States, India, and China will be the world’s top-three economies long into the future. And our dominant positions will be predicated on our ability to trade with each other and with our neighbors.
India is now the world’s fastest-growing large economy, and will soon have the world’s largest middle class. And to reap the full benefits of its demographic dividend, India needs to create approximately one million jobs per month for the next ten years.
As we all know, that will require some heavy lifting when it comes to getting reforms done and investment secured. Minister Gadkari estimates that improving India’s road and port infrastructure alone could boost GDP by two percent.
But of the many things that can stimulate India’s economic growth, I would argue that greater regional economic connectivity is truly the low-hanging fruit, which, as we’ve seen more and more recently, is ripe for the plucking.
One example is the Motor Vehicles Agreement, launched by India, Bangladesh, Nepal, and Bhutan in November. Cars and trucks driving from Agaratala in northeast India to Kolkata can now go through Bangladesh rather than around it, cutting travel time by almost two-thirds.
And the Coastal Shipping Agreement, signed by India and Bangladesh in November, will reduce shipping time from 30-40 days down to approximately 8 days, leading to a significant drop in freight charges and transportation costs.
New cross-border infrastructure, like the Trilateral Highway linking India to Thailand, via Burma, will also improve trade between South Asia and Southeast Asia, though much remains to be done – what Google maps says is a 9.5 hour drive from Imphal to Mandalay actually takes about three times as long today.
And if South Asia needs a proof-of-concept on the windfalls of connectivity, they need look no further than their neighbors in ASEAN. Southeast Asia’s admirable economic growth rates have coincided with the growth of intra-regional trade – which now stands at roughly 25%. In South Asia, that figure is about 5% – one of the lowest in the world.
There are a lot of complex factors behind that number, including political tensions and mutual mistrust. But poor infrastructure and institutional capacity are also at fault. And so we’ve targeted those and begun to tackle them through an initiative we call the Indo-Pacific Economic Corridor, or IPEC.
IPEC has four pillars: creation of a regional energy market; improved trade and transit infrastructure; streamlined customs and border processes; and enhanced people-to-people ties.
For today’s panel, I’ll focus on that second pillar: customs and borders. It’s no secret that bureaucratic, time consuming, and expensive customs and border procedures are perhaps the biggest impediments to regional trade.
To mitigate, we’re working with customs agencies around the region to help make things more efficient, so that goods can move faster, easier, and with lower costs. Implementation of the WTO Trade Facilitation Agreement will also help to decrease border wait times by making import, export, and transit procedures more transparent.
Of course, not all cross-border business is virtuous. The ability to travel across borders is precisely what allows terrorists, traffickers, and trans-national criminals to so successfully subvert peace and prosperity.
So the State Department also has programs that work with customs and border officials in the region to help them better identify and interdict dangerous materials and equipment used to produce chemical, biological, radiological, nuclear, and explosive weapons.
We’re also working with the region’s militaries to better secure the seas – long a preferred area of operations for some of the world’s worst criminals. Maritime security will become more and more important for South Asia, and we believe that the Indian Ocean Rim Association is an excellent venue for the region to expand maritime cooperation and target trafficking and smuggling.
Finally, together with India, we’ve recently concluded a roadmap to implement our Joint Strategic Vision for the Asia-Pacific and Indian Ocean Region. Working groups we’ve established will guide several joint lines of effort, including maritime security and regional connectivity, among others.
To wrap up, we’ve made greater economic connectivity in South Asia a major foreign policy priority, because we know that our economies will become increasingly intertwined in the decades ahead, and we know that security and prosperity here will correlate with greater security and prosperity at home.
Source: U.S Department of State
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