Raksha Anirveda US-India Defence Ties to Gain Belated Fillip with Industrial Security Annex
Kashish Parpiani
The following article originally appeared in Raksha Anirveda on March 24, 2020

The Industrial Security Annex (ISA) will help actualise the US-India Defence Technology and Trade Initiative (DTTI) and also translate into gains for Make in India initiative in defence sector



The US and India recently concluded the second edition of 2+2 consultative ministerial dialogue. Held between the chiefs of India and the United States’ defence and foreign ministries, the consultative platform stands symptomatic of Washington and New Delhi gradually moving away from the erstwhile top-heavy approach of relying on personal chemistry between respective heads of state.

Moreover, bereft of frictions that have come to plague the US-India trade dynamics, platforms like the US-India 2+2 dialogues have helped insulate bilateral strategic ties. For instance, at the inaugural edition of the dialogue in 2018, even as the Ministry of Commerce, India and the Office of the United States Trade Representative were locked in contentious trade talks, the US and India inked the second of three foundational defence interoperability agreements.

At the second edition of the consultative dialogue in December 2019, External Affairs Minister Dr S Jaishankar and Defence Minister Rajnath Singh convened with their American counterparts – Secretary of State Mike Pompeo and Secretary of Defence Mark Esper, in Washington DC. This time around, the meeting took place in the midst of escalated US-India trade tensions, with Washington revoking India’s benefits under the Generalized System of Preferences (GSP) programme and New Delhi having imposed retaliatory tariffs in the face of US tariffs on steel and aluminium imports.



Understanding the Industrial Security Annex

Keeping with the precedent of pursuing strategic avenues regardless of turbulence on the trade front, the dialogue bore a significant – and highly belated, development with regard to US-India defence ties. The two countries signed the Industrial Security Annex (ISA). As per the joint statement issued at the US-India 2+2 dialogue, the ISA seeks to “facilitate the exchange of classified military information between Indian and the US defence industries.” The signing of this annex was long time in the making, as either sides had expressed “their readiness to begin negotiations” on inking the ISA even at the inaugural 2+2 dialogue in 2018.

Essentially, the ISA permits the transfer of advanced defence technology across the cross-section of Indian and American public and private entities. Most crucially, the ISA institutes safeguards “to ensure that the [shared] information is protected under Indian law.” The implementation of the ISA stands as a crucial precursor to the complete actualisation of the US-India Defence Technology and Trade Initiative.

Set up in 2015 under the Barack Obama administration, the US-India DTTI aims to take bilateral defence ties away from a traditional buyer-seller dynamics to the one based on co-production and co-development. However, over the years due to little progress on avenues like the ISA, the DTTI had translated into limited gains for the bilateral defence ties.



Limited gains under the US-India DTTI

A result of the close working dynamics between then US Secretary of Defense Ashton Carter and Indian Minister of Defence Manohar Parrikar, the DTTI sought to bear benefits for either nations’ defence sectors. For instance, the push under DTTI for collaborative projects would entail the transfer of cutting-edge US technology to India, and its integration into global production supply chains. For the United States, the same would spur the expansion and diversification of supply and labour chains, and most importantly, offer the perfect inlet into a lucrative arms market – as India continues to be one of largest importers of arms in the world.

Under the DTTI, the US and India launched seven joint working groups to explore collaborative projects on aircraft carriers; jet engines; intelligence, surveillance and reconnaissance; chemical-biological protection; naval systems; air systems; Next Generation Protective Ensembles; and Mobile Hybrid Power Sources. In October 2019, however, during a visit to New Delhi by Ellen Lord – the US Undersecretary of Defense for Acquisition and Sustainment, the two countries announced the suspension of the project aimed at sharing technology for building fighter jet engines on account of “a challenge in terms of US export controls.” Instead, recognising that DTTI has been “an ongoing process”, both sides announced that they were “now poised to actually achieve tangible outcomes.” Thus, ahead of the 2+2 dialogue, the countries signed a ‘Statement of Intent’ and characterised “deliverables in the near, medium and long terms” – including platforms for drone warfare, light weight arms and networked systems.

Even before the recent signing of the ISA – which as mentioned serves as a primary precursor among other Congressional clearances for ensuring the safe transfer of sensitive defence technologies — some supplementary projects had furthered the spirit of the DTTI. For instance, Tata Advanced Systems Limited (TASL) and Lockheed Martin currently employ about 500 locals to produce two dozen aircraft empennages every year. In Hyderabad, TASL and Boeing employ around 350 skilled workers towards the production of helicopter fuselages. Boeing has also strengthened its supply chain with around 160 Indian partners, towards supporting sub-assembly production of aft pylon and cargo ramp components of heavy-lift helicopters.

However, these co-production projects are essentially “offset obligations”, towards India’s formal acquisition and induction of US arms platforms like the C-130J Super Hercules transport aircraft, the Apache AH-64E multi-role combat helicopters, and the Chinook CH- 47F (I) heavy lift tandem rotor helicopter.



Crossing the rubicon on bilateral defence ties

The US-India relationship is dynamic. Bilateral trade peaked at USD 142.6 billion in 2018. The US is India’s second-largest supplier of arms. Indian armed forces exercise more with American forces than with any other military in the world. And lastly, the US-India dynamics is underpinned with a robust (nearly four million people-strong) Indian American community. Bereft of any formal arrangements – either a free trade agreement or a security alliance treaty, the underscored developments reflect the uniqueness of the US-India relationship – driven by convergent interests and shared values. The same, however, also has its downsides. For instance, the recent hiccups in US-India ties – either on trade with US concerns on Indian market access barriers or even the US’ attempt to seek Indian policy congruence towards Iran or Russia through coercive means (like economic sanctions) – have also stemmed from the lack of an institutionalised framework informing bilateral ties. Compounding this lack of a formalised structure is the degree of transactionalism which the Trump administration has increasingly turned into a normative feature of contemporary US foreign policy.

In then navigating challenges – either structural (or due to lack thereof) or temporospatial ones emanating from the dispensation of the day – the dynamics requires champions for US-India bilateral ties on multiple levels. As discussed, the 2+2 consultative dialogue is a prominent example of the US-India bilateral trajectory moving away from overtly depending on top-level leaders’ personal chemistry to compartmentalise and delegate on multiple levels along the political leadership.

On defence ties, the same would not only mean moving away from a simple ‘buyer-seller’ dynamics – as the US-India DTTI rightly envisions, but also cultivating real ‘skin in the game’ – in terms of fortunes for the Indian and American people. The offset obligations being catered to by the joint facilities by TASL, for instance, with American defence manufacturers like Lockheed Martin and Boeing are the ideal avenues that require scaling up. As mentioned, although those current projects are cultivating local jobs and connecting Indian subcontractors to global giants in the defence sector, the gains are minimal as compared to the goals envisioned by ‘Make in India’ and ‘Skill India’ missions. Unfortunately, however, according to recent reports, ‘Make in India’ projects in the defence sector “worth over Rs 3.5 lakh crore” are either “stuck or still meandering through different stages, without the final contracts to launch production being inked.”

Therefore, the US and India signing the ISA at this critical point in time is set to accord a belated fillip to not only the US-India DTTI but also to ‘Make in India’ initiative in defence sector.