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Congress should scuttle Bush's nuclear deal with India

By Peter Morici
web posted March 6, 2006

The man who would rewrite the Global Climate Accord, reform China's financial markets and transform Iraq into a model democracy has turned his attention to India. This is one task I would prefer George Bush left to the next president.

U.S. President George W. Bush shakes hands with India's Prime Minister Manmohan Singh at the end of a joint news conference in New Delhi in March 2
U.S. President George W. Bush shakes hands with India's Prime Minister Manmohan Singh at the end of a joint news conference in New Delhi in March 2

India presents the West with enormous opportunities.  While China offers its blend of capitalism and autocracy to developing countries in Asia and beyond, India is a monument to the idea that developing countries can prosper and enjoy the many blessings of democracy.

India, like China, faces significant challenges but has fewer tools to cope than its Asian rival.
Both lack enough clean energy resources, and India does not have China's enormous exports to buy oil.

For India, nuclear power may be just the ticket. The technological obstacles to powering cars and industry with hydrogen are rapidly dissipating. More nuclear reactors would provide India with electricity now and the means to transition to the hydrogen economy over the next two decades. With its engineering talent, it could become the leader in hydrogen technology, while the Chinese, Americans and others continue to dally.

China is one of five recognized nuclear weapons powers under the Nuclear Nonproliferation Treaty. India, having weapons but not being one of the five, is an international nuclear outcast; hence, it faces more hurdles than China in obtaining the civilian technology.

For the United States, dealing with India makes sense. The U.S. civilian nuclear industry is boxed in, for now, by opposition from environmentalists. India offers great export opportunities to further develop the U.S. industry until Americans come around to the idea that nuclear reactors are safer than coal mines and cleaner than petroleum refineries.

That said, George Bush's deal with India is ill-conceived and poorly timed.

The agreement reached by President Bush and Prime Minister Singh seeks to ensure India does not use the technology it buys from the United States and others to further its weapons program. The deal purports to segregate India's civilian and military activities but is fatally flawed.

The agreement only places under international supervision 22 of India's 35 nuclear reactors. It strategically excludes its prototype fast-breeder reactor, which will produce more plutonium than it consumes and could bolster India's weapons arsenal.

Moreover, as long as scientists talk to each other and sovereigns delimit the movements of international inspectors, it is folly to believe a nonporous wall can be guaranteed between civilian industries and military efforts.

Currently, the U.S. outsourcing craze and trade deficit make India a sore point with many Americans. Despite more than a decade of liberalization, India's economy remains stubbornly protected. Even as U.S. companies happily send many jobs to India, it is reluctant to import many products Americans and others can make more efficiently.

On trade, President Bush brought back little new from India beyond the opportunity to sell civilian nuclear reactors. Generally, India will continue to import those goods and technologies it cannot make or develop for itself and protect the rest of its industries, even when the United States, Europe and Japan offer better products more cheaply.  India's rhetoric and posture in the Doha Round of global trade talks have made that abundantly clear.

U.S. trade with India is not large, and the U.S. bilateral trade deficit with India, at $11 billion, is dwarfed by the $202 billion gap with China. Yet, the United States does not need to create another China in India by powering its industry with nuclear technology and further opening the U.S. market to its products. Those can wait until India is ready to get serious about exposing its businesses to global competition.

If India, like China, starts racking up large trade surpluses, U.S. protectionists will have the opening they seek, and that could cook for good the U.S. commitment to free trade.

Congress has a long history of not ratifying agreements negotiated by presidents, and it would be justified in balking again. U.S. allies like France may be tempted by the opportunity to sell reactors to India; however, they would be wise, instead, to voice legitimate security concerns before Congress approves the sale of U.S. civilian nuclear technology to India.

The United States needs a more constructive relationship with India, but in the long run, the deal President Bush has negotiated will do more harm than good.

Peter Morici is a Professor of Business at the University of Maryland and former Chief Economist at the U.S. International Trade Commission.


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