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French President Woos India Against the United States

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French President Nikolas Sarkozy is now on a four day tour of India with his wife, Carla Bruni, November 4 to November 7. While US Sarkozypresident Barack Obama began his India visit with India’s business hub, Mumbai, Sarkozy chose India’s technology hub to start his India tour. He brought a retinue of 50 business people and top cabinet officials, including Economy minister Christine Lagarde along with him. Sarkozy seems to have come on a top mission, which will also include signing some business contracts.

Strategic and Business Goals

During his speeches on November 4 and in his interview with the Times of India, Sarkozy outlined his top political and trade-related global priorities of the India tour. The very important offers extended to, and requirements sought from, India are as follows:

  • Supporting France’s G20 agenda to reform the global monetary system during its G20 presidency in 2011.
  • Improvements in global governance.
  • Achieving greater stability in commodity prices.

In return for help in accomplishing the above-mentioned goals, Sarkozy offered the following package:

  • Helping the rupee to become one of the world’s major currencies.
  • Supporting India’s long-standing demand for a permanent UN Security Council seat.

Some business contracts will be concluded during Sarkozy’s visit. A major one is a memorandum of understanding signed between French nuclear group Areva and India’s Nuclear Power Corporation of India Limited (NPCIL) to supply at least two water-pressurised reactors worth 7 billion euros ($9.4 billion or Rs 43,240 Cr). France is competing with the US company Boeing to supply 126 fighter jets. France’s defence electronics group Thales is hoping to gain a contract to modernise 51 Mirage 2000 planes.

Strategic Goals

Since the financial crisis in 2008, US leadership of global political, strategic and economic arenas is increasingly facing challenges from other global financial and military centres such as the EU, under the leadership of Germany and France, emerging market economies (EMEs)with growing GDP growth and trade & current account balance surpluses under the leadership of China and Brazil , and to some degree, Japan.

Some of the recent developments indicate decreasing influence of the US. During the G20 ministerial meeting in South Korea, US Treasury Secretary Geithner proposed limiting trade surpluses of the countries to 4% of their respective GDPs. This proposal attracted fierce criticism from almost all quarters. Member countries were quick to grasp that the proposal was aimed at checking China’s growing trade surplus. Germany criticized it as a state control way of thinking. China and Japan also rejected the proposal. As a result, Geithner had to withdraw the proposal in APEC meetings held one month after the G20 ministerial conference.

The US announced the second Quantitative Easing (QE2) of $600 billion, which will be implemented over the next 8 months by buying treasury bonds. This measure also attracted criticism from the major world powers. China criticised the measure as “lacking any meaningful goal,” while Brazil noted, “There is no value to throwing dollars from the helicopter except to gain competitive advantage for US exports by devaluing the dollar.

Germany equated the measure with China’s supposed pegging of the yuan to the dollar deliberately to win advantage for its exports. Even Japan rejected the measure saying, because of US interest rates being kept at extraordinarily low levels (0.25%), Japan has been suffering with deflation for months.

The unemployment rate in the US increased again November, to 9.8%. Its GDP growth rate slowed in the second half of FY2010. All these developments indicate that US influence in the global economy is increasingly coming under scrutiny.

Of course, one cannot hastily conclude that US leadership has ended. It has still recorded some successes to prove its upper hand. For example, It could force the EU to lose two seats in the IMF as part of IMF reforms. It is still waging war in Afghanistan to gain strategic control in South Asia and the Middle East and to check China’s rise.

One of the important factors helping the US is that although the US may be in decline as an economic power, there is at this time no country or group of countries in a position to replace the US on the world economic stage. The European debt crisis is a big test, as well as an impediment for the EU to prove its supremacy. Japan is reeling under its deflationary economy with little GDP growth rate. China is still a third world country with millions of people suffering from unemployment and poverty. Moreover, EMEs have not yet organised under a single umbrella to exert their combined influence. One of the major EME countries, India, is believed to be a strong ally of the US.

Sarkozy’s offers to India have to be seen in this global background. Sarkozy’s attempts to woo India can be seen as attempts to encourage India to stand against US interests to gain its desired place as a global player in the UN and IMF. However, it is still doubtful whether India has the intestinal fortitude to stand against the US, amid the US’ increasing presence in the South Asia region. In real terms, India’s ambitions are limited to regional supremacy in South Asia, rather than global supremacy.

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