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The United States and India have an opportunity to co-define and co-implement a geoeconomic vision for the Indo-Pacific, based on shared values of freedom and transparency. However, formidable obstacles remain to overcome. Efforts from the United States have been ad hoc and at times self-defeating, such as withdrawal from the Trans-Pacific Partnership (TPP) trade agreement. Furthermore, India’s history and reputation in working with multilateral economic institutions has been mixed, to say the least.

It is in this context that China’s Belt and Road Initiative (BRI)—a trillion dollar infrastructure strategy—has the potential to reshape the future economic and geopolitical landscape of the Indian Ocean rim and Eurasia. Both Washington and Delhi remain skeptical of BRI. Yet neither alone has the resources to effectively shape it, much less put forward a compelling alternative. Only by cooperating together—and with other likeminded partners—can the United States and India develop an effective response to BRI, one that incentivizes China to converge with global norms and standards, cooperates with China selectively, and competes vigorously and smartly where required, all with the ultimate goal of reinforcing the rules-based international order.

Despite some recent high-profile setbacks to several BRI project,¹ China at present retains the initiative. Neither the United States nor India has yet to develop a coherent strategy toward BRI. The Obama administration’s regional connectivity agenda amounted to a piecemeal response. Whether the Trump administration will translate a growing focus on BRI into a systematic and appropriately resourced strategy remains uncertain. For its part, India largely views BRI as an extension of a long-term Chinese strategy of encirclement. It has responded by enhancing ties with states across the Indian Ocean Region (IOR) and beyond, as well as by leveraging regional organizations, but these efforts to date are more opportunistic than strategic.

To align their respective approaches toward BRI, the United States and India should take a series of unilateral, bilateral, and multilateral actions:

• Form an Indo-Pacific Development Hub. The United States should launch an interagency initiative that would bring together key personnel, tools, and resources from select US departments and agencies to focus on infrastructure in the Indo-Pacific.

• Ramp up the Indo-Pacific Economic Corridor. The United States should transition this initiative—launched by the Obama administration to promote connectivity within South Asia and between the region and Southeast Asia—into a more ambitious effort co-led with India.

• Export Entrepreneurial Models Of Growth. Working in concert where possible, the United States and India should launch a series of entrepreneurship forums for countries in the Indo-Pacific to offer them a more sustainable growth model than the debt-fueled infrastructure development associated with BRI.

• Position India as a Champion of the Rules-Based Economic Order. The United States and India should work together to bring India into the Asia Pacific Economic Cooperation (APEC) forum as a member.

• Align US-India-Japan Strategic Investments. The two Asian democracies that bookend the Indo-Pacific plus the United States should work together to create a strategic framework to identify key geographies and projects in the region that warrant prioritized investments based on a combination of economic, development, and military criteria.

The United States and India have an overwhelming interest in seeing that the rules-based order that has fostered global stability and prosperity for more than seven decades endures. To advance this shared interest, the two should align their approaches toward BRI, leveraging all instruments of national power to shape the initiative when possible, cooperate with China when practical, and compete when necessary.

Why BRI Matters

Unveiled by Chinese President Xi Jinping in the fall of 2013,² what has since become known as the Belt and Road Initiative (though still sometimes referred to as “One Belt, One Road”) is a long-term effort by Beijing to link together parts of Asia, the Middle East, Africa, and Europe through building ports, rails, roads, pipelines, and telecommunications networks, and other types of infrastructure. Geographically, BRI covers countries representing 65 percent of the world’s population and one-third of its economic output. China plans to spend a trillion dollars in support of the initiative, which at present encompasses two major parts: a “21st Century Maritime Silk Road” stretching from Southeast Asia across the Indian Ocean into the Mediterranean Sea; and, a “Silk Road Economic Belt” extending across Eurasia with branches terminating in Pakistan, Europe, and potentially additional locations.³ A “Digital New Silk Road” that overlays both the maritime and land corridors with communications technology infrastructure may ultimately become a third major part of BRI.⁴

BRI is enormously ambitious. Even if many projects never fully deliver or fall through, it could still reshape the economic and geopolitical landscape of the Indian Ocean rim and Eurasia in ways that pose a challenge to the existing rules-based international order. China’s lending practices associated with BRI at times deviate from global standards, such as transparent investment procedures in accordance with the rule of law and guidelines for social and environmental sustainability. In offering loans to countries at a level beyond their ability to repay, China has created debt traps that translate into financial leverage and permanently unequal diplomatic relationships. This in turn gives China an opening to parlay dual-use infrastructure constructed by its BRI investments into future military facilities that could provide a basis for projecting power in ways that go well beyond conducting non-combatant evacuations and counter-piracy. Lastly, the digital infrastructure associated with BRI may contribute to a further erosion of human rights in countries with poor governance, as Chinese companies have few hesitations about supporting internet censorship and violating online privacy.⁵

The United States and BRI

America’s response to BRI remains in flux. The Obama administration lacked a coherent perspective on BRI. Its piecemeal approach to promoting regional connectivity constituted a de facto – if limited – response. The Trump administration has expressed clearer views on BRI, voicing concern regarding its impact on global standards and potential to advance Chinese geopolitical interests. Yet whether the Trump administration will translate these concerns into a systematic approach toward BRI remains uncertain.

The Obama Administration’s Piecemeal Approach

During Obama’s tenure in the White House, BRI occupied a minor place in the hierarchy of issues that made up US China policy. Other issues dominated the Obama administration’s focus on Beijing. On the cooperative side, addressing climate change, promoting global economic development, and ensuring support for UN Security Council sanctions against Iran received priority. On the competitive side, countering Beijing’s construction and subsequent militarization of artificial island outposts in the South China Sea absorbed the attention of senior officials. Consequently, the Obama administration never formalized a view of BRI. Even so, its commitment to strengthen regional connectivity—as manifested in multiple initiatives spanning Central, South, and Southeast Asia—and drive to boost US investment across the Indo-Pacific functioned as a de facto response.

The New Silk Road Initiative was arguably the Obama administration’s signature connectivity effort, albeit on a geographic scale far more modest than BRI. Indeed, the New Silk Road Initiative predated BRI, and originated largely as an attempt to stabilize Afghanistan by economically integrating it into the surrounding region through reconstructing transportation and energy infrastructure links.⁶ Insofar as the New Silk Road related to China, it was an opportunity for cooperation. Unveiling the initiative in 2011, Secretary of State Hilary Clinton called for China to join the United States and India to “create a new Silk Road. Not a single thoroughfare like its namesake, but an international web and network of economic and transit connections.”⁷

Ultimately, the New Silk Road Initiative failed to galvanize Afghanistan’s economy, and the Obama administration’s interest in the effort waned. Its attention increasingly turned to South and Southeast Asia. This time, in addition to pursuing connectivity measures that could promote regional prosperity and harmony, there was a clear awareness of the need to compete with China’s expanding economic influence, including the potential effects of BRI.

This awareness underpinned several new initiatives. The most prominent was TPP, which the Obama administration came to embrace as a powerful instrument of economic statecraft that could open markets for the United States while elevating commercial, labor, and environmental standards across the Asia-Pacific. Obama and his foreign policy team were also clear about the geopolitical rationale: extending US economic influence in Asia at a time when China’s trade and investment relationships were increasingly pulling countries into its orbit.⁸

A number of key connectivity initiatives related largely to Southeast Asia. The Obama administration in 2013 introduced the US-ASEAN Connectivity Through Trade and Investment Initiative (USACTI). A combined project of the US Agency for International Development (USAID) and the State Department, USACTI sought to reduce barriers to ASEAN economic integration while promoting new industries and empowering nontraditional business actors.⁹the Obama administration in August 2015 launched an “American Innovation Roadshow” for Asia, with an initial focus on ASEAN. The roadshow comprised senior economic officials and US business leaders, and aimed to both showcase US excellence in innovation and to foster Asian entrepreneurs.¹⁰

In an effort to link South Asia with opportunities to the east, the State Department also put forward a connectivity initiative called the Indo-Pacific Economic Corridor (IPEC).¹¹ IPEC focused on four key goals for the region: creating new regional energy linkages; improving trade and transport corridors; streamlining customs procedures and border crossings; and bringing together businesses and entrepreneurs from around the region.¹² Emerging in parallel with BRI, though not intended to compete with it, IPEC never received significant funding allocations.

As the Obama administration drew to a close, the United States, though lacking a formal view of BRI, had adopted a somewhat competitive approach. Yet the ad hoc nature of the American response coupled with the failure of the Congress to ratify TPP and its rejection by both major party presidential candidates rendered the United States a peripheral actor as China moved to transform BRI from vision to a reality.

The Trump Administration’s Growing Focus

Although the Trump administration has yet to unveil a systematic response to BRI, it is already clear that over the coming years, BRI will occupy a comparatively prominent place in US policy toward China on the competitive side of the relationship—though not entirely, as demonstrated by an official American presence at China’s most recent Belt and Road Forum.¹³ 

Unlike their Obama era predecessors, senior Trump administration officials have publicly addressed BRI. When testifying before Congress, Secretary of Defense James Mattis bluntly observed: “in a globalized world, there are many belts and many roads, and no one nation should put itself into a position of dictating ‘one belt, one road.’”¹⁴ Speaking at the 2017 Atlantic Council-Korea Foundation Forum, Secretary of State Tillerson issued a public broadside against BRI: “China’s economic development, in our view, should take place in the system of international rules and norms, and One Belt, One Road seems to want to define its own rules and norms.”¹⁵ Trump has yet to directly address BRI in public remarks. However, in his speech at the APEC CEO Summit in November 2017, he delivered a thinly-veiled critique, calling for alternatives to “state-directed initiatives that come with many strings attached.”¹⁶

General skepticism within the Trump administration about Beijing’s intentions coupled with concerns about BRI’s long-term consequences likely accounts for its elevation within US China policy. On the economic side, these concerns center on the erosion of global economic standards, the creation of an unequal playing field for US companies operating across large parts of the Indian Ocean rim and Eurasia, and the unsustainable debt that countries receiving BRI investment are accruing. Geopolitically, these concerns focus on China’s ability to translate its financial leverage into permanently unequal diplomatic relationships that, together with dual-use infrastructure created by BRI, promote conditions conducive to China’s military expansion overseas. No administration is monolithic, but the prevalent sentiment is that BRI holds the potential to transform a major segment of the globe into a China-centric sphere.

The Trump administration has started to act on these concerns. Trump announced at the APEC CEO Forum that the United States would reform its development finance institutions to create new incentives for private sector investments.¹⁷ He has also urged international financial institutions (IFIs) to dedicate greater resources to large-scale infrastructure projects. However, even if IFIs move in this direction, the shift would occur slowly given organizational inertia; and most would reject becoming tools for the United States to compete with BRI, preferring instead to partner with China to shape the initiative from the inside.

The most promising aspect of the Trump administration’s evolving response to BRI is growing cooperation with allies and partners. During the president’s November trip to Asia, his administration announced that the US Overseas Private Investment Corporation (OPIC) would join with Japanese partners to “to offer high-quality United States-Japan infrastructure investment alternatives in the Indo-Pacific region.”¹⁸  BRI also appears to have been a topic of discussion in recent senior level meetings with India, as well as the revived US-Japan-Australia-India four-way talks, also known as the Quad.¹⁹ Overall, the Trump administration appears inclined to develop a robust strategic response to BRI. In fact, while not referencing BRI by name, the Trump administration’s National Security Strategy acknowledges a “geopolitical competition between free and repressive visions of world order taking place in the Indo-Pacific region,” calling out China’s role in using economic inducements and infrastructure investments to pursue its geopolitical aspirations.²⁰ Yet whether the Trump administration can fully execute a response to BRI is uncertain given its budgetary priorities and predisposition against multilateral organizations.

India and BRI

BRI has amplified Indian concerns about Chinese encirclement.²¹ These concerns predate BRI. They emerged in the mid-2000s in response to Beijing’s development of port facilities in the IOR—what many observers came to call a “String of Pearls Strategy.”²² As BRI has further boosted China’s presence in the IOR, Delhi’s concerns have continued to grow. It has in turn strengthened relations with states in the IOR and beyond and advanced a regional vision, though these multifarious efforts fall short of an overarching strategy toward BRI. 

The View from Delhi

Indian fears of strategic strangulation by a Chinese “string of pearls” proved premature, not necessarily overblown. As seen from Delhi, elements of BRI pose an immediate challenge spanning the diplomatic, economic, and military domains.

Nowhere is this more so than the China Pakistan Economic Corridor (CPEC), which purports to modernize Pakistan’s infrastructure through a variety of transportation and energy projects valued at over $60 billion.²³ India’s concerns with CPEC stem from two key issues. First, parts of CPEC run through Kashmir, territory that both Pakistan and India claim, which could greatly complicate peace and security there. Second, one of CPEC’s flagship projects is developing the Gwadar port. Delhi remains concerned that Beijing will gain a military foothold through Gwadar, which sits atop the western Indian Ocean.

Sri Lanka is another focal point for Indian concerns about BRI. Located at the center of the Indian Ocean, Sri Lanka lies just north of sea lanes that carry two-thirds of the world’s oil and half of all container ships.²⁴ Under the corrupt Rajapaksa regime, Sri Lanka welcomed relatively high-interest loans from China that financed the construction of the Hambantota Port and Mattala Rajapaksa International Airport. The current reform-minded government has struggled to get out from under this heavy debt burden to China. With few good options, Colombo signed a 99-year lease with Beijing for the southern port of Hambantota, effectively making a debt for equity swap that allowed China to gain a strategic asset at the center of the Indian Ocean.²⁵ 

Beijing’s ability to leverage BRI to enhance its military presence in the IOR through engagement with smaller island nations has also generated anxiety among many of Delhi’s foreign policy and security elites. As China has deepened economic ties with the Maldives—most prominently, by constructing the China-Maldives Friendship Bridge—the People’s Liberation Army Navy (PLAN) has begun to conduct port visits at the capital city of Male.²⁶ Moreover, China already uses the small island nation of Seychelles as an outpost to refuel and replenish the PLAN.

India would regard any of these Chinese inroads into its periphery with skepticism. Taken together, many in Delhi have come to view BRI as part of a zero sum competition with Beijing for power and influence in Asia.

India’s Emerging Response

Through an expanding strategic partnership with Japan, enhanced bilateral and multilateral relations with states in the IOR, and outlining a regional vision, India has started to respond to BRI. Its response is largely oppositional thus far, as demonstrated most tangibly by Delhi’s refusal to participate in the Belt and Road Forum that China convened in May 2017. However, India’s approach to BRI remains largely ad hoc and opportunistic rather than strategic.

A key element of India’s emerging response to BRI is a burgeoning strategic partnership with Japan. Earlier this year, Prime Ministers Modi and Abe signed over a dozen agreements ranging from security cooperation to infrastructure development to supporting United Nations Security Council reform.²⁷ During a recent bilateral summit, the two prime ministers have strongly reiterated their countries’ commitment to a free and open Indo-Pacific²⁸—a still undefined concept that has the potential to become an alternative to BRI. India and Japan have also launched a new initiative to better integrate the economies around the IOR, called the Asia-Africa Growth Corridor (AAGC). Overall, India and Japan appear closely aligned on BRI, with coordination between the two surpassing that between India and any other major power, including the United States.

In part due to concerns about growing Chinese influence resulting from BRI, India has also enhanced relations with its South Asian neighbors. India in June 2015 signed a Motor Vehicles Agreement to facilitate cross-border road transport with Bangladesh, Bhutan, and Nepal.²⁹ Furthermore, India and Bangladesh finalized a land boundary agreement in 2015, ending years of territorial dispute.³⁰ Lastly, India has sought to raise the profile of the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), a regional grouping, which it dominates given the exclusion of Pakistan.³¹

With Sri Lanka, India has attempted to use a mix of pressure and inducements. The former failed: the indebted Sri Lankan government ultimately agreed to give China a 99-year lease over the Hambantota Port. However, Delhi now appears poised to finalize a deal with Colombo to take a large share in nearby Mattala Rajapaksa International Airport, preventing China from making a similar play, and effectively limiting the potential of Hambantota to serve as a future base for the PLAN.³²

Partly in response to BRI, Delhi has sought to put forward a vision for the IOR. Modi articulated guiding principles for India’s engagement with the region in 2015 during a number of foreign visits to some of the island nations that dot the Indian Ocean.³³ He also released a new vision for India’s role across the maritime domain, called Security and Growth for All in the Region (SAGAR). The principles advanced by Modi included maintaining territorial integrity and maritime security; deepening security relationships with regional partners; expanding economic development opportunities across the region; and critically, cooperating with other major powers with interests in the Indian Ocean, including the United States.³⁴

Finally, when asked whether India would participate in the May 2017 Belt and Road Forum, the Indian government articulated a series of principles to assess connectivity initiatives that constituted an indirect—but public—critique of BRI. These principles included “good governance, rule of law, openness transparency and equality,” as well as “financial responsibility to avoid projects that would create unsustainable debt burdens” and environmental protection and skill transfer to local communities.³⁵

Although Delhi has not stood by as BRI amplifies China’s influence across the Indian Ocean rim, the current set of Indian responses falls short of a coherent strategy. Articulating a bold and definitive strategy toward BRI in the context of a larger geoeconomic vision for the Indo-Pacific would enable India to move from a haphazard approach to a series of tightly linked and proactive policies. The opportunity now is to make good on India’s intention to cooperate with likeminded major powers such as the United States that seek to promote peace and prosperity along with shared values.

A US-India Connectivity Agenda for the Indo-Pacific

The United States and India have much to lose if BRI transforms the economic and geopolitical landscape of the Indian Ocean and Eurasia into a Chinese-dominated sphere. Likewise, the two have much to gain if China’s lending practices under BRI ultimately come to align with international standards and countries considering Chinese investments have credible alternatives that help them avoid debt traps and the attendant loss of sovereignty. Moreover, the United States and India significantly converge in their perceptions of BRI—though Washington is more inclined to both shape and compete, while Delhi at present favors a largely oppositional stance. 
Now is the time for the United States and India to align their approaches to connectivity across the Indo-Pacific wherever possible. The following policies—some unilateral, some bilateral, and some multilateral—would serve to do so.

Form an Indo-Pacific Development Hub. The United States should launch an interagency initiative that would bring together key personnel, tools, and resources from select US departments and agencies to focus on infrastructure in the Indo-Pacific. Previous administrations have used similar models, such as Power Africa, which focused on providing affordable energy access to millions across the continent, or the Partnership for Growth, which focused on bringing a whole-of-government approach to a single country’s development.

The United States is well-positioned to create a model that draws from these experiences in the Indo-Pacific.³⁶ USAID in India transformed years ago to leverage private sector partners and indigenous innovation to bring a new model of development to India, an approach that could be replicated on a larger scale. In fact, USAID’s ability to leverage science and technology and scale up innovative models is unparalleled in the developing world, especially as it complements hard infrastructure projects with technical assistance. As part of an Indo-Pacific development hub, the Millennium Challenge Corporation (MCC), building off its existing pacts in Nepal and Sri Lanka, could create a regional pact that prioritizes infrastructure projects across South Asia. Other agencies, such as the Overseas Private Investment Corporation (OPIC) and the Export-Import Bank (EXIM), which offer competitive development finance options, could expand to support a more ambitious Indo-Pacific development approach. Standing up an Indo-Pacific development hub would require overcoming bureaucratic obstacles and garnering congressional support for new resources. But the initial challenge would prove worthwhile, as it could serve as a foundational element of a US response to BRI.

Ramp up the Indo-Pacific Economic Corridor. With South Asia remaining one of the least integrated regions in the world, significant opportunities exist to promote improved connectivity within the region and between the region and Southeast Asia. Moreover, there are specific areas where small amounts of US investment coupled with strong diplomatic engagement can produce tangible results in economic connectivity.³⁷ It is time for the Indo-Pacific Economic Corridor launched during the Obama presidency to transition from a US-led effort to an initiative co-led with India. No country has more to gain economically and strategically by strengthening ties with its neighbors than India. The United States should not remain wedded to the original focus areas of IPEC—energy, trade and transport, customs and borders, and people-to-people ties.³⁸ It should instead work together with India to define the priority areas, engage partners in the region to identify game-changing initiatives, and then cooperate to find resources for the implementation of specific projects.

Export Entrepreneurial Models of Growth. In November 2017, the United States and India co-sponsored the Global Entrepreneurship Summit (GES) in Hyderabad. This gathering—convened by the United States in a different location each year—attracts investors, entrepreneurs, government officials, and others.³⁹ The United States asked India to co-host in 2017 because of the tremendous potential that India’s indigenous innovation has in transforming so many lives on a breathtaking scale. Both the United States and India understand that as important as hard infrastructure is to the development of a society, it is the power of innovation through science and technology, new business models, and creative ideas that can lead to game-changing transformations for society, especially for those who live at the bottom of the income pyramid.

Entrepreneurship is a comparative US and Indian strength that China cannot easily match through BRI. Working unilaterally if necessary and where possible, in concert, the United States and India should launch a series of entrepreneurship forums for countries in the Indo-Pacific to offer them a more sustainable growth model than the debt-fueled infrastructure development associated with BRI. In addition, there is an opportunity for the United States and India to show leadership across the Indo-Pacific in promoting proven policy reforms that support a pro-innovation ecosystem, creating opportunities for transnational commercial partnerships, and identifying ways in which to build capacity and nurture talent focused on entrepreneurship.⁴⁰

Position India as a Champion of the Rules-Based Economic Order. Any effort to maintain international standards under pressure from BRI will be more effective if India becomes a stronger proponent of the rules-based economic order. A key action to help India to play this role would be Indian membership in the APEC economies.⁴¹ India should make a clear and explicit statement about its desire to abide by APEC’s principles, which will help soften the ground for those APEC economies skeptical about India’s commitment.  In return, the United States should go beyond lukewarm statements welcoming India’s interest in joining APEC,⁴² and unequivocally champion India’s entry into this important forum.

Align US-India-Japan Strategic Investments. The United States, India, and Japan have held a number of trilateral meetings over the past few years, including as recently as September 2017 at the foreign ministerial level.⁴³ Building on this mechanism, the three countries should work together to create a strategic framework to identify key geographies and projects in the Indo-Pacific that warrant prioritized investments based on a combination of economic development, and military criteria. The United States, India, and Japan could coordinate their engagement with government leaders in countries of particular interest for investment. Combined with their significant influence in international financial institutions (IFIs) ranging from the World Bank to the Asian Development Bank to the Asian Infrastructure Investment Bank, the three working in concert could bring significant resources to bear on prioritized investments. This would help to partially offset China’s financial advantage—a prerequisite for BRI’s success—and enable the United States, India, and Japan to compete with China in infrastructure development where it matters most.

Conclusion

BRI has the potential to reshape large parts of the globe into a China-centric sphere. This development would herald the end of the rules-based international order that has backstopped stability and prosperity for more than seven decades. The task for the United States and India is to come together and advance a geoeconomic vision that strikes a difficult balance between shaping BRI to align with existing norms and standards, engaging China directly in areas where cooperation is possible, and countering elements of BRI where it directly promotes a new Chinese economic and security order. A more aligned United States and India, working closely with other likeminded partners, can achieve this. Individually, neither will succeed, and BRI will likely pave the way for a reordering of the Indian Ocean rim and Eurasia.

Daniel M. Kliman is the Senior Fellow in the Asia-Pacific Security Program at the Center for a New American Security (CNAS). He previously served as Senior Advisor for Asia Integration at the US Department of Defense.

Manpreet S. Anand is a distinguished professor of practice at the Near East South Asia Center for Strategic Studies and served as deputy assistant secretary of state for South Asia in the Obama administration. The opinions expressed here are the author’s alone and do not represent those of the NESA Center, the Department of Defense, or the US government.