In a significant step that puts decades of Cold War baggage behind the world's two largest democracies, the United States and India have achieved consensus on a key bilateral agreement that promises to bolster the U.S. and India as reliable partners for the long future in the sensitive areas of defense and security trade. This bilateral breakthrough - achieving consensus on language regarding End Use Monitoring - was finalized during Secretary of State Hillary Rodham Clinton's official visit to New Delhi.
Such an agreement will enable defense and security trade between the U.S. and India as never before, and will facilitate the participation of U.S. companies in supporting India in transforming its military and homeland security apparatus.
India has budgeted as much as $40 billion through 2012 to procure "best technologies" for the upgrade of its defense establishment. This figure does not include the millions budgeted to upgrade India's homeland security infrastructure. End Use Monitoring, required under U.S. law, is a strong indication of President Obama's commitment to the U.S.-India strategic partnership, which is now achieving tangible and concrete traction.
"Agreement on EUM, besides opening the door to increased defense trade and security cooperation, indicates a high level of trust and cooperation between the United States and India," said Ron Somers, President of the U.S.-India Business Council, the Washington-based trade group that has championed for an EUM agreement between United States and India for the last three years. "Agreement on EUM language signals that both the United States and India are looking to share the latest and best American technology and systems."
Lockheed Martin and The Boeing Company stand to be beneficiaries as a result of this latest development. Both companies are competitively bidding for India's Medium Multi-Role Combat Aircraft (MMRCA) tender, valued at more than $10 billion. This procurement by India is one of the largest fighter aircraft deals on the horizon anywhere, and will upgrade the paradigm in relations between U.S. and Indian defense companies.
Lockheed and Boeing are competing in this procurement against Russia's Mig-35, France's Dassault Lockheed Rafale, Sweden's Saab Gripen and the Eurofighter Typhoon.
The winning company will not only provide 126 fighter aircraft to the Indian Airforce, but will also assist the Indian Airforce in its capabilities to train, sustain and maintain this new fleet, locking-in a long term partnership with the Indian Air Force and other India companies. The EUM Agreement with India will also enable other U.S. defense companies to be more proactive in participating in India's defense and security market, providing the Indian government a range of high-end technology and defense items ranging from helicopters to reconnaissance aircraft, as well as night vision gear to border protection equipment.
"In the wake of the tragic terrorist attacks in Mumbai, the United States defense industry looks forward to working closely with India to enhance its domestic security structure by providing the latest high-end equipment and services," said Ron Somers. "A successful EUM conclusion ensures continued support and cooperation between our two countries in this sensitive, strategic sector."
While successful completion of EUM negotiations is a positive step in the right direction, USIBC is aware that more still needs to be done in this important sector. On the top of USIBC's agenda is raising the FDI cap in defense to 49% and successfully refining India's defense offset requirements so American firms can provide full value to India's goal of modernizing defense production and building-out India's prowess in defense manufacturing.