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US could increase its focus on economic
matters under new Ambassador to India
India Report by John E. Carbaugh, Jr.
November 26, 2003
The soon to be new U.S. Ambassador to India, David Mulford, is vowing
to use his business background to boost U.S.-India economic ties, which
are still seen as lagging behind the recent progress made in other areas
of the relationship.
"The U.S.-India economic relationship presents a huge opportunity
for both of our nations," said Mulford, a former top U.S. Treasury
Department official turned international banker with Credit Suisse First
Boston, who is touting his international economic policy expertise as
ideally suited to his upcoming assignment in New Delhi.
INTERNATIONAL ECONOMIC POLICY SPECIALIST
"I believe this experience … in global economic and financial
affairs on behalf of the United States, together with my involvement these
past 10 years in the world of great economic transformation, will be particularly
useful in this assignment," Mulford said at his Senate confirmation
hearing last week. "…Working to strengthen further our economic
relationships with India would certainly be one of my highest priorities."
Mulford is a certainly a different animal than his predecessor Robert
Blackwill, with the previous U.S. Ambassador a long-time foreign policy
player, steeped in geo-political skills. In contrast, Mulford’s background
is finance, with his international economic policy skills outweighing
traditional foreign policy attributes.
MIXED REACTION TO MULFORD
President George W. Bush’s move to send Mulford to India has garnered
mixed reaction. Some observers have questioned his credentials for the
job, believing he has little clout within the Bush Administration, unlike
Blackwill, who was close to Bush and many of his senior advisors. Observers
have also questioned Mulford’s temperament, with the new ambassador-designate
not exactly known as the diplomatic type.
"Mulford’s combination of Wall Street bluff and political skills
has earned him a reputation as a blunt and determined practitioner, one
who has been known to upset bankers and government officials," according
to one profile of the man who will soon be the new occupant of Roosevelt
House.
Past media reports have also described him as "aggressive"
and "abrasive" with a "fiery temper."
However, informed Washington insiders caution not to underestimate the
extremely bright Mulford, who has carved out a successful banking career
after serving as the top international economic policy official in the
elder President Bush’s Treasury Department and in the Reagan Administration
-- with this experience gaining him many political allies still in Washington.
Observers also note that Mulford is well-equipped to strengthen the current
weakest link in the U.S.-India relationship, namely economic ties.
MULFORD TO ADDRESS LAGGING ECONOMIC TIES
U.S.-India economic ties have been seen as the Achilles’ heel in
the evolving bilateral relationship, largely due to continued troubles
in the Indian economy. The U.S. has especially complained that India is
dragging its feet over carrying out economic reforms -- with comparisons
to reform in China often unfavorable.
The problems in this relationship were exacerbated by Washington’s
anger over New Delhi’s stance in World Trade Organization (WTO) talks
in Cancun last September. India took an aggressive lead in opposing the
U.S., emerging as the leader of poorer countries in a stand-off with richer
nations over trade barriers, resulting in the collapse of the Doha Round
of liberalization negotiations. Cancun reinforced an American perception
that India is still a protectionist economy with too many barriers to
trade and investment.
Problems in U.S.-India economic ties have also been made worse of late
because of growing U.S. disquiet over India’s rise as an outsourcing
center, with American firms shifting jobs out of the U.S. into India.
The U.S. also sees India’s problematic economy not only in terms
of impeding bilateral trade and investment, but also as a wider strategic
concern. India’s economy is holding back the South Asian power from
fulfilling its potential as a major player on the international stage,
Washington argues.
Given ongoing concerns over India’s economy, Mulford suggested that
pushing India to further reform and open up its market would be a high
priority. " … Just as Indian products and services have done
well in the United States market, a vibrant, growing Indian economy should
be a magnet for increased U.S. exports and investment," he told the
Senate Foreign Relations Committee. "This can happen if the pace
of economic reform in India gathers steam. It will happen if India accelerates
its willingness to open its markets to greater foreign trade and investment."
GREATER OPTIMISM
However, there is more optimism of late that India’s economy is
on the rise -- helping economic ties with the U.S. catch up with the deepening
bilateral relationship on other fronts, such as in the political and security
fields. Bruce Gilley of Princeton University contends that India has already
transformed itself into a modern economy that can match its foreign policy
ambitions. "Almost unnoticed by the outside world, India over the
past two decades has witnessed an economic transformation of staggering
proportions," Gilley said.
Mulford also acknowledged progress in India’s economy. "India
has been a country which has been satisfied, it would seem, for many,
many years with what I would call rather moderate growth, a rather strong
state presence in the economy. That appears to be changing," he said.
"In recent years, they have carried out the beginning of reforms
that have begun to alter their economy. And in particular, we’ve
seen in recent years a much stronger growth rate. And I think it’s
fair to say they feel, perhaps, the need to grow more quickly for the
sake of their own people, as well as to continue to compete effectively
with China."
Despite this progress, Mulford vowed to continue to keep up pressure
on India over economic reforms. " … I think what we’ll
find is that if we press these issues relentlessly -- access to their
markets, and, secondly, access to foreign direct investments in India
-- I think we’ll have some success. So, if we can continue to help
them make the reforms, welcome the kind of foreign direct investment and
trade that gives a lift to the growth rate and to the performance of their
economy, there will be poverty reduction, just as there is already significant
growth in what’s called the Indian middle class, which I think is
something like 250 million people."
With a nod toward the Cancun debacle, Mulford added that the U.S. would
also encourage India to "participate fully in the WTO" and "expand
world trade."
ONUS ON INDIA AND PAKISTAN TO RESOLVE TENSIONS
While Mulford’s economic emphasis will be welcomed by business interests,
New Delhi might be breathing a sigh of relief regarding his position on
India-Pakistan tensions.
Although Mulford said the U.S. needs to do everything it can to press
India and Pakistan to make progress on Kashmir, he stressed that it should
not "insert" itself into the process as a "manager, mediator
or referee." India has long-opposed any third-party involvement in
the Kashmir issue, while Pakistan has tried to internationalize the territorial
dispute. "The India-Pakistan dispute over Kashmir is "something
which is very much between the two countries themselves," Mulford
said.
Mulford welcomed India’s olive branch to Pakistan last month, which
included offering Pakistan a set of 12 confidence-building measures as
an attempt to move toward normalizing relations -- and he added that the
U.S. would encourage such efforts to reduce tensions.
"We have to encourage both countries strongly to continue their
efforts; and to make it clear that returning to some of their past problems
we’ve seen there is simply not acceptable for the world," he
said. "The United States has warmly welcomed Prime Minister Vajpayee’s
‘hand of friendship’ peace initiative and the package of confidence-building
measures that India offered in October. We support the efforts of India
and Pakistan to improve their relations, and this, too, will be a high
priority for me."
QUICK LEARNER ON OTHER ISSUES
Mulford also stressed that the U.S. strongly supports India in its battle
against terrorism, just as India has backed the U.S. -- although he did
not specifically mention cross-border terrorism in Kashmir.
Mulford also appeared to downplay concerns about India’s nuclear
capability. Although India’s nuclear weapons development "was
contrary to our policies and objectives and something that the United
States is not happy with, it’s clearly reality," he said. "And
we have, I think, come to accept that it’s reality."
In light of that reality, he suggested that the U.S. and India focus
now on working together on preventing any proliferation of India’s
nuclear technology.
Given the U.S. acceptance of India as a nuclear power, it has moved in
the last couple of years to boost bilateral defense ties -- one of the
most promising areas in the evolving relationship. Mulford vowed to continue
this trend and make "real progress" in strengthening military-to-military
ties that would include additional joint exercises and more American defense
sales to India -- with this latter area not progressing as much as the
former.
Overall, Mulford was bullish on the future of India and its relations
with the U.S. "I have watched India over the years, in my private
career, begin to make the kind of transformation which if it does continue
to make … it will become one of the great powers of the future,"
he said. "The U.S. relationship with India is clearly moving into
a pivotal phase, perhaps providing for the first time for both countries
the most important opportunity for collective collaboration in their respective
histories."
‘ACADEMIC, BANKER, DIPLOMAT’
Mulford, a generous contributor to the Republican Party, was thought
for months to be the front-runner to replace Blackwill, who stepped down
in July to take a job in Bush’s National Security Council, but the
White House only officially announced his nomination last week.
Sources say that Mulford’s somewhat controversial past raised a
number of ‘red flags’ that complicated his background investigation.
However, any concerns were allayed after Bush reportedly consulted with
his father, who personally vouched for Mulford, the U.S. point man on
international economic policy in the Bush I presidency.
"David Mulford is a man of many parts: an academic, a banker and
a diplomat," one observer said.
Mulford’s academic credentials include a master’s degree from
Boston University in 1962, with a specialty in African studies, and a
1965 doctorate from Oxford University, where he again specialized in African
affairs.
However, he quit academia for banking in 1966, quickly earning a reputation
as a founding father of the Eurobond market during his time with Eurohouse
White Weld.
In the 1970s Mulford worked with the Saudi Arabian Monetary Agency, Saudi
Arabia’s central bank, advising the Saudis on how to invest their
burgeoning oil revenues -- known as "petrodollars."
INFLUENTIAL PLAYER IN INTERNATIONAL ECONOMIC POLICY
From 1984 through 1992 Mulford was first Assistant Secretary and then
Undersecretary for International Affairs at the Treasury Department in
the Reagan and Bush Administrations -- making him a highly influential
player in global economic policy for a decade.
Mulford was instrumental in the Plaza Accord of 1985 which resulted in
a coordinated effort to bring down the value of the U.S. dollar relative
to other major currencies. Two years later Mulford was also a leading
player in the so-called Louvre Accord -- named after the Paris hotel meeting
where G-7 finance ministers agreed that the dollar had fallen far enough,
and that action was needed to stabilize the currency.
Mulford was also the main player behind the 1989 Brady Plan to reduce
poor countries’ debt. The essence of the plan was that the banks
would agree to debt reduction in return for the debtor countries guaranteeing
to repay the remaining debt. The banks faced bankruptcy, until the U.S.
taxpayer bailed them out through a series of debt swaps coordinated by
Mulford which converted many of these loans into bonds.
In the early 1990s, Mulford turned his attention to negotiating the terms
of aid packages for Russia.
PART OF BANKING ELITE
Mulford left government in 1992 to join the Credit Suisse Group, where
he has most recently been serving as Chairman International of Credit
Suisse First Boston in London. Mulford previously served as chairman and
chief executive officer for Credit Suisse in Europe.
Mulford has been called one of the "roving ambassadors" for
the world’s biggest investment banks, and part of what leading U.S.
economist Jagdish Bhagwati described as a "power elite" in international
finance.
SOME BLACK MARKS
However, Mulford’s reputation soured somewhat over the Argentinean
financial mess of 2001. Mulford and Argentina’s then-economic minister,
Domingo Cavallo, helped negotiate a huge debt swap deal involving Credit
Suisse and other investment banks -- a deal which paid these banks enormous
fees.
However, the deal was heavily criticized when a few months later Argentina
defaulted and banks closed. Critics said that the biggest debt swap in
history made bankers rich but failed to prevent the default, merely putting
off the inevitable. Mulford was also investigated -- but cleared -- over
accusations of having a joint bank account with Cavallo.
Mulford also gained a black eye over his association with the Rohm Brothers,
whose banking interests in Uruguay and Argentina collapsed after they
were accused of money laundering.
Interestingly, Credit Suisse First Boston’s operations in India
are still suspended after regulators uncovered alleged price fixing.
LOOKING FORWARD TO INDIA
However, Mulford is now looking forward to being back in government service.
"I will have the privilege of joining an Administration team that
is already hard at work on the goal of fundamentally transforming the
US-India bilateral relationship into a mature partnership," he added.
"If confirmed by the Senate … it will be my goal to do everything
I can to see that our relationship moves forward to realize its full potential.
Clearly, this would serve the vital interests of both of our nations."
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