Tuesday, July 19, 2011

Secretary Clinton in India

Clinton and Krishna Secretary of State Hilary Clinton is visiting India. There are a skein of issues to discuss, but one with special resonance to us:

US Secretary of State Hillary Clinton pressed Tuesday for easier access to the Indian market for US nuclear energy firms, who are trailing their French and Russian competitors.

Here’s what she had to say about that:

"With regard to our civil nuclear agreement... we need to resolve those issues that still remain so we can reap the rewards of a robust energy partnership," Clinton said in opening remarks during her trip to India.

Creating or expanding a market for goods of any stripe is a job creator, so well worth pursuing. Nuclear trade between India and the U.S. is still relatively new – the treaty opening it was one of President George W. Bush’s last major accomplishments – so effort is still needed to resolve lingering issues. The most serious such issue involves liability:

The United States wants India to "tighten up" legislation to protect equipment makers from liability in case of nuclear accidents, saying it is much more stringent than comparable laws in other countries. General Electric and Westinghouse, the U.S.-based arm of Japan's Toshiba Corp , are keen to take a slice of the market.

Now, India has signed onto the relevant international treaty covering liability, the Convention on Supplementary Compensation for Nuclear Damage, but even at the time it did this last year, most nuclear technology vendors – including those in India’s domestic industry – thought it was inadequate to fully address the liability issue. That’s because the Indian parliament had earlier passed a law that conflicts with the conference and does not adequately shield suppliers from lawsuits.

Here’s what the Indian law says (you can read the legislation here):

The operator of the nuclear installation, after paying the compensation for nuclear damage, … shall have a right of recourse where the nuclear incident has resulted as a consequence of an act of supplier or his employee, which includes supply of equipment or material with patent or latent defects of sub-standard services.”

That provision and the lack of a provision prohibiting individual claims run counter to the convention. Here’s the specific provision in the convention:

The right to compensation for nuclear damage may be exercised only against the operator liable, provided that national law may permit a direct right of action against any supplier of funds that are made available pursuant to provisions in national law to ensure compensation through the use of funds from sources other than the operator.”

There’s no particular reason to think the U.S. is asking for something outlandish here – every other country that engages in trade of nuclear technologies follows the terms of the convention.

Now, to be fair, India has the experience of the 1984 Bhopal disaster, which led to the deaths of nearly 4,000 people. (You can read more about this at the National Institutes of Health.) Serious minds can disagree over the extent and quality of Union Carbide’s disposition of its liability obligation, but cannot dispute that the accident has cast a dark shadow over any subsequent consideration of industrial liability in India.

But, to return to a positive posture, it sounds as though India, at least on the executive level, agrees with Clinton. Here are the comments made by Indian Foreign Minister S.M. Krishna:

We reiterated our commitment to taking forward civil nuclear energy cooperation on the basis of full implementation of mutual commitments. We were reassured that United States reaffirmed its commitment for full civil nuclear cooperation. I expressed appreciation for our ongoing engagement and full support of the US for India’s full membership of the four export control regimes and our expectation of progress in tandem on the four regimes. We discussed UNSC reforms and India’s permanent membership of a reformed UN Security Council.

Diplomat-speak, of course, with an excess of politesse, but it shows the U.S. and India in sync on trade issues.

Now, I admit that there isn’t much a story here – Clinton and Krishna don’t seem ready to sign anything and I can’t find much evidence that the Indian parliament will revisit the liability issue imminently. But State is pushing for a reconsideration – that’s a plus – and the Indian equivalent seems open to it – another plus. That’s movement – good for the industry, good for trade balance, good for job creation. It’s a worthy effort that should have a few lights shined on it.

Hillary Clinton and Indian Foreign Minister S.M. Krishna.

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