Thank you, Dr. Sumantran, for that wonderful introduction. Mr. Banerjee, thank you for hosting us today, for your welcoming remarks. And ladies and gentlemen, distinguished guests, thanks for being here today.
And congratulations to CII on your success. You play a critical role in India's foreign trade and global engagement. You help the world to get to know India, and work with India, and vice versa. You know, I became familiar with CII through my association with the Aspen Strategy Group about 14 years ago, working with the great Tarun Das and Kiran Pasricha, all of whom have done such exceptional things for the U.S.-Indian relationship, dating back to those early days.
I then was an early and strong supporter of the U.S.-Indian relationship also. So for me this is a long, long awaited opportunity, which makes it doubly wonderful to be here today with all of you. I'm familiar with India's charms and culture, a place very close to my heart.
I had a great morning today, a very productive meeting with Ministry of Defense Antony and the senior leadership. This afternoon I'll meet with the Foreign Secretary and the National Security Adviser. Excellent discussions all the way around.
And we know that the U.S.-India relationship is global in scope, like the reach and influence of each of our countries. And our security interests converge. Maritime security across the Indian Ocean region; in Afghanistan, where India's done so much for economic development and the Afghan security forces; and on broader regional issues, where we share long-term interests, if not always common approaches, like Syria and Iran.
I like to think of India and the United States as kindred souls, sharing common values, as well as common interests and strong bonds in trade and technology, as well as security. President Obama has called the U.S.-India bilateral relationship one of the defining partnerships of the 21st century. And our defense cooperation, the topic of my remarks, is an essential part of our partnership.
I can tell you much more about the importance of our relationship, but today I want to speak with you about the practical steps we can take to improve our defense cooperation.
We want to develop a joint vision for U.S.-India defense cooperation. That's why I'm here, at the request of Secretary of Defense Panetta. We want to get to a place where we discover new opportunities continuously, making new and innovative investments that benefit both countries for generations. The only limit to our cooperation should be our independent strategic decisions – as any two states can differ – not bureaucratic obstacles or inefficient procedures.
The relationship has come a long way in the past decade. Our goal is to make it even stronger. We need to define where we want to go and then make it possible to get there.
We on the U.S. side have no preconceived model for this relationship or for India's role in this region of the world. We respect that you will follow your strategic interests. Our relationship will therefore be a unique one based on trust, sharing, and reliability. It will be shaped by our own respective strategic decisions and, I hope, by deep strategic dialogue, such as that which Secretary Panetta engaged in when he was here in June, and which I am having here today.
Before moving into the specifics of our cooperation, I'd like to start with some strategic concepts, the backdrop for our cooperation.
The last 10 years have had a profound impact on world affairs, affecting the United States, but also countries across the Asia-Pacific and around the world. The last 10 years – excuse me – we now find ourselves at a strategic inflection point, we in the United States, with two forces impinging upon us.
After a decade of conflict, one war has ended, in Iraq. The other, in Afghanistan, has not ended, but will transition soon to Afghan lead, thanks to the superb effort of the men and women of the U.S. and coalition forces. We've done exceptionally well.
But while we've been fighting insurgency and terrorism there, the world has not stood still. Our friends and enemies have not stood still. And technology has not stood still. The successes we've had in Afghanistan and in counterterrorism mean that we can now focus our attention on other opportunities and challenges.
The time has come for us in the United States to look up, look out, to what the world needs next and to the security challenges that will define our future after Iraq and Afghanistan.
We would need to make this transition no matter what, but a second force rises as well. That is the need to keep the United States' fiscal house in order, as outlined in the Budget Control Act, passed last year by Congress. While the U.S. base defense budget will not go down under this plan, neither will it continue to rise as we had earlier planned. But the wind-down of Iraq and Afghanistan gives us capacity to turn the strategic corner without an ever-rising budget.
These two forces, of strategic history and fiscal responsibility, led us to design the new defense strategy for the 21st century in a remarkable process this past winter steered by President Obama and Secretary Panetta. We're building a force for the future, what Chairman Dempsey calls the Joint Force of 2020. And as Secretary Panetta has said, it's going to be agile, lean, ready, technologically advanced, and able to conduct full spectrum operations and defeat any adversary, anywhere, anytime.
A central tenet of our new strategy is our rebalance to the Asia-Pacific region, one of the major strategic changes we are making as we come out of the era of Iraq and Afghanistan. The rebalance is reflected in force structure decisions we make (that is, what we keep and what we cut), in our posture and presence (that is, where we put things), in new investments we're making in technology, weapon systems, in innovative operational plans and tactics, and in alliances and partnerships in the region. Importantly, here in India, our rebalance extends to Southeast Asia and South Asia.
The logic of the rebalance is simple. The Asia-Pacific has enjoyed an environment of general peace and stability for more than 60 years, allowing Japan to rise and prosper, then Korea to rise and prosper, next Southeast Asia to rise and prosper, and now China, and in a very different way India, to rise and prosper.
The wellsprings of that security have not been found in the region itself. There's no NATO here. In the absence of an overarching security structure, the United States military presence has played a pivotal role in ensuring regional stability. We intend to continue to play that role. It's good for us, and good for everyone in the region.
Our rebalance is not about China, or the United States, or India, or any other single country or group of countries. It's about a peaceful Asia-Pacific, where sovereign states can enjoy the benefit of security and continue to prosper.
In the future, therefore, our Asia-Pacific posture will increase relative to other theaters. We intend to have 60 percent of our naval assets in the Pacific by 2020, a very different thing from history. We're developing new concepts of rotational presence, as opposed to traditional bases. We have Marines in Australia, Littoral Combat Ships in Singapore, and forward stationing in Guam.
We're investing in new platforms and technology relevant to the region, like the new bomber, new submarine-launched conventional weapon, cyber capabilities, and a host of upgrades in radars, electronic protection, space and electronic warfare. These and other future focused investments are another central tenet of our new strategy.
To those who doubt we have the resources to accomplish all of this, I would to the contrary point out two factors that make it eminently possible. First, with Iraq behind us and Afghanistan slated to wind down, capacity will be released that can be allocated to the Asia-Pacific region. Second, within our budget, we can and are prioritizing investments relative to the Asia-Pacific theater – rather than, for example, counterinsurgency, where we've put so much effort over the past decade. So the rebalancing is entirely practical.
Finally, central in our new strategy is, in our decades-long historical commitment to the region, we seek to build partnerships that leverage the unique strengths of our allies and partners to confront critical challenges and meet emerging opportunities. So, we're taking a strategic and comprehensive approach to security cooperation, as well as to our posture. As I'll say in a moment, we're streamlining our internal processes and security cooperation programs to share and cooperate with our partners better.
Our partnership with India is a key part of our rebalance to the Asia-Pacific and, we believe, to the broader security and prosperity of the 21st century. You are an economic power with an increasing military capability. Your leadership and civil discourse and democracy is critical to the political stability of South Asia and a beacon to the world. Our military-to-military engagement has increased steadily over the years to include a robust set of dialogues, exercises, defense trade, and research cooperation.
Our shared challenge in the next year is to find concrete areas to step up our defense cooperation so that only our imagination and strategic logic – and not administrative barriers – set the pace. That's why I came with a team of officials who are responsible to me and Secretary Panetta for executing this vision. We need to reinvigorate and commit to maintain a robust set of linkages and working principles and practices – many of which are in place – that will work every day to enable our cooperation and develop mutually beneficial policies in the future.
We want to knock down any remaining bureaucratic barriers in our defense relationship and strip away the impediments. And we want to set big goals to achieve.
Today I want to outline some of the steps the U.S. is taking in this direction and, if I may, some areas where we hope India will improve, too.
To begin with, as a country committed to enduring peace and security of the Asia-Pacific region, India deserves the best military equipment available. And we're prepared to help. Practically, we want to be India's highest-quality and most trusted long-term supplier of technology, not a simple seller of goods, in such fields as maritime domain awareness, counterterrorism, and many others.
We're committed to India's military modernization. We know that India has security challenges that are very real. India is a top priority in our export considerations. We trust India and know that India’s not a re-exporter or exploiter of our technologies.
We have an export control system to prevent high-end technology from getting to states that shouldn't have it, but our system can be confusing, rigid, and controls too many items for the wrong reasons. We know we need to improve it. We are improving our government's overall export control system under President Obama's 2010 Export Control Reform Initiative.
And at the same time, Secretary Panetta and I are committed to reforming the Department of Defense's internal processes. These reforms should make it easier for you to work with us and should benefit you, as well as our other partners. India's been very frank in expressing its concern with U.S. export controls and technology security policies, and we're taking real steps to address India's concerns.
For example, we moved DRDO and ISRO off the Commerce Department Entity List. We can therefore conduct research and co-develop technologies together – batteries and micro-UAVs – good initial steps, with much more to come. An overwhelming and increasing majority of munitions license requests have been approved more quickly under direct commercial sales, and this will continue.
But in addition to increasing sheer bureaucratic speed, we're trying to be more strategic about export decisions. We're making decisions more anticipatory, looking at what partners are likely to want in the future, and beginning our thinking and processes earlier.
In a terrific new initiative, we're building exportability into our systems from the start so it doesn't consume time and money to do it later. Next, we're putting priority cooperation sales on a special fast track. All these steps will be felt here in New Delhi. The combination of these and other efforts will help us respond more rapidly to India's requests for U.S. equipment and systems, particularly for more advanced technologies.
At the same time, we want to maintain confidence that our technology will be protected. India's concerned about protecting technology, too. We know that. We have a U.S.-India Senior Technology Security Group to address the genuine security issues that exist in our world, but it needs to be more active.
I just spoke to export control reform. And secondly, I want to report to you what we in the U.S. are taking steps to do to improve our foreign military sales, or FMS, system also. This is in both of our countries' interests.
India was our second-largest FMS customer in 2011, with $4.5 billion in total FMS transactions. And we delivered six C-130Js on time.
We think our defense technology is the best quality on the market. Some partners choose price over value. Buying American, whether through direct commercial sale or foreign military sales, will get India exceptionally high-quality technology, a high degree of transparency, and no corruption, which is mandated by our legal system.
Sometimes it appears that India favors direct commercial sales, and this is fine, but might overlook some advantages of FMS. The government-to-government agreement through foreign military sales offers competitive pricing, only slightly more than DCS. These costs go to DoD, which affords protections you cannot get from industry alone, and addresses sustainment needs over the long term. As I said many times when I was acquisition executive of DoD, lifecycle costs are frequently hidden and ignored in acquisition decisions.
So to sum up on FMS, we are making our foreign military sales system as easy to work with as possible. But for each sale, India should choose which group is in its interests, commercial or governmental. We will continue to improve both.
Next, and importantly, we're prepared to adapt our system to the unique needs of India and its Defence Procurement Procedure, or DPP. We aim to clarify our acquisition system, which isn't always easy to interpret.
I used to be Undersecretary of Defense for Acquisition, Technology, and Logistics, as has been mentioned. There was a chart on my wall outlining the 250 – or whatever – steps it takes to move a program from development to delivery. It read like hieroglyphics. I brought it along today to show you. This is what I had on my wall. This described the steps that you needed to go through to acquire something. And I dare say there's a similar chart over in the Indian Ministry of Defense.
I had trouble remembering all of this, so my staff was kind enough to make me this handy little wallet-sized card. I can refer to when I needed to. Well we're going to try to make this system – which is hard enough for us to understand and we can't expect anybody from anywhere else to understand it – more export-friendly.
We have a new fund that allows us to procure long-lead, high demand items so it'll have them on hand in anticipation of partner requests. We now have a cadre of acquisition experts to send to other countries to define their requests through cooperation and streamline our response. That should help India significantly.
Finally, and most importantly, we want to move beyond defense and trade – this is the important part – towards cooperative research and development and co-production with India. I'm a scientist; I know this is the central part.
I'm going to Hyderabad tomorrow, where Tata Advanced Systems Limited and Lockheed will begin producing parts for the C-130J. From now on, every C-130J around the world will contain parts made in Hyderabad.
That's an example of the kind of co-production that is the future. It highlights what can be achieved when we unleash the potential of our private industries. It shows what's possible when there's a common strategic view, when the bureaucratic barriers are down, and, importantly, when our strategic interests and genuine economic and business interests are aligned. You have to have all three of them to have a successful project.
This is just the beginning. Our horizons can and should expand further. That's what our leadership has directed us to give them. And of course, the only question for us is where does India want to expand and grow? That's a decision only India can make, then we can help.
Indian bureaucracies, like ours, are changing to say hello to the future. Our bureaucracies, however – both ours – were built during the Cold War. More recently, Indian introduced the Defense Procurement Procedure which is designed to protect against corruption by reducing prices and complexity. Now, however, a higher-end technology India seeks to develop a higher-end defense industry. That's a different environment.
Likewise in the Cold War, the U.S. bureaucracy was designed to protect a wide swath of technology. With the commercialization of the global marketplace, we now recognize that defense technology controls should be more focused. We want to cooperate with you on high-value technology.
To get where we both want to be, India can make some changes, too, to increase U.S. investment. If India raises its foreign direct investment ceiling to international standards, that would increase commercial incentives to invest here.
Second, offsets can be tremendously helpful to growing industry capabilities – if you have the right companies and the right absorptive capacity. If offsets are calibrated correctly, it works. But if offset requirements are too onerous or too narrow, they deter companies' interests and you lose that alignment of economic interests and strategic intent. For companies to participate, our arrangements must make good economic sense as well as good strategic sense.
Third, projects that integrate technology development, production and acquisition will require administrative structures that can do exactly that kind of integration.
So these are just three points where change could be a real help in Indian-American cooperation. Look, the point is that on both sides, we need to change, reform, and push ourselves to get to a place where U.S.-India defense relations are only limited by our thinking, not by our capacity to cooperate. That's what Secretary Panetta and National Security Adviser Menon charged when they met in June.
I'm looking forward to visiting India's technology corridor tomorrow. There, we'll all be reminded what is happening in the overall world of technology and industry. There, cooperation is the norm. Leaders of industry globally, such as those in this room, know that. Sometimes, we in the security community lag behind them in our ability to cooperate and advance technology. But the wisest of our industry leaders, including CII, also understand that without security, none of the other good things in life are possible – family, prosperity, progress – let alone business.
So in gatherings like this and in practical ways like those I have come to India to advance, they help show us the way. For that, Secretary Panetta and I are grateful.