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Remarks by Deputy Secretary of Defense Carter to the Confederation of Indian Industry, New Delhi, India

Presenters: Deputy Secretary of Defense Ashton B. Carter; Director General of the Confederation of Indian Industry Chandrajit Banerjee; and Chairman of the CII Defence Council Dr. V Sumantran
July 23, 2012

            DIRECTOR GENERAL CHANDRAJIT BANERJEE:  Doctor Ash Carter, Deputy Secretary, Department of Defense, United States, Her Excellency, Nancy Powell, United States Ambassador to India, -- Dr V Sumantran -- distinguished ladies and gentleman, on behalf of CII, a very, very warm welcome to Dr. Ash Carter, deputy secretary, Department of Defense, United States.

            Your presence is of significant importance to each one of us in India and particularly to CII.  We're indeed very happy that you could make time to address this very important session on U.S.-India defense cooperation, the way forward.  It shows the type of importance that you and your government attaches to this very important and -- important and emerging sector for India.

            Also, a very warm welcome to excellency the Ambassador.  Thank you very much for being here.  A warm welcome to you from CII.

            Also like to welcome all of the dignitaries present here at this session and for everyone who conveniently made it here with us today.

            CII has 7,500 corporate members, has a very strong defense set up -- defense sector set up within the system, defense, aerospace and the entire gamut.  And we see the type of opportunity and interest that this sector really has, especially when we work with together with the United States.  A country where -- with CII, that is again predominantly addressed with one of our oldest offices we’ve been fortunate to have -- since quite some time and this sector will always be -- merged  on the top in our discussions and in our -- as we have moved forward given our relationship with the United States.

            Ladies and gentleman, we've transformed the international, geopolitical fabric in the post-Cold War era.  It's interwoven by changes -- changed priorities and realigned -- possibilities.  The foundations of  -- (inaudible) -- converted -- (inaudible) -- between the United States and India in the last one and one half decades by -- within the opportunities for cooperation that this -- (inaudible) -- has offered.  Both the nations are working toward enhancing and strengthening the engagement.  India is viewed upon by the global community as a very strong, emerging power.  And India's strategic relevance in the region have increased manyfold in keeping with its expanding strategic reach and depth.

            India will be expected to discharge its responsibility as a regional power.  The Indian armed forces are making efforts to enhance their military capability and preparedness.

            It is the violence of defense weapons and they are huge all of us know that -- making an effort to diversify the sourcing of weapon systems.  It is estimated that India will be procuring anything between $80 billion to $100 billion of defense equipment in the next five years.

            It's a huge market and the potential to attract the U.S. defense industry and also a great opportunity for building a long term relationship with the defense industry.  India will no longer be satisfied with a buyer/seller or patron/client type of arrangement.  It is expected that the future of defense acquisitions will emphasize on transfer of technology as well as joint research and development of weapon systems.  We understand that the U.S. has begun to move towards India beyond just sales of defense equipment.

            Keeping in view the opportunity of cooperation arising out of the defense offset, there is a need to enhance the interaction between the tier one and tier two companies of both countries.  We at CII are working towards it.  We have been facilitating the interaction between the U.S. aerospace supply mission interactions with the Indian companies in different parts of the country.  CII also has mounted several missions.  But I must mention of a mission to Maryland and Virginia in June 2011 with the aim to enhance such interactions.  We suggested an --inaudible-- and institutional arrangement for these -- for -- for such missions and such exchanges.

            CII has been actively participating in the institutional arrangements that we have, which is the DDDG and the ACCD to discuss issues of mutual concern.  The efforts being put in by the governments on both sides towards resolving the issues affecting the transformation is indeed very encouraging.  The recent visit of the U.S. Defense Secretary Panetta to New Delhi signifies the interest and intent of cooperation.

            During the last -- (inaudible) -- meeting in 2011, it was commented that the U.S. should publish a list of technologies for which there would be no requirement of export licenses.  We in CII believe that such positive steps will definitely go a long way in taking the U.S. defense industry -- U.S. -- India-U.S. defense industry cooperation to a different plane.

            Ladies and gentleman continuing the ongoing momentum, India and U.S. need to identify the new ideas of cooperation. Currently industrial cooperation in defense can be ensured as India's skilled labor force -- skilled labor force can be a lot of advantage to the United States.

            Joint research and development can be undertaken.  In the future this offset --(inaudible)-- that are part of the cost of developing of defense equipment and India can play a major role in this respect.  It is evident from the fact that today all known defense industries of -- of the U.S. have established their offices in India and are engaged in dialogue with Indian industry.

            There are several MOUs that have been signed between the United States and the Indian industry for joint partnership and cooperation.  CII would wish to facilitate their engagement with Indian industry and other stakeholders in a much larger way than what has been the trend in the past.  CII can play a significant role in facilitating offsets.

            The Indian industry respects and understands the internal processes of export control and technology sharing of the U.S.  Of military indutries we have, CII comments that India should be a special status as a country for defense cooperation.  This will go a long way in giving a tremendous boost to the industry in defense cooperation.  This will help the industry from both the countries to focus more on substantial -- substantial cooperation issues and will take a lot of precious time to understand the procedural gaps in both our countries.

            Ladies and gentlemen, I just wanted to highlight some of these points before requesting Dr. Sumantran to give his remarks and thereafter listen  to Dr. Ash Carter for his views and for his comments.

            With that ladies and gentleman, once again a very warm welcome to each one of you for participating in this afternoon’s session.  Thank you very much.  (Applause.)

            CHAIRMAN V. SUMANTRAN:  Doctor Carter, Deputy Secretary, Department of Defense, United States; Excellency Nancy Powell, U.S. Ambassador to India, Chandrajit Banerjee; visiting dignitaries from the U.S , colleagues from India and other defense industries, friends from the strategic community and friends from the media, good afternoon and welcome.  It is indeed for me a privilege to address this very august gathering, a gathering of eminent policymakers, strategic thinkers and even businessmen from India and the U.S.

            I have been given the honor of introducing a person who actually doesn't need much introduction.  But, indeed, for those of you who are not familiar with Dr. Ashton Carter, allow me to very briefly introduce him.

            That he would have a long biography would be no surprise.  That he would have an industrious biography would also be no surprise.  But he also has an exotic biography.  (Laughter.)

            Dr. Ashton Carter is the Deputy Secretary Of Defense with the United States.  Previously, Dr. Carter served as Undersecretary of Defense for Acquisition, Technology and Logistics from 2009 until 2011.  Over the course of his career in public service, Dr. Carter has three times been awarded the Department of Defense's Distinguished Service Medal.  He earned a bachelor's degree in physics and Medieval history. Now that a very --(inaudiable)-- combination.  (inaudible) -- of course and went on to get his doctorate at Oxford where he was a Rhodes scholar and he graduated summa cum laude.

            Prior to his most recent government service, Dr. Carter was chair of the very well known -- (inaudible) -- global affairs faculty at the Harvard University's John F. Kennedy School of Government.  During the Clinton administration, Dr. Carter was Assistant Secretary of Defense for International Security Policy.

            He is a member of President Obama's Government Accountability and Transparency Board.  He is a member of the Council on Foreign Relations and indeed many, many other prestigious -- memberships.

            Welcome.  It's a pleasure to have you with us here.

            Before I invite him to the podium to share his views, let me also take a few minutes to share a few perspectives that I hope will advance the cause of India-U.S. relationship, and that is basic to this industry.

            To state the obvious, our relationship has evolved to avery advanced level, particularly post-9/11, where, with no surprise, we found we had common values.  We shared a common beliefs, conditioned on the value of democracy, respect for human rights, rule of law, and so on.  Our goals are similar -- international peace and security.  The tasks we face are similar:  international terrorism, piracy, destabilizing global and regional forces.

            In this global context it is no surprise that as for the 13th Finance Commission, India's defense capital expenditure budget is growing at at least 10 percent.  And while we talk about the economic impact of this journey, during the next five years this industry must also lead to the creation of almost directly or indirectly a million jobs.  So there is a great deal of expectation both from this industry, both the perspective of preparing for national security and advancing the state of development of industry.

            The bilateral defense trade between U.S. and India, under the state department framework has strengthened our bilateral relationship.  CII has remained in the forefront of highlighting industry's issues, concerns-- (inaudible) -- and in the many business-to-business and business-to-government dialogues.

            We've put in a lot of effort in this regard, and hopefully has played some small role in the fact that today many American companies are increasing their footprint in India.

            The India-U.S. defense trade has also increased manifold over the last one decade.  Today, we've crossed the $10 billion mark, and it looks like to reach the $25 billion threshold, we must take many more years.

            In India, our defense sector has also changed gears.  We request our American counterparts to use this point of inflection, and to set up their operations in India with emphasis on manufacturing, R&D, and value creation.

            If we can have co-development and co-manufacturing with other nations, including Russia, why not have a similar, and an even more promising relationship with the U.S.?  Together, we should promote India as a global defense manufacturing hub.  We have seen it in other sectors, including my own -- in manufacturing.  I truly believe that this is a potential to draw from.

            The idea must be to create win-win situations for both India and American companies.  We therefore sincerely ask that the U.S. accord special status to India as far as defense status is concerned.  Every year on average, India procures over $1 billion in equipment from the U.S.

            Understandably, we would like defense systems, equipment, weapons, and their subsystems  to flow in both directions.  This can be achieved by opening the private sector, where companies are both eager and better prepared today to assist U.S. integrators in the development of supply systems not only in India, but also in several parts of the world globally.

            Transfer technology is another concern.  We need to ease the restrictions around transfer technology, recognizing that India indeed has an impeccable record of non-proliferation in weapons.  The bilateral relationship, which has been built on trust, will ultimately be fortified as issues like DoD  get resolved.

            For this, we would urge the creation of dedicated forums as we do indeed have with some of the other (inaudible) partners; facilitate the fast-track of this area.

            As far as foreign direct investment is concerned, we in CII have been able to convince Indian industry, that FDI cap should really move from the present level of 26 percent to 49 percent on a case-by-case basis.  We do not believe FDIC will remain an issue for long, but we need some flexibility and support from the U.S. side as well.

            If we are getting access to critical technologies that demonstrate capability to create multiplier effects on the economy and the -- (inaudible) -- generation potential in India, we can together -- and this comes from both sides -- move forward with speed.

            As far as the United States is concerned, we indeed urge the U.S. government to encourage U.S. companies to participate in competitive bidding and to indeed make the final product economically and from performance even more competitive.

            The buy and make and the making here programs have been a part of a carefully crafted policy so that the infrastructure capabilities of this nation are improved.  India defense industry is keen to play a leading role in many strategic projects, and in this arena as well we look forward to support from U.S. defense industry -- (inaudible).

            For defense offsets, we in India understand that we view defense offsets as an enabler rather than a restricter on trade.   We can have, from CII, U.S. -- (inaudible) -- to identify appropriate offset partners in India.  We would urge that most of these offsets be directed towards the manufacturing sector and indeed to make sure that, as we all recognize, sustainable defense cooperation can only be based on the foundation of capability creation and capacity creation.

            As far as long-term investments are concerned, the ongoing Indian military modernization program, the state of which challenges -- (inaudible) -- is one of the largest military modernization exercises undertaken in recent times.  India's defense industry is poised for long-term investment, growth and capability -- (inaudible).

            It is timely for the U.S. defense companies to establish themselves in India with a long-term perspective.  (inaudible) -- relationships is not sustainable in the long term.

            Indian industry is not shying away from these issues --(inaudible)-- finding shortcomings and gaps and we're truly addressing them.  The U.S. defense industry and U.S. defense trade is indispensable as far as India is concerned.  However, we should not miss out on the point that the rest of the world is also observing these developments in India and the -- (inaudible).

            In some cases it has been observed by some parts of -- (inaudible) -- industry that doing defense trade with European countries is sometimes easier than that with the U.S.

            Yet, the conviction that the shared values between U.S. and India must lead to a special, sustainable and mutually beneficial relationship remains unshakable.  And it is with this optimism that I would now like to invite Dr. Carter to address this august gathering.

            Dr. Carter?

            DEPUTY SECRETARY ASHTON B. CARTER:  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 happy to continue 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.  We'll 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 insurgencies and terror 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 we 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, any time.

            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.

            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 detection, 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 -- 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 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 concern.

            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.  [Laughter]  This is what I had on my wall.  [Laughter] 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 -- [Laughter] -- 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 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 adapt to the future.  Our bureaucracies, however -- both bureaucracies 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 is 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 in growing industry capability 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' interest and you lose that alignment of economic interest 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.

            Thank you.  (Applause.)

            DR. SUMANTRAN:  Thank you very much, Doctor Carter.

            Doctor Carter has agree to take a few questions.  He has a limited amount of time, but he's willing to take a few questions from the audience.  So if you have a question, please sir.

            Yes ?

            Q:  Secretary Panetta, when he came here in June, had mentioned that he was appointing you a point person to unlock the potential defense trade between two countries.  Now I noticed defense trade -- (inaudible) -- defensive cooperation  Does this -- does this involve some kind of evolution in thinking or a re-think of the relationship?  Could you just talk us through where is -- is coming from and if I could add on a quick second question to that.  There's -- there's been no sign of an Indian counterpart -- (inaudible) -- is that an actual concern to you?  Have you asked the Indian (off mic)

            DEP. SEC. CARTER:  OK, both good questions.

            With respect to the trade versus cooperation, I think that shows that evolution in our understanding of what the point is here.  And I tried to make this point in my remarks.

            Trade suggests buyer-seller relationship and transactions.  And I think one of the things that I have learned just in being here so far, and that Secretary Panetta and I learned as we thought about this issue and talked to our Indian colleagues about this issue, was that what India wants and what we want in the long term is more than just buying and selling.  We want to do things together.  We want to develop products together and produce technology together.

            But there is a little bit of a difference between trade and cooperation.  And as between the two, we're really looking for cooperation.

            With respect to how my Indian colleagues choose to work with me and with the U.S. government, that's really for the Indian side to decide.  I'm focused on the results, not the mechanism.  And I think we'll get the results whatever is decided on the -- on -- on the Indian side.  So I'm -- I'm -- I'm fine whatever -- with whatever is decided.

            Q:  I work for Times Now.  It's a TV channel.  I'm taking you back to Dubai, the incident in which an Indian sailor was killed.  The Dubai government says that no warnings were issued.  The fisherman who survived said no warnings were issued.  What is your investigation finally saying?  And if warnings were issued, what were the warnings?  Could you just share them with us?

            DEP. SEC. CARTER:  Sure.  Sure.  I mean, we don't know -- the -- the investigation's not complete.  As you probably know, there are two parallel investigations.  They'll be thorough.  We'll be transparent about the results, but I just don't know what the results are yet.  So we don't know exactly what happened.

            And obviously, we very much regret the loss of life and injury.  Obviously, it's a dangerous part of the world.  We had real security concerns.  But we're very regretful for any -- any loss of life.  And that's extremely tragic.

            But the honest truth is, we don't know what happened.  We won't know until the investigation is complete.  So I don't even want to say what it is that -- our -- what I understand or we understand at the moment happened until the investigation's done, we just don't know what happened.  And then we'll be completely transparent about it, and -- and there'll be full responsibility.  And -- and certainly for the families and so forth, the -- the greatest condolences.

            Q:  Yes I'm -- (inaudible) -- walking us through the relationship between our two great countries.  And the focus that you have my question is very simple.  Up until now, we've been talking about -- (inaudible) -- platforms -- (inaudible) -- but if this relationship has really transformed to the next level, then it is more about the building up national capability, by which I mean manufacturing capacity, design and engineering services, and so forth.  And in the very near term there are a vast number of sectors -- (inaudible) -- thank you.

            DEP. SEC. CARTER:  Also a very good question.  And building capacity is why the word "cooperation," rather than "trade," is the appropriate one for where we're trying to get.  You mentioned robotics and automation.  That is one of the areas where we recognize -- and, in fact, we're recognizing earlier today -- is one where we both have aspirations and innovative potential.  So I think it is a very good candidate for exactly that kind of cooperation.

            Q:  Thank you Dr. Carter. My question to you is what high end technologies India should be expecting near future?  And is there any potential of the F-35 as well, in the country and also, while the U.S. seems to be coming very closer to Indian interests the concerns from India always has been that the United States is unable to offer the first line technologies. How do you answer to these concerns?

            DEP. SEC. CARTER:  Well, to the last part --

            Q:  Thank you.

            DEP. SEC. CARTER:  -- that may have been true in the past, but that's what we're trying not to have be true in the in the future.  India is, from our point of view, one of the most trusted destinations in the world.  We think we can share with India to the greatest possible extent.  And just making sure that that relationship of trust is reflected in how we actually administer our defense cooperation is, in one sentence, the principal purpose of my visit here today, the assignment that I've been given by Secretary Panetta and -- and Mr. Menon.

            You say what kinds of technology?  All kinds of technology.  You asked about the Joint Strike Fighter.  I've been asked this before.  The Indian government has not asked us for information about the Joint Strike Fighter, but I'll say the same thing I said a year ago or something.  Of course, if they ever do, we'll talk to them -- talk to them about anything.  That's not -- just to be clear, the Indian government has not asked us about the Joint Strike Fighter.

            DR.SUMANTRAN:  I think we have time for one last question.  Yes, sir.  Please.

            Q:  Thank you -- (inaudible) -- take the defense cooperation strategy to the next plane or next higher level, I think we need a showpiece project at the strategic level.  I have one in mind for example ballistic missile defense, a joint project.  Would the U.S. be willing to make such an offer to India?  Thank you.

            DEP. SEC. CARTER:  Two comments on that.  If you couldn't hear that, the question was about ballistic missile defense.  That's an important potential area for our cooperation in the future.  I do think that ballistic missile defense has a very strategic importance.  And therefore, the two governments should discuss that strategically before they discuss it technically.  And I think that they intend to.  Those strategic decisions on a topic like that precede a technical discussion.

            I'll make another sort of parenthetical comment.  I'm wary of showcases -- to use your phrase -- only because I want to be doing things that make real strategic and economic sense.  It's fine if they make symbolic sense, as well, but, first and foremost, I'd like it to make strategic -- it’s not to say they won’t occur sometime in the future, but showcases is not -- I prefer things that make hard economic and strategic sense.

            DR. SUMANTRAN:  I'm sorry.  There's a very tight demand on the deputy secretary's time, so if you'll allow me, I would just like to close with a word of thanks.  Ladies and gentlemen, of course, in all our years since independence  our economy has witnessed many challenges -- and indeed our   democracy. -- (inaudible) -- development -- (inaudible). -- (inaudible) -- India's concerns and its needs to build up its military capabilities and security -- (inaudible) -- is understandable .

            I would like to thank Dr. Carter for his very valuable comments and his indeed candid comments on several topics:  the whole topic of rebalance, the importance he accords this region.  I lost count the number of times he talked about removing bureaucratic hurdles and obstacles.

            We'd like to thank him indeed for not only taking the time, but indeed for his very practical and useful approach here.

            I would take this opportunity to request the U.S. industry to come forward, make best use of these opportunities of -- (inaudible) -- covering the entire gamut of high-tech component, as indeed we have discussed.

            And may I say, CII is always there to help you out.  As an organization, we are committed to creating indigenous defense industrial base.  However, without the support of friendly foreign countries, this would be a very difficult task.  Regarding our relationship with the U.S. government and industry, and on behalf of the Indian industry and CII, we commit full support to you.

            So once again, let me express my sincere gratitude to Dr. Ashton Carter.  We thank you -- sir for sharing your candid views.  We are hopeful that with your guidance, defense industries from both sides will benefit and together we can explore a lot of new avenues for cooperation -- (inaudible).  Thank you very much, Sir.

            And I would also thank excellency, Ambassador Nancy Powell and all of the visiting delegation from the United States.

            Thank you very much.

            (Applause.)