US, China role play for ASEAN

By Donald K Emmerson

NUSA DUA, INDONESIA – Southeast Asian policymakers looking north to the Asian mainland and east across the Pacific Ocean see two major, different, and complementary assets to their region: China’s biggest-in-the-world economy and America’s best-in-the-world military.

This is not to underestimate the economic importance of America to Southeast Asia. For all the hype about China’s rise and America’s fall, measured by the value of trade and investment flows, the Association of Southeast Asian Nations (ASEAN) economies’ interactions with China and the United States in 2009 were equally robust.

China and the United States each imported 10.1% of the total value of ASEAN’s exports. As for inflows of foreign direct investment into the ASEAN economies, of that total in 2009, China and the United States accounted for almost identical shares – respectively 10.4% and 10.8%. [1]

But a snapshot is not a film. These equalities filled a single frame in an ongoing video of progressively greater disparities in the relative importance of China and America to ASEAN’s economies. Back in 2003 America took in more than three times the share of ASEAN’s exports absorbed by China – 19% versus 6%. Seen from Southeast Asia, that American advantage over China has since disappeared. From 2003 to 2008, China’s share of all Southeast Asian trade burgeoned at an astonishing 26% average annual pace – a rate that the American market could not match. [2]

China’s economic importance to its southern neighbors will only increase in future as Western economies retrench, barring a Chinese financial crisis to come. China will not escape collateral damage if the eurozone implodes and political paralysis in Washington allows American budget deficits and national debts to spiral unchecked toward an estimated worst-case US$22 trillion over the next decade. [3] But China could still emerge from such extreme turbulence relatively better off than Europe or America, and thus better equipped to cushion the shocks to Southeast Asia.

Southeast Asians are by no means giving up on the American market, on American investment, or even on American financing. All of the policy analysts I have met so far on this trip through Southeast Asia want American economic engagement. There is nevertheless a tendency in Southeast Asia to think of Beijing and Washington as playing specialized roles: China the economic partner who facilitates prosperity, America the security provider who guards the peace.

Such a dichotomy is understandable. It captures the comparative advantage for Southeast Asia that each outsider has to offer: China’s booming economy, America’s matchless military. It avoids the risk – many Southeast Asians would say the folly – of entrusting regional security to the People’s Liberation Army Navy, or PLAN, let alone the PLA.

Whether China seeks hegemony over the region is a matter on which many disagree. But ASEAN will not willingly invite China to replace the American security role in Southeast Asia, not if Beijing continues to assert forcefully its control over nearly the entire South China Sea – or, as some Vietnamese and Philippine activists would like it to be called, the Southeast Asia Sea.

As for valuing America more for its might than its market, Southeast Asians want to trade more with America, attract more of its investment, and benefit more from its technology. But they fear that America’s domestic woes and partisan politics may turn its priorities inward, away from Asia. What they want from the United States is protection from harm not harmful protectionism. They know that only following a prolonged struggle did the Barack Obama administration finally persuade Congress to approve a trade agreement with South Korea. Exaggerations of America’s economic decline make China look all the more like the future.

Competing communities
Reinforcing this ostensible division of labor is the economic success of China’s preferred regional vehicle, ASEAN Plus Three (APT), which excludes the United States, compared with the prominence of security on the evolving agenda of the East Asia Summit (EAS), to which both China and the United States belong.
Beijing prefers the East Asia-only APT to the larger EAS where its influence is diluted. China sees the APT, which also includes Japan and South Korea, as a nascent East Asian Community based on trade and investment, a vision that ASEAN shares. Located as it is on the “wrong” – eastern – side of the Pacific, America is obliged by geography to cultivate a trans-Pacific space.

America’s then-president Bill Clinton expressed that oceanic – westward – American priority when he hosted the first-ever meeting of the leaders of the Asia-Pacific Economic Cooperation (APEC) forum, which includes China, in the west-coast city of Seattle in 1993. That Pacific outlook was even more evident in the Hawaiian location of the APEC leaders’ meeting just hosted by President Obama. But APEC has not lived up to its original promise as the basis for a trans-Pacific economic community – a Free Trade Area of the Asia Pacific (FTAAP).

Two questions arise: Should the economy-focused APT aspire to play a security role? Conversely, should the EAS privilege security alone, or should it also develop an economic agenda? Underscoring the timeliness of these questions is the consecutive scheduling of the APEC leaders’ meeting in Honolulu on November 12-13 and the EAS here in Nusa Dua, Indonesia on November 19.

Under present conditions the APT will not enlarge its footprint to encompass traditional security. China has not pressed for such an expansion of the APT’s terms of reference, and the ASEAN states are too suspicious of Beijing to go along. China will eventually play a hard-power regional security role of some kind, welcome or not. But for now, Southeast Asian leaders do not want to jeopardize the economic success of the APT by adding visceral issues of sovereignty and security to its agenda.

ASEAN hopes that China will someday sign what still does not exist – a binding Code of Conduct on the South China Sea. But even if that happens, ASEAN will not willingly ask Beijing to be the sole sponsor of regional security in East or Southeast Asia. In this delicate context, a security focus for the EAS amounts to a hedge against unwanted Chinese assertion. That hedge is still purely symbolic, however. To the extent that the United States credibly underwrites Asian-Pacific security, it does so through treaties and ties that are bilateral not multilateral, and the EAS to date has been little more than an annual conversation.

If APT will not soon evolve into a full-spectrum outfit by adding security to economic concerns, how about the EAS? Will its purview expand in the opposite direction, adding the regional economy to regional security as an object of its attention?

No full-service venue
Chinese officials did not welcome the formation of the EAS and appear reluctant now to incorporate economic affairs into its terms of reference. Beijing is loath to further empower a vehicle through which the United States and its democratic friends outside East Asia – India, Australia, and New Zealand also belong to the Summit – could frustrate Chinese goals.

If China is already primus inter pares among the 13 APT economies and is becoming the hub of the global economy, some in Beijing may see in the 18-member EAS the next concentric circle in which to augment Chinese economic influence. But China’s current priority is to grow APT into an East Asian economic community that reflects and projects China’s own comparative advantage.

Like the Hu Jintao administration in Beijing, but for very different reasons, the Obama administration does not want the EAS to become an economic summit. APEC already is one; why duplicate the “E” for “Economic” in that forum’s name? More recent, and conceivably more important, is what American policymakers perceive to be the accelerating momentum of a novel arrangement that is still being negotiated: the Trans-Pacific Strategic Economic Partnership Agreement, or Trans-Pacific Partnership (TPP).

Not long ago, when the TPP first appeared on their horizon, policy wonks rushed to Wikipedia to find out what it was. Its Lilliputian size and odd geography made it hard to take seriously. A 2005 agreement between Brunei, Chile, New Zealand, and Singapore seemed far too thin and dispersed to be the end of a larger wedge.
Since then, however, five more countries – Australia, Malaysia, Peru, the United States, and Vietnam – have agreed to participate in negotiations with a view toward joining the group. Canada, Japan, the Philippines, South Korea, and Taiwan have also expressed interest in possibly signing on.

A juggernaut the TPP is not. The high quality of the agreement helps to explain the low quantity of its members, who must commit themselves to comprehensive economic liberalization, including provisions on intellectual property, labor, and the environment. This high bar to entry may well enhance the agreement’s impact, and it appeals to American politicians averse to “unfair” trade.

But its provisions will be harder to endorse in countries that protect agriculture, repress labor, appropriate technology, and resent the costs of “greening” their economies. Its rules on intellectual property are especially controversial. This would matter less if the TPP were content to be a club of the few. But the Agreement expressly aims (in Article 1.1.3) “to support the wider liberalization process in APEC consistent with its goals of free and open trade and investment.” This mandate opens the TPP to interpretation as a would-be vanguard of freer trade in that far larger and less welcoming context.

Linked as the TPP is to APEC, the Obama administration would rather encourage that vanguard role in a two-track division of labor between the TPP/APEC (economy) and the EAS (security).

Deterrence in Darwin?
As I write this, President Obama is in Darwin, Australia, en route to attend the 6th East Asia Summit here in Bali on November 19. But Darwin is more than a convenient stopover between Australia and Indonesia. The Obama administration and its counterpart in Canberra have agreed that 2,500 American marines will eventually be rotated through that north-coastal Australian city every six months or so for exercises and training with the Australian Defense Force. From Darwin, Indonesia’s own coast is less then 500 miles away. “New US Base in [Indonesia’s] Backyard” ran the disapproving front-page headline in The Jakarta Post on November 17.

The American contingent will be available for rapid relief should a natural disaster strike Indonesia. But in answer to a question on the Darwin deployment at a press conference prior to Obama’s arrival in Bali, Indonesian foreign minister Marty Natalegawa did not mention this positive aspect of the American presence.

He emphasized the strictly bilateral nature of the Australian-American agreement to post the marines to Darwin – in effect, distancing Indonesia from the decision. He made no mention of China. But clearly he was thinking of Beijing when he said that he “would hate to see” the marines’ stationing trigger a “vicious cycle of tensions and mistrust” in the region. [4]

In contrast, a Philippine official called the American troop move useful, and he did not have disaster relief in mind. The move, he said, “bolsters our ability to assert our sovereignty over certain areas, yes” – strengthening Manila’s hand in negotiations with Beijing over the South China Sea. [5] This was probably not what the other Southeast Asian claimants to parts of the Sea would have wanted to hear.

Beijing’s first responses to the Darwin decision were muted. A foreign ministry spokesman did nevertheless link economy to security when he observed that “it may not be appropriate [for the United States] to intensify and expand military alliances at a time when [its] economy is still recovering.” [6] Read with just a hint of Schadenfreude: The deep-in-debt Americans can’t afford to raise their security profile in Asia.

America is not and does not wish to be seen as a half-super power in Asia, consigned only to a security role. It is not in the interest of the United States for Southeast Asians to go to the Americans for ships, but to the Chinese for sales – as an American here in Bali expressed it. However warranted it may be in other contexts, the Darwin decision has reinforced this association. It has also increased the chance that Washington could be seen as siding with this or that claimant in the dispute over the South China Sea. It does not help in this context that in Manila recently Secretary of State Hillary Clinton called this body of water the “West Philippine Sea” [7].

In 2008-09 then-prime minister of Australia Kevin Rudd proposed a full-spectrum framework equipped with a summit that could address problems with both economic and political causes, results, and interactions. His idea was not well conceived or presented at the time. But the absence of such a venue may be regretted nonetheless, as the latest financial crisis continues to illustrate so painfully the elusiveness of global financial security, the need for transnational coordination and governance reform to speed economic recovery, and the rising role of the Pacific Rim in seeking and sustaining long-term solutions.

The Obama administration deserves credit for having pivoted toward Asia and involving itself adroitly in the multilateral economic and security architecture that it found here. That American involvement may be harder to focus on and fund, however, as confrontational domestic politics in the run-up to next November’s elections and fiscal restraints in response to the financial crisis make a high worldwide profile on security harder to afford.

Drawdowns in Iraq and Afghanistan should help. So, too, will a more concerted effort to rebalance America’s profile toward greater and more productive engagements with Asians in economic terms.

Notes
1. ASEAN Secretariat: Table 20 [exports], ; Table 27 [incoming FDI], ; data as of July 15, 2010 and August 15, 2011, respectively.
2. ASEAN Secretariat: Chart 4.6 [US and China], www.asean.org/publications/AEC-Chartbook-2009.pdf; “ASEAN-China Free Trade Area: Not a Zero-Sum Game” [annual rate], January 7, 2010.
3. “America’s deficit,” The Economist, November 12, 2011, p 14.
4. Marty Natalegawa, press conference, Nusa Dua, Bali, Indonesia, November 16, 2011.
5. Ramon Carandang, Office of the President of the Philippines, press conference, Nusa Dua, November 17, 2011.
6. Zhu Shanshan, “Beijing questions US military boost in Australia,” Global Times, November 17, 2011.
7. Chris Nelson, The Nelson Report, Samuels International Associates, Washington, DC, November 16, 2011.

Donald K Emmerson (http://seaf.stanford.edu/people/donaldkemmerson/) heads the Southeast Asia Forum at Stanford University. His writings include Asian Regionalism and US Policy: The Case for Creative Adaptation (2010).

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