Category Archives: China-Southeast Asia

Plain Talk On Taiwan Overshadows Wooliness of IPEF

NOT FOR THE first time, US President Joe Biden has said that the United States would defend Taiwan militarily in the event of China using force to take control of the island. Nor is it the first time that his diplomats have had to walk back his comments, even before the inevitable condemnation from Beijing. 

At the same time, Biden, who was responding to a question during a press conference during his visit to Tokyo, said there had been no change in US policy towards Taiwan. The US One China policy holds that Washington maintains formal diplomatic relations only with Beijing and none with Taiwan and exercises’ strategic ambiguity’ over Beijing’s One China principle that Taiwan is an inalienable part of China to be reunified one day. Part of that ambiguity is not to say publicly that the United States would defend Taiwan militarily.

It has always been an illusionary fudge. The same year that Washington and Beijing established formal diplomatic ties (1979), setting the intractable Taiwan issue to one side, the US Congress passed the Taiwan Relations Act. The act guarantees US support for the island and specifies that the US must help Taiwan defend itself. It has been the basis on which the United States has continued arms sales to Taipei.

As regional leaders watch China build up its armed forces and demonstrate prowess in the skies around Taiwan and the waters of the East and South China Seas, concern about military action against Taiwan has increased. Pressure has been quietly mounting for the United States to be explicit about its military support for Taiwan in such an event. 

Recently, former Japanese Prime Minister Shinzo Abe said it was time for the United States to state clearly that it would defend Taiwan. Our man in Tokyo tells us that the incumbent, Fumio Kishida, has passed on the same view. 

Opinion in Washington splits between officials and politicians taking a more assertive posture towards Beijing and those who fear provoking Beijing into advancing its plans for reunification. Russia’s invasion of Ukraine has made the question of whether something similar could happen in Taiwan more prominent in Washington discussions.

Beijing’s view, repeated after Biden’s latest remarks, is that the Taiwan question and the Ukraine issue are fundamentally different. Foreign ministry spokesman Wang Wenbin said that to compare the two is absurd. 

Biden was speaking a truth hiding in plain sight as his administration seeks haltingly to mould a China policy that incorporates the direction set by his predecessor Donald Trump, but without the idiosyncratic rhetorical toxicity and disregard for diplomatic process. 

His comments on Taiwan overshadowed the announcement of his administration’s Indo-Pacific Economic Framework (IPEF). The IPEF aims to fill the vacuum of US economic engagement in the region left by Trump’s withdrawal from the US-initiated Trans-Pacific Partnership (TPP) in 2017 and cold-shouldering of its successor, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

At this point, the IPEF is little more than a bare framework and far from a conventional trade agreement that most of the 13 US allies that have signed up for it would prefer. The trade-agreement adverse Biden administration may cast it as a trade arrangement for the 21st century. However, it reflects domestic US political realities, including needing to satisfy Biden’s organised labour constituents and the groundswell of anti-China economic nationalism in Washington, as it does the promotion of regional economic integration.

Many of the South and Southeast Asian participant countries will be uneasy about the way the IPEF is being portrayed within the United States and among Washington’s closest regional security allies as a way of containing China’s growing economic sway over the region. China’s closest neighbours want deeper economic relationships with both powers.

The IPEF has four pillars:

  • fair and resilient trade, encompassing seven subtopics, including labour, environmental, and digital standards; 
  • supply chain resilience; 
  • infrastructure, clean energy, and decarbonisation; and 
  • tax and anti-bribery and anti-corruption.

Participants in the IPEF can pick and choose from that menu as they wish. Even though this should eliminate some of the horsetrading that so often stalls conventional trade deals, negotiating agreements for each IPEF pillar will neither be quick nor easy.

The target deadline is likely the Asia-Pacific Economic Cooperation (APEC) Leaders’ Meeting in November 2023, which the United States will be hosting.

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RCEP Arrives

THE CHINA-STEERED Regional Comprehensive Economic Partnership (RCEP) will come into effect on January 1, bringing together China, Japan, South Korea, Australia, New Zealand and the ten ASEAN nations in the world’s largest free trading agreement (FTA).

The 15 nations account for more than half the world’s exports and almost one-third of its GDP and its population. More significantly, they will likely account for most of the world’s economic growth in the coming decades.

RCEP was signed on November 15, 2020, having been hurried forward by Beijing. Ratification by the required nine signatory nations was achieved on November 2, and the agreement will come into effect in the minimum stipulated 60 days. Indonesia, the Philippines, Malaysia and Myanmar are the only four nations left to ratify it.

About 90% of goods will be traded tariff-free within RCEP, although that is largely the case already as ASEAN has FTAs with Australia, Japan, New Zealand and South Korea. The bigger benefit will likely come from dismantling non-tariff barriers.

This will bolster China, Japan and South Korea by strengthening their supply chains in the region. Regional supply chains are likely to become more China-centric, and, as the largest economy, China will be well-positioned to dictate terms and technical standards.

RCEP’s less industrially advanced nations such as Cambodia and Laos will benefit less substantially and have been given extensive phase-in periods to ease the transition. (Long transitions, exceptions, exclusions and non-enforceability of many of its 20 chapters are quite a feature of RCEP.)

The raw materials, machinery, motor vehicles and consumer products sectors are likely to benefit most, but trade in agricultural products, always contentious, is not covered under RCEP. RCEP also ducks other controversial issues such as subsidies for state-owned enterprises and labour rights.

Trade in services will be liberalised along two tracks. One group of countries — China, Myanmar, Thailand, Cambodia, Laos, Vietnam, the Philippines and New Zealand — will open selective service sectors on a ‘positive list’ basis. The others will open all service sectors unless expressly excluded.

RCEP’s membership has considerable overlap with that of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The latter addresses indirect barriers such as state-owned enterprises, subsidies, labour rights, environmental protections and climate change.

It also provides stronger intellectual property rights protections than RCEP. This may steer investment to RCEP members who are also part of CPTPP.

RCEP should help drive economic recovery in Southeast Asia in the short term as the region battles through the latest surge of Covid-19.

In the medium term, it should increase trade and investment within the region. Estimates vary widely, but there is agreement that it will be material and in part at the expense of other parts of the world.

This will accelerate the emergence of a China-centric regional economic sphere that has been occurring for some years and is distinct from markets in the West and the supply chains that feed them.

The shift of the world’s centre of economic gravity to the region would be slowed if the United States and the EU were to join one of the two groupings. Prospects for either are dim, with an increased number of bilateral trade agreements more likely, especially with security partners.

In the longer term, as RCEP’s member countries develop, they will have to address the structural, protectionist issues that the agreement has parked to the side. That will bring political tensions.

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China Demonstrates Hands-On Non-Interference In Myanmar

CHINA REGARDS THE military coup in Myanmar as an internal affair, and thus not one on which it needs to express any deviation from its default position on non-interference.

Given Beijing’s long-standing ties to the Myanmar military, it is safe to assume that its sympathies do not lie with the overthrown elected civilian government’s supporters. Its blocking of any action at the UN Security Council, such as imposing sanctions over the increasingly bloody February 1 coup, confirms that. So does Foreign Minister Wang Yi’s latest commitment to working with the Association of Southeast Asian Nations, as ASEAN espouses non-interference in member states’ affairs.

That is not to say that China does not have interests in the country. One is the 800-kilometre-long twin oil and gas pipelines that run from Kyaukpyu, the deepwater port that China is building on Myanmar’s Bay of Bengal coast, to Kunming, the provincial capital of Yunan in southwestern China. The pipelines, like Myanmar itself, are a key part of the Belt and Road Initiative. It gives China a short cut to the Indian Ocean, avoiding the chokepoint that is the Strait of Malacca.

The port and the pipelines are centrepieces of the China-Myanmar Economic Corridor, which passes through the rebellious Shan state. China plans several projects in the Shan and neighbouring Kachin states, which lie along the entirety of its strife-ridden border with Myanmar and where China periodically tries to broker peace.

These projects include three cross-border economic cooperation zones, the Myitkyina Industrial Zone in Kachin state and the railway from the Shan border town of Muse to Mandalay, which will provide a through rail link from Kunming to both Kyaukpyu and Myanmar’s largest city, Yangon, where China is also building residential, commercial and industrial facilities.

Many Chinese enterprises are also involved in resources extraction, including jade mining. China is Myanmar’s largest trading partner. The total value of two-way trade was $12 billion in 2019-20, with China running a $1.3 billion trade surplus, according to Myanmar’s Commerce ministry. There is also a lot of cross-border smuggling.

Anti-Chinese sentiment –never far from the surface in days of the former junta — has risen across Myanmar. In the face of threats to blow up the oil and gas pipelines, Beijing reported moved troops to its border opposite Muse at the beginning of the month, although it is unclear what they will do beyond providing a show of force. Moving troops into the country would require a tortuous twisting of the definition of non-interference.

So far, Beijing has just sought assurances from the Myanmar military about the pipelines’ security. With some cause. Fighting between the Kachin Independence Army and Myanmar’s military is reported across Kachin and northern Shan states, where Naypyidaw’s rule is mostly in name and requires repeated military crackdowns.

The Brotherhood Alliance, which includes the Myanmar National Democratic Alliance Army, Ta’ang National Liberation Army and Arakan Army, all of which are based along the Chinese border, says it is ready to join forces with all ethnic minorities to fight the regime if the killing of protesters continues.

The military has for decades fought ethnic armed organisations across Myanmar. Intensification of those conflicts was always likely to be part of the coup’s fallout, a development that Beijing will find difficult to ignore. Quietly, it will continue to provide its old friends in Myanmar’s military with diplomatic, financial and military support while continuing to warn against external interference in an internal affair.

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RCEP Provides Beijing With A Win-Win

Schematic representation of membership of the East Asia Summit, RCEP, ASEAN, the Quad and the CPTPP or TPP-11. Graphic: China Bystander.

CHINA IS ON the north-northwestern rim of the Regional Comprehensive Economic Partnership (RCEP). Yet it will be at the heart of the economic bloc that the trade agreement will cement.

RCEP is due to be signed on November 15 during the virtual twin ASEAN and East Asia Summits. The latter involves the ASEAN Plus Six — the six being China, Japan, South Korea, India, Australia and New Zealand — and the United States and Russia. As RCEP does not include India, the United States or Russia, it will have a summit of its own, too.

The 15 RCEP members (China, the ten ASEAN nations, and the four other countries with which ASEAN has free trade agreements, Australia, Japan, New Zealand and South Korea) account for approaching 30% of the world’s gross domestic product and one-third of its population. More significantly, they will likely account for most of the world’s economic growth in the coming decades.

Whether that will make this the Asian century rather than the Chinese century in succession to the long American century, is a matter for the future. For the present, it is the world’s engine of growth that will drive the recovery of the global economy from its Covid-19-induced recession.

India withdrew from the RCEP negotiations late on, concerned about both the impact of the dismantling of regional tariffs on its farmers and Chinese imports on its manufacturers. It may return at a later date. Most ASEAN countries would welcome that. Beijing will be indifferent, especially if border tensions with India remain.

The United States was never in, pursuing the TransPacific Partnership (TPP) instead as a geopolitical counterweight to the China-led RCEP as part of President Barak Obama’s ‘pivot to Asia’. President Donald Trump’s withdrawal from the TPP as soon as he took office in 2017 left its successor, the Comprehensive and Progressive Agreement for TransPacific Partnership (CPTPP, also known as TPP-11), a pale shadow of a competitor to RCEP, especially as Beijing moved purposefully to fill the resultant vacuum.

The Trump administration’s putative Indo-Pacific economic grouping based on private sector investment and the Quadrilateral Security Grouping (the Quad: India, Japan, Australia and the United States) never amounted to anything. Many ASEAN nations are uneasy about the Quad, uncomfortable with its security and military focus that pushes them towards choosing between Washington and their neighbour who is often their main trade and investment partner.

There is talk that the prospective incoming US president, Joe Biden, might join the CPTPP, but this Bystander feels it is too late; that horse has bolted. An alternative would be for the United States to seek to join RCEP, on the better-to-be–inside-the-tent theory. That would require a US-ASEAN free trade deal first.

There is more than symbolic significance in the fact that the RCEP is being signed before the next US administration takes office, even if it will not be implemented until the second half of 2021, following ratification by the signatories.

For Beijing, RCEP is an opportunity to write regional trade rules to its advantage, and also diversify its trade at a time of both unsettled relations with the United States and an eastward shift of the global economy’s centre of gravity. A win-win.

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China Extends Its Sway Over Mekong River

Chinese Premier Li Keqiang address the third Lancang-Mekong Cooperation Leaders' Meeting via video link from Beijing on August 24, 2020. Photo credit: Xinhua/Rao Aimin.

NOT FOR THE first time, there is concern that China’s hydro dam-building on the Mekong river is causing environmental harm upstream and low water levels downstream. And not for the first time, Beijing is pouring money on troubled waters.

Multiple hydroelectric dams are being built along its course and its tributaries, mostly in China, which calls the upper reaches of the river the Lancang, but also in Laos, which aims to be the ‘battery of Asia’.

Beijing rejects the accusation that it causes drought conditions downstream, where the low water levels are damaging agriculture and fisheries. The Mekong is the world’s largest inland fishery.

However, two days ago, Premier Li Keqiang (seen in the screenshot above) told a video meeting of the China-led Lancang-Mekong Cooperation (LMC) initiative that Beijing was willing to offer more assistance on water resources, road, rail and river transport connectivity and public health to its Southeast Asian neighbours.

He also said that China would share data on the river waters year-round, and not just during flood season. The intergovernmental Mekong River Commission (MRC) — which involves Thailand, Cambodia, Laos and Vietnam and has mostly been elbowed aside by the LMC — has called for year-round data for some time.

Mekong river nations’ leverage over China is limited. Water shortages would have to get far worse for the downstream countries to risk jeopardizing their relations with Beijing by pressing it over its dams.

Laos is unlikely to compromise on its hydropower ambitions, since electricity exports bring in much-needed foreign currency. At the same time, Thailand and Vietnam will be keen to keep importing Lao hydroelectricity to power their industrial development.

Undoubtedly, it is Beijing’s vision that is driving the development of the river. This encompasses not only dams but also development projects, special economic zones and trade that will integrate the region into the Belt and Road Initiative.

At some point, that might tempt the United States to look for means to deter companies and banks involved.

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Troubled Waters Stir Again In Disputed South China Sea

The US Navy's guided-missile cruisers USS Bunker Hill, front, and USS Barry seen in the South China Sea, April 18, 2020. Photo credit: Nicholas V. Huynh/US Navy. Public domain.

THE SAILING IN mid-April of the Liaoning along with the rest of the aircraft carrier’s battle group for the South China Sea on a training exercise was one of the less noted recent incidents in the maritime region where tensions are again rising.

Warships of the United States (see photo above taken in the South China Sea on April 18) and Australia have also arrived in the waters where for much of this month a Chinese survey ship, the Haiyang Dizhi 8, has been shadowing an exploration vessel operated by Petronas, Malaysia’s state-owned oil and gas company.

Separately, Beijing has created two new administrative districts covering Macclesfield Bank, the Spratly Islands and the Paracel Islands, drawing protests from the Philippines, which claims infringement on its territorial waters. Earlier, Vietnam protested to China over the sinking of a Vietnamese fishing boat near the Paracels, which is says was rammed by a Chinese vessel.

Repeated confrontation between China and Vietnamese fishing boats has been the low-level frontline in this dispute.

Vietnam, the Philippines, Malaysia and China, along with Brunei and Taiwan, have conflicting territorial and jurisdictional claims in the South China Sea.

Washington already believes Beijing restricts freedom of navigation in the disputed waters of the South China Sea to advance its disputed territorial claims. The latest events will give it further opportunity to accuse Beijing of using the Covid-19 pandemic to step up its intimidatory behaviour towards the other nations in the region.

US Secretary of State Mike Pompeo has already done just that and claimed that Beijing is augmenting its military bases at Fiery Cross Reef (which China calls Yongshu) and Subi Reef (Zhubi), and landed special military aircraft on Fiery Cross Reef.

Beijing is seen in Washington as having taken similar opportunistic advantage of the pandemic over Hong Kong.

None of this bodes well for any progress in the already protracted discussions between ASEAN and China over a South China Sea Code of Conduct — especially as a PLA-Navy spokesman says the Liaoning will now be regularly conducting training exercises in the South China Sea.

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ADB Lays Out Rocky Climb Back Up The Cliff

NO ONE CAN say how widely the Covid-19 pandemic may spread, and containment may take longer than currently projected. The possibility of severe financial turmoil and financial crises cannot be discounted. Sharp and protracted declines in commodity prices and tourist arrivals will challenge dependent economies across [Asia].

On such a downbeat, but realistic note, the Asian Development Bank introduces its 2020 Outlook, published on April 3. Its underlying theme is that the nascent recovery from last year’s decelerating pace of growth because of US-China trade tensions and the related global manufacturing recession has been snuffed out by the pandemic, and then some. Growth will rebound next year, the Bank believes, but not before it declines steeply this year.

For China, the Bank is forecasting growth to tumble to 2.3% for the year, against 6.1% last year and 6.7% in 2018. The high-frequency indicators from the early months of the year showing double-digit contractions in industry, services, retail sales and investment imply that the economy could likely see a double-digit contraction reported for the first quarter. The GDP figures are due on April 17.

To put that into context, the likely impact of Covid-19 will be more severe for China than that of the Asian financial crisis in 1997–98, the SARS (severe acute respiratory syndrome) epidemic of 2003 and the 2008 global financial crisis.

However, the recovery in the second half of the year implied by the growth forecast for the full year is seen carrying into 2021. The ADB expects growth will rebound to 7.3% in 2021, helped not just by the return of regular commercial activity but also by easy monetary policy and hefty and probably repeated fiscal and infrastructure stimulus on the part of governments.

The knock-on effect across the region will be as severe, as trade growth weakens further on the back of waning domestic demand, a halt to tourism, and transport and other supply disruptions because of the pandemic. The ABD forecasts regional growth of 2.2%, down from 2019’s 5.2%, but then a recovery to 6.2% in 2021. Excluding Asia’s newly industrialised economies (South Korea, Taiwan, Hong Kong and Singapore), growth is seen to slow to 2.4% in 2020 from 5.7% in 2019, and then to pick up to 6.7% in 2021.

A further drag on growth in China and the region, noted by the United Nations Conference on Trade and Development (UNCTAD), will be the fall in profits for foreign affiliates of multinational enterprises operating in the region, which in turn will reduce funds available for direct reinvestment:

On average, the top 5,000 multinationals, which account for a significant share of global foreign direct investment (FDI), have now seen downward revisions of 2020 earnings estimates of 30% due to Covid-19, and the trend is likely to continue. Hardest hit are the energy and basic materials industries, (-208% for energy, with the additional shock caused by the drop in oil prices), airlines (-116%), and the automotive industry (-47%). The latter industry was fate first to see earnings revisions anticipating the supply chain shock. Industries now expecting to be hit by a global decline in demand are rapidly catching up.

UNCTAD Investment Trends Monitor, March 2020 Special Edition

As the reinvested earnings component of FDI in Asia was 41% in 2018, these substantial downward revisions foretell sizeable effects on FDI from earnings losses. Downward revisions to multinationals earnings in China average 21%, UNCTAD notes.

The risks to its forecasts, as the ADB acknowledges, are nearly all to the downside and substantial. The assumption that the pandemic will be contained globally this year and normal business conditions will return next is a ‘good-case’ one: vast uncertainty about the duration and severity of the pandemic remains. The potential for second and third waves of the outbreak exist.

Thus the ADB’s broad range for the total global cost of the pandemic of between $2.0 trillion and $4.1 trillion, equivalent to between 2.3% and 4.8% of global GDP, with China’s cost approaching 5% of GDP. As the ADB also says, ‘the possibility of a financial crisis cannot be discounted and the pandemic could also bring about fundamental changes to the global economy over the long term’.

Most notable of those would be a retreat from the globalization that has underpinned the rise of developing Asia, with multinationals repatriating production and shortening global supply chains.

However, it is not just the pandemic that hangs heavy over the outlook for the region. Trade conflict between Washington and Beijing remains a significant risk, especially if the pandemic causes China to fall short on its commitment to increase imports of US goods and services in 2020 and 2021 by $200 billion over 2017 values, as the Phase One trade agreement between the two countries requires.

As this Bystander has noted, this was always an ambitious target, as are its components for imports of agricultural, manufacturing and energy products and services. With the president of the United States facing re-election in November and the US economy already taking a severe hit from the pandemic, nothing adverse can be ruled out.

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China-Malaysia Relations Pass Into A Chilly Phase

RELATIONS BETWEEN MALAYSIA and China have a history of blowing hot and cold. Malaysia’s new prime minister, if new is an appropriate adjective for the 93-year old Mahathir Mohamad, has brought a renewed chill, even though he has been a longtime friend of China by dint mainly of his criticisms of the West.

Mahathir has halted several high-profile, big-ticket infrastructure projects involving Chinese firms for review, including:

  • the $20 billion East Coast Rail Link under construction by China Communications Construction Co. and mostly financed by Export-Import Bank of China;
  • the $10 billion Melaka Gateway project , which involves three artificial islands and a cruise ship terminal, being developed by PowerChina International; and
  • the $2.5 billion trans-Sabah natural gas pipeline led by a subsidiary of China National Petroleum Corp.

Restrictions have also been imposed on the sales of units in Forest City, a $100 million real estate development on four artificial islands aimed at buyers from China.

There is also a report that three pipeline projects suspended in July have been cancelled outright, an oil and gas pipeline in peninsula Malaysia and another on Borneo, and a pipeline linking a Petronas refinery and petrochemical plant in Johor to Malacca. They had a combined cost of $2.8 billion.

Mahathir has several reasons for applying the brake.

One is purely financial. The first three are expensive projects that saddle the country with even more debt. Malaysia can just about manage its foreign-currency debt, but only just about. It cannot afford to let its financial position deteriorate, which, if the troubles of Argentina’s peso and Turkey’s lira spillover into other emerging market currencies, it could do quickly. Furthermore, Mahathir had long held that the country’s debt holds back its development. Nor does he want to risk Malaysia going the way of Sri Lanka, which had to yield control of a new port to China to settle debt it could not repay.

A second is political. In the wake of the 1MDB scandal. Mahathir is cracking down on what it believes is a whole raft of corruption-tainted deals struck during the previous administration of Najib Razak. The three deals mentioned above were all made within Najib’s time, and Mahathir has criticised them for being opaque.

A third is geopolitical. Mahathir is concerned about China’s increasing activity in the disputed waters of the South China Sea, where Malaysia has claims of its own over a dozen Spratly islands and a large acreage of oil and gas. Being in hock to China, which is also Malaysia’s largest trading partner, weakens Kuala Lumpur’s hand in pushing back against Beijing’s maritime assertiveness. Mahathir is strengthening relations with Japan and Australia to counterbalance China’s influence.

A fourth reason Malaysia’s relationship with its city-state neighbour, Singapore. The two nation’s relations with China tend to be the inverse of each other. Singapore’s relations with China are currently on the up.

Mahathir has said he will hand over the presidency to his deputy Anwar Ibrahim at some point, but may choose to make that point further into the future than he initially indicated (within two years). Anwar, though he has backed the review of the Chinese investments, would likely be more favourably disposed towards China. The further out the hand-over, the longer Malaysia-China relations will remain chilly.

Update: The Financial Times is reporting that Pakistan is initiating a similar review of the China-Pakistan Economic Corridor. That would have greater weight for Beijing than Malaysia’s review because of the corridor’s strategic importance, including its access to Gwadar, the port on Pakistan’s south coast on the Arabian Sea.

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Trump’s 3-D Re-engagement with Asia: Development, Defence and Diplomacy

THE BELT AND Road Initiative and the United States’ vision for the Indo-Pacific have a common end if different means.

Both are critical components of establishing the two powers’ respective influence over a region that is already well on its way to becoming the world’s economic centre. The former uses state-led infrastructure; the latter seeks to unleash the commercial might of private business, primarily US private business.

The Trump administration’s withdrawal from the Trans-Pacific Partnership, one of its earliest acts, cemented regional fears among the United States’ allies that the ‘America First’ rhetoric of the Trump campaign in 2016 presaged US withdrawal from the region, leaving a vacuum that China would need little encouragement to fill.

Whatever the validity of that fear — and US commercial imperatives were always going to mitigate against significant disengagement — Washington has had a struggle to reassure its traditional regional allies, who, after all, still have to live cheek-by-jowl with their huge neighbour, regardless of the tweet-du-jour coming from Washington.

The uncertainty surrounding the outcome of both Trump’s putative trade war with Beijing and his intervention in North Korea through a summit with North Korean leader Kim Jong-un have kept nerves taught.

While the political scientists hijacked the term Indo-Pacific from the marine biologists and oceanographers slightly more than a decade ago, it has only been over the past five years than it has gained currency with political leaders in the four key Into-Pacific powers, the United States, India, Japan and Australia. In the past year, it has started to take shape as an economic entity.

Today, US Secretary of State, Mike Pompeo, put some more flesh on those bones by announcing $113 million of investment in technology, energy and infrastructure investments in the region. This was, he said, a ‘down payment’ on a new era of US economic commitment to peace and prosperity in the region.

US officials say that this commitment is not aimed at countering the Belt and Road Initiative, but the underlining of the transparent and commercially led nature of the investments and the choice of phrases such as ‘strategic partnerships, not strategic dependence’ speak for themselves, as does Pompeo’s assertion that the United States would oppose any country that sought to dominate the region.

The money will go to improving partner countries’ digital connectivity and expanding US technology exports to the region ($25 million), helping regional energy production and storage (some $50 million) and creating a US government agency to support infrastructure development ($30 million). Much of the remainder of the money will go to a fund to let regional nations access US private legal and financial advisory services.

There will not be, it seems, a return of the United States to TPP. Pompeo said that the Trump administration would only be doing bilateral trade deals in the region.

He did, though, trail a coming announcement by US President Donald Trump on regional security assistance, reaffirming the administration’s emerging three-D approach to the region: development, diplomacy and defence.

Compared to, say, the $62 billion that China is providing for the China-Pakistan Economic Corridor and the estimated $1 trillion of Belt and Road Initiative projects underway, $113 million looks like small beer, and especially as much of the money will end up delivering export sales of goods and services to US firms. An America First foreign policy is still an America First policy.

The question becomes then, can US business leverage that into a credible competitive alternative model for regional development. Washington’s traditional regional allies will still take some convincing as much as they would like to have a strong counterweight in the United States to China’s growing regional power and influence.

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How Much Candidate Trump Will President Trump Contain?

Donald Trump seen in Washington, November 2011. Photo credit: Gage Skidmore. Licenced under Creative Commons

THE U.S.PRESIDENT-ELECT, Donald Trump (above), had few kind words for China during the presidential election campaign. He accused it of stealing millions of American manufacturing jobs and threatened protectionist tariffs against Chinese exports.

Yet to China he was the preferable candidate. His Democratic rival, Hillary Clinton, was seen, on the basis of having been seen at close quarters as U.S. secretary of state, to be no bosom buddy of Beijing.

The maverick nature of Trump’s campaign and his questioning of the basis of the United States’ traditional security alliances had, however, caused some optimism in Beijing that his election would weaken America’s international standing in the region and that his reservations about free-trade agreements would kill the Trans-Pacific Partnership (TPP), the economic prop of Washington’s ‘Asian pivot’.

However, set against that the uncertainty and volatility in regional affairs that a prospective Trump presidency will bring, in particular on the Korean peninsula. Beijing does not like uncertainty, and there less than anywhere.

Worse, long-cultivated contacts with the Washington China-policy and financial elite have been rendered for nought by the imminent arrival of a US president who at 70 has never held elected office and so has no track record, no known team and no known thought-through China strategy. Beijing also has reason to fear that Trump’s victory will put at risk the forces of globalisation that have propelled China’s economic and thus global ascendency.

It is unrealistic to expect that a Trump administration can repatriate low-wage manufacturing jobs. Those that automation and technology have not rendered redundant are already going to Vietnam and elsewhere in Southeast Asia if they are going anywhere as China ‘rebalances’. Moreover, China is only one aspect of the economic trends that are transforming the US economy in a way that leaves so many Americans, especially older, white ones, feeling left behind, a sentiment Trump so expertly tapped during his election campaign.

That is not to say that Beijing will not try to score points against electoral democracy, though it will not want to examine too closely the insurgence of rank-and-file voters against a ruling political class. Beijing is also unlikely to pass the opportunity to take an early measure of the next US president, probably by being more assertive in the South China Sea.

That, though, is a double-edged sword. It risks prodding Trump in the direction of politicising the issue rather than contesting it on legalistic grounds — such as through asserting freedom of navigation rights and using the UN Convention on the Law of the Sea. That approach, adopted by the Obama administration, has given Beijing scope to build its presence in the South China Sea with a lessened risk of direct US military confrontation.

Beijing’s scope for action now will also be tempered by the reactions of other regional nations to Trump’s election victory. Japan, for one, may see an opportunity to fill a potential vacuum both by building up its military capabilities and by being more active with its development aid and investment in the region. The Asian Development Bank, which falls under its sway, easily outguns the Beijing-created Asian Infrastructure Investment Bank.

South Korea, too, may end up with nuclear weapons from a Trump administration, a development that would be unwelcome in Beijing, not least because it ups the nuclear stakes on the peninsula, elevating the risk of instability that Beijing so abhors.

Further south, the Philippines, Malaysia, Thailand and Indonesia are all calculating where their strategic interests lie between China and the United States.

There has been a quiet (pace the Philippines new president Rodrigo Duterte) shift of emphasis towards developing stronger economic links with China while retaining Washington’s security umbrella. That shift will be being recalibrated in the light of candidate Trump’s criticism that US security partners are ‘free-loading’.

He is not the first US president to have made that complaint, but few have suggested that the US will take its umbrella away if its regional allies do not contribute their fair share to the costs.

Whether President Trump will take the same view as candidate Trump on this and all the other issues that touch on China is probably as much of a guess in Beijing as it is in the rest of the region, and even possibly, at this point, in Washington.

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Filed under China-Japan, China-Koreas, China-Southeast Asia, China-U.S.