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The US and economic stability in
Asia
By Russell L Smith and Caroline
G Cooper
WASHINGTON - Last month's Association
of Southeast Asian Nations (ASEAN) meeting and
Asia-Pacific Economic Cooperation (APEC) forum ended
very differently, sparking concern among trade watchers
as to the future role played by the United States in
Asia.
The ASEAN meeting concluded with a
stronger commitment by member countries and observers
(Korea, China, Japan and India) to integrate the region
more fully by 2020, suggesting that Asia is once again
pursuing an economic path exclusive of the United
States. This development should be particularly pleasing
to the former Malaysian Prime Minister Mahathir Mohamad,
who stepped down at the end of October and was the first
to advocate the formation of an East Asia economic
community in 1990.
But the APEC leaders' meeting
revealed a much different picture. That is, the United
States still wields much influence in Asia, especially
when President George W Bush puts Asia high on his
policy agenda. Despite strong protests from Mahathir,
the United States won support among APEC leaders to
restart World Trade Organization (WTO) talks using the
Derbez text from Cancun. Bush kept the talks centered on
security and strengthened support for his war against
terrorism. Bush was sucessful in redirecting the agenda
in part because Asian countries were embarrassed over
Mahathir’s blatantly anti-Semitic comments at an
Organization of Islamic States meeting in Malaysia just
a few days prior to the ASEAN meeting, not to mention
Mahathir's attacks on both the United States and the
WTO.
In fact, the results of the ASEAN and APEC
meetings were strikingly similar to those of the summit
meetings held in November 2000. It seemed that Asian
regionalism was shaping up to be a more potent force at
that time; China was beginning to exert more economic
influence in the region, the United States was less
engaged in Asia and only a few countries were
considering bilateral free trade agreements (FTAs) as a
substitute for the WTO. The re-emergence of Asian
regionalism appears less threatening today in large part
because in recent months the United States has displayed
more interest in the region, particularly as way to
counter China.
Since September, US officials
have stepped up pressure on Chinese officials to float
the yuan and comply more fully with China’s WTO
commitments. And US pressure has produced mixed results.
Chinese officials have committed to move gradually
towards a more flexible exchange rate and the government
has decided to relax some controls on the outflow of
capital.
Both US Trade Representative Robert
Zoellick and Commerce Secretary Donald L Evans, during
their trips to China in October, pressed Chinese
officials to implement fully China’s WTO commitments
relating to the protection of intellectual property
rights (IPR), fair distribution and trading rights, and
market access for agricultural goods. But industry
groups and some US lawmakers are not satisfied. They
have complained that the Bush administration’s handling
of the issue has included “too much rhetoric” and have
asked Bush to not only confront China on the issue, but
also consider undertaking a Section 301 unfair trade
investigation.
As the Bush administration works
to placate domestic interests on the China issue, it may
not be paying enough attention to China’s growing
popularity in Asia. US officials are forgetting that
countries in the region welcome China’s stable currency,
as it helped to mitigate contagion during the Asian
financial crisis. The importance of maintaining stable
currency regimes in the region has prompted countries to
enter into bilateral currency swaps with China and to
consider a more cooperative regional financial
framework. US officials have also failed to consider why
China has been so successful in expanding its economic
ties with ASEAN countries.
For some countries in
Southeast Asia, China is now a more important economic
partner than the US. The least developed countries in
the region, Cambodia and Laos, depend heavily on
economic development assistance from China, and former
Asian Tigers are hopeful that the China–ASEAN FTA will
expedite the return of foreign investment to the region
and increased access to the Chinese market.
China’s success in expanding its economic
influence in Southeast Asia often comes at the expense
of the United States. Chinese officials displayed shrewd
diplomatic skills at the WTO Ministerial Conference at
Cancun in September, currying favor with developing
countries on specific issues while taking care to
demonstrate a willingness to make concessions in other
areas in order to satisfy industrialized countries.
China also engaged in astute diplomacy at the recent
ASEAN summit, where Chinese officials bolstered their
efforts to integrate China with the region by agreeing
to a Treaty of Amity and Cooperation, while
simultaneously exploring enhanced economic ties with
Japan, South Korea and India,
At the APEC
meeting, Chinese President Hu Jintao encourage countries
to maintain the stability of the region and to counter
efforts by the US to increase economic ties with
non-Asian members of APEC such as Australia. Both China
and the US have proposed the expansion of trade ties
with Australia.
The United States does remain
important to many Asian countries, however, both as an
economic partner and regional stabilizer. Singapore was
the first Asian country to complete a bilateral FTA with
the US, and now Australia and Thailand are following
suit. But bilateral FTAs with the US are only part of
these countries' strategy. They also seek to balance
their regional interests by negotiating agreements with
other large economies in Asia - Japan and Korea. The
Bush administration might be able to take a lesson from
these countries regarding future US trade policy in
Asia.
Under Bush, US trade policy in Asia has
centered on bilateral FTAs with countries that Zoellick
has deemed qualified according to certain criteria and
which offer economic advantages to US exporters, not to
mention strategic advantages to the Bush administration.
But truth be told, trade policy in Asia has been driven
by one factor - support for Bush's "war on terror".
Asian countries selected as viable FTA partners have
supported the war in Iraq and are considered vital
partners in the war. Australia and Thailand are two
cases in point. Yet US FTA policy has seeminly
overlooked two of the US's most important trade and
security partners - Korea and Japan - both of whom
supported Bush’s "war on terror" and contributed to the
war in Iraq.
The Bush administration must do
more to engage Asian partners to ensure a fair balance
of both economic and security power in the region. Asian
regionalism by default centers around China, as
countries now depend on the Chinese market for economic
survival. Much of this has resulted from the lack of
full US engagement in the region. Indeed, US FTAs with
Singapore, Australia and Thailand, as well as continuing
dialogue in APEC will help to balance regional interests
in the short-term. But the United States will have to
think outside the box to achieve balance over the long
term. Most importantly, economic stability in Asia will
require more active, positive economic engagement by the
US with Japan and Korea.
(This article is posted
with the permission of KWR International Inc, a
consulting firm specializing in the delivery of
research, communications and advisory services.)
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