Monday, February 15, 2016

United States goes a’courting ASEAN


President Barack Obama is hosting leaders of 10 Southeast Asian countries in Sunnylands in California this week in a bold move to deepen and broaden US engagement with ASEAN. This is a positive development but it also imposes risks that, in the end, will be up to ASEAN to manage.

Other Asia Pacific countries have regular meetings with ASEAN leaders. The United States has come late in acknowledging the geo-strategic significance of the organisation. Southeast Asian leaders have already had 18 summits with China and 17 with Japan.

The Sunnylands Summit is a continuation of the US rebalance to Asia which started in 2009. US–ASEAN summits have been held on the sidelines of East Asia Summit meetings since 2013 after the United States ratified the Treaty of Amity and Cooperation and appointed an ambassador to ASEAN — the first non-ASEAN country to do so.

The ASEAN group is the fourth largest trading partner of the United States and American companies are the largest single source of foreign direct investment in the region. In fact, US companies have invested more in Southeast Asia than they have in Japan, China and India combined. The US–ASEAN relationship was elevated to a strategic partnership in Kuala Lumpur in November 2015 and a Plan of Action is being worked out for engagement over the next five years.

The agenda for Sunnylands is to strengthen economic, political, security and people-to-people ties. But the meeting comes at a time when ASEAN is at sixes and sevens and has the potential to undermine regional coherence unless the ASEAN group is clear about what it wants from its relationship with the United States. This raises some big questions.

ASEAN is a central anchor in Asia’s geo-strategic order. Against how some realists called the odds, ASEAN has not only survived but has also been a useful fulcrum in managing relations among the major regional powers. Driven to unity and cooperation in its relations with large neighbouring countries, ASEAN has been larger than the sum of its parts. ASEAN’s approach to international diplomacy carries weight despite the contradictions in coordination and coherence across a vastly diverse group of nations.

ASEAN, in the face of China’s rise and its competitive rivalry with the United States, now seems more important than ever.

Maintaining ASEAN centrality will depend on progress with its own economic integration. The ASEAN Economic Community (AEC) came into force at the beginning of this year. It is an ambitious project to move ASEAN towards a single market and production base. The United States, China, Japan, Australia and others in the region have a deep intersection of interests in a strong ASEAN. Making the AEC work is now essential to that.

The Regional Comprehensive Economic Partnership (RCEP) is being negotiated between ASEAN and its six East Asian free trade agreement partners China, Japan, South Korea, India, Australia and New Zealand. RCEP is an ASEAN-led agreement that, if successfully negotiated, will entrench ASEAN centrality. At best it can reinforce and extend the AEC so it is of vital importance to conclude an ambitious agreement that ultimately matches or betters the ambition of the Trans-Pacific Partnership (TPP).

High on the US agenda in Sunnylands will be a strategy for dealing with the maritime territorial disputes with China in the South China Sea and getting more countries lined up to sign on to the recently concluded TPP.

ASEAN cannot approach the TPP with a common position any time soon. Four ASEAN members — Singapore, Malaysia, Brunei and Vietnam — are members of the TPP and Indonesia, the Philippines and Thailand have expressed interest in joining. It is unrealistic to expect that there can be movement towards their membership for half a decade or more. That leaves the three least developed countries, Myanmar, Cambodia and Laos, still at the starting blocks given the high hurdles to entry and also because they are not members of APEC — a requirement under the current TPP arrangement. Meanwhile ASEAN’s engagement in the East Asian economy is the main game.

The TPP is yet to be ratified by its 12 members — which include Japan, Australia and the United States, but not China or India — and will not come into force until at least the beginning of 2018. It is very unclear how much longer after that new members will have to wait before they can expect to join. And even when they are eligible, they will have to negotiate entry separately through US Congress. This could be a very divisive process for the ASEAN group.

Former Indonesian trade minister, Mari Pangestu argues in this week’s lead that the discussion around the TPP this week should not be about urging ASEAN members to join the TPP. Instead, ASEAN should ‘address the potential diversion of trade and investment away from those ASEAN members not in the TPP. This is especially important for the least developed ASEAN countries, such as Cambodia, which are set to lose the most.’

‘The Summit should consider other initiatives that will help to secure ASEAN centrality and provide some transition flexibilities for countries choosing to join the TPP’, she says.

If individual countries chase entry to the TPP there is a risk that the focus in ASEAN will shift away from the AEC and ASEAN’s core agenda in East Asia through RCEP. Dealing with ASEAN countries bilaterally in this manner is precisely what the United States opposes China doing on territorial issues in the South China Sea. And yet, ironically, the conduct of its economic relations with the ASEAN economies embeds this strategic error.

In the economic and security spheres, ASEAN needs a common position that embodies the interests of all ASEAN members. The Philippines, Vietnam and Brunei have territorial disputes with China in the South China Sea. Peaceful resolution of these disputes and counterbalancing China’s assertiveness will be the other major agenda item in Sunnylands. The United States and ASEAN have similar positions on these issues but, as Pangestu suggests, it would be unwise of the United States to wrong-foot ASEAN efforts to secure agreement on its code of conduct in the South China Sea.

‘Leadership and neutrality from the largest ASEAN country, Indonesia — which is not a claimant — can help achieve’ a code of conduct that is being negotiated in an ASEAN-led regional forum, says Pangestu. That would seem to be a more likely way forward towards a peaceful resolution than a US-led response, especially since the United States is not yet signed up to the United Nations Convention on the Law of the Sea (UNCLOS). Of course, ASEAN will need American backing but it is with ASEAN that the diplomatic initiative needs to remain.

ASEAN needs to balance the United States and China. China is ASEAN’s most important economic partner. ‘Asian countries may support America against China to avoid Chinese hegemony’, says Hugh White, ‘but not to preserve US primacy. They are too polite to say that out loud, but if President Obama listens carefully to his guests … that is what he will learn’.

Let’s hope that ASEAN leaders speak up, and also hope that the importance of ASEAN centrality to the region is not accidentally overlooked in the pursuit of other objectives.

The EAF Editorial Group is comprised of Peter Drysdale, Shiro Armstrong, Ben Ascione, Ryan Manuel and Jillian Mowbray-Tsutsumi and is located in the Crawford School of Public Policy in the ANU College of Asia and the Pacific.

 

5 comments:

  1. Clouds are gathering over arguably the world’s most successful developing region. The most serious are blowing from China, which has followed an erratic course almost since Xi Jinping became Asia’s “man-in-a-hurry” since he took office in March 2013.
    Since 2000, the ASEAN countries have averaged GDP growth of more than 5 percent, though per capita income and living standards still vary widely. McKinsey & Company judged ASEAN collectively to rank the lowest among the world’s largest economies in GDP growth volatility from 2000-2013.
    Still, economic cooperation has generally not lived up to the hopes and aspirations of most member countries. Over nearly five decades, the rhetorical bar regarding intra-ASEAN trade and investment has always been set significantly higher than actual performance.
    At the time of the initiation of the ASEAN Economic Community in 2015, the ten countries were still trading much more with the rest of the world than with one other, especially if trade figures are adjusted to separate intra-regional trade among Japanese and Chinese corporate shipments of parts and components for their regional supply chains.

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  2. Relations with the United States have been warm throughout ASEAN’s expansion and evolution, though U.S. preoccupation with the Middle East after 9/11 and the invasion of Iraq created significant anxiety in some capitals about the strength of American interest and staying power. Relations have been on the upswing since the beginning of the Obama administration, though some important moves such as the rebalance to Southeast Asia and closer engagement with Vietnam had bureaucratic if not high level political roots in the last year or so of the George W. Bush administration.
    To date, nervousness about China’s increasingly assertive efforts to solidify its claim to nearly 90 percent of the South China Sea—including parts of the 200 nautical mile Exclusive Economic Zones (EEZs) of five ASEAN countries—has been the single most important reason for the positive reception in the region to the US military rebalancing to East Asia and the US’s its broader political and economic re-engagement with Southeast Asia.
    China’s effort to create a modern mare nostrum in the South China Sea through bullying and the deployment of overwhelming numbers of maritime police vessels, Coast Guard and People’s Liberation Army (PLA) warships remain a continuing threat to regional peace and stability and drive other claimants closer to the United States. But in recent months, China’s fast slowing economy and unsettling blunders by the Central Bank have created even more imminent dangers to both to ASEAN economies and regional stability.

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  3. The main reason has been China’s emergence little more than five years ago as the single largest market for ASEAN exports of commodities and manufactured goods. Chinese imports and fast growing American investment were twin engines of growth that supported ASEAN throughout the global recession.
    Now China’s rapidly slowing growth and questions about its financial stability are imposing a serious and unexpected drag on ASEAN’s largest economies, where massive Chinese investment in mines as well as deforestation in order to create rubber and oil palm plantations and transportation infrastructure have left communities adrift in a wasteland of environmental devastation.
    The falling yuan and the Xi administration’s surprisingly clumsy handling of its financial turmoil have shaken investor confidence throughout the world. China’s economic slowdown is likely to continue until policymakers finally make well recognized but politically difficult reforms and the economy purges itself of excess capacity and non-performing debt. Meanwhile, the rapid fall in imports of commodities coupled with a weak and still tenuous recovery of the global economy pose a serious short and medium threat to the well-being of most of the ASEAN countries.

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  4. Several non-military moves of the Obama administration, including the 2009 Lower Mekong Initiative (LMI) and the Trans-Pacific Partnership (TPP), have been strongly welcomed by the relevant countries—Cambodia, Laos, Myanmar, Thailand and Vietnam in the case of the LMI and Brunei, Singapore, Malaysia, and Vietnam in the case of the TPP talks. But Thailand and one or more other countries have reason for concern that their own exports and attractiveness to multi-national investors will suffer as a consequence.
    How Washington responds to the situation in the South China Sea and its overall policy towards Beijing are certain to be high on the list of talking points for the ASEAN leaders, as will a range of multilateral and bilateral development and capacity building programs under the framework of the new U.S.-ASEAN Strategic Partnership and the LMI.
    Equally if not more important will be the TPP agreement and its uncertain fate in Congress. If approved by Congress, the far-reaching agreement will almost certainly have significant economic, financial and even domestic political impacts on both the four ASEAN signatories, as well as the six who are not. Non-signatory ASEAN countries as well as China will be disadvantaged by restrictions on third party content. The most likely short-term disadvantage will fall on Thailand, the largest ASEAN economy after Indonesia, because of its deep integration in regional supply chains and geographic centrality astride major regional transportation networks.

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  5. In addition TPP discussions and the South China Sea tensions, concern that the Islamic State is establishing a foothold in the region and the best means to counter its recruitment efforts and the establishment of terrorist cells will be high on the Sunnylands agenda. Economic and security concerns, particularly those where the root cause emanates from China, continue to drive several ASEAN states closer to the United States, openly in the case of Vietnam and the Philippines and quietly in the case of Malaysia and Indonesia. It is unsurprising that these issues will drive the conversation at Sunnylands. The Obama administration and ASEAN would also be wise to begin give equal weight to conversations on climate change resilience and energy governance, two areas which ASEAN countries are lagging but are beginning to articulate the need for external partnerships.
    Dr. Richard P. Cronin is the Director of the Southeast Asia program at The Stimson Center, a Washington, D.C.-based think tank.

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