US eyes Southeast Asian markets to take on China

US eyes Southeast Asian markets to take on China

Fearful that the US may get sidelined in Asia, Clinton begins a whirlwind tour of the region

At a gathering of business executives in Cambodia this week, secretary of state Hillary Rodham Clinton plans to urge the expansion of US trade and investment across Asia, particularly in Southeast Asian nations on the periphery of China.

It has become more common these days for the nation’s chief diplomat to play a role as a business booster. But the extra attention devoted to economics is intended to send a message that Washington recognises that it initially overemphasised the military component of its new focus on Asia, setting up more of a confrontation with China than some countries felt comfortable with.

“There’s a nervousness that the two of them shouldn’t get into a fight,” said a senior Southeast Asian diplomat, who spoke on the condition of anonymity according to protocol. “No one wants to choose sides” between China and the United States, he said.

Indeed, both sides have an interest in channeling their rivalry into trade more than weaponry, even as it is clear that China sees itself as increasingly having the upper hand in the region.

“China is the biggest trading partner of Asean, Japan, Korea, India and Australia,” Cui Tiankai, a Chinese vice foreign minister, said in a speech in Hong Kong at the Asia Society, “and the biggest source of investment for many countries in the region.” Asean is the acronym for the 10-country Association of Southeast Asian Nations.

Cui, while speaking broadly about the need for ‘sound interaction’ between the United States and China, took subtle aim at the Obama administration, which often emphasises the role of the US as a Pacific power. “For China, an Asian country located on the Pacific coast,” Cui said, “the Asia-Pacific is our home and our root.”

Clinton arrived in Tokyo for a meeting on Sunday of multinational donors that is intended to raise billions of dollars for Afghanistan’s post-2014 civilian government. But much of the rest of her trip in Asia this week will focus on building economic ties to the fast-growing nations of Southeast Asia that are becoming increasingly bound by trade with China. She plans to visit Vietnam for an American Chamber of Commerce event, Cambodia to participate in meetings of the Asean foreign ministers, and Laos, which has not received a US secretary of state since 1955, when John Foster Dulles visited the newly independent country. That was another era. Dulles’ mission – his plane landed on a World War II steel mat runway only after buffalo were chased away – was to coax Laos into the anti-Communist camp in the Cold War. Clinton’s purpose, though unstated, will be to encourage Laos, now largely supported by Beijing, to see the United States as much of a friend as it does China.

Clinton is popular in Asia, in part because she shows up. In China and Singapore, she is seen as a powerful presidential contender in 2016. Wherever she goes, she will try to repair the impression that the Obama administration, in turning its attention to shoring up US military prowess with new weaponry and expanded agreements with Asian allies, is devoting itself to a strategy of containing the growing Chinese military at the expense of integrating Beijing into the global economic order.

Policy makers

The decision by the US Pacific Command not to invite China to a major US naval exercise off Hawaii last month that included Russia and India, China’s regional rivals, stung even some pro-American policymakers in China who saw it as further evidence of a deliberate containment policy.

Another chore for Clinton will be to allay anxieties about whether Washington, given mounting budget constraints, can follow through on its promises.

“The 2013 question that we hear a lot more of is: Can the United States sustain a higher level of commitment as we go forward in the Asian-Pacific region?” Kurt M Campbell, assistant secretary of state for East Asian and Pacific Affairs, said at a conference at the Centre for Strategic and International Studies in Washington last week.

Administration officials acknowledge that more ground in Asia has been ceded to China during the Obama administration, a decline that began as the Bush administration became preoccupied with the wars in Iraq and Afghanistan.

In an echo of Cui’s statement in Hong Kong, Ernest Z Bower, a US expert on the Southeast Asian economy at the Centre for Strategic and International Studies, noted that the United States was Asean’s largest trading partner in 2004, with total trade of $192 billion. But now China, which was an inconsequential trading partner of Asean as recently as the late 1990s, is by far the region’s largest trading partner, with two-way trade of $293 billion in 2010.

President Barack Obama, fearful that the US risked being shunted aside in Asia, embraced an initiative last fall known as the Trans-Pacific Partnership that aims to create a new free trade group among some Asian countries, several Latin American nations and the United States. Canada and Mexico were invited to join the talks at the recent G-20 summit meeting in Mexico.

But by not inviting China to participate, Washington again raised suspicions among Chinese economists and political analysts about its intentions. “It’s much ado about nothing,” said Fred Hu, chairman of the financial advisory firm Primavera Capital Group, and former chairman of Goldman Sachs in greater China. “How can you have a credible trade organisation if you exclude the biggest trading nation?” Clinton’s Asia tour is seen in the region as being prompted in part by China’s success in turning itself into the engine of Asia’s economic powerhouse.

At the turn of the century, “China’s rise was viewed by many of its neighbours as a potential threat,” said Peter Drysdale, editor of the East Asia Forum at the Australian National University in Canberra. “But when economies from South Korea to Thailand revived and the regional production-sharing networks matured, and China embraced an activist economic diplomacy to open its markets toward Southeast Asia, everyone seemed to benefit.”

Now Washington is worried about being left on the outside, looking in. “Asian integration without the US is the real competition,” said Liu Xuecheng, one of China’s leading experts on America. That, he said, is “the real challenge to the United States.”

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