Asia gets on with it while America’s out of play

Author: Peter Drysdale, Editor, East Asia Forum

Make no mistake, President Obama’s cancellation of his Asian trip to APEC in Indonesia and the East Asia Summit in Brunei at the weekend is a serious blow to American standing and its interests in the region and globally. Being out of play when Asia is a main game on the road to global economic recovery, and when the way in which things are done in Asia and influence over that will increasingly shape how the world is governed, is an act of substantial self-inflicted harm.

President Barack Obama turns from the podium after speaking in the James Brady Briefing room of the White House in Washington, Monday, Sept. 30, 2013, regarding the budget fight in Congress. (Photo: AAP)

Of course President Obama had no choice but to stay at home. It is certainly not his fault that the interests of the United States and it friends have been so seriously damaged by the lack of respect that has emerged in American politics for the core institutions and principles of its great democratic state. The culpability for this latest act of American political vandalism rests with the minority Republican right and their hapless majority house congressional leader, John Boehner. No democracy can work effectively without respect for the right of budget passage. That ensures that government keeps running. Obama’s failing, perhaps, has been to not stand firmly on that principle and tradition — as he is now doing, correctly — when the mad minority presumed the right to hold the executive to hostage over supply on earlier occasions, and now feels free to do it anytime it sees fit.

The real problem is not Obama’s no-show in Asia itself but what it says about the state of American governance. If the foundations of a functioning government are compromised at home, as they are so obviously now, America’s allies, friends and opponents alike must naturally question the credibility if its commitments around the world. Chinese commentary on America’s problems has been notably cautious. Some Chinese insiders worry privately about the message it sends about the democratic process ‘which will not be helpful to progress in China and the China–US relationship in the future’.

How can there be trust in American delivery on the deals its leaders propose to others when Congress messes capriciously with the authority of the US government?

President Obama and US Trade Representative Froman were scheduled to wrap up the so called Trans-Pacific Partnership deal around the edges of APEC in Bali, a deadline already now thrice delayed. With neither APEC’s host, Indonesia, nor China among the 12 negotiating parties and a long way to go before there is anything in the way of a substantive exchange of liberalising concessions on the table, a deal looked increasingly problematic. The goings on in Washington make the TPP look suspiciously more and more like a dead cat that no one in Congress will want to pick up any time soon. Among APEC members there was more progress on trade, with agreement to push ahead with talks on extending the Information Technology Agreement, a WTO initiative from APEC’s 1996 summit that has underpinned the massive growth of Asian trade in electronic goods.

The Jakarta Post concluded its editorial last Saturday on why it’s China’s — not America’s — century, observing that ‘Asia’s spotlight has not dimmed for the United States, but rather the United States has moved further away from it. There is little chance of Washington being able to hog the spotlight again, especially since it does not wield the economic clout it did in decades past’. That is not to say that US power does not remain important to the region. Many Asian countries are wary of China’s territorial ambitions and welcome the ‘pivot’ as a hedge against Chinese intentions in the South China and East China Seas. US troops in Japan and South Korea and its Pacific fleet are still a lynchpin in Asian security.

Yet US failure to engage weakens vastly its ability to capture Asian economic and strategic opportunities, especially those that sensibly acknowledge and capture the reality of China’s growing economic role in the region. Between 2000 and 2012, the US share in East Asia’s trade fell from 19.5 to 9.5 per cent while China’s grew from 10.2 to 20 per cent. Significantly, China’s role has been forged within the framework of open trade and investment arrangements under the WTO’s global trade rules and a national commitment to an open investment regime. China’s trade with Southeast Asia has grown so quickly that it is already a third of the way towards the trillion-dollar goal that Chinese President Xi Jinping has set for it.

Meanwhile the APEC meetings in Bali are shaping up to produce strong outcomes on issues that are central to regional growth and connectivity. Shiro Armstrong explains in this week’s lead essay, how Indonesia has worked painstakingly with its partners in APEC (and globally in the G20) to promote the infrastructure investment agenda, and how that will be a major achievement coming out of the Indonesian APEC Summit today. The Asian Development Bank calculates that Asia needs $8 trillion in infrastructure investment by 2020. Mobilising the capital and creating the institutional framework to deliver this will be critical to sustainable Asian and global growth. Playing into this space, China’s president, Xi Jinping, has announced the creation of an Asian Infrastructure Investment Bank which will fund infrastructure projects in developing countries and focus on connecting the region together.

As Armstrong says, ‘This Chinese leadership in providing regional public goods is a most welcome development. It is a timely and generous play into Indonesia’s APEC year’. As China hosts APEC in 2014, the proposal can evolve and develop. It is a significant initiative that will clearly be more successful the more it involves participation from others, is linked closely to other regional and multilateral funding institutions, such as the ADB, and embodies strong governance and institutional disciplines on infrastructure investment as a core deliverable.

Peter Drysdale is Editor of the East Asia Forum.
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