As developed countries struggle to recover after the global recession and try to confront the looming sovereign debt crisis in Europe, big emerging markets are now driving global growth.

Given the slow down in developed countries, emerging economies are trying to boost domestic demand to sustain growth — and this is particularly the case in China. But in recent months these developing economies have started to feel the pressure from the slowdown in the West, leading the G20 to put global growth high on its agenda.

Emerging economies have managed to keep up their growth rates and exports, and have thus experienced a trade surplus, while developed countries are facing huge trade deficits and have come to favour protectionism. The importance of recovering growth and jobs in the US, for example, and efforts to sustain export-led growth in China are now creating trade and currency friction between these two countries. For several decades there has also been a consistent increase in the trade deficit between the two — in favour of China — and this imbalance reached over US$200 billion per annum in 2010. The US kept quiet over this for a long time, as the trade deficit helped contain inflation due to cheap imports from China, and the unemployment level was still manageable. But as soon as the US realised this trade friction with China was affecting employment and there was no level playing field for its domestic industries, the Americans resorted to protectionism.

A major allegation against China is that its exchange rate is fixed and is not allowed to appreciate — all in the name of stability. As a result, China’s currency is undervalued, making its exports particularly competitive in the international market. The US has adopted several measures to counter the growth of Chinese exports and boost its own domestic economy. First, it has upped the number of anti-dumping cases against China. And second, the US government passed legislation to punish Chinese exports, as it believes that China is heavily subsidising its export items to the US. There have also been instances of tariff hikes on several import items from China.

The currency friction between China and other developed and developing economies is a matter of concern for the G20. China and the US are not only the world’s biggest economies, but they are highly dependent on each other for their growth — and of course the rest of the world also depends on them. China has nearly US$1.5 trillion worth of dollar-denominated assets, and it will be problematic for the US if China stops buying US government bonds. The US is equally dependent on China for its exports of primary commodities such as meat and fruit, and many US companies are based in China in the hope that domestic demand will rise and they will make profits. But Chinese domestic demand is still largely suppressed, meaning the US is not able to obtain sufficient market access. Meanwhile, China depends largely on the US market to sell its labour-intensive manufactured items. Nearly five per cent of China’s GDP comes from exports to the US. So, the trade friction continues.

The world’s two largest economies must work together toward solving this trade friction and to help avoid a currency war. China must allow its currency to be market determined, while the US must do away with its harsh protectionist measures.

India is an active member of the G20 and works alongside China and other developing countries on major international issues, including the restructuring of global financial architecture, and achieving progress on climate change and the Millennium Development Goals. India is aware the trade and currency friction between the US and China will not only hurt the G20’s agenda and the world economy, but will also affect its own future growth prospects. The US and China are India’s major trading partners, and any slowdown in these two countries would affect India as well. So Delhi has been opposing any protectionist measures adopted by developed countries, and pushing for market reforms by phasing out wasteful and distorting subsidies in countries like China.

India also understands the impact of China’s undervalued currency on its exports and expects China to understand the fair principles of trade. India believes there are bigger and more pressing problems that need the attention of the G20. Its member countries need to focus on solving the European debt crisis, help countries resolve trade and currency friction and give fresh impetus to the Doha Round. Against this backdrop, India needs to play a proactive role in the G20 to make it an effective body for dealing with these issues.

Dr Geethanjali Nataraj is a Fellow at the National Council of Applied Economic Research, India.

1. India losing ground to China on trade with Bangladesh
2. The India-China Strategic Economic Dialogue
3. India, China and Asian economic integration

Since the fourth quarter of 2010, the global economy has faced serious uncertainty and a turbulent outlook.

Both the US and Europe have gloomy growth prospects due to a lack of credible medium-term plans for debt reduction in the US and the sovereign debt crisis in southern Europe.

Against the downside risk to growth in the West, Asia’s recovery and growth in the past three years has been exceptional. China and India recorded the highest growth rates in the world with 10.3 and 10.1 per cent in 2010, respectively, while Indonesia, Thailand, Malaysia, the Philippines and Vietnam (ASEAN-5) grew 6.9 per cent. Asia, with a solid global market and a large pool of foreign exchange reserves, has proven to be the shining light of the world economy.

Asia’s future prospects are likely to be affected by the West, yet ‘rising Asia’ also appears able to help save the sinking world economy. Even with weaker demand from the West, Asian growth in 2012 is expected to remain strong on the back of solid domestic demand. But for robust, sustainable and balanced world growth, Asia needs to shift from its conventional extra-regional export orientation to intra-regional demand as a way to help advanced economies recover and to ensure its growth sustainability.

How can Asian governments accomplish these twin objectives amid the current global turbulence? First, they must continue to shift to more domestic demand-based growth in the short and medium term and accelerate ongoing regional economic integration to allow freer intra-regional trade and more cross-border investment. This policy shift will result in two things: greater self-propelled growth and more imports from Western economies, especially the US, which would help correct chronic trade imbalances and raise the growth potential of America and Europe.

Second, Asian governments must minimise external financial contagion and expand intra-regional FTAs to spur sustainable economic growth.

How can they do this? One effective means would be to create a cross-border free trade regime in East Asia. At present, there is a relatively low degree of intra-regional trade share in East Asia. Intra-regional trade among ASEAN+3 countries has increased steadily since 1998, when the Asian financial crisis was subsiding, but slowed a little after 2005. In 2008, the East Asian intra-regional trade ratio, at about 37 per cent, was lower than that of the North American Free Trade Agreement (NAFTA), and far lower than the euro zone’s ratio, with 60 per cent. Considering that the euro zone and NAFTA are free trade blocs, it seems plausible that East Asia could find significant growth sources from its own regional domestic demand if it established an East Asia-wide FTA.

Given the ongoing hub-and-spoke issues around intra-regional FTAs, East Asia should adopt a strategy of ‘doing easy things first’. A good example of such an approach is the Chiang Mai Initiative, which is already under way. The Asian Bond Market Initiative could also be accelerated to provide a viable cross-border financing scheme to small and medium enterprises. In this regard, a cross-border regional cooperation mechanism among sub-regions and mega-cities such as the Pan-Yellow Sea Circle and Greater Mekong Sub-Region could be a starting point.

Northeast Asian integration has great potential to build a robust regional community of peace and prosperity. It is encouraging that China, Japan and Korea in May 2010 agreed to establish a secretariat office in Seoul to address trilateral regional issues. Apart from FTA talks in Northeast Asia, Asian governments in ASEAN+6 need to pay attention to many proposals in cultivating diverse ‘public goods’ such as cross-border oil and gas pipelines and railways to enhance connectivity. Dynamic benefits resulting from a cross-border, bottom-up approach could also be derived from establishing common standards for production technology, product regulations, distribution and after-sales services.

By accumulating success stories for open Asian regionalism, major Asia Pacific economies can work together toward an Asia Pacific Economic Community, which the APEC forum has long addressed. Though it may take time to nurture mutual trust and confidence, Asia should be eager to establish open regionalism which a variety of external stakeholders, including the US, India, Canada, Australia and New Zealand, can join. Asian open regionalism needs to be translated into an Asia Pacific Economic Community to ensure it will be a building block toward viable multilateralism, not a stumbling block.

At this critical juncture of the world economy, East Asian integration must be pursued to increase its own growth momentum internally. Asia must move aggressively to shift its focus to the region’s 3.5 billion consumers so that its intra-regional demand-led growth can contribute to balanced and sustainable global growth. The Greek debt crisis clearly showed that no country can overcome the emerging economic malaise without a strong manufacturing base. Consequently, Asian economies need to strengthen the already existing global ‘manufacturing house’ through intra-regional trading. But Asia is diverse and still not free from historical rivalries. For both its own growth and the good of the global economy, Asia needs visionary political leadership to put historical legacies behind and look toward a long-term vision for an Asia Pacific Economic Community.

Choong Yong Ahn is Distinguished Professor at the Graduate School of International Studies, Chung-Ang University, Seoul.

This is an abridged version of an article that originally appeared here in Global Asia.

1. The DPJ: Sacrificing the economy to ‘save’ agriculture
2. World economy not quite out of the woods yet
3. Economic integration: Will Asia go regional?

The whirlwind visit of President Barack Obama to Australia on the way to the East Asia Summit in Indonesia last November, many believe, forever changed the Asia Pacific strategic landscape with a re-assertion of American primacy and power in Asia.

What was the thinking behind the moves that Obama announced in Canberra and how will it shape Southeast Asia’s strategic future?

American power is already well entrenched in Asia and the Pacific. A modest elevation of American troop presence on rotation and training in northern Australia — one concrete outcome of the visit — will have at most a marginal impact on the immediate strategic landscape. But Mr Obama’s visit, and in particular his declaration to Australia’s Parliament that America is ‘all in’ in Asia and the Pacific, changed the tone of the contest for influence between America and China in the region and cast it in more confrontational terms.

In this week’s lead Geoffrey Wade suggests that ‘the Darwin deployment is only one part of a much larger regional strategy, placing US forces far enough from Chinese missiles to be comfortable, but still sufficiently near to maritime Southeast Asian allies to swiftly engage if necessary. The proposed stationing of the US Navy’s newest littoral combat ships in Singapore and the growing American naval and air force cooperation with Indonesia serve a similar function’.

Wade sees these moves as the beginning of a major increment to US-led East Asian security architecture, involving the creation of a Southeast sector to the ‘Offshore Asia’ security zone. He says that the Northeast American security zone is already entrenched, with US bases and facilities in mainland Japan, Okinawa, South Korea and Guam being equipped with over 80,000 service personnel and some of the world’s most advanced defence hardware. The concept of a maritime security umbrella in the Southeast sector of ‘Offshore Asia’ (including the maritime ASEAN states, Australia, New Zealand, Papua New Guinea and some of the Pacific states) is now seen in Washington as key to maintaining a balance of power in East Asia, and achieving the US’s stated aim of preventing the emergence of a regional hegemon.

It might seem puzzling that the US would seek to create a security shield just for ‘Offshore Asia’ — the maritime Southeast Asian states and Australasia. One rationale, according to Wade, is that sea lanes in this region are vital to East Asian economic security, a critical choke point in the flow of Middle Eastern oil and Australian resources to Japan, Korea, and also to China. Maritime routes need to be kept open, ‘especially while the South China Sea disputes continues to fester and demand attention’. More straightforwardly, Wade claims, this new strategy is built on the reality that the US and its allies currently have overwhelming superiority in terms of maritime power. The US Pacific Fleet alone comprises 180 ships, nearly 2000 aircraft and 125,000 service personnel. If the US is to maintain influence and allies in East Asia then it needs to provide these countries with some persuasive evidence of its defence commitment and capacities. The ‘Offshore Asia’ security shield — utilising US ‘Air-Sea Battle’ forces — is a low-cost posture that might convince.

There is related hype among the region’s security community about Australia’s integration into a forward American military hub in Southeast Asia. It is, for the moment, just that: hype and hyperbole. That the Australian base has the advantage of having direct access to the Indian Ocean and, therefore, together with the substantial US naval, air and communications facilities in Diego Garcia, provides the US and its allies with unrivalled access to, and surveillance of, Indian Ocean maritime routes is one dimension of this hype. The reports that B-52 long-range strategic bombers, F/A-18 fighters, C-17 transport aircraft and aerial refuelling aircraft will be stationed at the Royal Australian Air Force Base at Tindal, about 320 kilometres southeast of Darwin is another. At another level altogether are reports suggesting that as part of the increased collaboration, Australia is preparing to purchase or lease Virginia-class nuclear submarines from the US. The antidote to this hype is to take a Bex and have a good lie down. Dreams for the so-called American pivot towards Asia need to be based on firmer fiscal and political stuff.

The mainland Southeast Asian states, as Wade argues, are increasingly embedded in tighter developmental and economic relations with China. In all of that the US is a big player. This is no Chinese imperial plot, as the incautious readers of Wade might conclude: it’s simply the product of the weight of Chinese economic growth interacting with the growth and development ambitions of the Southeast Asian mainland states. It is no different in fact from what is occurring with Japan, Korea, Indonesia or for that matter Australia. In mainland Southeast Asia, it has been promoted with the help of the Asian Development Bank (driven more by Japanese than Chinese agendas), through the creation of a Greater Mekong Subregion linking China and mainland Southeast Asia through economic corridors, which include a Chinese high-speed rail network linking mainland Southeast Asian capitals directly to Yunnan.

Unravelling these economic-security interests from political-security postures is not as easy as it might seem to the economically untutored defence strategist. Put simply, in this theatre, Chinese maritime security interests are legitimately and fundamentally interwoven with East Asian and all our economic security interests.

The complexity is reflected in the caution of Indonesian Foreign Minister Marty Natalegawa about the Canberra declaration, lest ‘these developments were to provoke reaction and counter reaction … a vicious circle or tensions and mistrust or distrust’, even the ‘innocent’ Indonesian suggestion that China might well be invited to join joint exercises at the Australian base. At APEC earlier in November Indonesia’s President, Susilo Bambang Yudhoyono, observed that, while he welcomed America’s regional presence, it was no longer desirable for the region to be dominated by a sole superpower. ‘New power centres are growing rapidly and power relationships are changing and becoming fluid’, he said, calling for what he called a ‘dynamic equilibrium’.

Therein lies the crux of it. Playing one hand into ‘Offshore Asia’ security might be a reasonable first move. But it is certainly not a viable long-term security strategy. Whether that hand will serve the preservation of peace or contribute to future tensions in East Asia will assuredly depend also on whether another hand can be extended to China, one that provides reassurance of its role and interests in regional security.

Peter Drysdale is the Editor of the East Asia Forum.

1. The emergence of ‘Offshore Asia’ as a security concept
2. Southeast Asia: Patterns of security cooperation
3. ASEAN divides

That US engagement with East Asia has grown in recent years is news to none.

But as the dust settles following President Obama’s announcement of the imminent stationing of US marine forces in northern Australia, it is perhaps time to assess what this development might augur for the broader East Asian region in the longer term.

The new deployment will involve the transfer of at least 2500 US marines to northern Australia over the coming five years. US naval and air forces will also increase their presence, and military exercises will be expanded. Given that Darwin is located only 800 kilometres from Indonesia and Timor Leste, reactions within the region have also been intently followed since the 16 November announcement. China is one of the loudest critics, suggesting that the placement of US marines in Darwin ‘indicated the persistence of a “Cold War mentality”’, and that this is the ‘starting point for the return of US armed forces to Asia’, with the aim of ‘sowing discord between China and ASEAN’. While Indonesian Foreign Minister Marty Natalegawa has warned that the action could inflame regional relations, ASEAN states have generally produced cautious statements hiding a muted satisfaction with the announcement. And unsurprisingly, Japan has welcomed the news.

Within Australia itself, there is vigorous debate on the new move. Hugh White, a professor of strategic studies at the Australian National University and a former deputy secretary for defence, avers that the deployment decision will have deep consequences for Australia’s relations with China, and that ‘in Washington and in Beijing, this will be seen as Australia aligning itself with an American strategy to contain China’. Clearly, the new deployment is responding to Southeast Asian and Western concerns about China’s burgeoning military and economic power in the region. And when all the euphemisms and rhetoric are stripped away, this is great power rivalry for influence and allies in maritime Asia.

The Darwin deployment is only one part of a much larger regional strategy, placing US forces far enough from Chinese missiles to be comfortable, but still sufficiently near to maritime Southeast Asian allies to swiftly engage if necessary. The proposed stationing of the US Navy’s newest littoral combat ships in Singapore and the growing American naval and air force cooperation with Indonesia serve a similar function.

This episode is the beginning of a major addition to US-led East Asian security architecture, involving the creation of a Southeast sector to the ‘Offshore Asia’ security zone. The Northeast sector is already well in place, with US bases and facilities in mainland Japan, Okinawa, South Korea and Guam being equipped with over 80,000 service personnel and some of the world’s most advanced defence hardware. Establishing a maritime security umbrella in the Southeast sector of ‘Offshore Asia’ (including the maritime ASEAN states, Australia/New Zealand, Papua New Guinea and some of the Pacific states) is now key to maintaining a balance of power in East Asia, and the US’ stated aim of precluding the emergence of a regional hegemon.

Why create a security shield just for ‘Offshore Asia’ — the Asian maritime realm? Yes, maritime routes need to be kept open, especially while the South China Sea disputes continue to fester and demand attention. But most importantly, the rationale for this new strategy lies in a simple truth: the US and its allies currently have overwhelming superiority in terms of maritime power. The US Pacific Fleet alone comprises 180 ships, nearly 2000 aircraft and 125,000 service personnel. If the US is to maintain influence and allies in East Asia it needs to provide these countries with some convincing evidence of defence capacities, and the ‘Offshore Asia’ security shield — utilising US ‘Air-Sea Battle’ forces — is intended to do precisely this.

What, then, of the mainland Southeast Asian states? ASEAN has been increasingly dividing along the mainland–island Southeast Asia fault line over the last decade, and China has been progressively drawing unto itself the polities and economies of the mainland. This is being done, with the assistance of the Asian Development Bank, through the creation of a Greater Mekong Subregion linking China and mainland Southeast Asia through economic corridors, which include Chinese high-speed rail networks linking mainland Southeast Asian capitals directly to Yunnan. And despite repeating the rhetoric of ‘ASEAN centrality’ or ‘ASEAN as a fulcrum for regional architecture’, most parties now at least obliquely recognise that the organisation is no longer a unity and that policies toward its component parts need to be differentiated — a practice which China has long been pursuing. The U.S. State Department-sponsored Lower Mekong Initiative, intended in some ways to counter this trend, is far too little and obviously too late.

Meanwhile, Darwin — where the first US marines will be stationed — provides the US and its allies with unrivalled access to both the South China Sea and the Indian Ocean maritime routes. Initial reports also suggest that B-52 long-range strategic bombers and other US aircraft will be stationed at the RAAF Base at Tindal, about 320 kilometres southeast of Darwin. The growing impetus of US-Australian defence cooperation in northern Australia will thus see the region increasingly become a major site of military activity. Associated with this, the population of Australia’s northern coastal region will likely swell, urbanisation should increase and commerce will undoubtedly expand. This will not happen overnight. But the new movement of population to this sparsely-populated coast will induce the emergence of new urban, economic and social forms, enriching Australia in diverse spheres.

With Australian population centres and economic activities moving closer to Indonesia — and in fact closer to all of maritime Southeast Asia — the existing political, economic, social and military linkages with these areas will inevitably become more intense, strengthening the ‘Offshore Asia’ grouping of which they will all be a part.

The ‘Offshore Asia’ security strategy, of which the Darwin deployment is an important element, promises to have huge effects on maritime Asia and on East Asian alliances for decades, if not centuries, to come. Whether this strategy will be a means of preserving peace in East Asia or will eventually be seen to constitute a casus belli remains, as they say, to be seen.

Geoff Wade is a historian at the Institute of Southeast Asian Studies, Singapore. A longer version of this article can be found here.

1. Asian security strategy: one hand not clapping
2. Southeast Asia: Patterns of security cooperation
3. Piracy and maritime security in East Asia

Taiwan’s presidential elections, since they first started in 1996, have in large part been referenda on the ‘One China’ policy.

Voters are generally offered two deviations from the status quo — either a path toward eventual reunification with mainland China or a path toward independence. Taiwan’s grand old party, the Kuomintang (KMT), espouses the former, while the opposition Democratic Progressive Party (DPP) favours the latter.

The stakes, obviously, are high for Beijing. In the past, Chinese leaders have tried — unsuccessfully — to bully, coerce and persuade Taiwanese voters. But the stakes are also high for the Indo-Pacific region because Taiwan is critical to the stability of US-China relations, especially at a time when they are both attempting to move away from the confrontation of the past two years.

Neither China nor the US want the Taiwanese voter to rock the boat. Both have let it be known they would prefer the incumbent president, KMT’s Ma Ying-jeou to win. In the event, the Taiwanese people agreed, with Ma winning 51.6 per cent of the vote, while the DPP’s Tsai Ing-wen received 45.6 per cent. This result came after pre-election opinion polls showed the election would go down to the wire, prompting thousands of expatriate Taiwanese to crowd onto flights and return to cast their ballot.

That Ma found himself neck-to-neck with Tsai is interesting. Four years ago, he was voted in after many voters felt the DPP’s Chen Shui-bian was taking Taiwan into dangerous waters with his pro-independence line. Ma delivered on his campaign promise of closer ties with the mainland. In 2010, he sealed a major trade deal with China, boosting trade, travel, communications and investments between Taiwan and the mainland. In fact, the annual value of trade between China and Taiwan is currently around US$160 billion. Taiwanese businesses invested close to US$40 billion in the four years of Ma’s first term. Chinese investment also increased, albeit only to the tune of US$170 million. The number of daily direct flights increased to almost one hundred, which brought in 2 million Chinese tourists and US$3 billion in receipts annually. There has been a parallel improvement in official relations between Beijing and Taipei as well.

Why, then, did Ma face a tough election? One answer is the ‘anti-incumbency effect’. As Ma admitted last month, there are some economic goals his government failed to achieve, especially those relating to employment and income growth. The other answer, one that goes beyond economic angst and back to the China–Taiwan question, might be a voter preference for centrist policies. The majority of Taiwanese people seem to support the status quo and will punish politicians who stray too far from it. This might help explain the closeness of the contest and the verdict itself.

In Beijing, Ma’s victory will be seen as vindication and a political triumph for President Hu Jintao. In the internal dynamics of the Communist Party of China, it is likely to empower individuals and factions close to Hu, influencing the pecking order of the new administration that will take over after this year’s party congress. To the extent that the issue of Taiwan’s status becomes less of a thorn in Beijing’s side, the political salience of the hawkish factions will diminish. This in turn could help reduce tensions with the US.

In Washington, some commentators have already begun asking whether it makes sense to allow Taiwan to influence relations between the US and China. While a policy reversal is unlikely, it is clear that Washington would prefer a Taiwan that does not inflame tensions in East Asia. Washington’s strategic calculus, like that of the other major powers in the Indo-Pacific region, is about shaping a favourable balance of power, not triggering a military confrontation.

India also faces a dilemma here. On the one hand, the geopolitical stability of a re-elected KMT government means greater economic opportunity for India to engage with Taiwan. The level of bilateral trade and investment between India and Taiwan is negligible; Taiwan accounts for a mere 1 per cent of India’s foreign trade. And Taiwan is responsible for only 0.03 per cent of total FDI in India, less than countries like Chile and Turkey. Bilateral trade agreements can help, but only if domestic reforms make India relatively more attractive as an investment destination. On the other hand, a Beijing less preoccupied by issues in its backyard will find it easier to project power elsewhere, including against India.

China and the US should be content with the re-election of Ma. For India, economic opportunities are stacked against geopolitical risks. Unless New Delhi uses the space created by the recent elections to rapidly scale up economic ties, it will find little upside in Ma’s success.

Nitin Pai is a Founder and Fellow at the Takshashila Institution. A version of this article was first published here in the Business Standard.

1. Taiwan in from the cold, with China’s blessing
2. Taiwan: The Democratic Progress Party’s ‘China Syndrome’
3. A US-Taiwan FTA

The sixth East Asia Summit (EAS) and 19th ASEAN Summit were held from 17–19 November 2011.

The EAS in particular helped renew regional channels of cooperation, a development marked by the entry of the US and Russia into the summit. While Dmitry Medvedev did not attend the 2011 summit, the US’ participation was extremely valuable to existing regional cooperation among the EAS countries. Washington must nevertheless ascertain what level of commitment other member countries expect from it — and also what it can gain from a renewed partnership with the region.

The US has numerous close allies in the Asia Pacific region, and shares good relations with many others. Despite these traditional relations, the US’ decision to become a member of the EAS was big news. This was the first time the US had joined a multilateral platform that consists of countries which are uniquely ‘East Asian’. And though the US remains a member of APEC, some ASEAN countries are not members of this organisation, meaning the US’ presence in Honolulu had little bearing on a few ASEAN countries.

Before the sixth EAS, the summit was largely driven by ASEAN. The overall mood of the EAS was one of regional cooperation, with an overwhelmingly economics-focused agenda — even if there were underlying frictions over the mode and membership of this cooperation. And while the EAS provided a forum for ‘broad strategic, political and economic issues of common interest and concern with the aim of promoting peace, stability and economic prosperity [in East Asia]’, it was only during the last EAS that the issue of maintaining peace and enhancing security cooperation in the region was given real attention.

The adoption of the ‘Bali Principles’ at this summit also helped ensure the equal status of all member countries in all matters of strategic importance and spelt out the overarching importance of relevant international laws, especially those related to maritime matters. This was a positive move for countries previously concerned by a perceived flux between the ideal of ASEAN centrality and the reality of China’s weight in the forum. But while the US’ influence cannot be underestimated in this new development, it must be recognised that most ASEAN member countries were more than ready to welcome the US and Russia, as they realised that no amount of emphasising ASEAN centrality could make a dent in China’s growing influence — both inside and outside the summit.

The 19th ASEAN Summit saw many leaders requesting the EAS to focus on strategic and maritime cooperation in the region. Clearly, this appeal was aimed at the US’ attendance, and the EAS Chair’s Statement also shows that the participation of the US led members to agree on the ‘supremacy of principles and norms of international law’. The emphasis on equal roles for all members and the supremacy of international law has been the single most important achievement of the sixth EAS, and it would not have been possible without the anchorage and support provided by the US. Bali equally saw EAS members committing to positive multilateralism in the region, and the US can help ensure the sustainability of this multilateralism by preventing the balance of power from tilting to any one side.

But the success of Bali raises an important question: is the US willing to make this a long-term commitment? Washington will have to answer this question with unambiguous and concerted action. Its participation at the leadership level is an absolute must; attendance at the 2012 summit and its related meetings in Cambodia will perhaps provide the first test. Despite being an election year in the US, it is imperative that the US leadership attend the summit. At the very least, the US will have to bear in mind the ASEAN culture, whereby high-level representation at the summit is both desired and expected of all countries, including the US.

In terms of potential contributions, the lack of institutional support is one significant shortcoming in the EAS which may be of immediate interest to the US. So far, ASEAN members determine the EAS agenda and the admission of new members. The ASEAN Secretariat also provides support to the summit, but is otherwise beset by ASEAN’s day-to-day business, and is currently gearing up preparations for the ASEAN Economic Community. Non-ASEAN members argue that they should be able to set and contribute to the EAS agenda, and the summit’s expected outcomes have not received adequate monitoring in the past few years. The US may consider strengthening the EAS’ institutional support by establishing a lean and effective EAS Secretariat, which monitors the summit’s outcomes throughout the year.

The US’ presence in the EAS could well be a positive for both the US and other member countries. As the gravity of the world economy shifts toward East Asia, it would be worthwhile for the US to remain engaged with this region. The US will also bring with itself the equilibrium needed in the region. In this way, the newly reinvigorated EAS may turn out to be a win-win for all members and an important contributor to regional cooperation in its own right.

Anita Prakash is Director of Policy Relations at the Economic Research Institute for AESAN and East Asia.

1. The East Asia Summit: ASEAN’s forum for maintaining peace
2. The East Asia Summit and regional financial cooperation
3. The United States and the East Asia Summit: a new beginning?

As if undermining the WTO’s Doha Round of global free-trade talks was not bad enough (the last ministerial meeting in Geneva produced barely a squeak), the US has compounded its folly by actively promoting the Trans-Pacific Partnership (TPP).

President Barack Obama announced this with nine Asian countries during his recent trip to the region.

The TPP is being sold in the US to a compliant media and unsuspecting public as evidence of American leadership on trade. But the opposite is true, and it is important that those who care about the global trading system know what is happening. One hopes that this knowledge will trigger what I call the ‘Dracula effect’: expose that which would prefer to remain hidden to sunlight and it will shrivel up and die.

The TPP is a testament to the ability of US industrial lobbies, Congress and presidents to obfuscate public policy. It is widely understood today that FTAs, whether bilateral or plurilateral (among more than two countries but fewer than all), are built on discrimination. That is why economists typically call them preferential trade agreements (PTAs). And that is why the US government’s public-relations machine calls what is in fact a discriminatory plurilateral FTA a ‘partnership’, invoking a false aura of cooperation and cosmopolitanism.

Countries are, in principle, free to join the TPP. Japan and Canada have said they plan to do so. But a closer look reveals that China is not a part of this agenda. The TPP is also a political response to China’s new aggressiveness, built therefore in a spirit of confrontation and containment, not of cooperation.

The US has been establishing a template for its PTAs that includes several items unrelated to trade. So it is no surprise that the TPP template includes numerous agendas unrelated to trade, such as labour standards and restraints on the use of capital account controls, many of which preclude China’s accession.

From the outset, the TPP’s supposed openness has been wholly misleading. Toward this end, the TPP was negotiated with the weaker countries like Vietnam, Singapore and New Zealand, which were easily bamboozled into accepting such conditions. Only then were bigger countries like Japan offered membership on a ‘take it or leave it’ basis.

The PR machine then went into overdrive by calling the inclusion of these extraneous conditions as making the TPP a ‘high-quality’ trade agreement for the 21st century, when in fact it was a rip-off by several domestic lobbies.

American regionalism closer to home shows the US now trying to promote the Free Trade Agreement of the Americas (FTAA). But its preferred template was to expand the North America Free Trade Agreement (Canada, Mexico and the US) to the Andean countries and include huge doses of non-trade-related issues, which they swallowed. This was not acceptable to Brazil, the leading force behind the FTAA, which focuses exclusively on trade issues. Brazil’s former President Luiz Lula Inácio da Silva, one of the world’s great trade-union leaders, rejected the inclusion of labour standards in trade treaties and institutions.

The result of US efforts in South America, therefore, has been to fragment the region into two blocs, and the same is likely to happen in Asia. Ever since the US realised that it had chosen the wrong region to be regional with, it has been trying to win a seat at the Asian table. The US finally got it with the TPP, simply because China had become aggressive in asserting its territorial claims in the South China Sea, and vis-à-vis India and Japan.

Many Asian countries joined the TPP to ‘keep the US in the region’ in the face of Chinese heavy-handedness. They embraced the US in the same way that East Europeans rushed to join NATO and the European Union in the face of the threat, real or imagined, posed by post-Soviet Russia.

America’s design for Asian trade is inspired by the goal of containing China, and the TPP template effectively excludes it, owing to the non-trade-related conditions imposed by US lobbies. The only way that a Chinese merger with the TPP could gain credibility would be to make all non-trade-related provisions optional. Of course, the US lobbies would have none of it.

Jagdish Bhagwati is Professor at Columbia University and Senior Fellow in International Economics at the Council on Foreign Relations, and is the author of Termites in the Trading System: How Preferential Agreements undermine Free Trade. This article was originally available here at Project Syndicate and is published here with the permission of the author. 

1. U.S. trade policy in Asia: Going for the Trans-Pacific Partnership?
2. Trans-Pacific Partnership Agreement: Carrying the water for America
3. Is the Trans-Pacific Partnership idea a dead end?

Since Ma Ying-jeou assumed the presidency in Taiwan in May 2008, relations across the Taiwan Strait have improved dramatically.

In the past three and a half years, 16 agreements have been signed on practical matters that have largely benefited both sides of the strait. The next presidential election in Taiwan is scheduled for 14 January 2012, and the race is extremely tight. Regardless of the outcome, the election will have a significant impact on the cross-strait situation and on US interests.

Most polls show Ma with a slight lead over Tsai Ing-wen, the Democratic Progressive Party (DPP) candidate. But the decision by James Soong to run as a third-party candidate for the People First Party has further complicated forecasts of the election results. Although most polls suggest that Soong will draw an equal number of votes from both of the other candidates, he will more likely siphon votes from Ma and tip the results in favour of Tsai. In the 2000 elections, Soong also ran as a third-party candidate, splitting the pan-Blue vote, enabling Chen Shui-bian to win with only 39.3 per cent of the vote.

If President Ma is re-elected, he is likely to win by only a slim margin. Although Ma has publicly tabled the possibility of signing a peace accord with Beijing in the coming decade, the absence of a domestic consensus on Taiwan’s relationship with the mainland is likely to make such talks difficult — if not impossible. Chinese leaders will likely be preoccupied with the succession for a year or two, but subsequently may become impatient to reach an agreement that would rule out independence for Taiwan or even press for progress toward reunification.

A victory by Tsai Ing-wen would create different challenges. Tsai is unlikely to accept the two pillars on which mainland China has based its willingness to engage with Taipei: the 1992 Consensus — the formula that made possible the historic Singapore talks between Taiwan and the mainland in 1993 and represents an understanding that there is only one China, though disagreement persists on how to define it — and opposition to Taiwan’s independence. As the election draws near and Chinese fears of a DPP victory increase, mainland officials are warning explicitly that rejection of the 1992 Consensus by a DPP president will result in suspension of cross-strait negotiations.

Beijing is extremely suspicious of Tsai, due in part to her role in former President Lee Teng-hui’s administration as head of an advisory group that suggested in 1999 a ‘special state-to-state’ relationship existed between mainland China and Taiwan. Some mainland Chinese scholars warn that a DPP victory could embolden domestic critics of Hu Jintao’s policy of pursuing ‘peaceful development’ in cross-strait relations to push for a tougher approach. Such a development on the eve of the mainland’s leadership transition could influence personnel arrangements and policies of the new leadership. But it is notable that despite such warnings there have been no hints in either public or private statements about taking military action against the island.

Still, a Ma victory is Beijing’s preferred outcome. Even if no substantial progress toward reunification is achieved in a second term under Ma’s rule, mainland officials are confident that cross-strait relations will at least be stable and predictable, enabling Beijing to focus attention on other pressing matters. President Hu’s ‘peaceful development’ policy would also continue, allowing for increased cultural and educational exchanges alongside expanded economic cooperation. A Kuomintang win would also leave China with important decisions to make, like whether to press for political talks and whether to respond positively to Ma’s demands for greater international space, economic cooperation agreements with other countries and reductions in Chinese military deployments opposite Taiwan.

Much is also at stake for the US. Washington has a strong interest in seeing Taiwan’s democracy continue to flourish and in the conduct of free and fair elections. Taiwan is a vibrant democracy that is widely viewed as a vanguard for political development in Asia — and a model for China in particular. At the same time, the US has an equally compelling interest in the preservation of cross-strait stability. The tensions that prevailed in relations between Taipei and Beijing beginning in the mid-1990s until 2008 were profoundly contrary to US interests. So, Washington is ambivalent: it prefers not to interfere in Taiwan’s elections, but also insists that Taiwan’s leaders manage ties with Beijing in a way that minimises friction and reduces the possibility of military conflict.

Regardless of who is elected in January, the US will likely maintain its important unofficial relationship with the government and people of Taiwan and abide by its commitments under the Taiwan Relations Act. Arms sales to Taiwan are also likely to continue, although advanced-weapons requests from Taipei are expected to be increasingly controversial as the cross-strait military balance shifts more decisively in Beijing’s favour and as China’s national power grows.

Bonnie S. Glaser is a Senior Fellow in the Freeman Chair in China Studies at the Center for Strategic and International Studies, Washington, DC and Senior Associate at the Pacific Forum CSIS. Brittany Billingsley is a Research Associate and Program Coordinator in the Freeman Chair in China Studies at CSIS.

This article is a summary of a newly released report, ‘Taiwan’s 2012 Presidential Election and Cross-Strait Relations: Implications for the United States.’

1. Taiwan, China, and the WHO
2. Taiwan: The Democratic Progress Party’s ‘China Syndrome’
3. Taiwan and Hu Jintao’s end-year overtures

It is wrong to assess the Trans-Pacific Partnership Agreement (TPP) against its short-term benefits — these may very well be non-existent. Instead, the deal’s true value hinges upon its chances of a medium-term expansion into Asia.

The TPP is an ambitious regional trade agreement under negotiation between ten economies: Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, the US, Vietnam and as of early November, Japan. The Agreement has concluded its ninth round of negotiations in Lima, Peru, with an unofficial round also occurring recently at the 2011 APEC summit in Hawaii.

Despite its many illustrious members, the gains to be had from the deal are not as great as might appear at face value. Australia already possesses existing FTAs with all but two of the nine other participants (Japan and Peru; and Peru is second-last on the list in terms of the value of Australian exports — less than A$100 million in 2010).

Such pre-existing links suggest there will be, at best, modest economic benefits for Australia resulting from the deal. But even if effects to the bottom line are marginal, other aspects of the TPP may be important.

Furthering the coherence of relationships between its members is one benefit the TPP seeks to achieve. The current group of FTAs throughout the Asia Pacific (the ‘spaghetti bowl’) lacks consistency, at times overlap, and often generate criticism regarding what the agreements do and do not cover, their text and their implementation.

A combination of modest gains and a step toward regional convergence in relations to trade does not quite warrant the TPP being named as Australia’s ‘highest [trade] negotiating priority’, as the government describes it. It is irrational to invest significant time, effort and resources into an initiative which has a low and largely intangible payoff. It appears there is more to the story here.

In short, the key value driver of the TPP is the potential for its future extension to other regions within the Asia Pacific.

For example, consider Australia’s top three export markets in 2010: China, Japan and South Korea. All three are powerhouses and none currently have FTAs with Australia. This description holds for the overwhelming majority of the TPP’s potential participants.

If a working TPP can be expanded successfully to other nations, conditional upon an initial success, then the potential for and size of future gains to all parties is large. Importantly, the broad realisation of this outcome is only possible with an initial agreement.

Press statements and present descriptions of the deal support this hypothesis. Language from the Australian Department of Foreign Affairs and Trade, describing the TPP, features terms including ‘living’, ‘building block’ and ‘21st century’. Japan’s recent request in early November to join the talks also cements this view with action.

It is difficult to assess whether such a valuation is the correct one. Trade is complex, and many experts in numerous fields are divided as to just how feasible or profitable a strategy of expansion may be. In any case, it is clear that the contemporary debate and discourse regarding the TPP should not be solely centred on the present — the deal should be recognised as both dynamic and speculative.

Hubert Wu is a student at the University of Melbourne and was a Global Voices delegate at APEC 2011.

1. Are there real dangers in the Trans Pacific Partnership idea?
2. The Trans-Pacific Partnership
3. Trans-Pacific Partnership talks in Singapore: Now it gets difficult

This year will be remembered as annus horribilis for Pakistan–United States relations.

CIA contractor Raymond Davis kicked off the downward slide when he gunned down two Pakistanis in Lahore, creating an enormous diplomatic immunity circus, which saw the media, politicians and even President Obama entering the fray.Next, ‘the 2 May incident’, as Pakistanis refer to it, or the CIA covert operation that killed Bin Laden, pushed relations to the brink, and many thought it couldn’t possibly get any worse. But it did. On 26 November, NATO forces accidently killed 24 Pakistani soldiers in Mohmand Agency. Pakistan’s Foreign Minister said the attack ‘demonstrated complete disregard for international law and human life and was in stark violation of Pakistani sovereignty’.

Pakistan–US relations are on life support. Pakistanis don’t trust the United States and Americans don’t trust Pakistan. Recent public polling showed that 55 per cent of Americans view Pakistan as an enemy and 69 per cent of Pakistanis view the United States as an enemy. Malaise doesn’t just exist at the ‘street’ level. Adm. Mike Mullen, former Chairman of the Joint Chiefs of Staff, told a Senate inquiry that the Haqqani network was a ‘veritable arm’ of the ISI (Pakistani intelligence). In Pakistan, well-known cricketer turned political candidate, Imran Khan led a two-day sit-in to block NATO supply routes in protest against the NATO strikes that killed Pakistani soldiers.

Can the downward spiral be reversed in 2012? One key thing that will drive relations (again) in 2012 is Afghanistan.

Afghanistan has become too central to the relationship between Pakistan and the United States. While ideally the US and Pakistan should conduct a bilateral relationship without a continual focus on Afghanistan, the unfortunate reality is that the US desire to eliminate terrorism and get out of Afghanistan militarily means that Pakistan has become a lever of US policy in Afghanistan.

The United States needs Pakistan to achieve a political settlement in Afghanistan that will earn it a modicum of respectability. One of the key things highlighted by Pakistani academics when talking about Pakistan–US relations is that both parties agree on what needs to happen to achieve a stable, secure Afghanistan, but the mechanisms on how to achieve these goals differ greatly.

Pakistan’s strategic calculus is at odds with the US’. The military has hedged its bets using the Haqqani network and the Afghan Taliban to counter the future US withdrawal and India’s increasing influence in Afghanistan. At the same time, the US calls publically for Pakistan to sever all ties with the Haqqani network and conditions military and civilian aid on terrorism cooperation.

Pakistanis complain loudly that the United States simply doesn’t understand Pakistan. That is probably true. Few understand how much the ‘threat’ of India colours Pakistani perceptions of the world. Pakistanis genuinely fear being encircled by India and are anxious that Afghanistan too will fall under India’s influence — hence the support for militant networks.

So who will have to make more concessions to the other? In 2012, it is likely to be the United States. As 2014 draws closer, the onus falls on the US to work with Pakistan constructively because soon, the US will need Pakistan more than Pakistan needs the United States.

Pakistan is too important to ignore and needs to be viewed through a new strategic lens. Moving forward, Pakistan is not only crucial to a political settlement in Afghanistan, but is a state with nuclear weapons, a strong army, weak democracy, as well as an economy that is unable to provide opportunities for an ever-increasing and youthful population. The problems facing Afghanistan have defined the last decade in the region, Pakistan will define the problems of the region over the next decade — and all policy makers need to be congnisant of this.

Alicia Mollaun is a PhD candidate at the Crawford School at ANU and is based in Islamabad.

1. Osama Bin Laden, Pakistan and the United States
2. Pakistan: US losing hearts and minds in the battle against terrorism
3. Pakistan: lots of headlines, little progress