Trump’s Asia Tour: From Old Conflicts To New Prospects, Part 2

Written by Dan Steinbock, Difference Group

Trump’s grueling 12-day Asia tour was a quest for mega deals. US policies in Asia are shifting. The stress on competitive strategic visions is being redefined by historic bilateral economic opportunities with China, Vietnam, South Korea, the Philippines and other ASEAN and APEC nations. See Part 1.

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Duterte recalibration between US and China

Washington’s ties with its former colony the Philippines grew deep during the controversial Marcos years (1965-86), which led to the end of the US bases in the country (1947-91) and the departure of US forces from the Philippines, and during the Aquino III years (2010-16), which resulted in the Enhanced Defense Cooperation Agreement (EDCA), the return of US forces to the Philippines, rearmament with Pentagon’s support and the escalation of maritime conflicts with China.

However, the twin periods of close US ties coincided with deep strategic dependency on US, increasing economic polarization within the country and the spread of drugs, corruption and questionable “narco ties” with the pre-2016 regime.

Since the 2016 election triumph of Rodrigo Duterte, the US-Philippines relationship has been subject to a recalibration and, in the end of the Obama era, alleged US efforts at destabilization. Duterte’s sovereign foreign policy is less reliant on US security guarantees and benefits from economic relations with China – even as he has been developing more constructive personal ties with the Trump White House.

Duterte’s sovereign foreign policy is less reliant on US security guarantees

Duterte has also been able to link the Philippines into the China-supported One Road One Belt (OBOR) initiative, which is vital to his government’s huge “Build, Build, Build” infrastructure program that is paving way to the tripling of the Philippine per capita incomes in the next 25 years.

ASEAN tribute to the not-so-benign hegemon

Trump seeks to review and renegotiate many of the existing trade deals, while challenging the US postwar hub-and-spoke system of security alliances in the region. Unsurprisingly, then, several Association of Southeast Asian Nations (ASEAN), countries – such as Malaysia, Thailand and Singapore – that were not included in the current tour sought to preempt pressures.

During a recent visit, Premier Najib Raza announced that Malaysia’s large national pension fund and provident fund would invest several billion dollars in equity and infrastructure projects in the US as Malaysia Airlines pledged to explore options for acquiring more Boeing jetliners and General Electric engines at $10 billion.

Prime Minister Prayut Chanocha promised Thailand would buy Blackhawk and Lakota helicopters, a Cobra gunship, Harpoon missiles and F-16 fighter jet upgrades, plus 20 new Boeing jetliners for Thai Airways. Siam Cement Group agreed to purchase 155,000 tons of coal while Thai petroleum company PTT will invest in shale gas factories in Ohio. Prayut and Trump signed an MOU to facilitate $6 billion worth of investments that could create over 8,000 jobs in the US.

Tiny but wealthy Singapore followed in the footprints. Prime Minister Lee Hsien Loong showcased Singapore Airlines’ deal with Boeing for buying 39 B787 and B777-9 aircraft, which – as it was said – could create 70,000 jobs in the US.

That is the regional way to offer dollar-tribute to the US hegemon.

US military pivot to Asia

Trump’s Asian tour was also about the hard sell of military assets across the region. According to SIPRI, increases in global military spending are now driven by demand in Asia, along with the Middle East. During the Obama military pivot to Asia, Asia/Oceania received most of global imports (43%). Of the 10 largest importers in 2012-16, half were in India, China, Australia, Pakistan and Vietnam.

Trump’s Asian tour was also about the hard sell of military assets across the region.

US dominates imports to its key security allies in East Asia and Oceania; Australia, Japan, and South Korea. In the past, these were thriving economies; today, they are aging and slowing. Growth markets are in emerging Asia, which is less prosperous and thus not willing to pay the US price premium, especially with more cost-efficient arms rivals, such as Russia.

Russia [has] dominated arms imports in India (68% of total imports) and Vietnam (88%).

When President Obama gave eloquent speeches about peace, his pivot to Asia contributed to maritime conflicts in the region fueling demand for weapons. But Pentagon did not cash the profits. Russia accounted for most arms deliveries to Asia and Oceania (37%), followed by the US (27%) and China (10%).

China has become a major arms supplier in Pakistan (68%), Bangladesh (73%), and Myanmar (70%).

And despite US-India strategic cooperation, Russia dominated arms imports in India (68% of total imports) and Vietnam (88%). Meanwhile, China has become a major arms supplier in Pakistan (68%), Bangladesh (73%), and Myanmar (70%).

From TPP lite to real free trade in Asia Pacific

After Japan, South Korea, China and Vietnam, Trump attended the Asia Pacific Economic Cooperation (APEC) Summit in Danang, Vietnam, followed by the 50th Anniversary of ASEAN and 40th Anniversary of the US-ASEAN Relations in Manila.

While trade ministers from 11 countries announced they would push ahead with a TPP lite, Abe may have seen the newly-named Comprehensive and Progressive Agreement for Trans-Pacific Partnership as a rival to the China-supported RCEP. In reality, it is a shaky TPP lite that will serve as a face-saving measure to him but as a hedge option to other 10 nations.

With the failed original TPP, the “America First” doctrine, Washington’s polarization and the impending impasse of the Mueller investigation, APEC hopes for greater US initiative in the region rest on quick-sand. The best APEC may hope for is long-term US-Chinese cooperation for the Free Trade Area of Asia-Pacific (FTAAP), which focuses on trade and investment and has room for both the US and China.

APEC hopes for greater US initiative in the region rest on quick-sand.

In this view, the US has a role in the ASEAN Economic Community (AEC), APEC and the US-ASEAN Connect Framework – as long as its engagement rests on economic cooperation, not geopolitical destabilization. In turn, the ASEAN nations’ integration plan AEC 2025 can benefit from China’s globalization initiatives, particularly the OBOR and the Asian Infrastructure Investment initiative (AIIP). In contrast, an enforced “America First” doctrine would undermine ASEAN 2025 goals.

A historic US-Chinese opportunity

In a defiant address, Trump told the APEC meeting that the US would no longer tolerate “chronic trade abuses,” while Xi announced that globalization was irreversible. What got lost in the translation was the intriguing fact – and historical opportunity – that the Trump and Xi visions need not be seen as exclusive.

In fact, both the US and Chinese visions support globalization, but with caveats. Both criticize the old multilateral international banks, though for different reasons. Both believe in rebalancing that is not accompanied by excessive trade deficits and foreign investment that should benefit both investors and destinations.

… both the US and Chinese visions support globalization

It is not the competitive US-China visions that offer a new path to the future in Asia Pacific. Rather, it is the inherent commonalities in these approaches that could sustain trade and investment in the region – and globally.

This article was adapted from a commentary published by China-US Focus 15 November 2017.