US looks to loosen China’s grip on SE Asia

Intensifying Sino-American rivalry is sending both glad tidings and worrying ripples through Southeast Asia, a strategically crucial region at risk of becoming a proxy theater in any armed conflict or all-out trade war between the two superpowers.

The Donald Trump administration has now openly turned its concept of a “Free and Open Indo-Pacific” (FOIP) into an overt anti-China narrative, one that portrays the Asian powerhouse as a direct and rising threat to the region’s “rules-based order.”

US Secretary of State Mike Pompeo underscored that point on a recent high-velocity diplomatic tour that aimed to rally regional support and resistance against China’s reclamation and military activities in the South China Sea.

Short of an armed conflict or full-blown trade war between the two superpowers, the Association of Southeast Asian Nations (Asean) has benefited from the rising US-China competition.

The dueling sources of economic and security assistance has allowed Asean states to hedge their dependence on any one country and enhanced their negotiating leverage in cases where they can play the two superpowers off one another for aid and benefits.

During the Australia-US Ministerial Consultations (AUSMIN) staged in Palo Alto, California in July, Pompeo and US Secretary of Defense James Mattis emphasized what they see as China’s growing threat to regional peace and prosperity.

Pompeo portrayed America as the chief guarantor of stability in the region, a commitment to a free and open order he said was “unshakable.” Pompeo described Australia as a key ally that has been crucial to maintaining a rules-based order amid China’s challenge to the status quo.

In their joint statement, the defense and foreign ministers of both allies, “emphasized that militarization of disputed features in the South China Sea is contrary to the region’s desire for peaceful development” and reiterated the obligation of all countries including China, “to respect freedom of navigation and overflight, and other lawful uses of the sea, in accordance with international law.”

In an indirect jab at China’s moves in the South China Sea, the allies also called on all concerned parties to “cease actions that complicate disputes and not to prejudice the interests of third parties or the rights of all states under international law.”

Shortly after the meeting, America’s chief diplomat embarked on a three-country tour in Southeast Asia where he met leaders from Singapore (Asean’s current chairman), Malaysia (now under new leadership) and Indonesia, largely seen as Southeast Asia’s de facto leader.

To underscore America’s continued commitment to the region, he offered a US$117 million fund for the transfer of high technology and high-quality private investments to Southeast Asia. The US is still by far Asean’s largest source of overall foreign direct investment (FDI), an often overlooked leverage point with all the attention on China’s recent checkbook diplomacy.

Pompeo also offered a US$300 million security assistance package to the region, with a particular focus on maritime security.

So far the defense package seems to be a continuation of the Obama administration’s Maritime Security Initiative (MSI) in Southeast Asia, which aimed to enhance the coast guard, surveillance and intelligence-gathering, and minimum deterrence capabilities of smaller South China Sea claimant states.

Vietnam, Malaysia, the Philippines and Indonesia, which has overlapping claims with China in the Natuna Sea, are expected to be the main beneficiaries of Trump’s initiative. The effort builds on parallel efforts by Japan and, to a lesser degree, India, South Korea and Australia to enhance naval interoperability and coast guard capabilities of Southeast Asian states.

The Trump administration has also pushed for “more regular and more robust” Freedom of Navigation Operations in the South China Sea and “rides on the shoulders” of the predecessor administration’s “best practices” to challenge any threat to regional security, a Pentagon official in Washington told this writer in late July.

Meanwhile, the US Congress is deliberating a much larger multibillion dollar Asia Reassurance Initiative (ARA), which aims to further strengthen America’s naval footprint in the South China Sea and other crucial maritime chokepoints across Southeast Asia and beyond.

Pompeo made it clear that Washington isn’t trying to match Beijing’s economic initiatives dollar-for-dollar, but it does aim to leverage its military muscle, soft power and network of alliances and partnerships in the region to constrain China’s maritime ambitions.

He also underscored the importance of the Better Utilization of Investments Leading to Development (BUILD) Act, a US$60 billion government-led fund to facilitate support for American private investment in strategic overseas sectors such as energy and information technology, particularly in Southeast Asia’s booming markets where the US is already a leading investor.

Pompeo also went on the diplomatic offensive during his Southeast Asian tour by questioning the veracity, quality and sustainability of China’s large-scale infrastructure investment deals under the US$1 trillion Belt and Road Initiative (BRI). In contrast, he claimed American investments in the region bring “quality” jobs in accordance with individual countries’ domestic regulations.

The Trump administration also hopes to augment its economic initiatives in the region by conscripting Japan and Australia, both of which have offered their own infrastructure development plans in Asia.

Japan’s own Connectivity Initiative includes a myriad of major projects aimed at enhancing basic infrastructure across Southeast Asia to help facilitate the growing flow of Japanese manufacturing investments in the region.

Earlier this year, Australia and Asean agreed to develop a joint infrastructure project, which, according to Australian Foreign Minister Julia Bishop, “will develop a pipeline of high-quality infrastructure projects to attract private and public investment.”

One problem with the proposals, however, is that Washington’s own commitment to international trade and outward investment is now in question with the Trump administration’s mounting trade war, which while mainly targeting China is impacting on all of Asia’s major trade-geared economies.

Many regional countries were disappointed when Trump withdrew the US from the Trans-Pacific Partnership multilateral trade pact, which the predecessor Obama administration championed as the economic component of his “pivot” to Asia policy.

China has deftly counteroffered a package of incentives as well as cooperative mechanisms to diffuse tensions with its increasingly jittery neighboring countries.

For instance, Beijing recently announced a “milestone” in its South China Sea Code of Conduct negotiations with Asean with the agreement on a “single draft negotiating text” that will serve as a basis for the finalization of basic rules among competing claimant states. The negotiations have dragged on for over a decade.

Singapore’s Foreign Affairs Minister Vivian Balakrishnan, for one, welcomed the “single draft” as a “living document and the basis of future code of conduct negotiations.” In a joint statement, Asean foreign ministers in early August “warmly welcomed the continued improving cooperation” with China in the South China Sea.

In that direction, on August 3 Asean and China held their first ever joint naval exercises through Singapore’s Changi Naval Base to boost their maritime security cooperation. The two sides also discussed prospects of a joint development agreement for resources in the contested waters.

As China and the US intensify their competition for regional influence, Asean members so far are mostly benefitting from the enhanced economic and strategic opportunities. That would change fast, however, in an open conflict scenario as the region could quickly turn into a proxy theater with the likely first flashpoint in the South China Sea.