With US-China competition growing in intensity, the timing of the US-ASEAN Special Summit could not be more critical. Having been postponed at the last minute in March, the summit will now be held on May 12-13 in Washington, DC.
The most intense competition between the US and China occurs in Southeast Asia. While the partnerships between the two largest economies in the world are settled in many places – China’s and Russia’s “no-limits partnership” and the US and European Union intertwined economically and militarily, with Australia, India and Japan joining the US in the Quad – the 10 countries of the Association of Southeast Asian Nations strive to maintain positive relations with both Washington and Beijing.
To paraphrase Singaporean Prime Minister Lee Hsien Loong, Southeast Asia “does not want to choose” between China and the US.
Economically, each country in the prime minister’s neighborhood most inextricably links to China. China’s trade with ASEAN nearly doubles that of the United States, reaching US$685 billion in 2020, with the US at $362 billion.
With the US falling behind China in terms of the region’s economic integration, this week’s summit will be both a major test and opportunity for President Joe Biden to reassure the region’s leaders that Washington will increase engagement with ASEAN beyond defense and diplomacy.
Such action will be well received, given that polls in ASEAN find the US a better steward of the multilateral, rules-based international order upon which smaller countries, including those of Southeast Asia, depend for stability and prosperity.
President Biden must demonstrate that his administration’s focus on the war in Ukraine will not detract from its larger goal of providing Southeast Asia with an economic alternative to China.
With the economic impacts of sanctions from Russia’s invasion of Ukraine being felt across the region, and China’s self-defeating Covid-19 lockdowns hurting as well, greater economic collaboration with the US could help offset the worst supply-chain shock in a generation.
Time for US to re-engage on trade
A decade has passed since the US entered a new trade agreement in the Asia-Pacific region, and nearly two decades since doing so in Southeast Asia.
While then-president Barack Obama nearly pulled off a game changer with the signing of the Trans-Pacific Partnership (TPP), the US withdrawing from it on his successor Donald Trump’s third day in office keeps Washington out of the ongoing regional integration.
With the US on the outside looking in, China has taken a leading role in setting the standards by serving as an architect and anchor of the Regional Comprehensive Economic Partnership.
Through RCEP, China becomes more integrated with ASEAN as well as other key players in the Asia-Pacific, such as Japan and South Korea. More recently, it also applied to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the successor to the TPP and the most ambitious and meaningful trade agreement in the region’s history.
As my colleague, former deputy US trade representative Wendy Cutler, recently testified before Congress, “If China’s accession negotiations move forward, it would be a game changer, likely eclipsing all other regional initiatives and becoming the most important trade negotiation in the region, with the US as a non-member wielding little, if any, influence over the process.”
‘Building the biggest possible tent’
The Biden administration understands the US can only have success in the Indo-Pacific region if it manages to attract unprecedented levels of coordination and contribution from partners across the region. Thus it aims to provide as big of a tent as possible, for as many countries as possible, to feel comfortable standing inside and alongside the US.
The Indo-Pacific Strategy charts an “affirmative” strategy, setting forth a shared vision for a free and open, connected, prosperous, secure, and resilient region. Through the strategy, the US will work with any willing contributor to expand the collective capacity of the region.
The Biden administration deliberately chose to release the Indo-Pacific Strategy ahead of Russia’s likely invasion of Ukraine, so that the relevant US government departments and agencies would know their marching orders and could begin implementing the strategy, while the president and his core national-security team focused most on events in Europe.
However, Biden and his team must visibly and tangibly demonstrate that they remain focused on Asia even amid conflict in Ukraine. The ASEAN Summit will help do that. But strong and visible momentum in implementing the Indo-Pacific Strategy will do that more.
The five core objectives of the Indo-Pacific Strategy are: advancing a free and open Indo-Pacific; building connections within and beyond the region; driving regional prosperity; bolstering Indo-Pacific security; and building regional resilience to transnational threats.
To implement this strategy, the Indo-Pacific Economic Framework (IPEF), being developed with America’s allies and partners, aims to deepen economic relationships in the region and coordinate approaches to global economic challenges.
Its objectives are: developing new approaches to trade that meet high labor and environmental standards; making shared investments in clean energy, decarbonization, and environmental sustainability; advancing resilient and secure supply chains that are diverse, open, and predictable; and governing digital economies and cross-border data flows according to open principles.
The IPEF will ultimately disappoint if it does not result in concrete actions, such as the US playing a leadership role in shaping the digital trade landscape. Rules and standards – not just rhetoric – are important to include in the IPEF to enable open digital markets, facilitate digital trade, and foster trust in the digital economy.
It should also offer directional ambition toward promoting trade liberalization or market access, ideally signaling Washington’s interest to join CPTPP eventually, something for which many both non-American and American-headquartered businesses in the region clamor.
If Washington just highlights America’s strong flow of foreign direct investment and stock, as well as its considerable support for regional climate-change mitigation and public health capacity-building, it will be insufficient to the task at hand.
The region faces simultaneous pressures, from continuing waves of Covid-19 to supply shocks, inflation, disruptions caused by the conflict in Ukraine, the impacts of rising interest rates in the US and leadership transitions at home. An opportunity arises amid these challenges for the US and its partners to exercise principled, pragmatic, results-oriented leadership in Southeast Asia.
‘Trade more, engage more’
The upcoming meeting between President Biden and the leaders of ASEAN will allow the US to seize this moment, for the benefit of both itself and the broader region.
Paying lip service to its “enduring commitment” to the region, while cautioning that any concrete steps on trade remain out of reach because of US domestic political constraints, will ensure continuation of the region’s growing economic integration with China.
As Singaporean Ambassador Tommy Koh stated in discussing America: A Singapore Perspective, the book he recently co-edited, that the US is not competing enough in Southeast Asia. The US brings a single focus of security, but Asians live by trade. This results in a mismatch between US policy and the region’s wish. The US is doing exactly the opposite of what this region wants it to do.
In calculating their next steps, Southeast Asia’s leaders are watching to see if Biden will continue ceding the development of regional economic integration to China, or if the IPEF will set the stage for the US to invest more and trade more, offering viable economic competition.
Patrick Clifford of McLarty Associates’ Southeast Asia practice contributed to this article.