ASEAN Questions US

The US is ceding leadership to China and Korea in Southeast Asia. Passing key trade deals could help remedy that.

In Asia, particularly Southeast Asia, a forward-deployed trade policy is a core element of a robust US foreign policy. Assessments of US power and the United States’ commitment to the region need speedy approval of the free trade agreements (FTAs) with South Korea, Columbia, and Panama when Congress reconvenes in September. This would not only help create momentum for economic recovery and more high-quality American jobs at home, but could be the first step in reversing the widespread perception in the Association of Southeast Asian Nations that the United States is falling behind its competitors in trade and investment in the region.

On political and security relations, Southeast Asian governments generally give the United States high marks for its efforts to boost ties with the region during the past few years. Several Asian countries, including Indonesia, were on the itinerary of US Secretary of State Hillary Clinton’s first trip overseas, and she has encouraged ASEAN with her forward-leaning Lower Mekong Initiative and comments about protecting freedom of navigation in the disputed South China Sea.

President Barack Obama has had two summits with his ASEAN counterparts, and Washington has acceded to ASEAN’s Treaty of Amity, joined the East Asia Summit (EAS), which has ASEAN at its core, and sent an ambassador to ASEAN based in Jakarta.

But on trade and investment, the United States is ceding too much leadership to China, Japan, Korea, and India, according to several Southeast Asian leaders; that is what those leaders told a delegation of commissioners advising the Center for Strategic and International Studies on relations with ASEAN who visited the region in July. The ASEAN leaders said the United States needs to step up its commercial engagement with the region to prevent ‘a line down the middle of the Pacific’ that could undercut a narrative of vigorous US engagement and hobble the long-term economic role of US corporations.

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It’s critical for Congress to pass the three existing FTAs in September. These agreements were essentially completed more than three years ago. Congress must act to signal that the United States intends to remain fully engaged globally on trade and investment ahead of four critical summits in which the president will participate in November. Without those FTA deals in hand, the US commitment to trade will be severely questioned when Obama attends the G-20 summit in Cannes, hosts Asia Pacific Economic Cooperation (APEC) leaders in Hawaii, and participates in his first EAS and third ASEAN leaders’ summit in Bali.

A continued congressional stalemate over the trade agreements will also hamper serious progress on the cutting-edge Trans-Pacific Partnership (TPP) agreement on trade liberalization, which includes four ASEAN countries (Brunei, Malaysia, Singapore, Vietnam), the United States, and four other partners and will allow other Asian countries to join over time. Officials of the countries involved in the agreement say the lack of progress on the existing agreements in Washington undercuts the market-opening offers US negotiators bring to the table out of concern that these could alienate a constituency in Congress needed to ensure support of three FTAs under consideration.

To be sure, US trade with and investment in ASEAN remains impressive. In 2010, ASEAN ranked as the United States’ fifth-largest trading partner with two-way trade reaching $178 billion, up 132 percent over the previous decade. With less than half of China’s population, ASEAN managed to attract almost the same volume of US exports, which are conservatively estimated to sustain about 269,000 relatively high-paying American jobs. Further, US foreign direct investment stock in ASEAN reached $153.3 billion in 2008 (the last year for which cumulative figures are available), $74.1 billion more than to Japan and $107.6 billion more than to China.

Despite this strong foundation, US trade and investment could have been even hardier. Over the past two decades, the American share of Asia’s international trade has declined by 9 percent. In part this is due to the fact that production supply chains for electronics have mushroomed in Asia in recent years as ASEAN’s more developed economies have provided components to assembly plants in China. This phenomenon has been stimulated by the Asian economic integration fuelled by the explosion of FTAs between Asian countries—from a mere 6 to 70— in the past 15 years. The United States, meanwhile, has only two FTAs in the region—with Singapore and Australia.

Passage of the three existing FTAs and progress on the TPP are critical ahead of the four November summits and the beginning of what looks to be a divisive presidential campaign next year. By approving the FTAs, Congress will give TPP negotiators a boost so that they can try to deliver the broad outlines of an ambitious agreement before the APEC summit and thereby take another step to strengthen US exports to the dynamic Asia-Pacific markets.

Congress had been expected to pass the trade deals in early August before it left Washington for a recess, but these plans were derailed by months of brinksmanship in the showdown over raising the government’s debt ceiling. In recent weeks, congressional leaders have said they reached a bipartisan agreement that will allow them to renew funding for a job-retraining programme and pass the three trade agreements when they return to Washington.

If the United States hopes to continue to be a major power in the Pacific, Congress and the White House need to work together to ink the three existing agreements quickly and move to substantially complete the TPP over the next few months. These deals will open markets, create more high-paying jobs, and help convince ASEAN that the United States is competing in the region not only politically and strategically, but commercially as well.

Murray Hiebert is Deputy Director and Senior Fellow of the Southeast Asia Programme at the Center for Strategic and International Studies in Washington, DC. This post originally appeared in the Southeast Asia from the Corner of 18th & K newsletter.