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US Must Recapture Lost Ground in Southeast Asia or Risk Being Shut Out

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US Must Recapture Lost Ground in Southeast Asia or Risk Being Shut Out

The “State of Southeast Asia 2020” report is a warning bell for American influence in the region.

US Must Recapture Lost Ground in Southeast Asia or Risk Being Shut Out
Credit: Facebook/ US Mission to ASEAN

Observers of U.S.-Southeast Asia relations have worried for many years about declining American influence in that region, and the growing skepticism and negativism with which the region views the United States. These concerns have intensified recently, as current and former government officials, business leaders, academics, and other opinion leaders increasingly voice worries that the U.S. is withdrawing from, disengaging from, or otherwise neglecting Southeast Asia.

The “State of Southeast Asia 2020” report, recently issued by the Singapore-based Institute of Southeast Asian Studies (ISEAS), is a timely addition to this conversation. It surveyed 1,300 policymakers, businesspeople, journalists, and civil society members from across the 10 Association of Southeast Asian Nations (ASEAN) member countries. The results are sobering, unnerving, and should be required reading for anyone who understands or cares about the region’s importance to American interests.

Some key findings: 47 percent of respondents to the ISEAS survey have little or no confidence in the United States as a strategic partner and provider of regional security. Only 30 percent have confidence that the United States will “do the right thing” to contribute to global peace, security, prosperity, and governance. More than three-quarters believe that U.S. engagement with Southeast Asia has declined under the Trump administration, and 79 percent believe that China is the most influential economic power in the region. Only slightly more than a quarter of respondents see the United States as the most influential political and strategic power in Southeast Asia, while 52 percent see China that way. Just under a quarter express confidence in the United States as the country most likely to provide leadership to maintain the rules-based order and uphold international law. The majority of respondents in seven of the 10 ASEAN countries would “side” with Beijing if forced (in some unspecified way), to make a “choice” between China and the United States. China even slightly edges out the U.S. in terms of respondents’ confidence about which country would provide leadership in championing the global free trade agenda.

Three points about these results: 1) they are not surprising; 2) they are disappointing; and, 3) they are worrisome.

No Surprises

The results are not surprising because U.S. actions have piped oxygen into the bellows of Southeast Asian skepticism, and they certainly reflect the types of commentary and criticisms the U.S. Chamber hears regularly from the region. The Trump administration’s withdrawal from the Trans-Pacific Partnership (TPP), a regional trade pact that included four ASEAN countries, and which was painstakingly negotiated over many years, did not engender trust or good will. That was followed by various threats of trade action against the 16 countries with which the United States runs the largest trade deficits. This list included four ASEAN countries (whose collective share of the U.S. trade deficit amounted to only 11 percent). The U.S. Chamber of Commerce has said repeatedly that the trade balance is a poor gauge of the success or failure of trade policy, a view shared by most mainstream economists.

Then came tariffs on imported steel and aluminum, a policy measure justified on dubious national security grounds, and which swept in several ASEAN countries. Subsequently, under the same national security pretext, the administration threatened to impose tariffs on imported automobiles and auto parts. As the U.S. Chamber of Commerce said at the time, “If this proposal is carried out, it would deal a staggering blow to the very industry it purports to protect and would threaten to ignite a global trade war.” It would certainly hurt some ASEAN countries like Thailand, from which the United States imported $3 billion in auto parts in 2017, though it and its neighbors are not the primary targets of this misguided policy. (To date the threats have not been carried out, even as those threats have been repeated).

In the months following the TPP withdrawal, the Trump administration assured business that new bilateral free trade agreements in Southeast Asia would be negotiated and would maintain and build upon the TPP’s gains. Three years on, no such negotiations have even been initiated, let alone concluded. Compounding this has been the lack of presence by senior U.S. government officials at the East Asia Summit, an annual gathering of regional leaders, for the last two years. We must recognize that the failure of senior officials like the president, the vice president, or secretary of state to attend such meetings is viewed as a high-octane diplomatic slight in ASEAN capitals.

Southeast Asian policymakers have to grapple with the unpredictability of U.S. international economic and trade policy, and the concern, not without evidence, that the region is not on American radar scopes. Hence the skeptical lenses through which they view the United States. Under those circumstances, it would only have been surprising if the survey results had been much different.

More in Disappointment Than in Anger

This leads to a second observation, which is that the results are disappointing because the perceptions are in many ways at odds at least with the commercial reality. That reality is that U.S. contributions to the region’s economies are immense. U.S. companies’ regional leadership in terms of corporate governance, social responsibility, labor practices, environmental stewardship, and respect for and promotion of the rule of law are their defining characteristics. ASEAN countries actively court U.S. investment and compete against each other fiercely for it.

Repeated surveys over a number of years by the U.S. Chamber of Commerce and the American Chambers of Commerce across Southeast Asia show steadfast optimism about the region. The same surveys have demonstrated that U.S. firms in the region enjoy good reputations relative to their Asian and European competitors, that the vast majority of U.S. companies’ workforces in the region are made up of local employees (unlike some of their competitors), and they offer innovation, flexibility, and creativity in the marketplace. U.S. companies are extremely competitive, and that competitiveness has a catalytic effect on their local partners and suppliers.

While the United States is not ASEAN’s largest trading partner, it still bought $206 billion worth of the region’s exports last year, and it is the largest foreign investor in the region. As measured by the Bureau of Economic Analysis, U.S. investment in the region stood at $271 billion at the end of 2018 (the latest data available), more than U.S. investment in China and Japan combined, and about 10 percent of ASEAN’s GDP. U.S. companies directly employ over 1 million workers in the region, paying out $30 billion in salaries and wages in the process, and indirectly support a much larger number of jobs through sourcing, contracting, and other business activity. U.S. companies are crucial to ASEAN’s integration into regional and global supply chains; by U.S. Chamber reckoning, American companies in the region annually generate roughly one-fifth to one-quarter of ASEAN’s total exports of goods and services.

ASEAN countries are not blind to this, and a robust U.S. economic presence is welcomed both for its commercial benefits as well as its strategic weight in terms of counterbalancing China.  But perceptions about U.S. commercial engagement in the region may be clouded by a number of factors. For one, state-backed champions with bottomless pockets from China and elsewhere bathe in the publicity of high-profile mega-infrastructure projects around the region. It’s not always positive publicity, as deals in Malaysia, Myanmar, and elsewhere have demonstrated, but these are nonetheless projects in which American companies are not players.

In addition, U.S. competitors recognize that simply “showing up” in Southeast Asian capitals counts for a lot. Aside from the great optics of high-level visits with elaborate deal signing ceremonies and CEO delegations in tow, which also count for a lot, such visits are effective means by which foreign countries can propel their business interests forward. By contrast, the United States is seen to have a chronic absenteeism problem.

What, Me Worry?

ASEAN countries may see China as pre-eminent in the region, but that doesn’t mean they like it. Only 6 percent of the survey respondents avow confidence in China as a leader in maintaining the rules-based order and upholding international law (the EU can take heart here, gaining a vote of confidence from 33 percent). The overwhelming majority of survey respondents worry about China’s political and strategic influence in Asia. ASEAN has not, does not, and will not want to “choose” between the United States and China; its policy of choice avoidance has been refined to diplomatic high art over the years. The question is the sustainability of that policy, especially if we keep seeing these kinds of results in future surveys.

In refreshing contrast, the United States maintains strong strategic and cooperative military relationships in Southeast Asia. And in this respect, the Trump administration has largely observed continuity with longstanding U.S. policy, and even strengthened some of the strategic relationships. This too is welcomed in the region. Military-to-military cooperation is very good, and Washington maintains robust programs of cooperation in counterterrorism, human trafficking, and other functionally vital, if not headline-grabbing, areas. In those important respects, the United States has not disengaged from Southeast Asia at all.

If this is a perceptions survey, and if the economic and security relationship is deceptively strong, then why worry? ASEAN will not simply leave itself to China’s tender mercies, and the U.S. presence is largely welcomed in the region. If the United States wants to be in Southeast Asia, it is essentially pushing on an open door. So what’s the big deal?

The big deal, of course, is that perceptions drive policymaking. Often unanswered and unnoticed, negative Southeast Asian perceptions could lead to policy choices that undermine U.S. interests in the region. Heterodox trade policy, a lack of presence, undue emphasis on trade deficits, and other nontraditional approaches to economic statecraft all combine to serve as an irritant to U.S. relationships in Southeast Asia. Continued unchecked, all of this will erode U.S. influence in ways both subtle and pile-drivingly obvious. The regional response to the U.S. withdrawal from TPP – to move ahead without Washington and to double down on trade deals like the Regional Comprehensive Economic Partnership, those with the European Union, and others – should be instructive.

That is not to say that these setbacks cannot be reversed. Indeed, efforts such as the Trump administration’s Indo-Pacific Strategy are laudable; the strategy focuses on real needs such energy, infrastructure, and the digital economy. It is still a work in progress and is not a substitute for a forward-leaning trade policy. However, it does provide genuine opportunities for progress.

Here too, the ISEAS survey reveals skepticism and cynicism; nearly a quarter of respondents see the Indo-Pacific Strategy simply as a China containment ruse, and 23 percent see it as undermining ASEAN’s relevance. More than half, however, say the concept is unclear and requires further elaboration. Those views can be addressed head-on simply by a better education effort, combined with robust and vigorous implementation, credibly backed up by resources, and guided by sound policy objectives.

The open door that the United States isn’t pushing on won’t stay open forever. It is time to reckon with the intertwined nature of economic and strategic competition in the region. The upcoming U.S.-ASEAN leaders’ summit in Las Vegas in March is near-term opportunity to recapture lost ground.  The United States needs to strengthen its economic relations, maintain and build on its military and strategic ones, recognize the shortcomings of existing approaches, particularly the mercantilist and meaningless trade deficit yardstick, and develop a better approach moving forward. When the polling results are this stark, shrugging them off is unwise. Instead, they should be taken as the warning that they are.

John Goyer is the Executive Director of Southeast Asia at the U.S. Chamber of Commerce.