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US opens regional trade gambit in
Asia
By Sreeram Chaulia
Towards the end of her five-day visit to Asia that revealed
new strategic thinking on several foreign policy indicators,
US Secretary of State Hillary Clinton this week delivered a
path-breaking speech on economic diplomacy in Hong Kong.
Grandly titled as "Principles for Prosperity in the
Asia-Pacific", it purported to place the United States in
the cockpit to drive the agenda of regional economic
integration that is distinct from what China has been
attempting under its own leadership banner.
Employing the language of economic rationality and avoidance
of wasteful costs, Clinton criticized "a hodgepodge of
inconsistent and partial bilateral agreements which may
lower tariffs, but which also create new inefficiencies".
Taking to task the over 100 bilateral trade pacts signed by
Asian states in less than a decade, she beckoned towards
"true regional integration" and a "genuine free trade area
of the Asia-Pacific".
The strategic undercurrent of these pronouncements is a
reality that the US' export-oriented businesses are feeling
the pinch of being left out of the growing sphere of
intra-Asian trade, with China as the center of the wheel.
The possibility that American businesses - spearheads tasked
by President Barack Obama to generate new export revenues to
bolster the sputtering US economy - could be left out of the
Asian pie as preferential trade agreements (PTAs) and
bilateral deals proliferate is a long-term apparition that
haunts geo-economic planning in Washington.
Clinton's emphatic assertion in the Hong Kong speech that
the US is a "resident economic power in Asia" is an
indication that the Obama administration aims to use its
formal resumption this November of leadership of the Asia
Pacific Economic Cooperation (APEC) forum to stage a
comeback into a regional field that is centering and shaping
around China.
Chinese demand for commodities and Chinese supply of
manufactured products now form the loci around which many
Asian PTAs and bilateral trade agreements are mushrooming.
Beyond the obvious ASEAN-China Free Trade Area forged by
Beijing with the 10-member Association of Southeast Asian
Nations (ASEAN) and operational since January 2010, even
those bilateral pacts which do not formally involve China as
a partner (eg the ASEAN-Korea Free Trade Area) are impacted
by the terms of trade and currency rates being set by
Chinese economic activity across the region.
While China and other Asian powers enter into ever denser
and complex trading relationships with seeming alacrity,
Washington politics have stymied the Obama administration
from wrapping up long-pending bilateral trade pacts with
South Korea, Colombia and Panama. Frustration with domestic
American political lobbies which continue to block adoption
of these deals seems to have convinced US foreign policy
elites that bilateralism is a spent mode which runs into
tangles and public relations fiascos.
The dysfunction of a divided government, wherein the
American presidency is with one political party and one
chamber of congress is with the opposition, has already put
Washington on the defensive in its engagements with Asia
about US public debt and the value of Treasury bonds. The
same institutional paralysis promises to bury a time-tested
preference in the US for bilateral economic settings.
A deeper structural reason for the US apparently jettisoning
the bilateral formula for the regionalist one has to do with
relative decline in American power capabilities.
Historically, hegemons and predominant states are
temperamentally inclined to one-on-one negotiations so that
their overall superiority in material might vis-a-vis the
weaker party will squeeze out the most advantageous
outcomes.
It bears reminder that the US was initially reluctant to
join the Word Trade Organization (WTO) in the early 1990s
owing to fears that a rules-based multilateral system would
flatten out the benefits of power asymmetry in bilateral
exchanges that Washington enjoyed in what used to be a
straightforward unipolar world.
Today, the more advanced condition of power distribution
among states has brought about scenarios such as those in
Southeast and East Asia, where the US is unsure of how long
its tag of "resident power" can be assured purely through
military bases and aircraft carriers. Ambitious
cross-regional trade ideas such as the "Trans-Pacific
Partnership" are meant to be eventual substitutes for an
inevitable fiscally dictated drawdown of US military assets
from Asia.
Can the US really assume the helm of a new regional
integration project in Asia? The contradictions are manifold
in Clinton's claims, because Washington has
characteristically been a divider of Asia rather than a
unifier. In the earlier leg of the same Asia trip on which
she gave the landmark Hong Kong speech, Clinton nudged India
to wake up, "act east" and take a more assertive leadership
role across the Asia-Pacific - a challenging invitation that
suggests a reprise of the old counterbalancing maneuvers to
contain China's rise.
The liberal economic vision of a seamless regional
pan-Pacific trade zone which lowers tariffs and spreads
prosperity requires sublimation of strategic political
rivalries and a willingness of major Asian powers to accept
the US as the bellwether which parcels out absolute gains to
all parties. Unfortunately, the Asian terrain is nowhere
close to such harmony and Washington is itself acting at
cross purposes despite heralding Asian regionalism.
Since the 1997 Asian financial crisis, regionalism has had a
distinctly un-American feel to it, notwithstanding the
internal wrangling among Asia's big powers. If the Obama
administration now hopes to divert momentum away from
institutions like the Chiang Mai Initiative (a regional
currency swap arrangement for financial stability among
ASEAN, China, Japan and South Korea) through its own "true
regional integration" via the pulpit of APEC, the result
could be counter-productive by once again dividing Asia as
was the case during the Cold War.
A pro-US camp and a pro-China camp may be too crude an array
of forces when the US and China are themselves joined at the
hip through the mechanism of American Treasury bonds. But
the intense security competition between Washington and
Beijing, which was most recently reflected in the rising
tempers in Southeast Asia over the Spratly and Paracel
islands disputes - as well as the strong animus between
China and India in the political sphere, render Asia
uneasily calm and on the brink of an unofficial Cold War
with more than two centers of power.
In milieus of rapidly shifting power and uncertainty about
which major state will end up at what stable pole position,
bilateralism and short-termism will continue to rule foreign
economic policies. The lifeless fate of the multilateral
Doha Round of the WTO has already raised doubts about the
viability of trade agreements with a large number of
parties. Given the push factor of specific industries of one
country aiming to capture market shares in spatially defined
territories of proximate countries, the exuberance for
bilateral PTAs within the Asian region looks set to
multiply.
The US is thus an unlikely saviour of global free trade and
an even less probable unifier of the Asian region. It is
more practical to imagine a future where partisan American
domestic politics would eventually yield to consensus on the
yet-to-be-ratified bilateral trade pacts, opening the door
for the US to sew up its own flurry of one-to-one deals in
Asia.
In her Hong Kong speech on July 25, Clinton showered praise
on the KORUS (South Korea-US Free Trade Agreement) as a
"model agreement" which Asian states must emulate for
provisioning protections for businesses, workers and
consumers. Asians could well retort that they have much
better domestic political capital to execute time-bound
bilateral trade pacts. Some leadership lessons in economic
diplomacy have to be learnt, not taught, by the Americans.
Sreeram Chaulia is Professor and Vice Dean of the
Jindal School of International Affairs in Sonipat, India,
and the author of the new book, International
Organizations and Civilian Protection: Power, Ideas and
Humanitarian Aid in Conflict Zones (I.B. Tauris, London)
(Copyright 2011 Asia Times Online (Holdings) Ltd. All rights
reserved. Please contact us about sales, syndication and
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