ASIA
22 March 2017
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Donald Trump’s potshots at Asia

Donald Trump has started badly his relationship with Asia, the world's most economically and politically important region, writes John West.

During the election campaign and before his inauguration, Donald Trump had much to say about Asia. He threatened to label China a currency manipulator, to levy an import tariff of 45 per cent on American imports from China, and to penalise companies that locate manufacturing investments in China rather than the US. Trump criticised the Chinese military island-building programme in the South China Sea. He also threatened to make Japan and Korea pay more for the US military troops and assets that are defending them, and suggested that they could acquire nuclear weapons so that they could assure their own defense. Trump also questioned the “One-China Policy”, spoke by telephone with Taiwan President Tsai Ing-wen. In contrast, Trump spoke positively about India and Pakistan.

The newly installed Trump administration has reacted swiftly on the Asian front, but with much more moderation. Trump officials have reaffirmed the US commitment to its alliances with Japan and Korea, while Trump himself indicated his support for the “One-China Policy” in a telephone conversation with Chinese President Xi Jinping. This is seen to have been a big back down for Trump, as Xi reportedly refused to talk with him until Trump honoured the One China Policy. Nevertheless, many mixed messages emanating from the Trump administration have left clouds of uncertainty for the moment.

To the dismay of the US business community, Trump has withdrawn the US from the TPP. This was after all a trade agreement designed by the US business community, largely for the benefit of the US business community, pushed onto allies and partners, and then rejected by a business man president. Many observers hope that the TPP will be revived and renamed in the future, or that parts of it will be resuscitated in future bilateral trade agreements.

Trump’s rhetoric on trade policy has been evolving and softening from the defiant protectionist messages during the election campaign and in his Inaugural Speech. He is now emphasising his support for both free and fair trade. According to the President’s 2017 Trade Policy Agenda, America has not benefited from its trade deals over the past couple of decades due to the lack of reciprocity in trading relations. He complains that many countries in particular have high trade barriers while their companies can export freely to the US. At the same time, there remains a strong protectionist undercurrent in the Trump administration, notably through his ‘buy American, hire American’ slogan. And Trump has threatened to disregard World Trade Organisation dispute settlement rulings.

There seems little hope of the TPP being revived, as Trump would now like US trade policy to focus on bilateral rather than multilateral deals. He plainly has China, Japan and Korea in his sights. The new Trade Policy Agenda highlighted the tripling of the US’s trade deficit with China since it joined the WTO, and the doubling of its trade deficit with Korea following their free trade agreement. On the occasion of their summit meeting, Trump and Japanese Prime Minister Shinzo Abe agreed to establish a new framework for economic dialogue, which is expected to lead to a bilateral free trade agreement.

In the trade field, China is the big fish that Trump will tackle. There was also a widespread consensus that China was flouting world trade rules, stealing US intellectual property, conducting state-sponsored industrial espionage, buying up US companies while keeping its own markets closed, and discriminating against American companies based in China. In time, it is likely that the US would seek to negotiate an economic framework agreement with China that addresses US concerns about the “lack of reciprocity” in US-China relations. This will be a major endeavour, which will test an already-strained economic relationship, especially in light of China’s poor record for implementing international agreements.

Trump is hardly likely to be interested in bilateral FTAs with smaller Southeast Asian countries which were TPP signatories, namely Brunei, Malaysia and Vietnam, and countries like Indonesia, the Philippines and Thailand that were lining up to be second phase TPP members. In short, Southeast Asia, and above all US relations with the region, could be the big loser from Trump’s TPP debacle and its new approach to trade policy.

Countries like China, India and the Philippines which rely heavily on migrants’ remittances could suffer from President Trump’s tightening of migration policies. These three countries account for almost all of America’s 1.5 million illegal migrants coming from Asia, and 13 per cent of all illegal migrants. Asia is also being hit by Trump’s tightening up of the temporary work visa (“H1-B visas”), as Indian nationals are by far the top recipients of these visas. And Trump’s blatant Islamophobia will not endear him to Muslim majority countries like Indonesia and Malaysia.

On the military front, the most important new initiative is the US’s installation in South Korea of the Terminal High Altitude Area Defense (THAAD) system, ostensibly to protect Korea from missiles from the North. The installation of the THAAD has been rushed prior to the 9 May Korean presidential elections, which will likely see a left-wing president elected. This has resulted in tensions between China, and Korea and the US, as China is concerned that it will enable the US to spy into its territory. China is imposing economic sanctions on Lotte, the Korean company that provided the land for the THAAD installation. China is also stopping its tourists from visiting Korea.

And lastly, it seems that Donald Trump’s administration is planning to defy Winston Churchill’s advice that “to jaw-jaw is always better than to war-war”. His budget proposal involves increasing funding to the US military by 9 per cent, while cutting the State Department’s diplomacy and foreign aid by a combined 28 per cent, and also the Environment Protection Agency by 31 per cent. Trump is also proposing that the US stop financing for all UN climate change activities.

“There is no question that this is a hard-power budget; it is not a soft-power budget,” said Mick Mulvaney, the director of the Office of Management and Budget. “The president very clearly wants to send a message to our allies and our potential adversaries that this is a strong power administration.” While Trump’s budget proposal will certainly be amended and softened by the Congress, it is a clear expression of his spirit. Trump’s plan to increase military spending, cut diplomacy and foreign aid, and withdraw from the TPP leaves it with a very lopsided relationship with Asia -- and very lopsided compared with China’s approach to its Asian neighbours.

Trump and Asia -- a preliminary assessment

President Donald Trump’s working assumption is that many Asian countries have been “ripping off” America in different ways. Countries like China, Japan and Korea allegedly have relatively closed markets, but benefit from the openness of the US market. Allies like Japan and Korea are believed to not contribute sufficiently to their own national security. And China has been protecting the rogue state of North Korea, and is violating international law in the South China Sea. While there is at least an element of truth in these concerns, the aggressive and combative way in which these concerns are communicated is not very constructive.

For their part, many Asian countries also have concerns about the US. The big policy switch-around from one administration to another can undermine the reliability of the US as a partner. For example, in an interview before the US elections, Singapore’s Prime Minister Lee Hsien Loong said that a failure to ratify the TPP "would be a very big setback for America." "Your standing goes down with many countries around the world," Lee said. "After you have gotten Vietnam to join, after you have gotten Japan to join, after Japanese Prime Minister Shinzo Abe has made very difficult arrangements on agriculture, cars, sugar, and dairy. Now you say, 'I walk away, that I do not believe in this deal.' How can anybody believe in you anymore?"

More generally, the recent US election campaign, and the turmoil of the early days of the Trump administration have greatly undermined the credibility of the US as an indispensable strategic power in the Indo-Pacific. Its moral ascendancy and soft power have been greatly diminished. At the same time, China is now the most important economic partner of most Asian countries, and providing much assistance and financing infrastructure without any policy conditionality.

Overall, under the Trump administration, Asia is now faced with a likely deterioration in key factors that have driven its development -- an open US market, a relatively benign security environment, and a stable global economic system.
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