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How Asean can bridge US-China gap and reap economic benefits amid potential flashpoints

South China Morning Post | 3 December 2022

How Asean can bridge US-China gap and reap economic benefits amid potential flashpoints

by Xue Gong

Political elites across Southeast Asia view the United States and China as two magnetic poles, pulling their countries in opposite directions. How can that be balanced?

In Washington, the bipartisan consensus is that Beijing is a rival that is intent on chipping away at the US’ global leadership. China has indeed been steadily expanding its economic influence in Southeast Asia. It is Asean’s biggest trading partner and has visibly entrenched itself in the region through its Belt and Road Initiative.

China also strongly supported Asean’s Regional Comprehensive Economic Partnership (RCEP) initiative and played a key role in stitching it together. This has further motivated Asian economies to embrace China’s leadership in regional integration.

To counter China’s regional influence, the US has been setting up a variety of geoeconomic tools. Washington launched its Indo-Pacific Economic Framework (IPEF), for instance, while pursuing decoupling from China.

Asean has long-standing economic and security ties with both China and the US that may seem to be at odds with each other. A few key Asean member states such as Thailand and the Philippines remain part of the US security structure in the Indo-Pacific even as they seek to enhance economic ties with China, for example.

Moreover, the region has many potential flashpoints – such as the territorial disputes in the South China Sea – that could intensify conflict between the two great powers.
Under such circumstances, how can Asean achieve greater economic integration at a time when China-US economic competition is heating up? What possible steps can Asean take to reap economic benefits and bridge the growing gap between the US and China?

In search of a middle way

For Asean to reassert its centrality and unity, a more pragmatic and issue-based approach to regional integration is required. One way would be for the region to consider spearheading a new movement supporting a ‘non-aligned’ foreign policy.

The Non-Aligned Movement (NAM) of the Cold War era was mostly pursued by countries in the Global South seeking independence in the event of a confrontation between the US and the Soviet Union. Similarly, in today’s context of great power competition, non-alignment will enable Southeast Asian countries to advance their interests without tying themselves unconditionally to the preferences of great powers.

The prospect of such a movement should instinctively appeal to the region’s small and middle-sized powers, who have been searching for ways to defend their interests together in the face of great power competition.

Singapore has already explicitly expressed an interest in taking a nuanced approach to non-alignment. Indonesia – with its legacy of leading the NAM at the 1955 Bandung Conference – has taken the lead in crafting regional policies such as the Asean Outlook on the Indo-Pacific, which reasserts Asean’s centrality and preference for dialogue and cooperation over rivalry.
The first tenet of a non-aligned foreign policy is diversification. Individual Southeast Asian states have taken steps to diversify their stakes and secure their interests. In the area of regional connectivity, for example, Southeast Asia has been seeking out more partners to help fulfil its need for regional infrastructure.

Besides China’s belt and road and Japan’s Partnership for Quality Infrastructure, Southeast Asia has also explored other platforms to enhance regional integration, such as the Asean-Europe connectivity agenda and the Asean Regional Integration Support from the EU (ARISE) programme. Indonesia has even secured better deals on development projects, such as the Jakarta-Bandung Railway, due to China and Japan’s competition for influence.

The second tenet of a non-aligned foreign policy is pursuing regional integration independent of external influences. By keeping regional dialogues open and by leveraging their strategic value for economic gains, Asean member states have been able to work together with various regional stakeholders to strengthen economic integration. One prominent example is the Asean-centred RCEP.

Asean member states have also contributed individually towards regional integration. For example, Singapore, together with various Southeast Asian nations, has participated in economic governance standard-setting on multiple platforms, including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

Although not all Asean members have joined the US-led IPEF – which is, notably, not a free-trade agreement – the participation of the bloc’s members indicates the opportunities for small and middle powers to co-write regional economic rules and attract foreign investment.

The final tenet of a non-aligned foreign policy is carving out a resilient development plan. Its Cold War forerunner originated from a clear ideological confrontation between the East and West.

Today, the ideological rift is not so obvious. Instead, non-aligned foreign policy is rooted in globalisation, a market-driven principle that keeps the regional economy thriving.

As a result of globalisation and regional integration, regional states benefit from increasing interconnectedness. Compared to the Cold War period, today’s non-aligned countries would enjoy access to greater resources due to such interconnectedness.

After the Cold War, the region reaped the benefits of free-market principles that enable the growth of an efficient regional market supported by interconnected logistics, supply chains and vibrant capital flows. Because they prospered from regional integration, Southeast Asian elites understand more than most the importance of an open regional economy that attracts private investment and mutually beneficial trade relations.

With its commodities, diverse markets and 680 million consumers, Southeast Asia is increasingly attractive to foreign investors. The number of digital consumers in the region, for example, is growing steadily and is forecast to reach 370 million by the end of the year.

Regional digitalisation presents investment opportunities in areas such as education, fintech – computer programs and other technology supporting financial services – healthcare, logistics and more, resulting in a greater flow of foreign direct investment into Southeast Asia. The huge market potential further empowers a non-aligned stance for the region.
Because of the economic gains made through regional integration, Southeast Asian states have become less vulnerable.

Regional integration is not merely about the economy but also about security. Economic disruption arising from the pandemic and from geopolitical tensions as a result of the Russia-Ukraine war is a strong signal that states should strengthen their capacity to absorb shocks.

While pursuing a non-aligned foreign policy, Asean members should eschew self-isolation and protectionism, and instead continue to enhance economic openness and interconnectedness as well as multilateralism. A strong, attractive and densely connected Southeast Asian market would increase the stake other countries have in the region – including that of the great powers.

In the far more globalised world of the 21st century, a new foreign policy of non-alignment can allow Southeast Asia to facilitate interaction between the rival blocs. Of course, mediating between the two powers would be challenging for any country. But by taking the lead to set regional standards, Asean member states could gain more leverage amid geopolitical tensions.

Xue Gong is Assistant Professor at the S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University, Singapore. This article was first published by the Asian Peace Programme, an initiative to promote peace in Asia, housed in the National University of Singapore’s Asia Research Institute.

 source: South China Morning Post