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Is the US ready to challenge China’s Asean influence?

The Irawaddy | Wednesday, October 21, 2009

Is the US Ready to Challenge China’s Asean Influence?


BANGKOK — Proposals by a prominent Washington senator to push the US government into a free trade agreement with Asean may be no more than a political prod to get President Barack Obama more engaged in Southeast Asia.

The same senator, Richard Lugar, prompted legislation in Washington in 2006 that forced President George W. Bush to appoint a US ambassador to Asean.
This file photo shows students getting ready to raise the flags of 10 Asean member states at the organization’s headquarters in Jakarta. (Photo: AFP)

Bush called in US State Department career diplomat Scot Marciel and merely extended his title—to become Deputy Assistant Secretary East Asia and Pacific Bureau and Ambassador for Asean Affairs.

Nothing else changed beyond that.

After eight years of Bush neglect, Asean is only the US’s fifth-largest trading partner, behind Canada, Mexico, China and the European Union.

US exports to the 10 Asean countries reached US $ 68.4 billion in 2008, about the same as US exports to China but still three times larger than exports to India.

These figures come from the US-Asean Business Council, a private industry-to-industry organization which has existed for more than 20 years.

What concerns Lugar, the Republican Party leader in the influential US Senate Foreign Relations Committee, is that during the Bush years China’s economic influence in Asean greatly outgrew that of America.

China’s overall trade and investment with the region mushroomed 20-fold between 2003 and 2008 to around US $200 billion—to reach about the same overall level as the US.

And this is before China fully implements a three-pronged fair trade agreement (FTA) with Asean, expected to happen during 2010. It is the first free trade agreement signed by China, according to the official news agency Xinhua, and will embrace trade, services and investment.

Lugar fears that such a development will put the US at a serious disadvantage in the region, but numerous political analysts take the view that the Bush years have already disadvantaged the US in Asia.

Two examples of China creep in Southeast Asia which might have seemed unthinkable a decade ago: Beijing has built a key Indian Ocean-facing strategic port on the coast of Burma which among other uses will transship oil from Africa and the Middle East through a pipeline into southwest China. The Singapore government has decreed that Mandarin should be taught alongside English in schools because of the strategic island-state’s rising economic ties with China.

Beijing now also has an Asean "ambassador." Xue Hanqin recently spoke about "cooperative projects" in agriculture, telecommunications, energy, transport and tourism and—or particular concern to five members of Asean—"Mekong River exploitation."

An Asean-China investment agreement signed in August will expand "bilateral investments by 40 to 60 percent over the next two years," Thai Commerce Minister Porntiva Nakasai said when signing the deal on behalf of Asean.

Given the weak and underdeveloped condition of almost half of the bloc’s members, the bulk of this investment will flow from China.

The US has an FTA in place with Singapore and has held talks with Malaysia on the subject. Negotiations with Thailand ended abruptly in 2006 after initiator Thaksin Shinawatra was ousted as prime minister in a military coup.

The US last year signed a Trade and Investment Framework Agreement with Asean—known as a TIFA—which many see as a precursor to a full free-trade pact.

Lugar acknowledges that achieving an FTA would be "complex and have possible challenges to negotiation given the varying levels of economic development and open markets among Asean countries," he said in a statement outlining his proposal.

The European Union has been negotiating an FTA with Asean since May 2007 and has faced numerous stumbling blocks, given the huge disparity in economic development among Southeast Asian countries. Europe also has problems with including Burma, where it has a number of economic sanctions in place—as does the US.

But despite that hurdle, Washington "should proceed to develop a comprehensive strategy toward engaging Asean," Lugar said.

Observers think that if the US government is keen to pursue the idea, the perfect opportunity to trigger talks will be on the sidelines of the Asean annual summit, to be held this year in Singapore from November 18-22.

US Trade Representative Susan Schwab is expected to be present.

She might "inject life" into the floundering TIFA, suggested the chairman of the Institute of Policy Studies in Singapore, Tommy Koh.

The Asean summit is also being held back-to-back with the Asia-Pacific cooperation forum known as APEC, which President Obama is scheduled to attend.

Washington has made noises about Burma, but the US’s economically weakened condition in the wake of the global financial crisis, and its preoccupation with Afghanistan, has made some in Asean question American commitment to Southeast Asia.

"The new US administration will have to signal soon how it intends to engage Asia, and vice-versa," Simon Tay, chairman of the Singapore Institute of International Affairs and Schwartz Fellow at the Asia Society in the United States, said in a recent commentary.

 source: The Irawaddy