U.S. Expands Trade in Southeast Asia to Check China

The United States maybe  in the initial stages of a Southeast Asian foreign policy overhaul; the Obama Administration is not only reconsidering its sanctions against Myanmar, but also reevaluating America’s policy toward the entire Southeast Asian region.  Brian McCartan has an informative article on the recent removal of Cambodia and Laos from the United States’ “blacklist”, which limits the government support U.S. based companies can receive when doing business with countries defined as “rouge nations”.

Cambodia and Laos have a combined populations of  about 20 million people,  and do not offer strong import markets for U.S. goods.  So, this policy change is not about trade benefit for the U.S. as much as it is spreading American soft power in the region.   McCartan cites growing U.S. concern over the increasing power of China in Southeast Asia as the catalyst.

This move has not come without issue.   Besides outraging the American Hmong community, who continue to protest the treatment of Hmong by the Laotian government, the Obama administration did not seem concerned with the potential alienation of Thailand.   The Thais  have had historic conflicts with the people of Cambodia and Laos since they arrived in the region from Southern China a millennium ago.  Most recently, Thailand has had border skirmishes with Cambodia over a territorial dispute, which  has that has left several soldiers dead and the the border militarized.  If the U.S. wants to strengthen its position in the region, alienating friends who have already been moving closer to China in recent years  is not advised.

China’s profile is rising in Southeast Asia, and while much of the elite welcome the resulting business opportunity, there is growing resentment and xenophobia  among the masses in several countries.  Much of this ‘nativism’ has been sparked by the mass importation of Chinese workers (legal and illegal) to support Chinese business operations.  China does this for three reasons, to limit inter-cultural conflict, keep costs low,  and to alleviate unemployment pressure at home.  Still, it is a practice that has created backlash in many areas of the world where China is heavily invested.

Due to China’s historic dominance in Southeast Asia and the economic dominance of existing ethnic Chinese communities in much of the region,  there is heightened sensitivity in many states to the possibility of “economically colonization” by China, while these concerns might be fueled more by nationalism than reality, they are real.  Even non-democratic governments, like Vietnam, have been forced to pay attention to their public’s concerns.

Due to their history, Vietnam is probably not the best barometer for China’s relationship with ASEAN; Vietnam has a long “love-hate relationship” with China.  However, America has continued to increase  economic ties with Vietnam since the  Bilateral Trade Agreement signed between the two nations in 2000.  Most recently, the Deputy US Trade Representative, Demetrios J. Marantis, indicated the U.S. was willing to grant Vietnam its Generalized System of Preferences (GSP) to further facilitating trade between the two nations.

Mostly recently, America has found itself in the middle of a territorial spat between China and Vietnam in the South China Sea.  The Obama administration has been forced to defend a U.S.-Vietnamese  business partnership exploring oil resources in the disputed  Paracel Islands.  Ownership of the Paracel’s are disputed by China and its neighbors, including Japan, the Philippines and Vietnam.

China has a history of pressuring foreign oil companies not to work with rivals in these waters.  They were successful in strong-arming  BP and  ExxonMobil to drop oil and gas exploration with Vietnam in the South China Sea, in 2007 and 2008 respectively. In 1988,  Vietnam and China engaged in a minor naval battle over the even more disputed Sprately Islands, also in the South China Sea, which resulted in the sinking of two Vietnamese vessels.  In subsequent years, Vietnamese fishermen have been fined for “illegal entry” and even killed by Chinese patrols in the disputed territory.

America has taken no sides in the conflict, however Vietnam can leverage its relationship with America to strengthen its claims and further its exploration in the region.  In return, America can gain greater influence in the region, especially in ASEAN, which is scheduled to assume the ASEAN Precidency in 2010.

I wrote previously about America’s need to improve its position in Southeast Asia:

In the aftermath of 9-11, the bulk of Washington’s foreign policy capacity was consumed by wars in the Middle East and Central Asia. Major initiatives in Southeast Asia fell by the wayside as the primary focus moved to counter-terrorism and other security concerns. Even when America’s focus broadened beyond the “War on Terror” into issues of trade, its approach was often ineffectual. The U.S. cannot afford to squander another decade in the region teetering between security issues and weak trade.

The 2005, Joint Vision Statement on the ASEAN-U.S. Enhanced Partnership was not enough to secure America’s future in Southeast Asia; Washington needs to define, create, and utilize more avenues of regular dialogue between itself and ASEAN. Although the U.S. and ASEAN have enjoyed relations for 30 years, no regular annual summits have ever been established. Shoring up the 21-member Asia-Pacific Economic Cooperation forum (APEC) is a good place to begin, but it should only be a pass-through for more specialized U.S.-ASEAN talks. The current lack of contact hurts America’s ability to focus its attention on ASEAN states. The U.S. should encourage East/Southeast Asian integration, because it will help to socialize and constrain provocative movements by China. It may also encourage American investors to do greater business in the region, as the various types of independent national laws and regulations are streamlined. Nevertheless, America should also exploit areas of friction between ASEAN and China, as well as the lack of cohesion within ASEAN.

Although China has achieved strong ties with certain members of ASEAN, many nations in the region, such as Malaysia, the Philippines, and Vietnam still maintain a healthy fear of Chinese hegemony and anti-Chinese sentiment in their populations has not yet abated. There have been complaints, by some ASEAN members, that China pushed bilateral FTA negotiations to isolate nations that were not very pro-China, such as Malaysia and Vietnam. Southeast Asian diplomats have also grumbled that China’s influence has hindered consensus building within ASEAN as member nations try to gauge Beijing’s potential reaction.

The U.S. has also not closely engaged China-friendly states, such as Myanmar and Cambodia. This is especially true in the case of Myanmar due to human rights concerns, which have resulted in embargo that have resulted in little political change. The U.S. needs a more pragmatic approach. These nations would be very receptive to American competition for their attention.

By the turn of the century, deeply pragmatic ASEAN states came to the realization that it was impossible to push Western powers out of the region, so it began what was termed, “constructive engagement” with all of them… reaping the benefits for its member states. Singapore Minister of Foreign Affairs George Yeo, speaking for ASEAN to the press in November 2007, described the importance of America to Southeast Asia: “In short, no major strategic issue in Asia can be resolved without the active participation of the U.S” (Marciel 2008).