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AseanAffairs Magazine
March - April 2010

The United States is facing daunting prospects in the Asia-Pacific region, a huge market for US goods, while China’s influence is growing as it makes rapid trade inroads in the region. The implications for the US and its need to redefine its ties with Asean are explored in our exclusive interviews with Ernest Z. Bower, Senior Adviser & Director - Southeast Asia Program, Center for Strategic and International Studies, Founding Partner, Brooks Bower Asia LLC and former President of the US-Asean Business Council, and Demetrios Marantis, Deputy United States Trade Representative for Asia.

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The second visit by US PresidenBarack Obama to Southeast Asia, inparticular, to Indonesia, his childhoodhome, and Australia, its staunch allyand supporter of American military efforts in Afghanistan, is seen as an importantstep by the US to restore its influence inthe region.

While economy, terrorism and climatechange all figure to play prominently in Obama’s first international trip of the year,the visit his administration officials say reflects his efforts to strengthen relationships with smaller, emerging nations.

The trip came at a time China-US relations were at a low point due to the recent announcement of US arms sales to Taiwan, Obama’s meeting with the Dalai Lama in February and China’s alleged manipulation of the yuan currency at an artificially low value, which reportedly is costing the US economy more than $200 billion per year in lost growth and is reducing American employment by as much as 1 million jobs.

The difficult Sino-US ties aside, Obama’s short visit to the region is expected to help the US redefine its relationship with Asean. AseanAffairs takes a look into the recent manouevres by China to strengthen its influence – both economically and politically in the region and the efforts being made by the US to redefine its ties with Asean – from the US perspective.

AseanAffairs’ interview withErnest Z. Bower, Senior Adviser& Director - Southeast AsiaProgram, Center for Strategic and International Studies,Founding Partner, Brooks BowerAsia LLC and former Presidentof the US-Asean BusinessCouncil

Q: Asean-China Free Trade Agreement (ACFTA) is seen among others as an attempt by China to buttress its growing influence and counterbalance American and Japanese power. What is your view?

A: I don’t see the ACFTA as focused on balancing US and Japanese power in Asean, but rather the Chinese government working to position itself as a leader in the region and putting its best case forward economically. China has done a tremendous job of seizing the opportunity to respond to Asean when it most needed a proactive economic and financial partner, namely during and after the Asian Financial Crisis of 1997- 2000. I believe China is acting to promote its own interests and is less motivated, at least in the ACFTA, by trying to balance the US or Japan.

Q: In your testimony before the USChina Economic & Security Review Commission in early February, you noted that China’s rapid economic expansion could bring about less favourable scenarios than have been witnessed. Please give us a sample or two of those possible consequences.

A: A couple of examples are that US companies find themselves competing with sovereign backed, Chinese state-owned companies who are not only backed by the Chinese Government but also not bound by any laws such as the US Foreign & Corrupt Practices Act (FCPA) which strictly defines how American citizens and companies
must operate when it comes to corrupt practices. In cases where officials are susceptible to bribes, US companies can find themselves at a distinct disadvantage.
Another scenario is that through its strategic and economic engagement of Southeast Asia, China may begin to develop exclusionary advantages based on Chinese
driven standards.
A good example would be if China was eventually in a position to impose for instance its own version of 3G telecoms standards on Southeast Asian governments. This would make Southeast Asia less interoperable with the rest of the world and give Chinese manufacturers and service providers a distinct commercial advantage in what would be a sizable market - China’s 1.3 billion plus Asean’s 600 million. On the security front, if China decided to try to impose its claims of sovereignty over key shipping lanes and potential oil and gas exploration areas in the South China Sea, this could cause a serious conflict of interests between China and Asean countries, as well as the US and other nations.

Q: How could this “peaceful rise” of China impact on the strategic interests of US in the region, in Southeast Asia, in particular?

A:  The peaceful rise scenario is one we all want to see. As I have said before, we should recognise that to date, China’s entrance into the regional and global economy and community of nations has been relatively smooth, peaceful and constructive. This has been very good for China and it is good for Asean, the rest of Asia, the US and the world. China has much to contribute in terms of talent, ideas, culture and is certainly a major market and source of new investment. US strategic interests in Asia would be augmented by the peaceful rise of China. A well considered approach would be to continue to elevate and expand close ties between China and the US, particularly between our militaries and national security policy makers. This can best be done both bilaterally but also through a regional security architecture that recognises the centrality of Asean. Asean is a good place for China, the US, India, Japan, Korea, Australia, New Zealand and potentially other actors to meet, share information and
deepen mutual understanding.

Q: A fast growing China is both an opportunity and a curse for Southeast Asia. But when it comes to trade Southeast Asia still depends more on the US than on China. Why should Asean leaders start worrying about China’s domination?

A:   Asean’s history is one of carefully balancing great powers. I believe Asean feels that China has had a good strong run in the region for the last decade. That rise has been helpful to Asean and filled a gap in a timely and effective way. But Asean does not want to be dominated by China and will resist attempts, real or perceived, for China to turn its charm offensive into demands for access or acquiescence. There are concerns that China has started to push on these latter points, in cases like offshore oil and gas exploration in Vietnam or in the Spratleys, or even in Myanmar where it is demanding clear access for its pipeline and bases offshore in the Andaman Sea. A strong and unified Asean is necessary to balance such moves.

To be clear, this is not anti-China. Asean has historically sought balance whenever a major power is perceived to be overextending its influence. This happened in the case of Japanese perceived dominance in the late 1980s and if the US ever stepped too far forward, I believe Asean would reach out to China, Japan and India
to seek to balance such advances.

Q: If Asean needs the US to advance its strategic interests in the region to satisfy its atavistic hunger for balance, how much does the US need Asean to advance its interests in the region?

A:    Good question. I think the US, China, Japan, Korea and India all need Asean to advance their interests in Asia. Asean is important because it is a large and important group of countries, but because it is a group, and therefore inherently less able or willing to be proactive in defining and pursuing its sovereign interests collectively, it is an easy place to meet and compete.

Asean is vital to the Asian strategic chess board. If it manages well and its dialogue partners play carefully, Asean may make the 21st century dynamism of Asia safe and relatively conflict free.

History is not so kind when looking at the rise of great powers. They tend to seek territory and dominance, but perhaps Asean can help China and India step onto the global stage without wars or dangerous conflicts. To achieve that goal, all parties must actively and consistently engage one another and recognise Asean’s centrality in
this new regional architecture.

So, to answer your question, the US needs Asean to play a constructive and proactive role, to strengthen its capacity and technical abilities and to effectively reach the goals outlined in the Asean Charter for economic, political/security and sociocultural integration.

My hope is that US policy makers fully grasp the importance of Asean and invest accordingly.

Asean China FTA

Consumer base:
-560 million (Asean)+1.3 billion (China)

Trade Target
- $200 billion by 2010, up from $192.6 billion in 2008 and $113 billion in 2005, making it the third-largest free trade zone in trade volume after the European Economic Area and the North American Free Trade Area

Brief Background
-initial FTA signed in November 2002
-some tariffs reduced since 2005
-agreements on goods and services concluded in 2007
-deal on investment completed in August 2009

The Deal
-tariffs on 90 percent of goods eliminated (starting Jan 1, 2010 for Indonesia, Brunei, Malaysia, the Philippines, Singapore and Thailand, and by 2015 for Laos, Vietnam, Cambodia and Myanmar)
-remaining 10 percent, including on textiles and some electronics, deemed sensitive, to be lowered more slowly
-zero tariffs on about 7,000 categories of goods
-preferential access given for Asean companies into China’s services market, and vice versa, in areas such as business services and tourism

Q: You recently stated that Vietnam’s chairmanship of Asian next year might step up US involvement in the region. But how, and why Vietnam?

A: Vietnam and the United States share a common interest in a strong, unified Asean. Although the two countries fought a war as adversaries less than 50 years ago, today they find themselves experiencing a confluence of interests and bilateral relations are advancing at an impressive rate. Asean members in general want the US to remain actively engaged, but we can expect Vietnam to be a particularly focused Chairman of Asean in 2010. I believe that President Obama should hold the next Asean US Summit in Hanoi this year and at the same time celebrate the 15th anniversary of US Vietnam relations which occurs on July 12, 2010

Q: Is Vietnam key to apparent efforts by the US to counterbalance China’s rising influence in Southeast Asia on the security front?

A: An enduring US strategy for Southeast Asia is not yet in place. However, the key elements of a strategy are in place. US engagement in Asean is not and should not
be defined by China or a perceived need to balance China. Vietnam and Asean countries, wanting to seek a balance between China, the US, Japan and India.

Vietnam is particularly focused on China at this time due to the aggressive Chinese push on the South China Sea, but other Asean countries have a similar interest in ensuring that as China advances, its impact on the region continues to be beneficial and that no one power attempts to dominate political, security or economic issues in Southeast Asia.

Q: The US is concerned over the tension between China and Vietnam over the territory (in the South China Sea), according to Deputy Assistant Secretary of State Scot Marciel. That, you said, is one of the reasons US shares an interest in a ‘strong Southeast Asia’. Please elaborate on the phrase ‘strong Southeast Asia’?

A: A strong Asean is one that makes effective progress towards the goals outlined in the Asean Charter, namely integration in areas of economic development, security and political, social and cultural arenas. Asean, like a banyan tree, will enjoy the strength of many standing as one. If the regional group achieves effective unity and integration, it will create a shelter, like the shade and protection of a great tree that will empower its people to be secure, peaceful and prosperous.

Q: President Barack Obama’s meeting with Asian leaders in November lacks substance. How would you respond to that comment?

A: I would put it another way. President Obama made an important first step in joining the inaugural Asean US Summit. He approached that forum in an appropriate and serious way, underlining his commitment and meeting his counterparts. He’s promised to meet again in 2010, and bring a more substantive agenda.

It may have been presumptuous to come to the first meeting as a new US president with too aggressive an agenda. I think the table is set, and indeed expectations raised, for a more substantive agenda from both the US and Asean when the leaders meet this year.


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