Insights and Analysis

Obama’s Asia Pivot on Shaky Ground

October 9, 2013

By John J. Brandon

Asia-Pacific leaders gather in Brunei this week for the 8th East Asia Summit (EAS) and the 23rd ASEAN Summit, on the heels of the Asia-Pacific Economic Cooperation summit in Bali on Monday. While a number of critical issues were set to be discussed, President Obama’s last minute cancellation of his entire Asia trip, skipping these meetings as well as two bilateral visits to Malaysia and the Philippines, has placed in doubt the U.S.’s ability to “rebalance” its Asia policy. The failure by the Congress and the president to come to a budget agreement to effectively address the nation’s debt ceiling has caused people all over the world, including Americans, to question the state of American governance. This comes at a time when China’s power and influence, for better or for worse, is rising.

President Obama had no choice but to remain in Washington until the budget crisis is resolved. While his trip to Asia would be in the U.S.’s longer-term interest and would reassure the Asia-Pacific community that the United States is still a viable world leader, such an act would have invited blistering criticism from the media and also from Republicans and a sizable number of Democrats.

Nonetheless, the inability of President Obama to attend the APEC and the EAS is a lost opportunity for his administration to solidify its commitment to Asia and leaves doubt in many Asians’ minds on whether the U.S. is able to serve as an effective counterbalance to China. President Obama was hoping to make progress in wrapping up the Trans-Pacific Partnership (TPP) by the end of the year. The TPP is a free trade agreement among 12 nations, and if ratified by the U.S. Congress would be the largest trade deal in history, valued at $28 trillion. President Obama has said that every extra $1 billion in exports would create 5,000 new American jobs. The President’s absence at APEC and the EAS does not promise the likelihood that an agreement by year’s end will be achieved.

China is wary that the TPP could be used to contain its burgeoning economic influence and is pursuing a rival trade deal, the Regional Cooperation Economic Partnership (RCEP), which includes all 10 ASEAN states and its FTA partners, Australia, China, India, Japan, New Zealand, and South Korea. Some ASEAN nations are concerned is that the TPP could be used to drive a wedge in ASEAN. The U.S. has countered with a program called the Enhanced Economic Engagement Initiative (or E3 Initiative), which is meant to lay the groundwork for ASEAN countries to adhere to the high standards found in the TPP. This begs the question whether the TPP and RCEP will compete or converge with one another?

China’s President Xi Jinping has pledged to increase China-ASEAN trade by two and a half-fold to $1 trillion within the next five years. China’s trade with ASEAN has grown from $8 billion in 1991 to $400 billion in 2012. U.S. trade has grown, but at a much slower rate, and consequently its share of East Asia trade has declined over the past decade from 19.5 percent to 9.5 percent, while China’s share has grown from 10 to 20 percent. Nonetheless, U.S. trade remains substantial at $200 billion, making ASEAN the U.S.’s 4th largest market for exports and 5th largest trading partner. U.S. ASEAN trade creates or supports 472,000 American jobs. In addition, U.S. foreign direct investment (FDI) in ASEAN represents by far the largest amount of FDI in Asia, amounting to $157 billion. Indeed, U.S. FDI in ASEAN is nearly three times larger than its FDI to China and 10 times more than to India.

President Xi’s call for an Asian Infrastructure Investment Bank will no doubt play a big part in discussions this week. There is good reason for this. Between now and 2030, The Asian Development Bank estimates that $8 trillion is needed for infrastructure development in Asia. This ties in closely with ASEAN’s desire to achieve connectivity ahead of the deadline for ASEAN economic integration by 2015. If successful, ASEAN will be much more attractive to large-scale investment than it would be as a collection of 10 small, segmented markets. It is in the United States’ interest to help foster ASEAN’s regional economic integration efforts.

Discussions at the East Asia Summit over maritime disputes in the South China Sea will also be important. China has disputes with four ASEAN nations – the Philippines, Vietnam, Malaysia, and Brunei. The U.S. has always been clear in its stance that it will not get involved nor take sides in territorial conflicts, but wants to see stability and freedom of navigation secured in the South China Sea. But the United States is urging all Southeast Asian nations, through ASEAN, to speak with one voice on maritime territorial conflicts and to work to the conclusion of a China-ASEAN Code of Conduct that would be legally binding. Leading up to the East Asia Summit, China has said discussion on maritime disputes in the South China Sea should be held “gradually.” This suggests that any agreement to these maritime disputes is still very far off in the making.

It is indeed unfortunate that President Obama cannot be in Southeast Asia this week to reassure leaders that the region remains integral to the U.S’s geo-political calculus and economic interests. Around the East Asia Summit in Brunei, President Obama was supposed to meet with all 10 ASEAN leaders for the first U.S.-ASEAN Summit. For the past four years, the president held a “meeting” with all 10 ASEAN officials. As part of the U.S. rebalancing strategy the U.S. decided last year to upgrade the leaders meeting to that of a “summit” in order to show the importance his administration is giving Southeast Asia. Perhaps one way President Obama could make up for his absence is to hold the U.S.-ASEAN Summit at a later date in the not-too-distant future, and invite all 10 ASEAN leaders to come to Washington (or elsewhere in the United States) to discuss how to strengthen mutual political, economic, and security interests. Such an overture by the president could help to persuade ASEAN leaders that the U.S. will continue to play an important, positive role in regional affairs as China rises and the broader Asia-Pacific region works to accommodate this rise and ensure peace, stability, and economic prosperity. This may at least dissipate, though probably not dispel, the notion in Southeast Asia that U.S. policy continues to remain episodic rather than consistent.

John J. Brandon is director of Regional Cooperation Programs for The Asia Foundation in Washington, D.C. He can be reached at [email protected]. The views and opinions expressed here are those of the individual author and not necessarily those of The Asia Foundation.


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