Morning Brief

Why should the US economic pivot to Asia be a top foreign policy priority in the era of Xi?

It's been half a decade already since the American economic marginalization of Asia pushed China to fill the region`s economic expectations
Published by
Central Office
on July 5, 2022
on July 5, 2022
Image Source:
The New York Times
Image Description:
Biden-Xi virtual summit, November 15th, 2021.

US-China competition in Asia-Pacific does not seem to be slipping in a favourable direction for Washington when it comes to economic statecraft. Former US President Donald Trump 2017 withdrawal from the Trans-Pacific Partnership (TPP), one of the most important economic pillars of the Obama administration's pivot to Asia, has limited any US commitment to the possibility of connecting the US economy with Asia. In the US, the TPP survived and under the leadership and guidance of Japan it was reframed as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPATPP), entering into force on the last day of 2018. On the other hand, China has committed to aligning itself to the newly sealed regional economic system, therefore filling the gap of American commitment initiated during Obama, withdrawn during Trump, and upheld during Biden. This approach is the most evident in Southeast Asia, mostly in any economic engagement with the main political and economic regional body, The Association of Southeast Asian nations (ASEAN). If the US currently has only a free trade agreement with a single ASEAN member, Singapore, China and ASEAN have been enjoying more than a decade of free trade since the ASEAN-China Free Trade Agreement (CAFTA) went into effect in 2010. Since then, the economic numbers in bilateral trade between China and ASEAN has been skyrocketing. By 2015, ASEAN's total trade with China reached $346.5 billion (15.2% of ASEAN's trade), and in 2020, China-ASEAN trade in goods reached $684.6 billion. By contrast, the total value of US-ASEAN bilateral trade has increased from $177 billion to $227 billion over the last decade. China’s participation within the Regional Comprehensive Economic Partnership (RCEP) that entered into force on January 1st, 2022, will double down the Chinese economic engagement with ASEAN, and represents a de-facto bilateral free trade agreement with four US allies: Australia, New Zealand, Japan, and South Korea.

What should concern Washington is that the Chinese participation in the new economic configuration of Asia will not only deepen the economic interdependence between several Asian nations and the People`s Republic in a time when the Chinese-related supply chains are proving to be insecure and increasingly regional states are pursuing a weakening of economic dependence on China and even a slight decoupling, but, as an inside member, China will be a major shareholder in framing the economic architecture of the region, and given its market size and economic clout, even a decisive influencer in building an economic system advantageous to Beijing and unfavourable to Washington. China formally applied to the CPATPP on September 16 and requested on October 31, 2021, to participate in the Digital Economy Partnership Agreement (DEPA), along with Singapore, New Zealand, and Chile, showing that China attaches equal importance to the economy and digital commerce. South Korea has also expressed interest in participating in DEPA. Important US allies, Japan and Australia cannot guarantee Washington that they can ignore China's interest in joining the CPTPP indefinitely and without any guarantees from the US administration that America is committed to stage an economic comeback to Asia any time soon. This would be even more difficult for Tokyo and Canberra to insist that Beijing must first comply with the group`s standards on market access (including procurement market), intellectual property, and labour and environmental protection before joining the CPATPP as Vietnam has been given some sort of waiver to meet all these requirements gradually in the future. Moreover, Japan and Australia could be pressured by other participating states to give Beijing similar treatment, given their increasingly economic ties with the Chinese economy. To change this, the Biden administration should first support the entry of the Philippines, Thailand, the United Kingdom, South Korea (all US allies), and Indonesia into the CPATPP (they all put forward their intention to join the trade agreement), followed by Washington`s own comeback. By doing this, the US will send a strong message that Washington is prioritizing the region not only politically, as part of its dispute with China, but also economically.

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