Asian leaders often like Republicans in the White House. You know what Republicans want: free trade, low taxes for US companies and a firm hand on security. Democrats are less predictable. They look for some of the above, while delving into messier issues such as human rights.
That’s why the election of Barack Obama comes with many question marks in Asia. Obama’s pledges to protect American trade and calls for tougher labour and environmental rules are stirring anxiety in a region dependent on US growth. Obama also isn’t as well known here as the man he defeated, Republican John McCain.
There’s no guarantee Obama, an internationally untested junior senator, will be a great president. Yet, there are many reasons why Asia should relax a bit. Here are five.
First, the protectionism myth. It’s important to distinguish between campaign talk and reality. Five years ago, the US could throw its weight around. That was before the humiliation of bailing out Wall Street with taxpayer funds.
Obama talked tough on trade to woo blue-collar workers away from Democratic rival Hillary Clinton, much the way Bill Clinton did when he ran for president in the early 1990s. Once in the White House, president Clinton was pro-trade. Chances are Obama will do the same.
Financial systems are symbiotically linked in ways they weren’t in the 1990s. Rather than driving economies apart, the universal nature of the current crisis could actually bring them closer together, like it or not.
Second, lessons from the 1930s. Protectionism is no wiser an option today than it was in 1930 when US lawmakers passed the Smoot-Hawley Tariff Act. It raised tariffs on many imported goods and deepened the recession.
You can bet Great Depression scholars, such as Federal Reserve chairman Ben Bernanke, will counsel against steps that do more harm than good. Also, Obama needs to realize the key to stability in Asia is economic growth. Less trade would hold back the region’s development, undermine its democratization and ultimately hurt US growth.
Third, debt. Were China, Japan, India or Taiwan to dump large quantities of treasurys, US borrowing costs would skyrocket. Asia can’t live without its key export market. This mutually assured economic-destruction angle limits Obama’s leverage and options.
Obama shouldn’t turn a blind eye to labour, environmental or safety standards. Far from it. Yet, he also should go after US executives getting rich exploiting Asia’s poor and environment.
When you consider Obama must withdraw troops from Iraq, stabilize Afghanistan, rewrite tax policies and undo any number of president George W. Bush’s screw-ups, will he really have that much time to micro-manage Asian trade?
Fourth, China’s mounting woes. The Communist Party’s real problem is how the crisis that began with US subprime loans is undermining the outlook. Tao Dong, Hong Kong-based chief Asia economist at Credit Suisse Group, says growth may slump to 5.8% this quarter. China’s growth hasn’t slipped below 6% since 1990. That may blunt Obama’s rhetoric calling for changes in China’s currency policy.
The sense of whiplash in Beijing must be extreme. The wonderful world of capitalism that was supposed to be the answer to all problems isn’t working out as planned.
China, flush with $1.9 trillion of currency reserves, is often seen as a possible savior for world growth. A widening gap between rich and poor and tainted-goods scandals make that less likely. As the world wonders if Obama will be less pro-trade, perhaps the focus should be on whether China will become less capitalist.
Fifth, the bar is really low. Bush neglected Asia. When he did engage the region, it was all terrorism all the time. Terrorism will colour Obama’s dealings with Pakistan, yet Filipinos, Malaysians, South Koreans and Thais care just as much about raising living standards.
Obama spent time in Indonesia as a child and, unlike Bush, he does understand nuance. The US can’t solve the world’s economic or security concerns without Asia’s help. The go-it-alone Bushism of the 2000s will give way to a more consultative and proactive relationship.
Uncertainties abound. Many in Tokyo think a president McCain would have been tougher on North Korea, and therefore better for Japan. Indian leaders, who enjoyed a warming relationship with the US under Bush, may be wary of change. Obama’s pledge to address climate change is another wild card. While Asia is at great risk from the forces of global warming, it won’t be easy to balance rapid growth with reducing pollution.
Yet overall, more diplomacy and less muscle-flexing by the US bode well for the fastest-growing economic region.
A less quantifiable point is how Obama could improve the US’s image in Asia. The sight of a black man of modest origin leading what’s often viewed as a largely white nation turned heads around the globe.
Yustina Amirah, principal of Asisi Elementary School in Jakarta, where Obama studied as a child, spoke for many when she said: “We hope Obama can restore America to become a great nation again.”
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