First came word that George W. Bush was blowing off South-East Asia. Then Condoleezza Rice did the same. Next comes counting the costs of the US ignoring the world’s most vibrant economic region.
US President Bush last month postponed talks with SouthEast Asian leaders in September in Singapore. A week later, secretary of state Rice scrapped her trip to Manila, where the Association of Southeast Asian Nations (Asean) is meeting this week. Asean confabs often are inane talkfests that achieve little. If the average American knows about the group, it may be from viewing the YouTube clip of Rice’s predecessor, Colin Powell, singing the Village People’s ‘YMCA’ at a 2004 Asean gathering. And Bush and Rice are focused on shoring up support for the war in Iraq.
Yet now is hardly the time for the US to be slighting and alienating Asia’s fast-growing economies. US complacency toward Asia is enabling China to make greater inroads into a region that once was near the top of America’s commercial and foreign policy agendas. China has been beset by bad public relations of late. Its product safety scandal is a case in point. So are concerns that worsening pollution will derail the economy. And then, there are the actual growth figures. China advanced 11.9% in the second quarter, fanning concerns about overheating.
For now, though, rapid Chinese growth is proving to be far more of a blessing than a curse for South-East Asia. With US trade with Asean having barely budged since 2000, China is blanketing the region with an aggressive charm offensive. Once, Japan was the big Asian power and, statistically speaking, it still should be. A $2.6 trillion (Rs105 trillion) economy would seem no match for Japan’s $4.5 trillion worth of output. Chinese growth, though, has become far more important to Asian neighbours. Over the last seven years, its trade with Asean countries has more than doubled.
Five years ago, Asian leaders viewed China as a threat; now the focus is on riding its boom. Its growing economic, cultural and military influence is impossible to miss travelling around the region these days.
That’s not to say China’s rise is all good. Cheap labour and loose environmental standards mean China is a tough place with which to compete. An undervalued yuan comes with costs to Asian neighbours experiencing a big increase in their currencies.
The Thai baht, for example, is up almost 20% versus the US dollar this year. The Philippine peso is up 8%.
Asia’s developing economies also may be relying too much on another developing one. While we are all used to China beating the odds and avoiding a crash, Asia’s No. 2 economy faces daunting—and growing—risks. China needs rapid growth to reduce poverty and dispose of bad loans in the banking system, while also cooling things down to avoid inflation and asset bubbles. It must keep pollution from overwhelming its outlook and figure out how to build a market economy while limiting free expression. Lots could go wrong in China. At the moment, China is investing in Asia and becoming a viable trading partner where the US once dominated. Supporters will say Bush and Rice are distracted by events in Iraq. Yet that’s just the point. Bush’s foreign-policy blunders are taking energy and attention away from where they should be.
This is the second time in three years Rice has snubbed South-East Asia. The region, let’s remember, holds massive amounts of treasuries, reducing US interest rates. It boasts many of the most lucrative markets and is home to a number of geopolitically vital nations with which the US should be building deeper ties.
Such inattention has enabled China to fill the void. Asean secretary-general Ong Keng Yong says a free-trade agreement with China is on track to be completed in 2010. The US, by contrast, “is terribly distracted by other things,” Ong says. It’s odd, really. US officials are increasingly worried about China’s military spending and global aspirations. This week’s 27-member Asean Regional Forum offers a perfect opportunity to engage Asia. Instead, the US is essentially forfeiting the event to an ascendant China. When the Bush administration has engaged Asia, it has been terrorism all the time. Security is important to Asians, though it’s hardly the main issue on their minds. Most care just as much about raising living standards. And the US treasury seems to have become an all-China-all-the-time operation. It’s obsessed with the yuan at the expense of all else in Asia.
Two decades from now, when the Bush administration’s legacy is debated by historians, how the US lost Asia will probably receive prominent attention. The US is by far the world’s largest economy and it’s likely to hold that title 20 years from now. Yet the Asian vacuum of the Bush years is doing potentially irreparable harm in a region still smarting over the 1997-1998 crisis. Back then, a slow response to meltdowns in Thailand, Indonesia and South Korea convinced many that the US didn’t care about Asia. Justified or not, that impression persists today. By sending deputy John Negroponte in her place to Manila, Rice is buttressing the perception the US is turning its back on the world’s most promising economies.
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