Asia Loses Confidence in US Leadership

American influence appears to be in precipitous decline across Southeast Asia as the Trump administration stumbles from crisis to crisis at the same time Chinese influence under increasingly aggressive Chinese leader Xi Jinping waxes across the region.

Although the decline started well before President Donald Trump came into office in 2016, with the failure of the Obama administration to press its so-called “pivot to Asia” beyond a few half-hearted military and diplomatic initiatives, it has accelerated under the current administration. With an Asia that is now fully able to act on its own as its military, industrial and economic prowess grow, the odds that the US can find its way back to its former pre-eminent position as the world’s guarantor of security as well as the engine of the global economy are slim.

The deterioration accelerated shortly after the 2016 election with the decision to void the Trans-Pacific Partnership, the omnibus trade package worked out with 12 Pacific Rim countries. Since the US backed out of that agreement, the 11 other nations, led by Japan, Australia and Canada, in December 2018 signed what they call the “Comprehensive and Progressive Agreement for Trans-Pacific Partnership,” which is designed to reduce tariffs between member countries that together account for more than 13 percent of the global economy as US erects tariff walls against China and possibly Mexico and considers them against EU car shipments.

At the same time, the US appears to be powerless to do anything about China’s encroachment on islets in the South China Sea which have been expanded into full-blown military installations. The US Navy routinely runs destroyers past the islets while the Chinese pretty much ignore them. At the same time the Belt and Road Initiative is extending China’s economic influence across the region at the same time the US is losing out.

As an indication of waning US influence, a survey called the "State of Southeast Asia: 2019,” conducted by the ASEAN Studies Center at the Singapore-based think tank ISEAS-Yusof Ishak Institute at the end of last year, shows that the region’s view of US reliability as a strategic partner and provider of regional security has fallen sharply. US readiness to abrogate treaties and other diplomatic arrangements is at least partly to blame.

Only 5 percent of 1,000 businessmen, political and academic and other figures who responded to the survey indicated full confidence in the US, with another 26.9 percent indicating “some confidence,” with the strongest support coming from Vietnam (54.9 percent) and Cambodia (45.8 percent.).

By contrast, according to the survey, 34.6 percent of the respondents have little or no confidence in the US’s reliability, with Malaysians most skeptical at 47.9 percent, Brunei (45.4 percent) and Thailand (43.5 percent) are also most skeptical.

"Equally noteworthy is the high level of uncertainty over the US’ commitment towards the region,” according to the survey. “About a third of the respondents (33.5 percent) are unsure of the US’s reliability, a view shared most widely in Indonesia (42.6 percent), Laos (41.4 percent) and Myanmar (41.2 percent)."

Taken together, 68.1 percent of the respondents are unsure of or have little confidence in the US’s reliability as a strategic partner and provider of regional security.

According to the survey, most respondents (45.4 percent) think “China will become a revisionist power with an intent to turn Southeast Asia into its sphere of influence” although there is little trust of China despite its resurgence as an international power.

According to the survey, the top six ASEAN member states agreeing with that assessment are the Philippines (66.4 percent), Vietnam (60.7 percent), Singapore (57 percent), Cambodia (50 percent), Thailand (45.1 percent), and Indonesia (37.7 percent).

The second most prevalent view regionally (35.3 percent) is that “China will provide alternative regional leadership in the wake of perceived US disengagement.” This is the top response from Brunei (61.4 percent), Malaysia (44.8 percent) and Myanmar (32.1 percent).

Rounding up the top three views, however, is the neutral response that “it is too early to ascertain China’s strategic intentions” (25.7 percent). Only 8.9 percent see China as “a benign and benevolent power.” Country-level results paint an equally pessimistic picture of China with only four countries breaking into modest double digits for this response: Laos (13.8 percent), Myanmar (13.1 percent), Cambodia (12.5 percent) and Indonesia (12.3 percent).

“This result, coupled with the majority view that China will be a revisionist power, is a wake-up call for China to burnish its negative image across Southeast Asia despite Beijing’s repeated assurance of its benign and peaceful rise,” the report states.

Reclaiming influence – if not economic clout – is not going to be easy. As a study by the global consultants McKinsey points out, West Asian—Middle Eastern, Persian Gulf—oil and gas exports are flowing across the Indian Ocean to the Far East despite the administration's threats of sanctions against Iran.

West Asia now trades much more with East Asia than it does with any of its former colonial masters. The Belt and Road Initiative, according to McKinsey, is just the beginning of a new phase of Asia’s integration through infrastructure, with 20 trade agreements being negotiated between Asian countries, with rising volumes of foreign investment, local currency debt, growing cross-border liquidity and trade financing, all former hallmarks of the western financial system. Asians are doing it themselves.

The TPP, first fashioned by the administration of President George W. Bush and later negotiated by the Obama administration, was specifically designed to give favored treatment to its signatories, which besides the US included Japan, Canada, Australia, Mexico, Malaysia, Peru, Vietnam, Chile, Brunei, Singapore and New Zealand in a massive free trade zone that would have included nearly 40 percent of the world’s gross domestic product.

It is now the US that is shut out, giving advantage, for instance, to Australian beef producers selling to Japan. America’s closest neighbor Canada, stung by President Trump’s tariff attacks, is actively taking advantage of its membership in the CPTPP. Jim Carr, Canada’s Minister of International Trade Diversification, has been quoted as promoting diversifying Canadian trade away from reliance on the US. Carr, for instance, has been promoting Canadian beef sales to Japan as a part of the has recently been in Japan (a party to the CPTPP) promoting Canadian goods and services, and specifically Canadian beef.

The original TPP would have been of major benefit to US west coast farmers as well as tech companies. Those same products are now being shipped by the signatories to the new trade agreement. In addition, as tariffs have denied US soybean producers access to Chinese markets, Brazil and Argentina have taken over those markets and it is questionable if the US could ever win them back.

But more, the trade wars the president has started with Asia have disrupted the supply chains that multinationals have created over decades, not just in China, but all the way across Asia and South Asia to countries like Bangladesh and Myanmar. Not just Apple iPhones but an enormous range of components of goods even including clothing are manufactured in many different countries, no matter where they are assembled.

The Boeing 787 Dreamliner, for instance, depends on more than 100 companies for its components. Some 30 percent of those components come from Japan, Italy, South Korea, Germany, the United Kingdom, Sweden, France and China. Apple works with suppliers in 43 countries and six continents to make its products.

These multinationals require stable international supply chains. The TPP was designed to create a predictable, constant trading zone that would have been dominated by the US and its manufacturers. They are now scrambling to try to secure their supply chains to guard against Trump’s trade war. Finding stable and constant partners in a trading war that is exploding longstanding government-to-government and business-to-business agreements is out the window.

There is little doubt that China is going to get beaten up by this trade war. Industrial production is subdued, exports are weaker, with 2019 GDP growth likely downgraded to perhaps 6.0 percent and the renminbi weakening against the US dollar, perhaps as low as RMB7.2.

But US multinational manufacturing and US influence are going to get beaten up more, because the tide of global influence in Asia is running against America. President Trump is about to learn that trade wars are not good and easy to win. America will pay for it in Asia.