The post-crisis geoeconomic trend threatens to create a division between Asia and the United States as Asian economies led by China continue to grow strong while the U.S. becomes more domestically focused, said Simon Tay, chairman of the Singapore Institute of International Affairs.
But to avoid a China-centric world landscape and pursue a more balanced regional development, Asia needs continued engagement of the U.S., and Japan has a key role to play to keep America involved in the region, Tay said at a recent seminar in Tokyo.
Tay was speaking at a seminar organized by the Keizai Koho Center on Aug. 3. Masashi Nishihara, president of the Research Institute for Peace and Security, served as commentator at the event.
The 2008 crisis and subsequent global recession changed the direction of the world’s geoeconomic trend, in which Asian economies except for Japan continue to grow strong while most of the advanced industrialized nations struggle with low growth, Tay said.
Such changes bring political consequences as well, he said, especially after the wars in Afghanistan and Iraq exposed the limitations of U.S. military power and America’s “soft” power has also been badly damaged in the years preceding the crisis.
Since his inauguration, U.S. President Barack Obama has repeatedly emphasized his wish for America’s closer engagement with Asia, Tay said. “He has made it clear he wants to engage with Asia. He does not want to be divided from this region — the world’s largest and fastest-growing economies and markets,” he said.
However, domestic political and economic challenges continue to keep the president from engaging with Asia, he pointed out. One symbolic example, he said, is the cancellation of Obama’s planned visit to Indonesia twice already this year — due to the congressional debate over his health care bill in March and over his response to the BP oil spill in June.
“He wants to engage with Asia, and Indonesia is the world’s most populous Muslim country and perhaps the most important country in Southeast Asia. He recognizes Indonesia as being strategically important . . . but despite his wish and strong political reasons, equally strong domestic politics kept him from fulfilling his promises (to visit Indonesia),” Tay said.
In the background of this, he said, is the American people’s focus on domestic job issues and the post-crisis economic problems and their growing doubts about the benefits of globalization — “whether their jobs have been lost to China, India and others.”
In Asia, meanwhile, “we are getting more used to being on our own,” said Tay, pointing to the growing Asian regionalism in such forms as ASEAN plus three and the East Asia Summit.
And in the process, Tay said people in Southeast Asia have looked increasingly away from the U.S. and Japan and more toward China. In recent years, Japan’s influence in Asia has been limited by its own economic and domestic political problems, while China “has begun to both charm and show its power to so many people in Southeast Asia,” Tay said.
China is “strategically focused,” Tay said. The U.S. distributes much more economic aid than China worldwide, but China gives three times more aid than the U.S. to Cambodia, he said. And because of the increasing investment and trade, tourism and economic aid, Southeast Asia is “beginning to hub around” China, he added.
Tay warned that such a China-centric trend is dangerous for Asia because many Asian economies still rely heavily on American consumption even after the crisis. The United States, for its part, needs to realize that Asian markets “represent the best growth opportunities in the world” for American exports, he said.
At the same time, the previous trans-Pacific pattern of production and consumption — where Asia served as a production platform that shipped goods to the U.S. for consumption — must change and Asian countries should use their own production platforms to satisfy their own demand, he said.
Continued U.S. engagement will be crucial for Asia also for security reasons given that China’s rise will upset many of the existing balances in the region, Tay said. “The peace that has accompanied Asia’s growth so far will not be guaranteed unless America is there,” he added.
Tay said that U.S.-China relations, in which the emphasis used to be on their increasing economic interdependence before the crisis, will face problems in the years ahead.
The recent dispute involving U.S. search engine giant Google over Internet censorship is just one of the episodes showing that the “honeymoon is clearly over” for many American firms, he said. Questions about China’s policies over the value of the yuan will persist and China is not likely to accept its own version of the 1985 Plaza Accord, in which Japan essentially agreed to guide the yen higher against the dollar, Tay said.
And just as resentment among the American public toward China appears to grow over job losses, “the same is also true of China,” Tay said. “Many of the Chinese people I met over the last year now feel that China is no longer ‘rising’ but ‘risen,’ ” and with the 2008 Beijing Olympics and this year’s Shanghai Expo, “they feel they are already there,” he said.
Tay cited a recent book titled “China Is Not Happy,” which has proven extremely popular among the Chinese by claiming that China should assert itself more, including in diplomatic and military ways.
“The main argument of the book is that China is ready to take the leadership in the world — and that China must change some of the rules” in doing so, he said. “The (government) leaders do not take this view, but the popular netizens of China are pushing this view.”
The continued growth of Asian economies is possible but cannot be taken for granted, Tay said, given that American and European economies remain weak and their current uptrend has been aided by the massive stimulus measures following the crisis that needs to end at some point.
Asia needs to pursue both greater regionalism and continued engagement with the U.S. — rather than either one or the other, Tay said. And Japan, as a key U.S. ally and host to this year’s Asia-Pacific Economic Cooperation summit in Yokohama, “can and should play a role” to help the region achieve both, he added.
Commentator Nishihara, formerly president of the National Defense Academy, said Japan needs to first put its own economic house in order before the nation plays greater roles in the region. The nation will need more foreign investment for its growth, but confidence in the Japanese economy will be in doubt if it keeps relying on massive debts issued each year, he noted.
Japan has also been unable to take any leadership role in Asia in recent years as the nation had changes in prime ministers every year since 2006, Nishihara pointed out. Every new leader comes up with his own version of Japan’s strategy toward Asia — only to be forgotten once he is replaced by another, he said. When Yukio Hatoyama became prime minister last year after his Democratic Party of Japan ousted the Liberal Democratic Party from power, he advocated the creation of an East Asian Community — an idea that had previously been floated a number of times — without sufficient discussions on how to proceed, he noted.
“That in itself was problematic and the Hatoyama administration ending up short-lived again damaged the credibility of Japan,” Nishihara said.