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America is missing out in 'Asianization of Asia'

Author Parag Khanna says world's future lies in the region

SINGAPORE -- Author and commentator Parag Khanna had to stop himself from updating his text every five minutes as he made finishing touches to his latest book last year. The relentless flow of headlines, mostly driven by U.S. President Donald Trump's habit of making policy on the hoof and announcing it on social media, meant Khanna had an almost unending stream of material in support of his thesis that the West, and America in particular, really does not understand the rise of Asia on the world stage.

According to the book, "The Future is Asian", the consequence of that failure of understanding, and the U.S. government's confrontational approach to China, will be the "Asianization of Asia". That, he explains, means greater economic and political interdependence between Asian countries, and a return to a historical multipolarity, where no single nation has hegemonic dominance of the region.

"The U.S. can believe it's going to suppress [Chinese manufacturing] and take steps to suppress and contain it, but it's preordained to fail," Khanna told the Nikkei Asian Review in Singapore. "I'm predicting the outcome of the trade war, which is the accelerated Asianization of Asia. It's happening right now."

Ahead of its publication in February, the book has already made its way into some international policy circles. In early January, U.K. Foreign Secretary Jeremy Hunt referenced it in a speech in Singapore, in which he outlined the justifications for Britain's renewed focus on Asia.

Khanna, a 41-year-old India-born American living in Singapore, is a geopolitical consultant to global companies and governments. In 2007, he advised U.S. special forces in Iraq and Afghanistan on political strategies, and has held positions at a number of prominent international think tanks, including the Brookings Institution and the European Council on Foreign Relations.

A well-known public intellectual in the U.S., he is author of half a dozen books on international affairs, nearly all bearing grandiose titles that promise to answer the big questions of our time, from "How to Run the World: Charting a Course to the Next Renaissance," to "Hybrid Reality: Thriving in the Emerging Human-Technology Civilization." The books have been translated into more than 20 languages and have been a fixture on bestseller lists since his first, "The Second World: Empires and Influence in the New Global Order," which was serialized in the New York Times magazine in 2008.

Khanna said the underlying trend he describes in his latest book has been extant for a quarter of a century, driven first by rising oil prices and resurgent interest in old trading routes across the Indian Ocean and former Silk Road.

"The energy super-cycle really woke up Asians to the complementarities that their economies have. The West Asians have oil and gas. Northeast Asia has the technology industry and now Southeast Asia has a cheaper labor force. There's food production in this region. Oil and gas elsewhere. And labor, from young to old," Khanna said. "It's a 25-year process that's been going on. It's embedded in a much older story -- this is how Asia was up until the 17th century."

Author Parag Khanna, photographed in Singapore, Dec. 2018. (Photo by Peter Guest)

Khanna said Western observers often see Asian development through an Anglo-American lens, which assumes that there will be a dominant, neo-colonial power -- in this case, China, whose expansion is being played out through infrastructure investment and debt finance.

"People tend to make the same mistake over and over, which is to believe that if you build a highway somewhere, build a railway somewhere, build a power plant somewhere, you own the place," he said. "You cannot see Asia as blocs, it's mutually reinforcing waves. Japanese industrialization inspired the tigers, the tigers and Japan invested in China. China is recycling all those savings into Belt and Road and sponsoring the next wave of Asian growth. That is how these waves play out."

Khanna believes that the Trump administration's highly confrontational approach toward China on trade is a demonstration of how egregiously the U.S. has misunderstood the region's economic and political dynamics.

"One of the things that the Trump administration has failed to understand is that they are the third most important player for China," he said. "Of course, in Washington it's portrayed as the opposite: 'We hold all the cards and let's stop them while we can.' But China's trade with its neighbors is way larger than its trade with the U.S. China's trade with Europe is way larger than its trade with the U.S. Most high-tech imports into China don't come from the U.S."

Khanna believes that the U.S.-China trade war will accelerate the integration of Asian economies and further diminish America's role in Asia, and will seriously harm U.S. companies that do business with China. Chinese companies, and possibly other Asian companies, will look to minimize the risk of future political disruptions by replacing American components with those from other Asian or European suppliers, he predicted.

"China will, sector-by-sector, permanently substitute any dependence on American suppliers," he said. "It gives China an excuse now to say that in the next procurement cycle for semiconductors, for high-tech components, even aircraft, why deal with Intel and Qualcomm, when you can just buy the same components from Samsung, from NXP, from anyone but the U.S.?"

Interpreting Asia as a battleground for rival hegemonies -- a zero-sum game where there will be one winner -- has led the U.S. to make counterproductive decisions. The country has refused to join institutions and programs that are Chinese-led or influenced, such as the Belt and Road infrastructure initiative and the Asian Infrastructure Investment Bank.

The Trump administration pulled the U.S. out of the Trans-Pacific Partnership, a free trade agreement between America and Asian countries. Rather than letting the deal collapse, the other parties to the TPP negotiated a similar agreement, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which excludes the U.S.

These are decisions motivated by poor assumptions, and ones that the U.S. will ultimately regret, Khanna believes.

"It's just going to be really bad for America," Khanna said. "You don't want to join TPP? Everyone else will join TPP. You don't join Belt and Road? Guess what, everyone else will join Belt and Road. You don't want to trade with China? Well guess what, everyone else is going to eat your lunch and take your market share."

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