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Economy

Fragile ASEAN alliance caught between the US and China

SINGAPORE   The Association of Southeast Asian Nations is as fragile as a house of cards. It needs to be handled gently, or else it could easily topple before anyone realizes it. Major countries don't seem to understand the delicate nature of the regional grouping, however.

     ASEAN is a group on which the world has placed its expectations as a driver of growth in the world economy. Furthermore, these countries are situated in a geopolitically important location, surrounding the South China Sea, where a military clash could erupt at any moment. So the major powers are eager to draw the group closer.

     This is what U.S. President Barack Obama was hoping to do when he invited the leaders of 10 ASEAN states to Sunnylands, California, on Feb. 15 for a summit. The U.S. government added "special" to the meeting's name, calling it the U.S.-ASEAN Special Leaders Summit.

     Did Obama's efforts succeed? In summing up the two-day summit and to announce the Sunnylands Declaration, he said, "I believe this summit has put the U.S.-ASEAN partnership on a new trajectory that will carry us to even greater heights in the decades ahead."

     Among East Asian leaders, Chinese President Xi Jinping has repeatedly visited ASEAN countries, each time bringing with him offerings such as official development assistance and cooperation in infrastructure development. Japanese Prime Minister Shinzo Abe is also anxious to deepen relations with ASEAN members to counter China. Indian Prime Minister Narendra Modi as well is eager to strengthen ties with Singapore and other small but economically important ASEAN members. In comparison with these Asian leaders, Obama's focus on ASEAN is big on rhetoric but the U.S. is perhaps behind Asian powers like Japan, China and India in terms of closeness with ASEAN states.

     An accomplishment, if any, at the Sunnylands summit is U.S.-ASEAN Connect, a new economic initiative unveiled by Obama. This economic cooperation program consists of four pillars, according to U.S. Mission to ASEAN, a U.S. government agency in Jakarta.

     The first pillar, Business Connect, calls for expanding mutual trade and investment by connecting American and ASEAN companies in a wide variety of industrial areas. The second, Energy Connect, will assist technological development, contributing to stable supplies of clean energy in the region.

     The third, Innovation Connect, aims at helping promote science and technology in ASEAN countries through exchanges between American and ASEAN entrepreneurs and researchers. In the fourth, Policy Connect, the U.S. government will advise the administrative authorities of ASEAN states about the standardization in the fields of trade, investment and technology and the fostering of small and midsize companies.

     It may be more correct to call them four "goals" rather than four "pillars" because the pillars have not yet been erected.

     Obama, who is keen to sell his "re-balance to Asia" policy to American voters in the midst of the ongoing presidential campaign, wants to build the pillars in a hurry. To implement U.S.-ASEAN Connect, Connect Centers will be set up in three ASEAN cities: Jakarta, Singapore and Bangkok. The centers will serve as points of contact for local companies wanting to do business with U.S. partners.

     U.S.-ASEAN Connect is a small step in the right direction as some of ASEAN's original members are beginning to see signs of being caught in the "middle-income trap," in which the middle class grows amid rising national income at a time when low-cost manufacturing alone can no longer guarantee growth. To avoid getting trapped, a country needs not just to manufacture products but to create innovation as well. The U.S. is right in thinking it would be wise to extend a helping hand to ASEAN members.

ASEAN SIDE   That is the long-term vision from the U.S. standpoint. The ASEAN side faces more imminent problems: security in the South China Sea, and the economic issue of the disappearance of huge demand along with the slowdown of the Chinese economy. What realistic responses to these looming issues the U.S. can offer will heavily influence whether ASEAN will deepen its friendship with the U.S. in the years to come.

     Regarding the stance toward China, Vietnam and the Philippines, which are in territorial disputes with China in the South China Sea, came into line with the U.S. at the Sunnylands summit. Cambodia and Laos, which have deep relations with China, worked to mute the critical tone against China in the joint statement. The result was an equivocal reference to China in the statement, as at the ASEAN summit in November last year in Malaysia.

     Given the split in stance among its member states, ASEAN cannot reach a clear conclusion on the South China Sea issue no matter how much it discusses the matter. The U.S. cannot expect much from ASEAN on this issue.

     Regarding the Trans-Pacific Partnership, which Obama considers to be a vital means to implement his rebalancing policy, there is also a subtle perception gap between the U.S. and ASEAN. Daniel Russel, assistant secretary of state for East Asian and Pacific affairs, stressed, "We believe TPP is a unifying force, not a divisive force," expressing the view that the high level of liberalization pushed by the U.S. will further advance the integration of the ASEAN region. The view reflects recognition among American policymakers that participation in the TPP will give countries an edge in trade with the U.S.

     In reality, however, the U.S. share of ASEAN's total trade value has been steadily decreasing. In 2000, the U.S. was their biggest trading partner, accounting for 16.1% of their trade, but the share halved to 8.2% in 2013. Now China is ASEAN's largest trade partner, making up 14%. An expert on the ASEAN region criticized the U.S., saying, "Stuck in the prosperous past, the country overestimates the allure of its market."

     Another serious concern among ASEAN states at the moment is shrinking demand in China, on whose market countries heavily rely to consume their exports. The creation of new demand requires domestic investment to refurbish infrastructure within the ASEAN region. In this respect, China acted smartly, establishing the Asian Infrastructure Investment Bank to invest in Asia's infrastructure facilities. The move was enthusiastically supported by ASEAN members. China knows what ASEAN countries really want.

     ASEAN leaders did not travel all the way to California to listen to Obama's lecture. The aim of their visit was balance -- to avoid having to draw too close to China. They must also have expected the U.S. to immediately commit to effective security and economic steps.

     The 10 ASEAN countries vary considerably in economic strength and political situation. Obama reiterated that ASEAN is the heart of the Asia-Pacific region, emphasizing his posture to respect the group as one community. But forcing the U.S. requests and expectations too strongly on ASEAN undermines the unity of the group. ASEAN probably remains purposely ambiguous on some issues and avoids jumping to conclusions to maintain the group's cohesion. This style conflicts with the U.S. way of often pressing for a choice between black and white alternatives.

     If a country wants to become a close friend of ASEAN, it must have a fine-tuned diplomatic sensibility as it handles the delicate ASEAN alliance, taking into account the grouping's diplomatic stance, which values balance as it seeks to keep an equal distance from the U.S., China, Japan and India.

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