The U.S. Needs to Up Its Economic Game in Southeast Asia

AMBASSADOR CURTIS S. CHIN AND JOSE B. COLLAZO


A bustling street in Kuala Lumpur, Malaysia
A bustling street in Kuala Lumpur, Malaysia

WASHINGTON—This August 16, after President Joseph Biden walked away from the podium in the East Room of the White House, one could understand if leaders across Southeast Asia and elsewhere in the Indo-Pacific region shuddered.


There goes America again, they might have thought: Another U.S. president has written off an Asian nation now deemed no longer sufficiently “strategic” for U.S. engagement.


“Our only vital national interest in Afghanistan remains today what it has always been: preventing a terrorist attack on American homeland,” Biden said in an address to the nation. His remarks came after the rapid collapse of the U.S.-supported Afghan government on August 15 following Biden’s earlier decision to move forward with the withdrawal of U.S. military forces.[1]


Chaotic scenes from Afghanistan would ensue, including the deaths of 13 U.S. military service members and more than 160 Afghan civilians in an attack near the Kabul airport. A U.S. drone strike ordered after Biden vowed retaliation for the airport attack ended in a tragic mistake, killing 10 civilians, including an aid worker and seven children. Some two decades earlier, the U.S. had invaded Afghanistan post-9/11 to fight a “war on terror,” which would continue under presidents from both political parties.


As seen from Southeast Asia, the parallels in rhetoric and images with America’s departure from South Vietnam 40 years ago are obvious. In this case, 20 years of American involvement ended as it had begun, with a Taliban government in power.


Engagement Goes beyond “Military-Industrial” Ties


America’s leaders must recognize that vital national interests go beyond military- and defense-driven imperatives alone, whether in Afghanistan or in Southeast Asia. The tail, in essence, should not wag the dog.


Six decades ago, in January 1961, President Dwight Eisenhower warned about what he saw as a threat to democratic government. He termed it the “military-industrial complex,” describing a formidable union of defense contractors and the armed forces.[2]


“Together we must learn how to compose difference, not with arms, but with intellect and decent purpose,” Eisenhower said. The former Supreme Allied Commander in Europe also warned of the “prospect of domination of the nation’s scholars by Federal employment, project allocations, and the power of money” as well as of the “danger that public policy could itself become the captive of a scientific-technological elite.” [3]


Fast forward to today, and Eisenhower’s words are well worth heeding. The need to focus on and strengthen commercial ties and other non-military engagement across Southeast Asia remains critical—even as necessary steps are taken to remain militarily ahead of an increasingly assertive, if not outright aggressive, China.


Important ongoing initiatives to ensure a free and open Indo-Pacific region include strengthening the Quad, officially the Quadrilateral Security Dialogue, composed of the United States, Australia, India and Japan. Maritime cooperation among the Quad began after the Indian Ocean tsunami of 2004. Today, the four nations—all boasting robust democracies and economies—have sought to expand cooperation on security, economic and health issues, including the financing and delivery of vaccines against COVID-19.[4]


Another important new initiative is the trilateral defense agreement announced in September 2021 by Australia, the United Kingdom, and the United States, informally known as AUKUS. Under the historic pact, nuclear-powered submarine technology will be provided to Australia.[5] The surprise announcement has raised concerns throughout Southeast Asia that the pact will increase tensions between the three countries and China—with the region being yet again the field on which future battles are fought.


The announcement echoes news during the administration of President Barack Obama that 2,500 U.S. Marines would be deployed to Darwin, Australia, as part of a longer-term U.S. military “pivot” to the Asian and Pacific region.[6] Following pushback from European allies worried about their place in the U.S. engagement, the U.S. “pivot to Asia” would later be rebranded as a “rebalance to Asia and the Pacific.”[7]


Reaction to the AUKUS deal in Southeast Asia has been mixed, reflecting the inability of the region to speak with a single voice, as well as the influence of economic and other ties with China. Malaysia and Indonesia expressed concern that the new security pact would lead to an arms race in the region. In contrast, Singapore and the Philippines welcomed the deal.[8]


This raises the question, to what degree have military considerations and initiatives dominated strategic calculations and engagement?


The U.S. Can Do Much More to Stay Relevant in Southeast Asia


“For an effective Asia strategy, for an effective Indo-Pacific approach, you must do more in Southeast Asia,” said Kurt Campbell, the White House Indo-Pacific Coordinator, at a recent Asia Society event. His remarks underscored that the United States is not doing enough, and for some has never done enough, to remain relevant in the region.


“We recognize fully that to be effective in Asia, you have to be effective in Southeast Asia,” said Campbell, who had served in the Obama Administration as Assistant Secretary of State for East Asia and the Pacific.[9]


For the United States to be successful, U.S. rhetoric must match the reality of U.S. engagement. This is as true today across the Indo-Pacific, from Afghanistan to the South China Sea, as it was when America’s friends and rivals in Asia saw a disconnect between U.S. rhetoric and the U.S. response over a “red line” drawn in regard to Syria’s use of chemical weapons.


As Ashley Townshend, Director of Foreign Policy and Defense of the United States Studies Centre, and his colleagues have written, the Biden Administration’s approach to the Indo-Pacific has so far lacked focus and urgency. “Despite its deep regional expertise and the region’s high expectations, it has failed to articulate a comprehensive regional strategy or treat the Indo-Pacific as its decisive priority,” says Townshend and his co-authors in calling for a “course correction.” [10]


But what does doing “more” look like?


“More” cannot be a repeat of past missteps. Failure to send high-level representation to critical regional and multilateral meetings including the U.S.-ASEAN Summit [11], and not consistently and adequately funding initiatives such as the Lower Mekong Initiative [12], are just two examples that cut across Democratic and Republican Administrations when it comes to less-than-optimal engagement with Southeast Asia.


“More” cannot be simply a “pivot to Asia 2.0,” which is seen as overly militaristic in nature and deemed more rhetoric than reality when it comes to business, trade, development, climate and health engagement that would be of long-term benefit for both the United States and Southeast Asia.


“More” must encompass an “all of government” U.S. approach—moving well beyond our U.S. Departments of State and Defense—and engagement in a sustained way with the region. The United States must better partner with Southeast Asian nations large and small, helping drive economic prosperity to our mutual benefit, just as we collaborate on strengthening regional security.


As unpopular as it may be, doing more means also talking about trade deals with the region and with our own fellow citizens. Business and government leaders must better understand and then address very real concerns about the unequal benefits and consequences of trade in America.


We Need to Value and Play the Economic Card


Trade has gotten a bad rap in the last few years, and that is understandable when unfair business practices by China, enduring trade deficits and heart-breaking job losses, as well as partisan politics, dominate the conversation.


Free and fair trade has been more aspirational than reality. More attention must be paid to the negative consequences of trade, specifically, the very real impact, both positive and negative, on real people—on jobs, livelihoods and people’s outlook on whether their kids will grow up to live better lives than their own. Promises of “job retraining” and one-off payments are an inadequate response by business and government to a loss of livelihoods.


It has been said that, for businesses, the biggest advantage of trade is that it allows companies to grow beyond their home borders and expand into new markets, creating new and different jobs back home and expanding consumer choices. We cannot ignore that 96% percent of the world’s consumers reside outside the United States, according to the U.S. Small Business Administration.[13]


There remains a robust demand outside America’s borders for U.S. products, brands and services—whether for U.S.-designed iPhones assembled abroad, American-made Boeing jetliners from the state of Washington and agricultural products grown in the U.S. Midwest as well as in Florida, Texas, California and elsewhere.


Here too is reason enough for an all-in American approach to Southeast Asia. There is much more to the Indo-Pacific region than China, Japan and India.


The 10 member states of the Association of Southeast Asian Nations (ASEAN) —Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam—together constitute a market with a population exceeding 660 million people. ASEAN countries combined also have the third-largest population in the world and a GDP of $3.2 trillion, making the region the third-largest economy in the Indo-Pacific and the fifth-largest in the world.


With growth projected to exceed 5.5% per year, the region’s economy will pass those of India and Japan to become the world’s fourth-largest by 2030, according to the U.S.-ASEAN Business Council, the leading advocacy organization for U.S. corporations operating within the dynamic ASEAN region.[14]


U.S. companies are already taking advantage of the business opportunities in this region, with U.S. exports recently exceeding more than $122 billion in goods and services to the ASEAN region.


At the state level, Texas has the largest share of exports to the region, with $20 billion worth of exports headed to ASEAN nations, supporting more than 84,000 jobs, according to “ASEAN Matters for America/America Matters for ASEAN,” a data resource created in partnership by the East-West Center in Washington, the U.S.-ASEAN Business Council and the ISEAS-Yushof Ishak Institute.


The economic cards that the U.S. holds are significant and well worth showing in America as part of non-partisan efforts to build support for greater, sustained U.S.-ASEAN engagement by all sectors.


As examples, ASEAN accounts for at least 20% of export-dependent jobs to the Indo-Pacific, not only in Texas, but also in the states of Arizona, Georgia, Kansas, Mississippi, Montana, North Dakota, Tennessee, Virginia, Wyoming, Oregon, Idaho and Maine.


The United States exports nearly $14 billion in agricultural and food products to ASEAN, with soybeans ($2 billion) and cotton ($1.6 billion) making up a large share of trade activity. This trade involves all U.S. states, from California ($2 billion) to Rhode Island ($1 million).


ASEAN is also the top destination for U.S. investment in the Indo-Pacific, with U.S. companies having invested nearly $338 billion in the region. That is more than the United States has invested in the much-discussed BRIC nations of Brazil, Russia, India and China combined.


Yet, amid all this success, the reality is that in 2020, Southeast Asia became China’s largest trade partner as the U.S.-China trade war forced Beijing to recalibrate its global supply chain. The European Union had previously been China’s largest trade partner. At the start of 2021, China’s top five trading partners are ASEAN, the EU, the United States, Japan and South Korea.


China and ASEAN also enacted an updated free-trade agreement in October 2020. In addition, “in an attempt to counter U.S. clout, the Chinese government has promoted trade with ASEAN and other participants in its Belt and Road infrastructure initiative,” according to Nikkei Asia.[15]


For U.S. companies and business people to better build on past successes in Southeast Asia amid China’s rise, the federal government in Washington, D.C., also has a role to play. For the Biden Administration and the U.S. Congress, that includes, at times, getting out of the way by doing away with burdensome regulatory and tax policies that unintentionally hinder U.S. competitiveness and U.S. business people abroad.


One enduring example of well-intended legislation with unintended negative consequences on Americans abroad that Washington should fully address is FATCA (the Foreign Account Tax Compliance Act). Due to the added reporting burden that FATCA requires of financial institutions outside the United States, numerous Americans in Southeast Asia and elsewhere have come up against foreign banks who have decided not to serve Americans. The result is added challenges for Americans overseas at a time when Washington should be making it easier for U.S. students, business people and entrepreneurs abroad to succeed.[16]


Government and business also must invest in personnel with an understanding of the Indo-Pacific’s diversity of cultures, challenges and opportunities. Post-pandemic opportunities should be explored with educational, cultural, tourism and other institutions to step up people-to-people engagement here and abroad between the United States and each of the 10 ASEAN nations.


At the same time, U.S. businesses that manufacture products in Southeast Asia for sale in Southeast Asia should not be unfairly maligned as they take steps to remain cost-competitive.


The Biden Administration and the U.S. Congress could also do much more to ensure that Americans abroad in Southeast Asia and elsewhere have access to COVID-19 vaccines as part of a U.S. commitment to assist nations in need, as well as assisting Americans abroad. While getting its house in order at home, the United States must also better engage with and support its own citizens living and working outside its borders.[17] Americans abroad are on the front lines of everyday engagement and interactions overseas.


We Need to Get Back into the Game (of Making Trade Deals)


President Donald Trump promptly withdrew the United States from the Trans-Pacific Partnership (TPP) trade agreement in his first few days in office, fulfilling one of his most popular campaign promises. The 2016 election year also saw the most prominent Democratic presidential candidates, including former Secretary of State Hillary Clinton, express their own opposition to the Obama-era trade deal. TPP had never been submitted to the U.S. Congress for ratification due to its likely failure to win approval, and trade deals, unfortunately, seem to have become increasingly toxic.


The TPP, designed to lower trade barriers among its participants, included four ASEAN countries (Brunei, Malaysia, Singapore and Vietnam), along with Australia, Canada, Chile, Japan, Mexico, New Zealand and Peru, as signatories. It is a trade agreement that Obama had once said would write the “rules of the global economy” and open markets to “A