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With U.S. focused on defense, China's trade and infrastructure sweep Southeast Asia

A train is ready on the station during the handover ceremony of the high-speed rail project in Vientiane, Laos, connecting the city with Kunming, China, on Dec. 3, 2021.
Phoonsab Thevongsa
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Reuters
A train is ready on the station during the handover ceremony of the high-speed rail project in Vientiane, Laos, connecting the city with Kunming, China, on Dec. 3, 2021.

As the United States' strategic rivalry with China intensifies, one part of the world, Southeast Asia — where the U.S. has ceded much influence over the past two decades to China — is witnessing renewed U.S. interest under President Biden.

Biden administration officials have made repeated trips to the region in the past year and the Association of Southeast Asian Nations, ASEAN, is looking with both hope and trepidation as Washington deepens competition with China over technology, investment, infrastructure and security.

In fact, Secretary of State Antony Blinken closed out 2021 with his first trip to the region as Washington's top diplomat, visiting Indonesia and Malaysia, where he asserted that "much of the planet's future will be written in the Indo-Pacific." If you combine the populations of Southeast Asian economies — estimated at 650 million — they make up the world's third largest labor force, behind only China and India. The region's middle class is expected to double by 2030.

Blinken sparingly referenced China in his public appearances, all the while signaling that the United States is better aligned with Southeast Asia's aspirations than China is.

Secretary of State Antony Blinken (left) meets with Indonesian Foreign Minister Retno Marsudi at the Pancasila Building in Jakarta on Dec. 14, 2021.
Olivier Douliery / Pool/AFP via Getty Images
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Pool/AFP via Getty Images
Secretary of State Antony Blinken (left) meets with Indonesian Foreign Minister Retno Marsudi at the Pancasila Building in Jakarta on Dec. 14, 2021.

"We all have a stake in ensuring that the world's most dynamic region is free from coercion and accessible to all," he said. "So we will work with our partners across the region to try to realize this vision."

The U.S. needs an economic roadmap for the region

The most meaningful part of the vision — the U.S. economic and commercial framework — remains short on details, but U.S. officials say the contours will become clearer in 2022. "It is in this arena of policy that China has done more to displace the United States than in any other," Van Jackson, senior lecturer in international relations at New Zealand's Victoria University of Wellington, wrote this month in Foreign Policy.

Singaporean academic and former senior diplomat Kishore Mahbubani says Washington needs to move with urgency. He warns that Southeast Asia is less interested in talk of "freedom" and "openness" and more about the material needs of the region and its recovery from the devastating impacts of the coronavirus pandemic.

In the past year, the Biden administration has made important strides in putting its military alliance with the Philippines back on track, and in shoring up relations with Vietnam.

U.S. Navy F/A-18 Super Hornets multirole fighters and an EA-18G Growler electronic warfare aircraft (second right) on board the USS Ronald Reagan (CVN-76) aircraft carrier as it travels in South China Sea on its way to Singapore, on Oct. 16, 2019.
Catherine Lai / AFP via Getty Images
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AFP via Getty Images
U.S. Navy F/A-18 Super Hornets multirole fighters and an EA-18G Growler electronic warfare aircraft (second right) on board the USS Ronald Reagan (CVN-76) aircraft carrier as it travels in South China Sea on its way to Singapore, on Oct. 16, 2019.

But Mahbubani, a former president of the United Nations Security Council and author of the 2018 work Has the West Lost It?, says the U.S. emphasis on defense and security may not be the best guarantee of its long-term interests. He says, "The more that America spends on military expenses, the less effective it will be in the long run in dealing with a far stronger and bigger Chinese economy."

Mahbubani notes that China has already pole-vaulted over the U.S. in terms of trade and economic engagement in Southeast Asia. In 2020, China's trade with Southeast Asia totaled $685 billion, nearly twice that of the U.S., whose trade with the region reached $362 billion. Mahbubani says 20 years ago, U.S. trade with Southeast Asia was three and half times that of China's and totaled $135 billion.

"So at the end of the day, that's the most important statistic to watch," Mahbubani says. "Not how many submarines you have in the region, it's how much trade you do with the region."

Gregory Poling, senior fellow for Southeast Asia at the Center for Strategic and International Studies, agrees. As Blinken visited Asia in December, "nobody was fooled by the fact that the administration doesn't have a trade policy," Poling says. "The big Achilles' heel remains trade" for the U.S.

The U.S. is missing from big Asia-centered trading blocs

There is growing consensus that the U.S. is playing catch-up after taking itself out of Asia's two biggest trade agreements, largely over domestic opposition. The newest of the two, the Regional Comprehensive Economic Partnership, or RCEP, took effect Jan. 1, lowering tariffs for most of the original signatories that have ratified it. RCEP links Southeast Asia's 10 economies with China, Japan, South Korea, Australia and New Zealand, combining 2.3 billion people and accounting for over a quarter of global trade.

Before the worst of the pandemic, the Brookings Institution's computer simulations found that RCEP could add $209 billion annually to world incomes.

Previously, former President Donald Trump, as one of the first acts in office in 2017, pulled out of another massive trade deal, what became known as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. It was a rebranded Trans-Pacific Partnership (TPP), a pact that culminated under President Barack Obama, who sought a "pivot" to Asia and a buttress against China's growing influence in an array of countries bordering the Pacific Ocean — from Australia to South America. Trump stoked opposition to the deal, casting it as a "job killer" for Americans.

China has now made a bid for membership in its successor 11-nation CPTPP that includes Japan, Mexico and Australia.

Munir Majid, the chairman of the Kuala-Lumpur independent think tank CARI ASEAN Research and Advocacy, says to ensure the U.S. has a say in shaping global trade rules, the Biden administration should get back to the negotiating table and work to join the behemoth trade blocs with Asia.

The U.S. remains on the sidelines, with Biden bowing to some of the same constituencies that supported Trump's policy. Majid says historically the U.S. has argued that "other countries are cheating" on every level. "Cheating because they subsidize their industries, ... cheating because they steal intellectual property rights ... cheating because they pay very low wages" with labor standards "not up to the mark."

But Majid argues for "greater discernment" on the part of the U.S., and a more "nuanced assessment" of what things are going wrong and where. "You can't just tar everyone with the same brush" and say a whole country is based on "exploitation," he says.

Van Jackson says the right economic statecraft would "focus on incentivizing the region's U.S. partners to make progress on labor rights, fair treatment of workers, floor wages for companies that export to the United States." He says Washington could also "offer massive aid for the transition to green energy" in developing Asian nations.

In the current highly partisan and polarized climate of Washington, however, the Biden administration may not wish to pursue any new trade deals recognizing that it would likely fail to persuade Congress to agree.

But Majid says if the U.S. is serious about deepening economic engagement it must also consider the impact of its monetary policy on the region. To tame the highest inflation in nearly 40 years, the U.S. Federal Reserve is expected to raise interest rates to slow the economy. In turn, Majid says Southeast Asian countries would have to follow suit and increase their interest rates to compete, and thus, negatively impact the recovery of their economies. "Do you think they're going to think highly of America?" he asks.

Majid stipulates that the U.S. must act in its own best interests, but he says, "America must also think of the impact of its policy changes on other countries, especially countries that it says it wishes to engage better."

A Chinese worker returns from lunch at a construction site near Otres Beach, in Sihanoukville, Cambodia, Aug. 3, 2018. Money from China accounts for a large share of foreign investment in the Southeast Asian country, creating new roads, airports, skyscrapers, dams, hotels and casinos.
Paula Bronstein / Getty Images
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Getty Images
A Chinese worker returns from lunch at a construction site near Otres Beach, in Sihanoukville, Cambodia, Aug. 3, 2018. Money from China accounts for a large share of foreign investment in the Southeast Asian country, creating new roads, airports, skyscrapers, dams, hotels and casinos.

The U.S. wants to catch up to China's regional infrastructure buildup

Southeast Asia, undeveloped just several decades ago, has become the No. 1 destination for U.S. private direct foreign investment in Asia.

However, analysts say very little private capital has gone to building roads, bridges, rail lines, airports and ports, which a region suffering from chronic underinvestment badly needs. High costs and perceived risks have made investors reluctant.

But the Biden administration is promoting a new initiative called Build Back Better World — an explicit alternative to China's sizable infrastructure offerings from East Asia to Europe. They are meant to invoke the Silk Road, but observers along with Western officials fear they are a stalking horse for Chinese expansion.

The Group of Seven wealthy democracies adopted Biden's "B3W" initiative last June, promising to unleash hundreds of billions of dollars for projects in needier countries. But it's only just begun.

And while Blinken told the region that the U.S. will help close the infrastructure gap, Mahbubani notes that China is far ahead of the U.S. in building needed projects. From Indonesia to Malaysia to Laos, Beijing has erected vital transport services with Chinese money and technology.

"There's now a new high-speed train in Laos started and Laos is one of the poorest countries in the world," Mahbubani says, adding, "It now has a faster train than anything the United States has."

Southeast Asia has both misgivings and deep relations with China

Dewi Fortuna Anwar, an academic with the Indonesian Academy of Sciences, says, all of the Chinese trade, vaccines and infrastructure notwithstanding, countries remain wary about China's rise. But she says Southeast Asians have to deal with China "for better or worse." It's "here for the long haul," she says, whereas the U.S. has often been considered absent, and an unpredictable partner.

"There's a perception that the U.S. is distracted quite often, inconsistent, and doesn't have long staying power," Anwar says.

The Biden administration is trying to change that perception, even as it keeps a laser focus on China. The stream of U.S. officials who have visited Southeast Asia in recent months, foremost Secretary Blinken, is intended to demonstrate that the U.S. is back, ready to listen, and to learn.

What the United States will hear, says Anwar, is that Southeast Asia is not interested in choosing sides in the great U.S.-China rivalry.

"We like to have choices. For Indonesia, strategic autonomy of the region is very important and that means that we want to be engaged with all sides, with all the major powers, without becoming too dependent. Without allowing any of the great powers to impose its hegemony."

But CSIS's Poling says, if pressed, the United States would be the partner of choice for many leaders in the region. "We can set aside, perhaps, Cambodia and Laos [which are closer to China], but everybody else is hungry for more U.S. engagement, not because they believe that the U.S. can create a unipolar moment in Asia. Those days are long, long behind us. But because they worry that China will."

The Nimitz-class aircraft carrier USS Carl Vinson (CVN 70), the Ticonderoga-class guided-missile cruiser USS Lake Champlain (CG 57) and the Arleigh Burke-class guided-missile destroyer USS Chafee (DDG 90) conduct a passing honors ceremony with Japan's Murasame-class destroyer JS Ikazuchi (DD 107) and the Kongo-class guided-missile destroyer JS Chokai (DDG 176) in the Pacific Ocean, Sept. 19, 2021.
Haydn N. Smith / U.S. Navy via AP
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U.S. Navy via AP
The Nimitz-class aircraft carrier USS Carl Vinson (CVN 70), the Ticonderoga-class guided-missile cruiser USS Lake Champlain (CG 57) and the Arleigh Burke-class guided-missile destroyer USS Chafee (DDG 90) conduct a passing honors ceremony with Japan's Murasame-class destroyer JS Ikazuchi (DD 107) and the Kongo-class guided-missile destroyer JS Chokai (DDG 176) in the Pacific Ocean, Sept. 19, 2021.

U.S. says it wants no conflict, but dangers over South China Sea disputes loom

Blinken assured the region that the United States does not want conflict, but he did call out Beijing's "aggressive actions" in the South China Sea, which have included building up Chinese defense and industrial outposts and conducting military maneuvers in the disputed waters. He stressed that these actions demonstrate how China undercuts the rules-based order the U.S. wants to uphold, and how China is thwarting the interests of five other claimants, including the Philippines and Vietnam, to the South China Sea.

A State Department report "Limits in the Seas" released this month states that China "unlawfully claims sovereignty" over most of the South China Sea, and says such claims "gravely undermine the rule of law in the oceans and numerous universally-recognized provisions of international law." And as such, "the United States and numerous other States have rejected these claims in favor of the rules-based international maritime order within the South China Sea."

The United States has justified its naval patrols in the disputed South China Sea on the grounds that it is safeguarding "freedom of navigation on the high seas." Mahbubani argues that as the world's largest exporter of industrial goods, China has no interest in seeing anything but free and unfettered sea lanes.

Malaysia's Majid says the region endorses the American effort to defend that order. "Without America taking action to show it wants to see that order preserved and protected," he says, "China may change it — in its own image."

Former Singaporean diplomat Mahbubani says what Southeast Asia wants most is that China and the U.S. not fight.

"And indeed," he says, "we would like both sides to frankly take a pause in the geopolitical contest and focus on fighting the common challenges we face today, like COVID-19 or climate change."

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