TRUMP’S CHOICE: FRUITLESS WAR WITH BEIJING OVER SMALL ASIAN ALLIES OR PUSH FOR CHINA INTERGRATION WITH EUROPE, U.S. FOR WORLD ECONOMIC TAKEOFF

When Donald J. Trump is inaugurated as President of the United States on Jan.20, we’ll still be guessing which of his tweets foreshadows real intent and which are simply tactical ground-leveling prior to cutting deals, apparently Trump’s preferred way of doing business.

By the evidence so far, observers can only hope that the president-elect and his minions will implement a coherent policy approach to the Asia-Pacific region. Clearly the new team in Washington is intent on changing Beijing’s behavior and certainly they’ve got its attention, drawing China’s new aircraft carrier the Liaoning into the Taiwan Strait and raising military tensions.

The President-elect has talked about building up the US Navy and he has phoned Taiwan President Tsai Ing-wen. While still one of a crowd jostling for the Republican Party nomination, Trump asserted that China was “build[ing] a military fortress the likes of which the world perhaps has not seen” in the South China Sea “because they have no respect for our president.”

Jaws dropped on Jan. 11 as Rex Tillerson, Trump’s choice as his Secretary of State, told senators that “we’re going to have to send China a clear signal that, first, the island-building stops, and second, your access to those islands also is not going to be allowed.”

Tillerson, the long-time CEO of oil and gas giant Exxon-Mobil, did not explain how this would be accomplished. Immediate reaction from Chinese sources was predictably defiant.

(Almost alone among multinational oil companies, Exxon has defied Chinese threats to exclude it from work in or offshore China if it persists in working with Vietnam in ‘China’s South Sea.’ Shell, Chevron and BP divested their VN concessions some years back, but Exxon continues to explore promising blocks off Vietnam’s central coast in partnership with PetroVietnam.)

China’s America-watchers may have hoped that Trump’s vow to deal roughly with China on trade issues was just so much campaign rhetoric. Indeed, if China-bashing is the new president’s true intention, they must wonder why he would pledge to “withdraw the United States from the Trans-Pacific Partnership,” a “21st Century trade pact” that excludes a China deemed too mercantilistic to be a member.

We’ve learned that Donald Trump is no respecter of precedent. In particular, he’s going to break fences in his trade diplomacy.  In earnest of his promise to punish China for “stealing American jobs,” expect the new president to play hardball. Point five of Trump’s seven-point trade policy reform agenda is using tariffs and sanctions to force China to let the yuan rise to its market value. Point six is denouncing China in the World Trade Organization for subsidizing its huge state corporations.

Can a good result come of all this? Is the new president’s naïve focus on a lopsided bilateral trade balance with China just evidence that he doesn’t understand how the world economy functions in the 21st century? Or does it leverage his perception that very many if not most Americans see “China” as a proxy for a relentlessly globalizing economy? Did Trump win because he, better than all his rivals, understood that although his supporters may have a foggy notion of globalization, they are quite sure that it has eroded their well-being?

I’ve argued in a previous Asia Sentinel article that once he takes over responsibility for steering the ship of state, Trump could with little embarrassment orchestrate a cosmetic renegotiation of the Trans-Pacific Partnership. “Fixing” the TPP, which was the product of six years of hard negotiation, would be considerably less vexing than substituting a bunch of more or less coordinated bilateral free trade agreements. Prime Minister Abe of Japan is eager to help. Which among America’s 11 TPP partners would point out that the new emperor’s clothes mostly don’t exist if he’s treading a path toward saving the landmark pact?

A more audacious strategy for the Trump team would be to negotiate a grand bargain with China on the political-economic trajectory of Asia. It’s something they should explore. By undoing some gratuitous slights to Beijing by the Obama administration, it’s just possible that President Trump et al. could reset the Washington-Beijing relationship in a positive way.

Like all its post-world war II predecessors, the Obama administration has wanted to lead, not join a procession. The country that designed the post-World War II global architecture has shown little interest in other countries’ multilateral initiatives. No less than their predecessors, Barack Obama’s trade negotiators have been prone to the “not invented here” syndrome. It figured in their stance toward three current initiatives. Two are Chinese, and the third originated with the 10-nation ASEAN group.

OBOR – One Belt, One Road – is China’s US$4 trillion scheme to improve land and sea connections between East Asia and Europe and all the intervening places. AIIB is the Asian Infrastructure Investment Bank – a made-in-Beijing addition to the array of multilateral institutions that vet and fund economic development projects.  RCEP, the Regional Comprehensive Economic Partnership, is a plain vanilla tariff-reduction scheme that ASEANs floated late in 2012. Lately it’s got wings as the anti-TPP, or the possible multinational trade pact that includes China. The more Trump and then his Democrat opponent Hillary Clinton trashed the TPP, the more RCEP came to look like a safe haven for regional free traders.

Sixteen nations – the 10 ASEANs, China, Japan, Australia, New Zealand, South Korea and India — have been negotiating RCEP since 2012. It started as a proposal to bring order to a jumble of overlapping bilateral free trade agreements, but it has grown in scope and ambition. Throughout, the US has been downright condescending about the party to which it wasn’t invited. Obama’s trade policy officials have sniffed that the RCEP scheme as “not really a trade agreement” because its proposed compliance deadlines are ­flexible. They add that RCEP neither prevents official favoritism to state-owned enterprises nor meets 21st century norms on labor rights and environmental protection. Maybe so, but if the TPP is dead, RCEP’s the only game left in town.

If the Trump administration were to show friendly interest in the RCEP negotiation, it could reinforce the efforts of RCEP negotiating partners that urge higher standards of intellectual property protection and effective dispute settlement procedures. It could lend support to efforts to forge the common rules of origin that would make it easier to integrate supply chains that cross national borders.

Oh, right – President Trump doesn’t like multilateral trade pacts. Would it help if RCEP is understood as a building block in a much larger effort, the economic integration of Eurasia?

OBOR and AIIB aim at building out Eurasia’s transportation, power transmission and communications infrastructure.  What’s not to like about that idea in principle? China’s companies are expert builders of highways, high-speed rail, pipelines, ports, energy terminals and fiber optic lines. American companies have many of the same skills, and complementary skills as well.  And so, patently, do a host of multinational firms headquartered neither in the US or China. Working together to connect the dots across Eurasia could be a win for all concerned.

Even so, Obama administration officials stiffed China when it advertised its “new Silk Road” (OBOR) and Asian Infrastructure Bank schemes. They explained that China isn’t really qualified to lead such ventures, implying with their body language that Beijing just isn’t sufficiently altruistic or broad-minded or culturally sensitive. The American argument fell this time on deaf ears. America’s friends and allies didn’t toe the line; to the contrary, all but Japan made haste to join the AIIB.

True, the Chinese economy is troubled by huge overcapacity in key industrial sectors like steel and cement. It has a huge hoard of foreign currencies. Beijing designed the AIIB and OBOR to create an outlet for both. It sees these initiatives also as the keys to unlock a supply of resources (oil and gas in particular) that its economy must have to keep growing. And, of course, China wants to prove its skill, build its stature and extend its influence. What aspirant great power wouldn’t?

Gal Luft wrote in Foreign Policy this week that “the world’s infrastructure deficit, particularly in the developing world, is alarming. Two decades into the 21st century, one-third of humanity is still lacking access to round-the-clock electricity and basic sanitation; over one billion people have no reliable phone service.”  In other words, there’s plenty of work to go around.

Why then shouldn’t the Trump administration conjure with the idea of supporting China’s OBOR scheme and joining the AIIB? Integrating the economies of Eurasia and bringing them into the 21st century need not be a zero-sum game and the US doesn’t have to be the captain of the team. Done right, OBOR could radically improve the welfare of a great many people in the continent’s vast middle. It’s a huge task, far too big for China alone, with or without help from the market’s invisible hand. The immediate challenge is for Beijing, with some help from Washington and Moscow, to construct a big tent — big enough to serve the economic ambitions of all, including India and Japan, Australia and Europe.

From a strategic perspective, China’s ambitious scheme is obviously of concern to Russia and India.  It’s also problematic from a development perspective, unless Beijing raises its game. Its state companies have seemed to be tone deaf on respect for local cultures, labor rights and environmental protection.  In too many overseas ventures, they’ve bribed big, bid low and done shoddy work.

Conceivably the Chinese will learn as they go, and in time turn into a bulwark of global comity. Everyone else, and particularly the US, has reason to support such an evolution.

Nor is it far-fetched.  Not so long ago, American automobile workers took sledgehammers to Toyotas. Then, US trade negotiators harangued Japanese counterparts on the perversity of Japan’s single-minded devotion to exporting its admittedly high-quality products, on one hand, and keeping out foreign goods on the other.

Like Trump advisor Peter Navarro ranting in recent months about China, trade hawks then were warning the President (Reagan, and then the elder Bush) that Japan was eating America’s lunch.  High on the ‘bubble economy,’ Tokyo was in no mood to listen to American admonitions about structural reform, until, in 1992, the bubble burst.

It’s taken a quarter-century of effort to revive and restructure Japan’s economy. Ironically, now it’s Tokyo that’s most ready to partner with the US if Washington were to engage Beijing in dialogue on development goals and standards. Perhaps both Trump’s people and their Japanese counterparts could start by acknowledging that the World Bank and the Asia Development Bank have gotten overly preachy.

If President Trump is serious about influencing China, Washington must bring some creative energy to the table, deployed in a way that engages Chinese imagination and allays its suspicion of American motives. Beijing could respond by confirming that its Eurasian integration vision is so vast and so audacious that yes, it really does need foreign partners and their skills to be part of it. After that, the sky could be the limit.

It will not be easy to get to ‘yes’ in a dialogue with Beijing about matters that will define the rest of the century. Still, the Trump presidency makes it seem more possible. American negotiators’ goal should be pragmatic and constructive cooperation, shaped by a set of rules that level the playing field for all participants in the OBOR initiative.

That’s a possible outcome because Trump and those who advise him about Asia have torn up the old script. Almost anything’s possible in Trump Year One. Led by US Trade Representative Bob Lighthizer, who as a USTR deputy a quarter-century ago orchestrated a similar structural dialogue with Japanese counterparts, the new crew will try to square the circle. They’ll aim to protect America’s stake in an increasingly integrated, dynamically expanding Eurasia while remaining true to the new president’s pledges to get tough with China.

Washington can perhaps bring it off, if Beijing sees an outcome – mutually respectful economic partnership – that’s so enticing that dumping its redundant products, dominating sea lanes or bullying smaller neighbors become for Beijing a relatively uninteresting diversion.

– http://www.asiasentinel.com/

.