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George
W: Implications for Asia
By Michael Alan Hamlin
May 21, 2001
In its recent report, "The Bush Presidency: Implications
for Asia," the Asia society ponders how the least-traveled
president in half a century will view Asia, its challenges, and
its relationship with its principal market. Authored by Murray Hiebert,
Far Eastern Economic Review's Washington Bureau chief, the report
suggests that in the matter of trade, anything could happen.
That's not a comforting thought. America's imports
of Asia's exports helped power the region out of its 1997 irrational
exuberance-induced financial crisis. Mr. Hiebert notes that US$110
billion worth of technical equipment was exported by Asia to the
US in 1999. "Information-technology products accounted for
over three quarters of the total exports from Singapore and Malaysia
in 1999, and more than 50 percent of the exports from South Korea
and Taiwan." The Philippines also fell into that second classification
in 1999, and last year as well.
The impact of a slowdown of any duration and certainly
an extended slowdown in the US economy is therefore a frightening
prospect for Asia and its still-recovering economies. But that threat
is not the only obstacle to recovery Asia faces. Although the impact
of liberalization and globalization on Asia's economies is still
being hotly debated by government, business, and activists, so too
is it being vigorously debated by US legislators who feel that too
many US jobs have been lost to Asia as a result of these trends.
Not that president George W. Bush himself cares much.
But the Democrats in the evenly split US Senate do care. Mr. Murray
notes, "many Democrats agree with labor unions that free trade
has cost the United States too many jobs." Although Asia's
continued recovery is desperately dependent on a strong US market's
thirst for Asian exports, a prolonged US downturn will likely shift
sentiment significantly away from free trade and toward preserving
US jobs.
That's a great irony for activists who claim that liberalization
and globalization disadvantage developing economies. In this instance,
the failure to push free trade as strongly as promised by Mr. Bush
will endanger every Asian economy, developing or otherwise by keeping
jobs and manufacturing at home. Of course, Mr. Bush himself remains
a stanch supporter of free trade. But as Mr. Murray notes, "Bush
will have a difficult time getting approval for any new trade agreements
unless he cobbles together a compromise that addresses enough labor
and environmental concerns to get support from moderate congressional
Democrats.
Free trade agreements up for consideration include
a bilateral agreement signed with Vietnam. Mr. Bush will also need
to complete negotiations for an agreement with Singapore, which
entered those negations due to frustrations with Malaysian and to
some extent Thai reluctance to embrace free trade in favor of protecting
inefficient domestic industries. Since China has not been admitted
to the World Trade Organization (WTO) yet, and is unlikely to be
admitted until next year, next month Mr. Bush will find himself
in the awkward position of endorsing normal trade relations status
with China after tough talk following a US spy plane collision with
a Chinese fighter last April, and a new agreement to sell Taiwan
advanced arms. Until admission to the WTO, Congress must debate
China's trade status with the US every year.
Interestingly, Mexico, a country Mr. Bush is close
to because of the long border it shares with Texas and the large
Mexican-American population there, is opposed to China's entry into
the WTO. China already has the largest trade deficit with the US
of any of its trading partners. Mexico fears that under WTO free
trade rules, Chinese exporters would further squeeze its own exports
to the US.
While Mexico's opposition ultimately will matter little,
its concern is one Asia should share. China's admission into the
WTO, according to the rules at least, should open its large domestic
market further to imports from the rest of Asia. But the tradeoff
for Asia will be intense competition for the hearts of US distributors
and consumers. Will that tradeoff be worth it?
Likely not, at least in the mid-term. The US market,
and that of Japan as well, will remain much more lucrative than
the China market. What this means for most of Asia, therefore, is
that Mr. Bush's argument with China actually works in Asia's favor,
especially for those countries whose exports in key sectors go predominately
to the US.
While Asia was wringing its hands over the recent US-China
chill down in relations, in urging a quick resolution and an end
to the animosity between the two governments the rest of Asia was
shooting itself in the foot. The longer China stays out of the WTO,
the longer every other economy in Asia will be better able to compete.
Its interesting that a US president with little interest in Asia
wound up helping the region by mistake, or certainly without the
intent to do so.
Animosity between the US and China has also helped
in other ways, although there will be many more to disagree with
this argument than the trade argument and the benefits of a delayed
entry into the WTO by China. China's growing military capability
concurrent to the dissolution of the Soviet Union has sharply focused
the attention of the US military on Asia. For US military strategists,
Asia is the most likely site of a major military incident. And naturally,
that incident is seen to involve China.
Another writer recently observed that China's idea
of China is an ancient notion of imperial reach, in which China's
not-so-invisible hand was at work throughout the region. With competing
claims for territory with a bevy of other Asian nations ill prepared
to stand up to China the presence of the US military, while perhaps
irritating for other reasons, will be comforting. Among subscribers
to that view is Singapore's senior minister Lee Kuan Yew. Singapore
in recent years has increased military cooperation with the US,
and access to its ports by the Pacific fleet. The Philippines is
one of several sites, including Guam, being considered for large
regional US bases, an irony considering the forced dismantling of
US bases in the country a decade ago. But the Philippines is also
one of the countries with competing claims with China, claims that
so far have been impossible to defend.
While Mr. Bush may not be Asia's president, so far
most of Asia is benefiting from the shift by the new administration
away from China envy to introspection. That this aids Asia inadvertently
is a pleasant side effect. What matters, however, is that Asia outside
China desperately needs new ways to compete with China, and should
take the help wherever it comes from, intended or otherwise..
(Mr. Hamlin is managing director of the consultancy
TeamAsia and the author of two books on Asian economies and managing
in Asia. His latest book is The New Asian Corporation: Managing
for the Future in Post-Crisis Asia. His e-mail address is mahamlin@teamasia.com.ph.)
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