Asia’s Future Beyond U.S.

-China Competition

- September 22, 2020September 22, 2020 - Asfand Bhutto

Evan A. Feigenbaum

Beijing and Washington are competing to set Asia’s rules, norms, and standards. But other
countries in the region are increasingly choosing to shape its future themselves.

Asia is changing dramatically, but the region’s two most significant powers are losing the plot.
China and the United States are racing to the bottom—refracting issues from trade rules to data
access and transfers to the development of a coronavirus vaccine through the prism of their own
geopolitical competition. The pandemic has only deepened this dynamic, as the two countries hurl
insults at each other and trade charges of culpability.

But other countries in the region increasingly view China, the United States, or both of them as the
spoilers of meaningful collective action. And they are stepping into the breach by coordinating and
cooperating.

Asia’s future will not be defined by the Sinocentrism that Washington fears or by the American
containment that Beijing seeks to forestall.

This means that Asia’s future will not be defined by the Sinocentrism that Washington fears or by
the American containment that Beijing seeks to forestall. Instead, what may prevail will be
fragmentation, shifting coalitions, and a discombobulated patchwork of rules, norms, and
standards.

BIPOLAR DELUSIONS

Ironically, for all their ideological and strategic differences, Beijing and Washington are
approaching the region in similar ways. Each is encouraging other Asian countries to accept its
preferred institutions, norms, standards, and rules. And each is coercing others to forestall closer
security or economic integration with its rival.

The United States has punished Asian companies whose sales improved China’s technology
base—for example, when it imposed high-tech export controls on Taiwanese chipmaker TSMC to
halt sales to a subsidiary of China’s telecom leader, Huawei. For its part, China punished South
Korean firms after Washington convinced leaders in Seoul to deploy a U.S. Terminal High-Altitude
Area Defense (THAAD) missile system, which Beijing detests. China has also implemented a de
facto boycott of Australian products, because Canberra echoed Washington’s call to investigate
the origins of the coronavirus, and has forced multinational firms to toe Beijing’s line on Hong
Kong while the United States urged resistance.
And yet the rest of Asia may be unwilling to be trapped in a box of either Chinese or American
making.

It is no easy feat to resist Chinese or American pressure, and both sides have powerful cards to
play.

It is no easy feat to resist Chinese or American pressure, and both sides have powerful cards to
play—China by further restricting access to its market and deploying coercive economic tools, and
the United States by leveraging access to its banking system and use of the dollar for commercial
transactions. But that is precisely what has been happening in recent years. To set trade rules, for
example, eleven countries completed the Comprehensive and Progressive Agreement for Trans-
Pacific Partnership (CPTPP) with neither the United States nor China as a party to the agreement.
And this could become a model in other areas as Asia’s capable, sizeable, and self-interested
players increasingly step up in fluid, issue-based coalitions.

During the Cold War, form drove function as Washington and Moscow forged exclusionary blocs.
By contrast, function could drive form in tomorrow’s Asia, as the region’s countries tack back and
forth between Beijing and Washington, set their own agendas, and reach agreements themselves.

Efforts by Beijing and Washington to define a zero-sum future for the region have thus far failed.
Both overestimate their own leverage and misunderstand the depth of changes since the
1997–1998 Asian financial crisis that have given countries in the region greater capacity and will to
shape their own futures.

RISING REGIONALISM

Players like India, Indonesia, Japan, Singapore, and South Korea have earned the right to
influence their region’s future. Nearly every government in Asia deeply mistrusts Beijing. Yet none
of them, even those most ambivalent about Chinese power, have embraced a U.S.-dictated future.

Players like India, Indonesia, Japan, Singapore, and South Korea have earned the right to
influence their region’s future.

In fact, pacts and institutions that exclude the United States have proliferated in Asia over the past
two decades, despite American efforts to stop them. Just take Beijing’s successful 2013 initiative
to establish the new Asian Infrastructure Investment Bank (AIIB). The United States not only
opposed the AIIB but actively sought to disrupt it, trashing the new bank and pressuring allies not
to join, though most ultimately did. And it has made a similar strategic mistake in its wholesale
opposition to China’s Belt and Road Initiative (BRI). Instead of supporting higher standards and
helping countries to extract more favorable loan terms from Beijing, Washington pressed
countries, usually unsuccessfully, to reject Chinese money entirely.
Yet Washington has taken the wrong lesson from such debacles. Even today, it ascribes efforts to
build a pan-Asian economic and institutional order largely to Chinese ambition. And it blames
Asian “weakness” in the face of Beijing’s pressure for the fact that these institutions and initiatives
have cohered. However, contemporary Asian regionalism—the desire to forge some cohesion out
of the region’s enormous diversity—has deep historical roots and many non-Chinese champions.

Japan, for example, has long been the hinge of U.S. presence and strategy in Asia. It hosts U.S.
military forces, shares Washington’s skepticism of China, and is a treaty ally. But while many
argue that the two countries should lead a regional response to China’s supposedly “new” pan-
Asianism, it was Tokyo that once incubated proposals for pan-Asian economic integration that
Washington now ascribes almost exclusively to Beijing. Against vehement U.S. opposition,
Japanese officials proposed in 1997 the establishment of an Asian Monetary Fund, an idea that
was abandoned under U.S. pressure but that helped give rise to subsequent Asia-only currency
swaps and Asia-only trade deals. And Japan is not alone: in 1990, Mahathir Mohamad, then
Malaysia’s prime minister, proposed a dead-on-arrival East Asian Economic Group.

A slate of more recent proposals rely on the region’s principal multilateral entity, the ten-member
Association of Southeast Asian Nations. These proposals include the Regional Comprehensive
Economic Partnership, a pan-Asian trade deal that Washington once viewed as the principal
competitor to the CPTPP. If it goes forward, with Washington having withdrawn from the CPTPP,
Asia’s trade rules and standards will be governed by two agreements that exclude the United
States and India—one of which also excludes China. And if Asia’s future economic rules are set
largely by the region’s other players, the United States’ “free and open Indo-Pacific” strategy could
be a hollow shell. Bluntly put, even if it is not dominated by Beijing, a more “Asian” Asia is not in
Washington’s strategic and commercial interest.

SHIFTING ECONOMIC DYNAMICS

Yet pressure from the United States to counter pan-Asianism is simply no longer as effective.
Relative to the rest of the world, the U.S. economy is smaller than it was before the 2008 global
financial crisis and much more so than during 1997–1998 Asian financial crisis.

Those crises bookended a tumultuous decade of debate about Asia’s reliance on Western
markets and capital. But those economies are no longer disproportionate demand drivers for the
region’s exports, and Asian sovereign and private funds increasingly provide capital to one
another.

In a growing number of sectors, Asian economies are major consumers, including of U.S. corn,
natural gas, pork, and soybeans.

Asia has become a source, not just a recipient, of capital.

Moreover, Asia has become a source, not just a recipient, of capital. China has extended its
foreign policy through capital-exporting projects like the BRI that Washington detests. Money from
Japan, South Korea, and other Asian economies is scouring the region for yield and financing
opportunities.

Meanwhile, Asia’s emerging powers, including India, seem less content than ever to inhabit an
architecture built largely by the West. This explains in part why India, despite its deep suspicion of
Chinese power, joined both the AIIB and the Chinese-backed New Development Bank as a
founding member.

TRANSCENDING BIPOLARITY

Amid these sweeping changes, it is no surprise that few Asian governments appear willing
to choose sides at the behest of the United States. But China is making a strategic miscalculation
too. Beijing has cajoled and threatened its neighbors to forestall deepened cooperation with
Washington, but its efforts have heightened fears of Chinese coercion and produced few tangible
results. For instance, when Beijing punished South Korea for considering the THAAD system,
Seoul went ahead with the deployment of one battery to Seongju, though it subsequently agreed
not to deploy others.

Washington faces the most acute challenges because hopes are high in Asia that it will modulate
some of its blunter approaches. Yet attitudes about China have hardened across the U.S. political
spectrum, as even Democrats who detest President Donald Trump embrace many elements of his
China policies. This stark bipolar framing traces back to former president Barack
Obama’s warning about the region during Trans-Pacific Partnership talks in 2015: “If we don’t write
the rules, China will.”

The coronavirus will only entrench the challenge, since the worst public health and economic crisis
in generations has failed to yield an iota of constructive cooperation between Beijing and
Washington. If a crisis of this magnitude cannot bring the United States and China together, Asia’s
players may seek to define their own new terms of engagement. One example is data governance,
as competing standards are already emerging in capitals from Tokyo to New Delhi.

This could lead to coordinated efforts in areas from public health to data access and transfers that
are driven by a diverse set of countries. As with the CPTPP, this coordination could in turn leave
out Beijing, Washington, or both if they threaten to become spoilers of meaningful action. It could
ultimately be these other Asian players that write the rules of their region’s future.

Source: Carnegie Endowment for International Peace