TCS Daily


For Washington, It's Asia in the Balance

By Rowan Callick - August 16, 2005 12:00 AM

The second George W administration team is certainly Asia-savvy, but the region is changing at a rate with which a Middle East-distracted Washington finds it hard to keep pace, and is making demands for which the administration finds it hard to make time.

In economic terms, much now depends on whether the World Trade Organization's Doha round can be salvaged. If the agricultural opening promised by Bush on the eve of the recent G8 summit in Scotland, on condition that Europe follows suit, is not translated into action then the round is probably doomed.

Bush's success in squeezing the Central America Free Trade Agreement through Congress gives some cause for hope -- but the margin, just two votes in the House, also indicates how hard it would be to win support for bigger measures with global scope.

At the same time as the world's trade ministers will be meeting in Hong Kong to consider the fate of the Doha round -- from December 13-18 -- the presidents and prime ministers of the 16 leading countries in Asia will assemble in Kuala Lumpur, Malaysia, for the first East Asia Summit, on December 14.

If the Doha round founders, there will be little to hold back these leaders from forming, in embryonic shape at first, an Asian economic community which will exclude the USA, and which will ultimately compete with both the European Union and the North American Free Trade Agreement. They are already developing a complex web of free trade agreements. Many are below WTO standards, with services and investment commonly excepted, and sometimes agriculture too. But China is now, if Hong Kong is included, the biggest trading partner of Japan and South Korea, and India too is becoming increasingly enmeshed economically with its neighbors to the east. The die is cast.

A decade or two ago, such an East Asia Summit might have just scraped a few seconds at the tail end of a CNN bulletin, a mere postscript to significant international action as observed in Washington or London. But today these countries -- the ten members of the Association of South East Asian Nations, plus China, Japan, South Korea, India, Australia and New Zealand -- comprise more than half the world's population and own more than two thirds of the world's foreign exchange reserves, including most of the USA's vast debt. They conduct most of their trade with each other. And most -- with China the main exception -- are lively democracies.

Washington's connections with the region remain vast and multi-layered. It is a key member of the Asia Pacific Economic Cooperation forum, whose leaders will meet in the dynamic South Korean industrial centre of Busan (formerly Pusan) on November 18-19. For many APEC countries, the opportunity for their leaders to meet with the US President every year is the biggest single attraction of the forum. But APEC needs to be invested with greater content if it is to maintain its regional role, as the East Asia Summit emerges as a rival.

ASEAN retains an important role as the gatekeeper determining which countries are eligible to attend the East Asia Summit. This meant, for instance, that Australia's government had to "eat humble pie" as the opposition foreign affairs spokesman Kevin Rudd described it, by signing up to ASEAN's Treaty of Amity and Cooperation that emerged from the Non Aligned Movement in its heyday -- because ASEAN made acceding to the treaty a condition of attending the summit.

Indonesia is re-establishing its international importance, this time as the world's most populous Muslim nation by far, and as a new, vibrant democracy. Historically, it has tended to be somewhat nervous of the influence of China, and so it turns naturally to nations which, it believes, can play a role to balance China's hegemonic tendency. Australia is prominent among those nations, and so is the USA, where President Susilo Bambang Yudhoyono, a former general, received education.

But Secretary of State Condoleezza Rice failed to participate in late July in the annual meeting of ASEAN and partner foreign ministers - which her predecessor Colin Powell always attended. The foreign ministers of China, Japan and India were also missing, but that mattered rather less. They are always circulating in the region.

Washington has sought to maximize its limited capacity to focus on Asia by multilateralizing its security and other involvements. The North Korean nuclear imbroglio is being tackled through the six party talks led by China. Japan is increasingly being enlisted as a willing partner in guaranteeing Taiwan's security. Annual security talks with Australia, Japan and South Korea have been upgraded -- though South Korea is steadily slipping inside China's fast growing sphere of influence in which Burma is already close to satellite status.

The USA has also formed an alliance with Australia, China, Japan, South Korea and India -- the Asia Pacific Partnership on Clean Development and Climate -- to provide an alternative route to the Kyoto Protocol to dealing with global warming, by focusing on developing and applying new technology.

Such initiatives are broadly welcomed in Asia. And although the European Union has also worked to develop institutional links with the region, they have not really taken root. The recent faltering of Project Europe with the failure of referendums on the new European constitution in France and Holland, the continuing weakness of European economic growth, and Europe's perceived limpness in the war against terror - even though this remains a marginal struggle in Asian eyes, except in parts of south east Asia - undermine its attractiveness as a key Asian partner. Robert Ronnie, the chief currency strategist of Australian bank Westpac, said such issues also affected Asian central bankers' euro holdings: "Asia doesn't want to be counting on a currency with a weak political system as a key member of its reserves."

The exceptionally warm welcome accorded Indian Prime Minister Man Mohan Singh in Washington recently, is a reminder that the USA's bilateral relations in Asia remain strong. Despite the incipient trade war, and the Pentagon's concerns about the People's Liberation Army's expensive investments, relations with China are broader and deeper than ever.

But despite the inevitable continuing friction and misunderstandings within Asia, the region itself is starting to cohere, and no one -- including staunch American allies Japan and Australia -- wants to be left out. In this process, the US has no capacity to be a prime mover. It does not lack friends inside, but it's a frustrating time for Washington.

Rowan Callick is Asia-Pacific editor of The Australian Financial Review.

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