EMERGING TRENDS IN ASIA-PACIFIC THROUGH THE PRISM OF U.S.-CHINA RELATIONS
By Martin Yupangco and Paul Gary Bograd
As we write this, the administration of President Joe Biden is barely twelve days old. It seems much longer. Given the lack of transition cooperation by his predecessor, there appeared to be little upon which to base a predictive analysis of the implications of an American Biden administration for governments, business, and multilateral institutions across Southeast Asia.
As you will see later in this analysis, many of the dynamics that shape the immediate future have already been formed. It is the diplomatic, political, business and financial skills of the countries of the Asia-Pacific that will determine outcome.
This is not a day-by-day prediction of events, but rather a look at the strategic trends exposed by a new administration in Washington and the economic and public health events of 2020.
We started with a deep analysis of the electoral nature of Biden’s administration, the events of the January 6th assault on the U.S. Congress as well as the American economic, sociological, and public health impact of the COVID crisis. The analysis was informing and interesting – even compelling.
We created a foundation for our analysis by systematically examining the essential global geo-politics, economics, finance, commercialism, and cultural dynamics that have been emerging in Southeast Asia over the past decades and concluded that the events of the COVID crisis and the Biden Presidency are going to create new dynamics. The events of 2020 are going to act as an accelerant that will turbo-charge the effects of those dynamics.
Moreover, our conclusion is that those accelerated dynamics for Southeast Asia will all pass through the prism of the relationship between China and the United States. And the relationship with China – good or bad – will also be accelerated by the events of 2020.
We welcomed the replacement of a fundamentally xenophobic and amoral Trump view of the world. However, any unbiased examination of the American election results made it clear that Biden’s victory margin was razor thin.
The Biden presidential victory was neither a fundamental repudiation of Trump-era public policy, nor was it a landslide, paradigm-shifting political event.
It was, by the barest of margins, a personal rejection of the character and persona of Donald J. Trump. Like Trump’s election win in 2016, a change of less than .08% of total votes cast, would have re-elected him – but it did not happen.
Then former Vice President Joe Biden at the 2019 Iowa Federation of Labor Convention in Altoona, IA. Photo by Gage Skidmore and licensed under CC BY-SA 2.0.
In addition to a victorious President-elect Biden, Republican candidates, representing the public policies of the Trump Presidency were nationally successful in what the Americans call “down ballot” – those offices below the Presidential race on voters’ ballots (national office, state, and local offices and public referendum).
So, a Biden Presidency won on the basis of the personal rejection of Donald Trump must build a national leadership and mandate in the face of public policy dynamics that remain popular among a majority of American voters, yet are not necessarily favorable to the geo-politics, economics, and security of most of the Asia-Pacific region.
And that means through the relationship with China.
Perhaps with hope more than intellect, we looked for Biden administration understanding with a Chinese leadership that would signal a better beginning and reflect on the reality of basic mutual self-interests that will empower the advancement of both societies. This could be best described as a form of sociopolitical co-dependence, or the understanding that the world is not a bipolar “zero sum game” where in order for one side to succeed, the other side must fail.
The Biden international relations team is an extraordinarily experienced and visionary group of empathetically thinking diplomats who genuinely understand the aspirations of China and Southeast Asia and have deep track records of win-win relationships. These include Anthony Blinken instead of Mike Pompeo; Katherine Tai replacing Robert Lighthizer; Kurt Campbell as the U.S. National Security Council's Indo-Pacific Coordinator and Biden’s “Asia Czar;” and Sung Kim as Assistant Secretary of State for East Asian and Pacific Affairs.
While Biden himself will be focused on repairing relations with Europe, Mexico, and Canada; the Asia team is nothing short of spectacular and certainly well aware of the U.S.-China economic co-dependence and mutual need for a strong and stable U.S. dollar inherent in Chinese ownership of dollar denominated debt.
The level of American-Chinese confrontation in the past weeks is both frustrating and disappointing. The verbal confrontation is not surprising. It comes with the territory. The Chinese foreign ministry talking about COVID-19 conspiracy theories, alleged American intent to destroy Chinese global corporate positioning, in addition to American rhetoric on human rights issues, “concentration camps,” intellectual property violations, and trade imbalance is neither surprising nor very productive.
Nimitz-class supercarrier USS Carl Vinson (CVN 70) transits the South China Sea in 2017. Photo provided by Official U.S. Navy Imagery and is licensed under CC BY 2.0.
However, it is a reality of the kind of “sound bite” or “Twitter-length” diplomatic commentary that is part of today’s geopolitical rhetoric. It is essential to understand both the context and the relevance of this type of commentary.
This verbal posturing may be politically necessary for the Biden administration whose margin of victory was slight in the emotionally volatile “Trade Narrative” states like Pennsylvania, Michigan, and Wisconsin.
What is both surprising and concerning though, is the immediacy of the military or national security confrontation between China and the United States in disputed areas so quickly after Biden’s inaugural. These include movement of the American aircraft carrier group into the South China Sea and Chinese military flybys near Taiwan, among others.
But our conclusion is that there will always be a significant level of publicly audible, competitive noise between the two great economic powers. In traditional media, social media, and some commercial relationships, verbal conflict is both inevitable and in some ways productive.
What is essential, undeniable, and sustainable as the Biden administration engages China is that the inherent financial and commercial realities between the two nations will ultimately lead back to diplomatic, economic, commercial, and trade relationships and communications that reflects the inherent co-dependence and fundamental win-win and mutual self-interest between the two nations.
The reality is that the genie of global and U.S.-China co-dependent finance, commerce, supply chain, and culture cannot be put back in the bottle.
Of course, military, political, and national security confrontations will get the cameras and flash attention of CNN’s interminable “Breaking News” – but financial, economic, and commercial engagement are where the real competition and real cooperation will be. And there currently is no bigger playing field than the nations of Southeast Asia and the greater Asia-Pacific region.
It is important that we are clear on this point. We do not in any form suggest that the nations of Southeast Asia and the greater Asia-Pacific region are some sort of pawn in a great power struggle between the United States and China.
In fact, we are suggesting just the opposite. Mutually beneficial bilateral and perhaps multilateral engagements between those individual states and the United States and China will be a powerful determinant and motivator for a prosperous and productive future.
The following is a first look at how some of those bilateral relationships may proceed:
International Trade
The Biden administration’s view on trade will likely be shaped by Obama-era leadership and thinking. The former saw liberalized trade relationships as an integrated component of a 21st century “mutual self interest” international order and not a “Trumpesque” domestic wedge issue and dog whistle to a false populism with racist and nativist symbolism.
Nevertheless, the Biden administration will likely not immediately roll back most of the Trump-era “protectionist” and “Anti-China” and “Anti-Trade” Executive Orders and regulations. The reality is these orders and regulations did very little to change the balance of trade, so they are not immediate critical obstacles to a return to an internationally rooted leadership in global trade.
However, Biden trade policy is also not likely to immediately return to advocacies like the Trans Pacific Partnership, or new versions of NAFTA, or even a revision of Pan-European trade regulations. These are symbolically domestically volatile for an administration whose margin of victory was slight in the emotionally volatile “Trade Narrative” states like Pennsylvania, Michigan, and Wisconsin.
Biden’s nomination of Katherine Tai as his trade representative is a very good sign for our part of the world. She is knowledgeable, capable of vision, and has a special interest in Asia.
She will likely look for trade engagements on behalf of the new Biden administration that create “quick wins” that avoid the negatives we described earlier, but also achieve the following:
Reward American job-rich export industries that would allow a Biden Presidency to reward sectors and regions that supported his election and potentially create an economic alternative to “Trumpism'' in certain big electoral states like Ohio and Florida. Rewarding states with significant agricultural exports sectors like pork, soybeans, renewable energy technologies, citrus, and corn could form the basis for a midterm election strategy that might preserve Democratic majorities in the U.S. House of Representatives and potentially the Senate. Conversely, this could motivate import strategies that benefit international trade partners at the expense of only those U.S. regions unlikely to be politically supportive of the Biden administration. Think catfish, prawns, consumer electronics, outsourced call center, and business process outsourcing (BPO) services.
Create less controversial bilateral and trilateral free trade arrangements that serve as balancing economic security arrangements to Chinese economic bilateral foreign policy initiatives. These bilateral and trilateral trade relationships are not likely to create defining domestic American opposition that multi-nation trade pacts would and can be relatively and quickly concluded when confined to small, even singular, product categories. This would involve countries like the Philippines, Thailand, Vietnam, and even Indonesia. These are countries that either have long-term American relationships, or desire newly-built relationships, even if only as a balance to Chinese economic ambitions and influence. Think pork, specifically defined seafoods, certain specific outsourced labor categories like medical, high technology engineering, and data science.
Distinguish a Biden administration’s America as an assertive, egalitarian economic partner and ally to nations, regions, and economic sectors that the Trump Administration has alienated via ill-conceived charges of currency manipulations and bilateral relationships overly focused on military cooperation.
COVID-19 Policy
We believe the COVID-19 Crisis has been more of an accelerant for pre-existing geo-political and economic dynamics as much as it is a crisis in its own right.
But COVID-19 policy has its own set of inevitable geo-political implications. The well-intentioned attempts by some Southeast Asian governments to deal with the Trump administration about practical aspects of COVID-19 policy were predictably useless; although U.S. public information and education aid programs moved quickly to assist in the initial containment efforts.
The early indications from the United States on COVID-19 vaccine activation policy are not comforting. The Biden administration will do everything and anything within its powers to meet its 100 days-150 million vaccinations pledge (though the jury is still out on its ability to achieve this).
President Biden indicated the United Sates aims to administer 150 million vaccinations over the next 100 days last January 25.
This is extremely important for many Southeast Asian societies as it will restore a confidence level and establish an endgame to the COVID-19 crisis. For countries like Vietnam and Malaysia, whose public health systems are structured and disciplined to effectively vaccinate its mass populations, this will be less important. But for countries like the Philippines, Indonesia and Myanmar, who have marginally fragile and bureaucratically broken public health systems, the example of an American success will be an important exemplary component to a successful vaccination activation effort.
It is informative to note that most nations in Southeast Asia have not undertaken to replicate the successful Chinese management of the COVID crisis. There is not enough data or information to determine why they would not copy the most successful management of the COVID-19 crisis to date, but it is significant that they would not or could not replicate the Chinese resolution to the crisis.
Successful COVID-19 policies for Southeast Asian governments will be more dependent on their fiscal management and abilities to arrange their procurement processes to best align with the most promising vaccine products, which are now in the private sector.
The attempts to create a global dynamic of “vaccine justice” to assure that less developed economies get equal access to vaccines does not appear to be gaining strength. This will place tremendous importance in the willingness of both China and the United States to enter into bilateral vaccine assistance programs with Southeast Asian countries.
So far, China appears to have the advantage in positioning its vaccines as diplomatic rewards for bilateral engagement. The United States has so far not really entered the government-to-government competition.
It is worth noting however, that government-influenced vaccine products from China and Russia appear to be less desirable in terms of cost, efficacy, and cultural acceptability to many Southeast Asian countries. Though in the absence of alternatives, the Chinese product could become a powerful relationship builder.
Outside of “government-to-government” vaccine assistance, finding insight and assistance in aligning and managing emergency procurement processes with the private sector vaccine providers will be the determinant of vaccine acquisition success for Southeast Asian states.
While the Biden administration is unlikely to provide vaccine inventory as foreign assistance, if the Biden administration succeeds in its 100 days-150 million vaccination plan, that knowledge will be part of the rewards of pursuing a bilateral relationship with the United States that could in some way compete with the more aggressive Chinese policies of providing vaccine inventory.
Infrastructure and Climate Change
The Biden administration’s intended infrastructure program, popularly named “Build Back Better,” may have a major impact on Asian government economic, labor, and knowledge export and comprehensive import-export policy, as well as private sector and Sovereign Wealth Fund investment policies.
Conventional wisdom is that the Biden administration’s infrastructure spending will focus on traditional “Rust Infrastructure” (roads, bridges, water systems, airports and the like). We believe there will certainly be some of that type of infrastructure investment, in order to politically satisfy some sectors of organized labor; but limitations on borrowing, accelerated by COVID-era government spending, and the time necessary to reverse the Trump era tax cuts will not create the budgets necessary for that kind of massive “Rust” infrastructure spending.
We believe that there is a more enlightened economic brain trust in the extended Biden team that will define “infrastructure” and “Build Back Better” in terms of infrastructure spending that will provide more immediate production capabilities and will create a sustainable infrastructure build for the future growth industries and governmental responsibilities of the middle 21st century. There will likely be investment in education, production, and developments related to climate change management, renewable energy development and transition, community care (health, day care, nursing home replacement), and public sector sponsored access to broadband and data among others.
This should inform the nature of development bilateral engagements in export production and supply chain and labor resource investments and planning across Southeast Asia. These are likely to be part of significant bilateral trade and more liberalized migration relationships between the Biden administration economy and Southeast Asian states.
Military and National Security Issues
The Biden administration is moving fast to both confront and stabilize its strategic and national security positioning with Russia and in Europe. It is not likely to move as fast and as directly with China and in the Asia-Pacific region.
The Biden Asia team is very good and understands clearly the economic and cultural implications of Chinese geographical assertion of their sphere of influence. They understand implications of the perceived diplomatic hypocrisy in American objections to China's assertion of its sphere of influence while America still maintains elements of the Monroe Doctrine that asserts American sphere of strategic influence across North and South America.
While the American side will continue to assert its navigational and strategic alliance presence and resources in the region, significant additional military spending build up is highly unlikely.
More likely is an unstated and publicly challenged, but de facto acceptance of China's assertion of its geographic sphere of influence.
The Biden administration may attempt to balance this by continued modest military presence, some arms sales to Taiwan and most likely renewed private American investment in infrastructure that will support American military capabilities in the region. Think extended use of Singaporean shipyard facilities, renewed interest in investment in the former Hanjin shipyard facility in Subic Bay, Philippines, and perhaps joint investments in logistics facilities in Vietnam.
Migration Policies
Although not as obvious a playing field for U.S.-China competition for influence in Southeast Asia, migration policies and issues will be significant. For some Southeast Asian countries, the Biden administration’s intention to liberalize migration policy will be a powerful symbol and practical motivation in a bilateral relationship.
American employment and family visa liberalization will be a powerful driver in countries like the Philippines, Thailand, Vietnam, and even Indonesia. The acknowledged respect and stature implied in this migration policy liberalization will have powerful and positive economic and cultural implications in a bilateral relationship with the United States.
By contrast, Chinese migration to the countries of Southeast Asia has generally not been very positive for bilateral relations. Hundreds of thousands of Chinese workers were exported to operate offshore gaming facilities in the Philippines and Cambodia with very little positive employment or revenue based economic impact for those countries. The perceived social costs of that deployment were generally not positive for Chinese bilateral relationships in those countries. Across Southeast Asia, Chinese migration to exploit natural resources and food supply has led to environmental conflict and, again, not significant positive economic result for the general population of those target countries.
Migration policy might be an unforeseen advantage for the Biden administration in the competition for bilateral relationships.
Internet Management and Freedom of Expression
Internet management and freedom of expression will arguably be defining issues for the political, economic, and cultural future of the nations of Southeast Asia and the Asia-Pacific. The differences in the American and Chinese views of internet management and freedom of expression poses existential questions about what defines and determines facts and the sociological impact of digital human interaction. There are reams of analysis of these dynamics, but there are two aspects that deserve highlighting in this analysis.
The first dynamic is formed around questions about who should be censoring content and controlling access to the platforms. There is a clear difference of reality between the United States and China and this difference is critical to how Southeast Asia and Asia-Pacific nations evolve economically, politically, and culturally.
The January 6th mob assault on the American Congress, the attempt to overturn the results of the election, and the ongoing ideological and cultural division were clearly empowered by false and irresponsible content and management of that online content.
Enrique Tarrio and other members off far-right group the Proud Boys pictured at a Virginia 2nd Amendment Rally in January 2020. Investigators are still determining the extent of the pro-Trump group's involvement in the events of January 6th at the U.S. Capitol. Photo by Anthony Crider and licensed under CC BY 2.0.
Apart from the obvious political motivations, it is undeniable that this content was profit driven as well as controlled and censored largely by private sector interests. This kind of internet management and the way American society has treated freedom of expression has clearly created a divisive and toxic sociopolitical environment.
The fact that the private sector worked to stabilize the situation by censoring then President Trump and exposing the more violent radical elements empowered by internet access, does not in any way exonerate the role that private sector control and censorship (or lack thereof) plays in defining sociopolitical behavior in the mass society that is America.
In contrast, China would claim that its public control and censorship of internet content, while certainly creating some limitations on freedom of expression, reflect control of content by a popularly empowered government, ultimately responsible to the population. This, the Chinese say, is in contrast to the United States where content and access is overwhelmingly in the hands of private sector interests who are responsible only to their investors and owners.
The Chinese position is that this manner of censoring and managing the internet is a proven enabler of stability and sociopolitical unity in the unique mass society of modern China.
The second dynamic is built on the understanding that who owns and controls the internet increasingly controls and defines commerce. The COVID-19 crisis has clearly accelerated the incredible movement to digital and internet enable commercial behavior. If internet censorship and management are the key elements of future political, ideological, and cultural development; then how governments regulate and control access to commercial content will be the fundamental determinate of social and economic prosperity. In consumer products and financial services, as well as government services and crisis response, America and China have gone down different paths.
China appears to believe that in order for this governing of commercial content to serve economic and social prosperity, the government and not the market needs to assert authority to manage the integration of production, communications, logistics, and finance into a unitary or single ownership. This is an ongoing engagement. The ongoing Chinese government intervention in the Alibaba listing is an ongoing case study into how this issue plays out.
America, on the other hand, appears to happily allow massive integration of economic interests placing control of production, communications, logistics, and finance in the hands of unified economic interests. The Biden administration has not definitively positioned itself on this issue, but the American tech oligarchy does appear to be Biden-oriented for the time being.
Interestingly, it appears that the communist based national government in China is more committed to empowering and protecting economically competitive sectors than the market economics of the United States.
Of course, these dynamics are energetically in play and in no way conclusive yet. For the nations of the Asia-Pacific region these two dynamics will influence how bilateral commercial arrangements with the United States and China will evolve over the next decade.
Governance, Social, and Human Rights Issues
The events surrounding the American presidential election, assault on the United States Congress, and COVID-19 response point to a fundamental governance challenge for the nations of Southeast Asia and the larger Asia-Pacific region. These questions are of special consideration to the thriving popular electoral democracies of the Philippines, Indonesia, and Malaysia. These questions will certainly impact bilateral relationships for these nations.
Popular electoral democracy and governance in the United States has led to the kind of societal cleaving that engendered violence, empowered failure in government's response to a public health crisis, and threatens a sense of national purpose and will. This is not to suggest that these are irreversible nor were they created by the 2020 electoral process. However, it is undeniable that the American version of popular electoral democracy accelerated these flaws. Whether a Biden presidency created by that same popular electoral democracy and governance will heal these flaws remains to be seen.
China has long asserted that its variation of democratic processes empowered by the Chinese Communist Party is the only stable way to assert the people’s democratic will in the mass society unique to China. They argue that the process produces experienced and stable leadership that has been tempered by internal challenges of thought and practice. Institutional discourse among decision-makers including decision-makers' attention to public dissatisfaction in issues like environmental management, food purity, public transportation, and even real-estate pricing, forms continuity of policy and creates a governing process most likely enables the aspirations of its citizens. Even the heavy handedness of its actions in Hong Kong do not appear to have internally diminished its perceived superiority.
China asserts that its form of representative democratic process has enabled its historically unique economic progress, poverty alleviation, and more specifically, enabled its successful management of the COVID-19 crisis and return to a stable economic trajectory.
For the countries of Southeast Asia, these counter narratives will weigh heavily as their forms of governance and democracy continually evolve, and will in many ways determine the bilateral relationships they form with both the United States and China.
Last Words
It is not our intention to try to provide a step-by-step predictive analysis to the implications of the Biden Presidency for the Asia-Pacific region and Southeast Asian nations.
That these implications and relationships will inevitably evolve through the prism of the American-Chinese relationship mandated that specific approach.
In this approach we have tried to offer our predictive viewpoint of some of the strategic trends and dynamics of both the American-Chinese relationship as well as the larger collective and bilateral relationships among the countries across the region.
We are living among the most volatile sociopolitical, socioeconomic, and environmental periods in history. We hope that some of the ideas we expressed will motivate discourse among and between business and financial leaders, elected and appointed government officials, media, academia, and responsible NGO sectors.
We look forward to participating.
Martin Yupangco is the Founder & Managing Director of Optima Strategies Limited, an international strategy, government & public affairs, and stakeholder relations firm. Mr. Yupangco is also the Founder & Managing Director of Investor Resources Counselors, an investment advisory & risk management firm.
Paul Bograd has been a Senior Advisor to Martin Yupangco and Optima Strategies since 1998. Mr. Bograd is an international communications advisor specializing in economic policy communications, crisis and risk management, electoral strategies, public and regulatory issues management & communications, institutional brand development, and behavioral economics. Previously, he served as the Associate Director of the Institute of Politics at Harvard University’s Kennedy School of Government.
DISCLAIMER: The information contained herein is strictly for informational purposes. Optima Strategies Limited and any of its principals or employees are not responsible for its completeness or accuracy. This information is offered as a free service and all receiving parties are advised to confirm any and all information. This document is the proprietary intellectual property of Optima Strategies Limited and should not be copied, circulated to other parties or otherwise used without written permission.
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