Chapter II: The U.S Rebalance to Asia Policy
2.2 From the Aspect of Economy…
deployment and further cause arms race between the U.S. and China in the region.
What does the Rebalance to Asia Policy actually bring to the region? Peace or unrest? From the analysis mentioned above, we understand that the U.S. is using military security as an excuse to get involved in Asian affairs. However, the economic benefits may be the real purpose of this policy. After all, the U.S. is facing crucial financial debt issues and rising concerns of security among the East Asian countries could bring huge interests from arm sales. In addition, the U.S. can rebuild its weakened hegemony in Asia at the same time.17
2.2 From the Aspect of Economy
Trade and economic interests are one of the most import purposes of the Rebalance to Asia Policy. Although the U.S. has been the number one international trade country, according to the U.S. Census bureau’s Foreign Trade Division, the trade deficit with China had been increasing over the past five years,18 so lowing the trade deficit has become an important task for President Obama. (See Table 2.2)
Table2.2 U.S. Trade in Goods with China (Units: millions of U.S. dollars)
Year
17 Zhen-Zhao Song, “The attempts and strategies of U.S. to return to Asia: Battles to maintain the hegemony,” Straits Review Monthly, Vol. 266, February 2013. Retrieved 10 January 2016, from http://www.haixiainfo.com.tw/266-8657.html
18 United State Census Bureau, “Trade in Goods with China,” 2010. Retrieved 10 January 2016, from http://www.census.gov/foreign-trade/balance/c5700.html
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Source: the U.S. Census bureau’s Foreign Trade Division
In 2012 the total trade amount in China reached US$ 3,867.5 billion,19 it was the first time that their trade amount exceeded the U.S. (US$3,822.1 billion).20 In addition, the IT industry in China is now big enough where it is able to develop to their own specification and not just do OEM production. In order to increase market share and strengthen the ability to compete in the market within China, other businesses have to accept the specifications and standards set by China, allowing China to gradually attain the power to dominate throughout the IT industry.
In order to satisfy its economic goals, the U.S. has specific instructions regarding its Rebalance to Asia Policy. In the Foreign Policy article "America's Pacific Century,”
Secretary of State Hillary Clinton wrote that the U.S. needs to see Asia as the core of its strategic interest. If Asia become an open market, this will bring the U.S.
opportunities of investment, trade and even more access to a high-tech, highly skilled cheaper workforce. The progress of economic recovery relies on exports and whether they can take advantage of the massive new market opportunities in Asia.21 In October 2011, Hillary Clinton said in a speech that Economic statecraft has two parts:
first, how the U.S. needs to harness their forces and use the tools of global economy to strengthen their diplomacy and presence abroad; and second, how the U.S. needs to put
19 Bureau of Foreign Trade, R.O.C. “Export and Import Statistics Summary Table to China.” January 29, 2015. Retrieved 10 January 2016, from
http://www.trade.gov.tw/Pages/Detail.aspx?nodeID=1376&pid=516602&dl_DateRange=all&txt_S D=&txt_ED=&txt_Keyword=&Pageid=1
20 Bureau of Foreign Trade, R.O.C. “Export and Import Statistics Summary Table to the U.S..” January 29, 2015. Retrieved 10 January 2016, from
http://www.trade.gov.tw/Pages/Detail.aspx?nodeID=1376&pid=516599&dl_DateRange=all&txt_S D=&txt_ED=&txt_Keyword=&Pageid=0
21 Hillary Rodham Clinton, “America’s Pacific Century,” The Foreign Policy, Oct. 11, 2011. Retrieved 10 January 2016, from http://foreignpolicy.com/2011/10/11/americas-pacific-century/
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that diplomacy and presence to work to strengthen their economy at home. In order to succeed the above two parts, firstly, the U.S. needs to update their foreign policy priorities to include economy every step of the way. Secondly, as they embrace economic statecraft, they need to hone the ability to develop and execute economic solutions to strategic challenges. Additionally, the U.S. needs to modernize their agenda on trade, investment, and commercial diplomacy to deliver jobs and growth for the American people.22
During a speech entitled “Delivering on the Promise of Economic Statecraft” in Singapore in November 2012, Hillary Clinton emphasized that the U.S. is making progress toward the Trans-Pacific Partnership (TPP) to lower barriers, raise standards, and drive long-term growth across the region. The TPP will cover 40 percent of the world's total trade and it will help build Asia's middle class and rebalance the global economy. At the end of her speech, Hillary Clinton once again reiterated that the U.S.’
global leadership depends on their economic strength, and it is also the main factor to ensure that the U.S. keeps leading position well into the 21st century.23
In 2013, President Obama emphasized job creation and economic growth through Trade as the goals of their trade policy. The main methods to reach their goals include:
Continued progress under National Export Initiative, advancing the Trans-Pacific Partnership Negotiations toward an Ambitious Conclusion, leading Creative and Effective World Trade Organization Member Efforts to Open Markets, enforcing rules, reducing protectionism, and finally expanding Trade Opportunities through Regional
22 Hillary Rodham Clinton, “Remarks on Regional Architecture in Asia: Principles and Priorities.”
Remarks by Secretary of State, Honolulu, Hawaii, Jan 12, 2010. Retrieved 10 January 2016, from http://m.state.gov/md135090.htm
23 Hillary Rodham Clinton, “Delivering on the Promise of Economic Statecraft.” Remarks by Secretary of State, Singapore Management University, Singapore, November 17, 2012. Retrieved 10 January 2016, from http://www.state.gov/secretary/20092013clinton/rm/2012/11/200664.htm#
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Economic Integration.24
Being the largest importer and exporter in the world, along with the controlling the exchange rate of their Renminbi, China has constantly put the U.S. in a difficult situation. Hence, the U.S. tends to promote TPP and uses the TPP to get try to get control back to furthermore reduce the influence that China has in Asia.
The Trans-pacific Partnership Agreement (TPP) was originally signed by Singapore, New Zealand, Brunei and Chile in June of 2005 as the Trans-Pacific Strategic Economic Partnership Agreement (TPSEP). At that time, there were not any members with large economic influence involved so it didn’t draw much attention.
However, in September 2008, the U.S. invited the above four countries and changed the name of the agreement to the Trans-Pacific Partnership Agreement (TPP) and later, Australia (2008), Peru (2008), Vietnam (2008), Malaysia (2010), Mexico (2012), Canada (2012) and Japan (2013) also participated in the negotiations. So far, the TPP is the first trade agreement that truly connects the entire Asia-Pacific region. The economic scale of 12 member countries could comprise as much as 40% of the world's total trade, exceeding the 23% held by the European Union (EU) and 26% held by the North American Free Trade Area (NAFTA).
After President Obama was elected in 2009, he used the framework of APEC to develop TPP, showing strong ambition to make the U.S. as the core in Asia-Pacific trade zone. The Obama administration organized a serious of negotiations, by the end of 2013, they had already finished 19 rounds of negotiations in Brunei. (See Table 2.3)
24 United State Trade Representative, “The President’s 2013 Trade Policy Agenda.” 2013. Retrieved 10 January 2016, from https://ustr.gov/sites/default/files/AnnualReport%20Final2013.pdf
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1 Melbourne, Australia 15-19 March 2010
2 San Francisco, United States 14-18 June 2010 3 Bandar Seri Begawan, Brunei 04-10 October 2010
4 Auckland, New Zealand 06-10 December 2010
5 Santiago, Chile 14-18 February 2011
6 Singapore 27 March-01 April 2011
7 Ho Chi Minh, Viet Nam 21 June 2011
8 Chicago, United States 09-15 September 2011
9 Lima, Peru 20 October 2011
10 Kuala Lampur, Malaysia 05-09 December 2011
11 Melbourne, Australia 03-09 March 2012
12 Dallas, United States 10-16 May 2012
13 San Diego, California, United States 02-10 July 2012 14 Leesburg, United States 06-15 September 2012
15 Auckland, New Zealand 03-12 December 2012
16 Singapore 04-13 March 2013
17 Lima, Peru 15-24 May 2013
18 kota Kinabalu, Malaysia 15-25 July 2013
19 Bandar Seri Begawan, Brunei 22-30 August 2013
Source: http://www.sice.oas.org/TPD/TPP/TPP_e.ASP
The TPP contains five key features; including comprehensive market access, fully regional agreement, cross-cutting trade issues, new trade challenges, and a living agreement.25
1) Comprehensive Market Access: eliminating tariffs and other barriers to goods and services trade as well as investment.
2) Fully Regional Agreement: facilitating the development of production and supply chains among TPP members.
3) Cross-Cutting Trade Issues: issues include regulatory coherence, competitiveness and business facilitation, small-and-medium sized enterprises (SME’s), and development of comprehensive and robust market liberalization.
4) New Trade Challenges: promoting trade and investment in innovation products and services.
5) Living Agreement: to enable updating the agreement to address trade issues that may
25 Coalition of Services Industries, “The Trans-Pacific Partnership (TPP).” Retrieved 10 January 2016, from https://servicescoalition.org/negotiations/the-trans-pacific-partnership-tpp
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emerge in the future, as well as new issues that could arise with the expansion of the agreement when including new countries.
The main issues discussed at the end of 2013 mainly focused on tariffs and free trade agreements between the different countries involved. It also touched upon issues regarding small/medium or weak industry production, mutual supervision and related regulations. Since the TPP is an agreement with a higher standard and is more comprehensive, it has three criteria including full liberalization, comprehensive topics and consistency of regulations. The TPP requires that goods be fully liberated, or at least 95% of the items should open to the market and to slowly lower tariffs to zero. In addition, the TPP expanded the scope of the framework of the WTO, moreover the domestic regulations should be established and match international standards especially towards copyright and trade barriers. The criteria mentioned above requires all the members of the TPP to follow certain guidelines that are designed to help the U.S. to maximize its profit in the long term. Professor Peter Petri from Brandeis University said that by setting the regulations to protect copyright, the TPP will not only increase the production value of the service industry, but will also benefit by attracting the likes of the film industry in Hollywood and high tech industry from the Silicon Valley.
Moreover, setting regulations relates to foreign investment and environmental protection will lower the barriers of agriculture production exports to Japan and other countries. Professor Petri estimated that if the TPP reaches an agreement and begins implementation, by 2025 it could contribute US$7.7 billion every year for the U.S., which is approximately 0.4% of their output value.26
East Asia plays an important role on global politics and economy. It is also the
26 WSJ, “TPP promoted by Obama only has little affection to the U.S. Enterprises,” Taiwan Trade, March 18, 2015. Retrieved 10 January 2016, from
http://www.taiwantrade.com.tw/CH/bizsearchdetail/7833679/C
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most economically energetic and fastest growing region in the world. We can foresee that in the coming future it will become the largest economic center and investment market. Through the TPP, President Obama can bolster the U.S.’ status and position in the East Asia economic zone and enhance its economic base in the region.27
The U.S. has put a lot of effort into building partnerships with the Asia-Pacific countries which can be seen as a new step under the Rebalance to Asia Policy. The purpose of it is to make sure that while the Asia-Pacific region becomes more and more important economically, the U.S.’ national interests will not be threatened, and of course the major cause for concern for the U.S. will still be China.