GDP and Military expenditure to cross-examine the amount of US involvement in SEA.
Finally, in the conclusion part, I will attempt to answer the second question brought about in Chapter 1: whether the development of MRSI would affect the economic relations between USA and ASEAN, and to what extent will China takes the US’ share in South East Asia?
4.1. US Foreign Relations and Military Strategy from 2001 to 2018
The foreign relations and military strategy from 2001 to 2018 could be observed through three phases: the Middle East, Pacific and Indo-Pacific, respectively through periods of President Bush, Obama and Trump. During Bush’s administration, foreign relations and military strategy was mainly focused in the Middle East due to the terrorist attacks against the United States on September 11, 2001. Given such reason, the Bush administration declared Global War on Terror and the subsequent campaign was launched to fight against Islamic terrorism. As Katz suggests, “The two signature policies of Bush’s War on Terror, the invasions of Afghanistan and Iraq, have had mixed results. On the one hand, both invasions succeeded in driving out of power the Taliban and the Saddam Hussein regimes, both of which were highly authoritarian, repressive and hostile toward the United States. On the other hand, the United States has not succeeded in establishing peace and security in either country even after many years of fighting.” (Katz, 2017) After President Bush’s War on Terror, Obama’s foreign policy strategy continued by the withdrawal of US troops from the Middle East.
During the Obama administration, other than the fall of Muammar Gaddafi's regime and countless civil wars in the Middle East and ISIL, the transition of focus to Asia reshaped the regional and economic order in the Pacific. Domestically, issues such as economy, employment, education, and medical care were not given sufficient consideration during Bush’s administration. Figure 9 shows the Military Expenditure
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of United States from 2000 to 2018. From 2000 to 2011, the military cost went from USD301,697 million to USD711,338 million, marking a 148% increase annually (SIPRI Military Expenditure Database, 2019). The overemphasis on military strength and counter-terrorism was over-prioritized, which resulted in huge military expenditure due to exhausting warfare in the Middle East. Economically, the Trans-Pacific Partnership (TPP) was organized with an attempt to shift the focus of U.S. foreign policy from Middle East to East Asia.
The Donald Trump administration focuses on “America First” approach, especially in terms of trade and military expenditure. By the end of 2018, Trump’s foreign policy was just as his election slogan: “America First.” During the election campaign, Trump vigorously criticized the North American Free Trade Agreement (NAFTA) in which the United States participated in the 1990s, and threatened to withdraw from the TPP endorsed by the Obama administration. Trump believes that these past concepts of globalization and free trade agreements will only seriously hurt Americans’ right to work and bring US trade deficit. In terms of security, Trump criticizes the North Atlantic Treaty Organization (NATO) for being an organization which is out-of-date, and all member states are only willing to enjoy the security provided by United States but unwilling to bear more responsibilities, which is no doubt equivalent to burdening the American people with more military budget. Compared to Bush, Trump is less involved in NATO and the Middle East than in Asia Affairs. He himself made the most visits to North Korea and has pose Indo-Pacific as his main focus for military strategy. In face of the rise of China, he waged a trade war against China by tariff and myriads of diplomatic means to contain China from economically rival US status in the Asia Pacific region.
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Note: Above in USD Million
Source: SIPRI Military Expenditure Database. (2019). Military Expenditure by Country, in Local Currency, 1949-2018. Retrieved from
https://www.sipri.org/databases/milex
Figure 9. USA Military Expenditure 2000 ~ 2018
0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000
USA Military Expenditure 2000 ~ 2018
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4.2. US Import and Export Statistics in South East Asia
Figure 10 shows the trade value of the import and export between the United States and ASEAN countries. Unlike China’s trading trend, US trade relations with SEA shows rather stable in a general picture. We could briefly categorize ASEAN members into three groups. The first group consists of Brunei and Singapore, in which the export volume from US is higher than that exporting to US, signifying trade deficit with US.
The second group consist of Indonesia, Cambodia, Malaysia, Philippines, and Thailand, in which the export volume from US is lower than that exporting to US, showing trade surplus with US in a steadier pattern, not expecting much increase in growth. In comparison with Group 2, the third group consists of Laos, Myanmar and Vietnam, which demonstrate a direct proportion of a growing trend.
Most countries demonstrate a non-drastic way of development. Compared with Figure 5, in which Brunei, Cambodia, Indonesia, Malaysia, Myanmar, Philippines and Singapore present China’s trade surplus with seven ASEAN members. It is sensible to infer that in face of China’s massive pouring of the fund in SEA, such degree is not to heavily affect the current status of US position and the trade dependency of ASEAN members towards US in this region, let alone discussing China obviously replacing US presence.
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Note: above in USD million / Blue –––– Export from US / Red – – – Export to US / Green – – – Data not available
Source: UN Comtrade Database
Figure 10. Trade Value of the Import and Export between US and ASEAN (by USD)
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4.3. US Foreign Direct Investment Statistics in South East Asia
From 2015, when the Belt and Road Initiative was launched, US Foreign Direct Investment net inflow started to decrease and when president Trump was elected in 2017, the United States FDI figure dropped drastically as a gesture of conservativism.
The starkest fall in 2013 when BRI was initiated. This could be rendered as an economic vacuum in which ASEAN countries are possibly seeking new, potential partners that serve as their new trade allies. As Trump’s “America First” policy is influencing US foreign policy, ASEAN countries, in need of infrastructural investment and loans, could be the victims under such change.
After US President Donald Trump assumed office in 2017, FDI dropped significantly to a new lowest point. On the other hand, apart from Singapore, countries such as Cambodia, Laos, and Myanmar have taken a large percentage of China’s FDI in ASEAN Countries whose contribution is rather small in the overall ASEAN GDP.
This once again resonates with China’s initiative to assist less developed economies to strengthen their infrastructure. According to Figure 11, the FDI inflow from USA has shown a falling curve since 2015, while China has been pouring money into ASEAN.
However, on the other hand, there is no drastic downfall as opposed to China’s FDI inflow to the region, showing a much more stable trend. Also, among ASEAN countries, only two countries show active trade balance with USA while the rest remain in trade deficit with USA. In terms of regional development, China’s climbing FDI has placed the nation in a position of a strong and beneficial sponsor. However, giving China an opportunity to step in is still far from replacing.
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Malaysia Indonesia
Philippines Singapore
Thailand
Note: Above in USD Million
Source: CEIC. ASEAN FDI Net Inflow: China and USA. Retrieved from https://insights.ceicdata.com
Figure 11. USA FDI Net Inflow to ASEAN
13682.07
8313.89
18971.22
11484.52
21161.67
23180.15
18810.69
5383.41
2010 2011 2012 2013 2014 2015 2016 2017
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Figure 12 demonstrates the total amount of trade balance between ASEAN and US.
The fading of U.S. FDI shows United States’ gradual unresponsiveness in terms of export value towards SEA compared to the past could give China an opportunity to step in, or as a debt collector. Based on the trade surplus ASEAN members enjoyed, we could not cross out the factor that US remains a pivotal trade partner in SEA. As the current trade war between China and USA is becoming more heated than ever, there is a stronger potentiality that China could establish stronger ties with SEA countries even at the cost of economic sacrifice to restrain U.S. tariff sanctions.
US-China trade conflicts and their impact on Southeast Asian countries and their countermeasures are indeed critical when it comes to analyzing the situation in South East Asia under the trade war between the two hegemons. The slowdown of the regional economy caused by the trade war has also stagnated the development of South East Asia regarding the continuation of mass infrastructural projects. ASEAN member’s trade surplus towards US may also give rise to the countermeasure that the United States will implement tariff sanctions in SEA. The benefits that ASEAN has gained in the Sino-US trade war include Chinese products transported to the United States via SEA. As such surplus continues to increase, the possibility of the United States offering anti-dumping and trade sanctions to SEA will likely be high. In addition, US manipulation of the exchange rate is another risk in the trade.
For ASEAN members, to stabilize trade cooperation between countries, it is nothing more than signing bilateral FTAs, participating in regional trade organizations, and stabilizing the overall economic environment. If the Southeast Asian economy can be strengthened, the impact of the US-China trade war can be reduced. However, in the context of the US-China trade war, internal cooperation and development among ASEAN countries remain crisis-prone.
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Note: Above in USD Million
Source: UN Comtrade Database. (2019). UN Comtrade: International Trade Statistics.
United Nations. Retrieved from https://comtrade.un.org/data
Figure 12. Total Trade Deficit between USA and ASEAN
-120000 -100000 -80000 -60000 -40000 -20000 0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
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4.4. Conclusion
As Figure 10 shows, most countries in ASEAN enjoy trade surplus while trading with US whereas China is pouring goods into SEA on a dramatic scale (as shown in Table 5). Under the framework of BRI, China is attempting to sacrifice its economic gain to position in place of USA as a potential leader in the development of the regional economy in South East Asia. Among ten ASEAN countries, only Brunei and Singapore appears to be having an active trade balance with United States whereas the rest create more trade deficit to United States over the years. Thus, by observing China’s economic influx into SEA that we could evaluate China’s potential role in ASEAN countries as a powerful partner. However, as opposed to its predecessor, US, it is hard to come to the conclusion to determine China’s replacement of US presence in SEA.
In response to the second question: whether the development of MRSI would affect the economic relations between USA and ASEAN, and to what extent will China takes the US’ share in South East Asia? Given the trade deficit between US and ASEAN, I infer that a prospective foundation paved for China’s potential leadership towards SEA based on economic sacrifice, but US presence in SEA is still unshakable due to the fact that US is still a major trade partner for many ASEAN members.
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Reviewing both positive and negative, this research briefly addresses two critical questions: First, the launching of BRI indeed provided cash-poor countries in SEA with funds for the potential infrastructural improvement, which explains the progressiveness of BRI in South East Asia. Second, the trade deficit between US and ASEAN, there is a chance for China’s economic influx into SEA that thus gives rise to China’s potential role among ASEAN countries as a powerful partner. However, as opposed to its predecessor, US, it is hard to come to the conclusion to determine China’s replacement of US presence in SEA due to the fact that many ASEAN members still remain active and stable trade relations with US.
China, throughout its history, has been more of a passive actor in both the regional and international sphere, which could be observed in three facets. First, with the waning US dominance after Trump being elected as the president, China is challenging US presence in SEA via three facets. First, the influx of infrastructural funds via AIIB is edging and luring ASEAN countries to take side. Second, in terms of the security dilemma, China is using its economic strength as a soft power to weaken US hard power in SEA. Thirdly, China is building a new national image in SEA through BRI strategically along its route.
BRI has shown China’s determination as an active player in South East Asia. In terms of maritime deployment, BRI plays an important role across SEA, tying the physical connections between China and its neighboring countries, especially ASEAN countries. Differentiating between western colonialism and Chinese presence in SEA, we could find the former showing a stance of exploiter whereas the latter demonstrates
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a more complicated cultural and historical linkage as well as a more long-term approach, manifested by China’s massive amount of investment in infrastructure, natural resource development, and public goods.
While there are positive perspectives regarding BRI, picturing it to be beneficial to fund infrastructure and pacifies regional conflicts, there is also criticism pointing out China’s ambitions aiming to replace United States’ influence in SEA. China’s fast-growing economy could indirectly justify its motive to launch BRI and make it a solution to solve its interior problem, which is, an imploding financial situation under which the CCP is eager to find a new market to exercise its accumulated resources.
Compiled and compared in USA and China’s Investment in ASEAN, from 2013 when the BRI was initiated, China has been actively pouring money into ASEAN. As the total amount of intra-ASEAN investment stays nearly unchanged and stable, US presence started to present stagnation from 2016 to 2018, which does not parallel the shift of US foreign policy direction during which was Obama’s Asia rebalancing strategy. Although USA still remains a major partner and investor in SEA, it is quite obvious that China’s gradual involvement in Asia is beginning to take shape, which could be seen in China’s trade surplus in SEA as previously mentioned in Chapter three.
China’s major investment could pose a potential hindrance to cross-strait cooperation, especially when DPP continued to remain in power after Tsai’s re-election.
It is not hard to picture South East Asia as a partial alternative investment target in place of Taiwan, given Taiwan’s unstable and uncertain political stance which is not in line with CCP’s political doctrine. To find a way out, Taiwan as one of Asia’s leading economies, China’s launching of BRI seems preemptive to this island. In terms of policymaking, the “New Southbound Policy” initiated by the incumbent government tends to reach out for more opportunities. In one of the four main areas, “Economic and trade collaboration,” it focuses on the involvement of regional economic cooperation
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with South East Asia, which attempts to “forge new economic and trade partnerships by exporting infrastructure construction services, helping Taiwan’s small and medium-sized enterprises expand in target countries, and providing Taiwanese firms with financial assistance. Also, connect more closely with supply chains and domestic demands in target countries, and collaborate on infrastructure projects (Executive Yuan Republic of China (Taiwan), 2019).” Taiwan is now facing serious brain drain that hundreds of medium-sized enterprises, as well as thousands of engineers, fled Taiwan to China in pursuit of higher pay and better opportunities. If Taiwan’s government fail to establish more channel and potential connections with economic partners other than China, Taiwan might face deeper dependence on China. For future researchers, I strongly encourage them to find more solutions tackling the cooperation of Taiwan and South East Asia to build up Taiwan’s regional connectivity.
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