The US-ASEAN Connect: A Game Changer

The US-ASEAN Summit held at Sunnylands in the US last week promised little to begin with. With President Barack Obama having less than a year left in office, some observers said that the Summit was purely symbolic as it was anyone’s guess if his successor would engage the region in the same magnitude. After all, President Obama has been the most active American leader in Southeast Asia.

As such, many felt that the Summit was also Obama’s way of leaving a legacy and enshrining the relationship so that his successors find it difficult to ignore. As it turned out, the Summit did indeed provide a platform for the Obama administration to deepen the American commitment to the region – more than expectedly.

The US-ASEAN Connect,  unveiled at the Summit as a new economic initiative by Washington to engage Southeast Asia, could prove to be a decisive factor in strengthening the US pivot to Asia. Here’s why.

1. In the absence of a clear economic strategy in Asia until now, the US had relied on the Trans-Pacific Partnership (TPP) for its main charm offensive. The problem with that was that the TPP only engaged 4 ASEAN states – Brunei, Malaysia, Singapore & Vietnam. The US required a broader and deeper engagement with all of the region. The US-ASEAN Connect, through trade workshops, will aim to educate the other ASEAN states on the benefits of the TPP and the steps they need to take to apply for membership too. This will help widen the reach of the TPP, and US trade influence, in the region.
2. Even so, the problem with having the TPP as the main thrust of the US economic strategy towards the region was precisely that it was yet another trade agreement – a new addition to the ‘spaghetti bowl’ of preferential trade agreements regime. Even though it is touted to be the most in-depth and highest quality multilateral trade agreement ever signed, so what you may ask? After all some member countries already have multiple trade agreements (including with some of their TPP counterparts) and so the TPP on its own doesn’t give the US a tremendous competitive edge in the region. If anything, it helps Washington write the rules of a new free trade regime but that is not to say that the Chinese-proposed Regional Comprehensive Economic Partnership (RCEP), or any subsequently developed trade agreement cannot eclipse it.
3. Moreover, free trade is built around supply-chain networks, which in turn is greatly dependent on infrastructure. In today’s globalized world, connectivity matters more than anything else and it is what gives countries an edge. Countries or cities that prosper are the ones that have close and seamless connectivity to markets for their produce, to source markets for raw materials, to capital, technologyand labour. Infrastructure is key to such connectivity. China understood this early on and that is why it has invested in building infrastructure not just within its borders, but around it and elsewhere. Wherever the Chinese have identified as key markets or regions, they have built infrastructure there. Be it Africa, Central Asia or South Asia. They have made efforts to do the same in Southeast Asia and the launch of the Asian Infrastructure Investment Bank (AIIB) will help them to develop more infrastructure in the region. The US had been overshadowed by China in this aspect in recent years. The US-ASEAN Connect, therefore, will help the US bridge this gap as infrastructure is one of the thrusts of this new initiative. By building its own key infrastructure in the region, the US can also shape supply-chain networks here and this will complement the TPP and enhance its benefits from it.
4. Any concerted and widespread effort by the US to build infrastructure region is also timely. With the Chinese economy slowing down and the yuan suffering the consequences of a more flexible trading regime and unprecedented capital outflows, China’s $4 trillion war-chest of reserves is quickly depleting, as the country draws from it to bolster the yuan from further decline. Any substantial erosion of China’s reserves in the future may deter it from spending too much on infrastructure projects in the region and so this could present the US with a timely opportunity to narrow the gap with China.
5. The US-ASEAN Connect also leverages 3 hubs – Connect Centres in Bangkok, Jakarta and Singapore. This will help Washington overcome its geographical proximity handicap to Southeast Asia by being on the ground through these rep offices. The locations of these hub will strategically strengthen the position of US in the region. The office in Jakarta will help Washington enhance its communication and engagement of the ASEAN Secretariat. The one in Bangkok is timely as it shows the Thai military government that the US chooses to engage it over any democratic hang-ups Washington may have. The military coup in Thailand two years ago affected bilateral relations as the US called for a return to democratic processes in the country, pushing the Thai military government deeper into China’s embrace. The establishment of the Connect Centre there will hence help in mending bilateral ties. Singapore, arguably the closest partner to US in the region, is a natural choice to be the center of any US-led initiative in Southeast Asia. Further, it places the US closer to the financial and connectivity hub of the region and with 3600 US companies in Singapore, the island-state allows the US Connect Centre the right platform to galvanize American economic capital in the region.
6. Through the US-ASEAN Connect, the US is also increasing its offering of capacity -building, technical assistance and helping to shape the entrepreneurial and innovation culture in Southeast Asia. This will be a significant boost to US influence and soft power in the region, thus increasing its appeal there.
7. The Sunnylands Summit is truly historical. Not just because it enshrines the legacy of the Obama administration’s engagement of Southeast Asia during his two terms in office. More importantly, it could have given more purpose and resolve to this strategic relationship. That, I reckon, is a legacy Mr. Obama would much rather leave behind.