President Barack Obama aims to build trade ties with Asia on his first
foreign trip since re- election, challenging China as island disputes leave the
region more open to closer economic and military ties with the U.S.
Obama’s three-day trip includes
visits to Thailand, which said this week it would join the U.S.-backed
Trans-Pacific Partnership trade talks, and Myanmar, a former military regime
bordering China that is hosting an American president for the first time. He
also will stop in Cambodia for a regional summit including leaders from China,
Japan and South Korea, which are all poised to get new governments in 2013.
“Clearly one of the objectives
here is to force China to accept the U.S. rules of the game for integration in
the region,” said John Ravenhill, a professor at Canberra-based Australian
National University. “The Chinese are going to be torn by these geopolitical
disputes and the desire to try to forge deeper integration with South Korea and
Japan as a counterweight to any U.S.-led TPP.”
China’s increased assertiveness
over disputed islands near its shores has pushed its neighbors closer to the
U.S. as Obama shifts naval assets to the region. Japan is bolstering its
military alliance with the U.S. and boosting investment in Southeast Asia after
its purchase of islands claimed by China rattled a $340 billion trade
relationship between Asia’s biggest economies.
‘Accidental Clash’
“The situation between China and
Japan is worse than it’s ever been for a long time,” Ian Storey, a senior
fellow at the Institute of Southeast Asian Studies in Singapore, said by phone.
“The real risk is an accidental clash that could escalate into something more
serious. The U.S. doesn’t want to get involved in a fight with China over
this.”
Obama is leaving the U.S. three
days after rocket attacks by Palestinian militants drew retaliatory strikes by
Israel in the worst violence between the two sides in four years. Obama also is
weighing who he will nominate in his second term to replace Secretary of State
Hillary Clinton and is in the middle of negotiations with Congress to avoid
automatic spending cuts that would hit defense.
Obama arrives in Thailand on Nov.
18 and meets with Prime Minister Yingluck Shinawatra. Her government announced
this week it would seek to become the 12th country to join the Trans- Pacific
Partnership, Obama’s top trade priority and one that includes four other
members of the Association of Southeast Asian Nations.
The next day, he heads to Myanmar
to meet President Thein Sein and Aung San Suu Kyi, the opposition leader who
spent more than 15 years under house arrest before the country shifted to
democracy after decades of military rule. He also will give an address at the
University of Rangoon.
U.S. Investment
As part of the effort to
encourage expanding democratic and economic reforms, Obama in July authorized
U.S. companies to invest in Myanmar for the first time since 1997, paving the
way for Coca-Cola Co. (KO) and MasterCard Inc. (MA) to announce moves in the
country.
While concerns remain about human
rights in Myanmar, Tom Donilon, Obama’s national security adviser, said the
president made the calculation that “we are not going to miss this moment” as
the country’s leadership has made a shift toward reform. U.S. engagement will
help lock that in, he said, adding, “We’re not naïve about this.”
Myanmar also can serve as an
example to North Korea for how to emerge from diplomatic and economic
isolation, Donilon said.
The island disputes will surface
at the East Asia Summit, where Obama will meet with Chinese Premier Wen Jiabao,
Japanese Prime Minister Yoshihiko Noda and other regional leaders. Obama is
attending the Asean-hosted meeting for the second straight year after the
10-member bloc invited the U.S. to join in 2010.
Island Dispute
China has demanded that Japan
withdraw from its September purchase of the islands, known as Senkaku in Japan
and Diaoyu in China. Anti-Japan protests have slashed China sales at Toyota
Motor Corp. (7203), Nissan Motor Co. and Honda Motor Co.
“China would like to have
friendly relations with all countries including Japan, but we have our
principles and our bottom line,” Vice Foreign Minister Zhang Zhijun told
reporters on Oct. 26. “And that is we will never give any ground on issues
regarding territorial sovereignty.”
Chinese vessels have been in or
near waters administered by Japan for 26 straight days, the Japanese Coast
Guard said Nov. 14, as diplomatic efforts to resolve the dispute founder. The
incursions into areas rich in fish, oil and natural gas have prompted Japan to
seek improved military ties with the U.S., Defense Minister Satoshi Morimoto
said on Nov. 9.
Military Face-Off
The dispute potentially could
grow into a military face- off, according to a confidential report submitted
this month to Secretary of State Hillary Clinton by a delegation of former U.S.
officials. Obama last year put 250 marines in Australia and plans to move 60
percent of the U.S. Navy’s ships to the region by 2020 to counter China’s
rising military might.
“This is not a zero-sum
competition,” Clinton told reporters on Nov. 14 in Perth, where she and Defense
Secretary Leon Panetta met with counterparts from Australia. “Rather, it is up
to the United States and Australia to lead the way in demonstrating that the
strong relationship between us can also help foster strong, healthy relations
with China, because the entire region will benefit from a peaceful rise of
China.”
China’s disputes with Japan, the
Philippines and Vietnam over contested islands may thwart talks on an Asean-led
trade deal set to be initiated at next week’s meeting. The trade bloc including
Asean, China, Japan, South Korea, India, Australia and New Zealand -- an area
with more than 3 billion people accounting for about a quarter of the world’s
gross domestic product -- rivals the Trans-Pacific Partnership and doesn’t
include the U.S.
Code of Conduct
Philippine President Benigno
Aquino will urge China to start negotiations with Asean on a set of rules to
avoid conflicts in the South China Sea, Raul Hernandez, spokesman for the
Philippine foreign affairs department, told reporters this week. China has
resisted talks after Asean members agreed to elements of a code of conduct in
July.
“We are ready to negotiate with
China,” Hernandez said, referring to Asean. “We hope China would respond
positively, and immediately tackle this issue so we can have something
binding.”
Ben Rhodes, Obama’s deputy
national security adviser, told reporters in Washington that, while the summit
won’t yield a resolution of the South China Sea disputes, Obama will continue
to press for a process to resolve them and de-escalate incidents that could
lead to conflict.
Asean had mended rifts exposed at
a July meeting, when the countries failed to reach consensus on handling
disputes in the waters in a communique, Hernandez said. The bloc’s differences
reflect wariness among leaders over picking sides between China and the U.S.,
according to Arthur Ding, a research fellow at the Institute of International
Relations in Taiwan.
“The rise of China and the pivot
of the U.S. to Asia has made Asean leaders anxious over the direction of the
region,” he said. “They are fully aware that they have to be very cautious
dealing with the two major powers.”
Daniel Ten Kate and Margaret Talev
Business & Investment Opportunities
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