East Asia: Trade Regime critical for Economic Stability and Political Security


East Asia: Trade Regime critical for Economic Stability and Political Security

by  EAF Editorial Group

What the Trump Administration will ultimately do to the shape of the global trade regime is difficult to foretell but there’s no question that it will change it forever, even if there is strong global push-back against Trump’s threat to unravel trade agreements and carry a protectionist stick.

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The trade regime, and the way in which it encourages open trade and international interdependence among those who sign on to its rules, is not simply an instrument of economic policy strategy that can be changed without political consequence. For most countries, and certainly those in East Asia which are so dependent on open trade to sustain their basic livelihood, the trade regime is a critical instrument of political security.

Trump has already signed executive orders to withdraw the United States from the Trans-Pacific Partnership (TPP) and renegotiate the North American Free Trade Agreement (NAFTA). What appeared noisy campaign rhetoric has been transformed into concrete action.

Trump’s withdrawal from the TPP is no big deal in itself: with the exception of what it promised in terms of liberalisation of the Japanese economy, the economic effects of the deal that was on the table were oversold. Even renegotiation of NAFTA may have more limited economic consequences than have been threatened. But these steps, together with the threat of punitive tariffs on imports from China and Mexico, plus a total retreat from multilateral or regional trade agreements, tears at the core principles upon which the US supported postwar economic order had been built.

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POTUS Donald J. Trump and China’s President Xi

Anyone who says that a switch of this magnitude and direction in the trade policy strategy of the world’s largest economy and second-largest international trader is of little consequence is seriously delusional. The old certainties that brought prosperity and a significant measure of stability to world affairs for nearly three-quarters of a century after the Second World War are under serious threat.

A world in which the defining characteristic is a lot of bilateral trade agreements rather than one in which multilateral and regional frameworks are predominant imposes costs on business and consumers alike because of the need for compliance with different rules of treatment across different trading partners. It also injects a different tone into international politics. These concerns are what motivates the argument for regional and global trade regimes that govern international flows of goods and services through unified rules and standards.

The broader the framework within which trade can take place, the greater will be the scope for division of labour and the higher the gains from international trade. Bilateral trade deals can’t replicate the gains from regional and multilateral agreement, and they will unhelpfully cut across global and regional value chains. As the largest centre of production networks, East Asia has much at stake in the push back against an open, global rules-based trading system and the regional arrangements that support it.

While the direct economic costs of Trump turning America’s back on the TPP and other measures might be relatively small, the systemic costs are much larger.

As Shiro Armstrong and Amy King write in this week’s lead essay, Trump’s executive order to withdraw the United States from the TPP agreement in the Asia Pacific ‘is a strategic turning point in the open economic order. It is a blow to furthering reform for some members, a lost opportunity for the United States to write the rules of international commerce, and more worryingly a sign of the United States turning its back on the global economic system it helped create and lead’.

How can East Asia, which includes China and Japan — the world’s largest and fourth-largest trading nations — stand against the corrosion of a global trading order that is so central to their common economic and political interests?

The economies of East Asia must, of course, stand quietly firm in global and regional forums and in all their bilateral representations to the United States against the undermining of the global trading system, giving strength to those forces in America that can help to shape much better outcomes than the present circumstances threaten. But, through their own commitment to collective liberalisation and reform, they can also help to lead the system back from the brink.

With major multilateral trade deals at the WTO now too difficult and bilaterals only able to make slow and incomplete progress towards freer markets, Armstrong and King observe, all eyes now turn to Asia’s Regional Comprehensive Economic Partnership (RCEP) agreement. It is the most important initiative on the global trade scene.

Image result for flags of asean member statesASEAN is the hub of RCEP Agreement

RCEP comprises the 10 Southeast Asian members of ASEAN as well as Australia, China, India, Japan, New Zealand and South Korea. Though, as Armstrong and King say, there are many misconceptions about the RCEP enterprise.

‘The first misconception is that RCEP is China-led. But China is a spoke and ASEAN is the hub of the arrangement. RCEP was built to consolidate ASEAN’s five separate free trade agreements with China, South Korea, Japan, India and Australia–New Zealand. And the RCEP idea and its guiding principles were crafted not in China, but in Indonesia. ASEAN centrality has ensured that RCEP has incorporated Asia’s other large power — Japan — and reflects Japanese preferences as much as those of China. Originally, China wanted to limit core membership of Asian cooperation to ASEAN plus China, Japan and South Korea. Japan wanted a larger membership, involving Australia, New Zealand and India, to help provide a counterweight to China’.

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In the end, ASEAN centrality and the interests of Australia and India in the region meant a broader and representative group ideally placed to take the lead collectively on global trade.

‘With the world trading system under threat’, as Armstrong and King conclude, ‘it is time for leaders in Asia to step up and push for opening markets and deepening reforms to enhance economic integration, not just with each other but with Europe, the United States and the rest of the world’.

*The EAF Editorial Group is composed of Peter Drysdale, Shiro Armstrong, Ben Ascione, Ryan Manuel, Amy King and Jillian Mowbray-Tsutsumi and is located in the Crawford School of Public Policy in the ANU College of Asia and the Pacific.

http://www.eastasiaforum.org/2017/02/20/east-asias-agreement-to-keep-the-world-economy-open/

Grow-Up, Mr. Trump–You are not Robinson Crusoe


January 4, 2017

Comments from Paul Krugman

Grow-Up, Mr. Trump–You are not Robinson Crusoe

For the past couple of months, thoughtful people have been quietly worrying that the Trump administration might get us into a foreign policy crisis, maybe even a war.

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Trump with Michael Flint (National Security Advisor) and Steve Bannon (White House Chief of Staff)

Partly this worry reflected Donald Trump’s addiction to bombast and swagger, which plays fine in Breitbart and on Fox News but doesn’t go down well with foreign governments. But it also reflected a cold view of the incentives the new administration would face: as working-class voters began to realize that candidate Trump’s promises about jobs and health care were insincere, foreign distractions would look increasingly attractive.

The most likely flash point seemed to be China, the subject of much Trumpist tough talk, where disputes over islands in the South China Sea could easily turn into shooting incidents.

And while there may be an element of cynical calculation in some of the administration’s crisis mongering, this is looking less and less like a political strategy and more and more like a psychological syndrome.

The Australian confrontation has gotten the most press, probably because it’s so weirdly gratuitous. Australia is, after all, arguably America’s most faithful friend in the whole world, a nation that has fought by our side again and again. We will, of course, have disputes, as any two nations will, but nothing that should disturb the strength of our alliance — especially because Australia is one of the countries we will need to rely on if there is a confrontation with China.

Donald Trump: Americans apologise to Australia after US President’s phone call with Turnbull

But this is the age of Trump: In a call with Malcolm Turnbull, Australia’s Prime Minister, the U.S. President boasted about his election victory and complained about an existing agreement to take some of the refugees Australia has been holding, accusing Mr. Turnbull of sending us the “next Boston bombers.” Then he abruptly ended the conversation after only 25 minutes.

Well, at least Mr. Trump didn’t threaten to invade Australia. In his conversation with President Enrique Peña Nieto of Mexico, however, he did just that. According to The Associated Press, he told our neighbor’s democratically elected leader: “You have a bunch of bad hombres down there. You aren’t doing enough to stop them. I think your military is scared. Our military isn’t, so I just might send them down to take care of it.”

White House sources are now claiming that this threat — remember, the U.S. has in fact invaded Mexico in the past, and the Mexicans have not forgotten — was a lighthearted joke. If you believe that, I have a Mexico-paid-for border wall to sell you.

The blowups with Mexico and Australia have overshadowed a more conventional war of words with Iran, which tested a missile on Sunday. This was definitely a provocation. But the White House warning that it was “putting Iran on notice” raises the question, notice of what? Given the way the administration has been alienating our allies, tighter sanctions aren’t going to happen. Are we ready for a war?

There was also a curious contrast between the response to Iran and the response to another, more serious provocation: Russia’s escalation of its proxy war in Ukraine. Senator John McCain called on the president to help Ukraine. Strangely, however, the White House said nothing at all about Russia’s actions until Nikki Haley, the United Nations ambassador, issued a condemnation late Thursday night to the Security Council. This is getting a bit obvious, isn’t it?

Oh, and one more thing: Peter Navarro, head of Mr. Trump’s new National Trade Council, accused Germany of exploiting the United States with an undervalued currency. There’s an interesting economics discussion to be had here, but government officials aren’t supposed to make that sort of accusation unless they’re prepared to fight a trade war. Are they?

I doubt it. In fact, this administration doesn’t seem prepared on any front. Mr. Trump’s confrontational phone calls, in particular, don’t sound like the working out of an economic or even political strategy — cunning schemers don’t waste time boasting about their election victories and whining about media reports on crowd sizes.

No, what we’re hearing sounds like a man who is out of his depth and out of control, who can’t even pretend to master his feelings of personal insecurity. His first two weeks in office have been utter chaos, and things just keep getting worse — perhaps because he responds to each debacle with a desperate attempt to change the subject that only leads to a fresh debacle.

America and the world can’t take much more of this. Think about it: If you had an employee behaving this way, you’d immediately remove him from any position of responsibility and strongly suggest that he seek counseling. And this guy is commander in chief of the world’s most powerful military.

Thanks, Comey.

This column has been updated to reflect news developments.


President Trump and Asia: Lest it’s misunderstood–America First


January 23, 2017

President Trump and getting on the front foot in Asia: Lest it’s misunderstood–America First

 by  Editors, East Asia Forum
http://www.eastasiaforum.org/2017/01/23/president-trump-and-getting-on-the-front-foot-in-asia/#more-54137

The inauguration of the 45th US President, Donald Trump, is a game-changer and the fallout threatens Asian interests perhaps more than those in any other part of the world.

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The 45th President of the United States of America–Donald John Trump

‘For many decades, we’ve enriched foreign industry at the expense of American industry’, Trump declared in his inaugural speech, ‘[we’ve] subsidised the armies of other countries while allowing for the very sad depletion of our military; we’ve defended other nation’s borders while refusing to defend our own; and spent trillions of dollars overseas while America’s infrastructure has fallen into disrepair and decay’.

‘From this moment on, it’s going to be America First, America First’, Trump hailed. ‘Every decision on trade, on taxes, on immigration, on foreign affairs, will be made to benefit American workers and American families. We must protect our borders from the ravages of other countries making our products, stealing our companies, and destroying our jobs. Protection will lead to great prosperity and strength’.

That the United States under Trump would ‘reinforce old alliances and form new ones — and unite the civilized world against radical Islamic terrorism’ might provide a reassurance to allies in Asia and the Pacific, but one that is deeply qualified by the notion that paying for US deployments abroad is under scrutiny.

What is Donald Trump like and what will his presidency really be about? No one can know for certain: the only predictability about Trump is his unpredictability. But the experts on Trump, those who have studied his life and career and written his biographies, are clear on three things.

‘They see the same person they’ve always seen — the consummate classroom troublemaker; a vain, insecure bully; and an anti-institutional schemer, as adept at ‘gaming the system’ as he is unashamed of that. As they look ahead … to his administration … they feel confident predicting that he will run the country much as he has run his company: for himself’.

Apart from his father, Donald Trump’s chief mentor in life was Roy Cohn, a Joe McCarthy henchman, ‘a guy who stood for cold-eye calculus about how bullying people works’.

The world out there, without its norms or conventions, for which Trump on his record has no respect, is a bigger bully pit than even he has had to deal thus far in his career. On all the evidence we have, there is zero chance that in the fights he picks with world leaders Trump will be capable of separating personal pique from his country’s interests — let alone the interests of the broader public.

Nothing about inauguration day has allayed the two main anxieties for Asia that have been fuelled by the harbingers of radical change under a Trump presidency.

The old certainties that brought prosperity and a significant measure of stability to world affairs for over three-quarters of a century after the Second World War are no longer clear.

The US anchor of the Western security system, on which order in Asia and the Pacific has relied, may be being weighed.

The institutional edifice on which economic certainty and political confidence in the US-led global order has been built — the postwar institutional framework that guaranteed economic openness and the prospect of economic and political security — is under threat as Trump appears bent on trade wars and calls for protectionism. This is not a narrowly economic problem: it affects the global security outlook and especially economic and political security in Asia and the Pacific.

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The comfortable view in Tokyo, Canberra and even in Beijing that Trump in election mode was all political rhetoric, and that US global economic and security strategies would largely remain undisturbed, has given way to deeper disquiet.

Reliance on the enduring operational verities of continuing strategic engagement with Washington, around the uncertainties that Trump brings to the game, is an increasingly doubtful refuge for the business-as-usual camp.

So how do we deal with the new Trump reality show in Asia?

Certainly not by sitting back and taking what the bully pit dishes up, argues Hitoshi Tanaka in this week’s lead essay. Trump’s ‘America First’ foreign policy rhetoric is moving the United States away from its traditional role as a global leader at a time when the domestic and international political environments are undergoing significant change, Tanaka points out. Japan, as the United States’ most important ally in Asia, has to get on the front foot in defining the kind of engagement it wants with America. Prime Minister Abe, Tanaka says, has been right to engage Trump early and, he might have added, to swing through Southeast Asia and Australia last week to seek common positions across the region.

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The Giants of East Asia

‘Given that Trump appears keen on having Japan expand its share of the security burden’, says Tanaka, ‘the best option would be intensive US–Japan consultations that aim to forge a common approach to key challenges as an initial step toward a joint US–Japan strategy for the region’. The overarching objective would be to retain and enhance US engagement in Asia while bolstering Japan’s security roles and functions within the alliance framework, and its contributions to peace, without opening a regionally destabilising Pandora’s box’.

An important strategic priority among the four that Tanaka identifies is nurturing a stable and inclusive regional order. ‘On its current trajectory, the Asia-Pacific regional order risks fracturing into a two-tiered structure composed of the US-led liberal international order and an emerging Chinese sphere of influence’. The United States and Japan should prioritise engagement with China and find a new way to coordinate among regional institutions and advance cooperation among Asian powers. This requires rapid and immediate elevation of consultation among the Asian powers.Sitting back and relying on old default settings is unlikely to work in the new bully pit.

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In the new Trump era, Prime Minister Abe, on regional engagement, and Chinese President Xi Jinping, on the importance of economic globalisation at Davos, have both set good examples of getting on the front foot in Asia. One hopes that other Asian leaders, individually and collectively, will quickly follow suit.

The EAF Editorial Group is comprised of Peter Drysdale, Shiro Armstrong, Ben Ascione, Ryan Manuel, Amy King and Jillian Mowbray-Tsutsumi and is located in the Crawford School of Public Policy in the ANU College of Asia and the Pacific.
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Japan-US Alliance in the Trumpian Era

by Hitoshi Tanaka, JCIE

Donald Trump’s election to the US presidency came as a major surprise to Japan and the rest of Asia. And Trump’s controversial campaign rhetoric has brought into question the pillars of US foreign policy, including the value of US alliance relationships, its commitment to free trade and its willingness to protect regional stability in the Asia Pacific.

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Yet the region must find a way to work with the Trump presidency. Japanese Prime Minister Shinzo Abe signalled Japan’s intention to do so by becoming the first foreign leader to meet with President-elect Trump on 17 November. Looking ahead, the region faces a number of challenges that require intensive consultation and cooperation.

Trump’s ‘America First’ foreign policy rhetoric appears to be moving the United States away from its traditional role as a global leader at a time when the domestic and international political environments are undergoing significant change. Continued US leadership and intensive cooperation with allies and partners will remain critical to the maintenance of regional peace and prosperity.

While the Trump administration contemplates its foreign policy approach, America’s allies must review their regional approaches as well. Given that Japan remains the most important US ally in Asia, the two countries need to move forward and further build up the infrastructure of the alliance.

Japan has responded to the changing security environment with a remarkable suite of defence reforms aimed at expanding its ‘proactive contributions to peace’. Japan will need to continue to expand its contributions, but must do so in a way that is anchored by its identity as a peace-loving nation that does not use military means to pursue its economic or political agenda.

Given that Trump appears keen on having Japan expand its share of the security burden, the best option would be intensive US–Japan consultations that aim to forge a common approach to key challenges as an initial step toward a joint US–Japan strategy for the region. The overarching objective would be to retain and enhance US engagement in Asia while bolstering Japan’s security roles and functions within the alliance framework, and its contributions to peace, without opening a regionally destabilising Pandora’s box.

The Trump and Abe administrations should focus on four key areas. First, a new approach towards North Korea is necessary. ‘Strategic patience’ has failed to change North Korean behaviour. The Kim Jong-un regime is edging closer to producing a miniaturised nuclear warhead that can be mounted on a long-range missile. This poses a serious threat.

Resolving the situation on the Korean Peninsula requires comprehensive and coordinated efforts between the United States, Japan and South Korea to bring China into the fold. Beijing is still hesitant to apply crippling pressure to the extent that it would seriously undermine the Kim Jong-un regime’s political control and run the risk of causing North Korean collapse. The United States, South Korea and Japan must do more to reassure China that a full break with the regime in Pyongyang will not end up being antithetical to its national interests. This requires joint contingency planning among the allies as well as intensive discussions with China to prepare for worst-case scenarios on the peninsula.

Second, greater confidence-building among the United States, China, Russia, Japan and South Korea is sorely needed in order to de-escalate tensions, defuse nationalism and build relations rooted in win–win cooperation. While this may be hard to envision based on Trump’s election rhetoric, operational-level cooperation that is already underway between the United States, Japan and other likeminded countries in the region can gradually be expanded.

The third priority is nurturing a stable and inclusive regional order. On its current trajectory, the Asia-Pacific regional order risks fracturing into a two-tiered structure comprised of the US-led liberal international order and an emerging Chinese sphere of influence. The United States and Japan should prioritise engagement with China. They need to find some way to coordinate among regional institutions and advance functional cooperation among Asian powers.

Though the Trump administration is likely to place lower priority on international institutions, it is in the US interest to find some way to promote smoother coordination between the Asian Infrastructure Investment Bank and the One Belt, One Road initiative on the one hand and the IMF, World Bank and Asian Development Bank on the other.

Finally, the United States will need to find a balance between cooperation with Russia in areas of mutual interest and maintaining a unified front within the international community against unlawful Russian behaviour, such as its unilateral annexation of Crimea in March 2014. There is a strong need for intense consultations between Japan and the United States on this front.

There is a deep sense of uncertainty about the future role of the United States in East Asia. As Trump takes office, it will be crucial that his team makes a concerted effort to understand the positions of US allies and friends. As US domestic politics and the regional balance of power undergo changes, intensive consultations and cooperation with allies and partners will be critical. Forging a joint approach on key regional challenges in a way that opens the door to a shared US–Japan strategy will benefit both countries.

Hitoshi Tanaka is a senior fellow at the Japan Center for International Exchange and chairman of the Institute for International Strategy at the Japan Research Institute, Ltd. He previously served as Japan’s deputy minister for foreign affairs.

 This article is an extract from East Asia Insights Vol. 11 No. 3 December 2016, which is available in full here, and is reprinted with the kind permission of JCIE.

 

Donald Trump could be the best thing that’s happened to China in a long time


January 15, 2017

Donald Trump could be the best thing that’s happened to China in a long time

by Fareed Zakaria*

https://www.washingtonpost.com

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Donald Trump has perhaps attacked no country as consistently as China. During his campaign, he thundered that China was “raping” the United States, “killing” us on trade and artificially depressing its currency to make its goods cheap. Since being elected, he has spoken to the leader of Taiwan and continued the bellicosity toward Beijing. So it was a surprise to me, on a recent trip to Beijing, to find Chinese elites relatively sanguine about Trump. It says something about their view of Trump, but perhaps more about how they see their own country.

“Trump is a negotiator, and the rhetoric is all part of his opening bid,” said a Chinese scholar, who would not agree to be named (as was true of most policymakers and experts I spoke with). “He likes to make deals,” the scholar continued, “and we are good dealmakers as well. There are several agreements we could make on trade.” As one official noted to me, Beijing could simply agree with Trump that it is indeed a “currency manipulator” — although it has actually been trying to prop up the yuan over the past two years. After such an admission, market forces would likely make the currency drop in value, lowering the price of Chinese goods.

Chinese officials point out that they have economic weapons as well. China is a huge market for U.S. goods, and last year the country invested $46 billion in the U.S. economy (according to the Rhodium Group). But the officials’ calm derives from the reality that China is becoming far less dependent on foreign markets for its growth. Ten years ago, exports made up a staggering 37 percent of China’s gross domestic product. Today they make up just 22 percent and are falling.

China has changed

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China has changed. Western brands there are rare, and the country’s own companies now dominate almost every aspect of the huge and growing domestic economy. Few businesses take their cues from U.S. firms anymore. Technology companies are innovating, and many young Chinese boasted to me that their local versions of Google, Amazon and Facebook were better, faster and more sophisticated than the originals. The country has become its own, internally focused universe.

This situation is partly the product of government policy. Jeffrey Immelt , the Chief Executive of General Electric, noted in 2010 that China was becoming hostile to foreign firms. U.S. tech giants have struggled in China because of formal or informal rules against them.

The next stage in China’s strategy is apparently to exploit the leadership vacuum being created by the United States’ retreat on trade. As Trump was promising protectionism and threatening literally to wall off the United States from its southern neighbor, Chinese President Xi Jinping made a trip through Latin America in November, his third in four years. He signed more than 40 deals, Bloomberg reported, and committed billions of dollars of investments in the region.

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Chinese global leadership on trade gaining support from ASEAN, Australia and New Zealand

The centerpiece of China’s strategy takes advantage of Trump’s declaration that the Trans-Pacific Partnership is dead. The trade deal, negotiated between the United States and 11 other countries, lowered barriers to trade and investment, pushing large Asian economies such as Japan and Vietnam in a more open and rule-based direction. Now China has offered up its own version of the pact, one that excludes the United States and favors China’s more mercantilist approach.

Australia, once a key backer of the TPP, has announced that it supports China’s alternative. Other Asian countries will follow suit soon.

At the Asia-Pacific Economic Cooperation summit in Peru in November, John Key, who was then New Zealand’s prime minister, put it simply: “[The TPP] was all about the United States showing leadership in the Asia region. . . . We really like the U.S. being in the region. . . . But in the end if the U.S. is not there, that void has to be filled. And it will be filled by China.”

Xi’s speech at the summit was remarkable, sounding more like an address traditionally made by an American President. It praised trade, integration and openness and promised to help ensure that countries don’t close themselves off to global commerce and cooperation.

Next week, Xi will become the first Chinese President to attend the World Economic Forum at Davos, surely aiming to reinforce the message of Chinese global leadership on trade. Meanwhile, Western leaders are forfeiting their traditional roles. Angela Merkel and Justin Trudeau announced last-minute cancellations of their plans to speak at the Swiss summit. Trump has only made sneering references to globalism and globalization, and no senior member of his team currently plans to attend.

Looking beyond Trump’s tweets, Beijing seems to have concluded that his presidency might well prove to be the best thing that’s happened to China in a long time.

*Fareed Zakaria writes a foreign affairs column for The Post. He is also the host of CNN’s Fareed Zakaria GPS and a contributing editor for The Atlantic. Follow @FareedZakaria

Bilateral and Regional Implications of the U.S.-Philippine Enhanced Defense Cooperation Agreement


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Number 365 | December 21, 2016

ANALYSIS

Bilateral and Regional Implications of the U.S.-Philippine Enhanced Defense Cooperation Agreement

By Renato De Castro

On April 28, 2014, then Philippine Secretary of National Defense Voltaire Gazmin and U.S. Ambassador to the Philippines Philip Goldberg signed the Enhanced Defense Cooperation Agreement (EDCA) a few hours before President Barack Obama’s arrival in the Philippines. The signing of the EDCA sent a strong diplomatic signal to Beijing that it would have to take account of an American military presence in the Philippines if it chose to unilaterally change the status quo in the South China Sea. More significantly, a rotational U.S. military presence was expected to strengthen the Philippines’ determination to uphold its territorial claims vis-à-vis China in the South China Sea dispute backed by American resolve and credibility to honor its defense commitment to the Philippines.

 The 21st Century Philippine-U.S. Enhanced Defense Cooperation Agreement (EDCA)

This is not a new security treaty; it is merely an updated version of the 1951 Mutual Defense Treaty. This executive agreement serves as a framework by which the Philippines and the U.S. can develop their individual and collective defense capabilities. This goal is accomplished through the rotational deployment of American forces in Philippine bases. Although the EDCA allows American forces to utilize facilities owned and controlled by the Armed Forces of the Philippines (AFP), the Philippine base commander has unrestricted access to these locations. Likewise, American-built or American-improved infrastructure inside these installations can be used by the AFP. Furthermore, any construction and other activities within the Philippine bases require the consent of the host country through the Mutual Defense Board (MDB) and Security Engagement Board (SEB). More importantly, the EDCA is designed to minimize domestic opposition to U.S. military presence in the country by explicitly affirming Philippine sovereignty and providing a legal framework for increased American rotational presence rather than the re-establishment of permanent bases, which remains a sensitive issue among Filipinos.

The EDCA also proved advantageous to the AFP. With its small and obsolete naval force and an almost non-existent air force, the Philippine military benefits from the regular and short-term visits of U.S. forces that conduct military training as well as humanitarian and disaster response operations. Logistically, the U.S. construction of vital military facilities, infrastructure upgrades (such as hangers, air defense surveillance radar systems, ground based air defense systems, and naval operating bases), and the storage and prepositioning of defense equipment in agreed locations can lower the cost of the force and training modernization programs since the buildings and equipment can be shared and utilized jointly by American and Philippine Armed Forces.

The implementation of EDCA augurs well for the Philippine military. Philippines Air Force (PAF) fighter pilots can train with their American counter-parts at the five airbases that are part of the agreement. The PAF can also use facilities that American forces will improve or build inside its facilities. In addition, the Obama Administration has requested US$50 million from the U.S. Congress to fund the Maritime Security Initiative in Southeast Asia. The lion’s share of the funds in the first year will go to the AFP’s capability building program. It is expected that there will be allocations for the purchase of equipment to monitor activities and movements in the South China Sea.

Regional Security Implications

During the Sixth Annual Bilateral Security Dialogue (BSD) between the U.S. and the Philippines in Washington D.C. on March 18, 2016, it was announced that American forces will be allowed access to the following AFP bases: Antonio Bautista Air Base in Palawan; Basa Air Base and Fort Magsaysay in Luzon; Lumbia Air Base in northern Mindanao; and Mactan-Benito Ebuen Air Base in Cebu.

With EDCA’s implementation, the United States enhances the rotational presence of its forward-deployed forces, improves existing facilities, and pre-positions supplies and equipment in five agreed-upon locations. In the long-term, the effects of EDCA will go beyond the modernization of the Philippines’ military and increased inter-operability between the armed forces of the two allies. The EDCA will have two far-reaching strategic/diplomatic implications. First, a rotational U.S. military presence will strengthen the Philippines’ resolve to uphold its territorial claims in the South China Sea and test American credibility in honoring its defense commitment to the country. Second, the use of air and naval infrastructure in the Philippines will facilitate a rapid and massive deployment of American forces in case armed clashes erupt in potential flash points such as the South China Sea, the East China Sea, and in the Taiwan Strait.

Since the 1996 Taiwan Strait Crisis, the USAF has sought arrangements for the rotational deployments of its aircraft and personnel in the Philippines. This arrangement entails infrastructural improvements to keep facilities “warm,” enabling the rapid start of operations in the event of a crisis. American access to the aforementioned five operationally flexible Philippine bases addresses this need. It also thwarts China’s plan of preventing U.S. forces from operating in the disputed South China Sea.

Conclusion

Currently, there is small unit of USAF aircraft and personnel deployed in the Philippines.  Only time will tell whether this small USAF formation will become an effective forward-deployed force that can deter China’s expansion in the South China Sea. This will depend largely on how President Rodrigo Duterte would tolerate China’s expansion into the Philippines’ maritime domain, and the importance of his country’s long-standing alliance with the U.S. Recently, however, President Duterte has expressed critical comments toward the alliance. He announced that he wants the withdrawal of 107 American troops from Mindanao, saying that he was only maintaining them against possible attacks by Muslim militants. He declared that the Philippines would stop patrolling the country’s Exclusive Economic Zone (EEZ) in the South China Sea with the U.S. Navy to avoid provoking China. In early October, he also announced that the U.S.-Philippine Philbex joint amphibious exercise would be the last during his four-year term.

On November 7, 2016, despite his earlier rhetoric against the U.S. and the alliance, President Duterte suddenly gave his consent for the conduct of a joint U.S.-Philippine military exercise and for the implementation of the EDCA. His decision to continue joint U.S.-Philippine military exercises and to implement the EDCA will be conveyed to the MDB later this month. However, it is still too early to guess President Duterte’s future executive decisions toward the implementation of the EDCA in particular, and the alliance in general. The AFP’s recommendations to conduct joint exercises between U.S. and Philippine forces and the implementation of EDCA will not only affect Philippine national security interests but also the regional balance of power.

About the Author

Dr. Renato Cruz De Castro is a professor (on sabbatical leave) in the International Studies Department, De La Salle University, Manila, and holds the Charles Lui Chi Keung Professorial Chair in China Studies.  He is currently the U.S.-ASEAN Fulbright Initiative Researcher from the Philippines based in the East-West Center in Washington, D.C. He can be contacted at renato.dccastro@dlsu.edu.p

The East-West Center promotes better relations and understanding among the people and nations of the United States, Asia, and the Pacific through cooperative study, research, and dialogue.

Established by the US Congress in 1960, the Center serves as a resource for information and analysis on critical issues of common concern, bringing people together to exchange views, build expertise, and develop policy options.

The Asia Pacific Bulletin (APB) series is produced by the East-West Center in Washington.

APB Series Editor: Dr. Satu Limaye, Director, East-West Center in Washington
APB Series Coordinator: Peter Valente, Project Assistant, East-West Center in Washington

The views expressed in this publication are those of the authors and do not necessarily reflect the policy or position of the East-West Center or any organization with which the author is affiliated.

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Australia-Philippines Relationship Status: “It’s Complicated”


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Number 364 | December 14, 2016

ANALYSIS

Australia-Philippines Relationship Status: “It’s Complicated”

by Charmaine Deogracias and Orrie Johan

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The Philippines and Australia fought side by side in the 1944-1945 campaign that liberated the Philippines from Japanese occupation. After the war, both countries forged alliances with the United States, as Australia and an independent Philippines became increasingly friendly. Today, with their overlapping and proliferating security partnerships, Australia and the Philippines have built on seven decades of bilateral ties to become comprehensive partners.

The two countries share an interest in the continued security and stability of the region and in freedom of navigation of the seas. The rising strength of China also looms large in the security calculus of each country. Both are trying to navigate the vast economic benefits and security concerns that China’s rise presents in the region, and this focus has brought the two countries much closer together. A major difference between the two is that the Philippines has a territorial dispute with China in the South China Sea while Australia does not.  This means that for a time Australia was more worried than the Philippines about being entrapped into a war against China. Now that friendly relations between China and the Philippines have been restored under Philippine President Rodrigo Duterte, who vowed to rely on China economically, there is greater convergence with Australian interests in avoiding conflict with China. But Philippines-Australia relations are now being undermined by the new Philippine government’s allergic reaction to human rights and resulting criticisms by Australian and U.S. governments. Relations are also affected by Duterte’s skepticism of Australian and U.S. resolve in supporting the Philippines, and by Australia’s concerns about a shift by Duterte away from the U.S. and towards China. These trends pose major challenges for Philippines-Australia relations and risk causing them to deteriorate.

Australia’s Cautious Bilateralism

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Australia has chosen to respond to the risk of increased regional instability by pursuing closer ties with many of its neighbors in the region, including with the Philippines. Until recently, Australia relied on its close alliance with the U.S. for its security and did not pursue strong security relationships with many other countries in the region. China’s growing challenge to U.S. predominance in the Asia-Pacific has led Australia to shift its approach by bolstering its ties with other regional powers, such as Japan and India.

This trend was strongly encouraged by the U.S., which under the Obama administration has advocated a similar approach to others throughout the region to help develop an Asia-Pacific Principled Security Network and boost regional stability. However, this approach has also become more attractive for Australia because of concerns that the U.S. could reduce its regional presence or even surrender its regional leadership role in the long-term, given growing opposition to international engagement within the United States. In such a scenario, strong Australian ties with other countries in the region could provide additional leverage in future interactions with China.

Among these bilateral partnerships, Australia’s relationship with the Philippines has been one of its fastest growing. Bilateral security cooperation began in earnest in 2005 when the Australian government expressed interest in assisting the Philippines with counterterrorism challenges. The relationship has since deepened to include a Status of Visiting Forces Agreement (SOVFA), which went into force in 2012.

Australia now conducts joint military drills with the Philippines, and has participated in the annual Philippines-U.S. Balikatan exercises since 2014. Australia has also supported the Philippines’ right to pursue an international arbitration tribunal’s judgement on its disputes with China in the South China Sea, over Chinese objections. However, despite these major bilateral advances, there have been signs that Australia is less willing than the Philippines to consolidate strong ties. Australia chose to sign a comprehensive partnership with the Philippines rather than the stronger strategic partnership that the Philippines sought, even as it chose to ink such an agreement with Singapore.

The reason for this appears to be that Australia has historically avoided escalating tensions in the region and chosen to refrain from pursuing a strategic partnership or alliance with the Philippines due to concerns that such an action could undermine stability in the South China Sea or force Australia into a conflict with China.

The Philippines’ Pivot to China 

Given the foreign policy shifts that Duterte is seeking, Australia’s calibrated form of security engagement with the Philippines is the kind that Duterte favors for now. His independent foreign policy is shaping up to have Russia as an ally, China as an economic partner, and have Japan compete with China to provide economic benefits and regional security for the Philippines.

Duterte would prefer to keep the status quo with the US alliance and the Australian comprehensive partnership, but their criticisms of his controversial anti-drug campaign will complicate this. Australia and the U.S. have provided a great deal of support to the Philippine military but Duterte has questioned Australian and U.S. resolve against China. He also criticized the US and Australia for meddling in Filipino affairs by condemning his anti-drug campaign that has so far resulted in over 3,000 extra-judicial killings. But his anti-U.S. sentiments are more deep-seated for personal and ideological reasons.

Changing the rhetoric on the South China Sea issue post-arbitration ruling, Duterte has chosen to take a more conciliatory approach in resolving territorial disputes with China and is poised to settle the contentious issue of sovereignty bilaterally. He has not sought a complete overhaul of his predecessor’s policies, as he expressed willingness to maintain close ties with Japan, which has become concerned at Duterte’s talk of radical shifts by the Philippines towards China. He is open to joint military exercises with Japan, but has redirected the focus of bilateral drills with U.S. armed forces from maritime security to humanitarian assistance and counterterrorism, and scrapped naval drills such as amphibious landings and boat raids altogether.

Duterte has not yet spoken of abandoning Australia or reducing the already low scale military exercises with it the way he has about the United States. But the fact is that Australia’s criticisms of Duterte’s extra-judicial domestic policies and controversial comments have put Australia on Duterte’s watch list alongside the European Union and the United Nations. It appears that under Duterte, Australian ambivalence towards stronger ties with the Philippines is beginning to be reciprocated.

Until recently, the main factor complicating Australia-Philippines relations was a divergence in attitudes to the risk of conflict against China. While that is no longer the case, differences over the Duterte administration’s policy approaches are now the primary obstacle to strengthening Australia-Philippines ties. These concerns will prevent the bilateral relationship from improving and may even undermine it in the future.

About the Authors

Charmaine Deogracias is  a journalist writing for Vera Files in the Philippines. She can be reached at charmdeogracias@gmail.com.

Orrie Johan is a researcher at the East-West Center in Washington. He recently obtained a master’s degree in Security Studies from Georgetown University. He can be contacted at orrie.johan@gmail.com

The East-West Center promotes better relations and understanding among the people and nations of the United States, Asia, and the Pacific through cooperative study, research, and dialogue.

Established by the US Congress in 1960, the Center serves as a resource for information and analysis on critical issues of common concern, bringing people together to exchange views, build expertise, and develop policy options.

The Asia Pacific Bulletin (APB) series is produced by the East-West Center in Washington.

APB Series Editor: Dr. Satu Limaye, Director, East-West Center in Washington
APB Series Coordinator: Peter Valente, Project Assistant, East-West Center in Washington

The views expressed in this publication are those of the authors and do not necessarily reflect the policy or position of the East-West Center or any organization with which the author is affiliated.

For comments/responses on APB issues or article submissions, please contact washington@eastwestcenter.org.

East-West Center | 1601 East-West Road | Honolulu, HI | 808.944.7111

East-West Center in Washington | 1819 L Street, NW, Suite 600 | Washington, DC | 202.293.3995

East-West Center in Washington, 1819 L Street, NW, Suite 600, Washington, DC 20036