February 23, 2019
A Trade Deal with China will require a more comprehensive approach, based on a fundamental shift in mindset, say Andrew Sheng and Xiao
In the ongoing US-China trade talks, considerable progress has been made on several key trade issues, such as intellectual-property rights protection. But to defuse tensions in any sustainable way will require a more comprehensive approach, based on a fundamental shift in mindset.
HONG KONG – Trade negotiations between the United States and China are closing in on the March 1 deadline, after which the bilateral tariff war will resume – beginning with an increase from 10% to 25% on $200 billion worth of Chinese products. While global financial markets are fluctuating wildly, investors seem to assume that too much is at stake for the US and China to fail to reach a deal. Their optimism could prove short-lived.
To be sure, there has been considerable progress on several key issues, such as technology transfer, protection of intellectual-property rights, non-tariff barriers, and implementation mechanisms. But to defuse tensions between the US and China in any sustainable way will require a more comprehensive approach, based on a fundamental shift in mindset.
Over the last 40 years, Sino-US engagement has been largely cooperative, reflecting a holistic approach that takes into account the interests of the entire global system. US President Donald Trump’s administration, however, does not seem to believe that engagement with China (or anyone else for that matter) can benefit both sides. As Trump’s “America First” agenda shows, the US is now playing a zero-sum game – and it is playing to win.
For example, the US has threatened to punish or desert its closest allies unless they increase their defense spending. Under pressure from the Trump administration, South Korea just agreed to increase its contributions to US forces in Korea by 8.2%, to $923 million, in 2019.
Similarly, Trump has repeatedly disparaged fellow NATO members for insufficient defense spending. Most recently, Trump has criticized Germany for spending only 1% of GDP for defense, compared to America’s 4.3%. German Chancellor Angela Merkel responded by condemning US isolationism at the Munich Security Conference, and calling for the revival of multilateral cooperation.
The Trump administration’s myopic approach is also apparent in its preoccupation with bilateral trade imbalances. Any US deficit with another economy is, from Trump’s perspective, a loss. Given this, if China agrees to cut its bilateral trade deficit with the US, other economies with bilateral surpluses vis-à-vis the US – including close allies, such as the European Union and Japan – may find themselves facing intensifying pressure to do the The weakening of trade that could result in this scenario would compound existing negative pressure on global growth, hurting everyone. A global economic downturn is the last thing the world needs at a time when it is already beset with risks, including a possible no-deal Brexit and populist gains in the European Parliament election in May.
Of course, while Trump does not spare his allies, his primary target remains China. After all, the competition between the US and China extends far beyond trade. Although the US maintains military, technological, financial, and soft-power superiority, China has been steadily catching up, leading to bipartisan support in the US for a more confrontational approach.
Last October, US Vice President Mike Pence bluntly accused China of technology theft, predatory economic expansion, and military aggression. Pence’s stance echoed the fears of the US national security community. As former US Defense Secretary Ashton Carter put it, “Because it is a Communist dictatorship, China is able to bring to bear on US companies and our trading partners a combination of political, military, and economic tools that a government such as ours cannot match. This puts us at an inherent disadvantage.”
And yet America’s tools are hardly useless. The US authorities have mobilized a broad range of domestic and international resources – from law and diplomacy to national security measures – to stop the overseas expansion of the Chinese telecommunications giant Huawei. If Western countries allow Huawei to build their 5G infrastructure, America’s hawks and their allies argue, they will be vulnerable to cyberattacks from China in some future war.
All of this has shaken business and market confidence to the core, wiping out trillions of dollars in market capitalization. And the Trump administration’s apparent insistence that countries choose sides in its dispute with China is further heightening fears. As the rest of the world’s trading countries understand, Trump’s approach will fragment business and reverse the globalization-enabled economies of scale that have fueled growth for decades.
“Ending the Sino-US trade war will require considerable statesmanship on the part of Trump and Chinese President Xi Jinping. But, beyond that, both sides need to recognize that supporting global peace and prosperity requires less ideology and more respect for diversity of political, social, and cultural systems. Failing that, the fault lines will continue to deepen – much as they did in the 1930s – potentially setting the stage for full-blown war”- .
More broadly, the Trump administration’s rejection of multilateralism undermines the global cooperation needed to confront a range of issues, including migration, poverty and inequality, climate change, and the challenges raised by new technologies. Trump’s focus on geopolitical rivalry – and the associated rise in security and defense spending – will dramatically reduce resources available for global public goods, such as infrastructure investment and poverty-reduction programs.
February 14, 2019
Southeast Asian economies may face major economic headwinds this year amid US–China trade tensions and US Federal Reserve interest rate increases. To help weather the impact, ASEAN member states should prioritise progress on regional economic initiatives.
Some observers think that the 90-day truce between Washington and Beijing could beget better relations between the two powers. But they may be overestimating China’s ability to make concessions that fulfil what the Trump administration wants. Buying more American products is easy, but implementing measures to address ‘unfair’ trade practices to a degree that satisfies the United States is more difficult to achieve within 90 days. More rounds of tariff escalations or other trade-restricting measures could be in the offing.
On the financial front, in December 2018 the US Federal Reserve raised interest rates from 2.25 to 2.50 per cent and forecast the possibility of further increases in 2019. The Fed did so to ensure there will be room for it to use monetary policy and decrease interest rates to fight the next US recession.
Additional hikes could trigger capital pull-outs from Southeast Asian countries as investors move funds to seek higher yields in the United States. If not well-managed, such capital outflows may instigate financial instability in the ASEAN region.
Regional economies must brace themselves for future economic and financial turbulence. While they are unlikely to be able to avoid such headwinds, ASEAN member states can nevertheless cushion the impact through regional initiatives: the ASEAN Economic Community (AEC) 2025, ASEAN–Hong Kong Free Trade and Investment Agreements (AHKFTA and AHKIA), Regional Comprehensive Economic Partnership (RCEP) and Chiang Mai Initiative Multilateralization (CMIM).
Policymakers should prioritise the complete implementation of the AEC 2025. This is a regional economic integration project by the 10 ASEAN member states designed to achieve five objectives: a highly integrated and cohesive economy; a competitive, innovative and dynamic ASEAN; enhanced connectivity and sectoral cooperation; a resilient, inclusive, people-oriented and people-centred ASEAN; and a global ASEAN.
Advancing the AEC 2025 will enable businesses to better tap into the integrated market of over 600 million people, rendering regional economies more resilient to the incoming headwinds.
Southeast Asian governments should also ratify the AHKFTA and AHKIA signed in November 2017 so that these treaties can enter into force in early 2019 as expected. The agreements will enhance cross-border flows of goods, services and investment between ASEAN and Hong Kong.
The agreements will not only allow firms to enjoy greater access to goods and services markets and better investment protection, but also enable ASEAN nations to further tighten trade and investment ties with China. The latter will help Southeast Asian economies to recuperate from any damage that future Washington–Beijing trade spats may inflict on them.
ASEAN authorities should also concentrate on wrapping up RCEP talks. If concluded, this 16-economy free trade bloc will encompass a market of 3.6 billion people that contributes to a third of global GDP. It will cover 29 per cent of global trade and 26 per cent of the world’s foreign direct investment flows.
Concluding the negotiation will create more opportunities for businesses to deepen their supply chains, and provide RCEP economies with another means to diversify their economic relations and cushion against the negative effects of future US–China trade war spats.
Finally, ASEAN nations together with China, Japan and South Korea (ASEAN+3) should advance the CMIM, a regional financial safety net under the ASEAN+3 framework. Launched in 2010, the scheme provides financial support through a network of currency swaps to help ASEAN+3 nations weather their balance-of-payments difficulties.
Because future Fed rate hikes could trigger investor panic leading to financial instability and capital flights in certain regional economies, the CMIM can provide financial assistance to alleviate such problems.
Admittedly, the above initiatives face their own challenges. A major hurdle for implementing the AEC 2025 is a lack of coordination among domestic ministries and agencies. Individual ASEAN countries must sort out how to improve coordination among the involved authorities. Certain domestic hurdles must also be cleared for a successful ratification of the ASEAN–Hong Kong treaties.
Planned elections in Australia, India, Indonesia and Thailand in 2019 may delay the conclusion of RCEP negotiations in the first half of 2019. Politicians in these nations will likely prioritise their electioneering over international matters. And if the momentum of RCEP talks picks up in the second-half of the year, the parties’ different positions and preferences will still need to be reconciled to seal the deal.
Regarding the CMIM, while a laudable agreement was signed in December 2018 to create more favourable conditions that will enable the regional financial safety net to better assist in a crisis, efforts to advance other aspects of the CMIM have been lacklustre in recent years.
For one, its size has remained the same at US$240 billion since 2012. With this amount, the scheme can at best provide simultaneous lending support to a few small- and medium-sized economies should they come under a crisis. The participants must push for an expansion of the CMIM’s size.
US–China trade tensions and Fed rate hikes will likely generate undesired effects for Southeast Asian economies this year. Despite the challenges of the above initiatives, ASEAN countries must collectively pursue them to navigate through the coming economic headwinds. Time is running out and policymakers must act fast.
Kaewkamol Pitakdumrongkit is Deputy Head and Assistant Professor at the Centre for Multilateralism Studies, S Rajaratnam School of International Studies (RSIS), Nanyang Technological University, Singapore.
February 13, 2019
Foreign Policy–Dealing with the US and EU : Cambodia’s strategic option(s)
‘Shopping diplomacy’, arms purchases, and good military cooperation with the US and EU canld help thwart Western criticism of Cambodia’s human rights record. But Soun Nimeth questions whether these are worth the risks, given Cambodia’s bad experiences in the 1970s when it fell into the abyss of a geo-political war.
With the looming geopolitical war, Cambodia is trapped in the center of a power rivalry between China and the US as well as the latter’s ally, the EU. This is both in terms of strategic contest and economic rivalry.
To recall the 1970s when Cambodia fell in the abyss of a geo-political war, the country now has no reason to feel flattered once again when it is in the cross hairs of the superpowers.
Despite several attempts, through a direct response to US Vice President Mike Pence’s letter as well as a face-to-face meeting with US Deputy Assistant Secretary of Defence for South and Southeast Asia Joseph H. Felter, to assure the US that Cambodia would not allow Koh Kong to be used as a Chinese naval base, the efforts seem to have fallen on deaf ears.
READ ON: http//www.phnompenhpost.com/national/trump-rein-your-embassy-hun-sen-calls-us-president-warn-diplomats-about-interference
The determination to project Cambodia as China’s proxy state seems to have already been carved in stone in America’s regional strategy. Unjustified concern was expressed in the latest “Worldwide Threat Assessment of the US Intelligence Community” that went all the way to allege that Cambodia might amend its constitution to cater for foreign military bases.
Cambodia is cautiously mindful of its dark past and it is in the interests of the Kingdom to dispel the paranoia of the US and EU. The question is, how can Cambodia go about it.
Looking in the region, Cambodia can find some clues from countries like Thailand, Vietnam and Singapore.
Neither the US nor the EU has ever demanded the reinstatement of the Thaksin government like they did vis-à-vis the dissolved CNRP. There is no public condemnation for the repeated election delays.
In contrast, Thai Prime Minister Prayut Chan-o-cha was welcomed to the White House by President Donald Trump in October 2017 as the Prime minister embarked on what Pongphisoot Busbarat called “shopping diplomacy”. The “shopping list” was aimed to reduce the US trade deficit with Thailand that amounted to $19 billion (2016). It included the lifting of the import ban on American pork and poultry products, the purchase of Boeing aircraft by Thai Airways, the purchase of American coal by Siam Cement Group, the boosting of investment in the US worth $6 billion to create more than 8,000 jobs, the agreement for Thai petroleum company PTT to invest in shale gas factories in Ohio and the $261 million arms purchase.
Thai Prime Minister Prayut Chan-o-cha was also received by British Prime Minister Theresa May and French President Emmanuel Macron in June 2018. In the latter meeting, Thailand’s space agency signed an agreement to buy an observation satellite worth $215 million from French manufacturer AirBus.
In the recent article entitled “ASEAN must make EU a strategic partner”, veteran journalist Kavi Chongkittavorn wrote that “Thailand sacrificed blood, sweat and tears to overcome the stringent criteria outlined by the EU, which would not have been possible without its military rulers’ vigorous use of the much-condemned Section 44.”
One would question what did he imply when referring to “blood, sweat and tears” to secure the EU’s lifting of the yellow card? This may hold the key on how the current Thai government could please Western countries despite being a military junta born from a coup.
In October 2018, when General Secretary Nguyen Phu Trong became the first Vietnamese leader to hold a dual role as central committee general secretary and president, no Western nation raised any alarm or condemnation.
Vietnam is a single-party state by all accounts but it enjoys excellent relations with the US and the EU. This is attributed to two factors; one being that they all share a common geopolitical arch-rival, China; and another one is the usage of Vietnam’s shopping diplomacy.
During the visit of French Prime Minister Edouard Philippe to Hanoi in November 2018, France and Vietnam signed two business deals worth over $10 billion. The deals included the purchase by Vietjet Air of 50 AirBus A321 neo planes worth $6.5 billion and CFM Leap engines worth $5.3 billion.
The recent Khmer Times opinion by Doung Bosba titled “Is everything about China bad?” has excerpted the Naval Time’s article on the decades-long lease of Singapore port to the US navy for the operation of the Logistics Group Western Pacific (COMLOG WESTPAC) and Navy Region Center Singapore (NRCS) among others.
Good military cooperation and being a strategic ally with the US has helped Singapore to navigate away from any storm of criticism over the nature of its government, which has been dominated by the People’s Action Party since the 1959 general elections.
From the cases of Thailand, Vietnam and Singapore, various options and lessons can be drawn such as cutting trade deficit, detaching from China or making China an enemy, conducting “shopping diplomacy” or leasing facilities to the US military. Whether such options are viable, considering Cambodia’s strategic predicament and its resources, is the question. Even more important, would there be assurances that the US and EU would not antagonize the Cambodian government, should Cambodia choose to please them? Who would guarantee that after pleasing the Western countries, Cambodia would not become the backyard of Thailand and Vietnam both politically and economically?
Without a clear answer to these questions, it is very much likely that Cambodia will continue to navigate in the dark and both the US and EU will continue to antagonize the Cambodian government for their own geo-political interests. Castigating Cambodia for its record on democracy and human rights is just a sideshow. The issue is greater than that if we consider why the US and EU coddle Thailand, Vietnam and Singapore– whose levels of democracy are far from the level demanded from Cambodia.
Soun Nimeth is a Cambodian analyst based in Phnom Penh
February 5, 2019
In defense of the elites
by Dr. Fareed Zakaria
This year’s World Economic Forum, more than usual, prompted a spirited round of elite-bashing, which has now become the trendy political posture on both the right and left. On one side, President Trump and Fox News hosts slam the out-of-touch establishment that, according to them, has run things into the ground. On the other side, left-wingers decry the millionaires and billionaires who, in one author’s phrase, “broke the modern world.”
Underlying these twin critiques is a bleak view of modern life — seen as a dysfunctional global order, producing stagnant incomes, rising insecurity and environmental degradation. But is this depiction, in fact, true? Are we doing so very badly that we need to bring back the guillotines?
On the simplest and most important measure, income, the story is actually one of astonishing progress. Since 1990, more than 1 billion people have moved out of extreme poverty. The share of the global population living in these dire conditions has gone from 36 percent to 10 percent, the lowest in recorded history. This is, as the World Bank president, Jim Yong Kim, notes, “one of the greatest achievements of our time.” Inequality, from a global perspective, has declined dramatically.
And all this has happened chiefly because countries — from China to India to Ethiopia — have adopted more market-friendly policies, and Western countries have helped them with access to markets, humanitarian assistance and loan forgiveness. In other words, policies supported by these very elites.
Look at any measure from a global perspective and the numbers are staggering. The child mortality rate is down 58 percent since 1990. Undernourishment has fallen 41 percent, and maternal deaths (women dying because of childbirth) have dropped by 43 percent over roughly the same period.
I know the response that some will have to these statistics. The figures pertain to the world in general, not the United States. Things might have improved for the Chinese, but not for the denizens of rich countries. That sense of “unfairness” is what is surely fueling Trump’s “America First” agenda and much of the anger on the right at the international system. (More bewilderingly, the left, traditionally concerned about the poorest of the poor, has become critical of a process that has improved the lives of at least 1 billion of the world’s most impoverished people.)
When criticizing the current state of affairs, it’s easy to hark back to some nostalgic old order, the modern world before the current elites “broke” it. But when was that golden age? In the 1950s, when Jim Crow reigned in the United States and women could barely work as anything more than seamstresses and secretaries? The 1980s, when two-thirds of the globe stagnated under state socialism, repression and isolation? What group of elites — kings, commissars, mandarins — ran the world better than our current hodgepodge of politicians and business executives?
Even in the West, it is easy to take for granted the astounding progress. We live longer, the air and water are cleaner, crime has plunged, and information and communication are virtually free. Economically, there have been gains, though crucially, they have not been distributed equally.
But there have been monumental improvements in access and opportunity for large segments of the population that were locked out and pushed down. In the United States, the gap between black and white high school completion has almost disappeared. The poverty gap between blacks and whites has shrunk (but remains distressingly large). Hispanic college enrollment has soared. The gender gap between wages for men and women has narrowed. The number of female chief executives at Fortune 500 companies has gone from one to 24 over the past 20 years. Female membership in national legislatures of Organization for Economic Cooperation and Development member countries has almost doubled in the same period. No countries allowed same-sex marriage two decades ago, but more than 20 countries do today. In all these areas, much remains to be done. But in each of them, there has been striking progress.
I understand that important segments of the Western working class are under great pressure, and that they often feel ignored and left behind by this progress. We must find ways to give them greater economic support and moral dignity. But extensive research shows that some of their discomfort comes from watching a society in which these other groups are rising, changing the nature of the world in which they’d enjoyed a comfortable status.
After 400 years of slavery, segregation and discrimination in the United States, blacks have been moving up. After thousands of years of being treated as structurally subordinate, women are now gaining genuine equality. Once considered criminals or deviants, gays can finally live and love freely in many countries. The fact that these changes might cause discomfort to some is not a reason to pause, nor to forget that it represents deep and lasting human progress that we should celebrate.
(c) 2019, Washington Post Writers Group
January 29, 2019
Cambodia’s Foreign Policy: Challenges and prospects
Strategically located at the center of the Mekong Region and Southeast Asia, Cambodia has great potential to become a bridging state in the region and strengthen its leadership role within ASEAN and other sub-regional institutions, argues Chheang Vannarith.
Small states such as Cambodia have fewer foreign policy options, given the narrowing strategic space for small states to manoeuver. In such a transitional period, Cambodia has to adjust and adapt in order to survive and thrive.
Foreign policy is not only the extension of domestic politics but also the adaptation to external dynamics. Cambodia’s worldview is dynamic – it continues to observe the main trends of regional and global politics, from which multiple futures can be formed.
Cambodia’s foreign policy has been robustly reformed over the past three years, especially in capacity building and strategic analysis. We have established the National Institute for Diplomacy and International Relations (NIDIR) to equip diplomats with analytical as well as soft skills. We need a few more years to see the fruits of this capacity-building programme.
The Founding principles of Cambodia’s Foreign Policy are permanent neutrality, non-alignment, peaceful co-existence, non-interference, no military alliances or military pacts, and no foreign military bases on its soil. The tenets of Cambodia’s development foreign policy objectives are economic development and poverty reduction, peace and security, cultural identity, and the national role in the global community.
How to transform the regional and international environment into a source of national development has been the priority of Cambodia’s foreign policy. Cambodia has been promoting an open and inclusive international economic multilateral system that is based on international laws and norms.
As a small and open economy, Cambodia is very much connected with other economies, relying on external markets and the inflow of foreign capital and technology. Hence, Cambodia is committed to upholding economic multilateralism through promoting a rules-based international order. Towards this, reforming and making the World Trade Organization (WTO) more relevant to both developed and developing countries is critically important to save the global trading system.
Asean is the cornerstone of Cambodia’s foreign policy as it provides an important shield to protect the sovereignty and independence of its member states, whilst also mitigating and filtering interference from major powers. As long as ASEAN members stay united to protect each other’s interests, I believe that ASEAN can navigate through uncertain and challenging times ahead. Cambodia has largely benefited from ASEANean’s economic integration, although the development gap remains an issue.
Within the context of contestation in the Asia Pacific region, the best scenario of a regional order, from the Cambodian perspective, would be an Asean-driven regional order. Neither a US-centric regional order nor Sino-centric regional order will make our region stable. Only ASEAN can ensure that regional cooperation and integration remain on track, although at a slow pace. Consultation and consensus, non-interference, and equal sovereignty are the norms that need to be nurtured.
National role perception
The perception of Cambodia’s national role does matter in foreign policy. Cambodia aims to become a peace contributor, civilization connector, and a bridging state in the Mekong region and ASEAN. In terms of contribution to peace, Cambodia has contributed more than 5,000 troops under the framework of the United Nations to various conflict zones. Currently, we have 810 troops conducting missions in four countries, including South Sudan, Mali, Central African Republic, and Lebanon.
This month, Cambodia hosted the launch of the Asian Cultural Council (ACC) with the aim to further connect civilisations in Asia and beyond. Building synergies between cultural diversity and sustainable development, peace, connectivity, and innovation is a new era of Cambodia’s cultural diplomacy, which is more proactive and dynamic. Cambodia has more to contribute to the Asian century under the framework of the ACC.
Strategically located at the Hub of the Mekong Region and Southeast Asia, Cambodia has great potential to become a bridging state in the region. To realise this vision, Cambodia needs to build its democratic governance to become a source of inspiration for other regional countries, strengthen its leadership role within ASEANean and other sub-regional institutions, and maintain trust and good relations with all Asian powers, especially China, India, and Japan.
Cambodia’s Foreign Policy will become more robust in response to fast-changing regional and global geo-politics. We have only one choice: adapt or be left behind. Cambodia must adapt itself to an evolving World Order as well as the contest to establish a new regional order in the Asia-Pacific. We need to be steadfast and stay ahead of the curve in our foreign policy strategic vision and tactical approaches. Capacity building and human capital are even more critical. Cambodia needs to invest more in research capacity in order to have more informed foreign policy making and develop a new generation of professional diplomats who are capable of analyzing international trends and building trust and friendship around the globe.
To fill the research capacity gap, Asian Vision Institute (AVI) is founded to conduct academic and policy researches in order to inform policy makers and stakeholders in Cambodia and the region. Multi-stakeholder dialogues on national and international issues need to be encouraged as Cambodia is looking for innovative ideas and solutions. AVI, by connecting people, knowledge and actions in Asia, can help Cambodia to ride the tide of the Asian century.
Dr. Chheang Vannarith is President of Asian Vision Institute