Trade outcome vital to success of ASEAN Summit


March 18, 2018

Trade outcome vital to success of ASEAN Summit

by Mari Pangestu and Peter Drysdale

http://www.eastasiaforum.org/2018/03/16/trade-outcome-vital-to-success-of-asean-summit/
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Economists Dr Mari Elka Pangestu (above) and Dr. Peter Drysdale

Australia has been an ASEAN dialogue partner since 1974, an acknowledgement of the centrality of ASEAN to Australia’s regional security. There have been ASEAN summits with Japan, China, the United States and India but the ASEAN summit in Sydney this weekend is the first in Australia.

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The Host, ASEAN-Australia Special Summit 2018, Prime Minister Malcolm Turnbull

The summit comes at a time when leaders in ASEAN and Australia confront a number of strategic choices. None is more important than how they respond to the threat to the global trading system, the foundation of East Asia’s prosperity and a critical element in its security.

ASEAN centrality has been an organising framework for Asian economic policy cooperation over the past half century.

The retreat of the United States under President Trump from leading the global economic order; the rise of China with its assertive stance on the South China Sea and its infrastructure development ‘carrot’ in the Belt and Road Initiative; a putative ‘Quad’ configuration of Indo-Pacific power around the US, India, Japan and Australia; and the North Korea crisis all present significant challenges to ASEAN’s central role in the region.

Last week, Mr Trump fired the first shots in what could become a global trade war with the imposition of 25 per cent tariffs on steel imports and 10 per cent tariffs on aluminium. The action, taken under the Section 232 national security provisions of US trade law, risks provoking tit-for-tat retaliation by trading partners who, unlike Canada, Mexico and Australia, aren’t able to negotiate exemption from its impact. It also risks the WTO rules-based trading system.

Mounting uncertainty has affected confidence in trade and economic recovery since Trump translated his campaign protectionist rhetoric into an ‘America First’ agenda. But the White House announcement last week threw the international system into chaos. If Trump’s imposition of these tariffs on a flimsy national security pretext does not outright flout the rules of the WTO, then it at least flouts its widely shared norms.

The response from the European Commission was to ‘do the same stupid things to respond to stupid things’ — promising retaliatory tariffs on a range of US exports into Europe, from Harley-Davidson motor bikes to bourbon whisky. The tariff imposts also launched a process in which partners like Australia successfully begged exemption on various grounds both sound and spurious, all of which are in clear violation of the understanding that trade will be conducted under internationally agreed rules, not ad hoc bilateral deals. That’s the beginning of the rot; it may be a short-term tactical victory for countries like Australia, but it is not effective trade policy strategy.

What can be done now?

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Australia’s Prime Minister Malcolm Turnbull (R) waves with ASEAN leaders (L to 2nd R) Laos’ Prime Minister Thongloun Sisoulith, Indonesia’s President Joko Widodo, Cambodia’s Prime Minister Hun Sen, Brunei’s Sultan Hassanal Bolkiah and Thailand’s Prime Minister Prayuth Chan-O-Cha for a family picture at the ASEAN-Australia Special Summit in Sydney on March 17, 2018.

The strategic objective is to keep the WTO system alive in the face of a potentially mortal threat. The United States is playing itself out of the system. Learning to live without the United States as a rules- and norms-enforcer won’t be easy, but it is the only response that will protect the system and avoid the large-scale economic cost and the dangerous political consequences of an escalating trade war.

Asia’s response to the Trump trade threat is critical for the international system. Asia’s prosperity and political stability depends critically on its integration into the global economy through the rules-based trading system which has underpinned the growth of Asian interdependence, Asia’s economic prosperity and its political security.

China is in Trump’s cross hairs as ‘the cause of US trade deficits because of its violation of trade rules’. But China is also a crucial stakeholder in the rules-based system through its largely faithful observance of the protocols of its accession to the WTO in 2001 and the huge trade in Asia and around the world that has been built on that.

Locking in China’s entrenchment to the WTO system — and resistance to the temptation to take retaliatory actions in the face of Mr Trump’s trade antics — is thus a major element in the system’s defence.

As China and the US stare each other down with a potentially devastating trade war on the horizon, it may seem strange to turn to ASEAN, but it has a central role in the collective response to Asia’s present predicament. That is because of ASEAN leadership in the strategic conception and negotiation of the Regional Comprehensive Economic Partnership (RCEP) in East Asia.

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RCEP includes not only the ten ASEAN economies but also Japan, South Korea, China, India, Australia and New Zealand. It’s a coalition of countries with the economic weight to deliver a powerful message to the world. The signing of the Trans-Pacific Partnership agreement without the United States in Chile last week was a start in defence of the global trading system. But that agreement doesn’t include China or most of ASEAN and is not systemically important enough to make the difference. RCEP is.

The threat to the multilateral trading system is more important than the still unfinished business on the Korean peninsula and worries about the South China Sea.

ASEAN, with Indonesia at its core, is a regional enterprise with a distinctly global outlook and objectives. Intra-regional trade is only 24 per cent of ASEAN’s total trade but it is deeply integrated into trade globally.

The Australia–ASEAN summit is a singularly important opportunity for setting out strategic interests in these economic dimensions of regional security and ASEAN’s role in achieving them. A declaration from the Sydney summit that commits to avoiding retaliation to US protectionism and elevating the momentum in RCEP will help cement a broader coalition of Asian economies, including China, Japan, South Korea and India, to holding firm on the international trading system.

It will also ensure ASEAN’s continuing centrality in cooperation across the region.

Dr. Mari Pangestu is former Indonesian Trade Minister and Professor at the University of Indonesia. Dr. Peter Drysdale is Professor of Economics and Head of the Asian Bureau of Economic Research and Co-Editor of East Asia Forum in the Crawford School of Public Policy at the ANU. This article was also published in the Australian Financial Review on 15 March 2018.

 

Four Challenges for Australia–ASEAN Relations


March 16, 2018

Four Challenges for Australia–ASEAN Relations

by Anthony Milner, Asialink
 

http://www.eastasiaforum.org/2018/03/15/four-challenges-for-australia-asean-relations/

Image result for asean-australia special summit 2018Sydney plays host to ASEAN-Australia Special Summit in 2018, 

ASEAN is back on Australia’s agenda. The media release for the 2017 Foreign Policy White Paper states that Australia’s first foreign policy priority is to ‘increase [its] efforts to ensure [Australia] remain[s] a leading partner for Southeast Asia’. At a time of deep uncertainty, engaging with ASEAN is a prudent policy direction. But Australia faces at least four challenges.

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First, the Australian government will struggle to maintain its priority on ASEAN. For some years, Australian commentary has been preoccupied with the US–China issue. The Australian government needs to explain that ASEAN is the central element in its overall Asia strategy, without implying that US–China issues are any less important. Deepening relations with ASEAN will make Australia a less lonely country and strengthen its influence in both Washington and Beijing.

Second, Australia is in some ways a less attractive partner for ASEAN than it once was. Compared with the 1970s — when Australia became ASEAN’s first dialogue partner — its economy is now far smaller than the ASEAN economy and its military advantage is also lessened. Not only are Japan and China massive economic partners for the region but South Korea — a minor economy in the 1970s — is now more important than Australia. The diminished position of the United States, Australia’s much-proclaimed ally, is a further element in this changed balance.

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Third, Australia needs to recognise and navigate differences between ASEAN and Australian policy objectives. For instance, there has long been anxiety in ASEAN about being forced to take sides in struggles between major powers. In the Cold War, a number of ASEAN countries resisted joining the US-led Southeast Asian Treaty Organisation and supported maintaining ‘equidistance’ between rival blocs. It is not surprising to encounter ASEAN concern about meetings between senior officials from Australia, Japan, India and the United States to discuss closer ‘quadrilateral’ cooperation. Such initiatives inevitably sharpen the sense of a pro-democracy gang-up on China.

Canberra needs to make it clear that its foreign policy has long been tailored to Australian rather than US interests — especially when the 2017 White Paper actually highlights the need ‘to broaden and deepen our alliance cooperation’.

For many years, Australia has focused on building ‘Pacific’ or ‘Asia Pacific’ institutions with a strong US presence. In contrast, ASEAN tends to favour an ‘East Asia’ concept and to concentrate on building the ASEAN community itself.

Today Australia’s advocacy of the ‘Indo-Pacific’ concept is causing confusion. The White Paper’s insistence that the Indo-Pacific is the region of ‘primary importance to Australia’ may seem a non-controversial innovation in Australia’s foreign policy rhetoric, but in Southeast Asia and China it is seen to diminish the term ‘Asia’ and imply an anti-China mindset.

There is sensitivity about terminology, partly because it can reveal serious policy orientation. It is regrettable that official Australian statements tend to refer to ‘Southeast Asia’, not ‘ASEAN’. Australia needs to emphasise that it is not hesitating on the project of building a strong ASEAN community.

A further divergence in policy of growing significance concerns China. ASEAN commentators seem less suspicious than Australians of China’s policies, including the Belt and Road Initiative. Informed by centuries of experience in handling China, ASEAN favours a policy of signalling support for China-led projects and only arguing hard about the details. ASEAN analysts do not advocate a subservient approach. They seek smart accommodation, not confrontation, with China.

In all these policy areas Australia will require a comprehensive and often subtle understanding of ASEAN perspectives. This raises the question of whether the government, media and university system still possess the level of Southeast Asia expertise achieved in the 1970s.

The fourth challenge that Australia faces with ASEAN concerns political culture. When Australian governments speak about ‘work[ing] more closely with the region’s major democracies’, they run up against the ideological tolerance that is a hallmark of ASEAN thinking. This tolerance underpinned, for instance, ASEAN’s rapid pursuit of relations with Communist Indochina after the United States’ withdrawal in the 1970s.

Australians do not reflect enough on how their liberal heritage may sharpen the sense of Australia being an outsider in many Southeast Asian eyes. Hostility to liberalism has been expressed not only in Islamic circles in Southeast Asia. Political change in Thailand and the Philippines suggests a reduced commitment to liberal values, and distinguished Singapore sociologist Chua Beng Huat has drawn attention to the determined rejection of Western-style liberalism in Lee Kuan Yew’s state.

A decade or so ago, Australian commentators thought they had heard the end of the ‘Asian values’ debate. As Australia works at being ASEAN’s ‘leading partner’, government officials and public intellectuals may well have to engage in more serious dialogue about values and ideology.

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Anthony Milner is Professorial Fellow at Asialink, University of Melbourne and Visiting Professor at the Asia-Europe Institute, University of Malaya. He is Emeritus Professor at The Australian National University.

This article appeared in the most recent version of East Asia Forum Quarterly, ‘Why ASEAN matters’.

READ: https://thediplomat.com/2017/02/whats-behind-the-first-asean-australia-special-summit/

Trump’s Trade War in Perspective


March 13, 2018

Trump’s Trade War in Perspective

By Anis Chowdhury and Jomo Kwame Sundaram

 

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Sydney and Kuala Lumpur – US President Donald Trump’s recent announcement of steep tariffs on steel and aluminium imports seems to have shocked US allies, even though these were among his 2016 election promises. The European Union (EU), Australia and Canada reacted sharply, in contrast to the more restrained response from China, the main target of earlier actions.

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During his 2015-2016 election campaign, Trump repeatedly claimed that the US is being unfairly treated. He reiterated this recently, accusing the EU of being “particularly tough on the United States”, adding “They make it almost impossible for the United States to do business with them. And yet they send their cars and everything else …”.

This trade war has been raging for some time, especially since the 2008-2009 global financial crisis (GFC). The World Trade Organization (WTO) has been quite helpless in preventing the resurgence of protectionism, or stopping developed countries from effectively sending the WTO’s Doha Development Round (DDR) into a coma.

Slowing output, trade: chicken and egg?

The WTO’s World Trade Statistical Review 2017 showed that world merchandise trade growth slowed down from 2.6 per cent in 2015 to 1.3 per cent in 2016, the slowest since the GFC. World merchandise trade grew about 1.5 times faster than output after the Second World War, accelerating to more than twice in the 1990s. After the GFC, this ratio dropped to around one, and then to 0.6 in 2016, for the first time since 2001.

Explaining the trade growth slowdown by blaming prolonged slower global economic growth ignores the output-trade growth dialectic. It does not explain why trade expansion has been faster – or slower – than output growth at different times. After all, trade liberalization was associated with general economic liberalization and globalization despite slower world output growth during the 1990s.

The relationship between the output growth decline and the trade growth slowdown since the GFC raises similar doubts. Rising protectionism may explain trade growth falling below tepid output expansion. Yet, increasing protectionism is not only a response to slower growth, but may also contribute to it.

According to research by law firm Gowling WLG, the world’s top 60 economies adopted more than 7,000 protectionist trade measures between 2009 and 2016. It also found the US and EU mainly responsible for harmful trade policies! Since the GFC, the EU has adopted some 5,657 trade-restrictive measures, while the US has introduced 1,297 measures ‘harmful’ to international trade.

According to research by law firm Gowling WLG, the world’s top 60 economies adopted more than 7,000 protectionist trade measures between 2009 and 2016. It also found the US and EU mainly responsible for harmful trade policies! Since the GFC, the EU has adopted some 5,657 trade-restrictive measures, while the US has introduced 1,297 measures ‘harmful’ to international trade.

According to the WTO, G20 economies had implemented 1583 restrictive trade measures by October 2016 compared to around 300 eight years before, i.e., about 1300 more. Between mid-October 2015 and mid-May 2016, G20 economies applied 145 new trade-restrictive measures – averaging almost 21 monthly, up from 17 between mid-May and mid-October 2015. The latest WTO report observed that G20 economies have implemented less traditional and more opaque measures, making it more difficult to monitor and report.

All this despite G20 leaders repeatedly reiterating the mantra from their first Summit in Washington DC in 2008 declaring: “We underscore the critical importance of rejecting protectionism and not turning inward … Further, we shall strive to reach agreement … that leads to a successful conclusion to the WTO’s Doha Development Agenda with an ambitious and balanced outcome. ….. We also agree that our countries have the largest stake in the global trading system and therefore each must make the positive contributions necessary to achieve such an outcome”. As is well-known, subsequent actions did not match these words.

An earlier WTO report with wider geographic coverage found 2,557 new trade restrictions by October 2015, up 17% from the previous year. Countries have increasingly resorted to discretionary, non-transparent, non-tariff barriers (NTBs), instead of more traditional, transparent trade barriers such as tariffs. These NTBs include subsidies, domestic content requirements, health and safety requirements, state-owned enterprises and public procurement. They involve much discretion, and greatly affect developing country exports.

Trump’s difference

So, what is so special about Trump’s announcement? With characteristic bluster, he announced transparent tariff measures – rather than non-transparent NTBs. Equally significantly, they were to be imposed on all others – US ‘friends’ and ‘foes’ alike, without discrimination. The Trump difference lies in his ‘America First’ brazenness. Belatedly realizing the likely political impact of treating all other parties equally, Trump later announced possible exemptions for ‘national security’ reasons.

Frustrated by the slow progress of protracted multilateral negotiations, many countries have turned to bilateral and plurilateral free trade agreements (FTAs), especially after the Obama administration and European Trade Commissioners put the DDR on hold. As Jagdish Bhagwati has long argued, such non-multilateral FTA ‘termites’ not only undermine multilateral solutions, but may – ironically – slow global trade growth.

The plurilateral Trans-Pacific Partnership (TPP) and its replacement, the Comprehensive and Progressive TPP, for the 11 other TPP countries after the January 2017 US withdrawal, have mainly been about non-trade issues. These include extending intellectual property protection and non-judicial investor-state dispute settlement, besides limiting state-owned enterprises and public procurement. Such measures involve other types of protectionism sacrificing the national interest, particularly of developing countries, while benefiting influential transnational corporations.

If the developed world really wants to avoid all-out trade war, they must return to and advance multilateralism for sustainable, comprehensive solutions. Fairly concluding the Doha Round, while keeping its development promise, as pledged by G20 leaders, will be prerequisites in this endeavour.

http://www.ipsnews.net/2018/03/trumps-trade-war-perspective/

Economists vs. Scientists on Long-Term Growth


March 4, 2018

Economists vs. Scientists on Long-Term Growth

Artificial intelligence researchers and conventional economists may have very different views about the impact of new technologies. But right now, and forgetting the possibility of an existential battle between man and machine, it seems quite plausible to expect a significant pickup in productivity growth over the next five years.

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CAMBRIDGE – Most economic forecasters have largely shrugged off recent advances in artificial intelligence (for example, the quantum leap demonstrated by DeepMind’s self-learning chess program last December), seeing little impact on longer-term trend growth. Such pessimism is surely one of the reasons why real (inflation-adjusted) interest rates remain extremely low, even if the bellwether US ten-year bond rate has ticked up half a percentage point in the last few months. If supply-side pessimism is appropriate, the recent massive tax and spending packages in the United States will likely do much more to raise inflation than to boost investment.

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It is hard to know who is right: neither economists nor scientists have a great track record when it comes to making long-term predictions. But right now, and leaving aside the possibility of an existential battle between man and machine, it seems quite plausible to expect a significant pickup in productivity growth over the next five years.–

There are plenty of reasons to object to recent US fiscal policy, even if lowering the corporate-tax rate made sense (albeit not by the amount enacted). Above all, we live in an era of rising inequality and falling income shares for labor relative to capital. Governments need to do more, not less, to redistribute income and wealth.

It is hard to know what US President Donald Trump is thinking when he boasts that his policies will deliver up to 6% growth (unless he is talking about prices, not output!). But if inflationary pressures do indeed materialize, current growth might last significantly longer than forecasters and markets believe.

In any case, the focus of economists’ pessimism is long-term growth. Their stance is underpinned by the belief that advanced economies cannot hope to repeat the dynamism that the US enjoyed from 1995-2005 (and other advanced economies a bit later), much less the salad days of the 1950s and 1960s.

But the doubters ought to consider the fact that many scientists, across many disciplines, see things differently. Young researchers, in particular, believe that advances in basic knowledge are coming as fast as ever, even if practical applications are taking a long time to develop. Indeed, a small but influential cult touts the Hungarian-American mathematician John von Neumann’s “singularity” theory. Someday, thinking machines will become so sophisticated that they will be able to invent other machines without any human intervention, and suddenly technology will advance exponentially.

If so, perhaps we should be far more worried about the ethical and social implications of material growth that is faster than humans can spiritually absorb. The angst over AI mostly focuses on inequality and the future of work. But as science fiction writers have long warned us, the potential threats arising from the birth of silicon-based “life” forms are truly frightening.

It is hard to know who is right: neither economists nor scientists have a great track record when it comes to making long-term predictions. But right now, and leaving aside the possibility of an existential battle between man and machine, it seems quite plausible to expect a significant pickup in productivity growth over the next five years.

Consider that the main components of economic growth are increases in the labor force, increases in investment (both public and private), and “productivity,” namely the output than can be produced with a given amount of inputs, thanks to new ideas. Over the past 10-15 years, all three have been dismally low in the advanced economies.

Labor force growth has slowed sharply, owing to declining birth rates, with immigration failing to compensate even in pre-Trump America. The influx of women into the labor force played a major role in boosting growth in the latter part of the twentieth century. But now that has largely played out, although governments could do more to support female labor force participation and pay equity.

Similarly, global investment has collapsed since the 2008 financial crisis (though not in China), lowering potential growth. And measured productivity growth has declined everywhere, falling roughly by half in the US since the tech boom of the mid-1990s. No wonder global real interest rates are so low, with high post-crisis savings chasing a smaller supply of investment opportunities.

Still, the best bet is that AI and other new technologies will eventually come to have a much larger impact on growth than they have up to now. It is well known that it can take a very long time for businesses to reimagine productive processes to exploit new technologies: railroads and electricity are two leading examples. The pickup in global growth is likely to be a catalyst for change, creating incentives for firms to invest and introduce new technologies, some of which will substitute for labor, offsetting the slowdown in the growth of the workforce.

With the after-effects of the financial crisis fading, and AI perhaps starting to gain traction, trend US output growth can easily stay strong for the next several years (though, of course, a recession is also possible). The likely corresponding rise in real global interest rates will be tricky for central bankers to navigate. In the best case, they will be able to “ride the wave,” as Alan Greenspan famously did in the 1990s, though more inflation is likely this time.

The bottom line is that neither policymakers nor markets should be betting on the slow growth of the past decade carrying over to the next. But that might not be entirely welcome news. If the scientists are right, we may come to regret the growth we get.

 

National Security in a Post-American Economic Order


March 3, 2018

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After the Second World War, the United States and its allies built a global, rules-based economic order. These days, there is much spruiking about the global rules based order and how it is at the core of the national security interests of liberal democracies. Less well understood is that the rules that matter most for global security are the economic rules of which America, seventy years ago, was the primary architect. This order, combined with comprehensive military power, was the American world order.

There are, of course, many other rules and institutions that govern non-economic affairs under the United Nations framework, such as nuclear non-proliferation, chemical warfare and the right of passage through the seas. None of them is so comprehensive or so entrenched in the management of behaviour between states as those of the rules-based economic order. None are so critical to economic prosperity, which under their aegis has seen hundreds of millions of people lifted out of poverty and the establishment of a confident basis upon which to engage in large-scale trade and economic exchange. None is so important to political security through the alleviation of the incentive to military conflict and political aggrandisement. The post-war economic regime opened the opportunity for even the smallest and poorest countries to realise their national potential without the fear of economic coercion by powerful neighbours.

The rules-based economic order redefined the global system for all those who signed on to it. It contrasts markedly from the world of empire and conflict that defined the system before the war. There is still conflict and chaos outside the global economic order. But even in the presence of that conflict, the American economic order has underpinned the expansion of global prosperity and security.

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In a brutally objective analysis in the March/April issue of Foreign Affairs, Adam Posen concludes that that order is today under threat from US President Donald Trump. Trump ‘has rejected the idea that the world’s economies all benefit when they play by the rules. Instead, he has decided that putting “America first” means withdrawing from supposedly bad deals, on which he believes the system is based’.

America hasn’t been dudded by the current system: it has reaped massive benefits, though it may not have distributed the gains terribly well. In reality, the United States supplies by itself only two essential aspects of the economic order: it extends an umbrella of security guarantees and nuclear deterrence for US allies, and its military ensures free navigation of the seas and airspace for commerce subject to some rules that are largely set by the United States.

While Trump has so far failed to follow through on his most destructive policy ideas, Posen says the damage from those he has effectuated has already begun to show. ‘His administration has hobbled the World Trade Organization (WTO), encouraged China and other autocratic regimes to lean on their smaller neighbours for economic loyalty, undercut agreements on tax evasion and climate change, and pushed even major US allies to negotiate free-trade and cross-border investment deals without the United States’.

There is no binary choice between security and economic interests for countries trying to manage the uncertainties of the post-American economic order, Gordon de Brouwer reminds us in our lead essay this week. The challenge is complex, risky and high-stakes. Australia, he points out , with its deep alliance ties with the United States and its huge economic and political partnership with China, has much at stake in correctly framing the complex and risky choices that it has to make in this new environment.

‘The idea that Australia can opt for security with the United States by winding down its economic relationship with China does not bear scrutiny. This move would make Australia weaker (a strong economy is a bulwark for security), it would lessen Australia’s ability to influence China’s engagement and interests, and it would increase the likelihood of conflict with China. Similarly, the idea that Australia can pursue its economic interests with China by opting out of its security relationship with the United States is not on the table’.

De Brouwer makes the point that in Australia ‘too often, “strategic policy” is used exclusively to define security interests, with economic interests treated as an add-on. Economic interests sound unstrategic and are dismissed in the US–China debate as just the pursuit of business’. Far from it, as Posen makes clear. Economic engagement is an ‘essential element in building national wealth and power as well as in reinforcing and habituating a rules-based and market-oriented international order. Defining and implementing strategic policy inclusively as the fulcrum of security and economic interests broadens the range of strategic options available to policymakers’, says de Brouwer.

The economic and the security elements of government are central to strategic interests. This is true not only in the Asian region but also globally. In Asia, Australia (which supplies over 60 per cent of the externally procured input into East Asia’s steel industry and a quarter of non-oil imported industrial resources to the region’s top industrial powers) plays a crucial role in this complex global economic and political security system. It was not always the case that Japan, South Korea or China had the inclination or the confidence to depend on free international markets to deliver strategic raw materials to their heavy industries in this way or on this scale. That confidence, and the mutual confidence of traders around the world in globalisation, was built within the framework of collective commitment to the WTO rules-based trade regime.

As Posen says, this regime is best seen as a ‘club that promotes a common set of beliefs to which its members broadly adhere: the ability to export to, import from, and invest in markets around the world’. Neither military power nor alliance structures are sufficient to protect this system.

The top strategic priority in Asia and around the world today is to protect a global economic order that is under threat. This is particularly so for Asian nations — including China — which are locked into the club and which (because of their scarce resources) are more dependent on integration into the global economy than are other countries. Declaring a position against Trump on the multilateral system at APEC in Vietnam and a commitment to concluding the Trans-Pacific Partnership despite the United States’ withdrawal were the first two important steps. Pulling off the negotiation of an ambitious Regional Comprehensive Economic Partnership in East Asia needs to be the next.

The EAF Editorial Board is located in the Crawford School of Public Policy, College of Asia and the Pacific, The Australian National University.

Xi Jinping and the Perils of One-Person Rule in China


March 3, 2018

Xi Jinping and the Perils of One-Person Rule in China

Last year, during several trips in which I travelled across China by train, two things in particular caught my attention. First, the red hammer and sickle—the universal symbol of the Communist Party—seemed to be proliferating on posters in cities, towns, and villages with the kind of vigor that I hadn’t seen since my childhood, growing up in an army hospital in Chongqing. Second, the only image I saw more frequently—in elementary-school classrooms, in airports and shopping malls, on billboards on highways and in rice paddies—was the face of President Xi Jinping. Each image was identical: the country’s supreme leader, with raven-black hair and a face fastidiously airbrushed to erase any hint of human blemish, smiling calmly, against a sky-blue background: an unimpeachable deity in an officially atheist state.

The announcement, made last Sunday, that the Party is proposing to abolish term limits for the Presidency further confirms the notion that Xi aims to be something other than just another leader in a parade of apparatchiks. In October, when he presided over the nineteenth Communist Party Congress, where his doctrines were enshrined in the constitution, I wrote that Xi’s status licensed him to “play an almost imperial role in shaping the fate of the nation.” Shortly after the term-limits announcement, a widely shared image of China’s last Emperor, Pu Yi, with the caption “Emperor calls: ‘Is my Qing Dynasty returning?,’ ” was banned on WeChat, China’s most popular messaging app.

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The People’s Daily, however, noted of the move to abolish term limits that the “Party’s proposition is in accordance with the people’s will.” It is true that, while China’s liberal intelligentsia laments Xi’s increasingly repressive policies—which have curbed human rights and undermined the rule of law in the most severe crackdown on civil society in decades—the majority of Chinese people, who do not live in the élite coastal cities or have access to news beyond the Great Firewall, take comfort and pride in Xi’s projection of strength. Still, if Xi wants to extend his rule indefinitely, there are a few historic truths that he will need to confront.

The Communist People’s Republic of China was founded in a theatrical break with history. In 1949, Mao Zedong stood atop the Gate of Heavenly Peace and declared that the “Chinese people have finally stood up,” a slogan that became the origin story of the modern nation. Equating the people’s independence with the Communist takeover was imprinted in the minds of every man, woman, and child. To my mother’s and my grandmother’s generations, the Party is what saved the nation from existential peril. China’s current leaders, including Xi, remain the beneficiaries of that origin story.

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Sun Yat-sen, the first President of the Republic of China, had laid the groundwork for it a couple of decades earlier, in his manifesto “The Three Principles of the People.” He wrote, “If we do not earnestly promote nationalism and weld together our four hundred million into a strong nation, we face a tragedy—the loss of our country and the destruction of our race.” Xi echoed that conviction at last year’s Communist Party Congress, promising to “strive with endless energy” to restore China to its rightful superpower status by 2049, and invoking Sun’s principle of “national rejuvenation.” But Sun also highlighted the greatest challenge to that plan. “Despite four hundred million people gathered in one China, we are, in fact, but a sheet of loose sand,” he wrote. This is a point that Xi may do well to heed. He is stridently confident and has broad support among the population now, but, by attempting to concentrate political power in his own hands, in a nation of not four hundred million but 1.4 billion people, Xi is assigning himself the sole responsibility of protecting an origin story that has largely been a myth.

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In the more than a century since Sun’s rule, China’s loose sand seems hardly to have settled into concrete. The market reforms that Deng Xiaoping introduced, in the late nineteen-seventies, ushered in a period of prosperity (there are now nearly six hundred billionaires in China), and Xi, with his immensely ambitious Belt and Road Initiative, clearly intends to go far beyond Deng’s goals and make China the economic engine of the world. But, despite the improvement in the average standard of living, China has gone from being a collectivist state that aspired to be egalitarian to being one of the most baldly unequal societies in the world. According to a report from Peking University, the poorest twenty-five per cent of households own just one per cent of the country’s total wealth, and the income gap is increasing. And the wealth is accumulating among the coastal élites, while the economy in the remote rural regions, many of which are inhabited by minority populations, remains stagnant. China’s Han majority has always been culturally dominant, but the nation is home to fifty-five officially recognized ethnic minorities, and the culturally distinct and significantly poorer western borderlands of Tibet and Xinjiang are the scene of increasingly violent unrest.

One-person rule is also prone to the kind of excesses and paranoia that may not only alienate the citizenry but undermine the institutions that previously insured the country’s stability. The crackdown has affected not only pro-democracy activists but also Xi’s high-ranking opponents in the Party. The military, which Xi heads, has taken an aggressive stance in territorial disputes in both the East China Sea and the South China Sea. Internet censorship is increasingly absurd—this week saw the banning of not only Winnie-the-Pooh (because he has been compared to Xi) but, reportedly, the English letter “N” (because it may denote the number of terms Xi may want to remain in office), along with the words “shameless” and “disagreement.” The portraits of Xi that I saw all across China serve as a reminder that a government’s need for propaganda tends to be inversely proportional to the strength of its political mandate.

China’s slated return to a one-person autocracy is sobering but hardly exceptional, given the rise of populist strongmen around the world. Xi’s particular asset—and what may sustain his support—is the deferred dream of true solidarity that Mao promised the nation nearly seventy years ago and that generations have held onto. But then, as now, authoritarian command of the nation requires not that the Chinese people “stand up” but that they bow to authority.