The White House announcement that Admiral Harry B. Harris, the current commander of the US Pacific Command, is President Donald Trump’s choice for ambassador to Australia is unambiguously good news for our alliance relationship. The posting sends the clearest possible signal that the US is intent on strengthening its Asian alliances. Europeans may still puzzle over Trump’s disaffection with NATO, but there should be no doubt that the White House sees America’s alliances in Asia as critical to sustaining an increasingly challenged strategic balance.

Predictably enough, America’s chorus of critics in Australia will seamlessly switch from agonising about Trump’s anticipated withdrawal from Asia to fretting that the president is too closely engaged. Could this White House get credit for anything from the Australian commentariat?

The White House media statement on Harris’s nomination for the post describes him as follows:

A highly decorated, combat proven Naval officer with extensive knowledge, leadership and geo-political expertise in the Indo-Pacific region, he graduated from the US Naval Academy in 1978 and was designated a naval flight officer in 1979. He earned a MPA from Harvard’s Kennedy School of Government, a MA from Georgetown’s School of Foreign Service, and attended Oxford University. During his 39-year career, he served in every geographic combatant command and has held seven command assignments.

None of this is hyperbole. The American military has an amazing capacity for producing warrior scholars among its senior leadership—people who think deeply about strategy and international affairs and who aren’t afraid of the instruments of military power that make America the force it is in global affairs. Harris is precisely that kind of strategic thinker. These qualities were clearly on display in the three speeches he delivered at ASPI gatherings. The admiral’s strategic nous is leavened with a self-deprecating sense of humour that works well with Australians. Harry ended a speech he delivered to an ASPI meeting in Brisbane with the line ‘fate rarely calls upon us at a moment of our choosing’ but then admitted the phrase came from the latest Transformers movie. ‘So if you remember nothing else, just remember that you were at ASPI the day when the PACOM Commander stole a line from Optimus Prime.’ Nice one, Admiral!

Australian media commentary has focused on Harris’s blunt language on China. His use at a 2015 ASPI conference of the term ‘great wall of sand’ to describe Chinese island construction in the South China Sea received international media attention at the time and was not appreciated in Beijing. It’s hard to fault the admiral’s assessment. During the height of China’s island construction in 2015 and 2016, the Obama administration spectacularly underestimated the significance of what was happening. Washington dismissed the South China Sea story as just spats over obscure rocks and shoals. Harris was one of the few voices raised to say that the US should be more concerned about Beijing’s construction of military facilities able to control the air and sea space over a region vital to East Asian stability. What a pity Obama didn’t listen. It’s largely ‘game over’ in the South China Sea now, although it remains to be seen when the PLA will demonstrate its newly established reach into an area 80% the size of the Mediterranean, lapping Indonesia’s northern coast.

American ambassadors are typically loath to inject themselves into Australian domestic debates, but one should hope that Harris will help inject a bit of spine into discussions on national security. We should be concerned with the way our public debate is being shaped. Every issue—from Harris’s nomination, to new espionage legislation, to changes in foreign investment decision-making—is now assessed from the perspective of how Beijing will react. Our media gleefully reports criticisms of Australia in the ranting Global Times or the more staid People’s Daily as though the approval of Chinese journalists is the best measure of good Australian policy. Ministers trip over each other as they struggle with talking points designed to say that China isn’t the biggest strategic elephant in the room. The rules-based global order is just taking a little nap, folks, or perhaps pining for the fjords; nothing to worry about here.

What’s really needed is an Australian conversation, shared with our closest friends and allies, about the rapidly eroding strategic outlook in the Asia–Pacific region. North Korea is the immediate problem—now on a brief pause while we pretend that the Winter Olympics has the power to unite the peninsula. Beyond the Korean problem, which for good or ill will be the major focus of 2018, is a China that is rejecting the rules-based global order, building a massive military capability and looking to dominate its neighbours. China wins if we prove incapable of even having a realistic conversation about what this means for Australian security.

Back to Harry B. Harris. As ambassador, his plain speaking may, publicly, take a more diplomatic approach. But he will have a direct line to Trump and, presumably, to Turnbull. Goodness knows the alliance needs an injection of fresh thinking and a willingness to tackle the realities of our worsening strategic outlook. Full marks to Chargé James Caruso and the embassy staff for ably running the mission, but we should hope that the admiral’s Senate confirmation is quick and that Canberra will soon welcome an ambassador uniquely able to help grow the alliance and to develop shared responses to the crumbling rules-based order.

For the past 50 years in Asia, the economists have consistently beaten the strategists in the crystal ball stakes. Over those decades, you’d have done better going to an economist rather than a strategist to predict Asia’s future.

The economist versus strategist proposition upends the cliché that economists are the gloomy profession. Compared to the defenceniks, the econ-nerds are radiant optimists, putting their faith in the market’s invisible hand and in all of us as rational actors.

Strategists dream up the worst possible scenario, then spend billions to defend against it, based on a simple proposition: if only one low-probability, high-impact nightmares arrives, it’ll ruin your whole day—or decade, or country.

While strategists are happy to have their dark projections proved wrong, economists are never mistaken—they merely rejig the model, refine the theory and demand better statistics.

Over the past 50 years, the economists have got it right in calling Asia’s miracle, while the strategists have been confounded at how the dream keeps delivering.

In The Strategist, these be fighting words. As this journalist is neither economist nor strategist (and, of course, some of my best friends are … etc.), I’ll go quickly to the standard hack defence: consider the facts.

When it comes to facts, my thoughts on Asia’s amazing run are shaped by an economist who has been a trusted guide for decades, Dr Peter McCawley. He has just published a history of 50 years of the Asian Development Bank (ADB), Banking on the future of Asia and the Pacific (download here).

When I sat down with Peter to get my signed copy, the conversation turned to one of his recurring optimistic themes: Asia’s economic rocket is still in the early boost stage, with many more golden decades to go. As McCawley commented: ‘It’s a dazzling story. We’re just at the start. Asia’s economic miracle can run for another 50 years.’

 McCawley points to electricity consumption as just one measure of the distance Asia still has to go. In Australia, annual electricity consumption is around 10,000 kWh per person, and in the US it’s 13,000 kWh per person. In India, Indonesia and the Philippines, the figure is about 800 kWh per person.

Asia is still relatively underdeveloped, McCawley says, and there’s a lot of upside to come: ‘They’ve tasted prosperity, and they like it—cars, bigger houses, mobile phones, international travel. The Asian boom will bring lots of troubles, it’s true—more pollution, for example—but the boom will go on nevertheless. Asians are sick of being poor.’

In the book’s conclusion, McCawley cites ADB thinking on what the Asian century could look like by 2050:

If growth in Asia follows recent trajectories, average per capita income could rise sixfold (in purchasing power parity terms) by 2050. In this scenario, the Asian share of global gross domestic product will rise rapidly, from around 28% in 2010 to over 50% in 2050. It is a reasonable assumption that, with half of the world population in Asia, the region will regain the dominant economic position it held before the Industrial Revolution.

The description of the golden future is followed by a quick nod to the strategists’ nightmare: ‘Asia’s rise is not preordained.’ Along with the usual econ-nerd prescriptions about macroeconomic management, infrastructure, health and education, plus open trade and investment regimes, there’s a don’t-stuff-it-up injunction: ‘Hard-won gains in growth and poverty reduction can be quickly lost if there is instability or conflict.’

Asia is already into a huge investment boom. McCawley comments that Asia’s levels of capital accumulation are low; the capital-per-person figure is only 10% of that in the US. The emerging power in rounding up multilateral capital is China.

In 2015, China created two new institutions for financing infrastructure:

• the Asian Infrastructure Investment Bank (AIIB), headquartered in Beijing
• the New Development Bank, headquartered in Shanghai and created by Brazil, China, India, Russia and South Africa.

McCawley’s book points to a possible division of labour between China’s AIIB and the Asian Development Bank:

AIIB would focus on infrastructure investment and stay away from concessional operations, social sector, policy-based lending, and research work, and … AIIB would aim at being a leaner institution without a resident Board. Because of these different characteristics, there would be more scope to cooperate and complement each other.

McCawley told me that Asia’s ravenous appetite for capital means there’s no need for a fight between the AIIB and ADB: ‘I don’t think there’s a problem. People are saying there’s rivalry, but both of them are relatively small banks. Even the World Bank is a small bank in banking terms. There’s room for another 10 AIIBs or ADBs in Asia.’

The difficulty for China in building Asia’s future, he suggests, is more about culture than cash. Chinese bureaucrats in Asia, McCawley says, ‘often don’t do negotiation very well—they’re not used to dealing with landowners, for instance’. The Chinese government model of seizing any land wanted for development can’t be exported: ‘It’s a big cultural problem. They’re used to doing things in China and this will work nowhere else in Asia.’

A China confronted by culture clash, McCawley suggests, can take some quiet lessons from the 50-year experience of the ADB, especially some habits of mind that Japanese leadership has built into regional development.

McCawley says the ADB is an important example of Asian regionalism:

This bank is interesting because it’s one of the most successful Asian regional organisations. If we’re interested in regionalism, what are the elements of success in this? Why has it worked? I think one of the reasons it’s worked is it’s not Anglo-Saxon. It’s an Asian institution. They have learned to compromise. They know how to go slow. And the Japanese are good at compromise when they want to—they’ll live with India and China.

May the economists continue to call it right.

As 2017 limps out and 2018 edges in, here’s Old Dobell’s almanac of the times, trends and twists of history.

Trump-eting: The US system is working, but it’s been a stress test from hell. America’s system will stand, but America’s international standing will suffer huge damage. The Donald breaks with 70 years of US history in Asia.

Accept his inauguration speech as a true statement of intent, based on Trumpian instincts:

• America first—the line from the inauguration that’ll be remembered is ‘the American carnage stops right here’
• protectionist and mercantilist—the global economy is a zero-sum version of the Hunger Games
• alliance rejectionist—America wastes trillions to defend others
• values—deals, not democracy. Strongmen and dictators, apply here.

My tip: he’ll get re-elected. We’ve got seven more years, unless Trumps gives himself a heart attack from too much dessert. Dating the superpower presidency from FDR, history says America re-elects its presidents.

Forget impeachment. The Republican Party has more to fear from the base than from Trump. A Republican Congress isn’t going to impeach its own voters.

America’s recovery is in its ninth year. The economy hums. Unemployment is 4%. Median earnings are rising and economists predict a ‘new golden age’ for American workers.

China chomps: The Oz foreign policy white paper got it into one sentence in its third paragraph: ‘Today, China is challenging America’s position.’ Even fiendishly complex trends and twists can be simply stated.

Next year, Trump will have to choose his Asia war. He can have trade war with China. Or he can do cold war with North Korea, with China’s acquiescence.

China trade war or Korea cold war: he can’t have both.

Some almanac cheer: The cold war with the Soviet Union was an ideological contest—a European religious war, largely fought in Asia. Today there’s zero ideology between China and America; this is just dollars and power. Donald the deal-maker suits China, and Xi Jinping plays him well.

More cheer: China isn’t a revisionist power like the Soviet Union. China is a status quo tidal power. Beijing loves the status quo. And Beijing knows the tide is moving its way. It wants more of both, on terms that serve the elite (aka the Communist Party) and service a quiescent people.

The nature of Oz: Australia is now a Eurasian country. As George Megalogenis records in the new Australian Foreign Affairs, this is an epic transformation, from Anglo-European to Eurasian.

The shift has gone into hyperdrive this century, fuelled (and peopled) by migration from China and India. Two and a half million of our population were born in Asia. The 2016 census says the languages spoken at home in Oz are, in order, English, Mandarin, Arabic, Cantonese and Vietnamese. Hindi and Tagalog are just outside in the top 10. Country of birth for Australians: China is number four, India number five.

Q: What will history mark as the biggest single change John Howard made to Australia?

A: Migration.

The scale and content of migration since 2001—emphasising skills, lifting numbers—remade the face of Australia. Howard created a Eurasian country in double-quick time. The man who said we didn’t need to choose between history and geography has shifted our history by embracing our geography. The law of unintended consequences has a wicked sense of humour.

Date the Eurasia project from 1972, the point Howard uses in his memoirs for the shift from excluding Asia to engagement. The early decades of the project involved openings, collaboration and what Bob Hawke called enmeshment.

The new stage—as we comprehend our Eurasian achievement—is Australia being changed by Asia. Such internal forces alter a nation’s foreign policy.

Oz–Eurasian foreign policy: Canberra’s international approach mixes Western language, US alliance and ASEAN flavour. We’re louder than ASEAN, but our positions increasingly match.

Australia does the ASEAN dance on Myanmar and the Rohingya crisis, on dealing with a murderous president in the Philippines and, as ever, on the central place of Indonesia in our future and our neighbourhood. Oz policy on the South China Sea is ASEAN’s policy with the volume turned up.

We share ASEAN’s dreams and nightmares on China. Like ASEAN, China is a presence in our people as well as in our policy. Ask Sam Dastyari or Andrew Robb how that works.

In March, the first Australia–ASEAN summit on Australian soil happens in Sydney. The foreign policy white paper is almost lyrical, as it should be:

Southeast Asia frames Australia’s northern approaches and is of profound significance for our future. ASEAN’s success has helped support regional security and prosperity for 50 years … Southeast Asia is the nexus of strategic competition, testing the region’s cohesion and ASEAN’s central role.

This almanac proclaims the Sydney summit the start of the march to Australian membership of ASEAN in 2024, the 50th anniversary of Australia becoming ASEAN’s first dialogue partner.

Uncertain era: The tyranny of the present reigns if we moan about uniquely uncertain times. Such anguish says more about Canberra than it does about the state of the world. We’ve lived through vastly more dangerous eras. Australia’s conceptual framework is being shaken, our long-term relative decline as a power and an economy in Asia proceeds as it has for decades, and the new fear is our feckless great and powerful friend. The simple response to the hand-wringing is that we’re born to uncertainty and live it all our days.

The wonderful Simon Leys, in his collection of bon mots, offers these:

Pedro Calderon: ‘The worst is not always certain.’

Nietzsche: ‘It’s certainty, not doubt, that causes madness.’

Let us fret less. And head to Christmas intoning a thought attributed to Benjamin Franklin: ‘Beer, beer, beer … beer is proof that God loves us and wants us to be happy.’

In the last year, the single most pointless wound inflicted by the US on Asia, not to mention itself, was its abandonment of the Trans-Pacific Partnership. In one fell swoop, the once great free-trading nation that was the United States of America died, leaving the global trading system utterly rudderless.

With America’s spurning of the TPP, not only was progress towards further trade liberalisation reversed; the global free-trade system itself, including its common rules and arbitration mechanisms for resolving disputes, came into question.

You don’t have to be a Marxist to understand that economics has a profound and probably even decisive impact on politics, both national and international. And, indeed, the geopolitical and geoeconomic implications of US President Donald Trump’s move are just beginning to be felt across the Pacific.

With China’s economic footprint across the Asia–Pacific region already large, countries in the region are now increasingly concluding that the US is consigning itself to growing economic irrelevance in Asia. US financial institutions will, of course, remain important, as will Silicon Valley, as a source of extraordinary innovation. But the pattern of trade, the direction of investment, and, increasingly, the nature of intra-regional capital flows, are painting a vastly different picture for the future than the one that has dominated post-war Asia.

The abandonment of the TPP—a key campaign promise that Trump fulfilled almost immediately upon taking office—reflects the collective failure on the part of the American political class in the 2016 presidential election. Continuing that failure, America’s leadership has not followed up on the decision with much of anything.

At home, the Trump administration has engaged in much chest-thumping about ‘America First’. Abroad, it has begun to tout an ill-defined concept of ‘a free and open Indo-Pacific’, which displays all the hallmarks of a slogan in search of substance. What economic reality will hang beneath this shingle, we know not. If the idea is a series of individual bilateral free-trade agreements, any seasoned observer of US trade diplomacy can tell you that we are looking at a decade’s worth of negotiations that, ultimately, will probably yield very little.

For their part, Asia–Pacific countries have begun to look to two unlikely sources for leadership on trade liberalisation: Japan and China.

Japan has sought to pull the TPP’s remains out of the ashes by creating the TPP 11, which includes all of the original negotiating states, except the US, which would be permitted to rejoin later. The core tenets of this agreement were signed, despite reservations from Canada, at the November Asia–Pacific Economic Cooperation (APEC) summit in Da Nang, Vietnam (a meeting that Trump himself also attended), highlighting Asia–Pacific countries’ view that they are no longer chained to US leadership. The so-called Comprehensive and Progressive Trans-Pacific Partnership represents a significant advance in terms of trade and investment liberalisation across the 11 signatory countries. As for the US, we can only hope that a future administration, whether Republican or Democrat, will see its way clear to acceding to an agreement that Japanese economic leadership has sought to keep alive. But, given the evidence, that may be farfetched.

The other surprising source of trade leadership in the Asia–Pacific region is China. Some years ago, the country began championing a Regional Comprehensive Economic Partnership (RCEP). While this will not represent a high-ambition arrangement, it will represent some advancement from the status quo. It embraces 16 states, including China, India, Japan and South Korea, but excludes the US.

India, the third-largest economy in Asia, could also have a critical role to play in furthering pan-regional trade liberalisation. But Prime Minister Narendra Modi’s government has yet to direct its political capital towards becoming a member of APEC, let alone advance a trade-liberalisation agenda of its own. This needs to change, but the forces of mercantilism are alive and well in Delhi.

The net result of these developments, with the US having eschewed both the TPP and RCEP, has been a further diminution of American power in the Asia–Pacific region. In fact, the US is increasingly emerging as an incomplete superpower. It remains a formidable military actor, with unique power-projection capabilities that extend far beyond its aircraft carrier battle groups to include an array of other capabilities that are as yet unmatched by other countries in the Asia–Pacific region. But its relevance to the region’s future—in terms of employment, trade and investment growth, as well as sustainable development—is declining fast.

Some in Washington DC seem to think that the US can sustain this pattern for decades to come. But many of us are skeptical. Unless and until the US chooses comprehensive economic re-engagement with the region, its significance to the overall future of Asia, the world’s most economically dynamic region, will continue to fade.

Precisely how other regional powers—China, Japan, India and South Korea (Asia’s four leading economies)—will respond to this decline remains to be seen. But the truth confronting those who observe the region closely is that Southeast Asia has already begun to move meaningfully towards China’s strategic orbit.

Ultimately, the policies of an administration committed to putting America first are likely, in Asia at least, to result in America being put last.

The decision to release Hafez Muhammad Saeed—the founder and leader of Lashkar-e-Taiba (LeT), a US- and UN-designated terrorist organisation—by a court in Lahore last week will be poorly received by Pakistan’s external interlocutors, particularly India and the US, but also China.

India has accused Saeed of being the mastermind behind the Mumbai terror attack in November 2008 that killed 166 people. His release will certainly do nothing to ease Pakistan–Indian bilateral relations. If anything, it will aggravate an already difficult situation, especially following the recent unveiling of President Donald Trump’s much-heralded new South Asia policy.

The Pakistan government had argued that Saeed’s nine-month house arrest should be extended again because he remained a threat to public safety and his release would attract financial sanctions against the country and lead to a halt in foreign funding for Pakistan’s failure to move against terrorism financing. The court rejected the government’s argument on the grounds of insufficient evidence.

The Indian government was ‘outraged’ by the decision. The foreign ministry stated that Saeed’s release was an attempt by ‘the Pakistani system to mainstream proscribed terrorists’. Privately, Delhi probably wasn’t too surprised. Saeed had been arrested several times on criminal and terrorism charges since the 2008 Mumbai attack, but each time his house arrest had been lifted. Delhi has repeatedly demanded that Saeed be handed over for trial in India.

Washington wouldn’t have been pleased either, though American annoyance will probably be limited. In the lead-up to Saeed’s release, the US State Department had expressed its displeasure. But since then the White House has been very quiet. While the Thanksgiving long weekend may have something to do with it, I suspect it’s mainly because the Trump administration wants to ease back on its anti-Pakistan rhetoric.

In his speech in August in which he revealed his South Asian policy, Trump didn’t beat around the bush in effectively saying that Pakistan was playing both sides when it came to counterterrorism. He demanded that Pakistan stop this immediately and ‘demonstrate its commitment to civilization, order, and to peace’. Trump also encouraged a greater role for India in Afghanistan, asking it to help the US more. That would have been like a red rag to a bull. And, indeed, Islamabad went ballistic—quite understandably so.

The White House heard Pakistan’s reaction loud and clear. Importantly, the Trump administration knows that Pakistan is a critical and essential player in trying to find a peaceful solution to Afghanistan. Washington simply can’t afford to alienate Islamabad. However, the administration also knows that its leverage over Pakistan is very limited. So it went into damage control, deciding that the Afghan angle of its South Asian policy was more important than the Indian one. Or, put differently, the White House decided that perhaps it had gone too far in its pro-India rhetoric.

So, while the LeT has been classified as a foreign terrorist organisation by the US government since 2014 and there’s a US State Department offer of US$10 million for information leading to Saeed’s arrest, the White House appears to have decided to downplay these issues. For example, when the US shared its list of known terrorists with Pakistan during Secretary of State Rex Tillerson’s visit in October, Saeed wasn’t on it.

But most importantly, the Department of Defense put a lot of pressure on key congressional committees to drop a provision linking financial aid to Pakistan with Islamabad taking action against the LeT. That was the first time the Senate had included the LeT—along with the Haqqani Network—as a condition for Pakistan to receive US$350 million in coalition support for its role in the war in Afghanistan. So not including the LeT was a significant victory for Pakistan.

Further confirming Washington’s desire to patch things up with Islamabad, General John Nicholson, the commander of US and NATO forces in Afghanistan, offered to take action against Taliban fighters involved in cross-border raids from the Afghan side of the border. Pakistan accepted the offer. The timing of Nicholson’s gesture is crucial: US Defense Secretary James Mattis is expected in Islamabad on 3 December to discuss Pakistan’s support for Washington’s new South Asia policy, specifically with regard to Afghanistan. Whether all of those overtures will be enough to put the US–Pakistan relationship back on track is another matter.

China, Pakistan’s closest ally, is the other regional player that won’t be pleased about the release of Saeed. And although Beijing has regularly used its veto at the UN to prevent Saeed from being classified as a terrorist, it knows that his release will create further friction between India and Pakistan. Such a development could threaten the peaceful regional environment that Beijing wants for the implementation of the US$50 billion China–Pakistan Economic Corridor (CPEC) project. China has a lot of prestige invested in CPEC, a cornerstone of its One Belt, One Road grand plan for Asia and beyond. The release of Saeed, a man whose firebrand reputation has been built on wanting to drive Indian forces out of Kashmir, therefore comes at a delicate time, given that some of the CPEC projects will be going through the disputed border region with India.

So all in all, Saeed’s release will complicate Pakistan’s relations with friends and foes in the neighbourhood. And the situation may get worse if Saeed decides to enter politics in the lead-up to the parliamentary elections next year. Saeed is a troublemaker with a strong following who shouldn’t be dismissed lightly. He also knows that he’s virtually untouchable, having been supported by the generals tacitly, if not implicitly, for the past 30 years. And, notwithstanding its statements, the Pakistan Army isn’t about to dump him. His LeT fighters play a too-important role in the never-ending Indo-Pakistan confrontation. So expect more trouble ahead.