Tag Archive for: East Asia Summit

Trump could make Asia more united

US President Donald Trump has raised the spectre of economic and geopolitical turmoil in Asia. While individual countries have few options for pushing back against Trump’s transactional diplomacy, protectionist trade policies and erratic decision-making, a unified region has a fighting chance.

The challenges are formidable. Trump’s crude, bullying approach to long-term allies is casting serious doubt on the viability of the United States’ decades-old security commitments, on which many Asian countries depend. Worse, the US’s treaty allies (Japan, South Korea and the Philippines) and its strategic partner (Taiwan) fear that Trump could actively undermine their security, such as by offering concessions to China or North Korea.

Meanwhile, Trump’s aggressive efforts to reshape the global trading system, including by pressuring foreign firms to move their manufacturing to the US, have disrupted world markets and generated considerable policy uncertainty. This threatens to undermine growth and financial stability in Asian economies, particularly those running large trade surpluses with the US—such as China, India, Japan, South Korea and countries in the Association of Southeast Asian Nations.

Currency depreciation may offset some of the tariffs’ impact. But if the Trump administration follows through with its apparent plans to weaken the US dollar, surplus countries will lose even this partial respite, and their trade balances will deteriorate. While some might be tempted to implement retaliatory tariffs, this would only compound the harm to their export-driven industries.

Acting individually, Asian countries have limited leverage not only in trade negotiations with the US, but also in broader economic or diplomatic disputes. But by strengthening strategic and security cooperation—using platforms such as ASEAN, ASEAN+3 (with China, Japan and South Korea), and the East Asia Summit—they can build a buffer against US policy uncertainty and rising geopolitical tensions. And by deepening trade and financial integration, they can reduce their dependence on the US market and improve their economies’ resilience.

One priority should be to diversify trade partnerships through multilateral free-trade agreements. This means, for starters, strengthening the Comprehensive and Progressive Agreement for Trans-Pacific Partnership—which includes Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Britain and Vietnam—such as by expanding its ranks. China and South Korea have expressed interest in joining.

The Regional Comprehensive Economic Partnership—comprising the 10 ASEAN economies, plus Australia, China, Japan, New Zealand and South Korea—should also be enhanced, through stronger trade and investment rules and, potentially, the addition of India. Given the Asia-Pacific’s tremendous economic dynamism, more robust regional trade arrangements could serve as a powerful counterbalance to US protectionism.

Asia has other options to bolster intra-regional trade. China, Japan and South Korea should resume negotiations for their own free-trade agreement. Japan and South Korea are a natural fit, given their geographic proximity and shared democratic values. The inclusion of China raises some challenges—owing not least to its increasingly aggressive military posture in the region— but they are worth confronting, given China’s massive market and advanced technological capabilities. With the US putting economic self-interest ahead of democratic principles, Asian countries cannot afford to eschew pragmatism for ideology.

Beyond trade, Asia must build on the cooperation that began after the 2008 global financial crisis. The Chiang Mai Initiative Multilateralisation, which provides liquidity support to its member countries (the ASEAN+3) during crises, should be strengthened. Moreover, Asian central banks and finance ministries should work together to build more effective financial-stability frameworks—robust crisis-management arrangements, coordinated policy responses and clear communication—to stabilise currency markets and financial systems during episodes of external volatility.

Trump is not the only reason why Asia should deepen cooperation. The escalating trade and technology war between the US and China is threatening to divide the world into rival economic blocs, which would severely disrupt global trade and investment. But there is still time to avoid this outcome, by building a multipolar system comprising multiple economic blocs with overlapping memberships. By fostering economic integration, within the region and beyond, Asian countries would be laying the groundwork for such an order.

In an age of geoeconomic fragmentation, Asian countries could easily fall victim to the whims of great powers. But by strengthening trade partnerships, reinforcing financial cooperation, enhancing strategic collaboration and building economic resilience, they can take control over their futures and position Asia as a leading architect of a reconfigured global economy.

A balloonist’s-eye view of summit declarations

Summit season is in full swing, with the East Asia, BRICS and G20 leaders’ gatherings over the last month and APEC summit yet to come in November in San Francisco.

It takes a balloonist’s tolerance for hot air to go through the communiqués, but the G20 Centre at the University of Toronto has done so, counting 242 new commitments in the G20 New Delhi leaders’ declaration, up from 223 at last year’s Bali summit and fourth highest since the leaders’ meetings of G20 members began in the wake of the global financial crisis in 2008.

They include vows to ‘accelerate strong, sustainable, balanced and inclusive growth’, ‘improve access to digital services and digital public infrastructure’ and ‘close gender gaps and promote the full, equal, effective and meaningful participation of women in the economy as decision-makers’.

Commitments are homogenised by the need for consensus; however, the communiqués still carry some geopolitical content. It was noted that the G20 communiqué omitted the reference to ‘Russian aggression’ that had been present in the Bali communiqué, but it had a much fuller commentary on the Ukraine war, calling for a cessation of military attacks on Ukraine’s food and energy infrastructure with deep concern for the impact of the conflict on civilians.

In a pointed reference to Russia, the communiqué said: ‘We call on all states to uphold the principles of international law including territorial integrity and sovereignty, international humanitarian law, and the multilateral system that safeguards peace and stability.’

The declaration noted that the G20 was the premier forum for international economic cooperation and was not a platform for resolving geopolitical or security issues, but it justified its deliberations on Ukraine saying they had significant consequences for the global economy.

Russia’s President Vladimir Putin missed both the G20 and the East Asia Summits, while putting in a video appearance at the BRICS summit (South Africa would have been bound by its membership of the International Criminal Court to execute arrest warrants on charges of war crimes, had he attended in person).

Putin sent Foreign Minister Sergey Lavrov to attend the G20 and East Asia Summits. Lavrov had to sit through the G20 debate on Ukraine and accede to India’s compromise of dropping the reference to Russian aggression in exchange for a sharper commentary.

US President Joe Biden, who did attend, may also have had an uncomfortable discussion about his country’s continued disruption of the World Trade Organization, where it has forced the appeals tribunal to shut down by refusing to endorse any new appointments of judges.

Biden had to agree to the G20 communiqué’s endorsement of the WTO as the ‘core’ of the multilateral trading system and commit to negotiations to restore the full functioning of the WTO appeals panel by 2024.

The East Asia Summit leaders’ statement included some commentary on maritime security that would have been uncomfortable for China. Although China’s President Xi Jinping did not attend the summit, his premier, Li Qiang, had to sign off on a communiqué that underlined the primacy of the United Nations Convention on the Law of the Sea and promoted ‘freedom of navigation and overflight, other internationally lawful uses of the seas and unimpeded lawful maritime commerce, the exercise of self-restraint, the non-use of force or the threat to use force against another state consistent with the UN Charter’.

China’s claim of territorial rights over the South China Sea is a source of dispute with several ASEAN members. It has refused to recognise the UNCLOS tribunal finding in favour of the Philippines over the extent of its territorial waters.

Xi’s failure to attend either the G20 or the East Asia Summit drew commentary questioning China’s commitment to multilateralism, with the Asia Society Policy Institute’s Neil Thomas telling the Financial Times, ‘This is the first of potentially many international summits that Xi decides to skip because of diplomatic conflicts or domestic troubles.’

However, as the greatest beneficiary of globalisation since its accession to the WTO in 2001, China is likely to remain engaged with these global forums. Xi is expected to attend the APEC summit and discussions are understood to be underway about a bilateral meeting with Biden.

The no-shows from Biden, Xi and Putin at the East Asia Summit may raise questions about its importance; however, the prime ministers of Japan, India and Australia each attended. Biden was represented by Vice President Kamala Harris.

As prime minister, Kevin Rudd had aspirations for the East Asia Summit to become the pivot of a pan-Asian economic and security community and pressed to expand its membership to bring in the ASEAN nations (as well as Japan, Australia and New Zealand) together with the US, China and Russia. The first summit of these leaders was in 2011. He contended that the APEC summit did not have the latitude to deal with security issues.

It is now 34 years since APEC was formed as a gathering of finance and trade ministers, and up to 30 years as a leaders’ summit. The G20 has 24 years as a finance ministers’ meeting and 15 years as a leaders’ summit.

The G7 started as a finance ministers’ gathering 50 years ago and has held leaders’ summits since 1975. Russia was invited as a member in 1997 and expelled following its annexation of Crimea in 2014.

While there are debates about who does and does not attend, and questions raised about whether they make any tangible difference to global policy, the summits are becoming institutionalised.

The least that can be said for them is that they bring leaders together in a structured forum where views are exchanged and, behind closed doors, disagreements can be aired. They are not a form of international governance: decisions are not binding as were, for example, the determinations of the WTO appeals panel and the UNCLOS tribunal.

The most comprehensive analysis of G20 policy follow-through has been conducted by the Global Trade Alert, associated with the Swiss University of St Gallen. It compiles a database of trade measures, assessing the extent to which G20 members have strayed from their 2009 commitment to eschew protectionism.

‘Any notion that the G20 acts as an effective force to align its members’ trade and industrial policies can be discarded,’ its latest report declares, noting that over the past year, protectionist measures have outnumbered liberalising measures by a margin of three to one.

Since the financial crisis, the most ambitious attempt to use the G20 to stimulate the global economy came with Australia’s chairmanship in 2014 when members committed to structural reforms to boost economic growth. Again, the promises were not kept and monitoring of their performance was ultimately abandoned.

However, a 2018 study by Adam Triggs, now the director of research at the Asian Bureau of Economic Research, found that leaders, ministers, central bank governors and senior officials still believed the G20 deliberations to be of great value, both for strengthening personal relations between leaders and for the exchange of policy ideas. Many cited initiatives they had implemented domestically that had been first discussed at the G20.

The G20, under India’s leadership, took a step to strengthen its legitimacy, inviting the African Union to become a member on equal footing with the European Union. It was the first expansion in the G20’s membership since its formation.

While the original G20 membership was largely decided by US and German officials, the BRICS grouping emerged from a Goldman Sachs research report. It has also sought to strengthen its legitimacy as a voice for the emerging world by expanding its membership to include Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates.

The admissions had a strongly Middle Eastern bias and, surprisingly, did not include either Nigeria or Indonesia, which are both among the largest emerging nations. Both have been reported to be concerned that the BRICS group is too driven by an anti-West agenda. In Indonesia’s case, its priority is its push to join the OECD.

Asia’s summit season blossoms

Asia’s summit season is bountiful. Flowers bloom, weeds sprout, thorns thrive, all coloured by policy and politics and the personalities of leaders.

The APEC summit and the East Asia Summit (EAS) bring lots of people together to do many things. The summits are multilateral events set amid a broader landscape of bilats and side meetings and myriad national and regional agendas.

The thriving flowers/weeds image responds to the question: What do summits achieve?

Answer: Meetings on the mount do service by commission and omission. What is agreed or attempted at the summit is fed by what’s avoided or fudged. The achievements list has several columns, including ‘successfully done’ and ‘successfully avoided’.

Substance mixes with symbolism—oft times it’s difficult to pick the reality beneath reams of rhetoric. The beauty of summit season is that it comes around annually. The continuum counts.

At the personality level, the season achieves something just by having Xi Jinping and Donald Trump spend quality time together in some different venues.

For Australia, summit season is a set element of the leader’s diary, an annual display of the shift of Australian international policy to the personal care of the prime minister. Habit shouldn’t blind Australia to significance. Heading to APEC and the EAS, Malcolm Turnbull could reflect that previous leaders back to Gough Whitlam and Malcolm Fraser would exult at Australia’s place at Asia’s top tables.

We don’t often hear these days the dismissive line about Asia’s summits being empty talkfests enlivened by silly shirts. The need for talking has seldom been greater. The stakes build as old areas of agreement break down.

The rulers of the Indo-Pacific must run the rule across how the rules of the game are running. And at least nod in the direction of systemic questions about who will write the rules.

Summit season demands a certain comfort with imprecision: all those blossoms are colourful, not coherent. A neat division of roles would say APEC does economics and the EAS does security. This orderly classification just ain’t correct.

From the moment of its birth as the Cold War died, APEC has had a tacit security dimension beneath its economic plumage. The EAS is even more candid about its twin economic and security dimensions. The summits mirror each other—more continuum than contrast—which helps get around anomalies such as India’s absence from APEC.

Having reported lots of summits—do a dozen APEC summits amount to the waste of a life?—I subscribe to Henry Kissinger’s acid view that nothing is more dangerous than leaders thinking their personal chemistry and brilliance can quickly solve stuff. Leaders must be led up the mount carefully. Summits get to first base by doing no harm. And APEC and the EAS this year kept the mishaps under control.

At APEC, the Trans-Pacific Partnership avoided death: a smaller grouping with a bigger name, now the Comprehensive and Progressive TPP. For an old APECer, it’s still remarkable to see Japan leading in the creation of an Asia–Pacific trade structure that doesn’t include the US.

The failure of Canada’s prime minister to turn up at the TPP ratification looks more like stuff up than cunning diplomatic ploy. During the short summit season, time is tight and mishaps arrive quickly—stretched schedules can cause shock and schadenfreude. Even outside the reduced/redux TPP, US gravity matters: a Canada renegotiating its vital interests in NAFTA isn’t going to be diverted by marginal TPP gains.

In the Philippines, officials of the ‘quadrilateral’—the US, Japan, India and Australia—had a sidelines meeting ‘to discuss a shared vision for increased prosperity and security in the Indo-Pacific region and to work together to ensure it remains free and open’.

Three of the quad leaders—Donald Trump, Shinzo Abe and Malcolm Turnbull—had their own joint meeting.

The quad is up and running for its second incarnation. The first quad version was killed in 2008 by the new Labor government of Kevin Rudd, worried about the negative response of China. Labor’s signalling this time is that it’ll commit to Abe’s diamond of democracies.

The quad is about the Indo-Pacific. And this summit season the Indo-Pacific arrived with gusto. The Asia–Pacific may be enshrined in APEC’s title, but Indo-Pacific widens the arena and players. Hello, India!

The Trump adoption of the term Indo-Pacific is more than just the reflex instinct to junk anything inherited from Barack Obama. The Obama usage was Asia–Pacific, so of course Trump wants something bigger, better and different. Plus, the quad is another way to think about the China quandary.

China’s criticism of the quadrilateral reflects its distaste for the Indo-Pacific usage. Beijing sees Asia–Pacific as an expression of the core equation China–US, and it hates a new idiom that can be read as India–US.

Behold the beauty of summit season. Beyond the official flowers in the formal communiqué vases, there’s a riot of colour and movement.

Time to consider refinancing options for the ASEAN secretariat

The 31st ASEAN Summit and its related meetings, including the East Asia Summit, start today and will run through 14 November. Lost in the hoopla over Trump’s attendance and the ongoing tension in the Korean peninsula is the critical agenda of ASEAN secretariat (ASEC) reform.

In August this year, the group’s foreign ministers simply noted that they were ‘pleased with the ongoing progress in the implementation of the recommendations by the High-Level Task Force (HLTF) on Strengthening the ASEAN Secretariat and Reviewing the ASEAN Organs’. With the annual tradition of parsing out ASEAN statements over China and the South China Sea, crucial intra-ASEAN plans have taken a backseat.

Yet, prompted by the infamous 2012 Cambodian chairmanship, the group formed the HLTF to boost ASEC’s role and capacity as an ‘institutional solution’. By the 2014 ASEAN Summit, regional leaders declared that they were committed to ‘strengthening ASEAN’s institutional capacity to support the ASEAN Community building, through streamlining and improving its work processes and coordination among ASEAN Organs and Bodies, enhancing the conduct of ASEAN’s external relations and strengthening the ASEAN Secretariat’.

The ASEC reform, in other words, was part of a wider range of institutional reform policies, from streamlining meetings to empowering the secretary general (see here and here). Most if not all of those recommendations, however, hinge on ASEC’s budgetary capacity.

The ASEC employs around 300 staff with a budget of about $20 million by 2016. The amount is miniscule considering the over 1,000 meetings it must organise annually. Some of the meetings should be aligned with the local host (ASEAN chair) each year, which raises the complexity and cost. As ASEAN chair for the 2017 summit season, the Philippines has organised 283 meetings at a cost of about $300 million (and possibly more given the security needs).

The current ASEC budget is unsustainable. According to the Asian Development Bank Institute, by 2030, the number of ASEC staff must increase to 1,620 with a budget of about $220 million (more than 12 times the current budget). Those projections are based on the need to handle numerous ASEC activities that have grown (and will continue to grow) to fulfil the mandates of the ASEAN charter.

The projected budget includes staff salary increases to attract the best and brightest. As it stands, on average, ASEAN salaries were only two-thirds of those of a comparable Jakarta-based UN agency. Any ASEAN-wide institutional reform policies therefore would be harder to pursue without significantly boosting the budget’s size and structure.

The current budget structure is based on the members’ equal contribution, per the ASEAN charter. This basically boils down to a negotiation over the lowest common denominator— finding the balance between what Singapore and Indonesia could afford with what Laos and Myanmar could contribute.

But if we read the charter carefully, there’s room for a reinterpretation. As Article 30 of the charter notes, ‘The operational budget of the ASEAN secretariat shall be met by ASEAN Member States through equal annual contributions which shall be remitted in a timely manner’ (emphasis mine). There’s nothing specific about the monetary equal value of those contributions. Much like UNCLOS prescribes an ‘equitable solution’ to maritime disputes, member states in this sense have (relative) space to interpret ‘equal contribution’.

I suggest a reinterpretation based on two options: either (A) equal share (percentage) of each country’s annual expenditure, or (B) equal share based on each country’s economic development conditions.

Let’s assume under the current format that each member contributes $2 million. That figure represents a small fraction of each member’s annual expenditure—from roughly 0.004% (Singapore) to 0.052% (Laos). In Option A, equality in proportion of expenditure means that each member must contribute an equal share of its annual expenditure. I propose an equal share of 0.02% of members’ national expenditure (see the table below). That option could get us roughly $93 million (or around half of what ASEC needs by 2030).

In Option B, equality in levels of economic development means that each member contributes ‘equally’ based on how developed its economy is. I propose that we use three different economic indicators: GDP, GDP per capita, and intra-ASEAN trade balance (each weighted differently: 30%, 40% and 30%, respectively). That option could get us to roughly $88 million (less than half of what ASEC needs by 2030).

Both options could be implemented gradually, perhaps within a three- to five-year scheme with a biannual review mechanism. If we can get to roughly the $100 million mark by 2025, then it would be a success. In any case, however, the problem with this reinterpretation idea will likely be political, especially if consensus decision-making remains.

Some members don’t want a strong secretariat, while others might simply be unwilling to pay more. After all, there remains a huge wealth gap within ASEAN, and changing the current equal monetary value format raises the ‘hierarchy of influence’ concerns. But if the challenges surrounding the South China Sea in recent years have taught us anything, isn’t it the case that the needs of the many outweigh the needs of the few?

The ideas in this post were presented at a workshop organised as part of the Australia–Singapore–United States Policy Trialogue on Southeast Asia (APTOS) hosted by the Daniel K. Inouye Asia-Pacific Center for Security Studies in Honolulu, Hawaii, on 25–27 October 2017.

The delights of summitry

G20 Leaders' PhotoOn the evidence of APEC, the East Asia Summit and the G20, anyone who decries summitry as a waste of time, talent and money either has a narrow view of the world or is extremely hard to please. To take just one of the players—but what a player—Xi Jinping in the space of a week has deeply delighted Oz and deeply shocked the Abbott government.

The delight was the consummation of a free trade deal a decade in the making. The shock was a climate change agreement with the US in which Canberra was surprised by Xi and blindsided by Obama. What more can you ask from summitry? Thrills, spills, twists and dramatic plot shifts—and this column isn’t even going near Putin.

The successive summits hosted by China, ASEAN and Australia produced a blizzard of images and ideas, driven by power, policy and personality. Tracking power is about the trend lines and how the narratives are sold. Read more

Do we need an Indo-Pacific treaty?

Indonesian FM Natalegawa at the conference ‘Intersections of Power, Politics and Conflict in Asia’ in June

Indonesian Foreign Minister Natalegawa has recently articulated his proposal for an Indo-Pacific Treaty at no less than three different conferences (including ‘Intersections of Power, Politics and Conflict in Asia’ in Jakarta in June) and it bears careful reading because it contains ambitious ideas.

To summarise his proposal, Natalegawa sees the Indo-Pacific region as beset by a deficit of ‘strategic trust’, unresolved territorial claims, and rapid transformation of regional states and the relationships between them. The potential for these factors to cause instability and conflict requires the region to develop a new paradigm, an Indo-Pacific wide treaty of friendship and cooperation, to encourage the idea of common security and promote confidence and the resolution of disputes by peaceful means. At present, Natalegawa has only provided the broad concepts behind the treaty but a precursor question is whether a treaty is really necessary? Read more