The Biden Administration’s Trade Policy and U.S. Relations with Southeast Asia

Since taking office in January, President Joe Biden has emphasized multilateralism as a core principle of his administration’s foreign policy. In contrast to former president Donald Trump, he has repeatedly expressed strong support for working with multilateral organizations, allies, ad hoc groups, and especially fellow democracies to address common problems. He and his top officials have already taken concrete steps in that direction, such as rejoining the Paris Agreement on climate change and the World Health Organization and reversing the Trump administration’s decision to block the election of a popular Nigerian candidate for director-general of the World Trade Organization (WTO).

President Biden’s strong personal commitment to multilateralism is a core component of a wider pledge to restore U.S. leadership. Both before and after his electoral victory, he announced that “America is back,” ready to resume leadership of the world once again.[1] But back to what? This essay will examine four key changes in Southeast Asia and assess the implications for the Biden administration’s trade policy toward the region.

CHANGES IN SOUTHEAST ASIA

Today’s Southeast Asia is not the Southeast Asia of the Obama administration. Four changes in particular stand out.

First, former president Trump’s open disdain for multilateralism accelerated a prior trend toward Southeast Asian agency. For the last quarter century, the ten members of the Association of Southeast Asian Nations (ASEAN) have inched unevenly but steadily toward closer integration. A flurry of preferential trade agreements has spurred slow but steady market opening, attracting foreign investment and nurturing supply chains. ASEAN’s crowning achievement was the successful conclusion of the fifteen-member Regional Comprehensive Economic Partnership (RCEP) agreement in 2020 after seven years of negotiations. The RCEP was an ASEAN initiative from the outset and remained under the leadership of ASEAN rather than China. As veteran trade analysts Peter Petri and Michael Plummer have remarked, the agreement is “a triumph of ASEAN’s middle-power diplomacy.”[2]

Second, the image and prestige of the United States, which had been falling gradually for some time, took a sharp dip during the Trump era. Glaring social and racial problems, the polarization of politics, a series of failed interventions in the Middle East, the two-time impeachment of the president, and the mishandling of the Covid-19 pandemic seriously undermined Southeast Asian confidence in U.S. leadership. On the trade front, the imposition of tariffs against friendly countries and the protectionism embodied in the slogan “America first” played badly in Asia. According to a 2020 poll, a majority of Southeast Asians had little or no confidence in the United States as a reliable strategic partner.[3]

ASEAN governments will view the Biden administration’s trade and investment policies with caution. They note that President Biden’s pronouncements are laced with more than a hint of “Buy America” protectionism. They are wary of his pledge to restore U.S. “leadership” and have doubts about the credibility of promises broadcast from Washington. They would also like President Biden and his top officials to tone down criticism of China. Just as they do not want to be forced to choose between China and the United States, they also do not want the atmosphere of their painstakingly constructed regional forums to be poisoned by current U.S.-China tensions.

President Biden’s early support for re-energizing the WTO signals an important change of attitude toward multilateralism. But it does not mean that U.S. trade and investment policy will be fundamentally different from that pursued in the last four years. Both political parties continue to be focused on the need to remain “tough on China.” Some tariffs imposed by the Trump administration are likely to be kept in place, and others will be removed only selectively. President Biden has reportedly hinted that he would like the United States to rejoin the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP, formerly the TPP), but he will probably not submit any trade legislation to Congress for at least six months to a year, and maybe longer.

Third, in the last decade Japan stepped up its statecraft in Southeast Asia. What had been a decades-long, low-visibility presence marked by generous foreign aid, investment, and economic partnership agreements blossomed into a large-scale strategic initiative.

During the first year of his second term in office (2012–20), Prime Minister Shinzo Abe visited all ten ASEAN members, which earned him considerable diplomatic credit in the region. He expanded foreign assistance and partially reoriented it to countries of “strategic” importance to Japan. He directed the Japan Coast Guard to expand cooperation and training with Southeast Asia and authorized the sale or donation of patrol boats, surveillance radars, and other maritime protection equipment to the Philippines, Vietnam, and Indonesia. After establishing a Japanese counterpart to the United States’ National Security Council, located in the prime minister’s office, he set up a well-staffed interministerial office to coordinate and strengthen Japan’s economic statecraft.

Japanese trade and investment relations with Southeast Asia are extensive. Japan is a major trading partner as well as the top foreign investor in ASEAN countries, edging out China. It spends more on Southeast Asian infrastructure than China does.[4] A trade agreement between Japan and ASEAN (known as the “ASEAN-Japan Comprehensive Economic Partnership Agreement”) went into force in 2008. The agreement addresses not only trade in goods but also investment, services, rules of origin, intellectual property protection, technical barriers to trade, and dispute-settlement procedures.

Particularly noteworthy was Japan’s response to China’s well-publicized Belt and Road Initiative. In 2015 the Abe government announced the five-year, $110 billion Partnership for Quality Infrastructure. The reference to “quality” infrastructure was an implicit dig at the alleged low quality of Chinese engineering projects. This initiative was enhanced to $200 billion the following year and extended to South Asia and Africa as well as Southeast Asia.

In most of Southeast Asia, Japan enjoys a high degree of popularity. Unlike South Koreans and Chinese, most Southeast Asians do not dwell on the horrors of the past, nor do they fear Japan’s economic and military power. When ordinary Southeast Asians are asked to choose what non-ASEAN country can be counted on most to “do the right thing,” Japan is the hands-down choice. It remains to be seen whether post-Abe leaders will build on Japan’s constructive aid and investment record or allow it to stall. Candidate projects could include health, “green” cities, digital education, and water security, all of which could draw on Japan’s expertise.

What is clear is that the Biden administration’s effort to improve the United States’ standing should be coordinated as closely as possible with Japan, especially in the areas of trade, investment, standards, regulatory harmonization, finance, and energy. Cooperative opportunities include the prioritization of climate change in the Japan-U.S. Strategic Energy Partnership and 5G promotion and adaptation in the Japan-U.S. Strategic Digital Economy Partnership.[5]

Fourth—but obviously not least—is the widespread economic presence and far-reaching influence that China has established in and with Southeast Asia. China’s role as an economic strongman is not universally welcome, however. In a 2020 survey, 72% of Southeast Asians polled were worried by China’s growing regional economic influence.

When judged by the degree of Chinese support devoted to trade rules and regional norms, there are two Chinas. The first China created the Belt and Road Initiative, the Asian Infrastructure Investment Bank (AIIB), the New Development Bank, and other multilateral institutions. This China has utilized the WTO’s dispute-settlement system and is active in many long-standing multilateral organizations. Only five days after President Biden’s inauguration, President Xi Jinping chose multilateralism as the theme of his speech to the World Economic Forum’s virtual conference. Hailing “the torch of multilateralism,” he argued against “showing off strong muscles or waving a big fist.”[6] There is no doubt whose muscles and fist he had in mind.

Among Beijing’s recent multilateral initiatives, the AIIB is the most institutionalized and the most impressive. The AIIB’s loan portfolio extends to social and digital infrastructure as well as to roads, ports, airports, and the like. The bank now has over one hundred members, including all ten members of ASEAN, but the United States and Japan have thus far refused to join.

The second China spews nationalist rhetoric and reacts furiously to perceived infringements of its national sovereignty. Its actions in the South China Sea have shaken Southeast Asian confidence in Beijing as a peaceful partner. On the trade and investment front, the Chinese government continues to bestow lavish subsidies on state-owned enterprises and has announced plans to become self-sufficient in key technologies and industries by 2025. Foreign companies continue to report intellectual property theft and forced technology transfer. Bilateral diplomatic spats sometimes lead to targeted import restrictions from the offending country.

ASEAN leaders vary in their response to these two Chinas, depending on domestic politics, economic reliance on China, geographic proximity, territorial claims, the degree of pro- or anti-Chinese feeling in the general population, and the size and nature of the Chinese presence in society. They have a long history of “hedging” and want to avoid being forced to choose between China and the United States. Only one ASEAN country (Cambodia under Hun Sen) has seemingly thrown in its lot with China, and that alignment is more a marriage of convenience than a genuine alliance.

POLICY IMPLICATIONS FOR THE BIDEN ADMINISTRATION

Given the significant changes in the strategic landscape in Southeast Asia, the belief that U.S. leadership can be restored to what it was ten or twenty years ago is wishful thinking. U.S. policymakers seeking to exercise leadership in the region in these new circumstances should begin by adopting a style of engagement that emphasizes listening. An interagency team of senior officials should undertake a listening tour of select ASEAN capitals in the near future. President Biden should attend the year-end U.S.-Asian summits in the same spirit.

In addition, U.S. officials must respect ASEAN’s newfound agency, recognize the relative decline in U.S. standing, and adapt to China’s new role. While maintaining a robust U.S. security presence and responding to future Chinese acts of aggression, they should tone down highly public criticism of China’s behavior, difficult as that may be. Quiet, less visible steps such as targeted visa restrictions will have a greater impact than public pronouncements that smack of arrogance and interference in other governments’ domestic affairs. “Noninterference” is one of Beijing’s most popular selling points.

On the trade front, the Biden administration should begin quietly building support for rejoining the TPP (now the CPTPP) in Congress and the public. Although active submission to Congress is probably two or three years away, officials must first make a credible, positive strategic case for re-engagement as well as a “worker-centric” one. Sectoral agreements in fields such as environmental goods and digital trade might not require congressional approval and thus look more promising in the near term. Reforming and updating the WTO from within should also be a priority.

To some extent, trade and investment agreements are political expressions of goodwill. With the support of Congress, the Biden administration should launch a reinvigorated public diplomacy program that highlights the United States’ culture, educational opportunities, entertainment, and other assets that are popular in Southeast Asia. The ability to provide accurate news and other information to counter local or China-directed propaganda is also a U.S. advantage that should be put to use. Utilizing these “soft power” assets will soften the edges of trade enforcement cases and other complaints that the United States might file against Southeast Asian countries. Public support of ASEAN of the kind expressed by former president Barack Obama would also put trade relations on a more cordial footing.

---

Ellen L. Frost is a Senior Advisor and Fellow at the East-West Center.

---

Endnotes

[1] Joseph R. Biden Jr., “Why America Must Lead Again: Rescuing U.S. Foreign Policy after Trump,” Foreign Affairs, March/April 2020, https://www.foreignaffairs.com/articles/united-states/2020-01-23/why-america-must-lead-again; and Trevor Hunnicutt and Humeyra Pamuk, “Biden’s Aim to Restore U.S. Leadership Could Be Tall Order in a Changed World,” Reuters, November 24, 2020, https://www.reuters.com/article/usa-election-biden/bidens-aim-to-restore-u-s-leadership-could-be-tall-order-in-a-changed-world-idUSKBN2842V.

[2] Peter A. Petri and Michael Plummer, “RCEP: A New Trade Agreement That Will Shape Global Economics and Politics,” Brookings Institution, November 16, 2020, https://www.brookings.edu/blog/order-from-chaos/2020/11/16/rcep-a-new-trade-agreement-that-will-shape-global-economics-and-politics.

[3] This and other polling data and opinion surveys discussed can be found in Tang Siew Mun et al., “State of Southeast Asia 2020 Survey Report,” ISEAS–Yusof Ishak Institute, 2020, https://www.iseas.edu.sg/articles-commentaries/aseanfocus/the-state-of-southeast-asia-2020-survey-report. See also “Asia and the United States after the Election of President Biden,” East Asia Forum, March 15, 2021, https://www.eastasiaforum.org/2021/03/15/asia-and-the-united-states-after-the-election-of-president-biden.

[4] Michelle Jamrisko, “China No Match for Japan in Southeast Asia Infrastructure Race,” Bloomberg, June 22, 2019, cited in David Shambaugh, Where Great Powers Meet: America and China in Southeast Asia (New York: Oxford University Press, 2021), 172, 290.

[5] I am grateful to James Schoff of the Carnegie Endowment for International Peace for these suggestions.

[6] Xi Jinping, “Let the Torch of Multilateralism Light Up Humanity’s Way Forward” (address at the World Economic Forum, January 25, 2021), https://www.fmprc.gov.cn/mfa_eng/zxxx_662805/t1848323.shtml.