America is more popular than China in Asia and the Pacific, and has deeper security relationships with the countries there. Yet, at the end of the day, it is economic power that buys the most influence, and here China is sweeping the floor with the United States. In 2000, U.S. trade with Asia was 50 percent more than China’s total global trade; today the only country in Asia Pacific that does more trade with the U.S. than China is tiny Bhutan.
While President-elect Joe Biden’s focus on re-establishing alliances is welcome, U.S. policy under his incoming administration must focus on resuscitating America’s economic sway in Asia if it wants to retain influence in the long run.
“America is back, ready to lead the world,” Biden announced on Nov. 24, no doubt to the relief of those who feel that the country has retreated unnecessarily from the global stage in recent years. The United States, he said, soon would be “reasserting its historic role as a global leader.”
This is easier said than done, particularly in Asia. For all its popularity and military power there, the U.S. is at risk of being sidelined in the long term because of its decline relative to China in the most important lever of influence of them all: economic power.
Whatever the ups and downs of the past four years, America as a country remains popular. According to research by Pew, 64 percent of people surveyed in six Asian nations have a favorable opinion of the U.S., with sentiments highest in South Korea and the Philippines. By contrast, China is overwhelmingly seen in an unfavorable light by many. Eighty-one percent of Australians, 75 percent of South Koreans and 86 percent of Japanese think negatively of China; only 34 percent of those surveyed in Asia have a positive opinion of the People’s Republic.
Then there is the defense angle. China might have the world’s largest fleet and an array of new weaponry, but in Asia and the Pacific the U.S. still holds military primacy, not least because of the breadth of its alliances. Even India, traditionally non-aligned, has signed a defense agreement with America, such is its worry about Beijing’s intentions following a deadly border clash in May.
Still, popularity and military strength are no match in the long run for economic power, for two reasons. First, as President Trump hinted at, security relationships can be broken. Second, as Asia has seen firsthand over the past half-century, economic improvement is the way for leaders to lift their people out of poverty, to meet their life aspirations and to strengthen the nation overall.
Unfortunately for the U.S., it is losing the economic power battle in Asia.
This is particularly true when it comes to trade. Data from the World Bank show that in 2000 the U.S. enjoyed trade with Asia worth $703.4 billion, which was more than 50 percent higher than the figure for China’s total global trade that same year, $474.3 billion. At the same time, America was the dominant trade partner of 80 percent of the world. This included almost every country in Asia, with the exception of Iran and a smattering of Central Asian states.
Today the roles are almost entirely reversed. China has overtaken its strategic rival in total global trade — $4.6 trillion to $4.3 trillion as of 2018 — and has replaced America as the dominant trade partner in 128 countries out of 190 measured. Such is the scale of the reversal between the two great powers that, by 2018, the only nation that America still dominated in trade in Asia was Bhutan, a remote Himalayan kingdom with fewer than 1 million people.
Now China is seeking to cement this dominance.
On Nov. 15, China and 14 other Asia Pacific countries — accounting for 2.2 billion people and 30 percent of the world’s economic output — signed the Regional Comprehensive Economic Partnership (RCEP). Although the scope of the agreement is limited, and some argue that it is not a proper free-trade agreement, RCEP will still reduce or eliminate tariffs on a whole host of goods and services.
Not surprisingly, just a few days after RCEP came into being, the biggest winners and losers are already clear. As observers such as the International Institute for Strategic Studies (IISS) have noted, the main winner is China. RCEP will consolidate Beijing’s economic ties with its neighbors, bringing them closer into its orbit and allowing it more leverage when it comes to regulation and standard setting.
On the other hand, the main loser is America. The fact that most of the RCEP signatories, including Australia, Japan and South Korea, are established U.S. allies is a sure sign that American power is not as strong as it once was.
Ironically, the path to RCEP was laid by the U.S. itself. The Trans-Pacific Partnership (TPP) was the centerpiece of President Obama’s “pivot to Asia,” and was designed to expand U.S. exports and investment into the region, thereby advancing American interests. When President Trump pulled out of the accord, it gave the signal — unwittingly or not — that the U.S. was no longer the ambitious trade partner that the region wanted. RCEP has, to some degree, filled this gap.
The question now is what the Biden administration can do about it. Recapturing U.S. economic leadership in Asia will be tough, given the emergence of RCEP and the lack of any firm commitment by Biden to re-join the TPP or its successor.
This does not mean America is out of it. It is still the world’s largest economy in absolute terms, and the holder of a number of strategic aces in Asia Pacific which it can in theory use as leverage to boost its economic footprint in the region.
Time is running out, however. For all its popularity and military strength today, unless America assertively looks to reclaim its position as the dominant trade partner for Asia and the Pacific, then, to paraphrase Biden, it is likely to find that its influence in the region has been made permanently historic.
Sam Olsen is the Singapore-based co-founder of the strategic consultancy MetisAsia and author of the newsletter WhatChinaWants. He has lived in Hong Kong and Singapore for a decade. A former staffer of the late Sen. Arlen Specter (D-Pa.), he was a campaign manager for Prime Minister Theresa May and a British Army intelligence officer, and has contributed to U.K. policy on foreign and trade affairs. Follow him on Twitter @samolsenx.