Though Southeast Asia has mixed feelings about Washington’s change of guard, the new Biden administration could make considerable gains in the region – with some policy adjustments. This could prove useful in the great power competition with China.
In a nutshell
- New leadership offers the U.S. a fresh start in Southeast Asia
- Countering protectionist tendencies could shore up trade
- Navigating human rights concerns may prove tricky
This GIS 2021 Outlook series focuses on the opportunities that stem from the upheaval of the past year.
With a change in government taking place, the United States has an opportunity to reassess and recalibrate its policies. In Southeast Asia, the U.S. could use 2021 to quell doubts about its staying power that countries there have called into question for decades.
In devising a strategy, Washington will have to take into account the region’s history and the various countries’ individual interests. Southeast Asian states have long had two overriding foreign policy priorities: autonomy and economic development. During the Cold War, this stance generally led to pro-U.S. positions. In recent years, it has increasingly meant accommodating China’s regional ambitions.
How Southeast Asian countries achieve their goals in 2021, including how receptive they are to foreign investment and trade, how they manage their security relationships and how they respond to criticism of their human rights records, will determine where they stand in the great power competition. The U.S. will have to be mindful of these factors if it wishes to make the most of its new political start.
Trade and investment
The U.S.’s economic position in Southeast Asia has not declined as much as headlines about China’s growing influence often suggest. The share of inbound investment flows remains mostly distributed among the U.S., Japan, China and the European Union. The U.S. led in 2019, with slightly more than its average 10-year share. The vast majority of U.S. investment in the region still goes to Singapore. It is unclear how much of this flows through to other members of the Association of Southeast Asian Nations (ASEAN), but a significant amount certainly does. Singapore’s largest destination for foreign direct investment is China.
Facts & figures
China’s number-one Southeast Asian investment destination in 2019 was Indonesia. Relative to the size of the recipient country’s economy, it was Cambodia, where Chinese investment in 2019 amounted to 17 percent of the country’s gross domestic product (GDP). Overall, China’s 2019 investments in Southeast Asia were equal to its average share – about half that of the U.S.
The new protectionist impulse in the U.S. is already affecting regional supply chains.
Trade relationships in Southeast Asia remain diverse, though China’s position is steadily improving. Since 2010, when it became the region’s leading trading partner, China has continued to grow as both an export destination and a source of imports. The region now buys three times as much in goods from China as from the U.S. As an export market, however, the U.S. has kept pace.
The challenge for the U.S. will not so much be in managing Chinese economic engagement in the region, but in navigating its own trade politics to maintain or improve this relatively positive picture. The new protectionist impulse in the U.S. is already affecting regional supply chains, forcing capital (including Chinese capital) out of China and into Southeast Asian markets. The phenomenon is enhancing, not limiting, Chinese influence. Trade initiatives like the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) will have a similar effect, leading to greater regional integration that marginalizes the U.S.
It will be difficult for Washington to alter this trend. In contrast to the EU and the United Kingdom, the U.S. is not expected to work toward new bilateral or regional trade agreements. Nor is it expected to offer significant relief from tariffs imposed by the Trump administration. If this remains the case, China is likely to gain market share, and therefore influence, in Southeast Asia.
Facts & figures
The opportunity for the U.S. lies in finding creative ways to reverse the politics of trade now prevailing in Washington. There is room for optimism. The American system is pliable to political leadership on the issue, and much of the electorate is open to the concept of free trade. President Trump led the country in a protectionist direction. It is not yet evident in President Biden’s approach, but strong leadership can change that course.
The U.S. remains the security partner of choice, which strengthens the U.S. position in Southeast Asia. No other major power has the capacity to play this role. Though the People’s Republic of China continues to foster some security relationships in the region, it is widely distrusted. The question is whether Washington will continue to back up its commitments to the region with the necessary resources.
In 2021, the U.S.’s annual National Defense Authorization Act (NDAA) dedicated resources to a new Pacific Deterrence Initiative (PDI). Modeled on the much more robustly funded European Deterrence Initiative, it aims to enhance the American defense posture in the Indo-Pacific region and to create mechanisms for maintaining it.
Another breakdown in relations with the U.S. would leave Thailand further exposed to Chinese influence.
The U.S. is continuing assistance to Southeast Asia under two ongoing frameworks. The first is the Indo-Pacific Maritime Security Initiative, which is designed to build partner country maritime defense capacity. The second is the Asia Reassurance Initiative Act, aimed at boosting engagement in the region. Then there are the traditional U.S. assistance programs, including providing weapons systems and development aid.
Record budget deficits will force the U.S. to adjust this sort of spending beyond 2021. This will likely mean some decrease in defense outlays (although nothing dramatic), and more funding for assistance and diplomatic budgets. These discussions will begin to unfold when the Biden administration submits its first budget to Congress. Southeast Asia will be looking at top-line numbers and focus on the broader Indo-Pacific region, but it will also search for signals about where it fits in the U.S. strategy.
The U.S. position in Southeast Asia became unstable as countries are wary of Washington taking attention away from China. They want the U.S. involved in the South China Sea and in the Mekong River – the two most important geopolitical hot spots in the region. On the other hand, they only welcome this American focus if it is indirect. Threading this needle will require concentrating on their needs and on keeping ASEAN central to U.S. security calculations in the region, which its members believe is key to keeping the peace.
The region is most worried about how the Biden administration and Congress will approach human rights, an issue that takes on greater importance when the Democrats assume control in Washington. There are no liberal democracies in Southeast Asia, though elements of liberalism are more present in some countries than others. There is true rule of law in Singapore, while Indonesia and the Philippines have competitive elections. But no country in Southeast Asia can be considered “free,” and several present serious obstacles to closer relations going forward.
First, there is the Philippines, where President Rodrigo Duterte’s terrible human rights record has handicapped the relationship. Pressure is growing in Congress to suspend security assistance to the country, and the issue will certainly be pushed again in 2021. Opportunity for the Biden administration will lie in its ability to deflect this pressure or accommodate the concerns in ways that keep the relationship on track. President Duterte’s term in office ends mid-2022, hence doing so will be a matter of biding time while keeping arrangements like the Philippines-United States U.S. Visiting Forces Agreement intact.
Second is Thailand. Following a troubled relationship with the security treaty ally under the Obama administration, President Trump demonstrated much less interest in the human rights issues that hobbled it. Elections in 2019 brought in a civilian government, which helped consolidate this shift. However, domestic dissatisfaction with Thailand’s illiberal democracy could provoke a reaction from Thai security forces harsh enough to strain the relationship once again.
Southeast Asia is wary of Washington taking its attention away from China.
Thailand has the most developed security relationship with China in Southeast Asia. Another breakdown in relations with the U.S. would leave it exposed to even further Chinese influence. The opportunity for the Biden administration here is similar to that of the Philippines. It can establish a relationship with the Thai government that allows it to discuss sensitive human rights at the highest levels and thereby preclude crises in the relationship. Intensifying regional diplomatic engagement will help in this regard.
Third, there is Myanmar. The Obama administration counted its partial opening to Myanmar as its greatest foreign policy success in the region. Since then, the Rohingya crisis, the fall from grace of Nobel Peace Prize laureate and leader Aung San Suu Kyi, and now the return of military government have cast doubt on that assessment. The Trump administration sought positive relations with Naypyidaw by only selectively imposing sanctions for human rights abuses. The Biden White House will likely respond to recent troubling events with a combination of this targeted approach and reimposition of broader sanctions suspended by the Obama administration.
In doing this, even more than in the previous cases, given the state of affairs in Myanmar fallowing the military’s return to governance, it will have to navigate a steady stream of human rights concerns over Myanmar coming from Capitol Hill. Congress has long exercised more control over Myanmar policy than it has any other country in Southeast Asia. Its approach has always been centered on human rights.
There are opportunities for the Biden administration and the new Congress in Southeast Asia that support an optimistic view. However, this optimism should be tempered. The challenges are great. If Washington can demonstrate the deftness and subtlety that are always prerequisites for successful Southeast Asia policy, it can use 2021 to demonstrate a long-term commitment that will give it an advantage in the great power competition and thus consolidate the U.S. position in Southeast Asia.