A vastly under-reported drama in Australia this past week both sounded a new departure in the old U.S.-Australian alliance and highlighted the central contradiction of the U.S. policy of "pivoting to Asia."
At the annual Australia-U.S. Ministerial meeting in Perth, Secretary of State Hillary Clinton, Defense Secretary Leon Panetta, and their Australian counterparts launched discussions on granting the United States further access to air bases in Northern Australia and to several naval ports, including one on the Indian Ocean just south of Perth. They also announced that the Pentagon would establish a powerful radar and space telescope in Australia to monitor Asian airspace.
In a speech in Adelaide following the meeting, Hillary called Australia an "indispensable ally" and said: "these past three days have reinforced for me the indispensability of the U.S.-Australian partnership. We are cooperating everywhere together -- in business, in shipbuilding, from the mountains of Afghanistan, to the atolls of the Pacific, to the thriving cities of Asia." This, of course, follows the agreement last year to deploy U.S. troops to Australia for the first time since the end of the Second World War. The plan is eventually to have 2500 marines at bases in Darwin. However, so far, only 250 have arrived there.
The announcements and the secretary's speech coincided with two major statements by Australians on the future of Australia. A white paper by a government appointed commission emphasized the centrality of China and Southeast Asia to Australia's future and called for a dramatic shift of Australian economic, educational, commercial, diplomatic, and strategic policies away from their traditional U.S. orientation and toward Asia. In particular, it called for a closer relationship with Indonesia and for Australian membership in the Association of Southeast Asian Nations (ASEAN). A speech by former Prime Minister Paul Keating not only called for closer alignment with Indonesia and ASEAN, but also called for a degree of separation from the United States, saying that Asia sees Australia as a toady of America and too ready to do its bidding. Other commentators raised the issue of whether Australia is unnecessarily and unwisely (in view of Australia's growing economic dependence on China) abetting the United States in a policy of containment of and opposition to the rise of China.
Indeed, in his own press statements, Australian Foreign Minister Bob Carr was at pains to explain that there was nothing about containment of China in any of the Australian-U.S. communiqués and insisted that Australia has not surrendered its foreign policy to the United States.
In her own response in Adelaide, Secretary Clinton said "the Pacific is big enough for all of us" and claimed that those who argue that Australia needs to choose between America and China are presenting a false choice. "That kind of zero sum thinking only leads to negative results," she explained.
On Saturday, however, The Weekend Australian foreign editor Greg Sheridan pointed to important hidden realities. The agreement from last year was supposed to bring 2500 U.S. marines for an annual rotation through Australia and was also to provide for expanded use of military air bases in northern Australia and of naval bases in Western Australia. Yet, so far the only thing that has happened is the rotation not of 2,500, but of only 250, U.S. marines. Sheridan says this is because the Australian government has gotten cold feet in the wake of Chinese warnings that Australia should not partner with America in suppressing China's rise.
What's going on here? Well for starters, it clearly is all about containing China. The United States has been the major power in the Asia-Pacific region for the 67 years since World War II. The Seventh Fleet has been there and U.S. troops have been stationed in Korea and Japan for all that time. Contrary to the popular meme that America was somehow neglecting Asia, it never left. But it also never felt the need to do a "pivot" and to establish further bases and troop rotations in Australia, or to station 60 percent of its naval ships in the western Pacific, or to become involved with the claims of various Asian nations over uninhabited rocks in the sea until China began to emerge as the second major power in the world.
Australia, like all of America's other allies, quasi-allies, and friends in the Asia-Pacific region is benefiting enormously from doing business with China and understandably wants to continue doing that business and even expand it. At the same time, however, it doesn't want to be pulled into too close an orbit by the Chinese tractor beam, nor does it want to have to defend itself against terrorist threats and those lusting for its vast mineral resources all by itself. So it turns to the United States to be the balancer and co-defender.
This, of course, is a way for Australia to have its cake and eat it as well. It is a brilliant strategy if it can be made to work. But there is a vulnerability highlighted by Bob Carr's urgent interjection that there is nothing about containing China in any of the U.S.-Australia agreements and by Hillary Clinton's comment that "the Pacific is big enough for all of us."
The vulnerability is that neither Australia nor any of the other Asia-Pacific nations want to risk offending China. Indeed, the Carr/Clinton comments as well as the slow implementation of the U.S.-Aussie agreements concluded last year are in consequence of complaints China has already made about these deals constituting nothing more than a policy to contain China.
Australia and the rest are increasingly ambivalent. They want Uncle Sam to be readily available in times of danger. At the same time, they don't want to admit too close an association. In short, they don't want to be asked to choose between China and America. One may wonder why the Americans would want friends who are afraid to acknowledge them, but so far, at least, Washington has taken the position that there is no need to choose. That, however, is not the position that China has taken. It interprets the ties of Asia-Pacific nations with America as aimed at containment of itself. It complains and threatens and in response everyone starts talking double talk.
Ultimately the question must boil down to what are the Americans getting out of this. The business the United States does with China makes it large and a chronic international debtor, and maintaining fleets, troops, and bases in the Asia-Pacific region only adds to its federal budget woes. Will it eventually conclude that the double talk is not worth the candle?
In response to my recent call for American ASEAN experts to be less focused on promoting a U.S.-ASEAN free trade agreement and more focused on having the ASEAN countries actually buy more from the United States, I received several queries about what exactly the United States has to sell aside from military hardware and systems.
This is an old question in the long running debate over the U.S. trade deficit and unfair trade in the Asia-Pacific region. Typically the discussion goes as follows. American commentators, business executives, and government officials claim the some market is unfairly closed or that exchange rates are being unfairly manipulated to the disadvantage of U.S. exports. This, they say, is exacerbating the already unsustainable U.S. trade deficit and will result in some dire consequence unless the offending countries stop cheating and start playing by the rules. The response from Asia is denial of any foul play and an assertion that American business doesn't try hard enough capped by the question, "aside from weapons and airplanes, what does American make that anyone in Asia could possibly buy?"
This has been an excellent debating technique for Asian officials and commentators because it has diverted attention from Asian policies to well known and glaring American weaknesses. In effect, this question has said: "Look, why don't you just forget about our policies and practices. The truth is that you have nothing to sell that we want to buy, and, therefore, even if we played exactly as you request there would be no change in the trade flows or in your trade deficit."
While it was always an exaggeration of U.S. weaknesses, this argument contained enough truth that it was long hard to counter. Today, however, that is much less the case. Let's start with weapons and aircraft. Even its harshest critics have always acknowledged that the United States is very competitive in the weapons and aircraft markets. Yet, even its closest allies have striven to import only what was absolutely necessary from the United States while having most of the arms and aircraft made in their own factories within their own territories. Take the recent decision by Japan to buy the U.S. F-35 as its next generation fighter plane. Japan is not going to import that plane off the shelf from an American factory. Rather it is negotiating to have as much of the plane as possible made in Japan despite the fact that making it in Japan will dramatically increase the cost.
As for commercial aircraft, press reports this week noted that Airbus will take a larger share of global aircraft sales this year than Boeing. This strong Airbus showing reflects the success of a long running European industrial policy that has been aimed not only at avoiding as much as possible the procurement of U.S. made aircraft but also at displacing them in the world markets. Virtually every Asian economy including those of Japan, Korea, and China has some effort underway to promote the production of commercial jet aircraft or of aircraft parts, and procurement both of U.S. brand military and commercial aircraft is often made conditional on at least partial production of the plane within the home territory of the procuring body.
So a good first reply to the question of what the United States has to sell would be - arms and aircraft, if that would only be fully permitted.
But now the even better reply is that the United States is the most competitive locations for production and provision of a broad range of goods and services. Take autos as an example. Honda has just announced that it may increase its production in the United States by 40 percent and begin to use the United States as an export platform for some models. This is because the strong yen has made U.S. based production more competitive than Japan based production. Similarly, Mercedes Benz, BMW, Hyundai, and other global auto makers are added production capacity in the United States not only to supply the U.S. market but also for export.
This morning's New York Times reports that GE is returning production of some appliances to Louisville, Kentucky and a recent study by Booz & Co. emphasizes that about 90 percent of U.S. manufacturing industries are quite competitive in global markets. One of the most competitive is semiconductors which were the basis of the whole rise of Silicon Valley. Yet, as in the case of aircraft, a number of governments are promoting and subsidizing indigenous semiconductor production as part of efforts to displace the leadership of the U.S. based production.
So the answer today to the question, is that the United States has plenty to sell if the strategic industrial policies aimed at displacing such sales are abandoned or modified. And it is the lack of focus on such policies that constitutes my opposition to proposals for free trade agreements like that suggested between ASEAN and the United States. Free trade agreements that do not result in more trade in items in which it is well know that countries are competitive is not really free trade. Rather it is a charade.
My call is for less charade and more real trade, meaning actual sales and delivery.
Munshi Ahmed/Bloomberg via Getty Images
If you want to understand the truly upside-down nature of the thinking of Washington's foreign policy elite on Asia, take a look at the just released report and press commentary by the U.S.-ASEAN Strategy Commission of the Center for Strategic and International Studies (CSIS).
Like all of these think tank commissions, this one is studded with former high ranking officials now consulting for a variety of global corporations both American and foreign. Particularly prominent in their remarks were former U.S. Trade Representative Carla Hills and former Defense Secretary William Cohen. Hills urged negotiation of that philosopher's stone of modern international relations, a free trade agreement, in this case between the United States and ASEAN. Breaking down barriers to trade and capital flows would encourage further investment in the region by U.S. corporations, she said.
In light of the fact that the ASEAN region is drowning in investment while the United States is starving for it, it's not clear why Washington should want to encourage further investment in ASEAN, but maybe Hills thinks the deal would encourage a two way flow of investment that would also be beneficial to the United States.
If that is the case, however, the commission's proposals do not include any recommendations on exchange rate manipulation, reciprocity on investment incentives, or other tax and regulatory tools often employed by the ASEAN countries in ways that tend to promote their trade surpluses and the U.S. trade deficit with its consequent impact on U.S. unemployment.
Joshua Roberts/Bloomberg via Getty Images
Clyde Prestowitz is the president of the Economic Strategy Institute and writes on the global economy for FP.