Emerging economies and realities: Despite their reliance, US keen on halting China’s economic influence

195300720

The recent Asia Pacific Economic Cooperation (APEC) meeting in Beijing has once again highlighted the United States’ fervor for grandstanding acts of stealing the spotlight away from its rivals, or at least halting the advances of emerging economies and political powers beyond the Western hemisphere, whether it be at home or abroad.

Just a day before the APEC summit, US President Obama gathered participants to the US-led but China-excluded Trans Pacific Partnership (TPP) held in the US embassy in Beijing. The TPP is essentially a regional trade agreement that aims to undermine China’s own Free Trade Area of the Asia Pacific, which is a broader framework for bringing closer integration of Asian economies.

This display of intent comes at a time when the TPP is yet to resolve long standing issues that has halted it from becoming a fully functional economic bloc. There are still protectionist issues to be settled between Washington and Tokyo, for instance, and New Zealand’s intention to “pull out of the negotiations if politicians in the US used them as a vehicle to try to contain the rise of China.”

IMF and World Bank: Tired economic powerhouses

As the United States’ economic and military influence further erodes, the vacuum it is creating is more and more being filled by emerging powers consisting of China, Russia, Indian, and Brazil, which together in July 2014, account for roughly 20% of the world’s economy based on GDP and 30% based on Purchasing Power Parity, which is a more accurate measure of world economy. In July, BRICS proposed a $100bn New Development Bank to meet infrastructure and development projects at a time when the West continues to erode its role in global trade.

The ongoing shift in global influence from West to East has rendered the traditional economic clout of the West, through the World Bank and International Monetary Fund, unable to meet the enormous investments that are required by developing economies in the Asia Pacific region and Latin America. Indeed, both lending institutions have become hostage to their colonialist approach to development, such as in leadership, voting rights, capitalization, headquarters, and staffing, which are all dominated by the United States.

The perception that emerging economies are still heavily reliant on advanced economies for market access and demand is quickly coming to a pass. In its International Trade Statistics 2014, the World Trade Organization concluded that “more than half the exports from developing economies were sent to other developing economies in 2013.” It also revealed that “countries in Asia sent more than 60% of their exports to other nations in Asia and to Africa and the Middle East, compared with just over 15% each to North America and Europe.”

As has been observed in the past decade, this tectonic shift in global economic activity will only continue to progress to reach other economies not held hostage by the traditionally two-edged economic and political policies of the West.

Advertisements

Obama Ignores China in Asian Tour

obama-4

US President Barack Obama has recently concluded a four-country tour of Asia, ending it with a rather undeniable reassuring that America will remain the dominant military force in the region.

The visit does not pretend to be about anything else, with a first-stop visit to Japan (presently involved in tense territorial disputes with China) and ending with a renewed military agreement with the Philippines.

Obama’s visit also reassured the region besides military obligations, including the muddled Trans-Pacific Partnership (TPP) agreement which aims to lower trade barriers between the most economically dynamic region in the world and the US.

In hindsight, all of these ‘high-profile’ gestures highlight what was missing: the involvement of China.

Military Intimidation Shrouded in Neutrality

The message is clear since Obama’s ‘Pivot to Asia’ proclamation in 2011: lest it forgets, the US must reassure China that no other power should try to ‘change the status quo’, for better or for worse. This ‘rebalancing’ of power, a shift of US military emphasis from the Middle East to the Pacific (China’s borders, from the Pacific to South Asia), has been cheerfully greeted by the region’s leaders.

Obama’s visit to Japan finally shows that the Washington is not neutral in the island disputes in the region. In a press conference in Tokyo, he stated that the US and Japan have a mutual security treaty that covers the disputed Senkaku/Diaoyu Islands–a complete about-face to his past statements regarding territorial disputes between China and Japan.

Benigno Aquino, President of the Philippines, (son of former President Corazon Aquino who was put to power by the American government in the late 1980s), hailed a new ten-year defense pact with the US as an agreement that “reaffirms our countries’ commitment to mutual defense and security, and promotes regional peace and stability.”

One common theme in this is their willingness to be part of Washington’s new focus on Asia. Indeed it seems to ‘work’ both ways: with the waning of American military power the US pushes these countries to be more aggressive against China, while the same countries can focus on developing their economies and outsource their defense and security needs to Washington.

Economic Partnership a “Bridge to Far”

Actively promoted by the United States, the Trans-Pacific Partnership (TPP) aims to give China’s neighbors an alternative to Beijing’s economic clout through less trade barriers and bureaucracy. China’s economic might, role, and influence in the global economy is undeniable. As such, a trade agreement that fails to include the second-biggest economy in the world (some speculate it to surpass the US as early as 2016), is a failure in itself already.

For instance, in the bilateral trade between Japan and the US, there has been suspicion on both sides about unfair government protectionist policies (Japanese automobile industry) and unfair government subsidies (US agriculture). Obama’s latest visit just showed how difficult it is to accomplish anything beyond the trade barriers.

And history is on the side of the free trade skeptics: today it is widely accepted that free trade agreements are discriminatory by nature, which is the reason why most economists today prefer to call the free trade agreements (FTAs) as preferential trade agreements (PTAs).

Indeed, the more Obama denied his visit was not about China, the more it was perceived as being about militarily and economically containing China.