Southeast Asia caught in a dilemma

The US-triggered trade war and its power struggle with China is giving countries in the region an increasingly difficult time

In his speech at the Shangri-La Dialogue on May 31, Singaporean Prime Minister Lee Hsien Loong said that most countries in Asia would be at pains to choose between the United States and China given that all US allies in the region have China as their biggest trading partner.

Lee suggested that to gain influence, smaller countries should work together to deepen economic cooperation, strengthen regional integration and build multilateral institutions. The Regional Comprehensive Economic Partnership would be an ideal example of such a framework, except that India’s opting out of the RCEP owing to some unresolved issues shows that for small Southeast Asian states promoting regional integration is caught with difficulties.

Therefore, the Southeast Asian countries’ response to this great power competition will shape the regional or even international environment for decades to come.

Some observers, argue that Southeast Asian countries benefit from import substitution or production relocation as a result of the trade spillover from China. Others claim that the Association of South East Asian Nations members are going through a bumpy ride as the US-triggered trade war against China continues. Take the case of Vietnam, an export-oriented country that has considerable trade ties with both China and the US. According to a report by Nomura, an Asia-based financial services group, Vietnam’s gain from the trade diverted from China is equivalent to 7.9 percent of its GDP — and its exports to the US in the first five months of 2019 surged 36 percent year-on-year.

Given its stable economy, Vietnam has not suffered much because of the Sino-US trade disputes. In fact, it has benefited from it. However, analysts say the sweeping slowdown of world trade, currency fluctuations, and Vietnam’s unpreparedness to benefit from China’s spillover effects in the long run could lead to pessimistic prospects for the country.

Given that the US is the top foreign direct investor in and an important security contributor to the region, and China the top trading partner and dominant economic driving force, Southeast Asian countries would prefer to have constructive ties with both.

But the recent ASEAN Summit demonstrates the contradictory attitude of the regional countries. On the one hand, they resist Washington’s pressure to distance themselves from Beijing, as they do not want to be used as proxies in the trade war. That is exactly why the ASEAN member states and China stepped up efforts to expedite the negotiations on the RCEP. Aware of the importance of strengthening relations with China and promoting regional integration, Southeast Asian countries appear to be arriving at a consensus to counter the negative impact of protectionism by bolstering multilateralism. On the other hand, there is no fundamental change in the region, especially in terms of security collaboration with the US.

The dilemma for Southeast Asian countries is unlikely to end soon, as China is expected by the US to challenge its dominance in the region. Earlier last year, in its National Security Strategy and National Defense Strategy reports, the US identified China as a strategic competitor that aims to realize “IndoPacific regional hegemony”. The US administration confirmed its regional strategy this year with a comprehensive Indo-Pacific Strategy Report asserting that China seeks to “reorder the region to its advantage”, while the US pursues “a future where small nations need not fear larger neighbors”.

Consequently, even if China and the US reach a trade deal, Southeast Asian countries will remain saddled with the dilemma of weighing up economic and security gains.

The region is no stranger to power competition. During the Cold War, ideology guided the regional countries’ foreign policies. After the end of the Cold War, the US undertook an engagement policy toward China, highlighting the potential of cooperation. It is in the interests of small countries to maintain equilibrium between big powers in peaceful times.

Southeast Asia is thus walking the tightrope as it engages with both sides. And with the power rivalry intensifying, Southeast Asia’s response illustrates a new trend in the era of high interdependence. “Don’t make us choose” has become a common refrain echoing through the region.

The uncertainty of the US’ commitment and long-lasting concerns about China’s rise are shaping the road ahead. The US president’s decision to withdraw from the Trans-Pacific Partnership three days after its inauguration triggered panic and damaged Washington’s reputation. What Southeast Asia is currently talking about, therefore, is not China’s rising influence in the region, which it sees as an inexorable trend, but the hard-edged rhetoric of the White House. So, China’s loss because of neighboring states’ overcautious policy does not necessarily translate into a win-win scenario for the US.

Southeast Asia’s response disavows a binary pattern for small states in the face of a great power contest. Their refusal to choose sides and their efforts to resolve disputes under a multilateral framework are conducive to regional stability and to preventing the world from heading back to bipolar confrontation. For both China and the US, a wise choice to maximize benefits in Southeast Asia would be to not push regional countries into choosing sides but to engage with them on their own terms based on positive economic and political agenda.

The author is president of Intellisia Institute, professor of International Relations at and associate dean of the Institute for 21st Century Silk Road Studies at Jinan University in Guangzhou. The author contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.

MA XUEJING / CHINA DAILY