America’s incoherent Asia policy

America’s Asia policy is internally contradictory and makes no sense. Four recent events make the point.

In Darwin yesterday, President Obama formally concluded an agreement for greatly enhanced U.S. use of northern Australian military bases. This will give the United States a quasi-permanent presence in waters of Australia, Indonesia, Southeast Asia, and India. At about the same time, Secretary of State Hillary Clinton was standing on the deck of a guided missile cruiser in Manila Bay and assuring the Philippines that the United States would keep its commitments to maintaining Philippine security.

Just before the president’s departure from Washington for his current swing around the Pacific the Chairman of his Council on Jobs and Competitiveness, GE Chairman and CEO Jeff Immelt, announced a new joint venture between GE and one of China’s state owned aviation companies. Under the deal, GE will transfer its leading edge avionics technology and move the production of its avionics products and many of the related jobs from the United States to China. This arrangement was cleared by the U.S. Departents of Defense and Commerce and presumably is in keeping with President Obama’s statement in his last joint press conference with Chinese President Hu Jintao that America would help China with the development of its own indigenous commercial jet liner.

Last summer, a New York Times story noted that the main spans for the new Oakland Bay Bridge are being readied for shipment from China, where they were fabricated, to the San Fancisco Bay area where they will be bolted in place. The bridge has been built in China because Chinese steel was quoted at a lower price than U.S. steel largely as a result of the undervaluation of the Chinese yuan arising from China’s currency manipulation – a manipulation that violates China’s IMF and WTO commitments and that the Obama administration has so far refrained from formally admitting (even though the president recently said at the APEC meeting in Honolulu that China is purposely undervaluing the yuan) and from taking any counter action.

Now the military agreements and statements in Australia and Manila are part of a much ballyhooed campaign by the Obama administration to demonstrate that it is pivoting in its foreign policy away from Iraq and Afghanistan and toward Asia where it is loudly telling everyone that it is "back." This all comes in the wake of China’s unexpected unveiling of its new stealth fighter during a visit by then Secretary of Defense Robert Gates and statements by senior U.S. military officers that China’s new missiles will soon, if they have not already done so, begin to deny the U.S. navy its absolute dominance of the western Pacific. It also comes in the wake of growing disputes between China and its southeast asian neighbors over islands and oil reserves in the South China Sea and their expressions of fear of Chinese aggression.

The U.S. statements and actions have been welcomed by the Southeast Asians with Singapore Prime Minister Lee Hsien Loong declaring the U.S. presence welcome and Indonesian President Yudhoyono saying he has no concerns about the U.S. movements.

So clearly the U.S. "pivot" is aimed at China and is based on the assessment that China poses an actual or potential threat to the interests of the United States and its allies.

But if that is the case, why is the United States pursuing trade and globalization policies that tend to undermine its own economic competitiveness while feeding the Chinese dragon? If he thinks the threat of China is sufficient to justify increasing U.S. military deployments in the Pacific, why does the president (who also presumably is interested in creating new American jobs) not call his friend Jeff Immelt out on moving avionics production to China?

The president said in Honolulu that China is purposely undervaluing its currency in ways that are incompatible with free trade. He knows that China is manipulating its currency in violation of its IMF and WTO commitments. Why doesn’t he direct his officials to file formal complaints and seek redress?

Or for that matter, why is he "back" in Asia with more military deployments? These deployments serve primarily to dampen conflicts between the various Asian countries, to calm region wide fears, and to make Asia safe for investment by global companies engaging in labor arbitrage by off-shoring their production to the Pacific. In effect, the U.S. military makes Asia safe for off-shoring and out-sourcing of production and jobs. One of America’s great competitive advantages is that it operates under a rule of law with strong property protection and is a safe place to invest. Why do U.S. policy makers want actively to negate that advantage?

It would be one thing if there were a real threat to America in the Asia-Pacific region. But there isn’t. Whatever it does in the South China Sea, China is not going to invade the United States. Nor is it going to stop selling to the United States nor is it going to stop buying things it can’t make itself from the United States. U.S. oil does not come through the Straits of Malacca or the South China Sea.

In short, the threat China poses to America is not a military or national security threat. Indeed, it is not clear that China even poses a threat to America so much as America poses a threat to itself.

By insisting on adhering to a simplistic, outmoded policy of laissez faire globalization and refusing to adopt comprehensive competitiveness policies to respond to the mercantilism of China and most of the rest of East and Southeast Asia (along with Germany, Brazil, and others) the United States is acting as its own worst enemy.

The use of military deployments to compensate for lack of economic competitiveness is an obvious instance of the adage that to a man with a hammer every problem looks like a nail. But over dependence on the U.S. military hammer only exacerbates the lack of U.S. competitiveness rather than compensating for it.

Of course, the United States cannot and should not withdraw from the Asia-Pacific region. It needs an appropriate mix of geo-political and geo-economic policies. But most of all what it needs right now is just some coherent thinking.