ASEAN integration can keep region above US–China fray

Many features of the US–Soviet cold war are present in contemporary US–China relations: ideological competition, struggles over the control of natural resources, and old-fashioned rivalry for leadership of the global community.

The question for ASEAN is: what is the likelihood of a cold war between US and China taking place on Southeast Asian soil? And what can be done to prevent a new cold war? Optimists among us would say that both Xi Jinping and Barack Obama are fully cognisant of the tremendous waste such a confrontation would entail. More importantly, neither the Chinese people nor the American people fear or dislike each other enough to support another cold war.

But our species can be short-sighted or short-tempered. The inescapable fact is that there will always be conflicts between nations of varying intensity. In a low-level conflict, China and the United States would be able to resolve differences through bilateral diplomatic means, and Southeast Asia would be left to its own devices by default through benevolent neglect.

With US–China tensions at a medium level, ASEAN countries would profit from the separate efforts of both countries to ‘win friends and influence people’. This is why China bought a possibly overpriced power station from the now-infamous 1Malaysia Development Berhad, why President Obama played golf with Malaysian Prime Minister Najib as a show of political support, why China made a more generous offer than Japan to build the high speed railway connecting Bandung and Jakarta, and why the United States granted extraordinary exemptions to Vietnam and Malaysia in the Trans-Pacific Partnership (TPP) negotiations. More recently, in February 2016, President Obama hosted a special get-together for ASEAN leaders in Sunnylands, California.

A high-level conflict would see tensions like those at the height of the US–Soviet cold war. To ASEAN’s detriment, both the United States and China would adopt the stance of ‘if you are not with me, then you are against me’.ASEAN cannot be a bystander in the present intensification of US–China rivalry. Its members must now work together on three fronts.

The first front is to work with other countries and international bodies (like the UN, the EU, the Organisation of Islamic Cooperation and the African Union) to strengthen existing global mechanisms of conflict mediation such as the International Court of Justice and the WTO.

The second front is to establish a strong regional mediation institution located in Southeast Asia itself. The question is whether it could be built without China’s support. It is generally to China’s advantage to delay the establishment of such a regional institution. China can count quite confidently on being an even bigger economic and political power in the future, and hence would have a bigger influence on an institution founded at a later point in time. ASEAN has to make China realise that this future advantage must be weighed against the greater risk of driving ASEAN irreversibly closer to the US in the present.

The third front is for ASEAN to quicken its rise as an integrated economic powerhouse. ASEAN has to be important enough to the US and Chinese economies for them to acquiesce to ASEAN’s requests to strengthen global institutions and to participate in the ASEAN regional mediation mechanism.

ASEAN economic integration will require every member to undertake two sets of reforms. The first is to boost economic development in each country. For example, Malaysia and Thailand, the two most advanced ASEAN countries after Singapore, have been caught in the middle income trap since 1995. ASEAN countries must implement important regulatory reforms to terminate the privileged positions of inefficient but politically-connected firms. Education systems must be brought to the level of Japan, Hong Kong, South Korea and Australia.

The second set of reforms is to achieve the declared objectives of the ASEAN Economic Community (AEC). The AEC must become as integrated economically by 2020 as the North American Free Trade Agreement is today. ASEAN members should also embrace integration with the United States through the TPP and with China through the Regional Comprehensive Economic Partnership.

Economic integration will result in losers as well as winners. Because the gains of the winners will exceed the losses of the losers, ASEAN must mobilise some of those gains to fund compensation programs. These should include trade adjustment programs to facilitate the transition of displaced workers to new jobs.

In keeping with social justice, Malaysia should subsidise temporarily the drugs that increase in price due to the TPP. The reason why the TPP debate was particularly rancorous in Malaysia was the government’s failure to extend any meaningful trade adjustment assistance to those hurt by TPP membership.

These reforms must be implemented simultaneously. Their interaction will speed up the emergence of ASEAN as a world economic power. For example, ASEAN members’ commitments to bring the AEC into fruition within a specified time period can be invoked against interest groups blocking badly-needed reforms.

The prudent strategic response by ASEAN to US–China rivalry is to first strengthen global institutions and establish a regional mediation mechanism; and second, to enact the reforms necessary to create an economically powerful AEC. The best defence is a strong regional economy. ASEAN should convert the US–China threat into an opportunity for region-wide economic integration.


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