America Needs an Economic Peace Strategy for Asia

By Van Jackson
Van Jackson is a Senior Lecturer in international relations at Victoria University of Wellington, a Distinguished Fellow at the Asia-Pacific Foundation of Canada, and the Defence & Strategy Fellow at the Centre for Strategic Studies: New Zealand. He is also author of the forthcoming book, Pacific Power Paradox: American Statecraft and the Fate of the Asian Peace (Yale University Press). Twitter: @WonkVJ.

Republished in Foreign Policy: https://foreignpolicy.com/2022/01/09/us-southeast-asia-china-biden-economic-strategy-geopolitics/

JANUARY, 11, 2022

In December, the Biden administration’s Indo-Pacific coordinator, Kurt Campbell, detailed the shape of U.S. thinking about China and Asia. He hit all the familiar notes: the importance of alliances, weapons sales to counter China, the centrality of ASEAN, and the optimistic view that Sino-U.S. relations could be at once competitive and stable.

In any other era, such talk might have been comfort food for regional experts and policymakers. But absent from Campbell’s remarks, made at a virtual conference on Indo-Pacific security organized by Australia’s Lowy Institute, was any meaningful statement about political economy—the single aspect of statecraft most crucial to the region’s stability. It is in this arena of policy where China has done more to displace the United States than in any other, and it remains the glaring hole in Washington’s attempts to craft an Indo-Pacific policy. When pressed on this by his host, Campbell acknowledged that defense initiatives were not enough. But he could mention no concept, policy, or action to suggest economics was anything more than a throwaway gesture in a speech. References to a forthcoming “economic framework” that promised to be “cutting-edge” both lacked specifics and was entirely unmoored from any stated purpose beyond wanting America to “design” the region’s standards.

To the extent Campbell’s remarks reflect Washington’s view of Asia, it is at once modestly reassuring and highly troubling. Reassuring because his bland rhetorical restraint is a refreshing departure from the volatility and pugnaciousness of the Trump administration. Troubling, however, because the ideas powering U.S. President Joe Biden’s Asia policy are as bland as the rhetoric itself. U.S. policy toward the world’s most important region is no more than a mashup of the residual inertia from Trump’s military-first Asia policy with a revival of Obama’s well-intentioned but ill-fated pivot to Asia, which also had a heavily militarized agenda.

Consequently, the United States is misallocating its attention and influence relative to what would actually benefit the region most. Economic policy, not defense policy, is the only way to address the interrelated problems of development, pandemic recovery, and adaptation to climate change—issues that plague policymakers throughout Asia and threaten to derail the region’s peace and prosperity.

But this is precisely the trouble with U.S. engagement in Asia to date. The United States has no economic strategy for the region—at least not since former U.S. President Barack Obama’s ill-fated attempt to negotiate a new U.S.-Asia trade agreement, the Trans-Pacific Partnership. Nor is it realistic to expect any U.S. economic strategy beyond the free-trade pablum so sharply at odds with U.S. domestic political constraints.

So what is the United States to do? 

First, Washington must obviously prioritize economic statecraft and stop thinking with its missiles. Economic equality outside U.S. borders does not even appear to register as a problem needing attention. And it is clear from the way U.S. leaders talk about their country’s role in Asia that trade, aid, finance, and development are not as privileged in their minds as the Pentagon is. If that does not change, the  United States will continue to place itself on the wrong side of defense spending, naval expansion, nuclear modernization, and missile proliferation trends that make the region into a powder keg, which serves no one except the defense industry.

Second, Washington needs an economic policy for Asia—but one that tries to do actual good for the region instead of furthering only abstract U.S. interests. And there is much the United States can do to do right by Asia.

For instance, U.S. officials could use the United States’ privileged position in the global economy to negotiate various forms of debt relief on behalf of low and middle-income countries in the region that have been hit particularly hard by the pandemic, such as the Philippines and Malaysia (The United States did this for Iraq after the 2003 invasion.) Washington could also grant them preferential trade access, which would be a boon to Asia’s export-dependent economies.

The right kind of economic engagement would also focus on engaging U.S. partners in the region on labor rights, fair treatment of workers, floor wages for companies that export to the United States, and anti-kleptocracy initiatives. Washington could also offer massive aid for the transition to green energy in developing Asian nations.

All this and more is in the realm of the possible and the good. But it requires recognizing that economic statecraft is the foundation for regional stability, durable peace, and more equitable development in low-income countries. Above all, Washington must stop conflating economic strategy with stale tropes on free trade and coercive sanctions.

The third thing the United States should do is recognize its own limits. The United States is not Asia’s economic hegemon, even though recently declassified documents suggest that U.S. officials still think it is. Since the 1997-1998 Asian financial crisis, the region’s dense financial and trade architecture has largely moved on without the United States. And that’s okay. There’s nothing threatening about regional institutions that are exclusively Asian, especially if they help the region manage balance-of-payments issues and encourage capital controls to avoid future fiscal crises. Not every problem can be solved by U.S. power—especially when it no longer enjoys the position of primacy it did at the end of the Cold War. Insisting otherwise is a path to ruin.

If the United States can prioritize economic statecraft oriented toward stability and peace, help Asian economies reduce inequality and adapt to climate change, and give up the effort to sustain a hegemony it no longer has, it will help Asia create not just greater stability, but a better and more just form of stability. It might even offset the loss of Washington’s once cooperative relationship with Beijing, which did more to keep Asia peaceful than many U.S. officials appreciate. In a world colored by Sino-U.S. rivalry, Asia needs a new source of stability. Fresh thinking about political economy may be just that.

The views and opinions expressed in this article are those of the author(s) and do not necessarily reflect those of the Asia Research Institute, National University of Singapore.