In September 2016, US President Barack Obama embarked on what is likely to be his last visit to Asia while in office. His first stop was Hangzhou, China to attend the annual G-20 conference. His second and last stop was Laos, a country a sitting US president had never visited.
President Obama’s reported purpose was to inject some life into America’s pivot to Asia that his former Secretary of State Hillary Clinton launched in 2011 and its “second leg,” the Trans-Pacific Partnership (TPP) plan. Both were flagging.
The hardly veiled objective of the president’s trip was to vie with China to maintain America’s influence in Asia and the world that China has been fast encroaching on in recent years. Showing a meaningful American presence at the G-20 meeting China was hosting and improving relations with a close ally of China in Southeast Asia were ways to do this.
The G-20, established in 1999 through initiatives by Germany and the US, was part of the Western-dominated global financial regime. In 2008 it replaced the G-8 as the main “economic council” of wealthy states, signaling that Western countries were not so well off and could no longer dominate international finance.
In 2015 it was decided China would host the meeting in 2016, reflecting China’s new economic influence in the world and continued slow GDP growth in the US, Europe and Japan following the 2008-09 global recession.
Also it was evident that the G-20, like other organizations that sought to restore global economic and trade expansion, has not been very effective in recent years. Hence, this task had fallen to regional and other organizations, and to China.
China’s President Xi Jinping declared he sought to revitalize the G-20 but also reform it and make it more innovative. He cited a new “global financial and economic architecture” that the US would participate in but would not dominate, “as a unipolar world no longer exists.” He pointed to an overreliance on monetary policy and too much focus on markets as opposed to nations, which had led to policies that did not give sufficient weight to real economic growth but also new technology. His statements had resonance.
To back up his plan to make the meeting show innovation, President Xi signaled changes in China’s own economic policies: new flexibility in stock and bond trading, exchange-rate movements, foreign investment, environmental policies, and cyberspace controls. Xi promised to trim China’s steel production capacity (to deal with a global glut in steel). He also announced opening seven new free trade zones in China and giving foreign investors access to China’s technology-focused Shenzhen stock exchange.
In contrast, the White House mentioned President Obama’s “ongoing commitment to the G-20” and his seeking to “promote cooperation in promoting a level playing field and broad-based economic cooperation.” President Obama’s ideas were vague compared to President Xi’s.
President Xi’s promises were buoyed by recent announcements of progress in China’s vaunted One Belt, One Road (rebuilding and upgrading China’s historical Silk Road while adding a maritime route) plan. The project is the largest in human history, bearing a cost of more than USD 1 trillion and is stimulating economic growth throughout Eurasia and Africa.
Data was also published at this time on China’s part in the increase of the world’s GDP. China is accounting for almost 39 percent of global expansion — four fold the US and six fold the EU. China, in other words, continues to be the world’s growth engine in spite of somewhat lower economic growth.
President Obama’s influence at the conference was hampered by even slower GDP growth than usual in the US (just over 1 percent) and by his TPP trade agreement showing little spark. Both presidential candidates, Hillary Clinton and Donald Trump oppose it. Speaker of the House Paul Ryan just recently came out against it. Some participating countries were balking. They were pessimistic about the TPP’s future and were looking for alternatives. Australia was shopping around for trade deals while Japan was fretting about its farmers’ anger over the deal.
Laos’s impressive economic growth in recent years has been largely the product of financial help from China the US cannot supplant.
Meanwhile, in August, representatives from fourteen Asian countries met for the latest round of talks to promote the China-led Regional Comprehensive Economic Partnership (RCEP) proposal. It will serve as plan B if the TPP fails, or will compete with it if it is ever realized. China has put extensive money into RCEP. A number of countries have joined, including several American allies — most recently Canada.
From the G-20 meeting President Obama travelled on to Laos. Laos’ relations with Vietnam, which was cuddling up to America due to strained relations with China, have improved. Laos is also less friendly with China of late. Thus Laos seemed to be an “opportunity country” to Obama.
More importantly, Laos is an outlier member of the Association of Southeast Asian Nations (ASEAN), the vital regional organization that Southeast Asian nations belong to and that is considered an opponent to China’s expansion in the South China Sea. Laos’ vote is decisive because ASEAN taking action on the matter requires unanimity.
In the wake of the recent ruling by the Permanent Court of Arbitration in The Hague against China’s claims in the South China Sea and China loudly rejecting the decision (with the support of Russia and some other countries) and the Obama administration strongly assailing China over the matter, ASEAN’s support was critical. But President Obama didn’t get it.
In Laos, Obama also sought to make amends over the huge quantity of bombs dropped on that country (numbering more than the total the US dropped on Germany and Japan during World War II) in the course of America’s Vietnam War. Many, which were mines or booby trap devices, remained unexploded and were a curse to Laotian peasants and children and anyone who walked in rural areas of Laos.
President Obama offered USD 90 million to clean up the bombs. Laotian authorities were grateful. But many saw the help as very late in coming — ex post facto for so many people that had been disfigured or lost limbs from the bombs.
In addition, Obama promised to promote trade and other economic help to Laos. But America not being a major trading partner or aid provider, this would have required a major policy shift on Washington’s part and Obama, with only a short time left in office and other more pressing issues on his plate, it is not likely to happen soon.
It likewise looks improbable in view of America’s current financial help to Laos being in the low millions of dollars while China’s is in the billions. China is Laos’s foremost trading partner and purveyor of aid and investment funds. China is building important railroads and roads in Laos. It controls the Mekong River, vital to Laos’s economy and livelihood, with seven dams upstream from Laos. Finally, Laos’s impressive economic growth in recent years has been largely the product of financial help from China the US cannot supplant.
Drawing up a scorecard… President Xi put on a terrific show at the G-20 meeting. The atmospherics of the meeting were exquisite. The venue was beautiful, historic Hangzhou. The food and entertainment was better than first class. Xi made welcomed promises about reforming China’s economy to benefit global economic growth and stability.
President Xi won the respect of top world leaders attending the meeting and showed that China was in the driver’s seat in terms of stimulating and fixing the slow growth in world economy and in global trade.
President Obama deserves kudos for reaching a climate change agreement with China. He also to some degree renewed faith in US ties with Japan and South Korea. Last but not least he may have slowed the tide a bit of Asian nations feeling American influence in Asia is on the decline.
But what President Obama did not accomplish was more poignant. He did not win support for pressuring China to stop or even reduce its claims in the South China Sea or counter its fast increasing economic and military influence in the region. Obama did not help the cause of the TPP. He did not change the fading hope that his “pivot to Asia” might become a central item in his foreign policy legacy. Alas, he gave the impression the US is no longer a rich country and in helping developing countries cannot compete with China.
The bottom line: President Obama’s last trip to Asia was hardly one to boast much about.