Pritzker’s June Business Mission: Anchoring U.S. Growth in Asia
May 29, 2014
U.S. secretary of commerce Penny Pritzker will travel to Vietnam, the Philippines, and Myanmar with American chief executive officers in early June. Her visit is important because for Asia the heart of sustained engagement and indeed the very concept of security is economics. Asia is seeking more comprehensive involvement from the United States, so the visit will be a welcome signal that the U.S. government recognizes the vital role of the American private sector in this foundational part of a future U.S.-Asia strategy.
Pritzker, whose June trip will be her third to Asia since taking office a year ago, understands the power of trade and investment based on her long experience in the private sector. She deserves credit for providing leadership in embracing America’s top companies and traveling with them to Southeast Asia.
Indeed, many U.S. companies have selected Southeast Asia as the foundation for Asian growth. In fact, business strategies for Asia have begun to mirror geostrategic thinking about Asia. Southeast Asia is a logical center for pan-Asian trade and investment. Its practical and historic connections to larger neighbors such as China and India make it an ideal base for a balanced and long-term Asia strategy. Over the last two decades, international companies have moved their Asia headquarters from Tokyo and Hong Kong to Singapore and other ASEAN capitals.
As China has turned the screws of its regulatory regime and engaged in a state-sponsored cyber grab of foreign companies’ technology and other proprietary data, and India works through how it wants to relate to foreign capital and technology, investors have sought a more politically and commercially stable base for Asian growth. ASEAN delivers that balance while maintaining privileged access to the other key markets in the world’s fastest-growing region through a set of rather uneven, but still effective, trade agreements.
ASEAN has economic and trade agreements will all members of the East Asia Summit with the exception of Russia and the United States. U.S. companies invested in most of those 18 countries can, in most cases, receive preferential access to this market, which represents 56 percent of the world’s population and a growing middle class eager for American products and services.
Sadly, U.S. companies have had to move ahead of their government in Asia and develop strategies that are not yet supported by a comprehensive U.S. strategy for Asia that takes America’s economic interests into account. The United States’ economic future depends heavily on the degree to which it comprehensively and effectively integrates with Asia’s economic engine—indisputably the world’s strongest and most dynamic now, and likely to remain so for the rest of the twenty-first century.
In fact, U.S. companies are the top net investor in ASEAN with total accumulated capital of $189 billion invested by the end of 2012. U.S. companies have invested more than three times as much in Southeast Asia as in China and more than six times as much as in India. The world’s top companies are looking to invest in Asia, and Southeast Asia continues to provide premier opportunities and a base from which to expand in other markets across the Indo-Pacific, including Australia, China, India, Japan, New Zealand, and Taiwan as well as in countries such as Papua New Guinea and Timor Leste that have only observer status in ASEAN.
In terms of trade, the United States has enjoyed strong growth in ASEAN. Bilateral trade increased 71 percent between 2001 and 2012, from $137 billion to $234 billion. However, the United States has lost relative market share in ASEAN to its competitors, including China and Japan, whose governments are more focused on engaging ASEAN as a whole, with the U.S. percentage of total trade in the ASEAN market dropping from 16.1 percent in 2000 to 8.1 percent in 2012.
Pritzker’s visit comes at a critical time in U.S. economic relations with Asia. In a forthcoming CSIS poll of thought leaders in 11 countries in the Pacific Rim, which was conducted in March-April, 56 percent of respondents said they expected their countries’ most important economic partner in 10 years to be China. Only 28 percent thought it would be the United States. In several Southeast Asian countries, the numbers were even more skewed: 75 percent of Singaporeans thought China would be their most important economic partner compared to 14 percent who thought it would be the United States. In Thailand, these figures were 75 percent and 4 percent and, in Indonesia, 57 percent and 22 percent, respectively.
Unfortunately, Pritzker’s portfolio focuses her narrowly on trade promotion, market access compliance, and, more recently, promoting foreign investment in the United States. The Commerce Department does not get to drive a strategic view of U.S. economic engagement in Asia as it should.
Asia is moving now to make the rules that will define how its dynamic economies integrate, and the United States must be an active participant in that discussion. To date, the U.S. plan rests on the success of the Trans-Pacific Partnership, a negotiation among 12 countries in Asia and the Americas that does not include all of the ASEAN countries or Asia’s largest (China) and third-largest (India) economies.
Pritzker is taking an important step in the right direction by embracing the backbone of American economic and financial leadership in the world, U.S. companies. Asia will understand and welcome this partnership between the U.S. government and private sector. More needs to be done in this area, however, to enhance U.S. competitiveness and anchor U.S. economic vitality in growth in Asia.
To build out U.S. commercial engagement with the region beyond her trip, Secretary Pritzker should do the following:
- Announce that she will visit the remaining ASEAN countries, accompanied by U.S. business leaders, during her term as secretary of commerce.
- Commit to attend the ASEAN Economic Ministers Meeting annually to drive a strategic engagement dialogue that will support and complement the efforts of the Office of the United States Trade Representative as well as enlarge U.S. economic engagement to include all 10 ASEAN countries.
- Invite her ASEAN counterparts to visit the United States for a major U.S.-ASEAN economic conference with commercial and strategic elements on the agenda. She should invite each minister to bring a CEO delegation to the conference to meet with their American counterparts.
- Include U.S. governors in the U.S.-ASEAN economic conference and invite them to promote investment in their states as well as new trade, education, and technology cooperation opportunities.
(This Commentary originally appeared in the May 29, 2014, issue of Southeast Asia from Scott Circle.)
Ernest Z. Bower is senior adviser and Sumitro Chair for Southeast Asia Studies at the Center for Strategic and International Studies in Washington, D.C.
Commentary isproduced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).
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