America Needs a Business Pivot Toward Asia

Publication The Wall Street Journal Author Curtis S. Chin Date August 8, 2012 Website http://online.wsj.com Much has been made of the Obama administrations policy pivot to Asia, increasing diplomatic outreach, and rebalancing and repositioning of military assets in the Asia-Pacific region. Missing from this shift is a business pivota more concerted effort to increase trade and investment between America and its allies in the region. This would be good strategy, and good economics too. So far, Washington appears to be thinking of Southeast Asiaand particularly the problem of growing Chinese assertiveness in the South China Seaprimarily in military terms. In June, U.S. Secretary of Defense Leon Panetta announced plans to base 60% of U.S. naval forces in the Asia-Pacific region by 2020. Yet adding a pro-growth, pro-business component to U.S. strategy could help Asian countries become stronger, more confident partners. Commercial ties also can help cement friendships. Beijing understands this, which is one reason Chinese companies have been investing heavily in the region. This would not mean starting from scratch: A significant U.S.-Asia economic and trade foundation exists that can be built on. In Southeast Asia, for example, U.S. exports exceeded $76 billion in 2011. American companies also have invested twice as much in the region as they have in China. To cite one example, Ford is investing $450 million in a new Thai plant that will employ 2,200. Ford is the second-largest automotive investor in Thailand after Toyota, having pumped in $2.5 billion over the years. Its success in Asia is to the benefit of the United States. But whereas the Chinese are now actively encouraging greater overseas investment to catch up, Washington has lost focus. America needs more than the occasional trade mission. The first step in a business pivot needs to be an explicit recommitment to free trade broadly and to free trade agreements (FTAs) specifically. For the past three years, too little has been done to advance a free-trade agenda beyond ratifyingafter long delaysagreements initiated by prior U.S. administrations. In the Asia-Pacific region, the U.S. has free trade agreements with only Australia, Singapore and South Korea. Negotiations continue toward a regional Trans-Pacific Partnership (TPP) multilateral trade agreement. Yet the U.S. commitment to this agreement, while welcome, again predates the present administration.

New initiatives are warranted. Washington could set a firm deadline for concluding TPP talks. Recently the focus seems to be more on expanding the number of participantsCanada and Mexico recently joined, and Japan mightthan on concluding negotiations. While businesses would benefit from a deal covering as many countries as possible, the number of countries is irrelevant if expanding participation means theres no deal at all. Washington also should look for opportunities to improve trade on a day-to-day basis. Logistics and transport are obvious cases. A low-profile but important move would be to boost negotiations on open skies agreements in Asia. Such deals allow airlines, including freight carriers, greater freedom to set routes and schedules between signatory countries. As of late 2010, the U.S. had more than 100 open skies partners. Conspicuously missing from the list, however, are several Asian nations. The Philippines and Vietnam each could provide future opportunities for partnership agreements if governments on both sides understand the benefits of greater cooperation and competition, and of encouraging the building of businesses across borders. Finally, a business pivot should consist not just of actions but also of words. It means ceasing to demonize companies that trade and invest overseas. Its difficult to excite business leaders about the prospect of additional trade with Asia if they have to worry about becoming political whipping boys. Partly this would be a matter of politicians exercising some restraint, but partly also a matter of putting some leaders in Washington who understand the strategic and economic importance of trade with and investment in Asia and are willing to help businesses make that case at home and push for expanded opportunities abroad. Unfortunately, theres hardly anyone in Washington right now making the case that protectionism hurts both the U.S. economy and American interests abroad. And no one is positioned to communicate with the business community on how best to expand commercial ties in Asia. A central benefit of peace and stability in Southeast Asiawhich is a goal of the U.S. administrations strategic pivotwould be to open the way for greater commercial opportunities on both sides of the Pacific. Its time for Washington to understand that trade and economic ties can be part of the means to a strategic solution in the region, and not just the ends. Mr. Chin, a senior fellow and executive-in-residence at the Asian Institute of Technology, is a managing director with RiverPeak Group. He served as U.S. ambassador to the Asian Development Bank from 2007 to 2010.