Asean will gain from a Biden presidency

The first thing to appreciate is that Biden comes to the presidency with the best foreign policy experience of any new American president since George H.W. Bush entered the White House in 1989. Like all American Presidents, Biden will pursue American interests in a hard-headed manner but he is likely to conduct policy in a more pragmatic way, in greater concert with allies and with much greater depth of understanding of foreign policy issues than his predecessor.

His 17 years as either Chairman or ranking member of the Senate Foreign Relations and his eight years as Vice-President have equipped him with a unique understanding of America’s place in the world, how it has changed and what needs to be done to preserve American power. He has substantial hands-on experience in areas as diverse as negotiating nuclear arms control agreements and managing the American military presence in Iraq. He has travelled extensively all over the world, developing personal relationships with key leaders, including President Xi Jinping of China.

Moreover, Biden’s strong multilateralist instincts will produce two departures from the Trump years. One is that he will veer towards a more cooperative approach with allies. Biden understands that the US performs best when backed by allies, particularly in Europe and Asia. Not for him the highly transactional style favoured by President Trump who berated even close allies such as Japan and South Korea, for example, over their military spending and even demanding that South Korea pay a huge fee for accommodating US troops on its soil.

Second, Biden appreciates the importance of the rules-based international order, so America will once again participate constructively in agencies for global cooperation such as the World Health Organisation (WHO) and the World Trade Organisation (WTO) while returning the US to the Paris climate accords.

In addition, Biden will probably abjure the highly-personalised approach President Trump took. Biden is committed to institutional processes, where policy decisions emerge from careful deliberations using expert knowledge. As many of his close advisors understand Asia and have good connections with Asian leaders, it is more likely that the views and concerns of America’s allies in Asia will be heard in the Biden White House. A more institutionalised foreign policy process also means that Biden will offer greater predictability — after four years of unsettling foreign policy developments. There will not be sudden decisions to hold summit meetings with North Korean leader Kim Jong Un or attempts to ingratiate himself with strongmen by endorsing their authoritarian methods as Trump was prone to.

A tough but nuanced approach to China

Biden will be tough on China. Remember that Vice-President Biden was in office when President Xi promised President Barack Obama that China would not militarise the territories in the South China Sea that it had seized. The Americans believe that even as Xi spoke, the Chinese military was already developing military facilities on those reefs and rocks. Thus Biden will be wary of China and Xi. We cannot see him reversing the higher tariffs that Trump imposed on China or retreating from the harsh restrictions on Chinese technology firms. Biden will probably renegotiate Trump’s trade deal with China, using Trump’s tariffs to extract more concessions on market access and the like. There will be no let-up in US pressure on Chinese tech. Biden is also likely to continue the Trump administration’s stepped up freedom of navigation operations in the South China Sea to demonstrate to China that the US will not accept China’s attempts to assert control in that disputed area. The American defence build-up which will eventually see a larger deployment of American naval assets in East Asia will also continue.

In some areas, though, Biden may offer some changes in strategy affecting Asia.

First, Biden is likely to be more cautious on Taiwan unlike the Trump team’s increasing embrace of Taiwan in military and economic fields. Biden will want to ensure that the US does not encourage independence-minded leaders in Taiwan to provoke China with rash acts and thus unwittingly cause a crisis or even a war. At the same time, Biden likely appreciates that the Chinese threat to eventually take over Taiwan by force if necessary is not just rhetoric — he will want to signal firmly to China that the US would respond forcefully in such circumstances.

Second, Biden seems to understand that the relationship with China cannot be entirely competitive, that there are areas where both sides can cooperate profitably. One area will be North Korea’s development of nuclear and missile technology which could threaten the US. Collaborating with China would give the US a greater likelihood of success in dealing with North Korea. Similarly, the US under Biden will probably be willing to cooperate with China on developing global strategies to mitigate climate change.

Third, Biden was part of the Obama administration which showed a greater recognition of Asean’s position. It was under Obama that the US first established a dedicated Mission to Asean in Jakarta, appointing its first resident Ambassador to Asean in 2011. Obama’s term saw the US participate at a high level in major Asean meetings, demonstrating its commitment to the region which has clearly flagged in recent years. It is reasonable, therefore, to expect Biden’s administration to revert to the policy of prioritising close ties with Asean nations and demonstrating that commitment in deed as well as in word.

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What about economic policies?

Biden’s likely economic policies will probably be a net positive for this region, though not everything he does will be welcome.

First, his overwhelming priority is to get the US economy back on track. In the near term, he has already prioritised containing the Covid-19 pandemic, which is blazing out of control in the country. His strategy will be more science-based and can help the US flatten the curve of infections, which would in turn allow for a faster return to normal patterns of economic activity by ordinary people and businesses. He will push for an aggressive fiscal stimulus — while opposition from his Republican rivals in Congress could limit its size, it will still be large enough to boost economic growth. Asian economies should benefit from the resulting revival of US economic activity and appetite for imports.

In the longer term, we expect Biden’s ambitious economic plans to be stymied by his Republican opponents who are likely to retain control of the Senate. What is likely to emerge will be:

Parts of his spending plan which are more acceptable to the Republicans — such as increasing spending on infrastructure, R&D, clean energy, education and healthcare. Biden is not likely to secure agreement on sufficient tax increases to fund all of these plans. Thus, there is a good chance that higher spending will not be matched by higher revenues, causing the American budget deficit to swell.

Biden is more committed to some form of industrial policy, where the Federal government would play a bigger role in promoting economic transformation. His economic team will probably want strategic items such as high-tech components used in the military or important medical items such as antibiotics and ventilators to be produced domestically. He could also be inclined to provide more incentives for American firms to bring production back from cheaper locations such as in Asia.

The Biden administration will also probably be tougher on countries like Singapore which offer tax and other incentives that result in American firms reporting profits — and paying taxes on those profits — outside the US.

The US is likely to continue wielding the threat of sanctions against countries deemed to be “manipulating” their currencies. Asian economies will continue to bear the brunt of this US approach.

Second, Biden is not an instinctive free-trader, so no one should expect him to seek more free trade agreements or open up the US economy to even more imports. Neither should we expect the US to return to membership of the Comprehensive and Progressive Trans-Pacific Partnership, a free trade agreement that embraces much of the Asia-Pacific including a number of Latin American economies and which was initially encouraged by the Obama administration. But, his multilateralist instincts will make Biden more open to cutting a deal to make the WTO regain its effectiveness. Currently, the WTO is leaderless after the US under Trump rejected the candidate favoured by most other members to be its director-general. Biden’s trade team will probably be willing to cut a deal on reviving the arbitration function of the WTO which has foundered because the US has vetoed replacements for retiring judges, rendering the dispute settlement function of the WTO defunct.

Why is all this good news for Asean?

Southeast Asia could emerge a winner from the Biden years, even if not everything Biden does will be welcome.

First, since Southeast Asia will be one of the main arenas for US-China contestation, a more nuanced and predictable American management of ties with China will produce a more stable region, with a reduced chance of miscalculations that could provoke instability. A US that is more clearly engaged in the region and pursuing rational policies will act as a better check and balance on China. That makes the world safer for Asean while giving it more room to manoeuvre.

Second, because the regional countries are relative minnows in the global system, they need a rules-based international order to protect them. A renewed US commitment to upholding multilateralism and defending that rules-based world order will offer a more robustly constructed umbrella to the less powerful countries in this region — whether this means a revitalised WTO or a reenergised set of security alliances in the wider Asia-Pacific region.

Third, the American economy is still a massively important market for Asean exports and an important source of direct investment. Thus, if Biden can be more competent in bringing the Covid-19 pandemic under control, Asean will be a winner. If over time, Biden’s long term economic strategy succeeds in alleviating some of the US’s weaknesses such as infrastructure and promoting higher quality growth there, Asean will also be a beneficiary. One risk is that of a weaker US dollar generating a degree of currency instability — Asean’s economic managers will have to be prepared to contain that risk.

Of course, a Biden administration may also be occasionally difficult with Asean countries on trade and currency management, but in the broader scheme of things, we see Asean as a big winner from the political change in the US.

Manu Bhaskaran is CEO at Centennial Asia Advisors