- The Competing U.S. and Chinese Models for an East Asian Economic Order
In the Asia-Pacific two competing approaches to economic cooperation have emerged: development regionalism and trade regionalism, each championed by a major regional power. China and the United States have both sought to impose rules and norms on East Asia through their regional economic agendas. In doing so, Sino-U.S. competition has primarily developed around setting standards through institution-building rather than through an arms race or a trade war.
China, for its part, has pursued a development model. The launch of the Chinese-led Asian Infrastructure Investment Bank (AIIB) as a key financial institution used to bolster China's Belt and Road Initiative (BRI) challenges the U.S. preference for democracy and a market economy based on free and transparent trade. The United States has thus far displayed its discontent with this approach by rejecting the AIIB and BRI and pressuring allies such as Japan to not participate.
The United States, by contrast, has traditionally embraced a policy of trade regionalism. The Obama administration, for example, prioritized negotiation of the Trans-Pacific Partnership (TPP) and emphasized the importance of including 21st-century standards such as a competition policy, which deals with state-owned enterprises (SOEs); protection of intellectual property rights; and mechanisms for enforcing labor standards. However, the Trump administration has expressed skepticism about multilateral agreements such as the TPP and instead is employing an "America first" approach with a strong orientation toward bilateral deals. The administration appears to view economic openness and globalization as harmful for U.S. jobs and is turning toward protectionism, including through the withdrawal of the United States from the TPP. In the eyes of the region, this policy stance displays a lack of respect for multilateral institutions and contributes to the growing doubts in East Asia about the credibility of U.S. leadership.
This essay examines the U.S. and Chinese visions for the East Asian economic order and discusses the specific points of convergence and divergence. It assesses the potential for the development-focused initiatives [End Page 19] proposed by China, such as the AIIB and BRI, to disrupt the existing U.S.-led regional economic architecture. A competition between these two superpowers has evolved around the rules governing the regional economic order, and whose rules become dominant is at the core of this power game. This essay argues that, should the Trump administration continue to withdraw from Asian trade multilateralism, the United States may create an economic power vacuum in which China can expand its influence—for instance, by promoting the Regional Comprehensive Economic Partnership (RCEP) with lower-quality provisions as an alternative regional integration framework. The Abe administration's efforts to conclude the TPP without the United States were thus significant to position the resulting TPP-11 agreement as a rule-setter in the Asia-Pacific.1
The United States under Trump and Trade Regionalism in Asia
Regardless of who serves as president, U.S. foreign economic policy has traditionally exhibited several consistent principles, including the commitment to open, transparent, free, and fair trade. Global free-trade practices flourished in the postwar period with the world economy under the leadership of a great power that promoted open commerce and enforced the rules of a cooperative game. The United States' preponderant technological advances and gigantic market size were essential for stabilizing international and regional economic institutions by forcing its allies and partners to support the liberal international order. The TPP was a typical example of this pattern of U.S. behavior.
The TPP, for example, sought to ensure a level playing field for SOEs, or competitive neutrality between SOEs and private companies, despite exceptions for local SOEs and sovereign wealth funds. Protectionist tendencies in China make it difficult for the country to play a leading role in trade regionalism, which primarily aims to promote economic liberalization and deregulation. The dominance of state capital in key sectors, including petrochemicals, finance, and steel, poses a major obstacle to China's participation in a high-standard regional integration framework. Under the Obama administration, the United States was also a vanguard in promoting the enhanced protection of corporate...