Breaking News

Bank of Japan Keeps Plan for 80T Yen Annual Rise in Monetary Base
Tweet TWEET

Obama Courts Asean as China-Japan Tensions Rise: Southeast Asia

President Barack Obama aims to build trade ties with Asia on his first foreign trip since re- election, challenging China as island disputes leave the region more open to closer economic and military ties with the U.S.

Obama’s three-day trip includes visits to Thailand, which said this week it would join the U.S.-backed Trans-Pacific Partnership trade talks, and Myanmar, a former military regime bordering China that is hosting an American president for the first time. He also will stop in Cambodia for a regional summit including leaders from China, Japan and South Korea, which are all poised to get new governments in 2013.

“Clearly one of the objectives here is to force China to accept the U.S. rules of the game for integration in the region,” said John Ravenhill, a professor at Canberra-based Australian National University. “The Chinese are going to be torn by these geopolitical disputes and the desire to try to forge deeper integration with South Korea and Japan as a counterweight to any U.S.-led TPP.”

China’s increased assertiveness over disputed islands near its shores has pushed its neighbors closer to the U.S. as Obama shifts naval assets to the region. Japan is bolstering its military alliance with the U.S. and boosting investment in Southeast Asia after its purchase of islands claimed by China rattled a $340 billion trade relationship between Asia’s biggest economies.

‘Accidental Clash’

“The situation between China and Japan is worse than it’s ever been for a long time,” Ian Storey, a senior fellow at the Institute of Southeast Asian Studies in Singapore, said by phone. “The real risk is an accidental clash that could escalate into something more serious. The U.S. doesn’t want to get involved in a fight with China over this.”

Obama is leaving the U.S. three days after rocket attacks by Palestinian militants drew retaliatory strikes by Israel in the worst violence between the two sides in four years. Obama also is weighing who he will nominate in his second term to replace Secretary of State Hillary Clinton and is in the middle of negotiations with Congress to avoid automatic spending cuts that would hit defense.

Obama arrives in Thailand on Nov. 18 and meets with Prime Minister Yingluck Shinawatra. Her government announced this week it would seek to become the 12th country to join the Trans- Pacific Partnership, Obama’s top trade priority and one that includes four other members of the Association of Southeast Asian Nations.

The next day, he heads to Myanmar to meet President Thein Sein and Aung San Suu Kyi, the opposition leader who spent more than 15 years under house arrest before the country shifted to democracy after decades of military rule. He also will give an address at the University of Rangoon.

U.S. Investment

As part of the effort to encourage expanding democratic and economic reforms, Obama in July authorized U.S. companies to invest in Myanmar for the first time since 1997, paving the way for Coca-Cola Co. (KO) and MasterCard Inc. (MA) to announce moves in the country.

While concerns remain about human rights in Myanmar, Tom Donilon, Obama’s national security adviser, said the president made the calculation that “we are not going to miss this moment” as the country’s leadership has made a shift toward reform. U.S. engagement will help lock that in, he said, adding, “We’re not naïve about this.”

Myanmar also can serve as an example to North Korea for how to emerge from diplomatic and economic isolation, Donilon said.

The island disputes will surface at the East Asia Summit, where Obama will meet with Chinese Premier Wen Jiabao, Japanese Prime Minister Yoshihiko Noda and other regional leaders. Obama is attending the Asean-hosted meeting for the second straight year after the 10-member bloc invited the U.S. to join in 2010.

Island Dispute

China has demanded that Japan withdraw from its September purchase of the islands, known as Senkaku in Japan and Diaoyu in China. Anti-Japan protests have slashed China sales at Toyota Motor Corp. (7203), Nissan Motor Co. and Honda Motor Co.

“China would like to have friendly relations with all countries including Japan, but we have our principles and our bottom line,” Vice Foreign Minister Zhang Zhijun told reporters on Oct. 26. “And that is we will never give any ground on issues regarding territorial sovereignty.”

Chinese vessels have been in or near waters administered by Japan for 26 straight days, the Japanese Coast Guard said Nov. 14, as diplomatic efforts to resolve the dispute founder. The incursions into areas rich in fish, oil and natural gas have prompted Japan to seek improved military ties with the U.S., Defense Minister Satoshi Morimoto said on Nov. 9.

Military Face-Off

The dispute potentially could grow into a military face- off, according to a confidential report submitted this month to Secretary of State Hillary Clinton by a delegation of former U.S. officials. Obama last year put 250 marines in Australia and plans to move 60 percent of the U.S. Navy’s ships to the region by 2020 to counter China’s rising military might.

“This is not a zero-sum competition,” Clinton told reporters on Nov. 14 in Perth, where she and Defense Secretary Leon Panetta met with counterparts from Australia. “Rather, it is up to the United States and Australia to lead the way in demonstrating that the strong relationship between us can also help foster strong, healthy relations with China, because the entire region will benefit from a peaceful rise of China.”

China’s disputes with Japan, the Philippines and Vietnam over contested islands may thwart talks on an Asean-led trade deal set to be initiated at next week’s meeting. The trade bloc including Asean, China, Japan, South Korea, India, Australia and New Zealand -- an area with more than 3 billion people accounting for about a quarter of the world’s gross domestic product -- rivals the Trans-Pacific Partnership and doesn’t include the U.S.

Code of Conduct

Philippine President Benigno Aquino will urge China to start negotiations with Asean on a set of rules to avoid conflicts in the South China Sea, Raul Hernandez, spokesman for the Philippine foreign affairs department, told reporters this week. China has resisted talks after Asean members agreed to elements of a code of conduct in July.

“We are ready to negotiate with China,” Hernandez said, referring to Asean. “We hope China would respond positively, and immediately tackle this issue so we can have something binding.”

Ben Rhodes, Obama’s deputy national security adviser, told reporters in Washington that, while the summit won’t yield a resolution of the South China Sea disputes, Obama will continue to press for a process to resolve them and de-escalate incidents that could lead to conflict.

Asean had mended rifts exposed at a July meeting, when the countries failed to reach consensus on handling disputes in the waters in a communique, Hernandez said. The bloc’s differences reflect wariness among leaders over picking sides between China and the U.S., according to Arthur Ding, a research fellow at the Institute of International Relations in Taiwan.

“The rise of China and the pivot of the U.S. to Asia has made Asean leaders anxious over the direction of the region,” he said. “They are fully aware that they have to be very cautious dealing with the two major powers.”

To contact the reporters on this story: Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net; Margaret Talev in Washington at mtalev@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.