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Shutdown Risks Obama’s Asia Trip With Trade Deals Waiting

The U.S. government shutdown may leave President Barack Obama’s foreign policy goals as an unintended casualty.

Obama is scheduled to depart in three days for Asia, a region that represents more than half the global economy and one where the White House is seeking to forge closer alliances to counter rising economic and strategic competition from China.

While Obama still hopes to make the trip, an extended shutdown may force him to cancel or shorten his travels, senior adviser Dan Pfeiffer said in an interview with Bloomberg News. “There are logistical questions,” Pfeiffer said. The president has postponed his Malaysia visit, the official news service Bernama reported today, citing Prime Minister Najib Razak.

A cancellation risks sending a signal of a diminished U.S. commitment to its global role that allies fear and hostile nations or groups might welcome, according to Leon Panetta, a former defense secretary and White House chief of staff.

Congressional Republicans “may think this is a political game,” said Panetta, a former Democratic congressman. “But it’s a political game that’s doing damage to national security. The biggest threat to our national security right now is our failure to govern,” because other nations “will view that as a weakness.”

Pacific Trade

Obama staked his second-term foreign policy on enhancing the U.S. economic and military presence in the Pacific. The U.S. exported $326.4 billion in goods and services to the Pacific Rim in 2010, according to U.S. Census Bureau data, up from $254.6 billion in 2009. That exceeded American exports to the European Union or to Canada. The U.S. also has bolstered its defense assets from Australia to South Korea to help safeguard sea lanes that carry more than $5 trillion of commerce, about $1.2 trillion of it U.S. trade.

The eight-day tour of Asia was scheduled to have stops in four countries and at three international summits, including the annual Asia-Pacific Economic Cooperation meeting among 21 members. It also would give Obama the opportunity for a face-to-face meeting with Russian President Vladimir Putin and Chinese leadership.

Among the administration’s main goals is making progress on the Trans-Pacific Partnership, an 11-nation free-trade zone linking an area with about $26 trillion in annual economic output.

Beyond the Trip

Obama’s events in Indonesia, Brunei, Malaysia and the Philippines have been planned for months and orchestrated to the hour, and White House press secretary Jay Carney has said Obama still intends to go. Yet with no clear end in sight to the fiscal stalemate with House Republicans and the effects rippling through the U.S. economy, the administration may be forced to prepare for the possibility of cancellation.

“I can’t imagine the president going abroad with a government that’s shut down,” Panetta, who was defense chief and Central Intelligence Agency director under Obama, said.

The shutdown risks feeding an impression that the U.S. is in retreat from its role of global leadership amid political polarization in Washington, according to Charles Kupchan, a senior fellow at the Council on Foreign Relations in Washington.

“It’s particularly important in East Asia where countries are uncertain about the long-term geopolitical trends and trying to decide whether to tilt toward the United States or toward China,” he said. “And as a consequence it’s an important time for Obama to show that Washington has its lights on.”

‘Significant Pall’

Defense Secretary Chuck Hagel also warned that the shutdown casts “a very significant pall over America’s credibility with our allies.”

“It does have an effect on our relationships around the world and cuts straight to the obvious question: Can you rely on the United States as a reliable partner to fulfill its commitments?” Hagel told reporters during a visit to Seoul.

Addressing reporters yesterday at the end of a meeting with Israeli Prime Minister Benjamin Netanyahu, Obama also drew a link between the shutdown and global U.S. responsibilities.

“We are the foundation of the world economy and the world financial system,” the president said. “And we certainly don’t allow domestic policy differences on issues that are unrelated to the budget to endanger not only our economy but the world economy.”

Cameron Cites Risk

The shutdown comes as Obama faces challenges in defining the international role of what he has called a war-weary America. He faces a backlash from other nations over disclosures of National Security Agency spying on allies, debate over a potential opening with Iran under its new president, and uncertainty over his handling of the war in Syria and his contention that the regime used chemical weapons.

The economic damage from the shutdown also may reduce U.S. clout.

“It is a risk to the world economy if the U.S. can’t properly sort out its spending plans,” British Prime Minister David Cameron told BBC Radio 4’s “Today” program in Manchester, where his Conservative Party is holding its annual conference. The U.K. government said in a notice to citizens that travelers may experience delays in air travel and immigration.

Germany’s Foreign Ministry issued a travel advisory for the U.S., citing on its website the risk of closed museums and national parks, and the German news magazine Spiegel Online warned that “a superpower has paralyzed itself.”

‘Like Noise’

The Stoxx Europe 600 Index added 0.8 percent to 312.86 at the close of trading in the equity benchmark yesterday. Investors assessing the impact of the U.S. shutdown decided it “looks more like noise rather than something that makes a fundamental difference for growth,” Nicola Marinelli, who helps oversee $180 million as portfolio manager at Glendevon King Ltd. in London, said by phone.

Going ahead with Obama’s Asia trip in the face of a shutdown would pose logistical as well as political hurdles. While the president’s Secret Service detail works regardless of a shutdown, the White House must determine whether enough staff can be deployed ahead of the president’s arrival in each country to facilitate his movements during a furlough of non-essential employees.

Another consideration is whether Americans will turn against him if he leaves the country rather than stays home to negotiate with congressional Republicans.

Putin, Li

While the White House hasn’t released Obama’s schedule for Asia, officials expected he’d have the chance to hold meetings with leaders on the sidelines of the conferences, as he has in past years. Bilateral sessions next week are likely to include Putin at the Asia-Pacific Economic Cooperation summit in Bali and Li Keqiang, China’s premier, at the Association of Southeast Asian Nations summit in Brunei.

Peter Orszag, Obama’s former budget director and a Bloomberg View columnist, said the president stands to lose either way.

“If he doesn’t go he has a foreign relations problem,” Orszag said. “If he does go, he’s got a domestic problem.”

To contact the reporters on this story: Margaret Talev in Washington at mtalev@bloomberg.net; Julianna Goldman in Washington at jgoldman6@bloomberg.net; Nicole Gaouette in Washington at ngaouette@bloomberg.net

To contact the editors responsible for this story: Steven Komarow at skomarow1@bloomberg.net; John Walcott at jwalcott9@bloomberg.net

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