Obama Asia Focus Hurt by Politics of Shutdown to Mideast

President Barack Obama is trying to keep his foreign policy pivot from becoming a revolving door.

Civil war in Syria, a military coup in Egypt and hints of a rapprochement with Iran are diverting the president’s attention from Asia, where he sees the future, to the Middle East, where he risks being consumed by the past.

The government shutdown dominating Washington politics is further imperiling the president’s signature overseas initiative. Obama yesterday curtailed a trip planned for Asia next week because of the political impasse at home.

“What’s happening in Syria, Iran and the like take up an enormous amount of oxygen,” said Kurt Campbell, an architect of Obama’s Asia policy before leaving the State Department this year. “There are deeply consequential things playing out there right now that demand a high degree of American engagement. At the same time, there are also pressures domestically.”

Those twin forces put at risk a presidential policy designed to enhance U.S. standing in a region adjusting to China’s continued economic and military emergence. Asia will witness almost half of global economic growth outside the U.S. in the next five years, according to the White House. And ripples from the rise of an increasingly assertive China are unsettling U.S. allies from Japan to the Philippines.

More Obstacles

Middle Eastern tumult isn’t the only threat to Obama’s Asia focus. As he prepares to depart on Oct. 5 for an Asian summit, the prospect of almost $1 trillion in Pentagon spending cuts over the next decade shadows his plans to raise the U.S. military profile in the region. Demands from 60 senators for action on “foreign currency manipulation” also complicate a proposed 12-nation trade zone linking some 40 percent of the world economy.

The distractions have sparked doubts about whether the so-called pivot to Asia is all talk and little action. After Obama devoted almost his entire Sept. 24 United Nations address to Iran’s nuclear program and the prospects for Arab-Israeli peace, those concerns deepened.

“Is the pivot to Asia in the second-term Obama administration sustainable with all the attention to the Middle East?” Indonesian Ambassador to the U.S. Dino Djalal asked at a Sept. 25 conference in Washington. “Our relations are still below our potential.”

‘A Priority’

Administration officials say the U.S. can focus on more than one region. Secretary of State John Kerry said Sept. 27 the Asian rebalancing is “a priority,” adding, “the entire administration is committed to this initiative.”

The Pentagon has vowed to protect the planned redeployment of naval and air forces to Asian missions, even as it tightens its belt elsewhere.

Amid speculation that the president ultimately will cancel what’s left of his Asian trip, Jay Carney, the White House press secretary, said today that Obama still hoped to attend planned summits in Indonesia and Brunei.

“These are the kinds of meetings where representation by the United States at the highest level achieves good things for us in terms of our national security and in terms of our role in the global economy,” he told reporters.

Clinton’s Term

The diplomatic shift dates to November 2011 when then-Secretary of State Hillary Clinton wrote in Foreign Policy magazine that, after a decade of war in Iraq and Afghanistan, the U.S. stood at “a pivot point” and must devote a “substantially increased investment” to Asia.

It was the rare Obama initiative that enjoyed Republican acceptance. House Armed Services Committee Chairman Howard “Buck” McKeon, a California Republican, said in July, “I don’t think there’s any disagreement on the goodness of rebalancing to Asia.”

The economic case is no secret. While the U.S. was preoccupied with the Mideast, Asia -- led by China -- has flowered. Since the 2003 U.S. invasion of Iraq, Asian equities have outperformed stocks in the U.S. and Europe. The MSCI Asia APEX 50 index has risen more than 200 percent since then, double the Standard & Poor’s 500 index gain and more than six times the increase in the Euro Stoxx 50 index. The MSCI Asia index is up 1 percent this year.

‘Juggling Act’

Making a success of the policy will also require the U.S. to get its European allies to bear more of the defense burden, better focus its efforts in the Persian Gulf and invest at home to remain competitive with China, said Sean Kay, director of the international studies program at Ohio Wesleyan University and a former State Department adviser.

“The pivot is the right strategy, but it’s going to need all these other elements to be in place,” he said. “It’s a real serious juggling act.”

Early commentary interpreted the pivot as mainly a military response to China’s rise, including a near-doubling of Chinese economic output from 2005 to 2012. U.S. officials then began emphasizing the economic and diplomatic aspects of the shift and dropped the term “pivot” in favor of “rebalancing” to avoid suggestions that the Middle East would be ignored.

“We’re working to strengthen every single part of our relationship, including our economic links directly between our citizens,” Kerry said at a Sept. 27 meeting of foreign ministers of the Association of Southeast Asian Nations.

Trade Accord

Where once the notion of rotating 2,000 U.S. Marines through the Australian port of Darwin drew center stage, now U.S. officials emphasize the Trans-Pacific Partnership. Talks began in March 2010 with the U.S. and six other countries: Australia, Brunei, Chile, New Zealand, Peru and Singapore. Since then, the process has broadened to include Japan, Mexico, Canada, Vietnam and Malaysia.

“TPP is really the center of the pivot, not just the economic part,” said Matthew Goodman, former director for international economics on Obama’s National Security Council staff. “In terms of something that’s new, something that has the potential to really lock us in to that region, there’s really nothing more important.”

The State Department expects 1 billion additional middle-class consumers in Asia over the next 20 years.

Many U.S. corporations already have seen their Asian businesses boom, according to data compiled by Bloomberg.

Apple Inc. (AAPL) last year tripled to more than 21 percent the share of its $156.5 billion revenue that it got from Asia. McDonald’s Corp. (MCD) drew more than 23 percent of its $28 billion in revenue from the Asia-Pacific region, up from 16 percent five years earlier. Johnson & Johnson got almost 20 percent of its $70 billion from the region, up from 14 percent. And 3M Co.’s Asia business accounted for more than 30 percent of its $30 billion in revenue.

U.S. Exports

Yet U.S. exports to the 14-nation Pacific Rim region, which includes China, accounted for a smaller share of total shipments in 2012 than a decade earlier, according to the U.S. Census Bureau. The U.S. last year sent 24.5 percent of its $1.54 trillion in exports to the region compared with 25.8 percent of $693 billion in 2002.

An eventual deal would be welcomed by companies such as Procter & Gamble, JPMorgan Chase & Co. (JPM) and Citigroup Inc., which are seeking improved protection for intellectual property.

Companies such as New Balance Athletic Shoe Inc. object to lowering U.S. tariffs on imported footwear, saying they fear “potentially catastrophic effects on the domestic footwear industry,” according to spokesman Matt LeBretton. A flood of low-priced Vietnamese imports could cost the jobs of many of the company’s 1,350 American shoemakers, he said.

‘Currency Manipulation’

Negotiators hope to make further progress on the margins of the Asia-Pacific Economic Cooperation meeting in Bali, which Obama is scheduled to attend next week, along with Brunei. U.S. Trade Representative Michael Froman says the aim is to wrap up a deal by year’s end.

One obstacle arose on Sept. 24 when 60 senators wrote the administration demanding that it target “foreign currency manipulation.” In June, 230 House members issued a similar call, meaning majorities of both bodies have urged such a move.

Congressional ire over foreign currency values typically centers on the Chinese yuan. China isn’t part of the TPP talks, so the focus is on U.S. ally Japan.

The lawmakers’ letters come amid a year-long decline in the value of the Japanese yen, which is down about 20 percent over that period. That makes Japanese exports more attractive to U.S. customers, raising the ire of U.S. automakers.

Still, Obama aims to demonstrate the U.S. emphasis on Asia by traveling to Indonesia and Brunei. Campbell, who left the State Department in February, said the diplomatic shift will outlast the impact of both events in the Middle East and budget battles at home.

“The fundamental focus of strategic engagement is shifting to Asia, but that will not happen overnight,” he said. “I’ve been to enough meetings with the president to know that’s his determination and intention.”

To contact the reporter on this story: David L. Lynch at dlynch27@bloomberg.net

To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net

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