The impacts made by the strategic competition between the U.S. and China on Southeast Asian countries

Since Donald Trump took office in early 2017, the relationship between the U.S. and China has entered an intensive, comprehensive strategic competition that has been even called the “second Cold War.” This new development has impacted on the entire political and security situation of the world, particularly the Southeast Asia which has been the centrepiece of the competition between major powers.

The competition between the U.S. and China - the “second Cold War”

During his presidential campaign in late 2016, Donald Trump ever announced that he could not call China by any other name than “an enemy of America.” After taking office, President Donald Trump launched a campaign of comprehensive competition with Beijing on various fronts.

On the commercial front, by the end of 2018, the U.S. imposed 10% tariffs on 200 billion USD worth of over 6,000 products imported from China. Since January 1^st, 2019, the tariffs have been increased up to 25%. After many intense negotiations, in late 2019, Washington and Beijing reached the phase 1 trade agreement. According to this deal, China pledged to buy 200 billion USD worth of American goods in the 2 following years. In return, the U.S. would decrease its tariffs on 120 billion USD worth of Chinese goods from 15% down to 7.5%. However, the U.S. 25% tariffs on 250 billion USD worth of other Chinese products would remain. The agreement would restrict China’s actions which were described as “intellectual property theft” and “forced technology transfer” from American companies. The phase 1 trade deal was just a start aimed at alleviating the conflict between the largest and second largest economies of the world. However, the deal could not be seen as a “ceasefire” or the end of the trade war between Washington and Beijing. Perhaps, it was “the silence before a big storm.”

In the battle between “Made in China 2025” and “Made in America,” in fact, it is a competition for hi-tech product market share in the context of the 4^th industrial revolution. With “Made in China 2025,” Beijing strives for the goal of becoming a “manufacturing power” in 2025 and it will surpass all leading industrial powers to hold an overwhelming position in the world’s hi-tech market in 2035. By the 100^th founding anniversary of the People’s Republic of China (2049), Beijing will occupy a dominant position in the world’s hi-tech industry. The U.S. believes that the threats posed by “Made in China 2025” are not only China’s ambition of gaining control of the world’s hi-tech market but also Beijing’s trickery to achieve its goal. Meanwhile, US President Donald Trump has implemented the policy of “Made in America” in a bid to regain the position of the world’s greatest industrial power they had ever held in the 20^th century. At the same time, the U.S. has taken various measures for preventing non-market or illegal economic activities of China, fighting against Beijing’s industrial intelligence, closely controlling contracts signed by the U.S. Administration and China’s ZTE and Huawei as the two largest hi-tech production and business corporations, and enhancing supervision of China’s investments in the United States of America.

 Besides, the competition between China’s “Belt and Road” Initiative and America’s “Free and Open Indo-Pacific” Strategy has been increasingly fierce. The U.S. has issued a warning that the “Belt and Road” Initiative would push many countries into Beijing’s “debt trap” and force them to assign part of their territories to China. Typical example is Sri Lanka. This country had to assign a strategic seaport to China in 2017 as it was unable to pay its debt. It is worth noting that in the Belt and Road, the “Maritime Silk Road” project has its starting point in the East Sea; therefore, Beijing has kept claiming its absurd sovereignty over this sea, leading to an escalation of tensions in the East Sea. In response to China’s Belt and Road Initiative, US President Donald Trump has transformed his predecessor’s “Pivot to Asia” Strategy into the Free and Open Indo-Pacific Strategy. According to the new strategy, Washington would establish a coalition including the U.S., Japan, India and Australia as the “Indo-Pacific Quadrilateral” against China. This mechanism is aimed at attracting the participation of regional partners in response to China’s sea power nation strategy. On November 5^th, 2019, on the sidelines of the ASEAN Summit held in Thailand, United States Secretary of Commerce Wilbur Ross officially announced the Blue Dot Network Strategy to encourage countries in the Indo-Pacific region and around the world to take part in sustainable infrastructural construction, facilitate economic development, ensure national security, and avoid being fallen into the “debt trap” from China’s Belt and Road Initiative.

According to experts, the nature of the strategic competition between the U.S. and China is an uncompromising confrontation between the U.S. free market economy and the Chinese state-controlled economy. When the COVID-19 pandemic originates from China and leads to the most serious crisis of ever in the world within the past 100 years, Washington and Beijing accuse each other of causing this disease, thereby escalating the competition between the two sides, possibly waging the “second Cold War,” posing much more dangerous threats to the whole world than those by the Cold War between the U.S. and the Soviet Union.

Opportunities and challenges for Southeast Asian countries

The trade war between the U.S. and China both creates opportunities for and poses challenges to Southeast Asian countries. After the U.S. imposed tariffs on Chinese goods, it would seek other markets, including Southeast Asian countries for its import. The imports which the U.S. needs are very diverse, from hi-tech products to agriculture, forest products and seafood with the quality equivalent to Chinese exports. In response to the U.S moves, Beijing also imposed tariffs on American exports, particularly agricultural produce and seafood. Obviously, China would increase the import of those products from Southeast Asian countries. In fact, Chinese consumer market really enjoys agriculture, forest products and seafood from Southeast Asian countries. Hence, in the upcoming years, it is highly likely that China will increase its import of those products. It is predicted that by means of “Made in China 2025,” Beijing will become the largest economy of the world, with a middle class of nearly 500 million people who have consumer demand equal to that of American people. Certainly, China will become the largest consumer market in the world, providing a historic opportunity for Southeast Asian countries to export their consumer goods to Beijing. However, it is extremely necessary for Southeast Asian countries to quickly reorganise their production lines and services to meet the increasingly higher criteria set by China, which is also seen as the biggest challenge for those countries.

The most surprising thing now is that the COVID-19 pandemic has paralysed a series of global supply chains and forced the U.S. and many other countries to face a painful fact that all of their benefits gained from dealings with China so far were just “a drop in the bucket” compared to the tremendous economic losses caused by this pandemic. Thus, the U.S. and many other countries are accelerating the process of moving their companies and manufacturers back home or to safer or more reliable partners that show no ambition of competing with Washington, particularly Southeast Asian countries. This is a historic opportunity for Southeast Asian countries to become the “workshop of the world.” However, it will pose great challenges to Southeast Asia countries as they will have to put strenuous efforts to restructure their economies, improve their management mechanisms, build and complete their infrastructures to meet the very high criteria for product quality and management as well as intensify the training of hi-quality human resources. Moreover, this process must be completed in a short time in order to not miss the coming “historic opportunity.” The strategic competition between China’s Belt and Road Initiative and the U.S. Free and Open Indo-Pacific Strategy has both created opportunities for and posed challenges to Southeast Asian countries. More specifically, countries in the Southeast Asia will have the right to select projects on infrastructural construction offered by both China and the U.S. in accordance with their socio-economic development strategies. However, the biggest challenge is that any country in the Southeast Asia which decides to take part in the Belt and Road Initiative will have to face the risk of falling into China’s “debt trap” or encounter Beijing’s ambition of monopolising the East Sea. Therefore, Southeast Asian countries, particularly those who have sovereignty disputes with China need to take advantage of support from the international community for multilateral mechanisms to deal with sovereignty disputes in the East Sea as this sea is related to the benefits of not only the region but also nearly the whole world. During negotiations for signing the Code of Conduct of Parties in the East Sea (COC) which is highly legally binding, Southeast Asian countries are confronted with Beijing’s plots and artifices of dividing, inciting and even forcing them to accept the content of the COC designed by China.

It is worth noting that in June 2019, the 34^th ASEAN Summit held in Bangkok, Thailand issued the “ASEAN outlook on the Indo-Pacific.” The Statement confirms the central role of ASEAN in the general regional structure towards the goal of maintaining peace, security and stability in the Southeast Asia, while expressing the standpoint that ASEAN will not support any power in the competition for influence in the Southeast Asia which holds a position of strategic importance and is located in the world’s busiest trade route connecting the Pacific Ocean with the Indian Ocean, towards India, the Europe, the Africa, the Middle East, and Latin America. Analysts across the world believe that it is a wise decision demonstrating a sense of unity within the ASEAN community, raising Southeast Asian countries’ status and role in taking advantage of opportunities and more effectively, better responding to challenges posed by the competition between the U.S. and China to this region.