Bloomberg News

Obama’s Asia Pivot Puts U.S. Approach to China on New Path

November 20, 2011

(Adds details of Obama-Wen meeting in seventh paragraph.)

Nov. 19 (Bloomberg) -- President Barack Obama’s pivot toward Asia is shifting the U.S. approach to China by teaming up with its neighbors to press the world’s second-largest economy to “play by the rules.”

During a trip that began in Hawaii Nov. 11, Obama has announced steps to expand trade and military cooperation with Asia-Pacific nations that share U.S. concerns over China’s policies on currency valuation, intellectual property and territorial claims. Obama met with Chinese Premier Wen Jiabao today in Bali, the final leg of the journey.

“U.S. pressure on China has intensified,” said Tim Condon, Singapore-based head of Asian research at ING Groep NV, saying the shift has “startled” the Chinese. “China can’t ignore the U.S. stance. The only question is how they interpret it.”

The administration’s foreign policy strategy is being refocused on Asia as Obama wraps up wars in Afghanistan and Iraq, and two and a half years after he announced an effort to step up engagement in the Muslim world and on Mideast peace negotiations that largely have fizzled.

Obama has said repeatedly throughout the trip that he is not pursuing a containment strategy against China and that his emphasis is on creating U.S. jobs. Even with signs that the U.S. recovery is accelerating -- the Standard & Poor’s 500 Index has risen 11 percent since the beginning of October -- the nation’s unemployment rate has hovered at or above 9 percent for more than two years.

Obama-Wen Meeting

Today’s meeting between Obama and Wen came at Wen’s request and they spoke about currency and business practices, White House National Security Adviser Tom Donilon told reporters in Bali. Donilon said the discussions “briefly” touched on the South China Sea, where territorial disputes have raised tensions between China and its neighbors.

“This has nothing to do with isolating or containing anybody,” Donilon said of the U.S. strategy in Asia.

Obama has set a goal of doubling U.S. exports to $3.14 trillion a year by the end of 2014 and he said Asia is key to that goal. The U.S. this year has exported more to the Pacific Rim than to Europe, Commerce Department figures show.

While on the Indonesian Island of Bali, Obama took part in an event highlighting at $21.7 billion order for Boeing Co. for 230 of its 737 aircraft from Indonesian carrier Lion Air, a record deal for the Chicago-based plane maker.

China ‘Rules’

In a news conference in Canberra, Australia, on Nov. 16, Obama said that it is “mistaken” to say the U.S. fears China or is seeking to isolate the world’s most populous nation.

“The main message that I’ve said not only publicly but also privately to the Chinese is that with their rise comes increased responsibilities,” he said. “It’s important for them to play by the rules of the road.”

At the Asia-Pacific Economic Cooperation summit in Honolulu on Nov. 12, Obama announced the U.S. and eight other countries - - not including China -- agreed to complete a Trans-Pacific Partnership trade accord within a year. Two-way trade between the U.S. and those nations totaled $171 billion last year, compared with $457 billion with China and $181 billion with Japan.

Obama said the U.S. welcomes additional participants as long as they commit to terms on currency, intellectual property protections, tariffs and market access -- points of friction between the U.S. and China.

More Leverage

While Obama and his advisers say the U.S. will continuing engaging China directly on issues of concern, the president’s strategy is aimed at increasing leverage.

“This is not simply a matter of the United States, again, raising these issues bilaterally,” Deputy National Security Adviser Ben Rhodes said.

The U.S. also moved to increase its military footprint in the region with an announcement that as many as 2,500 Marines will be stationed in northern Australia and a promise to strengthen Philippines naval defenses.

The enhanced U.S. presence may serve as a counterweight to China as it asserts territorial rights to the oil-rich South China Sea that are disputed by other Asian nations.

The Philippines and Vietnam, which have awarded exploration contracts in disputed areas to Exxon Mobil Corp., Talisman Energy Inc. and Forum Energy Plc, reject China’s claims over much of the sea.

‘Stabilizing Force’

Ricky Carandang, a spokesman for Philippine President Benigno Aquino, told reporters in Bali that the U.S. presence “bolsters our ability to assert our sovereignty over certain areas” and will serve as a “stabilizing force.”

While in Bali as the first U.S. president to participate in the East Asia Summit, Obama made an unscheduled announcement that he’ll send Secretary of State Hillary Clinton to Myanmar next month, the first visit of the chief U.S. diplomat to that country in more than a half century.

That also puts pressure on China, said Willy Lam, an adjunct professor of history at Chinese University in Hong Kong.

Myanmar’s government is “hedging its bets” by seeking to expand beyond Chinese patronage, Lam said.

Myanmar, an important gateway for China to the Indian Ocean, suspended China’s construction of a $3.6 billion dam in September and its Myanmar’s new defense minister recently visited Vietnam in what Lam said was interpreted as a “snub” for Chinese officials.

‘Very Worried’

Now China “is very worried about whether Washington might want to ‘steal’ its client,” Lam said.

The reaction of Chinese leaders to Obama’s Asia-Pacific tour has been muted. President Hu Jintao, at APEC, said the region should be one where there is active cooperation between the world’s two biggest economies. When the U.S.-Australia defense arrangement was unveiled, China’s foreign ministry said it needed to be studied to assess their benefit for the region.

Obama administration officials, who briefed reporters on condition of anonymity in Bali, said that the Chinese government was supportive overall because they want stability on their borders and greater integration with the international community.

Doug Paal, vice president for studies at the Carnegie Endowment for International Peace, a policy research center in Washington, said that “it is more in line with China’s interests to display a cool reaction” to Obama’s steps.

Paal, who served as Asia director for the White House National Security Council under President George H.W. Bush, said the Chinese government doesn’t want to acknowledge internally or publicly that “it is facing a greater threat” of pushback from the U.S. and other nations.

--With assistance from Julianna Goldman, Jason Scott and Daniel Ten Kate in Bali, Indonesia. Editors: Joe Sobczyk, Patrick Harrington.

To contact the reporter on this story: Margaret Talev in Bali at mtalev@bloomberg.net; Michael Forsythe in Beijing at mforsythe@bloomberg.net

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


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