Bloomberg News

Kerry to Assure Asia Allies on Pivot Armed With Stronger Economy

June 27, 2013

U.S. Secretary of State John Kerry

John Kerry, U.S. secretary of state. Photographer: Andrew Harrer/Bloomberg

When John Kerry makes his first trip to Southeast Asia as secretary of state this weekend, he’ll have an easier time convincing allies of a message his colleagues often repeat: The U.S. military shift to the region is sustainable.

Federal Reserve Chairman Ben S. Bernanke said this month the central bank will probably start reducing stimulus this year, prompting the dollar to surge against Asian currencies. Kerry will visit Brunei from June 30 to July 2 to attend a regional security forum with more than 20 counterparts from countries including China, Japan and North Korea.

“There is polite skepticism in some parts of the region concerning America’s financial staying power long term,” said Ian Storey, a senior fellow at the Institute of Southeast Asian Studies in Singapore. “That skepticism may be misplaced given that it looks like the U.S. economy is recovering, and the dire predictions over huge defense cutbacks may not transpire.”

President Barack Obama has sought to demonstrate the U.S. can sustain a shift in resources even as it faces as much as $500 billion in defense budget cuts over nine years. Territorial spats in the South China Sea, North Korea’s nuclear ambitions and the U.S. quest to detain whistle blower Edward Snowden have escalated regional tensions. China has also shown concern over a stronger U.S. presence in Asia, which it views as a bid to contain its own military expansion.

Brunei will be Kerry’s last stop on a trip that included visits to India, Israel and Saudi Arabia. The Vietnam War veteran and five-term senator took over from Hillary Clinton in February.

Clinton, Hagel

On her last trip to Asia as secretary of state in November, Clinton sought to allay concerns over U.S. economic leadership with a speech in Singapore titled: “Delivering on the Promise of Economic Statecraft.” Defense Secretary Chuck Hagel repeated that message this month in a visit to the city-state.

“It is true that the Department of Defense will have fewer resources than in the recent past,” Hagel said in remarks to a security forum on June 1. “It would be unwise and short-sighted to conclude, however, that our commitment to the rebalance cannot be sustained.”

The Federal Reserve bank will probably taper its $85 billion in monthly bond buying later this year and halt purchases around mid-2014 as long as the economy performs in line with its projections, Bernanke said on June 19. In May, purchases of new homes jumped to a five-year high, and automobile sales indicated the industry is on course for the best year since 2007.

Dollar Gains

Since June 19, the dollar has gained against all of the 11 most-traded Asian currencies, according to data compiled by Bloomberg. In that time it has gained 1.6 percent against the South Korean won, 2.3 percent against the Indian rupee and 3.4 percent against the Japanese yen, the data show.

To be sure, not all the data are rosy. The U.S. economy grew less than previously calculated in the first quarter, reflecting less spending on services by consumers who were trying to make ends meet after taxes rose, the Commerce Department said this week.

Chinese Patrols

U.S. allies in Asia including Japan and the Philippines have opposed increased Chinese patrols in waters off their shores. The U.S. military rebalance will mean that 60 percent of the Navy’s fleet will be based in the Pacific by 2020, from about 50 percent.

The Association of Southeast Asian Nations, which is hosting the meetings, has struggled to reach an agreement with China on rules for operating in the South China Sea, where six claimants are vying for oil, gas and fish. The U.S.’s declared interest in maintaining freedom of navigation in the waters has irked China.

China is willing through direct dialogue to resolve disputes in the seas, Foreign Minister Wang Yi said at a forum, according to a statement on the ministry website yesterday. “If countries try to rely on external forces to advocate claims without legitimacy, then this is futile and will eventually prove to be a strategic misjudgment where the loss will outweigh the gain,” Wang said.

U.S.-China tensions have risen after Snowden, who faces espionage charges for disclosing surveillance secrets, left Hong Kong for Russia on June 23 even as America issued an arrest warrant. Kerry this week warned China and Russia of “consequences” for their actions.

Kerry plans to meet Russian Foreign Minister Sergei Lavrov in Brunei to discuss plans for Syria, Interfax news service reported on June 25, citing Russian Deputy Foreign Minister Gennady Gatilov.

North Korea

Kerry may also hold a trilateral meeting with foreign ministers from Japan and South Korea, State Department spokesman Patrick Ventrell said on June 24, which would be the first such meeting since September. As of June 25, South Korea had no plan to meet separately with North Korea, which participates each year in the Asean Regional Forum, the South’s foreign ministry spokesman Cho Tai Young said.

Chinese President Xi Jinping, speaking yesterday after a meeting with South Korean President Park Geun Hye in Beijing, said the situation on the Korean peninsula is headed in a more “positive” direction and called for a resumption of six-party talks “as soon as possible.” Those talks, aimed at ending North Korea’s nuclear weapons program, have stalled since late 2008, and in January the North appeared to abandon them for good, with the official Korean Central News Agency saying there can be “no talks for the denuclearization of the peninsula.”

Indonesia Haze

Other participants at the Brunei meetings include top diplomats from the 10-member Asean, India, Pakistan, Australia, New Zealand, Bangladesh, Sri Lanka, Canada and the European Union.

Brunei, a Muslim-majority monarchy roughly the size of Connecticut, is among countries affected by haze stemming from fires in Indonesia to clear land. Jakarta is sending in its military to fight the fires, which have been blamed for hazardous air pollution in neighboring Malaysia and Singapore.

“We need to put in place a permanent solution to prevent this problem from recurring annually,” Singapore Prime Minister Lee Hsien Loong said in a June 25 statement. “Singapore stands ready to work very closely with Indonesia, Malaysia and others in the region to bring an end to the haze-related problems.”

To contact the reporter on this story: Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net

To contact the editor responsible for this story: Rosalind Mathieson at rmathieson3@bloomberg.net


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