President Trump's First 100 Days: Anything to see from South East Asia?

As the news cycle spins red hot in North America, and pundits and business leaders warn us of how political risk is now back at the centre of corporate decision making, from a seat in South East Asia it is tempting to ask: “Is all this political risk assessment really necessary?” Steve Wilford, Senior Partner at Control Risks, considers the options

This article was first published in the Orient Magazine, 27th June 2017

 

By Steve Wilford, Senior Partner, Control Risks

 

The headlines are once again awash with assessments of President Donald Trump’s performance after his administration passed its 100th day on 27th April. Or perhaps the correct phrase might be ‘more awash’ because a defining feature of this administration is the uncertainty it generates and the media scrutiny that such uncertainty produces. Are the ‘marines’, the ‘businessmen’ or the ‘zealots’ controlling the President’s thinking? Which US conglomerate will be next to receive the 3am Trump Tweet treatment? When is the wall with Mexico actually going up? Will the Mar-a-Lago summit with Xi Jinping be the site of a surprise grand bargain or the start of a trade war? It turned out to be neither. Perhaps the one question nobody was asking at that particular event was whether President Trump would launch a missile strike on Syria during entree or desert.

 

On trade, we all remember candidate Trump’s threats to impose blanket tariffs on Chinese goods and brand China as a currency manipulator. Well, 100 days on, that mooted trade war has become a mutually agreed plan between Beijing and Washington to address the US deficit – and one that was initiated by the Chinese. Indeed, the last trade action against China was carried out in the last days of the Obama administration over alleged aluminium dumping.

 

 

On security, candidate Trump’s assertions that America would act increasingly in its own interests and Asian allies had better pay up if they wanted US military support, has morphed into the April deployment of a US carrier battle group to support NE Asian allies coupled with categorical guarantees of existing alliances. Similarly, the Trump administration’s flirtation with putting conditions on the ‘One China Policy’ – a real red line issue for Beijing – was just that, a flirtation from which it quickly backed away. While the situation on the Korean peninsula is a concern, China’s exasperation with Pyongyang nowadays rivals that of Washington ‑ which contrary to the current sabre rattling actually bodes well for better collaboration between the two powers on this issue. For a cynic, it could almost be argued that the fizzling of the great Trump face off with China and apparent moderation of ‘America First’ politics amounts to a missed opportunity for South East Asia. US firms who may have been bullied in the China market as trade tensions rose may now keep their response to that ‑ a diversification of their investment portfolio away from China and into ASEAN – locked away in a filing cabinet.

 

Continuity wrapped in the hype of a celebrity real estate developer President is not, unfortunately, the only way to assess the Trump administration’s relationship with South East Asia. In many respects, the relationship hasn’t really begun yet. Behind the rolling golf summits and ad hoc Presidential decrees, the Trump administration has been spectacularly slow in staffing its machine, particularly in crucial areas such as the State Department and, to a lesser extent, the administration’s trade bodies. It was only recently that the Office of the US Trade Representative (USTR) published the government’s trade policy agenda and this, again, was for the most part a study in ‘America First’ generalisations asserting US sovereignty of trade policy (vis-à-vis the likes of the WTO), and following on from that greater Commerce Department rigor in the pursuit of anti-dumping and countervailing duty laws under the 1974 Trade Act. But it does name names. China is, of course, on the list of states criticised in the report for running a significant surplus with the US, but Vietnam, Malaysia, Thailand and Indonesia are also singled out. The USTR makes specific reference to the administration’s disappointment with the quality of existing trade deals.

 

To be clear, President Trump’s musings from the lectern are now concrete policy and his administration is clearly not walking away from forcing a better deal from specific surplus exporters. Indonesia, which mainly exports the natural resources that US industry needs, can probably rest easy, but Vietnam and Malaysia in particular could be the outlet the Trump administration needs for punitive anti-dumping or currency manipulation measures at a time when the price of ‘going after’ China may be politically and economically too high. Traditionally, states in South East Asia have tended to respond in a ‘tit-for-tat’ manner to anti-dumping actions rather than singling out locally invested foreign firms for ‘special regulatory treatment’. The bad news is Malaysia and Thailand in particular are going through a sensitive period in their domestic politics, and the Thai Junta and Malaysian Prime Minister Najib Razak will need to be seen to react to any US action on trade. This would have direct implications for US businesses certainly, and the broader foreign investment community possibly.

 

Most intangible of all is: what is America’s place in South East Asia under the Trump administration? This administration will not be mobilising American exceptionalism in the region, that so-called ‘city on the hill’ that past Presidents have used to mobilise American moral authority and soft power around the world. Trump has repeatedly critiqued that approach as simply benefitting foreigners at the expense of the US. Instead, the new mantra will be ‘transactionalism’, the diplomatic mobilisation of America First. That model guides thinking that would have trade sanctions placed on Malaysia, Thailand and Vietnam without considering the value of respectively two long-standing allies and a nascent one.

 

For similar reasons, the Trump administration is unlikely to expend political capital attempting to moderate the uglier manifestations of populism emerging around the region from the widespread support in Myanmar for the persecution of the Rohingya Muslim minority, to the popular extra-judicial mass killing of drug dealers in the Philippines. It will not be considered expedient or in America’s interests to do so. This is pertinent to us as investors in the region. As the region’s populists act with greater impunity, so will reputational risk to foreign investors rise (see above examples) and then, almost inevitably, the broader fabric of the foreign investment climate begins to erode.

 

All this analysis comes with a very big caveat. It presumes South East Asian states are purely passive actors in Washington’s diplomacy. The next 100 days will emphatically show they are not. It’s no coincidence that Philippines President Rodrigo Duterte’s special envoy to the US is President Trump’s former business partner (and now presumably the Trump children’s business partner). The flip side of transactionalism is that the ‘deal’ that gets done can be highly influenced by how President Trump perceives his opposite number on a personal level; Japan’s Shinzo Abe instinctively understood this when he rushed to Trump’s side after his poll win and then used the greens at Mar-a-Lago to carve a much better deal for Japan than the Trump campaign had promised. And don’t forget, when it comes to golf course diplomacy, Abe is a rank amateur compared to the leaders of this region.

 


 

About the Author

 

Steve Wilford is a Senior Partner for Asia-Pacific in Control Risks’ Global Risk Analysis team, in which role he leads a group of specialists conducting country, sector and regulatory risk assessment work. Prior to this, Steve was the Director of Corporate Investigations for South-East Asia. Steve is a regular BBC, CNN, CNBC, radio and print media commentator on trends in insurgency, political succession, corporate governance and threats to business assets in the Asia-Pacific region, as well as a frequent presenter at regional risk management conferences. Steve holds a master of philosophy in international relations from the University of Oxford, and a first-class honours degree in South-East Asian studies and language from the University of Hull, where he specialised in Thai military politics and Malaysian corporate governance issues.

 

About Control Risks

 

Control Risks is an independent, global risk consultancy specialising in political, integrity and security risk. They some of the most influential organisations in the world to understand and manage the risks and opportunities of operating in complex or hostile environments. Working across five continents and with 36 offices worldwide, Control Risks provides a broad range of services to help clients manage political, integrity and security risk. For more information visit www.controlrisks.com

 

 

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