BMI View: With the US presidential elections looming, we assess the likely impact on US-Asia relations of either an Obama win or a Romney victory. Generally speaking, we envisage broad continuity, as Washington's tilt towards Asia-Pacific is part of a long-term trend dictated by economic and geopolitical realities.
With the US presidential elections now less than two months away, we assess the likely implications for US-Asia relations of either incumbent President Barack Obama securing a second term in office (our core scenario), or of Republican candidate Mitt Romney taking the White House. Even though the US has been plagued by political gridlock in recent years, especially after the 2010 mid-term elections when Republicans regained control of the House of Representatives, we note that US presidents traditionally enjoy more political leeway on issues of foreign policy. Generally speaking, American presidents focus more attention on foreign policy issues in their second term, in order to secure a lasting international legacy. This means that a re-elected Obama would probably seek to achieve a major foreign policy success. Romney, on the other hand, would be a first-term president elected on the basis of domestic economic concerns, and would thus have to focus more of his attention on the home front.
Under A Romney Presidency, Will Obama's Pivot To Asia Continue?
Barring an unexpected geopolitical shock, an Obama victory on November 6 is our core scenario. This would almost certainly mean a continuation of his administration's refocusing of American foreign policy towards the Asia-Pacific region. In a speech to the Australian parliament in November 2011, the President explained this shift as a critical way to achieve his highest priority - greater economic opportunity for the US. Explicitly, Obama stated that he has made a 'deliberate and strategic decision' for the US to play a 'larger and long-term role in shaping this region [Asia] and its future'.
|Asia - View of the US, % Responded 'Favourable' (Year of Latest Survey)|
As regards Romney's position on US-Asia relations in general, it appears that very little separates the Republican and Democratic presidential candidates in the grand scheme of things. Indeed, on Asia matters, the Obama administration's National Security Strategy (published in May 2010) and the 2012 Republican Platform are largely mirror images of each other - outlining the US's leadership role in the region. To be sure, part of the reason why there has been minimal differentiation between both sides is due to the fact that both campaigns have focused primarily on domestic issues. Thus, apart from the country-specific policy differences we highlight below, broad Trans-Pacific relations are unlikely to undergo a major change following the upcoming elections.
China Relations: Romney's Hawkishness Likely An Election Ploy
Inevitably, US relations with China will form the biggest component of Washington's Asia policy. Mitt Romney has attempted to distinguish himself from the president by pledging a considerably tougher stance towards Beijing. A significant part of Romney's revised China policy would be labelling the world's second-largest economy as a currency manipulator, a move that could have vast repercussions. The designation of China as a currency manipulator would pave the way for the US to enact punitive trade sanctions in the form of tariffs on Chinese goods equivalent to the amount that the yuan is deemed to be undervalued. Given that the US is China's largest national export market, such a move could be the harbinger of a very serious trade war with wide-ranging implications for both countries.
However, tough talk on China has become something of a campaign tradition in the US, and is not necessarily indicative of action on the part of the candidate once he takes office. After all, both Bill Clinton and George W Bush adopted harsh rhetoric towards China during their first presidential campaigns, only to adopt moderate positions once in office. In 2008, Obama campaigned much on the same platform, citing outgoing President Bush's weaknesses in dealing with China and vowing to re-assess both Beijing's currency management and overall trade relations. However, despite perennial threats to do so, the Obama administration and Treasury Secretary Timothy Geithner have yet to actually take substantive action against China.
|The End Of The One-Way Bet|
|China - Reserves & Exchange Rate|
In this vein, we believe that Romney's hard talk on China is unlikely to come to fruition should he be elected. Beyond the political realities of his current tack, we also note that there is progressively less evidence suggesting that China's yuan is indeed undervalued. China's accumulation of reserves, which can be used as a proxy for the government's efforts to suppress the value of the yuan, has come almost to a standstill in year-on-year (y-o-y) terms. In June 2012, reserves grew by just 1.3% y-o-y, the lowest rate in at least 16 years. Given our expectations for China to endure hot money outflows as the economy continues to cool, we expect this trend to continue to play out, lending far less justification to Romney's ability to carry out his threat. Furthermore, China's importance as a destination for American exports has risen dramatically over recent years, far outstripping Japan since 2007 as the largest market for US goods and services in Asia. Given Romney's far-reaching pledges to fix the ailing economy, he would be hard-pressed to risk a trade war with such a major partner.
We take a similar view towards Romney's assessment of the projected Trans-Pacific Partnership (TPP). While both Obama and Romney have stated their support for the wide-ranging free trade agreement, Romney has voiced his opposition to Japan's accession in case Tokyo does not move to further liberalise its markets to international trade. While this stipulation helps to bolster Romney's pro-domestic business credentials, it would likely have little effect in practice given the uncertainty surrounding Japan's participation in the TPP.
|Trade War Unlikely|
|US - Export Market Breakdown, % of Total Exports|
Romney No Game Changer In Territorial Disputes
As with tough talk on economic relations with China, rhetoric outlining stronger support for US allies has long been a staple of challengers' campaign strategies. Romney has thus campaigned on a platform that he will be more aggressive in supporting the US's regional allies like the Philippines and Japan in their ongoing territorial disputes with China. However, we note that the Obama administration has also taken a realist approach to foreign policy in the Asia Pacific, pressing China to abandon its bilateral negotiation tactics in exchange for a multilateral solution that would serve as a counterbalance to its enormous regional power advantage. In effect, we expect that both a Romney and an Obama administration would continue to pursue the US's current realist tack in Asia, seeking to shore up support among its allies while at the same time attempting to limit China's growing regional influence by strengthening ties with India and Vietnam, both of which are apprehensive of Beijing's rise.
Elsewhere in East Asia, we expect to see continuity in the US's low-key approach towards North Korea. Pyongyang's nuclear programme has not attracted much attention during the presidential campaign, and is not considered a crisis. Military action against North Korea's atomic facilities is generally considered out of the question, since it would start a regional war. In any case, if Romney adopts a harsher stance, then he would find that Pyongyang reciprocates accordingly.
|Afghanistan - US Troops in Afghanistan|
On Af-Pak Related Matters
After more than a decade of active US and international military engagement in the Afghanistan-Pakistan ('Af-Pak') region, the conflict is winding down. Under the status quo (an Obama win), we continue to expect the full withdrawal of international combat forces from the country by the predetermined 2014 deadline, with Afghan forces expected to take the lead on national security next year - although the US will probably retain a smaller but multi-year military presence in Afghanistan. Romney, on the other hand, has stated that he plans to order a full assessment of the US presence in Afghanistan to make sure that progress is secured and that local forces are suitably trained. Crucially, the nature of the present withdrawal could see significant changes as the former Massachusetts governor believes that any withdrawal should be based on realities on the ground (as judged by the military), rather than adhere to a strict timeline.
Both candidates are cognisant that stable relations and constructive cooperation with both Kabul and Islamabad are necessary if any lasting success is to be achieved. Regardless of who is in the White House, managing relations with Pakistan will likely continue to prove difficult given Islamabad's need to balance the pervasive domestic anti-American sentiment and its mutually beneficial relationship with Washington. In a traditionally hawkish Republican tone, Romney believes that the US should not be hesitant to use the 'significant leverage' that Washington enjoys over Islamabad. However, considering the US' unilateral raid that led to Osama bin Laden's demise, we note that the Obama administration too has demonstrated its willingness to pursue a hawkish course of action.
Wild Cards In The Middle East
Although we believe that the US's tilt towards the Asia-Pacific region is part of a long-term trend, and that Washington is trying to reduce its military involvement in the Middle East, events in the latter region could still end up taking priority over Asia, at least temporarily. On that note, the US could get dragged into a war against Iran initiated by Israel, or take the lead in imposing a no-fly zone in Syria, which has descended into civil war. The fact that Tehran is supporting the Assad regime in Damascus means that the two stand-offs are interlinked, and could manifest themselves as a regional war which Washington might not be able to avoid.