By Ding Gang Source: Global Times Published: 2017-11-1
US President Donald Trump starts an official visit to five Asian countries on Friday, one of the most important visits abroad since he took office. Security and trade will be in focus during the trip.
Security is related to the status of the US in Asia while trade is the foundation of that status. The US has faced the challenge of reshaping its trade relations with Asian countries after Trump decided to withdraw from the Trans-Pacific Partnership (TPP).
Data from US-China Economic and Security Review Commission show that trade between the US and Asia increased 23.6 percent from 2010 to 2015, which is much higher than that between the US with Europe, North America and Latin America during the same period. The amount of US imports from Asia has exceeded $1 trillion since 2014.
US investments in Asia have also kept rising. According to China`s official statistics, by the end of December 2016, the US invested in 67,000 projects in the country, with actual FDI (foreign direct investment) reaching $79.86 billion.
Singapore is the second largest destination for US investment in Asia. The US equity investment in the country exceeds $70 billion, and 4,200 US companies have established branch offices in the country.
The expanding US capital flow to Asia decides the future trajectory of US-Asia relations with some friction likely due to profit disparity.
US economic interests are the priority of the Trump administration and the White House has pressured Asian economies through multiple rounds of negotiations with the expectation that this can bring as many benefits to his country as possible. Capital and the gains it leads to have become the most important factor guiding US-Asia relations.
Capital flows rapidly around the world, following the basic rule of going from regions of higher labor price to those of lower ones.
In the process, capital multiplies and looks for markets with lower labor cost so that middle- and lower-level jobs can be passed on to people in less developed areas.
In reality, jobs move from the US to South Korea, Singapore, China and Malaysia, and then later to Vietnam, Thailand and Laos, forming a chain of value and manufacturing. The problem presents itself thus: We may be able to control the speed of capital flow, but can`t fundamentally change its basic law.
That explains why Trump`s efforts to bring jobs back to the US from Asia sounds tempting, but he is unlikely to achieve what it expects.
In the next phase, Trump`s policy will follow the way capital works and focus on pushing forward market openness of Asian economies and promoting the "Made in America" label.
After abandoning the possibility of using the TPP to make multilateral rules, Trump will attach more importance to bilateral negotiations, which adds flexibility to his policy on Asia. But as Asian countries are losing faith in the US, both parties will raise their requirements, making negotiations harder to proceed.
Singapore`s Prime Minister Lee Hsien Loong said in his speech at the US Council on Foreign Relations that the US withdrawal from the TPP had hurt Washington`s credibility in negotiations and many countries will be reluctant to enter into one-on-one trade deals with Washington. In this case, if Washington in a rush requires other countries to allow more US access to their markets, it will end up in failure.
The concern for many Asian countries is no longer how to make more concessions over opening up the market and buying more "Made in America" products, but to think carefully about what benefits Trump can bring to them.
US investors want profit, so do investors from Asia. There has been a confluence and clash between US investment flow and the rapidly growing investment from Asia.
The author is a senior fellow with the Chongyang Institute for Financial Studies at Renmin University of China.