US President Biden is on a trip to Asia to meet the leaders of South Korea and Japan, and attend the summit of the Quad regional defence group (the US, Japan, India and Australia). This is Biden's first trip to Asia as president, 15 months after taking office, and it follows his recent 12 May summit with ASEAN leaders in Washington.
The announcements resulting from this engagement so far – the Indo-Pacific Economic Framework, involving 13 countries, and a US$150mn investment pledge for ASEAN – matter little to the outlook for emerging markets in Asia.
Those countries care more for reduced tariff access to the US market, which is not forthcoming, continuing US military support if needed, which is not in doubt given the majority of overseas US troops are already located in Asia/Pacific, and continued trade and investment integration with China, which is going to become ever more difficult to manage amid continuing US-China friction.
The rivalry between the US and China shapes the major external risk factors in the Asian emerging markets, spanning trade, investment and security. And that rivalry is unlikely to recede as the world moves to geopolitical tripolarity around the US, the EU and China.
Biden's comment, in response to a question in a press briefing, that the US would respond militarily if China 'invades' Taiwan is perhaps of greater note than the IPEF or the ASEAN investment pledge.
But, again, although unscripted and more candid than previous US remarks on Taiwan, it should not come as a surprise, given increasing high-level US diplomatic interaction with the Taiwan government under both the Trump and Biden administrations.
IPEF is not the trade deal Asia EM wants and the US$150mn pledge for ASEAN is trivial
So far, the two new initiatives to come out of US President Biden's engagement with Asian leaders are IPEF and a small investment pledge for ASEAN.
In the IPEF (Indo-Pacific Economic Framework for Prosperity), there are no changes to tariffs or US market access in what amounts to an outline for negotiation over areas such as digital economy standards (eg cross-border data sharing and privacy), supply chain coordination, decarbonisation, tax and anti-corruption enforcement.
The countries so far involved in IPEF, alongside the US, are Australia, Brunei, India, Indonesia, Japan, Malaysia, New Zealand, Philippines, Singapore, South Korea, Thailand and Vietnam.
IPEF may be branded 'a 21st century economic arrangement' involving countries that account for 40% of global GDP but it is in no way comparable to the Trans-Pacific Partnership deal, from which former US President Trump withdrew, let alone the Regional Comprehensive Economic Partnership led by China.
Separately, the US-ASEAN Special Summit pledge of US$150mn from the US to ASEAN countries appears trivial in comparison to ASEAN GDP of over US$3tn, even though the US claims it will go into initiatives that "will mobilize billions more in private financing".
The US pledge also looks trivial alongside China's US$1.5bn pledge for economic recovery in ASEAN at the China-ASEAN Dialogue 30th Anniversary Summit in November 2021.
Frenetic geopolitical backdrop
Biden’s engagement with Asian leaders occurs against a frenetic geopolitical backdrop:
Supply chain disruption post-Covid and due to China's zero-Covid strategy, which is perpetuating the impact on Asian supply chains deeply interwoven with China;
The increasing frequency of high-profile US diplomatic engagement with Taiwan;
Xi Jinping’s efforts to secure a third term at the helm of the Chinese Communist Party;
China's continuing friction in disputed Asia/Pacific maritime borders, eg skirmishes with Philippines fishermen, and the recent security deal with the Solomon Islands;
North Korea’s resumption of missile tests;
The aftermath of the chaotic withdrawal of the US from Afghanistan; and
The transition to leaders who are more hawkish on China in Japan (Abe to Kishida) and South Korea (Moon to Suk-yeol) but potentially slightly more dovish in Australia (Morrison to Albanese).
The Quad outspends China on military
The Quad (Quadrilateral Security Dialogue) is a forum for mutual security, restarted in 2017, involving the US, Japan, India and Australia.
It is effectively part of counter-balancing coalition to China’s territorial expansion ambitions and projection of power and influence in Asia Pacific and South Asia.
China’s military expenditure dwarfs that of all its regional rivals but its own spend is dwarfed by that of the US and the Quad. The Quad's historical annual average military spend is almost 4x that of China.
Critically, in the Asia/Pacific theatre, China’s naval assets, specifically aircraft carriers, are small compared with those of the US.
But Russia-Ukraine may have deterred (or stalled) China more than the Quad
But as China has demonstrated with ASEAN countries like Indonesia (Natuna Islands), Malaysia (Spratly Islands), the Philippines (Scarborough Shoal) and Vietnam (Paracel and Spratly Islands), the advent of the Quad has not inhibited its assertion of disputed territorial claims, embodied in its Nine-Dash Line. It has also not led to any softening of China’s claims to sovereignty over Taiwan.
However, following the Russian invasion of Ukraine and coalitions assembled by the US and NATO behind financial sanctions on Russia and arms supply to Ukraine, China is likely to tread more lightly around Taiwan.
The number of aircraft in China's sorties into the Taiwan Air Defence Indentification Zone has dropped to a daily average of three since the start of the Russia-Ukraine War from five in the prior three months.
And Russia-Ukraine has divided the Quad: India's neutrality on Russia
The Russia-Ukraine War has also exposed a fault line within the Quad, with India choosing a “neutral” path – abstaining from the UN vote to condemn Russia and purchasing Russian oil. The share of Russia in India's arms imports has dropped but remains dominant, particularly when the French Rafale jet fighter deal is excluded.
And other US allies in Asia want to tread a neutral path on China
The recent US-ASEAN summit has also highlighted how the ASEAN countries desire a degree of neutrality, in a manner that China hawks among US policy-makers might consider 'having their cake and eating it', with:
Greater trade access to the US market (something to take the place of the original Trans-Pacific Partnership – this was summed up best by Malaysian Prime Minister Ismail Sabri Yaakob in his comment that "The U.S. should adopt a more active trade and investment agenda with ASEAN, which will benefit the U.S. economically and strategically";
Continuing trade integration with China's Regional Comprehensive Economic Partnership (RCEP); and
The ability to call on the credible threat of US defence cover should China over-reach in its territorial claims (eg former Philippines’ President Duterte’s flip-flopping on US military treaties).