Strategy Note /

US allies in Asia-Pacific do not need reassurance

  • US Vice-President Harris' trip to Singapore and Vietnam follows Defence Sec. Austin's July trip (included Philippines)

  • The chaotic final withdrawal of the US from Afghanistan has prompted questions of commitment of the US in other regions

  • But over the last three decades permanently stationed US troop numbers in Asia-Pacific have been uniquely consistent

US allies in Asia-Pacific do not need reassurance
Hasnain Malik
Hasnain Malik

Strategy & Head of Equity Research

Tellimer Research
23 August 2021
Published byTellimer Research

US Vice-President Kamala Harris is visiting Asia-Pacific allies that might be nervous about the commitment of the US to preserve their security, following the chaotic final withdrawal of US forces from Afghanistan. They should not be.

In fact, taking a step back from the drama and horror of video footage from Kabul airport, and looking at historic troop deployments and long-term strategic goals suggests that the US will get more, not less, deeply involved with its Asia-Pacific allies.

US allies in Asia-Pacific include the largest components of the MSCI EM index after China, Taiwan (14.3%) and South Korea (13.1%), and, in our view, some of the most attractive equity market stories in EM globally, namely Vietnam, Philippines, and Indonesia.

Greater US involvement and support, at least to the degree that it does not antagonise an aggressive response from China (a risk clearly most acute for Taiwan), is generally a positive for the investment case in these countries (they have to spend less on defence and retain relatively favourable access to the US for their exports).

US wants to plug even deeper into Asia-Pacific

The Afghan catalyst for heightened concern over US commitment to regional security in Asia-Pacific comes in the context of former US President Trump's withdrawal from the Trans-Pacific Partnership. In Asia-Pacific there are three main potential military flash points involving US allies: South Korea and North Korea, Taiwan and mainland China, and ASEAN countries (eg Malaysia, Philippines, Vietnam) in dispute with China over territorial boundaries in the South China Sea.

Over the last three decades, US military presence has been remarkably stable in the Asia-Pacific region. While its troop numbers fell drastically in Europe, following the collapse of the USSR, and have fallen even more sharply in the Middle East and Central Asia, this is demonstrably not the case in Asia-Pacific.

US troop numbers in Asia Pacific have been fairly consistent

Indeed, the US now has more permanently stationed military personnel in Asia-Pacific than in all other regions combined.

US troops overwhelmingly skewed to Asia Pacific region

Arguably, the main change underway in US behaviour in the Asia-Pacific region is not any type of military drawdown; almost the opposite. The US is seeking to broaden the geographic footprint of its troops in Asia-Pacific. The bulk of US troops in the region are in Japan and South Korea. Hence the focus of recent US trips on ASEAN countries, which collectively host under 1% of US troops permanently stationed in the Asia-Pacific region.

US troops in Asia Pacific mainly in Japan and South Korea

US Vice-President Harris visits Singapore and Vietnam this week and follows Defence Secretary Lloyd Austin's trip in July (which included Philippines and led to President Duterte finally fully restoring the Visiting Forces Agreement, which covers US troop rotations for military exercises).

The US remains as motivated as ever by the need to preserve its control of key Asian supply chains, which are mainly via sea transport. The highest profile, but by no stretch the only industry, is semiconductors. Until the US has acquired and built cutting-edge semiconductor manufacturing capability and a combination of 3-D printing and automation allow for a wholesale shift of cost-effective industrial manufacturing back to its own shores, this motivation will remain in place.

From the US perspective, when it observes ASEAN's eclipse of the US or the EU as China's largest trading partner, or the establishment of RCEP (the Regional Comprehensive Economic Partnership, a trade integration between China and major Asian economies), it sees signs that it needs to do more, not less, in Asia-Pacific.

Meanwhile, US allies, as well all those countries less closely tied to the US, need to navigate the gradually narrowing economic, financial, and geopolitical space between the US and China.

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