Donald Trump’s America First policy equates to a pivot away from Asia.

by William Pesek

Donald Trump? The US President’s impulsiveness may not have been a specific in Malcolm Turnbull’s talking points with Shinzo Abe, but it was between the lines in bold type.

There’s much buzz in Tokyo about getting the so-called quadrilateral dialogue back on track. Abe, in 2007, touted a bloc of like-minded democracies to close ranks on China’s rising influence and even bigger ambitions. Self-avowed Sinophile Kevin Rudd, Australia’s then prime minister, demurred, fearing fallout from Beijing. Turnbull, in sharp contrast, has tilted back towards the Quad idea – a big win for Abe and his dream of joining hands with Australia, India and the US.

The problem is the key player was not in the room.

An Asian-region triad, of course, lacks the scale and leverage of a grouping that includes the world’s biggest economy. But the question for Abe and Turnbull had to be: who is a bigger threat to Asia’s stability over the next few years – Trump’s America or Xi Jinping’s China?

Taking the long view, Xi’s government seems the clearer menace. Aside from the ever-present risk of a major Chinese slowdown or debt crisis, Xi’s elevation of a rival “Beijing consensus” to replace the “Washington consensus” that Australia and Japan rode to prosperity makes 2018 a fraught moment for capitalism.

Washington’s policy prescriptions – free markets, transparency, financial liberalisation – have myriad flaws, some that culminated in the 2008 global financial crisis. But the illiberal Chinese model of semi-open markets, autocratic government and press censorship that Xi is selling an alternative hardly seems a viable road map for Asian Century greatness.

Bilateralisation of trade is a Beijing imperative. With the Trans-Pacific Partnership in flux and Xi’s “Belt and Road” initiative coming online, China’s president is driving ahead with his divide and conquer strategy. That gives other Asia-Pacific democracies every reason to seek strength-in-numbers, centred on Washington.

In the short run, however, Trump’s White House could be the bigger spoiler. Withdrawal from the TPP was enough of a blow for economies seeking a China insurance policy. Then came the President’s reneging on the Paris climate accord, and threats to the Iran nuclear deal and America’s trade pact with South Korea. The @realDonaldTrump Twitter feed pulsates with threats to ignore World Trade Organisation rules, put the International Monetary Fund in its place and pull out of the 24-year-old North America Free-Trade Agreement.

Waiting game

The two biggest Trump shocks could be yet to come: a trade war and military action on the Korean peninsula.

The odds of Trump slapping tariffs of between 35 per cent and 45 per cent on Chinese goods are rising with his blood pressure. As Russia investigations swirl, the White House is desperate to change the narrative. Trump also is miffed Xi hasn’t curbed Kim Jong-un’s exploits in Pyongyang. A populist attack on a nation that Trump accused during the 2016 campaign of “raping” America might be just the thing.

Any assault on China’s all-important export engine would crunch the progress made by Abenomics, and push Australia’s economy to the precipice of its first recession in 25 years.

Trump is itching to do more than just troll Kim’s North Korea via Twitter. The very top tick of his one-year-old presidency was April 6, when he fired 59 Tomahawk missiles at Syria. Praise came from all corners of the globe, including from his most vociferous critics in Washington. A pre-emptive strike on North Korea, though, would draw China into the mix, blowing up economic linkages.

Abe and Turnbull certainly have their work cut out. And the stakes are high for both. Tokyo has staked out a place as Trump’s best friend, even as it tries to reassert influence in Asia. Quite a balancing act considering Trump’s “America First” policy equates to a pivot away from Asia.

Prime Minister Turnbull’s pivot to the Quad has also been controversial at home. Australia is far more reliant on Chinese trade than India or Japan. India’s economy, rapid growth aside, is not even close to supplementing China as a customer for Australia should relations with Beijing ever sour to that point.

Reinvigorating the Quad makes eminent sense as China spreads its tentacles. A common threat for Canberra, New Delhi and Tokyo is being left out if the others just decide to pursue their own interests with Beijing. That’s why Abe and Turnbull should keep TPP alive by working to keep Canada in the fold and, eventually, pulling India, Indonesia and South Korea into the deal.

The China threat is straightforward, though. Trump, not so much. Three more years of The Donald – assuming his reign endures – complicates hopes for a workable four-way economic bloc. As a concept, the Quad is solid. In reality, its weakest link may be its biggest. So as Abe and Turnbull mull a common strategy to contend with mainland assertiveness, they’d be remiss not to have one for Trumpland’s unpredictability, too.

William Pesek is a Tokyo-based journalist William Pesek is a Tokyo-based journalist and author of Japanization: What the World Can Learn from Japan’s Lost Decades. He has been a columnist for Bloomberg and Barron’s.

AFR Contributor

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