The American Spectator

With the collapse of the Doha round of trade negotiations late month, additional economic liberalization may come to depend more on bilateral and regional free trade agreements (FTAs). Already about 300 such accords are in operation around the world; they could play an even greater role in the future.

FTAs also provide geopolitical benefits. In particular, they give Washington a means to strengthen bilateral ties with other states at a time of increasing international challenge. As political relations fray even with some long-time friends, the prospect of financial gain remains a strong inducement for allies to maintain close ties with the U.S.

Employing creative tactics to enhance American influence is particularly important in Asia, where China’s rise is transforming the region.

Although many Chinese remain desperately poor and economists disagree over the most accurate statistics representing the Chinese economy, the People’s Republic of China now possesses one of the top four economies on earth. The PRC’s rapid growth has spawned growing Chinese investment and especially trade in Asia and around the world.

At the same time, Beijing is asserting itself diplomatically and substantially augmenting its military. China is still far from achieving superpower status, but is fast becoming a significant regional power.

As a result, PRC influence is increasing even in nations long friendly to the U.S. Political tensions between Tokyo and Beijing cannot obscure their growing economic relationship; Australia is cultivating friendly political ties while profiting from expanding economic opportunities with the PRC. South Korea, a U.S. ally for more than 50 years, now trades more with China than with America; more South Koreans look favorably on the PRC than on America.

Economic ties also are increasing between China and Taiwan even at a time when the latter attempts to forge a separate political and cultural identity. Indeed, roughly four percent of Taiwanese live in the PRC, primarily for business reasons. PRC officials hope and independence-minded Taiwanese fear that the prospect of economic gain or loss may cause Taipei to compromise on its territorial integrity.

China’s evident rise has caused some Americans to see China not only as a diplomatic and economic competitor, but as a dangerous military adversary as well. They believe war is likely and direct confrontation is the only way to preserve U.S. influence in East Asia.

War obviously is in no one’s interest, especially between nuclear-armed powers. But the future of Beijing and the region is not fixed. U.S. policy can change the future.

AMERICA RISKS PLAYING A LOSING HAND if it bets U.S. simplicity against Chinese subtlety, however. Both Canberra and Seoul, for instance, have indicated a distinct lack of enthusiasm for any U.S. plan to “contain” the PRC.

A more nationalistic Japan seems more inclined to back America, but such resolve might not survive an actual confrontation. Taiwan, too, prefers smooth relations between Washington and China. Even a short-term U.S. victory in any conflict likely would leave Taipei at a long-term disadvantage.

Under these circumstances, Washington should look for additional cards to play. The most important benefit of American friendship today may be access to the U.S. economy. America retains the largest, most productive, and most advanced economy on earth. Any Asian country would benefit from linking up with the U.S.

Playing the trade card seems most important in cases where Beijing’s attraction is strongest, such as South Korea. Not only has China replaced the U.S. as the Republic of Korea’s leading trading partner, but, as noted earlier, younger South Koreans have begun to turn away from America to China and even North Korea. Sharp disagreement over policy towards the North has soured official relations as well.

But Seoul and Washington are negotiating an FTA. It is the one area where ROK officials seem enthusiastic towards the U.S.

Taiwan may be even more important. It is America’s eighth biggest trading partner (and America is third on Taiwan’s list), with two-way trade running about $60 billion annually, and is a high-income consumer and high-technology producer. Indeed, the U.S. exports more to Taiwan than to Australia, Chile, and Singapore, all of which now enjoy FTAs. Despite increasing economic links between Taiwan and China, the U.S. remains the largest investor in Taiwan, while the latter is a sizable investor in America.