James W. Fatheree


November 17, 2017


President Donald Trump spent the past two weeks in Asia reassuring our partners of our commitment to the region, promoting U.S. exports of defense and energy products, and working with regional powers to manage security challenges posed by North Korea. He further strengthened his close personal connection with Prime Minister Shinzo Abe, tried to build rapport with another pivotal ally, Korean President Moon Jae-in, and cultivated his personal relationship with President Xi Jinping of China all while discussing the situation in North Korea in more measured tones. On its surface, the trip went pretty well.

Yet if we look a little closer, the trip missed a few marks. It was light on details around U.S. trade and investment priorities, missing a major opportunity at the APEC CEO Summit and Leaders’ Meeting to articulate what the United States’ economic strategy in Asia will look like moving forward. The emphasis on the Indo-Pacific seemed more of a geostrategic vision than an economic and commercial strategy with staying power in the region. At the same time, a number of Asian economies ostensibly reached consensus on moving forward with the TPP-11 – a massive Asia-Pacific trade deal that excludes the United States – and China positioned itself as the champion of inclusive development, trade, and globalization moving forward.

Waning United States influence was met with concern across Asia, where I traveled to Vietnam, Korea, and Japan – essentially reversing the administration's trip. In each nation, I encountered U.S. companies wondering how they could remain competitive in local markets, and foreign governments trying to comprehend the new “America First” approach and tone of the U.S. government and what their own economic future might look like without U.S. leadership in the region.

In Korea, for example, it is positive that the focus seems to be on expediting the “amendment and modification” of the KORUS FTA, the five year-old free trade agreement that opened up Korean markets for a wide range of U.S. goods and services, rather than withdrawing from it. But the rhetoric used to describe this FTA – one of only three American FTAs in Asia – and the lack of clarity for the business community or other stakeholders about the administration’s specific priorities in the discussions beyond reducing the U.S. deficit in goods trade with Korea is still concerning.

Further, the fallout from this approach was not contained to the Korean peninsula. I was reminded that the treatment that Korea – and our NAFTA partners – are receiving is being watched warily by those countries considered as attractive potential bilateral FTA partners by the administration. This dynamic was on full display in both Japan and Vietnam, where overtures on bilateral trade deals were not reciprocated.

As the administration alters and redefines its Asia-Pacific strategy, other countries are offering an alternate vision. China is filling the void of international trade leadership by, at least rhetorically, espousing globalization and promoting infrastructure development throughout the region. However, China’s view of globalization and its economic-model present challenges for American leadership and economic interests in the region. Realizing this challenge, the White House has identified a number of issues that it wants to address with China. These include competition with state-owned enterprises, government intervention in the market, intellectual property protection, forced technology transfers, and restrictive data laws. Indeed, trade agreements such as TPP and KORUS were aimed at raising trade standards to counterbalance the discriminatory treatment and distortions emanating from China’s state-led approach. But with one gone and the other in jeopardy, the U.S. administration is steadily weakening its ability to accomplish its stated aims.

For American companies, withdrawal from the Asia-Pacific is not an option, yet they are finding it increasingly difficult to remain competitive there. To compete, U.S. companies need an integrated, cohesive U.S. government strategy toward the region encompassing, among other things, high-standard free trade agreements, expanded support from a fully-functional Ex-Im Bank and other export promotion programs, and the proactive use of international fora like APEC to help establish standards and practices that support our most competitive industries.

Unfortunately, we have yet to see such a strategy from the administration. There is mounting concern, in fact, that an ongoing exodus from the U.S. diplomatic corps and foreign commercial service will further hamstring small- and medium-size American exporters, which frequently rely on support from the U.S. government to access the world’s most economically dynamic region.

As the U.S. stands still – or arguably moves backward – other nations will continue moving ahead at the expense of our exporters and their workers.

About the authors

James W. Fatheree