Burma, Cuba, and Iran: the pros and cons of Obama’s rapprochement

 

 

2015 has been a big year in Obama’s administration, one that ultimately will shape his presidential legacy. While he did not do so well on the first term, and even on the first half of his second term (thanks to the government shutdown in 2013 and intense bipartisan politics being played in the Congress), his performance became hugely bolstered through the passage of fast-track authority, which enables the administration to finish Trans-Pacific Partnership (TPP) before 2017 and other proposed mega-regional free trade agreements in the future, as well as the improvement in relations with countries formerly dubbed as ‘sponsors of terrorism’ – while not being hypocritical that US does have its own particular record – and in this specific case, Burma (or Myanmar, you name it), Cuba, and Iran. I will not talk so much about other foreign policy accomplishments that he had done in his presidential period, but these three countries, oftentimes tied together in almost any media report as ‘centerpieces’ in his foreign-policy rapprochement, deserve some particular attention. While Obama’s efforts, which emphasize diplomacy and compromise rather than the overt use of military force, have won plaudits, there are always concerns about what these countries, upon the re-engagement, are doing, and will possibly do, in the present and in the future. In all Polyannaist terms, nonetheless, we do really expect – while keeping our realist mindset on track – that the ‘opening’ of these countries will also lead to the betterment in the surrounding regions, and the world.

 

BURMA

Source (for all map images): Lonely Planet

Population: 60 million (almost), GDP (nominal): 60-65 billion US$ (2014)

Pros: since the limited reforms introduced in 2011 by the quasi-civilian president Thein Sein, sanctions have been gradually lifted the country has managed to attract more foreign direct investment from numerous Asian countries (other than the long-standing investor China), such as India, Thailand, Singapore, Japan, European Union, and obviously, from United States. Tens of billions of dollars have been poured in various industrial projects, while construction boom, mostly focused on high-rise buildings, is currently taking place in major cities, particularly in Yangon. For all the doubts among much of the international communities, World Economic Forum did even organize an investment summit in early 2013. Middle class is emerging in major cities, an important component in the country’s path towards eventual democratization. Hundreds of political prisoners are also since then released from prisons, and political participation is also turning into a more competitive arena as well, with numerous parties now participating in the country’s parliament based in Naypyidaw.

Cons: human rights abuses continue to take place, and the notoriety surrounding the country’s treatment of ethnic Rohingyas, as evident in the massive refugee crisis occurring in the seas between Indonesia, Malaysia, and Thailand. The government continues to deny the citizenship status of the whole ethnic group, numbered at over 1.7 million strong. Other than Rohingyas, the government remains in belligerence with several ethnic-based insurgency groups in the border, particularly those near India and China (some of the peace accords struck with them in 2012 and 2013 failed). There are also concerns that the political reforms seemingly stall, with the latest regulation reserving 25% of the parliament seats to the armed forces, while a presidential candidate has to secure more than 75% of parliamentary support, an obstruction to the country’s most leading politician, Aung San Suu Kyi, to contest the electoral race scheduled to take place in October this year. It is obviously undeniable, in fact, that she can not become a candidate, but whether the next president will proceed with the ongoing reforms remains a big question that has to be solved.

Obama’s visits to the country: 2012 and 2014

 

CUBA

Population: over 10 million, GDP (nominal): 80 billion US$ (2014)

Pros: relations between United States and Cuba in 20th century were mostly characterized by Cold War conflicts, and CIA’s numberless covert plans to assassinate Fidel Castro, the country’s leading political figure, until his replacement by his brother, Raul, in 2008. Limited reforms have been introduced since then, most astonishingly, the layoff of over 500,000 public employees in 2010 (which indirectly also led to the growth of entrepreneurs). The rapprochement, initiated in May 2012 as part of a ‘spy swap’ program, had since become a wide-ranging thaw among the two countries, culminating with the December 2014 meetings between Raul and Obama, assisted by Pope Francis. Bilateral meetings between Raul and Obama continued further with Organization of the American States (OAS) Summit in Panama City in April 2015, which, for the first time, oversaw the handshaking between the two leaders.

Cooperation among the two countries extends not only among the leaders, but also in people-to-people level. Cuban medical researchers, which ‘doctor diplomacy’ is widely utilized in Cuban foreign policy, have pioneered a medical breakthrough in cure of cancer, and the cooperation has recently begun between the countries’ scientists. The re-opening of US embassy in Havana last week, as one expects, will push American businesses and tourists, gradually, to invest and interact with the locals living in the country in the future. Furthermore, the country can advance even further in its ‘doctor diplomacy’ strategy, now already dispatching more than 40,000 medical experts across the developing world.

Cons: two major takes. Firstly, US has continued to retain the notorious Guantanamo Bay prison, where the infamous CIA rendition program is still taking place there. Further negotiations between Washington and Havana have to be conducted in order to solve this decades-old, lingering problem. Another concern is the extent to which Cuba, still ruled by one-party regime, will introduce its political reforms, and also allowing more competitive political atmosphere. Such political opening will take years, if not decades; if reforms go too fast, a political crisis will be a real, legitimate threat. Gradual phases of tutelage will be a more recommended pattern to guide the country’s path towards political openness, and that will be left to his successors in 2018 (the time Raul resigns, as he will be 87 years old afterwards).

Obama’s visits to the country: zero

 

 

IRAN

Population: 80 million, GDP (nominal): 400-500 billion US$ (2014)

Pros: the nuclear deal, eventually achieved two weeks ago, was another highlighted achievement that Obama had achieved in his administration after over 6 years of uneasy numerous processes of negotiation, together with European Union, IAEA, China, and Russia. The deal itself will require Iran to highly limit (but not completely freeze) the nuclear program, obligate the country to open up for inspections by IAEA, as well as provide progress reports, up for international joint reviews, for a period of 10 years. While the accord was achieved ‘not with trust, but through verification’, the deal will enable the gradual lifting of economic sanctions that have crippled the country for almost one decade, potentially adding an annual oil revenue of more than 100 billion US$ that Tehran critically needs to support the long-term development. Still, a complete normalization of US-Iran relations will not be expected in a short term period, somehow.

Cons: There remains this question of regional rivalry between Iran and Saudi Arabia, two long-time arch-enemies, in Middle East. The two countries have played proxy wars and conflicts in Syria, Yemen, Lebanon, Iraq, and in numerous other Shia-Sunni conflicts across the region. Unlike the two countries above, Tehran plays a powerful influence in Middle East. It continues to retain support to Bashar al-Assad regime in Damascus (and most recently, a new law has been signed in Tehran to authorize 1 billion US$ of financial support to the beleaguered country annually), while the civil war in Yemen, despite the truce, has not led to a full pause. There remains doubt, also, of what will happen once the deal expires in 2025; such uncertainty will have a major implication on global geopolitics in the decades to come, especially when one expects Iran to be economically and politically in even stronger position than now. An Iran-Saudi rapprochement, possibly brokered by Washington, will have to be attempted in a few years to come to prevent a larger regional conflict to take place.

Obama’s visits to the country: zero

 

As much as these efforts have resulted in significantly positive impacts on US relations with the world in the second decade of 21st century, these deals also carry Obama’s name in a huge stake in the long-term future. What if the direction becomes worse rather than better? There is too much one can hardly speculate, even in the 10 years of time; this also carries an important question, furthermore, of what the future US presidents will relate to these countries in a post-Obama setting. Will the presidents maintain the ‘diplomacy-first’ strategy, or will the stance become much harder and more hawkish? In such situations of fixed uncertainties, wisdom will be the sole guidance one has to employ to understand the problems, and proactively solve them. For all the flaws that have occurred, at least, engagement is the continuous form of remedy in international relations that Obama has exercised (so far).

 

 

 

 

Harmonizing US-China trade relations : TPP and RCEP

 

Source: Asia Maritime Transparency Initiative (CSIS)

 

The realm of US-China relations in 2015 are, indisputably, game-changing and vastly different from US-China relations that we experienced in 2005. A decade has passed, and we have seen the increasingly closing gaps between United States and China in regard to their global power. 2014 was a pivotal year, when for the first time in history, US lost its monopoly of a country with double-digit trillion US$ in terms of GDP values. While the former has managed to accumulate over 17.5 trillion US$ in GDP, China, in that regard, has leapfrogged by adding almost 1 trillion US$, strengthening its position into 10.5 trillion US$ as of last year. It is not simply a matter ‘if’ – the question is simple: when will China overtake the US? My most rational forecasting (humbly speaking, with significant percentages of potential errors) is 10-15 years. Time is running short, and at least, China has succeeded to become the world’s largest economy, if one looks at the country’s purchasing power parity (PPP), at an estimated 17.6 trillion US$. Despite the fact that China has been gradually slowing down to a ‘new normal’ of growth rate, and most recently, the stock market crash taking place in the last one month, it doesn’t mean China has stopped generating its industrial output; the country simply wants to move up one stage into a more ‘high-quality’ economy (how high-quality it will be remains a good question), driven more actively by domestic consumption, and in a pattern widely similar to what Americans did after World War II, international trade. The economic slowing-down has pretty much forced Beijing to expand its trade agenda into a more complex level than before.

China has at least succeeded in some of its international initiatives: the country already established two development banks (AIIB and NDB) in 2014 alone, the ‘One Belt One Road‘ economic initiatives, planned to link Asia, Africa, and Europe into integrated transport and trading networks, have enjoyed significant support from many developing countries, particularly those in Asia and Africa. China is also moving along with free trade agreements, most recently with South Korea and Australia. The biggest one being negotiated right now, RCEP, is set for completion – should all parties agree – before the end of this decade (at most).

These bring challenges to United States, no doubt. Having recently recovered from 2008 financial crisis and hampered by the ongoing bipartisan politics in numerous policy agendas, it is undeniable, therefore, that the world will question if America will still remain relevant as the world’s global power in the decades to come. I dare not answer that question; it has to, to be honest, require a few upcoming presidents, all with sound, carefully planned, and long-term power projection ambitions, while at the same time bridging the bipartisan conflicts of interest. This will not be easy, for sure. Everyone knows how many innumerable difficulties President Barack Obama has encountered in ensuring his proposals pass the Congress. Most recently, the almost-casualty was the Trade Promotion Authority (TPA), a fast-track, no-Congress-amendment negotiating power critically needed to pass Trans-Pacific Partnership (TPP), the largest proposed free trade agreement in history. Already an elephant in the room, President Obama only began to aggressively promote and pitch the TPP in 2014 – all despite the fact that United States expressed its interest as early as 2008, and it was poorly-timed as ruptures between Obama and his own allies, Democratic Party, were increasingly deteriorating. It was only through a pragmatic, ironic compromise when Obama decided to gain ‘alliances’ with the Republicans that the fast-track authority was eventually signed into law by end of June 2015, giving him unprecedented negotiating powers with the rest of the trading partners.

Who are in the trade agendas?

Remember, RCEP is not firstly proposed by China. But because China is the largest economic power among all the negotiating parties, there exists perceptions that RCEP is solely a ‘Sino-centric’ initiative. Wrong. Known as Regional Comprehensive Economic Partnership, it is currently a negotiated, integration-based free trade agreement between 10 ASEAN member-states (Indonesia, Malaysia, Singapore, Thailand, Philippines, Brunei, Cambodia, Laos, Vietnam, Myanmar) and 6 Asia-Pacific countries by which ASEAN already conducts free trade with in the last few years, notably China, Japan, South Korea, India, Australia, and New Zealand. All combined, the trade agreement comprises nearly 30% of the world’s GDP (approximately 22.5 trillion US$). The primary goal of RCEP is to integrate the existing ASEAN FTAs with the neighboring countries into a single platform. There is a disparity among the countries, of course: Myanmar’s GDP per capita is less than 900 US$, while the levels in Singapore and Australia alone are more than 60-fold larger. Some countries like Cambodia and India also have not developed strong industrial bases, especially in manufacturing, if compared to major powerhouses like Japan and South Korea. That is why the negotiating parties are willing to be more pragmatic in enforcing the trade rules, in particular ensuring that a certain degree of protectionism can be applied to protect sensitive industries, particularly state-owned enterprises (SOEs), the still-dominant driving economic forces in countries like China and Indonesia.

On the other hand, TPP (Trans-Pacific Partnership) brings in a fewer number of countries compared to the former. Firstly negotiated by Brunei, Chile, Singapore, and New Zealand in 2005, US only entered the negotiation phase near the end of presidency of George W. Bush in 2008. Since Obama’s term, the United States has increasingly played a more pivotal role in ensuring the passage of the agreement. Unlike RCEP, it is a rules-based agreement which, repeatedly touted by Obama administration, attempts to ‘enforce 21st-century gold standards in global economy and redefine international trade’. Currently, the agreement consists of United States, Canada, Mexico, Peru, Chile, Japan, Malaysia, Singapore, Brunei, Vietnam, Australia, and New Zealand, all the while encompassing 40% of the world’s GDP (approximately 30 trillion US$). Other than TPP, there are also two other trade agendas that are currently being negotiated and proposed: a proposed massive trade agreement with European Union named as TTIP (Transatlantic Trade and Investment Partnership), containing a larger 50% of the world’s GDP (almost 40 trillion US$), and the lesser-known TISA (Trade-in-Services Agreement), which will bring in 50 countries controlling 70% of the world’s GDP, enforcing a near-complete trade liberalization in service industries.

 

 

Source: The New York Times

 

The idea of TPP is nothing short of controversies, of course. American service industries, and to some extent, also Singaporean, Japanese, and New Zealand will definitely reap the benefits, but median income wages for US manufacturing workers will slightly decline. This is obvious, because the ‘compulsory rules’ in liberalization will force companies to shift production to destinations offering lower labor costs, such as Malaysia, Peru, or Vietnam. Agriculture also remains hotly debated as US and Japan are yet to reach any consensus about the privatization and end of subsidies for Japanese agriculture, while American automakers steadfastly demand any protection measures from competition with Japanese car giants. President Obama also promises that the TPP will enable strict enforcement of labor and environmental protection, but how strict will the rules be enforced remains an unresolved question (most of the drafts are not even released to public). This is particularly concerning given the red-flag reports about labor conditions in Malaysia, Vietnam, as well as in Mexico and Peru. Pharmaceutical prices are also a huge concern, as the Big Pharma insists on intellectual copyrights for the new drugs, therefore posing an obstruction to the creation of generic drugs in developing countries. The impact on state-owned enterprises, particularly in Malaysia, Singapore, and Vietnam, will be mostly detrimental as well, as the firms will be forced to compete, on equal playing terms, with multinational businesses, especially those from US and Japan themselves. Currency manipulation, never regulated in IMF but proposed to be a punishment-imposing mechanism in TPP, makes both Japan and Malaysia afraid.

Nonetheless, as the Trade Promotion Authority (TPA) was eventually signed into law on late June, there is increasing possibility that the TPP will come into force by either the end of 2015 or the beginning of 2016. Even the passage of TPA is not by itself an absolute guarantee the TPP will be passed as well; the House Democrats will continue their ‘rebellion’ in upcoming votes (and there will be a presidential election next year). Still, the completion of this world’s largest free trade agreement, no matter how imperfect it is, will solidify Obama’s presidential legacy before he leaves the office.

Cold trade wars?

There is already much speculation if China and US are involved in some sorts of zero-sum game with the emergence of their TPP and RCEP trade agenda. If one looks at the fact that US does not participate in RCEP, and that China is not in TPP, one will simply take the easiest conclusion that there remains an ongoing ‘winner-takes-all’ mentality in the aspect of the two countries’ relationship. Again, this is a matter of perception; such worldview is not necessarily correct, but neither it is wrong, too. There exists, indisputably, a ‘race’ for more international influence from both countries, especially in their economic relationships.

But one does not simply go into a single corner to understand the full picture: China has not fulfilled all the ‘gold standards’ required by US in TPP negotiations, and US does not even have an existing free trade agreement with ASEAN. It is true that only in the recent years that China has gradually attempted to embrace economic reforms in lieu of its slowing-down growth rate, but Rome is not built in a day. The state-owned enterprises, loathed as they are for the inefficiencies, remain the major driving force of Chinese economy, and simply letting them compete with global firms will be analogous to learning to swim in a pond when one does not yet learn to swim in a pool. US participating in RCEP will bring more disadvantages just because US has not yet proposed any FTA with ASEAN member-states (except Singapore), due to the trade diversion effects potentially taking place upon the implementation. And, we all know, American government will not (almost for certain) ‘compromise’ with their high, ‘gold’ standards, largely insisting on the rules instead of the integration.

Major compromise: let it be

In the current format, the only best thing that can be done so far is to let the TPP and RCEP negotiations go separately as usual. None of them has entered into force, realizing that there are just too many issues all the negotiating, concerned countries will have to talk about. Still, sooner or later, even if these agendas eventually fail, trade will still take place as usual among the countries, but just on a wholly different level of integration, and in a way that would be rather chaotic and difficult to integrate. Nonetheless, both China and US realize that these are not simply the fixed-ending initiatives; they are simply the first step to a mega-regional economic integration in the future. TPP will not be limited to 12 countries only, as RCEP is not simply for 16 countries. China has resurrected again the FTAAP (Free Trade Area of the Asia Pacific) proposal in APEC 2014 Summit in Beijing. Once an American idea in bringing ‘harmonious’ integration among Asia-Pacific economies, the agenda failed in the early 21st century, given the perceived protectionism imposed by many of the countries at that time. That still exists, of course, to some extent, but given the increasing global economic integration brought about by globalization and disruptive technologies, one can no longer turn back the tide of time. United States can still play a major leadership role in Asia vis-a-vis China, only if the country is willing to let the latter integrate into the global stage. Still, to remain relevant in the world’s largest and most populous continent in a few decades to come, US should ensure that it can play an active economic role in more Asian countries, particularly in formulating a future US-ASEAN FTA. What I see is that US will only begin negotiating for such free trade agreement, if and only if ASEAN member-states can improve their trade regulations upon the adoption of RCEP in a few years. China, and other Asian countries, can also begin negotiating for upgraded versions of TPP, if and only if they can reform their economic structures, and ensure that the state-owned enterprises become more competitive, and more willing to improve their productivity rates. Only through hard compromises, can the TPP and RCEP eventually lead into FTAAP itself, which, I foresee, will take either one, or two decades, or even longer.

I’ve told you, it won’t be an easy, and nice, process. But still, an eventual integration is still minutely possible.