South China Sea

In May 2018, the Council on Foreign Relations’ Southeast Asia program convened a workshop to examine the direction of the U.S.-Southeast Asia relationship from the present to 2030. The workshop was held at the Council on Foreign Relations and was made possible by the support of the Henry Luce Foundation. The views described here are those of workshop participants only and are not CFR or Luce Foundation positions. The Council on Foreign Relations takes no institutional positions on policy issues and has no affiliations with the U.S. government. Introduction Although the Barack Obama administration rhetorically made Southeast Asia a centerpiece of its “rebalance to Asia” strategy, the administration still largely focused on the Middle East and Europe, and Southeast Asia remained a low U.S. policy priority. The Obama administration did try to boost U.S. economic ties with Southeast Asia in 2016 by forging the Trans-Pacific Partnership (TPP), but that trade deal was broadly unpopular in the United States. The following year, the Donald J. Trump administration ended U.S. participation in the TPP, and it also suggested launching punitive economic measures against Southeast Asian states currently running trade surpluses with the United States. Many Southeast Asian leaders now worry that Washington has no clear security or economic strategy for the region, other than applying pressure on Beijing to respect freedom of navigation in the South China Sea. In this perceived void of U.S. leadership and strategy, workshop participants assessed how Southeast Asia might change as China becomes an increasingly dominant regional security and economic actor. They also discussed the future of U.S. strategic and economic relationships with important partners in the region, including Indonesia, the Philippines, Singapore, Thailand, and Vietnam. Participants further considered how China might use its growing leverage in Southeast Asia, and whether Beijing’s tactics could backfire. Finally, several workshop participants posited that the United States, China, and Southeast Asian states could cooperate on at least some nontraditional security issues, such as combating piracy and terrorism. The Changing Regional Strategic Balance Participants agreed that the strategic relationships between the United States and many Southeast Asian partners remain strong, while the economic relationships are increasingly troubled. Participants still questioned, however, whether U.S. strategic policy is nimble enough to adapt as the regional situation evolves dramatically over the next decade, with Beijing likely to achieve near-total control over parts of the South China Sea. Many participants concurred that China is determined to be the dominant power in Southeast Asia and that it faces fewer obstacles to this goal than in any other region in Asia. Several participants argued that Chinese officials believe the Trump administration has no clear plan for U.S.-Southeast Asia security relations and that Beijing thinks the administration’s “Free and Open Indo-Pacific” idea is going to be rejected by many Southeast Asian states. They further noted that Chinese officials even believe that diminished U.S. interest in Southeast Asia could influence domestic politics in the region, as seen by the ascent of pro-China members of the Communist Party of Vietnam to the leadership at their 2016 party congress. Some participants argued that China sees Southeast Asia as eventually accepting what Chinese officials call hegemonic stability, in which the region is stable but China dominates regional strategic and economic institutions. In addition, some contended that China had identified Cambodia, Thailand, and, to a lesser extent, Malaysia as pivotal partners in Southeast Asia; China could use these states’ influence to sway other Southeast Asian countries and make China’s regional dominance appear unstoppable, and also promote China’s model of development. These participants maintained that Beijing is increasingly using not only assertive militarization of regional waters but also economic coercion—through promised or scuttled Belt and Road Initiative (BRI) aid projects and investments—to force Southeast Asian states to accept a China-dominated regional order within the next decade. Several participants asserted that the Philippines is an example of a state that has acceded to this economic coercion. Obstacles to Beijing’s Regional Strategic Dominance Other participants argued, however, that there are flaws in Beijing’s strategies to achieve hegemonic stability in Southeast Asia and that several states will not accept Chinese dominance between now and 2030. For one, some countries that China views as potential partners are politically unstable. Cambodia is a highly authoritarian state with no clear succession plan beyond Prime Minister Hun Sen; Thailand’s junta eventually will give way to some form of elected government, which may not be as pro-China; and, after the opposition coalition’s victory in Malaysia, China may face senior politicians more skeptical of Chinese economic policies. Moreover, participants noted that Southeast Asian states have growing concerns that, as they accept China-financed BRI projects, they are not only amassing excessive debt but also possibly ceding sovereignty over critical rail, road, port, and telecommunications infrastructure to Beijing. Several participants further identified a core group of countries most concerned about the changing regional strategic balance that are likely to hold out against Chinese dominance, using several forms of deterrence. Multiple participants argued that the United States should recognize that the Philippines and Thailand, U.S. treaty allies, will be unreliable partners and instead should focus on three states—Indonesia, Singapore, and Vietnam—and to a lesser extent Malaysia. These four countries are pursuing differing approaches to minimize China’s coercive abilities. One approach, favored by Vietnam and somewhat by Singapore, is to ramp up strategic ties with India and, to a lesser extent, Japan and Europe (particularly France), as counterweights to China’s increasingly powerful naval forces and assertiveness in regional waters. Another strategy, pursued most assertively by Indonesia and Vietnam, and also quietly by Malaysia, is for Southeast Asian nations to build up their own naval and coast guard forces, and use them in displays of deterrence in territorial waters where Chinese vessels have encroached, like those around Indonesia’s Natuna islands. Finally, participants generally agreed, these four countries are still optimistic that the United States will remain the major offshore balancing power in Southeast Asia. If the United States continues in this role, it could help these countries avoid being dominated by China. One participant noted that the United States strongly supports Southeast Asian states’ autonomy of action and defense of their territorial waters. This support for Southeast Asian states’ autonomy remains a major U.S. strategic asset. At the same time, some participants who remained optimistic about U.S. strategic influence expressed serious concern about whether the current Free and Open Indo-Pacific concept, initially imagined by Japan, had real relevance for Southeast Asian states. The Evolving Economic Relationship Participants generally agreed that the U.S.-Southeast Asia economic relationship is increasingly challenged not only by the U.S. withdrawal from the TPP but also by regional economic integration within the Association of Southeast Asian Nations (ASEAN) states, which the United States has mostly ignored. In addition, most workshop participants concurred that, while the United States and partners in Asia may attempt to create an alternative to China’s BRI, such an alternative is likely to fail, as it would be unable to mobilize the capital available in the BRI. Other than Japan, potential partners in such a U.S. scheme, such as India or even Australia, have minimal funds to provide a BRI alternative. U.S. companies and other major multinational corporations also clearly see opportunities arising from the BRI, especially companies in the shipping, logistics, construction, and finance industries. They may be unwilling to partner with any initiative that is framed as a clear alternative to BRI. One participant, however, cautioned that some of the rhetoric about the BRI’s financial size and potential consequences may be overstated. Other participants observed that the BRI is driven as much by a need to reduce overcapacity in the Chinese domestic economy as it is by foreign policy concerns, and so BRI planners may wind up making decisions that make little foreign policy sense for Beijing. Another participant noted that, regardless of the BRI’s existence, China is now ASEAN’s biggest trading partner, and that other than the Philippines, no Southeast Asian state has embraced the Trump administration’s preference for negotiating bilateral trade deals over multilateral regional trade integration. Participants further observed that any possible U.S.-Philippines bilateral deal was unlikely, since there were huge regulatory and political obstacles on both sides. In addition, participants generally agreed that China is effectively utilizing economic tools to maximize its strategic influence in Southeast Asia, such as by doling out aid deals piecemeal to ensure that countries only receive the full amount of promised assistance after they accept Chinese regional foreign policy aims. In general, participants believed that the U.S. political climate has become so opposed to multilateral trade deals that, no matter who wins the 2018 midterm and 2020 presidential elections, the United States is unlikely to rejoin the TPP. As a result of the United States’ absence from the TPP, one participant noted, China does not feel much pressure to push Southeast Asian states to accept the Regional Comprehensive Economic Partnership (RCEP), the Beijing-centered multilateral trade deal China promoted extensively in 2015 and 2016. Instead, Chinese officials appear satisfied that, without the United States in the TPP, China can largely determine the rules and norms of trade in Asia through a range of other deals it is negotiating besides RCEP, as well as through its actual trading practices. Several participants noted, however, that the United States could utilize aspects of the hard-line approach to trade favored by the White House and get Southeast Asian support for a tough trade policy against China. One participant mentioned that many Southeast Asian states, despite their robust trade relationships with China, share the Trump administration’s complaints about China’s unfair or even illegal trade practices, including forcing investors in China to turn over intellectual property to local partners. Recommendations Workshop participants generally agreed that the United States’ strategic and economic relationships with Southeast Asia are deteriorating faster than U.S. officials had foreseen only a few years ago and may be seriously diminished by 2030. However, the United States can take several measures to bolster its strategic and economic ties with Southeast Asia. Prioritize U.S. Relations With Indonesia, Malaysia, Singapore, and Vietnam These four Southeast Asian states are generally the most willing to push back against China’s growing strategic power in Southeast Asia. Several participants believed that the United States should prioritize these states in its relations with Southeast Asia over the next decade. It could do so by upgrading security cooperation with these states, increasing arms sales, and encouraging them to take on joint patrols of the South China Sea with other Southeast Asian states or with Australia or India. They also concurred that the United States should make only modest efforts to work with ASEAN as an organization, since the organization seems increasingly hobbled. For instance, several participants agreed that ASEAN, which has begun negotiating with China on a code of conduct for operations in the South China Sea, is already so divided internally that it is unlikely to conclude the negotiations with any agreement that actually protects freedom of navigation. Enlist Partners to Combat Trade Cheating Many participants believed that the United States would get strong support from Southeast Asian nations if it reached out to allies who have been victimized by China’s unfair trade strategies and then worked together to push China to end such practices. However, participants agreed, targeting China makes Southeast Asian states fear a U.S.-China trade war that could damage regional economies. Yet, failing to enlist Southeast Asian states as allies against China’s trade strategies would be counterproductive. Participants argued that, if the United States wants to pursue a tough trade policy with China that enjoys Southeast Asian support, the Trump administration should end its complaints about running trade deficits with states like Indonesia, which have not been credibly accused of unfair trade practices. Make the Free and Open Indo-Pacific More Than Just a Concept Participants generally agreed that the Trump administration still needs to more clearly define what the Free and Open Indo-Pacific concept means for Southeast Asian states. At present, the concept lacks a real structure. Participants noted that a plan should include activities that will take place in 2018, 2019, and 2020 to “put meat on the bones” of the idea. Without a clearly defined set of actions that will come from the Free and Open idea, and expectations for how these actions will affect Southeast Asian states, countries in the region will remain skeptical that U.S. policymakers will make Southeast Asia a priority. With a clear set of actions stemming from the idea, however, the Trump administration could convince some Southeast Asian countries, such as Vietnam, to embrace the concept and work more closely with the United States to deter China’s military buildup in the South China Sea and other areas.

On May 17, 2018, Patricia Kim testified before the House Permanent Select Committee on Intelligence on China’s worldwide military expansion. She discussed President Xi Jinping’s efforts to modernize the People’s Liberation Army (PLA) and to strengthen his personal control over the military, the aggressive expansion of the PLA’s presence in the East and South China Seas, and the mutually reinforcing nature of China’s commercial and military activities abroad. Kim also highlighted the serious challenges China faces in its quest to become a global military power, from potential sources of internal instability, to Beijing’s relative lack of allies and soft power in the East Asian region and beyond. When responding to China’s military expansion, Kim recommended that the United States should work with its allies and partners to shape the environment around China to disincentivize destabilizing behavior and to encourage Beijing to use its newfound power in constructive ways. To do this, Kim stressed that the United States must speak from a position of strength so that Beijing understands any attempts to restrict the United States’ presence in the East Asia will come at a great cost and set China back in its many ambitions. Kim recommended that the United States focus on its comparative advantages by: Strengthening military capabilities and maintaining a leading edge in technological innovation. Defensive measures to protect critical industries from Chinese espionage and strategic investment are necessary but not sufficient to stay ahead in the race for technological superiority. The United States must invest in education and research, and facilitate collaboration across industries and with allies to maintain its lead. Strengthening alliances and security partnerships. Alliances are an invaluable asset that enable the United States to lead collective challenges against Chinese aggression and to generally shape outcomes in the global arena. The United States should work with allies to strengthen individual and joint military capabilities, and endeavor to resolve disputes with allies discreetly and without undermining the credibility of its commitments. Presenting a proactive agenda in the East Asian region and beyond. The United States should think boldly about what proactive measures it can take, such as rejoining the Trans-Pacific Partnership, to signal its constructive presence in East Asia. The United States should also work with allies such as Japan and Australia to channel private investment in Asia and provide technical assistance to states considering Chinese investment. Championing liberal values of open society, rule of law, respect for individual and political freedoms and democratic governance. Liberal values underpin the soft power of the United States and still resonate around the world, even in China, where many elites and citizens alike are disturbed by the increasingly authoritarian turn of the Chinese government. The United States should continue to reaffirm the importance of liberal values among like-minded allies and friends, and confront challenges to its democracy at home, so that it can stand as a beacon that inspires people in China and elsewhere to push for greater openness in their own political systems. Leveraging China’s desire for stability and prosperity at home to discourage destabilizing behavior, and to encourage its active participation in tackling global challenges. President Xi has set out several ambitious targets for his country which cannot be achieved if China is beset with chaos and instability due to a war, for instance, in the South China Sea or on the Korean Peninsula. Rather than engaging in transactional bargains, U.S. leaders should continue to make the case to their Chinese counterparts that Beijing should refrain from provocative behavior and cooperate to solve global challenges because it is in China’s long-term strategic interests to do so. The full written testimony can be accessed here, and a video of the hearing can be accessed here.  

China is increasing its administrative control over the South China Sea. The U.S. government should initiate information operations that hinder China’s ability to expand and consolidate its control of the South China Sea and the airspace above it.