Asia’s response to Obama’s “Asian Pivot” was an invitation to pivot 360 degrees and go home. In today’s Asia Times Online, I report on what all of us really should worry about. Some excerpts:
It is symptomatic of America’s national condition that the worst humiliation ever suffered by America as a nation, and by an American president personally, passed almost uncommented last week. I refer to the Nov. 20 announcement at the Asian summit meeting in Phnom Penh that fifteen Asian nations comprising half the world’s population would form a Regional Comprehensive Economic Partnership excluding the United States. President Barack Obama attended the summit to sell an American-based Trans-Pacific Partnership excluding China. He didn’t. The American led-partnership became a party to which no-one came.
Instead, the Association of Southeast Asian Nations, plus China, India, Japan, South Korea, Australia and New Zealand, will form a club and leave out the United States. As 3 billion Asians become prosperous, interest fades in the prospective contribution of 300 million Americans—especially when those Americans decline to take risks on new technologies. America’s great economic strength, namely its capacity to innovate, exists mainly in memory four years after the 2008 economic crisis.
A minor issue in the election campaign, the Trans-Pacific Partnership initiative was the object of enormous hype on the policy circuit. Salon.com enthused Oct. 23, “This agreement is a core part of the “Asia pivot” that has occupied the activities of think tanks and policymakers in Washington but remained hidden by the tinsel and confetti of the election. But more than any other policy, the trends the TPP represents could restructure American foreign relations, and potentially the economy itself.”
As it happened, this grand, game-changing vision mattered only to the sad, strange people who concoct policy in the bowels of the Obama administration. America’s relative importance is fading.
To put these matters in context: the exports of Asian countries have risen more than 20% from their peak before the 2008 economic crisis, while Europe’s exports have fallen by more than 20%. American exports have risen marginally (by about 4%) from their pre-2008 peak.
China’s exports to Asia, meanwhile, jumped 50% since their pre-crisis peak, while exports to the United States have risen by about 15%. At $90 billion, Chinese exports to Asia are three times the country’s exports to the United States.
After months and dire (and entirely wrong) predictions that China’s economy faced a hard landing, it is evident that China will have no hard landing, nor indeed any landing at all. Domestic consumption as well as exports to Asia both are running nearly 20 percent ahead of last year’s levels, compensating for weakness in certain export markets and the construction sector. Exports to the moribund American economy are stagnant.
Where does America have a competitive advantage? Apart from commercial aircraft, power generating equipment, and agriculture, America has few areas of real industrial pre-eminence. Cheap natural gas helps low-value-added industries like fertilizer, but America is lagging in the industrial space. Four years ago, when Francesco Sisci and I proposed a Sino-American monetary agreement as an anchor for trade integration, the US still dominated the nuclear power plant industry. With the sale of the Westinghouse nuclear power business to Toshiba, and Toshiba’s joint ventures with China to build power plants locally, that advantage has evaporated.
The problem is that Americans have stopped investing in the sort of high-tech, high-value-added industries that produce the manufactures that Asia requires. Manufacturers’ capital goods orders are 38% below the 1999 peak after taking inflation into account. And venture capital allocations for high-tech manufacturing have dried up.