US lines up against China

Asian nations - and Australia - are in the middle as these two economic giants battle for dominance.

The United States has set out more clearly how it plans to shape Asia-Pacific security and prosperity in the 21st century. The key question countries in the region must now decide is the extent to which US terms for long-term engagement with the world's fastest-growing economic zone fit with their own interests.

Before flying to Indonesia for talks in Bali with Asian leaders, US President Barack Obama summarised his approach in an address to Parliament in Canberra.

The US has two broad aims. The first is to seek sustainable security by drawing the US, its allies and friends more closely together. The unstated goal is to counterbalance China's rise and provide a deterrent to its expansive policies should they involve the use or threat of force, or challenge freedom of navigation and overflight in international waters. Meanwhile, Obama says the US will continue its effort to build a cooperative relationship with China.

The second objective of America's new and more active Asia-Pacific policy is to advance what Obama called ''our shared prosperity'', primarily through an enlarged trans-Pacific trade and economic liberalisation deal: the Trans-Pacific Partnership.

The main problem is that neither approach being taken by the US, with Australia's support, is acceptable to China, a rapidly modernising military power with the second biggest economy after the US. To maximise its own influence, Beijing wants to promote East Asian economic integration by expanding its free trade agreement with ASEAN, the Association of South East Asian Nations, to include South Korea, Japan and possibly other economies in the region. Ernest Bower, director of the Southeast Asia Program at the Centre for Strategic and International Studies in Washington, argues that recent progress on the US-led Trans-Pacific Partnership makes a China-led East Asia economic bloc look less compelling. ''The rest of Asia wants to trade with China and to receive its investment and low-cost loans for infrastructure development, but ... does not want to be dominated by China,'' he wrote. ''Much of Asia also rejects the idea of Chinese governance even in the commercial and economic space - a phenomenon that has been strengthened during the last year-and-a-half as China tested whether it could turn the screws on its Asian neighbours over questions of sovereignty in the South China Sea by leveraging its new economic dominance,'' Mr Bower added. The US is now offering an alternative to a China-centric security and economic future for Asia. However, it is far from certain that enough countries in the region will embrace either the US security plan or the economic engagement plan to make them viable for the long term. Obama promised that looming cuts in US defence spending would not ''come at the expense of the Asia Pacific.'' But doubts remain in the region that the US has the economic strength and political cohesion to follow through on his pledge. The failure of Congress in Washington to agree on how to cut America's huge over-spending underlines this. Meanwhile, China is exploiting the uncertainty. After Obama announced last week that up to 2500 US Marines would be deployed at an Australian base in Darwin on Indonesia's southern doorstep, China accused him of escalating military tensions in the region. Several South-East Asian countries, including Indonesia and Malaysia, expressed concern that the presence of the marines could fuel mistrust and undermine regional security. Singapore's Foreign Minister K.Shanmugam explained that ASEAN nations did not want to get ''caught between the competing interests'' of major powers.

Despite this, US officials said after the East Asia Summit had ended in Bali last week that nearly all 18 leaders present raised concerns about maritime security in the disputed South China Sea, even though China objected.

On the economic front, the Trans-Pacific Partnership is being negotiated between the US and eight other Pacific rim countries: Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam. An outline agreement was unveiled earlier this month and the partners said they would try to finalise complex negotiations in 2012. At around the same time, the proposal received a boost when Japan announced it would start consultations with countries in the group about joining the negotiations. Two other substantial economies, Canada and Mexico, will do the same.

With the addition of these three, the Trans-Pacific Partnership's share of global goods exports would grow to 24 per cent, from 15 per cent, giving the group real weight to attract more Asia-Pacific economies to join. However, involvement of just the three new interested parties is likely to complicate and delay the conclusion of negotiations.

The Trans-Pacific Partnership's coverage of economic, commercial and regulatory activity is far more comprehensive than the regional integration plan promoted by China, and its entry terms are far more stringent. So it may actually have less appeal to many countries with vested interests to protect in agriculture and other sensitive sectors of their economies.

The People's Daily, mouthpiece of the ruling Chinese Communist Party, warned on November 17 that ''using a new mechanism of cooperation to replace an existing one will seriously harm the East Asian and the global economy.''

Suggesting that the partnership was designed to exclude and contain China, the Global Times, also published by The People's Daily, said that if the US wanted a larger membership for the partnership it would need to ease the joining rules. Otherwise, the paper added, ''any Asian cooperation with the absence of Beijing will not have much heft.'' The US will have to work hard to persuade its Asian trading partners that their economic interests are best served by a US-led deal rather than a China-led East Asian one. If America is to remain embedded in Asia, this is a must-win battle.