Guest Column

Budget Woes Could Hurt Outreach to Asia

By Matthew Pennington 20 January 2013

WASHINGTON—President Barack Obama wants Asia to be a growing focus of his foreign policy, but as his second terms starts, success could hinge on his ability to manage hot spots elsewhere in the world and avert a fiscal crisis at home.

Within two weeks of winning re-election, Obama became the first U.S. president to visit Burma, signaling his intent to sustain his administration’s “pivot” to the region following the decadelong entanglement in Iraq and Afghanistan.

That’s a reflection of Asia’s growing economic and strategic importance. In the past three years, Washington has embroiled itself in diplomacy over the disputed South China Sea, deployed more military assets to the Asia-Pacific and pushed forward a regional trade pact. It has also put a lot of effort into managing ties with emerging rival China.

Those moves have been broadly welcomed in Asia, but governments question the U.S. ability to sustain its policy.

While Sen. John Kerry, the nominee to replace Hillary Rodham Clinton as secretary of state, is expected to continue the policy, the Middle East looks destined to demand the lion’s share of his attention. There’s no end in sight to the civil war in Syria and pressure could mount to take military action over Iran’s nuclear program.

And it will be tough to enhance the U.S. profile in Asia in an age of austerity. In contrast to China, the U.S. can little afford more aid for its allies and to expand its military presence.

But perhaps most critical to U.S. stature in the region will be how it manages its deep political divisions at home. Failure to resolve the long-running standoff between Obama and Republicans over how to manage America’s $16.4 trillion national debt weighs on global financial markets. The Republican-controlled House is set to vote on a temporary measure next week that would permit the government to borrow more money to meet its debt obligations for about three months, although it wouldn’t tackle how to reduce the debt.

Without an extension in the debt ceiling, the world’s largest economy could default as soon as mid-February. That would likely prompt a downgrade in the U.S. credit rating, leading to higher borrowing costs in the U.S. and elsewhere. It would alarm creditor governments, such as China and Japan, which both hold more than $1 trillion in U.S. Treasury securities. It could undermine America’s position as a safe haven for investors and trigger economic turmoil.

Australia’s foreign minister, Bob Carr, warned after a last-gasp deal at the new year — staving off an immediate tax hike and budget cuts — that the massive U.S. debt has raised questions about the United States’ ability to provide world leadership. But the trusted ally put a positive spin on things: “America is one budget deal away from resolving the issue of American decline,” he said.

The top U.S. diplomat for East Asia agrees. Kurt Campbell, who is expected to stand down soon, said last week how the U.S. conducts itself domestically and handles its budget problems “will be at the heart of how Asia views our enduring role in the Asia-Pacific region.”

That standoff looms large as Obama takes the oath of office in the White House for his second term Sunday, ahead of a grand swearing-in ceremony at the Capitol on Monday.

Yet for all the divisiveness in Washington, Asia policy remains an area of broad agreement.

Both parties have supported efforts to build stronger ties with Asia to position the U.S. to benefit from the region’s rapid economic growth: cementing alliances in South Korea and Japan, building a strategic partnership with India and expanding ties in Southeast Asia. Most notably, Republicans and Democrats have shown rare unity in backing the administration’s ambitious outreach to former pariah state Burma.

But the Asia policy initiatives of Obama’s first term could bring with them messy responsibilities in the second term.

The U.S. declaration in 2010 of its national interest in the peaceful resolution of maritime territorial disputes in the South China Sea has boosted Washington’s standing among nations intimidated by China’s assertive behavior in the resource-rich region. But the Southeast Asian bloc that the U.S. wants to tackle the disputes appears ill-suited to cope. It is at risk of fracturing between those nations that want collective negotiations advocated by the U.S. and those opposing such diplomacy in deference to China.

Doubts remain over the commitment of Burma’s military to democratic reform. Despite a shift away from authoritarian rule that has been rewarded by the relaxation of U.S. sanctions, the military has waged an offensive against ethnic rebels in the country’s north.

If confirmed as secretary of state, an immediate concern for Kerry will be the rising tension in Northeast Asia, where China, Japan and South Korea all are ushering in new leaders.

China’s spat with Japan over contested islands threatens to embroil the U.S. if it escalates. While Washington will reaffirm its alliance with Japan, it also wants deeper ties with Beijing to dilute the risk of conflict breaking out. The U.S. will encourage Japan and South Korea—which both host American forces—to patch up relations strained over Tokyo’s attitude toward its colonial past.

On North Korea, Kerry’s arrival could herald a new approach.

As chairman of the Senate Foreign Relations Committee, he was critical of the Obama administration’s reluctance to negotiate with Pyongyang on its nuclear program, and held informal talks last year with visiting North Korean officials in New York. But he’ll also be aware of the pitfalls of such engagement. Within a week of the meeting in New York, the North dashed hopes of rapprochement by announcing a long-range rocket launch.