Indo-Pacific – USA Gov Policy

China is seeking to replace the American model of freedom with its own brand of authoritarian rule and the denial of individual liberty throughout the Indo-Pacific region.

Freedom House notes that The Beijing regime has established an authoritarian political system controlled by the Chinese Communist Party. Since 2007, Chinese authorities have tightened official controls over the media and civil society, and backtracked on legal reforms they enacted in the 1990s and early 2000s. The ruling Communist Party has chosen to prioritize party control at the expense of building autonomous legal and political institutions. Chinese authorities routinely suppress dissidents who attempt to peacefully exercise their constitutional rights.

The threat is that China seeks to export its dictatorial model. The Washington Post notes that China’s President Xi Jinping is eager to do so. In numerous speeches, beginning at least at the 19^th Party Congress in October 2017, Xi has reiterated his belief that “[China] offers a new option for other countries and nations…”

The Council of Foreign Relations concurs with that view, noting that In recent decades, China has captivated the world with its ambitious foreign policy. A major part of this story is China’s Belt and Road Initiative, a massive infrastructure and trade project that has poured billions of dollars into developing nations. But some scholars say that China is also seeking to export its authoritarian model of government and erode global democratic norms.

The Trump Administration has responded with its “Indo-Pacific Transparency Initiative.”

The effort includes more than 200 programs, costing $1 billion, that promote civil society, rule of law, and transparent and accountable governance across the region. They focus on anti-corruption and fiscal transparency, democracy assistance, youth and emerging leader development, media and internet freedom, and protecting fundamental freedoms and human rights.

The programs are broadly categorized as combatting corruption, promoting fiscal transparency, aiding democratic practices, assisting youth and emerging leaders in understanding free government practices, encouraging media and internet freedom, and advocating human rights and fundamental freedoms.

The anti-corruption efforts include the work of the Global Anti-Corruption Consortium, an effort that brings together investigative journalists and advocacy groups to expose corruption and drive reform.

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There are a number of examples of how the Initiative has operated.

Along with Australia, the U.S. is supporting democratic elections in Burma. The programs equip political parties, women, and youth candidates with an improved understanding of election procedures and regulations and enable Burma’s emerging leaders, including women, young adult candidates, and future political leaders, to attend Leadership Training Schools. Activities will also support international election observers and post-election dispute resolution.

In the Pacific Islands, USAID assisted the Autonomous Region of Bougainville in Papua New Guinea and Solomon Islands by providing technical assistance to the Electoral Commission during the August 2020 election period, promoting inclusivity and the safe conduct of elections during a pandemic

Another endeavor, the Young Southeast Asian Leaders Initiative promotes civic engagement and emerging leader development. Next year, this part of the Initiative will focus on human capital and healthcare, citizen journalism, good governance and civil society, and digital governance and digital economy.

No Initiative, no matter how generous or skillfully planned, will be effective if regional governments are forced to live in fear of Beijing’s military might and its willingness to use it. Over the next four years, the success of State Department efforts will require a creditable military deterrent from the U.S. and its allies.

Both in terms of trade and defense, the future of the 21^st Century depends on the political development of the Indo-Pacific region. Unfortunately, with the rise of China’s military strength and economic influence, that future has appeared somewhat bleak. The Trump Administration has sought to exercise both military funding increases and diplomatic initiatives to change that course.

Photo: Pixabay

Tensions between the United States and China had already been at a high pitch in the wake of Beijing’s increasing military power, and its aggressive moves towards its neighbors. Anger over the People’s Republic role in allowing the COVID-19 crisis to spread throughout the planet has escalated the strain to an unprecedented level.

Throughout the Cold War with the Soviet Union, a strong U.S. military presence and a solid collection of allies united through NATO helped Europe, and the world, avoid a third world war. Some in Washington are seeking to gradually develop that concept in the Indo-Pacific region to deter China.

The importance, and the danger, of the region is evident. Among the 10 largest standing armies in the world, 7 reside in the Indo-Pacific; and 6 countries in the region possess nuclear weapons. Nine of the world’s 10 busiest seaports are in the region, and 60 percent of global maritime trade transits through Asia, with roughly one-third of global shipping passing through the South China Sea alone. A quarter of U.S. exports go to the Indo-Pacific, and exports to China and India have more than doubled over the past decade.

Somewhat ironically, while China is the chief source of threat and uncertainty in the region, it is also the chief beneficiary of the Pax Americana that has characterized it since the end of the Second World War. A Department of Defense analysis released in 2019 notes that “Perhaps no country has benefited more from the free and open regional and international system than China, which has witnessed the rise of hundreds of millions from poverty to growing prosperity and security. Yet while the Chinese people aspire to free markets, justice, and the rule of law, the People’s Republic of China, under the leadership of the Chinese Communist Party, undermines the international system from within by exploiting its benefits while simultaneously eroding the values and principles of the rules-based order.”

Rep. Mac Thornberry, ranking member of the House Armed Services Committee, has released a discussion draft of the legislation

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largely aimed at China’s regional overreach. According to the Texas Republican, “Senior officials from both parties, military commanders, and international security experts have told us for years that the Indo-Pacific must be this country’s priority theater. They are absolutely correct, and it is time to put our money where our mouth is.” The legislation calls for $6.09 billion in FY21 to be spent in the Indo-Pacific region on enhancing missile defense, intelligence, surveillance and reconnaissance programs, infrastructure, prepositioned equipment and munitions, logistics, training and exercises, and programs to strengthen the capacity of allied and partner countries. It builds on the White House budget request for the region, as well as additional requirements identified by combatant commanders, service secretaries, and the Indo-Pacific Command’s investment plan, delivered to Congress last month.

The draft bill identifies the specific resources the Pentagon would need to deter China, similar to what the European Deterrence Initiative has done for Europe against Russia. The bill would strengthen America’s current military strength in the area, and its ability to respond to future threats.

There is no equivalent to NATO in the Pacific, so the measure also includes a commitment to work with and strengthen regional allies. More than just a single year spending commitment, it seeks to establish on ongoing basis support for confronting the People’s Republic.

The soon-to-be proposed measures includes a number of specific proposals. It would improve air and missile defense systems on the key base in Guam, as well as providing Homeland Defense radars for Hawaii. Bombers would be provided, as well as submarine warfare equipment.

Photo: The aircraft carrier USS Theodore Roosevelt and the guided missile cruiser USS Bunker Hill travel in the Philippine Sea, March 18, 2020. (U.S. Navy)

Quick Analysis

Federal Reserve Report on the Economy

The Beige Book is a Federal Reserve System publication about current economic conditions across the 12 Federal Reserve Districts. It characterizes regional economic conditions and prospects based on a variety of mostly qualitative information, gathered directly from each District’s sources. The latest edition has just been released. We present key portions of the summary here. Overall Economic Activity Overall economic activity expanded slightly, on balance, since late February. Ten out of twelve Districts experienced either slight or modest economic growth—up from eight in the previous report, while the other two reported no changes in activity. Consumer spending barely increased overall, but reports were quite mixed across Districts and spending categories. Several reports mentioned weakness in discretionary spending, as consumers’ price sensitivity remained elevated. Auto spending was buoyed notably in some Districts by improved inventories and dealer incentives, but sales remained sluggish in other Districts. Tourism activity increased modestly, on average, but reports varied widely. Manufacturing activity declined slightly, as only three Districts reported growth in that sector. Contacts reported slight increases in nonfinancial services activity, on average, and bank lending was roughly flat overall. Residential construction increased a little, on average, and home sales strengthened in most Districts. In contrast, nonresidential construction was flat, and commercial real estate leasing fell slightly. The economic outlook among contacts was cautiously optimistic, on balance. Labor Markets Employment rose at a slight pace overall, with nine Districts reporting very slow to modest increases, and the remaining three Districts reporting no changes in employment. Most Districts noted increases in labor supply and in the quality of job applicants. Several Districts reported improved retention of employees, and others pointed to staff reductions at some firms. Despite the improvements in labor supply, many Districts described persistent shortages of qualified applicants for certain positions, including machinists, trades workers, and hospitality workers. Wages grew at a moderate pace in eight Districts, with the remaining four noting only slight to modest wage increases. Multiple Districts said that annual wage growth rates had recently returned to their historical averages. On balance, contacts expected that labor demand and supply would remain relatively stable, with modest further job gains and continued moderation of wage growth back to pre-pandemic levels. Prices Price increases were modest, on average, running at about the same pace as in the last report. Disruptions in the Red Sea and the collapse of Baltimore’s Key Bridge caused some shipping delays but so far did not lead to widespread price increases. Movements in raw materials prices were mixed, but six Districts noted moderate increases in energy prices. Contacts in several Districts reported sharp increases in insurance rates, for both businesses and homeowners. Another frequent comment was that firms’ ability to pass cost increases on to consumers had weakened considerably in recent months, resulting in smaller profit margins. Inflation also caused strain at nonprofit entities, resulting in service reductions in some cases. On balance, contacts expected that inflation would hold steady at a slow pace moving forward. At the same time, contacts in a few Districts—mostly manufacturers—perceived upside risks to near-term inflation in both input prices and output prices. Highlights by Federal Reserve District Boston Business activity expanded at a modest pace in recent weeks, and prices rose slightly. Employment was flat overall, but one retailer reported significant layoffs. Convention and tourism activity grew at a robust pace. Home sales increased on a year-over-year basis, marking a turnaround. The outlook ranged from cautiously optimistic to bullish. New York On balance, regional economic activity remained flat. Labor market conditions were solid and continued to normalize as labor supply and labor demand came into better balance. Consumer spending was unchanged after a weak first quarter. Housing markets strengthened, with the spring selling season picking up beyond the seasonal norm. The pace of selling price increases remained modest. Philadelphia On balance, business activity was flat in the current Beige Book period—after declining slightly last period. Employment edged up, despite staffing and recruitment efforts slowing to a crawl. Wage and price inflation continue to moderate; however, housing affordability continues to be a concern. Overall, the outlook is positive, as firms remained optimistic about expectations for future growth. Cleveland District business activity increased modestly, as did employment. Firms anticipated greater ease filling open positions, including those that have been particularly challenging, because of increased labor availability. Wage pressures continued to normalize, and some contacts reduced starting wages for new roles. Cost and price pressures changed little. Richmond The regional economy grew at slight pace since our previous report. Consumer spending on retail goods was mixed but spending on travel and tourism was up slightly. Fifth District port activity slowed and was impacted by the collapse of the Francis Scott Key Bridge. Employment growth slowed from a moderate to a modest rate in recent weeks, but wages continued to grow moderately. Price growth also remained moderate. Atlanta The Sixth District economy grew modestly. Labor markets continued to stabilize; wage pressures eased. Many nonlabor costs moderated. Retail sales were steady, but consumers remained price conscious. Tourism remained robust. Commercial real estate conditions slowed. Transportation activity was mixed. Manufacturing grew slightly. Loan demand was flat. Energy activity improved. Chicago Economic activity increased slightly. Employment increased modestly; business and consumer spending rose slightly; nonbusiness contacts saw no change in activity; and manufacturing and construction and real estate activity were flat. Prices and wages rose moderately, while financial conditions were stable. Prospects for 2024 farm income were unchanged. St. Louis Economic activity has continued to increase slightly since our previous report. Prices have increased modestly, as contacts are broadly feeling the pressures of increases in both labor and non-labor costs. The outlook was neutral to slightly optimistic, which is generally unchanged from our previous report, but better than one year ago. Minneapolis District economic activity grew slightly. Employment grew some, but labor demand was softer. Wage pressures were present but continued to ease, while price pressures ticked up. Consumer spending was mostly flat, and manufacturing slowed modestly. Commercial and residential construction improved […]