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Why is Asia important to the United States?

By Paul Sullivan,
Georgetown University

Asia has 60 percent of the world’s population. The most populous nations on earth can be found there. China has about 1.3 billion people. India is not far behind with 1.25 billion, and will catch up to it by about 2030. The U.S. population of about 314 million is not far from that of Indonesia with 240 million. Pakistan has 182 million, Bangladesh about 153 million, Japan about 128 million, and the Philippines has about 94 million. Vietnam, Thailand and Burma put together have about 225 million people.
About 65 percent of all Muslims live in Asia. Muslims are about 25 percent of the world’s population. The countries with the most Muslims include Indonesia, Pakistan, India, and Bangladesh. Malaysia and even China have large Muslim population. This is not to point to threats or potential enemies, but to show how important it is for the United States to reach out to Asian Muslims to understand them and to work, trade and develop with them in the future. Contrary to popular mythology most Muslims are non-Arab.
There are unfortunately a significant amount of violent extremist Muslim groups in Asia, most particularly found in Pakistan, India, Afghanistan, Indonesia, and the Philippines. Others are scattered in other Asian countries. These have to be considered seriously even if they represent only a miniscule part of their given populations. There are also a significant amount of extremist Hindu, Buddhist and other groups scattered in Asia. They may not be considered a direct threat to the United States, but could be seen as sources of potential instability in the region in the future.
There is a significant growth in science, technology, engineering and mathematical (STEM) education in many Asia states, especially in China and India in recent years. Japan, South Korea, Taiwan and others have had significant STEM education for many years. Such a growth and strengthening of STEM education in the region could be seen as economic, military and relative power threats to the U.S. However, this growth could also be allowing increased opportunities in the future. Patenting and trademark developments have been very fast in China, for example, even if the laws protecting intellectual property have not been developing as quickly. Threats to U.S. intellectual property are significant in many Asian countries.
Some of the largest economies in the world are found in Asia. The U.S. economy is the largest with about $16 trillion in GDP. China is number two with about $11.4 trillion in purchasing power parity (PPP—sort of equating U.S. prices with prices of the country) terms. India may be number three with about $4.5 trillion GDP in PPP terms. Japan is number four with about $4.46 trillion in GDP in PPP terms. South Korea, Indonesia, and Taiwan come in with about $1.5 trillion, $1.2 trillion and $900 billion in PPP terms. Asia is about 30 percent of the world GDP. It is expected to grow to 40 percent in the coming few decades.
Some of the fastest growing economies in the world can be found in Asia. Cambodia, China, Laos, Papua New Guinea, China, and Timor-Leste are growing at between 7 and 8 percent per year. Mongolia is growing at over 13 percent per year. Bhutan is growing at around 10 percent per year. There are some countries that are not far behind these growth numbers who could be some of the most important emerging countries in the future, such as Vietnam. Thailand and Burma also have great potential, if they get their political acts together. There are numerous countries in Asia that could be engines of growth and development in the future, if certain things work out for them, especially political and social stability, and an opening up of their economies and societies.
Some of the countries that are the largest total international traders with the U.S. are in Asia, such as China, Japan, South Korea and Taiwan. India is a huge economy with a huge population that may be in line to develop more trade with the U.S. The top countries for U.S. trade surpluses are Hong Kong, Australia and Singapore. The top trade deficit countries for the U.S. include China, Taiwan, and Japan. U.S companies invest heavily in Asia, and especially in ASEAN countries. More and more U.S. companies and investors are looking to Asia given their growth and development potential; however there are some difficulties with rules of law, regulations, trade barriers and more that have tempered these investment moves to Asia.
The largest purchasers of U.S. treasury securities are China and Japan. Together they hold about $2.3 trillion in our debt. Each has about the same amount, $1.1 plus trillion. Taiwan, Singapore, and Thailand hold together about $364 billion of our debt. Hong Kong has about $165 billion of it. Asian are big players in our debt markets. Borrowing on the Asian markets has helped the U.S. economy grow. It has also allowed the U.S. federal government to build up a massive debt with fairly low interest rates in the last decade or so. Asia has been a big part of the “credit card of the world” that the U.S. used to build up its financial crises in the late 2000s. It has also been a big part in the paying of many federal government bills essentially on credit. There are some significant global imbalances that exist with many Asian countries having large financial surpluses and western countries having large debts. Certain instabilities have been built up with these instabilities. There have also been some bizarre results in overall global investments. About 75 percent of all financial instruments in the world are based on some form of debt, rather than investments directly in jobs producing industries. Derivatives associated with these debts are even more gigantic and may be in the hundreds of trillions of dollars. Government debt instruments dwarf corporate bonds. Financial corporation bonds dwarf non-financial corporation bonds.
So why is this important for future relations with Asia? One of the most important things to look at on this is how important China has been in financing U.S. debts. When China’s population ages further and the financial stresses from the one-child policy begin to kick in there will likely be less money in China to enter into the world financial markets. India will likely not be able to enter the world financial markets as China has. As China and some other Asian states head into their demographic shifts in the future, as they inevitably mature as economies with wage rates heading closer toward parity with competitors, and as they reach their resource limits in many ways (and resource prices will also increase), then the excess cash and the global imbalances may also change. It is hard to see now where exactly this may all be going, but clearly it is of interest to many.
Energy is also important. The U.S. is the largest oil importer in the world. However, China is not far behind and is growing very quickly. Japan, India, South Korea, Taiwan, Singapore and Thailand are also some of the largest oil importers in the world. Most of these countries get about 75 percent of their oil from the Arabian Gulf. Some, and significantly so China and India, continue to get considerable amounts of oil from Iran, a country that the U.S. is sanctioning.
The quickly growing economies of Asia will need more and more energy in the future. China surpassed the U.S. as the largest energy consumer in 2010. The greatest source of energy for the giants China and India have been by far coal. China relies on coal for 70 percent of all of its energy. 65 percent of its electricity production is from coal. India relies on coal for 42 percent of its energy production, but 75 percent of its electricity production. 25percent of India’s energy production is biomass in the villages. Once these villagers, about 25 percent of the population of India, get access to electricity there will be a huge increase in the demand for electricity generation. India will need to work out how much of that will be from coal.
Wind, solar, geothermal, and hydropower have a big future in Asia. China is leading the way in many alternative energy sources not just in Asia, but globally. China is also one of the largest manufacturers of wind, solar and other alternative energy devices. The Fukushima incident may spur Japan to invest far more heavily in alternative energy sources.
Nuclear power also has a considerable potential future in Asia even after the Fukushima incident. China has 52 reactors planned with 29 under construction. India has 18 planned with 7 under construction. South Korea has 5 planned and 4 under construction. Asia could be one of the fastest growing markets in nuclear power despite the incident in Japan. Japan may restart many of its nuclear plants, but will have political difficulty trying to increase its nuclear generation capacity in the future.
It is likely that multiple trillions of dollars will be needed to be invested in Asia over the coming decade to keep up with the electricity and other energy needs of these growing economies. There will be a need for some technical and other cooperation on alternative energy and other energy projects throughout the region. The U.S. government is heavily involved in some joint energy-environment working groups. Many U.S. companies are looking to Asia as a place where there energy projects and other energy-related projects could find fruition. Energy technology trade with Asia could be quite significant for the U.S. in the medium to long terms.
The shale gas and shale oil booms in the U.S. could also spur significant exports of LNG (liquefied natural gas) to Asia. If the politics and other concerns work out the U.S. could be the largest producer of oil in the world in the coming years. It could also be a major oil and gas exporter. Asia, given its much faster growth than many other parts of the world is clearly an area of interest for those exports.
The U.S. could also see Asia as a possible partner in its future efforts at combating various environmental issues, including, but not limited to, climate change, carbon sequestration, and other energy-related environmental issues, but also pollution of the seas and other water sources.
The seas of Asia are vital for trade and commerce globally. Given our globalized world it is important for all to keep the sea lanes of communications (SLOCs) open and safe for traffic. Some of the most important of these are the Malacca Straits, which has 36 percent of world trade going through them, the Sunda Straits, which has 7 percent of world trade going through, and the Lombok Straits, which has about 15 percent of world trade going through. Then, of course, there is the importance of the Pacific in world trade, which is gigantic. Of the top 20 containerized cargo exporters in the world 10 or them are Asian countries. They account for over 50 percent of all containerized cargo trade, with China dominating the list. Asian countries also dominate the imports of containerized cargos. 10 of the top 20 importers of containerized cargo are Asian states. China dominates Asian containerized cargo imports. The U.S. dominates the world on this. The largest trade routes in volumes and value are between the U.S. and China, China and the EU, and within Asia.
Food security could become a growing issue in Asia. The U.S. is a major agricultural exporter. Some of its fastest growing exports are in foods to Asia, especially to China. The U.S. could also work with many Asian states to help develop new ways of dealing with food security problems. Each could learn from each other. There is a lot of potential there.
Connected with food security is water security. Some of the potentially most contentious and explosive water conflict areas may be in Asia, such as the shared waters and rivers from the Tibetan Plateau that go to India, China, Pakistan, Bangladesh, Burma and more. There are also contentious areas along the Mekong. There are potential water conflict issues, both local and small and national and large, amongst many Asian states. These water stresses could lead to not only internal conflict, but also regional conflicts sometime in the future. Internal water stressed in India, Pakistan, and China could also put the break on some of the economic and other developments. Water issues and desertification in north and northwest China could be just the beginnings of water problems for the country. Internal and region conflicts in the region could quite easily spread in some circumstances.
The growth of the military might of China is a concern of the United States. The modernization of its Navy is of particular concern. India is also concerned about the military developments of China. India is having its own development of its military power at the same time, albeit more slowly than what is happening in China. It is, of course, important, that as these giant Asian states and others further development their militaries and military reach that diplomacy and other efforts be pursued to help temper some of the tensions that may result.
There are tensions building in the South China Sea, the East China Sea, across the Koreas, between China and Japan, between countries in Southeast Asia, and more. There are always the tensions between Pakistan and India. Then there are the constant chronic issues related to Afghanistan. Pakistan-US tensions are also not insignificant at times. There are many potential sources of conflict in Asia that could directly and indirectly affect the interests of the United States in many ways. Asia is a very big place. It is globally important on huge scales in economics, politics, military affairs, diplomacy, inter-cultural issues, and so much more.
This is just a much shorter discussion of the many issues that are importance to the U.S. in Asia. A full set of analyses would take many books. However, with this small article at least I may get some people thinking of the complex future ahead.

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Posted by on Dec 20 2012. Filed under Opinion. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

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