‘Economy is security’: Biden’s Quad trip shows that in Asia, trade and security are one thing

TOKYO — Security deals are important, but in Asia, money talks.

Australia, India, Japan and the United States wrapped their second Quad Leaders’ Summit on Tuesday in Tokyo, following a weekend visit by U.S. President Joe Biden to South Korea.

The Quad countries and others in Asia made clear over the last five days that while things like maritime defense are important, real security has to heed Asian countries’ economic wants and needs.

The Quad is an informal security alignment of four major democracies that came about in response to China’s rising strength in the Indo-Pacific region. As CNBC reported before the group’s first Leaders’ Summit last September, the Quad wants to branch into areas including tech, trade, the environment and pandemic response.

The Biden administration has tried to demonstrate that economic priorities can be addressed within the Quad, between countries one-on-one, or as part of new, multilateral arrangements — though the United States hasn’t gone as far as all of its Asian partners would like.

“The focus is now on establishing overlapping multilateral relationships that operate in meshwork,” said Jonathan Grady, founding principal of forecasting firm The Canary Group. “The players involved are often the same, however we see them participating in many different groupings from security to economic issues. There is strength in numbers.”

New South Korean President Yoon Seok-youl showed Biden around a Samsung semiconductor facility, and immediately afterward explained that in the eyes of South Korea, the concept of security is a broader topic than just the military.

“Mr. President, today we’re living in the era of economic security, where economy is security and vice versa,” Yoon said, according to a translation of his remarks.

From South Korea’s perspective — and from the perspective of much of Asia — the concept of defense and economic stability are intertwined, said Ali Wyne, a senior analyst with Eurasia Group’s Global Macro practice.

“President Yoon’s statement distills the painful experiences of the past two and a half years: the coronavirus pandemic and Russia’s invasion of Ukraine demonstrate how severely disruptions to the production and distribution of essential medicines, crude oil, and agricultural staples, among other goods, can undermine the global economy,” Wyne said. “It also affirms the need for the United States to enhance its economic competitiveness in the region.”

Indeed, economic competitiveness is where the United States faces a potent challenge from China, which has bigger trade relationships with most Asian countries — including members of the Quad — than the United States does.

In part to try to address that shortfall, the United States and 12 Asian countries on Monday announced the Indo-Pacific Economic Framework, or IPEF, an agreement designed to lay the groundwork for rules around the digital economy and supply chains in the region.

The IPEF is not a trade deal, and it doesn’t include a security component. Significantly, it also doesn’t give any new level of access to U.S. markets for developing countries in the group, including Indonesia, Philippines and Vietnam.

In the longer term, that could be a problem. Asked by CNBC earlier this month what he most wanted from the IPEF, Arsjad Rasjid, chairman of the Indonesian Chamber of Commerce and Industry, did not mince words: “Number one is access to the U.S market.”

“What we want end of the day is … to collaborate to develop economic growth, improve trade,” Rasjid said. “What we see is that there is more we can do together. This is a positive sign. But I hope this is not just politics per se, but what is the action? That’s more important.”

Biden is threading a needle between trying to raise America’s relevance in Asia on the one hand, and trying to avoid upsetting U.S. voters who — both left and right — are averse to trade deals.

Official statements out of Washington indicate as much. National Security Advisor Jake Sullivan on Monday said the IPEF is “part of President Biden’s commitment to putting American families and workers at the center of our economic and foreign policy, while strengthening our ties with allies and partners for the purpose of increasing shared prosperity.”

Other countries that are in the IPEF include Quad members Australia, India and Japan, as well as Brunei, Indonesia, Malaysia, New Zealand, the Philippines, Singapore, South Korea, Thailand, and Vietnam.

Pure security issues still matter in Asia.

Biden generated the biggest headlines of the summit — perhaps inadvertently — when he said that the United States would be willing to defend Taiwan militarily should China attack it.

Asked by a reporter if the United States would, in contrast to its approach to Ukraine, be willing use its military to help Taiwan, Biden said, “Yes.”

“That’s the commitment we made. We are not — look, here’s the situation. We agree with the One China policy. We signed on to it and all the attendant agreements made from there,” the president said. “But the idea that it can be taken by force, just taken by force, is just not appropriate. It will dislocate the entire region and be another action similar to what happened in Ukraine.”

Taiwan is a self-governing democracy, but Beijing regards the island as part of China. The official American position is that there is “one China.” The unofficial American policy is known as “strategic ambiguity,” where the U.S. avoids saying one way or another how far it would go to protect Taiwan.

Biden’s statement appeared to bring an end to a lot of the ambiguity, but U.S. officials said behind Biden that official policy hasn’t changed. U.S. Defense Secretary Lloyd Austin tried to clarify that Biden “reiterated that policy and our commitment to peace and stability across across the Taiwan Strait. He also highlighted our commitment under the Taiwan Relations Act to help provide Taiwan the means to defend itself.”

Beijing wasn’t having it.

“No one should underestimate the strong determination, firm will, and strong ability of the Chinese people to defend national sovereignty and territorial integrity, and do not stand against the 1.4 billion Chinese people,” China’s Foreign Ministry said.