Obama Heads To Asia Amidst Problems Without Easy Solutions

Obama Heads To Asia Amidst Problems Without Easy Solutions
White House (Pete Souza) [Public domain]

As US President Barack Obama heads to Asia for a seven-day, four-country tour, he isn’t likely to receive the rock star treatment he garnered during his first term.  In Asia, Obama is focusing on serious problems without easy solutions as he stops in Japan, South Korea, Malaysia and the Philippines.

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The China issue

While Obama won’t visit China, the expanding power of the economic and military force is difficult to ignore as longtime US allies are unsettled.  Observers are speculating that China might follow the Russian example and annex the disputed Senkaku Islands.  “I don’t think [China] would be bold enough to go after the Russian example,” a Japanese official told ABC News. “But, “we haven’t come to a definitive conclusion. We have to be careful to judge the impact on China of what Russia is doing in Ukraine.”

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The goal with China is to keep a lid on its aggressions, but this sentiment appears to be at loggerheads with an increasingly aggressive nation with an eye on a larger role in world leadership.  For its part, a senior Chinese military official was quoted as saying the Chinese military “can never be contained.”

Observers are looking for Obama to carefully reaffirm mutual defense agreements but do so in a way as not to threaten China, subtly calling on China to follow international economic and military norms.

Obama to shore up support for the controversial trade pact

Obama is expected to shore up support for the “Trans-Pacific Partnership,” a “free trade” agreement between 11 Pacific region countries and the US that notably excludes China, a “shot across China’s bow.”  While optimistic administration estimates say the so-called “TPP” agreement could lift US exports by more than $120 billion per year, previous trade agreements have failed to live up to the hype.

As previously reported in ValueWalk, after 20 years of NAFTA, the free trade agreement that dramatically lowered trade barriers between Canada, Mexico, and the United States, the economic impact on the middle class is uncertain. The track record of NAFTA has remained highly controversial, with supporters and detractors able to cite numerous pieces of data, many of them conflicting.

Detractors note that in 1993 the United States had a $2.5 billion dollar trade surplus with Mexico and a $29 billion dollar deficit with Canada. Since then, the combined deficit to Canada and Mexico has ballooned to an astounding $181 billion dollars. Even more damming, the annual growth of the trade deficit is actually 45% higher than the growth of deficits with countries that are not part of any free trade deal with the U.S.  The result has been a flood of middle class jobs leaving the country. The actual number of jobs lost is hard to calculate, but a special program ran by the Labor Department to assist displaced workers who lost their jobs to offshoring has a total of 845,000 participants.

Biggest problem with TPP may be at home

Obama’s biggest problem with the Trans Pacific Partnership may not be in Asia, but in the US.  As a recent ValueWalk article observed, the bill is secret to all but the powerful business interests who are loading it with highly unpopular measures.  Such measures include provisions that enabled the large banks to escape US SWAPs regulatory rules, weaken food labeling laws and inhibit internet freedoms.  A recent New York Times editorial even wondered aloud why the bill was so secret when the business lobby was more familiar with details of the secret agreement than those in Congress who are expected to vote on the issue.

In addition to shoring up the TPP collation of the willing, Obama will also make a historic visit to Malaysia in the wake of the loss of a passenger jet under suspicious circumstance.  The last to visit Malaysia was US President Johnson in 1966 during the heat of the Vietnam War.

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Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)www.valuewalk.com
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