A Southeast Asian Homecoming

Cole Altom: Hello everyone, thank you for joining us for another Geopolitical Futures podcast. I am Cole Alto, with me is Jacob Shapiro. Jacob, another week, another podcast. How ya doing man?

Jacob Shapiro: I’m doing ok. How are you doing Cole?

Cole Altom: I’m doing fine. You’ve been travelling a little bit, yeah?

Jacob Shapiro: I’ve been on the road. I haven’t been back in front of my fish tank for awhile to look at geopolitics but I’m back.

Cole Altom: Well, OK yeah, I’m sure the fish are happy to have you back.

Jacob Shapiro: I’m glad the readers also now know that I have a fish tank. I think it’s important to know things about where you get your information from.

Cole Altom: Well that’s between you and your fish. I’m fine with that. Fish aside, this isn’t a Geopolitical Futures fish podcast, it’s just our regular Geopolitical Futures podcast, yeah?

Jacob Shapiro: Is that the cue for week ahead?

Cole Altom: This is the cue for the week ahead and you to stop talking about fish.

Jacob Shapiro: Great, week ahead. Number one item on the agenda we just discovered while we were prepping for this podcast, which was there was a lot of stuff indicating that things maybe aren’t so rosy between Turkey and the U.S. We’ve been talking about this for a long time. It seemed like things were getting better.

Now you’ve got the Wall Street Journal reporting that maybe the U.S. has drawn down some forces from Incirlik, which is a base in Turkey that U.S. and NATO troops are stationed at and that’s a major tripwire for the U.S./Turkish relationship. You also had Erdogan over the weekend telling anybody in sight that NATO wasn’t supporting Turkey the way Turkey had supported NATO in the past so we’re gonna have to take a close look at U.S./Turkish relations in the week ahead especially leading into a meeting between foreign ministers coming up next week.

Cole Altom: Why would they draw down forces there or threaten to?

Jacob Shapiro: If they’re drawing forces there, I mean you could come up with a lot of theories, we’ll have to think about it more. My immediate sense is that’s a sign that relations really are leading to some kind of break. It’s nice for both sides to say a bunch of different things and to accuse one side or the other of not fulfilling promises or they want this or they want that. But Incirlik is the major tripwire, if you see the U.S. pulling out of there, maybe relations aren’t doing so well. You might remember that Germany actually did pull out of there.

Cole Altom: Well it’s interesting too because I mean it’s always something that you would think that Turkey kind of lorded over the United States and threatened the United States with. But that seems to not be the case right now, yeah?

Jacob Shapiro: Well I honestly don’t know enough to say what it is right now but I can tell you that just the fact that Incirlik is being raised tell me that this is way beyond the usual atmospherics with Turkey and that we have a lot to get down to. Because the last few weeks it seemed like relations were trending in a positive direction. So for me, this is a fairly telling reversal. It would be irresponsible to not point out that the Pentagon has since denied this. But sometimes a denial is all the more indication that something is actually going on.

Cole Altom: They’ve said something they shouldn’t have.

Jacob Shapiro: So that’s going to be very deep on our minds this week.

Cole Altom: Alright, what else you got?

Jacob Shapiro: Second of all and you know one of the conferences I was at last week was the Mauldin Economic Strategic Investment Conference in San Diego, that was great. I actually went to another conference after that and at SIC, the Mauldin Economic Conference, everybody was basically sounding the warning bells of a U.S. recession. I’ll say at the next conference, they were really bullish on the U.S. economy and not thinking U.S. recession.

But I say all that to say that the Bank for International Settlements released a quarterly report yesterday in which it said there were some major credit vulnerabilities in China and in Hong Kong and in Russia and in Turkey, which isn’t so surprising. But they also singled out Canada, they also singled out Switzerland, both of which are countries that sort of were not on our radar quite yet for that kind of problem.

Cole Altom: Certainly not the usual suspects.

Jacob Shapiro: So yeah we’re constantly looking at U.S. economic figures and there was actually a good jobs report. And you know there are a lot of things to be looking at here. But I can tell you that for us, the Bank of International Settlements is a very important source. They were really at the front of the Japanese economic meltdown in the late 80’s/early 90’s and so we have always viewed anything that the Bank of International Settlements says as something to be really interrogated deeply.

So they have their own economic statistics and modeling and that comes with strengths and weaknesses. But I can tell you one of the major things we are doing this week is we’re looking at why Bank of International Settlements is seeing that. We’re looking at how much Canadians are putting on there credit cards, which apparently is way more than I thought. And we’re looking at what’s going on in China and Hong Kong.

Cole Altom: How much did you think?

Jacob Shapiro: I didn’t think that much but it seems like they are all maxed out.

Cole Altom: OK, it’s interesting the things you think about sometimes, Canadians swiping their cards. Anything else?

Jacob Shapiro: Last but not least, I mean the last week in the lead up to Russia’s national elections and I think we’re gonna have a piece published this week about some of the background of why this is important but we noticed over the weekend a lot of reports of Russia very strongly encouraging people to register to vote, very strongly…

Cole Altom: Very strongly urging.

Jacob Shapiro: In the Russian sense of that term.

Cole Altom: So strongly that they didn’t have much of a choice in it?

Jacob Shapiro: Well some of them apparently didn’t want to and went away from it. For us, I mean obviously Putin is gonna win.

Cole Altom: Right.

Jacob Shapiro: That’s not under debate right now but those numbers of voter participation for us tell us perhaps, it’s a nice gauge for how much legitimacy, how much support Putin actually does have in the Russian population. And that really is important for Russia’s future. Now, it’s not a perfect statistic and there are actually a lot of other variables that we like to focus on to consider what the Russian people’s support of Putin is, but this happens to be just a nice one that we can really sort of say ok, here’s a figure and does that correlate with what we were thinking before.

Cole Altom: Ok great, thanks a lot Jacob, I appreciate it. Onto sort of like our main feature here today, we have a very special guest with us. Our own Phillip Orchard recently returned from what feels like a decade long stint living in Southeast Asia. He’s lived there for about as long as I’ve known him which is pushing on what five years now?

Phillip Orchard: Yeah I was there five years total.

Cole Altom: Five years total, that makes sense. And so we had invited him on and we are going to talk about Southeast Asia because Southeast Asia is great and is also kind of an overlooked part of our model in some of the things that we look at and there’s a lot to talk about and we’re going to get to that.

But in the intervening days, since we had asked him to come on, this thing happened and maybe our listeners have heard about it. North Korea, South Korea, United States, apparently Trump and Kim are going to meet in May. And so I think it would be remiss of us, it would be negligent of us if we didn’t exactly or if we didn’t address that in some way. There’s not a lot we can necessarily say, everybody’s speculating right now. How much ink has been spilled already on something that hasn’t actually happened and may not happen, we don’t really know.

So I do want to unpack that with you guys and Phillip is uniquely suited to do that as sort of an East Asian expert and Jacob’s a smart guy too. So I’m gonna turn it over to them I guess. And I have some other questions in the back of my mind. But I guess why now? Why did this happen? Why did Kim propose this as he allegedly did and why is Trump going along with it? What do they have to gain? Again just lay it all out for us.

Jacob Shapiro: Well here my two interpretations are this. One option I see is that the sanctions have really been biting and North Korea is not doing very well and they need some more access to the global, international, economic financial system, however you want to put that. That one doesn’t feel right to me just because and I agree with what Vladmir Putin said. Like the North Koreans eat grass, they’re like willing to stomach a lot of hardship. They’ve been starving their people for God knows how many decades now. Or actually we know how many decades, it’s been since 1950 and they’ve been going for the nuclear program you know since then.

Cole Altom: And that’s been kind of a common trip rolled out by a lot of people including us is that while sanctions may work a little bit better for a country like Iran that was kind of going through some similar things because it’s a little bit more connected to the initial market and North Korea is not. And so not only is data difficult to come by and we can only come by it anecdotally basically, but we’ve always been a little bit dovish on like how effective those are actually being but maybe not so?

Jacob Shapiro: Well I think you know we just have to think about it. It’s one of the potential options but its not the more likely one. The second one is just that North Korea has achieved the objective that it thought it could which was by doing this, it was able to create a problem in the U.S.-South Korea relationship and there was basically nothing more to be gained in that. It got South Korea to doubt that the U.S. was acting in South Korea’s best interest and just by planting that seed of doubt, North Korea can now say ok like the job is done. Let’s pull back a little bit, let’s do our routine where we’ll slow down and we’ll take food and we’ll take money and we’ll continue this very, very, very slow process where eventually we reunify the peninsula under our own terms.

Cole Altom: And it’s worth noting too, I felt that you like wanted to jump in here too. I guess it’s worth noting too like the Kim regime over the years has done this before as a means to buy some time and there’s a little bit of disingenuousness there, do you think that’s necessarily the case or do you want to speculate on that?

Phillip Orchard: Well I mean they haven’t promised anything, even everything that the South Koreans have said that the North Koreans have said in the meetings that they have expressed a willingness to denuclearize and that Kim Jong-un actually said what his Dad said which it’s always been the dream of the Kim family, the Kim dynasty to denuclearize the Korean peninsula. You know they haven’t confirmed that and they haven’t, there’s not a lot of evidence that they’re willing to actually give that much up.

So it’s hard to say if they’re just being disingenuous because at this point, they haven’t put a lot on the table. At most, it seems like that the only real concession that they’re offering is that they’re willing to freeze tests for a while and that’s not actually much of a concession. They need to keep testing their missiles and their nukes in order to achieve a full declared deterrent like that’s capable of striking the U.S. in order to keep the U.S at bay indefinitely. But it’s not even clear at this point whether that’s really on the table.

Cole Altom: This is a bit of apples and oranges comparison but it keeps nagging at the back of my mind so like I want to get you guys to weigh in on it. Iran is not North Korea and their programs are a little bit different and their programs are also at different stages of development but we did in 2015 have that historic deal whereby in theory Iran decided to like shelf its program for sanctions relief, we all know that story.

I don’t think that there’s necessarily any reason to think that that is exactly how it’s going to play out in North Korea. But it is interesting for me to think about when this goes forward, how does that affect the Iran deal, if at all?

Jacob Shapiro: I don’t think there’s really a correlation right now. I think the thing that you could say standing back from a 10,000 foot altitude is look the United States does not want to be involved in different places all over the world putting out fires. And if you even read the national security strategy from back in December that the United States published, it talked about Iran and it talked about North Korea as serious issues but the United States sees that its challengers on the global stage are Russia and China and so the United States basically deciding not to go after North Korea, to go along with South Korea, to not push the issue, to me says that you know the United States and China are now going to have some issues because that is really the relationship the United States needs to focus on.

So I think the same thing is probably true in the Middle East and that’s why you know we talked earlier is about why Turkey is such a big deal. The United States is really hoping to manage and balance relationships in both of these regions so it doesn’t have to come charging in with ineffective military operations every time. So I guess that’s the connection but you know I don’t think that Iran and North Korea are really tied but I don’t know Phil, what do you think?

Cole Altom: Well let me correct, I don’t think there so much tied as the way this as yet unnamed, unshapen nuclear quote un quote “agreement” or negotiation or talk or whatever you want to call it takes place in North Korea, that will necessarily sort of affect whether or not U.S. lawmakers along with Trump want to necessarily like let the waivers go or if they think actually yeah this doesn’t have strong enough enforcement mechanisms because I mean practically what’s the difference? Like game this out, suppose the U.S. and North Korea do actually come to some sort of quote un quote “agreement” way down the line, right?

If there’s no enforcement mechanism, then there’s no real guarantee that Kim’s gonna actually like abide by this agreement and so do you abandon it as people have threatened to like the Iran deal as well which has been its biggest criticism, right that we quote un quote gave too much away and that there’s like no way to enforce this. So I don’t know exactly how but it just feels to me that the Iran deal sort of does hang in the balance and it’s either gonna fall by the wayside or it’s gonna, I don’t know. I’m not really sure, it’s not really formed to the back of my brain but I don’t really see these like two inextricable issues either.

Jacob Shapiro: Well you know with your feelings and $2.75 you can get a cup of coffee at Starbuck’s these days.

Cole Altom: Aww that’s very nice. I appreciate that.

Jacob Shapiro: It was nice but again like look it’s gonna be strategic issues that are gonna define this like I really don’t think that what happens on the Korean peninsula right now, I don’t think Iran is sitting there watching you know this is how our program is gonna develop or the U.S., I mean Congress is different, that goes on popular opinion. But look when the United States is looking at North Korea not going after North Korea with a military attack means that the United States is basically pulling back and wanting to rely on its regional partnerships and its gonna try and rebuild that partnership with South Korea and support South Korea so that South Korea knows that no matter what happens the United States will have South Korea’s back whenever it calls for it.

I think that you know it’s the same type of deal in the Middle East. The problem with the Middle East is that whereas in East Asia, the United States has Japan and still has South Korea and the Philippines and a bunch of other friendly nations. In the Middle East, it’s looking more and more like the United States has Israel, maybe Saudi Arabia which is very weak, Turkey seems to be playing its own game. So in that sense, look North Korea can be contained. Like the North Koreans want the U.S. to overreact because the North Koreans and the Chinese can play that to their advantage. It’s a different story in the Middle East.

Cole Altom: Phil so Jacob has very politely, very mannerly told me that I was dumb, which I appreciate. Do you agree with him that I’m dumb or is that…

Phillip Orchard: Well what I would say is that I mean I think some people will point to ok well issues of U.S. credibility are at stake and sort of what Jacob was just saying is that, there’s only so many parallels you can draw. The credibility of whether the U.S. acts military or it can live up to the commitments that it makes in negotiations are so specific to the issue at hand and especially to issues that are you know are thousands of miles, in regions thousands of miles apart.

The U.S. outlook and ability to act and willingness to act whether or not their interests line up in order to negotiate or go and you know guns blazing in North Korea are completely different than those that are shaping a decision in the Middle East. Yeah I mean at this point obviously, it would depend, any kinds of parallels, we’d need to see how this process is going to unfold in North Korea first to be able to decide and we’re you know still a long way from any details on that front.

I mean I think when this news broke about Trump being willing to go, my first thought was like ok there must be a deal because Presidents don’t generally or almost ever, they don’t go set themselves up for failure. They only go to this kind of summit when they know when they’re gonna get. All the ground work is done at lower levels and in advance and they go just basically for the signing ceremony.

That’s not to say that Presidents don’t have influences over how the process unfolds but they don’t set themselves up for public embarrassment. That said, for better or for worse, Trump is an unorthodox President and a lot of the, there’s been very little evidence that suggests that there is a deal on the table right now. And so we are kind of in uncharted territory right now. Or I guess we’re in familiar territory in the sense that we are kind of where we’ve been for the past year or so.

Jacob Shapiro: Well I think just to piggy back on that, I think we’re where we have been for the last twenty years basically with North Korea and the United States, which is to say that, you’re right Trump is unorthodox and the fact that Trump is willing to go there and have a cheeseburger with Kim or he’s gonna meet Kim wherever he’s gonna meet him and eat that cheeseburger together, that’s strange, that’s not what a normal U.S. President would do, not that there is such a thing as a normal U.S. President. But that breaks precedent.

But the overall relationship if you look at it, North Korea’s doing the same thing it did to the Obama administration, the same thing it did to the Bush administration, the same thing it did to the Clinton administration, so in that sense Trump is getting a taste of what all the previous administrations did and is facing the same limited set of options. What has happened here though is that North Korea has at least advanced its technology to such a point where it was able to get the U.S. to show its hand a little bit.

And once the U.S. you know sent the carriers off the coast of the Korean peninsula and was talking and basically meeting Kim’s threats with its own threats, I think you had South Korea sitting there being like we don’t want to be stuck between all of this. We’re gonna have to chart our own course here and go forward. So in that sense, you know it’s both similar and different from previous things. But I think the important things here are similar, I think it’s still the same set of dynamics and it’s still, the U.S. doesn’t want to go to war in North Korea and you know that’s not really gonna change and Trump’s not really going to be able to change them.

Phillip Orchard: Yeah especially if there is no deal you know or the deal isn’t near, then it does raise the question of you know when Trump gets there and has very little to show for it. And you know if and when North Korea politely declines to hand over its nukes, where we go next? Whether that makes it politically untenable to continue to pursue the diplomatic course or not but we can cross that bridge when Trump takes us there.

Jacob Shapiro: And I would also just to say one more thing about this when you’re playing chess right, like you want to be the person who is making forward moves and then you’re opponent is reacting to you, right? Korea’s making the moves here. Now they basically just have pawns on the table, they don’t have any of the bigger pieces that the United States has. But the North Koreans have the pace of play. They are doing things and the United States and everyone around them is reacting to them.

So the fact that Kim has really backed off not just the testing but I mean the rhetoric has gone from you know the U.S. drowned in the sea of fire, these military exercises with South Korea can’t continue to North Korea saying no we understand that you have to do this that and the other thing so you know I would say in some sense, Trump is not in control here. He accepted an invitation like he’s not the one who went forward and made the invitation. Unless there’s some other secret thing here behind the curtains we don’t know about.

Phillip Orchard: Yeah I mean the North Koreans have been pushing for this kind of meeting forever. But what’s really remarkable to me is also how just how little involvement the Chinese and the Japanese have had in this whole process. They just seem like they have been completely pushed to the sidelines. I think China is probably fine with the way this is playing out, it prefers this then to a U.S. war, although you know potentially it forces them to intervene and puts the U.S. you know on its border.

The poor Japanese are just kind of stuck worried about that Trump’s gonna sell them out on some kind of deal that sort of let’s say stops North Korea short of developing ICBM’s that can you know hit the U.S. mainland but keeps them with capability to you know, with the nuclear missile capabilities to take out Japan. And all these countries with enormous amount of stake in the game are not really shaping its outcome, it’s basically been the two Koreas and the U.S. at this point and incredible to watch South Korea at least publicly orchestrate all this.

Cole Altom: Well I don’t want to cut y’all off and we can talk about this for a lot longer if we want to or of we need to. But you brought up Japan and it kind of is like a natural transition. Because like obviously the United States has been like Japan’s security guarantor for a long, long time. And the United States is a security guarantor in the region and that’s true to some degree of Southeast Asia and some of these little islands in the Philippines and things like that.

So you brought up China and sort of like the risk it poses, it’s been expanding in the South China Sea. As we all know it has very, very long historical ties, somewhat friendly, somewhat more acrimonious, many of them financial with these countries in Southeast Asia. So maybe this is a natural time to sort of transition into Southeast Asia and I guess because it is kind of overlooked I think it might be good to just kind of start at ground zero and say what is Southeast Asia? Why is it unique? Why is its relationship with China? How does it fit into our model?

Phillip Orchard: Sure, so I mean I was thinking about you know trying to reflect on some of the main takeaways I had from you know living there for five years in total now. And one of them was definitely the way the region is responding to the rise of China, Japan starting to push itself out and just how distant the U.S. feels. It changes from country to country and all these countries are responding to China differently but one remarkable thing I mean is just you get a sense of how inevitably destructive, or I shouldn’t say that, disruptive the rise of China is.

You see that just you know at any you know high profile tour site in Bangkok or Angkor Wat in Cambodia or in Ha Long Bay in Vietnam. Just busloads, busloads, plane loads, plane loads of Chinese tourists coming in. It’s exciting, you’re excited for them, a lot of them are coming sort of interior cities that you’ve probably never heard of or you know that I study China for a living and I’ll still have to pull it up on my phone to see where this city of 9 million people that I’ve never heard of is. And it’s exciting.

But with that many people coming at that scale, it’s just disruptive, it’s stressing the abilities of these countries to cope, the ability of the infrastructure, the hotels and so forth. It’s sort of a metaphor for I guess for like China’s rise in general. Whatever intentions you ascribe China whether you see it as trying to act in the best interest of the region or you know acting with some sort of nefarious motives. It just inevitably disruptive.

And so in Bangkok where I was living for the past two and a half years, luxury high rise condos going up all over the place. Most of them are about a third to a half empty. Quite a few of them, it’s just being bought out by Chinese investors who are nervous about the Chinese economy and looking to park their money in hard assets anywhere they can. Each one of those buildings that goes up, it displaces a neighborhood, it warps the local housing market, it changes all sorts of stuff.

So just the scale of China in all things is forcing these countries to react in certain ways. That said, it’s not all negative, some of it’s positive. I mean it’s injecting the region with capital, with cheap goods that improves standards of living, with infrastructure investment and so forth. But all of these countries don’t know quite yet how to respond to it, especially since they don’t know how to read China’s you know intentions. Especially on assertive issues and especially because the U.S. feels so distant.

Cole Altom: Well they don’t know you say but maybe even if they did know how to react or to respond, what can they possibly do? Because it’s worth pointing out that Vietnam, Cambodia, Laos, Thailand, Myanmar, these are not particularly affluent countries and they need Chinese investment whether they like it or not. And they know that there’s going to be like some strings attached and there’s going to be you know some earmarks and they’re going to have to like what get some Chinese workers and things like that. And that kind of like prevents them from being and acting truly as independent as they want to.

But you know you said each one is going to respond a little bit differently and that’s fair enough but like you know can you give us sort of like a generalized sense of like how some of these countries receive some of that attention whether its wanted or not? Like what can they do about it, even if they don’t like it?

Phillip Orchard: I mean it definitely changes depending on how close that country is to China and whether or not it’s engaged in any kind of territorial dispute obviously. But even then, I would say very few of these countries have any interest or any desire to pick a side. We wrote about this a little last week with Indonesia. Everyone ideally would take Chinese investment, would take…

Cole Altom: Actually, let’s take a step back, why is it hard for them to pick sides? Let’s dig into that a little bit.

Phillip Orchard: Well because they’re benefitting so much from Chinese investment and from you know Chinese tourists. They bring a lot of money from China’s attention to their region. That said they are very wary of China’s ability to act corrosively, to attach strings to its investments, to you know push its weight around in the South China Sea and so forth. So they do not want to end up basically in a situation where they’re basically puppet states or they’re overly reliant on the Chinse.

So what they’re doing is in large part, they’re reaching out to Russia, they’re reaching out to Japan, they’re reaching out to the U.S. But they’re uncertain about how willing the U.S. is to continue its traditional role which is as a giant consumer market for exports in the region while also floating and helping these you know nascent militaries kind of get their feet under them.

Cole Altom: Jacob, jump in here.

Jacob Shapiro: Well I think Phillip has actually put his finger on something that really hasn’t happened as I can see it in the last couple hundred years because there’s a major shift going on here with China. I don’t think it’s actually that hard to read China’s intentions. You know China historically basically always had everything it needed within you know the various empires or whatever what have you that were inside of China and it wanted patronage and it wanted people to accept China’s role as the center of the universe.

But you know China really didn’t have to go abroad in order to get what it needed. What has happened in the last let’s call it 70 to 80 years is that China has grown astronomically, its population and its economy. Some of what it needed to do that meant that a lot of its arable farm land was no longer there. It outstripped sort of the natural resources that are in China that it can depend on.

So what you see is China is importing food. It is fishing in waters that you know China may have claimed it on a map before but it actually needs to get the fish from the waters to feed the Chinese people. It is importing more oil from the Middle East and it needs those sea lanes that are part of Southeast Asia and part of that landscape to be open.

So this is really, it’s transformative because you know in the past sort of China was self-contained. It was Japan that was the one having to reach out to secure those sea lanes. There was a reason Japan went for Southeast Asia in World War II, right? One of the reason that we have a forecast of Chinese, Japanese competition is that for the first time you have a strong China, a strong Japan and both more dependent on imports.

So when you’re looking at China and how China is looking at Southeast Asia right now. It’s not just about defense, it’s not just about security, it’s not just about influence abroad. It’s also about we have a strategic need for some of these resources. We have a strategic need for some of these countries to be more friendly to our interests than the others. You could even say if China doesn’t get it the way that it wants in a peaceful way, China still needs to consume the food and the resources and the things like that.

So if you’re a Southeastern Asian country and you see this Chinese monster to your north that is starting to consume all this stuff and values some of the resources of your own country. Then you do have to think well am I going to go back to the Japanese? Am I going to go to the U.S.? That’s for me the major change and the real question.

Cole Altom: Right but it’s not just like a mine from which China like extracts stuff, it is largely that too, but they are you know investing in these countries and like putting in like large-scale infrastructure projects. Now whether that’s gonna secure some of China’s strategic interests like kind of remains to be seen but they’re also like, they are actively doing things, like quote un quote “beneficial” and “good” things for these countries as well, which makes it kind of a little bit difficult. Phillip, you’re nodding your head a lot, what’s going on?

Phillip Orchard: I was just thinking about how exactly what both you guys are saying is playing out in the Philippines.

Cole Altom: I wanted to bring up the Philippines, so I am glad you said that.

Phillip Orchard: So I mean our view is that China is the ultimate way, the best way for them to break out of the first island chain, the chain of islands running from Japan basically down to Indonesia, which ostensibly can block China’s access to the Pacific Ocean if occupied or if they allow like U.S. warships to have bases there, is to forge some kind of political arrangement with a country like the Philippines that where the Philippines would agree not to allow the U.S. ships to you know be based there and allow the Chinese to do whatever they need to do to get to the Pacific.

So in one sense you could say ok well that’s why all this massive amounts of investment that China has been pouring into the Philippines, that’s the goal. But at the same time, China’s been making it absolutely clear that they’re not gonna back down in the South China Sea and I think the point of what they’re trying to make is like this is ours we will absolutely do whatever’s needed to secure our interests strategically in valuable waters and here’s a lot of investment to make it go down easier basically.

Jacob Shapiro: Yeah and it’s funny that we’re talking about China this way because China actually has a lot of experience of its own with this, right? Because when the Qing dynasty was falling apart and it was the late 1800’s, you had a lot of foreign countries that were building infrastructure in China. Like Russians on the railroads and Japanese on the railroads and everybody thought that ok well if we own the infrastructure here and if we build the infrastructure, we’re gonna have influence, we’re going to be able to exact economic gains for our own country. That was true for a long time until the Chinese people stood up and Mao stood them up and took over the country and said no China is going to be strong now and China radiated outwards.

So when we think about what China is doing, it’s a delicate game like yes China will do whatever is necessary in the South China Sea to defend its interests except actually attack the United States Navy because it can’t handle a fight with the U.S. Navy.

Cole Altom: Yeah which is not in its interests.

Jacob Shapiro: China is not at the point yet where it can dictate terms to any of these countries so you know just the fact that China wants to build a bridge or a port in this that or the other place really doesn’t accomplish much because you know China has also had experience in Southeast Asia with not getting the outcomes that it wanted. It was also involved in Vietnam in its own ways and didn’t exactly get what it wanted after the U.S. was gone from there.

So just to say that a lot of what you’re seeing China do right now, they’re thinking long term. They’re setting their selves up for ok once we have developed the military capabilities and once Xi has fixed all these problems in the economy that he needs to become a dictator to fix, we need to make sure that we have good relations with these countries even though they’re going to have a natural suspicion of us because if you just look on paper and you forget about the United States for a second, China really is the country with the most power in the region.

So that’s why so much of what’s going on here, if you’re looking at this region, what’s important is what are the countries that China is succeeding in developing those more positive political relationships with? And then the flipside of that is what is the current pace of China’s entire reforms? What is the pace of the modernization and advancement of its military technology so that it can stop threatening to defend its interests, and then when it decides to, actually defend them?

Cole Altom: Ok then what are those countries then?

Jacob Shapiro: Which countries are?

Cole Altom: You asked so and you know like depending on what countries like it is sort of like successfully in these relationships with, like give us some examples of which ones those are and which ones are not.

Jacob Shapiro: Well I mean Phillip pointed out the Philippines which is a funny statement right there. But the Philippines…

Cole Altom: Because of his name.

Jacob Shapiro: Yeah. Thank you for telling that. Was that a funny pun?

Cole Altom: It wasn’t a pun and again it wasn’t funny. Sometimes when you need to explain a punchline, it can really deprive of it any landing.

Jacob Shapiro: Yeah that’s what I like to do. Like my humor sneaks up. Well ok we won’t go there. But the Philippines though is really accepting checks from everywhere. They still have the U.S. Defense Treaty, they still accept checks from Japan, checks from China, they are open for business. Phillip, what are some other countries that you’re sort of thinking about here?

Phillip Orchard: The only two countries I would say that are firmly in the tank for China at this point are Cambodia, which isn’t the most strategically important country but China has sort of successfully bought you know a reliable boat in ASEAN or Association of Southeast Asian Nations and other international forums where occasionally it’s handy to have someone carrying your water.

And to a lesser extent I guess Myanmar, which is well I guess China has succeeded in tightening its grip over Myanmar. Myanmar doing so reluctantly because China has all sort of leverage over it. But everybody else is very much trying to balance between you know like we were talking about earlier keep everyone, take Chinese investment for specific projects but avoid overreliance.

And but the big counterplayer here is Japan, which is much less likely to invest with strings attached and also is sort of a steadier economy and has much deeper historical business links throughout the region. Japanese firms have been setting up factories all over Southeast Asia but especially in Thailand, Malaysia, Indonesia and so forth for decades now.

Jacob Shapiro: Yeah and just one thing to and I haven’t actually thought about it this way before but if you also just look at a map and you see where Southeast Asia is, what surrounds Southeast Asia are basically three islands, ok Japan is one of them Phillip just mentioned. Then you’ve got Australia which is you know a very respectable power in its own right. Then you have India, not technically an island, but you know it’s the Indian subcontinent, if you look at a map the Himalayans sort of separate it off from everything above it and besides Pakistan is really not a lot there. We often think of India as an island.

So let’s say even China is able to capitalize on Southeast Asia, it is still surrounded by a ring of major powers that would want to block it as well. So you know when China’s thinking about how to break out of not just the first island chain but the second and the third and all of these other issues. You know, China really it helps them as much as possible to have positive relationships and the more that China gets pushy probably you know the weaker it is in terms of getting what it wants from those countries but also it has bigger fish to fry sort of outside of that.

So look China has a very difficult game here, when you just look at Southeast Asia and you understand sort of just how difficult this is going to be for China. China is not the only player and they have other countries that they have to deal with.

Phillip Orchard: Yeah and I would suggest that just to add I mean basically everyone in Southeast Asia except for Thailand has really rough memories of colonialism and the Cold War and what it lead to. And as a result, they are very reluctant to get caught in between these countries. And so it remains to be seen, they do not want to serve as like the battlefields between this emerging coalition of India, Australia, Japan and the U.S. and then China on the other side as much as possible. But inevitably, that’s the battlefield if it comes to that.

Jacob Shapiro: And this is actually how I think Southeast Asia ties into our earlier conversation about North Korea and South Korea because those Southeast Asian countries are definitely I think looking at the United States and seeing ok where did the United States draw its line? And then did the United States follow through on its line. So you know the U.S. had a red line about North Korea’s not going to have nuclear weapons that are going to reach the United States. If the U.S. can get an assurance that there are no nuclear weapons that can threaten the United States, it can maybe save face a little bit and walk out of North Korea with an agreement that can at least kick that can down the road.

If Kim is looking to embarrass the United States and exact a price, the United States might want to go along with that but then the dreaded credibility question comes up because if you’re Southeast Asia and you see the U.S. reneging on commitments to say Japan or South Korea. Maybe you start looking for other help to push back against China or maybe you’d be one of the first countries to flip to China if you think that’s the region the direction is trending.

So in that sense you know, what’s going on in Korea, like I will say flippantly sometimes you know the Korean peninsula doesn’t matter that much. I am just saying you know in terms of grand strategic issues, the actual who controls the Korean peninsula, not so important. What happens as a result of what the U.S. does and what its credibility looks like after Trump meets with Kim, well a lot of that will ripple throughout the region and then how those different countries respond and tie it to China and Japan and all these other things.

Cole Altom: That’s just about all the time we have for today. But Phil do you want to jump in with anything else before we go? Don’t feel obligated to if you don’t want to. We’re just three guys talking here about Southeast Asia. We could talk a lot more about it. We haven’t talked about like Chinese tariffs, or U.S. tariffs excuse me, steel and aluminum tariffs on China. We haven’t talked about like free trade and the death of TPP. And all these other, there’s like so….

Jacob Shapiro: We didn’t talk about the United States and a aircraft carrier visit to Vietnam.

Cole Altom: There’s like so much more we could talk about, there’s just not enough time and not enough hours in a day. But if you have anything else, you know speak now or forever hold your peace.

Phillip Orchard: Well we should probably do another half hour just on Thai food alone. So maybe next time.

Cole Altom: Are you a panang guy?

Phillip Orchard: I’m a big panang guy.

Cole Altom: Ok, cool.

Jacob Shapiro: Maybe Anthony Bordain will call one of us to go eat food in Southeast Asia.

Phillip Orchard: Aww man that’s my dream.

Cole Altom: No we’re being a little glib right now, but Southeast Asian food is objectively like the best food in the entire world and I’m not going to hear any argument to the contrary.

Jacob Shapiro: I’ll even, because I’m a nerd I can even tie this back to geopolitics too, right? Because if you want to have a sense of how the Obama administration and how the Trump administration are different yet the same, like look at the way they interacted with that. Like Obama went to Vietnam and had a picture taken of himself eating noodles in like a regular old noodle shop, right? I really wish I had a picture of like the Secret Service detail and everything else that was around it that had to be and ensure just so he could go in this like random street shop.

Cole Altom: For some photo-op, yeah.

Jacob Shapiro: But that was the image of the United States that Obama wanted to spread. We’re just like one of the guys having noodles in your noodle shop Vietnam, like we are not a threat anymore, we don’t want to do anything. Trump is a very different thing, right? He’s like no, no, no Kim fine whatever let’s have a cheeseburger, like maybe I’m gonna send some aircraft carriers to threaten you, this that or the other thing.

They are both trying to do the same thing. They are both trying to reassure their alliance network. They’re both trying to expand the alliance network. They’re both trying to get China to reign in line. So very, very different unorthodox styles but when we talk about sort of the threads of geopolitics that constrain and which make similar administrations in all countries not just the United States look the same, actually oddly enough the U.S. relationship to Southeast Asian food can work in. Was that a nice? I thought that was a nice move.

Cole Altom: Yeah that’s pretty. Yeah the gymnastics are like very impressive and it actually like worked.  Like it actually makes a little bit of sense so which is to say that like you know tactics can change but like the grand strategy when like if properly conceptualized and followed like remains the same. And that’s like what’s like more at the heart of geopolitics than that? So thanks for putting a nice little bow on this for me like that was like you did all the hard work for me. Phil, thank you so much for joining us, you’re back in town so we want to have you again, very, very, very soon. I’m Cole, that’s Jacob, that’s Phillip, see you all next time.