A 24 April article in Foreign Policy magazine reports on a leaked United States Government internal budget document detailing proposed cuts to the State Department and US Agency for International Development (USAID) programs for fiscal year (FY) 2018. If these cuts are enacted, some of Australia’s closest and poorest neighbours would be among the most severely affected.
Table: Department of State Operating Unit and Account Bureau, FY 2018 Control Levels (USD’000)
|| FY 2016
| FY 2018 Control
|| FY 2016 initial actual (not final) vs FY 2018 control:
| FY 2016 initial actual (not final) vs FY 2018 control:
||5 968 138
||5 190 960
|East Asia and Pacific
| Marshall Islands
| Papua New Guinea
| Regional (State)
| Regional (USAID)
|Europe and Eurasia
|Near (Middle) East
||1 732 200
||1 607 800
|South and Central Asia
||1 562 874
||1 129 785
||1 083 580
Source: FY 2018 Control Levels
As the table indicates, under the proposed cuts, both Timor-Leste and Laos would see all of the aid they currently receive through State Department and USAID-managed development and health programs cease, while assistance to Papua New Guinea and Indonesia via these programs would be reduced by two-thirds and more than a quarter respectively. Cambodia and Myanmar (Burma)—high-poverty countries which, along with Laos, have been a focus of China’s aid and infrastructure investments—would also face very large cuts, as would regional development assistance programs managed by USAID. Funding for regional economic support programs, which are usually more explicitly tied to United States’ foreign policy objectives and are managed by the State Department would, however, increase under the proposal.
The cuts would also reduce funding delivered through the State Department and USAID for some important global and multilateral programs: ‘democracy, conflict and humanitarian’ funding would be reduced by over half, and assistance for ‘oceans and international environmental and scientific affairs’ would be cut by over 94 per cent. While it is a global set of programs, this latter cut would disproportionally affect Australia’s Pacific Island neighbours for whom climate change represents a major economic development and security challenge.
In total, the proposed cuts to America’s development assistance would see America’s annual aid budget fall by a third, from around US$31 billion to US$20 billion. According to one estimate, ‘this would put the United States’ aid volume on par with that of Germany and the United Kingdom, countries one-sixth its economic size’. The article reports that the Trump administration is also considering the abolition of USAID altogether.
As the Foreign Policy article notes, it is not clear yet whether the proposed cuts will make it through the Congress given opposition from both ‘internationalist’ Republicans and most Democrats. One prominent Republican senator has described the proposed budget cuts as ‘dead on arrival’ and another has declared that ‘foreign aid is not charity … we must make sure it is well spent, but it is less than one per cent of budget and critical to our national security’. Indeed, the current Defence Secretary, Jim Mattis, has previously opposed cuts to America’s diplomacy and aid budgets.
Nevertheless, the proposed cuts are important because they signal that the Trump administration is pursuing a very different kind of ‘pivot’ to Asia than that of the Obama administration. Coupled with Trump’s early decision to withdraw the US from the Trans-Pacific Partnership (TPP) free trade agreement and his administration’s intention to seek a ‘historic increase’ to the United States’ defence budget, Washington appears to be eschewing both the economic development and ‘soft power’ dimensions of its engagement with Asia in favour of a renewed focus on the military dimensions. This is in contrast to the view expressed by the former US Defence Secretary, Ashton Carter, who described passing the TPP agreement as being ‘as important to me as another aircraft carrier’.
As noted, this change of approach comes at a time when China is intensifying its efforts to enhance its regional leverage and influence through large aid, investment and economic development programs such as the ‘One Belt, One Road’ (OBOR) initiative and the Asian Infrastructure Investment Bank (AIIB). To date, OBOR has been backed by an estimated US$50 billion worth of investment by Chinese entities, while the AIIB has recently expanded to include an additional 13 countries and now has 70 members. China is also strengthening its cooperation with Pacific Island countries on climate change issues.
In light of these high-profile Chinese initiatives and a possible US disengagement from the region’s development debates and architecture, one pair of experts has concluded that while it is early days, ‘the greatest developmental impact of the Trump presidency may be to cement the Beijing Consensus as the preeminent global development model’.
This prospect is likely to increase the pressure on Australia and other ‘Indo-Pacific’ countries, such as Japan and India, to strengthen their aid and economic development engagement with their neighbours. Pre-budget media reports suggest that the Turnbull Government will be redirecting some of Australia’s development assistance in the 2017–18 Budget to fund increased counter-terrorism resourcing for security and intelligence agencies. In March 2017, Foreign Minister Julie Bishop launched a new policy on ‘development approaches to countering violent extremism’.