Washington DC and the United Nations in New York mark the latest stops in a substantial foreign policy offensive for Aung San Suu Kyi. 

Her presence as Myanmar's leader at the East Asia Summit last week for the first time put the ‘State Counsellor’ (an office created to reflect her status as de facto head of government) on equal footing with other regional heads of government.

It also settles the question of how Suu Kyi's administration would handle issues of protocol and power-sharing with her largely ceremonial president: Htin Kyaw was sent on his first overseas mission to India, while Suu Kyi’s itinerary covers more pressing and high profile portfolios relating to ASEAN, China and the US.

A balancing act

The international tour is aimed at securing broad-based international endorsement for the new government (particularly in the context of international doubt regarding the capacity of the National League for Democracy to govern with little to no prior policy experience).

Suu Kyi is following her predecessor, Thein Sein, in choosing Beijing as the destination of her first official trip outside Southeast Asia, followed only later by Washington. This prioritisation says much about her pragmatic foreign policy. Her administration is not recalibrating so much as consolidating the ‘balancing act’ forged under the previous government.

Myanmar’s military and democratic government share common views on matching Myanmar’s opening to the West with maintaining strong ties to China. For the US, rivalry with China has given considerable momentum (and rare cross-party support) to US engagement. 

President Barack Obama, in the closing months of his presidency, and Hillary Clinton, in the final stretch of her presidential campaign, both heralded the visit by a democratic Myanmar leader as proof their engagement strategy (initiated in 2012 when Clinton was secretary of state) has paid off. Normalising ties with Myanmar (along with Washington’s lifting of its arms embargo on Vietnam) has been one of the few concrete diplomatic coups achieved under the overall US strategy of ‘rebalancing’ to Asia.

The lifting of sanctions

With his legacy in mind, Obama made a bold commitment yesterday to lift remaining US trade sanctions 'soon'. He also committed to reinstating tariff benefits for Myanmar imports under the Generalised System of Preferences.

The US first imposed economic sanctions on Myanmar in 1990 in an attempt to weaken the ruling military regime and its business interests. The sanctions did little to stem the rise of crony capitalism, but non-engagement did provide useful political and economic opportunities for neighbouring countries to bolster their influence, particularly China.

The Obama administration started to restructure sanctions in May 2012, when it removed a blanket prohibition on new US investment in the country, relaxed visa bans and allowed the resumption of most financial services. Prominent US policymakers now argue that what remains of the sanctions regime is ill-suited to a broader US policy shift that is prepared to deal with Myanmar’s downsides with greater engagement and depth. Relations have changed from a measure-to-measure approach (in which specific reforms were met with concessions from the US) to a multi-pronged strategy through which conditionality becomes more difficult.

From a business perspective, sanctions legislation remains complex, and its piecemeal suspension rather than removal has inhibited many US firms from considering market entry. So-called ‘smart sanctions’ (US Treasury-sanctioned bans on business dealings with specific conglomerates and businessmen) are targeted in nature but operate more as blunt tools in practice, dampening overall US business appetite. The US-ASEAN Business Council estimates 70% of Myanmar’s economy is still considered off-limits to American companies. 

Suu Kyi’s Dilemma

The Obama administration’s decision to lift trade sanctions and boost US business engagement in response to Myanmar’s democratic consolidation appears to be good news for Suu Kyi. But sanctions have long presented a policy dilemma to the former opposition leader, who under house arrest was a leading advocate of punitive measures against the previous regime. Now in power, her government is eager to show it can deliver economic dividends. On the other hand, Suu Kyi is wary of losing what she still considers a powerful political bargaining chip against the military.

Her party still appears uncomfortable debating the merits of decades of western sanctions or their long-term effects on the political economy. As recently as last month, the National League for Democracy rejected a proposal in Myanmar’s lower house calling for the US to lift sanctions. This contrasts starkly to Suu Kyi’s seemingly unequivocal statement to US Congress yesterday: 'We think that the time has come to remove all of the sanctions that hurt us economically'. The public concession has been a long time coming, and undoubtedly delivers an enormous favour to the Obama administration. 

Suu Kyi’s pronouncements will likely be enough to break US congressional deadlock on sanctions legislation. The Senate has softened its lines, with key former sanctions proponents including Mitch McConnell and John McCain backing sanctions relief. But strong opposition from sections of the lower house and human rights groups remains.

Nevertheless, behind the scenes, Suu Kyi may still be advocating for making the removal of the last vestiges of the US sanctions regime conditional on the military’s willingness to reform the 2008 constitution, which gives the army control of several key ministries and one quarter of the seats in parliament. Her qualification of lifting measures that 'hurt us economically' leaves scope for retaining elements of US legislation targeted at the military, on the grounds they have a minimal effect on the general economy. Certainly the arms embargo and the import ban on jade and rubies seem likely to remain until the last sanctions are removed. If this is the case, it may explain why both Obama and Suu Kyi have refused to comment on details or the timing of sanctions lifting, and suggests possible complications and delays to come for a bold new US business and political approach in Myanmar.

Photo: Getty Images/Aude Guerrucci/Pool via Bloomberg