US Making 'Third Neighbor' Moves On Mongolia

Collegial relationships with global partners – including immediate neighbors Russia and China, and the United States – are the cornerstone of Ulaanbaatar's foreign policy. So Mongolia must be vigilant, stable and flexible with its third neighbour's pursuits.

Given Mongolia's geographical constraint of being landlocked between two major US adversaries – Russia and China – strengthening strategic partnership with Washington requires flexibility and a systematic diplomatic approach to accelerate economic collaboration.

In 2018, before establishing the strategic partnership, the US Congress proposed the
Mongolia Third Neighbor Trade Act . The bill was reintroduced to Congress in 2019 and 2021, adding to delays. If approved, Mongolia's high-quality cashmere and textiles could be exported to the United States duty-free.

Another effort to improve Mongolia's legal environment for trade is the signing of the US-Mongolia Transparency Agreement in 2017. This 2017 trade agreement represented the first stand-alone agreement on international trade and investment transparency signed by the United States.

In the past, the United States has only ever negotiated transparency commitments as a part of broader agreements. Negotiating a stand-alone agreement with Mongolia concretely builds on cooperation between the United States and Mongolia and makes it possible for economic activities to accelerate.

The bilateral trading relationship continues to flourish, with Mongolia's exports to the United States increasing at an annualized rate of 1.84% between 1995 and 2021. Even so, Washington still requires more action from the Mongolian government.

In January 2023, US Ambassador to Mongolia
Richard Buangan stated his concern
to the American Chamber of Commerce in Mongolia on the country's opaque legislative processes and investment climate that remains“unattractive for investors and challenging for importers and exporters.”

To deepen US–Mongolia economic ties, the US Under Secretary of State for Economic Growth, Energy and the Environment Jose W Fernandez met with senior government officials and other stakeholders in Ulaanbaatar in June 2023.

On a later visit to Washington, Prime Minister Oyun-Erdene also signed the
US–Mongolia Open Skies Agreement
into implementation. The US Department of Transportation noted that“the Agreement will facilitate greater air connectivity between the United States and Mongolia and will provide the legal framework for nonstop passenger flights.”

Mongolia is now the 132nd US Open Skies partner. In addition, Mongolia received its first Boeing 787 Dreamliner in August 2023 and will be starting a direct flight from San Francisco to Ulaanbaatar.

But Mongolia will still need to strengthen and accelerate economic ties with Moscow and Beijing via bilateral and trilateral channels, such as the Russia–Mongolia–China Economic Corridor. Other trilateral meetings also serve as an important economic gateway, such as the US–Mongolia–South Korea or the US–Mongolia–Japan partnerships.

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From a geopolitical standpoint, as the Russia-Ukraine war and US-China trade tensions continue to destabilize the region and the world, small states like Mongolia often face a conundrum. Maintaining a balanced approach is necessary for continuing Mongolia's historical connectivity of comprehensive strategic partnerships with Moscow and Beijing.

A Mongolian man holds a protest banner in the shape of the Chinese flag which reads“Respect your constitution” during a protest against China's plan to introduce Mandarin-only classes at schools in the Chinese province of Inner Mongolia, at Sukhbaatar Square in Ulaanbaatar, the capital of Mongolia on September 15, 2020. Photo: Asia Times Files / AFP / Byambasureb Byamba-ochir

In the short-to-medium term, Beijing will remain a strong economic partner for Mongolia as an immediate neighbor and a top investment source for Mongolian copper ore, coal briquettes and iron ore.

But Mongolia is now a candidate for the Minerals Security Partnership , an initiative with 14 countries – mostly Western – that aims to bolster sustainable investment in critical minerals' mining, processing and recycling.

Mongolia must ensure that
its foreign policy
remains flexible and diversified to support its economic and social development.

Bolor Lkhaajav is Researcher specializing in Mongolia, China, Russia, Japan, East Asia and the Americas.

This article was originally published by East Asia Forum and is republished under a Creative Commons license.

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