Tag: Asian Balance

America defeats itself

There will be fewer takers for US promises in Asia now

As promised, Donald Trump has pulled the United States out of the Trans-Pacific Partnership (TPP), a regional preferential trade agreement that his predecessor put together to secure American primacy in East Asia against a rising China. It does not matter that the TPP had not yet been tabled for Congressional approval. It does not matter that the TPP might not have yielded the outcomes its proponents claimed it would.

What matters is that in one stroke of a pen, President Trump has confirmed the lingering fears among East Asian countries that the United States is unreliable as a partner in their attempts to manage an aggressively rising China. Barack Obama’s ‘pivot’ to Asia–of which TPP was an important plank–was itself a response to similar fears during his first term. That pivot was at best a promise that the United States will remain engaged in the region, realists in East Asia tended to suspect that it was reassurance without adequate credibility.

The thinking within the Trump establishment appears to be that the United States can take on China on world trade and militarily in the waters of East Asia. Rex Tillerson, who will head the State Department, took a hawkish line on the latter, suggesting that the United States might deny China access to the islands it claims. Mr Trump and his colleagues seem to believe they can confront China in trade and in East Asian waters while eschewing economic engagement with the countries of the region. They will soon find out how mistaken they are.

Economics is the bloodstream of East Asian geopolitics. China is a major actor in the region not because it has gunboats and missiles, but because it has deep and growing economic relationships with almost all countries of the region. The economies of East Asia, South East Asia and Australia depend on China for their prosperity to various extents. Whatever disputes they might have with Beijing, if they do not see an alternative to China-driven growth, they are unlikely to support President Trump’s moves against China. The United States is likely to find itself isolated if it contemplates escalating conflict levels in the region.

It is likely that the powers in the region will seek protection by increasing their military capacity, and the bigger ones might even contemplate nuclearisation. Most will try to make their peace with China—to the extent possible, as long as it is possible. They will look towards India as a potential actor that can help balance China: to what extent this will work depends on how much and how fast New Delhi liberalises the Indian economy. Unfortunately, there is no indication that the Modi government is prepared to accelerate domestic liberalisation at a pace that can reassure its Asian neighbours.

India is in the geography, and over the long term will remain a potential hedge against China. The United States, though, has just about defeated itself.

“If at the end of it all you let [Abe] down, which next Japanese prime minister is going to count on you — not just on trade but on security?…If you are not prepared to deal when it comes to cars and services and agriculture, can we depend on you when it comes to security and military arrangements?”

— Lee Hsien Loong, Singapore’s prime minister, WSJ

China warns Singapore

As Singapore confronts difficult choices, it must sound out New Delhi.

It is an open secret that the Singapore Armed Forces (SAF) train in the Republic of China in Taiwan, and the two countries have enjoyed a quiet, but very productive partnership since the early 1970s. Like how actors in ’70s Hindi movies used to become totally unrecognisable merely by putting on a moustache and a beard, Singapore’s soldiers would become Taiwanese ones when they exercised in that country. The subterfuge was out of respect for diplomatic niceties, to placate the People’s Republic of China. For instance, Singapore service personnel would assume Taiwanese aliases. Sometimes this would lead to hilarious outcomes: like when my friend, an ethnic-Tamil Singaporean infantry platoon commander, had to pass off as Chong Wai-kiong.

Singapore’s defence cooperation with Taiwan (Project Starlight) predates the establishment of diplomatic relations with China. For its part, Beijing was content with this arrangement, even when it came close to war with Taiwan in the mid-1990s. Ian Storey writes that Li Peng, then China’s Premier, said that China ‘should not mind too much’ if Singapore continued its military relationship with Taiwan, but had asked that this be done discreetly.

So last week, when Hong Kong customs authorities — tipped off by their Chinese counterparts — seized nine infantry vehicles on a ship that was making its way from Taiwan to Singapore, it appears that Beijing has decided to deliver a warning. Or more.

It comes as a surprise, but is clearly yet another manifestation of an emboldened China taking aggressive positions in its extended neighbourhood. Even if Beijing were to end the impasse by releasing SAF’s equipment in return for renewed Singaporean commitment to the One China policy, it would further strengthen the perception among East Asian countries that it is best not to antagonise China. It would also put greater caution, and perhaps even a suspension of the four-decade old Singapore-Taiwan military cooperation. Chastising Singapore has multiple benefits for China.

It is too early to tell if Beijing’s actions are informed by an expectation that the upcoming Trump administration will disengage from Asia, leaving the field open to China. China’s actions over the past few years suggest that Beijing is confident of upping the ante even in the face of US “pivot” to Asia. It may be American conceit to believe that Trump is leaving East Asia to China. The rulers in Beijing perhaps believe they already have Asia.

This is a crucial period for India’s own Act East policy. New Delhi must reassure Singapore, Hanoi, Jakarta, Seoul, Tokyo and Canberra that India has the wherewithal and a commitment to shape an Asian balance that does not surrender to Chinese hegemony. If the United States wishes to be part of such an arrangement, then it is all for the better. If not, the six Indo Pacific powers must manage on their own. Let’s not forget that if the United States is no longer in the picture, India is the only nuclear power on the other side of China.

On OBOR’s commercially suspect projects

Win-win, for China.

Analysts have observed that many projects that China is financing and building under Xi Jinping’s One Belt One Road (OBOR) initiative are commercially dubious. People whose job it is to worry about such things have have surmised that the real motivation might be military-strategic in nature.

There is another — less sinister, but non-mutually-exclusive — explanation. Fitch’s Kalai Pillay says that the real motivation is “exporting China’s excess construction capacity that is accompanied by financing from Chinese state-led enterprises.”

“A lot of the big construction companies in China have bulked themselves up significantly over the last 10 years to carry out the big infrastructure projects in China. As many of these come to the tail end they have this excess capacity, the know-how, the real technical knowledge, a lot of patented technology that can be sold abroad, that needs to be exported abroad,” Pillay says.

He adds that there may be little room for non-Chinese banks and institutions to play a role in financing OBOR infrastructure projects.

“The final leg to this is the capital. There is excess capital which finds itself into all kinds of things, international bond markets, the spread market wherever. But one way to export it also is through financing projects that’s going to take place outside of China. So that’s part of that OBOR strategy,” Pillay says. [The Asset]

In other words, China is providing cheap loans to regional countries to build infrastructure — that might not be commercially viable — using Chinese construction companies. If the projects take off, China benefits. If they don’t, then regional governments will be stuck with debts to the Chinese government.

Not bad. For Beijing, that is.

Manila on the Chinese bandwagon

The Philippines becomes the first Indo-Pacific country to declare itself for Beijing

On the geopolitics of the Indo-Pacific, I have long argued that “the small- and medium-sized countries of the region will prefer a balance where no single power dominates over them. If they do not see this forthcoming, they are likely to join the stronger side.”

Rodrigo Duterte, the president of the Philippines, appears to have decided that that stronger side is China.

“America has lost now. I’ve realigned myself in your ideological flow,” he said at a business forum in Beijing on Thursday. “And maybe I will also go to Russia to talk to Putin and tell him that there are three of us against the world: China, Philippines and Russia. It’s the only way.” [CNN]

There were indications of this for the last few months, but the manner in which he announced a “separation” from the United States, the Philippines’ treaty ally since 1951, could not have been more designed to ingratiate Beijing, his newfound benefactor. Mr Duterte calculates — correctly, in all likelihood — that China will now shower the Philippines with exemplary largesse. It is in Beijing’s interests to demonstrate that those who decide to join the Chinese side will be rewarded, as long as they are willing to ignore some trifling territorial disputes and international arbitration verdicts.

I have also argued that there is a Chinese wedge between ASEAN states that have a dispute with Beijing and those that don’t. That wedge has just gotten deeper and wider. The ASEAN agenda on maritime cooperation is now in question, as Philippines joins other pro-China ASEAN members in being uninterested in confronting China. Vietnam, in particular, will be under a lot more pressure.

The Philippines remains a pro-American country. It is also likely that parts of the country’s security establishment have deep links with the US armed forces. How Mr Duterte’s policy will go down with the people and the security establishment remains to be seen.

G-20, East Asia and high-profile foreign policy

The focus on G-20, East Asia and raising India’s foreign policy profile are all the right things to do, and long overdue.

Notes for my television appearance on CNN-IBN at 9am IST today:

The Brisbane G-20 statement is so closely aligned with India’s own growth agenda: India must capitalise on this opportunity.

G-20 should become India’s most important international engagement (as my Pax Indica article from June 2010 argues). What the UN was to newly independent India, G-20 should be for a newly resurgent India. New Delhi should invest in high forums that India is already a member of is more valuable than pleading to enter stodgy old clubs like the UN Security Council.

India must contribute to the Asian Balance because it is in our interests to do so. As China and the United States contest for global power, India must project power in regions like East, West and Central Asia to defend its interests. [This is the central argument of The Asian Balance, my monthly column in Business Standard.]

It is good for Prime Minister Narendra Modi to invest time in international engagements: India’s growth is influenced by the world and the world’s situation influences India’s growth [This is the subject of an ongoing research project between Takshashila and the Hudson Institute]. India’s policy discourse will benefit from the prime minister’s international engagements & exposure.

(Point made in response to other panelists)
Mr Modi’s personal popularity among expatriate Indians and the enthusiasm they have shown around his visit to Australia help elevate India’s foreign policy profile. However, it is important for the media to not hype it beyond a point. It is in India’s interests for Indian-Australians to be good Australians: by being loyal, responsible and successful members of their communities.

What does Taiwan’s election result mean for India?

Ma’s victory and India’s dilemma

Yesterday’s Asian Balance column in Business Standard.

Taiwan’s presidential elections, since they first started in 1996, have in large part been referendums on the “One China” policy. Voters have been offered two deviations from the delicious ambiguity of the status quo: either a path towards eventual re-unification with mainland China or a dangerous path towards independence. Taiwan’s grand old party, the Kuomintang (KMT), espouses the former, while the Opposition Democratic Progressive Party (DPP) favours the latter.

The stakes, obviously, are high for Beijing — whose leaders have tried, unsuccessfully, bullying, coercion and suasion to influence the Taiwanese voter. But the stakes are also high for the Indo-Pacific region because Taiwan is critical to the stability of US-China relations, especially at a time when they both are attempting to move away from the confrontation of the past two years.

Neither China nor the United States wants the Taiwanese voter to rock the boat. Both had let it be known that they would prefer the incumbent president, the KMT’s Ma Ying-jeou, to win. In the event, on Saturday, the Taiwanese people agreed. But not before pre-election opinion polls showed that the election would go down to the wire, prompting thousands of expatriate Taiwanese from places like Silicon Valley to crowd into flights back to the island to cast their ballot.

That Ma found himself neck-to-neck with Tsai Ing-yen, his DPP challenger, is interesting. Four years ago, he was voted in after people felt that the DPP’s Chen Shui-bian was taking Taiwan into dangerous waters with his pro-independence line. Ma delivered on his campaign promise of closer ties with the mainland, sealing a major trade deal with China in 2010, boosting trade, travel, communications and investments.

China-Taiwan trade is currently around $160 billion. Taiwanese investors pumped in close to $40 billion in the four years of Ma’s first term. Chinese investors reciprocated, albeit only to the tune of $170 million. Increasing the number of direct flights to almost 100 a day brought in 2 million Chinese tourists and $3 billion in receipts. There has been a parallel improvement in official relations between Beijing and Taipei, as much in form as in substance.

Why then did Ma face a tough election? One answer is what we would call an anti-incumbency effect. As he admitted last month, there were some economic goals his government failed to achieve, especially those relating to employment and income growth. The other answer, one that goes beyond economic angst and back to the China-Taiwan question, might be a preference by voters to drag deviations from the status quo to the middle. As Russell Hsiao, a political analyst, wrote in the Jamestown Foundation’s “China Brief” last month, a majority of Taiwanese people want to perpetuate the status quo and will punish politicians who stray too far from it. This might also explain both the closeness of the contest and the verdict itself.

Over in Beijing, Ma’s victory is seen as vindication and a political triumph for President Hu Jintao. In the internal dynamics of the Communist Party of China, it is likely to empower individuals and factions close to Hu, influencing the pecking order of the new administration that will take over after this year’s party congress. Also, as Willy Lam, a Hong Kong-based commentator, points out, “if the KMT continues to rule, one can assume that tensions will be lowered further and the [People’s Liberation Army] will have no reason to ask for a higher budget.” To the extent that the issue of Taiwan’s status becomes less of a thorn in Beijing’s side, the political salience of the hawkish factions will, on the margin, diminish. This in turn can help reduce tensions with the United States.

In Washington, some commentators have already begun asking whether it makes sense to continue to allow Taiwan to poison relations between the United States and China. While it is unlikely that such a policy reversal is in the offing, it is already clear that Washington would prefer a Taiwan that doesn’t raise the temperature in East Asia. Washington’s strategic calculus, like that of the other major powers in Indo-Pacific, is about shaping a favourable balance of power, not triggering a military confrontation.

India faces a dilemma. On the one hand, the geopolitical stability suggested by a KMT government means greater economic opportunities for India to engage Taiwan. Compared to Japan, South Korea and Singapore, our bilateral trade and investment with Taiwan is negligible. The country accounts for one per cent of India’s foreign trade. At 0.03 per cent of the total foreign direct investment in India, Taiwan ranks below countries like Chile and Turkey. Bilateral trade agreements can help, but only if domestic reforms make India relatively more attractive as an investment destination.

On the other hand, a Beijing less preoccupied with issues in its backyard will find it easier to project power elsewhere, including against India.

Geoeconomic opportunities are, thus, stacked against geopolitical risks. So unless New Delhi uses the space created by Saturday’s elections to rapidly scale up economic ties, India will have little upside from Ma’s success.
Copyright © 2012. Business Standard. All Rights Reserved. [Business Standard]

The Asian Balance: Assessing India’s East Asian engagement

Geoeconomics is the key to the seas East of Singapore

This was published in yesterday’s Business Standard.

The Asian Balance turns one today. It had promised to “devote itself to chronicling and interpreting the unfolding geopolitics of East Asia. It will be an unabashed advocate of Looking East far beyond the Straits of Malacca”. If anniversaries are a good time for some reflection, recent events make it even more necessary.

I had argued that three factors would shape the Asian balance. First, nuclear deterrence would shift the India-China context away from direct military conflict along the disputed land borders to theatres in and around the Indian Ocean. Second, the small- and medium-sized countries of East Asia would look towards India to help them counter the pressures arising from China’s geopolitical assertiveness. Third, the whole effort to create “one workable grouping (such as the East Asia Summit) is premised on the unfounded hope that a powerful China will play by the rules it promises to”.

It is not uncommon to hear Indian commentators lament how China is expanding its presence in countries traditionally considered close to India, how it has hardened its posture on the border dispute, and how it continues to prop up the Pakistani military-jihadi complex. New Delhi could do little about much of this because, by and large, it lacks direct levers. The structural geopolitics of the subcontinent leads to our neighbours welcoming an outside power to balance India.

Seen from the confines of a subcontinental mindset, New Delhi appears to have few options between resigned hand-wringing and reckless aggressiveness, both accompanied by rhetorical frenzy. But if you realise that the game board of the raja-mandala is global, New Delhi doesn’t look that helpless any more. Continue reading “The Asian Balance: Assessing India’s East Asian engagement”