REGIONAL TENSIONS: Show of strength
North Korea dominates the headlines, but other geopolitical tensions in Asia undermine the development of trade and business relations
Anyone looking at East Asia from outside might be forgiven for wondering just what is truth and what is fiction in the region: Japan, China and Korea apparently close to confrontation over territorial disputes? Or three neighbours sitting politely around a table and discussing a trilateral free trade agreement (FTA)?
The answer is that both represent the reality of the situation: East Asias leading powers are not at war (yet, at least) but neither are they at peace with one another. The bigger question, say some, is how long can this precarious balance between relative peace and confrontation be maintained?
Policymakers will need to be very careful to avoid political tensions in the region spilling over into the economic arena. These tensions have already harmed Sino-Japanese economic ties. The economic dimensions of the dilemma often escape attention as they are overshadowed by more dramatic reports of Chinese, Japanese and South Korean leaders hurling claims and counter claims about just which of their countries owns isolated islands or stretches of sea.
Tensions flared last year when then Japanese prime minister Noda nationalized the Senkaku Islands in the East China Sea, to which Japan and China (as well as Taiwan) lay claim. This led to riots in several Chinese cities, which left Japanese property there damaged and Japanese citizens and businessmen in a state of shock. Tensions reached a menacing new pitch when Chinese fighter jets reportedly locked on their radar to patrolling Japanese jets close to the Senkaku Islands a move reminiscent of when a Chinese trawler bumped Japanese coastguard vessels in the area in 2011, but potentially much more dangerous.
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Tensions rose yet again toward the end of April when a flotilla of boats carrying some 80 Japanese nationalists approached the Senkaku Islands, further straining Tokyos fraught relations with its Asian neighbours. The boats were shadowed by at least 10 Japanese Coast Guard vessels, while three Chinese government surveillance ships moved near the islands, and China declared the act to be illegal.
Matters were further exacerbated by Japanese prime minister Shinzo Abes present of a ceremonial pine tree to Tokyos Yasukuni Shrine where the names of so-called Japanese war criminals are enshrined, and by the visit of three members of the Abe cabinet together with many other MPs to the controversial shrine to pay homage. South Korean foreign minister Yun Byung Se on April 22 cancelled a scheduled visit to Japan over the Yasukuni visits.
Japan and South Korea too have experienced recent confrontation, at least at the diplomatic level, over who owns the disputed Takeshima islets, also in the East China Sea. And, China has had repeated and heated exchanges with some of its south-east Asian neighbours over other tiny islets in that region.
At the root of this problem lies, in part, the fact that ownership of undersea resources such as natural gas and oil (not to mention valuable fishing grounds) is at stake. But a deeper-rooted factor is the growing power of China in East Asia and what some see as US attempts to contain that power. Just as things were becoming hot enough to make global headlines, two things happened to deflect attention from the tense situation in East Asia: first was a change of top leadership in Japan, China and South Korea (more or less at the same time), and second was a renewed outburst of tantrums on the part of North Korea.
There are new regimes in China, Japan and Korea, a senior official from the ADB who wanted to remain anonymous says. Before the elections they had to take a strong position to build votes, though since then they have become a little more cautious. But if for domestic political reasons they become harder in their positions, things could escalate. The three leaders all want to prove that they are strong, and things could go quite sour.
Similar sentiments were expressed by veteran politician and former leader of the Democratic Party of Japan Ichiro Ozawa, who told Emerging Markets: I am hoping that the situation will not lead to some kind of contingencies on the front lines between Japan and China and Japan and Korea actual accidents or incidents between the two countries.
Damage has already been done at the economic level, in that Japans exports to China have seen a downturn, helping to push Japans overall trade balance into the red in 2012, while China has slipped back behind the US as Japans principal export source. Meanwhile, Sino-Japanese investment exchanges (not to mention overall relations) have also suffered a setback.
Yet, in the midst of all this, Japan, China and South Korea began negotiations in Seoul at the end of March on a trilateral trade agreement a prospect that has eluded them for years, or even decades. This looked like a triumph of crisis management. It is a very good and positive sign that the three countries have agreed to launch official negotiations, a Japanese foreign ministry official said, although agreement to negotiate the pact was first reached in 2009.
Almost in the same breath as welcoming the start of the trilateral talks, Japanese prime minister Shinzo Abe announced that the US had agreed to Japans participation in negotiations to expand the ambitious 11-nation economic partnership agreement known as the Trans-Pacific Partnership or TPP, which includes key Asia-Pacific powers but which at this stage at least excludes China and Indonesia among others. The TPP has drawn fierce criticism from Japanese agricultural lobbies, but opposition to it goes wider. I am [cautious] about the TPP, Japans former vice finance minister for international relations Eisuke Sakakibara tells Emerging Markets. We should be somewhat neutral at this moment, he suggests. Asia is already integrating, centring around China, and Japans position is very delicate. In national security, the US is Japans ally, but as far as the economy is concerned, our biggest partner is China, and we have to balance that. Jumping onto the TPP and giving the impression that we are joining a US initiative may be misinterpreted by countries like China and Hong Kong and others.
Some fear that the TPP could drive a wedge even deeper into relations between Japan, China and South Korea at a time when territorial and other issues are already a source of growing concern. The TPP and the Japan-China-South Korea FTA represent intersecting spheres of influence and, as such, the two initiatives may prove to be incompatible, it is argued.
Ambassador-at-large to Singapores foreign affairs ministry Tommy Koh suggested in Tokyo recently that Asean (the Association of South-east Asian nations) and the so-called 10 plus Six nations (Asean, Japan, China, South Korea, India, Australia and New Zealand) should try to conclude a Regional Comprehensive Economic Agreement (RCEP), which would be one of the largest free trade areas in the world.
This does not contradict what we are trying to do in Apec [the Asia-Pacific Economic Cooperation forum] in negotiating a Free Trade Area of the Asia-Pacific (FTAAP), Koh said. Remembering World War II, we dont want the Pacific ever to be divided again, and the link to the US is through Apec [Asia Pacific Economic Cooperation]. This is economically and strategically important, and this is why Singapore is so pleased that Japan has decided to join the TPP.
But the TPP appears likely to move on a faster track than such grand regional initiatives as RCEP or FTAAP or even than the proposed trilateral accord involving Japan, China and South Korea. Meantime, tensions among the three key powers could escalate again in the absence of any institutional framework for East Asian cooperation beyond US intermediation.
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