PacNet #31 – The Structural Limits of the Supply Chain Resilience Initiative

As a hub of global economic activity and great power tensions, the Indo-Pacific is home to an increasing number of minilateral arrangements shaping the future of the region. Groupings like the Quadrilateral Security Dialogue (Quad), as well as the Japan-America-India, Australia-Japan-India, and France-Australia-India trilaterals demonstrate this trend. The Supply Chain Resilience Initiative (SCRI), launched in April 2021 and complementing the Australia-Japan-India trilateral, is the latest such venture.

China’s deep integration in the international financial system and status as “factory of the world” make global supply chains unsustainably China-centric. COVID-19 revealed many states’ over-dependence on China-centered value chains, and the SCRI seeks to reconfigure global supply chain networks to overcome such vulnerabilities.

The SCRI seeks to ensure global supply chains remain resilient to future “black swan” events, such as pandemics and geopolitical tensions. With several states prioritizing supply chain risk diversification, the SCRI can also further Indo-Pacific economic security dialogue between like-minded nations. Importantly, the SCRI can help balance against China’s rapidly expanding influence, including through the Belt and Road Initiative.

Yet, despite its merits, the SCRI faces considerable structural limitations.

Firstly, although primarily a geo-economic mechanism, the SCRI risks losing focus amid the intensifying regional power rivalry. The initiative is a product of strategic necessity brought about by the pandemic, yet this emphasis on supply chain management is frequently ignored in media and scholarship in favor of strategic positioning vis-a-vis China. Yet, like Japan’s Expanded Partnership for Quality Infrastructure and India’s Act East Policy, the SCRI is not necessarily an anti-China venture.

China-dependent supply chains are a major concern for both smaller and major powers across many critical sectors, including essential pharmaceutical products, food, and industrial raw materials. However, the SCRI does not aim to entirely re-route existing supply chains; this would require complete economic decoupling from China, an unfeasible (and undesirable) goal considering Beijing’s economic clout. Instead, it seeks to build alternative, resilient supply chains to reduce over-dependency, diversify risk, and enhance ability to absorb future market disruptions. Rather than isolating China, the aim is to ensure national economies can withstand adversity. The focus on enhancing cooperation with like-minded nations is drawn on the imperative of building “a free, fair, inclusive, non-discriminatory, transparent, predictable and stable trade and investment environment.” The focus on inclusivity implies openness to dialogue (or participation) with all nations committed to similar ideals—even China.

Secondly, the SCRI remains far-fetched, even overly ambitious. Despite their broad-based synergy on China (or matters relating to China), the main proponents of the SCRI—Australia, India, and Japan—have gaps in their global multilateral practices, including trade and economic outlooks. This will limit the progress of the SCRI. For instance, Japan’s reluctance to support the expansion of the G7 to include India and Australia highlights how national interest considerations supersede any prospects of regional cooperation. Japan is a trading economy, and supply chains are critical to its growth. This is not true for India, which prioritizes manufacturing and innovation, even while aspiring to enhance integration with other economies before it can emerge as a trading nation. These differences could impact the SCRI’s direction and the importance each state gives it.

Thirdly, no clear vision currently exists among SCRI founders on how to shape their initiative. To succeed, a clear plan or charter is vital. The lack of a guiding document risks hampering cooperation, as has been the case with the Quad and Quad-plus, which has only picked up steam over the past year amid increased tensions with China. A similar problem emerged with the Asian Infrastructure Investment Bank and Regional Comprehensive Economic Partnership. Although India and Australia became AIIB members, Japan and the United States opposed it. With RCEP, Japan and Australia could not continue engaging (or supporting) India, displaying a lack of coordination and resulting in New Delhi’s withdrawal from this mega-trade deal.

These examples show the need for a common understanding, agreed framework, and concentrated dialogue to shape and implement the initiative. A charter would be useful in laying down expectations and requirements for the SCRI. As founding members consider the SCRI’s expansion “based on consensus” and acknowledge the importance of business and academia in further developing it, a charter could be critical in coding and committing to an “inclusive” outlook. A formal document would also mitigate criticisms that the initiative is a cartel or “anti-China,” potentially opening the door to induction for Beijing (or even to countries aligned strongly with Beijing) and allowing the Australia-Japan-India trilateral a rulebook to regulate China’s actions.

Fourthly, the SCRI remains limited to its founding members. With its focus on recalibrating global supply chains, expansion to include the United States must be explored. This would make the SCRI a derivative of the Quad, strengthening the Indo-Pacific concept and furthering their supply chain goals. President Biden’s recent comprehensive supply chain review outlined Washington’s need to build “resilient, diverse, and secure” supply chains; SCRI integration could be a productive move forward.

Similarly, the SCRI must consider full/partial participation of key economies and economic blocs—including ASEAN, the European Union (especially France, given its Indo-Pacific focus), and the United Kingdom. Several such entities, including the United States and ASEAN, have sought to reconfigure supply chains to reduce dependence on China and increase resiliency, but made no concerted effort in this direction. While the SCRI might be an Asian exercise, its ambition to create diverse, expansive, inclusive, and resilient supply chains mandates involvement by other major and middle-ranked economies everywhere. Moreover, the participation of technologically advanced actors beyond Asia would prove crucial given the SCRI’s focus on digital technologies. 

The SCRI’s success will depend on inroads it can make with ASEAN. With Australia-Japan-India at its core, the SCRI promotes inclusivity and multipolarity, but also seeks to build Asia-driven (or Indo-Pacific-driven) supply chains. Japan and India are key East Asian and South Asian economic powers; Australia is a major Indo-Pacific actor closely connected to Asia. In relative comprehensive national power, the Lowy Institute’s 2020 Asia Index placed Japan third in the region, India fourth, Australia sixth, and the United States first (with China a close second). Connecting with ASEAN will be economically lucrative and promote the SCRI’s “Asian” vision.

Despite its merits, the SCRI is structurally limited right now. Yet with economic transformation and post-pandemic recovery shaping regional power distribution, the expectations for the SCRI are immense. To meet expectations, the Australia-Japan-India trilateral must acknowledge the challenges and shape the initiative adequately to overcome them.

Dr. Jagannath Panda (jppjagannath@gmail.com) is a Research Fellow and Centre Coordinator for East Asia at the Manohar Parrikar Institute for Defence Studies and Analyses, New Delhi. Dr. Panda is the Series Editor for “Routledge Studies on Think Asia.”

PacNet commentaries and responses represent the views of the respective authors. Alternative viewpoints are always welcomed and encouraged. Click here to request a PacNet subscription.

PacNet #24 – Comparative Connections Summary: May 2021

REGIONAL OVERVIEW
CHANGE IN STYLE, CONTINUITY IN ASIA POLICY
BY RALPH COSSA, PACIFIC FORUM & BRAD GLOSSERMAN, TAMA UNIVERSITY CRS/PACIFIC FORUM
Quadrennially, we write to assure readers that there will be more continuity than change as a new foreign policy team takes office. Globally, this would not be the case this year. In its first few months, the Biden administration made 180-degree turns on issues such as climate change, World Health Organization membership, the role of science in the battle against COVID-19, immigration, and the Iran nuclear agreement. In our region, however, there has been more continuity. The Trump administration’s Indo-Pacific strategy focused on the Quad—the informal but increasingly structured grouping of Australia, India, Japan, and the US—and the Biden administration has doubled down on this effort, conducting the first (virtual) Quad summit. It has largely continued the “cooperate when we can but confront when we must” approach toward China. And while Trump appeared to have disdain for US alliances, every national security document from his administration underscored the central role US alliances played in its Asia strategy.

US-JAPAN RELATIONS
SUGA AND BIDEN OFF TO A GOOD START
BY SHEILA A. SMITH, COUNCIL ON FOREIGN RELATIONS & CHARLES MCCLEAN, HARVARD UNIVERSITY
The early months of 2021 offered a full diplomatic agenda for US-Japan relations as a new US administration took office. Joe Biden was sworn in as the 46th president of the United States amid considerable contention. Former President Donald Trump refused to concede defeat, and on Jan. 6, a crowd of his supporters stormed the US Capitol where Congressional representatives were certifying the results of the presidential election. The breach of the US Capitol shocked the nation and the world. Yet after his inauguration on Jan. 20, Biden and his foreign policy team soon got to work on implementing policies that emphasized on US allies and sought to restore US engagement in multilateral coalitions around the globe. The day after the inauguration, National Security Advisor Jake Sullivan reached out to his counterpart in Japan, National Security Secretariat Secretary General Kitamura Shigeru, to assure him of the importance the new administration placed on its allies. The COVID-19 pandemic continued to focus the attention of leaders in the United States and Japan, however.

US-CHINA RELATIONS 
CONTINUITY PREVAILS IN BIDEN’S FIRST 100 DAYS
BY BONNIE GLASER, GERMAN MARSHALL FUND OF THE US & HANNAH PRICE, CSIS
In its final days, the Trump administration took more actions to impose costs on China for its objectionable policies and to tie the hands of the incoming Biden team. The first 100 days of President Biden’s administration revealed substantial continuity in policy toward Beijing, with strategic competition remaining the dominant feature of the US-China relationship. Senior Chinese officials delivered speeches that pinned blame entirely on the US for the deterioration in bilateral ties. A round of combative, yet serious, talks took place between senior US and Chinese officials in Anchorage, Alaska. The US added new sanctions on Beijing for undermining Hong Kong’s autonomy. In coordination with its allies, Washington imposed sanctions on Chinese individuals deemed responsible for carrying out genocide and crimes against humanity in Xinjiang. Steps were taken by the US to demonstrate “rock-solid” support for Taiwan in the face of stepped-up Chinese coercion. Cooperation on climate change was launched with John Kerry’s visit to Shanghai to meet with his counterpart Xie Zhenhua, and Xi Jinping’s participation in the US-led Leaders Summit on Climate.

US-KOREA RELATIONS
HOPE SPRINGS ETERNAL
BY MASON RICHEY, HANKUK UNIVERSITY & ROB YORK, PACIFIC FORUM
In the first four months of 2021—the first three and a half of a Biden administration focused on domestic progress and COVID-19 vaccinations—US relations with the Korean Peninsula assumed familiar contours after four years of an unorthodox Trump administration. The US and South Korea quickly reached a military burden-sharing agreement and pledged cooperation in a variety of areas, although the regular differences of opinion lurk under the surface regarding how closely Seoul should work with both North Korea and Japan. The US-China rivalry remains a shadow over the Asia-Pacific security and political economy situation, complicating South Korea’s regional hedging strategy. Finally, North Korea’s nuclear program advanced apace, US and South Korean attempts to open dialogue were rebuffed, and the Biden team’s North Korea policy review will not endear it to Pyongyang.

US-SOUTHEAST ASIA RELATIONS
ASEAN CONFRONTS DUAL CRISES  
BY CATHARIN DALPINO, GEORGETOWN UNIVERSITY
The Feb. 1 coup in Myanmar dealt a serious blow to the ASEAN diplomatic order and presented the incoming Biden administration with its first major policy challenge in Southeast Asia. More profoundly, the coup set into motion a political and humanitarian crisis that has pushed Myanmar into an economic free fall. The imposition of Western sanctions gave China and Russia an opening to strengthen ties with the Tatmadaw. Myanmar was an extreme example of political turmoil, but the instability surrounding Thailand’s anti-regime and anti-monarchy movement persisted into the new year. In January, Vietnam embarked upon a more orderly political transition through the 13th National Party Congress, resulting in a leadership structure focused on ensuring stability, both external and internal.

CHINA-SOUTHEAST ASIA RELATIONS
BEIJING’S ADVANCES COMPLICATED BY MYANMAR COUP AND US RESOLVE
BY ROBERT SUTTER, GEORGE WASHINGTON UNIVERSITY & CHIN-HAO HUANG, YALE-NUS COLLEGE
Beijing confidently forecast continued advances in high-priority efforts promoting regional economic integration, ASEAN’s prominence as China’s leading trade partner, as well as strengthening supply chain connections disrupted by the pandemic and US trade and economic restrictions. Ever-closer cooperation to counter COVID-19 saw Chinese pledges add to its leading position providing more than 60% of international vaccines to Southeast Asian countries. Nevertheless, the unexpected coup and protracted crisis in Myanmar headed the list of important complications. The incoming Biden administration showed no letup in US-led military challenges to China’s expansionism in the South China Sea, while strong high-level US government support for the Philippines in the face of China’s latest coercive moves supported Manila’s unusually vocal protests against the Chinese actions. Beijing also had difficulty countering Biden’s strong emphasis on close collaboration with allies and partners, seen notably in the first QUAD summit resulting in a major initiative to provide 1 billion doses of COVID vaccines for Southeast Asia and nearby areas. The effectiveness of Chinese vaccines was now questioned by Chinese as well as foreign specialists and Beijing’s domestic demand was growing strongly, slowing donations and sales abroad.

CHINA-TAIWAN RELATIONS
TAIWAN PROSPERS, CHINA RATCHETS UP COERCION, AND US SUPPORT REMAINS “ROCK-SOLID”
BY DAVID KEEGAN, JOHNS HOPKINS SCHOOL OF ADVANCED INTERNATIONAL STUDIES & KYLE CHURCHMAN, JOHNS HOPKINS UNIVERSITY
For the leadership of Taiwan, the significance for Taiwan’s relationships with the US and China of the end of the Trump administration and the arrival of the Biden administration formed the defining concern as 2021 began. Taiwan welcomed two steps that the Trump administration took in its waning days: announcing a visit to Taiwan by the US ambassador to the UN (even though it was later cancelled) and repudiating the longstanding Taiwan Contact Guidelines, which was widely seen in Taiwan as overly restrictive. Taiwan’s anxieties regarding the Biden administration were quickly allayed, as incoming senior officials repeatedly called US support for Taiwan “rock solid” and issued new far less restrictive Guidelines. Taiwan also benefited from unusually direct expressions of support from Japan and other international partners.

NORTH KOREA-SOUTH KOREA RELATIONS
THE SOUND OF ONE HAND GIVING
BY AIDAN FOSTER-CARTER, LEEDS UNIVERSITY, UK
As in 2019-20, inter-Korean ties remained frozen, other than a rare lawsuit. Revelations that in 2018 Moon Jae-in’s government had pondered building the North a nuclear power plant caused a brief furor. Seoul’s propaganda balloon ban backfired, prompting widespread criticism—but no thanks from Pyongyang, which was also unimpressed by scaled-down US-ROK war games. North Korea tested its first ballistic missile in nearly a year, amid concerns of a new arms race; some analysts deemed the South culpable, too. Kim Jong Un’s sister Kim Yo Jong fired four verbal volleys, mostly insults. Another undetected defector highlighted failings in ROK border security. MOU Lee In-young was ubiquitous and loquacious, but scattergun in the causes he championed. Moon’s government remained reticent, or worse, regarding DPRK human rights abuses. With just a year left in office, and notwithstanding rare criticism of the North by ministers, Moon was expected to double down on engagement despite Pyongyang’s lack of reciprocity.

CHINA-KOREA RELATIONS
CHINA-KOREA RELATIONS POISED FOR RECOVERY DESPITE INTENSIFIED CONFLICT ON SOCIAL MEDIA
SCOTT SNYDER, COUNCIL ON FOREIGN RELATIONS & SEE-WON BYUN, SAN FRANCISCO STATE UNIVERSITY
China’s relations with North and South Korea gained momentum in the first four months of 2021. China-North Korea relations were propelled by an exchange of messages between North Korean leader Kim Jong Un and Chinese President Xi Jinping around North Korea’s successful convening of the Worker’s Party of Korea’s (WPK) Eighth Party Congress, the appointment of former North Korean Trade Minister Ri Ryong Nam as North Korea’s new ambassador to China, and another round of messages in March that emphasized the importance of close relations. In a Jan. 21 Cabinet meeting, South Korean President Moon Jae-in pledged to develop relations with China to new heights, and in a Jan. 26 telephone call with Moon, Xi expressed support for Korean denuclearization and joint development of China-South Korea relations. China and South Korea held consultations on maritime enforcement cooperation, defense lines of communication, health security, and free trade negotiations.

JAPAN-CHINA RELATIONS
THE GLOVES COME OFF
BY JUNE TEUFEL DREYER, UNIVERSITY OF MIAMI
After several years of seeking to counter each other while insisting that their relations were at a recent best, Tokyo and Beijing became overtly contentious. A major event of the reporting period was China’s passage, and subsequent enforcement, of a law empowering its coast guard to take action, including through the use of force, to defend China’s self-proclaimed sovereignty over the Japanese administered Diaoyu/Senkaku Islands in the East China Sea. Heretofore reluctant to criticize Beijing over its actions in Xinjiang and Hong Kong, Japanese Foreign Minister Motegi Toshimitsu finally did so in April, and pledged to work with the United States to resolve China-Taiwan tensions. Chinese Foreign Minister Wang Yi warned that a continuation of such moves would cause Chinese-Japanese ties to hit bottom and threatened retaliation for any interference on Taiwan. No more was heard about a long-postponed Xi Jinping visit to Japan.

JAPAN-KOREA RELATIONS
DIFFICULT TO DISENTANGLE: HISTORY AND FOREIGN POLICY
JI-YOUNG LEE, AMERICAN UNIVERSITY
Unsurprisingly, historical issues proved difficult to disentangle from other foreign policy issues in Japan-South Korea relations, which remained at the “worst level since the normalization” in the first four months of 2021. The Seoul Central District Court’s ruling on Jan. 8 that the Japanese government should pay damages to victims of sexual slavery during World War II set the tone for contentious relations at the beginning of the year. While the Moon Jae-in administration made gestures to mend ties, the Suga administration maintained that South Korea should take concrete measures to roll back the 2018 South Korean Supreme Court ruling on Japanese companies requiring them to compensate wartime forced laborers. Export restrictions levied by Japan against South Korean companies in 2019 remain in place, while the case is with the World Trade Organization after South Korea reopened a complaint in 2020 that was filed and then suspended in 2019.

CHINA-RUSSIA RELATIONS
EMPIRE STRIKES BACK AT MOSCOW AND BEIJING
BY YU BIN, WITTENBERG UNIVERSITY
For Moscow and Beijing, the changing of the guard in the White House in January 2021 meant no reset of ties with Washington. Instead, the newly inaugurated Biden administration turned the screws on both China and Russia by reinvigorating alliances, firming up sanctions, and prioritizing force deployment, particularly to the Indo-Pacific region. In contrast to Biden’s multifaceted diplomatic offensive, China and Russia seemed passive, if not inactive, both in terms of their bilateral ties and their respective relations with the US. Top Russian and Chinese diplomats met in person just once in the first four months of 2021 in the middle of sharply escalated tensions across the Taiwan Strait and in East Ukraine. Meanwhile, Beijing and Moscow waited to see if the transition from Trumpism would lead to a brave new world (“new concert of powers”), a grave new world of Kissingerian “great games” in the era of WMD plus AI, or something in between.

JAPAN-SOUTHEAST ASIA RELATIONS
A DIPLOMATIC “NEW NORMAL” IN THE INDO-PACIFIC REGION?
BY KEI KOGA, NANYANG TECHNOLOGICAL UNIVERSITY
Japan-Southeast Asia relations were relatively stable, despite COVID-19, as summarized by three trends: emphasizing multilateral actors; prioritizing enhancement of bilateral relations with two countries (Indonesia and Vietnam); and the synthesis of Japan’s Free and Open Indo Pacific “vision” (FOIP) and ASEAN’s ASEAN Outlook on the Indo-Pacific (AOIP). Japan and Southeast Asian states managed to achieve tangible cooperation, as illustrated by the establishment of the ASEAN Centre for Public Health Emergencies and Emerging Diseases (ACPHEED). Yet, strategic dynamics among Southeast Asia, Japan, and the United States are shifting because of changes in Japanese and US political leadership. Japan, the most reliable partner for Southeast Asia in the Trump era, seemingly faced a relative decline in the importance attached by Southeast Asia because of the United States’ renewed commitment to the region. In the context of this new diplomatic reality, the foremost challenges that Japan and Southeast Asia will likely face in 2021-2022 are Myanmar and ASEAN Centrality in the Indo-Pacific.

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PacNet #16 – Biden Seeking Middle Ground on China Policy

President Joseph Biden has long collaborated with colleagues with opposing views in the interest of achieving important policy accomplishments of broad national interest. In the process, he adjusts his positions on key issues, finding a middle position among competing pressures. For instance, Biden did this in deliberations among clashing Democratic members of Congress in trying to gain congressional approval of the $1.9 billion coronavirus relief plan.

Biden also demonstrated this tendency in adjusting his recent position on China. Candidate Biden’s rhetoric on China throughout active campaigning of 2019 was in line with other Democratic candidates in giving only secondary attention to China. The rhetoric contrasted sharply with the dramatic hardening of US policy carried out by the Trump administration, with bipartisan congressional support, at that time. Biden at first dismissed the danger posed by Beijing and later stressed that the United States had little to worry about as it was much more powerful than China. Ambivalent public opinion about China at this time suggested that the episodic disapproval of Chinese government practices by Biden and other Democratic Party candidates was an appropriate approach. Senior advisor Jake Sullivan agreed, judging that the “inside the beltway” discourse about the acute danger posed by China was politically unattractive and not shared by the American public. As public opinion at first gradually and then dramatically turned against the Chinese government in 2020 and the Republican Party focused on criticizing candidate Biden as soft on China, Biden turned sharply against China and attacked Trump policies as counterproductive and ineffective.

Seeking middle ground on China in 2021—key determinants

China policy is now under review by the Biden administration with final decisions likely coming only after consultations with US allies and partners and congressional decision makers, and following administration actions on more important domestic priorities. Going forward, determinants influencing how President Biden will adjust his approach and find an appropriate middle ground on China push policy in different directions. On one side are strong pressures to remain firm in the face of China’s many challenges to US interests; on the other side are determinants favoring some moderation of existing pressures. Public opinion, partisan politics and bipartisan congressional resolve along with China’s uncompromising behavior head the list of determinants favoring a sustained tough administration approach to China. US business interests and those of allies and partners along with practical need for cooperation with China on important issues argue for moderation toward China.

Sustain Toughness

Public Opinion. Longstanding ambivalence in US public opinion about China seen as late as 2019 has been replaced by overwhelming disapproval of the Chinese government in 2021. The widely used Gallup annual poll measuring US approval and disapproval of foreign governments showed unprecedented disapproval of China’s government unseen since the dark days of the Cold War. It surpassed US disapproval of Vladimir Putin’s Russia. Only North Korea and Iran had higher disapproval ratings.

Concurrent polling by the Pew Research Center also showed overwhelming American disapproval of the Chinese government, with 82% not having confidence in President Xi Jinping. The polls illustrated rising American angst over Chinese challenges to the United States on eight issues involving human rights, economic practices, and security matters. Americans were seen in agreement against Chinese human rights and economic practices, but there were important partisan divides.

Partisan divisions; continuing bipartisan congressional resolve against China’s challenges. The Pew findings showed strong partisan division over the priority of US countermeasures against China. 63% of Republicans but only 36% of Democrats favored giving a top priority to long term US efforts to limit China’s power and influence. Recent polling by the Chicago Council on Global affairs went further in underlining a partisan divide, showing that a majority of Democrats favored a policy of friendly cooperation and engagement with Beijing.

The Pew findings also showed a continuing strongly partisan divide since the George W Bush administration in viewing the president’s foreign policy effectiveness, with the out-of-power party supporters viewing the president negatively and the in-power party supporters viewing the president positively. Significantly, overall public confidence in President Biden doing the right thing in foreign affairs was comparatively low at 60%; President Barack Obama’s level at the start of his first term was 74%. And the level of confidence in President Biden doing the right thing on China issues was lower still at 53%, lower than in other areas of foreign policy.

Meanwhile, Republicans seem determined to defend the Trump government legacy of American countermeasures against Chinese challenges. Trump has been consistent in taking a hard line on China for almost a year and he remains a major force in American politics. The annual American Conservative Union CPAC conference in February targeted Biden’s China policy; the 120 member House of Representatives Republican Study Committee sharply condemned Biden’s China policy. Continued bipartisan congressional accord on sustaining US resolve on China showed in hearings of Senate Intelligence Committee and Senate Foreign Relations Committee considering senior administration leaders seeking Senate approval.

Chinese government behavior. Beijing remains uncompromising in the face of US countermeasures. It conducts egregious human rights violations in Xinjiang, imposes authoritarian rule in Hong Kong and targets Australia, India and Taiwan for special coercive treatment. Ever increasing are Chinese military advances to deter and if needed destroy American forces; closer collaboration with Putin’s Russia against US interests; China’s three-decade long efforts using state directed development polices to plunder foreign intellectual property rights and undermine international competitors, fundamentally weakening the free trade economic system; using gains from state directed economic practices to support ambitions to lead future high-technology industries, displacing the United States; exploiting economic dependencies via the Belt and Road Initiative and other means; fostering corrupt and/or authoritarian governments against the West; coercing neighbors unwilling to defer to China’s ever increasing demands; employing widespread influence operations abroad using clandestine means; and disregarding international law and accepted diplomatic practices.

Moderation

US business has been publicly low keyed in registering its concern over the costs to the American economy coming from existing US restrictions and tariffs targeting adverse Chinese economic practices and warning against perceived dramatic costs associated with further US efforts to “decouple” the US from China’s economy. The business interests of many US allies and partners share these broad concerns. And the governments of allies and partners generally oppose extreme measures undertaken in the last year of the Trump government arguing for ideologically based systemic opposition to the Chinese regime. They favor more nuanced approaches that the Biden government will need to consider in its in-depth consultations with allies and partners. Meanwhile, the administration’s perceived need to work cooperatively with China on climate change, the Iran nuclear agreement, and other matters may involve some easing of US pressures against China.

Clashing middle grounds?

President Biden finding a middle ground with US, allied and partner interests in adopting a more moderate policy toward China appears to run up counter to the president’s efforts to find a middle ground with US public preferences and Republican decision makers to counter China’s uncompromising challenges to the United States. There is no clear path forward on how to avoid or resolve this prospective dilemma.

Robert Sutter (sutterr@gwu.edu) is Professor Practice of International Affairs at George Washington University, USA. A major revision of his assessment of Chinese foreign policy is Chinese Foreign Relations: Power and Policy of an Emerging Global Force: Fifth Edition (Lanham MD: Rowman & Littlefield 2021).

PacNet commentaries and responses represent the views of the respective authors. Alternative viewpoints are always welcomed and encouraged. Click here to request a PacNet subscription.

PacNet #12 – China Policy from Trump to Biden: More Continuity than Change

The following is the first in a two-part series on the Biden administration’s policy toward the People’s Republic of China. Click here for part two on the expected changes from the Trump administration.

Media coverage of President Joe Biden’s first months in office has concentrated on the many areas where he has broken sharply with his predecessor. In the first 72 hours alone, executive orders were signed stopping the American withdrawal from the World Health Organization, rejoining the Paris climate accord, canceling the Keystone XL pipeline, reversing the “Muslim ban,” and halting construction on the southern border wall. One area that looks increasingly like it will exhibit greater continuity than change, however, is US policy toward China, which has emerged as a near-peer competitor on the world stage far sooner than most anticipated. In fact, while chasms remain between Democratic and Republican perspectives on many foreign policy issues—Israel, Iran, Russia, etc.—there seems to be uncommon convergence on the challenge posed by China, at least substantively if not stylistically.

The hardened approach among Democratic policymakers has been driven by disillusionment with China from the Obama years. In a recent BBC interview, Evan Medeiros, who served as President Obama’s China director on the National Security Council, conceded that he and other Obama-era China experts had misjudged how adversarial Chinese leader Xi Jinping would be in comparison to his predecessor:

“It’s important to keep in mind that the first Chinese leader that we had to deal with, Hu Jintao, was a very, very different leader than Xi Jinping: he was far less ambitious, he was far less aggressive, and he was far less willing to accept and tolerate risk and friction externally. So, when I look back at our China policy, I wish that we had recognized quicker how different Xi Jinping was from Hu Jintao and recognized how he was going to take China politically, economically, and strategically in a different direction.”

As President Biden continues looking to former Obama officials to fill national security roles in his administration, the China hands will be carrying this realization with them and appear resolved not to underestimate Beijing again. Following his first conversation with Xi since taking office, Biden warned, “if we don’t get moving, [China is] going to eat our lunch.”

This article will examine some expected areas of continuity with President Trump’s China policy, and a subsequent article will look at some other areas of expected divergence.

In reading the tea leaves on areas of expected continuity, a major one will be an enduring recognition within the administration that a coordinated, whole-of-government effort is necessary to effectively counter China. If China is seeking to erode American influence across a variety of domains, then America cannot respond in a disjointed fashion but must ensure that the full array of cabinet departments and the Intelligence Community are all on the same page and are fully leveraging their resources and authorities. To that end, Axios reported last month that “virtually every team in the [Biden] National Security Council, from technology to global health to international economics, will incorporate China into their work,” calling it as “a concrete example of the ‘whole-of-government’ approach toward China that officials from both the Biden and Trump administrations have supported.” Moreover, the Indo-Pacific team led by Biden’s Asia tsar Kurt Campbell, a former senior Obama administration official with deep expertise on East Asia, “will be the largest regional NSC directorate, a sign of how this NSC is prioritizing China and broader Indo-Pacific issues.” In many ways, this incipient US approach mimics the way Beijing approaches foreign policy, coordinating all elements of the country’s “comprehensive national power”—military forces, economic power, natural resources, scientific expertise, and so forth—to obtain maximum leverage over other countries rather than treating each as a separate domain.

Another expected area of continuity will be a readiness—eagerness, even—to publicly criticize the Chinese government, something earlier administrations had often eschewed out of an omnipresent concern that it might damage bilateral relations. There have been several high-profile examples already in the last month or two.

During his confirmation hearings, now-Secretary of State Antony Blinken concurred with the Trump administration’s assessment that China’s ongoing repression of its Muslim Uyghur population constituted a genocide, emboldening other countries such as Canada to follow suit. In a call to China’s top diplomat in early February, Blinken again criticized Beijing for its ongoing human rights violations in Xinjiang, Tibet, and Hong Kong, and for its reluctance to condemn the Feb. 1 coup d’état in Myanmar. Following China’s Feb. 11 banning of the BBC for its critical coverage of COVID-19 and Uyghur concentration camps, the State Department condemned the move as “part of a wider campaign to suppress free media in China.” We can expect such sweeping criticism to continue as the Biden team seeks to fulfill its commitment to hold the line against the Chinese and begin to reinvigorate Washington’s advocacy for democracy and human rights abroad, especially as new polling reveals historic levels of bipartisan unfavorability among the American people for Beijing.

Perhaps the most significant area of continuity will be on military policy. Late last year, the Defense Department’s annual China Military Power Report said Beijing “has marshalled the resources, technology, and political will over the past two decades to strengthen and modernize the [People’s Liberation Army] in nearly every respect,” and that “China is already ahead of the United States in certain areas.” The PLA has made dramatic improvements in its ability to conduct joint operations, has substantially expanded its overseas footprint, and has developed a suite of advanced missiles that make it significantly riskier for the US to operate close to China’s shores. The Pentagon report also said the PLA Navy had surpassed the US Navy as the largest in the world, with over 300 ships and submarines in operation and many more in production.

All indications are that the Biden team understands the scale of this military threat in the Indo-Pacific and will prioritize the region accordingly. In early February, two US carrier strike groups held simultaneous drills in Chinese-claimed waters of the South China Sea—the first such major exercise in seven months and the first of the new administration—and a destroyer separately conducted a so-called “freedom of navigation operation,” or FONOP, through the Taiwan Strait. These symbolic moves will be followed up by more concrete measures in the coming months and years, like insulating the US Indo-Pacific Command from expected defense budget cuts; in early March, Politico reported that INDOPACOM had asked Congress for almost $50 billion in additional funding this year and was expected to get a favorable response. Biden will also place substantial emphasis on rehabilitating relationships with key military allies in the region, including Australia, South Korea, Japan, and the Philippines, and is reportedly already planning a virtual summit with the Quad later this month. It is less clear whether Washington will maintain the same high level of engagement with Taiwan that was seen during the latter Trump years, as that has been particularly inflammatory to Beijing and the strategic benefits to the US have been unclear.

A final example of continuity between the Trump and Biden administrations will probably be on broad economic policy vis-à-vis China. Some of the more contested Trump policies, such as his unpredictable application of trade tariffs, will almost certainly fall by the wayside, but an emphasis on combatting unfair Chinese trade practices and applying sanctions where necessary will remain, as well as an acute awareness of Beijing’s malign cyber activities. Chinese economic and industrial espionage over the past two decades has been responsible for the theft of key strategic technologies with military applications and has cost the US economy hundreds of billions of dollars, according to a 2018 analysis by the Center for Strategic and International Studies. Once upon a time, American corporations may have been willing to swallow the costs of such activities in the belief that access to Chinese markets would eventually compensate for the losses, but that tradeoff has become less and less tenable as the mirage of eventual full market access has proven elusive.

None of this is to say that Biden’s China policy will be indistinguishable from Trump’s, but for all the reasons outlined above, differences will tend to be more stylistic than substantive. The subsequent article in this series will take a look at some of these areas of expected divergence between the Trump and Biden administrations and their implications for the US-China relationship going forward.

Eric Feinberg (eric.m.feinberg@jhu.edu) is a postgraduate student in the Strategic Studies Department at Johns Hopkins School of Advanced International Studies (SAIS) in Washington and a Young Leader at Pacific Forum in Honolulu. Prior to SAIS, he was a senior Asia analyst at US Special Operations Command Pacific and a military intelligence analyst at US Army Pacific in Honolulu.

PacNet commentaries and responses represent the views of the respective authors. Alternative viewpoints are always welcomed and encouraged. Click here to request a PacNet subscription.

PacNet #9 – The Quad’s Future is Tied to Soft Security

This piece is based on authors’ presentations/views at the SPF NUS-ISAS Joint Seminar on “Institutionalizing the Quad: Can it Seize the Momentum for the Future?” held on January 20, 2021.

There has been much dialogue over the future of the Quadrilateral process (Quad 2.0) involving Australia, India, Japan, and the United States in the Indo-Pacific, with many envisioning a militarization of the Quad or a securitization of the Indo-Pacific through security-centric agreements. Such debates extend to the extreme of proposing an Asian equivalent to NATO in the Indo-Pacific vis-à-vis China.

Outgoing US Secretary of State Mike Pompeo contended in October 2020 that formalizing the Quad could help build a “true security framework” to meet the challenges posed by Beijing. NATO Secretary General Jens Stoltenberg has asserted that the Atlantic Alliance “must become global” and departing US Deputy Secretary of State Stephen Biegun affirmed that some speculative discussions on the prospects of forming an “Indo-Pacific NATO” had taken place on the sidelines of the US-India Strategic Dialogue. Such remarks further fuel discussions of a potential militarized Quad, a grand coalition in the Indo-Pacific to contain an increasingly assertive China.

Notwithstanding the merits of such a debate, it is worth exploring how the Quad can be institutionalized in the region, instead of only instigating a competitive power framework. This holds utmost importance, with new US National Security Advisor Jake Sullivan aiming to “carry forward” the Quad format as a “fundamental foundational” aspect of America’s Indo-Pacific policy, further highlighted with the Biden administration’s recent proposal to hold a leadership summit of Quad members. For more than a decade and a half, the idea of Quad has survived in Indo-Pacific, starting with former Japanese Prime Minister Shinzo Abe’s speech titled “Confluence of the Two Seas” in the Indian Parliament in 2007, which triggered the debate over the Quad process. Since the mechanism’s revival in 2017, Quad member states have held several high-level and high-profile ministerial meetings, symbolizing the significance of the grouping in their foreign outlooks. While Chinese expansionism is the central motivating factor, a lack of commonality over whether to “contain China” or, instead, manage China’s influence and rise remains among Quad members, evidenced by the lack of a joint statement. How can member states institutionalize the Quad process while building a common security framework in the Indo-Pacific?

Above all, an attempt to institutionalize the Quad must be drawn on a practical and soft security framework that can gradually transform into a cohesive security (and, perhaps subsequently, a military) unit, shaped by the changing geopolitical situation. The goal of the Quad process, as it appears in their respective official statements, is to preserve a “rules-based order” in Indo-Pacific; a soft security framework must be drawn on their political, economic and ideological commonality. More importantly, such a framework must have a non-military connotation even though it would imbibe some maritime security features. Alongside such a soft security apparatus, the institutionalization of the Quad will invariably depend on building an exclusive Indo-Pacific identity, drawing its strength from democratic ideas and norms. The Quad is a political process, tied to immense soft and hard security objectives. Therefore, before (or alongside) exercising its military-economic muscles, the Quad must initiate deeper cultural and ideological diplomacy tracks to build political synergy that could eventually—given the right strategic circumstances—translate to a tighter security, and eventually a military, arrangement in the Indo-Pacific. Like NATO, driven not only by the Soviet threat but also to promote European political integration, Quad states must seek to establish solidarity and synergy before militarization.

Extending such a soft power network to further an Asian NATO equivalent entails careful political, economic, strategic, and ideological maneuvering among Quad members, who have had a clear divide in their China policies in the last two decades. In the post-pandemic period all Quad states, including the US, continue to share strong economic or multilateral interactions with Beijing. The latest EU-China Comprehensive Agreement on Investment (CAI) is a reminder that the “China connect” is a strategic reality in regional and global affairs—and Quad countries are no exceptions. Regardless whether the Quad becomes a formalized platform, all member states will need to deal with China in regional and global affairs. Although Australia’s inclusion in the Malabar military exercises undoubtedly strengthens arguments for a securitized (or even militarized) framework in the Indo-Pacific under the aegis of the Quad, Canberra’s addition does not necessarily imply creating a larger regional nexus aimed at managing China militarily. The Quad must have a value-driven approach, having drawn its strength from the “rule of law,” preserving freedom of navigation and aiming to implement democratic ideals with a “free and open” framework.

The Quad states must, firstly, invest in capability development efforts to create multi-layered networks among educational institutions, promote think tank forums in concert with the Indian Ocean Region (IOR) countries, and build scholarships or fellowship opportunities that promote ideological exchanges. Ultimately, the aim must be to build and sustain a stronger Indo-Pacific intellectual chorus challenging authoritarian and unilateral ideals and initiatives. The Quad countries need to promote a model for annual dialogues among think tanks, universities, and thinkers who could establish a platform for enhancing and amplifying such ideals. In this vein, an Indo-Pacific university or defense university in the region, with joint investment by Quad countries, could also boost intellectual exchanges and studies on how to strengthen Indo-Pacific security through coordinated political and economic engagement, while building an identity for the region and boosting purposeful maritime cooperation and effective maritime governance.

For instance, the evolution of BRICS from an abstract assembly to a concrete consortium of Brazil, Russia, India, China, and South Africa illustrates this effect. As a grouping of ambitious rising powers, BRICS has tried to influence global governance debates in its favor, even if India and China are not on the same frequency over a range of matters. More importantly, BRICS has emerged as a cohesive unit to promote the New Development Bank (NDB) as an institution the Indo-Pacific region needs. If Quad states can draw inferences from the BRICS’ model while promoting a rules-based, fair, and equitable banking culture within the Indo-Pacific, it can expedite and form overtures to a maritime nexus and connectivity-focused infrastructure development, eventually boosting and complementing supply chain networks.

The second critical variable for institutionalizing the Quad entails drawing lessons from the post-Cold War era, especially regarding creation of institutions. If China’s belligerence is the biggest motivator for the Quad to strengthen its guard in the Indo-Pacific, then China’s institution-building capabilities should merit equal deliberations and discussions among Quad countries. The gradual evolution and formalization of the Shanghai Cooperation Organization (SCO), from the informal, low-profile Shanghai Five to a well-established multilateral organization, is a successful example of Chinese enterprise in this area. The “Shanghai Five” was meant to address boundary disputes and cross-border terrorism between China and the Central Asian countries. Over time, Beijing systematically expanded the grouping’s canvas to include economic, political, and security objectives, thus building a cohesive multilateral institution in Eurasia. Today, such comprehensiveness has become the hallmark of China’s deepened and broadened security approach, aptly reflected in the SCO charter. Beijing defines security beyond expedient military terms, touching upon critical economic and political domains. To compete with China, let alone build a cohesive military unit to this effect, the Quad members must first find synergy within their own strategic objectives across the spectrum—to expedite a network of intellectual engagement commensurate with their objectives in the region.

Given the onset of a new administration in the White House, and the political uncertainty in Japan owing to its upcoming October 2021 election, the time has come to invest greater thought vis-à-vis the Quad process and guide its intellectual future. Rather than a mechanism aimed only at contesting China, the Quad must emerge as a soft and succinct regional cohesive grouping that promotes a culture of democratic ideals and links intellectual persuasion with the Indo-Pacific architecture to further its acceptance and institutionalization.

Jagannath Panda is a Research Fellow at the Manohar Parrikar Institute for Defence Studies and Analyses, New Delhi. He is also the Series Editor for “Routledge Studies on Think Asia.” 

Ippeita Nishida is a Senior Research Fellow of the International Peace and Security Department at the Sasakawa Peace Foundation (SPF), Tokyo.

PacNet commentaries and responses represent the views of the respective authors. Alternative viewpoints are always welcomed and encouraged. Click here to request a PacNet subscription.

PacNet #8 – Rebooting the UN-US Partnership: Global Goals Require Indo-Pacific Focus

The Indo-Pacific region has seen a rise in political instability in recent years. The Trump administration and China have been at loggerheads, through the WHO, in formulating a global approach to slowing the spread of COVID-19. The region has experienced a rise in human rights violations, evidenced by the bitter treatment of the Rohingya in Myanmar, China’s persecution of Uyghur Muslims in Xinjiang, and authoritarian crackdowns in Thailand and Cambodia. The Indo-Pacific has also witnessed China’s growing assertiveness in the South China Sea, East China Sea, and along the Indo-China border, eliciting a defensive posture from regional powers such as Australia, Japan, and India.

In full view of political and human rights crises in the Indo-Pacific, the UN has remained silent. It has failed to enact reforms to its major organs, such as the Security Council. It has failed to bring meaningful reform to the Human Rights Council, which remains populated by serial violators, including China and Iran, as well as its inability to find its voice on rights violations against Muslim populations in China, Myanmar, and India. The UN has remained “concerned” over India’s recent Citizenship Amendment Act and subsequent Hindu violence toward Muslims, China’s housing of Uyghur Muslims, or the plight of the Rohingya, but has not insisted through Special Procedures that independent investigators gain exclusive access to the most sensitive areas. China, like other autocratic regimes in the region, has repeatedly denied or stalled invitations to UN experts wanting to conduct official visits.

Despite these shortcomings, the incoming Biden administration represents an opportunity to reinvigorate ties between the US and the UN. Doing so could catalyze economic growth and provide stability in the Indo-Pacific. Regionwide, there is no shortage of challenges that need concrete solutions, including institutional reforms—both at the Security Council and the Human Rights Council—and a more robust climate change agenda.

Past and present American administrations have discussed reform at the United Nations, chiefly in the Security Council. Static since 1945, the aging body needs to be made fit for purpose in the modern era. To accomplish this, additional permanent members should be added—with two equally qualified candidates in the Indo-Pacific. India and Japan have lobbied for years with limited support. India has been an active participant in UN peacekeeping operations around the globe and Japan has been a leading contributor of development assistance (ODA) for decades. Their constant presence on the Security Council, combined with changes to veto powers, would add two vital allies capable of defending the international order and keeping the peace. Adding a third new permanent member from Africa would win concessions from the African continent—which has contributed proposals in the past that have received little recognition in the General Assembly. One of the principle strengths of the United Nations is its commitment to the equality of states, vested in Article 2 of the UN Charter. The Security Council is a forum where Great Powers exert influence on global affairs, yet to maintain that influence, the US needs a proactive Security Council that can both provide support to multilateral initiatives and advance its interests, as well as hold human rights violators and autocratic regimes accountable.

On the human rights front, the UN could facilitate reform proposals for the Human Rights Council. The Trump administration walked away from the Council in 2018, with former UN Ambassador Nikki Haley calling the body a “hypocritical and self-serving organization.” The Secretary-General António Guterres and Michelle Bachelet, the UN High Commissioner for Human Rights should advocate the reform of the Council by mandating the norm of taking into account the contribution of potential candidates to the Council, as well as their voluntary pledges and commitments. While the US is sure to return to the Human Rights Council under a Biden administration, it should back a proposal that would help eliminate states with poor human rights records, such as limiting Council seats to just one term or increasing the threshold to win a seat from a simple plurality to a two-thirds majority. Abandoning the Human Rights Council, rather than advocating for its reform is short-sighted thinking—a decision that left American allies in the Indo-Pacific, like Japan and Australia, in the lurch.

Climate change is another area of cooperation where the United Nations can engage with the Biden administration. Biden has already signaled as much by appointing former Secretary of State John Kerry as his climate envoy. While Asia’s economic engine now fuels the global economy, it is responsible for more than 50% of global greenhouse gasses through rapid industrialization. The Indo-Pacific needs to make climate change a higher priority, particularly in light of recent natural disasters. The US should address a number of climate vulnerabilities by dramatically upscaling humanitarian and disaster response exercises, as seen in the Cobra Gold and Tiger Triumph exercises with Thailand and India. Climate change needs to be viewed, including by the US as a security threat. Global temperature changes facilitate seawater rise, create storm surges, and strain fisheries. Climate change pressures put stress on bilateral relations, particularly in ASEAN, which are at risk of violent naval confrontations as a result of competing territorial claims in the South China Sea. The Biden administration would be wise to adopt a coherent national strategy on climate change, a glaring hole in Trump’s anti-science doctrine, which ignored Department of Defense warnings, particularly on the Indo-Pacific in 2019.

A focus on environmental initiatives would not only bolster Washington’s Indo-Pacific Strategy, but other states in the region such as Japan, Australia, and India with Free and Open Indo-Pacific visions and mutual environmental concerns. China need not be excluded from the group; the 2nd Belt Road Forum recently demonstrated Beijing is placing greater emphasis on the environment in BRI projects. Promoting crosswalks through the convening power of the UN can kill two birds with one stone, contributing to climate change cooperation in the Indo-Pacific while moving the China-US rivalry away from a zero-sum approach. The UN should avail itself of this opportunity. The UN could provide cooperation mechanisms to mitigate climate change impacts in the Mekong Delta, the South China Sea and South Asia. Piggybacking on pre-existing initiatives such as the US-Mekong Partnership or Australia’s Partnerships for Recovery in ASEAN and the Southeast Asian region may be a template for expanded multilateral cooperation.

To reinvigorate its partnership, America and the UN must proactively adopt policies that resonate with the Biden administration’s multilateral and internationalist inclinations. Institutional reform, human rights, and climate change cooperation are key areas of synergy in the broader Indo-Pacific.

Mark S. Cogan (mscogan@kansaigaidai.ac.jp) is an associate professor of peace and conflict studies at Kansai Gaidai University in Osaka; and a communications consultant for the United Nations Development Programme (UNDP). Twitter handle:@markscogan.

Dr. Stephen Nagy (nagy@icu.ac.jp) is a senior associate professor at the International Christian University in Tokyo; a distinguished fellow with Canada’s Asia Pacific Foundation; a fellow at the Canadian Global Affairs Institute (CGAI); and a visiting fellow with the Japan Institute for International Affairs (JIIA). Twitter handle: @nagystephen1.

PacNet commentaries and responses represent the views of the respective authors. Alternative viewpoints are always welcomed and encouraged. Click here to request a PacNet subscription.

PacNet #5 – North Korea Doubles Down on a Dead End

The views expressed in this article are those of the authors alone and do not necessarily represent the views of the Korea Society.  

“If something cannot go on forever, it will stop.” The American economist, Herbert Stein, chairman of the Council of Economic Advisors under the Nixon and Ford administrations, made this observation. However, the fundamentally unreformed, immutable North Korea continues to test the limits of Stein’s principle as it enters its eighth decade of what has become a no-exit political and economic drama.

In his report to the Eighth Korean Worker’s Party Congress this past week, North Korean leader Kim Jong Un admitted the country’s previous five-year plan (2016-2020) had failed and laid out a new five-year economic plan. (North Korean economic plans have had a checkered and blurry history. We tally the new plan as the country’s 11th.)

Unfortunately for the people of North Korea, the new plan does not offer a credible framework for overcoming the gale-force headwinds howling down on the North Korean economy. Most likely, North Korea’s economy contracted in 2020 more than any time since the collapse of the Soviet Union in 1991. Sanctions and the COVID border closure with China have sharply cut back both state-led and non-state trade and have crimped the inflow of renminbi. That, coupled with Pyongyang’s measures to wring hard currency from the special donju class of entrepreneurs and financiers, have dried up sources of domestic hard-currency investment, as seen in the shutdown of the informal foreign exchange market. Under these circumstances, the North Korean economy has been pushed to the brink, again.

Overall, the policy emphasis of the Party Congress report highlights the importance of strengthening centralized control and autonomy. Chairman Kim pointed out that “a precious foundation for making sustained economic development by our own efforts was provided.” The focus on self-reliance, self-sufficiency, and self-supported development are refrains that echo juche concepts championed by Kim’s father and grandfather.

Yet Kim admitted to setbacks in the past plan. He said “economic construction failed to hit the expected strategic goals,” growth objectives from that plan “fell a long way short” and the standard of living “could not be improved remarkably.” He admitted to internal problems and that “serious mistakes” were made in economic management. Technology was insufficiently utilized, and labor operated in an “irrational work system” with “incompetent” and “obsolete” working methods. Yet he insisted that such shortcomings and mistakes were forced by undisciplined deviations from an intrinsically good plan and by external factors.

In the deeper analysis of the shortcomings of the plan, the first factor mentioned is the allegedly “most barbarous sanctions and blockade by the US and other hostile forces.” Next, the report says the economy was hampered by natural disasters and the coronavirus pandemic. International sanctions in the face of an unpersuaded regime and the health environment have certainly had major impacts, and the latter has been an unprecedented global shock for North Korea and for every other country. But few countries face as bleak a future as North Korea.

In response, the Party Central Committee will strengthen unified guidance and strategic management over the economy. This involves a policy of micromanagement in various sectors, such as mining, machinery, chemical industries, and power. The invisible hand of Adam Smith will have no place in the new plan, albeit with some market activity likely to be tolerated at times.

But reconsolidating central control is short sighted and unsustainable. Whatever the near-term gains, over the long run, centralization will suffocate the nascent incentives that motivate donju trade and investment activities. Quasi-market activity has likely been the only source of growth in the North Korean economy in the past five years since international sanctions were ratcheted up.

Yet the plan leaves unanswered the question of the sources of financing. North Korea has scant domestic savings, no access to international credit and has squeezed the foreign currency savings of the donju entrepreneurs and financiers. At least, unless it changes course, it will not finance state investment and economic activity over the next five years through inflationary money creation as countries with recent episodes of hyperinflation have done—namely Zimbabwe and Venezuela.

Kim Jong Un’s doubling down on self-reliance and shunning external financial assistance is in reality making a virtue out of necessity. North Korea is the only country bordering China that is not receiving Belt and Road (BRI) infrastructure investment. This is probably due to two reasons. One, North Korea is not creditworthy. It has yet to completely restructure its debt arrears to foreign governments and banks incurred in the 1970s, and is thus a very poor credit risk for China’s development banks that finance BRI projects. Moreover, North Korea is likely wary of becoming too dependent on China, even if Chinese investment would boost national income.

Furthermore, because it is blocked by UN Security Council sanctions, Seoul cannot move forward on its offers of new economic cooperation projects for rail and road infrastructure, let alone revive the two Sunshine Policy era projects—the Kaesong Industrial Complex and Kumgangsan Tourism Zone. But even if it could, the lack of economic policy conditionality in the financing of infrastructure and industrial projects will not create the conditions in which reforms could be institutionalized and economic growth sustained. This is also a fundamental flaw in China’s BRI initiative—debt accumulation that does not enhance productivity and growth ultimately destabilizes an economy. The BRI and North-South economic cooperation projects are not a variant of the Marshall Plan, and North Korea would need a true Marshall Plan for sustainable development.

A curious aspect of the Party Congress report is that Kim Jong Un’s analysis of the current state of the North Korean economy is reminiscent of that made by his father, Kim Jong Il, in 1997. At that time, the centrally planned North Korean economy had collapsed from the delayed effects of the dissolution of the Soviet Union’s Council of Mutual Economic Assistance trade network, in which North Korea had participated. That shock was interwoven with natural disasters. In September of that year the International Monetary Fund (IMF) sent staff to Pyongyang on their first, and only, fact-finding trip. Data provided by North Korea painted a dire picture—North Korea’s economy was in crisis, with output cut in half inside four years. North Korean officials blamed “natural disasters.” The IMF staff disagreed, laying the blame on North Korean policy makers, citing the need for “a fundamental change in policies” and increase in transparency.

Back in 1997, North Korea had the option of taking a path to economic reform, there was an exit from economic destitution. But in turning its back on the IMF, the leadership showed that it was unwilling to open up the economy and reform. Arguably, in 1997, Pyongyang also had the political ability to do so. Its first nuclear test would take place almost a decade in the future and it therefore did not face the harsh regime of UN and US sanctions that now hobble its economy. Not possessing nuclear weapons in 1997, Pyongyang had not shut the door and bricked up the windows on a possible diplomatic opening which would set the stage for economic engagement with international financial institutions and the US. So now, North Korea has neither the willingness nor the ability to pursue systematic and sustainable economic development.

Because the Party Congress report and new five-year plan do not even hint at a fundamental shift in strategic and economic policy, North Korea is destined to remain in the same situation as the characters in Jean Paul Sartre’s existentialist play—locked up in a room in the netherworld, the windows all bricked up, and there is “No Exit.”

Thomas Byrne (thomas.byrne@koreasociety.org) is president and CEO of the New York-based Korea Society and former Asia-Pacific manager for Moody’s Sovereign Risk Group.  

Jonathan Corrado (jonathan.corrado@koreasociety.org) is policy director at the Korea Society, a contributor to NK Pro, and a former Korean-English translator for Daily NK.

PacNet commentaries and responses represent the views of the respective authors. Alternative viewpoints are always welcomed and encouraged. Click here to request a PacNet subscription.

PacNet #4 – 2021: A Year of Immense Frustration in and with Japan

The year ahead may prove to be one of the most frustrating in recent Japanese history. Despite an evolving and uncertain strategic environment, the future could be bright: Japan has unprecedented opportunities to shape that development. Unfortunately, however, structural and attitudinal constraints may slam the door on those options. It is possible to overcome these impediments, but it’s hard to have confidence that Japan will do so.

As Tokyo surveys the world beyond its shores, it should be optimistic. The Biden administration accepts and embraces core principles of Japan’s own foreign policy: multilateralism, institutionalism, a consultative process, and a commitment to rule of law. Most compelling, the new administration views Beijing with suspicion and is committed to multidimensional competition with China.

The Biden team sees alliances as critical to any strategy to engage China. Washington will applaud and encourage forward-leaning partners, especially given the need in the US to focus on domestic affairs (to rebuild national consensus) and reapportion burdens within security partnerships. This gives Tokyo ample space to promote and pursue its own foreign policy within an alliance framework. The end of the Trump administration will also shift the parameters of host nation support talks, which should reduce one source of tension in the relationship.

Tokyo has a reinvigorated and restructured national security bureaucracy that has enjoyed eight years of success. Japan has been modernizing its military—much more remains to be done—and promoting capacity-building among regional security forces. Resuscitation of the Trans-Pacific Partnership (TPP) as the Comprehensive and Progressive Agreement on Trans-Pacific Partnership (CPTPP), completion of the Regional Comprehensive Economic Partnership and other trade deals underscore Japan’s commitment to a rules-based global economic order and its ability to support it. All this has been done in the service of a strategic approach to regional security, one articulated in the concept of a “Free and Open Indo-Pacific,” and which has been adopted by the US (even if the words may change) and other regional governments.

A new appreciation for national economic statecraft gives Tokyo a chance to focus on and address emerging 21st century challenges. A new National Security Strategy, due to be published this year, provides an opportunity for bilateral cooperation and coordination as Tokyo and Washington simultaneously craft their own versions of that document. Japan should be confident as it engages the new US administration and be ready to push the partnership forward in ways that respond to its own concerns and preferences.

Japan should call for consultations as soon as Biden’s Asia team is assembled, and plan for a Security Consultative Committee (SCC or “2+2”) meeting by year’s end. Host-nation support talks should reach a quick—even if short-term—solution so that alliance managers can consider new and creative apportionments of roles and missions to better fit current realities. Among the discussion items should be alignment of national security strategies. Integral to any talks is a candid assessment of deterrence and ways it can be strengthened. A blue-sky assessment of alliance options is in order. Given the dynamics and shifts in the regional security environment, creativity is at a premium.

That potential will likely go unrealized, however. Japan’s leadership is currently weak, divided and, preoccupied with the fate of the 2020 Olympic and ParaOlympic Games. Combined with enduring misgivings about Democratic administrations in the US, the result will likely be inertia, if not paralysis.

An absence of strong leadership is the first problem. Any successor to Abe Shinzo would likely suffer in comparison: Abe, the longest serving leader in Japanese history, had a vision for his country and the determination to realize it. Suga Yoshihide was the consensus candidate to succeed Abe after his surprise resignation last summer, but the promise of policy continuity has been overtaken by an absence of vision and foreign policy experience. Suga took up where Abe left off, promoting the “Free and Open Indo-Pacific,” pursuing closer security ties with like-minded governments like that of Australia, as well as key Southeast Asian partners like Indonesia and Vietnam. More visible and important to voters has been the return of scandals from the Abe era, a third wave of COVID-19 infections (the most severe yet), and Suga’s uninspiring performance in addressing them.

A weakened prime minister allowed faction leaders to reassert themselves and play a larger role in policy. An internal party struggle over how to deal with China now threatens the most important pillar of Tokyo’s foreign and security policies. LDP Secretary General Nikai Toshihiro, who favors a softer line toward Beijing, is ascendant, and China hawks are retreating. A December survey of Japanese business reveals that the corporate sector too favors a softer approach toward China and would like the Biden administration to blunt the sharper edges of the Trump hard line. Insiders complain about a lack of leadership and the weakening of the Kantei when effective policy demands strong central authority to pursue a whole of government approach.

An additional distraction is the debate over the fate of the 2020 Summer Olympic and ParaOlympic Games, postponed from last summer because of the COVID outbreak and tentatively scheduled for this summer. Hosting the Games is a matter of tremendous prestige for the Japanese government—the public is far less enamored—and it weighs heavily on decision making in Tokyo. It will absorb considerable political capital of a government that may already be overdrawn, undermining the desire or capacity to push security policy or move forward on alliance issues. All countries must balance public health and economic needs as they respond to the COVID outbreak but the Olympics are a thumb on the scale in Japan, and have contributed to an erosion of trust in the Japanese government.

Polls offer a grim assessment. After taking office with some of the highest approval ratings in modern Japanese history, the Cabinet approval rating plummeted 32 points to 42% by the end of the year.

The second problem is longstanding suspicion in Tokyo of Democratic administrations in Washington. While the alliance with Japan enjoys bipartisan support in the United States, Japanese instinctively feel more comfortable with Republicans. This reflex will be complemented by nostalgia for the Trump years, during which Japan had a special relationship with the US president. Abe’s status as the “Trump whisperer” meant that Japan never felt the brunt of the president’s anger. Japan had space to pursue preferred policies and US rhetoric aligned with Japanese interests. There may have been some problems, but benefits outweighed costs. The departures of Trump and Abe have kindled fears that the alliance will be hobbled.

Combine a weak and divided leadership in Tokyo with suspicion of the new US administration and Japan will have little capacity or incentive for creative and entrepreneurial policy making. Instead, fearful of rejection or misinterpretation and eager to conserve precious political capital there will be an inclination to hunker down and cling to the status quo. This “shelter in place” mentality will do the alliance and Japan a disservice.

This outcome could change. A prime minister that is visionary and dynamic could alter Japan’s trajectory. Recent developments put that prospect within reach. As long as it remains a mere possibility, however, the gap between what could be and what is will widen. Frustration may be one of the better outcomes.

Brad Glosserman (brad@pacforum.org) is deputy director of and visiting professor at the Center for Rule Making Strategies at Tama University as well as senior advisor (nonresident) at Pacific Forum. He is the author of Peak Japan: The End of Great Ambitions (Georgetown University Press, 2019).

PacNet commentaries and responses represent the views of the respective authors. Alternative viewpoints are always welcomed and encouraged. Click here to request a PacNet subscription.

PacNet #3 – Getting China Policy Right

It should go without saying but I’ll start by saying it: to get China policy right we must first get China right. This means seeing China as it is, not as we would like it to be or as it claims to be. If one were to believe Chinese President Xi Jinping during his annual Davos and APEC speeches, China is today a bastion of free trade and open market access and the great defender of intellectual property rights and the rule of law; its rise is and will be peaceful. We know better. Under Xi’s leadership, China has changed significantly, but not for the better (from a US perspective, that is; whether things are better or worse from a Chinese perspective is for the Chinese people to decide).

For better or for worse, the China guided by Deng Xiaoping’s teaching—“hide your strength and bide your time”; “it doesn’t matter if the cat is black or white as long as it catches mice”—is gone. The color of the cat still doesn’t matter, as long as it faithfully subscribes to Xi Jinping thought. “Hide your strength” has been replaced by Wolf Warrior diplomats stressing that “China is a big country … and you’re not.” Other Deng precepts—collective leadership, term limits, the phasing out of state-owned enterprises, and most recently, the “one country, two systems” Hong Kong formula—apparently have no place in the new “China dream.”

US policy has also evolved, in response to a changing China. With apologies for oversimplifying what was and remains a complicated and deliberate process, I would argue that the Obama administration was slow in picking up the change. It started out with the right policy, but for the wrong China. Deng would have seen Obama’s “outstretched hand” as an opportunity to be embraced. Xi saw it as a weakness to be exploited. As Xi’s power grew, first as vice president and then as the ultimate leader, his policies became more aggressive and assertive; dare we call it a “China first” policy? In return, US policy shifted (in my words, not Obama’s) from “cooperate with China whenever and wherever we can and confront and constrain when we must” to “confront and constrain whenever and wherever we must while cooperating if and when we can.” The two main elements of cooperation and confrontation were still there but the emphasis clearly changed, as Obama began his “pivot” to Asia.

To its credit, the Trump administration (although sadly not the president himself) initially got China and China policy right. His first foreign policy team, under National Security Advisor H.R. McMaster, Defense Secretary Jim Mattis, and Secretary of State Rex Tillerson (remember him?) saw China (along with Russia) as a revisionist power that was out to directly challenge US regional and global interests. While keeping the door open for cooperation, the key idea was “reciprocity.” While Trump focused on the trade deficit and saw a trade deal as the “solution” to the China problem, his national security team focused more on China’s challenge to US security interests. The focus was, correctly, on Chinese behavior.  Then along came Mike Pompeo. Aided and abetted by National Security Advisor John Bolton and Defense Secretary Mike Esper, Secretary of State Pompeo shifted the emphasis and blame to the Chinese Communist Party (CCP), adding an ideological dimension that made cooperation virtually impossible, since it attacked the very source of Xi’s legitimacy.

To his credit, Pompeo did get one thing very right. He understood that “America first” could not mean “America alone” when it came to dealing with China. Trump’s grumbling notwithstanding, he strove to shore up US alliances; the incoming Biden administration has already indicated it will double down on this effort. Most importantly, Pompeo attached a high priority to formalizing the Quad, a coalition of “like-minded” states that includes Australia, India, and Japan, and building a possible Quad-plus (involving Korea, New Zealand, and Vietnam); the latter was focused on fighting the pandemic but nonetheless helped build up multilateral cooperation.

As the Biden administration assembles its Asia team and starts to develop its China and broader Asia policy, it must see China for what it is: a near-peer competitor engaged in a battle for influence vis-a-vis Washington and the West.

Don’t get me wrong. I’m still pro-engagement. Washington needs to properly balance cooperation (in areas like climate change and North Korea where a long-term solution is impossible without Chinese input), while being prepared to confront and constrain (vice contain) where necessary. The Trump administration’s Free and Open Indo-Pacific Strategy needs to be retained in some form; sadly it’s likely too much to ask that the name be retained, even though it originated not in Washington but in Tokyo and would thus signal both continuity and respect for our critical Northeast Asia ally.

Top priority should be given to strengthening and expanding the Quad, to bring in additional like-minded states who subscribe to the Quad’s main operating principles: support for the rule of law, freedom of navigation, transparency, and respect for human rights in a “free, open, and inclusive Indo-Pacific region.” Care must be given to avoid loaded terms like “league of democracies” (as put forth tentatively by Pompeo) or “an Asian NATO.” The former rules out essential players like Vietnam; the latter runs into the Asian allergy to all things European.

In their individual statements following the Quad Foreign Minister’s Meeting in Tokyo in October—there was no joint statement—three of the four ministers played down or avoided mentioning China; Pompeo (as usual but counterproductively) focused on the CCP threat. True, Beijing will see terms such as rule of law and freedom of navigation as code words aimed at China. The proper response in those instances should be “if the shoe fits, wear it.” Promoting an inclusive rules-based order is only anti-China if Beijing is bound and determined to not play by the rules. That’s China’s decision, for which it should expect consequences.

To date, Xi’s grand strategy has been tactically clever but strategically foolish. The new repressive national security law has been effective (thus far) in silencing democracy advocates in Hong Kong but has sent a clear signal to the rest of the world (and especially Taiwan) that Chinese promises, including legal agreements registered at the United Nations, are meaningless. Beijing’s heavy-handed reaction to Canberra’s request for a clear accounting of the origins of the pandemic may have hurt Australia’s wine sales (in direct violation of its World Trade Organization and bilateral trade commitments), but also clearly demonstrated that Beijing has no intention of separating politics from economics even while counseling others to do so. Beijing’s “14 demands” also reflect no hesitancy in interfering in another’s domestic affairs, a sacred principle when it comes to its own affairs. More importantly, China’s browbeating has also fortified Australia’s commitment to strengthening the Quad, just as aggressive Chinese behavior along the Indian border has prompted New Delhi to do the same.

Meanwhile, China’s recent law authorizing its Coast Guard to fire on ships entering what virtually every nation other than China considers international waters around its artificial islands and elsewhere in the South China Sea, is both tactically and strategically foolish. It’s never a good idea to be the first to challenge an incoming US administration. Biden will no doubt feel compelled to reinforce the long-standing dictum that “the US will sail and fly anywhere international law allows.” Passing this law at this time guarantees China’s relationship with the US administration will start off on the wrong foot.

The rush is on to develop—and name—a strategy that is right for the China we are dealing with today. I like “constrainment”; others have mentioned “competitive coexistence.” Regardless of what it is called, it must be a combination of cooperation and (gasp) compromise on the one hand, backed by firmness and a willingness to push back both unilaterally and multilaterally with like-minded states when appropriate. Maintaining and refining the Free and Open Indo-Pacific Strategy, built upon an expanded and redefined Quad, should be the building blocks upon which any new strategy is formed.

Ralph Cossa (Ralph@pacforum.org) is Pacific Forum president emeritus and WSD-Handa Chair in Peace Studies.

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PacNet #38 – Why America opposes the Belt and Road Initiative (BRI)?—A second look

As US-China relations decline to their worst state in over 50 years, it’s important that both sides understand fully the importance of their respective differences. US opposition to Xi Jinping’s signature Belt and Road Initiative (BRI) is commonly understood in China and elsewhere as a competition between the two powers for economic advantage and accompanying international influence. This line of assessment is valid as far as it goes but gives little attention to a wide range of factors in the BRI—and related Chinese statecraft employed in support of the initiative—that Americans deem seriously objectionable.

Some of these factors concern newly prominent unconventional Chinese actions and levers of influence abroad that were heretofore disguised, hidden, denied, or otherwise neglected or unappreciated by foreign specialists assessing Chinese foreign relations. The unconventional Chinese actions and levers of influence have been featured in investigations carried out by US and other government agencies and respected US and foreign think tanks. What the investigations show is that the BRI, despite Chinese rhetoric to the contrary, is part of a wide-ranging effort by the Chinese government to undermine the many interests of the United States and its allies and partners who stand in the way of China’s determined international ascendance, under the rubric of the BRI and other means.

Those interests include a) the rule of law; b) the rights of small nations seeking to avoid dominance in contested issues with large nations; c) transparent, free, and fair economic dealings in line with accountable governance; and d) popular political rights, religious freedom, and non-discrimination against minorities.

BRI challenges America

Legitimating China’s growth model, Huawei expansion—Beijing has succeeded in having the BRI widely endorsed by, among others, the UN secretary general, playing a prominent role in the two China-hosted international forums on the BRI in 2017 and 2019, and by Italy becoming the first of the G7 countries to join BRI in 2019. Meanwhile, the most important Chinese company associated with the BRI, Huawei, is advancing from a strong base among developed countries, seeking a leading global position.

Such endorsements of the BRI and advancement of Huawei are major problems for Americans who target China’s unfair economic practices. They aver that Beijing’s surplus capital for financing BRI deals has come as a result of China’s neo-mercantilist practices, marking the latest stage in a three-decade long effort using state-directed development polices which plunder foreign intellectual property rights and undermine international competitors. The profits flow into efforts to achieve dominance in major world industries, build military power, and support the BRI in order to secure China’s dominance in Asia and world leadership. They support companies like Huawei in their attempt to dominate international communications enterprises.

Broader international endorsement of the BRI and the expansion of Huawei would legitimate the longstanding negative Chinese economic practices. They would make it even harder for the United States to counter the many negative features of Chinese practices for US interests in the existing international economic order. That order is viewed as under serious threat coming from determined Chinese efforts to weaken and undermine restrictions on the egregiously mercantilist state-capitalism prevalent in China today.

BRI and corruption—The BRI is not a multilateral organization. Its basis is bilateral agreements between China—and Chinese firms—with various countries and their firms. These agreements are not transparent. Corruption is a serious problem in China, but it’s even worse in many developing countries. Chinese firms and supporting Chinese government representatives repeatedly work effectively with corrupt foreign leaders seeking mutual advantage, which comes at the expense of the country’s broad national interest.

A comprehensive study by the Asia Society of China’s BRI in Southeast Asia recalled the extraordinary scale of corruption in the Razak government in Malaysia making deals with enormous payoffs in very expensive Chinese projects in the country. It said the Malaysian case was an exception only in that corrupt practices were exposed, concluding “the pervasive use of bribery, cost padding, and kickbacks was also indicated in numerous other BRI projects in the region.” Studies by the International Republican Institute, the Center for American Progress, the Center for New American Security, the German Marshall Fund and many others came to the same conclusion in other parts of the world. Such practices undermine the international status quo, which have featured strong US-led efforts to reduce corrupt practices which weaken good governance and disadvantage the public interest.

The BRI supports authoritarian rule—Many corrupt cases in the BRI involve Chinese dealmakers and authoritarian “strong man” leaders seeking to advance authoritarian rule. Examples included Cambodia, Venezuela, many states in Central Asia and the Middle East, Sri Lanka, Montenegro, and arguably Serbia, the Maldives, Ecuador, the Philippines, and elsewhere. Such practices run against US interests in good governance with accountability to the people of the country. They promote an alternative international order that accommodates leaders who suppress the rights of their people for the sake of maintaining their power.

Authoritarian rulers often are keen on Huawei, Chinese communications and surveillance technologies and related equipment for use in controlling their populations. Some also adopt Chinese journalistic practices that serve to influence their people to support authoritarian rule. China in turn benefits from the sales, and Chinese representatives also gain much greater access to and a degree of control over the communications, surveillance, and media of the recipient country. The situation provides opportunities for Chinese espionage.

BRI fosters dependency, leverage and control—Beijing commonly uses BRI agreements to build economic dependence. The Chinese agreements often result in unsustainable borrowing. Debtor countries are more accommodating regarding Chinese demands for equity (e.g., land, ports, and airfields) and/or Chinese requests for access to military facilities or other favors. Salient examples are Cambodia, Djibouti, Ecuador, Ethiopia, Laos, Malaysia, the Maldives, Myanmar, Pakistan, Serbia, Sri Lanka, and Venezuela. The disadvantages for the United States are that Chinese actions foster a world order at odds with prevailing rules, with China free to manipulate vulnerable states for its own advantage, leading to economic stalling of these countries that will require costly intervention by existing international economic institutions.

Other Chinese BRI leverage disadvantageous for the United States comes as BRI participant states often rely heavily on trade with China. They are well-aware they need to defer to China on sensitive issues given Beijing’s long record of putting aside or manipulating WTO norms to use trade dependence as leverage in order to compel the country to meet China’s demands on a variety of policy issues. Meanwhile, Huawei and other firms’ expensive and complicated communications and surveillance systems along with Chinese provided hydro-electric dams and port operations cause recipient countries to rely ever more on Chinese businesses for management and maintenance. Such connections make the Chinese ties difficult and expensive to replace by another provider, adding to reasons for recipient states to defer to China on sensitive issues.

Conclusion

The US opposition to the BRI reflects a substantial set of differences with China, not just an issue of economic competition. Yet, there is no easy answer for the United States in countering the Chinese challenges as Beijing’s BRI advances its sway and finds welcome, notably from many authoritarian and/or corruptible leaders.

Robert Sutter (sutterr@gwu.edu) is Professor of Practice of International Affairs at George Washington University, USA. His most recent book is The United States and Asia: Regional Dynamics and Twenty-First Century Relations: Second Edition (Lanham MD: Rowman & Littlefield 2020).

PacNet commentaries and responses represent the views of the respective authors. Alternative viewpoints are always welcomed and encouraged. Click here to request a PacNet subscription.