Island feuds challenge US’ Asian ties

Posted on August 21, 2012


The last few days have seen several major developments affecting the relationships of the most important regional powers in East Asia. Thousands of protestors took to the streets of major Chinese cities on Sunday, chanting slogans and smashing Japanese-made cars to protest Japan’s claims to contested islands in the East China Sea.

On August 10, South Korean President Lee Myung-Bak made a very public visit to the Korean-controlled, Japanese-claimed Dokdo (Takeshima) islands, also known as the Liancourt Rocks, sparking a diplomatic crisis with Japan. Then a group of Chinese nationalists landed on the Japanese-controlled Senkaku (“Diaoyu” in Chinese) islands, and were promptly arrested by Japanese forces. This Chinese landing was followed by a Japanese civilian expedition a few days later, which inspired the massive street protests on the Chinese mainland.

Longstanding nationalistic and geopolitical undercurrents are bubbling to the surface in the East China Sea. These populist forces will affect the strategic environment in the area. It is at this crucial juncture that the US based Center of Strategic and International Studies released a report warning of “a time of drift” in the US-Japanese alliance.

The Center of Strategic and International Studies (CSIS) is a think-tank comprised of high-ranking former US policymakers. Its recommendations are highly influential, having been used in the past as part of the basis of US government policy. Their report, entitled, “The US-Japan Alliance: Anchoring Stability in Asia”, co-authored by former deputy secretary of state Richard Armitage, called for Japan to take a much more proactive role in Asia.

The paper encouraged a loosening of Japan’s constitutional prohibition on “collective self-defense”, and pointed out the “irony” of the US-imposed Japanese constitution preventing Japan from taking a more militarily assertive role alongside the US in Asia. More specifically, the report called for Japan to increase surveillance capabilities in the disputed South China Sea and prepare to send minesweepers to the Persian Gulf. [1]

The main motivation for the US to push for a more active Japanese security role in the region is to counter China’s rise. The CSIS report did make mention of North Korea, but the “challenges” posed by China’s increasing clout were a central theme of the paper. As the US pivots towards Asia, Japan is seen as a strong and indispensable ally.

However, enhancing the projection of US power into Asia with an increasingly militarized Japanese alliance poses serious risks. Foremost, the tragic history of Japanese imperialism and ongoing disputes over the portrayal of Japan’s imperial war crimes in the Japanese education system and political arena cause incredible friction between Japan and America’s other East Asian allies.

The CSIS report on US-Japan relations specifically called for a tripartite alliance between the US, Japan, and South Korea aimed at containing North Korea and limiting China’s ambitions:

“Washington, Tokyo, and Seoul should pool their diplomatic capital to jointly deter North Korean pursuit of nuclear weapons and help shape a regional environment best suited to respond to China’s rise”. [2]

In order to accomplish this end, the CSIS encouraged the Japanese government “to confront the historical issues that continue to complicate relations” with South Korea.

Herein lies the fundamental flaw in America’s reliance on an assertive Japan for America’s strategic pivot towards Asia. The Japanese nationalists who would be eager to assume a proactive regional stance are the very same political actors who are loath to face the unpleasant facts of Japan’s colonial history (much less apologize for them).

Additionally, any moves to promote an active stance by Japan’s military will cause a nationalist backlash in countries throughout the region. In East Asia, historical nationalism can trump geopolitics, and the wounds of the past run deep.

As concerned as South Korea, Vietnam, and the Philippines may be by China’s new assertiveness, these countries by no means would openly welcome a forceful Japanese stance in the region. The ongoing stand-off between South Korea and Japan over the Liancourt Rocks puts the United States in the awkward position of having its two most important regional allies face off against each other.

Open American backing for Tokyo to expand its military role in the region could completely alienate the younger generation South Korean nationalists, many of whom already bristle at the ongoing US military presence in the Korean Peninsula.

The US simply can’t reliably be a strategic partner to the people and governments of South Korea, the Philippines, and Vietnam while pushing for what will be seen as Japanese neo-militarism. The Chinese government will be sure to take advantage of regional anti-Japanese sentiment in the event of an American-backed Japanese projection of power.

Furthermore, no single issue can inspire Chinese nationalism like perceived Japanese aggression. The landing of several Chinese activists on the disputed Senkaku (Diaoyu) Islands last week caused a stir of emotions in China. The protestors received a hero’s welcome in Hong Kong after they were arrested and deported by the Japanese government.

Even more tellingly, after Japanese activists reached the disputed islands on Sunday, spontaneous and emotional protests erupted in several major Chinese cities within hours. Anger was vented against Japanese automobiles, restaurants, and retail outlets. Protestors in Shanghai denounced “Japanese imperialism”. [3]

Nothing could inspire a lasting sense of distrust, anger, and anti-American sentiment in China faster than US backing for a more assertive Japan.

Finally, US pressure to increase Japan’s overseas ambitions may cause sharp divisions in Japan itself. Fissures between pacifists and nationalists are emerging from Japan’s ongoing economic and political deadlock. Tokyo’s nationalist Mayor Shintaro Ishihara, who touched off the current round of the East China Sea dispute with an offer in April to “buy” the disputed islands, condemned the Japanese government for releasing the Chinese maritime activists, saying “It is a distinct criminal case … We can’t call Japan a real law-governed country if it sends them back as mere illegal aliens.” [4]

At the same time, reports are emerging that Japan’s ambassador to China, who warned of a “grave crisis” between the two nations over the dispute, is to be replaced because of government anger over his conciliatory line.

The CSIS’s warnings of a “time of drift” in US-Japan relations is indicative of the major shifts in regional power. South Korea and Japan may be strategically wary of China’s rise, but the major political forces in these two nations are by no means eager to jump into a united anti-China bandwagon.

South Korean President Lee must have been well aware of Japan’s deepening maritime dispute with China when he purposefully upped tensions with Japan himself by visiting the Dokdo Islands. For the time being, there is a de facto joint South Korean – Chinese effort to put pressure on Japan’s territorial claims.

Additionally, both South Korea and Japan have a deeper trade relationship with China than either country does with the United States. It is perhaps largely for this reason that the CSIS warns of a “drift” between the US and Japan – while the US seeks to deputize the Japanese government into keeping China is check, Japan is tugged by economic realities beyond any government’s control into China’s orbit.

A final lesson to take away from the ongoing maritime disputes between Japan and her neighbors is that a more democratic China will in all likelihood be a more aggressive China. It is important to note that the protest boat sent to “defend the Diaoyu Islands” was sent from Hong Kong, not mainland China. If political reform in the Middle Kingdom eventually leads to China becoming more democratic, then Chinese politicians will need to be quickly responsive to populist, nationalist voices.

China’s current leadership can play the long game and wait for China’s economic situation to continue improving. However, the temptation to project China’s increasing power may prove too great for a democratic government to resist if a crisis emerged.

The democratically elected leaders of Japan and South Korea currently engage in nationalist posturing in order to get votes, and neither of these countries has the manpower, money, and worldwide ambitions of the world’s most populous country.

What is more, nationalist political maneuvers are usually based on old historical animosities. The West and concerned regional powers should take careful note: if and when China’s political system becomes more democratic, expect it to be even more regionally assertive.

1. US report warns of Japan “drift”, urges defense boost, AFP, Aug 17, 2012.
2. US experts urge Japan to face historical problems with S. Korea, Asahi Simbun, Aug 17, 2012.
3. Anti-Japan protests across China over island dispute, BBC News, Aug 19, 2012.
4. Japan deports pro-China island activists, Aljazeera, Aug 18, 2012.

Brendan P O’Reilly 

America’s Pacific Century

The future of politics will be decided in Asia, not Afghanistan or Iraq, and the United States will be right at the center of the action.

As the war in Iraq winds down and America begins to withdraw its forces from Afghanistan, the United States stands at a pivot point. Over the last 10 years, we have allocated immense resources to those two theaters. In the next 10 years, we need to be smart and systematic about where we invest time and energy, so that we put ourselves in the best position to sustain our leadership, secure our interests, and advance our values. One of the most important tasks of American statecraft over the next decade will therefore be to lock in a substantially increased investment — diplomatic, economic, strategic, and otherwise — in the Asia-Pacific region.

The Asia-Pacific has become a key driver of global politics. Stretching from the Indian subcontinent to the western shores of the Americas, the region spans two oceans — the Pacific and the Indian — that are increasingly linked by shipping and strategy. It boasts almost half the world’s population. It includes many of the key engines of the global economy, as well as the largest emitters of greenhouse gases. It is home to several of our key allies and important emerging powers like China, India, and Indonesia.

At a time when the region is building a more mature security and economic architecture to promote stability and prosperity, U.S. commitment there is essential. It will help build that architecture and pay dividends for continued American leadership well into this century, just as our post-World War II commitment to building a comprehensive and lasting transatlantic network of institutions and relationships has paid off many times over — and continues to do so. The time has come for the United States to make similar investments as a Pacific power, a strategic course set by President Barack Obama from the outset of his administration and one that is already yielding benefits.

With Iraq and Afghanistan still in transition and serious economic challenges in our own country, there are those on the American political scene who are calling for us not to reposition, but to come home. They seek a downsizing of our foreign engagement in favor of our pressing domestic priorities. These impulses are understandable, but they are misguided. Those who say that we can no longer afford to engage with the world have it exactly backward — we cannot afford not to. From opening new markets for American businesses to curbing nuclear proliferation to keeping the sea lanes free for commerce and navigation, our work abroad holds the key to our prosperity and security at home. For more than six decades, the United States has resisted the gravitational pull of these “come home” debates and the implicit zero-sum logic of these arguments. We must do so again.

Beyond our borders, people are also wondering about America’s intentions — our willingness to remain engaged and to lead. In Asia, they ask whether we are really there to stay, whether we are likely to be distracted again by events elsewhere, whether we can make — and keep — credible economic and strategic commitments, and whether we can back those commitments with action. The answer is: We can, and we will.

Harnessing Asia’s growth and dynamism is central to American economic and strategic interests and a key priority for President Obama. Open markets in Asia provide the United States with unprecedented opportunities for investment, trade, and access to cutting-edge technology. Our economic recovery at home will depend on exports and the ability of American firms to tap into the vast and growing consumer base of Asia. Strategically, maintaining peace and security across the Asia-Pacific is increasingly crucial to global progress, whether through defending freedom of navigation in the South China Sea, countering the proliferation efforts of North Korea, or ensuring transparency in the military activities of the region’s key players.

Just as Asia is critical to America’s future, an engaged America is vital to Asia’s future. The region is eager for our leadership and our business — perhaps more so than at any time in modern history. We are the only power with a network of strong alliances in the region, no territorial ambitions, and a long record of providing for the common good. Along with our allies, we have underwritten regional security for decades — patrolling Asia’s sea lanes and preserving stability — and that in turn has helped create the conditions for growth. We have helped integrate billions of people across the region into the global economy by spurring economic productivity, social empowerment, and greater people-to-people links. We are a major trade and investment partner, a source of innovation that benefits workers and businesses on both sides of the Pacific, a host to 350,000 Asian students every year, a champion of open markets, and an advocate for universal human rights.

President Obama has led a multifaceted and persistent effort to embrace fully our irreplaceable role in the Pacific, spanning the entire U.S. government. It has often been a quiet effort. A lot of our work has not been on the front pages, both because of its nature — long-term investment is less exciting than immediate crises — and because of competing headlines in other parts of the world.

As secretary of state, I broke with tradition and embarked on my first official overseas trip to Asia. In my seven trips since, I have had the privilege to see firsthand the rapid transformations taking place in the region, underscoring how much the future of the United States is intimately intertwined with the future of the Asia-Pacific. A strategic turn to the region fits logically into our overall global effort to secure and sustain America’s global leadership. The success of this turn requires maintaining and advancing a bipartisan consensus on the importance of the Asia-Pacific to our national interests; we seek to build upon a strong tradition of engagement by presidents and secretaries of state of both parties across many decades. It also requires smart execution of a coherent regional strategy that accounts for the global implications of our choices.

WHAT DOES THAT regional strategy look like? For starters, it calls for a sustained commitment to what I have called “forward-deployed” diplomacy. That means continuing to dispatch the full range of our diplomatic assets — including our highest-ranking officials, our development experts, our interagency teams, and our permanent assets — to every country and corner of the Asia-Pacific region. Our strategy will have to keep accounting for and adapting to the rapid and dramatic shifts playing out across Asia. With this in mind, our work will proceed along six key lines of action: strengthening bilateral security alliances; deepening our working relationships with emerging powers, including with China; engaging with regional multilateral institutions; expanding trade and investment; forging a broad-based military presence; and advancing democracy and human rights.

By virtue of our unique geography, the United States is both an Atlantic and a Pacific power. We are proud of our European partnerships and all that they deliver. Our challenge now is to build a web of partnerships and institutions across the Pacific that is as durable and as consistent with American interests and values as the web we have built across the Atlantic. That is the touchstone of our efforts in all these areas.

Our treaty alliances with Japan, South Korea, Australia, the Philippines, and Thailand are the fulcrum for our strategic turn to the Asia-Pacific. They have underwritten regional peace and security for more than half a century, shaping the environment for the region’s remarkable economic ascent. They leverage our regional presence and enhance our regional leadership at a time of evolving security challenges.

As successful as these alliances have been, we can’t afford simply to sustain them — we need to update them for a changing world. In this effort, the Obama administration is guided by three core principles. First, we have to maintain political consensus on the core objectives of our alliances. Second, we have to ensure that our alliances are nimble and adaptive so that they can successfully address new challenges and seize new opportunities. Third, we have to guarantee that the defense capabilities and communications infrastructure of our alliances are operationally and materially capable of deterring provocation from the full spectrum of state and nonstate actors.

The alliance with Japan, the cornerstone of peace and stability in the region, demonstrates how the Obama administration is giving these principles life. We share a common vision of a stable regional order with clear rules of the road — from freedom of navigation to open markets and fair competition. We have agreed to a new arrangement, including a contribution from the Japanese government of more than $5 billion, to ensure the continued enduring presence of American forces in Japan, while expanding joint intelligence, surveillance, and reconnaissance activities to deter and react quickly to regional security challenges, as well as information sharing to address cyberthreats. We have concluded an Open Skies agreement that will enhance access for businesses and people-to-people ties, launched a strategic dialogue on the Asia-Pacific, and been working hand in hand as the two largest donor countries in Afghanistan.

Similarly, our alliance with South Korea has become stronger and more operationally integrated, and we continue to develop our combined capabilities to deter and respond to North Korean provocations. We have agreed on a plan to ensure successful transition of operational control during wartime and anticipate successful passage of the Korea-U.S. Free Trade Agreement. And our alliance has gone global, through our work together in the G-20 and the Nuclear Security Summit and through our common efforts in Haiti and Afghanistan.

We are also expanding our alliance with Australia from a Pacific partnership to an Indo-Pacific one, and indeed a global partnership. From cybersecurity to Afghanistan to the Arab Awakening to strengthening regional architecture in the Asia-Pacific, Australia’s counsel and commitment have been indispensable. And in Southeast Asia, we are renewing and strengthening our alliances with the Philippines and Thailand, increasing, for example, the number of ship visits to the Philippines and working to ensure the successful training of Filipino counterterrorism forces through our Joint Special Operations Task Force in Mindanao. In Thailand — our oldest treaty partner in Asia — we are working to establish a hub of regional humanitarian and disaster relief efforts in the region.

AS WE UPDATE our alliances for new demands, we are also building new partnerships to help solve shared problems. Our outreach to China, India, Indonesia, Singapore, New Zealand, Malaysia, Mongolia, Vietnam, Brunei, and the Pacific Island countries is all part of a broader effort to ensure a more comprehensive approach to American strategy and engagement in the region. We are asking these emerging partners to join us in shaping and participating in a rules-based regional and global order.

One of the most prominent of these emerging partners is, of course, China. Like so many other countries before it, China has prospered as part of the open and rules-based system that the United States helped to build and works to sustain. And today, China represents one of the most challenging and consequential bilateral relationships the United States has ever had to manage. This calls for careful, steady, dynamic stewardship, an approach to China on our part that is grounded in reality, focused on results, and true to our principles and interests.

We all know that fears and misperceptions linger on both sides of the Pacific. Some in our country see China’s progress as a threat to the United States; some in China worry that America seeks to constrain China’s growth. We reject both those views. The fact is that a thriving America is good for China and a thriving China is good for America. We both have much more to gain from cooperation than from conflict. But you cannot build a relationship on aspirations alone. It is up to both of us to more consistently translate positive words into effective cooperation — and, crucially, to meet our respective global responsibilities and obligations. These are the things that will determine whether our relationship delivers on its potential in the years to come. We also have to be honest about our differences. We will address them firmly and decisively as we pursue the urgent work we have to do together. And we have to avoid unrealistic expectations.

Over the last two-and-a-half years, one of my top priorities has been to identify and expand areas of common interest, to work with China to build mutual trust, and to encourage China’s active efforts in global problem-solving. This is why Treasury Secretary Timothy Geithner and I launched theStrategic and Economic Dialogue, the most intensive and expansive talks ever between our governments, bringing together dozens of agencies from both sides to discuss our most pressing bilateral issues, from security to energy to human rights.

We are also working to increase transparency and reduce the risk of miscalculation or miscues between our militaries. The United States and the international community have watched China’s efforts to modernize and expand its military, and we have sought clarity as to its intentions. Both sides would benefit from sustained and substantive military-to-military engagement that increases transparency. So we look to Beijing to overcome its reluctance at times and join us in forging a durable military-to-military dialogue. And we need to work together to strengthen the Strategic Security Dialogue, which brings together military and civilian leaders to discuss sensitive issues like maritime security and cybersecurity.

As we build trust together, we are committed to working with China to address critical regional and global security issues. This is why I have met so frequently — often in informal settings — with my Chinese counterparts, State Councilor Dai Bingguo and Foreign Minister Yang Jiechi, for candid discussions about important challenges like North Korea, Afghanistan, Pakistan, Iran, and developments in the South China Sea.

On the economic front, the United States and China need to work together to ensure strong, sustained, and balanced future global growth. In the aftermath of the global financial crisis, the United States and China worked effectively through the G-20 to help pull the global economy back from the brink. We have to build on that cooperation. U.S. firms want fair opportunities to export to China’s growing markets, which can be important sources of jobs here in the United States, as well as assurances that the $50 billion of American capital invested in China will create a strong foundation for new market and investment opportunities that will support global competitiveness. At the same time, Chinese firms want to be able to buy more high-tech products from the United States, make more investments here, and be accorded the same terms of access that market economies enjoy. We can work together on these objectives, but China still needs to take important steps toward reform. In particular, we are working with China to end unfair discrimination against U.S. and other foreign companies or against their innovative technologies, remove preferences for domestic firms, and end measures that disadvantage or appropriate foreign intellectual property. And we look to China to take steps to allow its currency to appreciate more rapidly, both against the dollar and against the currencies of its other major trading partners. Such reforms, we believe, would not only benefit both our countries (indeed, they would support the goals of China’s own five-year plan, which calls for more domestic-led growth), but also contribute to global economic balance, predictability, and broader prosperity.

Of course, we have made very clear, publicly and privately, our serious concerns about human rights. And when we see reports of public-interest lawyers, writers, artists, and others who are detained or disappeared, the United States speaks up, both publicly and privately, with our concerns about human rights. We make the case to our Chinese colleagues that a deep respect for international law and a more open political system would provide China with a foundation for far greater stability and growth — and increase the confidence of China’s partners. Without them, China is placing unnecessary limitations on its own development.

At the end of the day, there is no handbook for the evolving U.S.-China relationship. But the stakes are much too high for us to fail. As we proceed, we will continue to embed our relationship with China in a broader regional framework of security alliances, economic networks, and social connections.

Among key emerging powers with which we will work closely are India and Indonesia, two of the most dynamic and significant democratic powers of Asia, and both countries with which the Obama administration has pursued broader, deeper, and more purposeful relationships. The stretch of sea from the Indian Ocean through the Strait of Malacca to the Pacific contains the world’s most vibrant trade and energy routes. Together, India and Indonesia already account for almost a quarter of the world’s population. They are key drivers of the global economy, important partners for the United States, and increasingly central contributors to peace and security in the region. And their importance is likely to grow in the years ahead.

President Obama told the Indian parliament last year that the relationship between India and America will be one of the defining partnerships of the 21st century, rooted in common values and interests. There are still obstacles to overcome and questions to answer on both sides, but the United States is making a strategic bet on India’s future — that India’s greater role on the world stage will enhance peace and security, that opening India’s markets to the world will pave the way to greater regional and global prosperity, that Indian advances in science and technology will improve lives and advance human knowledge everywhere, and that India’s vibrant, pluralistic democracy will produce measurable results and improvements for its citizens and inspire others to follow a similar path of openness and tolerance. So the Obama administration has expanded our bilateral partnership; actively supported India’s Look East efforts, including through a new trilateral dialogue with India and Japan; and outlined a new vision for a more economically integrated and politically stable South and Central Asia, with India as a linchpin.

We are also forging a new partnership with Indonesia, the world’s third-largest democracy, the world’s most populous Muslim nation, and a member of the G-20. We have resumed joint training of Indonesian special forces units and signed a number of agreements on health, educational exchanges, science and technology, and defense. And this year, at the invitation of the Indonesian government, President Obama will inaugurate American participation in the East Asia Summit. But there is still some distance to travel — we have to work together to overcome bureaucratic impediments, lingering historical suspicions, and some gaps in understanding each other’s perspectives and interests.

EVEN AS WE strengthen these bilateral relationships, we have emphasized the importance of multilateral cooperation, for we believe that addressing complex transnational challenges of the sort now faced by Asia requires a set of institutions capable of mustering collective action. And a more robust and coherent regional architecture in Asia would reinforce the system of rules and responsibilities, from protecting intellectual property to ensuring freedom of navigation, that form the basis of an effective international order. In multilateral settings, responsible behavior is rewarded with legitimacy and respect, and we can work together to hold accountable those who undermine peace, stability, and prosperity.

So the United States has moved to fully engage the region’s multilateral institutions, such as the Association of Southeast Asian Nations (ASEAN) and the Asia-Pacific Economic Cooperation (APEC) forum, mindful that our work with regional institutions supplements and does not supplant our bilateral ties. There is a demand from the region that America play an active role in the agenda-setting of these institutions — and it is in our interests as well that they be effective and responsive.

That is why President Obama will participate in the East Asia Summit for the first time in November. To pave the way, the United States has opened a new U.S. Mission to ASEAN in Jakarta and signed the Treaty of Amity and Cooperation with ASEAN. Our focus on developing a more results-oriented agenda has been instrumental in efforts to address disputes in the South China Sea. In 2010, at the ASEAN Regional Forum in Hanoi, the United States helped shape a regionwide effort to protect unfettered access to and passage through the South China Sea, and to uphold the key international rules for defining territorial claims in the South China Sea’s waters. Given that half the world’s merchant tonnage flows through this body of water, this was a consequential undertaking. And over the past year, we have made strides in protecting our vital interests in stability and freedom of navigation and have paved the way for sustained multilateral diplomacy among the many parties with claims in the South China Sea, seeking to ensure disputes are settled peacefully and in accordance with established principles of international law.

We have also worked to strengthen APEC as a serious leaders-level institution focused on advancing economic integration and trade linkages across the Pacific. After last year’s bold call by the group for a free trade area of the Asia-Pacific, President Obama will host the 2011 APEC Leaders’ Meeting in Hawaii this November. We are committed to cementing APEC as the Asia-Pacific’s premier regional economic institution, setting the economic agenda in a way that brings together advanced and emerging economies to promote open trade and investment, as well as to build capacity and enhance regulatory regimes. APEC and its work help expand U.S. exports and create and support high-quality jobs in the United States, while fostering growth throughout the region. APEC also provides a key vehicle to drive a broad agenda to unlock the economic growth potential that women represent. In this regard, the United States is committed to working with our partners on ambitious steps to accelerate the arrival of the Participation Age, where every individual, regardless of gender or other characteristics, is a contributing and valued member of the global marketplace.

In addition to our commitment to these broader multilateral institutions, we have worked hard to create and launch a number of “minilateral” meetings, small groupings of interested states to tackle specific challenges, such as the Lower Mekong Initiative we launched to support education, health, and environmental programs in Cambodia, Laos, Thailand, and Vietnam, and the Pacific Islands Forum, where we are working to support its members as they confront challenges from climate change to overfishing to freedom of navigation. We are also starting to pursue new trilateral opportunities with countries as diverse as Mongolia, Indonesia, Japan, Kazakhstan, and South Korea. And we are setting our sights as well on enhancing coordination and engagement among the three giants of the Asia-Pacific: China, India, and the United States.

In all these different ways, we are seeking to shape and participate in a responsive, flexible, and effective regional architecture — and ensure it connects to a broader global architecture that not only protects international stability and commerce but also advances our values.

OUR EMPHASIS ON the economic work of APEC is in keeping with our broader commitment to elevate economic statecraft as a pillar of American foreign policy. Increasingly, economic progress depends on strong diplomatic ties, and diplomatic progress depends on strong economic ties. And naturally, a focus on promoting American prosperity means a greater focus on trade and economic openness in the Asia-Pacific. The region already generates more than half of global output and nearly half of global trade. As we strive to meet President Obama’s goal of doubling exports by 2015, we are looking for opportunities to do even more business in Asia. Last year, American exports to the Pacific Rim totaled $320 billion, supporting 850,000 American jobs. So there is much that favors us as we think through this repositioning.

When I talk to my Asian counterparts, one theme consistently stands out: They still want America to be an engaged and creative partner in the region’s flourishing trade and financial interactions. And as I talk with business leaders across our own nation, I hear how important it is for the United States to expand our exports and our investment opportunities in Asia’s dynamic markets.

Last March in APEC meetings in Washington, and again in Hong Kong in July, I laid out four attributes that I believe characterize healthy economic competition: open, free, transparent, and fair. Through our engagement in the Asia-Pacific, we are helping to give shape to these principles and showing the world their value.

We are pursuing new cutting-edge trade deals that raise the standards for fair competition even as they open new markets. For instance, the Korea-U.S. Free Trade Agreement will eliminate tariffs on 95 percent of U.S. consumer and industrial exports within five years and support an estimated 70,000 American jobs. Its tariff reductions alone could increase exports of American goods by more than $10 billion and help South Korea’s economy grow by 6 percent. It will level the playing field for U.S. auto companies and workers. So, whether you are an American manufacturer of machinery or a South Korean chemicals exporter, this deal lowers the barriers that keep you from reaching new customers.

We are also making progress on the Trans-Pacific Partnership (TPP), which will bring together economies from across the Pacific — developed and developing alike — into a single trading community. Our goal is to create not just more growth, but better growth. We believe trade agreements need to include strong protections for workers, the environment, intellectual property, and innovation. They should also promote the free flow of information technology and the spread of green technology, as well as the coherence of our regulatory system and the efficiency of supply chains. Ultimately, our progress will be measured by the quality of people’s lives — whether men and women can work in dignity, earn a decent wage, raise healthy families, educate their children, and take hold of the opportunities to improve their own and the next generation’s fortunes. Our hope is that a TPP agreement with high standards can serve as a benchmark for future agreements — and grow to serve as a platform for broader regional interaction and eventually a free trade area of the Asia-Pacific.

Achieving balance in our trade relationships requires a two-way commitment. That’s the nature of balance — it can’t be unilaterally imposed. So we are working through APEC, the G-20, and our bilateral relationships to advocate for more open markets, fewer restrictions on exports, more transparency, and an overall commitment to fairness. American businesses and workers need to have confidence that they are operating on a level playing field, with predictable rules on everything from intellectual property to indigenous innovation.

ASIA’S REMARKABLE ECONOMIC growth over the past decade and its potential for continued growth in the future depend on the security and stability that has long been guaranteed by the U.S. military, including more than 50,000 American servicemen and servicewomen serving in Japan and South Korea. The challenges of today’s rapidly changing region — from territorial and maritime disputes to new threats to freedom of navigation to the heightened impact of natural disasters — require that the United States pursue a more geographically distributed, operationally resilient, and politically sustainable force posture.

We are modernizing our basing arrangements with traditional allies in Northeast Asia — and our commitment on this is rock solid — while enhancing our presence in Southeast Asia and into the Indian Ocean. For example, the United States will be deploying littoral combat ships to Singapore, and we are examining other ways to increase opportunities for our two militaries to train and operate together. And the United States and Australia agreed this year to explore a greater American military presence in Australia to enhance opportunities for more joint training and exercises. We are also looking at how we can increase our operational access in Southeast Asia and the Indian Ocean region and deepen our contacts with allies and partners.

How we translate the growing connection between the Indian and Pacific oceans into an operational concept is a question that we need to answer if we are to adapt to new challenges in the region. Against this backdrop, a more broadly distributed military presence across the region will provide vital advantages. The United States will be better positioned to support humanitarian missions; equally important, working with more allies and partners will provide a more robust bulwark against threats or efforts to undermine regional peace and stability.

But even more than our military might or the size of our economy, our most potent asset as a nation is the power of our values — in particular, our steadfast support for democracy and human rights. This speaks to our deepest national character and is at the heart of our foreign policy, including our strategic turn to the Asia-Pacific region.

As we deepen our engagement with partners with whom we disagree on these issues, we will continue to urge them to embrace reforms that would improve governance, protect human rights, and advance political freedoms. We have made it clear, for example, to Vietnam that our ambition to develop a strategic partnership requires that it take steps to further protect human rights and advance political freedoms. Or consider Burma, where we are determined to seek accountability for human rights violations. We are closely following developments in Nay Pyi Taw and the increasing interactions between Aung San Suu Kyi and the government leadership. We have underscored to the government that it must release political prisoners, advance political freedoms and human rights, and break from the policies of the past. As for North Korea, the regime in Pyongyang has shown persistent disregard for the rights of its people, and we continue to speak out forcefully against the threats it poses to the region and beyond.

We cannot and do not aspire to impose our system on other countries, but we do believe that certain values are universal — that people in every nation in the world, including in Asia, cherish them — and that they are intrinsic to stable, peaceful, and prosperous countries. Ultimately, it is up to the people of Asia to pursue their own rights and aspirations, just as we have seen people do all over the world.

IN THE LAST decade, our foreign policy has transitioned from dealing with the post-Cold War peace dividend to demanding commitments in Iraq and Afghanistan. As those wars wind down, we will need to accelerate efforts to pivot to new global realities.

We know that these new realities require us to innovate, to compete, and to lead in new ways. Rather than pull back from the world, we need to press forward and renew our leadership. In a time of scarce resources, there’s no question that we need to invest them wisely where they will yield the biggest returns, which is why the Asia-Pacific represents such a real 21st-century opportunity for us.

Other regions remain vitally important, of course. Europe, home to most of our traditional allies, is still a partner of first resort, working alongside the United States on nearly every urgent global challenge, and we are investing in updating the structures of our alliance. The people of the Middle East and North Africa are charting a new path that is already having profound global consequences, and the United States is committed to active and sustained partnerships as the region transforms. Africa holds enormous untapped potential for economic and political development in the years ahead. And our neighbors in the Western Hemisphere are not just our biggest export partners; they are also playing a growing role in global political and economic affairs. Each of these regions demands American engagement and leadership.

And we are prepared to lead. Now, I’m well aware that there are those who question our staying power around the world. We’ve heard this talk before. At the end of the Vietnam War, there was a thriving industry of global commentators promoting the idea that America was in retreat, and it is a theme that repeats itself every few decades. But whenever the United States has experienced setbacks, we’ve overcome them through reinvention and innovation. Our capacity to come back stronger is unmatched in modern history. It flows from our model of free democracy and free enterprise, a model that remains the most powerful source of prosperity and progress known to humankind. I hear everywhere I go that the world still looks to the United States for leadership. Our military is by far the strongest, and our economy is by far the largest in the world. Our workers are the most productive. Our universities are renowned the world over. So there should be no doubt that America has the capacity to secure and sustain our global leadership in this century as we did in the last.

As we move forward to set the stage for engagement in the Asia-Pacific over the next 60 years, we are mindful of the bipartisan legacy that has shaped our engagement for the past 60. And we are focused on the steps we have to take at home — increasing our savings, reforming our financial systems, relying less on borrowing, overcoming partisan division — to secure and sustain our leadership abroad.

This kind of pivot is not easy, but we have paved the way for it over the past two-and-a-half years, and we are committed to seeing it through as among the most important diplomatic efforts of our time.

Hillary Clinton

It’s time for Japan to restore calm 

Seoul and Tokyo are on a head-on collision course over disputes on Dokdo and President Lee Myung-bak’s subsequent remarks on Japanese king Akihito’s apology.

The Japanese government decided in a Cabinet meeting Tuesday to make a proposal that the neighboring countries will jointly take the issue of Dokdo to the International Court of Justice (ICJ). However, the Seoul government rejected the idea, reaffirming its stance that there should not be any territorial disputes over the easternmost islets.

Now it’s clear that South Korea won’t change its position on the matter, as an anonymous South Korean official put it, “We have neither any reason to go to the ICJ nor will we go there.’’

Reports say Japanese officials also discussed ways to retaliate, if South Korea doesn’t respond to their proposal. Some possible measures include reducing the $70 billion currency swap with South Korea, suspending bilateral high-level talks and blocking
Seoul’s efforts to become a nonpermanent member of the United Nations Security Council.

These measures are being discussed emotionally in Japan without due consideration and will hardly hurt South Korea. The currency swap cuts, for instance, won’t put Seoul in a quandary and rather, it will result in the Japanese currency appreciating.

True, there could be controversy on President Lee’s demand for an apology from the Japanese king in terms of diplomatic relevance, but given Japan’s brutal colonization of the Korean Peninsula and atrocities committed during the colonial period, our president is entitled to make such remarks. Rather, it may be anachronistic for the island country to deify the king.

At the heart of Japan’s recent territorial disputes in Northeast Asia is its past history of militaristic invasion. We urge Japan to face up to its wartime past and demand that Japan do more to atone for its brutal expansionism in the 20th century.

Tokyo should be reminded that President Lee’s surprise visit to Dokdo was caused by its insincere attitude toward the so-called “comfort women’’ issue and provocative offensives concerning the tiny, rocky outcroppings in the East Sea. It also defies our understanding that Japanese Prime Minister Yoshihiko Noda is apparently taking advantage of the latest confrontational situation between the two countries for political gains in the lead-up to the general elections.

South Korea, for its part, needs to be cautious so that it won’t provoke Japan unnecessarily, given that Lee’s island visit was the start of the escalating conflict.

The Seoul government deserves blame for running about in confusion over Japan’s plan to take the Dokdo case to the ICJ. It should be fully ready for any contingencies ― some analysts raise the possibility that Japan’s ultra-rightists may try to land in the islets ― and exercise its utmost self-restraint in order not to get caught in Japan’s plot to turn Dokdo into a territorial dispute area.

What’s clear is that the inter-governmental conflict is escalating into a collision between nationalistic sentiments. Now it’s time for the neighboring countries, especially Japan, to stop accusing each other and restore calm unless they want the situation to go from bad to worse.

Korea Times

Five Conflicts That Could Roil Global Markets

With Europe’s woes temporarily sliding into the background, market speculators are looking elsewhere for the next source of global stress. From the Middle East to the South China Sea they are discovering a set of international tensions with the potential to spill over into economic disruption.

It’s showing up in various ways. Last month, the Turkish lira fell on concerns about the Turkish-Syrian border conflict. Last week it was the turn of the Israeli shekel, which came under pressure on concerns that Israel could attack Iran. And now the world’s eyes are on East Asia, where Japan has seen flare-ups in separate territorial disputes with both China and South Korea, prompting it to consider taking financial actions against the latter.

This series of what investors often call “geopolitical risks” extends a trend that began with last year’s “Arab Spring,” where a spate of a uprisings that started in Tunisia later spread to Egypt and other neighboring countries, including the now war-torn land of Syria. Oil prices rose above $100 a barrel for the first time since 2008, and markets across the world came under pressure.

“The Arab Spring awakened investors,” said Garth Ballantyne, who heads international equity sales trading at Auerbach Grayson, a broker dealer.

For now, emerging-market investors haven’t hit the panic button as none of these conflicts have ballooned to the point of having a broader impact. Nonetheless, all contain the potential to evolve into a wider blowup, even if there are mitigating factors keeping them from spiraling out of control.

Here are some pointers for how markets might deal with the simmering disputes on investors’ radars:

ISRAEL/IRAN: An Israeli strike against Iran could easily lead to conflict escalation across the Middle East. Israel maintains it has the right to prevent any Iranian development of nuclear weapons, while Iran says its program is for peaceful purposes.

Market consequences: Oil prices would likely spike on anticipated disruptions to Middle Eastern supply. Net oil importer countries, such as Turkey and India, would suffer. However, Bryan Carter, portfolio manager at Acadian Asset Management, argues that non-Middle Eastern exporter countries such as Brazil, Mexico and Malaysia could benefit from this and can function as good hedges against the risk of conflict. The Israeli shekel would also be a direct loser, as was clear from its recent slide as the saber-rattling perked up.

Likelihood: The potential for an Israeli attack on Iran has been known for years, which has tempered investors’ reactions to the latest flare-up. Some observers suggest Prime Minister Benjamin Netanyahu’s bark is worse than his bite, with talk of air strikes aimed more at keeping Washington engaged in protecting Israel’s interests than an indicator of Israel’s true desire to undertake such a risky venture.

SYRIA: With mediation efforts failing, the uprising against the government of President Bashar al-Assad has evolved into a protracted, all-out war, with few signs that either side will cave in soon. Turkey is the rebel faction’s main sponsor. Russia and China have successfully blocked bids for sanctions against Mr. Assad’s government in the U.N. Security Council.

Market consequences: Syria’s violence threatens to spill across its borders. For investors, Turkey is the biggest worry as its economy is far bigger than that of, say, Lebanon, and its markets are far more accessible to foreign investors than in most Middle Eastern countries. Turkey has only recently returned to investors’ favor and can ill afford the consequences of sectarian violence or the disruption from higher oil prices.

Likelihood: Although the conflict is raging close to Syria’s borders, it isn’t likely to spread far into Turkey. As Turkey is a member of NATO, Syria will be extremely wary of triggering an international response.

SOUTH CHINA SEA ISLANDS: A key reason why six countries have competing claims for this Southeast Asian archipelago is that they have a resource-rich seabed, which some say could contain as much oil as some Middle Eastern countries. China, citing historical rights, has taken control of a large portion of these islands. Other claimants, including the Philippines, Malaysia and Vietnam, have protested these incursions. The Philippines’ recent efforts to auction oil-exploration concessions in the region saw little response from large companies for fear of losing their China business.

Market Consequences: If China used its economic and military clout to force control of the islands and their vitally important sea lanes, international trade could be threatened. If so, some even see the U.S. being dragged into the conflict.

Likelihood: China is actively attempting to re-assert its hold over the islands. In June, China appointed 45 legislators, created a prefecture to manage the islands, and deployed a garrison. The U.S. response was guarded. China is likely to heft its economic weight and may not face much opposition, unless the U.S. were to take sides more forcefully.

LIANCOURT ROCKS: The conflict between South Korea and Japan over a group of islets in the Sea of Japan gathered steam after a visit to the islands by South Korea’s president, Kim Myung-bak. Japan said it wants to take the dispute to the International Court of Justice, but South Korea hasn’t agreed to it.

Market consequences: Japan has responded to the dispute by threatening not to extend parts of its $70 billion existing swap agreement with South Korea. That could leave the South Korean won vulnerable in the event of another global financial crisis, though with $314 billion in foreign currency reserves as of July the country has a deep pool of its own resources to fall back on.

Likelihood: South Korea has fended off calls from Japan to settle the dispute. So, it’s likely to surface again. Meanwhile, Japan is expected to make a decision on withdrawing the swap lines with South Korea as early as Tuesday.

SENKAKU/DIAOYU ISLANDS: These uninhabited East China Sea islands were the subject of weekend protests in China following a visit by Japanese activists. The U.S. transferred the administration of the islands to Japan in 1971, but China disputes the ownership. The islands lie within a key sea trade route and fishing zone and are also potentially home to energy resources.

Market consequences: The conflict comes at an awkward time for the two countries, just as they are trying to build mutual trade lines. In previous territorial disputes with Japan, China has frozen exports of metals and materials vital to Japan’s manufacturing industry.

Likelihood: As with other territorial disputes, China’s willingness to push its claims will likely be contained by its unwillingness to disrupt relations with important trading partners such as Japan.

Prabha Natarajan

U.S. Looms Large Over China’s Sovereignty Disputes

As tensions between China and Japan hit a new recent high this week over the disputed , and with Japanese forces joining U.S. marines in the west Pacific today for the start of a month-long military drill, Xinhua News warned the Americans to stop adding fuel to the diplomatic fire:

Though no country was named as the imaginary occupier, an official with the Japanese Ministry of Defense hinted that the war game is targeted at China, according to a report by Japanese newspaper Sankei Shimbun.

Given the recent flaring tensions over the Diaoyu Islands, the deliberate decision to carry out such an agitative drill serves nothing but fuels the fire, as it will aggravate the situation and jeopardize any future efforts for a peaceful settlement.

The move also gives the lie to Washington’s alleged neutral stance towards the China-Japan dispute and gives birth to more suspicion over the United States’ true intentions in the Asia-Pacific.

Whether China likes it or not, however, the U.S. is entrenched in Asia Pacific’s brewing maritime sovereignty storm. For The Wall Street Journal on Monday, U.S. Senator James Webb puts the latest round of tensions in context:

In truth, American vacillations have for years emboldened China. U.S. policy with respect to sovereignty issues in Asian-Pacific waters has been that we take no sides, that such matters must be settled peacefully among the parties involved. Smaller, weaker countries have repeatedly called for greater international involvement.

China, meanwhile, has insisted that all such issues be resolved bilaterally, which means either never or only under its own terms. Due to China’s growing power in the region, by taking no position Washington has by default become an enabler of China’s ever more aggressive acts.

The U.S., China and all of East Asia have now reached an unavoidable moment of truth. Sovereignty disputes in which parties seek peaceful resolution are one thing; flagrant, belligerent acts are quite another. How this challenge is addressed will have implications not only for the , but also for the stability of East Asia and for the future of U.S.-China relations.

What if China and Japan did trade naval blows, as they did during the Sino-Japanese War of 1894-1895? While unlikely, James Holmes of the Naval War College handicaps the fight for Foreign Policy:

Whoever forges sea, land, and air forces into the sharpest weapon of sea combat stands a good chance of prevailing. That could be Japan if its political and military leaders think creatively, procure the right hardware, and arrange it on the map for maximum effect. After all, Japan doesn’t need to defeat China’s military in order to win a showdown at sea, because it already holds the contested real estate; all it needs to do is deny China access. If Northeast Asian seas became a no-man’s land but Japanese forces hung on, the political victory would be Tokyo’s.

Japan also enjoys the luxury of concentrating its forces at home, whereas the PLA Navy is dispersed into three fleets spread along China’s lengthy coastline. Chinese commanders face a dilemma: If they concentrate forces to amass numerical superiority during hostilities with Japan, they risk leaving other interests uncovered. It would hazardous for Beijing to leave, say, the South China Sea unguarded during a conflict in the northeast.

And finally, Chinese leaders would be forced to consider how far a marine war would set back their sea-power project. China has staked its economic and diplomatic future in large part on a powerful oceangoing navy. In December 2006, President Hu Jintao ordered PLA commanders to construct “a powerful people’s navy” that could defend the nation’s maritime lifelines — in particular sea lanes that connect Indian Ocean energy exporters with users in China — “at any time.” That takes lots of ships. If it lost much of the fleet in a Sino-Japanese clash — even in a winning effort — Beijing could see its momentum toward world-power status reversed in an afternoon.

Here’s hoping China’s political and military leaders understand all this. If so, the Great Sino-Japanese Naval War of 2012 won’t be happening outside these pages.

See also a People’s Daily piece from Tuesday in which Peking University professor Liang Yunxiang details the legal basis of China’s sovereignty claim over the Diaoyu Islands.

Posted in: Economy, Politics