Asia steels for challenges ahead
By Francesco Sisci
BEIJING - On October 10, China's state-run Xinhua news agency saluted the
meeting between Chinese Premier Wen Jiabao, Japanese Premier Yukio Hatoyama and
South Korean President Lee Myung-bak, as "a new starting point for tripartite
cooperation".
The meeting explored the idea of a free-trade pact, inched closer to deeper
regional integration, and foreshadowed a possible Asian union modeled after the
European Union.
China, Japan, and South Korea declared they were "committed to the development
of an East Asian community", agreeing to expand cooperation across a wide range
of issues, including climate change and sustainable growth.
Economic forces and threats were at work. Recovery from the
financial crisis shows strong signs in Asia, carried by China, while the
economy is still very sluggish in America and Europe.
David Goldman, who writes for Asia Times Online under the pseudonym Spengler,
believes that unless something changes very soon, the United States - still by
far the largest global economy - is headed for a long period of stagflation
(stagnation plus inflation) [1] like the one that began in Japan in 1989.
The United States' present and foreseeable economic difficulties contrast
sharply with the numbers coming out of Asia, where in the second quarter Japan
showed clear signs of improvement. These two trends - the difficulties of the
US and Asia's improvements - if confirmed over the next couple of years could
become a major objective force driving regional integration.
So far, Asian growth has been driven by massive national stimulus packages,
mainly by China's trillions of yuan of credit to large companies. This,
however, cannot be sustained for too long without badly damaging the account
books of every country. Then, if in a couple of years the US is not clearly out
of its present quagmire, greater Asian trade integration could represent the
alternative.
Still, China may be less than keen to embrace this solution. The first
difficulty for China is choosing the members of future regional integration.
China, Japan, and South Korea agree on having the Association of Southeast
Asian Nations' members on board. But they disagree on the participation of
India. However, if push came to shove, it would hard for China to argue against
India's participation in a regional free-trade agreement.
On Sunday, just days after the failure of its bid to host the 2016 Games, Japan
renewed its Olympic Games ambitions, proposing to host them in 2020 in
Hiroshima and Nagasaki, the two cities bombed by atomic bombs by the US in
1945. This bid is a masterstroke. It is a bid for a future Nobel Peace Prize,
as it aims to celebrate peace and a world free of atomic weapons. Domestically,
it proves Hatoyama's determination and dynamism as well as his speed in taking
the initiative, which could help in expanding his support ahead of next year's
crucial Upper House elections. It nudges the world to pay closer attention to
the North Korean issue, and it shows Asia that - despite the fact that next
year China should become the number-one economy in the region - Hatoyama's
Japan can still take a leading role in the area and still has many political
tricks up its sleeve.
Although China has greatly improved its performance in international forums, it
still prefers bilateral talks. Proposed free-trade agreements have trade issues
bordering on politics that could easily entangle relations between China and
private entrepreneurs involved in China, its heavily industrialized Guangdong
province or the Philippines, as well as places like China's Zhejiang province
or Southeast Asian nations such as Thailand. For a very control-conscious
Beijing, it could be a nightmare, something that could block China from
developments in other regions.
Then, in theory, a grand entente cordiale with America - in practice, a group
of two between the US and China - could work better for Beijing. China would be
a junior partner, but it would have a major political "discount" in the ties.
In its dealings with the US, despite all the ideological preconceptions about
Chinese communism, China could start anew, putting aside its past.
The US does not have the many years of hatred or fear about Chinese historical
"hegemony" that one finds in many Asian countries and with which China will
increasingly be confronted as its economy and power grow in the coming decades.
Asian countries are not really scared about the threat of a future Chinese
invasion - this has rarely occurred in the past, and it looks much less likely
now. However, there is real concern about Chinese bullying, and thus the widest
cooperation of neighbors - including India, the only country that
population-wise can be compared to China - could help to minimize this
possibility.
The two options, the Asian community and the proposed "group of two", composed
of the US and China, are not mutually exclusive - they could be carried out at
the same time and possibly will. Still, the real issue is which one will be
fast tracked. This will largely depend on what the US decides to do next month,
when Obama goes to Beijing for a summit with his Chinese counterpart.
The United States could be interested in the emergence of an Asian community,
which could help bind a growing China. In different conditions and in a
different historical situation, an Asian free-trade agreement could serve to
rein in China. However, the centerpiece of the European Community, predecessor
to the European Union, was eliminating German leadership. Divided after World
War II and saddled with enormous guilt, Germany (still the largest economy in
Europe) no longer aspired to lead Europe, and this task fell on the two
members, the United Kingdom and France, which were in the EC but also had
national interests that were larger and different from those of the community.
US influence on the European Community was then much larger than what met the
eye.
Few of these conditions are met in Asia. China will not easily give up its
political aspirations. Nor is India willing to be controlled by America or
Japan. Being an island and fearing a possible squeeze between China and
America, Japan may also be inclined to take what it hears from the US with a
pinch of salt. Without a rather quick American economic recovery and with all
of Asia having witnessed the US battered and mired in Iraq and Afghanistan, any
Asian free-trade agreement could be more detached from the rest of the world.
Despite their many differences, Asian countries might decide it is more
practical and efficient to sort out their differences among themselves, as they
did for centuries, rather than with the external aid of the US.
Of course, the US will not then disappear from Asian radar screens. But with
less economic clout because of the lasting financial crisis, bad performances
on the battlefields in Iraq and Afghanistan, and an increasingly confused stand
on ideological issues such as human rights and democracy, the US could become a
dwindling presence in Asia, while inter-Asian politics may be on the upswing.
If this American crisis lasts more than four or five years, Washington might
find a different Asia by the time it has the muscle to come back. Asian
countries may simply get used to handling themselves with less US involvement
and thus might desire even less of an American future commitment in the region.
These are very real issues for Obama to consider before the next Beijing
summit. A strong US strategic and industrial commitment with China could help
to balance pan-Asian trends, and new Nobel Peace laureate Obama might want to
proceed with this commitment, having already recognized that the US-China
relationship may be the most important in the world now.
However, the devil may be in a mountain of details that could easily disrupt
the whole process. The details range from strategic issues like North Korea,
Iran, Taiwan and Afghanistan to trade, the environment, security, and
ideological issues, not to mention concerns about the future role of the
dollar, the yuan, and the global financial system.
These are huge questions that can't be ignored or swept under the carpet, nor
can they be painstakingly addressed one by one before building future ties.
Each of these details has the power to scuttle the whole relationship and shape
the future in one way or another. Yet each of them remains only a part of the
bigger political picture about the future of Asia and America.
It is unclear if there is or can be a formula to bring China and the US closer
together, taking into account the details without being too constrained by any
of them. Still, finding this formula in the next months or years could be
crucial to moving China more towards Asia or more toward America. The ball is
in Obama's court.
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