Thursday, 8 August 2013

China and Japan's competition for influence over ASEAN

There are many rapidly changing dynamics in play in East Asia. The options for monitoring range from the stumbling American “pivot” to flashpoint maritime security spats between almost every nation in the region.
But one of the more interesting, and ultimately important, interactions is the competition for influence between Japan and China over the Association of Southeast Asian Nations (ASEAN).

In a very real way, the ASEAN states are a collection of some of the world’s fastest-growing economies. According to a recent report, intra-regional trade between the ASEAN states more than doubled from NZ$177 billion in 2004 to just over NZ$410 billion in 2011.

There are still significant trade barriers yet to be smoothed over, but the combining thread points to a region growing in riches and appreciably increasing its standards of living.

ASEAN's 10 member states are home to about
600 million people across Southeast Asia - (Photo:Reuters)
ASEAN is now Japan’s second largest trading partner, collecting over NZ$311 billion in total trade in 2011. The group of nations also receives the greatest amount of investment out of Japan, spurred on by Mr Abe’s drive for deeper economic integration in East Asia.

Both China and Japan have noticed the opportunities in the region. Japan’s new Prime Minister Shinzo Abe has just finished a concerted tour of three of ASEAN’s heavyweights: Malaysia, the Philippines, and Singapore.

His goal was both to strengthen the various existing trade interactions with Japan while stressing their mutual strategic relationships, but also to leverage the current regional distrust with China.

Mr Abe’s recent diplomatic exploration in the ASEAN countries comes on the back of China’s slow down from their giddy heights of double-digit growth rates throughout the early 21st century.

China still has plenty of cash lying around for investment in the Asia Pacific, and there are few sane countries which would refuse the offer. But the continuing clashes in the crowded East Asian sea lanes are pushing ASEAN nations away from cooperation with China and further into the welcoming arms of Japan if Beijing is not careful.

This is a microcosm of a larger picture emerging in the East Asia economic region. As China slows, it is Japan which is looking stronger by the year, and that is a fascinating development. It would have been a brave soul to venture such a forecast twenty years ago.

Japan still has a laundry list of economic and political problems it needs to address, but the Japanese economy is very well placed for a return to economic dynamism in the next few decades.

But it is not just the potential for a continued rise in trade between ASEAN states and Japan which is catching the eye of many of those smaller Asian states. After all, ASEAN trade with China still reached an enormous NZ$500 billion record in 2012. And the last thing the ASEAN states need is to alienate or frustrate their Chinese trading partner.

From an ASEAN perspective, courting both nations will benefit the trading bloc, but they will need to tread a fine line. Some members are cautioning against turning entirely away from China despite the security tensions, but this mindset is getting more difficult to foster.

Those security issues are the very visceral reason the ASEAN states were happy to receive Mr Abe last month.

Japan’s navy is modernising faster than almost any other maritime nation on earth and offers the ASEAN trading group an alternative strategic benefactor to counter Chinese movements, especially since the United States are increasingly unwilling to involve themselves in security matters.

Mr Abe even mentioned on his recent tour that he was “delighted” that Japan could participate in ensuring the “freedom of navigation on the seas”. Given his tour’s relative success, there appears to be growing support in East Asia for Japan to provide the muscle in countering the growing Chinese capabilities.

China, for its part, is also recognising the need to talk to the ASEAN states, rather than relying on its coast guard and navy to intimidate its neighbours and leverage trade advantages. The smaller states do not wish to scare China away, but at the same time are worried about China’s expansion.

To go some way towards rectifying this, the Philippines and Vietnam sat down with China last week to negotiate a different method of interaction, but the talks were frosty at best.

Over the past few years, China has played off the individual ASEAN states against each other. This has distracted the nations from truly organising a coherent response to the issue. Japan is moving in to bring some semblance of connection.

As things presently stand, despite its size, China is falling behind Japan in the race for influence. Japan offers less in the way of trade perks for ASEAN (although still significant) as compared to China, but the trade-off benefit of a strong military counter to China’s expansion is an important reason for ASEAN states to balance their interests with both countries.

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