A tale of two Asias -Whatever happened to the ‘Asian Century’?

In recent months, two Asias, wholly incompatible, have emerged in stark relief. There is ‘Economic Asia’, the Dr Jekyll — a dynamic, integrated Asia with 53 per cent of its trade now being conducted within the region itself, and a US$19 trillion regional economy that has become an engine of global growth. And then there is ‘Security Asia’, the veritable Mr Hyde — a dysfunctional region of mistrustful powers, prone to nationalism and irredentism, escalating their territorial disputes over tiny rocks and shoals, and arming for conflict.

In today’s Asia, economics and security no longer run in parallel lines. In fact, they are almost completely in collision.

In the one domain, Asian economies have come in recent years to depend increasingly on China — and one another — for trade, investment and markets. And this trend toward regional economic integration has been reinforced over the last four years by austerity in Europe and slow growth in the United States. But these same economies now trade nationalist barbs, build navies and acquire new arms and power projection capabilities. With the exception of China, all major Asian states, though their economies are increasingly integrated within Asia, are tacking hard across the Pacific toward the United States for their security.

Put bluntly, Economic Asia and Security Asia have become increasingly irreconcilable. But where Economic Asia was winning the contest in the decade and a half after the Asian financial crisis of 1997–98, Security Asia has begun to overwhelm those recent trends.

Indeed, so powerful was the rise of Economic Asia that it had challenged even the long-standing American role in the region. Intra-Asian trade and investment took off fast with the end of the Cold War, but Asia’s growing web of economic and political connections was particularly reinforced by the 1997–98 financial crisis, when the United States was viewed, especially in Southeast Asia, as arrogant and aloof. And, in the ensuing years, preferential trade agreements, regionally based regulations and standards, and institutions created without American involvement advanced. These threatened to marginalise the United States over time.

But after two years of nationalistic rhetoric over rocks and islets in the East and South China Seas, Security Asia has roared back. Rampant and competing 19th- and 20th-century nationalisms have moved again to the fore as pathologies that seemed frozen in time raise the spectre of renewed conflict. Defence spending in China, Japan, India, South Korea and Taiwan has doubled in the past decade, reaching US$224 billion last year. Asians have worked for decades to develop a pan-Asian identity and enhance their collective clout in the global system. But economic integration has thus far yielded no basis for collective or cooperative security in the Pacific. 

Instead, the world’s new centre of economic gravity looks fragile and conflicted.

Could Security Asia actually overwhelm, or even destroy, the economic gains that were beginning to pull the region away from its debilitating past?

Some have argued that this is a temporary phenomenon — a cynical ploy by Asia’s politicians to build support at a time of domestic weakness. But it is too easy to dismiss these recent developments as the product of domestic politics. Yes, China, Japan, South Korea and Vietnam, among others, are focused on internal economic or political developments. Yet while it is true that popular chauvinism is a useful tactic for Asia’s beleaguered politicians, such tactics will yield significant costs and enduring damage. Nor are such passions easily turned on and off.

Look, for example, at the recent events in China: as protestors took to the streets this autumn in dozens of Chinese cities, Japanese businesses were attacked, thousands of China–Japan flights were cancelled, and Honda, Toyota, Panasonic and other popular Japanese brands closed factories.

South Korea and Japan have traded nationalist recriminations over even tinier rocky islets. Despite a robust trade relationship and a powerful shared interest in countering North Korean threats, the two could not sign even a straightforward intelligence-sharing agreement to enhance cooperation in the face of a common threat from Pyongyang.

Such developments belie much of what has been written about Asia’s recent evolution. Many have argued that Japanese strategy is now motivated principally by realpolitik instincts — specifically a desire to balance rising Chinese power. But if this is true, then it is difficult to understand Tokyo’s festering spat with South Korea. What is more, Tokyo has long been an exemplar of Economic Asia and a motive force behind the quest for greater regional economic integration. Post-war Japan, a strong US ally with a powerful sense of trans-Pacific identity, has incubated a variety of pan-Asian regional ideas and ideologies, especially with respect to Asian monetary integration.
Amazingly, even amid this autumn’s high geopolitical drama over contested islets, talks among Beijing, Tokyo and Seoul for a trilateral FTA rolled along, while ASEAN+3, which includes the South China Sea’s three most vocal antagonists (China, Vietnam and the Philippines), announced a strengthening of the Chiang Mai Initiative through pledges that double the arrangement’s size to US$240 billion.

Thus the current push and pull between Economic Asia and Security Asia raises a number of important issues. For one, Asia’s major multilateral institutions have proved to be almost irrelevant to practical problem solving. Pan-Asian regionalism has failed to quell Asia’s nationalist demons, and existing institutions, including those that involve the United States, have been largely missing in action throughout the turmoil of recent years. ASEAN cohesion collapsed at a meeting in Phnom Penh in July 2012, with the Cambodian chair at loggerheads with Vietnam and the Philippines over how sharply to confront Beijing. The new East Asia Summit (EAS) has done nothing to consolidate an agenda in between its annual meetings. And the ASEAN Regional Forum (ARF), despite being Asia’s leading security forum, has similarly become an arena for accusations and counterclaims.

Revisiting Asia’s regional institutions could help to fashion mechanisms better able to address the real problems while buttressing the US position. Inertia and ‘process-centred’ rituals continue to predominate at regional meetings. Diplomats rack up frequent flyer miles but little else. Certainly, it can be useful for heads of state to meet regularly. But it would be wise for a group of like-minded countries, including the United States, to think through a modest but substantive operational agenda for the next EAS meeting to decide priority issues. Then, depending on the issue, leaders could ask that the ARF or the APEC forum, or another relevant body, follow up with practical actions. This would begin to inject greater relevance into regional institutions and more connectivity among them.

A second issue touches the American role in Asia. The US role as Asia’s security provider has been reinforced even as the region’s economy has become increasingly pan-Asian, with the US role shrinking in relative terms.

At present, Washington faces two strategic dilemmas. First, the triumph of Security Asia would benefit the United States by assuring its centrality. After all, Washington is Asia’s essential strategic balancer and is becoming more so against the backdrop of growing Chinese naval power and projection capabilities. The dilemma, then, is that a security-dominant Asia will, at the same time, be a vastly more volatile region. And such volatility and instability are precisely what the United States has worked for two decades to avoid.

A second dilemma is that Americans seek a stable, dynamic Pacific Rim for the long term and, in that sense, need Economic Asia to prevail. But economically, Asia is increasingly pan-Asian, meaning that American centrality could actually shrink as trade and investment patterns come to further reflect intra-Asian economic and financial integration. US economic involvement with Asia is growing in absolute terms but receding in relative terms. Yet the US response has been deeply inadequate. Thus far, Washington has focused mainly on security ‘rebalancing’ to the exclusion of economic rebalancing. Asians are providing ever more economic public goods to one another, while the US role in this sphere has ebbed.

If present trends persist, America will only continue to recede. Thus the United States needs to raise its economic game in the region. And that will require revitalising the US economy and fiscal fundamentals. More than any factor, these could make a difference in demonstrating that the United States has staying power in Asia for the long term.

If history is any guide, it may take a crisis or game-changing shift for Asia to move more fully onto the positive path of Dr Jekyll. If China stumbles in its efforts to rebalance its economy, concerns will mount that China is falling into the middle-income trap, potentially risking its political stability. That could bring Asians together through a shared interest in avoiding a downward spiral in China. Similarly, a sudden collapse of North Korea could threaten all of Asia, precipitating a sobering crisis and leading nervous Northeast Asians to work together to manage the transition to a reunified Korea.

But Dr Jekyll faces an uphill battle. Even under such dramatic scenarios, nationalistic responses could ensue, leading Mr Hyde to prevail.

Authors: Evan A. Feigenbaum, Carnegie Endowment, and Robert A. Manning, Atlantic Council

Evan Feigenbaum is Nonresident Senior Associate at the Asia Program, Carnegie Endowment for International Peace.
Robert A. Manning is Senior Fellow at the Atlantic Council.