How to manage geopolitical instability in East Asia

 

East Asia and the world are facing uncertain times. The balance of regional power is shifting as emerging market economies such as China are benefiting from globalisation and are continuing to rise. At the same time, anti-globalisation sentiment is surging, as demonstrated by the United Kingdom’s Brexit referendum and by the election of Donald Trump as president of the United States on an anti-free trade platform. These developments serve to throw the international liberal economic and security order, which the United States has led since 1945, into considerable uncertainty.

How can we craft approaches to ensure regional stability and prosperity into the future?

The fate of East Asia has been significantly affected by relations between the three big powers — the United States, China and Japan. The United States has played an active role as an offshore balancer in the region, particularly under US President Barack Obama through his administration’s ‘pivot to Asia’. That concept included the Trans-Pacific Partnership (TPP) as the crucial economic pillar, US entry into the East Asia Summit, increased military engagement in the region, and the idea of conducting Sino–US relations by ‘managing differences and expanding cooperation’. Geopolitical stability in East Asia looked promising thanks to these devolpments under Obama and active support from Japan.

Donald Trump’s win in the US presidential election surprised the region. It is difficult to know precisely what the Trump administration will do. But it appears Trump is following through on his ‘America First’ approach to foreign policy and this may have spill over effects for Trump’s East Asia policy.

While it is too early to judge the Trump administration’s China policy, it appears that the United States will take a more confrontational approach toward China in the economic arena. This is underscored by the appointment of China hardliner Peter Navarro as the director of the National Trade Council and the nomination of Robert Lighthizer as US Trade Representative.

Today, China’s trade surplus with the United States accounts for about 50 per cent of the overall US trade deficit. But if the United States applies strong pressure on China, as it did on Japan in the 1980s, it will probably lead to Chinese countermeasures, which would likely result in a trade war. That outcome would be detrimental to the region.

A US–China ‘grand bargain’ may not be impossible. For China, any damage to the prospects of its high economic growth would be unwelcome. And if a grand bargain restrains aggressive Chinese behaviour in the South China Sea and East China Sea, it should be welcomed by the region.

We face many great challenges as we seek to manage geopolitical instability in East Asia. The best approach may be to pursue multilayered functional cooperation. This means starting with functions. Find those countries that have a common interest in enhancing functional cooperation on a particular issue. Different areas may require different coalitions for effective outcomes — for instance trade arrangements, financial cooperation for infrastructure investment, regional confidence-building measures, and cooperation on environmental and energy issues.

On trade arrangements, there are a number of mega-regional trade initiatives currently under discussion, such as the TPP, the Regional Comprehensive Economic Partnership agreement (RCEP), and the China–Japan–South Korea (CJK) trilateral free trade negotiations. While the Trump administration has withdrawn the United States from the TPP, the remaining 11 members might work to see what is possible among themselves. The RCEP and a CJK FTA could help to fill some of the gaps left by the TPP. But the bigger aim should be to realise a Free Trade Area of the Asia Pacific (FTAAP). Other trade initiatives should all be utilised as stepping-stones toward the establishment of an FTAAP.

On financial cooperation and infrastructure investment, we have seen the emergence of the Asian Infrastructure Investment Bank (AIIB) led by China. This is a positive development for the region given the huge demand for infrastructure investment. It is disappointing that Japan and the United States have not engaged with the AIIB. Both countries should do more to proactively engage in the creation of infrastructure in the region.

One way this can be achieved is through the establishment of a mechanism to coordinate cooperation between the AIIB and other institutions such as the Asian Development Bank and the IMF. Such coordination is critical to ensure that investment in infrastructure provides the best possible development gains for the region as a whole.

Greater confidence building among the five powers in Northeast Asia — the United States, China, Russia, Japan and South Korea — is sorely needed in order to de-escalate tensions, defuse nationalism and build relations rooted in win–win cooperation. Confidence building should initially focus on the low-hanging fruit of non-traditional security issues. This should include the joint establishment of concrete mechanisms for reporting on, preventing, and responding to natural disasters, major industrial accidents, acts of terrorism, and cyber-attacks. It should also include a commitment to nuclear non-proliferation. While these steps may be hard to envision based on what we have seen from the Trump administration so far, operational-level cooperation that is already underway in the region can gradually be expanded to realise easy wins.

There is a pressing need to tackle environmental and energy issues. Over the coming decades, the demand for energy will continue to grow exponentially, particularly in Asia’s emerging economies with expanding middle classes, such as China, India, and ASEAN nations. Regional cooperation —including joint efforts in areas such as energy exploration, the development of new extraction technologies, and the strengthening of nuclear safety measures—is needed to ensure that the energy demands of all nations are met. At the same time, the unabated use of fossil fuels will cause environmental damage detrimental to sustainable economic growth and poverty reduction, not to mention the planet. Intensive cooperation among nations for jointly funded and developed green energy technologies is sorely needed. The East Asia Summit and other regional forums should take up these issues in a more serious manner.

The Trump administration includes a number of climate change deniers while Trump himself has referred to climate change as a ‘hoax.’ Friends and allies of the United States will need to emphasise the importance of environmental and energy cooperation in their dealings with the Trump administration.

Managing geopolitical instability in East Asia will not be an easy task. There are understandably great concerns around the region regarding the uncertainties that the Trump administration brings. America’s friends and allies will need to cooperate, coordinate, and strive to make their views clearly heard on the importance of regional cooperation. The interconnected nature of global and regional challenges means that win-win cooperation is necessary more than ever. But given the nature of the globalised world we live in and the technological possibilities available to us, the potential for win-win cooperation is also greater than ever. Through multi-layered functional cooperation, we can manage geo-political instability in East Asia and safeguard shared regional peace and prosperity into the future.

Hitoshi Tanaka is a senior fellow at JCIE and chairman of the Institute for International Strategy at the Japan Research Institute, Ltd. He previously served as Japan’s deputy minister for foreign affairs.