Three Hidden Time Bombs in the US-Japan Alliance

The US and Japan need to align their policies on China strategy, deterrence and offensive military capabilities

The new defense plans emerging from Tokyo and Washington, D.C. offer a high degree of convergence.  In Japan’s December 2013 National Defense Program Guidelines (NDPG) and the United States’ forthcoming 2014 Quadrennial Defense Review (QDR), both allies seek to address the short- and long-term challenge of a reemerging China, while placing military forces within a comprehensive framework.  However, there remain at least three hard questions to be answered regarding future alliance cohesion: viz., how to forge a common China strategy, how to sustain extended deterrence, and how to integrate Japan’s increasingly independent capabilities, including offensive strike weapons.  Absent candid and persistent reflection on these issues, what now appear to be acceptable gaps could develop over time into deep fissures.

Japan’s National Defense Program Guidelines (NDPG)

Japan’s latest NDPG is the fifth such document to be published in the postwar period.  The 1976 National Defense Program Outline (as it was called then) emerged in the midst of U.S.-Soviet détente and burgeoning strategic arms control agreements.  A second was released in 1995 to update and rejuvenate the alliance after the end of the Cold War.  A third was written in 2004 in the aftermath of the threat of global terrorism and growing nuclear and missile threats.  A fourth, issued at the end of 2010 by the previous Democratic Party of Japan government, emphasized the rapid shift in the global balance.  The latest document, perfectly synchronized with the release of Japan’s first National Security Strategy and a five-year Mid-Term Defense Plan, emphasizes the deteriorating security environment in East Asia: North Korea is unstable and better armed; mitigating the effects of major disasters requires better preparedness and civil-military crisis management; and China’s coercive diplomacy and military modernization are causing alarm.

Chief among Japan’s concerns is China’s growing maritime assertiveness.  One aspect of the assertiveness is China’s resort to tailored coercion in “gray zone” areas of the East and South China Seas.  Another aspect is China’s acquisition of anti-access and area-denial (A2/AD) capabilities (a concept alluded to for the first time in an NDPG).  The near-term challenge is mostly a probing and nibbling strategy to test reactions to China’s unilateral alteration of the status quo; but in so doing, China has effectively stiff-armed repeated high-level Japanese requests to develop a crisis prevention and response mechanism between Japan’s Ministry of Defense and China’s Ministry of National Defense.  The long-term challenge is China’s apparent intention to exercise sea control over its “near seas,” and sea denial out to at least the first island chain of countries ringing these bodies of water.

Convergences with the 2014 Quadrennial Defense Review (QDR)

The Department of Defense’s new QDR is still awaiting official release, but the gist of the review is already in the public domain.  From what is known, there appear to be at least three areas of major convergence with the NDPG: the large security challenge of deterring and dissuading Chinese assertiveness in the short- and long-run; a commitment to maintaining maritime and air superiority; and the desire to embed the military instrument of power within a whole-of-government policy.  Of course there are limits to convergence: recognizing a China challenge is not the same as developing a coherent strategy for dealing with it; maintaining maritime and air superiority in the East China Sea may be more difficult than the United States’ maintenance of maritime and air superiority globally; and America’s comprehensive policy of gradually rebalancing to Asia is different in kind from Japan’s comprehensive policy of gradual defense normalization.

Like the NDPG, the 2014 QDR underscores the uncertain security environment, including the challenge posed by emerging power centers. Concern over a reemerging China is clearly shared on both sides of the Pacific. It may be possible to read the latest defense guidance as an interim blueprint for maintaining U.S. and U.S.-alliance primacy in the face of China’s hefty military modernization.  Acting Deputy Secretary of Defense Christine Fox, in a revealing speech on February 11, noted that she and other leaders in the Pentagon are determined to preserve U.S. military superiority over near-peer competitors (read: China).  Secretary of Defense Chuck Hagel, in previewing the QDR, emphasized that the United States will invest more to maintain superior air and naval forces.  The QDR remains committed to 11 aircraft carriers while building 2 new destroyers and two new submarines a year, sustains the F-35 Joint Strike Fighter acquisition, and invests in new technologies such as unmanned systems and cyber warfare.

Both the NDPG and QDR are part of a larger national vision and policy.  Japan is in the process of effectively normalizing its security role.  As early as April, Japan may act on a recommendation to adopt the right to collective self-defense, at least in some scenarios, and it is also looking to further relax its longstanding three principles regarding the non-export of military hardware.  Although the United States will release its next National Security Strategy shortly after it rolls out the QDR, it remains committed to a policy of comprehensive rebalancing, 

including military assets and operations, to Asia.  Critics might contend that the Obama administration is retrenching from global leadership and not following through with rebalancing. 

 But such criticism ignores the need to make tough tradeoffs between retaining sufficient existing defense capability and investing enough to retain a cutting-edge defense force for the future.

Clearly, the latest QDR will decrease some types of readiness (for instance, to fight another Iraq or Afghanistan war).  By downsizing the Army by 13 percent and eliminating the aircraft optimized for close combat support (the A-10), the QDR is thus proposing to absorb more near-term risk in this particular scenario.  Conversely, the administration is simultaneously hoping to better prepare for the “deep fight” or long-term competition in Asia.  Just as Japan’s NDPG is embedded in a chiefly economic approach to international security (with “Abenomics” and structural reform the key hope for reviving the world’s number three economy), the United States hopes to take advantage of the enormous economic opportunity of a dynamic Asia (and hence the pursuit this year of a multilateral Trans-Pacific Partnership trade agreement).  Having survived a dreadful year of sequestration in 2013, the 2014 QDR recommits the United States to shifting its most advanced and the majority of its naval platforms to Asia.

Three Divergences

But there are some important issues left more unresolved than answered by the NDPG and QDR.  The three major potential divergences concern the strategy for grappling with the China challenge; the ability to retain credible extended deterrence; and the level of complementarity and integration of U.S. and Japanese armed forces.

Crafting national strategy is difficult for any country, especially in today’s fragmented and fluid world. Alliance strategy is even harder, because of differences in security objectives, cultures, doctrines, experience, and geography. Japan is seeking to preserve the postwar system in East Asia while the United States is seeking to preserve it globally. Japan is worried about creeping encroachment in its waters and skies, while the United States has the luxury of observing general patterns of behavior from a distance. Distance creates different timelines. This explains why the NDPG is investing in the immediate creation of an amphibious capability, even though it means purchasing an amphibious vehicle (AAV7) not suited to the coral reefs surrounding most of the Senkaku Islands. The United States is trading in near-term readiness in order to free up more resources for the “deep fight,” or at least the long-term competition.  Japan is not oblivious to the long-term challenge, but it has a sense of urgency because of the constant, near-term test being presented by China.

While the general outline of a comprehensive counter-coercive diplomatic strategy may be emerging, the United States and Japan, as well as other states in the region, have no clear consensus on how to counter China’s tailored maritime coercion while trying to build an inclusive, rules-based regional architecture.  Some believe China was surprised by Japan’s purchase of leases to some of the Senkaku islands in 2012, and it opted to ratchet up the pressure to contest Japan’s claim to administration and sovereignty over what China calls the Diaoyu Islands.  This is why President Xi Jinping might be willing to shelve the dispute indefinitely, provided Japan would agree that administration of the islands is in dispute.  But the islands have become a symbol of national governance in both China and Japan, and Prime Minister Shinzo Abe is not going to back down in the face of Chinese assertiveness.  Paradoxically, President Xi may find that acceptable, because some level of tension with Japan strengthens him at home, by distracting a highly nationalistic domestic audience from local problems of corruption, quality of life issues, and slowing economic growth.

The immediate question is whether the United States and Japan can forge a comprehensive and coherent counter-coercion strategy, not only for the East China Sea, but also for the South China Sea.  But the overriding question is whether both the United States and Japan have a common vision for how to deal with the China challenge. Certainly Japanese are wary of any China-U.S. “new type of major power relations.”  Some also find the U.S. rebalancing policy incompatible with China’s insistence that its “core national interests” are fully respected.  These tensions are stoked by Chinese leaders who wish to place China on a par with the United States, and wish to isolate Japan and other neighbors who stand in its way.  Because Japan is now a “front-line” state whose geography offers it no breathing space from China’s rise, officials in Tokyo may have less patience than those in Washington with respect to shaping a China that does not know how it will sustain fast economic growth or the legitimacy of the Communist Party.

A second apparent alliance gap emerging from the NDPG and the QDR concerns how to preserve American extended deterrence in the face of rising Chinese military capabilities.  Both Japan and Korea are dependent on the U.S. nuclear umbrella, and upon the notion that U.S. military superiority will provide protection because the U.S. armed forces can maintain escalation dominance all the way up to the nuclear level.  But such military superiority is not providing an effective response to China’s largely non-militarized coercion in maritime Asia.  China is also using its growing A2/AD capabilities and a nascent blue-water navy to signal to the region that it is only a matter of time before the United States loses its conventional military superiority.  And China may be acquiring a secure second-strike nuclear capability that will further dilute the psychological assurance that America will be able to protect Japan in a future conflict.  At a minimum, China’s tailored coercion, China’s growing A2/AD capabilities, and China’s growing mobile ICBM capability complicate U.S. extended deterrence.  If Japan starts to acquire some offensive capabilities, as seems likely, as well as other elements of what might constitute its own A2/AD defenses, and if China responds with more military pressure, where will this leave the alliance with regard to extended deterrence?  So far, these are future problems, but they are not so futuristic that the alliance should not be debating them today.

A third potential divergence between Japan and the United States that can be gleaned from the NDPG and what we know of the QDR regards integration of forces.  To what degree will Japan’s increasingly comprehensive and independently capable defenses—including potential offensive strike capabilities—be thoroughly integrated with those of the United States?  The U.S.-Japan alliance has long tussled over the issue of “complementarity”—the idea that Japan should focus on acquiring forces that complement rather than compete with existing U.S. forces (JMSDF minesweepers to fill a U.S. Navy capability gap are a classic case in point).  The good news in the alliance is that Washington is no longer vexed by Japan’s acquisition of more independent and comprehensive capabilities.  Indeed, America’s relative decline makes some degree of greater burden sharing necessary.  Thus, the question should not be choosing between complementarity and independent forces, but rather a question of integration of U.S.-Japan forces.

Given the U.S. and Japan defense guidance, Japan should undertake more responsibility for both its self-defense and as a “proactive contributor to peace.”  This implies Japan taking greater responsibility for situations in areas surrounding Japan (Article 6 of the Treaty of Mutual Cooperation and Security between the United States and Japan).  While the NDPG retains the U.S.-Japan alliance as a pillar of security, its innovation is to realize a new “dynamic joint defense force” that maintains local air and sea superiority and can rapidly defend and protect the Southwest Island chain.  But the question is whether Japan, equipped with a more comprehensive military capability—to include the ability to strike back directly at North Korea or China should either commit aggression—will remain tightly integrated within an alliance strategy and military posture.  This problem isn’t urgent, as Japan’s acquisition of such capabilities will be incremental and relatively modest. Nevertheless, its resolution is extremely important as it will form the consequential basis for many political, acquisition, and force structure and posture decisions.  Conversely, with Japan now a frontline state, the U.S. will have to recalibrate its assumptions regarding the U.S. role in the defense of Japan per se, heretofore largely handed over to Japan.  This will involve a greater than recognized resumption of American responsibility for Article 5 treaty operations in direct defense of Japan.

These three challenges of strategy, extended deterrence and offense are not insurmountable.  Moreover, it would be unrealistic to expect the NDPG and QDR to provide satisfactory answers to such long-term and complex problems.  But ultimately, if these issues are not to decouple the alliance, they must be fully joined.  In that process of frank and sustained alliance debate, it will be necessary to begin with the basics to ensure that officials in both capitals are pursuing common political objectives, especially because there is virtually no basis in the alliance for such conversations, let alone understandings.  Nevertheless, despite the concerns about divergent pathways, the NDPG and QDR validate and document a strong alliance.  Putting this guidance into practice will begin by hammering out new alliance defense guidelines to replace those laid down in 1997.  That process is already five months underway, and the expectation is that it should be finished by the end of the year.  That is not a great deal of time to grapple with such vital issues, and even then only time will tell how well the architects of that document have succeeded.

Dr. Patrick M. Cronin is Senior Director of the Asia-Pacific Security Program at the Center for a New American Security (CNAS).

Indonesia’s Troublesome Economic Path

Time to regain confidence in economic integration

Integrating with the global market place was once Indonesia’s offensive strategic choice to accelerate economic reform and development. The country has benefited significantly from opening up to trade and investment.

It responded without hesitation to plummeting revenues from oil exports in the early 1980s with sweeping reforms to reduce tariffs, non-tariff barriers, red tape in customs clearance and procedures for obtaining business permits. These reforms spurred the expansion of light-manufacturing industries and helped the economy reach a steady rate of per capita real income growth of 5 per cent per annum until the Asian Financial Crisis in 1997.

Alongside domestic reforms, Indonesia was a champion of economic integration and openness on the international stage. In the 1990s, Indonesia led APEC’s Bogor Goals declaration and its leadership also helped create the ASEAN Free Trade Agreement in 1995. As a member of the G20 process, host for the 2011 ASEAN Summit and recent host of the 2013 APEC Summit,

Indonesia has supported old and introduced new initiatives for economic cooperation, especially in regard to connectivity and infrastructure. Indonesia is also one of the main advocates of the Regional Comprehensive Economic Partnership agreement, one of the most ambitious trade liberalisation vehicles currently being negotiated in Asia.

Yet today there seems to be growing caution towards greater economic integration. In recent years regulatory and incentives regimes have become more domestically oriented. Although Indonesia’s average import tariff is relatively low at around 7 percent, many imports are subject to new administrative requirements like pre-customs inspections and various permits. The services sector has not become more open to foreign direct investment (FDI) since 2003, with several areas remaining restricted to foreign participation.

Strict cabotage rules limiting the ability of foreign providers to service Indonesian domestic sea lanes, combined with restrictions on FDI in ports, warehousing, and freight forwarding, mean Indonesia’s logistics sector is less exposed to competition than its main regional competitors. And with the ASEAN Economic Community to be fully implemented in 2015, there is now pressure on the government to protect domestic businesses and impose new restrictive measures on trade and FDI.

The sentiments behind these policies are understandable. Indonesia wants an equitable industrialization process led by Indonesian entrepreneurs. The Indonesian economy is also sensitive to its current account deficit, which gives the impression that its industrial structure is too thin and dependent on imported goods and services. The trade balance is vulnerable to commodity price shocks as more than half of its export value comes from commodities and natural resources, whereas imports are mainly of capital goods and intermediate products. 

Indonesia needs to continue facilitating industrialisation to move out employment that is currently concentrated in low productive activities. Some argue that Indonesia should address these issues with less exposure to international markets.

But these concerns are best addressed by pursuing structural reform and taking advantage of further integration with the global economy. Indonesia needs to generate business opportunities to absorb at least 2 million new workers annually and position the economy to escape the middle-income trap.

This requires the economy to exceed the current growth trend of 6 per cent per year, which will be difficult given the prevailing employment growth rate and total factor productivity, and may require doubling investment growth. Given that Indonesia’s gap between savings and investment is already substantial and widening, the additional investment will have to come from an increase in annual FDI inflow from its relatively low current value of 2 percent of GDP.

Rather than pursuing import substitution to slowly develop a complete manufacturing base at home, Indonesia should participate more extensively in regional and global manufacturing chains. This would allow Indonesia to accelerate industrialization by taking advantage of natural resource wealth, having FDI pay for capital in the form of factories off-shored to Indonesia and leaving the nation free to focus on investing its own resources in human capital and programs to facilitate local industries climbing up the value chain where the value added is greater.

More openness could also substantially enhance productivity growth. A 2007 study by Mary Amiti and Jozef Konings found that a 10 percentage point fall in import tariffs on intermediate goods led to an average 11 percent improvement in productivity for Indonesian firms that used those imports as inputs, thanks largely to lower costs.

A separate 2009 study by Jens Matthias Arnold and Beata Javorcik suggested that Indonesian manufacturing firms that received capital and technology from FDI experienced, on average, a 13 percent productivity increase in just three years. Exposing Indonesia’s retail, domestic air transport and telecommunication sectors to greater international competition has also been shown to lead to significant output growth with productive spillover effects on the manufacturing sector.

Some domestic companies may indeed be unable to withstand global competition or benefit from further integration. However, it would be preferable for industrial policy not to protect the inefficient practices of such businesses but to help them address their core constraints and improve competitiveness.

A key issue in this regard is Indonesia’s relatively low public spending on infrastructure and the high cost of doing business. Indonesia must do more to reduce the cost of domestic freight, improve access to energy sources and reduce bureaucracy and regulatory uncertainties so that businesses can adjust rapidly to new opportunities. More competition in backbone and bottlenecked services such as domestic sea freight, broadband communication and energy distribution would help Indonesian businesses be more cost competitive. There is also room for intervention to improve workers’ skills and the capacity of local businesses to innovate.

Indonesia must regain its confidence in economic openness and international integration. Exposure to international economic forces can be difficult to manage at times but is critical for Indonesia to escape the middle-income trap.

(Sjamsu Rahardja is Senior Economist at the World Bank office in Indonesia. This appeared in the East Asia Forum)

US creates a power vacuum in Asia

Has the US turned inward-looking?

In a certain sense, the advent of the Barack Obama administration could be considered a sign of such a turn. Indeed, one of the objectives stated by the administration was a course correction away from the excessive intervention of the George W Bush era.

Shaken by the 9/11 terrorist attacks, the US veered sharply onto a course of intervention to eliminate that threat. Many Americans undoubtedly had in the backs of their minds questions about whether this course had made the US safer or simply deepened the chasm with the international community as they elected Obama to pursue a new approach to relations with the rest of the world.

The world welcomed the image projected by President Obama. In revamping US engagement with the rest of the world, Obama modified Bush's "war on terror" to a "war on violent extremism", and transformed the nature of the US engagement from "eliminating threats" to "seeking out possibilities". While the US must certainly address "violent extremism", this is not something that should frame all of its actions, and this change of perspective was at the heart of the worldview running through Obama's foreign policy.

Both the "dialogue with the Muslim world" stressed in the early days of the administration and the "rebalancing policy" of shifting the axis of US foreign policy to the Asia-Pacific region were the products of the global perspective taken by President Obama, who regarded international politics as a "space for possibilities".

There is a propensity in Japan to view this rebalancing policy as a response designed to counter the rise of China, but the Asia-Pacific region is above all one "replete with possibilities" for the US, whose intentions of once more engaging in regional affairs have garnered support. In this sense, it would be a mistake to jump to the conclusion that Obama's foreign policy is a manifestation of isolationism.

Nevertheless, Obama sought to steer a different foreign policy course from the "Bush doctrine" and its resultant excessive intervention, and he withdrew US foreign policy from a modality rooted in doctrine. A single doctrine greatly restricts US actions when engaging with a world of unlimited diversity, and tailored responses must be taken to address specific issues.

This sensitivity perhaps characterizes Obama's foreign policy. Still, in keeping a close eye on the actions of the US across the globe, the world has been looking for a certain type of consistency and trying to read something resembling a doctrine into it.

The Obama administration's efforts, tailored as they may be to resolving specific problems, will be interpreted subjectively by countries in other regions, and this itself will generate new dynamics in international politics. Given the difficulty of discerning consistency from an individual response, the US is widely viewed as being "confused".

Elements such as the inward-looking perspective of an American populace tired of war that has constrained US foreign behavior from within, the extreme degree of polarization along party lines that has made governing institutions dysfunctional, and the fiscal restrictions that make the US' global presence uncertain have combined to create an image of a "non-involved US". Completing this image in a symbolic dimension was the US response to the situation in Syria (deciding to intervene but not actually intervening).

While the Asia-Pacific region welcomes the US return to Asia (this term will be used for the sake of convenience, even while acknowledging the argument that the US never left in the first place), a vague unease has arisen with regard to US consistency.

If the US is to pursue a policy consistently emphasizing the Asia-Pacific region, it will require a firm strategy towards China; ie, a plan to deal with China's rise. However, the messages coming out of the US are confusing. A clear-cut example of that is the description of Sino-US relations presented by presidential adviser Susan Rice at Georgetown University the other day. It hardly need be pointed out again that many of us were baffled by the expression "operationalize a new model of major power relations" that appeared in her speech.

For the countries of Asia, China's presence is a matter of "geographical fate". Although the US will likely dismiss the monitoring of its every move by Asian countries as an overreaction, we cannot let up our scrutiny. The US is no doubt frustrated about being criticized as "imperialist" when it intervenes and being charged with "withdrawing" when it takes a more cautious stance. This is, however, the inevitable consequence of the US's global presence. The world is now concerned that the US, constrained by domestic political considerations, might be turning inward. This may indeed be somewhat of an overreaction, but it is a clear fact that this uneasiness itself constitutes a dynamic.

Obama's foreign policy may deem international politics to be a "space open for dialogue", but the rest of the world still considers international politics to be a "struggle for power" and reacts sensitively to the US' "non-exercise" of its power. No matter how much it advocates for "active involvement", the Obama administration will be unable to dispel this image of a "non-involved America" as long as this perception gap exists. We are now witnessing the creation of a type of power vacuum in international politics as well as an increase in instability as a result.

Nakayama Toshihiro teaches US politics and foreign policy as a professor at Aoyama Gakuin University, and also serves as a Visiting Fellow at The Japan Institute of International Affairs.

AJISS-Commentary is an occasional op-ed type publication of The Association of Japanese Institutes of Strategic Studies (AJISS) consisting of three leading Japanese think tanks: Institute for International Policy Studies (IIPS), The Japan Institute of International Affairs (JIIA), and Research Institute for Peace and Security (RI