Vietnam, United States Hold Naval Exercises

The United States Seventh Fleet and the Vietnamese People’s Navy began a five day long series of naval engagement activities last Sunday in commemoration of fifteen years of normalized relations between the two countries.

In what are the first training exchanges between both navies since the end of the Vietnam War, activities are mostly focused on building friendship with damage control exercises, search and rescue operations, medical and maintenance projects as well as mutual visits and sporting events.

Several Vietnamese dignitaries and military leaders visited the aircraft carrier USS George Washington on Sunday to observe the strike group operating in the South China Sea; recently site to renewed discord between China and its neighboring states, among them Vietnam. Read more “Vietnam, United States Hold Naval Exercises”

America’s Shadow Over the South China Sea

Conflict is boiling in the South China Sea once again. Secretary of State Hillary Clinton startled Beijing last week when she declared that the United States have a “national interest” in seeking to mediate a dispute which pits China against virtually all other maritime states in the region. The Chinese, of course, were furious about what they see as American meddling in their sphere of interest and would rather settle the matter with the countries of the Association of Southeast Asian Nations bilaterally.

Speaking at an ASEAN summit in Hanoi, Vietnam last Friday, Clinton stressed that while the United States intend to remain neutral, they have an interest in preserving free shipping in the region and are willing to facilitate multilateral talks.

The issue involves some two hundred islands and coral outcroppings which are claimed by Brunei, China, Indonesia, Malaysia, the Philippines, Taiwan and Vietnam. China has always insisted that its exclusive economic zone extends far into the South China Sea and claims all islands as its territory.

While the official Chinese response to Clinton’s offer was mild though positively agitated, newspapers have been less diplomatic. China’s Global Times complained of an “American shadow” over the South China Sea, questioning Clinton’s motives and warning ominously that “China will never waive its right to protect its core interest with military means.” The Xinhua News Agency was similarly belligerent, alleging that the United States were stirring conflict in the region only to extend their influence. “By claiming American national interests in the South China Sea, Washington intends to expand its involvement in an ocean area tens of thousands of miles away from America.” Foreign interference, according to the state news agency, “will only […] hinder a smooth resolution of the thorny issue.”

The two powers have clashed in the South China Sea several times before. Most recently, in March of last year, the USNS Impeccable, an ocean surveillance ship which the Chinese accused of spying, was harassed by Chinese vessels 75 miles off the coast of Hainan Island, site to a large, underground submarine base. The Pentagon lodged a formal complaint; the Chinese complained in turn that the Impeccable had been cruising in its exclusive economic zone; President Barack Obama sent the guided-missile destroyer USS Chung-Hoon to the area to protect the Impeccable.

American frustration with China’s determination to maintain predominance in the South China Sea is not Beijing’s foremost concern however. Washington, after all, needs Chinese support for sanctions against Iran and, more importantly, for action against North Korea. It won’t upset China too much about a few little islands which, really, America has nothing to do with and risk losing China’s already lukewarm support internationally.

Considering the fast improving trade relations between China and the member states of ASEAN, the former has a much greater interest in keeping its direct neighbors at bay. Without foreign support however, these countries are hardly capable of making a stand.

The Philippines in particular realize that they can’t take on China alone and have been pushing America to take their side. Clinton’s remarks at the ASEAN summit were something of a minor victory for Filipino diplomacy.

The Vietnamese, meanwhile, have shown an interest in the Quadrilateral Initiative which Australia, India, Japan and the United States launched in May 2007 in Manilla to counterbalance China’s naval potential. Last April, Vietnamese officials visited the USS John C. Stennis near Con Dao island off the Mekong Delta coast, chatting with US sailors about “strengthening mutual understanding” and “cooperating for peace in the region and world.” Although communist like China, relations between the two countries haven’t much improved since the brief Sino-Vietnamese War of 1979. Border disputes and regional rivalry continue to be cause for mutual mistrust.

Finally, Japan has also been working to strengthen relations with other East Asian powers, including India, Indonesia, South Korea and Vietnam, “over a variety of issues,” notes Kyle Mizokami at Japan Security Watch, “from piracy to the North Korean sinking of the Cheonan, with everything from soft power humanitarian visits to footwork by foreign and defense ministers.”

Clinton’s offer to mediate may have been quite sincere but coupled with perceived naval incursions in previous years, it’s not unnatural for some Chinese to presume otherwise. The United States should stand by its allies in Southeast Asia to prevent China from asserting itself in the region all too prematurely but there’s no need to congest the South China Sea with half of the Pacific Fleet. It’s a precarious balancing act, assuring both China and its neighbors that America favors neither at the expense of the other, but a highly important one at the same time.

East Asia’s Urbanization Problem

It’ll still be an Asian century, no matter the global recession. With China leading the way and neighboring economies boasting growth rates that make Europe’s pale in comparison, there seems little reason to doubt that proposition.

Kevin Brown is worried, though. There is a big problem to overcome “and it is not the flashpoints in North Korea, the Taiwan Straits and Kashmir,” he writes in the Financial Times. It is the region’s dangerous pace of population growth, “and the health, environmental and security problems caused by urbanization on a scale unique in human history.”

The United Nations is forecasting that the world’s population will rise by more than 40 percent to 9.3 billion by 2050, with the proportion living in cities increasing to 70 percent from slightly more than 50 percent today. But the impact will be concentrated in Asia, where two-thirds of the world’s population lives and where rapid economic growth is accelerating the natural process of urbanization. While Europe is dealing with the problems of ageing, Asia (excluding Japan) will be trying to cope with a rush to the cities estimated at nearly 140,000 people a day.

How well the Asian economies handle this rapid urbanization process “will have a huge impact on whether this really does turn out to be the Asian century,” according to Brown.

The signs, he’s afraid, are ominous. It is hard to imagine, after all, watching sprawling slums encroaching upon the otherwise very Western-looking metropoles of the East, that anything other than social upheaval and ultimately economic decline can come of it.

Yet the East Asian experience is hardly new. Chaotic urbanization has always accompanied fast growth and inspired concerns like Brown’s. Eventually, as economies mature, living conditions improve, along with people’s health, the city environment and security.

Brown would do well to remember that we broke out of the Malthusian Trap two hundred years ago. There is no reason to think Asia can’t do better.

America’s Spirit Invincible; China’s Still Puzzling

South Korea and the United States will launch a major, four-day naval exercise in the Sea of Japan this weekend, coinciding with the annual regional forum of the Association of Southeast Asian Nations (ASEAN) in Hanoi, Vietnam. Tension in East Asia has remained high in recent months especially after North Korea’s sinking of the South Korean corvette Cheonan last March.

The Cheonan incident is likely to dominate the ASEAN summit which will be attended by all Southeast Asian states as well representatives from China, Europe, Russia and of State Secretary Hillary Clinton for the United States.

North Korea, which has denied attacking the Cheonan and threatened with “all out war” should the South respond militarily to its sinking, is expected to dispatch its top diplomat to the annual security meeting.

A draft declaration that was obtained by Agence France-Presse ahead of the forum expresses a “deep concern” with the sinking of the South Korean ship but doesn’t call for sanctions. The South would like the forum to condemn North Korea for the attack. Few analysts expect that it will. Rather the draft calls for the “utmost restraint” and reaffirms support for a nuclear-free Korean Peninsula.

Judging from a joint statement released by defense secretaries Robert Gates of the United States and Kim Tae-young of South Korea on Tuesday, “restraint” is hardly an appropriate response according to these two countries. They announced military exercises “designed to send a clear message to North Korea that its aggressive behavior must stop, and that we are committed to together enhancing our combined defensive capabilities.”

The series of maritime and air readiness exercises, named Invincible Spirit, will involve some 8,000 military personnel from both countries and eighteen ships including the USS George Washington carrier strike group forward deployed at Yokosuka Naval Base, Japan. Over a hundred aircraft will also partake in the exercise, including the new F-22 Raptor fighter plane.

Whether Invincible Spirit will manage to deter North Korea is doubtful. Pentagon press secretary Geoff Morrell admitted as much, noting that “what makes North Korea so challenging and at times, so confounding” is that it “doesn’t care how it is viewed by the rest of world and doesn’t care how it treats its own people,” making it extremely difficult to gain leverage.

“At the same time,” said Morrell, “none of us wants to fight another war on the peninsula and clearly none of us — certainly the Chinese — are interested in instability on the peninsula.”

China favors stability before anything else yet as the North’s only friend in the region, its position is pivotal. In the wake of the Cheonan incident, it has become more difficult for Beijing not to accept the regime’s culpability. As The Economist opined last May, it no longer has an “excuse” to take Kim Jong-il’s claims of innocence at face value.

While its interest should compel China to side with ASEAN — having just signed a free-trade agreement in January — there are still hardliners within the Communist Party and the Chinese military who sympathize with their ideological counterparts in Korea. There is a chance for ASEAN and the United States to exploit the divide among China’s leaders over how to cope with North Korea’s mounting bellicosity however and have the internationalists prevail.

Foreign Ministry bureaucrats and politicians with ties to international trade want China to maintain a stable relation with the West. They understand that the country can’t simultaneously continue to support a rogue and desperate regime that will continue to invent crises to ensure its survival but undermine stability in all of East Asia in the process. China’s posturing at this weekend’s regional forum and, perhaps more telling, its reaction to the joint American-South Korean military exercise, may shed some light on whether the internationalists are gaining strength.

Reflections on the Asian Financial Crisis

What is now known as the Asian Financial Crisis began in July 1997 in Thailand where the baht fell victim to massive speculative attacks. Before the currency was finally devaluated to lose over half of its value, the country’s economic growth came to a grinding halt amid disastrous layoffs in previously booming sectors as finance and real estate. The Thai stock market lost so much as 75 percent of its value within mere months.

With Thailand’s economy apparently so similar to that of other newly industrialized East Asian states, investors worried that others would soon follow in its downfall so they began to pull out. The contagion that spread was deeply interwoven with the fact that many of Asia’s emerging economies had their currencies pegged to the American dollar. Businesses in these countries in the preceding years had borrowed massively in dollars. When their native currencies were devaluated, loans suddenly had to be repaid in more expensive dollars. Investors feared that many of the loans could not be repaid at all so they called in short-term loans or refused to renew them. By the time the states had depleted their foreign exchange reserves in desperate attempts to defend their currencies; East Asia was already abandoned by investors who had fled in widespread panic. The expectation of devaluation had made devaluation inevitable. The previously so blossoming young economies of East Asia were now thrown into a state of despair with many businesses collapsed and millions unemployed, once again living in poverty.

In the wake of the crisis, an intellectual debate quickly erupted over its origins. The “Asian Miracle” of previous years had so impressed many commentators that it was difficult to understand how it could have apparently collapsed within such short time. Read more “Reflections on the Asian Financial Crisis”

Don’t Worry Too Much About China’s Navy

As China continues to expand and modernize its navy amid the specter of an Asian naval race developing, Greg Grant wonders at DefenseTech what’s behind it all. “China is clearly intent on becoming a real maritime power; but is that a strategic choice made out of necessity or out of a desire to challenge other nations on the high seas.”

Many American commentators have convinced themselves of the latter. Sinophobia is real indeed when it comes to the fast growing military force that is the People’s Liberation Army Navy. Some even predict war by 2015 already though, as James Pritchett noted last February, “in terms of global seapower,” China is likely to remain “in the second band of naval powers for some time to come.”

At the same time, there is no denying that the Chinese navy is asserting itself. Just last week it conducted a series of live fire exercises in the East China Sea off the coast of Okinawa, Japan. The Japanese, still incensed over the appearance of ten Chinese ships near their waters in April, issues a formal protest which compelled Beijing, in turn, to declare that it had done nothing wrong — which, in spite of their ships’ proximity to Japanese waters, was perfectly true. Read more “Don’t Worry Too Much About China’s Navy”

China, Taiwan to Sign Free Trade Accord

China and Taiwan are expected to agree to a preliminary free-trade agreement later this month in a effort to normalize relations across the Strait after more than six decades of bickering and mistrust.

According to The Economist, the proposed Economic Cooperation Framework Agreement (ECFA) calls for cuts on 539 categories of Taiwanese exports to China over the next two years with scope for more to follow. The paper describes the agreement as “the cornerstone of the China-friendly policies of Taiwan’s president, Ma Ying-jeou.” Critics allege that the president’s foreign policy is geared toward ultimate reunification with the mainland.

Following Ma’s election in May 2008, relations with China rapidly improved. His government allowed regular charter flights to take place between the two countries to bring in Chinese tourists and it eased restrictions on cross-Strait investments.

Taiwan is hoping that the ECFA deal will herald its future inclusion in international free-trade arrangements; something China has so far opposed and prevented.

Last January Beijing initiated a free-trade accord with the member states of ASEAN; the Taiwanese exports included in the ECFA are from some of the industries most threatened by that agreement. The Taiwanese government is likely to try to reach similar arrangements with nearby Southeast Asian countries in an effort that will boost the economic integration of the region and decrease the likelihood of future conflict.

The opposition has reason to be suspicious though. While Taiwanese negotiators did not get everything they asked for, “the terms of the deal still seem remarkably sweet for Taiwan,” according to The Economist.

The 539 categories of Taiwanese exports are worth $13.8 billion, while Taiwan in turn will reduce tariffs for only 267 categories of Chinese exports, worth $2.9 billion. What is more, China has gone beyond its World Trade Organization requirements by dropping tariffs on various Taiwanese agricultural and fishing products, and Chinese negotiators said they would never push Taiwan to return the favor.

“China’s largesse is clearly political.” Beijing prefers Ma’s moderate Kuomintang over the more independence leaning Democratic Progressive Party while it has to cope with an Asian naval race and mounting tension in the region. As Robert Kaplan wrote in April, China feels “boxed in,” particularly from the sea, where it faces a chain of nations from South Korea to Japan to the Philippines to Indonesia and Australia, with implicit backing from across the Pacific, which are watching China’s rise with skepticism — indeed, sometimes outright fear.

In order to address that perceived threat from the high seas, Beijing is preparing to envelop Taiwan “not just militarily but economically and socially,” according to Kaplan.

Amid high unemployment figures, Ma’s popularity is slumping however. “Economic success has not trickled down to many Taiwanese,” knows The Economist, “and for them the ECFA is an abstract idea of frighteningly radical engagement with China.” Ma will have to prove to his voters that the China deal will benefit Taiwan directly before the presidential elections in 2012.

Tax Relief for Japanese Business

The Japanese government, headed, since Prime Minister Yukio Hatoyama resigned earlier this month, by former finance minister Naoto Kan, announced on Friday that it intends to bring down the country’s corporate tax rate. Tax relief for Japanes business is supposed to stimulate the economic recovery and end years of persistent deflation.

A corporate tax cut would “strengthen the competitiveness of companies based in Japan and encourage investments by foreign companies,” according to the government’s new “growth strategy.” The same document calls for merging various financial exchanges in order to enhance Japan’s role as a regional financial hub. Read more “Tax Relief for Japanese Business”

Why North Korea Will Keep Inventing Crises

Since North Korea sank a South Korean corvette in the Yellow Sea last March, the Hermit Kingdom proved once again just how capable it is of causing international consternation. South Korean President Lee Myung-bak promised “firm, responsive measures against the North.” The world’s last bastion of Stalinism threated with “all out war” in turn which prompted Korean stock to plummit in downward spiral the subsequent day. China and the United States were quick to get involved, both recommending restraint. One question has remained unanswered amid the saber rattling — just why would North Korea sink a South Korean ship anyway?

Kongdan Oh, previously with the RAND Corporation and currently a senior fellow at the Brookings Institution, is a specialist on North Korean security policy. In an interview with The Atlantic, Oh insists that the internal dynamic of North Korea necessitates constant crisis. “The regime was built on lies,” she says. “And the two leaders, Kim and Kim, created one of the worst — or best — cults of personality, perpetuating that they are the most brilliant strategic leaders and the entire world is kow-towing to them.”

In reality, North Korea is a failed state. Its people are impoverished and its economy is bankrupt. Indeed, according to Oh, besides Kim’s palace economy and slush fund, “the economy doesn’t exist.”

Considering such poor leadership, the regime desperately needs to justify its very existence. The North Koreans no longer believe that the South is a slave to America. On the contrary, most are well aware that their former brothers on the other side of the 1953 demarcation line are prospering. So, rather like Airstrip One in George Orwell’s Nineteen Eighty-Four (1949), North Korea needs crisis, constantly.

No ordinary crisis will do, says Oh, “given the grumbling of the technocratic level of mid-class elite who see the North’s declining power and know that there is no way out.” Instead, the regime has to foster a fear of imminent danger to keep Kim Jong-il in control. “For years, it has been one crisis after another,” from nuclear weapons to intercontinental ballistic missiles to abducting American journalists to sinking a South Korean navy vessel.

What should the West do? Oh favors sanctions that block Kim Jong-il’s slush fund. “That might be the most effective.” More important however is getting China on board. If China is to be a twenty-first century superpower, it can’t be seen as dealing with a gangster.

Not everyone in China agrees. There is still a powerful element in the military and Communist Party establishment that supports the nearby regime. But increasingly, the more internationally-oriented bureaucrats are taking over and the United States are seeing this as a chance to appease China. Washington knows that when Kim can no longer rely on Beijing, that’s the beginning of the end of his reign.

A Chance to Appease China

In the wake of North Korea’s sinking of the South Korean corvette Cheonan last March, the Obama Administration has been trying to muster Chinese support for renewed sanctions against the Stalinist regime. So far, its efforts have been frustrated by division within Beijing’s ruling class.

After international investigators proved that the North had been responsible for the sinking last month, even China, North Korea’s sole, if lukewarm, ally in the region could not afford to stay aloof. A Chinese Foreign Ministry spokesman called on all parties to “stay calm and exercise restraint.” Kim Jong-il headed for Beijing immediately to beg for support but there is a good chance that China will not veto UN Security Council action as it has before.

American secretary of state Hillary Clinton also traveled to East Asia where she expressed American solidarity with South Korea. After meeting with President Lee Myung-bak, Clinton said that it would be in “everyone’s interest, including China, to make a persuasive case for North Korea to change direction.” Her plea is unlikely to have fallen on deaf ears entirely. There is mounting discord among the Chinese leadership over how to cope with North Korea’s increasingly assertive stance on the world stage.

The division is reflective of China’s two camps. On the one hand are the hardliners who occupy prominent posts in the military and at Communist Party schools. They suspect that the United States are conniving to deceive China and keep it poor. On the other side stand internationally-oriented bureaucrats, including many in the Foreign Ministry and banking sector, who want to maintain peaceful ties with the West. The hardliners may have dominated in recent months, as evidenced by the persecution of Rio Tinto officials and the government’s response to Google’s decision to pull out of China, but the internationalists aren’t giving up. The current Korean situation is fueling their push to cooperate more productively with the rest of the world, the United States especially.

The Obama Administration appears aware of the split. As Defense Secretary Robert Gates said on Friday, China’s military is blocking efforts to strengthen it ties with the United States. Progress on mutual security issues has been “held hostage,” according to Gates, because the Chinese are upset with America’s recent arms sales to Taiwan. Again, the hardliners are having their way.

In all fairness to the Chinese, the Obama Administration hasn’t done a particularly impressive job at “strategically reassuring” them as was promised. Sinophobia continues to influence thinking in military circles; Sino-American relations are shaky. So ambivalent have the Americans been about their commitment to what is destined to become the defining international relationship of the twenty-first century that in March, the Financial Times urged Washington to be consistent toward China. “The important thing is to keep both elements of the relationship to the fore,” the paper recommended, “rather than fluctuating from one to the other according to circumstances — dismaying first the Chinese leaders and then the human rights activists and victims of China’s abuses.”

North Korea’s evermore bellicose posturing should be regarded as an opportunity to exploit the internal divide — and make a definite choice about how best to approach China.

Chinese civilian leaders have expressed growing puzzlement and anger about the North’s behavior. They are the administration’s allies. The Chinese military is powerful and the United States should endeavor to restore military-to-military contacts. But as North Korea continues to act erratic, the Chinese will be hard pressed to maintain their support for their neighbor Communist state. By working with the Chinese, not in spite of them, the United States may invigorate their internationalist school while dissuading the hardliners who will only grow stronger if the administration keeps regarding China as a future adversary before anything else.