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Author: Vasily Kashin, Higher School of Economics

During the annual meeting of the Valdai Discussion Club in October 2019, Russian President Vladimir Putin announced that Russia and China are cooperating on developing a ballistic missile early warning system (BMEWS). Putin underscored that such cooperation demonstrates the high level of trust between the two countries.

Beijing’s first efforts to develop and build a BMEWS and anti-missile defence tracking radars were undertaken as part of the abortive Project 640, an attempt to build a Chinese strategic missile defence system that ran in the 1960s–80s. Project 640 resulted in the construction of two functioning experimental radars: a type 7010 BMEWS radar and a type 110 tracking radar. Both radars were used for some time by the Chinese military.

China renewed its BMEWS development in the 2000s, using some of the experience gained from Project 640. Construction of long-range BMEWS radars started in the 2010s. Experiments with space-based ballistic missile early warning components were also renewed with the launch of test satellites.

The Chinese system does not copy any existing Russian system. But the Chinese have approached Russia for expertise in overcoming bottlenecks.

Russia–China military technical cooperation has always been rather secretive, and the level of secrecy has increased as both countries engage in more direct confrontation with the United States. So far the Russian media has identified just one contract related to the bilateral BMEWS cooperation with China. This contract is for the development of specialised BMEWS software, worth approximately US$60 million, was awarded to a leading Russian air and missile defence systems corporation.

This is likely not the only defence agreement between the two countries. BMEWS cooperation likely consists of numerous small contracts that address various problems in the Chinese system.

These systems are among the most sophisticated and sensitive areas of defence technology. The United States and Russia are the only countries which have been able to develop, build and maintain such systems. Early systems, both land and space-based, were unreliable, leading to several potentially catastrophic incidents during the Cold War after erroneous warnings of enemy attacks.

Technological assistance from Russia will help the Chinese to overcome several issues with their systems. This will decrease the probability of system malfunction, and in turn have a positive impact on global security.

Russian companies’ involvement in the development of these Chinese ballistic missile early warning systems gives them access to a great deal of data about system capabilities. This demonstrates a high level of trust and puts forward the question of possible integration of Russian and Chinese systems.

In the event of system integration, stations located in the North and the West of Russia could provide China with warning data. In turn, China could provide Russia with data collected at their Eastern and Southern stations. This would enable the two countries to create their own global missile defence network. But neither Chinese nor Russian governments have stated their intentions to do this yet.

Missile defence cooperation is in the interests of both countries’ militaries. Russia and China have conducted a number of joint computer-simulated missile defence exercises in recent years. But these only simulated the work of simpler theatre missile defence systems such as the S-400 and HQ-9 systems.

The introduction of the Countering America’s Adversaries Through Sanctions Act (CAATSA) — the US law that seeks to punish those who procure arms and defence technology from Russia — led to even greater secrecy surrounding Russia’s bilateral arms deals in recent years. Official statements have disclosed at least three new major contracts for the export of Russian arms and technology to China in 2019.

The political meaning of Putin’s statement on BMEWS cooperation extends far beyond the technical and military significance of these cooperation projects. It demonstrated to the world that the two countries are on the brink of a formal military alliance, which could be triggered if US pressure goes too far.

At the next Valdai meeting in October 2020, Putin suggested the possibility of a military alliance with China. The Chinese Ministry of Foreign Affairs’ reaction to this statement was positive but the Chinese side refrained from using the word ‘alliance’. Putin’s 2019 statement on BMEWS cooperation, however, was likely made without prior consultation with the Chinese and has caused unease in Beijing.

China–US relations have continued to deteriorate. In January 2020, outgoing US Secretary of State Mike Pompeo accused China of genocide in its Xinjiang Uyghur Autonomous Region. The accusation was later supported by Pompeo’s successor Antony Blinken.

Russia–US relations after Biden’s accession to power have had one positive development — the United States has agreed to extend the New Strategic Arms Reduction Treaty (START) for another five years. Despite this, the outlook for Russia–US relations remains bleak.

The reality of Russia–China defence cooperation is complicated. A working and effective military alliance can be formed quite quickly if the need arises. But current foreign policy strategies make such a move unlikely unless there is real and imminent danger of military conflict with the United States.

Vasily Kashin is a Senior Research Fellow in the Center for Comprehensive European and International Studies at the Higher School of Economics, Moscow.

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Author: Yan Liang, Willamette University

The Trump presidency somewhat decoupled the US and Chinese economies: relations have been damaged by tariff wars, the closing of consulates, the blacklisting of technology companies and the delisting of companies. The future of US–China relations under the Biden administration is still highly uncertain. Biden has promised to ‘be tough’ on China and his cabinet picks reflect this, but it is not yet clear what ‘being tough’ entails and what end it intends to serve.

The Biden administration is unlikely to escalate decoupling and instead steer US–China relations in a more positive direction.

The trade war has done more harm than good for the United States. Heightened tariffs did not reduce the US trade deficits. The deficit with China was US$276 billion in 2017, rose to US$296 billion in 2019 and further to US$317 billion in 2020. US trade deficits with other countries also grew: the average annual trade deficit in Trump’s first three years was US$556.9 billion, a 17 per cent increase from the four-year average of Obama’s second term.

Imposing tariffs also failed to sway China on fundamental interests. China did make some structural reforms on the demands of the Phase One trade deal. For example, it has met 50 out of 57 technical commitments to ease agricultural trade barriers and passed a new Foreign Investment Law to ban forced technology transfers. But these adjustments aligned with its own long-term interests of market reform. The trade deal may only have accelerated the reform process.

The trade war has cost US consumers and businesses dearly. According to a study commissioned by the US–China Business Council, the trade war cost the United States 245,000 jobs at its peak. Should it continue to escalate, it could cost the United States US$1.6 trillion dollars over the next five years.

A technology or finance war would also be counterproductive. Decades of globalised production have allowed China to establish a firm foothold in the global supply chain that is now impossible to shake. A recent survey by the American Chamber of Commerce in Shanghai indicated that over 80 per cent of US businesses do not plan to relocate from China. US firms are eager to access China’s vast markets, with its 300 million-strong middle class.

From both the supply and demand sides, it is costly, if not unrealistic, for the United States to decouple from China. The United States has worked tirelessly over the years to push for China’s reform and opening — for example, working to facilitate China’s access to the World Trade Organization. It is time for the United States to reap the benefits, rather than boxing itself out of the Chinese market.

Biden’s approach towards China is couched in his domestic priorities, including the four crises of the COVID-19 pandemic, economic recession, climate change and racial injustice. On all these fronts, it would be helpful to maintain a good relationship with and coordinate, or better yet collaborate, with China. A global health crisis requires a global response, as does global economic recovery. Fighting climate change certainly calls for the joint effort of the world’s two largest emitters. And demonising China will only heighten racial hatred towards Asian Americans. Ultimately, ‘being tough’ on China would work against Biden’s domestic interests.

Biden’s domestic efforts could instead cool US–China tensions. Revitalising the US economy would require, as he has pledged, investing in infrastructure, clean energy and education, and boosting working class bargaining power. The US–China decoupling move was substantially motivated by populist politics, supported by millions of Americans who feel left behind by globalisation. Helping those ‘left behind’ to get back on their feet and share in the economic prosperity of globalisation could help quell anti-China sentiment in the long run.

Biden is determined to revert to multilateralism, but this provides little room to ‘be tough’ on China. Trump’s damage to the US multilateral system is beyond a quick fix. Biden signed executive orders returning the United States to the Paris agreement and the World Health Organization, but domestic sentiment means it is much harder to re-join the Trans-Pacific Partnership. US allies and friends may also reasonably question its ability to commit beyond the four-year presidential cycle. There is also little appetite among US allies in Asia and Europe to develop cooperation aimed at ‘being tough’ against China after establishing close economic partnerships.

The most practical approach to ‘being tough’ would be ‘competitive recoupling’, where the United States and China carefully manage their differences, coordinate and collaborate on areas of common interest, and compete on equal footing in areas such as technology and trade.

How the US–China relationship will evolve depends not only on Washington but also Beijing. Now that a new US administration is expected to adopt a more constructive and less antagonistic tone, Beijing should also consider toning down its assertive stance, and returning to Deng Xiaoping’s approach. It should also assume the responsibilities of a rising global power and abide by agreed rules. A more open-minded, modest and trustworthy China would foster a friendly international environment that is conducive to its own economic growth.

Yan Liang is Professor of Economics at Willamette University, Oregon.

The post Biden on China: decoupling or competitive re-coupling? first appeared on East Asia Forum.



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Author: Kyle Ferrier, KEI

Iran’s seizure of the South Korean oil tanker the MT Hankuk Chemi in early January is undoubtedly linked to Tehran’s immobilised funds in Seoul. It is also clear that the dispute will require Washington’s involvement in one way or another to be resolved. What that will look like and when it will come is still unsure, but the longer it takes the worse off South Korea will be.

At the core of the issue is former US President Donald Trump’s withdrawal from the Iran nuclear deal, formally known as the Joint Comprehensive Plan of Action (JCPOA). Negotiated under his predecessor, the agreement provided Iran international sanctions relief in exchange for dismantling most of its nuclear program. Although most experts agreed the deal was working as intended, Trump withdrew the United States from the JCPOA in 2018, claiming it did not go far enough to prevent Iran from developing nuclear weapons.

With the US withdrawal came not only the reimposition of sanctions on Iran, but also the threat of secondary sanctions on other countries found to be trading with Iran, including those that were still signatory to the agreement.

For South Korea, Iran had become an important economic partner in the years when it had access to global markets. In 2015, the year before the JCPOA went into effect, South Korea imported 5.7 million tons of oil from Iran, but by 2017 this had shot up to 18 million tons, making Iran one of South Korea’s top three sources of oil.

Under a scheme set up in 2010, these trade payments were settled through won-denominated accounts owned by the Central Bank of Iran at two South Korean banks. Even with forewarning and exemptions that allowed Seoul to import Iranian oil for nearly a year after Trump terminated US participation in the JCPOA, when the spigot was turned off about US$7 billion was left in the account.

Without significant progress in the negotiations to get these funds returned, Tehran has by all accounts seized the ship as leverage to pressure Seoul, but the main stumbling block is still Washington.

Iran and South Korea have reportedly worked out that Iran can use the funds to purchase COVID-19 vaccines through the COVAX Facility with special approval from the US Treasury, though this has yet to happen and it is unclear exactly why. Iranian officials claim the South Korean banks are wary of being targeted by US sanctions while South Korean officials suggest Tehran is the one that is hesitant to act. Either way, the fear of US sanctions is the main problem.

To be sure, South Korea has come nowhere close to suffering from these sanctions as much as Iran has, but Seoul has still taken a financial hit and would like to resolve the current standstill as quickly and amicably as possible.

In addition to losing a major source of energy and inputs for its petrochemical industry, South Korean companies lost lucrative contracts to modernise Iran’s oil and gas facilities and oil tanker fleet. Promising small business cooperation in high-tech fields also ground to a halt. If the current predicament drags on and leaves a blemish on Tehran’s perception of the country, South Korean businesses could be severely disadvantaged if and when sanctions are lifted.

In this sense, the new Biden administration’s interest in re-entering the JCPOA is certainly a welcome change. But it may wind up taking longer than previously thought.

Over the past year, Iran and the United States, with the help of Israel, have engaged in a series of escalating provocations recently culminating in Tehran ramping up its uranium enrichment and the assassination of a top Iranian nuclear scientist likely at the hands of Israel. All of these developments have complicated the timeline and conditions for a US return.

During their confirmation hearings, Biden’s picks for Secretary of State and Director of National Intelligence each stated Washington was a ‘long way’ from re-joining the JCPOA. Additionally, both the Biden administration and Tehran want the other to be in compliance before returning to deal, and even then the United States could seek to leverage this compliance to address other areas of concern such as Iran’s missile program.

Seoul is looking to other diplomatic channels for help — including reaching out to one of Iran’s closest partners, Qatar — though it would be better served by elevating its efforts with the United States.

While it has been reported that the US Treasury has granted sanctions exemptions for Iran’s funds in South Korea to be used for the coronavirus vaccine, there have not been any major public statements that could assuage the fears of either Tehran or the two South Korean banks. Progress in closed-door talks with the United States are apparently behind Iran’s decision in early February to release the ship’s crew, but getting a high-level statement out in the open will likely be necessary for the safe return of the ship and its captain.

Securing such a public message out could help bring this unfortunate chapter in Iran–South Korea relations to a quick and agreeable close and may even help to open a new one for the United States and Iran. Amid its own standoff with Iran as to who will move towards compliance first, Washington could use this pronouncement as a low-cost goodwill gesture with Tehran to start building diplomatic momentum.

Kyle Ferrier is a Fellow and Director of Academic Affairs at the Korea Economic Institute of America (KEI).

All views expressed in the article are the author’s own and do not necessarily reflect those of any institution or organisation.

The post Resolving South Korea’s Iran conundrum first appeared on East Asia Forum.



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Authors: Hien Do Benoit, CNAM and David Camroux, Sciences Po

‘Di bat bien, ung van bien’ — a phrase evoked by Ho Chi Minh in 1946 — is the Vietnamese rendering of a Chinese maxim which may be translated ‘to respond to the changing with the unchanging’. This could sum up the essential lesson to be drawn from the 13th Congress of the Communist Party of Vietnam (CPV) held from 25 January to 1 February this year.

The Congress began with an upbeat tone. Vietnam has been lauded by the international community for its handling of the COVID-19 pandemic. With a population of 97 million people, Vietnam has only recorded 35 deaths. It seems to have done all the right things — closing borders early, heavily controlling locally targeted confinements and maintaining transparency in its communication strategy to encourage patriotic behaviour to combat the virus. While the rest of Southeast Asia is in recession, Vietnam recorded a growth rate of 2.9 per cent in 2020.

Vietnam’s chairmanship of ASEAN in 2020 was deemed a success culminating in the signing of the Regional Comprehensive Economic Partnership and the EU–ASEAN Strategic Partnership Agreement. Still, the international environment with continued China–US tensions under the new Biden administration, as well as no respite in Chinese assertiveness in Vietnam’s neighbourhood, augur for a difficult period ahead.

For the Party leadership, under such an unstable environment — both internationally and, because of the continuing pandemic, domestically — the Party Congress was a good time to consolidate, maintain the status quo and ensure the CPV deflects any criticism.

As expected, responding to appeals for consensus and unity, Nguyen Phu Trong was re-elected as General Secretary of the CPV. This rather bland grandfatherly custodian of Marxist–Leninist doctrine is reassuring not only to Party apparatchiks but also to the general population because of his aggressive campaign to uproot corruption. Trong’s protege Tran Quoc Vuong was rejected by the last two plenums of the Central Committee, so Trong became the default option.

For some observers, reliance on the old guard signifies an inability to prepare a new generation of leaders, especially as no consequential doctrinal innovations have emerged since Doi Moi (‘change for renewal’) in 1986. It is problematic for the CPV’s long-term viability to have a membership stagnant at approximately 5 per cent of the population and one that is increasingly ageing and male. Those under 50 make up only 17 per cent of the 200-member Central Committee. Women make up only 9.5 per cent of the Central Committee and the 18-member Politburo only has one woman.

Trong will also remain the President of Vietnam — a position he acquired after the death of Tran Dai Quang in 2018. This has led to comparisons with Chinese President Xi Jinping. This is misleading as Trong does not possess similar levers to maintain his position in a factionalised CPV and his personal modesty and ill health does not seem to display the same lust for power as Xi. He is certainly no harbinger of a ‘Vietnamese Dream’.

Trong was given an exception for a third term beyond the obligatory retirement age of 65. But he was not alone — of the 200 members in the Central Committee, there were nine other exceptions. Among these was Nguyen Xuan Phuc, the current Prime Minister. It appears that he was not chosen to be General Secretary because he does not come from the Communist heartland in the north. Still, he is expected to become president later in the year once designated by the National Assembly. The question is whether he will then make the presidential role more important than it was previously.

During Vietnam’s chairmanship of ASEAN in 2020, and in dealing with the COVID-19 pandemic, Phuc was omnipresent, apparently in part due to Trong’s real, or ostensible, ill health. Pham Minh Chinh, current head of the Central Commission for Organisational Affairs and number three in the Politburo, is foreshadowed to replace Phuc as prime minister — a sign of hierarchical continuity. But, as with the relationship between Trong and Phuc, it also indicates that power-sharing arrangements in Vietnam’s collegial leadership are also questions of individual and factional dynamics.

Since the seminal 6th Party Congress of 1986, which heralded the policy of Doi Moi, the CPV’s congresses attract increasing international attention. They are seen as providing guidelines for future policies as well as designating the key actors in the Vietnamese regime.

The 13th Congress was a disappointment then for those seeking significant changes. What emerged is an interim arrangement to mark time, so as to ensure the CPV’s grip on power. It remains to be seen whether this hiatus impacts other bodies in Vietnam — notably at the provincial level and, for example, on the ‘consultative authoritarianism’ of the Vietnamese National Assembly.

Hien Do Benoit is Associate Professor at the National Conservatory of Arts and Trades (CNAM) and Research Fellow at the Interdisciplinary Laboratory for Research in Action Sciences (LIRSA), Paris.

David Camroux is an Honorary Senior Fellow at the Center for International Studies (CERI), Sciences Po, and a Professorial Fellow at the University of Social Science and Humanities, National Vietnam University, Hanoi. He is a former Dissemination Coordinator for the CRISEA project on Southeast Asian regional integration of the EU’s Horizon 2020 Framework Programme.

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Author: Brendan Clift, University of Melbourne

The recent round-up and arrest of 53 pro-democracy activists in China’s nominally-autonomous, semi-democratic Hong Kong Special Administrative Region was the latest escalation in a long war on political opposition. With the crackdown perpetrated under the draconian national security law imposed by Beijing last year, the question now is whether Hong Kong’s English-derived, common law legal system can retain its distinct character and identity in the face of China’s authoritarian agenda.

Hong Kong’s pro-democracy movement pre-dates the region’s 1997 handover and has chalked up some wins over the years. But its broader objectives have remained unmet as Beijing has taken a different view on the ‘gradual and orderly’ progress to democracy referenced in Hong Kong’s constitutional document, the Basic Law.

Beijing’s reluctance to let go of the reins spawned the 2014 Umbrella Movement, the peaceful mass occupation of Hong Kong streets that likewise failed to bring about democracy but kicked off an ongoing period of political contestation. Hongkongers’ appetite for protest appeared to dim after that movement dispersed, but many young protesters redirected their energy toward electoral politics and a number won election to the regional legislature on pro-democracy and ‘localist’ platforms.

In early 2019, when the Hong Kong government proposed a new law which threatened to break down the ‘firewall’ between the legal systems of Hong Kong and China by facilitating extradition to the mainland, protests broke out once again — with over a million marching in a single day. The anti-extradition law protests lasted the best part of a year and evolved to become less about the proposed law — which was eventually abandoned — and more about the uncompromising stances and violent tactics adopted by both sides.

The protests received popular endorsement via a pro-democratic landslide in District Council elections later that year. This surprised Beijing and placed not just the agitators but Hong Kong’s democratic institutions squarely within its crosshairs.

Although the increased use of force by police has drawn attention and criticism, political repression in Hong Kong has generally taken legalistic form in order to maintain a veneer of legitimacy.

Since 2014, the Hong Kong government has screened out election candidates who it claimed to be secessionists and has had other legislators-elect thrown out for botching their oaths of office. When the legislature’s president allowed members to re-take their oaths, the government challenged his decision in the courts, which were compelled to order disqualification after Beijing intervened with new oath-taking rules.

The new rules emanated from the Standing Committee of the National People’s Congress (NPCSC) in the form of an ‘interpretation’ of Hong Kong’s Basic Law. Hong Kong’s courts held themselves to be barred from questioning the interpretation in form or substance.

Prior to this interpretation, overt interventions in Hong Kong’s legal system had been few, but the turmoil of 2019 drained Beijing’s reserves of restraint and the national security law — also promulgated by the NPCSC — was the result. The national security law’s headline provisions include broad offences of secession, subversion of state power and collusion with foreign forces with penalties that range up to life imprisonment.

Mere months later, the NPCSC issued an executive order allowing the Hong Kong government to summarily dismiss legislators it believed to have endangered national security or solicited foreign intervention. As a result, four moderate pro-democracy lawmakers were immediately sacked, which prompted the resignations of 15 more.

These events suggest the use of law and legal forms to disguise the unfettered, arbitrary persecution of democratic political opposition in pursuit of authoritarian ideological orthodoxy.

The 53 recent arrestees had participated in an event convened by pro-democracy parties and civil society groups to select candidates for the upcoming general election with the aim of winning enough seats to veto the budget and force the government to negotiate or its head to resign.

There is nothing in Hong Kong law to prevent any of this. On the contrary, the Basic Law provides for electoral rights (Article 39), foresees that the legislature may block supply (Article 51) and provides for the forced resignation of the head of the government (Article 52).

Nonetheless, organisers were told that their event was ‘illegal’ and the ensuing arrests were justified by reference to Article 22 of the national security law which proscribes subversion of state power. This extraordinary manoeuvre reveals that the authorities in Hong Kong define legality in political terms and sets up a clash between the Basic Law and the national security law.

Beijing’s post-2019 approach to governing Hong Kong suggests that political expedience will take priority over the text of Hong Kong’s mini-constitution. However that outcome is achieved — via the Hong Kong courts’ deference to realpolitik or by another NPCSC intervention — the rule of law will suffer.

Advocates for political reform are operating in an ever-shrinking space as the media is acquired or influenced, academic appointments become politicised and civil society adapts to a vast, vague national security regime.

Under that regime, even moderates who call on Beijing to keep its handover promises of Hong Kong autonomy and self-government have been branded threats to national security and ejected from public life.

The regional government is now largely compliant with Beijing’s wishes, but work remains to ‘harmonise’ the elected councils and the judiciary. There is talk of further reform to water down democrats’ influence, while repeated calls for the judiciary to be ‘patriotic’ and the jarring insistence that Hong Kong, like China, has no separation of powers ring ominous.

Defenders of Hong Kong’s legal system will insist that judicial independence is a prerequisite for the region’s continued wellbeing, but Beijing may reason that modern China has done well enough with its captive courts.

Brendan Clift is a PhD Candidate and teacher at Melbourne Law School, The University of Melbourne.

The post Political repression and authoritarian legalism in Hong Kong first appeared on East Asia Forum.



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Author: Yuki Tatsumi, Stimson Center

Japan’s 2021 defence budget is set to be its largest ever, continuing a near decade-long trend set in motion by former prime minister Shinzo Abe. Under Abe’s watch, Japan has increased its defence budget every year since 2005. The uptick in spending has continued since Abe left office in September 2020 — last December, the Ministry of Defense released its revised budget request for the 2021 fiscal year totalling approximately 5.3 trillion yen (US$50.2 billion).

This upward trend has at times been sensationalised as a return to militarism, with critics pointing to new capabilities introduced during Abe’s tenure. Recent examples include the indigenous development of long-range surface-to-air missiles and other ‘standoff capabilities’ to replace the cancelled Aegis Ashore missile defence program. The Aegis system will be replaced with destroyers and long-range cruise missiles based on the surface-to-air missiles already in use by the Japan Ground Self-Defense Force.

The reality is that Japan’s defence budget now and under prime minister Abe has remained below one per cent of GDP. If one excludes expenses related to relocating US forces in Okinawa, replacing and maintaining the Japanese equivalent to Air Force One, and making the Japan Self-Defense Forces (SDF) and Ministry of Defense more resilient to natural disasters, Japan’s defence budget did not recover to the 2006 level until 2018.

Increases in nominal defence spending since 2013 have been necessary to pay for several big-ticket items, such as enhancing the SDF’s amphibious capabilities and creating more robust space and cyberspace defence systems. Spending increases were also necessary to phase out F-2 fighter jets with next-generation F-X aircraft, and most recently to replace Aegis Ashore. This hardly meets the sensational characterisations of Japanese defence spending. Rather, these moves reflect decisions to address problems introduced by the country’s long period of economic stagnation known as the ‘lost decade’.

The defence budget’s basic ratio has remained largely unchanged. Personnel-related expenses continue to account for nearly 40 per cent of the budget. The remaining 60 per cent is spread thinly across other categories that include education and training, maintenance and repair, and research and development for new acquisition programs.

Future meaningful increases in Japan’s defence spending, however incremental, may not be forthcoming. Abe not only believed in investing in Japan’s defence capabilities to better prepare for tomorrow’s rising national security challenges, but also had the political gravitas necessary to secure the increases. New Prime Minister Yoshihide Suga, by contrast, is already seeing a decline in his public approval ratings due to his government’s indecisive handling of the third wave of COVID-19 infections. It is unclear whether Suga can continue to provide as much political support for a bigger defence budget as his predecessor did.

These factors point to a serious challenge for Japan’s defence planners: the current trajectory of the country’s defence build-up plan is not fiscally sustainable.

There are a couple of ways for Japan to avoid a possible train wreck. One is to accelerate the pace of defence budget increases to keep up with the anticipated rise in acquisition costs. The other is to apply greater scrutiny to all current and future acquisition plans to determine a fiscally-sustainable way forward. This might involve delaying or modifying the acquisition schedule, including considerable cut backs to the scale of the program, or even replacing the program with a more affordable option.

Since accelerating the pace of defence budget increases is likely to be politically untenable for the Suga government, the more plausible way forward for Japan is to opt for greater scrutiny.

Revision of Japan’s National Security Strategy (NSS), first adopted in 2013, is anticipated in the next couple of years. Japan is also at the halfway point of its Mid-Term Defense Program (MTDP), which runs until the end of the 2023 financial year. If the current MTDP does not undertake a mid-course revision by the end of this year, preliminary deliberations on the next program will commence in 2022, likely to occur in tandem with the revision of NSS.

With the anticipated revision of National Defense Program Guidelines (NDPG) happening around the same time, the revision of all three key documents will provide excellent opportunities for the Ministry of Defense as well as Japanese government as a whole to make the hard decisions that greater scrutiny entails.

Yuki Tatsumi is Senior Fellow, Co-Director of the East Asia Program and Director of the Japan Program at the Stimson Center, Washington, DC.

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Author: Naoise McDonagh, University of Adelaide

The World Trade Organization’s (WTO) 2014 Trade Facilitation Agreement is the only significant multilateral agreement it has concluded since its inception in 1995. Against that success, significant failures stand out. The inability to complete the Doha Development Round launched in 2001 and the failure to curb fishing subsidies despite the decimation of global fish stocks indicates that multilateralism is floundering.

The growth in plurilateral agreements adds to that view and raises questions about the WTO’s future. Plurilateralism refers to trade and investment negotiations between three or more countries, but fewer than all WTO members. Plurilaterals can occur inside the WTO, where non-signatories still receive the benefits through the most-favoured-nation requirement. The 1996 Information Technology Agreement is one early example. Issue-specific WTO plurilaterals, such as the e-commerce negotiations, are becoming a popular option. To reduce free-riding, these ‘open’ WTO plurilaterals require a critical mass of members to have signed on before entering into force.

Plurilaterals can also occur outside the WTO to form between-country preferential trade agreements (PTAs) where benefits flow only to parties to the agreement. PTAs include free trade agreements (FTAs), such as the China–Australia FTA, as well as regional and mega-regional trade agreements, such as the Regional Comprehensive Economic Partnership (RCEP). To be legal under WTO rules, PTAs must liberalise ‘substantially all trade’.

Multilateral gridlock means trade progress is now happening at the plurilateral level. This creates opportunities and dangers for the WTO. Opportunities arise through the prospect for trade progress that is sorely needed; danger lies in the possibility of governance fragmentation from external PTAs. In 2000 there were 83 PTAs in force, and by 2020 there were 303. This trend risks  the WTO becoming an institutional zombie struggling to manage a smorgasbord of inconsistent rules.

The success of the WTO’s predecessor, the General Agreement on Tariffs and Trade (GATT), is a key reason for multilateral difficulties today. The GATT began in 1948 with 23 members agreeing to reduce trade tariffs. Tariff reductions were the primary focus of negotiations through to the 1986 Uruguay Round, by which time there were 123 members. A reduction in tariffs from about 22 per cent of traded goods value in 1947 to 5 per cent after the Uruguay Round is indicative of the success of GATT negotiations.

When the WTO became operational in 1995, the GATT had largely completed ‘negative’ economic integration. This required very little ‘positive’ integration, the latter referring to rule convergence on national regulatory standards. The GATT also provided foundations for the current system, including non-discrimination rules, a dispute resolution forum and the norm of reciprocity between nations regarding tariff concessions.

The WTO was born into a role demanding greater regulatory convergence between nations on issues such as non-tariff measures, services standards, intellectual property, subsidies and an array of technical and legal standards. Further, with no provisions on e-commerce or digital trade and the incomplete General Agreement on Trade in Services, the WTO was outdated on arrival. The need for greater rule convergence to achieve further progress has significant ramifications for national regulatory sovereignty. It also demands national capacity for implementation and oversight that developing countries often struggle to meet.

The WTO sought such convergence with greater member heterogeneity compared to the GATT. The WTO now has 164 member nations, with divergences in development status, political systems and social preferences. Yet agreement on any WTO issue must be reached by consensus. Even between culturally and developmentally similar countries, differences in social preferences create major hurdles to securing a trade agreement when behind-the-border regulatory issues are at stake.

Two implications for PTAs are now evident. First, PTAs are a logical response to the difficulties of achieving consensus across WTO membership on issues that reduce domestic policy space. Second, the growth in PTAs indicates an ongoing desire by members to continue deepening trade integration. Neither implication suggests the WTO is becoming redundant. Rather, the WTO is a crucial foundation on which modern PTAs build. The United States–Mexico–Canada Agreement (USMCA), for example, uses significant amounts of WTO text and requires that basic disputes over technical barriers to trade be heard within the WTO’s framework.

By building upon the existing multilateral system, USMCA parties could focus on issues that extend the current rules. RCEP was similarly negotiated to be WTO-consistent and its Chapter 12 on e-commerce is viewed as providing the most likely path forward for the WTO’s e-commerce negotiations. Conversely, South Korea’s separate FTAs with the European Union and the United States codified two sets of mutually inconsistent rules relating to international standards, generating rule fragmentation.

Still, like-minded countries continuing to negotiate deeper trade integration is positive news. With multilateral gridlock, plurilaterals are the most realistic vehicle for trade progress. The risk to the multilateral system arising from external plurilateral PTAs is one of differentiated integration and governance fragmentation. Current geopolitical tensions amplify that risk. While this risk cannot be completely avoided, it can be mitigated.

Fragmentation risk can be reduced if PTAs ensure they are as WTO-consistent as possible, like RCEP. As PTAs prove the value of deeper integration there should be opportunities to multilateralise PTA innovations, like RCEP’s chapter on e-commerce. APEC’s ability to produce cooperative outcomes on transparency standards without formal negotiations provides another option for multilateral engagement. Yet it must not be forgotten that the WTO still serves crucial functions even as plurilaterals proliferate.

Naoise McDonagh is a Lecturer in Political Economy at the Institute for International Trade, University of Adelaide.

The post Is plurilateralism making the WTO an institutional zombie? first appeared on East Asia Forum.



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Authors: Laura Allison-Reumann and Philomena Murray, University of Melbourne

The new ASEAN–EU Strategic Partnership announced on 1 December 2020 marks a turning point in the relationship between the two regional organisations — not only has the donor–recipient dynamic of previous decades disappeared, but now the European Union may need ASEAN more than ASEAN needs the European Union.

The strategic partnership contains cooperative arrangements on a wide range of issues, including the economy, ASEAN integration, COVID-19 responses, sustainable development, maritime cooperation and cybersecurity. Yet to deliver on the strategic element of the partnership there are still some challenges to overcome.

The European Union and ASEAN have long emphasised shared values and principles, such as a rules-based international order, multilateralism and free trade. Yet there is evidence that the two are not on the same page. They have distinct positions on many of their priorities and different interpretations with respect to the role they play for their members. When it comes to values, the ASEAN-EU Co-Chairs’ statement announcing the strategic partnership did not mention democracy or human rights at all, a serious and contentious omission.

The European Union has long lacked the ability to influence ASEAN norms beyond economic integration imperatives. For this reason, the European Union may need to reassess its role as a norm entrepreneur. While the European Union and ASEAN have been working towards closer engagement for some years, the recent partnership is arguably negotiated more on ASEAN’s terms.

There is evidence that the European Union pushed for a strategic partnership more than ASEAN did, having emphasised strategic engagement in recent years and facing the disinterest of other EU partners (for example, Australia, Israel and Ukraine) in establishing such arrangements. A strategic partnership makes sense given that the European Union is a major development partner and ASEAN’s largest donor.

Looking at the Co-Chairs’ statement, the ASEAN-EU Strategic Partnership supports ASEAN centrality, an ASEAN-led regional architecture and the ASEAN Outlook on the Indo-Pacific. Together with the absence of references to human rights and democracy, the strategic partnership looks like an endorsement of ASEAN norms and principles, rather than EU goals and values.

The question remains as to whether the European Union — in its anxiety to defend multilateralism at all costs — has conceded too much or overlooked its core values in its pursuit of principled pragmatism to achieve a generic agreement.

There is also the question of whether EU support for ASEAN’s vision will deliver the intended outcome of enhancing EU security and its defence profile in the Asia Pacific. Will the strategic partnership grant the European Union membership in the East Asia Summit and ASEAN Defence Ministers Meeting Plus? It remains unclear.

Challenges abound for this inter-regional strategic partnership. First, the European Union and its member states must ensure coherence in their individual relations with ASEAN. Some member states already have Asia Pacific or Indo-Pacific strategies, with specific security and trade priorities and diplomatic approaches.

Second, the European Union needs to ensure coherence between its relations with ASEAN and individual ASEAN member states. The European Union has adopted positions towards individual ASEAN states on specific matters that contrast with its dealings with ASEAN, including the suspension of Cambodia’s EU trade privileges due to human rights concerns, conflicts with Indonesia and Malaysia over palm oil, and stalled FTA talks with Malaysia, Thailand and the Philippines.

The recent coup in Myanmar may also affect future relations. European leaders were quick to condemn the coup, yet have taken no action against Myanmar so far. ASEAN released a Chairman’s statement encouraging the ‘pursuance of dialogue, reconciliation and a return to normalcy’. How ASEAN and the European Union move forward with the situation in Myanmar will have important implications for the strategic partnership. Discord can indeed derail cooperation; in 2009, FTA negotiations between the European Union and ASEAN stalled, partially due to the problem of how to deal with Myanmar and its troubling human rights record.

Questions remain as to whether the new strategic partnership will somehow reconcile bilateral engagement and multilateral cooperation, in a time of Chinese assertiveness and a new US pivot to Asia. Until recently, the European Union and ASEAN could rally together against the US disdain for multilateralism under former president Donald Trump and China’s assertiveness in the South China Sea.

Going forward, ASEAN and the European Union will need to find coherence between their values, interregional and regional positions, and divergent interests among their member states. They will have to agree on how to deal with bilateral and regional issues, and how to carve out a space for the new strategic partnership in regional, multilateral and plurilateral arenas.

The EU High Representative for Foreign Affairs and Security Policy Josep Borrell declared that the ‘EU-ASEAN partnership is no longer a luxury but a necessity’. Whether it was ever a luxury is debateable, but the European Union now seems to fully comprehend the strategic importance of its relationship with ASEAN. Finding common ground and managing their differences will be key to bringing meaning and coherence to their newly minted strategic partnership.

Laura Allison-Reumann is Associate Fellow at the EU Centre in Singapore and Research Fellow at the University of Melbourne.

Philomena Murray is Jean Monnet Chair (ad personam) and Honorary Professorial Fellow at the School of Social and Political Sciences, University of Melbourne. She is also a Research Associate at the United Nations University Institute on Comparative Regional Integration Studies, Bruges, and Visiting Research Fellow at Trinity College Dublin.

The post The ASEAN–EU Strategic Partnership’s coherence challenge first appeared on East Asia Forum.



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Author: James Laurenceson, UTS

Hopes are high that with the Biden administration in the White House the United States might come to Australia’s rescue as China extends its Australian trade publishment into 2021.

In December 2020, President Joe Biden’s national security advisor Jake Sullivan declared that ‘America will stand shoulder to shoulder with our ally Australia and rally fellow democracies to advance our shared security, prosperity and values’. This followed reporting in The Wall Street Journal that outgoing Trump administration officials had mooted ‘an informal alliance of Western nations to jointly retaliate when China uses its trading power to coerce countries’.

Yet a sober assessment concludes that for all the genuine goodwill among Biden’s national security team, an economic coalition of the willing will struggle.

In the world of international commerce, strategic friends can be the fiercest rivals. Just a few weeks after Sullivan hinted at solidarity, he clarified that Biden’s foreign policy would be ‘measured against a simple metric: will it make the lives of working people better, safer, easier?’

He wasn’t talking about those in the western suburbs of Sydney or on rural properties in the Barossa Valley.

When Australian wine was hit with Chinese tariffs of 200 per cent in November 2020, the US National Security Committee enthusiastically tweeted that they would be serving Australian wine at a holiday reception. But they didn’t tell Californian winemakers to stand down: Australia’s AU$1.1 billion (US$850 million) share of China’s massive imported wine market is now up for grabs.

For Australian commentators accustomed to thinking of its ‘Five Eyes’ partners as powerful military and intelligence actors, the prospect of the group moving into the economic arena is an intoxicating one. But their bargaining position is undermined by the reality of their relatively small status in many markets.

Consider coal, the latest Australian export that China has cut off. In the global thermal coal trade, Indonesia is the superpower and accounted for 41 per cent of seaborne exports in 2019. Even if miners in the United States, Canada, the United Kingdom and New Zealand refuse to supply Chinese power generators, the only response it would draw from Beijing is chuckles. In the case of coking coal, lost Australian sales to China are already being snapped up by Canadian suppliers.

One prominent Australian strategist suggested that when a country faced Chinese boycotts, ‘collaborating nations would agree to purchase the goods or provide compensation’.

Good luck to any president or prime minister wishing to explain to privately-owned companies why they must buy goods they don’t want.

Recent years have also revealed a United States that is increasingly sensitive to China’s growing power. Tariffs slapped on US$350 billion worth of Chinese imports outside of World Trade Organization rules are just one example. Another is a ballooning in the number of Chinese companies targeted by the US Department of Commerce’s ‘entity list’ — including entities determined to undertake ‘activities contrary to US national security and/or foreign policy interests’ — to now more than 300.

The obvious danger for Australia is getting bogged down with the United States in the economic equivalent of the forever wars against its largest trading partner, this time spilling treasure rather than blood.

Managing Chinese economic coercion should be a focus of policy attention in Canberra. And how best to work with strategic partners is part of that. Perhaps the most promising element is enhancing the resilience of supply chains for essential or strategically important goods and services in a way that is also cost-effective.

But when it comes to China’s targeting of Australia’s exports, the most productive approaches will lie closer to home.

Australia can start by not panicking. The total value of Australia’s goods exports to China fell by only 2 per cent last year as China proved unwilling or unable to wean itself off big-ticket items like iron ore.

Next, Australia can strive to address the source of the risk. Michael Wesley delivered a blunt assessment that ‘the place to start in reconceptualising our relationship with China is by admitting our strategy so far has failed’. Plenty of countries in the region are balancing economic interests with China and security and strategic interests with the United States. But Australia is an outlier in facing unprecedented levels of Chinese trade aggression. This might prompt a reconsideration of whether the current approach is the best one available. The point isn’t to blame Canberra for Beijing’s bad behaviour. Rather, it’s about protecting Australia’s interests by not doubling down on an inferior strategy for addressing the challenge.

Australia can also work to mitigate the risk that remains. Trade diversification is a worthy objective. Tapping other markets has already proven feasible for producers in some industries like barley, beef and coal. But the difficulty of this strategy at an aggregate level is revealed by new data showing that China’s share of total Australian goods exports increased to a record high of 40 per cent amid the trade attacks.

The real diversification challenge for Australia is in expanding the range of products the country can competitively supply to international markets. A serious innovation agenda is needed. Culling the Austrade network in China and ramping it up in India or Indonesia won’t quite cut it.

James Laurenceson is Professor and Director of the Australia-China Relations Institute at the University of Technology Sydney.

The post No quick fix from Biden for Australia’s China trade woes first appeared on East Asia Forum.



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Author: Charles R Hankla, Georgia State University

US President Joe Biden’s administration must figure out how to pick up the pieces of former president Donald Trump’s controversial trade policy, especially as it relates to China. Some hope (or perhaps fear) that Biden will return US policy to a reformed version of the pre-Trump days of liberal internationalism, embracing free trade and global economic leadership. Yet an integrated approach between liberal internationalism and populism is more likely.

A liberal internationalist approach would see Biden bring the United States into the Trans-Pacific Partnership — the trade agreement among 12 pacific-rim nations that Trump abandoned in 2017 and has since become the smaller Comprehensive and Progressive Agreement for Trans-Pacific Partnership. He might also restart momentum towards the Transatlantic Trade and Investment Partnership with the European Union and negotiate new trade terms with a post-Brexit United Kingdom. He could reinvigorate the World Trade Organization (WTO) negotiation process while putting its dispute settlement process on firmer ground.

Biden has signalled that he could embrace a traditional form of liberal internationalism. In 2017, he gave a defence of the liberal international order at Davos and in 2020 he published a paean to US leadership in Foreign Affairs. But Trump has broken the post-war consensus in favour of free trade. The politics of trade has changed, with trade sceptics on the left and right now stronger. This points to the possibility that Biden will continue his predecessor’s populist policies on trade, focussing on protectionism and unilateralism.

The differences between a liberal internationalist and populist policy direction in the United States are stark on China policy. A liberal internationalist Biden would adopt a traditional US approach to China’s rise. He would see China’s growing economy as an opportunity for US business and would hope to manage any threat Beijing might pose by integrating it into international institutions and laws.

Still, Biden may add strategic vision to Trump’s erratic and disorganised trade policy, and he might take a more aggressive position towards perceived unfair Chinese trade practices. For example, he might impose trade penalties for Chinese currency manipulation or violations of intellectual property rights. Biden’s administration may also see trade protection as one of many policy instruments available to punish China for non-trade related behaviours to which it objects. These might include human rights violations against the Uighurs and aggressive behaviour against Taiwan or in the South China Sea.

A recent Carnegie Endowment for International Peace report titled A Foreign Policy for the Middle Class and co-authored by Biden’s national security advisor, Jake Sullivan, may shed some light on the new administration’s plans. It lays out a vision for a more integrated approach to US foreign relations, one which is neither purely liberal internationalist nor purely populist. Biden has endorsed the report and the broad concept of building policy around the interests of regular Americans, however defined.

A ‘foreign policy for the middle class’ aims to consider how any action will affect the lives of most Americans. It intends to build a broad coalition around US foreign policy, prevent swings from internationalism to isolationism and forestall destructive overcommitments such as the war in Iraq. Yet it is unclear what this approach would mean for trade policy and the US–China relationship.

That said, if Biden puts this report and its implications at the centre of his foreign policy, we can predict five areas of change.

First, there will be a more integrated approach to foreign policy. Biden’s administration will view trade policy with China as one portion of the overall US–China relationship, giving consideration to the implications of trade policy on US prosperity broadly.

Second, there will be an open but pragmatic approach to international cooperation on trade. Biden may be more amenable than Trump to signing new trade agreements and deepening old ones. Still, he will not support such agreements simply to solidify US leadership but will prioritise the economic impact of any potential agreement on middle-class voters.

Third, there will be strong demands that any new agreements contain more labour and environmental protections. The influence of the left wing in the Democratic Party, along with the political power of the US rust belt, makes it likely that such provisos will become increasingly important in trade agreements.

Fourth, there will be a greater emphasis on domestic, trade-related policies. This may include an increased focus on building domestic industries, encouraging the purchase of US products (already seen in a presidential executive order), discouraging outsourcing and the relocation of production, and promoting labour participation.

Fifth, there will be a willingness to denounce China over its human rights abuses and its perceived unfair trade practices, combined with a reluctance to deploy resources to confront the expansion of China. The United States will be reluctant to assert hegemony in the Asia Pacific if that requires deploying significant resources that are thought to be best spent at home.

Overall, Biden’s administration is likely to set a balanced, centrist course in its relationship with China and on world trade. It will neither revert to the old paradigm of liberal internationalism nor will it continue in the populist mould. The United States will draw on both traditions to develop a version of constrained internationalism that puts US economic interests, defined broadly, at the centre. Time will tell whether this new, hybrid approach to US foreign policy will pay dividends.

Charles R Hankla is Associate Professor of Political Science at Georgia State University.

The post Will Biden’s America change course on China and trade? first appeared on East Asia Forum.



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