1. Beijing Forum How China could remain power in South East Asia Analyzing the Trading Strategies between U.S and China The role of territorial disputesSoichiro Chiba
2. Content1Introduction2Neo Liberalism preventing developing countries from rising3 U.S’s trading strategy to take down China - China’s response4 Japans Concern5 Policies that China should make6 Conclusion
3. ◆Introduction As the negotiations on the free trade agreements moved on, a competitionbetween China and U.S seemed to develop. The Americans have put emphasis on theTPP agreement in South East Asia both because of the threat of rising Chinese powerand the need to reform the domestic U.S. economy. In response, the Chineseconsidered TPP as a threat to the power balance in South East Asia, fearing that U.Smight impose a set of policies on countries that would not fit China’s domesticpurposes, and might have a negative impact on China’s economic growth. This ledChina to set up its own trading block, ASEAN, in order to compete with the U.S. ledTPP. Japan may well play a main role here. If Japan agrees to join the TPP, thenmany neighboring countries would also tend to agree and the United States wouldbenefit. If Japan does not agree the TPP could not be said to be a successsince Japanplays such a huge role in the world economy, which would be a benefit to China.While Japan is choosing trading policies to remain close to the U.S, it is still possiblethat Japan could switch sides to become closer to China, becauseof both internal andexternal problems that will be discussed later. Therefore, whether Japan joins theTPP or not would be the key for the power balance in the South East Asia. In orderfor the Chinese to maintain conditions favorable to in economic growth, they shouldtake a set of policies to prevent Japan joining TPP, and urge Japan to join the Chineseled free trade association, thus enhancing China’s power in South East Asia.
4. ◆ Neo Liberalism preventing developing countries from rising The world had adopted neo-liberalism that the Western countries had led,since the Washington Consensus had adopted in 1989 (Serra, Narcís, and Joseph E32). The developed countries had sought to impose a set of policies to the developingcountries that weren’t capable of adopting the system that the consensus had created.Since the policies of the Washington Consensus were against the developing countrieseconomic interests and were not appropriate to their economic conditions, it is saidthat the developed countries “kicked away the ladder”. According to Ha-Joo Chang,developed countries are hypocritical in mainly two ways: “first, they seek to denytoday’s developing countries access to the same policy tools and, second, they urgethem both to adopt democratic reforms and protect intellectual property”(Serra,Narcís, and Joseph E 72). The problem is, the developed countries did not pursue suchpolicies that the Washington consensus sought, when they were in a period ofeconomic growth. They did the opposite. According to Irwin, ”they implemented hightariffs and sectorial industrial policies, lagged in the introduction of democraticreforms stole industrial technologies from one another, did not have independentcentral banks, and so forth’. (Irwin 2004) It is a historical fact that the developedcountries that are in power try to remain in power by adopting policies and strategiesthat are not capable for the rising developing power, in order to prevent them fromtaking over.
5. ◆The trading strategy of the U.S to take down China The United States seems to do the same as the Washington Consensus did tothe developing countries. China considers TPP as the U.S’s strategy to remain inpower in the South East Asia, by preventing Chinese rising power. In order to preventChina becoming a dominant power in South East Asia, they are looking forward toChina’s join to the TPP, regardless of Chinese capability of adopting its requirements.One of the issues that might make China face the incapability of the requirements set,perhaps, are the problem of intellectual property. According to the survey that washeld by the structure of industry council, 52% of the Japanese firms that weredamaged from issues related to intellectual property rights reported that they haddamaged from exportation of China(政治会議) One of the strategies of the U.S is toimpose a set of rules on the TPP countries. As Banyan states in The Economists,“ Unlike the trilateral FTA, the TPP is to cover, for example, intellectual property andenvironmental and labour standards, as well as tariffs”. (Trading strategies) The internal reason of the U.S trading policy as such is that president Obamais heading for an election soon, on 2012 November 6th. The main concerns are tosolve unemployment problems and to regenerate U.S economy. The expectancy thatTPP might be a panacea to both creating employment opportunities and to boost theU.S’s economy is huge in that the U.S’s exportation to South East Asia would be akey to solving both problems. If China would be the dominant rule maker of tradingin South East Asia, the opportunity of the United States would be dismissed.Therefore, also from the point of the U.S internal political benefits, the U.S mustprevent China from becoming a dominant power of making rules in South East Asiatrading. Therefore, they must construct a trading rule that is beneficial for them in thearea. China seems to be aware of the past that the developing countries have hadunfair sets of trade agreements that had been imposed on them,and have beenpreventing them from economic development. For those reasons, until now China
6. had simply been taking distance from TPP whenever there was a dispute about it.However, China’s attitude changed when Japan considered joining it. Due to theJapanese economic influence in South East Asia, Japan joining TPP might cause achain-effect to other countries to join TPP. After the manifestation of Japan in joiningthe TPP, Canada and Mexico followed Japan by also declaring that they are joining.Moreover, there are also many ASEAN countries that are considering joiningTPP(TPP と東アジアの経済統合 5). If Japan, Canada, and Mexico join TPP, theeconomy scale of the TPP would expand to 39% in terms of GDP, compared to 27%without them(TPP と東アジアの経済統合 5). In order to compete with the TPP that is led by the U.S, China is seeking for a3-country free trade agreement (FTA), with Japan and Korea. The aim of this FTA isto create a norm of trading rules that are led by China, and not letting the U.S interfere.From the pressure from the expansion of the role of TPP, they even showed tolerancein having a FTA based with ASEAN6.Before Japan had shown potentials of joiningTPP, they were only tolerant on ASEAN3, which shows their anxiousness of buildinga FTA without the United States. Therefore, the United States is seeking to surpasstheir rival by enhancing the role of TPP, since that the image of TPP was of anorganization that the small developing countries simply followed the U.S. However,entry of Japan might change the image of TPP by contributing to make a newframework and to expand the scale of it, which would be a threat to Chinese led FTAin South East Asia.
7. ◆Japans concern Japan shows tolerance to the TPP, which means that they are taking policiesfavorable to the United States.However, Japan had not yet joined the TPP becausethere are 2 concerns about it. One is about the agriculture problems. Since the TPPprohibits tariffs, the imported agricultural products would be cheaper and easier toconsume. Moreover, since that the imported agricultural products would be cheaperthan domestic ones, domestic famers might quit their jobs. The Ministry ofAgriculture, Forestry and Fisheries predict that it would be a loss of 4.1trillion yen ofagricultural GDP, and 7.9 trillion yen as a hole. (Ministry of Agriculture, Forestry andFisheries) The other concern is that there is a powerful politician against the TPPwithin the Democratic Party of Japan, Ichiro Ozawa. As in The Economists, “Tomake matters worse, in his own Democratic Party of Japan(DPJ) a faction loyal to the“shadow shogun”, Ichiro Ozawa, a former DPJ president recently acquitted of fund-raising offences, favors better ties with China. So it might prefer the trilateral deal toone that antagonizes farmers and other important lobbies at home”(TradingStrategies). As Prime Minister Yoshihiko Noda explained to the students in WasedaUniversity, Japan needs natural resources to compete with other countries. Though thesize of Japanese land territories is 60th in the world, the area of the sea that are Japan’sterritory are6th in the world, including territorial waters and exclusive economic zone.Therefore they should focus on the area of sea around Japan to seek natural resources.These Japanese needs make the territorial problems among China very serious. OnNovember 7th 2010, the Senkaku (In Chinese Diao-yu-dao) incident occurred andincreased tension between Japan and China. It has been disputed between Japan andChina regarding which has the ownership of the island, mostly because of the naturalresources around the island. Japanese captured the Chinese boat and the captain thathad been sailing around the Senkaku Island, because it was violating the Japaneseterritory in their perspective. However, they released the captain very soon because ofthe pressure imposed from the Chinese government. Since Japan’s best trade partner
8. is China, the Japanese government favored not violating international relations withthem (News109). This of course, increased Japan’s cautiousness to the Chinesegovernment. As Yoshihiko Noda stated, “negotiating with countries that have hugenatural resources are extremely difficult.” Therefore, it is predictable that Japan wouldbe very reluctant of taking policies that would be beneficial for China. Instead, fromthe threat of the rising power of China, it would make them prefer to prevent them, bytaking policies that are close to the United States.◆Policy that Chinese should make As stated before, Japan seems to play a key role in the competition betweenthe United States and China. If Japan joins TPP, it would contribute to United Statesdominating the trade market and making rules in South Asia. If they join trilateraltreed agreement, it would contribute to Chinaremaining in power in South East Asia.Thus, Japan refusing to join TPP would be necessary for China to remain in power,and Chinese should build a win-win situation with Japan. First, China should changetheir attitudes to solve the problem of the Senkaku Island immediately. Today, theSenkakuproblem has been complicated and very tensepart because of Ishihara’sdeclarationthat Tokyo district would purchase the island to protect it from the threatof China. (Politics Economics)The reality of China’s anti-Japan policy is that it hasseverely damaged China’s international image. Moreover, it had made negotiationswith Japan’s free trade agreement, which is the key for China to remain in power,much difficult. Domestically, Ishihara’s announcement of purchasing Senkaku islands,made the Chinese having an anit-Japanese demo, acting violence. This wasbroadcasted by Japanese media, successfully raised the tension among the publicopinion of the ordinary Japanese, made environment difficult for the politicians toagree to China led FTA.The incident had become increasingly complicated these days,and to dispute regarding this problem would be not a good idea since it would taketime, which would result in violating international relations with Japan.
9. Moreover, comparing the loss of the natural resources around SenkakuIslandis relatively small compared to letting the United States making rules in the SouthEast Asia. China should negotiate with Japan joining the trilateral trade agreementshowing positive attitudes towards SenkakuIsland.If they succeed with thenegotiations between Japan, prevent them from joining TPP and convince them tojoin the trilateral agreements, “the TPP “would look emasculated”. As Japans primeminister Yoshihiko Noda, put it in March, it would be like The Beatles without PaulMcCartney”. (He said the Americans is John Lennon) Obviously if Japan joinsChinese led FTA, it would make United States becoming the dominant and the rulemaking country in South East Asia very difficult. If China succeeds with tying upwith Japan, however, the status quo is extremely difficult, it would be a hugeadvantage to surpass the United States in terms of rule making in South East Asiatrading. As a result, China would likely to remain in Power. Even though China fails in taking consensuses with Japan, the internal politicsin Japan might beanother possibility to save China. The shadow shougun IchiroOzawa, which favors ties with China, has quitDemocraticParty of Japan and made anew party. If Ichiro Ozawa succeeds in his election, so that he would make policiestight to China as his proposal, it also prevents Japan from joining TPP and possibly tojoin the trilateral deal that are led by the Chinese. However, the possibility that IchiroOzawa would win the election is predicted small (政局).
10. ◆Conclusion The United States and China are struggling though trading strategies, UnitedStates-led TPP and China-led trilateral free treed agreement, since the one that wouldtake power in theSouth East Asia would have the advantage in surpassing their rivals.However, Japan seems to play a huge role here. Japan joining the TPP would create achain effect that many countries would follow Japan due to its influence in South EastAsia. On the other hand, if it refuses to join TPP, it would make TPP emasculated andtheU.S would be less likelyto prevent the rising Chinese power. However, the currentJapanese policy is close with the U.S for reasons of both concerns about protectingdomestic agricultural products, and the fear of the rising Chinese power, since thatthey have various problems regarding the territorial disputes. Thus, in order for Chinato remain in power, they should take policies tied with Japan by building a win-winsituation. Particularly, should insist on them joining their trilateral free tradeassociation by softening their drastic attitude towards SenkakuIsland. By creating awin-win situation between Japan and China, to take policies that are closely tied withJapan, would be the desirable strategy in order for China remaining in power in SouthEast Asia.
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