Lowy Institute

Malcolm Cook and I have been debating why China has been willing to bless Tony Abbott with an FTA when Mr Abbott has so strongly opposed Beijing's political and strategic interests and aspirations in Asia.

Why has President Xi met Mr Abbott's stick with such a juicy carrot, especially when Beijing has been so quick to use the stick itself on other neighbours? (Sam raised the related and important question of why China uses the stick at all when it has so many carrots to offer, to which I have offered an answer separately.)

Malcolm's explanation is that the economic benefits to China of the FTA simply outweigh the costs to China of Australia's position on strategic questions. He does not dispute that those strategic costs are significant, because he concedes both that China is serious about creating a new order in Asia, and that Australia's attitude to this is important to Beijing. He just thinks the economic advantages to China of a FTA with Australia are big enough to counterbalance them.

I'm not so sure. I think it is more likely that Xi and his colleagues believe that wider economic opportunities and kind words will seduce Australia away from its alignment with China's strategic rivals, and encourage us to be more willing to accommodate China's ambitions for regional leadership.

Of course it may be that we are both right to some degree. But it remains important to judge the relative weight of each factor in China's approach to Australia, because the implications for our position in Asia and our future policy depend a lot on which of them predominates.

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Malcolm's argument that economic factors predominate in Beijing's decision rests on judgments about the scale of the perceived economic benefits of the new FTA to China. That is hard to judge at this stage, of course, but we need to be careful not to take last week's euphoria at face value.

The evidence suggests that FTAs actually make very little difference to trade flows or GDP growth. Our Government's only word on this is a 2005 DFAT-sponsored study, which was the source of the much-cited figure of US$18 billion boost to Australia's GDP from an FTA with China. Here is what that study said about the impact, had there been an FTA between Australia and China over the past decade:  

In terms of average annual growth rates between 2005 and 2015, the FTA is estimated to increase Australia's real-GDP growth by 0.039 percentage points; and increase China's real-GDP growth by 0.042 percentage points.

Yes, that's right – four hundredths of a percentage point. In other words, the impact on GDP for China, as for Australia, was estimated to be utterly negligible, and there is no reason to believe that the deal that has now been done will have a significantly greater effect. Indeed the Productivity Commission's 2010 report on FTAs strongly suggests that it won't. It concludes that FTAs in general do nothing at all to boost trade or growth.  

But are there other economic benefits? One view is that China values an FTA with Australia to drive reform within China, which might indirectly boost growth. One cannot dismiss this out of hand, but it does seem on the face of it very improbable. The CCP seems to have no trouble driving reform on its own, and if it needs help from outside, why Australia? China has already signed FTAs with many advanced and prosperous countries which pose it no strategic problems. How does adding Australia to the list help?

So from the available evidence there doesn't seem much reason to think that economic motives have been uppermost in Beijing's decision to cuddle up to Tony Abbott. The fact is that this FTA, like others, is much more about politics than economics, in Beijing as well as in Canberra.

And one cannot help but notice that Beijing seems to have secured precisely the political outcome I think they were aiming at. Tony Abbott did, at least while Xi was here, show himself much more open to China's vision of Asia's future than he has ever been before, and he did so in direct defiance of Barack Obama's very plain and stern warnings just two days before Xi spoke in Canberra.

Time will tell whether this proves to be anything more than a passing blip. Tony Abbott may well revert to his previous strategic alignment against China at the next opportunity. If so, it will be instructive to see how China responds. That would perhaps tell us more about its motives and purposes.

In the meantime, it is easy to understand the attractions of Malcolm's interpretation of events. It would be nice to think that Australia's economic weight and sophistication is such an irresistible magnet for China that we can dictate the terms of the relationship and compel it to accept without demur whatever strategic positions we choose to adopt.

Be we would be unwise to assume that this is what is happening. It is at least as likely that the boot is on the other foot, and that China's economy is so important to Australia's future that Beijing can set the terms of the relationship — either by carrot or stick or both — and persuade us to look more kindly on China's aspirations for regional leadership.

Photo courtesy of the Department of Foreign Affairs and Trade.

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Sam Roggeveen raises an important question when, apropos my debate with Malcolm Cook about China's use of diplomatic carrots and sticks towards Australia, he asks why China bothers to use sticks at all when it has so many carrots. Like many others, Sam thinks China is making a mistake by acting so threateningly to so many of its nearer neighbours when it could so easily seduce them with economic opportunities.

We explored some aspects of this issue on The Interpreter back in May, specifically in relation to China's conduct in its maritime disputes with Japan and its Southeast Asian neighbours. I argued then that China uses these disputes specifically to weaken US regional leadership and strengthen its own by showing that America cannot or will not any longer support its friends and allies in Asia militarily as it used to do.

Sam's post however raises the deeper question of why China should think that this will help build its new model of great power relations in Asia. One simple answer is that everyone else does it. Most models of leadership at all levels of human interaction – even America's — involve a mix of both carrot and stick, and there is no reason to expect China's be to any different.

But I think there may be a more specific answer: the main target of China's sticks in the East and South China Seas is not its neighbours themselves, but Washington. It wants to convince America to step back from leadership in Asia by convincing Washington that it will have to confront China militarily to preserve its regional primacy, and that the costs and risk of doing so would be immense. It is trying to intimidate America, in other words. There is a good chance that it is working.

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Most people are surprised that China would think in these terms. It does not fit our model of how the world works these days. But my whole point is that the world is working differently now from what we have known, because for the first time in decades we are seeing real strategic rivalry between great powers. China is deadly serious about its 'new model', and will run real, if carefully calculated, risks to create it.

Moreover, viewed from Beijing, such measures might seem justified, and indeed required, by America's stubborn refusal so far even to contemplate any accommodation of China's aspirations. That refusal was restated more bluntly than ever by President Obama in Brisbane just last Saturday week. For Beijing, if carrots won't work on America, sticks must be applied, even if indirectly.

Photo courtesy of the White House.

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As Malcolm Cook says, this week's events show that Tony Abbott's strategic policies in Asia have not got in the way of his economic agenda. Mr Abbott has won his free trade agreement with China despite his enthusiastic alignment with Japan and America to resist China's regional ambitions.

So those, like me, who thought it might be otherwise have been proven wrong. When that happens it is a good idea to ask oneself why. Why has President Xi been so warm and generous to Mr Abbott when Mr Abbott has so deliberately opposed himself to China's interests and ambitions? There seem to be three possible explanations:

  1. Beijing doesn't really care much about these strategic/political issues, and their importance is outweighed by the economic value to China of the FTA and the diplomatic value of a warmer relationship with Australia.
  2. Beijing does care deeply about the strategic/political questions, but doesn't think Australia's views matter, so it is willing to ignore what Mr Abbott says on these subjects.
  3. Beijing does care deeply about these issues and does think Australia's views matter, but it decided carrots will work better than sticks. China's leaders may have calculated that the best way to change Mr Abbott's mind and bring Australia closer to China's views would be to offer soothing words and lavish gifts.

Which of these best explains what has happened this week? The Government probably believes it is option 1, and many others will agree. The consensus in Canberra remains that China is not really serious about challenging the US-led order in Asia, because for Beijing the economy always comes first. Hence Xi has been willing to overlook Abbott's strategic policies in pursuit of an economic win for China.

The problem with this explanation is that everything China has said and done in recent years shows that it is very serious about building a new strategic order in Asia. China's ambitions were absolutely clear from Xi's speech to parliament on Monday. It was equally clear from President Obama's speech in Brisbane that he takes China's challenge to the regional order very seriously indeed. That is exactly what his speech aimed to warn us about, in unusually stark terms.

Others too think the same. Mr Cameron's speech to parliament last week, and Mr Modi's yesterday, made plain their concerns about the strength of China's ambitions, and so did Mr Abe's address back in May. Only in Canberra does a consensus still prevail that China is not strongly committed to driving major change to the Asian order. The weight of evidence is strongly the other way, and that makes option 1 look implausible, especially as the economic benefits to China of the FTA are hardly transformational.

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What about option 2? For all the recent boasting about Australia coming out as a big regional player, it is possible that some people, even in the Government, still half-believe that what we say on these big issues doesn't really matter to the main players. A reflection perhaps of the 'adolescence' in our approach to foreign policy that Peter Hartcher has recently described.

But on this issue, at least, we should be in no doubt: Australia seems to have acquired quite a prominent place in regional power politics, as shown by the way Obama, Xi, Modi and Abe have all come here to deliver big geopolitical speeches. It would be unwise to believe that the Chinese do not care about Australia's position on Asia's great strategic questions.

That leaves option 3 as the most credible explanation for what has happened. If that is right, Mr Xi and his colleagues are very serious about their strategic ambitions, and do care what Australia thinks. But they concluded that it would be easy to bring us around to their point of view by offering an FTA and some reassuring words.

If that is what they thought then they seem to have been proved right – at least for now. To judge from what Mr Abbott said this week, and from the response of many of our leading commentators, Australia has taken a long step away from the policies he and they have articulated until now, and towards accepting and endorsing Mr Xi's vision of Asia's future under Chinese leadership. This is just what Mr Obama seems to have feared would happen.

But do the Chinese imagine that Mr Abbott's new-found enthusiasm for their vision of Asia will last for long? If so, they will be disappointed. He already took a step away from it in his exchanges with Mr Modi yesterday. What will he say next time he goes to Washington or Tokyo?

So where do we go from here? On the basis of this week's performance, Malcolm and others seem to think Mr Abbott has created a clear and sustainable basis for Australia's relations with China and our position in the power politics of Asia. I'm not so sure.

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Yesterday in Brisbane US President Barack Obama reaffirmed the Asian Pivot/Rebalance (transcript) which he presented in Canberra three years ago. But in doing so he presented a view of Asia's future, and especially of US-China relations, which was starker and darker than he gave in 2011. This makes the speech rather important. When future historians study the two speeches – and if they also look back to Obama's first big speech in Asia, in Tokyo in November 2009 — they will see clear evidence of how far America's sense of rivalry with China has intensified over the past five years, and especially over the past three years. They will see much less evidence of clear ideas about what America should do about it.

The significance of the President's words about Asia and China were somewhat overshadowed by the remarkable passage in his speech about climate change. I'll leave it to others to say what it might mean for climate policy, but it is worth noting what it means for relations between Canberra and Washington.

It is a very long time since any US president has publicly expressed his policy and political differences with his Australian counterpart as directly and even brusquely as Obama did yesterday, and to do so on that issue, at that time and place, was, well, very pointed. It is hard not to read it as a sign of how the Obama Administration sees Tony Abbott.

However, that matters much less than how the Administration sees Asia and China. Obama spoke more positively than he has done before about China's economic achievement and its significance for the welfare of the people of China, and of course he referred to the deal with Beijing on carbon emission targets. But he more than matched that with a distinctly adversarial tone in describing America's differences with China. These seem to me to be the key points:

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  • He spoke of 'genuine dangers' in Asia that can undermine progress, including 'Disputes over territory, remote islands and rocky shoals that threaten to spiral into confrontation'.
  • He spoke of the need to choose between two visions of Asia's future: 'Do we move towards further integration, more justice, more peace? Or do we move towards disorder and conflict? Those are our choices — conflict or cooperation? Oppression or liberty?'
  • He described America's vision of the regional order this way: 'We believe that nations and peoples have the right to live in security and peace; that an effective security order for Asia must be based — not on spheres of influence, or coercion, or intimidation where big nations bully the small — but on alliances of mutual security, international law and international norms that are upheld, and the peaceful resolution of disputes.'
  • And he left us in no doubt as to whose was the alternative vision. Back in 2011 Obama devoted only one paragraphs of his speech directly to China. Yesterday he devoted four paragraphs to China, in which he indirectly but quite unambiguously implied that China at present is not a responsible international actor and is not good for the region. He said America would cooperate with China where interests overlap, but not where they differ. And he explicitly warned against making too many compromises with China to accommodate its interests and values where they might differ from America's.

All of these points are much starker than any language he has used about China before. Obama's stress on choices seems especially pointed, in view of successive Australian Government's instance that 'we don't have to choose' between America and China.

And just to reinforce the point, a couple of days before Australia's FTA with China is due to be finalised, Obama made two not-so-subtle digs at our economic relationship with China. At one point he spoke disparagingly of trade whose purpose is 'simply to extract resources from the ground', and at another he spoke of building a new economic structure in Asia under the US-led Trans Pacific Partnership in which countries are no longer 'dependent on a single market'.

Finally, although Obama repeated the assurances he has made before about his resolve to use 'all the elements of America's power' to impose America's vision of Asia's future on a reluctant China, he did not explain what more America would or could do, beyond what it has been doing for the last three years, to resist China's challenge to US leadership.

Obama therefore gave us no reason to believe he has an answer to what he himself clearly sees as China's increasingly powerful bid to create a 'new model of great power relations' in Asia.

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As power shifts in Asia, Australia faces big new foreign policy challenges. Getting them right is vital to Australia's future security and prosperity. But the way we do foreign policy in Australia these days is not up to the task. We have to do foreign policy better.

This is the central argument of Peter Hartcher's new book, The Adolescent Country, which gives a fresh and well-framed take on the way Australia tries to position itself in the world. Peter is an indefatigable reporter, and he has garnered many interesting and important views from many interesting and important people. He is also an accomplished author who assembles his material into a fluent and accessible story.

It is also, at heart, a distinctly optimistic book, for two reasons.

Australian Foreign Minister Julie Bishop. (Flickr/CSIS.)

First, although Peter finds much that is wrong with the way Australia approaches foreign policy, he tends not to blame governments for that. Mostly – there are a few exceptions – he argues that successive governments in recent years have got things right and that it is the media, successive oppositions and the wider public who fail to understand how important their work is, and sometimes get in the way. The key message seems to be that all would be well if the media and the public would only take what their governments are doing more seriously.

Second, Peter seems broadly confident that good solutions to Australia's foreign-policy challenges are going to be relatively easy to find. His shares Julie Bishop's conviction that Australia is and will remain a 'top 20' power, and that as such we will be able to shape the international system to preserve our prosperity and security without having to make too many uncomfortable choices.

Alas, I'm not sure it's that easy.

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First, how should we score recent governments' foreign policies? Peter gives high marks for Rudd's G20 initiative and UN Security Council bid, for Gillard's support for Obama's Pivot, and for the Abbott Government's responses to MH17, ISIS and Abe's changes to Japan's defence posture. This is not the place to argue the toss about all these policies, but there are solid arguments that each of them was either largely irrelevant or actually damaging to Australia's core interests. The more of those arguments one accepts, the weaker our governments' recent performances look.

These examples also cast some doubt on Peter's diagnosis of the problem with our foreign policy. The media warmly applauded each of these policies, and those in opposition only overtly criticised one of them. A more critical observer might therefore argue that our media and opposition are too lenient on governments rather that too tough on them. More stringent scrutiny might produce better outcomes.

Second, I think we have to be a little more cautious about the seriousness of the problems we face and the choices they will impose on us. Peter's book discusses the strategic shifts in Asia and the need to respond to them, quoting with approval Michael Thawley's view that Australia has to 'take the lead in creating an agenda'. But he does not discuss in any systematic way what our response should actually be.

In fact Peter seems to accept the widely shared assumption that these responses need not involve any very hard choices for Australia, because US leadership will continue to provide the foundation of regional order. But that is not something we can simply assume, and one might argue that the real weakness in Australian foreign policy is that so few in government, the opposition or the media and commentariat are willing seriously to debate it.

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The four excellent responses to my post on China-Japan relations all present important points about Japan's situation and its options in the face of China's growing power. Just to recap, my piece questioned whether Chinese political and military pressure on Japan in the East China Sea is as counter-productive for China's strategic objectives as many people believe.

That depends of course how Japan and the US react to it. I suggested that it would serve China's aim of weakening US leadership in Asia if it undermined Japan's confidence in the US alliance by exposing America's reluctance to support Japan militarily against China. This would be seen as a win in Beijing even if Tokyo responded by building up its own defences, because China would rather face Japan than America as a strategic competitor in Asia.

My old colleague and valued sparring partner Malcolm Cook argues that if Beijing's leaders thinks this way, they are wrong. He says China's pressure on Japan has strengthened the US-Japan alliance, and cites Abe's measures to 'normalise' Japan's military role as evidence.

This is a key issue: if Malcolm is right than the Chinese really are making a big mistake in the East China Sea. That is why it is so important to test our judgments on it quite carefully. I'd offer Malcolm two sets of thoughts about it.

First, how confident is Tokyo that America really would be willing to go to war with China over the Senkakus? This is not at all a hypothetical issue for Japan. Malcolm seems to think Tokyo has complete faith in US military support. I am much less sure. That's partly because of what people in Tokyo say to me. It's partly because of what Americans say, and don't say. The polite word for America's signals over the Senkakus is 'mixed', and they remain so even after Obama's Tokyo statement earlier this year. Above all, it's because of the military realities. When we look at what would happen if the US actually did fight China over the Senkakus, we can see why Japan would be wise to doubt US support. 

Second, what is Abe's motive in strengthening Japan's military posture? Malcolm is sure that it is to reinforce the US-Japan alliance, not to replace it. I think it is aiming to do both. Prime Minister Abe no doubt hopes that by doing more to support America in Asia it will strengthen US capacity and resolve to preserve the status quo. But I have argued before that this won't work, and it seems that Abe sees that as a real risk. So his new policies are also intended to lay the foundation for Japan to look after itself if US support should fail.  

If these thoughts are right, China would be right to think that its assertiveness will weaken the US-Japan alliance, and leave Japan with only the two choices I mentioned.

However Dhruva Jaishankar's elegant post raises a different possibility.

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He suggests that even if Beijing is right to expect a weakening US-Japan alliance, it might be overlooking a third Japanese option. Rather than meekly submitting to Chinese primacy or reconstituting itself as an independent great power confronting China, Japan could join and perhaps lead a coalition of regional powers along the lines recently suggested by Rory Medcalf and C Raja Mohan. This is what Abe himself may well have in mind. 

Rory's and Raja's fine paper deserves a post to itself, but let me just say here that I think the possibility that they and Dhruva raise is less threatening to China's ambitions than one might suppose. That is because, whatever might be its diplomatic attractions, the strategic potential of such a grouping against China is very limited. Ultimately, it depends on how willing its members are to go to war on one another's behalf. In Japan's position, of example, the value of a regional coalition would depend on whether India, Australia, Vietnam and others would be willing to go to war with China to support Japan over the Senkakus. I bet they wouldn't, and I think China would bet that way too. So without America, Japan is on its own.

Of course China is keen to make sure it stays that way. That is why, as Christopher Pokarier quite rightly says, China is going out of its way to stigmatise Japan's defence policy changes as 're-militarisation'. Like him I think this is quite unjustified. Japan has a perfect right to defend itself just as any other country does. It has almost 70 years of good international citizenship behind it, from which the historical revisionism of Prime Minister Abe and his circle does not materially detract. And, above all, Japan today lacks the strategic weight to threaten China or any country that Beijing chooses to support. This is why I don't think we should be too worried about Japan reconstituting itself as an independent strategic power in the new order that is emerging in Asia as the old one passes away.

Which brings me finally to Brad Glosserman's piece. Brad is another favourite sparring partner. As always, he goes straight to the core questions. I absolutely agree with him (and with Malcolm) that the best thing for Japan would be to continue to depend on America. But I do not believe that is possible, because the old regional order in which that posture worked so well for Japan has been overturned by China's new power and ambitions.

The impact on Japan's situation is a simple matter of what we might call Newtonian strategy. As China's wealth and power grows, the costs to the US of conflict with China grow, and the threshold for US support to Japan against China goes up accordingly. It has now gone up far enough that America may no longer be willing to support Japan militarily over issues like the Senkakus which Japan rightly regards as vital. I think perhaps many Americans are in denial about this. I don't think many Japanese are. The Chinese understand it very clearly, and that is the message their actions over the Senkakus are trying to convey.

So what can Japan do? I think it faces a binary choice: accept Chinese primacy or try to preserve its full political and strategic independence. Which path Japan takes will depend, inter alia, on what kind of regional hegemon China might become. If it turned out to be as benign as the US has been in the Western Hemisphere, then a future for Japan as Asia's Canada might not be so bad. But how trusting are the Japanese willing to be? And what have the Chinese done to earn Japan's trust? 

And the alternative? I may have misled Brad by describing Japan's other option as a return to 'great power' status. I do not mean that Japan would need to compete with China for hegemony in Asia, or assert a sphere of influence of its own to match and balance China's. In the right regional setting Japan could establish itself as a great power on equal terms with China, without seeking hegemony or a sphere of influence. For reasons I set out in The China Choice, that regional setting would need to resemble the nineteenth-century European Concert of Powers: a Concert of Asia. Only as an independent great power in that kind of setting can Japan be secure over coming decades, unless it is willing to accept subordination to China.

Image courtesy of the White House.

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It has long been an axiom of Asian strategic analysis that the last thing Beijing wants is a rearmed, strategically independent, 'normal' Japan. And yet it seems obvious that Beijing's highly assertive policies are pushing Tokyo in exactly that direction. To many this provides yet another sign that China does not know what it is doing.

This is reassuring to those who think we do not need to take China's challenge to US regional leadership too seriously. As long as China foolishly stokes anxiety and provokes counter-balancing action among its neighbours, America has little to fear.

Well, maybe. But before we assume that China is being foolish, it is worth looking more closely at alternative explanations of what is going on. There is a chance that Beijing might be making a rather different mistake from the one most of us assume, and there is even a chance that they are not making a mistake at all.

One thing is for sure: China's conduct, especially over the Senkakus, is undermining Japan's post-war strategic posture, a posture which has served both Japan and China so well for so long. The foundation of that posture has of course been Japan's confidence that it can rely on America for its security, which in turn has seemed essential to Japan's unique version of 'national pacifism'.

As I have argued before (Explaining China's behaviour in the East and South China Seas), China's actions over the Senkakus seem deliberately designed to undermine Japan's confidence in American support by showing Japan that on a critical issue America is not willing to risk a clash with China on Japan's behalf. And that seems to be working. Despite President Obama's bold affirmation of US support over the disputed islands in Tokyo in April, Japanese confidence in US support against China does seem to have waned. The clearest signs are of course Mr Abe's steps to embrace collective self-defence and start looking for allies in Asia, including Australia.

These are exactly the kinds of steps towards normalisation that we could expect Beijing to want to avoid. So what is going on? There seem two possible alternatives to the conclusion that Beijing is just making a mistake.

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The first and perhaps more probable explanation is that China's leaders believe Japan is incapable of becoming a 'normal' military power again, even if it does lose confidence in US support. Beijing quite possibly assumes that Abe's bid to rebuild Japan as a great power in Asia is doomed to fail. After twenty years of economic stagnation, political drift, demographic decline and natural disasters, Japan is simply too demoralised to remake itself into a serious independent military power again.

My ANU colleague Amy King has recently written an outstanding piece suggesting that this is exactly what Beijing thinks. She shows that Chinese statements and commentaries almost completely omit Japan from discussion of Asia's strategic future. They just don't seem to take Japan seriously as a potential great power. That seems right to me: I've always been struck by how readily Chinese interlocutors dismiss Japan as a possible strategic rival.

This would explain why Beijing doesn't seem to worry about how Japan responds to its assertive tactics in the East China Sea. China's leaders may hope and expect that if their pressure tactics work, Japan will lose confidence in America and yet be unable to reassert an independent role as a great power. In which case, Beijing might think, Japan would have no alternative but to acquiesce in Chinese regional leadership.

But are the Chinese wrong to dismiss Japan as a future strategic rival in this way? I've always tended to believe that they were. Japan has such an intense sense of its own identity, and such an intense fear (thanks in part to China's own conduct) of how it would fare under China's regional leadership.

But many people who know Japan much better than I do say that this may not be right. They argue that Japan might indeed be unable, or at least unwilling, to resist Chinese regional leadership if American leadership falters. Now Brad Glosserman of CSIS has written a fascinating essay in the Summer 2014 issue of Washington Quarterly that sheds a lot of light on Japan's choices at this critical moment. Although Brad does not draw this conclusion specifically, his analysis does lend support to the idea that Japan would accept a subordinate status in a Chinese-led Asia. If that is right, then the current moves to undermine the US-Japan alliance make good strategic sense for Beijing.

The second possibility is that Beijing has got Japan wrong, and instead of sliding gracefully into subordination Japan would respond to any erosion of US leadership by rallying to Abe's call and re-establish itself as a great power in Asia, with nuclear weapons and all. I still think this is a real possibility.

If Beijing sees this as a possibility, or if it comes to see it as such in future, then it will face an interesting choice: would it rather face Japan as a strategic rival in Asia, or America? Either it stops trying to undermine the US-Japan alliance, which leaves US strategic weight in Asia largely intact as the principle limit to Chinese ambitions. Or it undermines the US-Japan alliance, in which case Japan replaces America as the major balancer of Chinese power in Asia. Which would Beijing rather deal with? I think they'd probably prefer Japan.

So either way, China's strategy may not be so dumb after all.

Photo courtesy of Wikipedia.

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John Garnaut, writing for Fairfax yesterday, says I'm wrong to argue that Prime Minister Abbott and Foreign Minister Bishop do not understand the nature of China's challenge to the Asian regional order. He says Bishop's remarks, in the fine interview John did with her last week*, show that she understands perfectly well that China is a threat to the status quo.

But that is not my point. I agree that Bishop (and Abbott) can see that China is posing a challenge. What they do not understand, I think, is how determined China is to pursue that challenge in the face of opposition. If they did understand that, they would realise that simply pushing back, as Abe wants us to do, will not persuade China to back off.

Instead it simply leads China to push back again even harder, which escalates strategic rivalry and increases the risk of war. I do not believe Abbott and Bishop want that, so I infer that they do not see that this is the where their policy leads, because they do not understand how determined China really is.

Of course this is not good news. Like almost everyone else, I would be much happier if China was willing to live with the old order which has served us all so well. But that is not the world we live in, because China is now too ambitious to accept the status quo, and too strong to ignore. We do not have to give it everything it wants, but we do need to try to do some kind of deal if we possibly can. We should all be exploring how such a deal could work.

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Instead we are worrying about what the Global Times says. I don't think that this matters much. It would be quite wrong to say that Bishop's remarks were unwise just because they were criticised in Beijing, and it would equally be wrong to judge they were sensible and helpful just because Beijing doesn't like them.

In fact the tone of Australia's bilateral relations with any of the great powers of Northeast Asia is not really the key issue here. What matters most to us is the quality of their relationships with one another. If America, China and Japan can all get on well, then we in Australia can easily manage our relations with all of them. If they get on badly, then we are in deep trouble.

That means the key test of Australian policy is not whether they like it in Washington, Tokyo or Beijing. It is whether we contribute to stoking animosity between them, or help to damp it down.

That's why last week's diplomacy with Japan was bad policy. Not because it irritated Beijing, but because it helped escalate strategic rivalry between China and Japan, and pushed Asia closer to a Cold-War style division into hostile blocs. Abbott and Bishop should understand that, but I do not think they do.

* China's Foreign Ministry now claims this interview never happened. In response, Fairfax has posted a recording and transcript.

Photo by Flickr user Steve Webel.

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Sam Roggeveen says that Mr Abe's visit last week, and Julie Bishop's interview with John Garnaut, show that the Abbott Government now accepts there is a serious strategic competition underway in Asia as China challenges US primacy.

If so, I think this would be an important shift. The simplest explanation for the Abbott Government's approach to strategic issues in Northeast Asia so far is that they simply do not understand how serious the strategic rivalry there is. As recently as last month in Washington, Tony Abbott was still talking down the challenge that China poses to the status quo in Asia – or at least that's how I interpreted his Chamber of Commerce speech.

Sam disagrees with that interpretation, but he suggests that the question is now moot. Whatever Abbott meant last month in Washington, Sam says, he and Bishop last week made it clear that they now see the situation more clearly, and that they have adopted Mr Abe's view that China is a major threat to the regional status quo.

But I'm still not sure they yet really understand the seriousness of China's challenge. To see why, look at how they intend to respond to it. Last week they signed up to Abe's plan to build a regional coalition of like-minded countries steadfastly to oppose China's ambitions for a larger leadership role in Asia. Abe sees Japan itself playing a major leadership role in this effort. That's why he was here in Canberra last week.

Whether Abe's plan is sensible depends on how China responds to it.

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Abe hopes and expects that if China meets determined resistance it will abandon its challenge and accept the regional status quo. If so, his plan will have worked and all will be well. Sam thinks this is what Abbott expects too: he says that Abbott wants to damp down strategic rivalry in Northeast Asia by deterring China from upsetting the status quo.

But that only works if China reacts the way Abe and Abbott expect, by backing off. They assume that China's challenge isn't really very serious, because they think China is not determined enough about changing the regional order to risk confrontation with Abe's Japanese-led coalition or the US or both. And they assume China believes that our side is, on the contrary, determined enough to risk confrontation with China.

How valid are these assumptions? We do not have to guess about this. 'Our side' has already tried to deter China from challenging by showing our resolve to defend the status quo. It was called the Pivot. The whole idea of the Pivot was that when Obama declared he was determined to preserve the status quo, China was supposed to back off graciously. But it didn't work. Instead Beijing pushed back harder, by escalating its maritime disputes with US friends and allies, especially Japan.

So now our side is pushing back harder again – this time led, tellingly, by Japan. That's what was happening last week. Abe's muscular new strategic policy, which we have signed up to join, is his response to China's response to Obama's Pivot. And how will China respond this time? By far the most likely Chinese response to Abe's move will be to push back harder again in turn, because the evidence strongly suggests that China is determined to change the order in Asia, is willing to confront the rest of us to do so, and believes that we will eventually back down. So Abbott's decision to support Abe just helps to escalate the strategic rivalry another notch.

If Abbott really understands what's happening in Asia, he would understand how serious China's challenge is, and he would recognise that Abe's policy will only lead to further escalating rivalry and an increased risk of war. Which is why even after last week I still think that Abbott either doesn't understand what is happening in Asia or he does understand and he thinks that escalating rivalry is a good idea.

I prefer to think he still does not understand. Once he does understand he will, one hopes, have enough imagination to see that there are more than two ways to respond to China's ambitions. We do not have to choose supine surrender or inflexible resistance.

Photo courtesy of @TonyAbbottMHR.

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Clearly Japanese Prime Minister Shinzo Abe has deep personal and political motives for wanting to change Japan's strategic posture, 'escape from the postwar regime' and make Japan a normal country. But he has only been able to push this week's changes through because many Japanese who reject Abe's revisionist nationalism have lost faith in the post-war strategic posture. They can see that relying on the US has worked well for decades, but is failing now as strategic circumstances change.

The question is whether collective self-defence will work any better to keep Japan secure in these new circumstances? I don't think it will.

Japan's old posture isn't working anymore because of the shift in relative power between America and China. The stronger China becomes, the more Japan fears that China will use its strength to subordinate Japan, and the less confident the Japanese can be that America will always help them resist Chinese pressure. As the economic and military costs and risks to America of conflict with China go up, US willingness to support Japan's interests goes down, and it becomes less clear that Japan's and America's interests will always coincide. Japan therefore loses confidence in a strategic posture based on dependence on the US. We can see all this playing out in the Senkaku/Daioyu dispute, making it Japan's most acute strategic challenge since the Second World War.

Will collective self-defence fix this problem? The argument that it will is simple enough: Japan will strengthen both America's willingness and its capacity to support Japan against China if it does more to support the US against China. This is the classic burden-sharing idea that has been central to the way alliances around the world have been seen to work for the last century or so. It has certainly been central to the way Australia has approached alliance management with both Britain and the US. Indeed Japan's alliance has been unique in not imposing this kind of burden-sharing, so Abe's move simply brings Japan into line with other US allies. 

But collective self-defence will only reinforce US strategic guarantees to Japan and restore Japan's confidence in the alliance if it deals directly with the factors that have been eroding them.

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On the military side, Japan's armed forces will make little difference to America's ability to win a war against China in the western Pacific. Very simply, even with Japanese support America could not achieve sea control against China's formidable sea denial forces, and even without Japan's support it can easily achieve sea denial against China's feeble sea control forces. So Japan's help would do nothing to break what is essentially a US-China maritime stalemate in which both sides can deny the waters around China to the other. And Japan can do nothing to help America control the very real risks of escalation which that stalemate produces. So Japan's commitment to collective self-defence will not reduce the costs and risks to America of confronting China.

Nor will Japanese burden-sharing make much difference to America's willingness to bear those costs and risks on Japan's behalf. America already has strong reasons to support Japan and preserve the alliance; it is after all the essential foundation of US primacy in Asia. The present crisis of confidence in the alliance arises precisely because the costs and risks of confronting China are now so great that they threaten to outweigh even this alliance in US strategic calculations.

And it is not clear that anything Japan could or will do under collective self-defence will tip the scales back the other way. Australians are familiar with the argument that big allies are more likely to come to a junior partner's aid if the junior partner has paid collective self-defence 'dues'. But this kind of moral entrapment seldom works. Tokyo would be unwise to assume that America will be so grateful for Japanese military support that they would feel obliged to come to fight China on Japan's behalf when America's own interests did not require them to do so. 

This suggests that collective self-defence as the junior partner in a US-Japan alliance will not solve Japan's strategic problems. Of course there may be a different model of collective self-defence in mind. Perhaps Tokyo intends that collective self-defence will allow it to join, and perhaps even to lead, a wider regional coalition or alliance to resist China's growing power. But that would not do much to make Japan more secure either.

In the end, Japan's best prospect for security in the Asian century is to build the forces it needs to defend itself without relying on others, and without threatening others. This is perfectly possible for Japan economically and militarily, but it would be a big step politically, and would require much better diplomacy than we have seen from Mr Abe so far. 

Photo by Flickr user JBLM PAO.

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Many people, like my old friend Brad Glosserman, find it hard to understand why China is acting the way it is in the East and South China Seas. What does Beijing hope to achieve by alienating its neighbours and undermining regional stability?

Let me suggest an answer: China is trying to build what President Xi Jinping calls 'a new model of great power relations'. To understand how this might be the aim of Beijing's actions, we have to recognise that under his 'new model', Xi wants China to wield much more power and influence in Asia than it has for the past few centuries. These things are inherently zero-sum, so for China to have more power and influence, America must have less. This is what Xi and his colleagues are trying to achieve.

Their reasoning is simple enough. They know that America's position in Asia is built on its network of alliances and partnerships with many of China's neighbours. They believe that weakening these relationships is the easiest way to weaken US regional power. And they know that, beneath the flowery diplomatic phrases, the bedrock of these alliances and partnerships is the confidence America's Asian friends have that America is able and willing to protect them from China's power.

So the easiest way for Beijing to weaken Washington's power in Asia is to undermine this confidence. And the easiest way to do that is for Beijing to press those friends and allies hard on issues in which America's own interests are not immediately engaged – like a string of maritime disputes in which the US has no direct stake.

By using direct armed pressure in these disputes, China makes its neighbours more eager for US military support, and at the same time makes America less willing to give it, because of the clear risk of a direct US-China clash. In other words, by confronting America's friends with force, China confronts America with the choice between deserting its friends and fighting China. Beijing is betting that, faced with this choice, America will back off and leave its allies and friends unsupported. This will weaken America's alliances and partnerships, undermine US power in Asia, and enhance China's power.

This view of China's motives explains its recent conduct.

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Ever since President Obama announced the 'pivot', China has tested US willingness to support its allies over the Scarborough Shoals and Senkaku/Daioyu disputes. Until his Asian trip last month, Obama seemed inclined to step back from America's commitments, but his bold words in Tokyo and Manila suggest he has recovered his resolve to stand firm.

Now we can expect China to test this newly-recovered resolve by applying more pressure in the same places or elsewhere. And that is what Beijing is doing today in the waters off Vietnam. It is calling Obama's bluff. Expect more pressure against Manila and Tokyo soon.

Of course this carries risks for China. It does not want to fight America, so it must be confident in the judgement that America will back down and desert its friends rather than engage in conflict with China, even if backing down badly weakens the US position in Asia. This confidence reflects two key judgments by China's leaders.

First, they believe that China's new anti-access/area denial capabilities can deny America a quick and easy victory in an maritime clash in the East Asian littoral waters. They have been reassured by America's own Air-Sea Battle doctrine that the US knows it cannot prevail in these waters without launching a major campaign of strikes against Chinese territory. Such strikes would obviously risk a major escalation which might not stop below the nuclear threshold. So China's leaders think their US counterparts understand that a war with China today is one that America could not be confident of either winning or limiting.

Second, Beijing believes the balance of resolve is on China's side. Washington clearly wants to preserve its role in Asia, but Beijing is even more determined to win power at US expense. China's conduct suggests that the leadership in Beijing believes Washington understands this imbalance of resolve. That makes the Chinese confident that US leaders will not assume that China would back down first in a crisis.

The idea that China might believe these things comes as a surprise to many outside China, including, one suspects, many in Washington. US policy towards China, including the pivot itself, is based on contrary assumptions. The consensus is that Beijing is not really serious about challenging US leadership in Asia because it is simply not willing to risk a confrontation with America which Beijing's leaders must know they would lose, and they do not care enough about expanding China's role in Asia to take that risk.

If that's true, then as Brad Glosserman says, China's conduct is clearly foolish. But before assuming that the Chinese leaders are fools, we would be wise to wonder whether they really do believe what Washington assumes they believe. I'm pretty sure they do not.

Asia today therefore carries the seeds of a truly catastrophic episode of mutual misperception. Both Washington and China are steadily upping the stakes in their rivalry as China's provocations of US friends and allies become more flagrant and America's commitments to support them become more categorical. Both believe they can do this with impunity because both believe the other will back down to avoid a clash. There is a disconcertingly high chance that they are both wrong. Someone needs to change the nature of the game to avert the risk of disaster.

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Commenting on Paul Keating’s speech about China’s strategic responsibilities in Asia, Michael Green asks how, under my model of an Asian concert of powers, America should respond to China’s Air Defence Identification Zone (ADIZ). It is a good question.

China’s move is a clear attempt use the threat of force to push Japan towards concessions over the Senkaku/Daioyu Islands. In Chapter 8 of The China Choice I argue that a concert requires agreement between the great powers on basic norms of conduct, including especially a prohibition on the use or threat of force to settle disputes.

I also explained that a concert could only last as long as the parties were clearly willing and able to uphold those norms against any of their number who tried to violate them, with force if necessary. So if there was a Concert of Asia today, the appropriate US response to China’s ADIZ would be full military support for Japan in resisting Beijing’s implied threat.

Moreover, I think this should be America’s response to China’s ADIZ now, when no concert yet exists, because China’s action would otherwise set a very risky precedent. So there is probably less difference between our views on the current situation than Mike might think.

But we probably differ about where we should go from here. Like most of the US policy community, Mike seems to believe that China is not really serious about challenging US primacy. Faced with firm US responses to provocative acts like the ADIZ, China will back off and accept the status quo. There is thus no need for America to consider changing its basic posture in Asia to avoid escalating strategic rivalry with China.

I think this is mistaken. Beijing seems committed to fundamental change in the Asian order. And it probably believes that America will back off once it understands China’s resolve; it would be foolish to declare the ADIZ otherwise.

This means both sides underestimate the other’s resolve, and hence also the need to compromise in order to avoid a collision. This makes the risk of war much higher that many people realise.

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To lower that risk, both America and China must compromise. China must accept the kind of restraints Paul Keating spelt out in his speech. America must accept that it cannot play a sustainable role in a stable Asia without relinquishing primacy and building a new and more equal relationship with China. So unlike Mike, I think America should do more than just stand up for Japan. To get the process rolling America should also start talking to China about a new basis for their relationship.

Michael might respond that America could never negotiate with a country that behaves as China is doing. But our Chinese colleagues might say that America would never negotiate with a China that didn’t behave this way, and they are probably right. US attitudes suggest that China has to threaten the current order in this way to get America to take its demands to change the order seriously. That does not excuse the Chinese action, but it does help to explain it.

Michael might ask whether China can be trusted to behave better once such a deal is done. I think there is a chance it will, if the deal gives it enough and the high costs of pushing for more are made unmistakably plain. And if not, then the Concert would collapse and we would just be back where we are now, but with the benefit of knowing that a deal was not possible.

My argument is not that I’m sure it will work, but that it is worth a try. That’s because the alternative is not the perpetuation of the peaceful status quo, but escalating strategic rivalry and growing risk of war.

Which brings us back to Michael’s response to Keating. He says he cannot understand why prominent Australians like Keating urge Americans to step back from primacy in the face of China’s challenge. Let me suggest three reasons. First, they take China’s challenge to the regional order seriously. Second, they don’t assume that primacy is the only possible basis for a strong US role in a stable Asia. Third, they clearly understand that the alternative of escalating rivalry between the US and China would be a disaster for everyone.

Lastly, I think Michael is wrong to say that only Australians think like this. We Australians speak more bluntly, but if Michael listens carefully he will find that many others in Asia say the same thing.

Photo courtesy of Sinodefence.

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James Goldrick has raised two very important issues in his latest contribution to our conversation about maritime strategy for Australia*. The first concerns the circumstances under which serious threats to Australia’s trade routes might occur. I had earlier argued that serious powers were most unlikely to attack one another’s seaborne trade except in a major war, because they all depend on one another’s economies, and on their own seaborne trade which is highly vulnerable to retaliatory attack. In short, they are deterred.

James worries that I am here making the same mistake as Norman Angell a century ago, who argued that economic interdependence made major war more or less impossible. I’ve spent quite a lot of the last few years arguing against the widely held modern version of Angell’s view that economic interdependence between the US and China makes strategic rivalry and conflict between them highly improbable (my reasons are set out in The China Choice, pp.53-56), which is why I’m gloomier than most about Asia’s, and Australia’s, strategic future.

So I’m not arguing that major wars won’t happen. I’m suggesting that serious attacks on trade won’t happen except during major wars. And I think that hypothesis is borne out by the historical record since 1800, though I’d be very interested in whether James, who knows vastly more naval history than I do, can think of some contrary instances.

Why does this matter? Two points. Firstly, it suggests that what ultimately keeps our trade safe outside major wars is not our capacity to defend our ships, but our capacity to attack others’, which is what provides the deterrent. Hence my view that forces optimised for sea denial are a better investment than those optimised for sea control.

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Secondly, it suggests that during major wars, when seaborne trade and supply would be massively disrupted anyway, the deterrent provided by sea denial capability would lapse. The task of defending shipping would then become very hard, because it would require the establishment of sea control. And as I argued earlier in this exchange, deep-seated technological and operational asymmetries make sea control against capable maritime forces dauntingly difficult.

This brings us to the second of the two issues James raised. I absolutely agree with him that keeping Australia, especially its armed forces, supplied in a major war is a cardinal question. But I do not share his confidence that the Navy we are building, or any navy we could build, can solve this question, given the daunting difficulty of sea control. Nor do I share his confidence that our allies’ navies can solve it for us, even if we are talking only about convoying small shipments of especially vital materials.

This is a critical point. To justify investing in forces for sea control, we need to establish not just that sea control is desirable, but that the forces we plan to build will deliver it where and when we need it. If the Navy can make a compelling argument that the kind of fleet it has in mind would achieve the sea control required to keep Australia supplied in a major war, I would very strongly support building it. I’ve never seen that argument made, or even attempted.

And what if we cannot keep ourselves supplied in war? This raises a very deep question indeed: is our island continent defendable if our great and powerful friends no longer rule the waves? This question has haunted Australian strategic thinking ever since Pax Britannica started to fray in the 1880s, but arguably it confronts us more starkly than ever in the Asian Century, when the economic sources of maritime power are so much more evenly distributed than they have been throughout our history.

I think perhaps Australia might still be defendable, even in a major conflict, but only if we address a whole range of issues that we have hitherto been happy to ignore, including the issue of wartime supply. But I don’t think spending billions on ships that can’t do the job counts as addressing this issue successfully.

This is not because I have a prejudice against big ships. I work hard to avoid prejudices for or against particular kind of capability. The only good reason to invest in any element of armed force is that it contributes to achieving the operational outcomes which most cost-effectively support Australia’s strategic objectives. This exchange with James has been all about whether the bigger ships now being built and planned for the RAN satisfy this criterion. I don’t believe they do.

Photo by Flickr user Andrew Scott.

* Ed. note: The exchange began on the Fairfax opinion pages with an op-ed by Hugh White, a response from James Goldrick, and a reply from Hugh White, before moving to The Interpreter with James Goldrick's piece.

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2 of 12 This post is part of a debate on Australia's consular conundrum

Alex Oliver's new Policy Brief on the Consular Conundrum tells some great stories to highlight a key problem, and comes up with some very good ideas about how to fix it (I wish I'd come up with the idea of a consular levy on passports or air fares when I looked at this issue a few years ago).

But Alex also wisely places the consular issue in the broader context of DFAT's workload and the question of the priority that ministers, and ultimately voters, place on the different functions we expect our diplomats to perform. If we assume that they are rational actors, the fact that ministers and voters have been willing to see resources swing so sharply from what one might call 'real' foreign policy to consular work shows that they value the later more than the former. 

If we in the foreign policy community think this is wrong (and I certainly do), then it is incumbent on us to explain why it is wrong. Part of that is to look at it from the consular side, as Alex does. But it is perhaps equally important to come at it from the foreign policy side, and explain why exactly we need to put more resources back into traditional diplomatic tasks.

This is something we don't do very well. Arguments for increased funding for diplomacy (including Lowy's excellent Blue Ribbon panel of a few years ago) tend to assume that diplomacy has an intrinsic value: diplomacy is good and more diplomacy is better.

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I'm familiar with this style of argument from long decades in and around defence policy, where arguments for bigger defence budgets typically take the same form. But such arguments seldom work, and nor should they. Ministers should only agree to spend more on diplomacy, whether by shifting money back from consular work or by increasing the DFAT budget, if they can be persuaded that there are high-priority policy objectives that could be achieved with the extra money, and which would justify the cost.

Those of us who think DFAT needs more money therefore need to explain as precisely as we can what we think needs to be done that is not being done now, why it matters to Australians that it should be done, and how spending more on diplomacy would do it. Above all, that is what DFAT itself needs to do, and has not done (so far as I can see) for a very long time.  

This is in fact what a real Foreign Policy White Paper would be all about. It would be interesting to try and draft one.

Photo by Flickr user ~David.

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Sam is quite right to hear echoes of Hedley Bull in Peter Varghese's point about the role of rules and institutions in managing strategic relations. This does indeed make Varghese much more than a crude realist. But that does not mean Varghese is putting as much faith as Sam perhaps suggests in the existing flora of regional institutions like APEC, the EAS of the ASEAN to manage the big strategic issues which his speech describes.

Elsewhere in the speech was this passage: 

The primary burden of managing strategic stability in Asia will fall on bilateral relationships and smaller networks of relationships among the major powers of the region. And of foremost importance among these relationships will be the US-China relationship.

This is spot on, and also very reminiscent of Bull.  Rules and institutions are not necessarily multilateral, or broadly inclusive. The biggest issues tend to be managed by the smallest groupings. Certainly, stable strategic relations between the US and China will need to be based on some new rules and understandings, but the understandings will be negotiated among the region's most powerful states, not in anything that looks like the EAS.

I do not presume to claim Varghese as a convert to my idea of a Concert of Asia, but this is the core idea behind my argument that a concert-like set of understandings among Asia's major powers is the best hope for stable region. The highly inclusive model of Asian regionalism that as evolved over the past few decades won't do the job, for reasons I explore briefly here.

Photo by Flickr user bingpoint-uk.

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