Lowy Institute

Prime Minister Abe's carefully crafted speech to the Australian parliament gave credence to Prime Minister Abbott's much tut-tutted claim that Japan is Australia's best friend in Asia. The historic speech also clearly helped dispel one doubt about Prime Minister Abe: that he was unwilling to address Japan's World War II past and the pain it caused. Rather, to the surprise of some, Abe started his speech with direct reference to exactly this. 

Alas, some doubts are harder to dispel than others, as shown by Sam Roggeveen's initial thoughts on Abe's speech and the coverage of Abe's visit prior to his arrival. Sam and Hugh White both worry that closer Japan-Australia relations mean Australia is somehow at risk of siding with Japan against China, given the worsening strategic rivalry between the two Northeast Asian neighbours, or of being dragged into a Japan-China war. I am sure many in the Ukraine or Georgia who waited in vain for Western military support may disagree with this logic.

This durable doubt mistakes convergence of interests for commonality of interests. As Abe makes clear in his speech, his main reason for pursuing a free trade agreement with Australia is structural reform of the Japanese economy. This is not the main reason Australia signed onto the deal. Similarly, even if Ian Buruma is correct and Abe's strategic and defence policy reforms are mainly driven by a growing (and rational) fear of China and desire to counterbalance it, Australia and many others can still seek opportunities to strengthen relations with Japan and get more out of Japan even if they do not share these same fears or counterbalancing goals.

Clearly, Australia can benefit from closer defence-technology cooperation with Japan which Abe's relaxation of arms exports facilitates.

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The UK realised this and signed a defence cooperation agreement with no existential angst about moving closer to war with China. Likewise, Abe's more forthright advocacy of adherence to international law when dealing with territorial disputes and Japan's enhanced support for maritime surveillance capacity-building in Southeast Asia are very much in line with long-standing Australian policy goals that were developed without primary consideration of China.

Friendships, special relationships and skilful diplomacy are built upon the recognition of convergence of interests and beliefs. This is different to a commonality of interests and beliefs, and such a convergence does not have to imply required future action. I would hazard that the burgeoning of the China-Australia relationship, despite the huge differences between the two states, is testament to this distinction.

If one accepts that Australian officials and politicians can do their job and realise this difference, it is hard to see how the steps taken by Japan and Australia to foster closer security ties is putting Australia or the Australia-China relationship at any greater risk. Forgoing such opportunities with Japan for doubts that deserve to be dispelled would be an opportunity lost and would raise questions in Japan about how good a strategic partner Australia really is.

 Image courtesy of pm.gov.au.

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If Prabowo Subianto does win tomorrow's presidential election in Indonesia, most if not all of Asia's elected democracies will be led by realist conservatives who triumphed over candidates less associated with this political position.

From Netanyahu and Modi in West Asia to Park, Abe and Ma (less so) in Northeast Asia, Aquino and Najib in Southeast Asia, and Abbott and Key in Oceania, the territory covered by this political trend is truly continental. Modi, Abe, Park and Najib are also stronger conservative nationalists than their party predecessors (Vajpayee, Fukuda, Lee and Abdullah respectively). The same trend is noticeable among East Asian non-democracies with Kim Jong-un and Xi Jinping seemingly more conservative and nationalist than their predecessors. The coup in Thailand is clearly inspired by conservative and nationalist goals and forces. Will the next generation of Vietnamese Communist Party leaders in 2016 follow suit?

The diversity of Asian societies and political systems and the fact that there are few if any exceptions (I cannot think of one) simply adds to the power of this political phenomenon and the need to try to understand it better beyond looking to the unique intricacies of each state.

Alas, Occam's Razor explanations do not help much. 'Kicking the incumbents out' is not persuasive because Key and Ma have served beyond their first electoral terms, while Park and Najib are from the same ruling party as their predecessors. Mohdi, Aquino, Abe and Abbott, on the other hand, are new. Similarly, the 2008 global financial crisis has not had a uniform political effect even in its North American and European heartlands; its putative political effects in Asia are even harder to divine.

Looking from India eastwards, I would hazard that the worsening external security environment is a contributing factor to the trend and one that is unlikely to change in the foreseeable future. In Northeast Asia in particular, conservative rule seems to be the norm, with the rise of the centre-left Democratic Party of Japan to power followed quickly by its political demise, and both the right-leaning Kuomintang in Taiwan and the Grand National Party and its successors in Korea well into their second terms after each losing the two previous ones. Economically, Northeast Asian countries have small state sectors (measured by share of GDP and total public sector employment) and tax takes, with limited welfare state systems, suggesting a regional conservative economic consensus.

A group effort might bring a clearer understanding of this trend. It would be great if Interpreter readers could comment from their own points of view on explanations for, exceptions to and disagreements with this trend, using the comments thread below.

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Prime Minister Abe's historic speech at last week's Shangri-La Dialogue focused regional and global attention (and Chinese ire) on Abe's desire for greater and more proactive Japanese security engagement in Southeast Asia. The International Institute for Strategic Studies' Shangri-La Voices series provides a useful caution on the domestic hurdles facing Abe's pursuit of this strategic rebalance.

But Japan is also in the midst of an economic rebalance towards Southeast Asia. This rebalance is sharper, and has some key differences to Abe's security shift. First, Prime Minister Abe is a minor figure; second, Japan's domestic situation is the primary driver, not a constraint; and third, the economic rebalance could well have a greater and more positive impact on Southeast Asia than the security rebalance.

Japanese investors are moving more money out of the demographically declining Japanese market and putting a larger share in Southeast Asia. But China (and India), despite their larger market sizes, are not the beneficiaries of these outflows. The rising cost of labour in China, not the rising tensions in the East China Sea, explain Japan's economic rebalance away from China. In 2013 alone, the six largest Southeast Asian economies (Indonesia, Malaysia, Thailand,  Vietnam, Singapore and the Philippines) received 2.5 times more FDI inflows from Japan than China received, and 11 times more than India received. Q1 2014 figures show an even sharper differentiation, with Southeast Asia's big six receiving more than four times as much Japanese FDI as China and 20 times more than India.

When it comes to portfolio outflows from Japan, the figures are even starker. According to a 19 May report in the Edge Malaysia newspaper by Bank of America Merrill Lynch researchers (not online), since 2010 there has been a net outflow for Japanese portfolio investment from China and a surge of inflows to Southeast Asia. Southeast Asia now accounts for 7.2% of Japanese overseas equity holdings, up from 4.3% in 2010, while China's share has fallen from 1.3% in 2010 to 0.7% at the end of 2013. Japanese bank lending to Southeast Asia is also growing much faster than Japanese cross-border lending to China.

While America's rebalance to Asia is seeing greater progress on the security side than the economic one, Japan is experiencing the opposite.

Photo courtesy of Wikipedia.

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Unity, at least for the group photo. (REUTERS/Soe Zeya Tun.)

History neither repeated nor reversed itself at the ASEAN Summit last weekend when it came to the South China Sea disputes. Three preliminary judgments can be made with an eye for ASEAN's future centrality in relation to this issue.

1. ASEAN and its host state clearly learned from its historic 2012 failure, due to internal divisions over the South China Sea, to issue a joint communique. Even before all the leaders had arrived in Myanmar's capital for the Summit's opening dinner,  ASEAN foreign ministers released a joint statement expressing 'serious concerns over the ongoing developments' in the South China Sea. As Singapore Foreign Affairs Minister Shanmugan noted, not issuing such a statement 'would have further dented ASEAN credibility'.

ASEAN as an institution and Myanmar as a host evaded the worst outcome. In fact, for Myanmar, the intense focus on the South China Sea disputes may even have reduced the Summit media horde's interest in more sensitive domestic issues like the treatment of the Rohingya.

2. The divisions within ASEAN over approaches to the territorial disputes between half of its members (including the three most populous) and China in the South China Sea mean ASEAN is increasingly sidelined when it comes to this core interest for the region. The joint statement places its hope in all parties respecting international law and the glacial negotiations between China and ASEAN on a Code of Conduct. Departing Indonesian President Yudhoyono, attending his last Summit, offered the nascent and amorphous ASEAN Political Security Community as a wider regional dispute-settlement mechanism. Even the largely boilerplate ASEAN statement was achieved only after the foreign ministers' meeting was extended by an hour and it was agreed that no specific country or 'ongoing development' be mentioned.

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For the Vietnamese Government, with large anti-China protests flaring and China's largest offshore oil rig in waters it sees as Vietnamese, this will not be reassuring. Same for the Philippines, which saw the Chinese gain de facto control of Scarborough Shoal after, according to the Philippine interpretation, welching on an American-mediated agreement for both sides to withdraw. For Hanoi and Manila, Chinese 'facts on the ground' are real, and hopes for a Code of Conduct that China will agree to and abide by are not.

If ASEAN had wanted to stay relevant to these concerns, it could have: (a) noted that China's recent actions are not consistent with the 2002 Declaration on Conduct in the South China Sea; (b) given ASEAN's stamp of approval to the Philippine case against China over this maritime dispute in the South China Sea as a way of bringing international law to bear and/or (c) provided public support to the draft Code of Conduct that has circulated within the confines of ASEAN for months. No such proactive steps, which certainly would have triggered a Chinese verbal barrage, were taken.

3. At the same time that President Aquino and Foreign Secretary Del Rosario were not being reassured in Myanmar, they were getting reassurance elsewhere. Philippine and American troops (along with 100 Australian participants this time around) were in the middle of the 30th annual Balikatan ('shoulder-to-shoulder') exercises, practicing the amphibious defence and recapture of remote offshore islands. Furthermore, both Japan and the US have officially singled out the danger of Chinese actions in the South China Sea, noting that they are part of a consistent and destabilising set of actions by China in its maritime disputes in East Asia more widely, and have repeatedly endorsed the Philippines' decision to take its dispute with China to an international legal tribunal. Reassurance sought and gained.

ASEAN was created to help individual Southeast Asian states manage relations with major extra-regional powers and to reduce the influence of major powers in Southeast Asia through united action. The 2002 Declaration on Conduct in the South China Sea has been held up as an exemplar of this approach. But since these heady days, ASEAN has been increasingly unable to live up to dual purpose when it comes to the South China Sea. The ASEAN Summit in Myanmar did nothing to alter this trend.

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There is a good chance that history will repeat itself at this weekend's ASEAN Summit in Naypyidaw, Myanmar. This could be bad for ASEAN claims of unity and centrality, and for the fraying credibility of the ASEAN-brokered 2002 Declaration on the Conduct of Parties in the South China Sea as an effective diplomatic means to manage the territorial disputes between China and five ASEAN member states in these troubled waters.

In 2012, with Cambodia as host, the 45th ASEAN Ministerial Meeting (AMM) failed for the first time in ASEAN history to issue an end-of-meeting joint communique, with the Philippines in particular (the weakest Southeast Asian state with a South China Sea claim, and one that has faced the most persistent Chinese coercion) incensed that Cambodia refused to include reference to the dispute in the rejected draft communique. Many suspected that Cambodia's close and asymmetric relationship with China was behind its un-ASEAN refusal. 

A post-AMM period of intense shuttle diplomacy by Indonesian Foreign Minister Marty Natelagawa led to a six- point statement on the regional grouping's position on the South China Sea that helped wipe some egg off the ASEAN face. But to the angst of those who support ASEAN centrality, the Philippines then took its growing dispute with China to the International Tribunal for the Law of the Sea rather than waiting for the 2002 Declaration to be transformed into a legally binding Code of Conduct, as was first hoped in 2002.

This time around, the stakes are higher.

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Vietnam and China are embroiled in a serious dispute over the towing of a Chinese oil rig (with naval and air cover provided) to a position the Vietnamese claim is on their continental shelf, and the Philippines and China are in dispute over Ayungin Shoal and the recent arrest of 11 Chinese sea turtle poachers by the Philippines in waters close to Palawan, which China claims. China’s oil rig actions and the blocking of supplies to Philippine troops on Ayungin Shoal clearly contravene the spirit and letter of the 2002 Declaration.

An ASEAN Summit brings together the leaders of the ASEAN member states. If they follow in the footsteps of their foreign ministers in 2012 and fail to come out with a Summit statement that addresses the tensions and Chinese actions in the disputed waters of the South China Sea, the cracks could be too wide and deep to paper over again. The lack of a statement, or one that is viewed as too soft by the under-pressure Philippine and Vietnamese leaders, will likely encourage these states to further sideline ASEAN in their approach to their territorial disputes with China. They could also seek support together, and look to major external powers which share their concerns about Chinese actions in East Asia's disputed waters.

Pity Myanmar (another ASEAN member state with a  close and asymmetrical relationship with China) its hosting duties.

Photo by REUTERS/Romeo Gacad.

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If, as expected, Australia and Japan sign a defence equipment agreement today, this should be seen as a normal and welcome development in the bilateral relationship (as ASPI's Peter Jennings notes) and certainly should not lead Australia to seek some kind of 'counterbalancing' reaction in Australia-China security relations. That would definitely be putting the cart (security agreements) before the horse (strategic trust) at a time when China's increasingly coercive maritime behaviour in the East and South China Seas is undermining that very trust in China's strategic intentions and security actions.

Why is this normal?

  • Japan recently signed a similar agreement with its first ever Western alliance partner, Great Britain, and is developing closer defence trade ties with France, among others. Australia is joining the lengthening queue.
  • This agreement would be the third functional agreement between Japan and Australia under the 2007 Joint Declaration on Security Cooperation following on from the 2010 cross-servicing agreement and the 2012 information-sharing one. Regional reaction to both was appropriately muted.
  • Japan and Australia face similar fiscal and defence industry problems that could be partially addressed by such an agreement.

Why should there be no connected Australia-China 'deliverable'?

  • Canberra did not feel the need to react to the two earlier functional agreements under the 2007 Joint Declaration or the Declaration itself with immediate, Australian-initiated institutional advances in Australia-China security relations.
  • Chinese officials consistently argue in regional fora that enhanced strategic trust must come before enhanced regional security cooperation; the confidence must come before the confidence-building measure. This is a prudent approach to foreign and security policy which the recent Australia-Japan security agreements reinforce, as does the comparative lack of such agreements between Australia and China.
  • If Australia's promotion of Australia-Japan and Australia-China security agreements and arrangements are based upon some type of balancing idea, Australia would place itself in the middle of the Japan-China strategic rivalry. This extraordinary new approach would be against Australian interests and against the natural and normal tendencies of our very different relationships with both of these major powers.
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philippines-indonesia relations ASEAN China

At least one long-running maritime border dispute in Southeast Asia is heading towards peaceful settlement.

On Monday, the Indonesian and Philippine foreign ministers announced that the two countries had settled their maritime border dispute, with a boundary treaty likely to be signed when President Yudhoyono visits the Philippines in May. This maritime border agreement follows a 5 February agreement between the Philippines and Indonesia to provide Filipino fishing vessels passage through Indonesia's exclusive economic zone to key fishing zones in international waters.

As reflected by the extremely minimal coverage of this story even within the Philippine press, regional and global attention is focused on the disputes in the South China Sea between China and Southeast Asian states.

Yet relations between maritime Southeast Asian states and ASEAN's ability to speak with one voice on the disputes between China and ASEAN members in the South China Sea have long been constrained by the large number of intra-mural maritime territorial disputes. Finding political solutions to these disputes would remove both constraints. The Philippines and Indonesia have made a good start.

Photo by Flickr user tylerray.

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8 of 11 This post is part of a debate on Japan-China relations

My thanks Rob Ayson for responding promptly to my post on Japan and Japan-China relations. Rob says my post reaffirmed his worries about Australia’s management of the relationships with Japan and China. But in turn, Rob’s piece reaffirmed the worries I expressed about his original post.

I have called these concerns the 'Three Overshoots':

1. The concern about 'annoying China' and the consequent judgments about necessary (not one example mentioned) versus unnecessary (Rob's focus) annoyances would help China set the terms for Australian foreign policy. It would provide China much greater influence than other powers whom Rob Ayson does not worry about annoying.

This point is particularly important because it is well known that Chinese diplomats and public figures frequently express public annoyance on issues other states would choose to ignore, from the content of film festivals and book fairs to private think tank reports and the local management of torch relays. If it becomes clear that avoiding China's annoyance has become a central consideration in Australia's foreign policy, one would imagine that such extraordinary diplomatic behaviour may become even more marked.

2. As I noted in my original post, the two cases of unnecessary annoyance Rob Ayson counsels against do not seem to be issues of Australia standing up to or pushing back against China.

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Prime Minister Abbott’s reference to Japan as Australia’s best friend in Asia is both true and very much in line with standard, decades-old Australian diplomatic language about Japan. The fact that Abbott reiterated this language in reference to Japan-Australia relations and an invitation for the Japanese prime minister to visit Australia bilaterally (something that has not happened since Prime Minister Koizumi) should not be noteworthy or annoying.

As for the Trilateral Strategic Dialogue’s opposition to 'coercive or unilateral actions that could change the status quo' in the East China Sea, it is China itself that has fulminated most about recent Japanese unilateral actions. This TSD declaration could be as much use to China as it is to Japan, or perhaps even more, given that China is not a TSD member. Rob's suggestion that Australia should seek to express such normal diplomatic language only in larger regional forums that include China would prove difficult, as China routinely quashes any such discussions in forums it is a member of, or in those over which it has leverage. Just ask ASEAN.

3. Rob Ayson (and Hugh White in the opinion piece Rob cites) over-interprets the Australian language on Japan and the scope and purpose of the Japan-Australia security partnership. Australia has never stated that it is an 'all-weather best friend of Japan'. Rather, Australia has emphasised that Japan is Australia’s best friend in Asia. I do not see how this is anywhere close to an unconditional alignment with Japan.

This tendency for overemphasis echoes earlier cautions from Hugh White that Australia should 'press the pause button' on its alliance with Japan, an alliance that neither Tokyo nor Canberra is aware of or working towards.

Looking at these three overshoots together, I fear that Rob Ayson has set the bar on what he deems 'unnecessary annoyance' of China so low that, in reality, he is counseling for what he says he opposes: making the avoidance of annoying China the starting point of Australian foreign policy.

Photo by Flickr user maxful.

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3 of 11 This post is part of a debate on Japan-China relations

Having been to Tokyo twice in the last two weeks* for interviews and workshops on Japan-China-Korea relations and Japan-Australia relations, my answer to Sam’s query (Is Japan Alarmed by China's Rise?) is YES.

Japan is alarmed, and so it should be.

Any country facing a neighbour that has a defence budget increasing at the speed of China’s, has a growing nuclear weapons program focused on short and medium-range missile delivery, is providing steadfast backing for a nuclear-armed rogue state that threatens you, is becoming more assertive in territories that both states claim, and has a leadership team that refuses bilateral summitry should be worried.

The troubled history of modern Japan and China, the size and trajectory differences between them and their very different political systems simply add to Tokyo's worries.

The 2010 National Defence Program Guidelines released by the Democratic Party of Japan-led government and the flurry of activity on security policy under the Liberal Democratic Party-led government indicate a bipartisan consensus in Japan about the threat to Japanese national interests from China’s growing military might and increasing assertiveness, particularly in the East China Sea.

This consensus extends to the need for Japan to enhance its own response capabilities, to strengthen the US-Japan alliance and focus it on this threat, and to develop stronger security relations with states in the Asia Pacific and beyond. This political consensus is also in line with Japanese popular concerns about China and Japan-China relations.

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Rob Ayson’s piece inadvertently highlights a connected worry for Japan: that states will increasingly view their policies and statements about Japan (and issues that Japan has a clear interest in) through the lens of their bilateral relationship with China.

Rob Ayson argues that Australia should not unnecessarily annoy China. He then nominates the Trilateral Strategic Dialogue’s (TSD) relatively moderate statement opposing 'any coercive or unilateral actions that could change the status quo in the East China Sea’ and Prime Minister Abbott’s reference to Japan as Australia’s ‘best friend in Asia’ as cases in point.

But the TSD statement refers to all parties in the East China Sea dispute, not just China. And China itself has expressed a very similar position on the East China Sea. As for Abbott's statement, among Asia’s major powers, Australia has the deepest and broadest commercial, diplomatic and security ties with Japan. That's not a bad definition of a ‘best friend’ in the realm of international relations.

If Australia shies away from telling the truth about its relationship with Japan due to fears of annoying China, or fails to support standard diplomatic language in regional institutions that Japan and Australia are part of and China is not, then Tokyo’s worries would seem to be justified.

* My research trips to Japan were funded by the Australia-Japan Foundation.

Photo by Flickr user Commander US 7th Fleet.

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The exit polls from yesterday's Upper House elections confirm that Japan has returned to one-party democratic rule.

The all-powerful Liberal Democratic Party again faces a rabble of small opposition parties, none with a serious chance of taking power for the foreseeable future. The Liberal Democratic/Komeito coalition is estimated to have won 74 seats of the 121 contested and retaken control of the Upper House it lost in 2007 during Shinzo Abe's first, attenuated, term as prime minister. No other party is expected to win more than 17 seats.

Shinzo Abe is now the most powerful Japanese leader this century: popular with the people, with majorities in both houses and, unlike Junichiro Koizumi, well liked within his again-dominant party. The real political and policy contest in Japan is again within the Liberal Democratic Party and the real test is again the prime minister's ability to rein in his politically safe caucus to support his reform agenda. Abe's plans to boost defence spending, take a firmer line on Japanese territorial integrity and restart more nuclear reactors will likely not be opposed internally.

Can Abe translate his strong political position into policy success? The litmus test will be his commitment to economic reform through free trade agreements (which led to the commencement in 2007 of Japan-Australia free trade negotiations and Japan recently joining the Trans-Pacific Partnership) and the need to raise consumption taxes. If Abe, in his uniquely strong position, cannot deliver, then Japan's political system will truly have experienced a back-to-the-future moment, and one that does not augur well for Japan's future.

Photo by REUTERS/Toru Hanai.

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On the measure of FTAs signed, New Zealand's 'Asian Century' project is doing better than that of its larger, louder neighbour.

Last week, New Zealand became the first OECD member to sign an FTA with Taiwan. In 2008 New Zealand was the first OECD member to sign an FTA with Taiwan's larger, louder western neighbour, China (Switzerland recently became the second OECD member to do so). After eight years of negotiations, the Australia-China FTA still seems more in the tunnel than near the light.

The NZ-Taiwan deal is a diplomatic win for both signatories and potentially a diplomatic challenge for the Trans-Pacific Partnership.

For President Ma, it reaffirms his argument that Taiwan can use its 2010 Economic Cooperation Framework Agreement with China to expand Taiwan's 'international space' by negotiating free trade agreements with other states, and counters the criticism of ECFA that it would bind Taiwan closer to the mainland.

For New Zealand, it builds on the first-mover advantages of its FTA with China and reaffirms New Zealand's diplomatic pluck and agility. The long formal title of the agreement — The Agreement between New Zealand and the separate customs territory of Taiwan, Penghu, Kinmen and Matsu on Economic Co-operation (ANZTEC) — suggests the flexibility required of New Zealand to do the deal with Taiwan within the limits of New Zealand's 'One China' policy. For Singapore and others in the region negotiating or considering an FTA with Taiwan, the NZ-Taiwan deal is a fillip and a challenge to finish their own negotiations.

The biggest challenge, though, may be for the Trans-Pacific Partnership. The NZ-Taiwan deal, particularly as New Zealand is a founding member of the TPP, should reduce any diplomatic reservations other members have over Taiwan's stated interest in joining the talks.

Membership of the TPP would be a much greater economic and diplomatic win for Taiwan and President Ma. However, it would also require much more of Taiwan in terms of economic opening than the NZ-Taiwan FTA. So far, it looks like Taiwan is not ready to open up enough to pose a diplomatic challenge to the Trans-Pacific Partnership. Taiwan should learn some pluck and free-trade commitment from its newest FTA partner.

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Responding to Sam Roggeveen's post and the question he poses to me: I think the best way to increase the costs to North Korea of its present course of action (and not only over the last weeks but years) is for affected parties to put pressure on the PRC for its support of North Korea through persuasion and by more public criticism of the PRC for its support of the DPRK.

This would not require escalation to military action against North Korea and would be a good addition to all of these affected parties' own China policies. China is the state that provides North Korea the most support for its present course of action and has the most capacity to increase the costs for North Korea short of military action. For me, the key is a change of behaviour in China and secondly a change of behaviour towards China of those countries affected by North Korean belligerence.

Photo by Flickr user Joseph A Ferris III.

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As  Rory Medcalf suggested in his contribution, the reactions of countries threatened by North Korea's latest nuclear-tipped bombast are playing out better than in previous episodes. This may be one of the reasons the twenty-something leader of North Korea is so quickly ratcheting up his threats.

So far, there is no sign that the new leadership in Seoul, Tokyo, Beijing or the new team at the White House is reacting by calling for compromise with Pyongyang or for restarting the moribund Six-Party Talks.

As we have seen before, rewarding North Korea for its threatening behaviour has not led Pyongyang to feel more secure and become less threatening. Rather, as should be expected, it seems to have sent the message that repeated belligerence is repeatedly successful.

As highlighted by Foreign Minister Carr, there is a growing willingness for affected parties to encourage, publicly and privately, the People's Republic of China to alter its long-standing support towards its North Korean ally and for the US to further enhance security cooperation with South Korea and Japan. The apparent cooling of relations between North Korea and the PRC and the fact that North Korean actions undermine Chinese regional strategic interests may make Beijing more receptive to this advice.

North Korean behaviour needs to change to bring long-term security to the Korean Peninsula. Rewarding North Korea for its belligerence is not the way to achieve this. Increasing the costs to the North Korean regime of this repeated behaviour pattern and strengthening cooperation among those affected by this belligerence is the much better option and the one that, so far, is being pursued. Let's hope China, a fellow communist regime, sees the wisdom in this and changes its own behaviour accordingly.

Photo by Flickr user UNC - CFC - USFK.

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This week I was involved with the OSCE-Asian Partners annual conference in Adelaide. The experience reminded me of one of the less studied and commented upon international policy dynamics: the resilience of existing international organisations that have lost their original drive, and the resulting pathology that it is extremely difficult for states to close down or exit international organisations.

One of the first pieces I co-wrote at the Lowy Institute on APEC tackled this dynamic and colourfully noted that 'after all, the zombie-like forms of several multilateral institutions that have outlived their purpose and their times still roam the global landscape; the international community's living dead.' Former Prime Minister Rudd's Asia Pacific Community idea ignored this dynamic when it came to East Asia's plethora of existing regional security organisations and died because of it.

I hope Interpreter readers can help me out by identifying:

  1. International institutions that have found a useful second life. I would offer the Bank for International Settlements. It started in the 1930s to manage German reparation payments and now is the 'central bank of central banks' at the centre of global efforts to maintain banking system stability.
  2. International institutions that have closed down or that Australia has withdrawn from. At the Adelaide conference, a coffee table of us came up with the Western European Union and SEATO.
Over to you, readers: send your thoughts to blogeditor@lowyinstitute.org, leave a comment on our Facebook page or connect with the Lowy Institute on Twitter.

Photo by Flickr user purplemattfish.

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My previous post on the cooling economic relations between Japan and China sent me to look at statistics on Japanese FDI outflows to Asia to see if there was any noticeable decline in outflows to China yet. The answer is 'no'. Japanese outflows to China as a share of total outflows to Asia stayed relatively stable (between 28-33%) from 2007-11 with an uptick in 2012 to 40%.

A closer look shows that the conventional wisdom that Japanese firms, when it comes to FDI outflows, are in a 'China+1' situation (the perceived phenomenon that foreign firms have concentrated too much of their FDI and production networks in China and that, to diversify risk, they are looking to a '+1' country in Southeast Asia) is not accurate. Except for the years of 2003-4, where China's share of Japanese FDI in Asia was well over half, China's share has remained quite stable.

In the last decade, the biggest move is the rise of Vietnam and India as FDI destinations and the continued strength of Southeast Asia as a destination. In 2008, India and Vietnam attracted more Japanese FDI than China. In 2011, Indonesia, the Philippines, Thailand and Malaysia together attracted more Japanese FDI than China despite being collectively much smaller in GDP and population terms.

So although there is growing Japanese FDI in the rest of Asia, this hasn't come at the expense of China. It is better to think of Japanese FDI as an 'Asia+China' story, with the boundaries of Asia shifting westwards.

Photo by Flickr user BilabialBoxing.

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