Lowy Institute

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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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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During the Koizumi prime ministership, China depicted Japan-China relations as 'politics cold, economy hot', with Japanese FDI inflows into China a key warming agent. Liberal optimists have repeatedly represented this situation as inherently moderating (Sam's brief response to Raoul Heinrichs also touches on this argument).

The belief that cooperative economic interests will trump divisive political and security ones is certainly under test at the moment, particularly with Beijing's willingness to politicise the Japan-China economic relationship.

More worrying for this central liberal belief, Japan-China political tensions and Japanese business concerns about China are cooling Japanese interest in the Chinese market. This December 2012 internet survey of the Japanese business community tells a bracing tale. Only 14% of those surveyed view China as 'an essential production base for Japan' while 77% (roughly 5 times as many) see that China 'has been an essential production base up to now, but will not remain so in the future.' 61% of the business people polled believe that the Chinese economy will fall into disorder within 5-10 years. 

Today, it is better to think of Japan-China relations as 'politics freezing, economy cooling'.

Photo by Flickr user vivafilmsky.

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As with the last lower house election in Japan in 2009, a change of government was widely expected well in advance of yesterday's poll. But as was also the case in 2009, what was surprising was the size of the swing away from the ruling party.

The LDP, with its long-standing coalition partner, New Komeito, have won over two-thirds of the 480 seats in the powerful lower house with the coalition more than doubling its representation. The ousted DPJ has lost 251 of its 308 seats and struggled to stay ahead of the new right-wing Restoration Party as the second largest party in the lower house.

As with the previous government, the new Abe Administration is stuck with the unenviable task of trying to navigate Japan through a worsening domestic socio-economic situation and external security environment. With this as background, I see three likely changes, two key continuities and two things to keep an eye on as a result of yesterday's election.

Changes

  1. The end of the 'twisted parliament': unlike the DPJ, the LDP now leads majorities in both the upper and lower houses and has a two-thirds majority in the lower house it can use to override the upper house if needed. This should end the legislative gridlock that gripped the DPJ Government and should ease legislative change.
  2. Return to traditional and failed economic policies: Abe's LDP is less economically liberal than Noda's DPJ. Abe has promised to boost spending on infrastructure and create pressure for even looser monetary policy while edging away from increasing the consumption tax and Japan's interest in the Trans-Pacific Partnership.
  3. Voter alienation: the 2009 landslide for the DPJ was due to voters' alienation with the LDP and excitement with the DPJ. Yesterday's election, with its low voter turnout and thumping of the DPJ, means this alienation now spreads to both parties. The DPJ lost this election; the LDP did not win it.

Continuities

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  1. Japan's security policy 'normalisation': there is now strong bipartisan (or 'tri-partisan' if one includes the 54-seat Restoration Party) support for Japan to more actively assert its sovereign claims to disputed territories and to boost its military force projection capabilities and alliance relationship with the US. Political change in the People's Republic of China and South Korea should mean that the Northeast Asia's territorial disputes will heat up even more.
  2. Diversifying partners: Abe was prime minister when the 2007 Japan-Australia Joint Declaration on Security Cooperation was signed in Tokyo and is a strong advocate of stronger security relations with partners beyond the US. He has a particular interest in closer relations with India and Australia.

Watching briefs

  1. The fate of the DPJ: the DPJ's 2009 victory promised a true two-party system in Japan. Its decimation after only one term in office may end this promise. Many ex-LDPers in the DPJ may choose to migrate back to their first political home.
  2. Abe's leadership: Abe was widely panned as a weak (by Japanese standards) prime minister when he stepped down in 2007. Will he be able to prove the critics wrong and control the again-dominant LDP and its reinvigorated factions?

Photo of a 2007 election poster featuring Shinzo Abe by Flickr user m-louis.

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The People's Republic of China's growing power, assertiveness and diplomatic imprudence is encouraging Japan's 'normalisation' by shifting domestic politics in Japan and regional views of Japan's proper security role.

The two main parties and the most influential newcomer party, the Restoration Party, have similar foreign policy platforms when it comes to protecting Japan's territorial integrity. This is no doubt partly due to ongoing tensions with China over the Senkakus and the political price former Prime Minister Naoto Kan paid for being seen by the Japanese public and media as having taken a step back on this dispute in the face of Chinese pressure.

At the same time, recent comments by the Philippine foreign minister in favour of Japanese constitutional reform and Japan's growing security ties with regional countries from India to Australia show a much greater regional willingness to see Japan as a regional security partner and not a possible threat.

A more assertive Japan with closer security ties to the US and the region and a populace in favour of this stance is not in China's interests. Yet this is what is happening largely in response to concerns about China's own actions and perceived intentions. No wonder the inflated talk about China's successful charm offensive and diplomatic nous of a few years ago has reduced to a murmur.

Photo by Flickr user US Pacific Fleet.

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The contrast between how broadsheet and tabloid newspapers covered the launch of the Asian Century White Paper on Sunday is telling. The Australian gave it saturation coverage and rolled out its big columnists to provide analysis. The Sydney Morning Herald also provided front-page coverage and considered analysis.

The Daily Telegraph, Sydney's largest circulation paper, relegated coverage to a single 1/4-page story on p.10, next to an equally sized one about the family pet. The pet story got a colour photo.

The Asian Century White Paper is the latest and most comprehensive embrace by Australia's political and wider elite of Australia's unquestioned membership in Asia and the need for Australia to change accordingly. The biggest problem with this assertion is not the difficulties of the policy reforms mentioned in the White Paper. It is that a majority of Australians refuse to join in this embrace.

The 2010 Lowy Institute Poll asked Australians which region Australia belonged to — it was a dead heat between Asia, the Pacific and none. Clearly, broadsheet editors think their readers belong to the Asia minority while tabloid editors seem to think differently about their readers.

Photo by Flickr user lonely radio.

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One of the less commented upon elements of the present flare-up between Japan and China over the Senkaku Islands is the public criticism of Prime Minister Noda's stance on the dispute by the head of Keidanren, Japan's most influential corporate association.

Hiromasa Yonekura made his critical comments of Japan's long-standing policy on the dispute while in Beijing meeting senior Chinese officials. Keidanren, under a different head, also publicly criticised the Koizumi Administration's approach to relations with the People's Republic of China in 2006 and asserted that Koizumi's replacement should take a more conciliatory approach.

These public criticisms show a growing willingness by Japan Inc to join the public discussion of Japan-China strategic relations in a way that suits Beijing as well as their own bottom lines. Recent comments by James Packer and Kerry Stokes show that a similar trend is developing in Australia. 

It looks like the challenge of managing growing economic ties and strategic concerns with the People's Republic of China is changing the nature of Japanese and Australian strategic debates and showing a growing divide between the respective corporate sectors and the mainstream security communities.

Photo courtesy of Wikipedia.

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