BOOK REVIEW: A ‘Vulcan’s’ Version of Asia-Pacific History

February 11, 2018

BOOK REVIEW: A ‘Vulcan’s’ Version of Asia-Pacific History

by John

Prosecuting an adequate foreign policy in Asia for the United States “requires mastering a strategic concept at least as complex as three-dimensional chess,” according to Michael J Green, who served on the National Security Council staff as a special adviser to George W Bush.

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“To use that analogy, on the top of the board, the United States must seek to reinforce a rules-based regional order underpinned by US leadership and backed by strong alliances, partnerships, trade agreements and multilateral engagement. On the middle board, the US will have to work toward a stable and productive relationship with China, constantly seeking new areas of cooperation based on a recognition of how much China can potentially contribute to global progress and prosperity. On the bottom board, the United States will have to continue ensuring that it has the military capabilities and posture necessary to defeat any attempts to overturn the current regional order through force.”

Think about the implications of that paragraph in connection with the government installed by President Donald Trump on January 20, 2016, and the astonishing damage the administration has done to the US position in Asia. The United States, Green writes, emerged as the preeminent power in the Pacific “not by providence alone but through the effective (if not always efficient) application of military, diplomatic, economic and ideational tools of national power to the problems of Asia.”  That 200-year campaign is now clearly over.

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The 45th POTUS is messing up US engagement with Asia– His All Options on the Table with North Korea Policy is creating tensions in Asia

Green, now a Senior Vice President for Asia at the Center for Strategic and International Studies in Washington, DC as well as a member of the School of Foreign Service of Georgetown University, has written the most deeply-researched, cogent and important book I have ever read on the US experience in the Asia Pacific, “By More than Providence: Grand Strategy and American Power in the Asia Pacific since 1783,” published in mid-2017. It is also badly flawed and has to be read in recognition that Green was a Vulcan, a member of the foreign policy team that advised Bush prior to his election in 2000.

Containing 174 pages of notes, bibliography and index in its 723 pages, it is arguably the most exhaustive history of the US presence in Asia going back to the founding of the Republic with the landing in what was then Canton of the clipper ship Empress of China at the Whampoa dock.

Image result for Michael J. Green By More than Providence: Grand Strategy and American Power in the Asia Pacific since 1783,”
It is the most deeply-researched, cogent and important book I have ever read on the US experience in the Asia Pacific–John Berthelsen

The book is an invaluable resource, a history of President-by-President Asia policy from George Washington to through Barack Obama drawn from hundreds of official sources and Green’s own experience. After the chapter on the administration of Gerald Ford, it needs to be read extremely carefully and critically. Although Green served as an adviser in the Clinton administration and as a member of the NSC under Bush the younger, it is clear where his heart is.

Even before that there are some significant elisions. The 1965 Gulf of Tonkin resolution is dealt with in a single sentence without mention of the fact that the linchpin for the resolution was a supposed attack on the US destroyers Maddox and Turner Joy by North Vietnam patrol boats during the administration of Lyndon B. Johnson. But the fact is that no such attack ever took place. The justification for US entry to a tragic war that took perhaps a million Vietnamese lives and 57,000 American ones was built on a lie.

There are other shortcomings. President Clinton’s decision to send two aircraft carrier battle groups to intercede in Chinese rocket rattling against the Strait of Taiwan gets short shrift although many analysts regarded it as a courageous strategic move.  Barack Obama is accused of waffling – which he did – although Edward Luce, in his new book “The Retreat of Western Liberalism” gives Obama rather higher marks.

George Schultz and Henry Kissinger

Ronald Reagan’s Secretary of State George Schultz is called “the most effective Secretary of State for Asia-Pacific policy in the history of the republic, which be news to Thomas Jefferson, John Quincy Adams, James Monroe, Edward Stettinius, James F Byrnes and others.

While he gives George H W Bush his due – a far more effective President than most give him credit for – Green far overplays Bush the younger, whose administration “came into office with a clear strategic concept on Asia focused on shaping a favorable geopolitical equilibrium in the region, and that generally held through a series of short-term crises and the attacks of 9/11.” He gives only passing reference to the infamous Bush Doctrine, which included not only unilaterally withdrawing from the ABM treaty, rejecting the Kyoto protocol, and a willingness to start preemptive wars, which meant that Asia cannot be considered separately from a long series of international disasters that reduced global approbation of US foreign policy.

His declaration of a “war on terror” included “rendition” of those suspected of terrorist activities to black site where they were tortured unmercifully.  The Bush administration also split its forces between Afghanistan and Iraq, fighting neither war very well. As a result, both countries ended up in a botch. In the wake of 9/11, when the world needed effective law enforcement and intelligence-gathering instead of the blunderbuss of twin invasions, Bush ridiculed John Kerry, his opponent in his second presidential race, as “fundamentally misunderstanding the war on terror.” The fact is that Kerry understood it a lot better than Bush did, to America’s deep misfortune.

Having said all that, the value in Green’s book is its deep wealth of detail about how successive governments – even the Bush 43 one – have conducted enormously layered foreign policies, not just in the Asia Pacific but across the world.  For those interested in foreign policy, it is a must read, especially given the tragedy that is being visited on US strategic interests by the current administration.

Trump, as Luce points out, “has chosen to drive America’s regional allies into China’s arms. Even Australia, which comes closest to US values, wants to enter China’s rival trade group, the Regional Comprehensive Economic Partnership.”  He voided the Transpacific Partnership, arguably over pique at Obama. At a time when a rising China is setting out to return to the global pre-eminence it enjoyed up to the 17th Century, throwing its weight around in East Asia, enormously skilled diplomacy is called for. Instead, Trump has decimated the State Department, appointed an oil man with no government experience as Secretary of State – and won’t listen to him even when he tries to talk sense into him.

Image result for john berthelsen asia sentinelJohn Berthelsen

The current President is not a man for three-dimensional chess. He is not a man for chess at all. As Luce points out – and Green probably would if he could add a chapter – the US has entered arguably the most dangerous period in the country’s history when it comes to Asian policy, if not global diplomacy overall.


Chomsky: How the US Is Playing with Fire in Asia

January 18, 2018

Chomsky: How the US Is Playing with Fire in Asia

A shifting balance of power in Asia has the potential for regional conflicts if it’s not managed, warns Chomsky.

Often dubbed one of the world’s most important intellectuals and its leading public dissident, Noam Chomsky was for years among the top 10 most quoted academics on the planet, edged out only by William Shakespeare, Karl Marx, Aristotle.

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An unrelenting critic of U.S. foreign policy since the 1960s, much of his intellectual life has been spent stripping away what he calls America’s “flattering self-image” and the layers of self-justification and propaganda he says it uses to mask its naked pursuit of power and profit around the world.

Now aged 85, Chomsky is still in demand across the world as a public speaker. He maintains a punishing work schedule that requires him to write, lecture and personally answer thousands of emails that flood into his account every week. He is professor emeritus of linguistics and philosophy at the Massachusetts Institute of Technology in Cambridge, where he has been based for nearly 60 years.

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Chomsky will make a rare trip to Tokyo in March, where he is scheduled to give two lectures at Sophia University. Among the themes he will discuss are conceptions of the common good, one deriving from classical liberalism, the other from neoliberal globalization that he predicts will lead to disaster very soon if not radically modified.

“That gives the answer to the question posed in the title of the talk: ‘Capitalist Democracy and the Prospects for Survival,’ ” he says. “The quick answer is ‘dim.’ ”

Tell us about your connections to Japan.

I’ve been interested in Japan since the 1930s, when I read about Japan’s vicious crimes in Manchuria and China. In the early 1940s, as a young teenager, I was utterly appalled by the racist and jingoist hysteria of the anti-Japanese propaganda. The Germans were evil, but treated with some respect: They were, after all, blond Aryan types, just like our imaginary self-image. Japanese were mere vermin, to be crushed like ants. Enough was reported about the firebombing of cities in Japan to recognize that major war crimes were underway, worse in many ways than the atom bombs.

I heard a story once that you were so appalled by the bombing of Hiroshima and the reaction of Americans that you had to go off and mourn alone . . .

Yes. On August 6, 1945, I was at a summer camp for children when the atomic bombing of Hiroshima was announced over the public address system. Everyone listened, and then at once went on to their next activity: baseball, swimming, et cetera. Not a comment. I was practically speechless with shock, both at the horrifying events and at the null reaction. So what? More Japs incinerated. And since we have the bomb and no one else does, great; we can rule the world and everyone will be happy.

I followed the postwar settlement with considerable disgust as well. I didn’t know then what I do now, of course, but enough information was available to undermine the patriotic fairy tale.

My first trip to Japan was with my wife and children 50 years ago. It was linguistics, purely, though on my own I met with people from Beheiren (Citizen’s League for Peace in Vietnam). I’ve returned a number of times since, always to study linguistics. I was quite struck by the fact that Japan is the only country I visited — and there were many — where talks and interviews focused solely on linguistics and related matters, even while the world was burning.

You arrive in Japan at a possibly defining moment: the government is preparing to launch a major challenge to the nation’s six-decade pacifist stance, arguing that it must be “more flexible” in responding to external threats; relations with China and Korea have turned toxic; and there is even talk of war. Should we be concerned?

We should most definitely be concerned. Instead of abandoning its pacifist stance, Japan should take pride in it as an inspiring model for the world, and should take the lead in upholding the goals of the United Nations “to save succeeding generations from the scourge of war.” The challenges in the region are real, but what is needed is steps toward political accommodation and establishing peaceful relations, not a return to policies that proved disastrous not so long ago.

How in concrete terms, though, can political accommodation be achieved? The historical precedents for the kind of situation we face in Asia — competing nationalisms; a rising undemocratic power with opaque military spending and something to prove in tandem with a declining power, increasingly fearful about what this means — are not good.

There is a real issue, but I think the question should be formulated a bit differently. Chinese military spending is carefully monitored by the United States. It is indeed growing, but it is a small fraction of U.S. expenditures, which are amplified by U.S. allies (China has none). China is indeed seeking to break out of the arc of containment in the Pacific that limits its control over the waters essential to its commerce and open access to the Pacific. That does set up possible conflicts, partly with regional powers that have their own interests, but mainly with the U.S., which of course would never even consider anything remotely comparable for itself and, furthermore, insists upon global control.

Although the U.S. is a “declining power,” and has been since the late 1940s, it still has no remote competitor as a hegemonic power. Its military spending virtually matches the rest of the world combined, and it is far more technologically advanced. No other country could dream of having a network of hundreds of military bases all over the world, nor of carrying out the world’s most expansive campaign of terror — and that is exactly what (President Barack) Obama’s drone assassination campaign is. And the U.S., of course, has a brutal record of aggression and subversion.

These are the essential conditions within which political accommodation should be sought. In concrete terms, China’s interests should be recognized along with those of others in the region. But there is no justification for accepting the domination of a global hegemon.

One of the perceived problems with Japan’s “pacifist” Constitution is that it is so at odds with the facts. Japan operates under the U.S. nuclear umbrella and is host to dozens of bases and thousands of American soldiers. Is that an embodiment of the pacifist ideals of Article 9?

Insofar as Japan’s behavior is inconsistent with the legitimate constitutional ideals, the behavior should be changed — not the ideals.

Are you following the political return of Prime Minister Shinzo Abe? His critics call him an ultranationalist. Supporters say he is merely trying to update Japan’s three outdated charters — education, the 1947 pacifist Constitution and the security treaty with Washington — all products of the U.S. postwar occupation. What’s your view?

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It makes sense for Japan to pursue a more independent role in the world, following Latin America and others in freeing itself from U.S. domination. But it should do so in a manner that is virtually the opposite of Abe’s ultranationalism, a term that seems to me accurate. The pacifist Constitution, in particular, is one legacy of the occupation that should be vigorously defended.

What do you make of comparisons between the rise of Nazi Germany and China? We hear such comparisons frequently from nationalists in Japan, and also recently from Benigno Aquino, the Philippine president. China’s rise is often cited as a reason for Japan to stop pulling in its horns.

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China is a rising power, casting off its “century of humiliation” in a bid to become a force in regional and world affairs. As always, there are negative and sometimes threatening aspects to such a development. But a comparison to Nazi Germany is absurd. We might note that in an international poll released at the end of 2013 on the question which country is “the greatest threat to world peace,” the U.S. was ranked far higher than any other, receiving four times the votes of China. There are quite solid reasons for this judgment, some mentioned earlier. Nevertheless, to compare the U.S. to Nazi Germany would be completely absurd, and a fortiori that holds for China’s far lesser resort to violence, subversion and other forms of intervention.

The comparison between China and Nazi Germany really is hysteria. I wonder whether Japanese readers have even the slightest idea of what the U.S. is doing throughout the world, and has been since it took over Britain’s role of global dominance — and greatly expanded it — after World War II.

Some see the possible emergence of an Asian regionalism building on the dynamic of intertwined trade centered on China, Japan and South Korea but extending throughout Asia. Under what conditions could such an approach trump both U.S. hegemony and nationalism?

It is not just possible, it already exists. China’s recent growth spurt is based very heavily on advanced parts, components, design and other high-tech contributions from the surrounding industrial powers. And the rest of Asia is becoming linked to this system, too. The U.S. is a crucial part of the system — Western Europe, too. The U.S. exports production, including high technology, to China, and imports finished goods, all on an enormous scale. The value added in China remains small, although it will increase as China moves up the technology ladder. These developments, if handled properly, can contribute to the general political accommodation that is imperative if serious conflict is to be avoided.

The recent tension over the Senkaku Islands has raised the threat of military conflict between China and Japan. Most commenters still think war is unlikely, given the enormous consequences and the deep finance and trade links that bind the two economies together. What’s your view?

The confrontations taking place are extremely hazardous. The same is true of China’s declaration of an air defense identification zone in a contested region, and Washington’s immediate violation of it. History has certainly taught us that playing with fire is not a wise course, particularly for states with an awesome capacity to destroy. Small incidents can rapidly escalate, overwhelming economic links.

What’s the U.S. role in all this? It seems clear that Washington does not want to be pulled into a conflict with Beijing. We also understand that the Obama administration is upset at Abe’s views on history, and his visits to Yasukuni Shrine, the linchpin of historical revisionism in Japan. However we can hardly call the U.S. an honest broker . . .

Hardly. The U.S. is surrounding China with military bases, not conversely. U.S. strategic analysts describe a “classic security dilemma” in the region, as the U.S. and China each perceive the other’s stance as a threat to their basic interests. The issue is control of the seas off China’s coasts, not the Caribbean or the waters off California. For the U.S., global control is a “vital interest.”

We might also recall the fate of Prime Minister Yukio Hatoyama when he followed the will of the large majority of Okinawans, defying Washington. As The New York Times reported, “Apologizing for failing to fulfill a prominent campaign promise, Hatoyama told outraged residents of Okinawa on Sunday that he has decided to relocate an American air base to the north side of the island as originally agreed upon with the United States.” His “capitulation,” as it was correctly described, resulted from strong U.S. pressure.

China is now embroiled in territorial conflicts with Japan and the Philippines and Vietnam in the South China Sea as well as the air defense identification zone on its contested borders. In all of these cases, the U.S. is directly or indirectly involved. Should these be understood as cases of Chinese expansionism?

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People pose with Chinese national flags after landing on Meiji Reef in the South China Sea

China is seeking to expand its regional influence, which conflicts with the traditional U.S. demand to be recognized as the global hegemon, and conflicts as well with local interests of regional powers. The phrase “Chinese expansionism” is accurate, but rather misleading, in the light of overwhelming U.S. global dominance.

It is useful to think back to the early post-World War II period. U.S. global planning took for granted that Asia would be under U.S. control. China’s independence was a serious blow to these intentions. In U.S. discourse, it is called “the loss of China,” and the issue of who was responsible for “the loss of China” became a major domestic issue, including the rise of McCarthyism. The terminology itself is revealing. I can lose my wallet, but I cannot lose yours. The tacit assumption of U.S. discourse is that China was ours by right. One should be cautious about using the phrase “expansionism” without due attention to this hegemonic conception and its ugly history.

On Okinawa, the scene seems set for a major confrontation between the mainland and prefectural governments, which support the construction of a new U.S. military base in Henoko, and the local population, which last month overwhelmingly re-elected an anti-base mayor. Do you have any thoughts on how this will play out?

One can only admire the courage of the people of Nago city and Mayor Inamine Susumu in rejecting the deplorable efforts of the Abe government to coerce them into accepting a military base to which the population was overwhelmingly opposed. And it was no less disgraceful that the central government instantly overrode their democratic decision. What the outcome will be, I cannot predict. It will, however, have considerable import for the fate of democracy and the prospects for peace.

The Abe government is trying to rekindle nuclear power and restart Japan’s idling reactors. Supporters say the cost of keeping those reactors offline is a massive increase in energy costs and use of fossil fuels. Opponents say it is too dangerous . . .

The general question of nuclear power is not a simple one. It is hardly necessary to stress how dangerous it is after the Fukushima nuclear disaster, which has far from ended. Continued use of fossil fuels threatens global disaster, and not in the distant future. The sensible course would be to move as quickly as possible to sustainable energy sources, as Germany is now doing. The alternatives are too disastrous to contemplate.

You’ll have followed the work of committed environmentalists such as James Lovelock and George Monbiot, who say nuclear power is the only way to save the planet from cooking. In the short term, that analysis seems to have some merit: One of the immediate consequences of Japan’s nuclear disaster has been a massive expansion in imports of coal, gas and oil. They say there is no way for us to produce enough renewables in time to stop runaway climate change.

As I said, there is some merit in these views. More accurately, there would be if limited and short-term reliance on nuclear energy, with all of its extreme hazards and unsolved problems — like waste disposal — was taken as an opportunity for rapid and extensive development of sustainable energy. That should be the highest priority, and very quickly, because severe threats of environmental catastrophe are not remote.

Noam Chomsky is Professor Emeritus in the Department of Linguistics and Philosophy at Massachusetts Institute of Technology. His most recent books are Who Rules the World? (Metropolitan Books, 2016) and Requiem for the American Dream: The 10 Principles of Concentration of Wealth & Power (Seven Stories Press, 2017). His website is

The Koreas: President Moon Jae-in pursues the Path to Peace the Kim Dae Jung Way

January 9, 2017

The Koreas: President Moon Jae-in pursues the Path to Peace the Kim Dae Jung Way

By Stephen Costello, AsiaEast

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It is hard to overstate the drama that has gripped the South Korean political world during the past 12 months. But the return of pragmatic democratic leadership today offers a crucial opportunity for President Moon Jae-in to reshape the perilous security situation in Northeast Asia as well as to reinvigorate South Korea’s democracy and economy.

The political year really began in October 2016, when then President Park Geun-hye’s combination of corruption and incompetence propelled hundreds of thousands of citizens onto the streets in lively but peaceful protests. On 10 March 2017, the National Assembly voted unanimously to impeach Park. Sixty days later Moon Jae-in was elected. There may not be any other democracy today that could do this.

Image result for president moon jae-inMoon Jae-In is a pragmatic strategist, not an ideologue


South Koreans can be rightfully proud of this. Yet it is not clear that government leaders or the policy community at large have fully digested the country’s growth or fully recognised its middle power potential. In this sense, they lag behind much of the public.

For South Korea and Northeast Asia, the most important aspect of Moon’s election is that he is a pragmatist, not an ideologue. That makes him unique right now in Northeast Asia. His task is to advertise South Korea’s assets and insist on the country’s rightful seat at the decision making table. If the Moon government can become a channel for clear and pragmatic policies, it can then lead on critical issues such as North Korean denuclearisation and development, disaster relief, clean energy and arms reduction.

Yet to do that, impediments within South Korea’s policy space must be acknowledged and managed — some will even have to be addressed head-on. One is that conservatives fear modernism and miss the imagined certainty of the pre-democratic era. Another is that there is a persistent political and personality war among democrats that may determine how successfully Moon can shape policy debates and maintain support in the National Assembly. Moon must also cooperate with the progressive People’s Party and the Justice Party in order to push through his initiatives.

There are two other challenges that could constrain South Korean power and flexibility. One is the radically different views that persist of South Korea’s role, power and responsibilities: on one hand, a weak and dependent South Korea, and on the other, a South Korea that stands as middle power. Even the President seems torn between them; Moon recently said that the regional situation ‘is not favourable to us’ and that South Korea ‘has no power to resolve the current crisis or help relevant sides seek an agreement’. But he has also insisted for months that Seoul should be ‘in the driver’s seat’ on North Korea issues, and he has begun to cultivate his relationship with Xi Jinping.

The second challenge is the South Korea–US alliance. The relationship is long overdue for readjustment and modernisation but is encountering numerous road blocks under the Trump administration. The Trump administration is an unreliable negotiating partner, and it has become hyper-sensitive to any hint of independent ambition by Seoul. While the alliance is not at risk, it sorely needs South Korea to assume greater responsibility. But US unpredictability and Trump’s bellicosity mean statements to that effect evoke nervousness among South Korean elites, and have prevented the government from advancing solutions.

Where does that leave South Korea’s foreign policy direction? President Moon needs to focus on three key external relations opportunities.

First is South Korea’s regional relations. Moon has already begun to manage the areas in which South Korean, Chinese and Japanese interests overlap. But it would be a grave mistake for Moon to continue to urge Russia and China to punish North Korea harder. Instead, his advantage lies in his ability to offer a roadmap for infrastructure and development that integrates the North. China, Russia and Japan would directly and amply benefit from this. Moon should also encourage diplomacy and increased global interaction with North Korea, which could form the basis for the next successful regional advancement.

Second is South Korea’s bilateral relations with North Korea. South Korea’s clear interest lies in reclaiming the strategic possibilities that emerged in 2000, when the North’s proposed denuclearisation benefitted each actor and Pyongyang’s security and development were tightly linked to it. But if the government continues to pursue the false notion that maximum isolation and pressure can lead to negotiations with Kim Jong-un, then it can make no progress.

Third is South Korea’s alliance with the United States. Due to mistakes of past US and South Korean presidents, the North Korea issue now largely defines bilateral relations. This was clear before Moon was elected. If he is to be a true friend to the United States rather than a Trump enabler, he will quickly take up leadership on Peninsular issues (which Trump has abandoned).

While the United States will eventually return to positive engagement on Peninsular issues, this may take five years or more, and Moon doesn’t have time to wait. Too much of South Korea’s agenda and its immediate security depend on him moving now. Trump has shown himself to be malleable — particularly if others arrange for the US’s advantageous participation. That possibility — rather than fuelling Trump’s non-strategic, ‘tough guy’ impulses — is where Seoul and Washington’s roles can be mutually reinforcing.

With its US ally temporarily drained of diplomatic and institutional capacity, and with broad public support, South Korea’s leadership has never possessed this level of capability, stability and flexibility. How and whether it is used will greatly impact regional dynamics in coming months and years. Will the government use its unprecedented power to play a decisive and positive role in 2018?

Stephen Costello is an independent analyst and consultant and the producer of AsiaEast. He was formerly director of the Korea Program at the Atlantic Council and director of the Kim Dae Jung Peace Foundation. His column appears at The Korea Times. You can follow him on Twitter at @CostelloScost.

This article is part of an EAF special feature series on 2017 in review and the year ahead.


Foreign Policy: Balancing US-China Interest in the Trump–Xi era

December 11, 2017

Foreign Policy: Balancing  US-China Interest  in the Trump–Xi era

by David M Lampton, Johns Hopkins University

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The Asian Statesman,HE President President Xi Jinping–Economic Diplomacy

From 1945 to 2016 the United States used its economic, military and ideological power to build institutions, alliances and regimes that contributed to global economic growth and the avoidance of great power war. In doing so, it fostered the rise of a new constellation of powers, China notable among them, with which it must now deal. If the United States wants to see its interests met, Washington must win Beijing’s cooperation rather than try to compel it.


On entering office, US President Donald Trump put several contentious issues with China on the backburner in the hope of achieving his primary goal — North Korea’s denuclearisation. When that failed, the front burner of US–China relations became crowded with previously repressed issues.

Several of these — US freedom of navigation operations in the South China Sea, talk of steel and aluminium tariffs, weapons sales to Taiwan, threats to tighten technology and investment flows as well as secondary sanctions on Chinese entities — threaten to become serious problems if not managed in a more careful manner than the Trump administration is currently demonstrating.

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From Pivot to Asia to Divert from Asia–America First

So what might the United States usefully do? There are three issues on which Washington should focus: fostering an economic balance of power in Asia that promotes regional stability, achieving more reciprocity in US–China relations and addressing the North Korean nuclear and missile problem.

A central part of Xi Jinping’s geo-economic vision is the expansion of regional links and the promotion of urbanisation and growth on China’s periphery to make China the central node in this growing region. For Beijing, this means north–south connectivity — namely supply chains that originate in China and extend to the Indian Ocean, South China Sea, Andaman Sea, Bay of Bengal and beyond.

Unless Washington wants Asia to become a unipolar sphere of Chinese influence, it should become more involved in the construction of regional infrastructure to foster linkages that are not just north–south but also east–west from India to Vietnam through Myanmar, Thailand and Cambodia and on to Japan and the wider Pacific.

Turning to reciprocity, when China joined the WTO in 2001 its overseas trade and financial involvements grew enormously. So too did its global trade surplus and bilateral trade surplus with the United States. Beijing soon had the technology, capital and capacity to seize the opportunities of openness abroad without providing reciprocal domestic access to the United States and others.

From 2008 onwards, the pace of domestic economic, financial and foreign trade liberalisation slowed. China’s world trade partners came to realise that as China leapt outward to seize opportunities, it did not reciprocally open itself in areas where foreigners enjoyed comparative advantages. Consequently, the issues of ‘reciprocity’ and ‘fairness’ have moved to front and centre in US–China relations. US companies are now asking themselves why Chinese entrepreneurs should be able to freely acquire US service and technology firms when these areas in China are closed to foreigners.

While US feelings of resentment mount, finding ways to enhance reciprocity with Beijing that do not injure US workers or other bystanders is hard. Limiting Chinese investment into US employment-generating firms diminishes US job opportunities. On the other hand, ignoring the problem invites extremist proposals at home as well as contempt in Beijing.

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Finally, the issue of North Korea. Trump thought his predecessors had been right in pressing Beijing to put more pressure on North Korea and in their assessment that Beijing had sufficient means to do so. Where they had gone wrong, Trump believed, was in not making it worth Beijing’s while to apply the necessary pressure.

So President Trump suggested that Washington would give Beijing concessions in other areas — trade and Taiwan among them — in exchange for pressure on North Korea. Of all the reasons that this approach has not worked out (including the viability of some of Trump’s promised consessions) the most dominant is that Pyongyang resists following any external advice that it fears would be lethal to the regime.

Consequently, the Trump administration is left with the same stark choices as its predecessors, except that Trump has staked even more on the issue and North Korea is further down its deliverable nuclear weapons path.

It is time for Washington (in close consultation with its South Korean and Japanese allies) to acknowledge that North Korea has a modest nuclear deterrent, and that as a result the United States should shift its aim from denuclearisation to deterring the use and further proliferation of these capabilities.

The US–China relationship is fraught with problems and will be for the foreseeable future. The United States is no longer positioned to compel cooperation from China. Any policy changes from Beijing must be negotiated, and within this negotiation Washington must seek a balance of power and interests.

David M Lampton is Professor and Director of China Studies in the School of Advanced International Studies, Johns Hopkins University. His most recent book is Following the Leader: Ruling China, from Deng Xiaoping to Xi Jinping.

This article appeared in the most recent edition of East Asia Forum Quarterly, ‘China’s Influence’.


Coping with Foreign Direct Investment

December 6, 2017

Coping with Foreign Direct Investment

by Jomo Kwame Sundaram and Anis Chowdhury

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Malaysia has been named by Forbes as one of the top recipients of foreign direct investment, followed by Singapore, Vietnam, Indonesia and India.

Foreign direct investment (FDI) is increasingly touted as the elixir for economic growth. While not against FDI, the mid-2015 Addis Ababa Action Agenda (AAAA) for financing development also cautioned that it “is concentrated in a few sectors in many developing countries and often bypasses countries most in need, and international capital flows are often short-term oriented”.

FDI flows

UNCTAD’s 2017 World Investment Report (WIR) shows that FDI flows have remained the largest and has provided less volatile of all external financial flows to developing economies, despite declining by 14% in 2016. FDI flows to the least developed countries and ‘structurally weak’ economies remain low and volatile.

FDI inflows add to funds for investment, while providing foreign exchange for importing machinery and other needed inputs. FDI can enhance growth and structural transformation through various channels, notably via technological spill-overs, linkages and competition. Transnational corporations (TNCs) may also provide access to export markets and specialized expertise.

However, none of these beneficial growth-enhancing effects can be taken for granted as much depends on type of FDI. For instance, mergers and acquisitions (M&As) do not add new capacities or capabilities while typically concentrating market power, whereas green-field investments tend to be more beneficial. FDI in capital-intensive mining has limited linkage or employment effects.

Technological Capacities and Capabilities

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The National Bank of Cambodia’s decision in March, 2017 to raise the minimum capital requirements of financial institutions in order to strengthen and stabilise the financial sector has led to an increase in foreign capital flowing into the banking sector, according to industry experts. Underpinned by political stability  and business friendly policies, Cambodia is expected to register robust real economic growth in 2017 in excess of 7 per cent per annum.

Technological spill-overs occur when host country firms learn superior technology or management practices from TNCs. But intellectual property rights and other restrictions may effectively impede technology transfer.

Or the quality of human resources in the host country may be too poor to effectively use, let alone transfer technology introduced by foreign firms. Learning effects can be constrained by limited linkages or interactions between local suppliers and foreign affiliates.

Linkages between TNCs and local firms are also more likely in countries with strict local content requirements. But purely export oriented TNCs, especially in export processing zones (EPZs), are likely to have fewer and weaker linkages with local industry.

Foreign entry may reduce firm concentration in a national market, thereby increasing competition, which may force local firms to reduce organizational inefficiencies to stay competitive. But if host country firms are not yet internationally competitive, FDI may decimate local firms, giving market power and lucrative rents to foreign firms.

Contrasting Experiences

The South Korean government has long been cautious towards FDI. The share of FDI in gross capital formation was less than 2% during 1965-1984. The government did not depend on FDI for technology transfer, and preferred to ‘purchase and unbundle’ technology, encouraging ‘reverse engineering’. It favoured strict local content requirements, licensing, technical cooperation and joint ventures over wholly-owned FDI.

In contrast, post-colonial Malaysia has never been hostile to any kind of FDI. After FDI-led import-substituting industrialization petered out by the mid-1960s, export-orientation from the early 1970s generated hundreds of thousands of jobs for women. Electronics in Malaysia has been more than 80% FDI since the 1970s, with little scope for knowledge spill-overs and interactions with local firms. Although lacking many mature industries, Malaysia has been experiencing premature deindustrialization since the 1997-1998 Asian financial crises.

China and India

From the 1980s, China has been pro-active in encouraging both import-substituting and export-oriented FDI. However, it soon imposed strict requirements regarding local content, foreign exchange earnings, technology transfer as well as research and development, besides favouring joint ventures and cooperatives.

Solely foreign-owned enterprises were not permitted unless they brought advanced technology or exported most of their output. China only relaxed these restrictions in 2001 to comply with WTO entrance requirements. Nevertheless, it still prefers TNCs that bring advanced technology and boost exports, and green-field FDI over M&As.

Thus, more than 80% of FDI in China involves green-field investments, mostly in manufacturing, constituting 70% of total FDI in 2001. China has strictly controlled FDI inflows into services, only allowing FDI in real estate recently.

Although long cautious of FDI, India has recently changed its policies, seeking FDI to boost Indian manufacturing and create jobs. Thus, the current government has promised to “put more and more FDI proposals on automatic route instead of government route”.

Despite sharp rising FDI inflows, the share of FDI in manufacturing declined from 48% to 29% between October 2014 and September 2016, with few green-field investments. Newly incorporated companies’ share of inflows was 2.7% overall, and 1.6% for manufacturing, with the bulk of FDI going to M&As.

Policy Lessons

FDI policies need to be well complemented by effective industrial policies including efforts to enhance human resource development and technological capabilities through public investments in education, training and R&D.

Thus, South Korea industrialized rapidly without much FDI thanks to its well-educated workforce and efforts to enhance technological capabilities from 1966. Korean manufacturing developed with protection and other official support (e.g., subsidized credit from state-owned banks and government-guaranteed private firm borrowings from abroad) subject to strict performance criteria (e.g., export targets).

Indeed, FDI can make important contributions “to sustainable development, particularly when projects are aligned with national and regional sustainable development strategies. Government policies can strengthen positive spillovers …, such as know-how and technology, including through establishing linkages with domestic suppliers, as well as encouraging the integration of local enterprises… into regional and global value chains”.

(This article was originally published in Inter Press service (IPS) news on November 21, 2017)

A Rejoinder: The View From Seoul: Trump’s Visit and the ‘Illusion of Achievement’

November 23, 2017

A Rejoinder: The View From Seoul: Trump’s Visit and the ‘Illusion of Achievement’

U.S. President Donald Trump’s brief visit to Seoul, the shortest leg on his East Asia tour, and his address at the South Korean National Assembly has led to various positive news accounts. Media reports extolled revamped U.S. policy toward the so-called “Indo-Pacific” as well as an apparent newfound flexibility on the part of Trump toward a diplomatic solution with North Korea. However, as Van Jackson, senior lecturer in International Relations at Victoria University of Wellington, noted in an email exchange: “The theme that I see emerging from the trip is ‘Illusion of Achievement,’” and “every seemingly positive story coming out of the trip is artificial and vastly overstated.”

Image result for White House Photo --Trump's Visit to South Korea

In fairness, Jackson continued, such trips usually “involve a bureaucratic scramble for deliverables, many of which were already in the works even if the trip never happened.” Trump’s apparent achievements in Seoul represent just that, namely, agreements already underway. Moreover, the visit did nothing to address and, indeed, highlighted various dilemmas faced by Seoul in relation to their American ally.

In terms of achievements already secured, most revolved around measures taken to strengthen the U.S.-ROK alliance’s defense and war-fighting capabilities. In line with last week’s security and military meetings in Seoul, Trump hailed plans for increased rotational deployment of U.S. strategic assets as part his Reaganesque effort to secure “peace through strength,” including recent deployment of three U.S. Nimitz-class supercarriers and a nuclear submarine to regional waters. In addition, Presidents Moon and Trump agreed “to push forward our cooperation at an unprecedented level to bolster Korea’s self-defense capabilities.” Again, this directly follows the 49th ROK-U.S. Security Consultative Meeting’s (SCM) Joint Communique. During the Trump-Moon Summit, both sides finalized the earlier decision to lift limits on the payload of ROK missiles. They also agreed to immediately begin negotiations on Seoul’s development and acquisition of the most advanced U.S. military surveillance assets and, potentially, nuclear-powered submarines. The latter are currently prohibited under the U.S.-ROK 123 Nuclear Agreement.

Now for the dilemmas, the first being trade. Similar to his statements in Tokyo, Trump proclaimed Seoul would order billions of dollars worth of U.S. military equipment, which “for them makes a lot of sense and for us mean jobs and reducing our trade deficit with South Korea.” Nevertheless, it is dubious that such orders will lead to an appreciable increase in jobs (so much as greater profits for a select few weapons manufacturers). Moreover, whatever the effect on the deficit, Trump’s desire to rework the KORUS FTA, a deal he said “has been quite unsuccessful and not very good for the” United States, likely will not abate. In fact, as Donald Manzullo, president of the Korea Economic Institute (KEI), notes, it seems Trump sees U.S. support for ROK security as leverage for pressure on trade, which “makes the KORUS even more fragile.” For Trump, such transactional bargaining makes sense and may also be perceived as a kind of victory at a time of historically low approval numbers, ongoing FBI investigations, and legislative difficulties at home.  Meanwhile, for Seoul, forced to make concessions to Trump’s economic nationalism in exchange for security, it appears a blithe disregard for their difficult position.

Image result for White House Photo --Trump's Visit to South Korea

President  Donald J. Trump– A Triumphant Pose on Visit to Asia

Next, another goal of Trump’s Asia trip is to tighten security cooperation between the United States and its allies, both to confront North Korea’s nuclear program but also promote a “free and open Indo-Pacific region.” One key element of is the enhancement of trilateral U.S.-ROK-Japan missile defense efforts as part of the larger U.S.-led regional ballistic missile defense (BMD) system. However, while strengthening such cooperation is “taken for granted in Washington,” it is not so in Seoul. Although Japan officially joined the U.S.-led system in 2006, just last week ROK Foreign Minister Kang Kyung-wha told National Assembly lawmakers the ROK was not considering any more deployments of the U.S. THAAD system, would not participate in the U.S.-led regional BMD networks, and sees trilateral cooperation solely through a peninsular lens, not as a trilateral military alliance extending beyond the North Korean threat or Korean Peninsula. In an interview last Friday, Moon reiterated Kang’s position and indicated the two rationales behind it.

Image result for White House Photo --Trump and Shinzo Abe

Golfing Buddies–Abe-San and Trump-San

First, Seoul views Tokyo’s moves to take on a bigger role in international security with skepticism. Moon does not want to see Japanese Prime Minister Shinzo Abe use the North Korea threat as “an excuse for military expansion.” As I previously noted, Pyongyang’s provocations have led to greater functional cooperation, but fears of Japanese militarization, historical animosity, and antagonistic nationalist discourses remain important obstacles. Second, and related, Seoul hopes to maintain and improve its relations with Beijing, its largest trade partner and key diplomatic partner vis-à-vis North Korea. On October 30, Seoul and Beijing agreed to move past their year-long stand-off over THAAD, with Seoul stressing it is not aimed at any third country beyond North Korea. Seoul’s insistence on not joining the U.S.-led BMD system, as well as limiting THAAD deployments and security ties with Tokyo, is part of Moon’s intention to “pursue balanced diplomacy” between the U.S.-ROK alliance and China. By enhancing the U.S.-ROK alliance but keeping it strongly focused on North Korea, Moon hopes to carve out space for solid relations with Beijing.

Officially, the United States welcomed the apparent settlement of the Seoul-Beijing THAAD dispute. Yet there are signs that Kang’s comments may have upset U.S. Forces Korea Commander General Vincent K. Brooks, who remarked after a meeting with Kang, “We have an alliance relationship and we should look very closely at the words said by the foreign ministry.” Simply stated, U.S. officials view the alliance as derivative of and embedded within a wider strategic setting; Seoul’s concerns, understandably, are narrower. This leads to the final and most importantly dilemma: the fundamental difference between Seoul and Washington’s order of preferences vis-à-vis North Korea’s nuclear weapons.

As Jackson remarked: “The press has made a big deal of Trump’s musing that it makes sense for North Korea to negotiate, but he’s made comments like that before and Kim Jong-un has no interest in negotiations if the goal is denuclearization. For those who wish for a diplomatic solution in Korea, Trump’s temperament is less important than the objective of U.S. North Korea policy.” What is the objective? The first U.S. priority has been repeatedly stated: the complete, verifiable, and irreversible denuclearization of North Korea. According to Trump and his aides, Pyongyang’s possession of nuclear weapons, particularly the capability to miniaturize and deploy warheads on ICBMs capable of reaching the U.S. mainland, is unacceptable and will not be tolerated. The problem: North Korea already has nuclear weapons, will not give them up, and appears intent on developing just such capability.

On the contrary, while Moon listed denuclearization of the Korean Peninsula as a key priority, it is not the primary one. Speaking from the same National Assembly podium a week before Trump, Moon laid out his five principles for a peaceful peninsula. The first principle and top priority “is to maintain peace on the Korean Peninsula. Thus, armed conflict must be avoided under any circumstance.” Although Moon reiterated the need to sternly respond to any North Korean provocation within a firm U.S.-ROK alliance as the fifth principle, from Seoul’s perspective, Pyongyang’s mere possession of an enhanced nuclear and ICBM capability does not in itself justify war.

Herein lies the crucial and seemingly widening gulf between Seoul and Washington. Historically, for the United States, the standoff on the Korean Peninsula has been one of extended deterrence, meaning deterring an attack against its distant Korean ally. Yet, with Pyongyang’s dogged pursuit of nuclear equipped ICBMs, the confrontation is transforming into one of immediate deterrence, putting U.S. territory directly at risk. This does not, in essence, change the existential nature of the North Korean threat for Seoul, but it does change the strategic dynamic for Washington, which has demonstrated it does not respond well to real or even perceived threats. Indeed, the qualitatively new reality has already produced an ever-growing drumbeat of war, with U.S. policy elites calling for preventative strikes based on distorted historical analogies and an apparently unmitigated faith in surgical U.S. strikes.

The bottom line: Trump’s hyperbolic rhetoric aside, articulated U.S. policy and the growing support for precipitous military actions among the DC beltway crowd is sufficient enough evidence for Seoul to wonder whether or not, when push comes to shove, it will be sacrificed to save Seattle.