The New Regional Agenda: Adjusting to China as a Great Power
Every state in East Asia desires continuing peace and development. But all of them must deal with conflicts of interest that touch their vital interests. The successful management of such conflicts has maintained regional stability and permitted the region to share growth and development. The key has been a regional order that finds its origin in the post-World War II era of US hegemonic power. From the start of the Cold War, the USA constructed a liberal international order for its allies and friends based on free trade for all within the sphere of US strategic dominance.
China defected from the Soviet block from 1971 and, after setting out on reform and opening up under Deng Xiaoping, it gained inclusion into the liberal free trade order. After the Soviet Union collapsed and left the USA predominant in a unipolar global structure of power, the liberal international order accommodated the former communist states. This globalized liberal order gave the USA an integral economic and strategic presence in every world region. Not all states accepted this US-sponsored global order, but very few chose to directly challenge it.
However, the rise of China to great power status is transforming the international structure of power from unipolarity to bipolarity, first of all at the regional level, which is the concern of this book. Some might argue that China is not yet fully qualified as a global power (Shambaugh). But there is no denying that China now wants to be recognized as a great power, and that all of its neighbors already treat it that way. China’s GDP has already surpassed that of the USA in terms of real production (measured in purchasing power terms); and though its growth is now dipping below 7 percent, its growth remains at least twice as fast as US growth, so its margin of superiority will widen in the foreseeable future. It is already without doubt the predominant economic and military power among Asian nations, and not only does it envision a new regional order, which it calls a “Community of Common Destiny,” but it also offers to provide public goods to realize it, such as its One Belt-One Road (OBOR) initiative to build economic corridors radiating out from China to integrate all of Eurasia with the Chinese economy; and the Asian Infrastructure Investment Bank designed to help finance the OBOR.
The new rise in power of China restructures not only the world and greater East Asia, but also each of East Asia’s subregions, where parties locked in local conflicts must now adjust their respective strategies. This kind of change occurring at all levels simultaneously can be destabilizing. Contributors to this volume look at the effects of China’s rise, examine the implications for regional order, and assess the future outlook at three levels, that is, the greater East Asian region; relevant Asian subregions; and regional institutions. Each contributor is an internationally recognized expert, and together they present a variety of regional perspectives on how China’s rise is affecting the prospects for stability.
Region, Regionalism, and Regional Order in East Asia
We think of the East Asian region as a network of states with interdependent economic and security relations. At its core are the ten member states of the Association of Southeast Asian Nations (ASEAN) and the Northeast Asian states of China, Japan, and the two Koreas. But the network of critically interdependent relations extends outward to include countries such as the USA, Australia, and India, whose strategic and economic links to East Asia are so deep that any discussion of East Asian security and prosperity cannot exclude them.
Other names for this network of regional interdependence could be chosen. For example, Americans prefer to use the term Asia-Pacific to place themselves as actors in a trans-Pacific framework of interdependent economic and security relations. India, Australia, Indonesia, and, increasingly, other actors use the term Indo-Pacific to focus on trade and security relationships that are quickly integrating the Indian Ocean and East Asian littoral areas into a vast belt of economic growth and development. These names are not so much mutually exclusive as indicative of different perspectives on the same underlying reality, of critically interdependent relations knitting together states in contiguous geographical space anchored in geographic East Asia.
Of course, in a globalized world any network of regional relations is actually part of an integrated globalized system of interdependent relations. But we can analytically frame and linguistically name a regional focus in a way that is appropriate to our interests. In this case, our interest is the impact of China’s rise on regional stability and how this impact will work itself out through this network of relationships. The rise of China to great power status will be felt first and foremost in East Asia. No one doubts the historic significance of China’s rising economic and military power. It is creating asymmetries in regional relations that empower China in qualitatively new ways.
Political adjustments are inevitable, and the fundamental question is whether the norms and values that provide the basis for the existing East Asian regional order can accommodate changes that China might like to see. China wants a leadership role in Asia to match its regional power ranking, but the current order has been built under, and is still reliant upon, US leadership. Almost all regional states belong to the Bretton Woods institutions and the World Trade Organization (WTO), which provide global rules for economic interaction. Treaties, conventions, international organizations, and customary international law provide norms that govern the relations between states. Regional stability is underwritten by the hub-and-spoke system of US bilateral military alliances with Japan, South Korea, the Philippines, Thailand, and Australia. This has allowed the US Navy to guarantee freedom of navigation in the global commons, which supports economic dynamism and the growth of trade, which is the functional core of the East Asian region.
Some suggest that China’s “peaceful rise” has been a “neo-Bismarckian” strategy to promote power accumulation without triggering a competitive, counterbalancing response from actual and potential rivals (Goldstein 2003). Analysts used to say, “The U.S.-China security dilemma is in large measure a function of the Taiwan question.” (Johnston 2004, p. 81) Today, however, the security dilemma is becoming rooted in the question of who will determine the norms that govern the regional order. Yan Xuetong (2014) argues that it is time for China to openly “strive for achievements” and compete with the USA for predominance in Asia.
Prior to the rise of a more assertive China, many looked at the regionalization of East Asian relations, that is, the growing intensity of intra-regional trade and investment relations centered in East Asia, and anticipated the growth of regionalism, that is, the effort to construct regional institutions, whether informal or formal, to consolidate stability and manage intensifying regional interdependence (Pempel 2005). Regionalism is a political process that aims to produce a convergence of interests and norms among states to gain greater security and prosperity through mutual accommodation. Thus, regionalism aims at least to produce stability, and it aspires to produce institutions that permit members to achieve shared goals. Whether or not regionalism succeeds is the test of its relevance.
East Asia’s Soft Regionalism
East Asian regionalism has taken on “soft” informal institutional forms, where actors meet regularly to discuss prospects for regional cooperation. This soft form of regionalism leads to flexible, ad hoc deliberations and agreements on specific issues where gains through cooperation can be easily achieved. It was hoped that soft regionalism would produce converging interests that develop into harder mechanisms with professionally staffed and legally chartered institutions that have the authority to make binding decisions and impose sanctions for noncompliance. This would create an institutionalized basis for regional stability and collective action.
The soft regionalism goes back to the late 1960s, when Japan’s dependence on exports to the USA, Australia’s desire for economic engagement with North America, and the desire of the USA to consolidate and spread a free trade order in Asia created a demand for trans-Pacific economic cooperation. The rise of US-Japan trade friction also meant that institutional mechanisms to manage trade informally would be useful. The informal initiatives supplied to meet these demands were the Pacific Basin Economic Community forum (PBEC) and the Pacific Trade and Development Conference (PAFTAD). The trans-Pacific economic cooperation concept later expanded in 1980 to incorporate developing countries in the Pacific Economic Cooperation Conference (PECC) forum.
The trans-Pacific PECC proposed the creation of the intergovernmental Asia Pacific Economic Cooperation (APEC) forum, which became a reality in 1989. APEC was intended to liberalize Asia-Pacific trade, and the USA used a prospective Asia-Pacific trade block as leverage to bring the Uruguay Round to a successful conclusion. In 1990, Malaysian prime minister, Mahathir bin Mohamed, reacted to the APEC agenda by proposing an exclusively East Asian regional institution. It was called the East Asian Economic Group and it would be composed of the ASEAN members with China, Japan, and South Korea joining the group. The idea was to focus on trade facilitation and industrial policy coordination rather than on trade and investment liberalization under uniform and legally binding treaty obligations. The idea failed when it met with resistance from the USA. But the idea of an exclusively “Asian” regionalism reemerged after the Asian Financial Crisis. High-level meetings among the ASEAN members, China, Japan, and Korea led these countries to form the ASEAN Plus Three (APT) summit process in 1999. APT created a nexus of bilateral currency swaps called the Chiang Mai Initiative that became a formal multilateral agreement in 2010.
In response to multinational corporations looking to set up regional production networks in Asia, the ASEAN countries produced the ASEAN Free Trade Agreement (AFTA) in 1992. This set of binding tariff and nontariff barrier reduction targets was intended to turn ASEAN into an integrated production base. In a further bid to boost trade and draw foreign investment, ASEAN began negotiating individual free trade agreements (FTAs) with China, Japan, India, Australia, New Zealand, and South Korea. By 2010, all these FTAs were signed. Then, in 2012, ASEAN launched formal talks on the Regional Comprehensive Economic Partnership (RCEP), which would consolidate ASEAN’s bilateral FTAs with China, Japan, South Korea, Australia, New Zealand, and India into a single multilateral arrangement. Negotiations were scheduled to finish by the end of 2015. Thus, we see that ASEAN has been the center of FTA construction in the region.
Failure to move the trade agenda forward at the global level has led to new macro-regional trade initiatives currently under negotiation, but political and institutional differences found within such a wide array of actors make it uncertain whether any will go much beyond the status quo. The above-mentioned RCEP is one major example. The other is the Trans-Pacific Partnership (TPP). In 2008, the USA joined an existing four-way FTA between Brunei, Chile, New Zealand, and Singapore called the Trans-Pacific Strategic Economic Partnership Agreement. Since then, Australia, Peru, Vietnam, Malaysia, Mexico, Canada, and Japan have followed suit and the name has been simplified to TPP. This has become a vehicle for the USA to revitalize trans-Pacific trade liberalization. However, in contrast to APEC’s inclusive soft cooperation that requires little of participants, TPP members self-select on the basis of their willingness to negotiate legally binding guarantees that go well beyond current WTO spheres of trade and investment liberalization. The TPP excludes China because the nature of its socialist economy prevents it from making the necessary commitments to deregulate and guarantee new kinds of property and contractual rights.
East Asia’s soft regionalism was built on economic interdependence, which in turn relied upon the global stability, freedom of navigation, and free trade rules provided by the US-sponsored liberal international order. In this sense, East Asia’s soft institutional arrangements implicitly affirmed the US hegemonic order (Katzenstein 2005). This is not to minimize East Asian regionalism, because this process aimed to shift the basis of regional order to law-based multilateral governance institutions. However, the rise of an assertive China that questions structural elements of the existing regional order forces us to remember that East Asian regionalism remains far from achieving its aspirations. If China, as a newly risen great power, defects from the existing liberal hegemonic order, it cracks the very foundation on which East Asian soft regionalism is built.
The Transformation of Regional Structure
When Deng Xiaoping led China into the era of reform and opening up, he wanted access to Western markets, capital, and technology on favorable terms. China agreed to side with the USA against the Soviet Union and stop challenging US leadership, and it endeavored to meet WTO, World Bank, and IMF rules as best as it can, while maintaining “socialism with Chinese characteristics.” The USA welcomed China and felt confident that over time, China would drop its distrust of the USA, democratize, and become fully socialized into the US-led liberal international order. This historic deal, which might be described metaphorically as “same bed, different dreams,” was marked by the normalization of China-US relations in 1979. The world remained bipolar at the global strategic level until the fall of the Berlin Wall in 1989. But at the East Asian regional level, East Asia consolidated under the liberal hegemonic order by 1979.
Today, however, China’s rise to great power status has changed the structure of regional economic and military power from unipolarity back to bipolarity, only this time with China as the other great power pole. One notes that today, the USA no longer has critical military or economic leverage over China, and other countries will do anything to avoid having to choose between these two powers.
Hegemonic Order Versus Balance of Power Order
When the world is unipolar, the predominant (hegemonic) power can create rules that lesser powers must follow or face possible consequences. This creates a system-wide, hegemonic order. Lesser powers gain benefits by joining this order, and incu...