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Should the US retrench from South Korea? Part 2: No

A couple of days ago I laid out the arguments for a US withdrawal from South Korea. Today, I lay out the arguments for staying.

This topic is rarely discussed. In the US, the foreign policy consensus for hegemony, forged between liberal internationalists on the left and interventionist neoconservatives on the right, remains strong. It has only just recently come under sustained criticism, likely due to the messes in Iraq and Afghanistan. That consensus takes the US position in Korea as a given. An American withdrawal has not seriously been mooted since the Carter Administration, when it indeed would have been a large mistake.

So what are the benefits of staying?

1. US Forces Korea (USFK) insures that the US retains a strong regional ally in a region the US now deems central

If the pivot to Asia (or 'rebalance' or whatever we are supposed to call it) is to take off, the US will need regional allies. Japan of course is the central US ally in the region. And others are being pushed toward the US by China's belligerent behaviour in the East and South China Seas. But India and the southeast Asian states are not so much pro-American as anti-Chinese.

By contrast, Korea has been a staunch US ally since the 1950s. It has deep inter-operability with the US military. It has never really wavered from the US camp. It even sent soldiers to fight in Vietnam to demonstrate loyalty. It is not the 'reckless driver' that other allies, most notably Israel, have been. While it spends less than it should on defence, South Korea free-rides far less on US power than Europe or Japan. As a percentage of GDP it spends around double what the average US ally does on defence.

The looming unknown question is whether South Korea would line up with the US in a Sino-US or Sino-US/Japanese war. The primary purpose of the pivot is to militarily hedge China (or openly contain it, if you're Chinese). South Korea is wary of this. China is its largest export market, and both Seoul and Beijing share a disturbingly bitter loathing for Japan. Will that draw Seoul and Beijing together? Probably not.

2. China will  claim that the US has 'fled' (or, once the US goes somewhere, it can never leave)

This is the worst possible argument for a US commitment — credibility. Staying some place for no other reason than that staying sends a good 'signal' is not a good rationale.

But it is pretty clear now that the Sino-US relationship is 'sliding from engagement to coercive diplomacy,' as David Lampton puts it. As East Asia enters toward bipolarity, a zero-sum logic will increasingly kick in, in which a US retrenchment will happily be read by China — one can always count on the Global Times — as US capitulation. Whether the US wants to stay in Korea or not, now it can't leave. It's stuck.

Indeed this is one of the great unseen costs of US interventions: once in, America can almost never leave anywhere without provoking a crisis of confidence about its credibility and commitment. In this vein, the time to withdraw from Korea was in the 1990s, at the peak of the unipolar moment, before the Chinese challenge to US power in the western Pacific, and when North Korea was wobbling. That window has probably closed.

3. South Korea, standing alone, might slide toward a semi-democratic national security state like Pakistan

This cost is almost never reckoned by those advocating withdrawal from Korea. Most advocates of retrenchment from Korea, such as Cato's Doug Bandow, assume Korea to be a stable market democracy that can carry the costs of a head-to-head competition with North Korea. This is so economically, but I am not so sure politically. For thirty years the 'republic' of Korea was more like a Prussianised barracks-state dictatorship than a republic, with one dictator, Park Chung-hee, who genuinely seemed like the Korean version of Mussolini (Park's repression was the big reason President Carter wanted to withdraw from Korea as part of his human rights emphasis in US foreign policy). So thorough-going was the McCarthyite propaganda of dictatorial Korea about the 'reds' to the north that many older Koreans will tell you they actually believed that North Koreans had red skin.

Long, enervating national security competitions, like those between Pakistan and India, or North and South Korea, are corrosive to democratic and liberal institutions. South Korea's dictators used to justify repression and illiberalism on precisely these grounds. It is a huge achievement for South Korea that it managed to create real democratic and liberal institutions. It would have been easy for South Korea to stay a militarised faux-democracy like Egypt today, or Turkey and Indonesia earlier on. A US withdrawal that pushed up South Korean defence spending to 7% of GDP might threaten the South Korean experiment with liberalism and democracy, one of especial importance in the future as an Asian model against the authoritarian 'Beijing consensus.'

4. A US withdrawal might in fact encourage the North Koreans to try again

A common assumption, particular on the South Korean left and among more dovish commentators (me included), is that North Korea has no real interest in unification. Unification means the elimination, if not extermination, of the Kimist elite and their privileges. North Korea, we assume, knows it will lose a war. The (North) Korean People's Army (KPA), while very large, is based on Cold War-era technologies. And like many communist militaries, its force structure is based around a repeat of World War II: the KPA has many tanks, armoured personal carriers, and infantry. It could fight and win the 1943 battle of Kursk. It is however unprepared and unequipped for the sort of modern warfare practiced by the US: C4ISR, overwhelming airpower, stand-off strikes facilitated by space power, the rapid destruction of command-and-control, and so on. As such, the KPA would lose a war with combined allied forces. It knows this; hence Pyongyang built nuclear weapons. They are the ultimate deterrent for an otherwise outdated military.

But it is precisely these 'networked battlefield' technologies that the South Korean military lacks. The ROKA (Republic of Korea Army) is still configured around infantry and traditional homeland defence. It lacks many of the high-tech capabilities of the US military, particularly in the air. The US would indeed 'tank-plink' the KPA and rapidly dissociate its units from each other and Pyongyang by destroying command and control. Can the ROKA do this? As the never ending debate over the reversion of OPCON ('operational control') of the ROKA in wartime suggests, most are sceptical. If not, the KPA might actually hold together in the field in a conflict.

The question is tough: if the US left South Korea, would North Korea see an opportunity for victory, to absorb a successful economy and bail-out its own decrepit system?

So what does all this mean? In brief, the debate over US forces in Korea is far less clear than many think. The Cold War is over. North Korea is no threat to the US, and if South Korea ramped up seriously, it could probably win a war without US assistance. On the other hand, US forces are already there. The costs of staying are minimal, and if the pivot is to really define US grand strategy in the coming decades, then South Korea could be a valuable ally if it will tilt against China.

Image courtesy of U.S. Army Korea (Historical Image Archive).

China-Japan competition: Hugh White responds

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Image courtesy of the White House.

India links: Independence Day, Pakistan talks, Central Asia, GM crops, Hindutva and more

Pacific island links: Sean Dorney, Fiji elections, West Papua, Gold Ridge mine and more

A selection of news, analysis and commentary from and about the Pacific island region.

  • Nominations for Fiji's general elections closed on 18 August. Twelve of the received nominations were rejected by the Fiji Electoral Authority, including that of Mahendra Chaudhry, leader of the Fiji Labour Party. Of the 249 accepted nominations, 41 are women. Fiji First was the only party to have all of its nominated candidates accepted; a number of these have since been challenged by the People's Democratic Party (PDP).
  • The future of the Gold Ridge mine in Solomon Islands looks increasingly uncertain. Further to suspension of operations and a massive reduction in the workforce, a deterioration in law and order in the area has resulted in the evacuation of all non-local staff.
  • Jope Tarai reflects on incidents of intimidation by Fijian authorities against those who support the cause of West Papuan independence. Meanwhile, in West Papua, the detention by Indonesian authorities of two French journalists is part of a decades-old policy of restricting international coverage of what happens in the province.
  • The IMF's quarterly 'Asia and Pacific Small States Monitor' is out, with a special focus on the impacts of climate change.
  • The Micronesia Challenge is a conservation initiative of five Micronesian countries. It has been awarded a Pacific Oceanscape Leadership award in recognition of its innovative and influential approach.
  • Ben Bohane highlights some key messages arising from a recent workshop that examined regional security issues.
  • Sean Dorney is leaving the ABC after 40 years of reporting on and from the Pacific. In 2012 he was awarded the inaugural Media Award from the Australian Council for International Development (ACFID) in recognition of his work. This is the speech he gave on receiving that award:

China links: SCO, Muslim faith revival, graft, China dream, Taiwan, Xinjiang and more

Should the US retrench from South Korea? Yes

Over at War on the Rocks, Christopher Lee (a former officer in the US Forces Korea [USFK]) and Tom Nichols (of the US Naval War College) have gotten into a useful debate on whether US forces should remain in Korea. This issue is not widely discussed, which is surprising given the end of the Cold War and the huge margin of advantage in South Korea's favour.

Although I have taught international relations in South Korea for six years, this idea is almost never mooted in academia or the media here, so I applaud War on the Rocks for broaching it. But I think Lee and Tom (full disclosure: Tom Nichols is a friend) have missed the strongest arguments for a pull-out. Specifically, I think Lee understates his case for withdrawal and Tom will have to work harder to justify his arguments for the US staying. Today, I want to lay out a more robust case for departure. In Part 2 I will outline the counter-argument. In brief, I think that the case for staying just barely clears the bar and that the tide is running against it.

Why could/should the US leave South Korea?

1. South Korea is free riding. It only 'needs' the US because it is doing less than it would otherwise

Free riding is controversial issue, one that has bedeviled all US alliances for decades. An entire literature within international relations is built around the curious dynamics, such as 'buck-passing' or 'reckless driving,' that characterise allies' efforts to shift burdens to other allies, or tie others unwittingly to their own national preferences.

The most acute free-riding problem in the US alliance structure is in Europe. NATO informally benchmarks 2% of GDP as a minimum for members' defence spending. Yet only four NATO states break that marker. This has systematically crippled NATO, forcing the US to take the lead on what ought to be European contingencies such as the Balkans wars, Libya, and the Ukraine. Japan is even worse, spending less than 1% of GDP on defence.

By contrast, South Korea spends 2.6% of GDP on defence. This sounds better, but unfortunately is far from enough given the massive garrison state of North Korea sitting right on top of it. There is no formal spending target (USFK places no such demand on Seoul) but the number I hear widely thrown around is that without the US, South Korea would need to spend two or three times as much as it does on defence now.

Every foreign security analyst I know in Korea thinks the ROK needs to spend a great deal more; South Korea has significantly under-invested in C4ISR, missile defence, and counter-insurgency tactics. It is woefully under-prepared to occupy North Korea. It does not draft women, despite a declining birthrate that is leading to a major shrinkage in the ground force. With a GDP 25 to 30 times that of North Korea and a population more than twice as large, South Korea has the room to make a far greater effort. Where Lee and Nichols spar over the small amount of money the US contributes to Southern defense, the real issue is getting South Korea to take its own defence far more seriously.

2. The US presence in Korea (and Japan) discourages Japan-South Korea rapprochement

I have written about this issue several times. In brief, the US alliance almost certainly inhibits much needed cooperation between Japan and Korea on regional issues, most obviously China and North Korea. Specifically, the US alliance permits 'moral hazard' in both: neither Tokyo nor Seoul suffer any consequences for ridiculous criticisms of the other because the US insures them both against the consequences. Hence Japan and particularly Korea focus far too much attention on each other, and not nearly enough on the real regional threats.

There is a great deal of agonising in the US over how to get these two allies to bury the hatchet and start working together, but no one wants to admit the obvious solution — a genuine threat of abandonment. Hawks will disagree, and there are indeed downsides to abandonment, but let's stop pretending that US regional alliances don't have costs such as this.

3. USFK's presence ideologically props up North Korea

One point that neither Lee or Nichols brought up is the obvious propaganda boon to North Korea of the US peninsular presence. This is not an uncommon omission. Most researchers on the North tend to assume that its ideology is a lot of empty talk, a smokescreen over a degenerate gangster-ocracy whose real 'ideology' is living the high life and hanging onto power by any means necessary.

While the elite's emptiness and cynicism is certainly clear, I think this is too easy. My own sense (perhaps from having visited North Korea and being bombarded relentlessly there with propaganda there) is that ideology is important. North Koreans are expected to attend ideology training 'classes' at least once a week (more often for officials and higher-ups). The official Korean Central News Agency and the three newspapers of Pyongyang exert tremendous 'intellectual' effort on ideological reinforcement. The focus of that ideology, particularly since the end of the Cold War and the collapse of communism, is anti-colonial nationalism, in which the US has taken the place of the Japanese invader and South Korea is the bastardised, globalised 'Yankee Colony.'

An imminent American invasion is the primary explanation the regime offers to its people for their privation and the permanent national security emergency. Take that justification away, and North Korea loses its raison d'etre. If South Korea is no longer 'occupied,' then why does North Korea need to exist at all?

4. USFK's persistence keeps China from cutting North Korea loose, which would accelerate Pyongyang's collapse

In the same way that USFK perversely acts as an ideological crutch for Pyongyang, so does it act as a reason for Beijing to endlessly prevaricate on North Korean bad behaviour and Korean unification. China is formally committed to Korean unification, but in practice this is a lie. Instead, the Chinese openly refer to North Korea as a 'buffer' between them and the robust democracies of South Korea, Japan, and the US.

I detest this logic. It suggests a breath-taking cynicism about the catastrophic human rights condition of North Korea. That China would callously instrumentalise a state that the UN recently likened to Nazi Germany is just appalling (and goes a long way to explaining why so few in Asia trust China). But that is the situation. However, were the US to retrench from South Korea, the Chinese fear of USFK on its doorstep would be alleviated. Indeed, South Korea could swap a USFK exit plus a promise of post-unification neutrality for a Chinese cut-off of aid to North Korea and pressure for unification.

Hawks in the US and South Korea might not like that, but alleviating the extraordinary suffering of the North Koreans should be the primary goal. If a USFK departure, tied to a major Chinese policy shift, could bring that about, it should be considered.

5. The US is not an empire. Where it can retrench, it should. Commitments should not last indefinitely.

This is an openly normative argument. If one embraces a full-throated version of US hegemony (militarised, globalised, interventionist) then this will not appeal. But post-Iraq, there is clear public desire to rein in American interventions, so the normative case for restraint, on liberal democratic grounds, is strong.

The costs of hegemony are not just financial. They also include the regular war-making and killing of foreigners; a sprawling, hugely intrusive national security state; domestic nativism; as well as torture, indefinite detention, rendition, and similar penal abuses. All this suggests that retrenchment would be good for American democracy and liberalism. Allies may not like that. They will complain of abandonment. But sacrificing America's liberal ideals at home to promote them abroad is strange brew. It is increasingly obvious that hegemony abroad is deleterious to American liberalism at home. Where allies can stand on their own, as South Korea very obviously can, US retrenchment would be domestically healthy.

Photo by Flickr user DVIDSHUB.

A breakthrough in Chinese climate policy? Not likely

I argued back in April that China's 'synthetic natural gas' (syngas or SNG, which is gas made from coal) is 'bad economics, bad science and an environmental catastrophe'. I also said that 'what is striking is the ambition of Chinese plans versus the widespread scepticism of SNG worldwide and inside China itself.' Apparently, some of this scepticism is now being heard.

Datang, a syngas pioneer, has exited the business, selling its operational Keshiketeng project. The company admitted that its entire syngas business proposition was failing technically and financially; relieved investors sent Datang's stock up 23% on the day of the announcement. Meanwhile, Greenpeace published an alarming report claiming that the 50 planned Chinese syngas projects would emit 1.1 billion tonnes of CO2 annually, almost triple America's entire stated CO2 reduction target by 2020. The National Energy Administration (NEA) in Beijing has now announced certain limits on syngas projects, reportedly worried about 'an investment spree regardless of environmental and economic realities.'

But if China does dial back its syngas ambitions, will it be due to financial considerations (as in Datang's case) or because of CO2 emissions (the concerns of Greenpeace)? Syngas is such a monster that the easy answer is 'both' (and in fact a third problem, water, weighs heavily against the technology too). But the fundamental question remains: just how serious is China about climate change, and is it prepared to sacrifice growth to limit its emissions?

The Lowy Institute's Rio Tinto Fellow, Lisa Williams, has highlighted that Beijing has other priorities (diversifying its energy base, leading new technologies, reducing pollution in its cities) which happily align with climate-change objectives. This explains the paradox of a nation admired for its renewable energy commitment while its citizens live in appalling smog.

Karolina Wysoczanska at Nottingham is sceptical: China indeed sees diplomatic and commercial opportunity in the global climate change carnival, but don't it to expect it commit to any hard targets.

Yet this very idea has been tentatively held out, both by a CASS professor suggesting a coal consumption cap at 4.5 billion tonnes in 2025, and by the Advisory Committee on Climate Change dangling a longer-term 11 billion tonne CO2-equivalent limit by 2030 (from 9.5 billion today).

But these were not official statements, and they were quickly disowned as such. Furthermore, there are a number of reasons to be cautious about any future 'breakthrough' on emissions caps.

China already mines 3.8 billion tonnes of coal every year, and Chinese coal alone accounts for 20% of all global CO2 emissions. On present coal use patterns, China is on track to belch almost half of the entire world's recommended maximum 'CO2 budget' of 32 billion tonnes of CO2 by 2030.

It would therefore take a wrenching change in China's economy to suddenly alter its trajectory of rapidly growing coal use. Goldman Sachs estimates that, in addition to the 3.8 billion tonnes mined this year, another 1 billion tonnes of new mine capacity is already under construction. Coal has become so abundant in China that prices are the lowest in six years. UBS sees almost 50GW (to put in context, a really big power station is 1GW) of coal-fired power capacity added each year for the foreseeable future: 'the reality is that no other technology — wind, solar, gas, hydro and nuclear — represent a viable alternative.' 

China is struggling to find conventional oil and gas deposits offshore and in shale gas. Renewable energy is attractive from a pollution-control perspective but needs expensive thermal power backup. As syngas illustrates, China will be tempted to use its super-cheap coal to substitute other energy sources where it can.

Most fundamentally, it is unlikely Beijing will act more cooperatively in the diplomatic sphere. China is sincere in perceiving itself as a developing country with a short industrial history. Collective action to protect the global commons is devilishly difficult. The Kyoto Protocol had little impact. Australia repealed a carbon tax as a business burden. The former Soviet Union is emitting well below its 1990 reference level but this is merely because its economy collapsed. America's shale gas revolution occurred not out of environmental concern but because it was profitable.

The Chinese syngas projects have almost certainly been slowed due to unsound economics, not because of concern over CO2. Notably, Beijing's NEA has banned only small 'sub-scale' syngas projects, not large ones. Maybe this is still good news, but it is premature to celebrate a shift in Chinese climate policy.

Photo by Flickr user World Bank Photo Collection.

Are we measuring international trade correctly?

Perhaps the most fundamental change in international trade in recent decades has been the development of multinational 'supply chains'. The production process has been 'unbundled', with different stages of production taking place in different countries. An iPad is assembled in China, but only $10 of the total production costs takes place in China; most of the total cost comes from inputs made in other countries, including the intellectual property and design input from Apple in California.  

In conventional trade statistics, exports are counted in gross terms, so the cost of the assembled iPad (including those elements imported into China) is counted in China's export figures. Over recent years, the misleading implications of the gross trade figures have been more fully recognised. Since 2012, an alternative value-add data set has been available.  

The Reserve Bank of Australia has built on this data to provide new insights into Australia's international trade, particularly on trade-partner shares. The diagram below, from the RBA, illustrates the issue. If Australia exports $100 of iron ore to China, which is then used as the input for products which China exports to the US worth $110, conventional statistics would record this as $100 of Australian exports and $110 of Chinese exports. But China has, in this exaggerated example, only added $10 of value.

Comparison of gross trade and value added trade

Focusing on 'value-add' statistics changes the picture of Australia's export partners.

In this example, the destination of $100 of iron ore exported by Australia is no longer China, but, in final product form, America. Comparing the two measures of Australia's export destinations, we get the following table: 

These value-added statistics also provide a very different perspective on the importance of the services sector to Australia's exports. In gross terms, services make up only 22% of exports, but services form an important input into other exports (especially manufactures). Recalculating exports according to value-added model takes the services component to over 40% of Australia's exports (a bit bigger than resources). This different perspective fits Australia's comparative advantage: our export future doesn't lie in manufactures, but in commodities and services.

These value-add statistics don't replace the conventional gross statistics, which are available more quickly and don't rely on so many assumptions. Nor are they the last word in the ongoing process of refining statics to reflect a changing world. But they provide a valuable alternative perspective, sometimes with policy implications. At the very least, they are a reminder of the complexity of international trade: our exports will depend not only on what is happening in China, but on what is happening in China's export destinations as well.

What Beijing fears most: Intra-Asian balancing

It is a truth universally acknowledged that a rising China, in possession of a modernising military, must be in want of a non-militarised Japan. So is Beijing being foolish by acting assertively in the East China Sea, thereby helping to fuel Japan's evolution into a full-fledged military rival? 

Perhaps not, says Hugh White. Based on analyses by Amy King and Brad Glosserman, he argues that either China doesn't believe that Japan can become a 'normal' military power (in which case Tokyo would have little choice but to accept a subordinate role to Beijing in Asia), or China calculates that its assertiveness and Japan's militaristic response will drive a permanent wedge in the US-Japan alliance, to China's benefit.

The possibilities Hugh raises are certainly compelling. China's coercive behaviour has so far elicited a relatively ambivalent response from America. Although Washington talks a tough game in Asia, and has continued apace with military exercises with other powers in the region that share its concerns about China's military modernisation, other aspects of its behaviour are cause for concern. Washington still felt the need to send two very different messages about its intentions to audiences in the US and in Asia (a point the Lowy Institute's Michael Fullilove recently raised with US Secretary of Defense Chuck Hagel in Singapore). Attempts at emphasising the non-military dimensions of Washington's 'pivot to Asia,' the mixed response to China's extension of an air defence identification zone in the East China Sea, and budgetary considerations all point to waning enthusiasm in Washington for confronting Beijing.

There's also good reason to suspect Japan's long-term political appetite for a strategic rivalry with China.

Prime ministers have short life-spans in Japan (even the charismatic Junichiro Koizumi lasted only five years) and incumbent Shinzo Abe's position on reinterpreting Japan's constitution is not necessarily shared by some within his own party, let alone the wider Japanese political and bureaucratic establishment. The sharp decline in Abe's approval ratings to below 50% raise further questions about his political longevity and, with it, Japan's future as a normal military power.

The ambivalence of America and the possible unsustainability of Japan's response to China's provocations are mirrored in other regional powers. Vietnam is of two minds about confronting China, with the wing of its Communist Party's Politburo that favours accommodating Beijing reportedly ascendant. Even in India, where anti-Chinese sentiment is incredibly high, there's a continuing desire to diversify relations with all major powers, which means deepening ties with China even as it hedges against Chinese assertiveness. This tendency was recently underscored by rumours that India may join the Shanghai Cooperation Organization as a full member later this year.

But while all these developments might suggest that Beijing is playing its cards shrewdly (staking its claims and asserting its dominant regional position without risking a significant backlash), White's argument falls short on a simple but important point. He presents a binary choice for China in the Indo-Pacific: either it will confront the US, supported by a self-constrained, pacified Japan; or it will face a remilitarised Japan that lacks the full backing of the US-Japan alliance.

Yet there's a third possibility that White has overlooked, one that is much more troublesome from Beijing's standpoint. That is the evolution of a strategic, security, and technological compact among resident Asian powers that serves to balance China. Chief among these balancers would be Japan and India, but Vietnam, Australia, and others could all conceivably play crucial roles. Indeed, Rory Medcalf and C Raja Mohan have recently raised this very possibility: the emergence of middle-power coalitions in the Indo-Pacific.

The one that has Beijing most worried, judging by the rushed visit of Chinese foreign minister Wang Yi to New Delhi in June, is the emerging strategic relationship between India and Japan. Security ties between these two countries are, at present, at risk of being both wildly oversold and under-explored. But there is no discounting the potential. As I've written elsewhere, India and Japan share similar concerns about Chinese intentions (both are locked in territorial disputes with China) and have doubts about Washington's commitment to the region. They also have complementary strengths, with Japan's financial resources and technological sophistication a natural foil for India's manpower-heavy and battle-hardened military. 

A security partnership with India offers Japan at least two other benefits, both of which, if carried through, could undermine Beijing's plans for regional hegemony. Japan's military-to-military contacts with India enable it to prepare for out-of-area contingencies, particularly in the maritime realm, which represents a key step in Japan's path to becoming a normal military power. More significantly, the possibility of joint production of the US-2 aircraft with India, and its potential export to third countries, could mark a major development as part of Japan's reversal of its self-imposed ban on defence exports.

There is a tendency in some quarters to downplay Beijing's ability to make mistakes. Even its handling of public relations — not exactly China's strong suit — can somehow be re-interpreted as an act of brilliance and sophistication. While White rightly raises two scenarios in which China's assertiveness towards Japan reaps dividends, it's hard to completely discount the possibility that Beijing is being short-sighted. China's leaders might relish the thought of unquestioned Asian dominance or a revanchist campaign against an isolated Japan. But the emergence of a balancing coalition led by Japan and India (and possibly including others) presents a much more daunting prospect.

Photo by Flickr user generalising.

China's strategy to sow distrust of Japan

Promoting mutual distrust in the Asia Pacific now appears central to Chinese strategy. As Hugh White has argued persuasively, China seeks greater influence in Asia through weakening the faith of America's regional allies and partners in US resolve to remain engaged in the region. This will be compounded if US preparedness to work collectively as a hedge against Chinese hegemony is eroded.

Clearly, central to such a strategy is the stigmatisation of Japan, given its locale, continuing economic, technological and cultural clout, and alliance with the US. In recent months, wilful misrepresentation of Japan's contemporary character as a society and a polity under the leadership of Prime Minister Shinzo Abe has escalated.

This has been evidenced starkly in Chinese media reaction to Abe's recent visit to Australia and the close and deepening ties affirmed by the Australian and Japanese governments. Shrill criticism from mainland media soon became news in its own right in Australia, and a counterweight to the otherwise upbeat news cycle around Abe's visit.

Overblown Chinese reactions to the Abbott Government's warm embrace of Abe appeared in Australia too.

'Japanese militarism is back' screamed the headline on the front cover of the Australian Chinese Weekly on 19 July. Within the paper was a full-colour glossy feature on Abe's visit to Australia, including a two-page spread repeating the headline overlaid on images of Abe and Abbott speaking together in Canberra and the rising sun emblem. The message was clear: the Australian Government, in welcoming Abe, is aiding and abetting the return of Japanese aggression.

As has recently been discussed on The Interpreter and elsewhere, the local Chinese-language media increasingly mirrors the political intentions of Beijing's leadership. Whatever the motivations for such scaremongering, it is consistent with what appears to be a deliberate strategy from Beijing of delegitimising Japan.

A core narrative is that Japan is guilty of reckless endangerment of regional peace through provocative actions towards China. This centres now on Japanese Prime Minister Shinzo Abe, with the nuances of Abe's worldview and statements disregarded as he is branded a dangerous rightist-nationalist-historical-revisionist. Such shorthand has become widespread in Western media reportage, as seen is this sloppy New York Times editorial.

Certainly Abe has given critics material to work with, most recently through his Government's review (though not retraction) of the 1993 Kono Declaration apologising to Korean 'comfort women'. Abe's visit to Yasukuni shrine stands, for critics, as having a totemic association with the glorification of past Japanese militarism despite the explicit disavowals of such a meaning by Abe.

Relations between China and Japan deteriorated markedly prior to Abe's election, primarily but not exclusively around the Senkaku/Diaoyu dispute. A turning point was when Beijing chose to interpret the September 2012 decision by the left-leaning Democratic Party of Japan (DPJ) Government of Yoshihiko Noda to purchase three of the Senkaku islands (from a private Japanese owner) as a major escalation of the dispute. The nationalisation decision was actually a preemptive move to stop moves by right-wing Tokyo Governor Shintaro Ishihara and various other nationalist activists to take control of one or more of the islets. What was widely understood in Japan as a move to defuse the territorial dispute was instead interpreted by China as an act of state aggression.

China blew a rare opportunity to drive a wedge between Japan and the US during the period of DPJ governments of Hatoyama, Kan and Noda by succumbing to hubris and belligerence just when a charm offensive was called for. The only consolation for China is that Abe is an easier target for delegitimating Japan.

Japanese public opinion towards China, for a long time more positive than that felt on the mainland for Japan, has deteriorated dramatically since 2010. Arguably, the resulting political climate helped Abe's return to the Liberal Democratic Party leadership. The more trashy elements of Japan's free media increasingly exploit domestic unease about China for commercial gain, although Japanese political leaders don't appear to be boxed in, policy wise, by public opinion in relation to China. Yet there is widespread acceptance of the need for an effective China hedge through better relations with both the US and other nations of the region. Moreover, Japanese of all political persuasions are tiring of being pressured by Beijing, and by Seoul, to make symbolic concessions just to start talking.

Japan could only consider distancing itself from the US if China seemed completely benign, and such a scenario is currently unthinkable to most Japanese. This is by no means costless to China, in either security or economic terms. Japanese FDI to China is down a third on the previous year. Japanese firms have long hedged against political risk in China by maintaining a strong commitment to investing in Southeast Asia and beyond.

Viewed from China, memories of wartime Japanese aggression, instances of a defiant lack of repentance by some Japanese identities, and conjuring up the spectre of resurgent Japanese militarism would seem the ideal means to stigmatise Japan throughout an Australasia with a shared experience of suffering in the Pacific war. Yet to date, fears of present and near future aggression from China (rather than increasingly distant memories of a past Japan) seem to have greater salience.

Only in South Korea, where collective memories of the trauma of Japanese colonialism has been central to legitimating political ideologies since the Korean war, is a large proportion of both elite and popular opinion critical of Japan. But with South Korea still dependent on US security guarantees, ill will between it and Japan is primarily an issue for America.

Prime Minister Abbott's warm welcoming of Abe infuriated Beijing not just because he was prepared to be magnanimous on matters of history. Rather, by simply stating the fact that Japan has been a model international citizen for nearly seven decades and deserves 'a fair go', Abbott struck a forceful blow against Beijing's strategy of delegitimising Japan and driving an attitudinal wedge between it and its longstanding postwar friends.