Tuesday 22 Jan 2019 | 13:21 | SYDNEY
Tuesday 22 Jan 2019 | 13:21 | SYDNEY

Weekend catch-up: Indonesia, the Volcker rule, Japan's national security strategy and more



21 December 2013 08:00

Bringing together the best longer Interpreter articles you were too busy to read this week.

Our last post for the year! As we noted yesterday, The Interpreter will be having a holiday from today, with regular posting to resume on Monday 6 January.

Two great posts on Indonesia this week. Lowy Institute Research Fellow Dave McRae tracked Jokowi's continued ascendance in Indonesia's opinion polls, and outlined what it will take for him to become president in 2014:

Two recent reputable public opinion polls in Indonesia provide further confirmation of the rise of Joko Widodo (known as Jokowi) as the clear front runner for next year's presidential elections.

From his original position as mayor of Solo — a city of around 550,000 people — Jokowi has captured a mood of public disillusionment to first win election as Jakarta governor in September 2012 and then surge past the previous presidential front runner Prabowo Subianto in popularity.

And ANU's Peter McCawley, looked at the post-Snowden state of Australia-Indonesia relations:

What is still more worrying is that there are now signs Jakarta's irritation is beginning to affect other aspects of the relationship.

Until now, the spillovers into trade relations between Australia and Indonesia have been contained. And in various statements, representatives from the Indonesian business community have said that they hope commercial relations between Australia and Indonesia will not be affected.

However, there are now reports suggesting that trade relations are under some scrutiny in Jakarta. The state-owned firm PT Rajawali Nusantara Indonesia says it has halted talks on a cattle ranch operation in Australia and has started talks with a New Zealand firm as an alternative. Perhaps not too much should be read into this news because doubtless commercial negotiations of this kind ebb and flow all the time.

But a report that the Indonesian government plans to suspend bilateral talks with Australia on a Comprehensive Economic Partnership Agreement (CEPA) is rather more serious. Australia has already invested considerable effort into negotiating a CEPA with Indonesia. A draft document already exists which sets out a useful framework for economic relations between Indonesia and Australia. The Australia-Indonesia Business Council has said that it 'wholeheartedly supports the concept and vision for the Indonesia-Australia Comprehensive Economic Partnership Agreement.' 

The Lowy Institute's Hugh Jorgensen showed us that an explanation of US banking regulation and the Volcker Rule can be insightful and funny:

As we saw in the global financial crisis, there is a good chance that any major American bank which approaches bankruptcy will be eligible for a bailout from the US government.

This is not because the government particularly likes bailing out banks, but because if a bank does lots of business with other banks, then its failure could lead to market contagion: if one bank fails, banks become very afraid of lending to other banks, people sell all their shares and withdraw their money (presumably to hide it under their mattresses) and, voila, we end up with another recession/depression.

Moreover, if it is a bank that accepts regular deposits (like salary payments), then the risk of people losing all of their savings is politically, economically, and politically (did I mention politically?), too horrible to consider. In principle, the US Federal Deposit Insurance Commission (FDIC) insures most deposit accounts up to a value of $250,000, but the FDIC is not really equipped to deal with mass banking-system failures, and the sight of FDIC officials at a major bank’s headquarters would have about as calming an effect on Wall Street as a breakout of Ebola.

Sticking with economics, Stephen Grenville updated us on the current state of the Trans-Pacific Partnership negotiations:

All this hard pounding at the negotiating table still has to receive the blessing of the US Congress, with its rampant vested interests and demonstrated capacity to thwart sensible economics. Thus this may well end up a futile exercise. 

The sad reality is that the world would be better off if there was, in fact, a more comprehensive set of rules to govern international economic relationships. Having laboured so long to produce so little at Bali, it’s doubtful the WTO can do the job. But it’s also doubtful that an equitable set of rules would be approved by Congress. The TPP, lacking universality and with all its pro-US biases, may be as good as we can get.

Our most popular post for the week was Shashank Joshi's excellent round-up of escalating US-India tensions following the arrest of an Indian diplomat in New York:

The US has difficult questions to answer over why it claimed diplomatic immunity two years ago when CIA contractor Raymond David was arrested in Lahore for killing two Pakistanis, despite Davis’ ambiguous diplomaticstatus in the embassy there. And why did the US feel the need to handcuff Khobragade in public, when it could surely have done so more discreetly?

India also needs to be careful. A timeline of events by Rediff suggests that this issue stretches back to March, with the Indian government bullying the housekeeper in question, revoking her passport, and detaining her family in India. She herself has been charged with 'extortion, cheating and conspiracy', and would be arrested if she returns to India.

It is difficult to see how Indian diplomats’ domestic arrangements can any longer remain the subject of a tacit understanding; the US press will almost certainly take a keener interest in the situation.

With respect to Indian retaliation, withdrawing security barriers from the embassy is a dangerous step that increases the risk of security breaches. If an incident were to occur, Delhi would be severely embarrassed. The government also risks being forced into tougher measures by the media and opposition parties, against its better judgment.

India has always reacted particularly sharply to indignities involving its politicians and diplomats, and it is easy to see this episode getting more poisonous if it drags on for much longer. It seems likely that the US will express contrition for the precise manner of the arrest, and that Khobragade will eventually be spirited out of the country to continue her diplomatic career elsewhere. But a lot more wrangling might come first.

I added some more thoughts on the costs and benefits of spying:

I can easily see how intelligence on a country's national leadership could be useful in the midst of a high-level negotiation. It might even be a stabilising influence during a crisis, if it helps one side understand the intentions of the other.

But when it comes to long-term strategic decision-making, intelligence on the private thinking of leaders is probably less useful. Take the upcoming Australian Defence White Paper, for instance, which will be premised on an assessment of strategic trends that go back several decades and look forward ten or more years as well. These trends are a combination of vast economic, social and political forces over time-spans which generally exceed those of individual leaders.

Of course the ideas and policies of leaders are important in shaping those trends, but for the most part, those ideas are not a secret, and even if they are secret initially, they reveal themselves in good time (eg. what difference would it have made to Australia to know weeks or months in advance about the economic reforms Deng Xiaoping introduced in China in the late 1970s?).

The big-picture international trends that will shape Australian strategic policy over the next ten years are well known. The trick is not in revealing information, but understanding the significance of what we already know and responding to it appropriately.

Finally, Lowy Nonresident Fellow and CSIS Senior Vice President for Asia Mike Green wrote on Japan's new 'national security strategy':

The National Security Strategy promises proactive peace and outlines a clear strategy of closer alignment with other maritime democracies and states in the Pacific. The defence documents point to a 1.7% increase in defense spending per year (important given overall budget pressures in the West), and a shift towards air and naval capabilities (the army will not shrink in numbers, but will have to live with half as many tanks).

Meanwhile, the Abe Government has launched Japan's first National Security Council (coinciding interestingly with China's new National Security Committee) and has passed necessary but controversial secrecy legislation in the Diet. In the first half of next year Prime Minister Abe is expected to relax constraints on exercising collective self-defense (the right of Japanese forces to come to the assistance of allies who come under attack while operating together with Japan).

Photo by Flickr user Paull Young.

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