Joseph Caron
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September 20, 2012

Ditchley Park: Some interesting insights

Ditchley Park: Some interesting insights

41 knowledgeable and experienced Asia Hands, including from the UK House of Lords and Foreign Office, the highest ranks of the US State Department, the governments of China, Korea, Japan, Mongolia, and assorted business people and academics, assembled at Ditchley Park near Oxford last week to discuss Asia. While there was a concerted effort to insure that the agenda covered the entire East Asian region and beyond, all roads eventually lead back to China.

Some of the commentary will interest many Canadians.

TPP:

– the jury is out on whether the TPP can be concluded and whether it can be economically meaningful; without Japanese participation, the Partnership will address only about 10% of existing trade flows;

– Japan’s position is currently summed up as: ‘thinking about maybe announcing that is it might consider joining’; the government of Prime Minister Noda is weak, and opponents in Japan have been successful in spreading a great deal of misinformation about the implications of participating in a successful TPP (including the rumour that it would mean introducing Obama Care to Japan!); Japanese negotiators are described as being in a 1970s time warp;

– the current negotiating atmosphere is tense, with New Zealand and Australia accusing the US of not practice what it is preaching regarding subsidies, restricted markets and so forth;

– Vietnam, an important player in the current limited context, may not be able to deliver what is being sought regarding environment, labour conditions, liberalization;

– Canada and Mexico’s participation broadens the economic potential of a deal, if concluded, but it is too early to determine the implications of its asks and carve-outs;

– the US – President Obama himself – has told the Chinese that they are welcomed to join in the negotiations, but the Chinese strategic assessment is that the TPP is a US-imposed form of soft-containment and forced liberalization;

– US political party and Congressional support for trade agreements that lead to liberalization is waning, even among Republicans; support for the Korean deal was the exception, and it may prove to be the undoing of future deals: Korean exports to the US are up 40%, but US exports to the RoK have increased by less than 10%, providing fodder to the anti-trade liberalization forces in the US;

– meanwhile, the WTO is moribund, as a trade expansion vehicle, and its legitimacy in dispute resolution may be eroding.

What’s most worrying:

– there is a destabilizing lack of clarity about China’s geopolitical goals, and the type of regional security system which would satisfy its political and economic interests and security concerns, all the while respecting the legitimate interests of other countries with stakes in the region: given today’s globalized economy, that means just about everyone else;

– there is a serious lack of strategic trust between the USA and China;

China repeats that it recognizes US interests in the region and welcomes its engagement; but at the same time, it rejects US actions aimed at calming increasingly tense relations between China and, especially, the Philippines, Vietnam and Japan, in their territorial disputes;

– there has been a dramatic erosion of the credibility of the EU and the US as a result of the financial crises, and the difficulties both are experiencing in getting out of the holes that they have dug for themselves; State Council’s Wang Qishan  – possibly No. 3 in the coming Party disposition – has asked the Americans: ‘Who’s going to teach the teachers now?’;

– while there are innumerable US/PRC dialogue mechanisms, absent is an agreed method of managing short term crises, whether they are in the nature of the blind activist Cheng Guangcheng affairs, or shooting down the P3C surveillance plane a few years back; it is likely that sharp, local encounters between the US and Chinese navies in the future will occur, and with increasing frequency, but there is no established mechanism, such as the US/Soviet hot line system, to address them;

– China’s assertion of sovereignty over most of the South China Sea and attendant sabre-rattling, is heavy on rhetoric, but light on justification under traditional maritime law, the 1980 Law of the Sea Convention, and the historical experience of Southeast Asian countries; changing the situation on the ground, along with the unresolved Korean Peninsula, is now the greatest threat to stability;

– behind its borders, China is plagued by increasing corruption from top Leaders down, growing inequality, a new middle class worried about keeping its gains and passing them on to their children, a stifling security establishment (with a larger budget than the military) and the built-in contradictions between authoritarianism and the freedoms necessary to create an expansive, economy-leading private sector;

– throughout the region, nationalism of the most virulent character is on the rise, as seen during the Conference itself, in China vis-à-vis Japan, providing a cinéma vérité back-drop; the internet and social media are generating public opinion pressures that governments find increasingly difficult to contain – when they are not stoking these pressures themselves;

What’s more encouraging:

– China cannot pursue and achieve its economic and power objectives absent a stable geopolitical environment, involving productive relations with its neighbours, the USA and the EU; it knows that, among post-war developing economies, only 13 have managed to avoid the middle income trap, and there is no guarantee that China will do so; China’s new Leaders know this, and recognize that they will have to introduce a new development model;

– China needs the US, European and Asian markets, absent a dominant domestic market of its own; all the while, the pressures for global integration will continue apace;

– in the face of all of this, and at a time of leadership transition in Party and Government, internal debates in China on what needs to be done, including on governance, are white hot; to the extent that these things can be gauged, the public expects a change in direction; the opportunity for positive change is there, but certainty that it will be given shape and implemented is not;

– Coda: and speaking of change, there may be some new thinking in the DPRK about its future course, just maybe. Hauling out Mickey Mouse at a recent gala in Pyongyang is seen as signaling something.

Best Line of the Meeting Award goes to a senior US State Department representative:

“The US should stop wasting money bombing mud-huts in Afghanistan and put its resources in Asia”.

 

 

Joseph Caron