Tuesday, November 23, 2010

North Korean Aggression: Reconsider Airlines in East Asia

Today, North Korea fired more than 100 artillery shells to Yeonpyeong Island, north west of South Korea. According to a Korean newspaper, 2 South Korean servicemen and 21 non-combatant residents were killed in the crossfire (“North Korea shells southern island, two fatalities reported”; Korea Joong Ang Daily; November 23, 2010). The reason for North Korean aggression is not clear at this stage. In any case, see the map below.

This is not the first time that Yeongpyeong Island is attacked by North Korea. Kim Jong Il went into a skirmish with South Korea in 1999 and 2002 near this island. If you see the map, you will find that Incheon airport (A on the map), boasting the hub of East Asia, is very close to such dangerous Yeongpyeong Island (3 on the map).

It is time that airlines in East Asia were reconsidered. The Narita-Haneda air systems, around Tokyo, must be arranged urgently, as alternative hubs to Incheon. Currently, Japanese political corridor is in a complete mess over minor scandals and partisan conflicts. Under short-lived Hatoyama administration, Land and Transport Minister then Seiji Maehara launched this ambitious plan, to restore Japanese economic strength.

Now, things have become more impending. This is not just for Japanese economy or status in the world, but for global public interest. The world needs the Narita-Haneda hub in East Asia! Act beyond petty power games in Nagata-cho!

Sunday, November 21, 2010

The US-Indian Talk: A Rollback from Apologist Diplomacy?

Shortly after the loss in the midterm election, President Obama left for a ten day trip to Asia. Among big events including G20 in Seoul and APEC in Yokohama, bilateral talks with India is the most important because actual and concrete strategic issues were discussed, unlike nebulous and gigantic multilateral shows of G20 and APEC.

In addition to the rising market, India is a key country in security issues such as the Af-Pak problem and non-proliferation. Also, the trilateral power game among the United States, China, and India is an issue not to be dismissed. Prior to the bilateral talk from November 6 to 8, Senator John McCain gave a lecture on US-India relations at the Carnegie Endowment for International Peace on November 5. See the Video below.

Throughout the speech, McCain emphasized common democratic values between the Unites States and India, which are the key to develop further strategic partnership. India is not only a prospective emerging market for the United States. The Af-Pak problem is a critical issue for both countries. Senator McCain said that if the United States withdrew from Afghanistan prematurely, India would regard it as reluctance to deep commitment in the War on Terror. This is a critical point, because Bob Woodward says that President Barack Obama is psychologically out of Afghanistan, in his book “Obama’s Wars”. Actually, Obama showed the timetable for withdrawal from the Afghan frontline by 2014 at NATO summit in Lisbon (“Lisbon: NATO leaders endorse Afghanistan 2014 withdrawal date”; Daily Telegraph; 20 November, 2010).

Quite interestingly, McCain said that the US-Indian axis of democracy would advance liberty in Burma and Iran. In terms of geography, India is located between East Asia and the Middle East. The strategic partnership is beyond the Af-Pak security. India is developing naval cooperation with the United States, Australia, and other Asia-Pacific democracies. A hinge of eastern and western Eurasia, India is the key spot to coordinate trans-Atlantic and trans-Pacific strategies of the United States. The problem is, the Obama administration is still somewhat shy of trumpeting America’s championship in global democracy. Therefore, the US-Indian partnership for regime change in Iran and Burma is likely to be a blueprint for the future.

Regarding the peaceful rise of China, though McCain talked implicitly of Indian counterbalance, he was cautious of making critical remarks on this country. McCain may have given consideration to business interests. However, he said that the US-Indian strategic partnership would be helpful to make China a “responsible power”.

On the other hand, George Perkovich, Vice President at the Carnegie Endowment for International Peace, said that the US-Indian relationship needs sustainable development without relying on “amphetamine” deals such as the Indo-US nuclear agreement by the Bush administration. See the video of an interview on November 4 below.

Particularly, liberals are concerned that the nuclear deal with a non-NPT member is contradictory to US national interest of non-proliferation. In addition, they worry that verification for nuclear facilities in India is only for US built ones, and other nuclear sites are out of touch. Therefore, liberals think this agreement will provoke nuclear arms race in the Indian subcontinent and around the world. However, liberals agree that strategic partnership with India is a vital national interest for the United States in view of the War on Terror and export market. As a centrist, Perkovich agrees with McCain’s view of common democracy values between the United States and India.

Regarding the Indo-Chinese geopolitical rivalries, Perkovich argues that the United States not make use of it. For India, China is a less important security concerns than the Af-Pak turmoil, Pakistani nuclear threats, and Islamic terrorists, he says. Historically, threats to India came from the Khyber Pass, rather than Himalaya Mountains. As Perkovich says, we should rather not expect Indian counterbalance against China too much.

At the meeting in New Delhi, President Barack Obama and Prime Minister Manmohan Singh reached a crucial agreement on a wide range of issues. As the most leftist senator, Obama was critical to the bilateral deal under the Bush administration. However, as the president, Obama is keen to pioneer the market for American business, and expand investment in India. In security, Af-Pak, piracy, non-proliferation, counter terrorism, and bilateral defense cooperation are discussed. Both leaders agreed to develop bilateral partnership on new issues, such as the Evergreen Revolution and cyberspace security. The former is very Obamanian. It seems that this is a part of Obama’s Green New Deal, which has not made sufficient progress in the first half of the presidential term (“White House issues fact sheets on Obama's India visit”; Hindustan Times; November 9, 2010).

From Indian point of view, the latest joint statement with the United States is a breakthrough to join multilateral export control regimes of WMDs. S. Samuel C. Rajiv, Associate Fellow at the Institute for Defence Studies and Analyses in New Delhi, says that the US-Indian joint statement on November 8 will pave the way for Indian membership of the Nuclear Suppliers Group, which will ultimately lead to India to join NPT and help India’s bid for a permanent member seat at UN Security Council, along with Germany and Japan. Obama is advancing his predecessor’s pursuit: deepening nuclear business with India, while accommodating this country into a US-led non-proliferation regime (“India’s Accommodation in Multi-lateral Export Control Regimes”; ISDA Comments; November 10, 2010).

The strategic partnership with India is a bipartisan national interest to the United States. For India, this will help boost its standpoint in global strategic bargaining. The bilateral deal by the Bush administration may have been controversial, but current administration could not develop the partnership furthermore without “amphetamine”. India is the first country that Obama visited after the midterm elections. Is this the first step to bring US foreign policy back to the normalcy as Robert Kagan argues, from apologetic diplomacy in the first two years?

Thursday, November 11, 2010

The Clash between the West and Emerging Economies

The media and business societies talk about emerging economies these days, because they see new market opportunities in those countries, which should not be missed. But are emerging economies really the hope for the future? Contrary to myopic commercialism, they pose critical challenges to liberal world order of the global political economy. Developed nations face severe competitions against cheap labor rivals. Some of emerging economies defy Western-led liberal system to defend their autocracy.

Emerging economies consist of BRICs, ASEAN, South Korea, Mexico, South Africa, and so forth. They are not uniformly the same. Some are democratic and pro-West, while others advocate completely new world order, as expressed in China’s “peaceful rise”.

Among rising economies, the most important group is BRICs, because they have political aspirations for greater influence, based on their economic prosperity. While Russia and China explore “leading” position through challenging the West, India pursues the rise through strategic partnership with the United States. Brazil may have tried to meddle Iran and the global community in cooperation with Turkey, but it does not challenge American preeminence. Therefore, we have to pay special attention to China and Russia.

When I attended a policy round table on APEC by the Japan Forum on International Relations on October 15, I mentioned three problems of political environment in China. I wonder why so many businessmen explore market opportunities in this country, without solid assurance for economic freedom for foreign business. First, China is notorious for currency manipulation to win global competition unfairly. Second, human rights problems are serious risks. In the Senkaku dispute, the Chinese authority has no hesitation for retaliatory arrests of Japanese businessmen working for Fujita Construction Company. Third, due to information control by the Communist Party, Google has withdrawn from China.

Remember that Western great powers refused Meiji Japan’s request to improve the “unequal treaty” in the 19th century, because Japanese legal system was not well arranged, which could have led to human rights abuse to Europeans and Americans in Japan. Only when Meiji Japan persuaded Western great powers that it had become “civilized” enough, did they accept Japanese request for equal partnership. For foreign business, political environment in current China is more dreadful than Tokugawa and early Meiji Japan.

While advocates for mutual dependence insist that engagement with China and Russia will tame them regardless of their regimes, they make use of our liberal world order to exploit us. Chinese capitalists buy strategic industries in America, Europe, and Japan to pirate the knowledge and to dominate the world economy, in close cooperation with the Communist Party. Russian oligarchs buy luxurious condominiums in South Kensington, which made it easier for FSB agents to lurk in London to assassinate Alexander Litvinenko. Through close cooperation between authoritarian government and privileged business, both countries make money for military build-up, which will ultimately pose threats to free nations. During the bubble economy, Japanese bid for the Rockefeller Center in New York annoyed Americans. It is understandable that people hate such a Shylockian behavior, but it was no threat at all as “no one can take the Rockefeller Center to anywhere”. But Chinese and Russian capitalists openly defy Western liberal capitalism.

In addition to regime and great power rivalries, nationalism is another problem. In the 1990s, South East Asian nations advocated “Asian values” to legitimize their paternalistic authoritarianism of the state over citizens. Booming economy in those days strengthened their confidence, which led them to defy Western preeminence. Only when hit by the Asian financial crisis, did they stop claiming Asian values against Western liberalism.

As to economic aspects, competitive advantage of cheap labor is not the only problem when we talk of emerging nations. Stephen King, chief economist of HSBC, warns that competition for scare resource will be intensified between the West and emerging nations. With the rise of living standard and the demand, emerging economies will increase more influence on price setting of natural resource. While globalization makes world economy overall grow, cheap labor subcontracts with emerging economies erodes consumer confidence in the West. Though free market is expected to be a built-in-stabilizer to avoid resource conflict as seen in World War Ⅱ, autocrats in Russia and China simply want higher growth through capitalist economy, while strengthening their political positions by manipulating the market (“Stephen King on scarce resources”; The Economist Online; October 13, 2010). Actually, China announced to reduce export of rare earth materials when the Senkaku conflict with Japan broke out this October.

The most critical problem with the rise of emerging economies is erosion of liberal world order. Ian Bremmer, President of Eurasia Group, and Nouriel Roubini, Professor of Economics at the Stern Business School of New York University, raise serious concerns that the world is changing from unipolar hegemonic stability to nonpolar irresponsible instability (“Paradise Lost: Why Fallen Markets Will Never Be the Same”; Institutional Investor; September 2010). Seeing from the theory of hegemonic stability, only a liberalist nation can provide the global public goods of liberal world order. The hegemonic state may have to share responsibility with other powerful stakeholders as Britain explored “bi-gemonic” stability with America during the interwar period. However, burden sharing states must be free nations, and just simply being powerful is not enough. Britain never thought of sharing hegemonic responsibilities with Nazi Germany and the Soviet Union. None of current emerging economies are well qualified to share responsibilities with the United States, Europe, and Japan, and there is no wonder why G20 policy coordination works so poorly.

Of course, we need to respect their aspiration for equal relations with the West. What really matters is the nature of their regimes. Particularly, we need to pay attention to fundamental ideals of their nation building. While the “peaceful rise” of Maoist China is dangerous, the competitive rise of democratic India is peaceful. Since the independence, India has been pursuing economic development in Fabianism, which is the core value of British Labour Party. Therefore, we can welcome the rise of India, but not China.

Myopic businessmen need to see the world from “Country First” viewpoints. It is necessary to evaluate emerging economies who they are. Multinational corporations doing business with dangerous regimes may earn profit for a short term, but in the long run, they will lose. In the past, the Ohira administration of Japan continued the IJPC petro-chemical project with Iran when the United States and European allies imposed economic sanctions against the hostage crisis of the US embassy in Tehran. Business with the rogue regime ended is failure as the Iran-Iraq War broke out.

It is too naïve or Shylockian to regard emerging economies just simply as new market opportunities. They can be economic rivals, security threats, or anything that will destroy our liberal world order. Leaders of America, Europe, and Japan must think again how to deal with emerging economies.