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This is a report from a two-day retreat entitled "US-Japan Relations and a Changing Asia."

Feb. 29 - March 1, 2008
Cambridge, Mass.
US-Japan Relations and a Changing Asia

The Center organized a two-day retreat entitled "US-Japan Relations and a Changing Asia." The event was held on Feb. 29 and March 1, 2008, at the Endicott House at MIT. Moderating the discussions was Richard Samuels, Ford International Professor of Political Science and director of CIS. Llewelyn Hughes, a doctoral candidate in the Department of Political Science and an affiliate of the Security Studies Program, served as rapporteur.

Below is an excerpt from the first session. The full report is available here.

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Taylor Fravel, one of many
speakers at the retreat,
talked about the rise of China.

The first session was used to describe the changes in the international environment in East Asia against which the regional powers—United States, Japan, and other governments—are responding. These can be categorized into changes in balance of material power in the region, driven by the rise of China and India, and increasing regional economic interdependence. Importantly, the conventional wisdom about each of these phenomena elides significant details likely to influence how the established powers respond.

On China's rise, it is a truism that the pace of its growth is one of the most remarkable events in economic history, reaching sustained rates over the last twenty-five years of 9.8 percent per year. Nevertheless, while China is growing in absolute terms relative to Japan, the evidence suggests its economy will not necessarily intersect with that of the United States, when calculated in current U.S. dollars rather than purchasing power parity terms. China is certainly rising against Japan, and pulling away from India, but it is not closing on the United States in the way that popular rhetoric commonly assumes.

Diplomatically, the most significant recent change has been China's embrace of multilateralism. In the mid-1990s China was wary of participation in multilateral institutions, but it has embraced them over the last decade, with ASEAN+3 a useful signpost of China's increasing willingness to engage with the region on a multilateral basis. Further, China moved to create a number of these institutions outside East Asia, demonstrating its interests beyond its periphery. In terms of the diplomatic power China gains over other states through this change, however, while it has conferred the ability to frustrate the aims of others, it has not conferred significant power to positively shape the regional environment.

Perhaps the most vexing component of the rising China thesis is the growth in defense expenditures. China has had double digit growth in spending since the early 1990s, although there is controversy over the precise amount. China declared $48 billion in 2000, for example, but the U.S. Department of Defense has estimated spending as high as $128 billion. In terms of capabilities, China has acquired nuclear powered attack submarines as well as Sovremenny-class destroyers with Sunburn anti-ship cruise missiles. These acquisitions represent a dramatic shift in China's maritime capabilities, and may suggest blue-water aspirations.

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A Sovremenny class destroyer—a sign of China's growth in maritime capabilities

Nevertheless, China's growth in maritime capabilities does face challenges. First, its navy need not venture far from its shores to encounter the navies of other states, in particular Japan and the United States. Second, although defense expenditures are growing fast, concerns about China's increased spending on maritime capabilities must be balanced against other spending priorities, such as enhancing internal security within China, improving defensive capabilities against external threats, and preparing for a contingency across the Taiwan Strait.

China's rise has garnered the most regional interest, however, India is also clearly broadening its engagement in East Asia across the economic, security and regional institutional spheres. Economically, India's trade with East Asia reached $100 billion in value in 2007, and is expanding particularly rapidly with China and ASEAN.

Japanese companies also play an important role in the increase in ASEAN-India trade, and see significant economic opportunities in India. In order to facilitate this, Japanese ODA to India has increased. In fact, almost one-third of Japanese ODA currently flows to India, and next fiscal year Japanese ODA to India will be greater than $2 billion. Through this Japan has undertaken a number of flagship projects, including the Delhi-Mumbai freight corridor, with the aim of increasing bilateral trade and investment.

India is also engaging in the East Asian regional architecture, following the Rao government's 1994 announcement of India's "Look East" policy. India became a dialogue partner with ASEAN in 1995, the first India-ASEAN summit was conducted in 2002, and in 2005 India became a full summit partner. India is also conducting free trade agreement (FTA) negotiations with ASEAN, Korea and Japan, which are scheduled to conclude by the end of 2008, and has engaged China in discussions of a regional trade organization.

In the security realm there has also been a shift in India's security perceptions to the East as the danger of total war with Pakistan has fallen Indian concerns about China's rise in East Asia grow, and India's interests have also expanded to include problems of maritime safety and energy security. India currently has the ninth largest defense budget in the world at $22.4 billion, and the third largest in Asia after Japan and China. Further, India's defense budget grew at 11.6% in 2007, and it is modernizing its forces through the purchase of 126 multi-purpose aircraft in a deal worth $10 billion. Lockheed has also offered India the F-18, and has been active in missile technologies. Finally, India is introducing an aircraft carrier purchased from Russia, and has started developing submarine technologies.

In the maritime environment, India has conducted frequent joint naval exercises with countries in the region, including fourteen times with Singapore, ten times with Indonesia, and five times with Thailand. Japan and India also conducted joint naval exercises twice last year: once in the Sea of Japan, and once in the Bay of Bengal as part of a multilateral joint naval exercise including the United States, Japan, India and Singapore. India also conducted its first ever join naval exercises with China in December 2007.

This growth in the Indian profile in the defense sector is mirrored by the interest of regional powers in partnering with India, including Japan. Conference participants disagreed, however, about where the impetus for these initiatives lie. One line of argument holds that the engagement of India by the United States and Japan is clearly designed to contain China. An alternative view is that there is an intrinsic reason for Japan to deepen relations with India: Japanese business want to pursue opportunities in India. Further, India's trade with China is also expanding rapidly, signaling the potential emergence of big regional Asian markets that connect China, India and South East Asia. This is a phenomenon not irreducible to a classical balance of power approach. Finally, it is unlikely that India would use Japan as a military balancer against China. India's traditional balancer is Russia, so it is more likely it would look to Russia, or perhaps the United States, if it chose to pursue such a strategy.

Another participant noted that a third view is also possible: that while Japan's relationship with India can be characterized as an attempt to contain China, it is not only driven by this. Rather, engagement can also be understood as an attempt to explore areas of mutual interest between the two countries. In particular, while India is unlikely to ally with any one state, incorporating it into regional endeavors such as protecting the Sea Lines of Communication (SLOCs) serves to establish rules about regional peace and security. This framework, once established, can then be opened to China in order to see if they are willing to work with Japan and India.

Changes in South Korea are also likely to play an important role in the regional environment. South Korea remains a shrimp amongst whales, however it is prouder and more self-confident than it ever has been, and is also undergoing a review of its regional relations with China and the United States.

On China, South Korea does not see itself as a peer, unlike Japan. In fact, South Korea is increasingly dependent on China economically; China is South Korea's largest trade partner, with twenty percent of total trade, and is also its largest investment partner. Growing Chinese economic, and military, power has not led South Korea to "lean towards" the side of its giant neighbor, however, despite a brief period of China fever. Recent polls show, for example, that some fifty percent of the population see China as South Korea's biggest military threat over the next ten years. South Koreans also fear that China may assert sovereignty over some part of Korea as their territory, and are concerned about China's influence in North Korea.

A reassessment of relations with the United States is also occurring, however no concrete vision for the US-Korean alliance has emerged, and there has been no equivalent of the 1996 U.S.-Japan joint statement. There is a consensus, however, that alliance remains important to South Korea both as reassurance and a hedge, and newly elected South Korean President Lee Myung-bak is clear in his desire to strengthen the U.S.-South Korea alliance as the centerpiece of South Korean foreign policy.

On North Korea, the implications of opening up for the North Korean leadership and military will be severe, and any such process is likely to be extended over a long period of time. The question of how this problem develops is an open but it will undoubtedly have enormous consequences, and there is little contingency planning going on. In particular, one participant noted North Korea has a nuclear weapon they are unlikely relinquish without regime change. This poses a problem for the U.S.-Japan alliance, because it makes Japan worried whether the U.S. extended deterrent is really viable, given the North Korea nuclear capability.

The final component of the changing regional environment is the economic changes in East Asia, and particularly the recent spate of free trade agreements (FTA). In contrast to the conventional wisdom, however, the increasing number of FTAs in East Asia tends not to promote regionalism, as they are negotiated between countries that are often distant from one another. Further, the trade shares of the FTAs are small in scope, and voluntarism commonly displaces legalism in their articles. Indeed, in Japan's case sectors have been excluded from the dispute-resolution mechanisms established within the FTAs.

Despite the more geographically wide-ranging, and functionally constrained, characteristics of East Asian FTAs, there is nevertheless evidence of Sino-Japanese competition over their signing, most notably with ASEAN. This has made ASEAN the focal point for regional integration, conferring it with political weight in excess of its economic significance. It has also frustrated the business lobby in Japan, which hopes to pursue an FTA with China. China is also likely to be more successful in exporting its model for FTAs, as it tends to offer more narrow agreements with less formal dispute-resolution mechanisms, in contrast with Japan, which typically makes modest concessions while and demanding multiple WTO commitments.

Participants in the conference added a number of elements to the regional dynamics sketched above. One noted that Russia and Iran should be included in the analysis of India's rise, as well as how Japan and the United States are likely calibrate their responses to India's interactions with these countries. A second noted that the U.S. is likely to be distracted from East Asia for many years, given that senior policymakers and military officers are focused on the Middle East.

Massachusetts Institute of Technology