FVR's Speech in Pacific Basin Economic Council & Pacific and Asian Affairs --Hawaii, September 29,2006

Wednesday, October 04, 2006 --The Manila Times




Asia Pacific prospects: China, Japan, the United States and Asean


By Fidel V. Ramos, Former Philippine President


(Speech before the Pacific Basin Economic Council and the Pacific and Asian Affairs Council in Honolulu, Hawaii, September 29, 2006.)



First of three parts

IN our part of the world, over the next ten years 2006-2015, the main currents seem fairly easy to predict.

In its drive for great-power status, China will continue to reclaim its historical centrality in East Asia. Already it is emerging as the “second” pole of what has been, over these last 15 years, a unipolar world.

We may also expect Japan, China’s long-standing rival, to contest Beijing’s efforts to gain regional primacy. Meanwhile, the smaller and economically weaker Southeast Asian states, in self-defense, have begun to take seriously their avowed ambition to achieve economic and political consolidation by way of an Asean Charter in the making.

And they are wise to do so, because East Asia does not lack flashpoints of regional conflict. There are the rival claims over still-undiscovered hydrocarbon resources in the islands of the South China Sea (Spratlys); rising Islamic militancy in Indonesia and in Southern Thailand; and, most worrying of all, is the unstable Pyongyang regime on the Korean Peninsula still rattling its nuclear saber.

Of course, the United States, which has regarded itself—since the 1890s—as an Asia-Pacific power, will continue to assert its security interests in the region. And Washington’s first priority has always been to prevent the rise of a regional superpower that could undermine the US lead role in the Asia Pacific and, subsequently, pose a global challenge to US preeminence.

Since the end of World War II, Washington has been the fulcrum of the East Asian power balance. And it is Pax Americana that has given the East Asian states the breathing spell to put their houses in order and to grow their economies at the postwar world’s fastest rate. Over the foreseeable future, the American presence will continue to be a key factor in East Asia’s affairs.


How will the great-power rivalries resolve themselves?

Any of these flashpoints flaring up into conflict will burst the bubble of Asia-Pacific stability. The life-and-death question is how the US-China relationship will resolve itself. And the answer will never be as plain as it was in the case of older historical rivalries—such as that between France and Germany in the middle 1800s; that between Great Britain and Germany, beginning in the late 1880s; and, that between Japan and the so-called ABCD powers (the Americans, the British, the Chinese and the Dutch) in the late 1930s.

In our time—given the awesome power of nuclear weapons—the outcome of the natural rivalry between a hegemonic state and a rising power need no longer be inevitable conflict. Consider how the 40-year-long American-Soviet Russian ideological confrontation died away, without breaking out into a shooting war. Nowadays, too, great-power relationships are made up of many complex strands. Not only are there more avenues for contact. In an increasingly interdependent world their strategic interests often overlap—as the US-Chinese-Japanese-and-Russian interests do in the Korean Peninsula. Also, the recent sortie to Beijing of US Treasury Secretary Henry Paulson—to exploit his well-established economic networks with Chinese leaders as head of Goldman-Sachs in his previous role—augurs well for a more congenial relationship between America and China.


Even globalization could become an irritant

Economic globalization has been another positive influence—at least for the most part. Open trade and investment have linked great-power economies in ways that can mitigate great-power rivalries. For instance, Japan’s ruling politicians may regard China as a strategic rival, but Japanese business leaders regard it as a valued economic partner. It is by trading with China—and by investing there—that the Japanese have revived their declining economy.

US-Chinese commerce, too, is expanding beyond conventional expectations. In President Hu Jintao’s own estimate, over 9 percent of all the foreign direct investment (FDI) in China today comes from American corporation. Naturally, China’s surplus in their two-way trade—now in the neighborhood of $200 billion—has become an irritant to many American leaders. Already populist American politicians blame China for the migration of US jobs and industries.

Over these next 10 years, a China driving for superpower status, a Japan nurturing a resurgent nationalism and an America asserting its Asia-Pacific lead role are the realities we in East Asia must live with.


China reasserting its central role in Asia

Let us elaborate briefly on these points, beginning with China’s drive for great-power status.

China’s first economic census—concluded in 2005—suggests that its economy is larger than has been estimated. With an economy valued at nearly $2 trillion (instead of $1.65 trillion) in 2004, China may have already surpassed Italy, France and Britain to become the fourth-largest in the world—next to Germany, Japan and the United States. Already, many forecasters convincingly argue that China will be the largest in the world before 2040.

China’s political leaders tout their country’s “peaceful rise.” But most every one else—the American superpower especially—is hedging against an unwanted consequence of China’s resurgence from 150 years of decline. In July 2005, the Pentagon declared that “China’s rapidly modernizing military could pose a long-term threat to other regional forces.”

But—at least for the moment—it is the “soft power” being generated by its increasingly open economy that Beijing is deploying expansively. China has not merely revived the Japanese economy. It has become a growth engine for the Asean states as well. And even Australia’s enduring boom Canberra owes almost entirely to its export of mineral and energy resources to China.







Thursday, October 05, 2006 --The Manila Times


Asia-Pacific prospects: China, Japan, the United States and Asean


By Fidel V. Ramos, Former Philippine President

(Speech before the Pacific Basin Economic Council and the Pacific and Asian Affairs Council in Honolulu, Hawaii, September 29, 2006)


Second of three parts

In Japan, Beijing is leveraging its economic power to break down “Japan Inc.”—the cronyist partnership traditionally shared by Japan’s political and business leaders. In the view of Japan’s ruling elite, Mao Zedong’s heirs will try to hang on to power by substituting a new nationalism (pride in China’s modernization achievements) in place of their communist ideology. And they believe that Beijing has chosen Japan as its “hate-object.” At the same time, Japan’s leaders worry that their economy is becoming as closely tied to China’s as Taiwan’s.

Historical baggage left over from WW II still hinders the Northeast Asian states from leaving behind the “politics of national memory.” Korean nationalism, too, remains fiercely anti-Japanese. And, quite predictably, Chinese and Korean feelings had been inflamed by Prime Minister Junichiro Koizumi’s visits to the Yasukun Shrine—where some war criminals are venerated along with the war dead in accordance with the imperial Shinto cult. It is hoped that PM Shinzo Abe, Koizumi’s successor (and protégé), will act to moderate this historical antagonism.

How emotional these competing nationalisms can be is shown by the feelings recently aroused by conflicting claims over uninhabited China Sea islets—between Japan and China over Senkaku-Daioyu, and between Seoul and the Japanese prefecture of Shimane over Dokto-Takeshima. Generally, Japan is becoming more assertive against China, which Tokyo’s National Defense Program now describes as a “potential threat.” To build up counterweights to China, Japan is moving closer to both Russia and the United States. With Russia, Japan has begun to resolve its postwar dispute over islands in Kuriles chain. And, despite Chinese protests, it has also begun investing in the Russian Far East.


Tokyo reassessing its defense policies

The Bush administration, for its part, wants Tokyo to become—like Great Britain—a more “complete” ally. This will entail a revision of Japan’s 1946 Constitution—whose Article 9 memorably renounces war as an instrument of national policy or as an inherent right of the Japanese state. While Charter change is something most Japanese now are willing to do, younger Japanese in particular no longer take for granted that the United States will protect them.

Under the impact of what it sees as the shifting regional power balance, Tokyo is moving its security system from defensive power to a preemptive strike capability. Japanese strategists see their short-term problems as arising from guerrilla attacks, terrorism, or missiles from North Korea. But they accept that, over the long-term, the national interests of Japan and China might collide.

Although PM Shinzo Abe has openly espoused reforms in Japan’s pacifist Constitution, and most Japanese may have reached a consensus on Article 9, Tokyo is unlikely to rush through such a step, since Japanese rearmament neighbors still are unconvinced that Japan has been cured of its militarism. Japanese liberals themselves still warn that the people and the government may not be able to control a resurgent military.



Future of the US-China relationship


Let us now turn to the future of the US-China relationship.

The era of good feeling in the security relations between Washington and Beijing generated by the 9/11 terrorist attacks has largely dissipated. In the view of an American analyst, it has been replaced by a “climate of strategic mistrust,” but not yet of unrelieved, “strategic antagonism.” The scale of its military spending attests to America’s determination not to be overtaken by any other power—or even a combination of powers. China’s military spending itself is estimated (by The Economist of London) to be rising by 12.6 percent yearly—although it is still less than a fifth of what the United States does spend.

Pentagon strategists have been shifting the weight of US overseas deployments from Europe to the Pacific, and from Northeast Asia broadly southwards—toward Okinawa, the Philippines and Vietnam—and westward from Hawaii to Guam. The Chinese themselves have been redeploying their forces away from the Russian border. Even more significantly, China—a land power since the 15th century—is developing its seagoing capability. Already China’s navy is beginning to intrude into American dominance of the China Sea. Fortunately, one potential flashpoint—the Taiwan independence movement—seems to be declining with the passage of time.


Washington outside looking in on EAEG

Beijing’s diplomacy seems focused on diluting Washington’s strategic dominance in East Asia, avoiding strategic encirclement by the United States and its allies, and positioning the erstwhile “Middle Kingdom” as the core-state of an East Asian community.

The United States is at the moment outside looking in on an East Asian economic bloc that is performing up—with a resurgent China as its most likely leader. The East Asian Economic Grouping (EAEG) that Beijing and Asean contemplate will incorporate Japan and South Korea, but many cut out the United States.

Washington itself is weaving an alliance to “contain” China’s influence. It is courting Vietnam, Indonesia and India while cementing its relationship with Pakistan. Not only has Washington established a military presence in the cluster of Muslim states in Central Asia; it apparently even provides hospitality to China’s Uighur separatists in Xinjiang. With Delhi, Washington has just signed a 10-year military agreement that provides for joint weapons production, greater sharing of technology and intelligence, as well as increased trade in arms.

Washington also seems to be trying to contain China economically. In 2004 opposition in the American Congress killed the Chinese bid for the acquisition of the American energy company, UNOCAL—in what The Economist described as a “blatant disregard for fair play and open markets.” And, at a time when Beijing is reaching out all over the world for strategic raw-material sources to keep up its economy’s galloping growth, the UNOCAL fiasco will remind Chinese leaders—uncomfortably—of the boycott the Western powers imposed on Japan’s raw-material imports in 1941, which firmed up Tokyo’s fateful decision to attack Pearl Harbor.

So where will it all end? China is not just reshaping the global economy. The global economy is also reshaping China. Already China is moving—even if by fits and starts—toward an economic structure based on the rule of law, a more efficient allocation of capital, and improved corporate governance.

In a word, China’s stake is growing in the rules-based global market system that the United States has done the most to promote over these past 50 years. The two powers have a stake in each other’s prosperity—not only because they are huge trade and investment partners, but also because, together, they can decide on global war or peace.


China as a growth center for Asean

Washington may resist what it perceives as Beijing’s determination to assert itself as the paramount East Asian power. But Southeast Asians are more ready to accept that China will sooner or later become a great power—and that it is unrealistic to think that outsiders can prevent such an outcome.

For the moment, Southeast Asians have set aside their anxieties about how this resurgent China will exercise its regional preeminence. Given the downturn over this last decade in Southeast Asia’s biggest traditional markets—mainly Japan and the United States—Asean has embraced China as an engine of growth for the region. This year, China’s entire trade with the 10 Asean states would catch up with the region’s $120-billion trade with the United States.

Over January-June of 2005, two-way trade grew by 27 percent, making Asean China’s fourth-largest trading partner. China-Asean trade has increased by $50 billion since the sides began carrying out their free-trade agreement in 2002. President Hu Jintao has set a target of $200 billion for China-Asean trade by 2010, when the agreement becomes fully operational. By then, Asean plus China will become the world’s largest free-trade area in population terms. Right now, it represents a market of over 1.75 billion people; a combined gross domestic product of over US$2.6 trillion; and external trade valued at $1.3 trillion (2005).

When Asean plus China expands to incorporate Japan and the republic of Korea, East Asia would be able to sustain economic growth from within itself—because of its increasingly wealthy home-market and its vast savings pool. Of course, Asean and China also compete—in their labor-intensive exports, in attracting foreign direct investments, and even in building up their value-added chains.





Friday, October 06, 2006 --The Manila Times




China’s strong influence on the Philippines


By Fidel V. Ramos, Former Philippine President


(Speech before the Pacific Basin Economic Council and the Pacific and Asian Affairs Council in Honolulu, Hawaii, September 26, 2006)



Conclusion

Among all the Southeast Asian states, the Philippines enjoys the fastest-growing trade with China. Over these last six years, China-Philippine trade has been growing by an average of 38 percent. From a low of US$65 million in 1965, total trade rose to $17.6 billion in 2005—with the Philippines gaining a favorable balance of $8.1 billion. For 2006, total trade is projected to reach $23 billion, which should bring it close to the magnitude of Philippine trade with the United States and Japan.

Not only has the two-way trade grown exponentially. Chinese investments, Chinese technology and Chinese tourists have all started coming into the Philippines. Economic cooperation between our two governments has also expanded in many areas—in agriculture, fisheries, infrastructure and tourism.

Not coincidentally, economic cooperation has generated political side-benefits. It has enabled the two countries quietly to ease their residual political problems, notably their conflicting claims to islets in the South China Sea—thus enabling their national oil corporations including Vietnam’s to explore jointly for hydrocarbon resources in the contested area. This tripartite arrangement in the South China Sea is the obvious model for resolving similar conflicts in the East China Sea and the Sea of Japan.

Philippine leaders have also invited the Chinese to make equity investments in mining projects and large public works ventures being planned. These include railways, airports, seaports, highways and power projects. A Cabinet Working Group estimates that these programs and projects would require, over an extended period, a total Chinese investment of US$32.5 billion—in equity, joint ventures and loans on varying terms.


Regional integration as the global norm

To a certain extent, the other East Asian countries share Japanese apprehensions that, as China’s power increases, the latter could eventually distort the rules for regional transactions—whether in trade, investment, the environment or even security—but they differ from the Japanese in that they see in rules-based regional institutions and treaties their beast hope for positively channeling the rising influence of the great powers. It is true that, for East Asia—even more than for Western Europe—deep integration that submerges the nation-state is no more than a distant dream. Over the foreseeable future, an East Asian Economic Grouping—even if it takes off—is unlikely to develop beyond a free-trade area, similar to earlier movements in Europe and in the Americas.

If they are to deal equally with China in the already-established Asean plus China configuration, the Asean states must also become more coherent economically and politically. Right now, they are still a long way even from reducing the trade barriers among themselves and creating a single Asean market that can rival China’s in the eye of foreign investors.

For the countries of East Asia, the immediate usefulness of an East Asian Economic Grouping would lie in the framework of rules and procedures that it sets down—and within which not just China, but also Japan, must work—in all their regional dealings.

In another 10 years, we may expect regional integration to become the global norm. Given the World Trade Organization’s recent failure to open up global trade, regional blocs to create economic scale will likely become the main diplomatic activity of these next few years. Certainly, all Asean leaders live with the knowledge that the alternative to regional unity is to become marginalized in global competition. Thus, the urgent need for an Asean Charter.

Among these regional groupings, East Asia could become the greatest—since it would have vigorous growth engines—China and Japan, plus up-coming ones like Korea, a resurgent Indonesia, and an interconnected India.


From the American to the Asia-Pacific peace

Over the next 10 to 15 years, the task for our statesmen would be to replace the American peace (Pax Americana) that has enforced stability in this region with a Pax Asia-Pacifica. Unlike the American peace—which is at bottom based on America’s military might—an Asia-Pacific peace would be the peace of virtual equals.

An emergent Pax Asia-Pacifica, in which the US will still be a major player, would be a broader security arrangement based not on the “balance of power” but on the “balance of mutual benefit.” Clearly, it must be built on an understating among the most affluent, and most powerful, countries in our part of the world—the United States, Japan and China. Indeed, a constructive Chinese role in organizing the Asia-Pacific peace would demonstrate China’s commitment to becoming the “responsible stakeholder” that Washington has challenged Beijing to become.

Japan, too, must take up a more responsible role in the region. Clearly, one of the challenges in ensuring the Asia-Pacific peace is a win-win relationship between Beijing and Tokyo. In the interest of stability, both these two powers should stop allowing the historical past to get in the way of a bountiful, peaceful, stable Asia-Pacific future.

In the end, relations among the great Asia-Pacific powers, Asean included, will always be an interplay of competition and cooperation. The strategic challenge will be for all our countries and all organizations devoted to regional integration to ensure that the “spirit of cooperation” is always stronger than the “competitive impulse.”







 
 
 
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