Asia's New Age of Instability
Mini Teaser: Asia’s four pillars of stability, bulwarks of a highly successful regional system crafted and fostered by America, are all crumbling. The region’s future will be shaped and defined by the struggle to replace those pillars.
A CENTRAL theme in the Obama administration’s recent foreign-policy narrative has been that the United States is returning to Asia after a decade of distractions in the Middle East. It is easy to argue that Asia should be America’s highest foreign-policy priority. After the financial crisis, Asia emerged as the growth dynamo on which the hopes for the revival of the American and global economies are pinned. At the same time, this very economic dynamism produces huge bilateral trade deficits and is largely responsible for the steady decline of American manufacturing. And Asia is home to the United States’ most serious strategic competitor: China.
America is about to discover that Asia has changed dramatically over the past decade. Its main strategic competitor is now its largest creditor; its most important regional ally, Japan, has entered its third decade of economic stagnation, demographic decline and toxic politics; and once-estranged countries such as India and Vietnam have become promising but demanding partners. America has changed too. It is constrained by a war-weary population and a stifling government debt burden.
The big question is where the United States fits into this changed Asia. Its current approach appears to be a mixture of updated Asia strategies of old and tactical responses to various demands of Asian competitors, allies and partners—some wanting the United States to be a guarantor; others wanting it to be a balancer; and yet others viewing America as an opponent. What is missing is a careful reappraisal of Asia’s new strategic dynamics, a hardheaded assessment of what America’s Asian interests are and a considered approach to fulfilling these interests.
Such a reappraisal requires a proper understanding of the pillars of America’s successful Asia policies in the last quarter of the twentieth century. It should include an analysis of the fundamental changes that have undermined these pillars and will likely erode them further in coming decades. It must then identify American interests within the new Asia and find the best policy levers for securing them.
IN THE quarter century after the 1975 fall of Saigon, U.S. policy in Asia was highly successful, based on economic and security returns against strategic investments. During this period, the economies of Pacific Asia grew faster than any region in human history and pulled the American economy into a robust growth cycle. Meanwhile, American strategic interests across the region were unchallenged, while political tensions over U.S. basing were managed effectively. Conflict within and between states declined steadily. Alliance relationships were straightforward and uncomplicated.
America’s successful policies in Asia were built on four interlocking pillars. The first was the inability of any Asian state to aspire to regional leadership. The region’s largest states were too poor and internally focused to make serious bids for predominance, while the richest and most cohesive were too small. With no state making a bid for leadership, Asian nations generally accepted Washington’s regional footprint.
But the United States carefully crafted a “hegemony-lite” alliance structure that maintained the region’s noncompetitive dynamic by ensuring a high cost to any Asian state that tried to assert its leadership. The alliance network and historical memories discouraged Japan, the only country large and wealthy enough to contemplate the possibility, from attempting to assert regional dominance. After the Vietnam War, the United States itself reduced its regional presence, and Asian nations viewed its footprint as light enough to ensure America was a nonthreatening guarantor of regional order.
The second pillar, interlocking with the first, was the belief among Asian elites that economic development trumped all other priorities and no political or strategic dispute should threaten the stability essential to development. The postindependence leaders in Southeast Asia believed that rivalry and confrontation resulted in widespread poverty and unrest. The formation of the Association of Southeast Asian Nations (ASEAN) in 1967 created a regional ethos—that stability was essential for development and development was essential for stability. This stimulated regional growth and spread across Pacific Asia in subsequent decades.
The United States invested in the second pillar by adding a third: it let Asian states institute distinctive political and economic models allowing them to nurture and mobilize domestic wealth and expertise free of external competitors and to minimize the impact of economic retardants. Japan, for example, constructed an economy closed to outside investment, structured around the domestic mobilization of capital and the close involvement of the state in the economy, and oriented toward the maximization of manufactures exports managed by a controlled exchange rate. South Korea, Taiwan, Hong Kong and Singapore adopted elements of the Japanese model. But they added a form of soft authoritarian governance to forestall any internal resistance to their rapid development.
The United States also kept its large, dynamic domestic market open to Asian exports, even in the face of mounting trade deficits. Meanwhile, America’s alliance system allowed the Asian tigers to stint on their own security investments while channeling resources into their economic development. The United States did not give such concessions to any other region. The third pillar validated and strengthened the first two by demonstrating quickly the returns that came from shelving ambitions and rivalries. It also stirred loyalty to the norms and structures of the global economic order without giving the Asian states any significant voice in shaping those norms. Even as the world’s second-largest economy, Japan played a relatively minor role in major decisions affecting the global economic order.
The fourth interlocking pillar was the close alignment between Asian states’ security partnerships and their trading and investment patterns. The noncommunist countries in Asia, whether American allies or passive beneficiaries of the alliance network, all became part of a Pacific Rim trading cycle that brought together American consumers, North Asian manufacturing, Southeast Asian labor, and Australian minerals and energy. It was a trading cycle that both compensated for the Cold War separation of Pacific Asia from its traditional economic hinterland in mainland China and promoted unprecedented growth rates.
The American alliance system, with its alignment of security and prosperity interests, made compromises easy: as Washington watched its allies and friends boom, it was easier to overlook their less-than-liberal economic and political practices. Meanwhile, as long as American troops and aircraft carriers stayed in the Pacific, Asia’s dynamic economies accepted Washington’s dollar-seigniorage privileges and its preferences for the global economy.
THE FOUR pillars of Asia’s late-twentieth-century stability now are under unprecedented challenge. The power distribution that ensured no Asian country was in a position to make a bid for regional leadership—the first pillar of stability—has given way to a more hierarchical order. China sits atop the Asian power pyramid, with substantial economic heft, high growth rates, geographic and demographic size, and military-modernization levels that provide ample capacity to assert regional leadership.
But China lives in a crowded and jealous neighborhood that includes direct rivals with competing territorial claims and historically uneasy relationships: Japan, Vietnam, Indonesia, India and perhaps Russia. These second-tier powers don’t want to cede regional leadership to Beijing, but they also don’t want to balance explicitly against China’s growing clout. They prefer to reach out to each other and to the United States through a network of less formal collaborations: investments in vital infrastructure, foreign direct investment, collaborative naval exercises, and joint ventures in energy and technology.
Meanwhile, the rapid growth of second-tier powers is raising apprehensions in some of their neighbors. A tertiary level of soft balancing has emerged in Asia as the neighbors of second-tier powers reach out to China for reassurance. China’s trade with India’s neighbors is almost four times the value of India’s trade with them, while Beijing’s closest relationships in Southeast Asia are with countries that have long lived in Vietnam’s shadow. A destabilizing dynamic of bids and counterbids for Asian preeminence is well under way.
The second pillar also is crumbling. After five decades of economic growth, the commitment of Asian elites to a mutual understanding on stability and development is giving way to an unstable mix of vulnerability and entitlement. Industrialization and urbanization have made Asia’s most dynamic economies heavily dependent on imports of minerals and energy, a dependence that will only increase. This has generated a sense of vulnerability in some Asian capitals based on concerns about access to reasonably priced resources and the capacity of strategic rivals to interrupt supply routes. At the same time, the sudden emergence of the big Asian economies as the growth dynamos of the global economy has generated nationalist expectations that they should be treated with greater respect by other countries. A mix of greater vulnerability and growing confidence has played out in an accelerating series of confrontations in the East China Sea, the South China Sea, the Sea of Japan and the Sino-Indian border region.
Pillar three also is under challenge. The United States and the world no longer want to allow the policy choices of Asian economies to fly under the radar of scrutiny and pressure, while their sudden prominence has led Asia’s major economies to demand a greater voice in global economic affairs. Concern about America’s trade deficits with Pacific economies is not new. In the mid-1980s, the United States pressured Japan to revalue the yen-dollar exchange rate via the Plaza Accord; a decade later, the Asian financial crisis and International Monetary Fund (IMF) actions delivered political and economic reforms that brought Asian countries’ policy settings into greater alignment with Washington’s preferences. The United States and Europe used China’s accession to the World Trade Organization (WTO) as leverage to gain Chinese economic reforms.
But with the global financial crisis, the tables have turned. The malaise in Europe, America and Japan has given sudden prominence to Asia’s emerging economies as the great hope for the global economy. This new prominence has stirred Chinese leaders such as president-in-waiting Xi Jinping to remind the West of its responsibility for the crisis and consequently the hypocrisy of the West’s attempts to pressure China into reforms. Asia’s big economies, joined by other emerging powers such as Brazil, now have a major impact on global initiatives, from the WTO’s Doha Development Round to action on global warming. Their exchange-rate valuations, energy pricing, fiscal policy and investment now have impact far beyond Asia. Beijing’s statements about the need to end the U.S. dollar’s role as the sole global currency, the growing voice of emerging Asian economies in the IMF and the increasing footprint of Asian donors in global development assistance are all signs of the burgeoning weight of Asian voices in the global economy. Thus, the gap in economic perceptions and preferences between the United States and the major Asian economies is wider than ever; what has changed is the significance of these disagreements for the global economy and their new prominence in shaping U.S.-Asian relations.
The fourth pillar of Asia’s stability—the alignment between security preferences and trading and investment patterns—also has crumbled. China has begun to reclaim its natural position as the economic hinterland of the Pacific economies. Over the past decade, it has emerged at the center of the region’s tightly integrated Asian system of distributed manufacturing. Industrialized economies in East and Southeast Asia increasingly have become exporters of component parts to China, the final point of assembly and export of finished products. Component exports increased from just over half of Southeast Asia’s exports in 1992 to two-thirds in 2007. The main destination was China, whose imports of component parts grew from just 16 percent of its manufacturing imports from East Asia in 1992 to 46 percent in 2007. This integration is reflected in the fact that Asian nations tracked China’s economic fortunes during the global financial crisis more than they did those of the United States or Europe.
Many of the region’s countries that are most closely bound into China’s economy are either allies of the United States, rivals of China or both. Japan, South Korea, the Philippines and Australia have tightened their alliances with the United States as they have simultaneously deepened their economic integration with China. But countries that are not U.S. allies—Vietnam, India, Indonesia and Singapore—also have tightened their security ties to Washington while trading and investing more intensively with China. As Asia’s rivalries deepen, instability increases, and the pulls of economic and security interests will introduce further uncertainty.
For the first time in decades, the prospect of an Asian power hierarchy is imaginable, welcomed by some and feared by others. Asian economies are major consumers of global energy, minerals and food, and this raises fears of systemic vulnerability of supplies. The postcrisis prominence of Asia’s emerging economies has built a new sense of confidence, with those nations demanding respect and a greater global role. But the arrival of this prominence has been so sudden that few Asian powers have clear agendas for the global economy or its institutions. A major question mark hovers over the evolving strategic intentions of the Asian powers.
THUS, THIS new Asia presents unprecedented complexity in the strategic choices facing both Asian nations and the United States. Governments, regional organizations and commentators have put forth four policy responses to Asia’s new strategic picture. None fully takes into account the nature of Asia’s strategic change and instability.
Some analysts and experts argue that the best mechanism for Asian stability is the one that ensured stability for the past sixty years: the U.S. system of alliances. Adherents of this concept believe Washington and its allies and partners should invest in maintaining the U.S. system’s predominance in Asia. The idea is that this position of strength would keep the costs prohibitively high for any Asian power with aspirations to regional leadership. The stability and certainty provided by a robust U.S. alliance system would ensure continued prosperity and discourage potential challengers from upending the continuity of Asia’s security order. But signs of an American weakening or retreat would tempt regional powers to fill the vacuum, ushering in a period of debilitating power rivalries.
This strategy enjoys bipartisan support in the United States and has strong proponents among governments and commentators in Asia. The systematic tightening of bilateral alliances between the United States and Japan, Australia, South Korea and the Philippines since 1996 and the rapid development of security “partnerships” between the United States and India, Singapore, Malaysia, Vietnam and Indonesia since 2000 suggest that Asian countries are embracing this option. But some experts question its sustainability. They note that America’s Asian allies have become used to investing relatively little in their alliances with Washington. Since the end of the Vietnam War, they haven’t been asked to contribute to alliance operations in the region (though several have contributed forces to coalition operations in the Middle East), and they have made force-acquisition choices based largely on national, rather than alliance, requirements.
But the combination of China’s military buildup, targeted toward vulnerabilities in the U.S. force posture in the western Pacific, and mounting government debt in the United States means that much more is likely to be asked of U.S. allies and partners in Asia. And the commitment issue goes beyond money. After America’s expenditure of blood in Iraq and Afghanistan, its public would not long tolerate a U.S. Asian intervention in which local allies shed significantly less blood than the Americans. Thus, a much higher proportion of the “investment” in the U.S. alliance system—in terms of resources and explicit commitments—will need to be made by Washington’s Asian allies and partners. But those allies most closely aligned with America—Japan, South Korea and Australia—lack the heft to seriously help counter the challenge of China’s buildup. Those partners with the greatest heft—India, Vietnam, Indonesia—are least likely to align closely with the U.S. alliance system, given their view of their place in the world and the expanding range of options conferred by their new prominence.
Asia’s age of instability also poses dilemmas for a Washington that has doubled down on its alliance commitments across the Pacific. The growing frictions between China and its smaller neighbors in the South China Sea and the East China Sea pose an entrapment danger for the United States in the western Pacific. America’s embrace of the status quo in these waters has bolstered the confidence of the Philippines and Vietnam in strongly opposing Beijing’s claims, militarily and diplomatically. For Washington, these low-level confrontations will pose a never-ending dilemma over when to demonstrate commitment to allies and when to stay silent to keep China’s neighbors from becoming too assertive. Washington’s interests in maintaining freedom of navigation and reassuring its allies of its reliability have to be balanced against the downside of giving its Asian allies and partners a blank check to push their claims aggressively. For the United States, a combination of its geographic remoteness and Asian allies’ memories of its perceived unreliability during the 1997 Asian financial crisis has heightened its reliability-entrapment dilemma. For its Asian allies, the continuation of tense relations with China is the best insurance that the United States will continue supporting them.
The second prescription for bolstering Asia’s stability focuses on regional institutions. The success of ASEAN in shelving regional tensions and disputes bolsters arguments that Asia’s future stability lies in multilateral institutions rather than bilateral alliances. The growth of regional institutions with ASEAN at their core—including Asia Pacific Economic Cooperation, the ASEAN Regional Forum (ARF), ASEAN Plus Three and the East Asia Summit—is interpreted as the steady externalization of ASEAN’s principles of intramural conflict avoidance. Joining these bodies are yet more regional gatherings such as meetings of the ASEAN defense ministers plus those of the United States, China, India, Japan, South Korea, Australia, New Zealand and Russia as well as the Shangri-La Dialogue and a host of joint military exercises and patrols. The rationale here is that these forms of Asian regionalism can move Asia from a “modern,” conflict-prone region to a “postmodern,” postconflict region, as Europe did after World War II. Enhanced regionalism seeks to socialize away impulses toward hierarchy and rivalry through the repeated engagement of Asian countries in disaster relief, joint exercises, military exchanges, peacekeeping, patrolling against transnational threats and second-track discussions.
Based on the number of regional multilateral meetings, the emergence of a postmodern security order would appear to be well under way. But it is doubtful whether all this frenetic trust building has really had much impact on the deeper drivers of strategic rivalry and instability. The trend lines of Asian countries’ military expenditures tell a tale of escalating security competition. Over more than fifteen years, institutions such as the ARF have been ineffective at resolving issues of ongoing tensions such as the rival claims in the South China Sea—to a large extent because they are prevented from directly addressing actual disputes. In 2002, Indonesia and Malaysia, founding members of ASEAN, referred their territorial dispute over the Sipadan and Ligitan islands to the International Court of Justice for adjudication rather than to any regional organization. It is hard to imagine Asia’s multilateral institutions transitioning from conflict shelvers to shock absorbers and conflict resolvers, which they must do if they are to be any sort of answer to Asia’s rising instability.
There are also signs that some of Asia’s major powers have sometimes seen regional institutions less as vehicles for cooperation than for competition. Beijing’s clear preference for Asia’s premier institution is ASEAN Plus Three (China, South Korea and Japan). Tokyo, worried that such a small grouping opens the institution up to Chinese domination, prefers to add India, the United States, Russia, Australia and New Zealand. Japan and China each engaged in frenetic campaigning in early 2005 to gain support for its own preference among Southeast Asian countries. In the end, both versions of regionalism were created; the Beijing-Tokyo competition over regionalism may have abated for now but could reemerge in future. Regional institutions could generate Asian turbulence rather than assuaging it.
A third policy solution involves a combination of alliances and regional institutions. By investing in the alliance system and thus raising the costs to a challenger, the United States and its allies can deter China from taking on the status quo. The counterpart to this “hard” balancing is “soft” engagement through regional institutions where the deeper engagement of China will help socialize Beijing into accepting the status quo. The rationale is to soften the confrontational aspect of hard balancing while closing off China’s other options to being socialized through regional institutions.
This hedging concept, however, does nothing to mitigate the weaknesses in both the alliance and regionalism options. The United States and its allies still face real dilemmas in investing sufficiently in the predominance of the alliance system to deter China’s challenge. The allies’ commitment dilemmas—on both sides—don’t go away. And there is scant evidence that two decades of membership in regional organizations have “socialized” Beijing in any significant way. China appears completely comfortable in Asian institutions, even taking on an increasingly vigorous role, because they give Beijing a greater say in regional affairs while allowing it to cordon off any issue it wishes to avoid. Thus, Beijing pursues its stridency in the South China Sea, confident that the region’s institutions won’t discuss the resulting tensions against its wishes. The Asian institutions’ tendency to duck points of friction in the changing power order has led the region’s states to invest heavily in other responses: arms buildups, alliances and security partnerships.
The fourth prescription focuses on a great-power agreement on a concert of power. Proponents argue that, despite increasing instability and rivalry, Asia’s great powers will by necessity agree on the need to avoid conflict. A Concert of Asia would grow from a common agreement that tensions, territorial disagreements and misunderstandings should be managed without conflict. With solidarity among the great powers on this imperative, no single power could challenge the concert system. To manage international rivalries and dissension, a Concert of Asia would rely heavily on mutual commitment of the participating powers to the prerogatives and rights of each and their common responsibilities to maintain the region’s order and stability. For some proponents, this would mean that the United States and China would have to reach agreement that each has a legitimate role in regional leadership, which would require Washington to concede to Beijing a more substantial regional leadership role than it currently does.
The Concert of Asia, unlike the U.S. alliance network or regional institutions, is currently just an idea. It has no track record against which to test its prospects. But, like the other prescriptions, it generates doubts about whether it can mitigate Asia’s age of instability. Concerts, after all, will endure only when their members share fundamentally compatible ideas on what constitutes a stable and acceptable order. This appears to be a remote condition in Asia. There is a fundamental divide among developed and emerging powers on many aspects of the regional and global orders, including the composition and scope of international and regional institutions, the competing imperatives of sovereignty and intervention, and the operation of global markets. For the United States, the answer is for China and the other Asian powers to accede to the existing order; for Beijing this would be tantamount to followership, although it is unclear whether China has formulated alternatives for elements of the current order it opposes. These disagreements manifest themselves in standoffs within several institutions, and a Concert of Asia isn’t likely to avoid similar disagreements. There also appears to be scant incentive for China, the United States or any other Asian great power to concede parity to others. China sees itself as rising and the United States in decline, while many Americans see America’s problems as temporary and China’s ascent as destined to be short-lived. As long as their expectations remain divergent, Asia’s great powers aren’t likely to agree on their mutual roles and prerogatives.
AS ASIA’S emerging strategic rivalries intensify, the current menu of policy choices could actually worsen instability in the region. Strategies of predominance and hedging run the risk of exacerbating instability, while emphasizing regionalism or establishing a great-power concert would at best only paper over the region’s dangerous dynamics. Instead, Washington needs to return to the philosophy that underpinned its highly successful Asia policy in the last quarter of the twentieth century: investing in the stabilizing possibilities of Asia’s local strategic dynamics.
The most fundamental starting point for a new U.S. strategy in Asia must be an acceptance that the region has moved from a situation of a relative absence of rivalry to one of escalating rivalry. In this context, U.S. alliances and partnerships no longer hold the prospect of a “hegemony-lite” policy of making any bid for regional preeminence prohibitively costly. Instead, Washington should accept that the best avenue for countering Beijing’s regional preeminence is through local Asian apprehensions and balancing behaviors, which present China with a much more complicated challenge than direct military competition with the United States. American and Asian interests should coincide here in using these new dynamics of rivalry as stabilizing forces for the region.
Fortunately, Asia’s other new strategic dynamics provide possibilities for mitigating local rivalries with stabilizing factors. The vulnerability of Asia’s emerging powers to sudden disruptions in energy, minerals and food supplies is one such powerful stabilizing factor, reminding Asia’s great powers that if their rivalries spin out of control, they could jeopardize the very bases of their newfound power and stature.
Similar possibilities exist in the growing divergence between the security and prosperity interests of regional states. The growing codependence of Asia’s emerging powers on each other for their prosperity and economic growth should be fostered, as it is a compelling restraint on their strategic rivalry. At the same time, Asian states’ wariness of becoming too beholden to Beijing should forestall the prospect that the rest of Asia will slowly gravitate toward China in forming an exclusive economic and political bloc.
If America gets its approach to Asia wrong, it will exacerbate the region’s instabilities, ushering in a period of global unsteadiness. But as the only non-Asian country with the capacity to influence the geopolitics of Asia, and with a clear set of interests in the stability and prosperity of the region, the United States has a central role to play in helping build a stable Asia in this century. To do this, it must return to the original source of its remarkable policy success in Asia—a commitment to understanding the sources of local instability and investing in local impulses toward peace and prosperity.
Michael Wesley is an adjunct professor at the University of Sydney and a nonresident senior fellow at the Brookings Institution.
Image: Pullquote: For the first time in decades, the prospect of an Asian power hierarchy is imaginable, welcomed by some and feared by others.Essay Types: Essay