Martin Jacques - When China Rules the World

From the ASEAN perspective, the origins of the new rapprochement lay in two initiatives. The first was the decision taken in 1992 to establish AFTA — the ASEAN Free Trade Area — which required the ten member states to remove all barriers to free trade by 2010. [875] [875] Shee Poon Kim, ‘East Asian New Regionalism: Toward Economic Integration? ’, Ritsumeikan International Affairs , 5, 2003, p. 70. The second was a call made by Mahathir Mohamed in 1990 that East Asia should establish an East Asian Economic Group, later termed the East Asian Economic Caucus, as a means of offsetting the negative effects of the Western-dominated international economic order. [876] [876] Zhang Yunling, East Asian Regionalism and China , p. 3; Shee Poon Kim, ‘The Political Economy of Mahathir’s China Policy: Economic Cooperation, Political and Strategic Ambivalence’, Annual Review of International Studies , 3 (2004), p. 7. The proposal was supported by ASEAN but opposed by Japan, and it was only after the Asian financial crisis that it gained serious momentum. Mahathir’s initiative stemmed from his conviction that membership of East Asian bodies should be confined to countries within the region and his antipathy to APEC (Asia-Pacific Economic Cooperation), which included non-Asian members like the US and Australia. In fact Mahathir’s position prefigured what was to become an increasingly important fault line within the region — the exclusion or inclusion of the United States — with Japan always favouring inclusion and China, sotto voce , tending to favour — though not always — exclusion.

The shift in China ’s approach took place between 1997 and 2001. [877] [877] Shambaugh, ‘Return to the Middle Kingdom?’, p. 27. At a China-ASEAN summit in 2001 — known as ASEAN+1 (i.e., China) — China proposed the creation of a China-ASEAN free trade area to be established by 2010 (initial discussions had begun in 1999). [878] [878] www.aseansec.org/16646.htm; and Wang Gungwu, ‘ China and Southeast Asia ’, p. 204. The ASEAN-China Free Trade Area, or ACFTA as it became known, was an extraordinarily bold proposal to create a market of almost 2 billion people, thereby making it by far the largest free trade area in the world. [879] [879] Zhang Yunling, East Asian Regionalism and China , p. 18. The ASEAN countries had become increasingly nervous about the effect China ’s growing economic power might have on their own exports and also their inward foreign investment: its proposal for a free trade area helped reassure them that China would not pursue economic growth regardless of the consequences for others. At the ASEAN-China summit in 2003, China formally acceded to ASEAN’s Treaty of Amity and Cooperation — which committed China to the core elements of ASEAN’s 1967 Charter — the first non-ASEAN country to do so (India has since followed). In 2002 it also signed the Declaration on the Conduct of Parties in the South China Sea, which rejected the use of force in resolving the disputes over the Spratly and Paracel islands. [880] [880] Shambaugh, Power Shift , p. 32; and Callahan, Contingent States , p. 71. These had been a serious and continuing source of tension between China on the one hand and Vietnam, Taiwan, the Philippines, Malaysia and Brunei on the other, culminating in military conflict with Vietnam [881] [881] Rex Li, ‘Security Challenge of an Ascendant China: Great Power Emergence and International Stability’, in Zhao, Chinese Foreign Policy , p. 28. and the Philippines. [882] [882] Callahan, Contingent States , p. 66. An 8,000-strong contingent of Marines is based on Hainan Island for the purpose of defending China ’s claims. The agreements between ASEAN and China were to have a major impact on the political dynamics of East Asia. Prior to them Japan, which had long been the major external player in the South-East Asian economies, had resisted entering into regional trade agreements, preferring instead to operate by means of bilateral agreements. Japan now suddenly found itself on the back foot, outmanoeuvred by China ’s bold diplomacy, and ever since it has been running to catch up. [883] [883] Zhang Yunling, ed., Designing East Asian FTA: Rationale and Feasibility (Beijing: Social Sciences Academic Press, 2006), p. 61; Nobutoshi Akao, ‘Re-energizing Japan’s Asean Policy’, AJISS-Commentary , 2 August 2007, posted on www.jiia.or.jp/en.

Already, in 1997, during the Asian financial crisis, there had been the first ASEAN+3 summit (China, Japan and South Korea) and this was later formalized into a regular event. At the ASEAN+3 summit in 2003, the Chinese premier Wen Jiabao proposed that a study be made into the feasibility of an East Asian Free Trade Area, which was accepted. [884] [884] Chu Shulong, ‘US Security Strategy in Asia and the Regional Security Regime: A Chinese View’, paper for IIPS International Conference, Tokyo, 30 November — 1 December 2004. Following China ’s lead, in 2005 Japan started to negotiate its own Free Trade Agreement with ASEAN, which was agreed upon in outline form in 2007. In 2009 Australia and New Zealand did likewise. There is now a complex web of Free Trade Agreements in the process of negotiation in East Asia which is intended to act ultimately as the basic infrastructure of a wider East Asian Free Trade Agreement, designed to be in place around 2007 and implemented before 2020. [885] [885] Zhang Yunling, East Asian Regionalism and China , pp. 24, 29. Whether this ever materializes, of course, is another question, but the progress towards a lowering of tariffs in the region — with China in the driving seat — stands in marked contrast to the effective demise of the WTO Doha round, a point lost on neither ASEAN nor the rest of East Asia. [886] [886] David M. Lampton, ‘ China ’s Rise in Asia Need Not Be at America ’s Expense’, in Shambaugh, Power Shift , p. 312.

ASEAN lies at the core of the new East Asian arrangements and has provided them with their template. Although South-East Asia has always been the poor relation in the region (in 1999, for example, the GDP of the North- East Asian economy was more than nine times that of ASEAN), [887] [887] Kim, ‘East Asian New Regionalism’, p. 65. it would have been impossible for North-East Asia to have played the same role because the latter remains too divided, riven by the animosity between Japan and China, and to a lesser extent that between South Korea and Japan, as well as distracted by the disputes over Taiwan and the Korean Peninsula. As a result there is nothing like ASEAN in North-East Asia: such formal multilateral arrangements are almost completely absent. An important consequence of these various developments has been the effective exclusion of the United States from economic diplomacy in the region. This has never been China ’s stated aim, [888] [888] Zhang and Tang, ‘ China ’s Regional Strategy’, pp. 52-3. but, intended or otherwise, it is what has happened in practice. The centrality that APEC enjoyed in the mid nineties, and in which the US was a key player, [889] [889] Michael Yahuda, ‘The Evolving Asian Order: The Accommodation of Rising Chinese Power’, in Shambaugh, Power Shift , p. 349. now seems a distant memory. The marginalization of the US is also manifest in the Chiang Mai Initiative, first agreed in 2000 on the proposal of the Chinese, [890] [890] Jim O’Neill et al., ‘ China and Asia ’s Future Monetary System’, Goldman Sachs Global Economics Paper , 129 (12 September 2005), p. 11; for details of the Chiang Mai Initiative, see www.unescap.org/pdd/publications/bulletin2002/ch8.pdf. which involves bilateral currency swap arrangements between the ASEAN countries, China, Japan and South Korea, thereby enabling East Asian countries to support a regional currency that finds itself under attack. The agreement was a direct product of the Japanese proposal for an Asian Monetary Fund during the Asian financial crisis, [891] [891] Zhang Yunling, East Asian Regionalism and China , p. 54. which was strongly opposed at the time by both the United States (on the grounds that it would undermine the IMF) and China (because it came from Japan). China has since swallowed its opposition — no doubt in large part due to the strengthening position of the renminbi — while the United States, weakened by the IMF debacle in the Asian financial crisis, has not resisted. [892] [892] Ibid., p. 29; also Martin Wolf, ‘Asia Needs the Freedom of Its Own Monetary Fund’, Financial Times , 19 May 2004.