Global Economies

“The news last week that China surpassed Japan as the world’s second largest economy (after the US) coincided with the annual report the US department of defense presents to the US Congress, on Military and Security Developments Involving the People’s Republic of China, 2010,” Sidhu writes.  “This happenstance reflects the direct correlation between China’s growing economic strength and its increasing military might and holds important lessons for many countries, notably India.”

While China’s growth is impressive, Sidhu points out the economic and military differences between the U.S. and China: “On the economic front, China’s annual GDP of around $5 trillion is still one-third of the US’ $14 trillion.” China’s defense budget is pegged at somewhere between $80 billion to $150 billion dollars: “Yet even this high figure dwarfs in comparison with the towering US defence budget of over $650 billion,” Sidhu explains.

China plans to expand its growth through new technologies with a focus on cyber warfare, missiles and space technology, and extended-range power projection capabilities.

Sidhu concludes with by looking at India’s progress and the challenges of its future economic and military growth. “Perhaps the most important lesson is to seek to create a cooperative security arrangement, particularly involving China, so that the prospect of war is eliminated,” he asserts. “This might prove to be the most ambitious challenge of them all.”

Click here to read Sidhu’s article on livemint.com

Japan’s political and security calculus has been entirely different from that of India all these decades. Japan has depended on the US for its security through a mutual defence treaty whereas nonaligned India has abjured all military alliances. The two countries have not therefore had a shared security perspective. In foreign affairs Japan has followed the US lead, tuning its relations with India to the tenor of India-US relations.

India’s political closeness with the Soviet Union may not have been a contentious element in India-Japan ties bilaterally, but it certainly impinged on Japanese view of India’s role in south east Asia- a primary area for Japan’s post-war economic effort. India’s closed door economic policies until 1991 discouraged a pragmatic build up of mutual economic ties with an economically focused Japan, despite political divergences. When China opened up economically 12 years before us, India lost out in regional economic stakes, as Japan put its investment and trade energy in building a massive relationship with the giant next door.  The nuclear question has bedevilled India-Japan relations more than it need have because of peculiar Japanese sensitivities as the only victim of the actual use of nuclear weapons.

This Japanese squeamishness has seemed politically and morally dubious as Japan has hung on tenaciously to the nuclear weapon guarantee of the very country that martyred it with nuclear devastation. Japan has, with twisted logic, disregarded the nuclear threat to an India without any external nuclear shield from two collaborating nuclear neighbours, and irritatingly lectured India on the virtues of nuclear abstinence.

Major changes- all welcome- have taken place in the quality and content of India-Japan relations in recent years. India’s transformed ties with the US has prompted Japan to modulate its policies toward India. With India and the US stepping up their defence cooperation, India and Japan announced enhanced defence cooperation between them in a joint statement issued during Indian Defence Minister’s visit to Japan in May 2006.   With India and US establishing a strategic partnership, the Indian and Japanese Prime Ministers also announced a Strategic and Global Partnership in December 2006. It envisages stepped-up defence and technological cooperation, annual summit meetings, dialogue between National Security Advisors, a Comprehensive Economic Partnership Agreement, working together for the security and safety of international maritime traffic, pursuit of the G-4 agenda for Security Council reform and close collaboration in the East Asia Summit(EAS) as well as in the East Asia Community(EAC).

As India-US understanding has grown, so has India-Japan bonding. In December 2009, during Prime Minister Hatoyama’s visit, a New Stage of Strategic and Global Partnership was announced, with agreement on an Action Plan containing specific measures to advance security cooperation, such as deepening the annual strategic dialogue between the two Foreign Ministers, holding an annual Defence Minister level dialogue, instituting a combined foreign affairs and defence 2+2 dialogue(held in July this year) that Japan has only with two allies- the US and Australia, and, calling, in addition, for an open and inclusive East Asian Community as distinct from China’s exclusivist approach that would   impair India’s Look East Policy.

To put the bilateral relationship on a higher strategic footing, Japan has removed 11 Indian entities from its end-user list, sent its army, naval and air chiefs to India and participated in the trilateral India-US-Japan Malabar naval exercise and a quadrilateral exercise with Australia’s addition that became politically controversial in India because of concerns about it slipping into US led defence arrangements in East Asia and China’s querulousness about the intent of these exercises, which also made Japan and Australia baulk at quadrilateral initiatives involving democracies in Asia.

Japan has tried to manage China’s rise constructively by creating positive economic linkages intended to blunt potential friction through interdependence, emulating US strategy. China no doubt provided a huge new market for Japanese products and investments, doubly important because of Japan’s stagnant economy. But a rising and confident China, with bulging economic, financial and military muscle, has begun to cause concern to neighbours because its political and strategic intentions remain unclear. Japan and China have already had a face off in the South China sea which China now defines as its “core interest”. In this background, as well as saturation limits on Japanese economic expansion in China, India’s value as a strategic partner is obvious. Neither Japan nor India has any intention to antagonize China or pursue any containment policy, and the leaders of both countries have clarified publicy that their security cooperation is not China-oriented, but hedging strategies against a potential China threat even as that country is positively engaged cannot be ignored.

A third driving factor in the Japan-India relationship is, of course, the economic opportunities that Japan’s stagflation ridden economy burdened by unemployment and an aging population sees in a growing and dynamic Indian economy. India and Japan are working on a Comprehensive Economic Partnership Agreement(CEPA), and hope to sign it when PM goes to Tokyo this October. CEPA is intended to enhance reciprocal investments and boost the current low levels of India-Japan trade- $13 billion in 2008-2009- far short of the target of $20 billion by 2010. India could potentially serve as a global manufacturing hub for Japanese industry if projects like the Delhi Mumbai Industrial Corridor financed by Japan are accomplished. For India hi-tech trade with Japan holds great promise in the fields of energy efficient technologies, ultra mega power generation projects based on super critical technologies, and new and renewable energy sources like clean coal, solar and nuclear.

The Indo-US nuclear deal and the NSG waiver for India has opened doors for India-Japan discussions on a nuclear pact. Japanese companies like Mitsubishi and Hitachi which control GE and Westinghouse would no doubt want to capitalize on India’s commitment to the US for the installation of 10,000 MWs of nuclear power in the country by its companies. The first round of talks on the nuclear nuclear pact has followed discussions on the subject between the Indian and Japanese Prime MInisters at the June 20 Toronto G-20 summit. The pitch has been queered by the mayors of Hiroshima and Nagasaki opposing nuclear cooperation with a non-NPT country like India, prompting Foreign Minister Okada  to state publicy at New Delhi on August 21 that he expected Japan’s philosophy of non-proliferation, including suspension if India tested, to figure in appropriate terminology in the agreement, to conclude which no time lines will be drawn- a signal that it is unlikely to be ready by October when PM goes to Tokyo. Ostensibly, Japan wants India to go beyond the  language of the India-US nuclear deal. One cannot see how India can.
 

The author is a former foreign secretary of India and a member of EWI’s Board of Directors. The article was published in Mail Today.

At last! A new, and unlikely contender steps onto the field of play to take on the reigning champions of Europe. In an unlikely move last month, British Prime Minister David Cameron scored a dazzling goal against the Sarkozy-Merkel camp on the issue of Turkey’s membership of the European Union.

Cameron said on 27 July: “I’m here [in Ankara] to make the case for Turkey’s membership in the EU. And to fight for it.” He was joined by Lech Walesa on 19 August. “There is no Europe without Turkey”, the feisty giant-killer of Gdansk told a journalist.

Nobel Peace Prize winner from 2008, Martti Ahtisaari, leads an international commission that has twice reviewed the relationship between Turkey and the EU. The first report in 2004 confirmed the EU’s legal obligation to proceed with Turkish accession. The second noted the “vicious cycle” of negative public debate and stalling and reaffirmed the importance of seeing a “transformed Turkey” as a member of the European Union.

Citing the Association Agreement between the EEC and Turkey in 1963, a Customs Union agreement in 1996, and an EU decision in December 2004 that Turkey could join subject to completion of accession instruments, the Ahtisaari Commission went on to note that Turkey is already “broadly integrated into almost all pan-European Institutions”: the Council of Europe, including the European Court of Human Rights, and the Organization for Security and Cooperation in Europe.

According to a 2005 report by the Foreign Policy Centre (London), titled “Turks in Europe: Why Are We Afraid”, the position of Germany’s Angela Merkel reflects the failure of German policies of integration of its Turkish immigrants. More recently, domestic politics in France have led President Sarkozy to make disquieting statements about immigrant communities in his country. His statements have been accompanied by clear indications of state-sanctioned hostility to, or discrimination against certain classes of immigrants (Muslim women wearing burqas) and would-be immigrants (Roma).

I wonder about David Cameron’s motives in joining the debate so vociferously and, as he said, “very passionately”. But this is a fight that I hope he and his new partner, Walesa, can win.

Chancellor Merkel has advocated that Turkey should scale back its expectations and settle for a “privileged partnership”. She is not supported on this by her coalition partner, Foreign Minister Guido Westerwelle, who in visiting Ankara on 28 July, left open the door for continuing negotiations. The Independent Commission labeled advocacy of “privileged partnership” as a “populist excuse”.  There are far higher political stakes in the question of Turkey’s relations with Germany and France, and how these two countries view Turkey’s inclusion in the EU. The prospect that the EU would abandon its legally binding commitment to Turkey because of domestic political positions inspired by xenophobic or anti-immigrant sentiment at home could be, in the words of a Turkish German politician, a “fatal political signal”.

As Turkey becomes more active on the global political stage, it is becoming a lightning rod for the worst nightmares of conservative American analysts, with one from the American Enterprise Institute recently charging at Congressional hearings that Turkey’s foreign policy in the Middle East “favors the most radical elements”. Thankfully, more considered views are in evidence from the German Marshall Fund’s Ian lesser at the same hearings: “if Turkey’s candidacy proves hollow, this could well interrupt or reverse Turkey’s longstanding convergence with the West, further complicating an already strained relationship with the United States.”  But please note, the fight for Turkey in Europe is a fight for dignity and equality as much as it is a fight for realpolitik. If immigrant bashers win, that could become a fatal political signal for the internal security of the “immigration continent”.

China’s hard-won diplomatic gains in Europe in the last two decades are under threat. China’s position in the world of information security is taking its toll, at the same time as European apathy or even resentment towards China is growing. China’s government should act more forcefully to redress both sets of perceptions. At the same time, European institutions, including the EU and NATO, must take China more seriously as a security actor.

European businesses, especially banks and high tech companies, are becoming more hostile because of aggressive efforts coming from inside China to steal privileged information, to use the internet for criminal fraud, to penetrate key infrastructure networks and to generate spam. According to an official Chinese source, the country dealt with 48,000 cases of cyber crime in 2009. Russia’s Kaspersky Lab has identified China as the source of more than half of the world’s cyber crimes in 2009. Serious corporate leaders who are aware of cyber security threats emanating from China no longer engage in any electronic communication for business when they visit the country.

China also sees itself as a victim of large-scale international cyber crime. In June this year, China published its first Internet White Paper. In this document, China committed itself to working with international partners to fight cyber crime. European governments and their  regional organizations need to respond to this commitment and engage more effectively with China to address mutual concerns about cyber security.

Public attitudes in Europe to China are getting more negative, compared with increasingly favorable images of China in many other regions and countries (including even Japan). For example, according to a recent poll commissioned by BBC, “in Italy and Spain already low positive views [of China] have decreased by seven points so that just 14 per cent in Italy and 22 per cent in Spain view China's influence as favorable”.

In January 2010, Charles Grant of the Centre for European Reform noted that attitudes toward China were becoming “prickly”. A Pew Global Attitudes survey report released three weeks ago noted that opinion on whether China’s economic rise is beneficial reported that “majorities in Germany, France and Spain … see China’s economic strength as a bad thing for their country”. The deterioration in European views of China since 2005 revealed in the Pew data has been sharp, with the number holding negative views rising in the UK from 16 to 35 per cent and in Germany from 37 per cent to 61 per cent of those surveyed.

China’s diplomats in Europe have a job on their hands. This is complicated by the relatively small amount of political attention European leaders give to China, apart from occasional official visits. This trend toward indifference has been evident for several years in the regular EU-China summits, about which Chinese sources have often complained. More surprisingly, the European neglect of China also surfaced in the report of the Albright experts group on NATO’s new security concept. The giant Asian country on a growth trajectory got three very bland mentions in that report. The gulf between American preoccupation with China’s rise as a potential security competitor and a more benign (more indifferent?) view at government level in Europe could not be more pronounced. Who is right here?

Europeans need a more rounded and better developed view of what China is and what it holds for their future. As the cyber challenges suggest, risk management for European security (and NATO) in the next ten years may depend far more on how change unfolds in China than in any other single country in the world.

Members of the U.S. delegation included EWI President and CEO John Edwin Mroz; retired General Eugene Habiger, former Commander in Chief of the U.S. Strategic Command; retired General Charles F. Wald, former Deputy Commander in Chief of the U.S. European Command; former Assistant U.S. Trade Representative Timothy Stratford; Joel Cowan, a member of the EWI Board of Directors; David Firestein, EWI's Director of Track 2 Diplomacy; Piin-Fen Kok, EWI's China Program Associate; and Karl Rauscher, EWI's Chief Technology Officer and Distinguished Fellow.

The delegation engaged in a day and a half of discussions with Chinese experts hosted by CIIS and met with Vice Foreign Minister Cui Tiankai, Vice Minister Liu Jieyi of the Chinese Communist Party’s International Department, and Vice Minister Sun Yafu of the State Council Taiwan Affairs Office.  The group also visited the China Institute for International Strategic Studies, the China Arms Control and Disarmament Association, the China Institutes of Contemporary International Relations, Horizon Research Consultancy Group (a public opinion polling firm) and the China Social Entrepreneur Foundation.
The main purpose of the Dialogue was to explore concrete ways to increase strategic trust between the United States and China.  Topics addressed included:

• Critical concerns in U.S.-China political, military and economic relations, including Taiwan, Tibet and barriers to the bilateral trade-and-investment relationship.
• Public diplomacy:  Identifying and debunking the main myths about the U.S.-China relationship, clarifying strategic perceptions of each other, and addressing how each country can make itself better understood.
• The situation in the Middle East, including the Iran nuclear issue and opportunities for U.S.-China cooperation to promote socio-economic development in the region.
• Strategic stability in the 21st century: Balancing strategic offensive and defensive weapon systems.
• Potential U.S.-China cooperation on outer space.

The dialogue produced important new institutional partnerships for EWI in China and laid the groundwork for continued U.S.-China Track 2 activities.

Every American president is expected to roll out a “National Security Strategy” at least once, describing his overarching vision that is supposed to provide a framework for day-to-day decisions.  During the presidency of George W. Bush, two were published—in 2002 and 2006. Just recently, Barack Obama produced his first one. With that as background, take this quick quiz—and no cheating by looking past the questions to the answers.

Guess which statements are from the 2006 Bush National Security Strategy and which are from the 2010 Obama version:

• “The proliferation of nuclear weapons poses the greatest threat to our national security.”
• “Going forward, there should be no doubt: the United States of America will continue to underwrite global security.”
• “The times require an ambitious national security strategy, yet one recognizing the limits to what even a nation as powerful as the United States can achieve by itself.”
• “The United States is waging a global campaign against al-Qa’ida and its terrorist affiliates.”
• “While actively seeking Russia’s cooperation to act as a responsible partner in Europe and Asia, we will support the sovereignty and territorial integrity of Russia’s neighbors.”

Once you’ve made your choices, check out the answers in the footnote. While the two documents highlight many of the differences between Bush’s and Obama’s approach to key national security issues, there is a reason why it’s easy to guess wrong on some of these.  Despite their sharp disagreements, both leaders share some of the same assumptions about the threats the United States faces and the continuing need for the country to play a strong leadership role in ensuring global security—but in cooperation with allies and other partners.

At a time when the BP oil spill in the Gulf of Mexico appears to symbolize the inability of the Obama administration to influence events, when Iran and North Korea continue to defiantly expand their nuclear programs, and when tensions in the Middle East are escalating again, talk of the primacy of American power can seem presumptuous, if not tone deaf. Yet top American policy makers continue to take their country’s leading role for granted. And despite their frequent misgivings about U.S. policies, others continue to do so as well.

Lecturing a visiting American delegation in Beijing last month, Rear Admiral Guan Youfei of the People's Liberation Army called the United States a “hegemon” who is trying to encircle China. In a back-handed way, these and similar denunciations elsewhere only confirm the notion that no one else can aspire to play the same kind of dominant role in the global arena—for better or for worse.

Which is why it’s worth focusing a spotlight on the evolution in American thinking that the new National Security Strategy represents. It’s not as big a change as many expected, but it represents a significant shift in emphasis and rhetoric in a number of areas. Among them:

• While Bush’s 2006 version talks about the need for economic development around the world, stressing the role of free markets and free trade as the engines of growth, Obama’s 2010 version starts with the premise that the United States needs to get its own economic house in order. “At the center of our efforts is a commitment to renew our economy, which serves as the wellsprings of American power.” Bush would not have quarreled with that notion, but before the 2008 economic crisis, the vulnerabilities of the American economy—as well as the global economy—weren’t nearly as evident as they are now. Which is why this is the strongest message now.
• “We will disrupt, dismantle, and defeat al-Qa’ida and its affiliates,” Obama’s version proclaims. But it seeks to distance itself from Bush’s “War on Terror” by emphasizing that it is not a war against a tactic or Islam as a religion, rather a war against a specific network. Bush, too, insisted he wasn’t at war against Islam, but his version declared: “The struggle against militant Islamic radicalism is the great ideological conflict of the early years of the 21st century.”
• Both versions point out that America cannot meet the global challenges alone, but Obama’s puts more emphasis on “collective action” and talks about engaging with not only Russia and China but also rising powers like India, Brazil, South Africa and Indonesia. While it also stresses the vital role of NATO and other traditional alliances, there’s more of a sense of a fluid new constellation of countries to deal with, along with new groupings like the G20 nations.
• The Obama version talks about the need to promote “universal values” such as freedom of speech and religion and insists that the United States will do a better job of upholding those values at home.  At the same time, the Obama team clearly wants to make a break with what it characterizes as “an endless campaign to impose our own values” abroad. Bush’s 2006 version declared unabashedly: “Championing freedom advances our interests because the survival of liberty as home increasingly depends on the success of liberty abroad.”
• Accordingly, the passages in the Obama version puts the most stress on the need for cooperative efforts on common problems, in most cases avoiding direct challenges to existing governments. While calling for increased cooperation with Russia, the Bush report cited the “diminishing commitment to democratic freedoms and institutions in that country.”  Obama’s report mentions American support for the territorial integrity of Russia’s neighbors, but doesn’t directly criticize the Kremlin’s domestic policies. Bush’s report also took on several other countries by name such as Venezuela, which isn’t mentioned in the Obama version. Bush’s report bluntly states:  “In Venezuela, a demagogue awash in oil money is undermining democracy and seeking to destabilize the region.”

There are plenty of other areas where the respective wordings illustrate differences in emphasis, but even on something like the need to diversify sources of energy there are a lot of common themes. All of which argues for putting these two documents in historical context, with both of them fitting into an alternating pattern of American leadership styles.

Broadly speaking, the world agonizes about American leadership for two reasons: either it is seen as too belligerent and aggressive, or as too weak and passive. In recent times, George W. Bush was seen as the exemplar of the aggressive approach, and Jimmy Carter as the exemplar of self-doubt and weakness. The Iraq war cemented Bush’s reputation on that score, and the Iranian hostage crisis and the botched attempt to free the 52 Americans held captive in the Tehran embassy for 444 days did the same for Carter.

Arguably, both labels are unfair—at least up to a point. Bush wasn’t as much of a belligerent unilateralist as his caricature makes him out to be. In dealing with Iran, for example, he was happy to have the European partners take the lead in trying to negotiate a deal to contain its nuclear program—an effort that, like the subsequent one under the Obama administration, has visibly failed. But many members of Bush team like Defense Secretary Donald Rumsfeld were openly dismissive of allies and foes alike.

Carter initially did push a strong international agenda, particularly on human rights. And after he was famously caught off-guard by the Soviet invasion of Afghanistan in 1979, he took a much tougher stance towards Moscow as it began threatening Poland during the rise of Solidarity. He also boycotted the Moscow Olympics. Yet he was tagged as a vacillating president, inconsistent in his use of America’s political and military might, made to look helpless in the face of Iran’s revolutionary guards while agonizing about his country’s spiritual “malaise” and the perils of the nuclear age.

The reality is that any president is vulnerable to criticism and instant labeling, whichever way he leans. But it is possible to change initial perceptions. In the 1990s, the Clinton administration faced the weakness criticism for initially failing to respond to the massacres in Rwanda and the crisis in the Balkans. But by eventually taking the lead on Bosnia and Kosovo, when Europeans failed to do so, it dramatically changed its image.

Right now, the most common criticism of Obama’s foreign policy, both at home and abroad, is that he is too eager to engage former enemies and not sufficiently attentive to traditional allies—or assertive enough about America’s aims. In trying to compensate for Bush’s perceived brash unilateralism, he is hesitant to promote human rights and democracy or to criticize corrupt, dictatorial regimes. As with the case of Bush and Carter, this may be an oversimplification, but Obama needs to be cognizant of those perceptions in order to undo them over time. That’s why his National Security Strategy’s less-than -convincing pronouncements on such issues are a bit of a missed opportunity.

But those strategy documents don’t tell anything like the whole story. The real key is the implementation. So far, for example, Obama hasn’t demonstrated that he has a convincing plan to curtail the escalating federal budget deficit, which is crucial to the long-term health of the American economy. On the other hand, his more muted talk on terrorism hasn’t prevented him from launching an intense campaign of deadly drone attacks on Al-Qa’ida’s leadership.

The most important message of both the 2006 and 2010 documents is that America still sees itself as the leading power in the world. Looking at the world today, there’s still no alternative superpower. Not the European Union, which is caught up in the euro crisis and, for all its accomplishments, hasn’t lived up to its broader political ambitions. Not Russia, which has been unable to arrest its rapid demographic decline or to build the kind of healthy politics, civil society and rule of law that are prerequisites for true modernization. Not China, which, despite its impressive economic boom and growing political clout, is still more of a regional than a world power.  

Yes, the world still looks to America and America still looks to the world. But America’s influence can also continue to wane if its leadership isn’t up to the current challenges—no matter what the National Security Strategy says.

Voice of America's Russian service quotes EWI's Jacqueline McLaren Miller and Danila Bochkarev in an article about Russian-Italian relations. Miller and Bochkarev discuss the importance of South Stream, the proposed gas pipeline that would connect Russia to Italy through Bulgaria.

"There is a clear political momentum growing for South Stream in Europe. What is in sharp question is the economic momentum," says Miller. "This is an expensive project—some estimates have put it at twice the projected cost of Nabucco."

"There are important cultural and scientific contacts between the two countries," adds Bochkarev. "Italy strongly supports Russia’s integration with the rest of Europe."

A analysis of Gazprom's strategic engagement with Central Asia by EWI Associate Danila Bochkarev is featured in the June 2009 issue of Pipeline and Gas Journal.

Bochkarev, who initially wrote the piece for EWI's web site, identifies the commercial interests of Gazprom, the Russian energy giant, and lays out the ways in which these interests translated into a regional pricing strategy. "An understanding of Gazprom’s strategic imperatives in Central Asia could have helped to predict the conglomerate’s new pricing strategy towards Ukraine," he writes. "Further, it could have avoided – or at least attenuated – the January 2009 gas crisis between Moscow and Kiev."

Click here to read Bochkarev's article in Pipeline and Gas Journal

European Energy Review features State-Owned vs. Multinational Oil: New Rules for Market Intervention, a policy paper by EWI Senior Fellow Angelica Austin.

Click here to read the coverage on European Energy Review

Click here to view the policy paper by Angelica Austin