This week China imposed a ban on beef supplied by four Australian meat suppliers. Beijing is also looking at imposing crippling tariffs on barley imports.
Both of these come in the wake of Canberra’s calls for an independent investigation related to the COVID-19 outbreak in China to garner a better understanding of the systemic reasons for the outbreak, but more importantly to glean a path forward as to how to prevent another pandemic from emerging.
How should middle powers such as Japan respond to this economic coercion of one of its closest partners? This question is made more complicated by the fact that Japan’s economic prosperity remains deeply wedded to a stable political and economic relationship with its biggest trading partner, China.
First, we should recognize that the implementation of economic coercion to achieve China’s political objectives is not an exception, it is a track record. Many of Japan’s liberal democratic friends and partners as well as Japan have experienced similar treatment.
For instance, China has imprisoned three Canadians since December 2018 after Canada's arrest of the Huawei executive Meng Wangzhou and coercive economic measures taken against it, including blocking canola imports into China.
Another example is that of South Korea, which received similar coercion in fall 2017 after installing the THAAD (Terminal High Altitude Area Defense) system to defend against North Korean missiles. Tours were canceled, while South Korean blue chips such as Lotte faced regulatory interference that caused negative impacts on commercial operations. Other forms of coercion included prolonged tax investigations, fines, delayed licensing approval and at least one case of property seizure.
Japan itself has also been a victim of economic coercion with the informal embargo of rare earth materials in fall 2010, and then again beginning in September 2012 after its nationalization of the Senkaku Islands. The latter incident resulted in vandalism of Japanese businesses in China, Chinese consumers temporarily refraining from consuming Japanese products and a decrease in bilateral trade.
Norway, the Philippines and France, among others, have been casualties of economic bullying as well. This list does not include those countries that were “warned” of the economic consequences for refusing to allow Huawei’s 5G system to be introduced into their countries.
With the track record clear, the second aspect of this pattern of economic coercion is that it is targeted at states with a strong and enduring relationship with the United States and strong economic ties with China. Punitive economic coercion is not just meant to shape the bilateral relationship between China and the targeted counterpart, but also to drive a wedge between the targeted country and the U.S.
By inflicting economic pain on friends of the U.S., Beijing is hoping to compel states to choose between China as their economic benefactor and the U.S. as their security partner.
This logic is sound as states like Japan, Australia and South Korea deeply rely on China for their economic prosperity. Notwithstanding, the economy versus security choice deeply oversimplifies the relationship that each of the above countries has with the U.S.
They are not merely security partners. Japan, Australia, Canada, South Korea and others share a respect for a rules-based order and liberal democratic institutions, not to mention a plethora of other values that act as an enduring cohesive that binds these countries and societies together at many levels.
Ordinarily, friends and partners of the U.S. could rely on Washington to “watch the backs” of middle powers through proactive and rational diplomacy, a commitment to multilateralism, and through investing in the U.S.’ most valuable foreign policy asset: its deep and widespread global allies, partners and networks.
Unfortunately, this asset has been profoundly weakened by the “America First” president that attenuates the ability of middle powers to robustly deal with bullying by Beijing.
The question for Japan and other middle powers is how to protect themselves from economic coercion and the negative downstream effects of U.S. President Donald Trump's policies.
First, forging middle power solidarity of like-minded countries is imperative. Japan has a leading role here alongside Australia, Canada, South Korea and other like-minded states.
Building economic security to combat economic coercion should be a key pillar of any middle power alignment. Here, Japan has a key role based on its leadership in resurrecting the Trans-Pacific Partnership.
In the wake of Trump’s withdrawal from the original TPP, Prime Minister Shinzo Abe made the consequential decision to move forward on the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) without the U.S. At the same time, he pushed forward on the Japan-EU Economic Partnership to inculcate Japan into two critical multilateral trading agreements.
To grapple with the growing challenge of economic coercion by Beijing, Japan should forge a consensus with other middle powers to expand the CPTPP so that it creates a grouping of like-minded members. This grouping would help diversify the economic and trade portfolios of participating countries so they are not so deeply affected by the deployment of economic coercion as a tool to cajole and extort states when they disagree with Beijing.
Key candidates should be South Korea and the United Kingdom, but also states in Southeast Asia. If Vietnam was able to make the necessary commitments to join the high-quality CPTPP, there is no reason other ASEAN member states can't do likewise.
This does not mean decoupling from China. China plays a critical role in the global production network and its burgeoning middle class are vital engines of global economic growth. We cannot decouple nor would it be beneficial to decouple.
What is pivotal though is a diversification of our economic and trade portfolios so that China is one part of a balanced trade and economic strategy.
Expanding the CPTPP is not enough. Japan needs to find a path for India’s inclusion into the Regional Comprehensive Economic Partnership. Without India, the RCEP would be less influential due to size, but also for the same reasons explained above, the more trade partners we have means less dependence on a single state for our economic security.
Middle power solidarity should not only be about insulating themselves against economic coercion. It is critical that they find ways to re-engage the U.S., either in a second Trump term or in the case that presumptive Democratic presidential candidate Joe Biden is elected.
This is even more critical in the COVID-19 pandemic era. Without a strong, reliable and rational U.S. as partner, middle powers will be increasingly exposed to coercive diplomacy and many of the Indo-Pacific region’s challenges will not be resolvable.
Middle powers should find ways to include the U.S. in the CPTPP. Its economic weight would be magnified, helping middle powers like Japan insulate themselves from economic coercion. Inclusion of the U.S. in the CPTPP would also be a tremendous motivator for China to make reforms to its economy so that it would be more transparent, in order for it to eventually join the first-tier trading agreement and enjoy its benefits.
Unpopular but crucial, Japan and other middle powers need to demonstrate through action the merits of multilateralism. This means they need to step up to the plate and take on more of the burden that the U.S. has traditionally shouldered. This means more collective, bilateral and multilateral cooperation in other domains outside the economic sphere.
For too long the U.S. has been the primary security provider in the region. It is time for middle powers to work in concert with the U.S. so that collective resources can be deployed in the Indo-Pacific. By doing so, middle powers such as Japan can transform the inward-looking “America First” mantra into “multilateralism first.”
How to do this? The Obama administration gave us half the answer with the “Pivot” or “Re-balance.” Here it was the U.S. unilaterally shifting resources to the Indo-Pacific region. To deal with the challenges that lie ahead in the Indo-Pacific, such as economic coercion, middle powers will need their own pivot. They must shift in their diplomacy to collectively shoulder more of the burden in the region alongside their enduring partner the U.S. through an active promotion of multilateralism while supporting each other and a rules-based order.
The question is whether Japan and other middle powers will build solidarity to achieve that worthy goal.
Stephen R. Nagy (@nagystephen1) is a senior associate professor at International Christian University and a visiting fellow with the Japan Institute for International Affairs.
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