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Jeju Forum Alumni Newsletter
Titles [Jeju Forum Alumni Newsletter] (No.7 | November 2018) The Geoeconomics of the Indo-Pacific Initiative
Writer JPI  (admin)
2018-11-29 오후 7:18:27

What are the geoeconomic implications of the notion of the “Indo-Pacific” region, recently advanced and promoted by the United States? This session discusses the possibilities for concretization and expansion of the economic cooperation in the region ranging from the Pacific Ocean to the Persian Gulf, as actively encouraged by the US and Japan within the framework of the “Indo-Pacific Strategy.” In particular, geoeconomic implications of the economic interests and diplomatic leverage in security relations that the Indo-Pacific initiative may offer to potential participants in their pursuit of common strategic goals will be explored in detail.

 

The following are excerpts from the final report of the Jeju Forum 2018.

 



 

Moderator

KANG Seonjou Professor, Institute of Foreign Affairs and National Security, Korea

National Diplomatic Academy

 

 

 

Discussant

James CHOI Ambassador of Australia to the Republic of Korea

KIM Joong-Keun Former Ambassador of the Republic of Korea to India, Executive Adviser, PG Group, Singapore

Shivshankar MENON Chairman, Advisory Board Institute of Chinese Studies, India

Akihiko TANAKA President, National Graduate Institute for Policy Studies

 

James CHOI Environments for economic growth are changing in Asia. The changing nature of economic growth is reshaping economic environments. The U.S. remains the world’s largest economy, but its relative weight in the global economy has been declining. In a changing environment, other countries have emerged as economic powers such as Japan in the 1980s, the four Asian tigers (i.e. Korea, Taiwan, Hong Kong, and Singapore) in the 1990s, and China today. From the perspective of Australia, the global economy is tilting toward the West. Despite the rapid economic growth, China is facing challenges in its transition from a labor-intensive economy toward a service- and technology-based economy. With the center of the economy shifting toward the West, countries in the ASEAN region are expanding at a rapid rate. The changes in strategic weight are fueling competition for hegemony in the region. China is transforming itself into a superpower and has a good chance of outgrowing the U.S. Moreover, there is a growing probability of China exercising its military might, on the back of its economic growth. China has the largest military power in the region. China is also challenging the world on the ideological front. China is displaying strong confidence as a leader in an alternative system, and enhancing its influence on the global stage, advocating its values, interests, and systems. During a multilateral forum, Chinese President Xi Jinping expressed his commitment to making China a global leader by implementing the “Made in China 2025” initiative in strategic areas in a world to be reshaped by the Fourth Industrial Revolution. In the past, the pursuit of economic ambition, or the expansion of trade relations, overshadowed strategic rivalry. Today, economic competition is raising tension. Economic might and trading power are used for strategic purposes. Regional integration also sees the heightening of geoeconomic competition for infrastructure and related financing. China’s One Belt, One Road initiative reflects the country’s confidence in building a new economic order.
The economic expansion of this kind is not without risks. Currently, about two thirds of the countries included in the One Belt, One Road initiative are classified below an investment grade. A case in point is Sri Lanka’s handover of its Hambantota Port to China. The Australian government is concerned about the impact of the concession deal between the two countries on neighboring countries in the Pacific region and the possible threats to sovereignty. It should be noted that the U.S. has also a strategic interest in shaping the Indo-Pacific region. Under the Trump administration, the U.S. abandoned the Trans-Pacific Partnership (TPP), and President Trump is endeavoring to achieve strategic goals through tariffs. The Trump administration’s tariff policy is not just targeting its largest rival, China, but also allies such as Korea, Australia, and the EU. “America First” does not differentiate rivals from non-rivals.

The U.S.-China rivalry is going to define the Pacific region. Japan as the world’s third largest econo¬my, is unlikely to sit on its hands while the region is expanding toward the West amid rapid changes. The relation between Japan and China also holds the key to the future of the region. Competition in the region should further intensify, as India is implementing its “Act East” policy, supported by rapid economic growth, and China is pursuing its “Look West” policies. The future of power dynamics in the Indo-Pacific region is uncertain. One thing for sure is that we have never lived in a world where China, India, and Japan are equally mighty. It looks inevitable that the Indo-Pacific region will be a stage for competition.

Ahead of the U.S. and Japan, Australia used the term, “Indo-Pacific region” in its 2013 Foreign Policy White Paper and the 2016 Defense White Paper. Australia’s 2017 Diplomacy White Paper specified the Indo-Pacific region as a key region. As Australia faces the Indian Ocean to the West and the Pacific Ocean to the East, it is natural to see the Indo-Pacific region as a collective concept. Moreover, although some say that the quadrilateral talks are part of the Indo-Pacific strategy, and the “Quad” shares the understanding of the Indo-Pacific region, this is incorrect. The quadrilateral cooperation does not involve the military realm nor seeks to keep China in check. Australia does not believe containing China is possi-ble or desirable. It is proper to define the Indo-Pacific region, despite being a useful term, in a way that suits respective parties. Australia refers to the area as the Indo-Pacific region not because it has the same strategies with other parties, but because it has the same perspective of geoeconomic and geopolitical changes in the world. I believe the term Asia-Pacific, as it is, is not sufficient to grasp the pending issues, and the Indo-Pacific region better reflects a new reality.

What matters is what we want to do in the Indo-Pacific region. Australia’s 2017 Foreign Policy White Paper prioritizes enhancing and promoting a “rules-based order” in the Indo-Pacific region. The Indo-Pacific region stands to benefit most from the rules-based order that has contributed to the devel¬opment of the world after World War II. Korea, the ASEAN region, China, and India have achieved rapid growth by ensuring that the rules-based order regulates competition and enables free and fair competition. Australia wants the region will be secure, open, prosperous, resilient, and free from coercion. Accordingly, it is necessary to examine the challenges facing the region. Geopolitical and geoeconomic competition should not be allowed to destroy the global commons.

 

KIM Joong-Keun Let me explain about the back¬grounds of maritime security threats. Currently, with the competition between the U.S. and China escalating, Asia is facing new threats—maritime territorial disputes, Sea Lines of Communication (SLOCs), and the modernization of China’s navy. As the U.S. and Japan act in response to China’s rise, the In-do-Pacific notion was introduced. Under the Obama administration, the U.S. adopted the Indo-Pacific notion and defined SLOCs as a key maritime interest for the U.S. Shinzo Abe, Japan’s prime minister proposed that Japan, the U.S., India, and Australia forge security partnership in the Indo-Pacific region under the “Democratic Security Diamond” initiative. Australia used the term Indo-Pacific in its 2013 Foreign Policy White Paper. Taking its geopolitical location into consideration, Australia has expanded the alliance system beyond the U.S., forging secu¬rity relations with India, as is the case with Japan. India actively participated in security partnerships with the U.S., viewing China’s One Belt, One Road initiative as a policy to enclose India economically and geographically. In 2013, China introduced its One Belt, One Road as a policy focusing on the con¬nectivity and cooperation with Eurasian countries. However, some view the policy as being designed to restrict U.S. leadership in Asia and magnify China’s influence. President Trump confirmed the strategic importance of the Indo-Pacific region in 2017, mentioning “a free and open Indo-Pacific region.”

Disputes over maritime security in the Indo-Pacific region have brought to the surface China’s conflicts with Japan in East Asia, and with Southeast Asian countries in the South China Sea. China’s aggressive maritime activities have prompted Southeast Asian countries to build a tighter security partnership with the U.S. The threat to SLOCs, which may have a significant impact on the maritime trade of energy resources, has important security implications for China and other Asian countries. Notably, the renewed U.S. interest in Asia has made China more vulnerable to the risk of oil supply disruptions. The modernization of China’s military forces is focusing on upgrading A2/AD and maritime forces. Given the possibility of China having nuclear-equipped fighter bombers by 2020, China’s strategies are posing a formidable threat to the U.S. In response, the U.S. is enhancing its oversight and naval presence in the Indo-Pacific region, embracing the Air-Sea Battle (ASB) approach.

Maritime security is emerging as a key agenda in the Indo-Pacific region. Nevertheless, the region lacks the following three conditions to enhance economic integration and cooperation: 1) a dialogue system for economic cooperation 2) regional trade agreements and 3) infrastructure/connectivity initiatives.

The primary objective of the Indo-Pacific Vision is to establish regional frameworks to address secu¬rity concerns and include India in the existing allies. It remains uncertain whether the Indo-Pacific Vision will be able to materialize. The U.S., a strong advocate for the Indo-Pacific Vision has yet to come up with action plans. China will definitely make efforts to reduce the overwhelming influence of the U.S. India’s admission to APEC might be a solution, as the Indo-Pacific region lacks an internal mechanism for regional economic cooperation.

Economic strategies available to Korea are closely related to security strategies. It should be noted that the Indo-Pacific Vision is basically related to the escalation of the U.S.-China rivalry. Given that the alliance with the U.S. is pivotal to Korea, the safety of marine vessels and freedom of navigation should be key factors to be considered.  

 

Shivshankar MENON The Indo-Pacific region is critically located. When Antarctica is placed at the center of the map, the ocean is one huge, interconnected body of water that spans several basins, and marine transportation is most cost-efficient. That is, using the term “Indo-Pacific” itself is the first step in recognizing that the ocean is one continuous body of water. However, it also reflects the difficulty in dividing the ocean into regions or segments.

His Excellency Prime Minister Narendra Modi defined the Indo-Pacific region as stretching from the shores of Africa to that of the Americas. This area is what India considers the Indo-Pacific region. What matters is that the ocean is gaining importance to us all. Nearly 90 percent of India’s trade is routed to maritime passages. However, geographical differences exist even in the ocean. The Pacific Ocean, the Indian Ocean and the Atlantic Ocean are open, whereas the East China Sea and the South China Sea are enclosed by land. For instance, the axis of the Indian Ocean has never been dominated, which explains why the Indian Ocean, unlike other enclosed seas, became the stage for international trade.
There has been a geographical justification for using the term Indo-Pacific. The economic justification is also gaining ground. The center of the global economy is shifting toward the Indo-Pacific region, which is the key driver for global economic growth. In addition, most countries which benefit from globalization are located in this region. Accordingly, trade-dependent economies have shared interests to keep maritime passages secure and stable.

It is ambiguous whether the use of the term Indo-Pacific is geopolitically justifiable. State actors behave as if it is more insecure than ever in dealing with issues that have deteriorated over the past two decades such as denuclearization, piracy, terrorism, drug trafficking, and human rights. The world is wit¬nessing the largest-ever arms race in human history. In Asia alone, national spending on defense systems, especially offensive arms such as submarines and missiles, surged 9 percent from 2013 to 2015. Many countries in the region are heavily investing in their naval forces, as well as national defense, and act as if they feel insecure, joining hands with informal alliances. With a sense of insecurity growing over the past decade, defense security cooperation has increased exponentially, and cooperation has become the norm.

However, the western shore of the Pacific Ocean—near China and the Indian Ocean—has problems of a different nature. Today, the Indian Ocean does not have serious security issues, while the West Pacific Ocean is witnessing territorial and maritime disputes and remains under the influence of the U.S.-Japan alliance. The world’s superpowers are implementing strategies that would increase their own interests. China has come up with the One Belt, One Road initiative worth 1 trillion dollars, while the U.S. is expected to invest 1.5 billion dollars over the next five years to expand its presence in the Indo-Pacific region as part of its efforts to make the Indian Ocean central to its military strategies.

In conclusion, the term Indo-Pacific is an economically justifiable one based on the geographical concept and has a geoeconomic element. Neverthe¬less, it is questionable whether the term will provide guidance to the world’s superpowers. Frankly speaking, as a government official I do have a keen interest in what the government will do. However, what the government announces is one thing, and what it does is another. As such, when it comes to the Indo-Pacific region, I believe actions speak louder than words. As maritime security interests vary by country, countries will respond differently to situations that may occur in the Pacific Ocean, the Indian Ocean, and the Atlantic Ocean. A shared vision for the Indo-Pacific region does not exist, and one should not assume that every country has a shared understanding of the Indo-Pacific region. Countries other than China have made few changes to their maritime strategies over the past three years. In addition, with the absence of institutional consistency, the East Asia Summit (EAS) may provide a theoretical basis for joint security strategy. However, it remains uncertain whether member countries have reached a consensus on using the EAS to jointly address security threats. I think the EAS will be able to serve as a reasonable and proper forum led by the heads of the member countries, yet it is unlikely to materialize anytime soon.

The Indo-Pacific notion has been discussed in terms of an ocean. The ocean is an important cor¬ridor connecting land. Without taking the land into consideration, addressing marine orders alone won’t solve security problems. For instance, the U.S., a seafaring nation sandwiched between the Atlantic Ocean and the Pacific Ocean, may believe so. However, that is not the case for other countries. Accordingly, both land and marine issues should be part of the equation. Moreover, the Indo-Pacific strategy is proposed and analyzed as if coastal countries should fully respond to the strategy of advanced countries. No coastal country would like it if it were left with no other options but to follow the lead of advanced countries. Given the way it is presented, the Indo-Pacific strategy is unlikely to win support and participation from many countries. Countries should be able to work together when investments and actions to enhance maritime security are implemented through a bottom-up approach, trust-building and risk-control measures are in place, and strategies encompassing all coastal countries are devised. The geoeconomics of the Indo-Pacific region should be geographically based. The Indo-Pacific notion, which sees increasing economic justification, should be embedded into the strategic and geopolitical concept, which requires all related countries to work together. If such is the case, the Indo-Pacific region’s geoeconomic potential should be materialized.

 

Akihiko TANAKA With differing views on the Indo-Pacific region, there is no consensus as to what the term Indo-Pacific term refers to, and how to define the geographical scope of the Indo-Pacific region. Given that the Free and Open Indo-Pacific (FOIP) strategy, as announced by Japanese Prime Minister Abe, first brought up the idea of connectiv¬ity with Africa, I think Japan views the Indo-Pacific region as encompassing California and East Africa.

Japan is seeking to expand the implications of the Indo-Pacific notion, with the center of the global economy shifting from the Atlantic Ocean in 1990 to Asia-Pacific in the 2000s and southward to the Indo-Pacific ever since. The key drivers for innovation are IT powerhouses such as California, China, and India. As the shifting of the economic center is accompanied by changes in trading partners, Japan should take note of growth potential. The 21st century sees ongoing changes in viewpoints. During his visit to India in 2017, Prime Minister Abe referred to the relation between the Indian Ocean and the Pacific Ocean, drawing attention to changes in the way the region has been perceived. Overall, global projections forecast the growth of the Indo-Pacific region, which is premised on stability and peace. The economic prosperity that East Asia has achieved is attributable to the absence of wars since 1979, which is almost a political miracle. Efforts to preserve the peace are needed to ensure peace and prosperity in the Indo-Pacific region. To this end, there are a few things to be noted. The first is managing the balance of power dynamics. I agree with His Excellency Ambassador James CHOI about anti-China sentiment, yet balancing power dynamics is important. Power dynamics should be balanced through engagement with China. The second is to guard against risks arising from vulnerable countries. Civil war-torn countries and other developing countries are located close to the Indo-Pacific region and experience dynamic developments. Related threats should not be overlooked, and efforts must be made to bring peace to the region. Aside from efforts to preserve peace, it is necessary to conditions for basic economic growth. Infrastructure, physically connecting the Indo-Pacific region, should pave the way for economic growth. Aligning existing projects with new projects, or at a national level, would enable Japan and China to work together. Infrastructure develop¬ment is pivotal to peace preservation and provides grounds for further growth. The development of a talent pool is also important. A Sino-Japan partnership is critical in such areas.

 

Q & A

 

Q. His Excellency Ambassador KIM Joong-Keun placed a relatively greater focus on the rise of China and underlined China’s maritime force as a potential threat. Other presenters viewed the Indo-Pacific re¬gion from a geographical and economic perspective. Why do you consider China to be a potential threat?  

 

A. KIM Joong-Keun At this point, the details of the Indo-Pacific Vision are undisclosed. For instance, none of the Quad has yet to elaborate on security issues. The same is true of economic issues. That’s why all of the talks are devoted to explaining the background. The Indo-Pacific Vision was created out of concerns over the Sino-U.S. rivalry. Indeed, such rivalry has an impact on security. Economic development plans have yet to be established.

 

Q. Prime Minister Abe was the first to bring up the Indo-Pacific Vision, saying that the strategy would be aligned with China’s One Belt, One Road initiative. What is your take on that?

 

A. Akihiko TANAKA I could not agree more. I believe the Indo-Pacific Vision and China’s One Belt, One Road initiative are compatible. When it comes to political backgrounds, Japan was late to join China’s One Belt, One Road initiative because political tensions with China made it difficult for Japan to embrace China’s policies and work together with them. The political atmosphere since 2014 is hampering Japan from fully committing to China’s One Belt, One Road initiative.

 

Q. During the presentation, Shivshankar MENON said additional elements should be satisfied to realize the Indo-Pacific Vision. What obstacles do you see to the Indo-Pacific Vision?


A. Shivshankar MENON When asked about what the Indo-Pacific strategy is, I gave a blended answer because I think most countries in the region have their own Indo-Pacific strategies. Japan and India also have had their strategies for a long time. Strategies cover issues common to the region, which explains why countries in the region have entered free trade agreements with each other since the 1990s. On the economic front, the Indo-Pacific strategy is already underway. Accordingly, it would be wrong to say that there is no strategy, and nothing has happened.

On the maritime security front, since the 1990s countries in the Indo-Pacific region have worked together more than ever, when they joined hands to combat piracy in the Malacca Straits. Respective countries have their own strategies. If one asks what India can offer, the answer is that India will do its best to do what it can in the realms of economy and security. It depends on what the partners want. I am not saying that a big picture should be presented, and all must be asked to join. The Indo-Pacific strategy won’t work that way because respective countries are free to choose areas of cooperation according to their varying security and economic needs. For instance, I think maritime security is an area where all countries—the U.S., Japan, China, and India— can work together. As His Excellency Ambassador KIM Joong-Keun mentioned, it is encouraging that although countries are placed in different parts of the Venn diagram, the overlapping section does exist and continues to expand over time. Countries increasingly share interests in economic, political and security issues, and now is time to work together in a forum larger than the Quad. Accordingly, I believe the EAS will serve as a proper forum.

 

Q. The Indo-Pacific Vision has been around for 10 years. But it is only recently that the strategy is being discussed. Why do you think it took so long for it to come to people’s attention?

 

A. Akihiko TANAKA It was 2016 when Prime Minister Abe brought up the Indo-Pacific concept, with the region gaining in importance. Japan’s high-quality infrastructure has different significances to different people. Some believe the creation of high-quality infrastructure is driven by Japanese businesses. As President of Japan International Cooperation Agency (JICA), I think infrastructure, which lasts longer, should be provided to meet the needs of partner countries.

 

Q. Japan provides the Indo-Pacific region with high-quality infrastructure. I would like to ask His Excellency James CHOI and Shivshankar MENON as to what contributions Australia and India can make for the Indo-Pacific strategy.

 

A. James CHOI The question as to what Australia can do for the Indo-Pacific region will have a similar answer to what the Asia Pacific region can do for Australia in 1989. The Asia Pacific region was a concept redefining Australia’s vision for the region and the future composition of the region. Today, the center of the global economy is shifting in a changing world, which calls for a new perspective of the region. Australia does not view the Indo-Pacific region as a channel to provide other countries for quid pro quo. While redefining the way the region is perceived, Australia is seeking forward-looking measures to maintain peace and prosperity with a focus on joint security, economy, trade and orders based on rules and regulations. If these issues are overlooked at this point, it may risk undermining the regional power-check structure at the expense of the interest of underdeveloped countries. When APEC was formed in 1989, it was unknown what the concept of the Asia Pacific region will offer to countries. However, to-day, the EAS is being held through the establishment of institutions in partnerships with APEC. Likewise, asking where the Indo-Pacific region is headed for is important, and Australia is picturing the future of the Indo-Pacific region.

 

Q. Korea is apparently under pressure to join the Indo-Pacific strategy. As is the case with Thailand and the Philippines, is the Korean government facing pressure from the Trump administration?  

 

A. KIM Joong-Keun Although I am not a government official, no countries have been pressured in this regard as far as I understand. President Trump has never personally mentioned Korea’s participation in the strategy.

 

Policy Implications

 

• Historically, there has been a geographical justification for the use of term: the Indo-Pacific region. Aside from the historical rationale, the economic justification is also gaining ground. However, advanced countries are implementing strategies to enhance their own interests in the Indo-Pacific region, and marine security needs vary from country to country. Accordingly, there is no single, common vision for the Indo-Pacific region. It should not be presumed that every country has a shared understanding of the Indo-Pacific region.

 

• The balance of power in the Indo-Pacific region looks uncertain going forward, and it looks inevitable that the region will be embroiled in the competition for hegemony. Countries which have a keen interest in the Indo-Pacific region, have a shared view of economic, political, geopolitical and geoeco¬nomic developments in the world. Enhancing and promot¬ing a “rules-based order” in the Indo-Pacific region should be the primary goal.  

 

• The heightening of the U.S.-China rivalry is closely related with the Indo-Pacific Vision. Asia is facing new threats to mar¬itime security such as maritime territorial disputes, SLOCs, and the modernization of the Chinese navy. Nevertheless, it is necessary to its own mechanism for economic coop¬eration to enhance economic integration and cooperation. Possible solutions include the creation of a dialogue system to facilitate economic cooperation, the establishment of trade agreements within the region, and India’s admission to APEC.

 

• With the center of the global economy shifting toward the Indo-Pacific region, peace preservation efforts are needed to ensure peace and prosperity in the region. The preservation of peace requires active efforts to manage the balance of power dynamics, guard against risks arising from vulnerable countries, and build peace.  

 

• Without taking land into consideration, addressing marine orders alone will not solve security problems. Accordingly, both land and marine issues should be part of the equation. Countries should be able to work together for the Indo-Pacific strategy, when investments and actions to enhance maritime security are implemented through a bottom-up approach, trust-building and risk-control measures are in place, and strategies encompassing all coastal countries are devised.

 

• It is encouraging that although countries have different interests, an overlapping area does exist and continues to expand over time. Countries increasingly share interests in economic, political and security issues, and now is the time to work together in a forum larger than the Quad.