Great power struggles in Asia

This is my Perspective column from this week’s Fund Strategy magazine.

Some global trends get little attention in the British media. Those who only follow domestic television channels or newspapers would struggle to find news about the fraught relations between the world’s three largest economic powers.

This tension manifested itself in a recent visit by Shinzo Abe, the new Japanese prime minister, to see Barack Obama in the White House. Although relations between the two leaders were fairly cordial the trip indirectly strained ties between Japan and China still further.

An interview Abe gave to the Washington Post in advance of the trip acted as a catalyst for the row. The prime minister apparently accused China of having a “deeply ingrained” need to spar with other Asian countries over territory.

Unsurprisingly the comments evoked a furious response from Beijing. Such blatant criticisms of what is officially a friendly nation are taboo in diplomacy.

Japan responded by claiming that the newspaper had misquoted Abe. But even if that is the case the misunderstanding signals a deep rift between the two countries. Otherwise one comment would not prompt such a strong response.

In any case the spat did not end there. The China Daily, one of China’s main newspapers, raised the spectre of Japan’s behaviour during the second world war to discredit Abe’s recent calls for a strong Japan. In an editorial it referred to Japan being “in a region that vividly remembers his country’s brutal rampage across Asia 70 years ago”.

In a way this can be seen as an extension of the row over some tiny islands in the East China Sea that did get some coverage in Britain last autumn. Japan, which has controlled the islands since the second world war, calls them the Senkaku. Mainland China, which claims them as its own, refers to them as the Diaoyu. To make matters even more complicated Taiwan, which also claims them, names them the Tiaoyutai.

But the conflict did not stop in the autumn. Japan recently scrambled F15 fighter jets to follow Chinese surveillance aircraft. Tokyo has also alleged that Chinese warships have targeted Japanese vessels with fire-control radar.

Despite what some experts claim, it would be wrong to see the dispute as primarily over natural resources such as fish or crude oil. The islands are important for their symbolic value. Japan wants to retain its role as a leading player in Asia whereas China has become the region’s largest economic power.

That is why it cannot be dismissed as simply a sideshow. The conflict is already souring relations between the world’s second and third largest economies. In addition, some Japanese firms have already suffered as a result of a boycott by Chinese importers.

Nor is America absent from the row even though it is not playing a direct role. Washington is acting as mediator between the two sides as a way of underlining its continuing importance to this vital region.

America has used its mutual security treat with Japan as a way of reassuring Tokyo that it is on the same side. However, it has steered clear from offering Japan unequivocal support in its territorial disagreement over the islands. No doubt the invitation for Abe to visit Washington was at least partly designed to placate Japan.

For America too this dispute has a broader context. It is determined its retain its role as a key player in East Asia in the wake of China’s rise.

This concern has informed what the Obama administration has called its “pivot” to Asia over the past two years. This involves giving relatively more attention to Asia while giving correspondingly less to Europe and the Middle East. Indeed it is probably part of the reason why America is withdrawing troops from Afghanistan and Iraq. Such deployments give it fewer resources to devote to other places including East Asia.

Washington denies that the pivot amounts to a “containment” strategy akin to the way it handled the Soviet Union during the Cold War. Officially America and China maintain friendly relations. But there is no doubt that America wants to cement its own role in the region and that this involves being a counterweight to China’s influence.

America’s pivot to Asia also reflects the changing face of the world economy. It is shifting towards the Pacific. The Chinese economy on its own is bigger than that of the entire eurozone and growing faster. China and Japan together are larger than America.

European trade has also come to play a smaller role within the American economy.  America’s largest import partners in 2011 were China followed by Canada, Mexico and Japan. Its largest export partners were Canada and Mexico followed by China and Japan. Europe does not get much of a look in.

Although Europe still accounts for a large part of the world economy an important shift has already occurred. In many respects trans-Pacific relations have become more important than trans-Atlantic ties.

If the key Pacific powers fall out with each other it would have serious consequences for everyone.