China-ASEAN pact offers more than win-win
By Brantly Womack
The formal inauguration of the ASEAN-China Free Trade Area (ACFTA) on January 1
marks the culmination of arguably the most successful big-power diplomacy of
the post-Cold War era.
Since 1991, China's relations with Southeast Asia have moved from an alliance
of convenience with the Association of Southeast Asian Nations (ASEAN) against
Vietnam, Cambodia and Laos to close and multi-dimensional interaction with an
expanded 10-member ASEAN and with each of the association's member states (in
addition to the above-mentioned trio, the group now
includes Myanmar alongside founding members Brunei, Indonesia, Malaysia, the
Philippines, Singapore and Thailand).
A similar pattern of China's successful engagement with neighbors can be seen
in the Shanghai Cooperation Organization with Russia and Central Asia and, less
successfully, in the six-party talks in northeast Asia over North Korea's
nuclear program. With the exception of China's trans-Himalayan border,
promotion of regional multilateral institutions has progressed hand-in-hand
with strengthening bilateral relationships.
The formula for China's successful good neighbor policy has many labels, but
the simplest is "win-win". Every country in Southeast Asia has benefited from
broader and deeper relations with China, and ASEAN as a regional organization
has been strengthened by China's involvement.
Trade, investment and tourism have blossomed. China's willingness to sign the
Framework Agreement on Comprehensive Economic Cooperation in 2002 and the
Treaty of Amity and Cooperation in 2003 encouraged other nations to follow
suit. Despite global economic uncertainty displacing US-centered globalization,
China and ASEAN are off on the right foot in a new era. But the path ahead is
not simply a yellow brick road of win-win policies.
Why not? What could possibly be wrong with win-win? A cynical power theorist
would say that if one side wins more than the other, the one who wins less may
end up being dominated by the one who wins more. But this hardly applies to
Southeast Asia. No individual state in Southeast Asia has ever considered
itself the equal of China. Moreover, China's military budget surpassed the
aggregate military budgets of Southeast Asia in the 1990s. And ASEAN is no
North Atlantic Treaty Organization. Rather than being a security umbrella for
coordinating action in crisis situations, ASEAN is more of a consensual parasol
that works best in sunny weather. If losing parity with China were the tipping
point for subjugation, Southeast Asia lost long ago.
Win-win is too simple a formula precisely because of the disparities between
China and Southeast Asia. Individually and collectively, Southeast Asian
nations are more exposed in their relationship with China than vice versa.
According to estimates of the Central Intelligence Agency in the United States,
all of ASEAN together in 2008 had only one-third of China's gross domestic
product (GDP) in terms of purchasing power parity (PPP). The economy of
Shanghai is one-and-a-half times that of Singapore. Guangdong's GDP exceeds
that of Indonesia, while the combined economies of Guangxi and Yunnan, middling
provinces by Chinese standards, exceed those of their neighbors Vietnam, Laos
and Myanmar.
Therefore, Southeast Asia is necessarily more alert to the risks as well as the
opportunities of its relationship to China. Proportionally, it has more at
stake, and the sense of risk as well as opportunity is all the more vivid to
individual states in Southeast Asia.
Southeast Asia's dilemmas in dealing with China can be illustrated by the
recent controversy in Vietnam over Chinese investments in bauxite mining and
processing. It is certainly a win-win situation. The Chinese company involved,
Chinalco, is a major global investor in bauxite mining and alumina processing.
Bauxite occurs in limestone areas with poor agricultural prospects. Vietnam has
the world's third-largest bauxite reserves, and hopes to attract US$15 billion
in investment in this area by 2025. It needs the investment in the current
global economic climate, and it also needs to offset its severe balance of
payments deficit with China.
But the Vietnamese people have been very concerned about Chinese bauxite
development. They are concerned about the ecological effects of mining; about
the major stake that a powerful Chinese company would have in central Vietnam;
and about losing jobs to imported Chinese workers. They do not want to have the
future of a major national resource in the hands of an outside power. Win-win
is not enough. Vietnam wants reassurance about its long-term interests because
it is dealing with a much larger neighbor.
Similarly, the proposal of two corridors, rail and highway, from Nanning, the
capital of the coastal Guangxi autonomous region, bordering Vietnam, to
Singapore would undoubtedly benefit Vietnam. The corridors would run most of
the length of Vietnam, thereby improving domestic transportation as well as
connections to China and to the rest of mainland Southeast Asia. However, given
current patterns of trade, far more goods will be coming down the corridors
from China than going up from Vietnam, and much of Vietnam's exports would
continue to be raw materials and resources.
This is still win-win for China's producers and Vietnam's consumers, but
consumers also need to produce, and Vietnam's economy must continue to
modernize and become more sophisticated. It is therefore hardly a surprise that
on such win-win projects China pushes forward while Vietnam hesitates. A change
at the periphery of China's economy could affect the heartland of Vietnam's.
Vietnam is the most sensitive country in Southeast Asia to China, but the
entire region is aware that its interests and China's interests are not
identical, even if many are compatible. The problem of asymmetric relationships
cannot be solved, it can only be managed.
Take for example China's single most successful gesture in its regional
relations. In 1997, China held the value of the yuan steady against the dollar
while the Southeast Asian currencies were falling. Its neighbors were impressed
that China could succeed where they failed, and they were grateful that China
prevented a race to the bottom in currency devaluations.
Since August 2008, China has pursued exactly the same policy, but its effects
on Southeast Asia are the opposite of a decade earlier. Now the yuan's peg to a
declining US dollar is forcing neighbors to compress their currency values in
order to maintain market share. China's neighbors wonder how long currency
compression will last and what will happen when the yuan finally does revalue.
There is little reassurance from China, and no claim that it is helping the
neighborhood.
The tension between China and Southeast Asian states over conflicting claims in
the South China Sea has become the symbol of the region's collective uneasiness
concerning China's commitment to cooperation. The "Declaration on the Conduct
of Parties in the South China Sea" signed in 2002 was a watershed event in
regional confidence-building, but there has been little further progress.
Moreover, China's expansion of naval facilities on Hainan raises concerns
throughout the region regarding China's military transparency and intentions.
In fact, however, multilateral cooperation is the only feasible way for any
country, China included, to profit from the disputed area. It would be
difficult to extract oil at gunpoint, and the costs to China's regional and
even global relations would outweigh any possible gains. The only winning path
in the South China is one of more serious cooperation and reassurance.
While win-win is the slogan of the day, deeper principles have lain behind
China's successes of the past two decades. China's willingness to work with
multilateral regional institutions has been a big part of the winning formula.
Participation in ASEAN's general relationship with China buffers the exposure
of each individual state. This benefits China as well as ASEAN.
Vulnerability causes smaller states to hesitate in asymmetric relationships,
while collective agreements reduce individual vulnerability. Within each
bilateral relationship, sensitivity to the dilemmas faced by the smaller side
even in a win-win situation is essential for continued development.
For example, not only does Vietnam have reason to expand its merchandise market
in China, but China has an interest in Vietnam's marketing success. Currently,
Vietnam's weak sales to China are a major trade bottleneck; a more balanced
relationship would enable trade volume to expand on a solid basis.
Finally and most importantly, China's traditional respect for the sovereignty
and autonomy of all states becomes ever more important with the growth of
China's relative power. As Sophie Richardson's recent book on China-Cambodia
relations demonstrates, the "Five Principles of Peaceful Coexistence" have been
an especially important foundation of China's relations with smaller states.
[1] The time has come to multilateralize the five principles into a general
respect for regional consensus and international agreements and institutions.
In the new era of global economic uncertainty, the risks that smaller countries
face are more vivid than their opportunities. The special task faced by
regional powers, whether China, or South Africa, or Brazil, or India, or
Russia, is to earn regional leadership by reassuring neighbors that their
interests and voices will be respected.
Moreover, they need to take the lead in regional projects that address common
problems. But to do so effectively they must act in a spirit of multilateral
respect. For the past two decades, China has led the cohort of regional powers
in developing cooperative relationships with neighbors, and one of the fruits
of success is the successful beginning of ACFTA. But it is only a successful
beginning, it is not the end of the road.
Note
1. China, Cambodia, and the Five Principles of Peaceful Coexistence, by
Sophie Richardson. Columbia University Press, 2009.
Brantly Womack is the Cumming Memorial Professor of Foreign Affairs at
the University of Virginia. His recent books include China and Vietnam:
The Politics of Asymmetry (Cambridge University Press, 2006) and China
among Unequals: Asymmetric Foreign Relations in Asia (World Scientific,
forthcoming).
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