Will the US Foreign Policy of Encirclement Stoke a South China Sea War?

Historian Eric Margolis sees a similar pattern to World War I developing in the Spratlys Dispute

Writes Mr. Margolis (bold emphasis mine)

China is usually very cautious in its foreign affairs. But of late, Beijing has been aggressively asserting maritime claims in the resource-rich South China Sea, a region bordered by Indonesia, Vietnam, Brunei, the Philippines, Malaysia, Taiwan and China.

Japan, India, South Korea and the United States also assert strategic interests in this hotly disputed sea, which is believed to contain 100 billion barrels of oil and 700 trillion cubic feet of natural gas.

China has repeatedly clashed with Vietnam and the Philippines over the Spratly and Paracel islands and even mere rocks in the China Sea. Tensions are high.

In 2010, the US strongly backed the maritime resource claims by the smaller Asian states, warning off China and reasserting the US Navy’s right to patrol anywhere. Beijing took this as a direct challenge to its regional suzerainty.

Last week, Washington raised the stakes in this power game, announcing it will permanently base 2,500 Marines at the remote northern Australian port of Darwin.

Marine regiment can’t do much in such a vast, remote region, but Washington’s symbolic troop deployment is another strong signal to China to keep its hands off the South China Sea. China and nearby Indonesia reacted with alarm. Memories in Indonesia of 1960’s intervention by CIA mercenaries and British troops remain vivid.

The US is increasingly worried by China’s military modernization and growing naval capabilities. Washington has forged a new, unofficial military alliance with India, and aided Delhi’s nuclear weapons development, a pact clearly aimed at China. China and India are locked in a nuclear and conventional arms race.

US military forces now train in Mongolia. China may deploy a new Fourth Fleet in the South China Sea. Washington expresses concern over China’s new aircraft carrier, anti-ship missiles and submarines, though these alarms coming from the world’s leading naval power seem bit much.

The US is talking about selling advanced arms to Vietnam, an historic foe of China. The US is also modernizing Taiwan’s and Japan’s armed forces.

These moves sharpen China’s growing fears of being encircled by a network of America’s regional allies.

The recent ASEAN summit in Indonesia calling for a US-led "Trans-Pacific Partnership" was seen by Beijing as an effort to create an Asian NATO directed against China.

Rising tensions over the South China Sea disturbingly recall the naval race between Britain and Germany during the dreadnaught era that played a key role in triggering World War I….

US foreign policy has become almost totally militarized; the State Department has been shunted aside. The Pentagon sees Al-Qaida everywhere.

Read the rest here

I’d further add that prevailing economic conditions in developed nations like the US may prompt their politicians to divert the public’s attention by inciting geopolitical tensions. And this also exhibits how the state loves and thrives on war.

Graphic: World’s Largest Armed Forces

Because of the Spratly’s brouhaha, many Filipinos seem to be searching the web for the odds of winnability for the Philippines, in case of a military escalation that could lead to a war with China.

I think these people, whom have not experienced the horror of wars, seem to desire it, perhaps in the doltish presumption that any war won’t get them involved or that wars function as some form of sporting event.

In wars, the losers have always been the people, as both combatants and non-combatants get slaughtered, aside from the economic hardship, physical dislocation and the psychic or mental trauma that arises from such hellish events.

Worst, people from opposing camps shoulder the burden of paying for such outrageous exercise.

Yet if there are any winners, they have always been the politicians, who see people fighting and dying in their behalf and paying for their reckless adventures in the false name of nationalism.

This graphic from the Economist.

The above graph only shows that a war with China is suicidal.

The better alternative is to engage them in more trading activities that should ease geopolitical pressures. Trade and not war is the answer.

Videographics: China's Growing Exposure on Europe

I have been saying that China's foreign policy approach to the Spratly's dispute have not been consistent with her actions as seen through most of the world. That's why I harbor suspicions that there could be other ulterior motive behind China's seeming militant stance.

In Europe, China's has ostensibly been increasing her exposure in terms of outward investments by Chinese companies, property acquisition by Chinese residents and even in support of the Euro from China's government as this year's episode of the Greece crisis culminated. I dealt with this earlier here.

See all these developments from the incredible videographics from the Economist below:

Has the Tensions over Spratly’s Islands been about US Weapons Exports?

At the Lew Rockwell Blog, Butler Shaffer writes,

As the Philippines and China continue their conflict over sovereignty in the South China seas, the United States announced that it will provide the Philippines with additional military weaponry. Wars — and the sale of tools of death and destruction with which to conduct them — remain America’s principal exports to the rest of the world!

The big boys club continues to show how they pledge cooperation with one another. China, yesterday, has once again reaffirmed her commitment to help save Europe by offering to buy bonds of crisis affected European countries, as I recently posted.

If big boys seem to be in cahoots over highly sensitive geopolitical affairs, then it would be an oddity to see continuing antagonism on the Spratly’s issue when the same big boys are directly (China) or indirectly (US) involved.

Perhaps, it could be read that China has been bullying the Philippines. Yet perhaps not.

Or that China could be using Spratly’s as diversion to domestic political problems as evidenced by sporadic riots.

But, Professor Butler’s comment provoked a ‘naughty’ idea on my part represented by this question:

Has China been acting as a shill for the US military-industrial complex?

Or stated differently, has the tensions over the Spratly’s Island been all about boosting US weapons exports?

My earlier thoughts on the Spratly’s dispute here and here. Yet, this seems like a new angle to explore.

China to Assist in the Bailout of Greece

I have been saying that today’s globalization has not been limited to trade, investment and labor but also to the conduct of policies.

Recent concerns over Greece debt and entitlement Crisis has prompted China to renew her pledge of support to latest the bailout scheme still being finalized by the Eurozone as of this writing.

This report from the Reuters, [bold emphasis mine]

China's "vital" interests are at stake if Europe cannot resolve its debt crisis, the Chinese Foreign Ministry said on Friday as it voiced concern about the economic problems of its biggest trading partner.

At a media briefing ahead of Chinese Premier Wen Jiabao's visit to Europe next week, Vice Foreign Minister Fu Ying made plain that China had tried to help Europe overcome its troubles by buying more European debt and encouraging bilateral trade.

"Whether the European economy can recover and whether some European economies can overcome their hardships and escape crisis, is vitally important for us," Fu said.

"China has consistently been quite concerned with the state of the European economy," she said.

Wen is due to visit Hungary, Britain and Germany late next week, just months after he visited France, Portugal and Spain and offered to help Europe overcome its debt woes.

Well China’s earlier purchases had already been substantial.

From another Reuters article [bold emphasis added]

The Asian powerhouse has been steadfast in its support for the Eurozone since the onset of the crisis. It purchased a significant amount of EUR440bn EFSF rescue facility that started auctioning bonds earlier this year. Although it is difficult to clarify how large its European debt holdings actually are since this data isn’t published by China’s Sovereign Wealth Fund, it is thought to include Greek, Portuguese and Spanish bonds.

Some observations

This adds to the pile of evidence of the tightly entwined and coordinated actions of the central bank-government-banking system global cartel.

Remember, it isn’t Greece who is being bailed out but bondholders which comprise mostly foreign banks. The global political claque appears to be closing ranks.

One positive aspect is that trade fosters such collaborative action, even if trade could have possibly been just as a guise or a subordinated priority.

This should also serve as a foreign policy guide in dealing with China especially applied to the local Spratlys dispute. Elsewhere in the world, China’s foreign policy appears tilted towards cooperation than belligerency.

Finally, the money China will utilize, from her mounting over $3 trillion forex reserves, in assisting Europe would likely come at the expense of supporting US bonds. This should put more pressure on the US Federal Reserve to redeploy QE but perhaps in another name and or another form.

China has reportedly marginally increased her bond purchases from the US last April, but statistical inflation continues to ramp up (despite 4 policy rate increases). China’s bubble cycle appears to be in the maturing stage as her property sector continues to sizzle despite her government’s actions.

Myth of War as Political and Economic Solution

Some people here or abroad seem to be agitating for war.

In the Philippines, recent unfortunate incidents over at the Spratlys Islands have prompted some officials to call for increased military spending as countermeasure against alleged provocations by foreign marauders.

As earlier pointed out, suggestions of an ‘arms race’ are foolish because they are not only economically unfeasible but political brinkmanship risks escalation which might lead to undesired consequences that may be baneful for both parties. In addition war spending robs the local economy of productivity and resources which leads to poverty.

Since the Philippines have an existing Mutual Defense treaty with the US, which other nations recognize, then perhaps current incursions by China represents a test of this relationship or has been merely been flexing her brawn in order to flaunt her new hardwares of destruction.

Besides, China’s actions have not shown aggressiveness elsewhere, and to the contrary, has been more investment oriented.

This is unless China’s military and incumbent political leaders have different agendas.

In the US, experts like Dr. Paul Krugman seem to be arguing for increased war spending to bolster the economy. Professor William Anderson quotes Krugman

“If we had the threat of war, had a military buildup, you’d be amazed at how fast this economy would recover.”

For people who view the world in the context of dollar and cents, then this view would seem plausible.

Yet as rightly pointed out by Professor Anderson the US has been waging war on different fronts,

I'm not sure what we call Iraq, Afghanistan, Libya, and wherever else the U.S. Armed Forces are shooting people. I think I call it war, and we can see just how good it has been not only for our economy, but also the economies of the lands this government has attacked.

From Google’s Public Data

From Cato.org

In relative terms, the US has the largest share of military spending in the world and has continuously outspent the world. And this has been growing trend since 2000 (obviously post 9/11).

So has increased war spending or other forms of government spending been boosting the US economy? Unfortunately not.

From Dan Mitchell

War as a demand booster is a myth.

Henry Hazlitt in his must read classic Economics in One Lesson debunked this fallacious dollar and cents view based on ‘aggregates’.

The great Mr. Hazlitt, (italics original)

Now there is a half-truth in the "backed-up" demand fallacy, just as there was in the broken-window fallacy. The broken window did make more business for the glazier. The destruction of war will make more business for the producers of certain things. The destruction of houses and cities will make more business for the building and construction industries. The inability to produce automobiles, radios, and refrigerators during the war will bring about a cumulative post-war demand for those particular products.

To most people this will seem like an increase in total demand, as it may well be in terms of dollars of lower purchasing power. But what really takes place is a diversion of demand to these particular products from others

In wars, it is not just the diversion of resources from productive to consumptive activities, which brings about a lower standard of living, but the intangible costs from losses of human lives (capital)! Death from war or disasters or any form of destruction cannot serve as economic boosters.

Those who argue for war do so either because they know someone else will do the dying for them or have not envisioned of the brutalities of a real war.

Maybe this is part of what historian Arnold Toynbee calls as the “Generational Cycle in the transmission of a social heritage”.

Dr. Marc Faber quotes Toynbee,

The survivors of a generation that has been of military age during a bout of war will be shy, for the rest of their lives, of bringing a repetition of this tragic experience either upon themselves or upon their children, and... therefore the psychological resistance of any move towards the breaking of a peace ....is likely to be prohibitively strong until a new generation.... has had the time to grow up and to come into power. On the same showing, a bout of war, once precipitated, is likely to persist until the peace-bred generation that has been lightheartedly run into war has been replaced, in its turn, by a war-worn generation'

In short, the lack of exposure to war whets the desire for war.

Here is a suggestion: Dr. Krugman and all his ilk and his followers (including Filipino politicians and their adherents), who yearn for war for whatever reasons, should go to the front line, instead of getting ensconced in the proverbial ‘ivory towers’, and bring their family along with them.

If you want war, go fight them yourself!

Spratlys Dispute: Why AFP’s Plan to Build Up Military Signifies War on the Filipinos

Governments always look for an excuse to expand power. And General Douglas MacArthur was right, government always try to keep “us in a continuous stampede of patriotic fervor -with the cry of grave national emergency” by conjuring “terrible evil at home, or some monstrous foreign power that was going to gobble us up if we did not blindly rally behind it”

The geopolitical tensions over Spratlys Island have prompted the Philippine government to shop for arms, according to yesterday’s news.

From the Philippine Daily Inquirer,

Amid increasing concern over renewed tensions in the South China Sea, the Philippine Embassy here is shopping for excess defense equipment from the United States under Washington’s Foreign Military Sales (FMS) program.

Jose L. Cuisia Jr., the Philippine ambassador to the US, said he has asked the Department of National Defense and Armed Forces back home to provide him with a wish list of military equipment they will need to shore up the country’s defense capability.

He said he expected the defense department to “prioritize” its modernization goals, but was careful not to explicitly link the purchase of US excess defense articles to the Philippine military’s job of securing the territorial sovereignty of the country in the face of China’s alleged intrusions into the areas of the disputed Spratlys group claimed by the Philippines

The idea that the Philippines can resolve the current dispute with China over an ‘arms race’ or by brinkmanship is not only unfeasible and anachronistic but outright ridiculous.

Unfeasible because in almost every aspect, the Armed Forces of the Philippines cannot measure up to China’s People Liberation Army in terms of numbers and in technology.

In addition, China is by far wealthier (in terms of GDP per capital) than the Philippines and thus can afford to spend more for her military services. [Google Public Domain]

Chart from Tradingeconomics.com

Considering that China has unveiled its newest stealth warplane and aircraft carrier, it would seem that no amount of nonsensical ‘arms race’ will prevent a ‘determined’ China from encroaching on Spratlys.

But this isn’t to say that China will do so.

I say anachronism too because military engagement has not been the du jour foreign policy for China.

Had she assimilated an imperialist path, Taiwan, which China claims as part of her territorial sovereignty, would have been invaded. And so with the Japanese held Senkaku Islands, which China has claims too along with the Spratlys. A similar political friction arose in Senkaku Island in 2010 following a collision between Japan’s Patrol boats and a Chinese trawler.

Yet China’s geopolitical strategy has been to expand trade and investments around the world.

Derek Scissors of Forbes magazine writes,

China's hefty investments in sub-Saharan Africa have received deserved attention, but its investment in Latin America has been overblown by some. One reason is a common event in bilateral commercial transactions--grand announcements that never come to fruition. In mid-April Venezuela proclaimed a $20 billion oil-for-loans deal with China, but Caracas' track record in this area encourages skepticism. China has little investment in the Arab world, which is perhaps surprising in light of its focus on energy, but it has sizable engineering and construction contracts there. Australia, at $30 billion, is the single biggest draw for Chinese investment. The U.S. is second at $21 billion, Iran third at $11 billion.

The places where the Chinese have invested most often are also the places where their investments have been most often thwarted: Australia, the U.S. and Iran, in that order. Failures stem from a variety of causes, such as nationalist reactions in host countries, objections by Chinese regulators and mistakes by the Chinese firms themselves. According to the Heritage tracker, the value of failed investments from 2005 to 2009 is a staggering $130 billion. Chinese investment could have been a full 40% larger than it was had the failed deals closed.

So the more appropriate action to resolve any territorial dispute should be to actively increase trade with China.

As Frederic Bastiat once said,

When goods don't cross borders, armies will

Greater trade will likely ensure an amicable or diplomatic settlement because both China and the Philippines would like to see a continuity of this mutually beneficial relationship.

And this goes back to the reason why the call for more military spending represents a war against the citizenry.

As the great Ludwig von Mises wrote,

The adequate method of providing the funds the government needs for war is, of course, taxation. Part of the funds may also be provided by borrowing from the public, the citizens. But if the Treasury increases the amount of money in circulation or borrows from the commercial banks, it inflates. Inflation can do the job for a limited time. But it is the most expensive method of financing a war; it is socially disruptive and should be avoided.

More military spending means higher taxes and risks of higher inflation. It also means redistribution of wealth from the ‘productive’ private sector to government appointed intermediaries and suppliers or non-productive capital consuming activities.

Doing so leads to lower economic growth, higher unemployment, lower investments, higher risk premium and a lower standard of living. Also this amplifies the risks of corruption.

In addition a military build-up could also extrapolate to using newly acquired weapons against the citizenry to suppress political dissent or for repression or to expand in the engagement of military conflict with local subversives.

So instead of seeking diplomatic solutions, the likely path is to have more turmoil which heightens political instability which should further weaken the economy. It's another lesson we never seem to learn.

OPINION ON THE SPRATLY ISLANDS DISPUTE:Deflate tension with dialogue

UPDATE:

I noticed that this June 2011, there has been quite a number of visits on this page. Nevertheless, this is an old (2004) but relevant article, not from me but from the Japan Times. This article was one of my test-experimental posts prior to my 'calling' to go blogging.

My personal opinion on the concurrent (2011) Spratly's dispute can be read here and here.

SPRATLY ISLANDS DISPUTE
Deflate tension with dialogue
By RONALD A. RODRIGUEZ
Special to The Japan Times

HONOLULU -- Recent events confirm that maritime territorial disputes in the South China Sea remain an issue for East Asian governments. Ownership of the Spratly Islands is claimed, in whole or in part, by Brunei, China, Malaysia, the Philippines, Taiwan and Vietnam.

In the first quarter of 2004 alone, the claimants took turns building up anxiety, raising concerns about the sustainability of the status quo and whether the 2002 Delaration on the Conduct of Parties in the South China Sea could ensure the claimants' self-restraint.

First came the Philippines' announcement of the Balikatan exercises with the United States in the South China Sea in February. The Philippine action appeared to be driven by Manila's growing uneasiness over an increasing number of visits by Chinese research vessels and warships in the Spratly Islands, as well as the sudden appearance of new Chinese markers on the unoccupied reefs late last year. The mounting tension did not dissipate until Philippine President Gloria Macapagal Arroyo assured the region that the military exercises did not have anything to do with the maritime territorial disputes.

Then came Taiwan's turn. On March 23, a Taiwanese speedboat carrying eight individuals landed and carried out the swift construction of a makeshift "bird-watching stand" on the Ban Than Reef. Vietnam strongly condemned Taiwan's move and demanded an end to the construction activities. Vietnamese Foreign Ministry spokesperson Le Dung branded Taiwan's handiwork "an act of land-grabbing expansion that seriously violated Vietnam's territorial sovereignty" and warned of possible consequences from Taiwan's "adventurism."

Taiwan's action didn't go unanswered. Two days after the Ban Than Reef incident, Vietnam reaffirmed its sovereignty over the Truong Sa (Spratly) and the Hoang Sa (Paracel) atolls by announcing that it would hold the inaugural tourist boat trip to the contested islands. China decided to conduct a Navy drill in the South China Sea on April 12, sending signals to the other claimants to back off.

The Chinese display of naval capability in the South China Sea didn't stop Vietnam. Unfazed, Hanoi gave its white navy ship HQ988 the go signal to sail for the atolls with about 60 tourists and 40 officials on April 19. Many saw the controversial eight-day round trip as the beginning of more Vietnamese tourism activities in the area -- a development that follows the Malaysian lead of a few years ago.

The maneuvering for advantage in the South China Sea reveals the frailty of the nonbinding declaration. In November 2002, the region celebrated the signing in Phnom Penh of the landmark declaration between the Association of Southeast Asian Nations and China in which the claimants agreed to avoid actions that could raise tension in the South China Sea. The nonbinding nature of the declaration, however, has been a concern for some of the signatories. Two years after it was signed, the parties are almost back to where they started. Most, if not all, do not seem ready to allow regional concerns to supersede their national interests. This is why, at least for some critics, the declaration has been reduced to a "flimsy piece of paper."

There are two views on the value of the declaration. Mark Valencia, an ocean policies expert at the Honolulu-based East-West Center, typifies the skeptic's view. He anticipated that the declaration was doomed, considering it a flawed attempt to reduce the heat over territory in the South China Sea. This view sees the declaration to be a self-deceiving exercise that satisfied ASEAN's thirst for political accomplishment, but did not offer profound changes in the security situation in the South China Sea. Valencia emphasizes that no loose agreement would prevent claimants from positioning themselves strategically in the lingering dispute.

The other view takes a more cautious position. Aileen Baviera of the University of the Philippines' Asian Center, for instance, cautions against a rush to judgment and outright dismissal of the declaration, arguing the claimants' constant reference to it whenever there is a problem suggests that parties continue to find value and purpose in its spirit. In this sense, the declaration has value as a referent, and modifies the behavior of the parties to the dispute. The Philippines' and China's efforts to downplay their navy drills as either part of a regular security routine or unrelated to the maritime territorial disputes indicate a turnaround in their more self-assured positions of the past.

Recent moves by Taiwan and Vietnam cannot be downplayed, however. It's time to reassess the declaration and see how similar incidents can be avoided. For one, the parties should start molding a set of guidelines that will diminish the gray areas in the declaration. The declaration should define the 10 points that the parties have agreed on and seek strategies to put them into operation them as soon as possible. The mounting criticisms of the declaration should create momentum for greater interest in a more binding agreement.

In addition, the parties should build on the prospects for regional cooperation that emerged out of China's decision to sign the Treaty of Amity and Cooperation with ASEAN on Oct. 8, 2003. Not only does the treaty commit ASEAN and China to a nonaggression pact, but it also increases the possibility of a more binding agreement on the South China Sea in the future.

Optimists and skeptics share the view that dialogue is a basic need in the South China Sea. But any fresh initiative should emphasize the need for progress in cooperative endeavors, rather than dwell on infractions. The parties can begin with the six proposed areas of cooperation in the declaration, which include marine environmental protection, marine scientific research, safety of navigation and communications at sea, search and rescue operation and combating transnational crime.

Taiwan will continue to be a problem. To date, China has refused to allow Taiwan to become a signatory to any legal accord in the South China Sea. Yet any failure to consider Taiwan's interests will enable it to play spoiler. A peaceful resolution to the disputes requires effective management of the Taiwan problem.

In hindsight, it was probably the lack of sustained dialogue that has weakened the foundations of the declaration. The parties overlooked the fact that continuous interaction is an equally important element of the signed declaration. While an informal working group still convenes, the gradual retreat of catalysts like Canada and Indonesia, as well as key individuals like Hasjim Djalal, has had an impact.

The parties may not readily agree, but it appears that the South China Sea needs another intermediary. Takers anyone?

Ronald A. Rodriguez, head of the Northeast Asia program and officer in charge of the security and strategic studies program at the Center for International Relations and Strategic Studies, Foreign Service Institute of the Philippines, is currently a Vasey Fellow at the Pacific Forum CSIS, a U.S. think tank based in Honolulu. These are his personal views.

The Japan Times: June 28, 2004
(C) All rights reserved