China’s view of interdependence

In international relations theory, students are generally taught that one of the best ways to promote cooperation between states is through increased economic interdependence. If there are high levels of trade and investment between two economies, according to the liberal school of thought in international relations, then there will be a lower likelihood of conflict. Trade and economic ties cause states to make rational decisions, and generally raise the costs of war and the mutual benefits of peace and cooperation.

When it comes to dealing with China’s rise, many international relations scholars therefore advocate this sort of economic liberalism. They believe that the more China is enmeshed in the international economic order, and the more it trades with the world, it will be incentivized to cooperate and avoid disputes with neighbors in the region.

This seems like an elegant solution.

Unfortunately, what works in theory may not work in practice. On the contrary, the primary observation that emerges from recent Chinese behavior in the region is that such liberal economic principles do not hold in Beijing.

Look at North Korea, for example. China does infinitely more business on an annual basis with South Korea than it does with North Korea. According to the Korea International Trade Association, annual two-way trade between Seoul and Beijing last year was on the order of $244.6 billion, while annual trade between Beijing and Pyongyang was $5.62 billion.

This means that the ROK does literally 50 times more business with China than China does with North Korea. In spite of these economic realities, China continues to privilege its relationship with Pyongyang as the key one on the peninsula. Why? Because strategic priorities overtake economic ones on the Korean peninsula for Beijing. So much for China’s view of economic interdependence.

As my CSIS colleague Bonnie Glaser has written in more detailed and eloquent terms than I have done here, China’s relations with Japan, Southeast Asia and Europe offer other proximate illustrations of China’s economic muscle-flexing.

In September 2010, the Japanese coast guard arrested and detained a Chinese fishing boat captain for over two weeks after a collision at sea near the disputed Senkaku/Diaoyu islands. Beijing responded by protesting the charges and demanding the release of its national, but it also cut off the shipment of rare earth minerals to Japan.

Chinese officials denied such a practice, but Japan, which is the world’s largest importer of rare earths and imports 60 percent of China’s rare earth exports, felt the pinch immediately. The re-emergence of disputes over the Senkaku/Diaoyu islands this year has also coincided with more restrictive measures by the Chinese on rare earth exports. The ostensible reason is to “stabilize” prices, but the Wall Street Journal estimated that exports this year would barely reach an unprecedentedly low 10,000 tons. The country most impacted by this economic strong-arming? Japan, of course.

The Chinese use of economic leverage also extends to Southeast Asia. This past spring, confrontations between Philippine naval vessels and Chinese surveillance ships in the Scarborough Shoals over illegal Chinese fishing led to strong diplomatic protests.

Beijing also grew very unhappy with a U.S.-Philippine military exercise the following week. So in May 2012, China started to block the import of fresh fruits from Manila.

The ostensible reason was that harmful bacteria had been found in bananas and pineapples making their way from the Philippines (the former is Manila’s second-largest agricultural export).

The “health inspections” then grew to include mangoes, papayas and coconuts, all important exports for Manila. But Beijing’s intended message of retaliation was clear and it did not release the controls for the month until Philippine businesses pressured their government to accede to Chinese demands.

Finally in December 2010 the Norwegian Nobel Prize Committee awarded the august prize to Chinese dissident Liu Xiaobo. The Chinese government was both embarrassed and angered, and called on the Committee to reconsider its decision. Instead, the committee went ahead with the ceremony, leaving the now-famous empty chair reserved for laureate Liu.

How did China respond? Beijing quietly stopped the import of Norwegian salmon and called for a hiatus in ongoing free trade talks. Norway had benefited greatly in recent years from an uptick in fish exports to China, taking full advantage of a 50 percent increase in Chinese demand for such products. The Chinese action collapsed sales of Norwegian salmon by as much as 62 percent, and Beijing has denied a visa to the former Norwegian prime minister to visit the country.

This is not economic interdependence. As Bonnie Glaser has written, “China has directly used economic relations to compel target countries to alter their policies. And this growing trend is worrisome.” China is not enmeshing itself in economic interdependence, it is instead exploiting interdependence as a tool to coerce others.

Draconian measures that are designed to leverage trade ties to punish economic partners and achieve political objectives do not instill confidence that a Chinese hegemon in Asia would necessarily be benevolent nor liberal.

* The author is a professor at Georgetown University and senior adviser and Korea Chair at CSIS. His new book is “The Impossible State: North Korea, Past and Future.”

by Victor Cha