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The Liberal Order in the Indo-Pacific

The liberal international order is under threat on multiple different fronts, both domestic and international: from populist forces to Russian interference in democratic elections, from anti-EU movements to the backlash against new trade agreements, from the rise of great power revisionism to questions regarding U.S. alliance commitments. These developments are leading core defenders of the liberal international order to focus their attention closer to home, and — as a result — questions about the future of the liberal order in Indo-Pacific itself have assumed less urgency, especially when coupled with the immediate security challenge from North Korea. However, the longer-term battle for the future of the liberal international order will likely be determined in the Indo-Pacific. It is in this vital region that the order is being challenged by a clear alternative in the form of a rising China. Democracies in that region are frontline states in this regard and although U.S. and European leadership is essential, the actions that they take will determine not just their own future but that of the order itself.

The long-term trends in the region have been positive: freer and more open economies, the consolidation of democracy in former authoritarian states, and the persistence of the “long peace” in Asia. Yet recent years have seen real setbacks: China’s growing military assertiveness, democratic rollback in several countries in the region, and the establishment of an economic order that is leaving states more vulnerable to coercion. Some of these developments reflect global trends, whether the rise in strong-man leadership, the growing ambition of authoritarian states’ efforts to reshape their neighborhoods, or the political pressures that are facing the international trading system. Others are unique to the region, such as the danger presented by a nuclear North Korea. But many of the challenges are tied to the fact that the threats to the liberal order posed by the authoritarian state with the most potent combination of military and economic power are at their most acute in Asia. The most advanced applications of Chinese “sharp power” techniques are playing out in Taiwan. The most direct exercise of China’s coercive military power is playing out in the South China Sea. The fastest growth in economic dependency and Chinese debt traps is playing out across developing Asia, from Laos to the Maldives. 

These threats are more intertwined than they have ever been. Any response that focuses on military deterrence without an adequate economic strategy or that proposes “high-standard” trade and investment packages without addressing the political conditions that lead to developing countries accepting vast levels of “low-standard” Chinese finance in the first place is likely to fail. On this front too, developments in recent years have given cause for concern. The U.S. withdrawal from the Trans-Pacific Partnership (TPP), fixation with bilateral trade deficits, and protectionist measures have undermined the potency of the economic offer of the liberal democracies. The U.S. voice on human rights and democracy in the region has faded, emboldening leaders in the region who believe that undermining the rule of law and democratic norms is not only a cost-free proposition but may even be applauded. And while the Trump administration is continuing to increase U.S. military presence and activities, allies in Asia have grown more anxious about the reliability of U.S. commitments, the predictability of decision-making in Washington, and the disconnect between security and economic policy, such as the U.S. willingness not only to impose tariffs on allies but to do so on national security grounds.

The picture is certainly not unremittingly bleak. American friends and allies have responded to these challenges by stepping up their own efforts rather than by bandwagoning with China. The TPP countries moved ahead with the slightly adapted and redubbed Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), in the absence of the United States, while Japan and the EU closed the world’s largest bilateral free trade agreement. Japan and India have exercised leadership in pushing back against and developing alternatives to the most problematic manifestations of China’s Belt and Road Initiative. Seoul has shown notable diplomatic dexterity in navigating threats of war on the Korean peninsula. The U.K. and, to an even greater extent, France have made symbolically important steps in expanding the European security role in Asia, from freedom of navigation operations to the recent French basing agreement with India.

The current U.S. administration is also setting in motion important shifts in U.S. strategy that are likely to outlast it. There is a major reorientation in U.S. China policy that reflects a greater emphasis on competition across the economic, security, and ideological spheres, which is moving ahead with strong bipartisan support. There is greater awareness of the advantages of joint action in addressing the challenges of China’s rise, not only with traditional regional security allies but with other economic powers and extra-regional partners and allies. There are increased efforts to coordinate on areas ranging from trade to infrastructure, whether through the re-established U.S.–Japan–India–Australia “quad” or the U.S.–Japan–EU trade chiefs’ new trilateral meetings, which are heavily focused on addressing challenges related to China. The risks that capricious decisions and “friendly fire” incidents, such as the recent steel tariffs, will undermine some of these efforts are high. But credit is owed to the efforts of many in the Trump administration who are laying the groundwork for a more effective long-term U.S. response, from the “Free and Open Indo-Pacific” strategy, and the National Security Strategy, to the National Defense Strategy, as well as racking up some short-term successes, such as marshaling the “maximum pressure” campaign on North Korea.

The wherewithal certainly exists to secure and maintain a liberal order in the Indo-Pacific, given the combined economic and military power of the United States and its friends and allies. But achieving that will require a deep, thoroughgoing commitment to sustaining the economic and security conditions for liberal democracy in the region amid serious and growing pressures. While some of the strategic language is in place, and new structures of cooperation are taking shape, it would be delusional to pretend that there is confidence among like-minded powers that current efforts are anywhere close to sufficient.

This report is intended to provide an overall assessment of the liberal order in the Indo-Pacific and evaluate the approaches by the major democratic powers to sustain and defend it. It will be followed by a series of shorter policy briefs looking at how those democratic partners and allies can craft a more effective set of responses to the challenges.

GMF’s mission is to strengthen transatlantic cooperation in the spirit of the principles underlying the Marshall Plan. Throughout this report, we use the term “liberal international order” to refer to these principles: an open, rules-based international system founded on shared values, principally: democracy, the rule of law, and the protection of human rights. These shared values underpin a pluralistic, tolerant world, in which peoples determine their own futures and borders are not changed by force. This report thus identifies and assesses three pillars of the liberal order in three chapters: open economies, common security, and democratic governance and human rights. 

This work grows out of GMF’s longstanding convening and research on Asia and on challenges to the liberal international order and, given GMF’s focus on transatlantic cooperation, places particular stress on the current and potential role for Europe in the Indo-Pacific. For many years, the Europeans have been legitimately criticized for the limitations of their approach to Asia. Yet recent years have seen important shifts in the EU’s China policy, more concerted efforts to develop a rounded approach to Asia, the successful completion of major FTAs in the region, and concrete steps to increase a European hard security role. More importantly, as appreciation grows of the centrality of trade, investment, and economic strategy to the security and political direction of the Indo-Pacific, the weight placed by other states on the role of one of Asia’s principal economic powers is naturally growing with it. This report therefore also outlines a basis for a model of cooperation that goes beyond the quad and the ASEAN-centric regional institutions to include the EU and its member states as critical partners to ensuring that the liberal order in Asia is maintained.

Most Positive Trends

Allies and Partners Stepping Up

Across the three pillars, we have identified some significant positive trends: U.S. allies are stepping forward to take leadership Washington has abdicated or provide stronger support. This was the case in important trade agreements — notably the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU–Japan free trade agreement — after the United States withdrew from Trans-Pacific Partnership (TPP). The efforts of Japan especially were central in both these projects, which send a strong signal that the liberal, open trading system could survive. In other realms, we have also seen allies stepping up. France has given the United States important backup by increasing its naval presence in and around the South China Sea, while Japan is providing essential military aid to South East Asia.

Allies and Partners Converging

There is also some positive movement on economic cooperation between the United States and its partners. The views of like-minded actors are slowly converging on the shared economic challenges posed by China, on issues ranging from investment screening and overcapacity to the Belt and Road initiative. Japan, India, Australia, and increasingly the EU and the United States have also begun to step up their own efforts in supporting Asian connectivity; while the BRI poses a major challenge, it has also had a galvanizing effect. The standout example is Japan’s successful pursuit of the deep-sea port deal in Maldives. If Japan and its partners coordinate more, they should be able to offer an appealing alternative to BRI funding in enough important cases to make the difference. Despite differences on trade policy elsewhere, China is a major area of agreement and Japan, the EU, and the United States have made some progress toward developing a more coordinated approach on trade, though this risks being undermined by the Trump administration’s current ad hoc policies, for example with regard to steel and aluminum tariffs.

Allies and Partners Withstanding

Despite Chinese attraction and coercion and the waning appeal of democracy globally, several regional democracies — Japan, South Korea, Taiwan, and India chief among them — have demonstrated the considerable entrenchment of democracy in the Indo-Pacific. Similarly, the “long-peace” in the region is also holding as cooler heads have thus far prevailed, despite significant provocations both in the realm of maritime and even nuclear security. This too is a positive note, though perhaps a troublingly tenuous one.

Most Worrying Trends

China’s Growing Assertiveness

China is becoming more assertive and less rule-abiding. With growing military capabilities and growing disrespect for established international rules and norms in its immediate neighborhood and beyond, China is the largest challenge to the future of the liberal order in Asia from a security perspective. Similarly, China’s expanded use of economic coercion, and the growing dependency of states across the Indo-Pacific on Chinese finance, pose serious risks to a liberal political and security order in the region. The Belt and Road initiative has created or deepened debt traps for a number of countries, and Beijing has utilized forms of economic pressure for political and security ends. In the current state, miscalculations, accidents, and misunderstandings can lead to military escalation when the established norms and mechanisms to provide a safety net continue to be ignored. After decades of stability in Asia-Pacific major power war has become a plausible option.

Toxic U.S. Trade Policy

The Trump administration’s trade strategy risks dividing allies in their approach to China and has weakened the capacity of the advanced industrial democracies to present a compelling alternative economic offer to states in the Indo-Pacific. The U.S. withdrawal from TPP, the push for bilateral agreements premised on reducing trade deficits, and tariffs that hit US allies, have made it harder to mount a common response to the Chinese economic challenge.

Inequality Undermining Democracy

Income inequality in various emerging economies in the region is giving rise to public dissatisfaction, populism, and social discord. The poor in several states increasingly see democracy as a nice to have that comes at the expense of their economic well-being, rather than a system that will allow for general improvements in their lives. 

Technologically Abetted Control

China is developing technological tools for control — the social credit system chief among them. China’s artificial intelligence research is also highly advanced. We should be very worried about seemingly rational technological developments that are ultimately designed to further — if not totalize — state control, not least because these can also be easily exported and shared with like-minded rulers.

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