Wednesday, January 17, 2018

China’s big shadow over Japan PM’s visit

 The word is not being spoken in any formal speeches and it is not being mentioned in final statements and declarations, but it is being talked about in the corridors and it is at the back of everyone’s mind during Japanese Prime Minister Shinzo Abe’s current visit to five Latin American and Caribbean (LAC) nations. The visit started on July 25 and ends on August 2. The word is “China”.

Animosity between China and Japan has been steadily increasing over the last few years and relations are now tense at best and hostile at worst. From the Chinese side, according to Prof Zhou Yong-Sheng at the China Foreign Affairs University, “Japan can develop as a military superpower and boss around the region again”. He adds, “China is no longer the country it is was 120 years ago and, therefore, Japan should not commit the folly of starting a war with its western neighbour”.

Those are fighting words and there have been skirmishes in both the sea and air over claims to sovereignty of five small islands known as the Senkaku in Japan and the Diaoyu in China. This had led to a military build-up in Japan that has been criticised by China on almost a daily basis. The heat generated over this was fanned into a flame by the prime minister’s insistence on visiting the Yasukuni shrine that venerates Japan’s war dead who China regards as invaders and from the World War 11 occupation of Chinese territory.

The Japanese leader is visiting the five LAC nations in the wake of a very successful visit by Chinese President Xi Jinping in which he signed agreements that exceed US$10 billion with Argentina, US$5 billion with Venezuela, and US$1.8 billion with Cuba. Additionally, Xi offered to extend a line of credit of up to US$10 billion to members of the Community of Latin American and Caribbean states (CELAC) and to create a US$20 billion fund to finance infrastructure projects in LAC countries. China is also LAC’s second largest trading partner after the US. In 2013, trade reached US$261 billion of which China enjoys a surplus. Nonetheless, Chinese investment, particularly in infrastructure, has helped to boost economies in LAC countries, including the nine Caricom countries that have diplomatic relations with China.

The Japanese leader is very keen to boost trade with Latin America and the Caribbean which, while it nearly doubled over the past decade, still accounts for just five per cent of Japan’s foreign trade. He will also want to expand Japan’s stock of foreign investment in LAC which is now lagging behind China at US$60 billion.

The name of the game is two-fold. The first is economic and includes access to LAC resources, such as oil, gas and minerals, as well as investment in large infrastructural projects that would give Japan a sizeable return. In this regard, Chile, Colombia, Brazil and Mexico are the main targets. The second part of the game is political influence particularly in Japan’s quest for a non-permanent seat on the United Nations Security Council (UNSC) for which elections will be held in October 2016. In both cases, Japan comes up against China.

While China is one of the five permanent members of the UNSC, it has been openly campaigning against Japan’s candidacy for the single UNSC seat that will be available to Asia. Japan is contending with Bangladesh whose candidature China avidly promotes in order to block Japan.

It is because of the vote for the UNSC that Japan was particularly interested in meeting the 14 independent Caricom nations in Trinidad and Tobago on July 28. If they all vote for Japan, Prime Minister Abe would be delighted.

And that is where the challenge and the opportunity arise for the Caricom states. 

For the five that do not have diplomatic relations with China (they are tied to Taiwan), supporting Japan poses no challenge at all, but the others do have to be mindful of the consequences of supporting Japan for the UNSC. Dealing with this issue will call for skilful diplomacy.

On the economic front, like China, Japan has been pledging large regional aid and investment packages to Africa and Southeast Asia, the value of which are US$43 billion and US $20 billion, respectively. It is unlikely that transactions of such sizes will be extended to all of the LAC countries. The LAC nations are a low priority for the Japan International Cooperation Agency (JICA) which provided only US$450 million to the entire region in 2012. 

It would have been worth drawing that reality to Prime Minister Abe’s attention even as Caricom leaders describe the plight of their economies and the restricted space in which they operate because of rules made by institutions in which Japan has a powerful voice.

Additionally, the meeting with Mr Abe was a chance to lever support from Japan in critical areas such as: providing help to address debt (many of the Caricom countries now have a debt-to-GDP ratio of over 60 per cent); active support in the Organisation for Economic Co-operation and Development and the Financial Action Task Force for compensation for the high costs that result from compliance with their rules; financing for Climate Change adaptation; advocacy in the IMF and World Bank to make Caricom states eligible for concessionary loans; and more Japanese investment in renewable energy and infrastructure.

Over all these discussions, of course, China casts a long shadow.