There can be absolutely no doubt that, in terms of political risk analysis, the Indo-Pacific is the pivotal arena of our new era. It contains most of the world’s future economic growth, just as it encompasses most of the world’s future geostrategic tensions.
As was laid out in a recent column, this most pivotal region, the centerpiece of the brewing Sino-American superpower contest, is entirely out of kilter, as Beijing’s overly aggressive strategic moves have been matched in folly by Washington’s entirely gormless misunderstanding of the importance of geoeconomics.
Just this past month, new empirical, real-world data emerged to strongly underline this geostrategic thesis. New Zealand — heretofore a charter member of the Anglosphere’s anti-Chinese alliance — sought to limit its involvement in the crucial Five Eyes intelligence sharing consortium. At the exact same time, honorary Anglosphere member Japan (given its reorientation in the reformist Meiji Restoration of the 19th century around policies predicated on British lines) sought formal entry into the exclusive club.
The irony is that these entirely different strategic trajectories are both explained by the lopsided nature of the Sino-American cold war contest. New Zealand is drawing away from America due to its economic dependence on China, even as Japan moves even closer to Washington due to its fears over increasingly aggressive Chinese moves in the region.
In flouting burgeoning Anglosphere efforts to expand the remit of the Five Eyes intelligence consortium in an anti-Chinese direction, New Zealand could well pay a price. An internal 2017 review of the country’s intelligence networks found that for every report New Zealand submitted to the Five Eyes consortium, it received 99 in return. That it is willing to put in jeopardy such an obviously advantageous security arrangement merely underlines how important the country’s economic links with China have become.
Beijing is by far Wellington’s largest trading partner. In 2020, fully 32.3 percent of New Zealand’s exports went to China. Likewise, New Zealand was an early and enthusiastic proponent of Xi Jinping’s massive Belt and Road Initiative (BRI), signing onto the infrastructure deal in 2017. Unlike neighboring Australia, the left-leaning government of Jacinda Ardern has shown absolutely no inclination to leave the BRI, despite Beijing’s increasingly aggressive stance in the region.
Rather, the reverse has occurred, as the Ardern government has cravenly prioritized its ties with China, whatever increasing dangers Beijing has been posing in the Indo-Pacific. In May 2020, New Zealand was the only member of the Five Eyes not to sign a joint statement condemning China’s crackdown in Hong Kong. The Ardern government has also opted out of common Five Eyes statements criticizing China’s treatment of the Uighurs in western Xinjiang province. Finally, this month, New Zealand confirmed the rest of the Anglosphere’s worst fears; openly saying it is “uncomfortable” with expanding the anti-China remit of the Five Eyes network in general.
The reason for this turnaround is simple. Both American political parties continue their ruinously protectionist withdrawal from the world, following on from the US abrogation of the Trans-Pacific Partnership (TPP) under Donald Trump, and the Biden administration’s palpable lack of enthusiasm in rejoining the pact. At the same time, China continues (presently through the guise of the Regional Comprehensive Economic Partnership free trade deal) to further economically integrate with the region. More and more, China is becoming the only economic game in town for the Indo-Pacific. If the US does not correct its terrible geoeconomic folly, more New Zealands are surely set to follow.
But, on the other side of the ledger, China’s impatience with history, as it seemingly tries to take on the rest of the Indo-Pacific region at once, continues to decisively hobble its efforts to best America in their pivotal strategic contest for dominance. In uncharacteristically throwing caution to the wind, Xi has made it clear that China intends to call the tune for the whole of the Indo-Pacific, not at some future date, but right now.
As a result, long-term and important American allies, such as Japan and Australia, are clamoring to enhance their already highly integrated strategic partnerships with America. Just this past month, the Japanese ambassador to Australia announced that Tokyo is planning to join the Five Eyes.
America must relearn the importance of geoeconomics, even as China must refrain from strategically scaring the horses in the Indo-Pacific.
Dr. John C. Hulsman
The addition of Japan amounts to a huge boon for the consortium. Japan has world-class intelligence capabilities regarding China, due to its proximity to Beijing, as well as its cultural and historical understanding of its traditional rival. The bottom line is clear: Japan wants to further embed itself in the US-Anglosphere anti-Chinese alliance.
The disparate reactions of New Zealand and Japan confirm my earlier hypothesis of the lopsided nature of the Sino-American cold war. Most nations in the Indo-Pacific region want to shelter under the US security blanket, even as they also want to further their booming trading ties with China. Collecting stable allies in the region will be the key to ultimate strategic success. To get there, America must relearn the importance of geoeconomics, even as China must refrain from strategically scaring the horses in the Indo-Pacific. Whichever country adapts, developing a holistic response to the region, is sure to win this most important of political risk contests.