September 21, 2015 11:28 pm JST
Trade and territorial dispute

China's presence in contested waters threatens TPP's goals

YASU OTA, Nikkei Asian Review columnist

SINGAPORE -- Japanese and U.S. efforts to strengthen economic and regional security in Asia via the Trans-Pacific Partnership trade pact may be hampered by China's military presence in the key South China Sea trade route.

     About 350 ships pass through the Strait of Malacca by way of Singapore daily, and one-fourth are effectively owned by Japanese companies. A peek into the control center of a marine transport company helps visualize this. Countless dots on a screen marking ship locations form a cloud-like line linking Singapore and the waters off Taiwan's coast. This trade route is crucial in manufacturers' supply chains and for energy supplies to Asia.

     Right in the middle of this line, however, are the Spratly Islands, which are claimed at least in part by China, Brunei, Malaysia, the Philippines, Taiwan and Vietnam. China is creating artificial islands in the area, building runways and ports there, as shown by images from U.S. patrol aircraft. Southeast Asian defense authorities see China's moves as efforts to cement its effective control over the waters and the air above them.

     Success by China would undermine the stability of the sea lane -- the lifeline for Japan's economy. Southeast Asian nations would have to set policy under Chinese pressure, and U.S. and Japan-led efforts to develop economic order in Asia would be put to naught. Before building a new economic order with the trade pact, the rule of law must first be instilled in disputed waters at the center of the stage.

     This perhaps explains the U.S. decision to involve Vietnam and Malaysia in the TPP talks, despite their economies lagging in market liberalization. The two countries could join Singapore and Brunei, which have free trade policies, in surrounding the South China Sea to counterbalance China. The Philippines also is working to join the TPP talks.

     The TPP framework was conceptualized by Washington as a geopolitical strategy when U.S. President Barack Obama took office in 2009. The departments of State and Defense are said to have been brought on board in the White House-led designing of the framework. The aim was to improve military and economic stability in line with America's "pivot to Asia."

     With the framework built, the trade talks were passed on to the U.S. trade representative, who is influenced by Congress and various industry lobbyists, and the focus shifted to specific industries such as automotive, agriculture and pharmaceuticals. At the last ministerial-level negotiations in Hawaii in late July, the 12 TPP participant countries failed to close gaps on drug patent protection and the dairy trade, heightening concern that the talks may drift to nowhere.

     Canada, which rejected New Zealand's demand to import more of its dairy products, is unlikely to open up, with a federal election coming Oct. 19 and Prime Minister Stephen Harper's government struggling to stay in power.

     Chinese President Xi Jinping's planned summit in the U.S. this week is seen doing little to resolve South China Sea territorial conflicts. And ministers from the TPP countries will gather Sept. 30 in the U.S. city of Atlanta for what might be the last hope to reach a general agreement on the pact this year.

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