At Modi-Abe summit, China will loom large

Prime Minister Narendra Modi makes his third trip to Japan for his twelfth summit with Japanese Prime Minister Shinzo Abe later this month, on October 28-29. Japan is the only country other than Russia with which India holds annual summits. Mr Abe was in India just a year ago for the last summit.

But geopolitics has been forced to evolve under relentless pressure from US President Donald Trump to demand bilateral trade concessions from America’s major trading partners in a skewed approach to global trade. He has to date imposed tariffs on Chinese goods worth $250 million. Japan has dodged the US threat for 18 months to impose similar tariffs on Japanese automobile exports to America. Eventually, Japan has agreed to hold trade talks, that it is likely to base on past Trans-Pacific Partnership negotiations, which the US abandoned after the election of Mr Trump. Japan has gone ahead and finalised the trade partnership among the other 11 members.

But before Prime Minister Modi arrives in Tokyo, Mr Abe heads for a more important meeting with Chinese President Xi Jinping. The United States has applied pressure on China, put in more explicit terms by vice-president Mike Pence in an address on October 4, when he listed the direct threat to the US from Chinese spies, non-tariff barriers, coercive measures against foreign companies and propaganda. Meanwhile, US warships have been aggressively patrolling the South China Sea under a “freedom of navigation” exercise, leading to some close encounters with the Chinese PLA Navy. The Abe-Xi summit takes place against this background.

The China-Japan détente can alter the geopolitical dynamics in Northeast Asia as it could help construct or enhance stabilising regional geo-economic structures. Negotiations to finalise a Regional Comprehensive Economic Partnership (RCEP) between ten Asean nations and Japan, China and the Republic of Korea (South Korea), plus India, Australia and New Zealand could move faster to fruition. China is keen to rebalance its trade and reduce its dependence on the US market and the American dollar. This will not happen overnight, nor unless China too moderates relentless pressure on nations along its periphery by cartographic invasion by literally swallowing up open seas as its territory. Thus, the tone and tenor of what emerges when leaders of the second and third largest economies of the world meet would determine the new Asia. It is speculated whether the two will announce a convergence or even cooperation between them on infrastructure projects in Asia. In other words, will Japan accept the Chinese vision of the Belt and Road Initiative (BRI)? India and Japan have been the two major Asian powers taking exception to the ambitious project, dear to President Xi’s heart, due to its lack of financial soundness and strategic ambiguity.

Thus, the next India-Japan summit will be conditioned by the outcome of the China-Japan summit. Perhaps a convergence between all three major Asian powers is inevitable in a Trumpian world. Prime Minister Modi had launched his own détente with China at the Wuhan summit earlier this year in what was clearly a course correction after being seen as openly balancing, if not confronting China in partnership with Japan and the US. The revival of the Quadrilateral — bringing together Australia, India, Japan and the US — after a decade of hibernation and the US declaring the Indo-Pacific as the new seamless region of operations for its military and diplomatic assets were tangible steps to check Chinese ambitions.

While the three Asian powers try to adjust their mutual interests to reduce tension and increase cooperation, India and Japan cannot afford to let down their guard. They constitute the two democratic ends of the Indo-Pacific crescent that wraps around China’s sea access. Mr Trump is both an agent of disruption, as he threatens trade with both while seeking concessions, but in checking the unbridled rise of China he may actually facilitate regional accommodation. Whether China is willing to make strategic changes of a lasting nature or is simply seeking a tactical pause regionally while it handles the larger threat from the US remains to be seen.

China must be closely reading the domestic developments in each rival nation carefully. The US will hold its bi-yearly congressional elections on November 6. It is being speculated that Mr Trump’s Republicans may lose control over the House of Representatives. In India,

Mr Modi faces crucial Assembly elections in the Hindi belt, on which rested his 2014 win, to which results will be out on December 11. Only Mr Abe stands politically resurrected with three more years of power after his recent electoral success. On the other hand, while President Xi may not be facing elections, his concentration of power can only succeed if he continues to deliver economic growth. Thus Mr Trump, perhaps unknowingly, is driving Asia towards a new balance which was otherwise upset by Mr Xi’s unrestrained ambitions. Even China may be realising that its BRI is facing a blowback, with Malaysia paring back projects after the election of PM Mahathir Mohamad, as indeed even Pakistan under new PM Imran Khan is being forced to turn to the IMF for financial rescue, and thus compelled to prune the China-Pakistan Economic Corridor.

Last week, at the IMF-World Bank meeting in Indonesia the director-general of the World Trade Organisation, Roberto Azevedo, was asked if a new trade war had begun. Without agreeing, he said: “Many shots have been fired”. But it was one shot, after all, killing Austria’s Archduke Franz Ferdinand, which had triggered the First World War. With the G-20 meeting in November in Argentina, and the crisis over America’s Iran sanctions kicking in on November 4, and indeed the fracas over the Saudis killing journalist Jamil Khashoggi, the global economy confronts multiple crises. Any one, or worse a combination, of those “shots” could unleash a tsunami of escalating oil prices and global chaos. Wise leadership over the next few months will hopefully be able to avert that.