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Will There Be an End to the Korean War?

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The Korean War began 70 years ago, on June 25, 1950. This was not just a standoff between neighboring states. The Korean War, in fact, began as a civil war between the two Korean camps (the North, that sought to build the future of Korea according to the Soviet model, and the South, committed to American attitudes). In the context of the Cold War, it immediately developed into a large-scale military conflict. Great powers were directly or indirectly involved. This includes the USA, Great Britain, USSR, PRC, as well as the UN, which sent an international military contingent to Korea under its own flag to help the South.

Military Confrontation on the 38th Parallel

The inter-Korean confrontation continues to this day. Today, on both sides of the 38th parallel — the latitude line that roughly demarcates the two Korean states — military fortification is piled up, and thousands of troops with modern weapons and military equipment target each other. Moreover, in accordance with the Mutual Defence Treaty between the U.S. and South Korea, the latter is hosting a group of U.S. troops of 28.5 thousand people, subordinate to the ROK/U.S. Combined Forces Command (CFC).

And if Seoul does need the U.S. military presence in Korea in order to protect South Korean economic prosperity from the hypothetical encroachment of Pyongyang, then for Washington, it is only an element of the global system for ensuring “American leadership.” The Korean Peninsula is the only continental element of the U.S. military presence in East Asia. In addition, South Korea, as an ally of the United States, significantly strengthens American military power in the Pacific, doing so to a much greater extent than Japan, still fettered by Article 9 of its Constitution.

Nuclear Issue

In the 1990s, the tangle of security problems on the Korean peninsula was supplemented by the North Korea nuclear crisis. North Korea, in violation of the Treaty on the Non-Proliferation of Nuclear Weapons, announced the development of a nuclear missile program. Pyongyang remembered the calls of the American General Douglas MacArthur, who led the United Nations Command in the Korean War, to use the atomic bomb, and believed that the DPRK’s own nuclear weapons could prevent a potential strike from the United States in the event of a new inter-Korean war.

The United States confronted the North Korean nuclear missile program with a sanctions war and aggressive military rhetoric. This included direct threats of President Trump in 2017 to physically destroy the DPRK should it decide not to give up nuclear missile development. However, common sense prevailed. Mutual accusations gave way to dialog. Three inter-Korean and two North Korea-the U.S. summits took place in 2018–2019.

Inter-Korean Dialog

Inter-Korean dialog was facilitated by two circumstances. On the one hand, having created long-range nuclear missile weapons, the North Korean leader Kim Jong-un decided that the main strategic goal to ensure the security of the DPRK from the United States had been achieved, and that the nuclear-missile race could be suspended by putting more funds into economic needs. On the other, it was the behavior of South Korea that promoted a thaw in the relations. And this is not only due to the fact that from the very beginning, the current President of the Republic of Korea, Moon Jae-in, went to the polls under the slogans of restoring dialog with Pyongyang. The aggressive rhetoric of Donald Trump in 2017 regarding the DPRK also played its role. For the first time in several decades, the world was faced with the real threat of a new war on the Korean Peninsula at the initiative of the United States. South Korea would be the main victim of it, suffering a powerful blow from the North. Therefore, if Washington’s victory in the war would be the liquidation of the North Korean state in its current form, then for Seoul, the only option for victory would be to prevent the war.

There were a lot of expectations from inter-Korean summits. But these expectations were only met, perhaps, by the fact that there will be no nuclear or other war in Korea in the near future. The declarations adopted in Panmunjom and Pyongyang by Kim Jong-un and Moon Jae-in set a number of tasks to promote cooperation between the two Korean states. However, for the most part, these documents looked more like statements of intent. Many political and legal obstacles stood in the way of fulfilling these intentions.

Therefore, the inter-Korean dialog that pompously started in 2018 began to stall by the end of 2019. At the beginning of June of the current year, it even reached a dead end. Under the pretext that the South Korean authorities did not prevent various public organizations from sending balloons with leaflets wording the attacks on the North Korean regime, Pyongyang blocked all communication channels with Seoul. In addition to this, Kim Jong-un’s sister, Kim Yo-jong, who now oversees relations with the South and, in general, has practically become the second most influential figure in the DPRK power structure, promised Seoul to destroy the inter-Korean liaison office in Kaesong in the near future (which was done — Ed. note.), the next step to be made by the military of the North.

The point was not, of course, in sending the balloons with leaflets to North Korea, especially since many of them had not reached the DPRK. The reasons go deeper. On overcoming the coronavirus pandemic, the DPRK economy is in dire need of economic support, and Pyongyang makes it clear that they are dissatisfied with Seoul’s lack of any steps aimed at restoring inter-Korean economic cooperation. This was stipulated by the agreements reached at the summits of Kim Jong-un and Moon Jae-in. This is primarily about the Kaesong Industrial Complex (KIC) and the Kumgangsan tourist region. The KIC, located in the DPRK near the border with the Republic of Korea, was the largest and most successful inter-Korean project. It housed the production of more than a hundred South Korean small and medium-sized enterprises, which employed about 50 thousand North Korean workers. By 2015, through the work of the Kaesong complex, inter-Korean trade turnover reached USD 3 billion, which made South Korea the second most important trading partner of the DPRK after China. The Kumgangsan tourist region was open to South Korean citizens for ten years, from 1998 to 2008. During this time, almost 2 million South Koreans could visit it, giving the DPRK government an additional source of income.

Pyongyang seems to be counting on the large victory of the ruling Democratic Party in the parliamentary elections in South Korea in April this year, which might create new prerequisites for restarting the inter-Korean peace process. This is all the more since immediately after the elections, the Office of President Moon Jae-in stated that normalization of relations with Pyongyang remained a priority for the country’s leadership and the resumption of negotiations between the North and the South might occur in May-June.

However, the initiator of rapprochement with the North, President Moon Jae-in, found himself in a critical situation. The most important asset of his party in the elections was not an inter-Korean settlement program, but the successful actions of the South Korean authorities in the fight against the pandemic. Now that the unrest around the pandemic has more or less subsided, the economic problems in the country, aggravated by the pandemic and corruption scandals involving people close to Moon, are again coming to the fore in the public consciousness of the South Koreans. So today, the President of the Republic of Korea is clearly not up to talking with Pyongyang.

The pressure of the big ally certainly plays its role. Before the results of the U.S. presidential election, Washington will not only be unable to take any action on the Korean vector, but will also disallow Seoul to take the initiative.

Do all of Korea’s Neighbors Want the Reunification?

In the current alignment of forces near the Far Eastern borders of Russia, the establishment of Korea as a single independent neutral and nuclear-free state would be in its interest. The question, however, is that at this stage, neither North nor South Korea is ready for reunification. The partners of the two Korean states are not ready for this either.

Seoul is concerned that reunification will come at a very high cost, pulling it out of competition at the regional and global levels for a long time. Pyongyang, in turn, does not intend to surrender to the South. They examined the experience of Germany, where the capitalist West brought the socialist East to heel, making former GDR citizens “second-class” and subjecting members of the former East German power elite to all kinds of persecution, including imprisonment. The new young generation of the North Korean elite is actively blending in with the emerging North Korean business under Kim Jong-un. We have already seen something similar in Russia. Both of these classes — the current military party elite and the North Korean nouveau riche — have a vital common interest in preserving a separate North Korean statehood. The unification of Korea under the leadership of Seoul is equally dangerous for both, because in this case, the elite will lose power, and local business will simply be crushed by the South Korean chaebol monopolies.

As for the United States, it is not really in its interest to have Korea reunited rather than having status quo on the Korean peninsula, maintaining tensions there. This is the most convenient way to keep and, if necessary, strengthen the U.S. military-political presence in Northeast Asia.

China is considering the alignment of forces on the Korean Peninsula primarily through the prism of its confrontation with the United States. Beijing will support the reunification of Korea only if it is sure that a united Korea will be pro-Chinese. There is no certainty about this: Korea, united under Seoul conditions, will, at best for China, become a powerful independent state with strong ties to the United States, and at worst, like Japan, the outpost of Washington’s deterrence of China in the region.

The Japanese, in turn, say that the main question for them is who will get the North Korean nuclear weapons. Tokyo will support the reunification of Korea, only being sure that these weapons are destroyed or withdrawn. In fact, the Japanese are simply afraid of the emergence of a united Korea as a powerful competitor in the regional and world arena, similar to the way England and France tried to delay the unification of Germany in the late 1980s.

Therefore, speaking about the reunification of Korea in the current conditions is at least premature. It should be a matter of inter-Korean reconciliation, building bridges between the two Korean states.

Trump and Pyongyang

In 2018 Donald Trump’s transition from the threat of a military attack on Pyongyang to a dialog with Kim Jong-un was largely forced. Both the insistence of South Korean President Moon Jae-in on the issue of inter-Korean detente and the general international attitude against the risk of a nuclear war against North Korea played a role. Special attention should be given to, firstly, the “road map” for settling the nuclear issue on the Korean peninsula put forward on July 4, 2017, by the Ministries of Foreign Affairs of Russia and China. And, secondly, to the unwillingness of the U.S. allies to engage in new American adventures in Korea, which was clearly shown in January 2018 at Vancouver meeting of the foreign ministers of those states whose troops fought in the Korean War of 1950-1953 on the side of the South as part of the so-called UN forces in Korea.

In dialog with Donald Trump, Kim Jong-un voiced the new relations between the DPRK and the U.S. as the main condition for the denuclearization of the Korean Peninsula. These relations should be based on mutual trust and free from mutual demonization. It is clear that this is not an easy task for Pyongyang and Washington. But there are examples of how similar challenges were solved in due time in China-the U.S. and Vietnam-the U.S. relations. The future relations of the DPRK and the U.S. could reach the level of today’s communication between Vietnam and the U.S., when they still remember the war, but the memory of the past does not prevent them from working together in the present.

Pyongyang could stop the development of ICBMs, freeze the production of nuclear materials, and open its nuclear facilities for international inspections. And Washington, in return, would officially recognize the DPRK, establish diplomatic relations with it, exchange diplomatic missions, limit military activities at its borders, reduce and ultimately lift sanctions, and provide economic and energy assistance to the North.

The problem, however, is that at least for the coming year, any progress in the U.S.-North Korea dialog is ruled out. Trump is concerned about preparations for the presidential election, the extremely unfavorable situation in the country due to racial unrest, and not about Korea. Both now and in case of winning the elected position, there will be more important issues — China, Europe, Russia, the Middle East. Korea will not be among the U.S. foreign policy priorities even if Biden wins the election (all for the same reasons).

Inter-Korean Reconciliation Matter is in the Hands of Koreans Themselves

The main result of the inter-Korean summits was Seoul being reconciled with the existence of the DPRK and adopting the policy of peaceful coexistence with respect to it. The urgent need for the Republic of Korea today is to recognize the status of the DPRK as a sovereign state, the rule of law and constitutionality of its leadership, and shift the relations between the two Koreas into a bilateral format.

The UN is called upon to play its role in this situation. It has been dealing with the “Korean issue” from the moment it arose in the late 1940s. Yet after the approval of two resolutions on this issue at once during the 30th session of the General Assembly in November 1975 (one initiated by the USA and the other by the USSR (both remained unfulfilled)), it basically removed the issue of a political settlement in Korea from the agenda.

First of all, it is worth changing a completely unnatural situation when, formally it is not the Republic of Korea, that is in the military confrontation with the DPRK, but the UN. To assist South Korea during the Korean War, in accordance with UN Security Council Resolution No. 84 of July 7, 1950, the United Nations Forces in Korea were created — the multinational armed forces of 16 states led by the United States. Since these forces participated in the Korean War under the UN flag, and the 1953 Korean Armistice Agreement was signed on the behalf of these forces opposing the Korean People’s Army and Chinese People’s Volunteers (and in fact on behalf of the UN), the latter is still formally at war with the DPRK, that since 1991 is a full member of the UN.

It is time to adopt the UN Security Council declaration and to declare that the Korean War was a page of the past, that the UN Security Council turns this page and, accordingly, there is no need for the UN Command in Korea.

As for the American troops in South Korea, their presence should be regulated exclusively by interstate agreements between the Republic of Korea and the United States. In this case, it would be worthwhile to decide on the issue of Operational Command (OPCON) by the ROK/US Combined Forces Command. Now, under bilateral agreements, in peacetime on the peninsula, South Korea commands both its own troops and the U.S. military contingent. However, with the outbreak of war, the command automatically transfers to the United States, which means, in fact, that the President of the Republic of Korea, as the Supreme Commander-in-Chief of the country’s armed forces, becomes subordinate to the Lieutenant General of the U.S. Armed Forces.

Peace Treaty

The question about the need to replace the 1953 Armistice Agreement in Korea with a peace treaty repeatedly arose in connection with the inter-Korean summits. At the same time, there is a wide range of opinions expressed as to which states should be parties to this treaty.

The Armistice Agreement of 1953 was not an interstate document. It was an agreement between the commanders-in-chief of the warring parties on the suspension of hostilities, the withdrawal of troops and establishing a demilitarized border between them. Neither the Republic of Korea, nor the United States, nor China in state capacity were involved in the armistice agreement. Moreover, the United States and China did not participate in the Korean War as states.

The peace treaty on the Korean Peninsula should be the treaty of two sovereign independent states — the DPRK and the Republic of Korea. There are certain preconditions for this. A joint communique of the Republic of Korea and North Korea was issued on July 4, 1972, calling for an independent and peaceful reunification of the divided country, without depending on foreign powers and without foreign interference, on the basis of “great national unity.” In December 1991, the heads of government of the North and South for the first time formally recognized the equal existence of two Korean states by signing the Agreement on Reconciliation, Non-aggression and Exchanges and Cooperation. Five inter-Korean summits took place from 2000 to 2018, joint declarations being adopted at each of them — a program for the development of bilateral relations aimed at a gradual shift from confrontation to reconciliation and phased rapprochement. None of these documents provided for the participation of any third states in inter-Korean communication. It was and should be about the interaction of the two Koreas exclusively in a bilateral format.

It is noteworthy that during the 2018 Pyongyang Summit the Agreement on the Implementation of the Panmunjom Declaration in the Military Domain was signed by the Ministers of Defense of the DPRK and the Republic of Korea. This is a fundamentally new and, most importantly, a practical step towards reducing military tension. Confidence-building measures between the military are being strengthened, communication channels are opening up, the parties are going to take all measures to prevent any clashes and conflicts with the use of military force in any territory. This is all the more important, firstly, since the ROK in its own capacity did not sign the Armistice Agreement in Korea in 1953. Secondly, the leaders of the two states announced that they would pursue a joint bid to host the 2032 Olympic Games. That is, the ROK recognized that it did not expect, as in the previous years, the regime to fall in the DPRK and that the North and South would exist separately even in 15 years.

The Korean War that started 70 years ago, has not ended yet. The Korean crisis today is one of the main threats to international security. This crisis has two components: the division of the Korean nation over decades into two separate states and the DPRK nuclear missile program.

These two components of the Korean crisis are interconnected, but their impact on each other is unequal. Pyongyang’s refusal from nuclear development alone will not end the confrontation between North and South. At the same time, normalization of inter-Korean relations is a prerequisite for ending the Korean War matters and solving the denuclearization issue of the Korean Peninsula.

From our partner RIAC

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A brief history of Sino-Australian political relations from 1949 to 2020

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Former prime minister Malcolm Turnbull and Mr Xi met for a bilateral talk during the G20 Forum in Hangzhou.(Supplied: Twitter)

To understand what is happening now requires an understanding of history. The recent Sino-Australian relations have been like a roller coaster ride, which needs to date back to history at least from 1949.

There are several characteristics worth mentioning in Sino-Australian relations. First, there have been diplomatic ups-and-downs between the two governments due to the divergence of the two countries’ political systems and ideology. Second, by comparison, bilateral ties have generally been improving for decades due to the reciprocal economic complementarities and cooperation despite the recent trade disputes. Third, Sino-Australian relations “has become more unequal with the passage of time” due to China’s rise. Fourth, the influence of the US on the foreign policy of Australia cannot be underestimated. In terms of structure, this part will be divided into four periods, posited on the founding of the People’s Republic of China in 1949, the establishment of diplomatic relations in 1972, the outbreak of Tiananmen Incident in 1989 and the recent decline of bilateral relations starting from 2015 with additional illustration of the influence of the US in Australian foreign policy.

The Pre-recognition politicial relations from 1949 to 1971

Graeme Dobell argues, “China has always loomed in the Australian consciousness”, possibly because Australia is geographically located in the Asia Pacific and surrounded by Asian countries with a significant number of ethnic Chinese. Historically, China was viewed in Australia as a threat, namely, “Yellow Peril”. The notion is a color-metaphor, full of racism. East Asians, especially the ethnic Chinese, are an existential hazard to other countries as immigrants.  Professor Gina Marchetti argues that

the rooted in medieval fears of Genghis Khan and Mongolian invasions of Europe, the yellow peril combines racist terrors of alien cultures, sexual anxieties, and the belief that the West will be overpowered and enveloped by the irresistible, dark, occult forces of the east.

In Australia, as a Western country located away from the West,  its Immigration Restriction Act of 1901, infamous as the White Australia Policy, was designed to prohibit Chinese settlers. “Fear of China and hostility to the Chinese immigrants were factors” that supported the Federation of Australia, and both factors existed for decades. The federating of Australia was the process by which the sixBritish colonies consented to unite and become the Commonwealth of Australia. Liberal Prime Minister Harold Holt formally abolished the White Australia Policy in 1966 with the introduction of the Migration Act 1966. By legislating legal equality among European and non-European migrants, this new Act has opened a new immigration history era. It has been the most crucial step in forminga multicultural society in Australia.

However, Australia’s unique geographic location and huge disparity of population between Australia and China have decided that the natural insecurity of Australia as a nation, for that linguistically, historically and intellectually, Australian ancestry originates from Europe, and its vital economic partner and most crucial military ally is the United States, both far away from Australia. Furthermore, Gyngell argues there is always “fear of abandonment” in Australian foreign policy. Likewise, former Australian Minister for Foreign Affairs Gareth Evans and former Australian diplomat Bruce Grant confirm that

the evolution of Australian foreign policy needs to be assessed against a background in Australian politics of persistent anxiety about a threat from Asia: sometimes vague and undifferentiated, sometimes specific, but always there.

In this period, China was viewed in Australia as a threat, namely, the aforementioned “Yellow Peril” and “Red Menace”. Arguably, the Red Menace has always existed in the Australian society and the government until now,which is a term applied during the Cold War for describing a nation that faces the increasing authoritarian threat of communism. This term was used to refer to the Soviet Union, while nowadays, it has been employed to mean Communist China. Besides, the difference of scare only reflects the extent to which the Australian government fears the Chinese Communist Party. From 1949 to 1972, especially when Australian and Chinese troops participated in the Korean War as rivals and later the Cultural Revolution was launched in China, Sino-Australian relations were hostile to each other due to the fact they were both subordinated to different political and ideological camps: USSR-led communism and the United Stated-led capitalism.

The steady development of Sino-Australian political relations from 1972 to 1989

During this period, Sino-Australian relations encountered the most drastic ups and downs the bilateral ties have ever experienced. In 1972, the Whitlam Labor government’s election marked the most radical turning point in Sino-Australian history by establishing diplomatic relations with China in December of the same year. Despite the endeavor, Whitlam made, this new chapter of the bilateral relations is mainly dependent on the change of  China Policy from the strongest ally of Australia, the United States. More concretely, in the early 1970s, the American army was withdrawn from Vietnam, indirectly ending the military collisions with the People’s Liberation Army.At the beginning of 1972, Nixon has his dramatic visit to Beijing and Shanghai.

From 1972 to 1989, the bilateral relations were at the stage of steady development. Partly, the positive Sino-Australian relations can be attributed to the same view of opposing the Soviet threat, which facilitated the Sino-Australian cooperation. More specifically, in July 1973, the first Sino-Australian trade agreement was signed by the Chinese government and the Whitlam government. The visit of Whitlam to Beijing in late 1973 culminated in a joint communique, concurring with the promotion of views exchanges among the Sino-Australian officials. In 1976, during the period of the Coalition-led Fraser government, “the Australian Parliament even stood in silence in the honor” of Mao Zedong, when Mao passed away. In 1978, the Australia-China Council was built by the Coalition-led Fraser government to facilitate bilateral relations.

Furthermore, in the 1980s, with the economic reform of Deng Xiaoping and the incrementally frequent visits of Sino-Australian senior leaders, the Australian government saw the economic opportunities China may bring, and the Chinese government also realized the Chinese modernization might benefit from the support of Australia. Mackerras argues that “the mid-1980s saw the relationship reach a peak”. In 1984, the ALP-led Hawke government launched the China Action Plan, “an overall economic program towards China”, aiming to deepen bilateral economic cooperation. In 1985, Hawke told the Australian parliament that a ‘special relationship’ between the two countries was forming.

The realistic Sino-Australian political relations from 1990 to 2015

The outbreak of the Tiananmen Incident in 1989 was a devastating turnaround in Sino-Australian relations, bringing the vigorous relations to a sudden stop. To some extent, Deng’s economic reform gave Australia and the Western world an illusion that China tried to become more Western. Contrariwise, the Incident shattered misapprehension of the special relationship between the two countries and has pushed human rights to one of the central issues that needs to be addressed in the bilateral agenda until now. It is noteworthy that the negative influence of the Tiananmen Incident was in all domains. Antagonized by the Australian broadcasting of violence in Beijing, the Australian people, including politicians, business people, scholars and religious figures, unanimously condemned Beijing. All aspects of Sino-Australian relations were affected at varying levels.

Arguably, after the Tiananmen Incident, the attitudes of the Australian government has changed to be more pragmatic and national-interest-driven. Wang argues that  the reassessment of Sino-Australian relations “did not lead to a fundamental policy shift” in Canberra “and human rights were not emphasized to the detriment of Australia’s economic interests”. In 1993, as the first Australian Prime Minister after the Incident, Keating visited China, breaking the diplomatic ice, partly because he needed to push wool exports to China.

Noticeably, from 1989 to 2015, China and the comparison of world powers experienced earthshaking changes. The hazards of the Asian Financial Crisis in 1998 and the Global Financial Crisis in 2008 lead to the economic meltdown of some Southeastern countries and the relative decline of the West. Bearing the two Crises, China has benefited enormously, even the most, from joining the WTO and other regional and global economic organizations as a member of economic globalization. At the end of 2010, China surpassed Japan and has become the second-biggest global economy, indicating that the global economic center has gradually transferred to East Asia. During this period, Hong Kong and Macao were subsequently handed over to China, enhancing China’s confidence. There is no doubt that bilateral relations have been increasingly asymmetrical during this time, leading to the concept of equal partners less possible.

From 1989 to 2015, facing China’s economic rise, on the one hand, the Australian government and business took advantage of the historical opportunities and have been more engaged in the Chinese economy. For instance, the Coalition-led Howard government was a firm“ supporter for China’s accession to the WTO” to share better Chinese economic growth. In 2014, the Coalition-led Abbott government and the Chinese government started to portray the bilateral relations as a “comprehensive strategic partnership” due to the incremental and robust trade relations and more frequent communication between top leaders of the two sides. On the other hand, due to the different political ideologies and systems, and the gradually widening disparity of the two countries, there have been strong concerns in the Australian government that China may leverage trade over Australia. Foot  indicates the sense of uncertainty and insecurity in Canberra that

Has Beijing worked to support the dominant norms of the international order, or has it striven to overturn them? Has it ever deserved to be called “responsible power”, a term defined by the dominant states, or has it acted irresponsibly? To place these questions more explicitly within an international relations framework, has China shown itself since 1949, and more especially during the period of reform and opening since 1979, as capable of be socialized into supporting global norms? Or, as realists would predict, have there been signs that its rising power over the past two decades has generated new tensions in the international system? Looking more to the future, what kind challenge does its enhanced capabilities pose to the status quo?

Despite the dilemma that the Australian government has to face and the political ups and downs between the two countries during this period, “the growing sense of independence in formulating Australia’s policy towards China, as well as the increasing saliency of trade considerations in implementing such policy, has transcended political and inter-administration divides”. Thus, to some extent, although there were still ups and downs during this period from the ALP-led Hawke government to the Coalition-led Abbott government in 2015, the bilateral relations “appears to have become less uncertain” and matured. Arguably, the Australian government started to view China either without unjustified fear as they had before 1972, or super optimism as they had before 1989.

In fact, the differences may only exist in the style of how different administrations approach China. For instance, the first Mandarin-speaking Prime Minister Kevin Rudd introduced a concept called “Zhengyou in Chinese that means to voice different opinions to benefit the Chinese leadership. By comparison, another Prime Minister John Howard preferred to deal with China on more practical issues.

The increasingly strained bilateral political relations from 2016 to 2020

Bilateral relations have deteriorated since the exacerbation of territorial disputes in the South China Sea in 2016. The Australian government criticized China for not abiding by the South China Sea Arbitration, a joint statement with Japan and the US. In response, the Chinese government expressed its strong displeasure through its state-owned media the Global Times, denouncing Australia as a “paper cat”. Currently, the Australian government is concerned that Chinese activity in the South China Sea may threaten Asia pacific security, thus influencing Australian sovereignty and security.

More importantly, Australia’s closest and strongest ally, the US, initiated a trade war with China at the beginning of 2018.  Since Australia often follows American foreign policy, the increasingly intense Sino-American relations have negatively affected Sino-Australian relations. In the same year, Sino-Australian ties soured further when Australia became the first country to officially ban China’s Huawei from its 5G network. A similar prohibition on Huawei was later executed in the US in 2019.

In terms of domestic politics, there are continuously more negative speeches about China.Australian politician Andrew Hastie urges urged the Australian government and public to realistically recognize the unprecedented democratic conviction and security threat from China. He even goes “as far as to compare the Western tolerance of China’s rise with the appeasement of Nazi Germany”. Hamilton argues Chinese infiltration in Australia is a “silent invasion”. The Minister for Home Affairs Peter Dutton, one of most senior officers in the Liberal-Coalition-led Morrison administration, condemned China’s interference and cyber hacks in Australia and claimed that the policies of the CCP are incompatible with Australian values.

2020 may have been the most turbulent year for Sino-Australian relations so far. Facing the once-a-century Covid-19 pandemic, Beijing has taken trade actions against a series of Australian goods such as barley, cattle, wine, cotton and coal after the Morrison administration advocated an independent Covid-19 inquiry without consulting Beijing first.

The tension also extended to people-to-people exchange. Canberra has warned its residents against arbitrary arrest in China. In contrast, Beijing has cautioned against studying and visiting Australia due to purportedly increasing racism and discrimination against people of Chinese and Asian descent. At the end of 2020, Morrison reacted furiously and demanded an apology from Beijing to an image tweeted by a Chinese diplomat showing an Australian soldier holding a knife to an Afghan child’s throat, which has further shadowed current and future relations.

Meanwhile, despite the global pandemic, there is increasing scrutiny in Australian media, including of the Hong Kong anti-extradition bill, the Xinjiang re-education camp, and China’s political donation to Australian political parties, Chinese spy students, the fight between Hong Kong and Chinese students in Australia, the defection of Wang Liqiang, Huawei backdoor suspicion and the detention of Cheng Lei and Yang Hengjun. According to the Lowy Institute poll in 2019, Australians’s trust in China to ‘act responsibly’ has dropped to 32 %, a 20-point decline from 2018. In 2020, trust in China has deteriorated to 23%, the lowest point in the Poll’s history.

Whatever, if any, evidence underpins these narratives or not, they seem to point out one reality: the plummeting state of Sino-Australian relations. Geoff Raby, former Australian Ambassador to China, even argues that Sino-Australian relations are at their lowest ebb since 1972.It may be controversial to argue that the current bilateral relations are worse than the relations in 1989, but it is appropriate to point out the reality that the Sino-Australian relations have been incrementally damaged. The Australian government’s dilemma is the overreliance of the Australian trade upon China and the exacerbated political disagreement. Jonathan Pearlman argues that “security and economics are tugging Canberra in different directions, as are its values and its interests”.

The Influence of the United States in Australian foreign policy

Undoubtedly, the Australian foreign policy has been influenced by the American government, as Australia has been called the “fifty-first state” of the US. Australia and the US have the same language background, similar European ancestry, similar political systems and strong economic ties. More importantly, in 1951, Canberra and Washington agreed on the Australia, New Zealand and United States Security Treaty (ANZUS), regulating that “an attack on either country’s armed forces or territory in the Pacific area” means “common danger” for the three countries. Since the US abolished its responsibilities to New Zealand due to the disputes of nuclear-armed ships, the ANZUS has become a bilateral treaty between Australia and the US and, separately, between Australia and New Zealand.

Given the American economic and military power around the world and the substantial disparity of Australia-American strengths, it is easy to argue that the ANZUS is the cornerstone of Australian security, and the US is the most important ally of Australia. In fact, Australia followed the US’s leadership through the UN, in the Korean War in 1950, the Vietnam War in 1962, the Afghanistan War in 2001 and the Iraq War in 2003 and recognized the PRC after the Nixon government had changed its China policy. To underpin the above view, Tow and Albinski affirm that the “ANZUS alliance remains Australia’s primary security relationship”. The former Australian diplomat Dr.Alison Broinowski argue that

Australia uncritically and voluntarily imitates its major ally (the United States) and its minor ally (the United Kingdom) in most things, yet lacks the capacity to do them well and the independence to do them differently. Having taken the drug of dependence from birth, Australia seems allied and addicted to it.

Thus, it is easy to question how independent Australia’s foreign policy is, especially its China policy, and argue that Australia does generally imitate the US’s foreign policy. As for the recent downturn of bilateral relations, Geoff Raby, an insider of Australia politics, believes that Canberra has developed policies to push back China’s rise in that the US started regarding China as a strategic competitor.

However, there is some policy flexibility in the Australian government, mainly economic-interests-motivated. To cite an instance, despite the opposition of the US, Australia participated in the China-led Asian Infrastructure Investment Bank in 2015 and leased the Port of Darwin to a Chinese company in the same year. Australia took the position as an outsider in terms of the Sino-American trade war, suggesting the two sides to end the fight to avoid the risks of collateral damage to Australia. Even in the 1950s and 1960s, when the Australian government adopted a hostile attitude towards China, the wheat trade between China and Australia“reached a significant level”.

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The Economic Revival of Japan

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Photo: Jezael Melgoza/ Unsplash

Amidst the uncertainty weaved by the pandemic, the stock markets around the world have shunned the preconceived notions associated to their functionality over the past year. While some sophisticated economies are suffering turmoil at the ensue of new Covid variants, deviant vaccination drives, and resumption of state-wide lockdowns, some of the countries are outright negating the educated forecasts made by seasoned financial experts all over the globe. China stands as a flag-bearer of such reality-defying markets: bagging GDP growth unlike any in the world whilst simultaneously controlling the virus strain in Beijing. Recent to the tally, however, is the quaint nation of Japan that despite being head-to-head with another gruesome wave of Coronavirus, still manages to consistently outperform the hailed champions of the global financial markets.

The 3rd biggest economy in the world astonished the financial gurus when Nikkei 225, Japan’s core stock market Index, soared up steadily over the last few weeks. With a 1.9% hike at the week’s opening on Monday, 15th February, Nikkei 225 Index surpassed the coveted 30000-point threshold after more than three decades. The economic rebound is associated to the export sector picking up the pace after a sluggish performance last year. The country still wrestles with the throttle of the pandemic; confirming over 1000 Covid-positive patients since November 16th and adding the cumulative death toll of 7056; surpassing the 7000 deaths mark in just under two weeks.

The positive effect, however, dawns since the daily confirmed cases are showing a steady drop; below 1000 daily-confirmed cases in over 4 months. This occurrence is in tandem to the global fall in the Covid cases. Moreover, Japan’s approval of the Covid vaccine produced by Pfizer Inc. is reflecting the recovery in the health condition of the country, especially a lucrative news amidst the second health emergency recently imposed in Tokyo.

Standing at the 30393.13-point mark, Nikkei 225 is expected to follow the bullish trend heavily over the following week as well. According to the measured forecasts, the bourse is optimally headed to strike the 33000-point mark after crossing the milestone of triple decades. This is due to the positive economic outlook in tandem to the rebooting of the global economy which would ultimately enable the export-reliant country. With Japan announcing a 12.7% GDP growth trailing from the recovery of the last quarter of 2020, followed by a hefty government stimulus to prompt domestic consumption, the Japanese bourse is expected to inflate by up to 30% by the end of the first quarter of 2021 in March, presumably speculating a record surge to bypass the highest ever figure of 38915.87-point, posted by Nikkei 225 back in 1989 before being subsequently floored by the notorious price bubble crash.

However, the economic recovery much less a record shattering surge in the market is heavily dependent on some of the core facets. The debacle of the nationalisation of vaccines is evident in Europe and ironically is the crisis posing more of a serious threat than the pandemic itself. Japan’s economic stability would only be possible given the vaccinations are administered effectively and timely with minimal resistance. As Japan still finds it hard to evade the emergency measures introduced in multiple regions, a vaccine crisis could intensify the emergency precautions and lockdowns may even gear into effect. This could seriously undermine the production capabilities of the country which ultimately could carry forward as an element hampering the blooming investor confidence in Japan.

Much to the global conformity of economic peril last year, Japan’s economy also contracted by 4.8% in 2020. The steep contraction, despite being of a greater extent relative to the 3.5% annualised shrinkage in the US economy, was still much controlled than the forecasted 5.3% fall projected by the International Monetary Fund (IMF). However, unlike some of the regional economies, the pandemic-induced decline lasted only for a short span of time before Japan waded through and rallied. Posting a 3% growth in the 4th quarter of 2020, when major economies like Germany and US grappled with recession, Japan steadily made surface.

Now as the pessimism looms in Europe and the political divide worsens in US, Investors are pouring confidence in Japanese equities which provide a solid foundation to the already surging Japanese Indices. This shift in perspective could be gauged by the purview of global stock positions taken by the active equity investors throughout the globe; pouring investments unlike the sceptical position adopted since January. The increasing investor confidence coupled by the improving economic and social health of Japan has proved monumental on the financial charts; despite being in the highs of a heavy stimulus, S&P 500 continues to be outperformed by Nikkei 225, sometimes even falling short by colossal margins to the returns added by the Japanese Index.

Which way the markets would turn and how Japan could sustain the whelming economic recovery depends largely on how Japan deals with Covid and how efficiently it regulates the vaccination drives. Moreover, Japan’s success may be upped the ante by any new misery that might befall on US or Europe that could ultimately drive more confidence and flare to the 3rdlargest economy of the world.

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East Asia

Mongolia-World Bank Group Partnership: Three Decades of Partnering for Prosperity

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It all began exactly thirty years ago. On February 14, 1991, the eve of Tsagaan Sar, Mongolia joined the World Bank Group[1]. This was the period when the country had just gotten on the path of democracy, free market, and openness to the outside world.  Mongolia rightly took pride in this transition but, at the same time, it presented enormous challenges, including a sharp economic contraction. Following the cut of external aid, the hardship was felt by Mongolians every day. Long lines were visible on every street corner for rationed food.

The World Bank’s support was quick to arrive. By the end of 1991, the first project of $30 million was already signed to help rehabilitate production in key sectors such as agriculture, energy and transport. The World Bank also carried out a comprehensive macroeconomic analysis, zooming in on the immediate challenges of runaway inflation and falling output.

Since these early days three decades ago, the World Bank Group (WBG) has accompanied Mongolia’s strong recovery and development, culminating in the country’s graduation from the International Development Association (IDA) – the WBG’s lending window for low income countries – last year. Mongolia’s economy has expanded significantly over this period, with GDP per capita rising more than fourfold from $1,072 in 1991 to $4,339 in 2019. But growth has been volatile. Like many other resource-rich countries in the world, Mongolia experienced persistent boom-and-bust cycles. Economic diversification remains critical to generate productive jobs, especially for the young. People’s living standards have improved, but growth did not not generate shared prosperity for all. Mongolian citizens expect their government to deliver quality education and health services, and provide for a clean and safe living environment. Their aspirations have not yet been fully realized.

Through good and difficult times, the WBG has remained a steadfast partner of Mongolia. Our budget support operations helped Mongolia restore macroeconomic stability and lay the foundations for inclusive growth. Our investments contributed to economic development in both mining and non-mining sectors, improving people’s livelihoods, and addressing environment and climate challenges. A total of $1.28 billion World Bank financing has been committed to Mongolia for these years. The WBG’s private sector arms—the International Finance Corporation (IFC) and Multilateral Investment Guarantee Agency (MIGA)—have also been active in supporting private investments.

The investments have helped improve people’s livelihoods across the country. In the energy sector, we supported electricity access to over 100,000 rural and herder families providing them with portable solar panels in the 2000s. In the early 2000s, the World Bank telecommunications project helped all 360 soums in Mongolia gain access to modern phone and internet services. To help herders mitigate natural disaster risks, we supported the world’s first index-based livestock insurance system in Mongolia. To improve governance, we helped revamp the statistical system in Mongolia to match international standards to inform decision making, and empowered citizens to make their voice heard on public expenditure allocations at local levels. IFC financed Mongolia’s first utility-scale windfarm for the country and supported reforms to increase access to finance for SMEs through enabling movable collateral.   

Most recently, in the face of the COVID-19 pandemic, the WBG quickly mobilized over $60 million to support the relief and stimulus measures for saving lives, protecting the poor and vulnerable, and ensuring sustainability of businesses and jobs. These resources are being invested for the most essential medical and diagnostic equipment in three tertiary hospitals, nine district hospitals of the capital city and 21 aimags, personal protective equipment for frontline health workers, and training for medical staff. A new project, which would finance the vaccination of about 60 percent of Mongolians has just been approved. The Bank is also financing the temporary relief of social insurance contribution for over 120,000 self-employed workers including 72,000 women and around 150,000 workers employed by 18,000 firms affected by COVID-19. Bank support has also benefited approximately 1.19 million children through the top-up payments to the government’s Child Money Program.

After thirty years of partnership with the World Bank Group, Mongolia has become a lower-middle-income country and its vision is to become by 2050 a high-income country with high levels of human development, better quality of life, a diversified economy, and good governance. This is an aspiration we will continue to support. To turn it into reality will be challenging. The first step will be to gradually phase out short-term relief measures and return to the important agenda of structural reforms which are needed to rekindle growth and make it sustainable and inclusive. Over the medium-term, Mongolia will have to contend with the growing risks associated with climate change, and the challenges this will bring to the structure of its economy. And it will need to offer its youth the perspective of productive, well-paying jobs, to retain the country’s talents at home.

The WBG is honored to have been Mongolia’s trusted partner over the past thirty years. We are confident that our partnership will continue and further strengthen in the decades ahead, rain or shine.

 [1] Mongolia joined the International Bank for Reconstruction and Development (IBRD), International Development Association (IDA), the International Finance Corporation (IFC), and International Centre for Settlement of Investment Disputes (ICSID) in 1991; and Multilateral Investment Guarantee Agency (MIGA) in 1999.  All these organizations together known as the World Bank Group.

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