Geoeconomic Order in the Asia-Pacific

The Asia-Pacific is experiencing tremendous uncertainty. Past patterns and long-standing norms have become weak predictors of current regional interactions. Today’s uncertainty contrasts with two earlier, more-defined regional periods.¹ A rigid Cold War bipolarity structured security and economic relations in the early years following World War II until it slowly buckled after a series of events: the United States’ defeat in the Vietnam War, China’s limited embrace of markets, and the collapse of the Soviet Union and its satellites. Crucially, geoeconomic relationships rarely bridged the yawning geostrategic gorge of bipolarity. Friends traded with friends, not with potential adversaries.

A second order elided the first, distinguished by reductions in the centrality of hard security conflicts and declining military budgets, on the one hand, and deepening economic interdependence with expanded regional institutionalism transcending ideological differences, on the other. The result was a regional order marked predominantly by peace and prosperity lasting from the late 1980s into the early 21st century.

Continuities from this order remain; however, the last decade has witnessed numerous birth pangs suggesting the arrival of a third order dominated by a resurgence of geopolitics, nationalism, and heightened state-to-state tensions. Most prominent among the recent changes has been the acrimonious deterioration in relations between an ever-richer and more militarily assertive China and an economically wobbling and militarily drained United States. Predictions proliferate of a gladiatorial contest marked by xenophobic salvoes, economic decoupling, techno-nationalism, mutual provocations, and the menacing whirlpool of military conflict.²

Saori Katada’s new book Japan’s New Regional Reality: Geoeconomic Strategy in the Asia-Pacific advances an overarching argument about Japan’s geoeconomic efforts during the second and third of these orders. During the first and early second order, when the United States and Japan held the preponderance of regional economic power, Tokyo pursued what Katada labels its “old-style regional geoeconomic strategy” (p. 16). This strategy was a product of the country’s bilateral predisposition and domestic mercantilism. Since the late 1990s, as China added muscle and Japanese vigor flagged, the old strategy has been jettisoned in favor of a new, state-led, and liberal strategy anchored in “regionalism as its structure, formal rules and institution building as its mode of engagement, and the promotion of liberal global standards as the underlying values” (p. 20). Recent top-down government initiatives make this new strategy “state-led,” and while “liberal,” it is less about the ideological embrace of free-market fundamentalism than the advance of rules-based standards advancing competitive markets (p. 20). Not at all coincidentally, such standards are highly beneficial to Japan’s most sophisticated global companies.

The book is compelling in its nuanced advance of this core argument, four elements of which, in my estimation, deserve to be highlighted here. First, the book’s emphasis on geoeconomics resonates with the overwhelming attention that most Asian governments devote to their national economies as integral components of national security. Leaders in these countries remain largely convinced that their continued legitimacy depends on delivering tangible material benefits to their citizens. Since the economies of most Asian states are deeply enmeshed in regional production networks and complex supply lines, none are eager to confront a Hobson’s choice between hard security and continued economic interdependence. Such a choice might be pressed on them should China and the United States advance toward existential competition with the demand that other regional actors choose sides.

Second, the book is compelling in its treatment of the interactions between Japan’s domestic political economy and its efforts to respond to alterations in regional economics. The complicated weavings of embedded mercantilism that defined Japan’s domestic political economy until the mid-1990s unraveled due to the restructuring of government agencies, financial reforms, enhanced political intervention by policymakers on behalf of the economy’s least-competitive sectors, and globalized businesses that were no longer tethered to state largess or bank loans. These new domestic arrangements altered Japan’s responses to the changing regional environment. Although Katada is not explicit about causality, my reading is that both shifting regional conditions and a...