2013 ended with a series of self-inflicted wounds. President Obama, with a huge assist from the US Congress, reinforced apprehensions about the US commitment to the region by skipping both the East Asia Summit (EAS) and the APEC Economic Leaders Meeting. Setting an unreachable yearend goal to finalize the Trans-Pacific Partnership (TPP) was another in the series. So too was President Xi Jinping’s decision to announce China’s East China Sea Air Defense Identification Zone. Not to be left out, Japanese Prime Minister Abe Shinzo closed out the year by visiting Yasukuni Shrine, further alienating Beijing and Seoul while drawing a rare rebuke from Washington as well. How much this will impact his “go south” policy to build better relations with ASEAN remains unclear. North Korea’s regent Jang Song Thaek saw his career go to the dogs – at least figuratively – due to alleged greed and other criminal acts. Many fear that the prospect for Chinese-style reform in North Korea died with him.

2013 ended with a series of self-inflicted wounds. President Obama, with a huge assist from the US Congress, reinforced apprehensions about the US commitment to the region – not to mention concerns about Washington’s inability to get its act together – by skipping both the East Asia Summit (EAS) and the Asia Pacific Economic Cooperation (APEC) Economic Leaders Meeting. Setting an unreachable yearend goal to finalize the economic foundation of the pivot – the Trans-Pacific Partnership (TPP) – was another in the series. So too was President Xi Jinping’s decision, just prior to Vice President Biden’s trip to China, Japan, and Korea, to announce China’s East China Sea Air Defense Identification Zone encompassing territory claimed by both US allies. China’s promise of more ADIZs to come raised concerns (and increased calls for greater US involvement) from nations bordering the South China Sea as well. Not to be left out, Japanese Prime Minister Abe Shinzo closed out the year by visiting Yasukuni Shrine, further alienating Beijing and Seoul while drawing a rare rebuke from Washington as well. How much this will impact his “go south” policy to build better relations with ASEAN remains unclear. North Korea’s regent Jang Song Thaek saw his career go to the dogs – at least figuratively – due to alleged greed and other criminal acts (like not applauding his nephew vigorously enough). However his final wound was inflicted, many fear that the prospect for Chinese-style reform in North Korea died with him.

Pyongyang’s “smile offensive” quickly fades

Let’s start with the most serious, indeed fatal, wound. We talked in our September issue of Comparative Connections about a possible North Korean “smile offensive.”  It didn’t last long and clearly did not apply to the country’s presumed number two leader, Jang Song Thaek. His purge and subsequent quick execution – most likely by firing squad – proved once again the dangers associated with being next in line in an authoritarian society. Even being the top guy’s uncle (by marriage, not by birth) cannot save you.

What this means for the stability of the regime and its future policies is anyone’s guess, and it’s important to remember that when it comes to North Korea, we’re all guessing. The experts seem divided between those who think that Jang’s removal from power reflects Kim Jong Un’s total control – he is now secure enough to remove his father’s chosen mentor – and those who believe that it reflects just how unstable and vulnerable the young general really is. One thing is sure: the previously purged Jang won’t be making another comeback. Putting him to death – common for lower-ranking individuals but rare for senior leaders, especially if members of the ruling family – could show how insecure Kim is about his ability to truly neutralize his once-powerful uncle. This could indicate that more purges and instability will follow.

While much remains to be sorted out or understood, one suspects that “Chinese-style reform” has become increasingly unlikely for North Korea. Jang had long been seen as its chief advocate. When Jang visited Beijing in 2012, he reportedly assured the Chinese leadership that, in return for Chinese support for the new boy leader, Kim Jong Un would, with Jang’s encouragement and guidance, eventually take the North down the Chinese path.

In all likelihood, this line of thinking has been at least temporarily discredited. If reports that China received no advance warning of this event and that some Jang supporters are seeking asylum in China are true, this bodes ill not only for the China model, but perhaps for the overall China-North Korea relationship as well. The fact that Jang’s long list of sins included selling North Korean assets too cheaply to China must be additional salt in the Chinese wound.

In his 2014 New Year’s message, Kim Jong Un (in addition to boasting about ridding the Party of “factional filth”) continued to call for both economic development and a strong defense posture (read: nuclear weapons); Washington and Seoul (and more quietly even Beijing) have insisted Pyongyang can’t have both. Kim mentioned “nuclear war” six times in his speech, making it clear that a strong defensive capability was critical given the continued threat posed by “the US and south Korean war maniacs.” This does not bode well for the prospects of a resumption of denuclearization talks anytime soon.

As was the case in his 2013 address, Kim seemed to be waving a conditional olive branch toward the South, but only if Seoul changed its evil ways. As we were going to press, ROK President Park Guen-hye wisely called his bluff, calling for a resumption of the divided families program – cruelly scuttled this summer at the 11^th hour by the North – as a sign of Pyongyang’s sincerity. Stay tuned! [See Aidan Foster-Carter’s North-South Korea Relations for more details].

Obama no show

In his end of year commentary in The Huffington Post entitled “The Asia Rebalance is here to Stay,” Assistant Secretary of State for East Asia and the Pacific Daniel Russel boasted that his boss, Secretary of State John Kerry, had been to Asia four times in the last nine months. That’s the good news. What he did not say was that two of these trips were to fill in for President Obama, who was forced to cancel (for domestic political reasons you all know and we are personally embarrassed about) his scheduled Fall Asia visit to Bali (for the APEC meeting), Brunei (for the EAS), Malaysia, and the Philippines.

By all accounts, Kerry acquitted himself well. While his participation in the ASEAN Regional Forum meeting this past summer was literally a fly-by, this time he spent a full nine days in Asia attending the two summits with a side visit to Malaysia as well. He returned to Asia in December to amend for Obama’s missed trip to the Philippines, at which time he visited Vietnam as well.

Speaking on background, a senior administration official noted that Kerry received “very strong signals from all of the ASEAN countries about the US contributions to ASEAN as a key actor in both regional economic architecture and the regional security architecture” at the US-ASEAN Summit that took place along the sidelines of the EAS. The senior official also praised the EAS:

The East Asia Summit has really arrived at a point of a strategic dialogue among all of the member states in which they can address a variety of economic and security challenges facing the region in a very constructive way, in [a] way that facilitates practical cooperation, but in a way that also creates – allows a conversation that facilitates development of rules and norms on maritime security but also on nonproliferation, also on challenges like humanitarian assistance and disaster relief in a way that further confirms that the East Asia Summit has really arrived as the principal political and security institution in the region.

With all due respect to Secretary Kerry, this is all the more reason President Obama should have been there. His absence was not fatal to the “pivot’s” credibility, even though the international media had a field day declaring his absence as another big victory for China. If this is true (and we think this theme was grossly overplayed), Beijing managed to snatch defeat from the jaws of victory shortly thereafter with its ill-timed and ill-conceived ADIZ announcement.

Biden and China’s East China Sea ADIZ

Details of the vice president’s trip to Japan, Korea, and China (and Kerry’s trips to Malaysia, the Philippines, and Vietnam) are provided in the respective bilateral chapters that follow this overview. Here we will primarily address the atmospherics. Biden’s second trip to the region this year was initially aimed at reinforcing the US commitment both to its strong alliances and to the “new type of major country relations” being trumpeted by Chinese President Xi Jinping, with whom Biden had established a good personal relationship during exchange visits when Xi was vice president. Instead, it was mostly about the ADIZ. Biden (rightly) felt compelled to show strong support to Washington’s two close allies in the face of perceived Chinese assertiveness and it cast a pale on his visit to Beijing as well.

We say “perceived assertiveness” because no one denies China’s right to establish an ADIZ; the US, Japan, and South Korea, (among many others) have them, why not China? But the somewhat threatening manner in which it was announced, the ground rules (insisting on notification of aircraft passing through, even if not heading toward the Chinese mainland), the fact that it covered territory claimed and occupied by Japan and South Korea, and the timing (during increased tensions with Japan over the disputed islands and just before Biden’s visit) all magnified the problem, as did Beijing’s acknowledgment that additional ADIZ announcements covering the Yellow Sea and South China Sea were forthcoming at a time of Beijing’s choosing. The announcement stirred nationalist feelings in Japan and South Korea and made many in Seoul have second thoughts about what they thought was a growing special relationship with Beijing.

The announcement also prompted the Pentagon to remind folks in the region, and especially in China, who the real superpower still is. A B-52 mission was deliberately flown through the newly declared ADIZ without prior warning or permission; the PLA Air Force did not respond. While the ADIZ announcement may have served the purpose of putting more pressure on Japan to acknowledge its territorial dispute with China, it clearly undercut Xi’s “good neighbor” policy pronouncements and made China’s neighbors further cheer on the US pivot.

Discovering who ‘real friends’ are

The limits of China’s “good neighbor” policy were also evident in the aftermath of Typhoon Haiyan, the superstorm that walloped the Philippines on Nov. 8. Haiyan, known as Typhoon Yolanda in the Philippines is thought to be the strongest storm ever recorded, packing winds of 196 mph. Nearly 8,000 people died or were left missing in the storm and 11 million have been affected, many left homeless. In the wake of this catastrophe, Beijing’s first response was to offer $100,000 in cash and additional humanitarian relief assistance, a miserly response by any standard, the reflected Chinese anger over Manila’s readiness to challenge its claims to territory in the South China Sea. After being roundly criticized in the international media, Beijing pledged an additional $1.4 million in aid and dispatched a hospital ship.

In contrast, the US initially contributed $20 million in aid, a figure that was subsequently increased to $37 million. The US also dispatched Osprey helicopters and other equipment from Okinawa, along with the USS George Washington carrier strike group, amphibious ships and other vessels, and C-130 cargo planes. In all, some 13,000 military personnel have been working on the relief effort. Equally impressive was Japan’s response. Tokyo initially offered $10 million and then upped that sum to $30 million in emergency grant aid, with another $2 million worth of emergency relief goods and assistance via nongovernmental organizations. In addition to a total assistance package of $52 million, 1,000 Self-Defense Forces personnel were dispatched to help out, the largest such overseas deployment.

The “rebalance” lives on!

Secretary Russel’s commentary was not the only defense of the US rebalance. A more definitive statement came from National Security Advisor Susan Rice in an address about “America’s Future in Asia” at Georgetown University in late November, during which she announced President Obama’s April 2014 planned trip to Asia (reportedly to Malaysia, the Philippines, and Japan, although some are speculating that Abe’s Yakukuni visit may prompt a revision).

Following the theme laid out by Vice President Biden in his July speech (outlined in our last Regional Overview), Rice stressed the multidimensional nature of the rebalance, which she called “the cornerstone” of the Obama administration’s foreign policy: “No matter how many hotspots emerge elsewhere, we will continue to deepen our enduring commitment to this critical region. Our friends in Asia deserve and will continue to get our highest level attention.”

She outlined what the administration hoped to achieve over the next three years: “Ultimately, America’s purpose is to establish a more stable security environment in Asia, an open and transparent economic environment, and a liberal political environment that respects the universal rights and freedoms of all.”

In her comments on “enhancing security,” she focused on strengthening US alliances and building a constructive relationship with China: “When it comes to China, we seek to operationalize a new model of major power relations. That means managing inevitable competition while forging deeper cooperation on issues where our interests converge – in Asia and beyond.”

One area of deeper cooperation was the Korean Peninsula, where she reinforced the US argument that North Korea could not have both nuclear weapons and economic progress: “Pyongyang has a choice: on the one hand lies greater isolation and crippling economic privation; on the other, a true chance for peace, development and global integration.”

While identifying “fostering democratic values” and “”advancing human dignity” as other important US goals, she paid particular attention to the importance of “expanding prosperity”; she identified “concluding negotiations for the Trans-Pacific Partnership and achieving Congressional approval” as “our foremost economic goal in the region.”

Trade talks: timid and tepid

Trans-Pacific Partnership. Concluding the TPP may be Washington’s “economic goal,” but that wasn’t enough to produce a final deal. The desire to wrap up talks by the end of 2013 outpaced reality. A four-day ministerial meeting in Singapore in December failed to produce an agreement despite “substantial progress” (the term used in the official statement released after the meeting). US Trade Representative Michael Froman characterized the talks as having “great momentum.”

It is easy to blame President Obama’s absence for the failure – his presence at the APEC meeting would have spurred negotiations and provided more “oomph” – but there is little indication that the sheer force of his personality would have resolved the complex difficulties that hold up a deal. The negotiations have been closely held, triggering considerable concern about the TPP’s terms among groups not at the table. Draft sections have been leaked to Wikileaks and several memos found their way to the Huffington Post website, one of which shows the US as the outlier on many issues. The difficulties have not dented the Obama administration’s enthusiasm for an early conclusion of the TPP talks, however. The next round of meetings is scheduled for January. Meanwhile, there are glimmers of interest in China, South Korea, and Taiwan about joining the negotiations. There is little prospect of that before a deal is finalized, but those comments indicate a positive assessment of the TPP prospects and its terms.

Regional Comprehensive Economic Partnership. The second round of RCEP talks took place in Australia in September, the third round is scheduled for January 2014 in Malaysia, and a final deal is still on track to conclude by the end of 2015. RCEP is considered by many to be the Asian counter to the TPP. It is an Asia-only deal that includes the 10 ASEAN states and six of their dialogue partners (China, Japan, Korea, Australia, New Zealand, and India) and lowers its standards for the sake of greater inclusiveness. The official view is that TPP and RCEP are mutually reinforcing efforts to promote regional integration, although elements of competition are unmistakable.

World Trade Organization talks. TPP and RCEP are sub-optimal economic responses to the failure of the Doha round of World Trade Organization negotiations. Sub-optimal because global trade deals are always preferable to regional agreements and produce less distortion of trade. But both regional negotiations also have political purposes the WTO process does not address. (Some of those purposes are acknowledged – promotion of regional integration – while others are dark speculations – the TPP is an attempt to create a regional order that minimizes Chinese influence). In the last month of 2013, WTO members agreed on a small package of trade measures that proved that Doha is not yet dead and stirred some hope for the larger negotiating framework. Representatives in Bali, Indonesia adopted measures to streamline trade, allow developing countries more options for ensuring food security, and boost developing countries’ trade. The agreement was noteworthy for several reasons. First, it was the first ever from the WTO system, which was established in 1995. Second, it demonstrated important cracks among developing nations thought to be allied; the split between Brazil and India in particular is noteworthy.

Abe targets ASEAN

Noteworthy last year was Japanese Prime Minister Abe Shinzo’s aggressive Southeast Asia diplomacy. During his first year in office, Abe visited every ASEAN member state and in December hosted a Japan-ASEAN Summit. The summit commemorated 40 years of partnership between Japan and ASEAN, a reminder that Southeast Asia has long figured prominently on the Japanese diplomatic agenda. Nevertheless, the Abe strategy seems to herald a new approach, one with two interconnected strands. The first is the prioritization of Southeast Asia above Japan’s neighbors in Northeast Asia. The failure to make progress in relations with Beijing and Seoul has disillusioned the prime minister and encouraged him to focus his time and energy elsewhere. Second, aggressive outreach to Southeast Asia, in both the bilateral and multilateral context, is an attempt to raise Japan’s regional profile and counter the view that Tokyo is a spent diplomatic force, or at least one that is relegated to second place behind China. In other words, Southeast Asia has become an arena for diplomatic competition with China. One compelling example is the Dec. 15 announcement of a new “strategic partnership” between Japan and Cambodia, a government that was lambasted two years ago as the handmaiden of Chinese interests in ASEAN. The new relationship was lubricated by the announcement of nearly ¥14 billion in infrastructure loans to Cambodia. While there is great reluctance to call this outright competition and no regional government wants to pick sides between Tokyo and Beijing, the battle for regional affections gives Southeast Asian governments more leverage and room to maneuver.

A ‘regret’ addressed

The success of Japanese attempts to raise its regional profile ultimately depends on how Tokyo is perceived by regional governments. That task became considerably harder on Dec. 26 when Prime Minister Abe made a surprise visit to Yasukuni Shrine, the site where the souls of those who fought for Japan – including convicted war criminals – are interred. The visit was a genuine surprise: there was no reason to go that day – it is no special occasion; Abe said he merely wanted to tell the souls of his accomplishments on the anniversary of his first year in office.  Even close allies such as Liberal Democratic Party Secretary General Ishiba Shigeru and Komei party head Yamaguchi Natsuo heard about it only when the prime minister was en route to the shrine. On the other hand, Abe has repeatedly said that his failure to visit Yasukuni during his first term in office was one of his greatest regrets.

To be fair to Abe (without in any way condoning the visit), he made it clear that the purpose of his visit – heated allegations by others notwithstanding – was not to glorify Japan’s past but to commit his administration to peace: “There is criticism based on the misunderstanding that a visit to Yasukuni Shrine is an act of worshiping war criminals. I came to report before the souls of the war dead how my administration has worked over the past year. I came today to express my determination and pledge to build an era in which people will not suffer from the horrors of war.” Abe noted that he also visited Chinreisha Shrine, dedicated to those killed by wars worldwide from all countries: “To those who lost their lives in wars, I placed my hands together to pray for the repose of their souls and vowed to renounce war, with the resolve of building an era in which the people will never again suffer the ravages of war.” The message was clearly lost due to the venue where it was delivered.

The visit triggered predictable, powerful criticism from China and Korea. Less anticipated was the expression of “disappointment” by the United States because the visit would “exacerbate tensions with Japan’s neighbors.” Some reporting suggests that the prime minister may have thought that the prospect of progress on the long-stalled move of Futenma Air Station in Okinawa – a deal was announced the day before the visit – would secure US acquiescence to the visit; if so, he miscalculated.

The question now is how severe the repercussions will be. Economist Richard Katz has argued that Beijing has attempted to insulate the Japan-China economic relationship from political winds; an editorial in China’s famously nationalistic Global Times, which counseled against overreacting to the visit, suggests he may be right. Still, the visit indicates that Abe has lost patience with his neighbors and abandoned hope of finding common ground to forge a forward-looking relationship; at least, he figures the costs of not going are no longer worth paying. That may be a reasonable calculation from his perspective – at least as a conservative nationalist politician. Whether it serves Japan’s national interest is another matter. Plainly, however, it frustrates US attempts to promote cooperation between its two Northeast Asian allies and makes even more sensitive any divergence between Washington and Tokyo when it comes to dealing with China. Among the key questions for the first months of 2014 is how the damage will be contained and whether he has done real harm to the US-Japan relationship.

2014 economic outlook

As always, much will depend on economic performance. The ability of regional governments to improve their citizens’ lives is the starting point for political legitimacy, but growth pays other dividends, too. A rejuvenated economy will shift perceptions of US strength and resilience relative to that of China, as well as give President Obama additional leverage in domestic political debates. Prime Minister Abe’s economic agenda is designed to provide a foundation for the reassertion of Japanese standing and influence. Growth also changes perceptions of the utility of trade deals.

The US outlook has brightened as a tepid recovery appears to take root.  Unemployment has fallen to under 7 percent, and growth hit 4.1 percent in the third quarter of 2013. Final numbers aren’t yet available, but housing markets appear to be recovering, exports are growing in tandem with inventories, all of which puts the consensus forecast of 2.5 percent growth for the year within reach. A budget deal struck at the end of 2013 could eliminate debilitating uncertainty – a similar agreement on raising the debt ceiling cannot be assumed – allowing the IMF, among others, to forecast 2.6 percent growth in 2014.

Japan had a good year in 2013 as Abenomics and a steadily depreciating yen boosted growth. The economy expanded a blistering 3.8 percent in the second quarter, but that pace slowed (as was inevitable). By year’s end, GDP was expected to register growth of 1.1 percent over the year, down from an initial forecast of 1.9 percent. (In contrast the OECD in November forecast 1.8 percent growth in 2013.) The big question for Japan is whether the projected increase of the consumption tax from 5 percent to 8 percent will strangle the recovery. Most economists believe that there is enough momentum to sustain the expansion, but some fear that part of the growth in 2013 resulted from early purchases to avoid the new tax rate. The Bank of Japan is anticipating 1.4 percent growth for 2014, while the OECD forecast is slightly brighter at 1.5 percent.

China continues to moderate its glide path, with most predicting that the country will hit the official target of 7.5 percent growth this year. The OECD forecast is 7.7 percent for 2013, and 8.2 percent in 2014. Questions remain about the reliability of Chinese statistics and the ability of the government to continue to check unbridled expansion, but the recovery in the US bodes well for an economy that remains heavily dependent on exports.