Publication in Economics, Politics and Public Policy in East Asia and the Pacific

The state of the relationship with Japan

Author: Peter Drysdale

There has been some static in the relationship between Australia and Japan since the election of the Rudd Government last year. Does this mean that there has been a fundamental re-positioning in the relationship, here in Australia, or at the other end in Japan?

The answer to that question is ‘no’.

Then what explains the static in the relationship? Read more…

The flying kangaroo – An endangered species?

Author: Christopher Findlay

The Qantas strikes, associated with the airline’s attempts to buy-in services from offshore, remind me of something I wrote in 1985 about the air transport business: that in the face of a more open trading regime, ‘civil aviation could be unbundled and industry-specific skills could be exported in a number of forms’.*

The consequence, I thought, could be the export of variety of services that contribute to the efficiency of the service that consumers finally get.

The pattern of unbundling may not have worked out in the way I was expecting (I thought then that the delivery of the final service might move offshore and that back-office functions might stay in Australia), but options like this are critical for the operation of competitive business and for getting consumers a good deal. Read more…

Blind spots in the Australia-Japan relationship

Author: Kent Anderson

Most driving accidents are caused by not appreciating the dangers in our blind spot – the overtaking truck, the momentary lapse of concentration. The same is true in international relations: consider how Schapelle Corby irrationally derailed Australia’s relations with Indonesia, or how the abduction issue in Japan derailed the historic engagement with North Korea. These are evidence of how events fired by domestic populism and fanned by tabloid media can undermine the most rational, calculated gains in international relations.

The Australia-Japan relationship has two blind spots that could undermine the obvious, rationally calculated collaboration on economic, political, security, and other affairs that make Australia and Japan the potential ‘bookends of peace’ in the Western Pacific. For Australia, the blind spot is underestimating the significance for Japan of China. For Japan, the blind spot is underestimating the significance for Australia of whales. These issues play in to domestic politics in both countries in unpredictable ways.

Read more…

The education game

Author: Christopher Findlay

The Bradley Review of Australian Higher Education discussion paper is just out.

It documents the internationalisation of Australian education. The OECD data says that Australia has the highest proportion of international students of any OECD country (19.3 per cent of all students at Australian universities in 2005).

Nonetheless, the report appears naïve about the demand for tertiary places in Australia. Read more…

Economic reform in Japan on hold

Author: Shiro Armstrong

Prime Minister Koizumi set up the Council for Economic and Fiscal Policy as a mechanism to strengthen structural reform in Japan. But the Council now appears ineffective under the weak leadership of Prime Minster Fukuda. Reforms have faltered.

In a speech to the annual NBER conference in Tokyo this week, Hiroko Ota , Japan’s Economic and Fiscal Policy Minister admitted that ‘Japan has so far failed to take advantage of globalisation’. Ota is a key force for reform in the Japanese government. In her candid assessment of progress and debate on economic reform, she highlighted many areas where Japan has fallen behind. The recent immigration debate, she said, is welcome but it is a debate that is 20 years overdue. Read more…

Understanding China’s oil prices

Author: Dominic Meagher

China’s energy markets can most accurately be described as operating under the principles of managed market-based economy. Gasoline prices have been heavily controlled and the prices for key energy resources such as coal are not exactly set by the market.

But nor is the government any longer able to completely control energy prices as it once did.

Last week China’s NDRC lifted the prices of gasoline, diesel oil, aviation kerosene and electricity (Xinhua). At 18 per cent, the price rise was the largest ever one day price rise for gasoline in China, and the first price rise since November (CNBC).

So what’s behind this sudden energy price adjustment? Read more…

Japanese destroyer arrives in China

Author: Dominic Meagher

The Japanese Destroyer, Sazanami was led into Zhanjiang military port yesterday by the Shenzhen, a Chinese missile destroyer (and the first Chinese navy ship to visit Tokyo last November).

This is the first time the Japanese navy has been in China since World War II.

The 4,600 ton warship and its 240 member crew arrived in Zhanjiang (in Guangdong province) loaded with relief supplies. The supplies (mostly food, blankets, hygiene masks and disinfectant) are being unloaded today and will travel by train to Sichuan to aid the recovery of the Sichuan earthquake victims. (CCTV)

The visit has received wide coverage in Chinese media, with Chinese sailors lined up to welcome the ship under the flags of both countries. Read more…

Japan searches its soul over Akihabara

Author: Peter Drysdale

Two weeks ago, on the eve of Kevin Rudd’s visit to Japan, Tomohiko Kato, a 25-year old high school drop-out and casual worker from Shizuoka, drove a truck into a crowded shopping mall in Akihabara, the popular electronics shopping district in Tokyo, slaughtering 7 people and wounding many others in a stabbing rampage that followed.

Another young crazy whose psychosis could just as well have rent innocent lives apart in Melbourne, San Francisco or Madrid but for where he happened to be born?

Not if you believe the collective outpouring of self-analysis that has been going on in Japan ever since. This was a peculiarly Japanese story, in a society that does not give anyone a second chance.

Japan is undoubtedly a very rich country. But it is a rich country without the ostentatious displays of wealth that remain in America, for example, and income inequality as it is conventionally measured has always been by international standards been very low. Merit and effort appeared, for years of growing Japanese prosperity, to define life’s chances.

Read more…

Japanese media on Rudd; Australia’s Japan correspondent?

Author: Peter Drysdale

Now the dust has settled on Prime Minister Kevin Rudd’s visit to Japan earlier this month, the editorials from Japan’s major dailies provide an insight into what the Japanese commentators made of our new government and the initiatives he launched in Japan (see the Asahi and the Nikkei [paywalled but excerpts below]). The contrast with the reporting the visit by the Australian media pack could hardly be greater. Hardly surprising, given most of the Australian media pack has no grounding or reference points in Japan: the entire Fairfax group doesn’t have a correspondent in Japan and randomly picks up stuff from the wires for its reporting on Japan. Japan is still Australia’s number one export market. The Australia-Japan political relationship is one of our most important. Then can someone explain to me why Fairfax Media the Australian Financial Review (supposed to be Australia’s leading economic newspaper), the Sydney Morning Herald and the Age have no one on the ground in Japan.  By contrast the Nikkei has someone on the ground in Australia and the Asahi sent its Editor-in-Chief to do a front page report on what Rudd was on about in March.

Perhaps Mr Rudd should try a program of Asian literacy on the Australian Press? Read more…

Australia and India

Author: Peter Drysdale

The first visit of the Indian External Affairs Minister, Mr. Pranab Mukherjee, to Australia this week will help both the Indian Government and the new Rudd Government in Australia get the importance of Australia’s growing relationship into better perspective in both countries. There is little capacity in either the Australian or Indian press for informed analysis of what the issues for both countries are.

As I said in the Crawford Lecture in New Delhi in April, India and Australia are on the cusp of an historic opportunity for sharing a new, much more important relationship in the future than we have shared in the past.

Australia is already deeply integrated into the East Asian economy. Australia’s external economic relations are more closely tied to the East Asian economy than are those of any other country in the world. The whole structure of our interests in global economic and political affairs was changed fundamentally over the past four or five decades by the development of our relationships with Japan and East Asia.

Read more…

Weekend thoughts

Author: Shiro Armstrong

Last week in a seminar given by a Japanese economist on profit shifting within Japanese corporate groupings, a Chinese economist was seriously puzzled and asked “if the firm is not making a profit, why doesn’t it shut down?”. To this the Japanese economist answered “well, it is not socially desirable because of the loss of jobs etc”. Capitalist China and socialist Japan…

Meanwhile, Sam Roggeveen over at the Lowy’s Interpreter blog agrees with Peter Drysdale in the ongoing exchagne with Hugh White which now spans both the EAF and the Interpreter blogs. Hadi Soesastro and Andrew Elek, two experts on regional architecture with extensive experience, have written their views on PM Rudd’s call for an Asia Pacific Community earlier here and here.

Reflecting on the world food summit

Guest Author: James Ingram

The outcome of the recently concluded World Food Summit attracted little reporting in the Australian media. Unfortunately the focus as usual was on personalities, notably the attendance of Presidents Mugabe and Ahmadi-nejad. Otherwise it was not seen as especially newsworthy.

Read more…

One more word on regional architecture

Author: Peter Drysdale

Hugh White is right that ‘what we need to do is to agree that we can build a dialogue of equals on strategic questions despite differences in values’. That is precisely what ‘’the simplest rules of engagement’’ for discussion need to cover. This is something very basic indeed – all of the major powers need to agree to treat each other as equals, with equally legitimate political systems and international interests. Without that, the basic conditions for a cooperative dialogue about Asia’s strategic future cannot be met.’ (link).

But I am not sure that he knows whether political leaders in the region will be open to thinking about these conditions as the starting point in strengthening regional architecture or whether appeal to the principles that have driven Asia Pacific cooperation– openness, equality, and evolution — have a chance of being extended to the political and security theatres (see Elek).

Hugh wants to surrender taking the chance on the ground that this is the stuff of power politics and power politics is a zero sum game. No doubt it is, at its end-point, but over a significant range it is a mixed interest game. And there are many security interests among the regional powers – both traditional and non-traditional (climate change, natural disaster relief, energy and food security) – in which the common positive interests exceed the negatives. And that’s the territory Mr Rudd, I presume, together with a more than few hard-headed strategists in the region are seeking to map now.

And I should say that the EU metaphor is a red herring, except to anyone who has interpreted the Rudd initiative through lazy journalism.

A US-Taiwan FTA

Author: Shiro Armstrong

At the American Enterprise Institutes’s panel discussion on Taiwan’s Economic Future, this week much of the initial talk centred on a US-Taiwan free trade agreement (FTA). But all the speakers were in agreement that the economic benefits are ’embarrassingly small’. That is, a few billion dollars in trade gains (including a lot of trade diversion) and miniscule income gains — all too small to quote in percentage terms.

Some other useful points worth mentioning:

-One of the biggest impediments to Taiwan’s trade is its trade with mainland China is a one way street, or one hand clapping, as it restricts imports of a whole range of critical goods from the mainland… and prevents Taiwan from achieving its full competitiveness in the global economy. (direct trade and investment was banned until as recently as 2001).

Read more…

Misconceptions about Japan’s foreign policy posture

Author: Tomohiko Satake

Much thinking outside Japan about Japanese foreign policy posture assumes that a cornerstone in mainstream Japanese foreign policy is containment strategies towards China, which deviates from Japan’s traditional China policy. Former Prime Minister Abe and his Cabinet (read Abe and Aso) were indeed proponents of this posture swimming against Japan’s foreign policy tradition, though even he committed early to patching up relations with China.

While Abe and his faction pushed for values-based diplomacy such as democracy (read exclude and surround China), the Fukuda Cabinet’s line once more reflects core Japanese foreign policy thinking more faithfully, anchored in the economic realities and geo-political realities the country faces.

Read more…