Japan, China, South Korea island disputes threaten global economy (+ video)
Island disputes between Japan, China, and South Korea are threatening financial stability in East Asia, and with it, the global economy. The next US administration should push publicly and persistently for a solution.
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First, nationalist fervor in China has led to a de facto boycott of Japanese goods, causing September sales of Japanese cars in China to plummet. Japan’s major automakers say they will draw down production in China. Overall, Japanese exports to China fell 14 percent in September from a year ago, according to preliminary figures from Japan's finance ministry.Skip to next paragraph
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The second eyebrow raising incident occurred earlier this month when Japan and Korea allowed a $57 billion expansion of a currency swap agreement – essentially an emergency line of credit – between their central banks to lapse. Both countries deny that territorial dimensions led to the lapse, but the denials are unconvincing. Risks to global financial stability are increasing, which is precisely the climate where such agreements are valuable in the first place.
Third, China decided not to send any representatives to the annual meetings of the International Monetary Fund (IMF) earlier this month. The reason? Tokyo hosted the event.
Other signs cause concern. September Japanese auto sales are also down in Korea. And Chinese tourists, once planning trips to Japan, are opting to visit other countries.
The timing of all this could not be worse for the global economy.
In its October report on the World Economic Outlook, the IMF warns that “risks for a serious global slowdown are alarmingly high.” East Asia has been the most important region for global economic growth since 2008. With US and European economic struggles likely to continue next year, East Asia’s economic performance is more important to the world economy than ever.
To date, the US has largely sat on the sidelines as the spat has intensified. That can no longer continue. The next administration – regardless of party – should address the territorial and economic issues head on by publicly and persistently pushing for an international solution to the crises. At a minimum, the next US president should meet with the leaders of China, Japan, and South Korea over the economic and security aspects of the disputes at the next G20 summit in June 2013.
The events of recent weeks, including Chinese military exercises in the East China Sea, clearly show that the next administration cannot treat this as a purely regional issue. While a negotiated settlement on island ownership is not likely any time soon, American engagement should provide an opportunity for the big three to take the necessary steps to cool down – and warm a shivering global economy.
Daniel McDowell is an assistant professor of political science at the Maxwell School of Citizenship and Public Affairs at Syracuse University.