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Will China-Japan-US Tensions Sink the Global Economy?

A looming crisis in the Pacific could have big consequences for the United States.

| Tue Jan. 22, 2013 5:48 PM EST
President Obama announces an expanded military presence in Australia, November 2011.

This story first appeared on the TomDispatch website.

Don't look now, but conditions are deteriorating in the western Pacific. Things are turning ugly, with consequences that could prove deadly and spell catastrophe for the global economy.

In Washington, it is widely assumed that a showdown with Iran over its nuclear ambitions will be the first major crisis to engulf the next secretary of defense—whether it be former Senator Chuck Hagel, as President Obama desires, or someone else if he fails to win Senate confirmation. With few signs of an imminent breakthrough in talks aimed at peacefully resolving the Iranian nuclear issue, many analysts believe that military action—if not by Israel, than by the United States—could be on this year's agenda.

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Lurking just behind the Iranian imbroglio, however, is a potential crisis of far greater magnitude, and potentially far more imminent than most of us imagine. China's determination to assert control over disputed islands in the potentially energy-rich waters of the East and South China Seas, in the face of stiffening resistance from Japan and the Philippines along with greater regional assertiveness by the United States, spells trouble not just regionally, but potentially globally.

Islands, Islands, Everywhere

The possibility of an Iranian crisis remains in the spotlight because of the obvious risk of disorder in the Greater Middle East and its threat to global oil production and shipping. A crisis in the East or South China Seas (essentially, western extensions of the Pacific Ocean) would, however, pose a greater peril because of the possibility of a US-China military confrontation and the threat to Asian economic stability.

The United States is bound by treaty to come to the assistance of Japan or the Philippines if either country is attacked by a third party, so any armed clash between Chinese and Japanese or Filipino forces could trigger American military intervention. With so much of the world's trade focused on Asia, and the American, Chinese, and Japanese economies tied so closely together in ways too essential to ignore, a clash of almost any sort in these vital waterways might paralyze international commerce and trigger a global recession (or worse).

All of this should be painfully obvious and so rule out such a possibility—and yet the likelihood of such a clash occurring has been on the rise in recent months, as China and its neighbors continue to ratchet up the bellicosity of their statements and bolster their military forces in the contested areas. Washington's continuing statements about its ongoing plans for a "pivot" to, or "rebalancing" of, its forces in the Pacific have only fueled Chinese intransigence and intensified a rising sense of crisis in the region. Leaders on all sides continue to affirm their country's inviolable rights to the contested islands and vow to use any means necessary to resist encroachment by rival claimants. In the meantime, China has increased the frequency and scale of its naval maneuvers in waters claimed by Japan, Vietnam, and the Philippines, further enflaming tensions in the region.

Ostensibly, these disputes revolve around the question of who owns a constellation of largely uninhabited atolls and islets claimed by a variety of nations. In the East China Sea, the islands in contention are called the Diaoyus by China and the Senkakus by Japan. At present, they are administered by Japan, but both countries claim sovereignty over them. In the South China Sea, several island groups are in contention, including the Spratly chain and the Paracel Islands (known in China as the Nansha and Xisha Islands, respectively). ;China claims all of these islets, while Vietnam claims some of the Spratlys and Paracels. Brunei, Malaysia, and the Philippines also claim some of the Spratlys.

Far more is, of course, at stake than just the ownership of a few uninhabited islets. The seabeds surrounding them are believed to sit atop vast reserves of oil and natural gas. Ownership of the islands would naturally confer ownership of the reserves—something all of these countries desperately desire. Powerful forces of nationalism are also at work: with rising popular fervor, the Chinese believe that the islands are part of their national territory and any other claims represent a direct assault on China's sovereign rights; the fact that Japan—China's brutal invader and occupier during World War II—is a rival claimant to some of them only adds a powerful tinge of victimhood to Chinese nationalism and intransigence on the issue. By the same token, the Japanese, Vietnamese, and Filipinos, already feeling threatened by China's growing wealth and power, believe no less firmly that not bending on the island disputes is an essential expression of their nationhood.

Long ongoing, these disputes have escalated recently. In May 2011, for instance, the Vietnamese reported that Chinese warships were harassing oil-exploration vessels operated by the state-owned energy company PetroVietnam in the South China Sea. In two instances, Vietnamese authorities claimed, cables attached to underwater survey equipment were purposely slashed. In April 2012, armed Chinese marine surveillance ships blocked efforts by Filipino vessels to inspect Chinese boats suspected of illegally fishing off Scarborough Shoal, an islet in the South China Sea claimed by both countries.

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