EXECUTIVE SUMMARY

China’s rising assertiveness and uncertainties about America’s response to it are causing middle powers in Indo-Pacific Asia to look beyond traditional approaches to security. India, Australia, Japan and some ASEAN countries are expanding security cooperation with each other. The next step should be the creation of ‘middle power coalitions’: informal arrangements where regional players cooperate with one another on strategic issues, working in self-selecting groups that do not include China or the United States.

Areas of cooperation could include security dialogues, intelligence exchanges, military capacity building, technology sharing, agenda setting for regional forums and coordinated diplomatic initiatives to influence both US and Chinese strategic calculations. This would build regional resilience against the vagaries of US-China relations, including against the extremes either of conflict or collusion. It would also reinforce the multipolar quality of the emerging Indo-Pacific order, encouraging leaders due to meet soon, India and Australia are well placed to form the core of this middle power coalition building.

Until recently it was widely hoped that a combination of economic interdependence and regional institutions would mitigate great power rivalry and all but eliminate the possibility of major interstate conflict in Asia. [1] This hope, however, now seems forlorn. In particular, countries in the region are increasingly concerned about the risky trajectory of US-China relations. This is in turn bringing into question traditional approaches to regional security, whether it be dependence on US alliances, multilateral frameworks or non-alignment. [2]

Asian countries that until just a few years ago were willing to bet on China’s peaceful rise are now preparing to hedge in the face of China’s increasingly coercive behaviour against Japan, the Philippines and Vietnam. To insulate themselves from the risks of strategic competition or collusion between China and the United States, Asia’s diverse ‘powers in the middle’ – including India, Japan, South Korea, Australia, Indonesia, Vietnam and other ASEAN countries – are adopting a range of strategies. Strikingly, these nations are looking beyond formal regional multilateral institutions, alliance with the United States, and traditional postures of non-alignment to cooperate with each other.[3]

Where could and should this lead? Mutual assistance among the Indo-Pacific’s middle players should expand, and should not be limited to bilateral cooperation. A logical extension of this would be the creation of Indo-Pacific ‘middle power coalitions’: informal arrangements where the powers in the middle make it a priority to strengthen and help one another, working in self-selecting groups, or ‘minilateral’ arrangements that do not include China or the United States. Areas of cooperation could include security dialogues, intelligence exchanges, military capacity building, technology sharing, agenda setting for regional forums, and coordinated diplomatic initiatives to influence both US and Chinese strategic calculations. This would build regional resilience against the vagaries of the US-China relationship, including against the extremes either of conflict or collaboration. It would also reinforce the multipolar quality of the emerging Indo-Pacific order, encouraging continued US engagement without unduly provoking China by creating the impression of US-led encirclement.

This Lowy Institute Analysis examines the prospects for flexible middle power coalitions in Indo-Pacific Asia.[4] It begins by reviewing the changing security dynamic in Asia and the potential trajectories of the US-China relationship, many of which could harm the interests of the powers in the middle. It explores the rapidly expanding security cooperation among those middle players, and identifies the prospects, problems and priorities for building durable middle power coalitions.

It concludes by focusing on two powers, Australia and India, explaining why their growing security relationship could form a core of middle power coalition building in the region. India’s new prime minister Narendra Modi is due to visit Australia in November 2014 for the G20 Summit, and it is expected that Australian prime minister Tony Abbott will visit India before then, probably at the start of September.[5] The next few months thus offer an ideal window for the two leaders to strengthen their countries’ bilateral security cooperation and begin joint efforts towards minilateral cooperation with other regional powers in Asia.

STRATEGIC CHANGE IN ASIA

After decades of stability under unchallenged US dominance, the Asian strategic order is changing and uncertain. This has been driven by the rise of China as a great power, perceptions of US relative decline, and the ways in which other Asian nations are responding to both. China’s economic growth, its increases in military spending, and the extension of China’s interests and reach across the wider region have been key features of this changing strategic landscape. More recently, the region has seen growing evidence of Beijing’s willingness to challenge aspects of the status quo, notably with regards to maritime claims.

Disputes over maritime territory, resource rights, history and nationalism have worsened between China and several neighbours, notably Japan, Vietnam and the Philippines. Security mistrust has persisted also between China and India, including over their contested border, and in light of China’s growing naval presence in the Indian Ocean. In response to these tensions, regional countries are modernising their defence capabilities and, where possible, deepening their ties with the United States.

For its part, the United States has moved to reassure allies and partners. Since 2011, the so-called ‘pivot’ or ‘rebalancing’ strategy has involved a mix of diplomatic, military and economic initiatives aimed at shoring up America’s strategic investment in Asia. The pivot is not purely about balancing against China’s growing power in order to reassure allies and deter destabilising actions. Yet that is a substantial part of its intent.

Three years on, the pivot remains open to doubts and criticism.[6] The pivot has fallen victim to US defence budget cuts, domestic political paralysis, and misgivings in a growing part of the American public about maintaining their country’s global security leadership. Diplomatically, it has been undermined by uneven US participation in high-level Asian forums. There is little sense of large-scale reinforcement of the US military presence. Existing US military capabilities in Asia are formidable, but stretched.[7]

There are also questions about Washington’s appetite for risk. The Pentagon has said it is prepared to “project power in areas in which our access and freedom to operate are challenged”, implying a greater willingness to place forces at risk in Asia than in the past. [8] Yet it is difficult to square this with the nagging sense, fed by US hesitancy over Syria, Iraq and Ukraine, that the Obama Administration would prefer to lead from behind. In these circumstances, many Asian countries are increasingly concerned about the shape of the region’s security future and are considering what they can do.

ASIAN SECURITY FUTURES  

It is clear that the US-China relationship will be at the centre of Asia’s security future. But there are many ways in which relations between the United States and China could evolve. Most do not bode well for the ability of the powers in the middle to protect and advance their interests. A range of possibilities, outlined below, illuminate the challenges and choices they face.

Obviously the most devastating − if unlikely − outcome of Asia’s uncertain security future would be a worsening of current tensions leading to a major war between the United States and China. The catalyst for this could be a conflict between China and one of its maritime neighbours – notably US allies Japan or the Philippines – in which the United States becomes militarily involved in support of its ally. Or it could be renewed Taiwan tensions, the chaotic aftermath of regime collapse in North Korea, or a spark or scenario not yet possible to envisage. There would probably be multiple points at which major war could be averted by leaders’-level diplomacy. But there is no guarantee that either diplomacy or economic interdependence could stop conflict from beginning or escalating. The 100th anniversary of the outbreak of the First World War is a reminder that seemingly localised security shocks can have unpredictable and devastating consequences. A US-China war would wreak immense damage on all countries’ interests, even were hostilities to cease well before the nuclear threshold.

Another harmful but less catastrophic outcome would be a Cold War between the United States and China. A prolonged era of intense near-war confrontation would likely see Beijing and Washington insisting that smaller powers take sides, militarily, economically and diplomatically. Some observers suggest that the region is already moving in this direction and that the rhetoric at recent security forums has already taken on this tone. [9] Again, were such a situation to eventuate, the interests of the powers in the middle would be subordinated to Chinese and US priorities and risk-taking, even if initially some of them – notably Vietnam and the Philippines – might welcome strong US pushback against China.

Other scenarios short of conflict also bode poorly for the interests and freedom of action of the region’s powers in the middle. One is the prospect of a Sino-centric Asian order. Many scholars, and not only in China, have argued that there is something natural about Asia being reorganised around Chinese primacy. If China’s rise and America’s relative decline continue along the present lines, it is not difficult to imagine a regional order eventually dominated by Beijing. [10] The United States would seek to prevent such an outcome, as would many countries in Indo-Pacific Asia, notably Japan, India, South Korea, Indonesia, Vietnam, and Australia, although there are no guarantees they would be successful.

Another possibility is the reinforcement of American primacy. This would require a slowdown in economic growth or internal instability in China, or a dramatic revival in America’s economy and political will. It would also need the maintenance of America’s military edge and the strengthening of its traditional alliances and new partnerships. [11] While many of the powers in the middle would welcome the continuation or restoration of the old order, they cannot afford to base their security policies on that uncertain prospect. Their strategic planners have to treat it as a possible outcome, not a probable one.

One broad set of possible futures involves some form of accommodation between the United States and China, an approach advocated by some prominent voices in the Australian public debate, notably Hugh White. [12] At the moment, a comprehensive accommodation of China’s interests seems far from a likely choice by a United States stung by Chinese maritime assertiveness and economic espionage. It was not long ago, however, that the first Obama Administration signalled its willingness to look for ways to accommodate at least some of the interests of a rising China, provided it was willing to play by (US-led) international rules. [13] Some in Asia worried that this attempt to offer strategic reassurance to China would be at the expense of their own interests. However, Beijing rejected Washington’s overtures, probably seeing them as a sign of weakness, and soon thereafter proceeded to display a new assertiveness at sea and in diplomatic forums. This weakened the case in America for a strategy based on accommodation with China, and instead pushed US policy in the direction of the pivot. Still, some leading figures in the US strategic community, such as Henry Kissinger, continue to warn that a confrontation with China would be disastrous for America and insist there is no alternative to “cooperation and co-evolution”. [14] For its part, in light of the US pivot to Asia, the new Chinese leadership under Xi Jinping has called for an undefined “new type of great power relationship” between Beijing and Washington. [15] Any Chinese misgivings about an accommodation, in the form of a Sino-American condominium or ‘G-2’, are less about the principle than its terms.

Accommodation could take a variety of forms. One possibility is that the two powers agree to spheres of influence. Much like Spain and Portugal agreed not to compete at the dawn of the colonial era, some analysts suggest that the United States and China could demarcate areas of primary interest in which they would not contest each other’s leadership. A more inclusive version of accommodation would see the construction of an Asian ‘concert of powers’, perhaps including China, the United States, Japan and India. [16] Another variant of accommodation is the idea of the United States shifting to an ‘offshore balancing’ role, involving a marked diminution of its military presence and day-to-day diplomatic activism in East Asia.[17]

In theory, it would seem normal and acceptable for a rising power’s interests to be accommodated. The realities of the current Indo-Pacific strategic situation, however, mean that an effort at accommodation would bring major risks and uncertainties: accommodation would itself be destabilising. Any form of accommodation between the dominant power, the United States, and the rising challenger, China, would involve Washington ceding additional space and role for Beijing in the management of the regional order. This would have been welcome if Beijing’s neighbours were politically comfortable with China’s rise. Today they are not. For those in Asia with significant concerns about how Beijing might use its growing power, American support or legitimisation of a larger Chinese role would create strategic anxieties.

It is difficult to imagine a large and workable Chinese sphere of influence in Asia that did not challenge the interests, security and dignity of other substantial countries, such as Japan, India or Vietnam, and was not accordingly resisted by them. To concede control of the South China Sea as part of a Chinese sphere of influence would be to concede “more than is compatible with the vital interests of other great powers”.[18] Although the concert of powers idea might seem acceptable to Japan and India, it is not clear why China would accept an arrangement where it was outnumbered three to one by the United States, a US ally (Japan), and a strategic competitor (India). Offshore balancing, meanwhile, is prone to the tyranny of geography. If the United States is already cautious about making shows of force against coercion in an Asia where it maintains strategic presence, it is difficult to envisage it returning forcefully to the region in all but a catastrophic scenario – at which point it would lack the capability advantages, such as in maritime surveillance, that only ‘being there’ can provide.

A more attractive possibility for the region’s future would be not so much accommodation but incorporation: an increasingly powerful China taking its place as a constructive player in strengthened regional institutions. The region would make some adjustment to China’s growing interests provided that China – and America – accepted that truly inclusive regional organisations became the principal platform for managing security differences. This would involve concessions from both powers to allow inclusive regional bodies like the East Asia Summit (EAS), centred on ASEAN, to have a major say in managing key tensions that touched on those powers’ interests. But this path is presently little more than theoretical: it looks very unlikely. Even the mere construction of such institutions has been bedevilled by competition between the powers. China, having failed to exclude the United States, India and Australia from the EAS, instead tries to stop this institution from addressing sensitive matters such as the South China Sea.

MIDDLE POWERS, MIDDLE PLAYERS

As the United States and China redefine their relationship, Asia’s middle powers will be left to navigate this uncertain security future. There is no reason, however, why they should be passive players in this process: they have the potential to influence the evolution of relations between the two giants.[19] But if they are to do this, it is clear that they will need to move beyond their existing approaches to regional security and work much more closely with each other.

The idea of middle power diplomacy – typically involving the building of coalitions in multilateral forums – has considerable lineage, especially in Australia and Canada.[20] More recently it has, to varying degrees, been identified as relevant to many countries in Indo-Pacific Asia. [21] It makes sense to understand Australia, South Korea and the more militarily and diplomatically capable Southeast Asian countries – Indonesia, Vietnam, Malaysia, Singapore – as middle powers. Even Japan [22] and India [23] can plausibly be defined as middle powers for the time being, given their internal challenges and the limits of their capacity to shape the strategic environment unilaterally.

Working together, Asia’s middle powers could affect the regional balance of power. They have their own kind of strength in numbers, if only they can coordinate their capacities better. For instance, as of 2013, four of the region’s middle powers, Japan, India, Indonesia and Australia, had a combined population of 1.64 billion, a combined GDP of US$ 9.13 trillion, and combined defence expenditure of US$ 127.80 billion. By contrast, the US has a population of 316.5 million, a GDP of US$ 16.78 trillion and defence spending of US$ 640.21 billion. For its part, China's population was 1.36 billion, its economy US$ 9.18 trillion and its defence budget US$ 188.46 billion respectively. [24]

At the moment, Asia’s middle powers pursue three main types of broad security strategy. Some have made the alliance with the United States the cornerstone of their approach. Others have put their faith in multilateral or regional approaches; others in various forms of non-alignment. The utility of each of these approaches is likely to be tested by the evolving security future of Asia.

RELIANCE ON THE UNITED STATES

China’s rising power is testing American alliances. Thanks to the rapid advances in its military capabilities, Beijing is probing the durability of American strategic primacy in the Western Pacific. Although the United States is a bigger military power in global terms, and its technological edge will likely endure for many years, Beijing has begun to alter the regional military balance. If Chinese force modernisation continues apace it will eventually tilt the US-China bilateral military balance in the Western Pacific in Beijing’s favour. This will undermine the credibility of US alliances and more broadly raise doubts about Washington’s ability to forestall Chinese pre-eminence in Asia.

China’s neighbours see a US policy establishment divided on the question of coping with Beijing’s rise. Despite Washington’s assurances, many Asian nations worry about the constancy of American purpose in Asia. For example, the Obama Administration has moved from seeking a degree of accommodation with China to announcing a high-profile pivot to Asia and then a seeming de-emphasis of the rebalance strategy – all in the past six years. Asians also worry about the combination of America’s continuing preoccupation with the Middle East, the breakdown of post-Cold War understandings with Russia, hints of renewed isolationism and an increasingly dysfunctional domestic polity in Washington. All of this will make the United States a less predictable variable in the Asian power calculus. This in turn means that Asia will not only have to hedge against China’s rise but also against prospects of America’s relative decline and inattention.

Against this backdrop, both the United States and its allies are looking to diversify their security partnerships. For decades the United States had relied on formal bilateral alliances and special relationships in Asia. Now Washington is broadening the base in multiple ways. Even as it strengthens traditional alliances (Australia, Japan, South Korea, Philippines, Thailand) and long-standing partnerships (Singapore), Washington is seeking to deepen defence relationships with India, Indonesia, Malaysia and Vietnam. Washington is also encouraging its allies to work with each other.

The past few years have brought a rapid expansion of bilateral security cooperation agreements across Asia. US allies and partners are expanding their own bilateral defence ties with each other as well as third parties.[25] Consider, for example, Japan’s growing defence engagement with Australia, India and the ASEAN nations, involving high-level dialogue, information sharing, capacity building and defence exports. Tokyo’s security partnership with Canberra now appears poised for a significant expansion following prime ministerial visits in both directions in May and July 2014. Some observers suggest Japan is seeking a quasi-alliance commitment from Australia, while Canberra appears interested in the option of acquiring Japan’s advanced submarine technology. [26]

Since the middle of the last decade, when Japan announced the launch of a strategic partnership with India, security cooperation between the two has grown to cover a range of activities including regular military exercises and combined ‘2+2’ talks among senior foreign and defence ministry officials. The two sides are also exploring industrial collaboration, beginning with transfer and production in India of a Japanese amphibious aircraft. While progress will necessarily be slow, thanks to cautious bureaucracies in both capitals, there appears to be a rare alignment of political stars with the return of Shinzo Abe as Japan’s prime minister and the 2014 election of Narendra Modi with a strong mandate. In the last few years, Japan has also devoted special attention to developing defence and security cooperation with Southeast Asian countries, notably Vietnam and the Philippines. Japan has also stepped up its activism in the various ASEAN forums.

Another US ally, South Korea, has traditionally focused on its alliance with the United States and the security threats from the North, yet it too has made defence cooperation a major priority for its engagement with other countries in Asia. Although Seoul’s current relations with Tokyo are strained, it has expanded its defence diplomacy with Australia, India and some Southeast Asian countries, notably Indonesia, and is seeking to combine this with defence technology links.

In much of this cross-cutting alliance diplomacy, Australia has been a quiet leader, beginning with its 2007 bilateral security declaration with Japan, and a similar subsequent statement with India in 2009. Australia has also worked to deepen practical security cooperation and dialogue with Southeast Asian partners, including Singapore, Malaysia, the Philippines, Vietnam and, despite recent ructions over espionage and illegal immigration, its close neighbour Indonesia. Australia has become a venue of choice for multilateral defence exercises, such as the first naval drills of the 18-country institution known as the ASEAN Defence Ministers Meeting Plus, conducted in October 2013. Canberra’s defence policy documents highlight such engagement as a way to influence the regional security environment and manage risks of conflict. [27]

No US ally sees its new regional partnerships as a substitute for an alliance with America but rather as a useful complement. In fact, America’s own quest to build new defence partnerships in the region has made it easier for allies to do the same. This widening of the network of defence cooperation has also included trilateral arrangements. Notable among these are the Australia-US-Japan trilateral security dialogue – which has translated into military exercises and the building of interoperability – and a more modest India-Japan-US trilateral dialogue, as well as the frequent involvement of Japanese warships in India-US ‘Malabar’ exercises.

MULTILATERAL AND REGIONAL APPROACHES

Those regional middle powers that have placed their faith in multilateral or regional mechanisms to provide for their security are also being forced to look beyond such approaches by the strategic changes underway in Asia. Indonesia’s experience with ASEAN is a case in point. It has long been a point of faith for ASEAN to mitigate great power tensions in Asia by drawing all powers into a cooperative security mechanism under its aegis. The reality is that the very construction of regional institutions has fallen prey to conflicts between regional powers. The 2005 formation of the East Asia Summit centred on ASEAN, underlines this. China first pushed for an EAS based on the ASEAN+3 process that excluded India, Australia and the United States. Most of ASEAN preferred to ensure that those countries, plus Russia, were present in the EAS to broaden the playing field and dilute Chinese influence. Thus, since then, Beijing’s emphasis has been on limiting the scope of the EAS and refusing to let it touch China’s pursuit of its interests, trying to block it from discussing the South China Sea.

Neither the older institutions like the ASEAN Regional Forum (foreign ministers level) nor the newer ones like the ASEAN Defence Ministers Meeting Plus (which brings together the defence ministers of the EAS member states) are likely to be effective in coping with the historic redistribution of power in Asia. Their focus on soft security issues only underlines an inability to address real problems. Beijing has also shown the ability to use proxies such as Cambodia to break ASEAN unity on issues involving disputes between its member states and China.[28] There have been suggestions from Beijing of a “new Asian security concept” that somehow downplays the current regional institutions and seeks an end to US alliances in the region. Speaking at a hitherto little-known forum called the Conference on Confidence Building and Interaction (CICA), Chinese president Xi Jinping declared that Beijing would build it up as the main multilateral security body for the region. [29] The implication was that China would marginalise the EAS and other ASEAN-centric institutions, even though CICA does not include Japan, Indonesia and the Philippines, among others, as full members.

NON-ALIGNMENT

The changing regional scenario is also encouraging Asia’s non-aligned countries to discard their traditional military isolationism and expand security cooperation with their fellow Asian countries and the United States. During the Cold War, both the United States and the Soviet Union were distant powers. It was relatively easy to stake out a neutral or non-aligned position between them. Dealing with US-China rivalry poses more difficult challenges for the large non-aligned countries in the region such as India and Indonesia. That China is an Asian power gives Beijing the advantage of emphasising inherited regional traditions of Asian solidarity and opposition to Western dominance, appealing to sections of some Asian political elites. Yet this card has its limits. The slogan ‘Asia for Asians’ has less appeal now that many of China’s neighbours see a threat to their interests emanating from China rather than from former colonial powers. Those countries facing territorial claims from China – Japan, the Philippines, Vietnam and India – have no difficulty seeing through Beijing’s recent rhetoric about a new framework for Asian security.

The governments of Japan, the Philippines and Vietnam have become increasingly explicit in warning about the risks they see in Chinese power. In most other regional countries however, especially those with traditions of non-alignment, there remains a reluctance to be forthright about such questions, amid significant domestic opposition to any arrangement that would look like an alliance with Washington to balance Beijing. That said, expanding defence cooperation with America short of a formal alliance has become an important objective of states such as India, Indonesia, Vietnam, Malaysia and Singapore.

These countries are conscious, however, that they cannot rely on the United States alone to guarantee their security. Expanding defence cooperation with other regional powers has, therefore, become a major feature of regional security politics. India, which limited its defence engagement with even closest partners such as the Soviet Union in the Cold War, has significantly expanded defence partnerships with a range of countries over the last decade and more. [30] The rise of China and its growing military profile in the Subcontinent and the Indian Ocean have intensified India’s quest to consolidate its traditional security partnerships in the region as well as build new ones. If India’s new defence diplomacy has little resemblance to the past politics of non-alignment, the situation is similar with other countries like Vietnam, Indonesia and Myanmar, which are all discarding postcolonial military isolationism.

TOWARDS MIDDLE POWER COALITIONS

So far these moves by Asian middle powers to look beyond their traditional approaches to security have been fairly tentative, limited to bilateral or at best trilateral arrangements. Middle powers are looking to one another and sensing the possibility of safety in numbers. So what might be their next move? A logical next step would be to begin building flexible middle power coalitions, to explore ways of harnessing the convergent interests and substantial capabilities of India, Australia, Japan, Indonesia and other nations in between.

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