Bridging Cooperation and Competition in Asia

Bridging Cooperation and Competition in Asia

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CFR Senior Fellow Alyssa Ayres and Joshua Kurlantzick, and the Lowy Institute's Philippa Brant and Euan Graham, join Forbes Asia's Tim Ferguson to discuss the future of Asia's regional institutions and multilateral mechanisms. The panel considers the role of ASEAN as a coordinating mechanism for regional dialogue, noting that its lack of unity on sensitive issues remains a challenge for U.S. policy in the region. The discussion additionally considers trade agreements, including the Trans-Pacific Partnership and the Regional Comprehensive Economic Partnership, and China-led institutions, including the Shanghai Cooperation Organization and the Asian Infrastructure Investment Bank.

This meeting is part of the U.S. Rebalance to Asia Symposium, presented by the Council on Foreign Relations and the Lowy Institute for International Policy.

This event was made possible by the generous support of longtime CFR Member Rita E. Hauser and the Hauser Foundation.

MODERATOR: Well, thank you all in this hearty contingent that has made it to the final session of our jointly presented discussion over last night and today. We will attempt in this session to shift the focus a bit more toward the Asian countries themselves outside of the pure U.S.-China and North Asian discussion that has occupied some of the previous conversations, moving to Southeast Asia and the South Asian subcontinent and such.

With particular attention to what we're calling the architecture either that does exist or that could exist. I would use the world lattice work, I suppose, to describe the series of engagements that these countries have either formed over a period of decades.

Some of them, as we discussed earlier today, date back to the early 1960s. But increasingly there's a view that this kind of architecture, if it can be established, can help those parts of Asia outside of the U.S.-China competition have a presence, as the various powered dynamics of the region get sorted out.

That said, it is clear that the increased temp of the U.S.-China competition, the rising stakes, if you will, the sense that there is a seeming urgency to diplomatic and economic affairs in Asia, is giving new energy to this kind of architectural discussion. So it does provide a context for what we're going to discuss today.

I am blessed by the (inaudible) two visiting panelists from the Lowy Institute. On the far end, Euan Graham, who was participating in one of the earlier panels. And we're joined at this panel by Philippa Brant, who is a research associate there who was focused primarily on the outreach of China in this larger region of Asia.

From the Council on Foreign Relations, at the far end, Joshua Kurlantzick, who is the senior fellow for Southeast Asia. Has a scholarly affiliation recently with the Carnegie Endowment for International Peace. And I think along the lines has actually committed acts of journalism.

(LAUGHTER)

So we won't hold that against him.

Alyssa Ayres is back for this panel, the senior fellow for South Asia, India, Pakistan here at the council, with State Department experience in that region as well.

So let's see if we can oscillate a bit between security and trade here, and maybe broaden the discussion into some other areas that may crop up as these—this architecture is constructed. I was thinking environment, for example, migration, transparency and corruption all might be areas in which, as a more formalized kind of relationship among these nations developed. These might be areas where this architecture could be used for advancement.

Let's start on the security front since the U.S.-China competition is now drawing discussion ranging from, for instance, Australia's former Prime Minister Kevin Rudd, now of the Asia Society becoming increasingly vocal about the, in his view, the urgency of dealing with the U.S.-China competition. Michael Pillsbury's new book, the council's own recent paper on this—in this regard. All of these contributing to the idea that we're reaching, if not a crisis point at least a point of worry as far as this competition's concerned.

Euan Graham, I'll turn to you first in this regard. Is there, in your view, a special urgency right now to the development of a security architecture in the region, apart from the U.S.-China direct engagement?

GRAHAM: I think it's been a long time coming. I mean there's no particular trigger that makes it more urgent now than it was two or three years ago.

In fact, you mentioned Kevin Rudd before, who I think the genesis of his specific community proposal was a similar concern about how do you provide a platform that will manage the Great Power relations, provide a stage, if you will, for the elephant so that you don't get trampled underneath.

As to whether you can have a neat division of labor between security and economics I think is a moot point in this region. It's very hard to do that. It's very hard to take economics out and remove it from a security context and vice versa.

That makes for a bit of an unwieldy and rather amorphous set of arrangements that are in place. I think that's a fact of life that we have to live with. And the results the architecture that we have is often compared to a noodle bowl or an alphabet soup.

But if you were to take the architecture as a metaphor, what would it look like? It's unplanned. It has grown very quickly in quantitative terms.

So there's no shortage of dialogues. And that's not a bad thing. But it does come at an opportunity cost for diplomats who have to send their, particularly their principals, their leaders to do two summits per year in Asia is a hard ask.

That might not be the rational solution to have an APEC and an EAS if you were to approach this from the ground up. But that's another feature of the architecture of this area is that everything requires heritage status. So once unfurled, it's very difficult. There's no demolition making way for the new.

MODERATOR: Right.

GRAHAM: So there's a kind of, if you like hoper there's an enmeshment that takes place over time. And in that I think Australia's clear choice, I think the East Asia Summit has been—that is the sort of preferred vehicle I think of the policy setting top-down end of the architectural spectrum, the high rise, if you like.

ASEAN is still central, and all of its spinoff dialogues. But ASEAN has the role of the hub for all of the—most of the architecture by default. Why? Because there is no agreement amongst the external powers, particularly Japan and China, over who should have that leadership role. So there again is a sort of rather messy reality.

For all that, I think at the economic end of the spectrum ASEAN has been particularly successful. We have 2015 is a year where ASEAN is due to move to its various pillars of community building, one of which is the economic one.

Still work to be done on labor mobility between the ASEAN nations. But nonetheless, I think some tangible results.

Where we see much fewer tangible results is on the security side. And there we're left with the kind of raw reality that although ASEAN sometimes has a rather proprietorial attitude, if I can use that, toward the centrality question of it being the hub organization. Clearly as issues like the South China Sea have demonstrated, it's unable to develop a consensus.

MODERATOR: Right. As was discussed earlier today, compared with Europe this is a less formalized, perhaps less cohesive kind of engagement in Asia. And yet for at least a few decades now there have not been sustained hostilities between nations. Certainly uprisings within nations, but not sustained hostilities between nations, and generally robust economic growth

I return to this question of whether there is in fact a particular urgency right now. Josh, do you have a view in this? Are we at a pivot point, if you will, that we weren't at five years ago or 10 years ago in the region?

KURLANTZICK: Well, I think that first of all the idea that ASEAN, other than in the actual period of the Vietnam War, has played a role in diffusing conflict in the region is not correct. I mean there have actually been conflicts in the region, internal conflicts.

There was a conflict in East Timor in 1999 that ASEAN advocated completely. So I think that it is true that ASEAN played some role in the Vietnam War era. But I don't think it can be credited today for playing a role at all in diffusing conflict.

Also I think that there is some urgency from the ASEAN side, although I'm not necessarily sure you would see it in the way that ASEAN leaders act in that many of the countries in Southeast Asia, not all of them, but many of them are now at the start of middle income traps. Some of them are much poorer.

But the ones that are at the middle income trap, they're—in other words, they have done well with low-end manufacturing, lower value manufacturing, Thailand, Malaysia, Indonesia, the Philippines. They need to move up the value-added ladder. And a true EAC—a true AEC, ASEAN Economic Community, would be quite beneficial for them.

In actuality the ASEAN Economic Community that's supposed to come into effect this year, it is true that it is coming into effect, but I just wrote down (inaudible). About 30 percent of the most important industries in the region are not covered by it.

If you talk to companies, foreign companies that are investing in ASEAN, they don't believe that it's actually going to be as effective as people say. And in a lot of the areas, the final step in terms of labor and also important industries is not put into place.

So from the Southeast Asian countries' point of view, if they want to be taken seriously economically, if they want to move up the value-added chain, which is critical in Thailand and Malaysia for example, this is really important for them to put through. And they haven't really done it.

The only country in the region that has really committed to 100 percent on the community and on every industry is Singapore. And Singapore is sort of an abnormal country in a lot of ways.

MODERATOR: Philippa, is there a sense that, with regard to your interest in China's growing role in the region, is there a sense of China stepping in to a void here that there was some sense a lag, both with regard to security, but especially with regard to trade and economics, development, the Asia Infrastructure Investment Bank and the like? Is now the time that this is happening because the region is so obviously in need of some kind of assistance?

BRANT: I mean I think there's a couple of things to say here.

Obviously there is a need in the Asian region for more investment, more trade, more infrastructure development, more development assistance more broadly. And China has a growing role to play in its foreign aid. Bilateral foreign aid program is growing. It's now the sixth or seventh largest donor in the world, although still doesn't focus primarily on Asian region.

There's a recognition that in terms of multilateral institutions China definitely wanted to play a larger role. And you know obviously tried to do this through reform of the existing institutions, the World Bank and the Asian Development Bank. Some of those reforms have been held up by U.S. Congress and others. And so the alternative then is to establish another institution.

Now I don't see this institution as a direct challenge to the Bretton Woods institutions. I think it can play a complementary role. And my main point to make here is that if you had a choice between China operating purely bilaterally or China operating through some kind of multilateral institution that may be Chinese-led and may be Chinese-driven, but it's still a multilateral organization.

Surely we should be encouraging more of this regional and multilateral engagement. Because the alternative is China goes at it alone and you have less ability to influence that.

MODERATOR: So, I saw the figure $62 billion associated today with the so-called Silk Road Initiative. It goes by a more formal name, but basically the effort of China to construct both the Central Asian and through South Asia a series of trade routes and the like.

There's that and then there is the infrastructure bank that now has 57 varieties of nations associated with it. Is there any doubt as to the, a, Chinese capacity and b, willingness to follow through on these initiatives?

BRANT: Absolutely. It's going to be a huge challenge for China. I mean we shouldn't get too caught up in the big announcements and the pledges.

I think if we're going to look at China's influence we really need to follow the money. We need to look at how these initiatives are playing out in individual countries, and also the role that each country plays in negotiating with China. These are massive initiatives that China does have implementation challenges.

And so whilst they seem massive on paper, they're not short, one- or two-year aim. It's a 30-, 40-, 50-year ambition. And who knows what can happen—what can happen down the track.

But I say that as a positive thing because it means that there's more space for individual countries in the region to assert their needs, to work with China to make sure that any kind of economic development plan is also in their own interests and not just being used by the Chinese to further some of their own geopolitical objectives.

MODERATOR: Alyssa, for all the talk of China's ramping up its efforts and the like. It's confronting its own pronounced slowdown economically. And it may be the case that the country that you have most focused on, India, now after a rather sleepy period will actually be producing economic growth rates exceeding that of China.

Are we perhaps skewed in our attention here within the region toward the Chinese element and forgetting the fact that there is a potentially very powerful economy emerging at the other end?

AYRES: Well, that's a softball question for me because I always think the attention is skewed. Certainly some of the latest growth projections suggest that India should surpass China's growth next year with China slowing and India's growth ticking up.

But it's also the case that—for me one of the most interesting things that's happening with regional architecture in Asia is the increase of the kinds of groupings that are sort of Asia only. I mean the United States is very invested and very engaged with APEC and with ASEAN. And we have a strong presence there, with EAS, as Josh referred to.

But there's now a number of other organizations taking shape in which China and India and other countries are major plAYRES. So you see—we have our Trans-Pacific Partnership conversation with countries, but China and India are leading the Regional Comprehensive Economic Partnership negotiation. I don't know where that will end up.

And certainly it will be a far lower standard type of a trade agreement than the kind of trade agreement that the U.S. focuses on. But what does that really mean? Does it mean that it will knit together the countries of Asia that are participating in this RCEP more tightly than the United States may be with some of these others?

I mean it's worth actually thinking about that. There are other architectures emerging, some China led, some with broader participation. The Shanghai Cooperation Organization, India and Pakistan are now undergoing a process of accession to that organization through the course of this year.

There is the SECA that we talked about, the confidence building, the Conference on Interaction and Confidence Building in Asia. The United States is not partaking in this in any way. So they had a big summit I think in Shanghai last year, last summer.

So you know what's happening? Is Asia looking to group itself more tightly together with institutions in which the U.S. isn't a participant? Or should the United States be trying to play a role in some of these institutions? I mean I think the jury is still out on that question. But that is a phenomenon that I do see emerging.

BRANT: That—sorry to interrupt, but I think it's both of those things because the countries in the region don't want to have to make that choice now. They don't want to be forced into a position that they have to choose between some kind of China-led architecture or a U.S.-led architecture in the region.

So what you see is this proliferation—and we can talk about the problems with the proliferation and the noodle bowl institution building. But you have to have countries, small sub groupings, some involved in this organization, some involved in this organization. And you end up with this—I think it's a sort of a hedging bet by everybody to get involved in as many things as possible so that you don't have to make that choice.

MODERATOR: Euan, going back to the episode, I think the Shangri-La Dialogue episode, if we can invoke another reference to the region here. Late last year when matters of U.S. versus China came to the floor again the U.S. made a representation there. And China soon thereafter had to follow with its own stamping of feet, if you will.

I wonder again, do exchanges like that cause us to kind of see regional issues more in a U.S.-China dichotomy than is called for? Alyssa was suggesting that there's a much broader, or at least more nuanced series of discussions going on. Is that how you see it?

GRAHAM: That to an extent, that is the kind of "Punch and Judy" show approach to regional security dialogue is that one tends to expect that there will be a U.S.-China showdown. And the Shangri-La Dialogue has not disappointed in that in the last couple of years.

We shouldn't forget either, however, that the keynote last year was delivered by the Japanese prime minister. We're not talking in that sense about a purely bilateral situation where China and the United States get to declare the strategic weather and everyone else has to either put up with the sunshine or be buffeted by the winds. It's actually more complex set of relationships, the Japan-China relationship, which now fortunately has become stabilized.

But I don't think any of the root causes of tension have been addressed. And that trilateral, triangular dynamic I think is much less predictable, much harder to control. That's, I think, been brought home in the inability of the ASEAN various fora to address issues not just in their own backyard, but further out.

I mean I think the ability to address conflict management, I think that's what we're really talking about. ASEAN had declared three-stage process in which it was supposed to move from confidence building to preventive diplomacy to conflict-resolution.

I think conflict-resolution is so far out of view it's not really on the horizon. Conflict management is what we need to return to the architectural metaphor.

The other thing that's missing in this rather sprawling, free fire building zone of multilateral institutions is the basic emergency services. We don't have anything that can address crises as they develop. That's the sort of machinery that I think that is necessary, not just for U.S. and China.

But as I say, it goes down the ladder. We need Japan and China, Philippines and China where there is no hotline between either of them. And that's, I think, where really the effort needs to be directed from a security point of view.

MODERATOR: You mentioned Japan and Prime Minister Abe's increasingly vocal participation in all of this. It is the case that Japan is often seen lumped together with the U.S. as a sort of strategic partner, whether it's the Trans-Pacific Partnership or their (inaudible) to the Asian Development Bank, the rival institution to the new Chinese infrastructure bank.

Josh, I want to ask you. Do you think it's right to look at, for example, Trans-Pacific Partnership as essentially a U.S.-Japan vehicle? Or do you see it differently?

KURLANTZICK: No, I don't—I mean I think that first of all it's important to understand that originally the U.S. wasn't even involved. It was launched by other countries and the U.S. joined much later.

Secondly, the ADB as a rival to the AIIB, the ADB I think existed or a long time. It's gone through various iterations. And it's still unclear, it may well be that Japan joins the AIIB and in fact that we encourage them to join.

I see the council has a good graphic from a few days ago, not to tout the council. But that shows that if Japan joined U.S. allies and U.S. partners would have a significant voting share in the AIIB. So, it's not necessarily not in our interest to have them join.

In terms of Japan and the U.S. dominating TPP, I think I mean when you have such large economies in a trade agreement, there's to some extent—and also ones that have significant bilateral challenges between them, there's to some extent they're going to be the elephants in the room.

But I think that the other countries are not shy about reminding the Japanese and the United States that they originated the TPP and they have significant in it themselves. So I think it's wrong to look at it—I mean we look at it from our own perspective. But it's wrong to look at it that way, yes.

MODERATOR: An earlier session looked at some of the new leaders in these countries, including Jokowi in Indonesia. We were, before this session, joking about how in this country at least Indonesia doesn't occupy as much attention as it does in the region itself and in Australia and the like.

Is there a—is the region sort of, as with India, waiting for other significant plAYRES to step forward and lead some of this architecture building?

KURLANTZICK: Yes. I mean I think that, well there's a few different aspects of this.

First of all, not to be negative, but in Southeast Asia there's a significant arms race going on. In fact the most impressive—or unimpressive if you don't support—arms race in much of the world. The Philippines, Vietnam and China are already engaged in quite dangerous maneuvers.

And I don't know exactly at this point what Indonesia's position is going to be. But Indonesia has become increasingly concerned about China's activities in the South China Sea as well.

So to some extent, countries in the region naturally historically look to Indonesia for leadership. But now you have such significant bilateral challenges that all sorts of different relationships are being built. Vietnam is building a strategic relationship with the Philippines, primarily simply because they both distrust China.

The new president of Indonesia himself, his position is a little—almost everything is a little befuddling. He has no foreign policy experience previously. And to my opinion he looks a little bit over his head.

He has enunciated a certain maritime concept for Indonesia. It's a little unclear as to what that's going to be. But naturally Indonesia would be a regional leader. It's sort of punched below its weight for some significant period of time.

MODERATOR: We'll go to the members in a moment. Please prepare your questions.

Before we do I just want to ask, getting back to India for a moment. Is there—what would you put the risk at of some kind of India-China renewal of hostilities, beyond the occasional border skirmish, that would put a lot of these countries in the region at some considerable level of discomfort?

AYRES: There have been continued border skirmishes that cause great angst in India, as you would imagine. Do I think that it's likely to see an escalation? I think that's probably a very low likelihood.

That's one of those sorts of low likelihood, potentially high impact kinds of scenarios. I think it would be very low likelihood because both countries have a lot at stake.

KURLANTZICK: And yet getting to the architecture question there's really no formal sort of dispute resolution...

AYRES: Right.

KURLANTZICK: ... mechanism that exists...

AYRES: That's exactly right. The only way to kind of manage these problems when they do occur is bilaterally when these skirmishes do take place. You know we had a couple episodes a few—two years ago where I believe PLA were camped out for almost three weeks in one area. Again, disputed territory.

But there is no real mechanism than bilateral for the national security advisers to meet and discuss. And when you've got two countries, two major countries that have very different views about their border and their territory and who claims what, that's obviously not what the ideal scenario.

MODERATOR: So on trade or on security or on some of those other aspects of the regional architecture and future, any questions that any of you have. Yes?

QUESTION: Thank you. Olin Wethington.

Wonder if you could assume that TPA comes into being TPP is concluded. Could you paint the scenario in terms of U.S. policy for what should follow in terms of adding additional countries to that 12-country mix? Who comes next?

KURLANTZICK: It's not the U.S....

QUESTION: You got Philippines, you got Thailand, you got South Korea, you got Indonesia...

KURLANTZICK: It's not the U.S.'s...

(CROSSTALK)

QUESTION: ... all outside this 12-country...

(CROSSTALK)

KURLANTZICK: ... who joins the TPP. I mean those are sovereign countries. It's their decision whether they want to join the TPP.

QUESTION: But where might their...

KURLANTZICK: Oh, OK.

QUESTION: ... candidate be?

KURLANTZICK: Well, in terms of the ones you just mentioned I would say they're far from being candidates. Thailand, there's no way. The current Thai government has got its own serious challenges.

The Philippines, President Aquino doesn't have the political capital to get anything done before his terms ends. Then possibly we'll see.

The others, South Korea, I'm not—I don't...

BRANT: I guess South Korea is the one that's come out in the last couple of days to say that they would like to join. So, whether or not that's feasible.

GRAHAM: I think because South Korea has a bilateral free trade agreement with the United States, a lot of the incentive to be an early mover on TPP is not there. So I would assume it'd be a watch and waiting briefly. Interest on the Korean side will be more on the neighbors, China and Japan.

AYRES: If I could just quickly jump in. I mean I think that India is probably some distance from being in a position to be looking at the TPP. But certainly I mean I've advocated that it would be in U.S. interest to try to work to get India into APEC. They have expressed their interest in being part of this grouping.

It's a nonbinding discussion forum. So should there be an India entry into APEC it probably would position India much more—it would position them better to make a credible ask to look toward TPP in the future. But I do think this is a much longer term scenario.

BRANT: And it's interesting that China is actually advocating for institutions like—organizations like APEC to be the prime negotiating place for regional trade agreements and regional economic discussions. So by allowing India to participate as well could help with some of those tensions perhaps.

GRAHAM: Maybe more of an abstract answer to that, and I don't know whether it is a real or false analog to security, where I spend most of my time looking. But I think regional fora have suffered from going broad rather than deep.

And that was ASEAN's big problem, not consolidating early off economically and now being confronted with a kind of two-track process, which there's an ASEAN minus formula that allows individual countries like Singapore to go out and pursue their own free trade treaty. But that's a rather messy outcome.

I would say that consolidation would be in order to see how the TPP works before it starts looking at enlargement.

MODERATOR: China pretty consistently resists maritime arbitration or adjudication, isn't that right? This is one area where they...

KURLANTZICK: That would be an understatement.

MODERATOR: ... definitely do not want regional participation, at least with regard to their own territorial ambitions.

GRAHAM: Just a caveat to that is they're not in principle opposed to it. But their clear principle is that it should be pursued bilaterally, not multilaterally.

MODERATOR: Yes. Yes, indeed.

Question in the back?

QUESTION: Chris Brody, Vantage Partners.

The Asian Infrastructure Development Bank, how is the U.S. behavior, not joining, discouraging other people from joining and anything else you want to comment, with respect to the development of the bank perceived by different countries in Asia? Do you agree with the way U.S. has handled it? And if not, how might it have been handled differently?

MODERATOR: Philippa?

BRANT: I was a very early advocate of Australia joining the Asian Infrastructure Investment Bank. And I think part of the reason why Australia delayed its decision was due to U.S. pressure, or at least the perception of how the United States would react to that. I think it caused a number of tensions or concerns in the region about what the implications would be by joining onto a Chinese-led institution, given that the U.S. was so anti the institution.

So I think the United States has done itself some real damage in terms of how China is perceiving—the United States has been encouraging China to participate more, to stand up, to be more responsible. Now, the challenge is that's not always going to look exactly like the United States and its allies want it to look like.

But an Asian Infrastructure Investment Bank is a low-risk initiative. It's a chance where you can participate and you can encourage your allies to participate without—it's not a security, it's not high-risk.

So you know I think that's why we're starting to see some of the language around the TPP shifting to be much more broader. And it's not just now about a trade agreement. It's about the U.S. rebalance.

And if it doesn't come through it's going to be problematic for the perception about U.S. engagement in the region. And a lot of that has stemmed from the fiasco around the Asian Infrastructure Investment Bank.

KURLANTZICK: I might just add to that, Mike Levy, who is one of the fellows here, has a good op-ed about that about.

And I completely agree that the idea now that the TPP—and this was enunciated quite clearly by the secretary of Defense—is also somehow a leverage—a lever of security, I think is a huge mistake. It's conflating the two. And it's unnecessarily antagonizing both allies in Asia and our "frenemies" like China. It's just a complete mistake.

GRAHAM: Reminds me of a slightly longer time span that there is a kind of precedent for this. In a different context after the Asian financial crisis there was a Japanese proposal to set up an Asian monetary fund, which was squashed ultimately I think because of U.S. opposition. So I think the lesson was there to be learned, unfortunately.

AYRES: Can I just jump in on that quickly? I mean part of your question was how was this perceived in the region?

I think certainly in the part of Asia that I work on, countries like India and Bangladesh signed up right away to be founding members of the AIIB. Sounds like a good idea. This is going to be an institution that invests huge capital sums in infrastructure development.

So I think the confusing part was if there's going to be a new institution that is going to play a role in helping countries develop their infrastructure in a manner that the World Bank is not doing as much anymore.

I don't believe the ADB is that active in these kinds of large infrastructure projects, maybe on smaller projects. And the United States is also not following through on rebalancing some of the voting participation in the Bretton Woods institutions. And how could we possibly stand against an effort by the region itself to try to fill the gap there?

So I just think it was a kind of a confusing episode where countries in the region didn't really understand why the United States wouldn't applaud this effort.

KURLANTZICK: Yes. And I would just add to that. I mean for the poorer countries in Southeast Asia—for the wealthier countries there is the issue of the U.S., China, who is competing for influence. But for some of the poorer countries it's a no-brainer. It's like well if someone's going to potentially finance infrastructure, OK.

AYRES: Right.

MODERATOR: Given the nature of development banks I wonder if this is a nonstory a year from now. This rollout...

BRANT: Well...

MODERATOR: quietly...

BRANT: ... yes and no...

MODERATOR: ... begins...

BRANT: I think it could've been a nonstory. But the fact that it has become such a political issue, all attention will be on how China manages this AIIB.

So there's an extra pressure there for China. It has to succeed now. The stakes are much higher.

If it had of just been a quiet, Chinese proposal that didn't cause the concern, yes, if it failed it could've just quietly disappeared. A little bit like a year ago everyone was very concerned about the BRICs bank, the new development bank. And we haven't seen much movement on that.

MODERATOR: Indeed.

Jeff?

QUESTION: Thank you. Jeff Laurenti.

I wonder if the panel could give us a sense of who in the Asian region would actually be thinking seriously about a pan-Asia regional security architecture. I don't mean a talk shop like a Shanghai Cooperation Council, but something that has serious security-related functions of mediation, of peacekeeping and such. Given that this, unlike the other major regions of the world has no inherent coherence among states.

Wildly desperate, you'd be building it on premade hostilities between India, Pakistan, China, Japan divide and such. What could a continental-wide security architecture actually deliver that in fact the U.N. Security Council doesn't already more or less provide in terms of multilateral coverage?

GRAHAM: You asked who. I mean I think that's as close to the Chinese vision as anyone's in the region. But for the reason, the obvious reason that most countries in the region look to the United States as their primary provider of security, then having a pan-Asian exclusive vision of that is going to be a no sell to those on the maritime periphery who've been feeling the pressure directly.

AYRES: But to the extent that there is a sort of functioning mechanism to talk about security issues, wouldn't you say the ADMM-Plus is providing something of a development there?

GRAHAM: It is a positive development. I think the ADMM-Plus, as all of the ASEAN-linked for a, has one with the most momentum potential on defense.

MODERATOR: And this involves which nations?

GRAHAM: So it's the same membership as the East Asia Summit, the ASEAN 10 plus the eight. And that has—it's done good work. But it's more very down, I think, at the weeds of working groups which are doing HADR, military medicine.

It's thematic, functional cooperation. It's not the big strategic picture. I think maybe behind the question was more the kind of big vision.

I don't see the—I think the ADMM-Plus fills an interesting gap. But along ASEAN traction of development it's going to be slow and steady. I don't think it's going to try and reinvent itself as a conflict-resolution group. It's basically a defense cooperation forum.

KURLANTZICK: I think that just to illustrate some of the failures, I think what the region could use is on a higher level and a more specific bilateral level, active hotlines that they know how to use. And forget about all—I mean I know this panel is the regional architecture, but forget about much of the regional architecture.

(LAUGHTER)

So this is the example I'll give. In May 2014 one of China's state energy companies moved a rig into disputed waters in the South China Sea, waters that are also claimed by Vietnam. China and Vietnam have an acrimonious, but also in some ways harmonious relationship.

For a month they didn't pick up the hotline to call each other. And they let major riots break out in the Ho Chi Minh City area, in which not only some Chinese people but other people were killed.

Finally a month later they picked up the hotline, and to some extent diffused the conflict. There's no guarantee that that same thing won't happen again.

They have a hotline. China and the Philippines don't even have a hotline. Many of the countries in the region don't.

To me what the region could use is hotlines directly in which leaders commit to picking them up immediately when there's a significant challenge. And also have some experience—get some practice in using them before those challenges.

GRAHAM: One thing that links those—that with the last question, the ADMM-Plus. One strand of activity I should've mentioned is there's a Bruneian led proposal to get cross-splicing (ph) hotlines between ASEAN capitals. That, I'm told, will require a total of 44 separate functioning hotlines. Why would you need one between Rangoon and Jakarta?

But that aside, I think it does show I think a sensible sort of developmental progression so that you get the ASEANs talking to each other first rather than getting individual ASEAN countries organizing hotlines with external partner in which I think that could become a much more messy development. With the single exception of the Philippines and China, I think for obvious reasons they do need to have something that can handle incidents at sea.

MODERATOR: As was noted, one of the barriers to parts of this infrastructure being developed is the—and the lack of cohesiveness vis-a-vis Europe is the fact that there are great disparities among these countries, including their methods of governance, democracy being a rather mixed bag in ASEAN.

I happened on this delicious item as I was preparing for this. There's an ASEAN leadership forum at the end of this week, I believe, in Kuala Lumpur. And the speakers at this forum are the leaders of Cambodia, Laos, Myanmar, Hong Kong, and none of whom could be accused of being democrats. And the host speaker of course, Prime Minister Najib Razak of Malaysia who, as Josh and others have noted, is not exactly stepping forward as a great democrat himself.

Is democracy a sort of underlying foundation that's required for there to be significant progress among these very disparate countries?

KURLANTZICK: Well, I mean I think democracy is a nice thing in general.

(LAUGHTER)

Anyone that knows me knows that. I think you could have cooperation without democracy. I mean in the gulf—in the Persian Gulf other than Yemen, the countries that are—cooperate quite effectively a lot of issues without any of them being democracies.

There's a whole range of challenges in ASEAN. But I mean were they all more democratic it's not necessarily sure that they would work together. ASEAN worked together probably better in 1969 when they were six countries all led by very powerful autocrats who had a similar vision.

More challenging, actually, is the vast disparity in wealth, and the problem that they have to operate by consensus. And the third problem that they select a leader who doesn't have a presence on the world stage, as opposed to like a Chris Patton or someone like that, or even the current E.U. chief who is not perhaps—was not—foreign policy chief.

So the person who leads ASEAN is both viewed as sort of a middle level player and doesn't get the type of meetings that a Chris Patton or an E.U. foreign policy chief would get.

MODERATOR: Unless he's Lee Kuan Yew.

KURLANTZICK: But Lee Kuan Yew would never be the ASEAN secretary general. That's exactly the problem. Lee Kuan Yew didn't want an ASEAN secretary general who would be more powerful than Lee Kuan Yew.

(LAUGHTER)

MODERATOR: Any more questions on some of these—yes, in the back?

QUESTION: Hi. Jarrett Wade (ph).

I'd be curious on the security front comments on the ISIS threat in the region in particular. We saw obviously the aid workers from Japan. And I'd be very interested in hearing comments about you know how does China think about this as it relates to its Muslim population? China's outreach to Pakistan, all those dynamics, is that a wild card out there?

MODERATOR: If I can extend that just a bit beyond ISIS to jihadists generally, of which there are definitely presence in the region.

AYRES: Yes. I don't know who would answer on China. I'd like to say something about India, but defer first to somebody to answer about the China.

MODERATOR: Is there a sort of unifying element, do you think, in the region in resisting this kind of element?

GRAHAM: I'll also take the Fifth on answering for China. I can talk about Southeast Asia a little bit. Maybe, Philippa, if you want to comment on China.

I think it is a worry. Singapore, I've spent the last four years, certainly has made it a key priority. I think they see it as the leading concern at the moment, for the same reason that many other developed countries are in the same situation where it's a kind of convoluted, two-level threat.

One at which there is an expectation to respond to the demands of an ally or partner in form of the United States. But also the very real tangible threat of recruitment and then being re-exported back to the homeland.

And I think that's something that Singapore, which has always been very neuralgic to the idea of homegrown terrorism or terrorism from, if you'd like, the surrounding Malay-Muslim sea in which it finds itself an ethnically Chinese majority island. And its' somewhat uncomfortable relationship is expressed in a very acute threat perception. And I think that's true in Malaysia where you've seen a series of recent arrests, allegations that there have been infiltration of the armed forces.

I would also put it in perspective, however. This is something I think in the region is of a very different kind of challenge. Not one that really gets at the fabric of the region, which is what we're talking about in here where that is still basically great power dynamics, which are the driving forces.

BRANT: Yes. Just briefly on China, yes it is a concern for the Chinese government. Part of its concern is about unrest on its borders in Afghanistan, Pakistan, Central Asia.

But the challenge is that a lot of China's response is also tied up with the way it is implementing certain policies in Xinjiang (ph). So, you know there's always an issue when there's some kind of terrorist attack or some kind of unrest in Xinjiang (ph).

Or in China the Chinese government—whether or not you can trust the Chinese government's assessment of just who those attackers were and what they're—whether or not they had ties to extremist groups in the region. So it makes cooperation with China—between China and other countries I think an extra challenge.

Just one extra—one thing to add, I guess it's also a concern in Indonesia and also in Australia. At the institute this week published a paper on the foreign fighter threat to—there are a number of Australians going across to Syria and Iraq and fighting.

And there's a real concern in Australia about the threat of those returning and maybe carrying out attacks here. Similarly with Indonesians training, being drawn and training in Syria and coming back and establishing you know new cells in Indonesia.

AYRES: So India is definitely concerned about the rise of ISIS. And that has become a more pronounced concern over the course of the past year, particularly as splinter groups in Afghanistan have recently declared loyalty to ISIS.

The U.N.—special representative of the secretary general in Afghanistan, the UNAMA head in Afghanistan recently spoke to the U.N. Security Council as they were renewing the mandate for UNAMA. And part of his presentation was to say that you know ISIS has in fact established a toehold here.

I believe he used the word "toehold" in Afghanistan. His primary concern was that this could be an umbrella, kind of an intellectual umbrella under which a lot of disparate terrorist groups would then unite and become a more worrisome force.

So there's that element, obviously quite close to India's borders. But there has been another, much smaller incident phenomenon, but something that does worry Indian security planners. And that is that there has been a limited amount of recruitment of Indian Muslims to ISIS.

There was last summer, maybe it was last May or June, a photograph of a number of young men wearing ISIS shirts in an area in Tamil Nadu (ph). This is a highly developed part of India in South India. What had drew these young men to be interested in declaring this loyalty, however superficial, to ISIS remains a mystery.

Then there was an incident several months back where a Twitter personality, somebody who had been identified as a kind of Twitter-focused recruiter for ISIS was unmasked as being a young software guy in Bangalore.

So I think that's gotten everybody sitting up and saying wait a minute now, what's happening here at home? And what do we need to be doing to make sure that we don't have a phenomenon of foreign fighters, as has become a problem in Europe.

Also on India's border, again, a much smaller, more limited phenomenon, but worth mentioning is the issue of Maldives, which is 100 percent Sunni Muslim. The former president of Maldives gave an interview last November in which he said that Maldives was becoming a kind of ISIS jihadist recruiter's paradise. And he estimated that even in his country of a population of about 350,000 that there had been more than 200 some Maldivians going to Iraq to fight with ISIS.

So if they come back, Maldives is just an archipelago, all these islands, many of which are completely uninhabited and therefore not governed very well. That would obviously be an issue of great security concern in the Indian Ocean.

MODERATOR: Another democracy lost, by the way...

AYRES: Yes.

MODERATOR: ... in the Maldives.

Yes, sir?

QUESTION: We haven't mentioned one thing, I don't believe—I'm sorry, John Watts from the World Policy Institute.

The possibility and the actuality of the cyber conflict, our—various senior people in our government, the U.S., have not claimed. They just haven said that they're very high portion of government aided cyber conflicts, cyber attacks on corporations and other organizations here, and to a very high degree. And they state it's just a matter of weak belief (ph). Does this come up in these discussions? Are there concerns within Asia about the type of conflict with the (inaudible)?

MODERATOR: Cybersecurity architecture. Is there one?

GRAHAM: There's an ASEAN strand of activity on cyber. There's an ASEAN strand of activity for most things. I'm not sure to what state it is a realization.

But the reality is yes, the vulnerability extends to Southeast Asian countries as it does universally. Singapore is very aware of its potential vulnerability as a—not just as a small state, but one that's particularly prone to the disruption not just of state assets, but of the financial institutions that drive the economy increasingly.

Australia too, I think very much in focus is to draw together not just federal government efforts, but to draw in the private sector to make sure there is a concerted effort there. I think maybe my colleagues would be aware of more of the details. But I do know that that features within recent Australian defense planning documents too.

The one area where I would differ from your question is framing China as the origin of the threat. I think that obviously—that's potentially true, but it's not seen as a one-source threat. It's cyber threats from their own citizens as much as anyone else. I think it's just a realization that a lot of critical infrastructure is yet to really be put into a secure framework.

KURLANTZICK: I would just add briefly, they have some of the same challenges.

Cybersecurity in Southeast Asia as you do with China and terrorism or whatever you want to call it in western China in that you have a number of governments in the region that have cracked down on various aspects of the Internet in the name of cybersecurity: Vietnam, certainly Vietnam and Thailand and Malaysia to some extent.

It's unclear whether they're actually interested in cybersecurity or they're simply interested in squelching online dissent. So you have that problem as well.

MODERATOR: Certainly the Chinese expertise in this area is exportable you might say, one way or the other.

Remaining question? We have just a couple of minutes left. If not, I'm going to ask our worthy panelists to engage in a little parlay game here.

Since the Trans-Pacific Partnership and Trade Promotion Authority is so much on the table here in the U.S., I'm going to ask each of you to put a percentage, meaning a betting ratio, on what you think the odds are of, how should I frame this, firming up a Trans-Pacific Partnership by the end of the Obama administration?

I'll start, 30 percent.

AYRES: Oh, I'd say much higher odds. I'd say 65-70 percent.

MODERATOR: Philippa?

BRANT: I have no idea. I'll say 50-50.

(LAUGHTER)

MODERATOR: Good answer.

GRAHAM: There's an advantage to coming third on that guessing list.

(LAUGHTER)

Sixty percent.

KURLANTZICK: Sixty. Do I win if I get like one end or the other?

(LAUGHTER)

Well...

AYRES: The Price Is Right.

KURLANTZICK: I think that you have a president who's a lame duck. He doesn't have—he doesn't have to run again. There's essentially a successor that seems to be to be crowned. She has perhaps more freedom of movement in a primary than she would if she had a real challenger.

The president has already sort of made his statement on it. He has clear support from the Republicans that he needs, and some Democrats. He has support from Wyden (ph). So I would say 80, 85, 90 percent.

MODERATOR: There you go.

(APPLAUSE)

OK. Very good.

(APPLAUSE)

Thank our panelists, and conclusion of a great session today.

(APPLAUSE)

AYRES: Thank you.

(APPLAUSE)

END

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