Friday, May 02, 2014

US China Japan Quandary

As I write this, President Obama has ended his Asian tour (sounds rockstaresque). Although he was met by major protest nearly everywhere he went, from the Philippines where protestors were sprayed with water hoses to Malaysia, his main worry continues to be how to deal with Japan, an ally but at the same time not offend one of America’s largest holder of U.S. debt – China.

In word, President Obama stated that the US Japan alliance was "stronger than ever" adding in so many words that America opposes any efforts (by China) to undermine Japan’s administration of the disputed and uninhabited Diaoyu Islands in the East China Sea (note East China not East Japan).  By taking this position, The President basically questioned China's sovereignty and “legitimate interest," to use the words of foreign ministry spokesman Qin Gang, in the Diaoyu Islands, which they feel have nothing to do the Japan-US security treaty. Also, there remains the effort of the U.S. to implement Obamas GATT and NAFTA, the 12-nation Trans-Pacific Partnership (TPP), which excludes China.

Some may argue otherwise, but it should be remembered that since the fall of japan after WW 2, it was clear that a primary objective of the occupation of Japan would be U.S. military control in the region for decades to come albeit not originally outlined in the Potsdam Declaration as such. This was achieved when General Douglas MacArthur, along with a few staff WROTE the entire new constitution of Japan that has lasted ever since. Specifically via But the most unique and one of the most important provisions came in Article 9, which outlawed the creation of armed forces and the right to make war.

This is a difficult prospectus for the U.S. while mainstream media incessantly pounds that China is faltering economically, the question is compared to whom?  Not the U.S. for certain.   First, U.S. bureaucrats insist that the Chinese economy is in deep trouble, although the Chinese economy grewat 7.4% year-on-year for the first quarter of 2014. In particular when compared with the miniscule expanded 0.10 percent growth in the U.S. Gross DomesticProduct (GDP) observed in the first quarter of 2014 over the previous quarter.  And loot will continue to flow in to China given the global demand for copper, soybeans and multiple investments and trade arrangements between China and South America. China has a large hand and equal investment in Copper in both Chile and Peru and Iron in Brazil as well as sustainable energy development in Venezuela. Plus one must recognize the long standing relationship China and Trinidad have in the Caribbean. The reality is that South America now imports more from China than it does from the European Union, according to the U.N. economic agency for the region.

Then there is the issue with China and Russia , which appear to be making moves toward quitting using (diversifying) the US dollar or at least significantly cutting the dollar share in their forex reserves (a move that will most likely broaden the Yuan’s daily trading range). Add to this that from of January 2013 to the end of July, the Bank of Russia reduced its stockpile of US Treasury securities from USD 164.4 billion to USD 131.6 billion (a reduction of US Treasury obligations by USD 32.8 billion, or by 20 percent), there are some serious issues on the table for the administration to address and not just give window dressing.

Even more important is that the military containment of China for the U.S. is the main reason this administration has proffered unequivocal support for Japan, although they are well aware that such may have a dire impact and strain on the U.S. economy.  Specifically, speaking, if China desires to retaliate, in concert with Russia and other BRIC nations, the result could led to starting the demise of the dollar – meaning the American way of living will be severely impacted as a consequence with growing levels of inflation in the form of increases in the cost of food, clothing and gasoline and utilities.

It should be reminded, give the manner in which the U.S. has targeted Russia for what has occurred in the Ukraine, and leaving China out of the TPP talks, what we observe as closer interaction between Beijing and Moscow are really about protecting their domestic economies. But it is not farfetched to see that is they continue this close corporate, an outcome of bad and poorly thought-out U.S. foreign policy could be a direct challenge and attack on the dollar.

The U.S. concerns in China will prove to be challenging for the present administration. For one they are all over the place in policy and tend to reflect a moderately satirical ineptness to the goals and aims of their foreign policy efforts.  On the other, I am still waiting (as I suspect others) for  Mr. Obama to define what he means by “rebalancing” U.S. policy towards Asia, when his actions show opposite and even worse, the same old U.S. approach. By this I mean the neocolonial zeal reflected in President Obama’s desire to re-occupy the Philippines consequently continuing the United States historical imperialist agenda in Asia.

China has the second largest economy in the world and recently it has been project to pass the U.S, before the next year, with some economist suggesting that the size of the Chinese economy will become three times larger than the U.S. economy by the year 2040. The concern is that much of the U.S. dollar’s valuation stems from its lock on the oil industry and if China and Russia and the BRIC nations can accomplish this, next thing is the dollar is gone and  gold will rise. As I write and you read, Iran is already in the field trying out a non-dollar based international trade system.

It will be hard for Obama to both keep from upsetting China and at the same time appease Japan, as current news reports in the region have noted.  It is the administration desire to maintain U.S. military hegemony in both Malaysiaand Philippines, by making sure neither nation ever reach the strength militarily equal to Vietnam, as well as do all possible to prevent China from reaching parity with the U.S as a naval power that could eventually challenge American in the Indian Ocean and the Western Pacific. The obstacle is, has the Obama administration really thought about what their actions may result in, or are they just making it up as they go like they were in a game of pick-up and run?


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