Structural trends could force swing states to choose sides
Structural trends could force swing states to choose sides
WRITTEN BY MARC SAXER
7 November 2023
China and the United States have entered an all-out competition over hegemony in the Indo-Pacific. Both superpowers are putting pressure on allies, partners, and third countries to choose their side. Most countries in the region believe their interests are better served by refusing to take sides and they employ balancing strategies to keep their strategic options open. Whether this posture is sustainable, however, will depend on structural trends that drive economic bloc building and technological bifurcation. Is there a slippery slope into bipolarity that forces smaller powers to choose sides against their interests?
Some Indo-Pacific states have closely linked their security and band-waggoned their economic development to a superpower. Australia, New Zealand, Japan, and South Korea are doubling down on their military alliance with the United States. And under President Marcos Jr., the Philippines — an old treaty ally — also seems to have returned to the fold. China has traditionally avoided formalised alliances. But in addition to Russia and North Korea, Cambodia and Laos may be assumed to be in the Chinese camp today. If the Burmese junta stays in power, Myanmar will probably have no other option than to link its fate with that of China.
The majority of Indo-Pacific countries, in particular the ASEAN states, are deeply concerned about the tendencies towards bipolar bloc formation, technological bifurcation, and ideological binaries. Most fear being drawn into a hot war over Taiwan. But even if the competition remains cold, having to choose one market, one technology world, and one infrastructure over the other poses opportunity costs and will likely result in a loss of prosperity. In response, most Asian states are hedging against risks through delicate balancing acts.
‘Partnerships of the Middle’ recognise the aversion of Asian powers against alliances and offer informal avenues of collaboration to safeguard global public goods.
Accordingly, and despite enormous Western pressure, many states in the Global South have neither condemned the Russian invasion nor joined the sanctions regime against Russia. Like many Europeans, even the US allies in Asia refuse to decouple from China. Conversely, Belt and Road Initiative (BRI) partners such as Malaysia and Pakistan are escaping pressure from Beijing by cancelling projects or turning to the US-led International Monetary Fund (IMF) for a bailout.
Balancing and multi-alignment strategies reduce risk and offer opportunities
Acting as a “swing state” (e.g. those refraining from choosing sides in the US-China strategic competition but cooperating on a case-by-case basis according to their interests) opens up tactical scope to play the two superpowers against each other to one’s own advantage. In the tradition of “bamboo diplomacy”, the military juntas in Myanmar and (until recently) Thailand have side-stepped pressure from Washington by working more closely with Beijing. India is capitalising on its cautious tilt towards the Quad (the Quadrilateral Dialogue with Australia, Japan, and the United States), securing precious investments, arms sales, and technology transfers, while also receiving cheap energy and advanced weaponry from its traditional partner Russia and keeping the doors to China open through its membership of BRICS and the Shanghai Cooperation Organisation. Similarly, Bangladesh and Vietnam benefit from China's economic dynamism and the Western diversification of supply chains (“China plus One”). The Global South, whose legitimate interests have been overlooked for decades, uses the limelight to set the global agenda.
Opportunities to exert influence, however, are not restricted to multi-alignment or non-alignment strategies. The United States’ European allies have convinced the Biden administration to focus on selective de-risking in particularly vulnerable strategic sectors instead of a comprehensive decoupling from the Chinese market. Japan is pulling the counterproductive narrative of systemic rivalry between democracies and autocracies, and refocuses the conversation on preserving the “rules-based international order”. Tokyo and Canberra successfully rebranded the region into the “Indo-Pacific”, and pushed for a revitalisation of the Quad. India leveraged American help to deny China’s G20 obstructionism and position itself as the true champion of the Global South.
But in the core areas of strategic competition, the pressure from Washington and Beijing is overwhelming. Practically every US ally has decided against the 5G technology from the Chinese company Huawei. And despite massive resistance from their industries, South Korea, Taiwan, and the Netherlands have been strong-armed into decoupling from the Chinese chip industry. Cambodia and Laos, on the other hand, seem to have bowed to Chinese pressure and to obstruct a united ASEAN front over the contested South China Sea.
Structural trends may force smaller powers to choose sides
For the time being, there is ample space for Asian states to evade the pressure to choose sides. Multi-alignment strategies avoid the risk of being targeted by the ‘snubbed’ partner and allow reaping the benefits of collaboration with a shifting constellation of partners. The strategic question is whether this room for manoeuvre will remain open or shrink in the long run. In other words, will structural trends force Indo-Pacific countries to pick sides against their best interests?
First, there is technological bifurcation and geoeconomic bloc building. If technologies split into incompatible sub-worlds, third parties have to decide whether to source their infrastructure and equip their products with chips and software from one realm or the other. This trend is being accelerated by geoeconomically motivated export controls and investment bans, especially in the area of goods that can be used for military purposes. The use of a technology can, therefore, result in access or exclusion from either the American or the Chinese market. If a country picks the ‘wrong side’ in this strategic competition, it risks being cut out of the supply chains of one bloc, if it chooses the ‘right side’, it may benefit from friend-shoring.
Pressure to choose sides is exerted through the financial sector as well. Interest rate hikes in the US and the Eurozone may trigger a new round of sovereign debt crises, pushing some highly indebted countries into default. But bailouts from the Western-dominated IMF or rival Chinese institutions come with political conditions attached. As the sanction regime against Russia shows, the West still has the power to exclude states it deems hostile from financial markets, access to credit or payment systems (SWIFT), and even to freeze foreign reserves. US sanctions against Iran and Russia are also forcing third countries to cooperate or risk losing access to the American market. This “exorbitant privilege” drives de-dollarisation efforts by China and others. So far, trading in local currencies, holding reserves from a basket of currencies, the internationalisation of the Renminbi and financial payment systems like the Russian System for Transfer of Financial Messages (SPFS) or the Chinese Cross-Border Interbank Payment System (CIPS) do not offer real alternatives to the US dollar. But in the future, struggling economies may be compelled to decide between competing financial systems.
Finally, the logic of military alliances and security partnerships may override commercially motivated resistance to decoupling. In case of a military confrontation between China and the US, the pressure from both to choose sides would be neck-breaking. This is the lesson Europe had to learn after Russia’s invasion of Ukraine. But even in the run-up to a potential Chinese invasion of Taiwan, US allies are being strong-armed to help mitigate the fallout. This is why Taiwan diversifies semiconductor supply chains by building up production facilities in Europe and the US. South Korea and the Netherlands were pressured to join the Chip 4 drive to decouple their chip industries from China. If a hot war breaks out, allies will be forced to fully decouple and enlist in the military campaign.
Exploring ‘Partnerships of the Middle’
In the short run, many Asian countries will continue to pursue their interests through non-alignment or multi-alignment strategies. But in the long run, structural trends are prone to get harder to resist and may force countries to choose sides against their best interests.
From a global perspective, the emergence of bipolar blocs would hamper efforts to combat challenges from climate change to pandemics, take a toll on economic prosperity, and pose a threat to peace and stability. Managing strategic competition, and keeping room for manoeuvre open therefore seems to be the best course of action. ‘Partnerships of the Middle’ can help to reduce tensions and safeguard international law as a shield against pressure from the strong. American allies in Europe and the Indo-Pacific have a proven track record of lobbying Washington to consider their interests. Beijing has shown a willingness to listen to the concerns of the Global South. Together, powers in the middle need to convey clearly that escalating competition between the superpowers is detrimental to their interests. Working as a ‘Group of Friends for Multilateralism’, reputational cost for the disregard of international law can be imposed, and responsible stakeholders can strengthen multilateral institutions. ‘Partnerships of the Middle’ recognise the aversion of Asian powers against alliances and offer informal avenues of collaboration to safeguard global public goods.
DISCLAIMER: All views expressed are those of the writer and do not necessarily represent that of the 9DASHLINE.com platform.
Author biography
Marc Saxer is a political analyst, strategist and writer. After more than a decade in Asia, he currently serves as the Head of the regional work of the Friedrich-Ebert-Stiftung in Asia Pacific with a focus on geopolitics and world order. Image credit: Flickr/Finnegan (cropped).