Asia on the rise: strategic significance and implications

March 27, 2014 - nr.86
Summary

Summary and recommendations

This final chapter summarises the main findings of the report point by point, and presents recommendations to the Dutch government based on those findings. The recommendations include both goals that the Netherlands should work towards in a NATO and EU context in order to promote the desired developments in Asia, as well as interests which the Netherlands must champion in its bilateral relations with Asian countries.

  1. One of the biggest challenges of the next 20 years will be to further integrate China into the system of global governance and persuade it to take its share of responsibility for the supply of global public goods. It is important to bear in mind, however, that the average standard of living in China is likely to remain considerably lower than that in Western countries for some time to come. To prevent China from rebelling against the existing world order, its influence at the leading international organisations must reflect its greater economic weight. It will also be necessary to engage with China on whether key international rules – particularly those governing finance and economics – still adequately reflect the interests and views of both established and emerging countries. It would not be realistic to assume that China, with its growing self-confidence, will want to conform completely to norms and principles that the West drew up after the Second World War. Nor is it by any means certain that we shall succeed in agreeing new rules. Partly in view of this fact, the AIV calls on the government to become actively involved in the debate on the basic principles of a future world order, and join like-minded countries in seeking formulas for international cooperation that will be acceptable to both old and new international players. The Netherlands could take the initiative by convening meetings of international legal and other experts from established and emerging countries.
     
  2. The likelihood of a military contest between China and the US occurring on a global scale in the next 20 years is small. The more likely possibility would be a regional conflict that broke out more or less unintentionally as a small armed incident, perhaps over the disputed islands in the East and South China Seas, and then spread and escalated to a higher level of intensity due to political miscalculation or technical failures. There is a classic entrapment or abandonment dilemma in relations with those countries in Asia that rely on US military protection. On the one hand, the US administration wants to limit the risk that reckless action on the part of one of its Asian allies drags it into an unintended conflict, while at the same time reassuring those allies that it will provide military assistance in the event of Chinese aggression. The AIV agrees with those who call for China and the US to participate in an Asian regime of cooperative security, whereby both parties take account of the other’s security interests. The need for such a regime is only reinforced by China’s unilateral decision to institute an air defence identification zone. Such a regime could be put in place via a series of confidence-building measures: joint search-and-rescue at sea, exchange of information on military movements, advance notice of military exercises and admission of foreign observers during military exercises. To reduce the risk of military movements by the other side being misinterpreted, reliable hotlines at the highest political and military level will be essential. Military plans that could unnecessarily be perceived as provocative by the other side are at odds with the basic principle of cooperative security. In this context, the AIV questions whether it was wise for the US to adopt the Air-Sea Battle concept as part of its military strategy vis-à-vis China. After all, this operational concept involves large-scale attacks on targets on the Chinese mainland and at sea in response to threats in the western Pacific, thus disregarding the importance of de-escalation and managing conflicts at a low level of intensity. The AIV would advise the government to support practical proposals that could help enhance trust between the political and military leaders of countries in the Asia-Pacific region and limit the risk of ‘conflict by accident’. The EU, in particular, will have to use its influence to persuade China and other countries in Southeast Asia to cooperate on the drafting of an international code of conduct on the territorial disputes in the South China Sea.
     
  3. In the next 20 years there is likely to be a further shift in the global balance of power towards the countries of East and Southeast Asia. For this reason alone, the US president’s call for the countries of Europe to work together more strategically in the Asia region must be taken seriously. This will require a political strategy in which the US and Europe set out the common objectives and instruments of their policy in the Asia-Pacific region based on a clear definition of their mutual interests. The core of this strategy will be the modalities of their interaction with China, which in this context must be seen primarily as a great power with a claim to a leading position in this part of the world, and which will not shy away from reinforcing its political demands by diplomatic and economic means, and ultimately also by military means. Although there are convincing arguments for emphasising dialogue and cooperation in Western countries’ policy on China, a credible military counterweight to China is also essential, not least because of the nature of China’s political regime. China’s unilateral decision to announce an ‘air defence identification zone’ covering a large proportion of the East China Sea has prompted doubts about its willingness to resolve disputes (territorial and otherwise) with its neighbours peacefully. The AIV would call upon the government to first discuss a transatlantic Asia strategy in an EU context. This should be followed by more frequent talks between the EU and the US and consultations within NATO, eventually resulting in a common US-European Asia strategy.
     
  4. In determining their contributions to the implementation of a common strategy, it is important to acknowledge that though the EU and the US have a common interest in maintaining peace and security in the Asia-Pacific region, and in continued economic growth in the region, there are also some not inconsiderable differences. These are a result of geographical location (the US is a Pacific power but Europe is not), of unequal military capabilities and potential for influencing developments, and of different views on the best way of dealing with tensions and conflict in general. Europe has a limited arsenal of hard military power and, given the repositioning of and impending cutbacks to the United States’ armed forces, it will be forced to use its relatively modest military capability to prevent, manage and settle any conflicts that arise in and near Europe. Instability on Europe’s borders could have a direct impact on our societies. This could take the form of large flows of refugees, for example, an increased risk of terrorist attack or a blockade of goods flows. In accordance with the advisory report that the AIV issued on this matter in early 2012, the government is advised to continue unabated its efforts to promote military cooperation at European level in order to reduce Europe’s vulnerability in terms of defence, and – in the longer term – to increase the defence budget.1
     
  5. Europe’s contribution to the implementation of a transatlantic Asia strategy will mainly be economic. In terms of security it will be restricted to conflict prevention and resolution, with limited deployment of military personnel. The EU is Asia’s biggest trading partner, bigger even than the US. It has signed partnership agreements with all the major countries of East Asia. These agreements provide in principle for deep and broad-ranging cooperation, and not only on economic matters. While the potential of this cooperation has by no means been fully exploited yet, the EU should be more realistic when it comes to setting ambitions and targets. The priorities of EU policy on the Asia-Pacific region should be:
    - to broaden existing bilateral trade agreements into multilateral trade agreements in order to encourage closer ties between countries in the region, irrespective of political differences (e.g. a wide-ranging regional free trade agreement with ASEAN);
    - to support the creation or strengthening of regional institutions that impose rules, supervision and procedures for the settlement of disputes on economic relations between countries in Asia. Growing economic relations within Asia have made the countries in the region highly dependent on one another, without institutions to support economic cooperation, as in Europe.

    The AIV advises the government to press for the EU to take an active role in institution building in the Asia-Pacific region. It believes that the EU’s diplomatic presence in Asia needs to be expanded for this purpose. In the short term, the EU could offer its good offices and expertise to help make a success of the integration process aimed at transforming ASEAN into a three-pillar structure (Security Community, Economic Community and Socio-Cultural Community).
     
  6. The shift in the global balance of power to the Asia-Pacific region is not a compelling reason for reconsidering the NATO Strategic Concept adopted in Lisbon in November 2010. Expanding the area covered by the North Atlantic Treaty would prove an insurmountable obstacle for a large number of European allies. Nor is it certain that expanding the military assistance obligation towards Asia would be a wise move politically. The Treaty (signed in 1949) provides sufficient flexibility for security problems in the Asia-Pacific region to be dealt with in a responsible manner. They may, after all, have serious repercussions for relations elsewhere in the world, including in the Atlantic region. The AIV believes that, in this respect, maximum use should be made of the opportunities for consultation and cooperation available under article 4 of the Treaty. NATO could also be used as a platform for deepening the partnership agreements that already exist with a number of Asian countries. This should mainly take the form of closer cooperation on missile defences, maritime security, cyber security, counterterrorism and anti-piracy operations. Despite NATO’s unique position as the world’s foremost integrated military alliance, the AIV cannot disregard the fact that the significance of the Atlantic Alliance is likely to decline further the more the US regards Asia as the main source of threats to its vital interests, and the more it – rightly – comes to regard security in and near Europe as primarily the responsibility of the European allies. Given that the military relationship between Europe and North America is likely to be less close in the future, the AIV believes that the importance of political cooperation will only increase. This can best be safeguarded in the future by stepping up cooperation on non-military matters. The AIV would therefore advise the government to do its utmost to ensure that the current negotiations on a Transatlantic Trade and Investment Partnership succeed and, at the same time, to submit or support proposals for closer transatlantic cooperation on crossborder crime, energy policy, environmental management, education and science.
     
  7. The effectiveness of EU action on China is undermined by the fact that member states are generally led by their own short-term national interests. The economic crisis of the past few years has strengthened this tendency. Member states that are inclined to prioritise national economic interests over, say, human rights considerations damage the EU’s reputation as a normative power. Furthermore, quite apart from the issue of human rights, when some member states fail to champion the principle of reciprocity (as in the case of relations with China) they put the implementation of common EU trade policy under pressure. The generous access to the European market enjoyed by China is not matched by equal access for European countries to the Chinese market. The European Commission receives varying degrees of support from the member states in its efforts to counter Chinese dumping practices. The AIV still regards the EU’s common trade policy as a valuable instrument, which deserves the support of the Netherlands. If, however, it becomes clear that EU member states are attempting to gain national advantages at the expense of other member states by means of bilateral action that circumvents common policy, the Netherlands must first work to restore the unity of EU policy, and otherwise also opt for the bilateral approach of furthering its own national interests. The AIV urges the government to focus its efforts above all on a common trade policy on China that is based on reciprocity, even if this is against the Netherlands’ interests in the short term, and to ensure that all member states comply with this policy.
     
  8. The arms embargo against China introduced by the EU in response to the violent suppression of the Tiananmen Square protests in 1989 is a major obstacle to stronger cooperation with China on foreign and security policy. Beijing remains interested in obtaining dual use technology from Europe, particularly from France and the United Kingdom. In its 2007 advisory report on China, the AIV called for the ban to be lifted, in part because enforcing the embargo undermines the spirit of partnership, and because its effectiveness is in doubt. The AIV believes that these arguments are just as valid today. Nevertheless, it has concluded that it would not be advisable to lift the arms embargo before discussing the matter (again) with the US. A unilateral European decision would after all be at odds with the above proposal for joint US-European efforts to arrive at a common strategy on Asia. The AIV advises the government to raise the issue of the arms embargo on China in the near future in talks between the EU and the US. Any decision to lift the embargo must be taken on the basis of an assessment of (a) China’s cooperation on the drafting of an international code of conduct on the territorial disputes in the South China Sea, (b) its willingness to provide greater transparency on the size and composition of its armed forces, and (c) the current human rights situation in China.
     
  9. The Netherlands’ interests in Asia are mainly economic. Although trade with Asian countries has increased considerably over the past decade, these countries still account for a relatively small share of Dutch exports. What’s more, there is a great imbalance in trade between the Netherlands and China, in particular. China exports many times more goods to the Netherlands than the Netherlands does to China, while the situation is reversed when it comes to investment. To stimulate Dutch exports to Asia, it is important that efforts are made to improve Dutch export finance. Dutch exporters are currently at a disadvantage relative to exporters in competitor economies in Europe. The Netherlands provides state aid for export finance by means of export credit insurance, but leaves the actual financing of export transactions to commercial banks. Governments in other EU member states, on the other hand, provide export finance themselves, giving their exporters more certainty about the availability of finance, as well as better terms. The AIV advises the government to press for agreements or arrangements at EU level to create a level playing field for export finance.

    Besides making better use of export opportunities to Asia, particular attention should also be paid to China’s interest in gaining access to the knowledge and technology of Dutch universities and companies. There is no inherent reason why knowledge and technology should not be transferred on a healthy commercial basis, though a word of warning is appropriate in this context. The AIV believes that any such transfer must not result in vital sectors of the Dutch economy losing out in the face of international competition. Caution is also advised when it comes to possible takeovers of Dutch companies by foreign investors. To the extent that Chinese investors tend mainly to target vital parts of our infrastructure, such as communications networks and port facilities, an assessment of the national interest or national security will be required. The procedure and criteria for such an assessment must also be coordinated at EU level. The AIV would urge the government to consider developing policy in this area that does justice both to the open nature of the Dutch economy and to the protection of vital national interests.
     
  10. The AIV realises that the current asymmetry in the size of their respective armed forces limits the opportunities for bilateral military cooperation between the Netherlands and China. This makes existing forms of multilateral cooperation in an EU and NATO context, for example on anti-piracy operations, all the more valuable. This certainly applies to the forthcoming cooperation between the Netherlands and China in the UN peace mission in Mali, in which soldiers from the Chinese People’s Liberation Army will be responsible for the security of the UN base at Gao, where Dutch soldiers are also stationed. The AIV also welcomes the plan to expand maritime cooperation between the Netherlands and China. Besides the exchange of information between the hydrographic services of the Dutch and Chinese navies, as decided in 2013, this might also include other forms of cooperation, such as providing training modules for each other’s military personnel. The path to such cooperation has already been paved by recent agreements on exchanges of staff officers from the Dutch and Chinese defence colleges and knowledge sharing between the School for Peace Operations and its Chinese counterpart. The AIV recommends that the government explore further opportunities for bilateral military cooperation with China, in addition to EU and NATO initiatives; such cooperation could serve as a confidence-building measure.
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1 AIV advisory report no. 78, ‘European Defence Cooperation: Sovereignty and the Capacity to Act’, The Hague, January 2012.
Advice request

Mr F. Korthals Altes
Chairman of the Advisory Council
on International Affairs
P.O. Box 20061
2500 EB The Hague


Date   4 July 2013
Re       Request for advice on the growing power of Asia


Dear Mr Korthals Altes,

We are writing to request an advisory report on the possible consequences for the Netherlands, and Europe more generally, of the growing power of Asia and the increasing focus on Asia by the United States.

The global balance of power is changing as power shifts towards emerging countries, a trend which is particularly visible in Asia. This development is primarily economic in nature, but it also has a clear impact on political and military relations. The shift in power is expected to continue, possibly at an accelerated pace. As it proceeds, growing tension can be observed in the Asia-Pacific region.

More than ever, the strategic focus of US foreign and security policy is on Asia (especially Southeast Asia) and the Pacific. This American focus reflects in part the sharp increase in defence spending in the Asian region and the existing and potential conflicts in that part of the world.

In its 2007 report ‘China in the Balance: towards a Mature Relationship’, the AIV highlighted China’s growing regional influence. At the same time it noted that China was gradually moving towards more active and constructive participation in the UN, for example in the area of peace operations. The AIV also highlighted the lack of transparency with respect to Chinese military reforms. We would ask that you incorporate your previous conclusions and recommendations on security issues into this new report, with due regard to current developments.

Although we are chiefly concerned with the political and military aspects of this issue, we realise they cannot be divorced from other relevant developments. Our questions thus overlap with related policy areas.

Questions

We would like the AIV to address the following questions:

  1. What impact will the growing power of Asia today have in the medium term, and how will this influence the Dutch security situation?

Does the AIV believe that economic, political and military power will indeed have shifted to Asia and the Pacific in 20 years’ time? What form will this shift take? What will be the importance of stability in Asia to the Netherlands and Europe in 20 years? What Dutch interests could be at stake?

Following on from this: given that common threats demand a common response, what players on the international stage can the Netherlands best work with to further its security interests? In that light, we ask the AIV to examine the opportunities for partnerships between European countries and the United States, possibly via the EU and NATO, and with countries and forums in the Asian region, paying particular attention to the following questions:

Should the Netherlands push for a more active EU role in Asia with regard to political cooperation, peacekeeping and peacebuilding? To what extent should the Common Security and Defence Policy focus on this region? And what regional partners and organisations are relevant to the CSDP? What role could the partnerships formed in Chicago with such countries as Australia play in this? Finally, please discuss in depth the potential substance of the EU and NATO dialogue with Asian partners, and what partners would qualify for it.

  1. What does the shift in the United States’ strategic focus to Asia and the Pacific mean for NATO, the EU and the Netherlands?

We would like to ask the AIV to consider the impact of this shift on the integrity of Dutch territory and that of its allies, the promotion of the international legal order and the economic security of the Netherlands.

The US strategic guidance issued in January 2012 seems to portend a clear foreign policy rebalance towards Asia. The United States recently emphasised its interest in involving Europe in this rebalance, in the hope that advancing common standpoints and shared interests would boost the effectiveness of US foreign policy. Against this background, we ask the AIV to examine in greater detail the expected policy choices of the United States, and their possible implications. What are the advantages and disadvantages for the Netherlands and the EU of such a partnership with the United States?

This strategic rebalance could have repercussions for the military partnership with the US, especially in NATO. The repeated US requests for its European allies to take on a greater share of the burden within the alliance go to the very heart of this partnership. At present, the Americans provide around three-quarters of NATO capabilities.

Burden-sharing requires that Europe shoulder its responsibility for ensuring sufficient military capability and engaging in crisis operations in Europe’s vicinity. The AIV has already set out its views on this subject. Last year it produced the report, ‘European Defence Cooperation: Sovereignty and the Capacity to Act’.

In summary, we ask the AIV to examine the ramifications of the United States’ foreign and security policy rebalance towards Asia (especially Southeast Asia) and the Pacific – in particular for NATO, the EU and the Netherlands. How should Dutch foreign and security policy respond to this trend? What goals should the Netherlands pursue in NATO and the EU?

We look forward to receiving your report.

Yours sincerely,

 

Frans Timmermans
Minister of Foreign Affairs
Jeanine Hennis-Plasschaert
Minister of Defence

 

Government reactions

Professor Jaap de Hoop Scheffer
Chairman of the Advisory Council
on International Affairs
P.O. Box 20061
2500 EB The Hague


Date  1 April 2014
Re     Government’s response to AIV advisory report ‘Asia on the Rise’


Dear Professor De Hoop Scheffer,

Please find below the government’s response to the advisory report ‘Asia on the Rise: Strategic Significance and Implications’ (Advisory Report no. 86, December 2013). A copy of this letter will also be sent to the President of the Senate and the President of the House of Representatives.

Introduction

The government would like to thank the Advisory Council on International Affairs (AIV) for its advisory report ‘Asia on the Rise: Strategic Significance and Implications’. As requested, the report examines in detail the implications of Asia’s increasing power for the security of the Netherlands. It also explores the significance for NATO, the EU and the Netherlands of the reorientation of US foreign and security policy towards the Asia-Pacific region.

In its report, the AIV focuses on the countries of East and Southeast Asia, devoting particular attention to the position of China. Restricting the report to the Asia-Pacific region is understandable, given the greater strategic focus on China in US foreign and security policy. This does not, however, mean that other Asian actors, such as India, are not equally important, particularly when it comes to security policy. The report also, albeit to a lesser extent, examines the position of Australia and Indonesia in the Asia-Pacific region and the Netherlands’ enhanced relations with these countries in particular. In 2013, for instance, the Netherlands and Indonesia agreed on a wide-ranging partnership and, building on this, signed a Memorandum of Understanding on military cooperation in February 2014.

The government notes that the main thrust of the advisory report is in line with its policy as set out in the policy memorandum of November 2013, ‘Dutch Policy on China: Investing in Values and Business’ (Parliamentary Papers 33 625, no. 59). The memorandum explores the implications of China’s increasingly prominent political and economic role in Asia, focusing on how to make the most of our common interests and involve China in global security issues. The government concludes in the memorandum that China and the rest of the world are growing increasingly dependent on each other. It seeks to encourage China to accept its global responsibilities in the fields of security, the rule of law, climate change and development.

In a more general sense, the government is attempting, in both its bilateral and multilateral foreign policy, to strengthen economic ties and political relations that can help promote common values in areas like democratisation, human rights, the rule of law, market economics and a rules-based world trade system. This approach is applied equally to all countries in the Asia-Pacific region, taking account of their different stages of development and degrees of embedment in the international system.

A greater role for the EU in the region would include the Union’s greater involvement in the further development of Asian regional structures. The Netherlands supports active dialogue between the EU and regional organisations like the Association of Southeast Asian Nations (ASEAN) and the ASEAN Regional Forum (ARF). However, Europe is becoming less important to the Asia-Pacific region, partly because of strong economic growth and increasing economic integration in the region itself, and partly because of the euro crisis. This underlines the importance of Europe putting its own house in order. The fact that the countries of the region have traditionally been more interested in bilateral than multilateral cooperation is also significant.

The AIV underlines the importance of bilateral relations with China, Japan, South Korea and Indonesia. The Netherlands already maintains close relations with these countries and the government regards the report as an encouragement to continue on its current path. The AIV believes the enhanced focus on Asia should also be reflected in the number of official visits, in consultations and in the allocation of diplomatic staff and resources. Efforts by the government in this area are already under way, as evidenced by the recent series of high-level visits to and from the countries of the Asia-Pacific region and the parallel visits by trade delegations. Likewise, the network of diplomatic missions in the region has been expanded. In late 2013 the prime minister visited China, accompanied by a trade delegation, and bilateral human rights consultations with China were resumed during the same period. The new Chinese president, Xi Jinping, made a State visit to the Netherlands on 22 and 23 March 2014.

Global

New actors are taking their positions on the world stage. At the same time, global crises involving the climate, the financial system and terrorism need to be tackled. This combination of factors means that Western countries must invest in relations with newcomers and allow these countries to take up their positions without undermining universal principles. The Netherlands is advocating a coherent agenda aimed at strengthening the international order, to promote peace through a robust legal architecture and a strong focus on development, disarmament and human rights.

The UN mould in which the shape of the international community was cast after the Second World War is no longer appropriate in the 21st century. The Security Council needs to be expanded and its composition adapted to the new reality. In addition, the AIV rightly regards it as a major challenge to integrate China and other emerging nations into the system of global governance and to ensure that they share responsibility for addressing global issues. Joint action as part of the international legal order should in addition ensure that sensitive issues can also be discussed at a bilateral level.

Since 2007, when the AIV published its previous China report, China has increasingly been involved in UN operations. In Mali, Dutch units are now partly under the protection of a Chinese contingent. China also assists in anti-piracy operations and the protection of international shipping routes, and it is open to certain forms of bilateral military cooperation.

The AIV recommends that China’s voting weight in international organisations be brought in line with its increased economic and political weight. Major steps have recently been taken in this respect, particularly at the international financial institutions. The Asian Development Bank (ADB), on which the Netherlands Institute of International Relations ‘Clingendael’ recently published a report, is one example. The Institute expects the ADB to make a growing contribution to stability, development and regional cooperation in the Asia-Pacific region. More clearly reflecting the growing economic power of certain regional member states like China and India in the ADB, as the AIV recommends, would help make this possible.

With its permanent seat on the UN Security Council and membership of the G20, China was already strongly represented in key governance bodies. As stated above, the challenge now is to encourage China to become actively involved in reforming the system and to accept more responsibility, commensurate with its new status. As the AIV points out, the new ground rules for international relations will have to allow room for the views and interests of China and other emerging countries.

A situation in which regional differences stand in the way of agreement on key global problems should be avoided. The government will strive to develop shared values on human rights jointly with emerging countries like Indonesia, and to promote these values in other countries in the region, by fostering trilateral cooperation.

Regional

Politics and economics in the Asia-Pacific region are turbulent. Besides potential for growth and cooperation, there are also risks in the region. Tensions arising from territorial and maritime claims continually resurface.

The government endorses the AIV’s view that there is a need to support proposals that strengthen mutual trust between political and military leaders and that minimise the risk of a spontaneous conflict. It also agrees that the EU could potentially play a significant role in this, and supports the EU’s efforts to deepen security cooperation with the ASEAN member states. The EU-ASEAN Plan of Action for the period 2013-2017, adopted by the meeting of foreign ministers in Brunei in 2012, contains proposals for practical cooperation on maritime security, confidence-building, peacebuilding and peace enforcement, and conflict prevention. The government also supports the EU in its efforts to engage with the ASEAN Defence Ministers’ Meeting.

The government is keen to see consistent, high-level representation of the EU at the annual meetings of the ARF. Ten ASEAN countries participate in the ARF, along with seventeen dialogue partners, including all actors relevant to the Asia-Pacific region. The ARF is the only forum for political and security dialogue in the region at which the EU represents all member states. The ARF Work Plan adopted under the Vietnamese Chairmanship envisages the development of the ARF as the central pillar in the regional security architecture by 2020, with ASEAN as its driving force. Experts meet every year to discuss issues like maritime security, cross-border crime, non-proliferation and disarmament, and a range of other security matters.

The EU does not yet attend the East Asia Summit (EAS). Besides the EU-ASEAN Plan of Action, however, in 2012 an agreement was signed for EU accession to the ASEAN Treaty of Amity and Cooperation, and this should eventually lead to the EU’s participation in the annual EAS.

Countries like Indonesia, the Philippines and Vietnam favour a multilateral approach to the territorial disputes in the South China Sea. They want to discuss unresolved disputes with China in ASEAN. The ASEAN Declaration on the South China Sea and the ASEAN-China Declaration on the Conduct of Parties in the South China Sea are important in this connection. The latter foresees a legally binding Code of Conduct that is still to be agreed. Disagreement over including a reference to the South China Sea prevented any final declaration at the 2012 ASEAN summit. The divisions within ASEAN were caused by China’s position that bilateral settlements should be reached with individual countries. China regards any attempt to internationalise bilateral disputes as destabilising and an infringement of its sovereignty. For their part the ASEAN countries, which are highly focused on consensus, do not always regard the strong views of other partners as helpful.

The Netherlands takes a neutral position concerning the territorial conflicts in the Asian seas, but in accordance with EU policy calls on the parties involved to resolve them peacefully in compliance with international law. For instance, on 19 March 2014, at the Jakarta International Defence Dialogue, the Dutch Minister of Defence highlighted the importance of free use of the sea in accordance with international maritime law, of which Dutchman Hugo Grotius was the founder. The Netherlands has an interest in unrestricted passage – which has never proved a problem – and stability in the region. Given the strong nationalist feelings provoked by territorial claims in all the countries concerned, it is important that the Netherlands refrain from taking a position that might damage bilateral relations.

Although the United States also declines to take sides in the territorial disputes, it has military alliances with Japan and the Philippines, both of which have claims against China. The United States supports the creation of an ASEAN Code of Conduct, and has called upon the parties to resolve disputes peacefully and in accordance with international law. The EU takes the same position, as expressed most recently by the EU High Representative in a 2012 joint statement with the United States issued in Phnom Penh, which is examined in further detail below.

The AIV calls for the EU to take an active role in institution-building in the Asia-Pacific region, and for it to expand its diplomatic presence in Asia. The government endorses this recommendation. As the AIV observes, there is virtually no regional security structure in Asia, and this could be problematic. A paradoxical development appears to be occurring in the region, whereby countries in the region are becoming economically more interdependent, while growing more inward-looking in their politics and security policy. There is a strong likelihood that problems will arise if economic growth in Asia stabilises or declines, as some have already predicted for China. A stronger regional structure is therefore very important. The EU could share best practices in this area.

The Netherlands supports the plan to post a dedicated EU ambassador to ASEAN. The EU already provides ASEAN with expertise, strengthening the organisation’s secretariat in Jakarta, for example, as part of the Brunei Plan of Action 2013-2017. Bilaterally, the Netherlands contributes every year by inviting twenty young diplomats from ASEAN member states to a short Clingendael course on the institutional aspects of regional integration.

Transatlantic matters

EU and US policies on the Asia-Pacific region share important principles. This was demonstrated by, among other things, the joint statement issued by then US Secretary of State Hillary Clinton and EU High Representative Catherine Ashton at the ARF meeting in Phnom Penh in July 2012. The statement advocated promoting peace and stability in the region and working for sustainable development, and underlined the importance of free trade and economic growth.

At NATO level, too, there are regular talks on developments in Asia. The Political and Partnerships Committee and the North Atlantic Council (NAC), the highest level of consultation, are forums in which allies can consult on all matters that could affect their territorial integrity, political independence and security.

Building on the statement by Clinton and Ashton, the Netherlands lobbied for the EU-US Summit on 26 March 2014 to consider the Asia-Pacific region. The government emphasised the importance of finding peaceful solutions to territorial conflicts in line with international law, and the possibilities for arbitration.

The Netherlands has joined with Johns Hopkins University in the US to launch a research project entitled: ‘The Rise of Asia: Implications for the Transatlantic Agenda’. The aim of the project is to formulate specific recommendations for Europe-US cooperation on Asia. The first working conference of the project was held in October 2013 and a follow-up, to be attended by the Dutch Minister of Foreign Affairs, is planned for May 2014 in Washington. The Netherlands is working closely with EU partners on the project, including Germany, Finland, France, Poland and the United Kingdom. The recommendations that emerge from the project will address areas such as the deployment of European expertise for capacity-building in regional institutions, international law on territorial and maritime conflicts, and new mechanisms for cooperation between NATO and Asian partners.

The government takes on board the AIV’s advice that the regular talks with the United States on Asia should be stepped up. The Netherlands already actively participates in an informal dialogue on developments in the Asia-Pacific region, launched in Washington in 2012, between the State Department (the Assistant Secretary of State for East Asian and Pacific Affairs) and a number of ambassadors from EU member states. The Netherlands also plans to continue talks on Asia between the EU and the US after completion of the Johns Hopkins University project. This will take the form of ‘track two diplomacy’, involving both policymakers and representatives of think-tanks and academia.

Any transatlantic Asia strategy should extend further than just China. Traditional partners like India, Japan and South Korea, and countries belonging to the ‘next eleven’, like Indonesia and Vietnam, are equally important. Cooperation on security and stability with like-minded countries such as Australia and New Zealand is also very valuable.

At multilateral level, both the EU and the United States are already investing in capacity-building at ASEAN, as described above. The EU and the US also play their part in regional consultative bodies like the Asia-Europe Meeting (ASEM, for the EU) and the EAS (United States). The EU could enhance its profile in the region on the basis of its economic weight and ‘soft power’ capabilities, as well as highlighting its neutral position. The government will make every effort to ensure that our distinctive input is discussed more thoroughly with the United States.

Among NATO partners there has been a growing realisation that the security of the alliance benefits from close cooperation with third countries. Increasing attention is being focused on shared (transboundary) security priorities. As a result, the importance of NATO’s partnership policy has grown in recent years. NATO has a number of partners in the Asia region, including South Korea, Japan and Pakistan. Regular consultations are held with these countries to discuss common threats. The Netherlands regards NATO’s partnerships with countries at a greater distance from the alliance as very important. India is another notable example.

By extension, the government agrees with the AIV’s analysis that Europe must not only consolidate military transatlantic cooperation, but also invest more in its political and economic relations with the United States.

Since July 2013 the European Union and the US have been negotiating an ambitious free trade agreement, the Transatlantic Trade and Investment Partnership (TTIP). Both sides aim to conclude an ambitious agreement on a range of trade and investment issues. As an export-based economy, the Netherlands stands to gain a great deal from the TTIP. A broad-based agreement could earn an estimated €4.1 billion a year for the Dutch economy, and a more limited agreement, €1.4 billion.

The AIV rightly points out that the TTIP is more than simply a free trade area. It would also establish new common standards and rules that could also be applied outside the Atlantic region. The TTIP therefore also has geopolitical value because it strengthens the position of the transatlantic partners in their relations with third countries. A free trade agreement between the EU and the US could help guarantee a rules-based international order. The TTIP also has great symbolic value for relations between the EU and the US, as natural partners.

The Netherlands still prefers multilateral agreements. They are better not only for the Netherlands, but also for partners in low- and middle-income countries. A good multilateral trade system and a key role for the World Trade Organization (WTO) remain essential. An ambitious bilateral agreement like TTIP can make a positive contribution to a global trade agenda.

The government supports the AIV’s recommendation that every effort be made to ensure the success of the current talks on a transatlantic free trade and investment agreement.

The AIV points out that the forthcoming Trans-Pacific Partnership (TPP) agreement, in which China does not currently participate, could be seen as a US strategy to contain China. As the AIV rightly observes, it is therefore strategically important that the United States prevent China being excluded from the TPP and that China be given the opportunity to join at some point. The EU could press for this both in its dialogue with the US and in its own cooperation with partners in the region, including South Korea, Japan, the ASEAN countries and India.

The government will also focus attention in the coming period on other areas where the AIV recommends closer transatlantic cooperation.

Policy on trade with Asia

The EU is negotiating on a broad range of issues with China, including access to government procurement contracts, customs cooperation (to counter trade in fake goods, for example), investment, export credits, recognition of geographical names, free movement of services and the opening of markets for environmental goods and IT products. As a corollary to this, there is potential for a free trade agreement. This prospect and success on several negotiating tracks will however depend on the progress of domestic reform in China, on which major first steps were taken last year.

In all these negotiations – contrary to what the AIV suggests – there is no division between the member states. In 2013 a coordinated strategy was developed which, at the EU-China Summit last November, resulted in the adoption of a broad cooperation agenda.

The AIV cites the example of the planned border tax adjustments on solar panels from China to illustrate how divisions among the member states might hamper negotiations with China. This case in fact concerned a European Commission proposal to which 18 member states objected. It was more a matter of an ill-conceived proposal by the Commission than of divisions among member states. The Netherlands’ objections also received broad support in the House of Representatives.

China has a trade surplus with the EU. However, the balance of trade is not a problem for the EU because it has traditionally been roughly equal, and now in fact shows a slight surplus. The Chinese balance of payments surplus has fallen from over 10% of GDP in 2007 to around 2% in 2013. This is a fraction of the Dutch percentage. The yuan’s exchange rate rose by 7% last year, according to the Bank for International Settlements. China is one of the EU’s fastest growing export markets. In this context, the government will continue to support EU policy geared towards further integration of China into the rules- and agreements-based open world trade system, since this is in the Netherlands’ own interests.

The government largely agrees with the AIV’s analysis of the arms embargo that the EU instituted against China in 1989. The Netherlands would not object to lifting the embargo, but in current circumstances there is no occasion for taking such a step. Relevant considerations include the human rights situation in China, stability and security in the region, and relations with allies. While relations between China and Taiwan may be improving, certain aspects of the human rights situation still give cause for concern. The AIV rightly highlights the need to involve the United States in any future European decision on the arms embargo.

The AIV advises the government to seek EU agreements to create a level playing field for export financing. Agreements already exist at EU level, based largely on arrangements concerning export financing and export credit insurance set out in the OECD Arrangement on Guidelines for Officially Supported Export Credits, which is directly applicable to EU countries via EU legislation. The Arrangement sets out guidelines on minimum interest rates, maximum loan terms, repayment schedules and other matters relevant to the provision of export credit insurance or export financing by or on behalf of governments. However, not all countries make use of the opportunities offered by the guidelines. The Netherlands does not provide any export financing by or on behalf of the State, but it does regard a level playing field as important.

The AIV also calls for policy that both reflects the open nature of the Dutch economy and protects vital national interests. The government believes that, when Chinese investments are assessed, a clear distinction should be drawn between takeovers that are part of normal commercial practice and takeovers that constitute a threat to national security. This would leave it primarily to companies to safeguard their own competitive position and to protect the knowledge necessary to do so. Where investments impact on national security the Netherlands already has the necessary safeguards in place, laid down in both general and sectoral legislation. The government is currently examining how economic interests could be weighed against security interests more regularly and systematically. If necessary, the government will tighten the current set of instruments geared to safeguarding national security.

Military cooperation

The government agrees with the AIV that the EU must take more responsibility for security and defence. The International Security Strategy of June 2013 highlights the zone of instability around Europe and the need for European military cooperation. In 2013, the Netherlands took further steps towards realising this ambition, for example by signing a declaration of intent with Germany, further elaborating Benelux defence cooperation and strengthening its military ties with France and taking part in a British-led EU Battlegroup. The European Council, in its Council Conclusions of December 2013, also underlined the importance of greater defence cooperation, and announced specific measures, the details of which are currently being worked out. The government will continue unabated its efforts in support of these steps.

At the same time, the government is keen to sustain close military cooperation with the United States, both bilaterally and as part of NATO. The US and the countries of Europe can only meet future threats by acting jointly. The government therefore does not share the AIV’s view that military ties with the US will become less close. However, a more balanced division of burdens and risks between the US and Europe will be necessary. It is no coincidence that burden sharing and risk sharing will be important themes at the NATO summit in Wales in September 2014. Equally important is the interoperability of American and European combat forces, both within NATO and alongside partner countries. This too will be discussed in Wales. The Netherlands supports the maintenance and acquisition of relevant military capability, within the applicable budgetary frameworks. This will require European military cooperation to be strengthened. Such cooperation is also essential if Europe is to take more responsibility.

The government welcomes the AIV’s call for bilateral military cooperation with China. The report highlights initiatives developed in recent years, such as exchanges between the School for Peace Operations and its Chinese counterpart and between defence colleges. Defence officials have visited China and Chinese delegations have been received in the Netherlands, for the purpose of strengthening defence relations. The Minister of Defence is due to visit China in April, with a view to consolidating cooperation in the areas mentioned and creating scope for further initiatives. Our military relations with China will receive a particular boost over the next few years thanks to our involvement in the UN MINUSMA operation in Mali, which will further enhance our bilateral military relationship and mutual trust.

China is not the only country with which the Netherlands has bilateral military ties. Defence attachés have been accredited to various countries, including Australia, with which military cooperation has been stepped up in the framework of the ISAF operation in Afghanistan. Indonesia also deserves special mention. The Netherlands naturally has longstanding military ties with Indonesia, but over the past year military cooperation with the country has been strengthened and formalised in a Memorandum of Understanding. Ties with Indonesia are being strengthened primarily for military and economic reasons, but this has also resulted in a strategic dialogue with the Indonesians.

Yours sincerely,

 

Frans Timmermans
Minister of Foreign Affairs
Jeanine Hennis-Plasschaert
Minister of Defence

 

 

Press releases

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