Japan-China: Bloomberg has published an excellent report that describes the economic consequences of Japan’s dispute with China over ownership of the Senkaku Islands. No other news outlet has published a comparably insightful and detailed account.
The first point the journalists made is that trade relations between China and Japan multiply the costs of a territorial dispute. Japan’s trade with China is valued at more than $300 billion per year, which is potentially at risk.
A Chinese boycott of Japanese imports would hurt China but might already have resulted in a reduction of GDP, according to Bloomberg citing JPMorgan Chase, because of reduced Chinese purchases of Japanese goods.
Ripple effects in China from boycotts of Japanese manufactures put at risk the jobs of millions of Chinese who work in Japanese industries in China. Japanese auto sales declined. Air travel cancellations increased in both countries. One Japanese department store retailer closed 60 of 169 stores because of anti-Japanese vandalism and threats.
Comment: The key point is that global economic integration magnifies the consequences of international disputes. Interdependency means both sides seriously suffer economically, although security incidents result in no casualties. Japan might have sustained a .5 per cent decline in GDP in the last quarter of 2012, essentially because of Chinese hostile, nationalistic responses to the islands dispute.
Both sides got hurt, but China can absorb the consequences more than Japan.
Another key point is that the dispute shows how the Chinese fight in every kind of battle space – at sea, in the air, on the land, in cyber space, in international political space and in economic space. Total warfare means total to the Chinese. They are experimenting with that in the Senkakus dispute.
Phi Beta Iota: The USA desperately needs a) an Open Source Agency (OSA) as recommended by the 9/11 Commission, with a National Monitoring and Planning Center such as General Tony Zinni has suggested in his book, The Battle for Peace, and a Multinational Decision-Support Centre with military channels for reachback to the eight tribes in all coalition countries (and eventually, also hostile countries, the mutual benefits will be considerable). Imagine what the Chinese “dashboard” looks like on this — utterly predicatable (see the analytic model depicted in Robert Steele’s 2011 Thinking About Revolution in the USA and Elsewhere) and also utterly unavailable in the USA. The USA also desperately needs a Deputy Director for Management in the Office of Management and Budget (OMB) who can actually manage across agencies, across policy and spending domains, and across the four levels (strategic, operational, tactical, and technical), with line item veto authority that can only be over-ruled by the President once validated by the Director of OMB.