Sino-Japanese Island Spat

The disagreement between China and Japan over five very small islands in the East China Sea again reared its head on September 11^th, when the Japanese government purchased three islands that it did not already own from their private owner for the price of ¥2 billion ($26 million). China responded with offensive posturing, as we discussed during this week’s class, sending patrol vessels into the region. The Japanese purchase, which was made over a vocal Chinese opposition, stirred up a number of protests throughout Chinese cities including Beijing, Shenzhen, and Luoyang, that have continued into this week.

These protests were the topic of discussion in a recent article, “The Dangers of a China-Japan Trade War” (The Diplomat), that outlined some of the more ominous economic consequences that may result from the squabble over the islands.  According to the article, angry crowds have attacked and destroyed several Japanese branded products during the protests, and companies have closed facilities in the area. Also troubling, as author James Parker suggests, is the consumer boycott of Japanese products that some Chinese are calling for.

Of course, formal economic sanctions of the Japanese by the Chinese are a possibility (and considering that China accounts for nearly 20% of Japan’s export this could severely damage the Japanese economy). However, while not impossible, these sanctions are complicated by WTO obligations and can cast an unfavorable light on the Chinese. China, because of the power of its State Owned Enterprises, could also call for an unofficial boycott, which will do considerable damage while dodging those pesky WTO obligations.

Nevertheless, trade rarely flows one way. Any sanction on the part of the Chinese will almost certainly result in a tit-for-tat reaction by the Japanese. The ensuing “boycott war” will damage both sides, and might work to dissuade companies from countries outside China and Japan from investing in China.

Negative effects on trade, of course, are just one potential consequence of the dispute.  While the United States has claimed that it will remain neutral in the disagreement, we’ll see how long that will last.  The BBC reported that on the 18th that  US Ambassador Gary Locke’s car was attacked by protesters in Beijing while they chanted anti-America slogans and assertions that the islands were Chinese territory as they attempted to prevent the car from entering the embassy.

Earlier this week, the United States also sealed a new missile deal with Japan. The announcement that the United States would be sending another advanced radar system to the Japanese, ostensibly to bolster Japanese defense against North Korea, has predictably worried China. The Chinese, despite overtures by the U.S., are likely to see Washington’s growing missile presence in the area as a threat to its own interests and not the defense of Japan that it claims to be.

The issue is complicated, potential U.S. involvement notwithstanding. Japan and China are facing their own unique internal complications: nationalist agitation is present on both sides and Japan is about to face a general election. The opposition hopeful for the next prime minister is the son of Tokyo governor Shintaro Ishihara. Ishihara, who has been described as a “crusty, China-baiting nationalist” launched a campaign for the islands to be bought by the Tokyo metropolitan government in April.  Japan’s recent purchase of the islands by current Prime Minister Yoshihiko Noda could have been meant to foil Ishihara’s plan. Noda seems to be trying to soothe tensions with the Chinese, as he’s pledged to keep the Japanese from setting foot on the islands—but the probability remains that China will see this as an attempt by Japan to increase their already extensive maritime scope, and not to diffuse a potentially explosive situation.

Class, what do you think? What is the likelihood and what are the consequences of potential U.S. involvement in the Sino-Japanese dispute over the Senkaku/Diaoyu islands? How will Japan and China continue to address the dispute, taking into consideration the upcoming Japanese general elections?

Additionally, do you believe that the Sino-Japanese trade relationship be enough to keep the conflict from spreading or violence from breaking out?  Parker, at the end of his recent article in The Diplomat, ominously points out that: "strong economic relationships before WWI didn't stop the march to war." Or, as he hopes, will cooler heads prevail?