Image: Sang Kham poses amid some of the thousands of bombs he has defused. He's turned the weapons into a shrine to victims of the U.S. bombing campaign. © Jerry Redfern

Abstract

Studies of the short-term impact that armed conflicts have on economic development abound, but there is little consensus about their long-term legacy. This paper, which was first published at VoxEU.org, evaluates the enduring effects of the U.S. government’s “Secret War” in Laos, waged from 1964 to 1975.¹ As a result of the intense bombing campaign, Laos is now severely contaminated with unexploded ordnance, which has impaired Laotians’ health, education, and migration choices. These factors have in turn hindered the structural transformation and economic growth of the country, which remains one of the world’s poorest.


Introduction

The destructive nature of conflict is hard to overemphasize. Armed confrontations bring havoc not only to combatants, but also to local businesses and innocent bystanders. The World Bank estimates that immediately after a typical civil war, a country’s GDP is 15% lower and its citizens face increased poverty rates of up to 30% (Collier et al 2003, Collier 2007).

While the short-term effects of war are extensively documented in the literature (Blattman and Miguel 2010, Bauer et al. 2016), its long-term consequences have been more elusive. Several studies have found no long-lasting impact after bombings in Japan, Germany, and Vietnam (Davis and Weinstein 2002, Brakman et al. 2004, Miguel and Roland 2011, respectively). Others, echoing the quip by Charles Tilly, have even argued on behalf of the potential fiscal capacity gains emerging from war (Dincecco and Onorato 2018, Voigtländer and Voth 2012). This emphasis on postwar recovery appears at odds with the ‘conflict trap’ hypothesis proposed by Collier (1999), according to which countries remain poor partly due to conflict.

In a recent paper (Riaño and Valencia 2020), we test whether this is the case for Laos.² From 1964 to 1975, Laos suffered one of the most intensive bombing campaigns in human history; as a result, the country is now severely contaminated with unexploded ordnance (UXO). Could this continued legacy of war be one of the key drivers of Laos’s underdevelopment?


Context and Data

The Laotian Civil War (1953-1975) can be understood as a classic Cold War conflict. It pitted the Communist Pathet Lao against the Royal Lao Government. As part of its Cold War counterinsurgency operations in Southeast Asia, the U.S. government conducted a series of military interventions in Laos from 1964 to 1975 (Congressional Research Service 2019).  The country was of key geostrategic interest, given the neighboring conflict in Cambodia and Vietnam (Dell and Querubin 2016). The United States intervened in Laos, but the conflict remained secret at the time, as was eventually acknowledged.³  More than 270 million cluster bombs were dropped in the country during this ‘Secret War’, about a third of which did not explode. It is estimated that around 50,000 Laotians, most of them civilians, especially children, have been killed or injured by US bombs. However, less than 1% of these munitions have been cleared⁴ and at the current pace it could take more than a 100 years to clear the country (Congressional Research Service 2019), making this the number one development issue in Laos (Boddington and Chanthavongsa 2008).

To test our hypothesis, we combine data on the incidence of conflict with key economic indicators. Data on more than 1.6 million bombing missions conducted from 1965 to 1975 have been recently declassified and are available from the U.S. Department of Defense. We link this geo-located information with data on nightlights from the U.S. Air Force Defense Meteorological Satellite Program. We use the 1993, 2003, and 2013 missions to track the evolution of this variable over time. We complement this indicator using the Population and Agricultural Censuses of 2005 and 2011, at the village level. Additionally, through the Integrated Public Use Microdata Series (IPUMS) we have the 10% sample of the 2005 Census, which contains around 561,000 individual-level observations. Reports on UXO accidents come from the National Regulatory Authority (NRA) for Mine Action and is a daily panel, covering accidents from 1950 to 2011.


Empirical Strategy

We proceed with our empirical analysis in the following way. First, we partition the country into small grid cells of 10 x 10 kms. Working at this unit of observation allows us to control, via fixed effects, for time invariant characteristics at the province and even the district level (Laos has 18 provinces and 141 districts). Still, we take into account geographic and location characteristics such as altitude, ruggedness, temperature, precipitation, latitude, and longitude. Additionally, we control for other characteristics relevant to this particular setting, such as distance to the 17th parallel, distance to the Vietnam border, and distance to the capital Vientiane. Still, estimating the regression using ordinary least squares (OLS) could have remaining problems, as bombing was probably not random.

To solve this potential endogeneity issue, we employ an instrumental variables (IV) identification strategy. As instruments we propose two variables. The first is the distance to the Ho Chi Minh Trail, in particular the part that was unknown to the US at the time, mostly constituted by underground tunnels. This instrument exploits the asymmetric information inherent in violent confrontations. Similarly, we use distance to the nearest U.S. air base outside of Laos, established before the conflict started in the 1960s. This sensitive information comes from recently declassified CIA documents. We believe that the location of these bases – in South Vietnam, Thailand, and Japan – can be viewed as exogenous to the subsequent Laotian conflict.


Results

OLS results reveal a negative and significant relationship between conflict incidence (number of bombs dropped) and income (nightlights). A summary of this negative relationship can be seen in Figure 1. In terms of magnitude, we find that a one standard deviation increase in bombs leads to a 33% decrease in nightlights with respect to their mean, an effect that corresponds to a 9.3% fall in GDP per capita – a sizable decrease. Bombed regions are not only poorer today, but are also growing at slower rates than unbombed areas. The results are robust to using geographic and location controls, as well as netting out fixed effects.


Figure 1 
Notes: The three panels of the figure depict a map of the Indochina peninsula with stable lights in 2013 (left), the same map overlaid with bombing events from 1965–1973 (centre), and a binned scatterplot of this relationship for Laos, net of geographic and location controls (right).


Our IV estimates confirm the baseline OLS and FEs findings. First, we find a negative and strong relationship between both distance to the Ho Chi Minh Trail and the nearest U.S. air base and bombings. We also estimate a quadratic relationship in the first stage to allow for heterogeneous effects (Dieterle and Snell 2016). Using these instruments, we find again a negative and highly significant relationship between the number of bombs dropped and lights in 1993, 2003, and 2013, providing a more causal interpretation of our empirical estimates.


Mechanisms of Transmission

To explore potential mechanisms of transmission, we divide the sample between villages that are above and below the median in terms of number of bombs received. We find that in the former, people have lower expenditures and higher poverty rates, so the nightlights results translate into concrete development outcomes. We also find that bombs are tightly related to UXO contamination of agricultural land, at the extensive and intensive margins. We confirm these findings using a high-frequency panel of UXO accidents starting in 1950, where we find more such accidents in heavily bombed areas from the 1960s to today (Figure 2).


Figure 2

Notes: Panel A of this figure depicts the spatial distribution of UXO accidents (events involving death, disability, or major injury) at the grid cell level in Laos. Panel B presents the relationship between intensity of the bombing campaigns in the country and the number of UXO accidents by decade.


Still, the negative effects of conflict appear to transcend the direct effects of UXO contamination, hampering other key economic investments as well. At a first pass, we observe that bombed areas are less dense today, and that they have lower levels of human capital in terms of literacy and health. Affected villages also appear to have worse public goods provision, in terms of electricity and water supplies. Expanding on these results at the individual level, using a difference-in-differences specification, we find that those who were still young in 1964, when the bombing campaigns started, received significantly fewer years of schooling. In modern times, now that these individuals have entered the labor market, they also have a lower probability of being employed as a whole. Moreover, even when employed, these individuals are more likely to be working in agriculture, and less likely in services, delaying the structural transformation of the economy (Figure 3). 


Figure 3

Notes: This figure presents the event study analysis of the bombing campaigns from 1964 to1973 on long-term individual outcomes. It shows how difference-in-differences coefficients of cohort interacted with the intensity of bombing in the province of birth. Individual outcomes come from the census of population and housing of 2005. The name of each panel corresponds to the outcome of each model: Years of education, long-term migration, working in agriculture, and working in services. 


Finally, we study the interaction with migration. We find that conflict decreased the rates of internal migration by around 10%. Using a triple difference specification, we are able to decompose the human capital and labor effects for migrants and non-migrants. We find that the negative education shock is concentrated among those who stayed (about 90% of the sample) rather than on those who moved. These results for human capital parallel those for sectoral employment, where again, non-migrants are more affected. Taken together, these rural-urban migration patterns help explain the negative long-run development consequences of the Laotian conflict, providing lessons for other countries still grappling with the multifaceted legacies of war.


Conclusion and Policy Implications

We contribute to the literature on conflict by showing the negative and sizable economic impact of a confrontation that formally ended decades ago. We also single out UXO contamination as a key element in the continued negative effect of war. Since the Laotian war officially ended, people have been affected directly through UXO accidents as well as indirectly through lower education and less labor mobility into modern sectors and urban centers. This pernicious combination of factors, among others, helps explain why Laos remains one of the poorest countries in the world today.

We believe that our findings could better inform policies for both affected and attacking countries. First, the demining agenda should take center stage in conflict-stricken areas, as was the case in Mozambique (Chiovelli et al. 2018). Local leaders can also learn from the results presented with regard to the specific channels of transmission of the effects of UXOs. They can, for instance, improve the targeting of their existing policies accordingly, or implement new programs geared towards alleviating the lingering consequences of historical conflict. Policymakers in attacking countries should consider the long-term socioeconomic legacy of their military actions, weighing the large and permanent economic costs against their more immediate political and strategic objectives.



Juan Felipe Riaño is a Ph.D. Candidate in Economics in the Vancouver School of Economics at the University of British Columbia. His research interests are in Development Economics, Political Economy, and Economic History. He is currently working on the determinants of state capacity in developing countries and the long-term impacts of conflict on economic development. He has worked on these topics in Colombia, Mexico, and the Lao People's Democratic Republic. He holds a B.Sc. in Industrial Engineering from Universidad de Los Andes and a B.A and M.Sc. in Economics from the same university.

Felipe Valencia Caicedo is an Assistant Professor in the Vancouver School of Economics at the University of British Columbia. Prior to that, he worked at the Department of Economics at Bonn University. Felipe obtained his Ph.D. in Economics cum laude from Universitat Pompeu Fabra in 2015, through the European Doctoral Programme. He worked as a Consultant at the World Bank in Washington, DC, from 2008 to 2010 and an Analyst at Goldman Sachs in 2005. His primary research interests are in Development Economics, Economic History and Economic Growth, with an emphasis on Latin America.




Notes

1.  The arguments and findings in the present paper, which was originally posted at VoxEU.org, are more fully developed in Riaño, J and F Valencia Caicedo (2020), “Collateral Damage: The Legacy of the Secret War in Laos”, CEPR Discussion Paper 15349.

2.  Closely related papers have looked at the impact of demining campaigns in Mozambique (Chiovelli et al. 2018), the problem of UXOs for land use in Cambodia (Lin 2016) and how conflict has hampered structural transformation in Colombia (Fergusson et al. 2020).

3.  https://obamawhitehouse.archives.gov/the-press-office/2016/09/06/remarks-president-obama-people-laos

4.  https://www.thislittlelandofmines.com/


References

Bauer, M, C Blattman, J Chytilová, J Henrich, E Miguel, T and Mitts (2016), “Can War Foster Cooperation?” Journal of Economic Perspectives 30(3): 249–74.

Blattman, C and Edward M (2010), “Civil War,” Journal of Economic Literature 48(1): 3–57.

Boddington, M and B Chanthavongsa (2008), “National Survey of UXO Victims and Accidents,” National Regulatory Authority for UXO/Mine Action Sector in Lao PDR (NRA).

Brakman, S, H Garretsen and M Schramm (2004), “The Strategic Bombing of German Cities during World War II and its Impact on City Growth,” Journal of Economic Geography 4(2): 201–218.

Chiovelli, G, S Michalopoulos and E Papaioannou (2018), “Landmines and Spatial Development,” National Bureau of Economic Research Working Paper Series, No. 24758 (see also the VoxDev column here).

Collier, P (1999), “On the Economic Consequences of Civil War,” Oxford Economic Papers 51(1): 168–183.

Collier, P, V L Elliott, H Hegre, A Hoeffler, M Reynal-Querol and N Sambanis (2003), “Breaking the Conflict Trap: Civil War and Development Policy,” World Bank Policy Research Report. World Bank and Oxford University Press.

Collier, P (2007), The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done About It, New York: Oxford University Press.

Congressional Research Service (2019), War Legacy Issues in Southeast Asia: Unexploded Ordnance (UXO), CRS Report.

Davis, D and W David (2002), “Bones, Bombs, and Break Points: The Geography of Economic Activity,” American Economic Review 92(5): 1269–1289.

Dell, M and P Querubin (2016), “More Bombs, More Shells, More Napalm: Nation Building through Foreign Intervention,” VoxEU.org, 16 August.

Dieterle, S G and A Snell (2016), “A Simple Diagnostic to Investigate Instrument Validity and Heterogeneous Effects When Using a Single Instrument,” Labour Economics 42, 76–86.

Dincecco, M and Onorato, M (2018), From Warfare to Wealth: the Military Origins of Urban Prosperity in Europe, Cambridge University Press.

Fergusson, L, A Ibáñez and J Riaño (2020), “Conflict, Educational Attainment, and Structural Transformation: La Violencia in Colombia,” Economic Development and Cultural Change 69(1): 335–371

Miguel, E and G Roland (2011), “The Long-Run Impact of Bombing Vietnam,” Journal of Development Economics 96(1): 1–15.

Riaño, J and F Valencia Caicedo (2020), “Collateral Damage: The Legacy of the Secret War in Laos,” CEPR Discussion Paper 15349.

Voigtländer N and H Voth (2013), “The Three Horsemen of Riches: Plague, War, and Urbanization in Early Modern Europe,” The Review of Economic Studies 80(2): 774–811.

Working Paper | No. 125 (October 2020)

David Arase

Executive Summary

• Due to China’s coronavirus lockdown, Japan’s imports from China in February 2020 fell by almost half from a year earlier. This disrupted the flow of parts to Japanese factories and goods to Japanese retail malls, which sharply affected Japan’s exports, GDP, and consumer welfare.

• The $2.2 billion fund announced on April 7 has a narrow and limited intention to restore production of critically needed goods such as medical masks, help Japanese firms seeking to relocate outside China, and mitigate accumulating supply chain risk in China which Japanese firms had been ignoring.

• This move initially appeared to be only a minor setback to warming Sino-Japanese relations.

• However, far-reaching consequences of the coronavirus pandemic have caused adjustments to Japan’s perceptions and foreign relations in such a way as to make this move part of an overall setback in Japan-China relations.

• Japan’s post-pandemic foreign policy outlook may create new opportunities for ASEAN-Japan cooperation.

Introduction

In early April 2020 as the coronavirus pandemic sharply curtailed Japan’s supply of intermediate and finished goods produced by supply chains anchored in China, Japan earmarked JPY 220 billion (USD 2.1 billion) of its emergency economic support package to help Japanese manufacturers shift production of critically needed goods from China to Japan and another JPY 23.5 billion to move production to third countries. The first package of subsidies announced on July 17 included 87 companies receiving a total of JPY 70 billion. Thirty firms will relocate production to Southeast Asia and the remaining 57 will return production to Japan. [1]

This move had been discussed and approved in principle at the March 5 meeting of the Council on Investments for the Future. [2] At this meeting, Prime Minister Shinzo Abe said, “for those products with high added value and for which we are highly dependent on a single country, we intend to relocate the production bases to Japan. Regarding products that do not fall into this category, we aim to avoid relying on a single country and diversify production bases across a number of countries, including those of the Association of Southeast Asian Nations.”

A Limited Move to De-Risk Japan’s China-Centered Supply Chains

The concern of the Council on Investments for the Future was narrowly focused on dealing with unforeseen difficulties created by the coronavirus pandemic for Japanese business and society. Global supply chain risk materialized in the losses to the Japanese economy caused by China’s coronavirus lockdown, which disrupted Japanese supply chains in China and caused a shortage of critically needed medicines and protective medical gear sourced from China, highlighting the overdependence on China.

Leaving aside the sudden impact of the coronavirus, which led to a nationwide lockdown that caused as many as 205 million Chinese jobs being lost, [3] there were already other longer-term economic risks facing Japanese firms in China. These included reduced exports due to the U.S.-China trade war and slowing global GDP and trade growth, which put at greater risk a Chinese economy overburdened by debt. At the same time, the cost of production in China was rising due to higher wage demands and tightening environmental regulation.

Until the pandemic hit, Japanese firms operating supply chains in China were uncertain about what to expect and took a wait-and-see attitude. But by February 2020, prospects for the Phase One trade deal signed with the United States in January were already in doubt when the pandemic’s enormous negative impact became apparent. A February survey of 2,600 Japanese firms in China found that 37 percent were looking outside China for suppliers. [4] A Japan Chamber of Commerce and Industry survey published in April found that of 8,852 Japanese firms in China, 7.1 percent wanted to scale down or withdraw. [5]

Nevertheless, Abe’s $2.2 billion initiative by no means meant that corporate Japan had an intention to de-couple from the Chinese economy. The above-mentioned survey also found that 40.1 percent of Japanese firms were willing to expand their Chinese operations. China had become Japan’s largest trade partner, and Japanese investment in China no longer used it primarily as an export platform. Most Japanese firms were now geared to serve China’s growing need for industrial and consumer goods especially in areas like software, telecoms, wholesale and food. According to the Japanese government, the average proportion of Japanese factory production in China that was sold as exports in 2019 was only 32.5 percent (JETRO). [6] And as Chinese consumers gained disposable income, Japanese retailers and service industries stood to join Japanese manufacturers doing good business in China. But reconciling corporate Japan’s interests with Japan’s broader geopolitical and political interests in an era of rising strategic tension is proving to be a vexing issue.

Impact on the Broader Bilateral Relationship

Abe did not wish his supply chain initiative, which targeted Japan’s export-oriented investment in China to affect a hoped-for bilateral political rapprochement that began in May 2018 when prime minister Li Keqiang visited Tokyo. The U.S.-China trade war had begun in March and Li visited Tokyo in May to entice Japan with new trade and investment opportunities as China’s economic relationship with the United States soured. Li was received cordially by Prime Minister Shinzo Abe, who was keen to calm Japan’s territorial conflict with China; establish strategic stability and cooperation; expand access to the growing Chinese economy; partner with China to promote regional stability and prosperity (within the framework of the U.S.-Japan alliance); and develop a sound political relationship. Li invited Abe to visit Beijing to discuss a normalization of bilateral relations. [7]

Japan has relied on positive economic engagement with China to cultivate friendship and enhance mutually beneficial relations. But the resulting bilateral relationship is narrowly based on China’s need for Japanese capital, goods, and technology, which is diminishing over time as China works to eliminate dependence on the advanced western economies. Meanwhile, China’s political and strategic animosity directed against Japan due to historical grievances and Japan’s alliance with the United States continues unabated as evidenced by increasing military maneuvering in and around the Japanese islands. [8]

A ‘New Era’ of Bilateral Collaboration?

Abe visited Beijing in October 2018 where he met President Xi Jinping and offered him a state visit to Japan. Abe vowed to work for a “new era” of “collaboration not competition” in bilateral ties that was to be inaugurated by agreements signed during Xi Jinping’s visit to Tokyo in April 2020. [9] Abe also “raised pending problems directly with President Xi,” a reference to Japanese citizens recently arrested for espionage in China as well as continuing intrusions by Chinese vessels into waters surrounding the Senkaku/Diaoyu Islands. [10]

After returning to Tokyo, Abe was eager to make the impending Xi state visit a success and ignored escalating Chinese intrusions into waters immediately surrounding the Senkaku/Diaoyu Islands. Japan’s coast guard reported that from January to mid-December 2019, Chinese government vessels intruded 1,021 times—far exceeding the previous record of 819 set in 2013—and entered the Japanese-administered islands territorial waters a record-setting 112 times. [11] To register this rising geopolitical risk, Japanese Defense Minister Taro Kono said that Japan “cannot overlook” the frequent violations of Japanese territorial waters, and that China needed to “work hard” to improve the situation “otherwise we may find a difficult environment for the visit.” [12]

To curry favor with China, Abe continued to allow visitors from China (except those originating in Wuhan) to enter Japan without quarantine restrictions after China began lockdown measures on January 23. This policy elicited mounting domestic criticism for the risk this posed to public health in Japan. Despite calls as early as February 2020 by his own Liberal Democratic Party’s members and by opposition parties (including the Japanese Communist Party) to postpone Xi’s visit due to the coronavirus, Abe remained optimistic about Xi’s state visit. [13]

Abe’s attitude was also out of step with changing Japanese perceptions of China. According to the 2019 Genron poll on mutual public perceptions, Japanese opinion toward China deteriorated with 44.8 percent saying relations were “bad”, a six percent increase from 2018; 31.8 percent thought that relations had gotten worse, an increase of 13 percent. Overall, 84.7 percent had an “unfavorable” impression of China; only 15 percent had a “favorable” impression. [14]

Abe’s effort to curry China’s favour despite mounting problems, continued until March 5, 2020, when Japan announced a trifecta of China-related initiatives. The government announced a delay in Xi’s visit due to the coronavirus pandemic. It also announced that a 14-day quarantine for all visitors from China would now be required. Finally, as discussed above, Abe announced subsidies to help Japanese firms relocate supply chains out of China.

Yet another economic de-risking move that was perceived to distance China and Japan happened on May 11, when a new law was passed to require advance notice from foreign investors that wanted more than a one percent stake in designated Japanese firms, which included over half of Japan’s listed companies. [15] The intent was to limit foreign acquisitions of strategically significant Japanese firms that became distressed or undervalued due to the economic fallout of the pandemic. It did not specifically target China, but efforts by Chinese state-owned and state-backed enterprises and investment funds to acquire ownership in strategically important Japanese firms would likely be affected by it.

Xi Visit Eventually Derailed and a “New Era” Postponed

From March into April 2020, the world responded politically to China’s flawed early handling of the coronavirus and its use of the World Health Organization (WHO) to manage perceptions during the global spread of the disease. WHO came under widespread criticism including in Japan where Deputy Prime Minister Taro Aso said that it should be called the “Chinese Health Organization.” [16] In May, China’s reliance on “wolf warrior” diplomacy to create a praiseworthy image of Beijing’s role during the pandemic led the Japan Times on May 26 to publish an op-ed entitled, ‘China is its own worst enemy.’ [17] Then on May 28, China’s National People’s Congress called on its Standing Committee to draft national security legislation for Hong Kong that would “outlaw acts of secession, subversion, terrorism and conspiracy with external forces in Hong Kong,” and would allow mainland security agencies to operate as necessary to enforce the law. [18] The next day, two LDP policy forums devoted to foreign affairs sent letters to Abe asking him to cancel Xi’s visit and resist China’s proposed national security legislation for Hong Kong. [19]

Geopolitically, the focus was also on China as it moved aggressively around its contested South Asian and East Asian peripheries. China sank a Vietnamese fishing vessel on April 8; operated an ocean survey vessel from mid-April to mid-May inside Malaysia’s EEZ; on April 18-19, it claimed the Paracel and Spratly islands as administrative districts and named some 80 contested land features in the Spratly Islands. Along the Sino-Indian border, Indian and Chinese soldiers engaged in physical fighting in Ladakh on May 5 and May 9, which culminated in extended hand-to-hand combat on June 15 that led to the death of 20 Indian troops. On May 10, two Chinese coast guard ships entered Japanese-administered territorial waters of the Senkaku (Diaoyu) Islands and ordered a Japanese fishing vessel to leave the area. [20] In mid-May, China began large-scale naval military exercises that reportedly will involve both of China’s aircraft carriers and include a simulated takeover of Taiwan-administered Pratas Island. [21] And on May 29, Li Zuocheng, chief of the Joint Staff Department and member of the Central Military Commission, said that China would “take all necessary steps to resolutely smash any separatist plots or actions" in Taiwan. [22]

On June 4, a date pregnant with meaning for those engaged with China, the Japanese government reported that it had ceased preparations for Xi’s state visit. [23] Then days later, on June 10, Abe announced that, in light of the need to uphold democracy and human rights as well as lead global opinion, he would draft a statement to be issued by the G-7 nations asking China to reconsider its proposed Hong Kong national security legislation. [24] The G7 issued the statement on June 17, which expressed “grave concern regarding China’s decision to impose a national security law on Hong Kong” because it “would curtail and threaten the fundamental rights and freedoms of all the population protected by the rule of law and the existence of an independent justice system.” [25] With over 1,400 Japanese firms operating in Hong Kong, Japan also has a substantial economic stake in preserving the status quo there.

On June 30, the day that China’s Standing Committee of the National People’s Congress passed the National Security Law for Hong Kong, Japanese Defense Minister Taro Kono warned China that “it will significantly affect President Xi Jinping's state visit to Japan,” preparations for which had been suspended although the trip itself had not been officially called off. [26]

Abe likely was reluctant to voice criticisms that China would almost certainly view as insults. But political and geopolitical developments concerning China greatly changed the domestic and international political atmosphere to make it difficult for Abe to sustain his attempted bilateral rapprochement with China.

Unfortunately, as desirable and beneficial to both sides as better bilateral relations may be, the Japan-China relationship is entangled with wider economic, political, and social circumstances that condition Japan’s economic engagement with China. Japan and China are discovering that, despite their best efforts, deepening their bilateral economic engagement is difficult to realize in a world of worsening geopolitical, ideological, economic, and societal divisions.

Implications for Southeast Asia

As Japan becomes more proactive in looking for ways to reduce overdependence on the Chinese economy and maintain the status quo in regional and global governance, it will naturally look to enhance engagement and cooperation with ASEAN members that share these concerns. Certainly, with respect to supply chain diversification out of China, Japan can be expected to look favorably upon ASEAN member plans to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) or to initiate infrastructure investment focused ASEAN-Japan discussions to enhance ASEAN’s attractiveness as an integrated platform for Indo-Pacific supply chains.

In the area of maritime security and regional governance under the rules-based order, Japan undoubtedly welcomed the Chairman’s Statement of the 36th ASEAN Summit held in late June, which reaffirmed ASEAN’s commitment to “the peaceful resolution of disputes, including full respect for legal and diplomatic processes, without resorting to the threat or use of force, in accordance with the universally recognized principles of international law, including the 1982 United Nations Convention on the Law of the Sea (UNCLOS);” and, “stressed the importance of maintaining and promoting peace, security, stability, safety and freedom of navigation in and overflight above the South China Sea.” It would be in Japan’s interest to support and enhance ASEAN leadership in these areas.

Finally, in the post-COVID-19 world, enhanced ASEAN-Japan non-traditional security cooperation to prevent and manage future epidemics could and should be an important new initiative.

NOTES

[1]"Japan Reveals 87 Projects Eligible for 'China Exit' Subsidies." Nikkei Asian Review, Jul 17, 2020. [Return to Text]

[2]"Council on Investments for the Future Cabinet." Cabinet Office of Japan, March 5, 2020. [Return to Text]

[3]"Coronavirus: China's unemployment crisis mounts, but nobody knows true number of jobless." South China Morning Post, April 4, 2020. [Return to Text] [Return to Text]

[4]"Japan Sets Aside ¥243.5 Billion to Help Firms Shift Production Out of China." The Japan Times, April 9, 2020. [Return to Text]

[5]Reynolds, Isabel and Emi Urabe. "Japan to Fund Firms to Shift Production Out of China." Bloomberg, April 8, 2020. [Return to Text]

[6]"Results of JETRO's 2019 Survey on Business Conditions of Japanese Companies in Asia and Oceania." Japan External Trade Organization (JETRO), February 13, 2020.< [Return to Text]

[7]Huang, Kristin."China, Japan mark 40th anniversary of peace and friendship treaty." South China Morning Post, August 12, 2018. [Return to Text]

[8]"Japan Ministry of Defense White Paper 2019." pp. 71-74, Japan Ministry of Defense, 2019. [Return to Text]

[9] "Japan, China Vow to Promote New Economic Cooperation Amid Trade War." Kyodo News, October 26, 2018. [Return to Text]

[10]Nagai, Oki. "Japan's Once-a-Decade Mind Games with China Over Top Leader Visit." Nikkei Asian Review, Jan 27, 2020. [Return to Text]

[11]Akiyama, Hiroyuki. "Ahead of Xi's Visit, Japan Troubled by Senkaku Incursions." Nikkei Asian Review, Dec 13, 2019. [Return to Text]

[12]"Japanese Defence Chief Taro Kono Warns China Over Disputed Islands: Respect International Norms Or ‘pay the Cost.'" South China Morning Post, Jan 15, 2020.
"Japan should Reconsider State Visit by China's Xi: LDP Lawmakers." Kyodo News, May 29, 2020.[Return to Text]

[13] "Calls Grow to Postpone Xi’s April Visit to Japan." Asia News Network, Feb 2, 2020. [Return to Text]

[14]The Japan-China Joint Opinion Survey 2019" The Genron NPO, Oct 24, 2019. [Return to Text]

[15]Reidy, Gearoid and Shoko Oda."Japan Moves to Limit Foreign Investment in Half of Listed Firms." The Japan Times, May 11, 2020. [Return to Text]

[16]Hernández, Javier C. "Trump Slammed the W.H.O. Over Coronavirus. He’s Not Alone." New York Times, Apr 8, 2020. [Return to Text]

[17]Chellaney, Brahma. "China is its Own Worst Enemy." The Japan Times, May 26, 2020 [Return to Text]

[18]"Security Law to Aid Confidence in Hong Kong." China Daily, May 28, 2020. [Return to Text]
Buckley, Chris. "Hong Kong Opens Door to China's Hulking Security State." New York Times, Jul 2, 2020.

[19]"Japan Warns China's Move on H.K. Law would Affect Xi's Visit." Kyodo News, Jun 30, 2020 [Return to Text]

[20]Panda, Ankit. "Japan Protests China Coast Guard Harassment of Fishing Vessel Near Senkaku Islands." Diplomat, May 11, 2020. [Return to Text]

[21]Heydarian, Richard Javad. "US, China Tensions Poised to Erupt Over Taiwan." Asia Times, May 28, 2020.
"China Launches Naval Exercise in South China Sea." Radio Free Asia, July 2, 2020
"Reagan, Nimitz Enter South China Sea as China Conducts its Own Military Exercises." Military.com, Jul 2, 2020. [Return to Text]

[22]Tian, Yew Lun. "Chinese General Threatens Attack on Taiwan to Stop Independence." Sydney Morning Herald, May 29, 2020. [Return to Text]

[23]Shigeta, Shunsuke and Tsukasa Hadano. "Xi's Japan Trip Unlikely this Year as US-China Tensions Burn." Nikkei Asian Review, Jun 6, 2020. [Return to Text]

[24]"Japan PM Abe Says G-7 Nations Eye Joint Statement on Hong Kong." The Mainichi, Jun 10, 2020 [Return to Text]

[25]"G7 Foreign Ministers' Statement on Hong Kong Media." States News Service, Jun 17, 2020. [Return to Text]

[26]"Japan Warns China's Move on H.K. Law would Affect Xi's Visit." Kyodo News, Jun 30, 2020. [Return to Text]