Great Power Competition and Middle Power Strategies

This book addresses economic statecraft by middle powers in the context of geoeconomic competition in the Indo-Pacific, exploring both the theoretical and thematic contours of this concept and issue-specific dynamics in the areas of finance, trade, shipping, energy, and technology competition. Contributors focus on the impact of renewed great power competition between Washington and Beijing in the Indo-Pacific region, particularly regarding middle power economic statecraft strategies.

This paper draws on an institutional typology to systematically compare China’s Belt and Road Initiative and the US-led Build Back Better World (B3W) by examining institutional strength, actor scope, geography, partner size, sectoral coverage, nature, and aggregate monetary value. I argue that, in contrast to orthodox institutions that are bodies of multilateral or minilateral arrangements with binding rules and procedures, both the Chinese and US initiatives are pseudo institutions. The analysis finds that both the Belt and Road Initiative and the Build Back Better World are global liberalizing initiatives, and all countries are welcome to join, but their institutional strength is weak, and their partner size has been small. For sectoral coverage and aggregate monetary value, the Chinese initiative surpasses the US-centric one. In addition, both initiatives operate as hub-and-spoke arrangements.

Since the beginning of the 2000s, the involvement of great powers in international organizations has leveled off, and perhaps even declined. This has created space for middle power states to increasingly leverage their burgeoning economies and bolster their international status. In recent years, middle powers have begun to create institutions independently, without the immediate accession of great power states. Therefore, this paper will utilize case studies of the CPTPP and DEPA to understand how middle powers design institutions differently than great power states because of their unique goals and interests in the international system.

The European Union (EU) is determined to play an active role as one unified power on the world stage today. However, to have one common voice facing the world is not an easy task for the European bloc. While the making of an autonomous geopolitical actor is struggling, it is not the case with the EU’s trade policy. As a traditionally strong trade actor in the world, the EU has set its eyes on Asia for finding partners as it launches the new generation of free trade agreements since 2006. Traditionally, Indo-Pacific is an area where the United States and China enjoy a preeminent position for historic reasons. The new power dynamic of US-China competition, however, makes the region at the heart of geo-economic tensions and gives the EU a more relevant role in the midst of this new geo-economic competition. The inquiry of this research starts here. This paper begins with examining the methods of EU’s geo-economic strategy, reflected in its current external policies in the Indo-Pacific. Then it focuses on the three main policy fields where the EU is most visible in the region and recalibrates the latest development of EU’s multilevel governance system in these policy fields. This paper argues that the unique way of common policy-making of the EU affects its international actorness and how the EU’s multilevel governance works in different policy areas that would hinder or support the strategic autonomy of the EU. Finally, it depicts how the EU navigates the geo-economic tensions in the Indo-Pacific by using this strategy and analyzes how principled pragmatism is maneuvered in this context.

This chapter examines the sources and pressures of infrastructure investment in the Global South in the context of privatization of development finance in the post-global financial crisis world. As a geoeconomic challenge against China’s developmentalist infrastructure “big push” through its Belt-and-Road Initiative, the Japanese government has advocated “quality infrastructure.” Other OECD governments have also emphasized bankable infrastructure projects with the hope that such emphasis on quality will invite institutional investors to infrastructure financing and mobilize their resources through a public-private partnership. By examining contrasting financing features and risk considerations of infrastructure financing between China and Japan, the chapter illustrates the motivation and difficulty of such efforts, where quantity versus quality competition among the financial suppliers of infrastructure investment plays a vital role.

Over the past decade, China Ocean Shipping Company (COSCO) has become a major player in the domestic market and has expanded its role in global shipping alliances. Through policy interventions, the Chinese government has supported COSCO’s growth, allowing the company to benefit from port expansions, export surges, and the Belt and Road Initiative. This has increased China’s importance in regional and global container shipping traffic, giving COSCO an advantage in negotiating maritime routes and managing costs. In turn, COSCO has provided Beijing with leverage to protect Chinese export interests from trade measures and market disruptions. This case study highlights the importance of state-corporate relations in changing national competitiveness at regional and global levels. However, it also reveals the challenges in achieving geopolitical aims through economic statecraft, as Beijing has struggled to counter shipping oligopolies’ push for higher freight costs and plan for the long-term sustainability of Chinese fleets.

This paper analyzes the emergence of Korea’s economic statecraft based on strategic ambiguity in the context of such complex changes. First, I examine Korea’s attempt to strengthen cooperation with Southeast Asia as a regional strategy, especially in the case of the intensification of strategic competition between the United States and China at the regional level. Second, in the process of restructuring the supply chain, I explore how Korea has strengthened its cooperation with the United States while gradually diversifying the existing supply chain from China. Third, I reexamine Korea’s efforts to expand cooperation with like-minded countries based on the Korea-US alliance.

The escalating competition among great powers has disrupted the global political and economic order. While most nations recognize their limited ability to influence global politics, Vietnam has emerged as a regional middle power with potential to play a niche role in regional geopolitics through its bamboo diplomacy. The use of bamboo, a fast-growing, slender grass that is resilient against strong winds, serves as a metaphor for Vietnam’s foreign policy, which seeks to combine firmness in principles with flexibility in tactics. In this paper, we propose a three-force framework to explain the rationale behind the bamboo policy in the new world geopolitical context. This framework considers Vietnam’s spatial proximity to a great power, kinship heritage with competing powers, and opportune external factors that have propelled the nation onto the world stage. Using the concepts of organized hypocrisy, paradox in social choice, and axiomatic integrity, we analyze the viability and sustainability of the bamboo diplomacy. Ultimately, we explore whether Vietnam’s statecraft could serve as a viable pilot model for emerging regional middle powers.

The growing awareness of data’s importance for economic growth has prompted many countries, especially developed ones, to establish a free, open, and rules-based environment for digital trade. In contrast, many emerging countries, particularly China, have pursued protectionist measures for economic and national security reasons. The condition of differing approaches to data governance is consequently posing many challenges in the international society. Although the WTO has made several attempts to establish multilateral rules for digital trade, there are few rules governing the data. As a result, digital trade rules have been adopted regionally or bilaterally through free trade agreements (FTAs). One of the most innovative digital trade rules was adopted by the Trans-Pacific Partnership (TPP). After the United States’ withdrawal from the TPP, Japan led the remaining TPP members to establish the Comprehensive and Progressive Agreement on Trans-Pacific Partnership (CPTPP) with the support of other middle powers, such as Australia. The United States has recently sought to establish a new digital trade framework in the Indo-Pacific with middle power countries, like Japan and Australia. In light of these developments, we analyze the possible roles of Japan to contribute to the establishment of multilateral and regional digital trade rules by considering the following questions: (1) how do developed countries perceive data protectionism in emerging countries, especially China, and how have they responded; (2) how and why can middle powers like Japan take the initiative to form multilateral and regional digital trade rules with like-minded major powers, such as the United States and the EU, in response to US-China geoeconomic competition; and (3) what are effective strategies for Japan to facilitate discussions about establishing a multilateral digital trade rule. This paper analyzes the reasons for the different approaches and emphasizes that Japan, which has established pioneering digital trade rules, should strive to formulate rules for digital trade through various international organizations.

In an increasingly competitive geo-economic and geo-energy landscape in the Indo-Pacific, South Korea’s Moon Jae-in government (May 2017–May 2022) attempted to achieve energy security and safety at the same time by accelerating renewables while phasing out nuclear energy. During his tenure, President Moon pushed forward his ambitious plan to promote renewable energy and energy transition. He set the 20 percent target for renewable energy’s share by 2030, thus marking a sudden departure from his predecessors’ cautious and conservative approach to renewables. Concurrently, his government launched a controversial policy to phase out nuclear power over a period of four decades. South Korea’s pro-renewables and anti-nuclear energy policy has been determined not by science but by ideology, riddled with political and financial scandals. In a dramatic turn of event, the new Yoon Suk-yeol government has promised to reverse Moon’s nuclear-free promises, reflecting the dire need to address energy trilemma challenges and meet geo-economic goals. This chapter concludes that the direction of South Korea’s carbon-neutral energy policy is right in the context of global campaign for clean energy and climate action, but its energy transition needs to be depoliticized and its speed adjusted.