Dignity or Decline?

TOKYO – Kokka no Hinkaku, The Dignity of a State, is the title of a recent book by the Japanese mathematician Masahiko Fujiwara that has sold three million copies. Talk about the book in Japan is so fervid that the term “dignity” (hinkaku) has become a buzzword.

That Japan’s dignity is now a central issue should surprise no one. For this is a moment when Japan must chart its course – either decline or dignity – as a “state” (kokka) in relation to its giant neighbor, China.

The issue of relations with China crystallized in September, when the Japanese Coast Guard arrested the captain of a Chinese trawler after his ship hit two Japanese patrol boats near the Senkaku Islands, which are part of Japan and within its territorial waters. Tension between Japan and China – which claims the islands – immediately soared.

For many years, Japanese governments have taken a “let-sleeping-dogs-lie” approach to territorial disputes over the islands, ignoring repeated provocations by China (and Taiwan). But that ended with the election of September 2009, which ushered in the pro-China administration of Prime Minister Yukio Hatoyama.

Hatoyama was naïve enough to declare publicly his intention of turning the East China Sea into a Chinese-led “Sea of Fraternity.” He also earned the distrust of the United States, Japan’s most important ally, by advocating the relocation outside Japan of a US air base on Okinawa.

Diplomatic realism was not restored after Hatoyama’s fall from power earlier this year. Instead, his successor, Naoto Kan, continues to believe that Japan can somehow opt out of history and a turbulent region. Speaking at the United Nations plenary meeting this September, Kan said that his government seeks to achieve a “society in which human suffering is reduced a minimum.” National security is treated as a low-grade issue.

Meanwhile, China is following its own definition of “dignity,” which looks to almost everyone in Asia – other than Kan’s government – as a right to dominate. Indeed, China no longer even tries to hide its desire for hegemony in the Pacific.

China appears to have seen the standoff over the Senkaku Islands as a test of wills – a test Kan’s government failed abysmally. In retaliation for Japan’s refusal to release the trawler captain, China hinted that it might recall its ambassador from Tokyo, suspended bilateral ministerial-level exchanges, and canceled a tour to Japan for about 10,000 Chinese.

More ominously, the Chinese arrested four employees of Fujita, a Japanese construction company, on suspicion of espionage. The four were in China for a project commissioned by the Japanese government to dispose of chemical weapons abandoned by the Japanese military after World War II. Chinese officials also suggested the possibility of banning exports to Japan of rare-earth elements – raw materials crucial for many Japanese manufacturing processes – and appear to have done so informally.

Inexperienced and diplomatically inept, Kan’s administration buckled, releasing the trawler captain early. His government then sought to pin the blame on the local prosecutor who had formally arrested the captain. This display of weak-kneed diplomacy appalled many Japanese, and popular support for Kan’s administration has plummeted.

The de facto export ban on rare-earth elements – often referred to as “industrial vitamins” – struck a terrible blow to Japanese companies, which rely on China for 97% of their supply. Among a variety of rare-earth elements, neodymium and dysprosium are widely used as a magnetic material for motors in environmentally friendly vehicles and home appliances, while erbium is used as a dopant in optical fibers and cerium as an abrasive for polishing liquid crystal display (LCD) glass.

The “rare-earth threat” is not confined to Japan, as China accounts for over 90% of the world’s production, roughly 120,000 tons. But this shouldn’t be a threat at all, because the world has ample reserves of these elements. Indeed, rare-earth elements are “rare” only in the sense that they are distributed in small quantities and must be extracted from ores, a time-consuming process. Rare-earth mines are found throughout the world. China dominates the global market simply because it has fairly abundant rare-earth ores close to the surface.

Of course, China also has abundant cheap labor to process ore. Rare-earth ores in southern China – all except for those in Inner Mongolia – contain radioactive substances that pose significant threats to human health and the environment. Other countries might worry about the health risk to workers in rare-earth processing, but that does not appear to be true of China.

In the face of aggressive price cutting by Chinese rare-earth producers, many mines in the US and elsewhere in the world were shut down over the years. Even before the trawler incident, China was trying to regulate rare-earths, defining them as a strategic resource. Chinese officials say that concern over the overexploitation and illicit export of rare earths prompted them to regulate the industry more closely. But this regulation, when combined with China’s aggressive pricing, suggests a desire to assert monopoly control, and the de facto ban of rare-earth exports to Japan looks like an effort to test the benefits of this looming monopoly.

China’s move, however, put the rest of the world on alert. Many countries are now planning to develop their own or alternative sources of rare-earth elements, and to accelerate efforts to develop technologies that are free of them.

But China has another motive for tightening the noose on rare-earth exports: it wants to force high-tech firms to operate in China, so that local companies can absorb their technologies. A senior official of a Chinese company has said that, even though rare-earth exports have been restricted, Japanese companies can secure their supply by launching operations in China.

If there is a response to such blackmail that could preserve Japan’s dignity, the Kan government is unlikely to find it.

Yuriko Koike, Japan’s former Minister of Defense and National Security Adviser, is now Chairman of the Executive Council of the Liberal Democratic Party.

Copyright: Project Syndicate, 2010.
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