Seas of Opportunity and Tension: Free Trade and Alliances in the Indo-Pacific

The term Indo-Pacific region, first coined by Gurpreet Khurana, executive director of the National Maritime Foundation in New Delhi, in 2010, refers to the geographical area stretching between China and the United States, mainly encompassing the Pacific Ocean, including a portion of the Indian Ocean. This relatively new term highlights India’s ambitions to become a regional and global power, shifting attention away from its neighbor, China. A country with which it maintains a territorial dispute and competition on economic, technological, financial, and military levels. 

This zone comprises several countries and is one of the areas where various powers maintain interest and seek to expand their spheres of influence. Consequently, this zone concentrates on average 60 percent of the world’s GDP and 50 percent of international trade. Both China and the United States are promoting the “Sea Dominance” Theory, better known as the “Mahan” theory, which argues that control of sea routes is essential for the economic growth and political power of a nation aspiring to be or remain a global power. Today, dominion over the seas, with particular emphasis on the places where international trade routes run, is of utmost importance as it allows control of the flow of goods and money in the world. 

Analyzing the economic context, as of 2022, the leading economic powers of the Indo-Pacific region by current GDP volume, according to World Bank data, are China ($17.96 trillion), Japan ($5.01 trillion), India ($3.39 trillion), Australia ($1.67 trillion) and South Korea ($1.66 trillion). These countries have strong trade ties among themselves. It’s worth noting that free trade plays a vital role in providing inputs for the production chain in these countries, where China is the most significant actor due to its productive capacity and the potential of its technically trained human capital, developed since the early 90s. 

While there are growing border tensions among the region’s countries in the face of China’s growing power, they also maintain strong trade ties. For instance, Japan is the second economy in the area. As of 2022, it exports 19.4 percent of its goods to China and imports 21 percent of goods and services, making it its primary customer and supplier. This case is replicated by South Korea, which exports 25.3 percent and imports 22.5 percent of its goods from China. The issue in Australia is similar. It exports 23 percent and imports 32 percent of its goods from China. However, India presents a different scenario, as the United States represents its leading trading partner. This is because 17.7 percent of its goods are exported to the USA, and only 3.3 percent are sold in China. Contrary to its supplies, given that 14 percent of these are of Chinese origin. 

According to the “Doctrine of Trade for Peace“, free trade is essential to avoid war conflicts due to the economic and social costs they entail. If so, the countries of the Indo-Pacific region would not have sufficient incentives to enter a scenario of armed conflict. However, this situation is nuanced when observing China’s expansionist policy with hegemonic desires. Due to this situation and to balance the scales, countries like India, Japan, Australia, South Korea, etc. promote alliance policies and companionship, with the USA very interested in encouraging them to curb the rapid rise of China as the world’s second power. 

In conclusion, the Indo-Pacific region is a geopolitically important and economically active area, with countries maintaining strong trade ties. Despite the tensions and competitions in territorial, economic, technological, and military fields, the countries of the region recognize the importance of free trade as a tool to promote stability and prevent armed conflicts, following the “Doctrine of Trade for Peace”. The term “Indo-Pacific” highlights India’s ambitions to become a regional and global power, which has generated greater competition for influence between the United States and China. Given that this region constitutes a considerable portion of the global Gross Domestic Product and international trade, controlling maritime routes becomes an essential element to boost economic growth and consolidate political power. 

Despite the differences and tensions among the countries in the region, economic cooperation and alliances are strategic to balance power and avoid conflicts. Countries like India, Japan, Australia, and South Korea are interested in promoting economic freedom, free trade, and cooperation. If China’s rise wants to be peaceful, that should also be its agenda.

* Erick R. Vilca Espejo is a highly trained and results-oriented Peruvian economist with extensive experience in economic, social, political analysis and strategic decision-making related to public management and territorial development. He is currently an Intern at Fundación Internacional Bases. 

Source: We Are Innovation