Bloomberg News

Obama Affirms Japan Ties as China Sea Spats Threaten Trade

November 20, 2012

Barack Obama

President Barack Obama arrives at the Peace Palace in Phnom Penh on Nov. 19, 2012. Photographer: Jewel Samad/AFP via Getty Images

President Barack Obama met with leaders from China and Japan to wrap up a three-day trip to Asia as countries in the region struggled to resolve territorial disputes that threaten to disrupt economic ties.

Obama called the U.S.-Japan alliance the “cornerstone” of regional security in a meeting with Prime Minister Yoshihiko Noda, who emphasized the importance of relations given the “increasing severity” of the security environment in Asia. Chinese Premier Wen Jiabao said he wanted his meeting with Obama to send a “positive message to the world.”

“It’s important that our two countries cooperate to build a more secure, prosperous future” for the Asia-Pacific region and the world, Obama told reporters as he began the meeting with Wen in Phnom Penh, Cambodia. “As the two largest economies in the world we have a special responsibility to lead the way in ensuring sustained and balanced growth.”

Tensions over China’s territorial claims risk disrupting commercial ties between Asia’s biggest economies as Europe’s sovereign debt crisis and the U.S. fiscal cliff threaten global growth. Japan this month said it would bolster military ties with the U.S. after its purchase of islands claimed by China rattled a $340 billion trade relationship.

‘Anchor of Stability’

“There needs to be a reduction of the tensions in the East China Sea and a process going forward, more broadly, to ensure that these types of disputes don’t risk escalation,” Ben Rhodes, White House deputy national security adviser, told reporters in Phnom Penh. “We believe that the alliance we have and the military cooperation we have with Japan has been an anchor of stability in Asia for decades, and has helped, by the way, create the context that has allowed for broader prosperity and the peaceful rise of China.”

Wen told Asian leaders that China does not want to “overemphasize” territorial disputes at international meetings, according to Fu Ying, deputy foreign minister. Wen affirmed China’s sovereignty over the Scarborough Shoal in the South China Sea and said acts to defend its sovereignty are “necessary and legitimate,” Fu told reporters in Phnom Penh.

Chinese and Philippine vessels squared off earlier this year over the Scarborough Shoal, a land feature in the South China Sea claimed by both countries. The Philippines today called for talks among claimant states.

‘Urgent and Imperative’

“At no time in the contemporary history of the South China Sea has clarification and delimitation of maritime areas become more urgent and imperative than they are now,” President Benigno Aquino said in a statement distributed in Phnom Penh.

Southeast Asian nations again sparred over handling maritime conflicts with China, reflecting divisions that surfaced in a July meeting when the Association of Southeast Asian Nations failed to release a communique for the first time ever.

“We are not going to allow the issue to cloud or to affect other pursuits that we are doing here,” Surin Pitsuwan, Asean’s secretary-general, told reporters today, referring to the island disputes. “But of course any other member states who would like to carry this issue in its own way, to pursue its own interests, those states have the right to do so.”

Noda yesterday told Asean leaders he would seek to resolve differences with China in a “calm and peaceful manner,” according to a government statement, after the countries sparred over disputed islands at a summit of European and Asian leaders in Laos earlier this month.

‘Not Good’

China has demanded that Japan withdraw from its September purchase of the islands, known as Senkaku in Japan and Diaoyu in China. Anti-Japan protests have reduced China sales at Toyota Motor Corp. (7203), Nissan Motor Co. and Honda Motor Co.

“It’s not good to be honest,” Qin Gang, a spokesman for China’s foreign ministry, told reporters today, referring to China’s relationship with Japan. “But the reason is not on China’s part.”

Southeast Asia is growing more reliant on trade with China, which is a gateway for shipments to advanced economies, according to the Organization for Economic Cooperation and Development. The euro-area economy succumbed to a recession for the second time in four years, as governments imposed tougher budget cuts and leaders struggled to contain the debt turmoil.

Asean leaders today started talks on a regional trade agreement with China, Japan, India, South Korea, Australia and New Zealand, an area with more than 3 billion people representing about a quarter of the world economy, according to data compiled by Bloomberg. China has been Asean’s largest trading partner since 2009.

Trade Accord

China, Japan and South Korea also announced the start of trade negotiations, according to the official Xinhua News Agency. The first round of talks will take place next year, it said.

Asean’s differences over handling territorial disputes emerged yesterday after the Philippines, a U.S. ally, disputed Cambodia’s assertion that the bloc agreed to limit discussion of maritime claims in the South China Sea at international forums. Cambodia hung banners hailing the country’s close ties with China on a wall outside the summit venue.

“The Philippines looks to China to set the example of wise and peace-seeking leadership,” Aquino told reporters last night. “Our region is very diverse and its harmony can easily be disrupted by sheer political, military, or economic might.”

Surveillance Ships

China has resisted talks with Asean on a legally binding code of conduct in the South China Sea, where it has deployed maritime surveillance ships to assert its territorial claims. The Philippines and Vietnam, which have awarded exploration contracts to Exxon Mobil Corp. (XOM:US), Talisman Energy Inc. (TLM) and Forum Energy Plc (FEP), reject China’s map of the sea as a basis for joint development of oil and gas.

Australian Prime Minister Julia Gillard, who also attended the meetings, called for the South China Sea disputes to be resolved according to international law.

“We are talking about an area of the world that our shipping needs to go through to take our goods to the world,” she told reporters today. “This is a very heavily used trade route for Australia and consequently what happens there in terms of maritime security is important to us.”

To contact the reporters on this story: Daniel Ten Kate in Phnom Penh at dtenkate@bloomberg.net; Margaret Talev in Phnom Penh at mtalev@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net


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