Rethinking U.S. Strategy in the Pacific Islands

In the wake of Vice President Pence’s October 4 speech at the Hudson Institute on relations between the United States and China, little mention has been made of the Pacific Islands, an area long overlooked in Washington and a recent focus of Chinese attention.

Although China is currently setting the pace of the “great game” playing out in the Indo-Pacific, it still has a long way to go before it challenges U.S. regional supremacy. The United States has time to call the play, and it remains by far and away the “indispensable nation,” but complacency is a luxury that Washington currently doesn’t have.

China talks up a big game and understands the value of perpetrating a mythology of its inevitable dominance. It is an attractive and reasonably plausible message. But in this context, it is important to understand China’s endgame—to be the Indo-Pacific’s paramount political, military, and economic power. 

Essentially, China seeks to ease the United States out of the door, deadbolt it, and make sure it doesn’t come back. To this end, China is utilizing all the tools in the statecraft toolkit. It deploys anti-ship and surface-to-air missile systems on its artificial islands, bullies the United States and allied ships on the high seas, splashes around cheap money, and dictates to foreign airlines how they should refer to Taiwan. 

Across much of the Indo-Pacific, China currently sets the tone of the game. Critically, the United States does not. Washington needs a win. Accordingly, the United States should look to the Pacific Islands as a strategic opportunity to push back.

The Pacific Islands certainly doesn’t top China’s strategic agenda. But China does view the Pacific Islands as a test of U.S. resolve in its quest to displace the broader regional U.S.-led rules-based order.

China’s method in the Pacific Islands is a familiar one. It courts Pacific Island nations through loans to fund jointly developed infrastructure projects, not unlike its One Belt, One Road approach—an enticing prospect for economically less developed countries that have long felt marginalized by large outside powers. Best of all, the Chinese money comes with next to no transparency, governance, or environmental caveats.

But the Chinese money is a loan, with big strings attached. As the Lowy Institute’s Philippa Brant has noted in 2015, since 2006, 80 percent of Chinese aid to the Pacific Islands has been in the form of these loans—which has caused a debt balance on highly favorable terms to China. When countries are unable to pay the terms of the interest on these loans, China then justifies claims to infrastructure like ports, natural resources, or territory—"debt trap diplomacy.” 

In the Pacific Islands, while the United States, Japan, and Australia provide an aid and development-based model, China offers an attractive alternative state-controlled aid and investment option, which promises rapid delivery, few regulatory conditions, and significantly, partnership with a major strategic power.

The western aid and development model anticipates figurative debts of gratitude, while China’s approach includes literal economic debts that can yield new political ones. If the

debt is serviced, China profits economically; if it’s not paid, China wins strategically. It’s a Chinese win-win scenario.

Against this model, regional powers like Australia, Japan, and New Zealand believe their influence has been diluted. They are right to worry.

Take Vanuatu as an example. Even though Australia remains the largest donor in Vanuatu (and indeed in the Pacific Islands region), Vanuatu has just signed on to a new $100 million port project with China at Luganville. This area was the site of the second largest U.S. military base in the Pacific during World War II.

Both China and Vanuatu deny their deal involves construction of a Chinese military base. But the possible strategic implications of a failure by Vanuatu to repay its Chinese debt are obvious—with unfettered access to a port strategically located between Australia and Hawaii. 

In Sri Lanka and Djibouti, China has used the same loan shark playbook to maximum effect, recently gaining control over port facilities after both countries defaulted on their loans. China then subsequently opened a naval base in Djibouti in August 2017. 

So how should the United States respond in the Pacific Islands?

First, be bold. We need to stop seeing China as 12 feet tall. It’s not.

The Pacific Islands is not the central front in pushing back on China; it is a soft underbelly. But neither is the South Pacific region strategically benign as United States planners have long believed.

A Pacific Islands strategy should, in the main, seek to ensure Pacific nations retain their sovereignty, while providing an economic framework that meets their needs for prosperity, security, and stability. But it also should serve to demonstrate U.S. strength, values, and purpose.

For planners, the “free and open Pacific” model must remain as the United States’ endgame. The United States should not compromise the values for which it has long stood—individual freedom, the rule of law, the primacy of the free market and transparency and accountability.

At every opportunity, and at every level, United States leaders should call out China for its mercantilist approach to the region and highlight the inevitable debt and sovereign loss under the Chinese model. The United States and Chinese models are not the same. The United States should be more strident in making the difference pointed.

More senior attention is absolutely required. Ideally, President Trump should have taken the opportunity to visit the region for the Asia -Pacific Economic Cooperation (APEC) and Association of Southeast Asian Nations (ASEAN) leaders meetings next month. By skipping the summits with regional leaders, U.S. leadership and commitment will remain an open question. Either way, regional leaders will continue to hedge against United States leadership and commitment. China knows this.

There is no doubt that Vice President Pence will do a fine job representing the United States at both meetings. But, the president of the United States is the president of the United States. On the back of the trade war, the recent U.S. Navy Taiwan strait warship transit and the vice president’s China speech at the Hudson Institute, Mr. Trump’s attendance would have sent the right message at the right moment.

Domestic unity and stability are also key but with a story to tell. Ongoing political instability in Australia and a fractious political environment in the United States offer China a narrative of Chinese stability to smaller Pacific nations. Western liberal democracies currently look in short supply of this.

Engage more often and more deliberately in the Pacific Islands. Washington would do well to increase naval port calls and military capacity building, demonstrating deeper United States attention to the region and at the same time further upping its development assistance—all aimed to demonstrate U.S. long-term commitment. 

To be sure, the Trump administration deserves some credit for its approach. The bipartisan passage of the Better Utilization of Investments Leading to Development Act (BUILD Act) is an important step to incentivize and increase U.S. private sector investment in emerging economies. In concert with increasing military capacity building and upping development assistance, strategies to increase private capital investment signal intent to create a mutually beneficial economic relationship and not one grounded in perceived aid-dependency.

Greater coordination of development assistance with leading Indo-Pacific partners is also needed. Deeper cooperation between India, Japan, and Australia would signal regional unity and intent. It would also act as an avenue for building on any future Quad framework between the United States, Japan, India, and Australia. U.S. leadership in realizing such an arrangement is pivotal and needed.

The U.S.-led model is still more vibrant and more fulfilling than anything else on offer. A demonstrable show of U.S. leadership and commitment to the Pacific Islands is a strategic opportunity well worth considering.

Patrick G. Buchan is a fellow with Alliances and American Leadership Project with a focus on Indo-Pacific security at the Center for Strategic and International Studies (CSIS).

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Patrick Gerard Buchan