A M A C D O N A L D - L A U R I E R I N S T I T U T E P U B L I C A T I O N

Canada and the Indo-Pacific:

Contributor,
bystander or
casualty?
Stephen R. Nagy
Hanh Nguyen
Hoang Tra Ly
Chandrika Pandit
Giovanni Catino

October 2021
BOARD OF DIRECTORS ADVISORY COUNCIL RESEARCH ADVISORY
BOARD
CHAIR John Beck
Vaughn MacLellan President and CEO, Janet Ajzenstat
DLA Piper (Canada) LLP, Toronto Aecon Enterprises Inc, Toronto Professor Emeritus of Politics,
VICE-CHAIR Aurel Braun, McMaster University
Jacquelyn Thayer Scott Professor of International Relations Brian Ferguson
COO, Airesun Global Ltd; and Political Science, University of Professor, Health Care Economics,
President Emerita, Cape Breton Toronto, Toronto University of Guelph
University, Sydney
Erin Chutter Jack Granatstein
MANAGING DIRECTOR Executive Chair, Global Energy Historian and former head of the
Brian Lee Crowley, Ottawa Metals Corporation, Vancouver Canadian War Museum
SECRETARY Navjeet (Bob) Dhillon Patrick James
Gerry Protti President and CEO, Dornsife Dean’s Professor,
Chairman, Mainstreet Equity Corp, Calgary University of Southern California
BlackSquare Inc, Calgary
Jim Dinning Rainer Knopff
TREASURER Former Treasurer of Alberta, Calgary Professor Emeritus of Politics,
Martin MacKinnon University of Calgary
Richard Fadden
Co-Founder and CEO, B4checkin,
Former National Security Advisor to Larry Martin
Halifax
the Prime Minister, Ottawa Principal, Dr. Larry Martin and
DIRECTORS Associates and Partner, Agri-Food
Brian Flemming
Wayne Critchley Management Excellence, Inc
International lawyer, writer, and
Senior Associate,
policy advisor, Halifax Christopher Sands
Global Public Affairs, Ottawa
Robert Fulford Senior Research Professor,
Blaine Favel Johns Hopkins University
Former Editor of Saturday Night
CEO, Kanata Earth Inc,
magazine, columnist with the Elliot Tepper
Cut Knife, Saskatchewan
National Post, Ottawa Senior Fellow, Norman Paterson
Colleen Mahoney School of International Affairs,
Wayne Gudbranson
Sole Principal, Carleton University
CEO, Branham Group Inc., Ottawa
Committee Digest,Toronto
Calvin Helin William Watson
Jayson Myers Associate Professor of Economics,
Aboriginal author and entrepreneur,
CEO, Jayson Myers Public Affairs Inc., McGill University
Vancouver
Aberfoyle
David Mulroney
Dan Nowlan
Former Canadian Ambassador to
Vice Chair, Investment Banking,
China, Toronto
National Bank Financial, Toronto
Peter John Nicholson
Hon. Christian Paradis
Inaugural President, Council of
Co-founder and Senior advisor,
Canadian Academies, Annapolis Royal
Global Development Solutions,
Montréal Hon. Jim Peterson
Former federal cabinet minister,
Vijay Sappani
Counsel at Fasken Martineau, Toronto
CEO, Ela Capital Inc, Toronto
Barry Sookman
Veso Sobot
Senior Partner,
Director of Corporate Affairs, IPEX
McCarthy Tétrault, Toronto
Group of Companies, Toronto
Rob Wildeboer
Executive Chairman, Martinrea
International Inc, Vaughan
Contents

Acknowledgements............................................................................................... 4

Introduction
Stephen R. Nagy..................................................................................................... 6

Middle Powers in the Indo-Pacific: Evolving Functional and

Principle-based Alignment
Stephen R. Nagy................................................................................................... 13

Canada’s Indo-Pacific Priorities: Investing in a Free and Open

Digital Economy
Stephen R. Nagy and Hanh Nguyen.............................................................. 22

Digital Connectivity in the Indo-Pacific: The Potential for Middle

Power Cooperation on 5G Technology
Stephen R. Nagy and Hanh Nguyen ............................................................ 28

Cooperative Middle Power Approaches for Infrastructure and

Connectivity Development
Stephen R. Nagy and Ly Tra Hoang.............................................................. 34

South Asia in the Indo-Pacific: Evolving Alignment for Middle

Power Security Cooperation
Stephen R. Nagy and Chandrika Pandit........................................................ 41

Safeguarding Peace and Stability through Economic Cooperation

in the Indo-Pacific Region
Stephen R. Nagy and Giovanni Catino.......................................................... 51

MLI would like to thank its partner in this project, the Konrad-Adenauer-Stiftung.
Cover photo credits:
Copyright © 2021 Macdonald-Laurier Institute. May be reproduced freely for non-profit and educational purposes.

The authors of this document have worked independently and are solely responsible
for the views presented here. The opinions are not necessarily those of the
Macdonald-Laurier Institute, its Directors or Supporters.
 Acknowldgements

T his collection of policy briefs has its roots in several Indo-Pacific related
events held in Tokyo at the Canadian and US Embassies. They include the
December 9th, 2019, “Free and Open Indo-Pacific (FOIP): Enhancing Mid-
dle Power Cooperation & Coordination” at the Canadian Embassy, the “Free
and Open Indo-Pacific: Approaches to Investment and Infrastructure” held
on April 15-16, 2019, by the Pacific Forum at the US Embassy, and the “Mari-
time Issues in the Indo-Pacific: Building a Shared Vision of ‘Free and Open,’”
hosted by the Pacific Forum, the US Embassy in Tokyo, the Yokosuka Council
on Asia-Pacific Studies, and the Center for Rule-Making Strategies at Tama
University on November 21-22, 2019.

The policy briefs that make up this collection would not have been possi-
ble without the contributions of Ms. Hạnh Nguyễn, Ms. Hoang Tra Ly, Mr.
Chandrika Pandit, Mr. Giovanni Catino, and Ms. April S. Lagrimas. Each
worked diligently to compile notes during sessions and to bring their analysis
to the collection from their own national and research perspectives. David
McDonough also deserves thanks for his editorial work in putting this collec-
tion together.

I would like to also extend my gratitude to Claude Demers, Canadian am-

bassador to the Côte d’Ivoire (former counsellor and head of the Political
and Economic Section in Tokyo) and Ambra Dickie, first secretary (Political
Section) at the Canadian embassy in Tokyo, for their support in organizing
Indo-Pacific-related events at the embassy. These events have provided an
enormous wealth of regional context to how Canada fits into the Indo-Pacif-
ic region and how regional stakeholders view Canada and concepts like an
Indo-Pacific vision. The views of experts and practitioners in the region have
been instrumental in crafting these briefs but also in building a sustained net-
work of researchers, practitioners, and policy-makers who have shared their
convergent and divergent thoughts on the region.

4 CONTRIBUTOR, BYSTANDER OR CASUALTY? | October 2021

Last, I would like to convey my support to the Japan Institute for Internation-
al Affairs, the Macdonald-Laurier Institute, the Canadian International Coun-
cil, the Asia Pacific Foundation of Canada, the East Asia Security Centre and
my colleagues throughout the region for their support and encouragement in
bringing this collection to fruition.

Stephen R. Nagy
Senior Associate Professor
International Christian University, Tokyo, Japan

Senior Fellow, Macdonald-Laurier Institute

Fellow, Canadian Global Affairs Institute
Visiting Fellow, Japan Institute for International Affairs
2018 AIF Fellow, Center for Strategic and International Studies
Distinguished Fellow (2017-2020) Asia Pacific Foundation of Canada

October 2021 | CONTRIBUTOR, BYSTANDER OR CASUALTY? 5

 Introduction
Stephen R. Nagy

I n the past several years, middle powers and major powers such as Japan
(2017), India (2019), France (2018), the Netherlands (2020), Germany (2020),
and Australia (2020) have released statements, guidelines, or visions on the
importance of the Indo-Pacific region and the policy areas that they deem
to be critical to ensuring that the region is stable, rules-based, and inclusive.

These frameworks are distinct from the US’s Indo-Pacific strategy released
by the Department of Defence in June 2019 (United States, Department of
Defense 2019) and the State Department’s report, A Free and Open Indo-Pa-
cific: Advancing a Shared Vision (United States, Department of State 2019),
released in November 2019.

The reason is simple. While American allies support aspects of the US Indo-Pa-
cific strategy, they remain reluctant to pursue their respective visions of the
Indo-Pacific through the lens of containment or with a fiercely anti-Chinese
Communist Party (CCP) perspective, as exemplified by US Secretary of State
Mike Pompeo’s July 23, 2019 speech, Communist China and the Free World’s
Future (United States Embassy and Consulates in China 2020). Moreover,
many of the states adopting Indo-Pacific visions have China as one of their
top trading partners. This is a relationship that they want to keep, though
some may wish to recalibrate it so they are less vulnerable to economic and
other forms of coercion but also to another shock to the China-centred global
production network.

6 CONTRIBUTOR, BYSTANDER OR CASUALTY? | October 2021

Why are states beginning to employ terminology that frames
the Indo-Pacific as a region? Where is Canada in this process?

There are several reasons that states are framing the wider region as “the
Indo-Pacific.” First, the region has become the centre of global economic
growth, security, and development challenges. It is home to the three of the
world’s most populous countries, the second, third, and fourth largest econ-
omies, six security alliances with the United States, numerous territorial dis-
putes, and five declared nuclear powers.

It is also home to the two biggest trading agreements, the Comprehensive

and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Re-
gional Comprehensive Economic Partnership (RCEP). The former includes
Canada as a founding member and the latter is an ASEAN-centred economic
agreement that includes all the ASEAN Plus Six members1 save India.

Trading agreements aside, the rapidly emerging middle classes throughout

the region represent a quickly expanding consumer market for goods, natu-
ral and energy resources, and agricultural products, as well as offering a key
opportunity for Canada to diversify its export destinations.

The most critical sea lines of communication are located in the South and
East China Seas (SCS and ECS) and the Indian Ocean; the potential for a
major disruption in the import and export of goods and energy resources
due to accidental or intentional conflict, a natural disaster, climate change,
or other non-traditional security challenges means that the region requires
multilateral institutions to stabilize and contribute to its development.

Simply, what happens in the region has spillover effects in the rest of the
world, including Canada. The most salient and contemporary example of this
is the COVID-19 pandemic, which emerged out of Wuhan, China, and severe-
ly disrupted global supply chains. The impact of the COVID-related shutdown
in China affected supplies of personal protective equipment (PPE), car parts,
electronics, and many other goods.

Still today, international travel for business is limited. Vaccines have not prov-
en to be a panacea for the movement of people, goods, and capital; that will
only happen when a reliable, inexpensive, and sustainable policy is adopted
to prevent the transmission of COVID-19.

Second, the existing regional order is being contested and the outcome of
that competition will have deleterious effects on both direct regional stake-

1
The ASEAN Plus Six members include ASEAN member states along with China,
Japan, and South Korea, Australia, New Zealand, and India

October 2021 | CONTRIBUTOR, BYSTANDER OR CASUALTY? 7

 holders and extra-regional stakeholders like Canada, the EU member states,
Japan, South Korea, Southeast Asian states, etc.

That contest is the second reason for turning towards the whole Indo-Pacif-
ic as a region. China’s re-emergence as the largest economy in the region
as well as its behaviour both internally and externally are drawing concern
from regional and extra-regional stakeholders. Internationally, countries
are concerned about China’s increasingly assertive behaviour along the Hi-
malayan plateau, its refusal to recognize the Permanent Court of Arbitra-
tion’s July 2016 decision rejecting China’s claims in the SCS, its building of
and militarizing artificial islands in the SCS, and its grey zone operations
in the SCS vis-à-vis the Philippines and in the ECS vis-à-vis Japan’s Senkaku
Islands.

Internationally, countries are

concerned about China’s
increasingly assertive behaviour.

This assertive behaviour has come hand-in-hand with a growing track record of
economic coercion, hostage diplomacy,2 and initiatives that are clearly aimed at
revising the regional order in favour of China and its one-party system. Signature
projects such as the Belt and Road Initiative aim to reconfigure its decades-long
integration project on terms favourable to Beijing by creating dependent eco-
nomic relationships. Closed digital systems, as embodied in China’s approach
to Internet governance, aim to foster standards and regulations that will enable
Beijing to transform itself from being a rule-taker to a rule-maker.

Meanwhile, neighbouring states are witnessing China’s hard turn towards

techno-authoritarianism (Blanchette 2020), its adoption of the controversial
National Security Law (NSL) in Hong Kong, and its establishment of “re-ed-
ucation” (Australian Strategic Policy Institute 2021) camps interning more
than one million ethnic Uyghurs. It is natural for China to be striving to be a
rule-maker while also dealing with lingering issues associated with the found-
ing of modern China (Wang 2020), but regional revisionism at the expense of
others is not. The same is true in dealing with internal threats.

2
The arrest of Michael Kovrig and Michael Spavor in December 2018 following the
arrest of Huawei Executive Meng Wanzhou follows a pattern of hostage diplomacy.
Citizens from Australia, Japan, the US, Sweden, and the UK have also been detained
in a similar manner.

8 CONTRIBUTOR, BYSTANDER OR CASUALTY? | October 2021

A transparent, rules-based approach to dealing with China’s domestic chal-
lenges would not raise the same concerns as its current hard-line approaches.
States like the UK, which has signed substantive agreements with the People’s
Republic of China (PRC), see Hong Kong’s NSL as a clear abrogation of a bilat-
eral agreement, and view the forced detainment of the Uyghurs as a cultural
genocide reminiscent of how Canada, Australia, and the US approached their
First Nations people in the past.

In this sense, the motivation for states, including Canada, to adopt frame-
works for the Indo-Pacific is driven by a concern of what an Indo-Pacific region
dominated by a Chinese state would mean for trade, human rights, security,
sovereignty, and regional and global governance. These concerns are based
on a track record.

It is proactive for states to ensure that China’s development does not reshape
the Indo-Pacific region in a manner that erodes the existing rules-based order
or marginalizes their national interests.

Concurrently, if countries hope to take full advantage of the region’s potential

and ensure that they are not bystanders or casualties to what happens here,
they will need to develop a vision for the Indo-Pacific that is based on their
national interests and material and diplomatic resources.

On May 3rd, 2021, Canada took its first steps to contributing to a free and
open Indo-Pacific region when Marc Garneau, Canada’s minister of foreign
affairs, and Motegi Toshimitsu, Japan’s minister of foreign affairs, met on the
sidelines of the G7 Foreign and Development Ministers’ meeting, in London,
England, to announce a Shared Canada-Japan Priorities Contributing to a
Free and Open Indo‑Pacific Region (Global Affairs Canada 2021).

The shared statement focused on these six areas (Global Affairs Canada
2021):

1. Rule of law

Enhance political, security, and defence cooperation to maintain and pro-

mote the rule of law in the Indo-Pacific region, including by working to-
gether to address unilateral actions that undermine regional stability and
the rules-based international maritime order based on international law,
consistent with the UN Convention on the Law of the Sea (UNCLOS), and
cooperation on the multinational initiative to address activities that violate
the UN Security Council resolutions on North Korea, such as ship-to-ship
transfers.

October 2021 | CONTRIBUTOR, BYSTANDER OR CASUALTY? 9

 2. Peacekeeping operations, peacebuilding, humanitarian
assistance, and disaster relief
Explore opportunities for further cooperation between Canada and Japan in
the area of UN peacekeeping operations, including peacekeeping capacity
building in the region, as well as in the areas of peacebuilding and human-
itarian assistance and disaster relief, making the most of the Canada-Japan
Acquisition and Cross-Servicing Agreement.

3. Health security and responding to COVID-19

Coordinate to tackle COVID-19, improve health outcomes, and strengthen

health security around the world and in the region, including by supporting
R&D and equitable access to vaccines, therapeutics, and diagnostics, and re-
inforcing the health systems of each country by advancing universal health
coverage and collaborating to mitigate biological threats.

4. Energy security

Promote the stable supply of sustainable resources to support energy security

in the Indo-Pacific region, including energy projects between Canada and
Japan, such as the LNG Canada project.

5. Free trade promotion and trade agreement implementation

Welcoming the success of the CPTPP, continue to steadily implement and

work to expand the CPTPP. Continue to support the rules-based multilateral
trading system and advance WTO reform. Share best practices on the promo-
tion of micro-, small-, and medium-sized enterprises (MSMEs) and inclusive
trade, including women entrepreneurship, capacity building of developing
countries and supply chain resilience.

6. Environment and climate change

Promote cooperation on climate change and the environment in the region,

with special attention to the Pacific Island countries to help improve their
economic development, promote food security and ocean sustainability, and
implement climate change mitigation and adaptation efforts, including by en-
hancing access to finance.

These six pillars of shared cooperation are important for Canada to focus
on as it seeks to inculcate itself into the Indo-Pacific region as a sustainable,
meaningful, middle-power stakeholder. Importantly, Canada is building its
role alongside Japan, one of its closest partners in the Indo-Pacific region, a
country that prioritizes rule of law, international institutions, and multilater-
alism to bring peace and stability to the region.

10 CONTRIBUTOR, BYSTANDER OR CASUALTY? | October 2021

To contribute to the development of concrete initiatives that will further en-
gage Canada in the Indo-Pacific region, this collection is structured as six
short, digestible, policy briefs meant to highlight the challenges and opportu-
nities that exist in the region for Canada and other middle powers. The views
expressed are the views of the authors and are not meant to be exhaustive;
they are meant to be constructive.

Stephen Nagy is a senior associate professor at the International Christian Uni-

versity in Tokyo, a senior fellow at the Macdonald-Laurier Institute, a fellow at the
Canadian Global Affairs Institute and a visiting fellow with the Japan Institute for
International Affairs. Twitter handle: @nagystephen1.

References
Australian Strategic Policy Institute. 2021. The Xinjiang Data Project. Austra-
lian Strategic Policy Institute. Available at https://xjdp.aspi.org.au/.

Blanchette, Jude. 2020. “Xi Jinping’s Chinese Communist Party.” East Asia
Forum, December 18. Available at https://www.eastasiaforum.org/2020/12/18/
xi-jinpings-chinese-communist-party/.

Global Affairs Canada. 2021. Shared Canada-Japan Priorities Contributing

to a Free and Open Indo‑Pacific Region. Government of Canada. Available
at https://www.canada.ca/en/global-affairs/news/2021/05/shared-canada-ja-
pan-priorities-contributing-to-a-free-and-open-indopacific-region.html.

United States Embassy and Consulates in China. 2020. Communist China and
the Free World’s Future. Speech by Michael R. Pompeo, Secretary of State, July
23. United States Embassy and Consulates in China. Available at https://china.
usembassy-china.org.cn/communist-china-and-the-free-worlds-future/.

United States, Department of Defense. 2019. Indo-Pacific Strategy Report:

Preparedness, Partnerships, and Promoting a Networked Region. Gov-
ernment of the United States, June 1. Available at https://media.defense.
gov/2019/Jul/01/2002152311/-1/-1/1/DEPARTMENT-OF-DEFENSE-INDO-PA-
CIFIC-STRATEGY-REPORT-2019.PDF.

October 2021 | CONTRIBUTOR, BYSTANDER OR CASUALTY? 11

 United States, Department of State. 2019. A Free and Open Indo-Pacific: Ad-
vancing a Shared Vision. Government of the United States, November 3.
Available at https://www.state.gov/a-free-and-open-indo-pacific-advancing-a-
shared-vision/.

Wang Gungwu. 2020. How Political Heritage and Future Progress Shape
the China Challenge. Podcast. Harvard Fairbank Center for Chinese Studies,
October 24. Available at https://podcasts.apple.com/jp/podcast/harvard-fair-
bank-center-for-chinese-studies/id1255938359?l=en&i=1000495867800.

12 CONTRIBUTOR, BYSTANDER OR CASUALTY? | October 2021

 Middle Powers in the Indo-
Pacific: Evolving Functional and
Principle-based Alignment

Stephen R. Nagy

T he future of the open, US-led, rules-based order in the Indo-Pacific is in

question for a number of reasons:

China has re-emerged as the dominant economy in the region and is

not playing by the rules. It’s economically coercing its trading partners
(Nagy 2021) and claiming sovereignty over features in the South China Sea in
breach of international law (Permanent Court of Arbitration 2016).

The United States is acting unilaterally and unpredictably. The Trump

administration firmly rejected America’s traditional leadership approach.
Questions linger as to whether the Biden administration’s tilt back to multi-
lateralism, alliances, and consultation is sustainable and enduring (Strangio
2020).

The United States’ future in the region is unclear. There are questions
about whether the US presence in the Indo-Pacific is sustainable and endur-
ing. The turn inward under the Trump administration and the COVID-19 in-
duced economic downturn have magnified these concerns (Suzuki 2020).

The deepening US-China competition is threatening to split the region-

al trading system into two: This risk is most acute in the digital economy.

October 2021 | CONTRIBUTOR, BYSTANDER OR CASUALTY? 13

 The middle powers of the region – especially US allies like Canada, Japan,
South Korea, India, and Australia – are particularly vulnerable to these dy-
namics. This vulnerability has become more pronounced as their compre-
hensive power position vis-à-vis the US and China continues to decline (Lowy
Institute 2020).

In lieu of these dynamics, a new middle power diplomacy is rising to meet the
challenges. The four facets of their response include: buttressing the rules-
based maritime order; insulating themselves against Chinese economic coer-
cion; embarking on new infrastructure initiatives; functional participation in
the Quadrilateral Security Dialogue (the Quad) on a case-by-case basis. Each
will be examined in turn.

Supporting a rules-based maritime order to hedge against

China’s assertiveness

A rules-based maritime order is particularly essential for middle powers be-

cause they rely upon agreed-upon rules to ensure that a Machiavellian “might
is right” approach to foreign affairs does not become standard practice. A
rules-based order preserves their territorial integrity, ensures open sea lanes
for the trade on which they rely, and decreases the chance of accidental inci-
dents that could spiral into regionwide conflict.

However, China is threatening that order through:

• Unilateral seizure and militarization of contested territory, particu-
larly in the South China Sea.
• Flagrant disregard for rulings from international institutions, such
as that from the Permanent Court of Arbitration, which ruled
against China in 2016 over its claims in the South China Sea.
• The use of so-called “grey zone” operations (Morris et al. 2019, 27-
42, 91-122) in both the East China Sea and the South China Sea that
threaten, seize, or erode the sovereignty claims of other countries
and the adoption of lawfare tactics (e.g., using legal weapons to go
after critics abroad) in the maritime domain (US-China Perception
Monitor 2016).

China’s behaviour is of particular concern to middle powers like Canada,

which question the future of a rules-based order when the rising state fla-
grantly disregards existing institutions and breaks promises made to other
country’s leaders.

In response, middle powers are now collaborating on ways to strengthen that

maritime order. Germany, France, the Netherlands, the US, and the EU have
also adopted an Indo-Pacific framework in part with this strategy in mind.

14 CONTRIBUTOR, BYSTANDER OR CASUALTY? | October 2021

Canada is still in the process of formulating its policy. However, during the
visit of former Japanese Prime Minister Shinzo Abe to Ottawa in 2019, Ca-
nadian Prime Minister Justin Trudeau noted that both have a “shared vision
for maintaining a free and open Indo-Pacific region based on the rule of law”
(Canada, Prime Minister of Canada 2019).

One key collaboration here, under Japan’s de facto leadership, is the vision of
a Free and Open Indo-Pacific (FOIP) (Japan, Ministry of Foreign Affairs 2021).
Key facets of the FOIP vision are relevant here:
• A focus on the rules-based maritime order. This entails a re-
newed focus on ensuring that all disputes are settled peacefully
and in accordance with international law, and ensuring that illegal
activities like piracy, terrorism, and smuggling are stamped out.
• A central role for ASEAN in upholding that order. Countries
like Indonesia, Vietnam, Malaysia, and Singapore must play a key
role in the vision.
• Promoting an open and inclusive concept. A rules-based order
requires buy-in from all parties, and Japan’s approach has contrib-
uted to the promotion of a shared vision for the region.

Some of the main initiatives undertaken under the FOIP vision include:
• Maintaining open sea lines of communication (SLOCs) involves
naval patrols through key maritime trade routes to ensure they remain
free and open. It also includes anti-piracy activities in certain areas.
• Monitoring and surveillance includes using aircraft to spot illegal
activities like the smuggling of goods (especially oil) into North
Korea in breach of UN sanctions.
• Enhancing the capacities of stakeholders is something Japan
aims to do through enhanced governance, interoperability train-
ing, and the provision of equipment such as coast guard vessels
(Nagy 2018).

These activities are clearly much broader than what is required to meet the
challenges from China. The vision is broad in part because Japan is eager
to ensure that its FOIP vision is not conflated with a “China containment
strategy” or the security-focused Indo-Pacific strategy put forth by the Trump
administration. The reason is simple: middle powers like Canada, Australia,
Japan, and other neighbours of China cannot afford to prosecute a zero-sum
approach to China because of its size, trading relationships, and critical role
in dealing with regional and global challenges.

Further, in addition to participating in the FOIP vision, middle powers are

also deepening and diversifying their security partnerships in the region. This
includes:

October 2021 | CONTRIBUTOR, BYSTANDER OR CASUALTY? 15

 • Enhancing security partnerships with the US and other middle
powers through institutions such as the Quad (a security partner-
ship comprising the US, India, Japan, and Australia). Recent exam-
ples include the Sea Dragon 21 joint exercises in which Canada
joined Quad countries in exercises around Guam in January 2021
(CTF 72 Public Affairs 2021) and the April 2021 La Pérouse naval
exercise in the Bay of Bengal in which France participated along-
side Quad members (Kashish and Dubey 2021).
• Increasing the quality and quantity of bilateral, trilateral, and
multilateral military training with a view to enhancing interoper-
ability, capacity, and presence.

Insulating themselves against Chinese economic coercion by

diversifying their economic relationships and strengthening
trade ties amongst themselves.

China has not been shy about weaponizing access to its market, upon which
many middle powers are heavily dependent. Examples include:
• Stemming the flow of tourists to South Korea after South Korea
installed the Terminal High Altitude Area Defense (THAAD) system,
a US missile defence system.
• Vandalizing and destroying Japanese businesses in mainland China
after Japan nationalized the Senkaku Islands.
• Curbing its imports from Canada, particularly canola and meat, fol-
lowing Canada’s arrest of Huawei’s Chief Financial Officer Meng
Wanzhou at the request of the United States.
• Banning imports of Australian barley, wine, and beef following Aus-
tralia’s call for an international investigation concerning the origins
of the COVID-19 pandemic.

Episodes like these have put Canada and other middle powers in the difficult
position of choosing between their security and values and their economic
prosperity.

In response, middle powers are:

• Selectively diversifying away from China and decreasing their
economic dependency on the Chinese economy. This accelerated
during the COVID-19 pandemic (Nomura 2020; Runda and Ra-
manujan 2020).
• Enmeshing themselves in multilateral trade agreements,
including the Comprehensive and Progressive Agreement for
Trans-Pacific Partnership (CPTPP), the Japan-EU Economic Partner-
ship Agreement, and the Regional Comprehensive Economic Part-

16 CONTRIBUTOR, BYSTANDER OR CASUALTY? | October 2021

 nership (RCEP). These agreements enable the middle powers to
receive the benefits of free trade but also ensure that their respec-
tive trade portfolios are diverse enough to protect them against
economic coercion by larger states.
• Engaging in middle power diplomacy to push back against hos-
tage diplomacy and economic coercion. One such example is the
Declaration of Arbitrary Detention in State-to-State Relations
(Global Affairs Canada 2021).

These free trade and diplomatic initiatives have the added benefit of inculcat-
ing stability into the region by developing thicker economic ties and promot-
ing more rapid economic development.

Multilateral middle power cooperation against states that engage in arbitrary

detention and economic coercion raises the costs for offenders.

China has not been shy about

weaponizing access to its
market, upon which many middle
powers are heavily dependent.

Embarking on new infrastructure and connectivity initiatives to

provide high quality alternatives to the BRI
China’s Belt and Road Initiative (BRI) is providing much-needed infrastruc-
ture for the Indo-Pacific region. Yet middle powers are nonetheless concerned
about several issues related to BRI projects, such as:
• transparency and sustainability;
• environmental impact;
• dilution of international standards and norms, and the potential to
lock participants into Chinese standards and norms;
• the potential to increase dependence on the Chinese economy;
and
• the potential to prop up authoritarian regimes, especially through
corruption.
Middle powers are now addressing these concerns by looking for ways to shift
regional integration away from China’s BRI-centred model. They are working
with the US and the EU to promote alternative infrastructure projects to the

October 2021 | CONTRIBUTOR, BYSTANDER OR CASUALTY? 17

 BRI – ones that stress transparency and fiscal and environmental sustainabil-
ity. Canada has a role in contributing to these initiatives. Several prominent
examples include:

• The Partnership on Sustainable Connectivity and Quality Infra-

structure between the European Union and Japan.
• The Australia-Japan-United States Trilateral Infrastructure Part-
nership.
• The Resilient Supply Chain Initiative.

• Pre-existing middle-power projects such as the Japan-Mekong

Connectivity Initiative and Australia’s Partnerships for Recovery in
ASEAN and the Southeast Asia region.

Trade and connectivity projects like these are becoming the platform by which
middle powers are converging their interests. And importantly, the US and
the EU are working effectively alongside them. Canada can and should carve
out a role in these initiatives.

Participating in the Quad on a case-by-case basis to provide

maritime and terrestrial public goods in the Indo-Pacific

The Quad is a platform through which security and other forms of maritime
and territorial public goods can be provided to the Indo-Pacific region. Can-
ada can “bolt” into Quad activities to form a Quad-plus arrangement. “Bolt-
ing-in” allows for public goods to be provided in a sustainable way, where
Canada has the capability to do so, in areas of concern. To provide a sustain-
able contribution, Canada needs to find suitable initiatives to join and lever-
age its comparative advantages. Key initiatives include:

• Participate regularly in Quad exercises, either actively or as an

observer, to buttress maritime domain awareness and to protect
SLOCs.
• Use the Quad and pre-existing partnerships in the region to con-
tribute to humanitarian assistance and disaster relief, search and
rescue, and tackle other non-traditional security challenges such as
illegal fishing, piracy, and sanctions evasion.
• Carve out a role in pre-existing infrastructure and connectivity to
provide public goods to the region, specifically, supply chain diver-
sification and health infrastructure initiatives.

Some opportunities for middle powers to build on their growing success in

the Indo-Pacific include:
• Bringing more partners into their initiatives generally. Partners
with converging interests in this crucial region can be found almost

18 CONTRIBUTOR, BYSTANDER OR CASUALTY? | October 2021

 everywhere in the world. Bringing them in helps these initiatives
reach critical mass, especially in an era where US involvement and
leadership can no longer be counted on.
• Bringing more partners into the CPTPP agreement specif-
ically. Expanding the CPTPP agreement to include South Korea,
Thailand, and the UK would enhance the ability of middle powers
to defend themselves against economic coercion. A serious case
could even be made for Taiwanese membership – based on China’s
practice of allowing “sub-state” actors to join the BRI without na-
tional governments doing so.
• Crafting more robust responses to economic coercion. Middle
powers should reach agreements to support each other when sub-
jected to economic coercion – and design the mechanisms to do so.
• Continuing to support shared standards. One facet of this is to
embrace the Japanese proposed initiative of “Free Trade and Data
Free Flow with Trust” (DFFT), which aims to set reliable and trust-
worthy rules around the flow of data.
• Better co-ordinating positions on security issues. There are
untapped opportunities for middle powers to speak and act in con-
cert on issues like the South China Sea, the East China Sea, Taiwan,
and the Korean Peninsula.

Stephen Nagy is a senior associate professor at the International Christian University

in Tokyo, a senior fellow at the Macdonald-Laurier Institute, a fellow at the Canadian
Global Affairs Institute, and a visiting fellow with the Japan Institute for International
Affairs. Twitter handle: @nagystephen1.

October 2021 | CONTRIBUTOR, BYSTANDER OR CASUALTY? 19

 References
Canada, Prime Minister of Canada. 2019. “Prime Minsiter of Canada an-
nounces closer collaboration with Japan,” April 28. Government of Canada.
Available at https://pm.gc.ca/en/news/news-releases/2019/04/28/prime-minis-
ter-canada-announces-closer-collaboration-japan.

CTF 72 Public Affairs. 2021. “Sea Dragon 2021 Kicks Off Between US and
Partner Nations.” United States, Department of Defense, Commander, U.S. 7th
Fleet, January 11. Available at https://www.c7f.navy.mil/Media/News/Display/
Article/2468589/guam-hosts-partner-nations-in-exercise-sea-dragon-2021/.

Global Affairs Canada. 2021. “Launch of Declaration Against Arbitrary Deten-

tion in State-to-State Relations.” Media Advisory, February 15. Government
of Canada. Available at https://www.canada.ca/en/global-affairs/news/2021/02/
launch-of-declaration-against-arbitrary-detention-in-state-to-state-relations.
html.

Japan, Ministry of Foreign Affairs. 2021. “Free and Open Indo-Pacific,”

April 1. Government of Japan. Available at https://www.mofa.go.jp/policy/
page25e_000278.html.

Lowy Institute. 2020. Asia Power Index 2020. Lowy Institute. Available at
https://power.lowyinstitute.org/.

Morris, Lyle J., Michael J. Mazarr, Jeffrey W. Hornung, Stephanie Pezard, Anika
Binnendijk, and Marta Keep. 2019. Gaining Competitive Advantage in the
Gray Zone: Response Options for Coercive Aggression Below the Threshold
of Major War. RAND Corporation. Available at https://www.rand.org/content/
dam/rand/pubs/research_reports/RR2900/RR2942/RAND_RR2942.pdf.

Nagy, Stephen R., 2018. “The East Asia Perspective on the Security Partnership
with Japan.” In Paul Midford & Wilhelm Vosse (eds.), Japan’s New Security
Partnerships: Beyond the Security Alliance. University of Manchester Press.

Nagy, Stephen, R. 2021. “Mitigating China’s Economic Coercion.” Japan

Times, May 21. Available at https://www.japantimes.co.jp/opinion/2020/05/21/
commentary/mitigating-chinas-economic-coercion/.

Nomura. 2020. “Diversification from China: The Push and Pull Factors: What
are the Global Implications of Diversifying from China?” Nomura, August.
Available at https://www.nomuraconnects.com/focused-thinking-posts/diver-
sification-from-china/.

20 CONTRIBUTOR, BYSTANDER OR CASUALTY? | October 2021

Parpiani, Kashish, and Mrityunjaya Dubey. 2021. “La Pérouse – Quad Naval
Exercise and India’s Strategic Partnership with France.” Observer Research
Foundation, April 4. Available at https://www.orfonline.org/expert-speak/
la-perouse-quad-naval-exercise-and-indias-strategic-partnership-with-france/.

Permanent Court of Arbitration [PCA]. 2016. “The South China Sea Arbitra-
tion (The Republic of the Philippines v. The People’s Republic of China).”
PCA Press Release, July 16. PCA. Available at https://pca-cpa.org/en/news/pca-
press-release-the-south-china-sea-arbitration-the-republic-of-the-philippines-
v-the-peoples-republic-of-china/.

Runda, Daniele F., and Sundar R. Ramanujan. 2020. Recovery with Resilience:
Diversifying Supply Chains to Reduce Risk in the Global Economy. Center
for Strategic and International Studies, September 10. Available at https://
www.csis.org/analysis/recovery-resilience-diversifying-supply-chains-re-
duce-risk-global-economy.

Strangio, Sebastian. 2020. “At Annual Summit, US Stumbles on Engagement

with Southeast Asia – Again,” The Diplomat, November 16. Available at https://
thediplomat.com/2020/11/at-annual-summit-us-stumbles-on-engagement-
with-southeast-asia-again/.

Suzuki, Hiroyuki. 2020. Japan’s Leadership Role in a Multipolar Indo-Pacific.

Center for Strategic and International Studies [CSIS], October 23. Available at
https://www.csis.org/analysis/japans-leadership-role-multipolar-indo-pacific.

Tiezzi, Shannon. 2016. “China’s Plan for Lawfare in the Maritime Domain.”
U.S.-China Perception Monitor, March 15. Available at https://uscnpm.
org/2016/03/15/chinas-plan-for-lawfare-in-the-maritime-domain/.

October 2021 | CONTRIBUTOR, BYSTANDER OR CASUALTY? 21

 Canada’s Indo-Pacific Priorities:
Investing in a Free and Open
Digital Economy

Stephen R. Nagy and Hanh Nguyen

T he digital economy is developing rapidly. The digital economy refers to

a wide range of economic activities that employ digitalized information
and knowledge as key factors of production. Information and knowledge are
collected, stored, and analysed by digital technologies such as the Internet,
cloud computing, big data, fintech, and other technologies (Asian Develop-
ment Bank 2018). The digital economy creates new types of jobs, accelerates
innovation, and encourages economic growth, but also brings about critical
socio-economic changes (Asian Development Bank 2018).

Being at the forefront of the development and regulation of the digital econ-
omy benefits Canadians. As such, Canada has an interest in investing in and
securing a free and open digital economy in the Indo-Pacific and beyond.

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership

(CPTPP), the United States-Mexico-Canada Agreement (USMCA) and the Ja-
pan-US Trade Agreement (USJTA) have chapters that address this emerging
arena of trade and innovation. Chapters on the digital economy focus include
but are not limited to (United States Trade Representative 2019):

22 CONTRIBUTOR, BYSTANDER OR CASUALTY? | October 2021

 • Prohibitions on imposing customs duties on digital products trans-
mitted electronically such as videos, music, e-books, software, and
games.

• Ensuring non-discriminatory treatment of digital products, includ-

ing tax measures.

• Ensuring barrier-free, cross-border data transfers in all sectors.

• Prohibiting data localization requirements, including for financial

service suppliers.

• Prohibiting arbitrary access to computer source code and algorithms.

• Ensuring that firms can be flexible in their use of innovative encryp-

tion technology in their products.

Concerns about the development of the digital economy include:

• Bifurcation of digital systems: The development of a closed “China-

net” with artificial intelligence capabilities might lead to the risk of
a bifurcation of digital systems: an open system led by the US and
a closed system led by China (Nagy 2019a).

• China’s promotion of “Internet sovereignty”: China advocates the

approach of “Internet sovereignty” in global Internet governance,
which prioritizes sovereign rights over freedom of information on
the Internet (Economy 2018).

The bifurcation of the digital economy has complicated implications for Indo-
Pacific stakeholders. Core concerns include:

• Disrupting global supply chains due to duplicating and local-

izing business platforms for two systems. A bifurcation of digital
systems would put additional costs and pressures on businesses
as they work to adjust their business operations and products to
accommodate the two different systems, which would in turn lead
to shifts in global supply chains (Nagy 2019b).

• Rising production costs as businesses adjust to both systems.

Duplicating and localizing business operations will increase pro-
duction costs for businesses, thus reducing consumption and eco-
nomic growth.

• The role of the Chinese government in the digital economy,

data privacy, and intellectual property protection. The ubiqui-

October 2021 | CONTRIBUTOR, BYSTANDER OR CASUALTY? 23

 tous presence of the Chinese Communist Party (CCP) in all aspects
of China’s society, including the economy, blurs the line between
public and private sectors (Blanchette 2019). Chinese legislation
such as the 2015 National Security Law and the 2017 Cyber Securi-
ty Law requires cooperation from businesses regarding national se-
curity issues, thus strengthening this concern (China Law Translate
2015; Creemers, Triolo, and Webster 2018).

Canada and like-minded countries have a deep-seated interest in investing in

a free and open digital economy in the Indo-Pacific to prevent the balkaniza-
tion of the digital economy. Canada also wants to ensure that Canadian busi-
nesses are not prejudiced by closed systems or systems that are not governed
by rule of law. Shared interests in the digital economy include:

• Promoting shared standards, rules, and good governance in

the digital economy. A shared regulatory framework in the digital
economy would reduce the cost of integration between different
systems, harmonize regulations, and stimulate innovation and eco-
nomic growth.
• Preventing the bifurcation of digital systems. Developing and
maintaining an open, rules-based digital economy at the global lev-
el is a priority for middle powers to avoid detrimental effects from
a digital iron curtain.

Using pre-existing cooperation as a springboard will be critical for Canada

as it works to be at the forefront of the digital economy’s development and
inclusive regulation. Pre-existing initiatives to add value include:

1. US-led cooperation
• Offers a comprehensive model for cooperation: crowding in fund-
ing by governments to induce private investments, rating mecha-
nism for projects, diverse partnerships
o Examples: US BUILD Act, Blue Dot Network, US-ASEAN Smart
City Partnership, US-ASEAN Cyber Policy Dialogue, US-ASEAN
Connect’s Digital Economy Series, US-Japan Policy Coopera-
tion Dialogue on the Internet Economy.
• Format: Cooperation between the private sector, US government
agencies, and third countries, with US government agencies acting
as a mediator.
• Emphasis: A market-driven, rules-based approach that supports lo-
cal and American small- and medium-sized enterprises (SMEs), and
promotes US technologies, solutions, and best practices.

24 CONTRIBUTOR, BYSTANDER OR CASUALTY? | October 2021

2. Middle powers-led cooperation
• Offers a comprehensive model of cooperation at bilateral and tri-
lateral levels: facilitating collaboration and investment, developing
rules and practices, supporting start-ups with education, training,
and capacity building.
o Examples: Japan-India Digital Partnership; Digital Economy
Partnership Agreement (DEPA) between New Zealand, Singa-
pore and Chile; Data Free Flow with Trust (DFFT).
• Cooperation initiative in data flow: a critical but contentious area.

3. Big businesses-led cooperation

• Softbank’s “smart city” proposal for Indonesia’s new capital; coop-
eration between Mitsubishi, Nomura, and Vingroup for smart city
development in Ho Chi Minh City (Vietnam).
• Initiated by big businesses without the mediating role of govern-
ment agencies.

Solutions for achieving a free and open digital economy in the Indo-Pacific
include:

• Bringing middle powers into US-led cooperation initiatives.

Creating roles for middle powers in the development of the digital
economy in ASEAN, thus strengthening the trilateral cooperation
between the US, middle powers, and ASEAN.

• Scaling up cooperation at bilateral and trilateral levels to in-

clude other countries. An example would be expanding New Zea-
land-Singapore-Chile DEPA to include other members in the CPTPP
(as New Zealand, Singapore, and Chile are already members of the
CPTPP). DEPA’s focus on digital trade and economy also comple-
ments existing rules regarding digital trade in the CPTPP.

• Develop a detailed framework and rules for Data Free Flow

with Trust. DFFT is now just a concept, but it has the potential to
bridge divisions and build trust between the US, which supports
the free flow of data to initiate innovation and economic growth,
and the EU, which opposes the free flow of personal data due to
privacy concerns (Carter and Sukumar 2019). Implementing DFFT
would require Japan to work with the US, the EU, and China to
develop a shared regulatory mechanism for the digital economy.

• Focusing on a market-driven, rules-based approach with sup-

port for local partners and SMEs. This approach ensures sus-
tainable and inclusive economic growth and development, which

October 2021 | CONTRIBUTOR, BYSTANDER OR CASUALTY? 25

 contrasts with China’s strategy of promoting state capitalism and
state-owned enterprises.

Canada is well-positioned to add value to the regulation and development

of a free and open digital economy in the Indo-Pacific. It has the governance
tools, is part of both CPTPP and USMCA, and it is a close partner of both the
US and Japan. Leveraging existing expertise, relationships, and governance
tools, Canada is well placed to add value to the digital economy in the
Indo-Pacific.

Stephen Nagy is a senior associate professor at the International Christian University

in Tokyo, a senior fellow at the Macdonald-Laurier Institute, a fellow at the Canadian
Global Affairs Institute, and a visiting fellow with the Japan Institute for International
Affairs. Twitter handle: @nagystephen1.

Hanh Nguyen is a Young Leaders program member of the Pacific Forum and a
Nonresident WSD-Handa Fellow. She received her MA in International Relations at
International Christian University, Tokyo. Her research interests include Southeast
Asia politics and security and Vietnam’s foreign policy. She has written for the Pacific
Forum, The Diplomat, 9DashLine, Geopolitical Monitor, and the East Asia Security
Centre.

References
Asian Development Bank [ADB]. 2018. Understanding the Digital Economy:
What Is It and How Can It Transform Asia? Event, February 21. ADB. Available
at https://www.adb.org/news/events/understanding-digital-economy-what-it-
and-how-can-it-transform-asia.

Blanchette, Jude. 2019. China’s New Red Guards: The Return of Radicalism
and the Rebirth of Mao Zedong. Oxford University Press.

Carter, William A., and Arun Mohan Sukumar. 2019. “Resolved: Japan Could
Lead Global Efforts on Data Governance.” Debating Japan 2, 6, June 27.
Available at https://www.csis.org/analysis/resolved-japan-could-lead-global-ef-
forts-data-governance.

China Law Translate. 2015. National Security Law of the People’s Republic of
China. China Law Translate, July 1. Available at https://www.chinalawtranslate.
com/en/2015nsl/#_Toc423592316.

26 CONTRIBUTOR, BYSTANDER OR CASUALTY? | October 2021

Creemers, Rogier, Paul Triolo, and Graham Webster. 2018. “Cyber Security
Law of the People’s Republic of China.” New America, June 29. Available at
https://www.newamerica.org/cybersecurity-initiative/digichina/blog/transla-
tion-cybersecurity-law-peoples-republic-china/.

Economy, Elizabeth. 2018. The Third Revolution: Xi Jinping and the New Chi-
nese State. Oxford University Press.

Nagy, Stephen. 2019a. “A.I. Hegemony with Chinese Characteristics: Geo-

technology and US-China Trade War.” China-U.S. Focus, January 25. Available
at https://www.chinausfocus.com/finance-economy/ai-hegemony-with-chi-
nese-characteristics-geotechnology--the-us-china-trade-war.

Nagy, Stephen R. 2019b. “Japan’s Hong Kong Conundrum.” Japan Times,

September 26. Available at https://www.japantimes.co.jp/opinion/2019/09/26/
commentary/japan-commentary/japans-hong-kong-conundrum/#.XimDlx-
MzZn4.

United States Trade Representative. 2019. Fact Sheet on U.S.-Japan Trade

Agreement. Office of the United States Trade Representative, September. Avail-
able at https://ustr.gov/about-us/policy-offices/press-office/fact-sheets/2019/
september/fact-sheet-us-japan-trade-agreement.

October 2021 | CONTRIBUTOR, BYSTANDER OR CASUALTY? 27

 Digital Connectivity in the
Indo-Pacific: The Potential
for Middle Power Cooperation
on 5G Technology

Stephen R. Nagy and Hanh Nguyen

5G technology promises a number of benefits, including higher Internet

speed, stable connections, and wider coverage than the previous
generation of wireless networks (Wall 2018). It will also play a crucial role
in a wide range of new areas, such as establishing smart cities by connecting
smart equipment, self-driving vehicles, traffic monitoring, virtual reality,
automation, and information collection.
Yet, notwithstanding the benefits, severe competition in digital connectivity
and 5G technology has prompted what some observers call a Tech Cold War
(Segal 2020). Clearly, there are growing questions as to the implications of
an authoritarian state being the first mover as states vie to be artificial intelli-
gence superpowers (Lee 2018). The main apprehensions include:
• Chinese domination in 5G technology and in particular, the role
of Huawei: A global enterprise focusing on communication infra-
structure and a pioneer in 5G technology, Huawei has become the
centre of attention due to accusations of alleged close connections
with the Chinese government.
• Pressure from China and the US regarding the adoption of 5G
technology: Since the end of 2018, the US has increased pressure
on Huawei, banning its equipment from government purchases,

28 CONTRIBUTOR, BYSTANDER OR CASUALTY? | October 2021

 restricting US companies from doing businesses with it, and
lobbying allies and partners to drop Huawei equipment from their
communication systems. China, in return, has increased pressure
on other countries to adopt Huawei’s 5G equipment.
• Weaponization of digital space and 5G technology: With 5G tech-
nology and digital connectivity being deployed domestically to
monitor and control the behaviour of China’s citizens, there are
concerns about the export of these technologies to other nations.

States within and outside the Indo-Pacific, including Canada and like-minded
middle powers, are especially vulnerable to the negative aspects of an author-
itarian-dominated digital infrastructure and 5G (or 6G) technology ecosystem.
Disquietude around these vulnerabilities include:

• Security risks to critical information infrastructures: Using software

or hardware “back doors” in 5G equipment to disable or take con-
trol of vital infrastructure such as power grids, financial markets,
and transport systems (Giles and Woyke 2018).
• Interference in domestic or international politics: The well docu-
mented interference in the US 2016 presidential election and dis-
information campaigns around the Hong Kong protests and the
COVID-19 pandemic have demonstrated that malevolent actors can
use digital infrastructure to subvert, obstruct, and undermine open
societies (United States, Senate Intelligence Committee 2019; Kur-
lantzick 2020; Conger 2019).
• Espionage risks: Collecting sensitive information and data, such
as private information on citizens, trade secrets, or intelligence so
that it can be used for malign purposes (Giles and Woyke 2018).
• Technology leaks: The US is concerned that Huawei could supply
American technologies to countries under US embargoes, such as
Iran or North Korea (Giles and Woyke 2018).
• Risk of bifurcation of 5G network systems: A “digital iron curtain”
between the US and China could force countries to choose one
or the other system, thus increasing costs for businesses (Findlay
2019).

Considering the risks associated with a digital 5G infrastructure for open so-
cieties like Canada and its allies and partners, they have a shared interest in
the following:

1. Digital Infrastructure and 5G technology innovation

• Develop diverse networks of 5G technology and equipment provid-
ers: Help countries avoid becoming dependent on a single provid-
er, thus mitigating security risks and privacy concerns.

October 2021 | CONTRIBUTOR, BYSTANDER OR CASUALTY? 29

 • Ensure that 5G (or 6G) technology and equipment is secure:
Secure equipment helps countries mitigate risks related to
infrastructure security, cyber espionage, and data leaks. This effort
will need to include all of Canada’s allies and partners, especially
emerging states.
• Develop global standards for components of 5G and next-genera-
tion systems: A shared, rules-based standard for the components
and regulations of 5G networks and next-generation systems would
help accelerate the integration of different suppliers’ systems and
reduce costs for businesses (Findlay 2019). Those standards would
also protect privacy and prevent unlawful state intervention into
networks.

2. Building on existing cooperation

Several declarations and statements among various partners already exist and
Canada and its middle power allies could build upon them. They include:
• EU-Japan 5G Joint Declaration (May 2015) (European Commis-
sion 2015/2021)
• EU-China 5G Joint Declaration (September 2015) (European Com-
mission 2015)
• EU-South Korea 5G Joint Declaration (June 2014) (European Com-
mission 2014/2021)
• Osaka Declaration including Data Free Flow with Trust (DFFT)
(June 2019) (G20 Osaka Summit 2019)

• ASEAN-US Cyber Policy Dialogue (October 2019) (United States,

Department of State 2019).

3. Shaping digital connectivity and the development of a rules-based,

free, and open 5G technological ecosystem using sustainable, middle
power solutions that include:

• Joint bidding between corporations from the US and middle pow-

ers: Huawei has an advantage in supplying all components related
to 5G technology, from base stations to chipsets to antennas. In
a bidding process, a comprehensive provider like Huawei would
have more chance at winning a bid than providers supplying indi-
vidual components. Joint bidding between different corporations
in the US and other middle powers, in which each would provide
a specific component, would strengthen their chances in a bidding
process.
• Better funding coordination among the US and middle powers:
The US and middle powers can’t compete with China’s funding

30 CONTRIBUTOR, BYSTANDER OR CASUALTY? | October 2021

 of and state support for digital technologies. To counter China’s
strength, they could consider coordinating their funding processes
such that each country would prioritize funding for a specific as-
pect or component of 5G technology.
• Developing a shared standard among the US and middle powers for
5G technology to prevent security risks: A shared standard would
create transparency, provide a framework for 5G operations, and
reduce costs for business while also putting pressure on Huawei to
comply with shared rules in many important markets.
• Restricting Huawei’s participation to non-sensitive aspects of 5G
systems: Since Huawei is a pioneer in 5G technology, excluding
the company from the deployment of the technology is not only
unattainable, but costly for many countries. Restricting Huawei’s
participation to non-sensitive aspects of 5G systems and subjecting
its equipment to vigorous security tests (such as are offered by, for
example, the Huawei cybersecurity evaluation centre in the UK)
provide a temporary solution to avoid security risks and pressures
from both China and the US.
• Cooperating with Huawei through joint partnerships: Alleged links
to the Chinese state subject Chinese digital companies, including
Huawei, to increased suspicion abroad, thus hurting China’s efforts
to become a top player in technology. By cooperating with Huawei
in the deployment of 5G technology through joint partnerships,
the middle powers would have oversight of Huawei’s technology
and equipment and help Huawei improve its reputation.
• Promoting stakeholder buy-in: For many countries deciding wheth-
er or not to use a technology from country A or B, cost is the de-
termining factor. Middle powers like Canada, working in concert
with the US, must solve the financial hurdles that emerging states
face when adopting a new technology such as 5G. Canada and its
partners must adopt grants, fiscally responsible subsidies, market
access, and other creative solutions to help shape a country’s deci-
sions about which technology it will embrace.
• Incorporating a connectivity and technology pillar into the Indo-Pa-
cific vision: Technology and regulatory adoption by Indo-Pacific
stakeholders requires a long-term strategic vision of the region, a
clear articulation of the role each has, and clear areas in which
cooperation between Canada and like-minded partners can pro-
vide value to the region’s connectivity and technology. Promoting
a rules-based, free and open connectivity and technology ecosys-
tem should be part of that vision as it is consistent with Canada’s
commitment to the rule of law, development, and its middle power
identity.
.

October 2021 | CONTRIBUTOR, BYSTANDER OR CASUALTY? 31

 Stephen Nagy is a senior associate professor at the International Christian University
in Tokyo, a senior fellow at the Macdonald-Laurier Institute, a fellow at the Canadian
Global Affairs Institute, and a visiting fellow with the Japan Institute for International
Affairs. Twitter handle: @nagystephen1.

Hanh Nguyen is a Young Leaders program member of the Pacific Forum and a
Nonresident WSD-Handa Fellow. She received her MA in International Relations at
International Christian University, Tokyo. Her research interests include Southeast
Asia politics and security and Vietnam’s foreign policy. She has written for the Pacific
Forum, The Diplomat, 9DashLine, Geopolitical Monitor, and the East Asia Security
Centre.

References

Conger, Kate. 2019. “Facebook and Twitter say China is Spreading Disin-
formation.” New York Times, August 19. Available at https://www.nytimes.
com/2019/08/19/technology/hong-kong-protests-china-disinformation-face-
book-twitter.html.

European Commission. 2015/2021. “21st EU-Japan ICT Dialogue: Strengthen-

ing Cooperation.” European Commission. Available at https://digital-strategy.
ec.europa.eu/en/news/21st-eu-japan-ict-dialogue-strengthening-cooperation,
last updated March 9, 2021.

European Commission. 2014/2021. “Landmark Agreement between the Euro-

pean Commission and South Korea on 5G Mobile Technology.” Press Release.
European Commission. Available at https://digital-strategy.ec.europa.eu/en/
news/landmark-agreement-between-european-commission-and-south-ko-
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European Commission. 2015. “The EU and China Signed a Key Partnership

on 5G, Our Tomorrow’s Communication Network.” Press Release. Europe-
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presscorner/detail/en/IP_15_5715.

Findlay, Christopher. 2019. “Can Cooperation Prevent a Digital Iron Curtain?”

East Asia Forum Quarterly 11, 3 (September): 15-18. Available at https://
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mit/osaka19/en/documents/final_g20_osaka_leaders_declaration.html.

32 CONTRIBUTOR, BYSTANDER OR CASUALTY? | October 2021

Giles, Martin, and Elizabeth Woyke. 2018. “The 6 reasons Why Huawei Gives
the U.S. and Its Allies Security Nightmares.” MIT Technology Review, Decem-
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why-huawei-gives-the-us-and-its-allies-security-nightmares/.

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During the Pandemic.” Council on Foreign Relations, September 10th, 2020.
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October 2021 | CONTRIBUTOR, BYSTANDER OR CASUALTY? 33

 Cooperative Middle Power
Approaches for Infrastructure
and Connectivity Development

Stephen R. Nagy and Ly Tra Hoang

T he Indo-Pacific has been emerging as a region of critical importance to

international security and economic development. To reach its full po-
tential, it requires a massive investment in infrastructure and connectivity.
Investment should be based on the following facts:

• The region is home to the fastest growing markets in the

world. Prior to the COVID-19 pandemic, states and regions cen-
tred in the Indo-Pacific such as China, India, and Southeast Asia
more generally were among the fastest growing economies in the
world. Rich in natural resources, a large young population, and a
burgeoning middle class, the region is the engine of the world’s
economic growth.
• The region hosts at least three dynamic maritime trading
routes (known as sea lanes of communication or SLOCs). The
Indian Ocean, the South China Sea, and the East China Sea serve
as major arteries for the flow of energy and goods. They are also
zones of instability as China continues to challenge international
law through so-called “grey zone” operations and lawfare tactics.

34 CONTRIBUTOR, BYSTANDER OR CASUALTY? | October 2021

 • Rapid economic growth and enhanced trade cooperation
in the region require a massive expansion of infrastructure.
There have been huge demands in the region for constructing and
upgrading not only hard infrastructure like roads, bridges, ports,
railways, airports, and irrigation, but also soft infrastructure like
digital connectivity and health infrastructure.
• There are huge infrastructure gaps among countries in the
region. While some countries in the Indo-Pacific enjoy advanced
infrastructure, others lack the infrastructure necessary for econom-
ic and social development.

China’s widespread investment in

infrastructure and connectivity
development has raised several concerns.

China is expanding its economic and strategic influence through Belt and
Road Initiative (BRI) agreements, which invest in regional infrastructure and
connectivity projects with partnering countries, provinces, and cities. China’s
widespread investment in infrastructure and connectivity development has
raised several concerns, specifically:
• Questionable transparency and limited governance practices of
projects managed by state-owned enterprises using Chinese funds
(Hillman 2019).
• The quality, sustainability, and social and environmental impacts of
Chinese infrastructure investment (Balding 2018).
• The potential debt trap in which host countries find themselves
when they are unable to pay the debt brought on by loans for big
projects (Rana and Xianbai 2020).
• Security and strategic concerns that stem from infrastructure proj-
ects funded by Chinese contractors.
• The fracturing of the cohesiveness of regional institutions when
infrastructure and connectivity projects are used as rewards for
deference on issues deemed important to Beijing (Chirathivat and
Langhammer 2020).
• The potential of a “lock-in” effect in which recipients of BRI aid will
be locked into a developmental trajectory dependent on technolo-
gy, materials, and aid from China.

October 2021 | CONTRIBUTOR, BYSTANDER OR CASUALTY? 35

 Based on these concerns, key players such as Australia, Japan, India, the EU,
and the US are bolstering their cooperation with each other and regional
partners to provide alternatives to China’s BRI. Canada has yet to carve out
a role in the burgeoning infrastructure and connectivity activities that are
currently evolving.

Through well-chosen initiatives, regional countries can meet their need for
infrastructure and connectivity while challenging the expansion of Beijing’s
influence. Current infrastructure and connectivity projects in the Indo-Pacif-
ic are diversified by degrees of cooperation among regional middle powers.
Through consultative diplomacy, Canada could find opportunities to contrib-
ute materially, financially, or through the provision of expertise in some of the
projects below:

1. Regional middle powers working unilaterally on infrastructure

projects, including:
• Japan: Developing roads and bridges along the Southern Eco-
nomic Corridor and the East-West Economic Corridor; connecting
Mumbai and Ahmedabad with a high speed railway project; devel-
oping roads, bridges, and a port connecting inland states to the
Indian Ocean; and enhancing Mekong connectivity through the Ja-
pan-Mekong Connectivity Forum.
• South Korea: Promoting the New Southern Policy, which includes
developing ports and a rail system in Vietnam, the Philippines, and
Indonesia as well as mega-bridge construction projects in Brunei
and Malaysia.
• Australia: Currently concentrating on ASEAN countries and India,
the Australian Infrastructure Financing Facility for the Pacific was
launched in 2019 with US$1.39 billion in funding.

2. Regional middle powers engaging with each other and with

other world partners:
• Japan and Australia: Signing the 2018 Memorandum of Under-
standing (MOU) that enables information to be shared between
the two in order to identify suitable infrastructure projects in the
Indo-Pacific and facilitates cooperation between Japanese and Aus-
tralian companies.
• Japan and the US: Affirming their shared vision and cooperation
on joint projects in third countries; fostering investments of high
standard in the energy sector; creating a framework for co-financ-
ing; enhancing cooperation on concrete projects such as the Jawa-1
Gas-to-Power Project in Indonesia and the liquefied natural gas-to-
power project in Bangladesh.

36 CONTRIBUTOR, BYSTANDER OR CASUALTY? | October 2021

 • Japan and the EU: Signing an MOU in September 2019 that allows
more fiscally sustainable loans for infrastructure projects in the In-
do-Pacific countries.

3. Trilateral cooperation:
• The Trilateral Infrastructure Partnership between Australia, the US,
and Japan was established in 2018. Following from it, the liquefied
natural gas project in Papua New Guinea launched in June 2019 is
the first joint financing project in the Indo-Pacific region. The three
countries are currently identifying more joint projects in ASEAN
countries.
• The Resilient Supply Chain Initiative (RSCI) between India, Japan,
and Australia aims to link development and the diversification of
supply chains in the three countries.

The infrastructure and connectivity strategies of middle powers in the In-

do-Pacific should adhere to a rules-based order that focuses on fiscal trans-
parency, sustainability, and an environmentally friendly approach that is free
of geopolitics. These efforts should be the gold standard for infrastructure
and connectivity projects, but should also lead by example to encourage BRI
initiatives to implement similar standards (Nagy 2021). Key facets should
include:

• Emphasis on quality and affordability. Japan, Australia, South

Korea, and the US prioritize high quality as their competitive of-
ferings. But in tandem with quality, affordability must be front and
centre in infrastructure and connectivity projects.
• Ensuring transparency and avoiding adverse social and en-
vironmental impacts. Bilateral and trilateral cooperation frame-
works (among regional middle powers as well as between them
and the US and the EU) help to promote the transparency of any
infrastructure projects. The goal of those projects is to provide
consultancy and technical support rather than direct involvement,
and to use local construction labour and adhere to world-class en-
vironmental standards. Managing the projects this way helps gov-
ernments in the host countries to develop and manage their own
investments.
• Avoiding debt burdens. Regional middle powers should commit
to providing infrastructure and connectivity projects with fiscal and
financial sustainability while respecting the host country’s sover-
eignty. This will create user buy-in from Indo-Pacific stakeholders,
especially those who are fiscally challenged or harbour lingering
suspicions about Western powers.

October 2021 | CONTRIBUTOR, BYSTANDER OR CASUALTY? 37

 The comparative advantages of middle powers in the Indo-Pacific, which
includes their experience and ability to boost infrastructure investment in
emerging states, is well known. Their commitment and growing convergence
of interests in developing both hard and soft infrastructure in the region un-
derscores the value of cooperation. Additionally, the involvement of other
partners like the US and the EU provides the region with more opportunities
to construct high-quality infrastructure.

There are several obstacles that regional mid-size powers need to address for
better results. They include:
• Shortage of financing. It is estimated that the region needs
US$1.7 trillion per year to upgrade its infrastructure through 2030
(Asian Development Bank 2017). However, currently, the annual
investment is US$881 billion.
The COVID-19 pandemic caused an economic downturn among
middle powers. That fact, and the US’s more inward-looking incli-
nation, will both place great demands on policy-makers to articu-
late the need for and importance of infrastructure and connectivity
spending in the Indo-Pacific when voters are prioritizing invest-
ment at home.
• Lack of competitiveness on cost and approval times. China as-
sists countries that want to work with them on infrastructure proj-
ects by providing them with low cost offers, and they offer a faster
response time and less binding requirements than middle powers
do. Meanwhile, the high project standards of regional middle pow-
ers are often understood as being marked by slow approvals and
interference in domestic policies. The US and its like-minded re-
gional middle power allies and partners need to find creative fiscal
and regulatory solutions to be competitive with BRI projects.
• Environmental sustainability. Most of the less developed coun-
tries in the Indo-Pacific do not pay enough attention to environ-
mental sustainability despite their vulnerability to climate change
and other environmental issues.
• Experience and capacity shortage. While infrastructure leaders
like Japan have a long history of constructing infrastructure, some
mid-sized powers do not have much experience or the capacity to
work on large-scale projects. Middle powers such as Canada need
to identify and leverage their competitive advantages to find ways
to collaborate.
• Bureaucracy constraints from the host countries. The domi-
nance of state-owned firms in foreign aid projects, poor project
selection, lack of transparency, corruption within bureaucracies,
and regulatory frameworks that discourage the participation of the
private sector are all obstacles that need to be removed. Middle

38 CONTRIBUTOR, BYSTANDER OR CASUALTY? | October 2021

 powers such as Canada can share good governance practices to
achieve these objectives.
• Cyber security concerns. Hackers may exploit the development of
digital connectivity for nefarious purposes. Since cyberspace is an im-
portant soft infrastructure platform, middle powers need to inculcate
cyber security into their infrastructure and connectivity initiatives.

Some recommendations for middle powers, including Canada, to develop

rules-based infrastructure and connectivity in the Indo-Pacific include:
• Engage with the private sector. Bringing private sector and
non-governmental organizations into infrastructure projects help
to increase transparency and decrease independence on govern-
mental resources.
• Be open to local and international participation. Unlocking the
potential of local and international partners can bring different ex-
pertise and experience to a project. Moreover, local participation
in infrastructure projects also helps create jobs for local people
and contributes to increasing the constructing ability of the host
countries.
• Mobilize a variety of financial sources. Host countries can fill
financial gaps by unlocking national savings, call for private capital,
and make use of multilateral and bilateral financial institutions.
• Bring in the capabilities of each nation. It is not necessary for
players to bring only their construction equipment or raw materi-
als to a project. Infrastructure development in the region requires
human resources with legal and accounting expertise to identify
sustainable projects. Other soft skills are also needed to ensure a
smooth construction and maintenance process.
• Bring in China. Engaging China in the infrastructure projects led
by middle powers not only makes use of valuable Chinese resourc-
es and but also encourages Beijing to meet international standards
of transparency and good governance in their own infrastructure
investments.
• Build trust with regional countries. Gaining trust from national
governments of the host countries helps middle powers to increase
their leverage when competing with China. Middle powers are able
to attract host countries through their emphasis on high quality,
fiscally sustainability, and respect for sovereignty.
• Enhance digital connectivity. The Indo-Pacific is a huge poten-
tial market for digital development thanks to its young population
and dynamic economic growth. Developing digital connectivity not
only helps citizens in the region benefit from the digital economy
but also allows them to directly engage in information exchange
and find solutions for local developmental issues.

October 2021 | CONTRIBUTOR, BYSTANDER OR CASUALTY? 39

 Stephen Nagy is a senior associate professor at the International Christian University
in Tokyo, a senior fellow at the Macdonald-Laurier Institute, a fellow at the Canadian
Global Affairs Institute, and a visiting fellow with the Japan Institute for International
Affairs. Twitter handle: @nagystephen1.

Ly Tra Hoang is an MA graduate from the International Christian University, Tokyo.

Her research interests include Vietnam’s foreign policy, Vietnam–Japan relations,
maritime security, and Southeast Asian studies. She was a fellow under the Japanese
Grant Aid for Human Resource Development Scholarship (JDS).

References

Asian Development Bank. 2017. “Asia Infrastructure Needs Exceed

$1.7 Trillion Per Year, Double Previous Estimates.” Asian Development
Bank, February 28. Available at https://www.adb.org/news/asia-infrastruc-
ture-needs-exceed-17-trillion-year-double-previous-estimates.

Balding, Christopher. 2018. “Why Democracies Are Turning Against Belt and
Road,” Foreign Affairs, October 24. Available at https://www.foreignaffairs.
com/articles/china/2018-10-24/why-democracies-are-turning-against-belt-and-
road.

Chirathivat, Suthiphand, and Rolf J. Langhammer. 2020. “ASEAN and the EU

Challenged by ‘Divide and Rule’ Strategies of the US and China[:] Evidence
and Possible Reactions.” International Economics and Economic Policy 17,
659–670. Available at https://link.springer.com/content/pdf/10.1007/s10368-
020-00470-6.pdf.

Hillman, Jonathan, E. 2019. “Corruption Flows Along China’s Belt and Road.”
Center for Strategic and International Studies [CSIS], January 18. Available
at https://www.csis.org/analysis/corruption-flows-along-chinas-belt-and-road.

Nagy, Stephen. 2021. “Sino-Japanese Reactive Diplomacy as Seen Through

the Interplay of the Belt Road Initiative (BRI) and the Free and Open Indo-Pa-
cific Vision (FOIP).” China Report 57, 1: 7-21.

Rana, Pradumna Bickram, and Jason Ji Xianbai. 2020. CO20191 | BRI’s “Debt
Trap Diplomacy”: Reality or Myth? Nanyang Technological University Com-
mentary. S. Rajaratnam School of International Studies, November 4. Available
at https://www.rsis.edu.sg/rsis-publication/cms/bris-debt-trap-diplomacy-reali-
ty-or-myth/#.YJDQKuj7SUk.

40 CONTRIBUTOR, BYSTANDER OR CASUALTY? | October 2021

South Asia in the Indo-Pacific:
Evolving Alignment for Middle
Power Security Cooperation

Stephen R. Nagy and Chandrika Pandit

A free and open, rules-based Indo-Pacific region is untenable without an

enduring US commitment, an active role for South Asian states, and co-
ordination with middle powers. A rules-based order for the region is critical
for peace and stability for the following reasons:

• The Indian Ocean is the central sea artery of the Indo-Pacific

region. The Indian Ocean is the key sea line of communication
(SLOC) for the transport of energy and goods to and from the
world’s most dynamic economic region. Disruption of this SLOC
would have consequences for the global economy.
• China is challenging the rules-based order in the region.
Through a mixture of grey zone operations (Asia Maritime Trans-
parency Initiative 2021), lawfare tactics that rely on using legal
weapons to go after critics abroad, and ignoring decisions by inter-
national courts, China is attempting to establish regional hegemo-
ny in the East and South China Seas (ECS and SCS) and create a
military and commercial presence in the Indian Ocean.

October 2021 | CONTRIBUTOR, BYSTANDER OR CASUALTY? 41

 • SLOCs are migrating away from a rules-based to a “might-is-
right” order. The increasing reliance on might over law and order
is inculcating instability into critical SLOCs, raising the chances of
accidental conflict and a disruption in trade.
• China is expanding its commercial, diplomatic, and military
footprint in South Asia. Through the Belt and Road Initiative
(BRI) and, now, vaccine diplomacy, China has improved its rela-
tions with India’s small neighbours by financing infrastructure
projects and other economic opportunities. This is interpreted as
interfering in India’s sphere of influence and raises concern about
Chinese intentions.
• The United States’ future in the region is unclear. It is unclear
what role the United States sees itself playing in the Indo-Pacific,
and lack of policy coordination between the US, India, and other
powers is placing Indo-Pacific stakeholders in an increasingly diffi-
cult position of choosing between their security provider (the US)
and their economic partner (China) (Fook 2020).
• Traditional and non-traditional security challenges in the
region. India faces territorial disputes with other countries in
the Indo-Pacific, including China and Myanmar. Similarly, the
region is suffering from non-traditional security threats such as
piracy, human trafficking/smuggling, terrorism, environmental
degradation, climate change, food scarcity, natural resources crises,
natural disasters, social complexity, humanitarian issues, and
governance problems.

India has started to cooperate with

other powers through its inclusive
concept of the Indo-Pacific.

South Asian states such as India, Sri Lanka, Bangladesh, Maldives, and Nepal
are particularly vulnerable to these dynamics. However, India has started to
cooperate with other powers through its inclusive concept of the Indo-Pacif-
ic to meet these challenges. Three significant responses to India’s outreach
include:

1. Supporting a rules-based maritime order by cooperating with

like-minded countries in the traditional security domain – to hedge
against China’s assertiveness.

42 CONTRIBUTOR, BYSTANDER OR CASUALTY? | October 2021

 2. Strengthening ties in the non-traditional security domain by
enhancing cooperation between India and other middle and small
powers including Canada.
3. Increasing commitments to the Quadrilateral Security Dialogue
(Quad) and Quad-plus formula.

1. Supporting a rules-based maritime order by cooperating

with like-minded countries in the traditional security domain to
hedge against China’s assertiveness

A rules-based maritime order is essential for South Asian states, including

other like-minded countries in the region. It assists with the:
• Maintenance of peace, stability, and security in, upon, and over the
sea lines of communication
• Enforcing norms of legal commerce
• Freedom of navigation
• Overflight and other international legal use of the oceanic and air
space
• Protection and preservation of marine resources
• Framework for a sustainable and responsible fishery

However, China is challenging the order by:

• Expanding its maritime dominance through grey zone, lawfare,

and military means. China has been militarizing the contested
territory in the East and the South China Seas (Japan Ministry of
Defense 2021). Chinese naval, coast guard, and merchant vessels
are often found loitering in the Indian Ocean.
• Disregarding the Permanent Court of Arbitration’s rulings in
the SCS.
• Rapidly militarizing. The Indo-Pacific is very anxious about China’s
rapid militarization (Tian and Su 2021) and naval modernization,
and about the perception that maritime security conflicts over
SLOCs and territorial claims with China will intensify.

China’s assertive behaviour is of particular concern to middle powers,

including India. Core concerns revolve around a rising power using force or
other tactics to change the regional order.

In response, India is cooperating with middle powers and the US to secure

the rules-based order in the Indo-Pacific. A key example can be found in
Indian and Japanese collaboration in their Free and Open Indo-Pacific
visions. These visions include:

October 2021 | CONTRIBUTOR, BYSTANDER OR CASUALTY? 43

 • India’s SAGAR. The Hindi word for “ocean,” SAGAR also stands for
“Security And Growth for All in the Region.” India’s concept of the
Indo-Pacific is based on the region remaining free, open, and inclu-
sive, alongside a cooperative and collaborative rules-based order.
It is also rooted in Association of Southeast Asian Nations (ASEAN)
centrality and inclusivity. This approach is aligned with India’s “Act
East Asia Policy.”
• Japan’s FOIP (Free and Open Indo-Pacific). Japan’s FOIP vision
stresses a rules-based maritime order. This includes the rule of law,
freedom of navigation and overflight, peaceful settlement of dis-
putes, and promotion of free trade. It also aims to address regional
security challenges such as piracy, terrorism, proliferation of weap-
ons of mass destruction (WMD), and natural disasters. Like India’s
approach, it is also based on ASEAN centrality and inclusivity.

Some critical factors undertaken under the broader concept of FOIP are:

• Protecting the sea lines of communication;

• Search and rescue;
• Preventing oil spills in the ocean;
• Regulation of maritime installation;
• Counter operations against piracy and terrorism;
• Protecting trade shipping lines;
• Gathering natural sea resources; and
• Monitoring and surveillance activities, including using aircraft to
patrol and check for illegal activities like piracy, smuggling, and
terrorism.

These non-traditional forms of security cooperation are more advanced than

simply cooperating to constrain China. Moreover, India and Japan are doing
more, as are other like-minded countries, to expand FOIP to the whole In-
do-Pacific region. This framework involves:

• Boosting security cooperation with the US and other middle

powers in the region. This includes the regional security architec-
ture such as Quad and Quad-plus involving the US, India, Japan,
and Australia.
• Enhancing security cooperation at different levels. Bilateral,
trilateral, and multilateral military exercises have taken place, in-
cluding the Malabar exercise and the Japan-India-Sri Lanka Trilat-
eral Strategic Dialogue.

Canada and Japan’s recent announcement of Shared Canada-Japan priorities

contributing to a free and open Indo‑Pacific region (Global Affairs Canada

44 CONTRIBUTOR, BYSTANDER OR CASUALTY? | October 2021

2021) and Japan’s commitment to enhance rule-of-law cooperation in the
maritime domain demonstrate a deepening alignment of middle power
interests in the Indo-Pacific.

2. Strengthening ties in non-traditional security by enhancing

cooperation between India and other middle powers including
Canada

The Indo-Pacific region, including South Asia, faces a number of unconven-

tional security challenges. The following are the region’s immediate prob-
lems that require regional and extra-regional cooperation:

• Poor governance is a critical source of insecurity for sub-state

communities in South Asia. Poor governance provokes violence
and reduces the ability of governments to use democratic means to
achieve social justice and the rule of law. Poor representation, lack
of accountability, corruption, a politicized judiciary, partisan poli-
tics, weak and ineffective institutions, violent and corrupt electoral
processes, inadequate infrastructure, poor public service delivery,
and discrimination based on religion, caste, and gender are exam-
ples of poor governance in the region.
• Piracy. The Indian and Pacific Oceans have a high volume of global
trade and pirates consider them “sites of profit.” Pirates can oper-
ate at chokepoints and along coastlines. Some countries near the
chokepoints have inadequate maritime security capabilities and
limited coordination with other countries, which makes it easy for
piracy to take hold. Similarly, calculating the cost of responding to
piracy is problematic because it requires cooperation among vari-
ous powers in the region.
o India is a key partner helping combat piracy in the Indian
Ocean. India has enhanced its collaboration with countries
bordering the Arabian Sea and along the East African coast.
For example, it has partnered with the UAE in a naval exercise
(Gulf Star 1) and with the Kenyan navy in a joint exercise. In-
dia has signed an MOU with Mauritius on maritime security
in the Indian Ocean region, in which both are to “train and
patrol the seas together,” operationalize coastal surveillance
radar (CSR) stations, and use Dornier aircraft to undertake
surveillance. India can similarly partner with other powers in
the region.
o Terrorism in the Indo-Pacific. Iraq, Afghanistan, India, Pa-
kistan, the Philippines, Nigeria, Somalia, Egypt, and Syria are
countries that face the most serious threat of terrorism. Ex-
amples include Al-Shabab in Somalia; Al-Qaeda; Boko-Haram
in Kenya; Jemaah Islamiyah, Abu Sayyaf and the Moro Islamic

October 2021 | CONTRIBUTOR, BYSTANDER OR CASUALTY? 45

 Liberation Front in Southeast Asia; Jemaah Ansharut Daulah
(JAD), an Islamic State-linked terrorist organization in Indo-
nesia; transnational armed groups in Malaysia; local armed
groups in the Philippines; violent activities of Arakan Salva-
tion Army in the Bangladesh-Myanmar border regions; and
lone-wolf terror attempts in Australia and the US. Small terror
groups have allied with each other or even with ISIS.

o Combatting terrorism requires collaboration at bilateral,

regional, and multilateral levels with the help of existing
regional organizations and international organizations.
Examples include the South Asian Association for Regional
Cooperation (SAARC), the Bay of Bengal Initiative for Multi-
Sectoral Technical and Economic Cooperation (BIMSTEC),
ASEAN, and the Indian Ocean Rim Association (IORA). Canada
needs to maximize its relationship with India and leverage its
comparative advantage to contribute to counterterrorism in
the region.

Combatting terrorism requires

collaboration at bilateral, regional,
and multilateral levels.

• Forced migration (refugees and internally displaced persons).

People leave their homes for a variety of reasons, such as in search
of security, threats to life and property, to avoid conflict and war, in
search of protection from religious or other kinds of persecution,
for work and food, or in search of a better life. Over one-fourth of
the world’s refugee population is in South Asia. Examples include
the Rohingya in Bangladesh and India, Afghans in Pakistan, Tamils
in southern India, Bhutanese and Tibetans in Nepal, and people
affected by the India-Pakistan conflict.

o Coordination among state and non-state actors, civil

society organizations, and intergovernmental organizations
at a multilateral level helps to address these issues. Canada
can contribute through coordinating actors and providing
resources and expertise.

• Human trafficking and smuggling in the Indo-Pacific. Cambodia,

Laos, and Myanmar are source countries for many trafficking

46 CONTRIBUTOR, BYSTANDER OR CASUALTY? | October 2021

 victims, who often find their way to countries such as Thailand.
Cambodia’s coastal region is considered a recipient zone for
women trafficked from Vietnam and other countries. Vietnamese
workers are trafficked for forced labour in other countries on the
false pretext of lucrative job opportunities. Indonesia has emerged
as an important transit point for human trafficking and smuggling.
Rohingya refugees from Myanmar seeking to travel to Malaysia
and through to Australia often use Indonesia as a transit point.
Malaysia receives refugees from countries other than Myanmar,
too, including Bangladesh, and other Southeast Asian countries.
Filipinos are often trafficked to more affluent countries. Nepalese
women are trafficked to India and Malaysia.

o Police, law enforcement, security, intelligence, govern-

ment IT and information agencies, and non-state actors
can work together at the bilateral and multilateral levels.

• Humanitarian assistance and disaster relief (HADR) following

natural disasters. The Indo-Pacific region is particularly vulnera-
ble to natural disasters such as drought, earthquakes, floods, wild-
fires, storm surges, tsunamis, cyclones, and landslides.

o Major naval powers in the region are used to coordinating

their actions to improve HADR measures. For instance, the
joint naval exercise Milan in 2014 focused on “Maritime Coop-
eration for HADR Operations,” and at a sub-regional level, the
BIMSTEC Disaster Management Exercise was initiated in 2017.

• Many countries perceive climate change as threatening their

food and water security and causing natural disasters. Agrarian
economies such as Nepal, Bhutan, Pakistan, India, and small island
states like Sri Lanka and the Maldives are vulnerable to the effects
of climate change, but its severe impacts are trans-national.

o Cooperation at both the country and regional level can help

address the effects. For example, the South Asian Association
for Regional Cooperation (SAARC), the International Centre
for Integrated Mountain Development (ICIMOD), and the
Asian Development Bank (ADB) are working together on
issues of food and water security and climate change with
respective governments in the South Asian region.

• Cybersecurity. The Indo-Pacific region has emerged as the hub

of innovation in the cyber security domain. The countries in the
Indo-Pacific often face cyber attacks from state and non-state attack-
ers alike. The large economies in the Indo-Pacific, such as the US,
Japan, India, and Taiwan are among the top 10 countries targeted
by cyber attackers. Attackers are motivated by the possibility that

October 2021 | CONTRIBUTOR, BYSTANDER OR CASUALTY? 47

 they can steal intellectual property, gather intelligence, disrupt or
sabotage the targeted country, or reap a financial gain.

3. Increasing the commitment to the Quadrilateral Security

Dialogue (Quad) and the Quad-plus formula

• Quad-plus functional cooperation. In January 2021, exercises

by Quad (a security partnership comprising the US, India, Japan,
and Australia) around Guam under Sea Dragon 21 (CTF 72 Pub-
lic Affairs. 2021) included Canada (the “plus,” in this case). France
followed by leading the La Pérouse joint exercises (Parpiani and
Dubey 2021) in April 2021 in the Indian Ocean. More Quad-plus
cooperation is feasible and desirable.

• Quad partners and the provision of public goods. The March

2021 Quad Leaders’ Joint Statement highlighted the provision of
public goods in the March 2021 Quad Leaders’ Joint Statement,
“The Spririt of the Quad” (The White House 2021), which focused
on four areas: 1) supporting a region that is free, open, inclu-
sive, healthy, anchored by democratic values, and unconstrained
by coercion; 2) promoting a free, open rules-based order, rooted
in international law to advance security and prosperity and count-
er threats to both the Indo-Pacific and beyond; 3) pledging to re-
spond to the economic and health impacts of COVID-19, combat
climate change, and address shared challenges, including in cyber
space, critical technologies, counterterrorism, quality infrastruc-
ture investment, and humanitarian assistance and disaster relief as
well as maritime domains; and 4) joining forces to expand safe, af-
fordable, and effective vaccine production and equitable access, to
speed economic recovery, and benefit global health.

Some opportunities for South Asian and middle powers to build on

the growing success in the Indo-Pacific involve:

• Creating institutional/cooperative frameworks at two levels.

This should take place at the sub-regional and trans-regional levels
covering the whole of the Indo-Pacific.

• Focusing on troubled areas and hotspots, particularly areas

that will yield significant results. A focus on transit points will
significantly help to address human trafficking and smuggling,
while an emphasis on chokepoints will help to control piracy.

• Cooperation among the leading powers in the region. India,

the US, Japan, Australia, and other middle powers should collabo-
rate intensively on maritime security in general and in combatting
piracy specifically. The collaboration needs to take place with re-
gional organizations such as ASEAN, BIMSTEC, SAARC.

48 CONTRIBUTOR, BYSTANDER OR CASUALTY? | October 2021

 • Focusing on developing state capacities and governance. Mid-
dle powers in the Indo-Pacific should focus on critical sectors/and
institutions such as law enforcement agencies and develop col-
laborative platforms. Building state capacities will help to address
issues such as terrorism and human trafficking and smuggling.

• Cooperation with both state and non-state actors. Addressing

non-traditional security issues needs partnerships with agencies
dealing with police, law, education, IT, and various non-state
actors.

• Developing resilience. Combatting extreme climatic conditions

requires making agriculture more disaster resilient in rural areas
and implementing robust rural livelihoods programs.

• Free, open, and secure cyberspaces. Partners in the Indo-Pacific

must engage in information sharing with an aim to addressing
cybercrimes and cybersecurity issues

Stephen Nagy is a senior associate professor at the International Christian University

in Tokyo, a senior fellow at the Macdonald-Laurier Institute, a fellow at the Canadian
Global Affairs Institute, and a visiting fellow with the Japan Institute for International
Affairs. Twitter handle: @nagystephen1.

Chandrika Pandit ([email protected]) graduated from the International

Christian University in Tokyo with an MA in International Relations. His research focus
is Nepal-India-China relations.

October 2021 | CONTRIBUTOR, BYSTANDER OR CASUALTY? 49

 References
Asia Maritime Transparency Initiative. 2021. “Caught on Camera: Two Dozen
Militia Boats at Whitsun Reef Identified.” Asia Maritime Transparency Initia-
tive and Center for Strategic and International Studies, April 21. Available
at https://amti.csis.org/caught-on-camera-two-dozen-militia-boats-at-whitsun-
reef-identified/.

CTF 72 Public Affairs. 2021. “Sea Dragon 2021 Kicks Off Between US and
Partner Nations.” United States, Department of Defense, Commander, U.S. 7th
Fleet, January 11. Available at https://www.c7f.navy.mil/Media/News/Display/
Article/2468589/guam-hosts-partner-nations-in-exercise-sea-dragon-2021/.

Fook, Lye Liang. 2020.“China-US Competition: Southeast Asia Can Decide

What’s Best.” ISEAS – Yusof Ishak Institute, November 3. Available at https://
www.iseas.edu.sg/media/commentaries/china-us-competition-southeast-asia-
can-decide-whats-best/.

Global Affairs Canada. 2021. Shared Canada-Japan Priorities Contributing

to a Free and Open Indo‑Pacific Region. Government of Canada, May 3. Avail-
able at https://www.canada.ca/en/global-affairs/news/2021/05/shared-cana-
da-japan-priorities-contributing-to-a-free-and-open-indopacific-region.html.

Japan Ministry of Defense. 2021. China’s Activities in the South China Sea
(China’s Development Activities on the Features and Trends in Related Coun-
tries). Government of Japan, March 2021. Available at https://www.mod.go.jp/
en/d_act/sec_env/pdf/ch_d-act_b_e_210421.pdf.

Parpiani, Kashish, and Mrityunjaya Dubey. 2021. “La Pérouse – Quad Naval
Exercise and India’s Strategic Partnership with France.” Observer Research
Foundation, April 4. Available at https://www.orfonline.org/expert-speak/
la-perouse-quad-naval-exercise-and-indias-strategic-partnership-with-france/.

Tian, Nan and Fei Su. 2021. A New Estimate of China’s Military Expenditure.
Stockholm International Peace Research Institute [SIPRI]. Available at https://
www.sipri.org/publications/2021/other-publications/new-estimate-chinas-mil-
itary-expenditure.

The White House. 2021. “Quad Leaders’ Joint Statement: ‘The Spirit of the
Quad.’” The White House, March 12. Available at https://www.whitehouse.
gov/briefing-room/statements-releases/2021/03/12/quad-leaders-joint-state-
ment-the-spirit-of-the-quad/.

50 CONTRIBUTOR, BYSTANDER OR CASUALTY? | October 2021

 Safeguarding Peace and
Stability through Economic
Cooperation in the
Indo-Pacific Region

Stephen R. Nagy and Giovanni Catino

T he Indo-Pacific is the world’s most dynamic economic area. How-

ever, economic and geopolitical competition is reshaping the
balance of power in the Indo-Pacific region. Key drivers include:
• Unsatisfied and assertive regional stakeholders. While China is
not alone in contesting territories in the Indo-Pacific, it is by far the
most proactive in challenging the sovereignty claims of its neigh-
bours in the East and South China Seas (ECS and SCS) and the
Himalayan plateau.

• The Belt and Road Initiative (BRI). The BRI provides valuable
public goods to the region. It is also creating asymmetric economic
relations with recipient countries that could alter the regionalization
process away from an ASEAN centred one towards one dominated
by Beijing.

• Re-emergence as the region’s dominant economy: In the short-

to mid-term, China’s economy will continue to grow and be a more
attractive market for neighbouring states. China presents both an
opportunity and a risk as Beijing has a growing track record of
economic coercion.

October 2021 | CONTRIBUTOR, BYSTANDER OR CASUALTY? 51

 FIGURE 1: CREDIT RATING SCORE BY BRI-PARTICIPATING ECONOMY
VERSUS CONSTRUCTION PROJECT INVESTMENT

Investment grade score Cummulative China investments in the construction sector (RHS)

Average score over the period 2005-2017 Cummulative notional amount from 2005 to 2017 (USD million)

40,000
20
35,000
15 30,000
25,000
10 20,000
15,000
5 10,000
5,000
0 0

Source: OECD 2018.

Source: S&P, Fitch Moody’s. AAA and Aaa are given a score of 21; AA+
and Aa1 are given a score of 20, and so on, down to 1 for D and C at the
junk end. Investment grade ends at BBB-/Baa3 at a score of 12.

• Debt. Potential debt issues loom. Figure 1 shows the sovereign

credit ratings calculated by scoring the ratings from Moody’s and
S&P/Fitch (the grey area) along with the investment by China in
construction projects for each economy. Seventeen economies
score at or above 12, which gives them an investment grade rating
of BBB- or above. Meanwhile, 29 economies are rated below invest-
ment grade and 14 have no rating at all (economies to the right of
Iraq in Figure 1). China’s investment in construction infrastructure
projects in these latter economies constitutes well over half of the
cumulative totals since 2005: i.e., US$253.8 billion compared to a
total cumulative investment of US$420 billion since 2005 (OECD
2018).

• The US role in ensuring security. Long-term concerns about the

US commitment to the Indo-Pacific deepened under the Trump ad-
ministration (Chong 2020). The Biden administration’s different
tone and behaviour has helped to reduce those anxieties, but ques-
tions remain about the sustainability of the US role in the region.

Given the facts above, middle powers in the region and the US will have
different approaches to building their Indo-Pacific visions to meet their com-
prehensive needs, which will also include their approach to China. Canada’s
engagement with stakeholders will depend on its own unique understanding

52 CONTRIBUTOR, BYSTANDER OR CASUALTY? | October 2021

of the approaches it wishes to take, and the associated opportunities. Canada
has a number of possible avenues to approach Indo-Pacific engagement – spe-
cifically, by working with key partners and their respective approaches in the
region. Possible partners and their approaches are explored in more detail
below:
1. ASEAN

ASEAN and Southeast Asian states prioritize strategic autonomy as a

tactic to manage larger neighbours in and out of the region. How-
ever, despite the general perception that ASEAN silently acquiesc-
es to Chinese influence in the region, ASEAN member states are
becoming ever more anxious about China’s increasingly assertive
behaviour (Tomotaka 2020). China has been adept at leveraging
its economic relations with Southeast Asian states to prevent them
from developing a unified stance on South China Sea-related issues.

• Conflict management vs. conflict resolution. ASEAN must

operate within the mandate of its Charter, namely, “respecting
the fundamental importance of amity and cooperation, and
the principles of sovereignty, equality, territorial integrity,
non-interference, consensus and unity in diversity.” Canada
can contribute to both Conflict management vs. conflict
resolution by promoting track 1.5 diplomacy.

2. Japan

The Japanese government has looked for the US to collaborate more

in the region. This includes finding a place for the BRI and Japan’s
national interest to co-exist. Japan is also keen to involve other pos-
sible partners in its regional engagement, including Canada.

• Japan’s Free and Open Indo-Pacific vision (FOIP). The

FOIP aims to increase Japan’s contribution to infrastructure
funding, though it is difficult for Japan to compete with China
on the amount of funding.

• FOIP sustainability, branding, and collaboration. Tokyo

is counting on the quality and the merits of its transparency
and the socio-environmental impact of its projects as a
means to entice actors to engage with them in the region.
In collaboration with the Asian Development Bank, its 2015
“Partnership for Quality Infrastructure” aimed to fund US$110
billion for infrastructure projects in Asia.

The Japanese government is taking a dual approach to the region

– one that is non-zero-sum. For instance, it supports the BRI on
the one hand, and strengthened relations with the US on the
other (Ekman et al. 2019). Indeed, Japan sent a large delegation

October 2021 | CONTRIBUTOR, BYSTANDER OR CASUALTY? 53

 to the BRI summit in May 2017. Japan is ready to cooperate
with China if transparency and the economic viability of the
projects are ensured, BRI loans are fair, and if is the projects
are in accordance with the Comprehensive and Progressive
Agreement for Trans-Pacific Partnership (CPTPP) and contribute
to the peace, prosperity, and stability in the region.

3. European Union (EU)

The EU continues to hesitate in its approach to the Indo-Pacific and

on its China policy.

• Interference by China. China’s growing track record of

fracturing EU unity and interfering in internal European
Union affairs have irritated Brussels and influenced the way
the EU is engaging with China.

• Divide and rule. There is a perception that China is taking a

“divide and rule” strategy to the EU through its 16+1 Summit
with European countries, where China is strengthening
bilateral relations with only some of the 16 members and
giving them more attention than others. In 2019, for instance,
the Czech Republic not only received the first visit by a
Chinese president to the country, but it was also Xi Jinping’s
first presidential visit to any of the Central and Eastern
European countries. Romania and Serbia also welcomed high-
level business delegations from China in 2019 with €6 billion
committed to Romania (Stanzel 2016).

• Balancing. The EU-Japan free trade agreement and EU-Japan

connectivity partnership are widely viewed as a strategic tool
to balance China’s economic power and political influence.

• Tilting. The adoption of the “EU Strategy for Cooperation in

the Indo-Pacific” (EU 2021) on April 19, 2021 and the EU’s
suspension of its efforts to ratify its China investment deal
suggest that the EU is tilting towards an Indo-Pacific vision
more in line with Japan, the US, and other key Indo-Pacific
stakeholders.

Indo-Pacific economic development needs to be supported by infrastructure

and connectivity. Such components not only provide broad economic ben-
efits but are also a means to promote peace, prosperity, and stability in the
region. As Canada looks to avenues of engagement, its efforts should be in-
formed by the following key points:

• Economy as a central pillar. Any Indo-Pacific vision must put

economic development at its core. This includes promoting trade
through regional free trade agreements and reform of the World

54 CONTRIBUTOR, BYSTANDER OR CASUALTY? | October 2021

 Trade Organization to adjust for trade imbalances associated with
the rapid increase in the size of the Chinese market as well as
enhancing connectivity and infrastructure.

• Financial gaps in infrastructure. There is a paucity or imbalance

of infrastructure in the Indo-Pacific. The Organization for Econom-
ic Cooperation and Development estimates global infrastructure
investment needs at US$6.3 trillion per year from 2016 to 2030
to support growth and development, without even considering
further initiatives to combat climate change (relative to mid-2016)
(OECD 2017). Canada needs to work with key partners in the re-
gion, such as Japan, the US, and Australia to find opportunities to
cooperate sustainability.

• Market-based economic competition. The growing role of

state-owned enterprises (SOEs) and the cozy relationship between
Chinese businesses and the Chinese government has created an
unfair trading environment. States need to ensure that any free
trade agreements they negotiate limit the role of SOEs and es-
tablish clear borders between businesses and governments. The
CPTPP is a model that should be expanded with this goal in mind
and Canada should work with like-minded partners to realize that
objective.

However, there are issues in the region which are hindering the economic
integration among countries. These include:
• Deepening authoritarianism. Deepening authoritarianism is blur-
ring the distinction between the government, political parties, and
policy.

• The questionable reliability of the US. Domestic politics in the

US and its tilt towards less international engagement raises con-
cerns about the sustainability of the US commitment in the region.
This was exacerbated by the Trump administration and by the eco-
nomic, social, and political capital damage caused by the COVID-19
pandemic.

• Questionable Chinese intentions. Beijing’s assertive behaviour

raises concerns about its regional hegemonic intentions. This has
become especially acute with its rapid militarization (Tian and Su
2021).

• Heterogeneity in the Indo-Pacific. The Indo-Pacific region has

exceedingly diverse values and norms. Canada needs to cooperate
with like-minded democracies and states that have shared interests,
not alienate potential partners (Brands and Edel 2021).

October 2021 | CONTRIBUTOR, BYSTANDER OR CASUALTY? 55

 Structural issues such as an aging population will affect development in the
Indo-Pacific region and need to be addressed in any strategic Indo-Pacific en-
gagement. China, Japan, and South Korea all face serious demographic issues
when it comes to their aging population, while South Asia and Southeast Asia
have young populations but not necessarily enough white collar jobs to help
them become middle-income states. China’s “economic miracle” is facing re-
sistance from demographics, the COVID-19 pandemic, and states re-orienting
their economies to be less exposed to economic coercion.

Any potential partners looking for future economic cooperation in the In-
do-Pacific must have a clear-eyed understanding of these macro trends as they
seek to develop infrastructure and connectivity in the region.

Considering the issues mentioned above, a common rules-based order is

fundamental to building trust among countries and to building economic
prosperity based on transparency. There are several key areas upon which to
focus:
• Rules-based common standards. The different initiatives for
connectivity all require that the accounting policies of the differ-
ent countries be coordinated and harmonized. By improving trans-
parency, we can better promote cross-border investment financing.
Canada can provide deliverable and sustainable good governance
tools to facilitate this process.

• Focusing on norms and values while cooperating on China.

China should not be excluded. It should be involved in the many
on-going initiatives with the aim of improving the quality of infra-
structure projects under the BRI and coordinating them with oth-
er initiatives. Third country cooperation between Japan and China
may be a template for other middle powers to duplicate.

• The Partnership on Sustainable Connectivity and Quality In-

frastructure. Japan and the European Union are currently engaged
in the Partnership on Sustainable Connectivity and Quality Infra-
structure (EU 2019). The EU and Japan should work to expand
their international people-to-people exchanges with Southeast Asia
states and China. For instance, by increasing exchanges between
institutions in higher education, they will be able to create pro-
fessionals with a shared regional and global vision. One concrete
example is to connect with the ASEAN University Network, which
consists of 26 leading universities across the region and provides
exchange and placement opportunities for both staff and students
to study and learn.

56 CONTRIBUTOR, BYSTANDER OR CASUALTY? | October 2021

Stephen Nagy is a senior associate professor at the International Christian University
in Tokyo, a senior fellow at the Macdonald-Laurier Institute, a fellow at the Canadian
Global Affairs Institute, and a visiting fellow with the Japan Institute for International
Affairs. Twitter handle: @nagystephen1.

Giovanni Catino graduated from the International Christian University in Tokyo with
an MA in International Relations. Currently he is a PhD candidate focusing on the
Belt and Road Initiative, China-EU relations, and economic development in the Indo-
Pacific.

References

Brands, Hal, and Charles Edel. 2021. “A Grand Strategy of Democratic Solidarity.”
Washington Quarterly 44, 1: 29-47. DOI: 10.1080/0163660X.2021.1893003.

Chong, Ja Ian. 2020. “The Challenges in Resetting US–Southeast Asia Rela-

tions.” East Asia Forum, December 10. Available at https://www.eastasiafo-
rum.org/2020/12/10/the-challenges-in-resetting-us-southeast-asia-relations/.

Ekman, Alice, Françoise Nicolas, Céline Pajon, et al. 2019. China’s Belt &
Road and the World: Competing Forms of Globalization. Études de l’ifri
[French Institute of International Relations]. Available at https://www.ifri.org/
en/publications/etudes-de-lifri/chinas-belt-road-and-world-competing-forms-
globalization.

European Union [EU]. 2019. “The Partnership on Sustainable Connectivity

and Quality Infrastructure between the European Union and Japan.” Press
Release. European External Action Service, EU, September 27. Available at
https://eeas.europa.eu/headquarters/headquarters-homepage/68018/part-
nership-sustainable-connectivity-and-quality-infrastructure-between-europe-
an-union-and_en.

European Union [EU]. 2021. “EU Strategy for Cooperation in the Indo-Pacif-
ic.” European External Action Service, EU, April 19. Available at https://eeas.
europa.eu/headquarters/headquarters-homepage_en/96741/EU%20Strate-
gy%20for%20Cooperation%20in%20the%20Indo-Pacific.

Organisation for Economic Cooperation and Development [OECD]. 2018.

OECD Business and Finance Outlook 2018. OECD Publishing. Available at
https://doi.org/10.1787/9789264298828-en [paywall].

October 2021 | CONTRIBUTOR, BYSTANDER OR CASUALTY? 57

 Stanzel, Angela. (2016). China’s Investment in Influence: The Future of 16+1
Cooperation. European Council on Foreign Relations. Available at https://css.
ethz.ch/en/services/digital-library/publications/publication.html/ee8004de-
d063-4404-a694-ba9646e7b9d8

Tian, Nan and Fei Su. 2021. A New Estimate of China’s Military Expenditure.
Stockholm International Peace Research Institute [SIPRI]. Available at https://
www.sipri.org/publications/2021/other-publications/new-estimate-chinas-mil-
itary-expenditure.

Tomotaka, Shoji. 2020. “ASEAN’s Growing Concern About China’s Assertive

Stance in the South China Sea.” International Information Network Analysis,
October 6. Sasakawa Peace Foundation. Available at https://www.spf.org/iina/
en/articles/shoji_12.html.

58 CONTRIBUTOR, BYSTANDER OR CASUALTY? | October 2021

October 2021 | CONTRIBUTOR, BYSTANDER OR CASUALTY? 59
 Ideas change the world
WHAT PEOPLE ARE SAYING ABOUT MLI

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