Commerce with competitors: Economic interdependence, vulnerability and security policy in contemporary East Asia

Abstract

Under what conditions does economic interdependence render contemporary East Asian states vulnerable to China, and when can interdependence actually affect these states' security policies? Existing measures do not accurately account for the microfoundations of interdependence, and miss the reality that modern production and trade have evolved from traditional bilateral movements of final goods to vertically fragmented transnational production networks and trade in intermediate inputs. Interdependence generates vulnerability through asymmetry, and I propose a novel theory of asymmetry and operationalize interdependence according to an economy's specialized profile in the transnational production network. I hypothesize that certain types of production profiles face greater potential losses from disruption of the bilateral relationship because of the specificity of their economic linkages with China, thereby increasing their vulnerability. I also test the hypothesis that economic vulnerability causes accommodating security policy. Case studies of East Asian states' bilateral relations with China between 2002-2013, loosely structured as two paired comparisons--Japan and the Philippines, Singapore and Australia--provide confirmatory evidence that specialized production profile is a superior measure of interdependence and vulnerability, but that the political salience of security issues limits the influence of economic interdependence on security policy.