Why Vanuatu is important for US and China?

Vanuatu's economy has historically relied on subsistence agriculture, as well as a complex system of exchange both within and among its islands (Adams & Foster, 2019). The establishment of European plantations in the island group after 1867 brought about significant economic transformations. Following its independence, Vanuatu's primary sources of foreign income have been identified as tourism and offshore financial services. The increasing revenue generated by the tourism industry has garnered the interest of international corporations aiming to transform the land into vacation destinations and other forms of entertainment (IMF, 2023).

Last year, Wang Yi, the Foreign Minister of China, embarked on an eight-day visit to ten Pacific Island Countries (PICs) and eventually jointly organised the second annual China-Pacific Island Countries Foreign Ministers Meeting with Fiji on May 30, 2022. The People's Republic of China's endeavour to advance a comprehensive framework agreement, the preliminary version of which was disclosed beforehand, was unsuccessful in garnering unanimity among the PICs during the assembly. This development has elicited regional apprehensions regarding China's expanding presence in the Pacific islands. However, it has also been perceived as an indication of China's constraints in the area (V., 2022). Looking at the efforts made by China in the region, the United States of America (USA) has ramped up efforts to revive its relations with the PICs intending to counter China’s belligerent presence in the PICs with almost $1.5 billion dollar investment and additional $800 million expanded programs in the region (The White House, 2022).

Strategic Significance of Pacific Island Countries

The Pacific Ocean constitutes 50% of the total oceanic area on Earth and harbours a greater number of marine species than any other oceanic basin worldwide. Additionally, it accounts for 70% of the worldwide fish catch (Holler, 2023). The Pacific Islands are known to harbour the most substantial extant reserves of healthy tuna stocks globally. The region's share of the worldwide tuna catch is estimated to be worth over US$ 2.4 billion (Kumar, 2022). Given that the Pacific Ocean constitutes half of the world's oceanic expanse, its well-being has a direct impact on the world. The Pacific Islands harbour substantial blue carbon reservoirs, which encompass mangroves, seagrasses, and salt marsh habitats, that exhibit remarkable carbon sequestration capabilities and are considered to be some of the most effective carbon sinks worldwide (Bell et al., 2021).

The land area of the islands is relatively small and they are dispersed extensively throughout the expansive equatorial region of the Pacific Ocean. Despite their small size and low population, these states possess some of the largest Exclusive Economic Zones (EEZs) globally. Extensive EEZs offer significant economic opportunities by virtue of their capacity to harness the abundance of marine resources, including fisheries, energy, minerals, and other valuable assets (Hannesson, 2008). Consequently, the preference of certain nations is to be recognised as Big Ocean States, as opposed to Small Island States. Kiribati and FSM, which are both PICs, possess EEZs that exceed the size of India's EEZ (OCS, 2016).

Besides, environmental and economic significance, the PICs have also become a playground for major powers. PICs have been instrumental in the context of significant power competition, serving as platforms for power projection and experimental arenas for the advancement and exhibition of strategic capabilities. During the colonial era, dominant nations engaged in a competitive struggle to acquire authority over these pivotal regions. The Pacific islands served as a significant site of hostilities during World War II, pitting the United States against imperial Japan (Myers, 2020). The geographical isolation of these islands from prominent global population hubs led to the establishment of several significant nuclear weapon testing facilities by the United States, the United Kingdom, and France. Furthermore, the 14 PICs collectively hold a significant number of votes within the United Nations, thereby serving as a potential voting bloc for major powers to garner support from the international community (IFRI, 2022).

China’s Relations with PICs and Vanuatu

The diplomatic relations between China and Vanuatu, which were established in 1982, have facilitated mutual development over the course of four decades. The nations entered into a collaborative agreement in 2019 as part of the Belt and Road Initiative (BRI) proposed by China. In recent times, the two parties have entered into over 10 agreements pertaining to areas such as fishery, maritime affairs, science and technology, civil aviation transportation, infrastructure, and police exchanges and cooperation. These efforts have been aimed at fostering comprehensive and practical exchanges and cooperation between the parties (Jingyi, 2022). Based on the findings of the Lowy Institute's study, it can be inferred that with the exception of Vanuatu, no Pacific country has incurred fresh financial obligations from China since the year 2018 (Pryke, 2020).

The year 2021 saw China exporting goods worth $87.6 million to Vanuatu. China's primary exports to Vanuatu consist of Large Construction Vehicles ($3.92M), Rice ($3.05M), and Iron Cloth ($2.9M). Over the course of the past 26 years, there has been a notable increase in the exports of China to Vanuatu, with an annualised growth rate of 16.3%. Specifically, the value of exports has risen from $1.73 million in 1995 to $87.6 million in 2021. Over the course of the past 26 years, Vanuatu's exports to China have demonstrated an annualised growth rate of 36.2%, rising from $3.6k in 1995 to $11.2M in 2021 (OEC, 2023). The Pacific Islands region is witnessing an increasing influence of China, primarily manifested through its significant aid endeavours. According to the Lowy Institute, a research organisation based in Sydney, China's development assistance reached its highest point in 2016. However, between 2011 and 2017, China's loans and grants constituted 8% of all foreign aid to the region, which exceeded the United States contribution of 0.3% during the same period (Pandalai et al., 2022). From 2006 to 2017, the People's Republic of China provided a total of nearly 1.5 billion United States dollars in foreign aid to the Pacific Islands region, primarily in the form of grants and loans. Within the identical timeframe, the United States provided a total of 1.5 billion US dollars in economic aid solely to the Republic of the Marshall Islands (Pandalai et al., 2022).

USA’s Bid to Counter China in the Pacific Islands

During the Pacific Island Forum (PIF) meeting held on July 12th, 2022 in Suva, the Vice President of the United States, Kamala Harris, participated remotely. The United States has made supplementary commitments to enhance its involvement with the region. For 33 years, the United States has served as a reliable development collaborator with the Pacific Island Countries (PICs), exemplified by the creation of the "South Pacific Tuna Treaty" (NOAA Fisheries, 2019). This agreement has been a crucial component of the political and economic partnership between the US and the Pacific Islands. According to Harris, the United States is poised to seek an economic assistance package of US$ 60 million over the next decade from the US Congress. This represents a significant increase from current levels and is in response to a recently signed Economic Assistance Agreement with the Forum Fisheries Agency. In 2020, the United States recorded a total of US$ 548 million in goods exports and US$ 420 million in goods imports. On October 15, 2020, a Trade and Investment Framework Agreement (TIFA) was signed between the United States and Fiji (Fiji.gov, 2020). Suva has been awarded microgrants totalling approximately US$ 247,000 with the aim of enhancing economic stability and promoting financial empowerment among women. As part of this initiative, the Academy for Women Entrepreneurs (AWE) has been established to facilitate skill development and networking opportunities (State Dept., 2022). The government of Washington is providing assistance to Suva's indigenous institutions to discover inventive industrial resolutions. This aid is in the form of a fresh grant of US$ 20,000 to the Pacific Tourism Association (SPTO) to collaborate with small tourism enterprises in Fiji, Kiribati, Nauru, Tuvalu, and Tonga (Everett et al., 2018).

In order to enhance the existing bilateral ties, the U.S. Department of State has communicated its intention to the Ni-Vanuatu Government to establish a diplomatic mission in the Republic of Vanuatu, contingent upon Congressional notification. In alignment with the Indo-Pacific strategy of the United States, the establishment of a lasting diplomatic presence in Vanuatu would enable the U.S. Government to enhance its associations with both the officials and the populace of Ni-Vanuatu. The establishment of the U.S. Embassy in Port Vila has the potential to enhance bilateral cooperation and development assistance in various areas, including addressing the issue of climate change. At present, the United States sustains diplomatic ties with the Government of Vanuatu, albeit without a physical embassy located within the country's borders. The individual serving as the Charge d'Affaires, ad interim, stationed in Port Moresby holds accreditation to Vanuatu and undertakes frequent travels to the aforementioned country (US Department of State, 2023).

The United States has entered into a collaborative accord with Pacific island nations, citing apprehension in Washington regarding the escalating Chinese sway. The entity in question has disclosed a sum of $810m (£725m) in financial assistance, in addition to acknowledging the sovereignty of Niue and Cook Islands as independent states. The agreement was signed by a total of fourteen nations, among them the Solomon Islands, despite earlier reports indicating that its leader would abstain from signing. The area holds significant strategic value due to its position as the entry point to Asia from the Pacific. The geographical position of the area in question and its requirement for aid, specifically in addressing the consequences of climate change, have incited a struggle for power, with China expressing a strong interest in assuming a leading position (Tan, 2022).

Escalating Powerplay in the Pacific

In June, Beijing presented a comprehensive trade and security agreement to ten countries in the region. However, the proposal was not implemented as a significant number of nations refused to endorse it. The 11-point declaration put forth by Washington encompasses a range of topics, including but not limited to security and climate change. According to the White House, the agreement was reached in the midst of a progressively intricate geopolitical climate (Tan, 2022). China has exhibited a growing inclination towards discussing security collaboration alongside its economic diplomacy with the PICs. In April of 2022, the People's Republic of China entered into a security agreement with the Solomon Islands that has been the subject of controversy and has elicited concerns within the region. The PICs did not reach a consensus on China's comprehensive and ambitious proposals, resulting in China's inability to secure a collective agreement on the matter. China's increased diplomatic efforts in the PICs have led to a more cautious approach from traditional regional powers such as the United States and Australia, who have historically held significant influence over the area's dynamics (Krishnan, 2022). The United States has initiated a reassessment of its diplomatic agenda pertaining to the region subsequent to the agreement between China and the Solomon Islands. The potential involvement of the United States in galvanising resistance to China's proposed agreement cannot be discounted (Lyons, 2022).

According to Kurt Campbell, the coordinator for the Indo-Pacific at the U.S. National Security Council, the Pacific region is the most probable area where the United States may encounter an unforeseen strategic development from China. Campbell's statement makes a reference to the apprehensions of Washington regarding China's purported attempts to procure military installations in the Pacific, thereby constraining the United States' sway in the area (Brunnstrom & Needham, 2022). This statement also signifies a fundamental apprehension of the United States with regard to the ascension of China in the Indo-Pacific region. In recent decades, China has endeavoured to acquire military, economic, and political sway over minor states and islands in the Indo-Pacific region, thereby engendering a rivalry that Beijing cautions could potentially escalate to tensions comparable to those witnessed during the Cold War (Baruah, 2022).

Conclusion

Vanuatu is just one aspect of the larger geostrategic rivalry surrounding the Pacific Islands. New Zealand, Australia, the USA, Japan and China are some of the primary players in the region attempting to create their presence and influence in the Pacific Island countries. The region is not only an important part of the USA and Chinese foreign policy, but it also has larger geostrategic consequences for the Indo-Pacific region. The Pacific islands are not mere instruments in the geopolitical competition, but rather autonomous actors with the capacity to exert influence. The government has exhibited an increased level of prudence in their interactions with foreign entities and has demonstrated greater proficiency in securing advantages that align with their country's interests. The diplomatic efforts of China exhibit both advantageous and disadvantageous aspects. The Pacific Island states are significantly attracted to the infrastructure support, expedited approval and delivery, government scholarships, and technical training offered by the entity in question.

References

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Pic Courtesy-Monica MG at unsplash.com

(The views expressed are those of the author and do not represent views of CESCUBE.)