The Effectiveness of Minor Powers’ Hedging

Strategy: Comparing Singapore and the Philippines*

Ryan Yu-Lin Liou**1

S. Philip Hsu***

Abstract

Many Southeast Asian countries are known to employ hedging strategies toward

an emerging new regional order. We explore hedging and other strategic concepts, and

how effective minor powers’ hedging are. Prior research suggests that lesser powers in

Southeast Asia will benefit more by hedging, but little empirical evidence has been

offered to support this claim. By underestimating the influence of domestic actors and

enduring rivalry, the hedging thesis might overestimate the effectiveness of hedging

and find no variation among Southeast Asian states. Singapore and the Philippines serve

as two cases to examine and compare the effectiveness of minor powers’ hedging. We

find that Singapore and the Philippines both have acquired economic and security

benefits from China and the United States. However, the Philippines has the South

China Sea dispute with China and domestic constraints, so it is less successful than

Singapore particularly in advancing security relations with China.

*Please do not cite this draft without the authors’ permission. **PhD student, the Political Science and International Affairs Program, University of Georgia, USA.

Email: ryanliou@uga.edu ***Professor and Department Chair, Department of Political Science, National Taiwan University, Taiwan.

Email: schsu01@ntu.edu.tw

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Introduction

Since the mid-1990s, there has been considerable research exploring China’s rise

and how Southeast Asian (SEA) countries respond to the emerging regional order, an

order which is now shaped mainly by China and the United States. Nevertheless, debate

continues regarding SEA states’ strategies toward China and the United States. In the

shadow of China’s growing military and economic power, several SEA countries try to

keep relations open with major powers in this region. For example, while Vietnam is

China’s “friend,” it has enhanced its relations with the United States in recent years.

Regarding current discussion on these lesser powers’ strategic responses, hedging is the

most significant topic. Hedging has been considered a strategy to allow a country to

maximize its benefits by avoiding overt commitment to big powers and choosing sides

among these powers (Acharya 2003; Ciorciari 2010; Goh 2005; Kuik 2008, 2016;

Weitsman 2004, 32). On the one hand, Singapore, Malaysia, the Philippines, Thailand,

Indonesia, among others, are the widely recognized as hedgers between China and the

United States. On the other hand, Cambodia and Laos are the prime examples of not

adopting hedging due to their unambiguous alignment with China.

Although hedging is widely recognized as the optimal as well as most popular

strategy in Southeast Asia, little is known about: i) what the differences are between the

concept of hedging and other strategic concepts; and ii) how effective SEA countries’

hedging strategies are. This paper aims to address these questions. Moreover, much

scholarship suggests that SEA countries will benefit more from a hedging strategy, but

little empirical evidence has been offered to support this claim. The question of whether

hedging help countries maximize returns remains unresolved. This paper thus attempts

to examine the relatively underexplored issue, that is, the effectiveness of minor

power’s hedging. Prior research mostly overlooks the effects of domestic politics and

enduring rivalry with target states, which may account for the variation of hedging’s

effectiveness in Southeast Asia. By underestimating the influence of domestic actors

and enduring rivalries (e.g., territorial disputes), the hedging thesis might overestimate

the effectiveness of hedging and find no variation among hedgers. Additionally, this

paper covers some gaps in much of the literature by examining SEA countries’ relations

with China and the United States on both the economic and security dimensions.

We make two central claims. First, we contend that overstretching the hedging

concept will undermine its analytical rigor and make almost every country a hedger.

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We clarify hedging as combining different tools, separating issue areas, and

diversifying target states and thus hedging distinguishes itself from the other strategic

concepts, i.e., balancing and bandwagoning. Second, we present evidence indicating

that Singapore and the Philippines have acquired economic and security benefits from

both China and the United States, but there are visible differences in these benefits

between the two countries. These minor powers in Southeast Asia have enhanced

security ties with the United States and obtained economic benefits from China.

However, while many studies claim that a hedger can maximize national interests from

the United States and China, we argue that hedging does not necessarily translate into

these results because domestic politics and enduring rivalry could constrain the

hedging’s effectiveness. Our findings suggest that although the Philippines has reaped

benefits from China and the United States, its hedging effectiveness was moderated by

its domestic politics and enduring rivalry with China. Therefore, we argue that the

Philippines’s hedging is less effective than Singapore’s.

The Debate on SEA Countries’ Responses to the Emerging New Order

There are three main propositions regarding SEA countries’ strategic responses to

the emerging new order shaped by China’s rise. The first proposition is the balancing

viewpoint, which is primarily based on the balance of power theory. It argues that most

SEA countries, especially maritime countries, are balancing or will balance China by

taking advantage of security cooperation with the United States, because of the lack of

trust in China and the influence of geopolitics (Emmers 2003; Friedberg 2011; Ross

1999, 2006). The second viewpoint on SEA-China relations is bandwagoning. In

contrast to the balancing proposition, the bandwagoning perspective is partly derived

and revised from the hegemonic stability theory. The bandwagoning viewpoint posits

that SEA countries will bandwagon with China and that China will play a leading role

in Asia mainly due to historical experiences (Tributary System), a huge power

asymmetry, shared culture and ideas, and China’s recent successful policies (Kang

2003a, 2003b, 2007; Womack 2003).

Moving beyond the realist approach adopted by the balancing and the

bandwagoning viewpoint, the third position is the hedging perspective. The hedging

proposition functions as a bridge between the other two arguments, contending that the

dichotomy between balancing and bandwagoning is static, and introducing a more

dynamic analytic framework that combines indirect balancing, engagement, and

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bandwagoning concepts. The hedging viewpoint recognizes the coercive measures used

by many SEA countries in addition to acknowledging the cooperation and positive

aspects of SEA-China relations. For instance, Amitav Acharya refutes the

bandwagoning viewpoint by giving examples of SEA countries’ military modernization,

and by arguing that trade and investment acceleration in Southeast Asia with China are

not a product of strategic bandwagoning but of economic pragmatism. He further claims

that through regional institutions and continuing dialogues, SEA countries may acquire

high-level autonomy and the capacity to socialize China (Acharya 2003, 2014).

Slightly different from Acharya’s argument, Evelyn Goh considers Southeast Asia

a less active and symmetrical player. Goh’s findings suggest that the United States is

still the dominant power in the region, and thus SEA countries will take advantage of

the public good provided by the United States and preserve the current hierarchy led by

the United States. Goh holds that SEA countries have deployed the “enmeshment”

strategy to increase the target states’ stakes, especially China’s, in regional or

international order (Goh 2007, 2013). Overall, the hedging perspective posits that SEA

countries have two goals: First, to obtain greatest benefits by engaging with China (e.g.,

through institutions and economic linkages) as well as through indirectl balancing (i.e.,

by maintaining close ties with the United States). A second consideration is to seek

more freedom of action by expanding the strategic options (Fiori and Passeri 2015;

Khong 2004; Kim 2016; Kuik 2008; Manning and Przystup 1999; McDougall 2012;

Medeiros 2005; Tan 2012) (see Table 1).

Table 1. Debate on SEA Responses to the Emerging New Order

Balancing Bandwagoning Hedging

Analytical

Foundations

Balance of

Power Theory

Revised Hegemonic

Stability Theory

Balance of Power,

Institutionalist,

Interdependence

Assumption of

Structure Anarchy Hierarchy led by

China

Highly Fluid and

Uncertain

Main

Arguments/

Predictions

SEA countries,

especially

maritime

countries, will

balance

against China

by cooperating

with the

United States.

Due to power

asymmetry,

historical and

cultural factors,

SEA states are

willing to live in a

stable hierarchical

system led by

China.

Because many SEA

countries engage

China with caution,

they maintain security

ties with the United

States and avoid

choosing sides. In this

way, SEA hedgers can

maximize their

interests.

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While insightful, these three arguments regarding SEA countries’ strategic

response have some limitations. The balancing viewpoint ignores the “positive-sum

game” trend after the Cold War and places too much emphasis on coercion; thus, it

cannot fully explain the SEA countries’ flexible and diverse responses to China’s rise.

The central problem with the bandwagoning argument is that it is easy to take a county’s

cooperation with great powers as bandwagoning. However, cooperation in economic

and political areas does not mean compromise with China. In addition, policy and

strategy are at different levels; thus, some SEA countries’ compliant policies cannot be

considered as a bandwagoning strategy. The hedging perspective has captured the fluid

dynamics of today’s Asian order by addressing both the cooperative and coercive

dimensions and coping with the US’s security role. Additionally, SEA countries’

moderate defense spending and military modernization since 2000 support the hedging

perspective. We can also see the Philippines, Singapore, and others are hedging on

specifics. Therefore, the hedging perspective is the most convincing argument within

the current debate.

However, while various hedging studies suggest that those SEA countries can

benefit hugely from hedging strategy, remarkably little empirical research has tested

this claim. Further, there is insufficient research on the differences in the SEA countries’

hedging effectiveness. Hence, this paper has two aims. First, to clarify the concept of

hedging; and second, to assess the effectiveness of SEA countries’ hedging by focusing

on the cases of Singapore and the Philippines.

Discussion of Lesser Powers’ Strategies

The literature on smaller country’s strategies toward great powers falls into four

types: challenging type, compromising type, cooperative type, and combining type. The

challenging type mainly includes balancing (Walt 1987; Waltz 1979) and soft balancing

(Nexon 2009, 340–47; Pape 2005; Paul 2005). Their major features are to use coercive

policy tools and to challenge the existing order. In contrast, the main feature of the

compromising type is to concede to great powers in order to avoid conflicts or to reap

greater benefits. This type includes bandwagoning, appeasement, buck-passing, and

accommodation (Christensen and Snyder 1990; Kang 2007; Mearsheimer 2001, 157–

62; Schweller 1994).

As for cooperative strategies, they primarily entail engagement, binding, and

transcending, and their features are employing non-coercive policy tools (e.g.,

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multilateral institutions) to overcome the anarchy structure or even shape the great

powers’ preferences (Schroeder 1994, 117; Schweller 1999, 13–15; Schweller and

Priess 1997, 8–9). Hence, while both are non-coercive, cooperative strategies are more

proactive than compromising strategies.

Lastly, enmeshment and hedging can be categorized as combining because both

strategies employ cooperative instruments and coercive instruments simultaneously

(Ciorciari 2009, 167–69; Goh 2007, 120–27; Khong 2004, 172–92). Although these

two strategies maintain coercion to cope with target countries, they are different from

balancing and soft balancing because they do not intend to challenge the existing order.

Because these four types of strategies have common ground, we simplify our discussion

into three major strategies: balancing, bandwagoning, and hedging in the later context.

Clarifying the Concept of Hedging

Borrowed from the field of finance, hedging is employed to lessen risks and avoid

fluctuations via multiple tools. However, the concept of hedging has been significantly

extended in international relations in recent scholarship, and it seems that hedging can

explain every country’s foreign strategy. In the development stage of hedging’s

analytical framework, scholars have gradually integrated different concepts. For

example, Cheng-Chwee Kuik analyzes SEA countries’ hedging by integrating indirect-

balancing, dominance-denial, economic-pragmatism, binding-engagement, and

limited-bandwagoning. He further contends that these “counteracting” policy tools help

smaller powers reduce risks and increase returns (Kuik 2008, 2013, 2016). Similarly,

Le Hong Hiep examines Vietnam’s strategy toward China by dividing hedging into four

elements—hard balancing, soft balancing, economic pragmatism, and direct

engagement. Every element also entails multiple policies (Le 2013).

We draw attention to two mediating factors. First, by stretching the scope, the

concept of hedging in most literature is so broad that analytical rigor is undermined. By

integrating almost every relevant strategic element into hedging, such an analysis

becomes “unfalsifiable.” For example, in Kuik’s lines of reasoning, Malaysia is a

hedger even though it adopts limited bandwagoning, engagement, and indirect

balancing (Kuik 2016). If this is the case, however, then Laos and Cambodia would also

be treated as hedgers. This definition does not distinguish hedgers from non-hedgers.

Second, existing studies consider hedging a mixed strategy of balancing and

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bandwagoning. However, the coexistence of cooperation and discord in international

politics is a normal phenomenon. The “counteracting” policies or cooperation cum

conflict do not equate to a hedging strategy. We argue that researchers should avoid

vague definitions of hedging. The combination of policy tools does not necessarily

represent the use of hedging. The requirement of hedging is being able to pass on risks

to others. For example, many SEA countries pass most of their security risks and

burdens to the United States because the latter provides public goods (e.g., freedom of

navigation) and takes on primary responsibilities to keep China in check. Thus, these

minor powers in Southeast Asia can hedge on specifics and avoid primary balancing

burden and war risks. We contend that hedging has three elements. As well as the

combination of policy instruments, there are two other essential components in hedging:

the separation of issue areas and the diversification of targets/partners. We will illustrate

this below.

To address the issues caused by the over-extension of hedging, Lim and Cooper

offer a critical and solid analysis of the hedging concept by redefining hedging as

sending an ambiguous alignment signal to great powers and then they examine four

cases: Japan, Australia, Vietnam, and Singapore. By narrowing the hedging scope to

the security domain, however, their findings unsurprisingly show that the United States

is the SEA states’ top strategic choice. Yet they go too far in excluding the economic

importance in order to maintain focus on traditional security (Lim and Cooper 2015).

By neglecting the economic factors, however, the hedging concept lacks analytical

value in spite of shrinking the scope. The main reason is that economic consideration

is crucial for SEA countries, whose economic performances are the foundations of

regime stability (Chan 2013). The Asian financial crisis in 1997 provides a clear

example of economic factor. Therefore, the economic dimension must be included so

that the hedging framework remains meaningful and useful. This paper will examine

hedging from both security and economic perspectives. We also do not agree with Lim

and Cooper that non-US treaty ally and minor/no security dispute are the necessary

components of hedging states. Like Thailand and the Philippines, while being the US

allies, they still can employ hedging. In the next section, we aim to clarify hedging by

identifying hedging’s implications.

Combination of Policy Tools and Separation of Issue Areas

Most recent scholarship considers hedging to be either an amalgamation of

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coercive and cooperative measures or a combination of balancing and bandwagoning.

However, combination does not capture all aspects of hedging. A country that simply

combines different tools cannot be defined as a hedger because, by that loose definition,

almost every country would be a hedger. We argue that there is another essential

element in hedging: the separation of issue-areas. A hedger will attempt to align with

other countries on different issues by taking advantage of the latter’s niches. Thus,

numerous SEA hedgers choose to cooperate with China in the economic realm but

prefer to treat the United States as their security protector. The issue areas of interaction

between SEA and other major countries include traditional security, non-traditional

security, trade, investment, finance, aid, and so on. As for the policy tools of SEA

countries, they range from coercive to cooperative options, including military

modernization; low-intensity coercion (e.g., military exercise with the third party);

limited security collaboration (e.g., Confidence-Building Measures [CBMs]); financial

cooperation; and warm trade and investment linkage. Due to the growing nature of the

non-zero-sum game in Asia, issue areas become more diverse, thus accommodating

multiple actors.

Diversification of Target States

Additionally, hedgers intend to diversify their target states to expand strategic

space. The selection of targets is based on the targets’ strengths and characteristics.

Most SEA countries’ primary targets are the United States and China, while other

countries, such as Japan, the EU, and India, are considered secondarily important. For

SEA economies, China can be their economic engine by promoting trade and

investment. While China’s economic role has become more central in Southeast Asia,

the United States maintains the indispensable security role in the region (Cha 2010,

2017; Chan 2013, 161–81; Sutter 2010, 53–54). On the other hand, some SEA mainland

countries (i.e., Cambodia, Laos, and Myanmar) principally look to China for their

security and economic resources. As for Thailand, its trade dependence on China has

grown as its dependence on the United States has gradually waned. Moreover, although

Thailand remains as a military ally of the United States, it has started to increase

security exchanges with China. In a similar vein, while Vietnam has close ties with

China, it has significantly improved relations with the United States in recent years. As

for SEA maritime countries, such as Japan, Taiwan, the Philippines, Singapore,

Malaysia, and Indonesia, they still see the United States as playing a vital security role,

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while their economies depend more on China.

By building on the existing hedging literature, this article advances a more

rigorous definition of hedging as combining different tools, separating issue areas, and

diversifying target states. Thus, hedging distinguishes itself from other strategic

concepts, i.e., balancing and bandwagoning.

Case Selection

Although the literature employs hedging concept on SEA countries, this paper

focuses on only Singapore and the Philippines. These two countries are selected as the

two “least likely” cases. As Table 2 and Table 3 indicate, they both are the closest

strategic partners of the United States among the SEA maritime countries. It is believed

that if two countries are in different political-military camps, it is less likely to have

close trade linkage between them due to the negative security externality concern. That

is, political-security alignment will influence economic ties (Gowa 1994). Among the

SEA countries, Singapore and the Philippines are clearly under the US security

umbrella. Consequently, if Singapore and the Philippines can on the one hand, maintain

close relationship with the United States and even enhance this linkage, and on the other

hand successfully benefit from China and hedge between China and the United States,

we could argue that hedging thesis is more persuasive.

Table 2. The Sum of China’s/ the US Arms Imports, 2002-2014

Millions of US Dollars

China US

Singapore 0 5028（58.21%）

Malaysia <0.5（0.13%） 114（2.86%）

Indonesia 191（4.18%） 325（7.11%）

Brunei 0 73（15.24%）

the Philippines 0 236（71.95%）

Vietnam 0 0

Thailand 96（5.37%） 472（26.38%）

Myanmar 1097（41.32%） 0

Laos 37（42.05%） 0

Cambodia 114（45.42%） 0

Notes: The numbers in parentheses represent the dependence of arms transfers on the target

countries.

Source: Calculated from SIPRI Arms Transfers Database,

http://armstrade.sipri.org/armstrade/page/values.php.

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Table 3. SEA Counties’ Security Linkages with the US

Defense

Agreement

Military

Deployment Other Commitments

Treaty

Ally

the

Philippines

1951Mutual

Defense Treaty;

1998 Visiting

Forces Agreement;

2002 Mutual

Logistics Support

Agreement; 2014

Enhanced Defense

Cooperation

Agreement

(EDCA)*

Deploy forces to

PH’s bases on a

rotational basis;

Joint Special

Operations Task

Force-

Philippines; P-8

Poseidon Patrol

Aircraft

MNNA; sales on

coastguard cutter and

frigates; assist in

modernizing PH’s

army; assist to enhance

PH’s maritime domain

awareness conduct

patrol in South China

Sea; IMET;

intelligence sharing

Yes

Singapore

2005 Strategic

Framework

Agreement for a

Closer Cooperation

Partnership in

Defense and

Security

Forward

Operating

Sites(FOS); Four

Littoral Combat

Ships*; P-8

Poseidon Patrol

Aircraft**

PSI; MNNA***; help

to upgrade equipment;

military training and

intelligence sharing

Not

formal,

yet

quasi-

ally

Thailand

1954 Manila Pact;

1962 Rusk-Thanat

Communiqué; 2012

Joint Vision

Statement for the

Thai-U.S. Defense

Alliance

N.A. MNNA; IMET;

intelligence sharing Yes

Malaysia N.A. N.A.

Assist in advancing

Malaysian maritime

domain awareness

(e.g., offer coastal

surveillance radar

system to Malaysia);

IMET

No

Indonesia

2005 Framework

Arrangement on

Cooperative

Activities in the

Field of Defense

N.A. IMET No

Brunei N.A. N.A. PSI No

Vietnam N.A. N.A.

Shore up Vietnam’s

maritime security

capacity; transferred 5

patrol vessels and

partially lift arms

embargo; provided

FMF for Vietnam since

2009; IMET; PSI

No

10

Defense

Agreement

Military

Deployment Other Commitments

Treaty

Ally

Myanmar N.A. N.A. IMET**** No

Laos N.A. N.A. IMET No

Cambodia N.A. N.A.

Assistance on military

equipment; vehicle

maintenance and

logistical management

training; IMET

No

Note: MNNA: Major non-NATO Ally; FMF: Foreign Military Financing; IMET: International Military

Education and Training; PSI: Proliferation Security Initiative.

*not yet in force, but the Philippines’ highest court has approved this deal on January 13, 2016.

**in plan

***US designated, but Singapore declined.

****since 2015

Source: Rinehart (2015); Manyin (2014), Chanlett-Avery et al. (2015), Vaughn (2011); Lum (2013),

U.S. Department of Defense (n.d.).

Variables

Dependent Variables

The dependent variable in this paper is the effectiveness of hedging strategy. We

aim to assess and compare the hedging effectiveness of the Philippines as well as of

Singapore. For SEA countries, the implications and niches of the United States and

China are different. While the United States is their security protector, China is their

economic driver, as shown in Table 4.

Table 4. SEA Countries’ Hedging Objectives

Toward

US

Security: a. enhancing strategic ties to avoid being abandoned

b. promoting autonomy to avoid being entrapped

Economy: US’s provision of trade surplus, investment, and crucial

skills, etc.

Toward

China

Security: a. socializing China to reduce the risk of revisionist China

b. advancing relations to avoid conflict and make peace

Economy: China’s provision of export market, supply chain, soft loans

and grants, etc.

Therefore, we evaluate the effectiveness of Singapore’s and the Philippines’s

hedging strategy from two aspects: economy and security. On the one hand, we analyze

the two countries’ trade, investment, and economic arrangements with the US and

China. On the other hand, in terms of security, we examine the security relationships

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between the two countries and the US as well as China.

In economic realm, the primary indicator on testing SEA hedgers’ efficacy is

acquiring economic benefits from China. In addition, SEA hedgers’ secondary objective

in the economic realm is to maintain economic interests from the United States. In

security area, SEA hedgers’ primary objective is to strengthen security ties with the

United States. SEA hedgers’ secondary objective in the security realm is to advance

security relations with China via hedging (see Table 5).

Table 5. The Indicators of Hedging’s Effectiveness

Dimensions Indicators

Economy

Primary:

Acquiring economic benefits from China

Secondary:

Maintaining economic interests from the US

Security

Primary:

Strengthening security ties with the US

Secondary:

Advancing security relations with China

Independent Variables

The independent variables include hedging strategy, domestic politics, and

enduring rivalry with target states. Based on the existing literature, we expect that a

hedger will reap economic and security benefits from China as well as from the United

States. We also expect that the more influential the domestic politics in the hedger, the

more difficult it is for the hedger to gain these benefits. Additionally, we expect that if

a hedger has enduring rivalries with target states, it is less likely to obtain benefits via

hedging strategy.

Assessment of the Effectiveness of Hedging

Acquiring Economic Benefits from China and Maintaining Economic Interests from the

United States

From Table 6 and Table 7, we can see the trend indicates both Singapore and the

Philippines are increasingly dependent on China’s market and less reliant on the US

market. From 1995 to 2014, Singapore’s export dependence on China grew steadily

from 2.3% to 12.6%, at an increase of nearly 6 times. On the other hand, Singapore’s

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reliance on the United States declined from 18.3% to 5.9%. Like many SEA states,

Singapore’s export dependence on China has surpassed their dependence on the United

States. As for the Philippines, the share of exports to China in its world exports climbed

from 1.2% to 13.0% from 1995 to 2014, whereas meanwhile its share of exports to the

United States dropped from 35.8% to 14.1%. These numbers suggest that Singapore

and the Philippines have increasingly shifted their major trade focuses from the United

States to China.

In terms of foreign direct investment (FDI), the Unites States remains a key

provider to Singapore and the Philippines, and Thailand in 2012. On the other hand,

China plays a much less important role than the United States in these two hedgers’ FDI

sources (see Table 8).

Finally, as shown in Table 9, both Singapore and the Philippines have successfully

made several economic arrangements with China and the United States. Singapore

concluded China-Singapore Free Trade Agreement (CSFTA), US-Singapore Free Trade

Agreement (USSFTA), and Bilateral Investment Treaty (BIT) between Singapore and

the US. The Philippines, on the other hand, has fewer economic deals with the great

powers than Singapore. It singed BIT and Trade and Investment Framework Agreement

(TIFA) with the US, and joined the US Generalized System of Preferences (GSP).

Additionally, both Singapore and the Philippines joined China-ASEAN Free Trade

Agreement (CAFTA) and Chiang Mai Initiative Multilateralization (CMIM), and they

are the founding members of the Asian Infrastructure Investment Bank (AIIB) led by

China, and the negotiation partners of the Regional Comprehensive Economic

Partnership (RCEP). Singapore also inked the Trans-Pacific Partnership (TPP) (AIIB

n.d.; Chalongphob Sussangkarn 2010; International Enterprise Singapore n.d.;

UNCTAD n.d.; USTR n.d.).1

The developments above show that Singapore and the Philippines have been

incorporated more deeply with China and the United Sates, and have acquired more

economic benefits from trade, investment, and important economic deals. This trend

also indicates that despite having enduring rivalry with China, the Philippines can

obtain economic returns from the China via hedging strategy.

Moreover, the combination of high levels of trade flow, FDI stocks, the integration

1 RCEP is under negotiation and expected to be finished in 2016; TPP signed on February 3, 2016.

13

of production networks, and economic arrangements between Singapore and the

Philippines with China and the United States may also lead to some positive political-

security effects on bilateral relations (Chan 2013; Gartzke, Li, and Boehmer 2001;

Mansfield and Pevehouse 2000; Maoz 2009; Pang 2007). As long as China maintains

policies of reassurance rather than taking a revisionist route, and the United States

maintains a pivot-to-Asia policy, Singapore and the Philippines would continue to take

advantage of the thriving Chinese economy and a stronger US commitment.

Table 6. Share of Exports to China (%)

1995 2000 2005 2010 2014

Singapore 2.33 3.42 8.61 10.36 12.55

the

Philippines 1.20 1.74 9.89 11.09 12.98

Source: Calculated from International Monetary Fund (IMF), Direction of Trade Statistics CD-ROM,

December 2015.

Table 7. Share of Exports to the US (%)

1995 2000 2005 2010 2014

Singapore 18.25 17.31 10.41 6.53 5.91

the

Philippines 35.77 29.85 18.02 14.72 14.13

Source: Calculated from IMF, Direction of Trade Statistics.

Table 8. 2012 FDI Stock from China/the United States

Millions of US Dollars

China US

Singapore 11,646

(7)

87,834

(2)

the Philippines 301

(6)

7,646

(1)

Note: The number in parentheses denotes rank among SEA countries; China’s data do not include

Hong Kong and Macau.

Source: Calculated from UNCTAD FDI/TNC database, “Bilateral FDI Statistics,”

http://unctad.org/en/Pages/DIAE/FDI%20Statistics/FDI-Statistics-Bilateral.aspx.

Table 9. Important Economic Arrangements with China/the US

China US

Singapore CAFTA; CSFTA; BIT; CMIM;

AIIB USSFTA; (TPP)

the Philippines CAFTA; BIT; CMIM; AIIB TIFA; GSP

Note: All included signed agreements and agreements in force.

14

Strengthening Security Ties with the US

Both Singapore and the Philippines have embraced the US security commitment,

public goods (e.g., conducting freedom of navigation operations and maintaining

stability in the region), defense cooperation (e.g., military exercises, military training,

and intelligence sharing), arms transfers, military deployment, and other assistances

(e.g., US Foreign Military Financing).

While the relationship between the Philippines and China has been worsen due to

the dispute in South China Sea, the relationship between the Philippines and the US has

been enhanced. The US has provided the Philippines with three Hamilton-Class Coast

Guard Cutters through its Excess Defense Articles (EDA) in order to improve the

maritime combat capacity of the Philippines. For example, the US has transferred BRP

Gregorio del Pilar and BRP Ramon Alcaraz as well as twelve used F-16 aircrafts to the

Philippines. Moreover, Robert Willard, the then Commander of US Pacific Command,

said that the US would like to expand the presence in Southeast Asia and proposed to

deploy more reconnaissance planes and Littoral Combat Ships (LaGrone 2013; Yap

2011).

In terms of the military modernization, the US has offered the Philippine Coast

Guard training and telecommunication equipment, strengthened its maritime domain

awareness, and enhanced intelligence sharing and interoperability between the US

forces and the Philippines forces. In addition, the US also helped the Philippines

establish National Coast Watch Center. All the efforts are conducive to Philippine

maritime safety and deterrence capability against China in the South China Sea (Agence

France-Presse 2011; De Castro 2011, 249; Manila Bulletin 2013; Philippine Daily

Inquirer 2012; Simon 2012). In 2014, the US and the Philippines even inked a milestone

agreement: Enhanced Defense Cooperation Agreement (EDCA), further expanding US

military presence in the Philippines, such as rotational deployments in Philippine bases

(Thayer 2014; U.S. Embassy in the Philippines 2014).

In 2005, Singapore and the US signed Strategic Framework Agreement for a

Closer Cooperation Partnership in Defense and Security (SFA). This agreement is

significant for advancing Singapore-US security relations. Through SFA, these two

countries have fostered cooperation on anti-terrorism, nonproliferation, joint exercise

and training, intelligence sharing, and defense technology. Moreover, the US has

deployed four Littoral Combat Ships in Singaporean waters, including USS Freedom,

15

USS Independence, USS Fort Worth, and USS Coronado. Singapore has become the

fulcrum of US’s forward deployment in Asia-Pacific (Bitzinger 2011; Huxley 2013).

Additionally, Singapore and the US have conducted a wealth of joint military exercises,

Southeast Asia Cooperation against Terrorism (SEACAT), Cobra Gold, Exercise

Commando Sling, Cooperation Afloat Readiness and Training (CARAT), and Rim of

the Pacific (RIMPAC) (see Table 9).

Advancing Security Relations with China

The bright side of Singapore’s and the Philippines’s relations with China is that

they have improved security relations with China via a series of CBMs, including

annual security consultation, regular joint exercises, or other military exchanges (see

Table 10 and Table 11). Meanwhile, these hedging acts do not harm the US- Singapore

relations and the US-Philippines relations. In addition, both China and the United States

signed ASEAN Treaty of Amity and Cooperation (TAC).

However, there are still some limitations in Singapore’s and the Philippines’s

relations with China and the United States. These limits are mainly due to asymmetrical

capability, the feature of ASEAN soft institutionalism2 , and domestic politics. Even

though a wealth of official statements and initiatives has been issued by China, they

often lack substance. Moreover, the Philippines does not bind China via institutions and

norms as much as the hedging perspective predicts. The South China Sea issue is a hard

test. Although China signed the Declaration on the Conduct of Parties in the South

China Sea (DOC) in 2002, a political document without legal binding, DOC neither

establishes verification and punishment mechanisms, nor copes with thorny issues, such

as resources development and conflict resolution (Storey 2011, 144–50). Additionally,

because China is afraid of SEA countries forming a united front and having greater

bargaining power, it prefers bilateralism rather than a binding multilateral approach to

addressing the South China Sea issue. Thus, the Code of Conduct in the South China

Sea (COC) delays progress. Hedging has not greatly improved the Philippines-China

relations as hedging perspective widely predicts.

Furthermore, despite ASEAN being the key driver and agenda-setter in the

regional institutional building as many scholars argue (Jones 2010; Kim 2012; Stubbs

2014), the soft institutionalism practiced by SEA states may make ASEAN Regional

2 For ASEAN soft institutionalism, see Amitav Acharya (2002); Khong and Nesadurai (2007).

16

Forum (ARF), ASEAN Defense Ministers Meeting-Plus 8 (ADMM+8), and other

ASEAN-driven mechanisms fail to reach a consensus, bind great powers, and manage

conflict in the foreseeable future (Goh 2011, 373–401; Jones and Jenne 2016; Jones and

Smith 2007, 144–69). Meanwhile, in responding to US rebalancing and active

involvement in the South China Sea in recent years, China has become more assertive

in continuing to develop anti-access/area-denial (A2/D2), and even claiming the South

China Sea issue belongs to China’s “core interest” as well as to the core interests of

Tibet and Taiwan (Krepinevich 2009, 22–23; Storey 2011, 78–96; Wong 2011).

Tensions have grown between China and the Philippines in the South China Sea

in recent years. While close economic linkages are sometimes conducive to obtaining

benefits and reducing conflict, they also might lead to asymmetries in dependence and

thus become an important source of influence for big power (Keohane and Nye 2001,

9–16, 196–97). For instance, although the Philippines has enjoyed economic gains from

China in recent years, it simultaneously has born the costs due to asymmetrical

interdependence with China. After the Scarborough Shoal confrontation in 2012, China

took advantage of the Philippines’ high vulnerability, and punished the latter by

resorting to economic sanctions on the major Filipino import to China: bananas (Cuneta

and Hookway 2012). From 2011 to 2014, the Philippines’ ratio of China’s total banana

imports dropped from 91% to 68%.3 These examples suggest a slender chance of China

being compromised with the Philippines in the South China Sea.

Although China has demonstrated restraint since 2002, it is only willing to have

functional cooperation with SEA countries to buy time (Fravel 2011; Storey 1999).

China’s assertiveness in the South China Sea make the argument that China has been

enmeshed or socialized through a hedging strategy seem too optimistic and need to be

examined further. Additionally, SEA countries have been divided by the United States

and China, especially since the United States pivoted to Asia and South China Sea

tensions escalated (Ross 2013, 31–35). For example, due to different attitudes toward

great powers among the ASEAN members and the lack of internal unity, ASEAN was

unable to issue a joint communiqué in the ASEAN Foreign Ministers Meeting for the

first time since its establishment in 2012, and failed again to reach consensus in the

Fourth ADMM+8 in 2015 (BBC 2012; Shoji and Tomikawa 2016, 153–54).

3 Calculated from the ITC Trade Map Database, http://www.trademap.org/.

17

Overall, the South China Sea issue indeed affected the Philippines-China relations,

thereby making the Philippines’s hedging less effective in advancing security relations

with China than Singapore’s. For example, Singapore and China inked “All-Round

Cooperative Partnership Progressing with the Times in 2015,” suggesting their close

relations. The Philippines and China, in contrast, have remained “Strategic and

Cooperative Relationship for Peace and Development” since 2005. This contrast shows

that the enduring rivalry with the target state has negative influence on the effectiveness

of hedging, particularly on advancing security relations with China.

Table 10. The Military Exercise with China/the United States, 2002-2015

China US

Singapore

“Cooperation”-Joint Training

Exercise (2009); Exercise

Maritime Cooperation (2015)

Exercise Tiger Balm (1980), Cobra Gold

(2000), Exercise Commando Sling

(1990); SEACAT; “Merlion”-Naval

Exercise; CARAT (1996); RIMPAC

(2014)

the Philippines N.A.* Balikatan; PHIBLEX; CARAT (1996);

RIMPAC (2014)

Note: a. Only regular exercises counted. b. The numbers in parentheses represent the inaugural year.

*Held Joint Marine Search-and-Rescue Exercise in 2004, but stopped afterward.

Source: Straits Times (2015); Xinhua News Agency (2009); U.S. Marine Corps (n.d.); Commander of

U.S. Pacific Fleet (2014); U.S. Department of Defense (n.d.).

Table 11. Confidence-Building Measures with China

Annual

Security

Consultation

Strategic/Cooperative

Partners

Other

Measures via ASEAN

Singapore Yes (2008)

All-Round

Cooperative

Partnership

Progressing with the

Times (2015)

Port visit,

military

personnel

exchange,

national

defence

report, or hot

line.

ARF (1994); China-

ASEAN Strategic

Partnership for Peace

and Prosperity

(2003); ADMM+8

(2010); informal

China-ASEAN

Defence Ministers’

Meeting (2011);

Expanded ASEAN

Maritime Forum

(2012)

the Philippines Yes (2005)

Strategic and

Cooperative

Relationship for

Peace and

Development (2005)

Note: The numbers in parentheses denote inaugural year.

Hedging Strategy and Domestic Politics

Although hedgers have opportunities to gain more benefits from the great powers,

18

there are abundant cases showing the influence of domestic politics on hedging

effectiveness. The domestic politics factor in Singapore is not as salient as in the

Philippines. The Philippines has protectionist inclinations and highly divided domestic

groups, thus constraining its government’ hedging capabilities. Some of the economic

cooperation deals between the Philippines and China or the United States are stalled or

blocked by domestic players (Naya and Plummer 2005, 294; Solingen 2008, 25;

Tongzon 2005). For instance, despite the Philippines expressed high interests in joining

TPP, the domestic factors, including the degree of liberalization, local regulations, and

interest groups, limit their ambitions to adopt dual tracks: TPP and RCEP, which are

integral for hedgers to reap both benefits from the great powers. In contrast, Singapore

is more maneuverable because of its lack of significant influence of domestic politics.

Also, some studies indicate that nationalism had impacts on Philippine foreign

policies. For instance, in 2004, the Philippines and China singed Joint Marine Seismic

Undertaking (JMSU), agreeing to have joint exploration on natural gas and oil in the

South China Sea. However, because of strong opposition in the Philippines, Philippine

government was forced to cease this cooperation deal (Baviera 2012; Emmers 2010,

75–80, 132; Tan 2010, 42–43). These examples indicate that domestic factors have the

potentials for impeding hedging effects, such as delaying the cooperation process

between the Philippines and China.

Conclusion and Discussion

Overall, we found that Singapore and the Philippines have enhanced security ties

with the United States and acquired economic benefits from China. However, while

prior literature claims that a hedger can maximize national interests from the United

States and China, we found that some factors may constrain the efficacy of hedging.

Hedging’s effectiveness diminished in the Philippines because of its domestic politics

and enduring rivalry, i.e., territorial dispute with China in the South China Sea.

Singapore’s hedging strategy, on the other hand, is more effective because of its lack of

salient effect of domestic politics and enduring rivalry with any great power. In other

words, while both Singapore and the Philippines employ hedging, the enduring rivalry

with China and domestic politics in the Philippines make its effectiveness different from

Singapore.

Our analysis extends existing literature on hedging and on SEA countries’ relations

19

with China and the United States. First, we offer contributions to the research on the

hedging concept, which has not been clearly defined nor thoroughly explored in terms

of its the differences from other well-developed strategic concepts. We clarify hedging

as a strategy combining different tools (e.g., military modernization cum warm trade

exchanges), separating issue-areas (e.g., traditional security, non-traditional security,

trade, and investment), and diversifying target states (e.g., the United States and China).

Second, we argue that specific areas show different results. In the economic realm,

minor powers in SEA can reap benefits from China and the United States. Moreover,

as the case of the Philippines indicates, even though having the enduring rivalry with

China, the Philippines still can reap economic returns from China via hedging. On the

other hand, in the military-security area, due to the South China Sea issue and domestic

constraints, the Philippines gained fewer benefits than in the economic realm. Therefore,

this paper suggests that future examinations of strategic ties between SEA hedgers and

major powers need to consider the separation of issue areas and the influence of

domestic politics and structural factors (e.g., enduring rivalry with great powers).

This research addresses only a few aspects of the larger set of issues related to

hedging and SEA’s relations with China and the Unites States. Some important

questions that merit further examination include the factors that account for minor

powers’ preference for hedging and their openness to change. Will hedging stop because

the relations between the United States and China worsen? Why, when and how does

hedging cease? These are questions worth future research.

20

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