The future of the region: Merchants or missionaries? CURIOUSLY ENOUGH, AN American company called Atlantic has spent the past 30 years doing thriving business across the Pacific. Based in California, it sends orders to Chinese factories to produce small items of furniture. Its founder and CEO, Leo Dardashti, is sticking with China as a manufacturing base despite rising costs because of the mutual trust between him and his factory owners there. But he also believes China and America make a unique fit: "There is no country in the world that has the buying power of the United States and no country that has the production power of China." If he needs 400,000 items within a few months to sell in stores across America, only China has the scale to provide them, he says. He travels to China frequently, sometimes as often as once a month. The friendships he has established with the people who make his goods are the foundations of his business, he says. It is not just eye contact and smiles. As I sit in their factory, I'm a relatively big buyer, but I have to be careful how I play that game. I have to make them like me, tell them what my values and goals are, offer them a good deal. It's all about negotiation. Negotiation is an art he believes the leaders in Washington and Beijing should develop in their dealings with each other, too. Instead, they appear to be drifting further apart. As the Chinese see it, America is becoming increasingly bossy, and as the Americans see it, China is becoming a bully with its neighbours, some of whom are loyal American allies. Singapore is a good place from which to observe this tension. It wants a strong American presence in the region as a counterweight to China but also tries to see things from China's perspective. Singaporean scholars say one of the main difficulties with the United States is the "universality" of its belief system - the idea that there are universal values such as human rights. With China the problem is its history, which stretches back so far it also comes close to being seen as a universal truth. Wang Gungwu, chairman of Singapore's Lee Kuan Yew School of Public Policy, says China is particularly irritated by America's sense of the immutability of its superpower status, especially in a region that China has historically considered its own sphere of influence. He acknowledges that America freed the region from Japanese imperialism and stopped the spread of communism, but in China's eyes that does not entitle it to an eternal hegemony in its backyard. It would like its own status as a rising power to be registered. The idea of the status quo for ever and ever is so alien to the Chinese way of thinking. Throughout their history the only norm is change. Another source of tension is rules. For China and other parts of Asia the idea that Western rules on issues like freedom of the seas, democracy and human rights are set in stone is anathema, says Mr Wang. Nothing is absolute, everything is negotiable. The region's history, with imperialists and missionaries arriving on the same ships, has made it wary of absolute values. "We understand that the Western idea of rules stems from a long legal tradition, but practical people recognise that laws change," he explains. In his view, America's businessmen understand this; its "political missionaries" do not. Dream or nightmare? Yet China is just as dogmatic, especially in its political system, and also in its treatment of its neighbours. Mr Kausikan, Singapore's ambassador-at-large, attempts to justify China's "grave suspicion" about Western attitudes to universality, explaining that its government is attempting to maintain internal stability at a time of unstable public opinion. For the rulers, that means keeping the Chinese Communist Party in power. Mr Kausikan also accuses China of projecting a "virulent nationalism" based on supposed historical claims that is causing alarm in its neighbourhood. He asks whether China will pursue sovereignty through commonly agreed norms or by use of force. "It is this, more than any other single factor, that will determine whether the "China dream" will become the region's nightmare. The record is mixed and China has not behaved consistently. Great powers have a responsibility to reassure that China has only partly fulfilled. As this report has argued, the Pacific is a place of networks and interconnections. That connectivity has become stronger on both sides of the ocean, partly because smaller countries need to link up to provide a counterweight to the big powers in their regions, and partly because they need to tie their fortunes to their big neighbours in order to become indispensable to them. That is as true of South-East Asia and China as it is of parts of Latin America and the United States. In the next decade or two, these linkages are likely to become more trans-Pacific in nature, partly because the Chinese growth engine is slowing. East Asian investment in the Americas will increase in a bid to get closer to the big market of the United States. Japan and South Korea may be keen to diversify their trading relationships to become less dependent on China. A China concerned about its economic future could behave belligerently. But given its interest in maintaining domestic stability, it is more likely to see trade agreements with its Pacific neighbours as a way of securing that stability, much as the European Coal and Steel Community of 1951, which brought together Germany and France, two old antagonists, laid the foundations for the European Union. America and China are also bound together by a mutual dependence. In fact, as Mr Kausikan points out, that may deepen the strategic distrust between them. Taken to its extreme, it could be the Pacific's economic equivalent of the mutually assured destruction in the Atlantic that helped prevent the cold war from turning into a hot one. But it is less grim. China, for all is assertiveness, shares elements of the Western market model that the Soviet Union did not. America and China hold strategic dialogues on economic and military matters. They are negotiating a bilateral investment treaty that American officials say is economically ambitious for China. According to a recent poll of opinion leaders around Asia by the CSIS, 83% of the Chinese ones think America will still be their country's most important economic partner in ten years" time. If America wants to nudge China towards becoming a "responsible stakeholder" in the world, helping shore up the system that guarantees free trade and free seas, it may also have to accept that its own relative power in the Pacific region is in decline. This may mean taking potentially risky strategic decisions; for example, allowing its post-war security alliances with Japan and South Korea to mature into more equal partnerships. It could also mean allowing regional security alliances to prosper without America as the hub around which they revolve. If these include China, so much the better. As in all successful negotiations, both America and China need to engage in give and take. With such a spirit, the Pacific age could create new rules and institutions fit for the 21st century. As Mr Dardashti pragmatically puts it: "We need those guys, and they need us."