China and Japan have a strong economic relationship, but the Senkaku/Diaoyu islands have become a symbol of the tensions and misunderstandings that define the bilateral political relationship. This crisis may even have the potential to spark full-blown conflict.

According to the liberal theory of international relations, peace should prevail among freely trading nations. But free trade is not the only criterion for peace. To guarantee peace, Japan and China must trust each other, not just trade with one another. On that note, China and Japan might want to think about why the European Union was recently awarded the 2012 Nobel Peace Prize.

For the better part of the 19th and 20th centuries, sovereignty over the French town of Strasbourg has been a matter of contention between France and Germany. France and West Germany were lucky enough to be on the same side in the Cold War, and in 1957 they were among the founding members of what would later become the European Union. Since then, European institutions have helped build trust among European nations. There is now a shared narrative of history between Paris and Berlin, and this makes the idea of a war between France and Germany unthinkable. The European Union may be regarded as a waste of public money with a self-interested bureaucracy, but the duplication of the European Parliament headquarters in Brussels and Strasbourg is a small price to pay for enduring peace.

Things are very different in East Asia. Though there was no extended boycott of Japanese products after the Senkaku/Diaoyu issue flared up, Japanese exporters have been seriously damaged by the dispute all the same. Writing in the South China Morning Post, Hu Shuli observes that Sino–Japanese economic relations are so important that it is in China’s national interest to keep economics and politics separated. The Chinese government should preserve its foreign policy from a furiously anti-Japanese vocal minority. China is the largest market for Japanese exports and the largest import supplier for Japan. So if China were to ‘to pull the economic trigger’ against Japan, as Hu puts it, there would be huge disruptions in China’s industry, which depends on Japanese supplies and investment. Still, despite the claims of some liberals, economic cooperation does not necessarily create trust — the high level of economic interdependence between Germany and Great Britain in the second half of the 19th century did not prevent the outbreak of World War I.

There is a severe lack of trust between China and Japan. In 40 years of formal diplomatic relations Japan has never made a satisfying apology for its notorious use of ‘comfort women’ during World War II, and there have been recurrent protests on both sides over whose ‘history’ of the war is correct. In an essay first published in The Asahi Shimbun and later translated into English, Haruki Murakami argues that the Japan–China relationship is characterised by ‘hysteria’. Murakami compared China and Japan to two people who get drunk on cheap alcohol and ‘are left with nothing but an awful headache the next morning’.

For domestic political reasons Tokyo’s government has downplayed the Chinese reaction to its purchase of the Senkaku/Diaoyu islands. Japanese politics has recently become more nationalistic. The new Japan Restoration Party is led by the nationalist mayor of Osaka, Toru Hashimoto, and former prime minister Shinzo Abe (who denies comfort women were used) has been elected head of the Liberal Democratic Party. Japan’s resurgent nationalism will make it difficult to heal the wounds of the 20th century.

It is much more difficult to interpret the Chinese government’s attitude to anti-Japanese protests. British journalist and author Jonathan Fenby thinks there are three possibilities: the government was unable to keep the protests under control, it did not act to stop the protests for fear of stirring up more anger, or it did not want to run the risk to appear unpatriotic. As both countries go through domestic political transitions, the absence of mutual trust means the situation could easily get out of hand.

Effective diplomacy is based on a rational trust-building process and not on letting emotions run wild, yet neither party in the Senkaku/Diaoyu controversy seems to want to bear the domestic political costs of building trust. China and Japan should follow the lead of France and Germany. It might be possible to argue the European Union is now in the midst of an economic battle and that austerity measures now forced upon Greece, Spain and Portugal are just war by other means — but at least Europeans will not be called up to fight and die over whether Strasbourg is part of Germany or France.

Giuseppe Gabusi is Adjunct Professor of International Political Economy and Political Economy of East Asia at the University of Turin, and visiting fellow at the College of Arts and Social Sciences, Australian National University.

An Italian version of this article is being published on OrizzonteCina, a leading online newsletter jointly published by the T.wai (Torino World Affairs Institute) and IAI (Istituto Affari Internazionali in Rome).