Though he doesn’t use the term, what Watts is talking about here is the assignment of value judgments. When he makes the point of differentiating the concept of black and white from black vs white (or white vs black), the latter of which is the more common social construct, he is making the point that the value judgement assigned to these representative symbols is narrow and self-defeating. Clearly white cannot exist without black - it is the contrast that gives them their symbolic power. I would argue that a continuation of the metaphor could follow the line of reasoning that they are innately connected because they are both colors. they are connected through a deeper unity that surrounds them - a larger position in reality than simply as opposites.
Here the point Watts makes that “there is no such thing as an atom without space surrounding it” is fundamental. It is exactly the idea of the creation of music - where the space between the notes is as important, or even more important, than the notes themselves. The problem is the need of the mind to differentiate that supposed separateness and isolate it without regard for the larger construction of the whole. The very thing that makes our minds powerful tools for creation - that made our ancestors capable of survival and adaptation - now limits our perception of the universe - and the fact that our place is not ‘within’ the universe, but inexorably a part of it.
Here there is no good or bad, no winner or loser - they are both aspects of the same degree, the same character. Without one there is no contrast to the other - and the very idea that one might exist without the other is unintelligible when one considers the interconnected framework of the whole of reality. Perhaps the ancient model of the wheel really is the best way for our minds to perceive the state of existence - for the ‘dark’ and the ‘light’ are in constant flux with one another, and neither order or chaos will ever be completely in control.
I feel like pointing out that Terry Gilliam’s film ‘The Zero Theorem’ brings some of this up within a solid narrative framework. Art, it seems, is still one of the best methods for understanding reality.