[ Home | Taiwan | PRC | Cross-Strait | U.S. | Japan | Asia-Pacific | Papers | Media | Archives ]

Future long-term stability in the Asia-Pacific region, if not globally, in no small part rests on the maintenance of harmonious relations among three key actors -- the United States, Japan, and the Peoples Republic of China. To the extent the three can cooperate, a generally benign security environment will develop in which the challenges sure to emerge in the region can be managed. Conversely, tensions and conflict among the three will have a profoundly destabilizing effect region-wide. In addition, the ongoing Asian financial crisis has demonstrated the importance of close cooperation and coordination among these three nations, any one of which could -- by action or even by inaction -- seriously undermine the prospects for recovery.

The major foreign policy challenge facing U.S. policymakers in Asia, therefore, is to balance the critical need to sustain the "world's most important bilateral relationship-bar none" between the U.S. and Japan with the equally compelling need to improve Sino-U.S. relations in order to maintain regional stability and prosperity and, in the worst case, avert a new Cold War in Asia. Even as it crafts its security and economic policies toward Japan and China, the U.S. must encourage these two historic adversaries to manage more effectively and harmoniously the third leg of this triangle, while avoiding "zero sum" actions which are perceived as improving any leg of the three way relationship to the expressed detriment of any other leg or legs.

Other Important Players. This is not to imply that other states are not important in the overall Asian security calculus. The future course and behavior of the two Koreas, individually and (at some unpredictable point in the future) together, will certainly have an influence. And, while the U.S., Japan, and China, individually and collectively, have the ability to influence events on the Peninsula, it is equally true that actions by the Koreas can force policy choices by the three larger states that they might otherwise not pursue.

Likewise, we ignore Russia only at our own peril. Russia is less significant a player in Asia today than perhaps at any time in this century, but it still has important security and economic interests with China and Japan, and if it feels these are being sidelined, it could play a disruptive or spoiler role. While improved Russia-China relations, even under the rubric of a so-called "strategic partnership," serve the interests of peace and stability in the region, the fact that both sides see the political value in periodically hinting that such an arrangement is necessary "to adjust the balance of world power" raises the possibility of future problems. Historic Russo-Japanese animosity also cannot be ignored, although the informal "shirt sleeve" summits between then-Japanese Prime Minister Ryutaro Hashimoto and Russian President Boris Yeltsin have helped to improve this relationship.

The nations of Southeast Asia, through their Association of Southeast Asian Nations (ASEAN), have also proven to be a major force for stability in the region.<1> Two of these states, Indonesia and Vietnam, are large enough in their own right to have a major impact on regional events, and we have seen how economic difficulties in one state, Thailand, can have a domino effect throughout Asia and beyond.

At the far reaches of the region, India's future course and its relations with its Asian neighbors, especially China and the ASEAN states, will also help shape the Asia-Pacific geopolitical environment. Failure to effectively manage and appropriately respond to India's and Pakistan's entry into the "nuclear club" could have far-reaching consequences for Asia-Pacific security and relations among the three major powers, especially if North Korea or Taiwan were to emulate these two South Asian states and aggressively pursue a nuclear weapons program.

Nuclear aspirations aside, Taiwan remains a critical variable in the overall Asian security equation. If the "One China" formula to which China, the U.S., Japan, and Taiwan all still profess to subscribe (albeit in some instances with differing definitions) were to be officially discarded by any one of the players, regional equilibrium would quickly be destroyed. This, despite the fact that "One China" is widely recognized as a convenient (if nonetheless essential) fig leaf, rather than an accurate description of geopolitical fact today.

Maintaining the Current Equilibrium. Having said all this, however, we return to our basic proposition: that the political, economic, and overall security environment in Asia in the new millennium will be most influenced by the ability -- or inability -- of the U.S., Japan, and China to positively and peacefully interact with one another. According to Professor Ryosei Kokubun, this viewpoint is shared by their Asia-Pacific neighbors as well:

Maintaining a harmonious three-way relationship requires, first and foremost, that all three sets of bilateral relationships remain amicable. Each set of relations must be seen as contributing to the greater good; if harmony is to be achieved, it seems particularly crucial that no single nation or bilateral relationship give the appearance of conspiring against any other nation or group of nations. To the extent that any one of the three perceives one of the others as its next enemy, this could quickly become a self-fulfilling prophesy. Should this occur, it is difficult to imagine a scenario in which the third party could remain neutral.

Identifying the policies by which to accomplish this successful interaction is one of the objectives both of this paper and of a broader U.S.-Japan-China "Trilateral Project" undertaken by the Pacific Forum CSIS over the past two years with the Research Institute for Peace and Security in Tokyo and the China Institute for International and Strategic Studies in Beijing. This paper draws heavily from, even while expanding upon and updating, the various papers, proposals, and observations put forth during a series of three meetings held in Tokyo, Beijing, and Washington D.C. during 1995-97.<3> However, the views expressed here are solely those of the authors and do not necessarily reflect those of the project participants, the host institutes, or the project sponsors.

Defining the "Triangle." It is important at the onset to stress that the inter-relationship that we are describing is neither a three-way "strategic partnership" nor a big power condominium, nor is it an equilateral triangle. From our perspective, the strongest, most important leg is, and must continue to be, the U.S.-Japan relationship. It provides the foundation upon which U.S. Asian security strategy, to include our all-important relationship with China, rests.

When we look at the three sets of bilateral relationships today, the U.S.-China link appears the most challenging. It is also the one that is most likely, if not given proper attention, to plunge the region into another bi-polar confrontation which would serve no one's long term security interests -- not America's, not Japan's, and certainly not China's. But, if in our effort to improve Sino-U.S. relations, we put U.S.-Japan relations at risk, we end up worse off than we started, since this long standing alliance relationship provides the basis for both Washington’s and Tokyo’s broader-based national security policies in Asia and beyond. Despite the central role of the U.S.-Japan security alliance, the broader, all-encompassing relationship is not, and should not be viewed as, a "zero-sum" game. When one side of the three way relationship improves, all three sides potentially benefit.<4>

The goal here is to identify and build upon the common interests and objectives shared by all three nations in order to avoid misunderstandings or conflict and to better deal with potential regional crises. We will start with an assessment of the overall security and economic environment, looking both at current and potential future trends and challenges. We will then look at common objectives upon which to build the three way relationship, even as we also identify varying long-term objectives which, if not properly addressed, could undermine future harmony. We will end with some policy recommendations aimed at sustaining three-part harmony in Asia.

The overall security situation in the Asia-Pacific region is as good or better than it has been at any time during this century. Cooperation and dialogue have become the predominant trends. As Chinese security specialist Xie Wenqing noted during the third Trilateral Project seminar, "since the end of the Cold War, significant adjustments have been made in relations between major powers in East Asia resulting in a new phase of cooperation and mutual conditioning."<5>

Positive Trends. Most significantly, with the long-overdue initiation of regular Sino-American summits between U.S. President Bill Clinton and Chinese President Jiang Zemin, we now see frequent and fruitful meetings involving the leaders of all the major Asia-Pacific powers. In addition to the two Clinton-Jiang summits, since the fall of 1997 Japan's Prime Minister has visited China and Russia, Russian President Boris Yeltsin has been to both China and Japan and most recently hosted President Clinton in Moscow, and China's Prime Minister has visited Japan. This fall, China's President will likely visit Japan and the new Japanese Prime Minister, former Foreign Minister Keizo Obuchi, plans to visit Washington and Moscow. In addition, these key leaders, along with other regional heads of state, meet annually at the Asia-Pacific Economic Cooperation (APEC) Leaders' Meeting. Such meetings increase understanding and promote confidence among the major Asian powers.

In Southeast Asia, the ASEAN states continue to sweep most of their historic rivalries under the rug in the name of ASEAN unity and have taken the lead in creating a thus far surprisingly successful multilateral dialogue organization -- the ASEAN Regional Forum (ARF) -- in order to engage all their Asia-Pacific neighbors, including China, Japan, and the U.S., for the first time in structured dialogue on broad-ranging Asian security issues.<6> In 1995, Vietnam joined ASEAN and the ARF, and the normalization of relations between the U.S. and Vietnam occurred a year later. Most recently, Laos and Myanmar have also joined ASEAN, making that organization's dream of Southeast Asian unity 90% complete. Both are already in the ARF, as is Cambodia, whose full membership in ASEAN has been delayed due to political turmoil in Phnom Penh.

Meanwhile, democracy has taken root in the Philippines, South Korea, Russia, and Taiwan, and continues to evolve elsewhere. While all in varying degrees are currently caught up in the ongoing Asian financial crisis, democratic traditions have been mostly been sustained and in some countries strengthened despite the economic downturn, providing hope for future stability and renewed prosperity.

In Northeast Asia, Japan has demonstrated an increased willingness and capability to take a more active leadership role in multilateral forums. Meanwhile, those concerned about potential Japanese militarism should be encouraged by the downsizing of Japan's already modest armed forces and by Japan's unswerving commitment both to its three non-nuclear principles and to the Japan-U.S. security alliance which makes this commitment possible.<7> The U.S.-Japan alliance was also reinvigorated by the April 1996 U.S.-Japan Joint Declaration and the subsequent release of new U.S.-Japan Defense Guidelines. As will be discussed below, this revitalization effort has regrettably raised some unfounded regional concerns due to continued misunderstanding about U.S. desires and Japanese intentions. In truth, the Joint Declaration and the Defense Guidelines promote regional stability, and are seen as doing so by the majority of Asia-Pacific nations.

China's continued emergence, politically and economically, has also contributed positively and substantially to the general sense of well-being in the region. This, according to Xie Wenqing, is due to China's decision to pursue a foreign policy that "devotes itself to striving for an international environment of peace and stability" while pursuing a military strategy of "strategic defense."<8> As the 1997 15th Party Congress and the 1998 National People's Congress both underscored, China is irreversibly committed to economic reform and to a more market-oriented system, albeit under the rubric of "socialism with Chinese characteristics." China is even experimenting with democratic elections at the village level. The smooth reversion of Hong Kong to Chinese rule and China's willingness to live up to the 1984 Sino-UK Joint Declaration and 1990 Hong Kong Basic Law provide additional cause for optimism, as does President Jiang's repeated references to the mainland's willingness to engage in cross-straits dialogue with Taiwan.

In addition, China's leaders have signaled an increased willingness to participate in multilateral forums such as the ARF, the Asia Pacific Economic Cooperation fora (APEC), and the non-governmental Council for Security Cooperation in the Asia Pacific (CSCAP).<9> It has also made significant gestures demonstrating Beijing's commitment to economic integration and the peaceful settlement of disputes. The July 1998 Chinese Peoples Liberation Army (PLA) White Paper was a welcome step toward greater Chinese military transparency.

Russia has also revitalized its role in the region following the collapse of the Soviet Union. Russia is seeking to play a positive role in the ARF, hosting a September 1998 ARF track two conference in Vladivostok aimed at developing a Statement of Basic Principles for Security and Stability. Russia has also joined APEC and CSCAP and is seeking to play a more active, positive role in the Korean Peninsula peace process.

In addition, President Yeltsin's joint decision with then-Prime Minister Hashimoto to settle the Northern Territories dispute and craft a peace treaty before the turn of the century augers well for future Northeast Asian security.<10> So too do agreements on Sino-Russian border demarcation and on confidence building among China, Russia, and neighboring Central Asian states.

Meanwhile, while tensions have yet to fully subside on the Korean Peninsula, the immediate nuclear crisis has at least temporarily been defused. South Korea's President Kim Dae-Jung has embarked on a "Sunshine Policy" aimed at improving relations with the North while Pyongyang seems willing, if not eager, to improve relations with Washington and Tokyo, even as it cautiously evaluates the peace overtures from Seoul. Cooperation among the U.S., ROK, and China in offering to engage the DPRK in four-party talks also holds out promise (albiet ofttimes tentative) for future progress.

On the surface, the security situation has never been better in Asia. Beneath the surface, however, uncertainty remains about what the future will bring. While the prospects for conflict seem low in the near term, the potential for misunderstanding (and even open hostilities) remains and could grow, especially if relations among the U.S., China, and Japan, become soured.

Before discussing regional uncertainties and the potential for conflict, however, we should first look at the economic situation in the region and especially between and among the three principal actors, since the Asian financial crisis has a profound effect on the trilateral relationship and on the potential for crisis in the region.

If the security situation has never been better in Asia, at least on the surface, the economic instability rocking the region presents countries with their greatest economic challenge in four decades. The persistence of the financial crisis is a seismic event that has shaken confidence and reduced real wealth. It has jolted the belief in conventional economic assumptions and promises to alter the economic landscape for years to come. This is especially devastating for the Asia-Pacific region, whose rapid economic growth and subsequent rise of economic interdependence was a celebrated facet of inter-governmental relations, countering traditional undercurrents of political mistrust.

Conflict and Cooperation During the High Growth Era. During Asia’s rise as a global economic power, Asian states encountered their normal share of economic conflict, but mostly learned that economic growth was not a zero-sum game, that there was mutual gain from their own and their neighbors’ growth as well. The creation of the Asia-Pacific Economic Cooperation (APEC) forum in 1991 demonstrated a new-found confidence in negotiating solutions to economic issues in a multilateral setting, reflecting the strong economic linkages that drew the entire region together in a complex web of trade and investment. In this sense, growing economic relationships had a stabilizing influence on political relations region-wide.

This was less the case for trilateral relations. As a result of the Tiananmen crisis in 1989 -- unfortunately coincident with the demise of the Soviet Union and the resulting vacuum in the strategic underpinnings between both the U.S. and Japan with China -- growing economic relations among the U.S., China, and Japan continually failed to overcome political differences. While trade and investment between China and the world’s first and second largest economies continued to grow, political tensions, often turning to confrontations, thwarted opportunities for deeper economic cooperation with China. Meanwhile, President Clinton’s election in 1992 and his avowed policy of market opening in Japan (as well as China and elsewhere) brought a seemingly constant stream of complaints and threats. Finally, China and Japan’s economic ties were also limited by political differences, particularly the Chinese nuclear weapons tests of July 1995, which revived historical rivalries and concerns between the two neighbors.

During this period of political tension, U.S. and Japanese trade with China showed marked growth, while trends in foreign direct investment appeared to be more sensitive to political uncertainty. Total Japan-China trade (exports plus imports) grew from about $18.2 billion in 1990 to $64.1 billion in 1997, and Japan has seen its $6 billion surplus with China in 1985 become a $20.3 billion deficit in 1997, largely due to Japan's reliance on China as a source of raw materials.<11> The total volume of U.S.-China trade grew from $25.2 billion in 1991 to $78.3 billion in 1997, marked by a growth in U.S. imports of textiles and consumer goods. The U.S. last had a surplus with China in 1983 of $600 million, which has steadily eroded to a deficit of $49.7 billion in 1997. This is second only to the U.S. trade deficit with Japan, which stood at around $56.1 billion by 1997 -- about the same level as 1987.<12> These twin deficits comprised nearly 60% of the total U.S. trade deficit in 1997, but as trading partners Japan and China are certainly distinguished by their position as purchasers of U.S. exports: Japan was number three (behind Canada and Mexico) and China number 14, whereas Japan and China were number two and number four, respectively, as suppliers of U.S. imports. This picture reveals that both the U.S. and Japan will encounter problems with China as long as it fails to open up to more exports.

Foreign direct investment (FDI) from Japan and the United States into China also grew in the 1990s, although less decisively. Japan's FDI in FY1989 was just $438 million, which grew to $4.5 billion in FY1995 and fell to $2.0 billion in FY1997. In cumulative terms, Japan's investment in China falls short of the volume in Southeast Asia, and in recent years China is the largest recipient of Japanese investment in A sia, concerntrating in the electronics, textiles, and transportation equipment sectors.<13> The Chinese leadership regularly complains about the lack of technology transfer from Japanese firms, presumably due to lack of licensing agreements extended from Japanese to Chinese firms as compared to, for example, United States' companies. Yet it can be argued that Japanese firms are simply following domestic practices, where licensing agreements are less the norm in Japan than in the United States.

FDI from the U.S. into China has also encountered similar swings as Japanese FDI; from $1.2 billion in 1994, FDI dropped to just under $300 million before climbing back to about $1.2 billion in 1997,<14> with total cumulative investments of $18.3 billion since 1980. In recent years, U.S. FDI has been concentrated in banking, insurance, leasing real estate development and oil exploration; in 1997, for example, U.S. firms owned 42% of the investment companies in China.<15>

While these trends reflect growing interdependence, participants in the Trilateral Project agreed that there is plenty of room for expanding economic ties. With diplomatic exchange returned to more normal levels as a result of the successful 1997-98 summitry, the U.S. and Japan can renew their commitment to work with China to bring about her economic integration into the world economy. Leadership in both countries should rise above domestic critics who argue that China’s economic rise is detrimental to U.S./Japanese interests. China’s economic emergence is positive for world standards of living if policies are appropriately implemented, argues The World Bank in a comprehensive 1997 study of China’s development challenges.<16>

Popular assumptions that the world has never witnessed the likes of an emergent China are historically inaccurate: China’s projected share of world trade during 1979-2020 would be no different than what the U.S. achieved as an emerging trading power in the late nineteenth century, and what Japan similarly achieved in the second half of the twentieth. During both of these periods, importantly, world economic growth was buoyant and world markets were open (italics added). The Bank notes that the emergence of the U.S. and Japan as trading powers in their respective eras were not only good for their own economies, it was positive for higher world incomes and standards of living – and the same should hold true for China. So the first message for trilateral cooperation is that for China to continue to be a success, the three need to work together to ensure that global markets remain open. “Closing markets to China now may hurt its growth prospects, but more important, it will damage other countries’ capacity to adjust and benefit from China’s dynamism.”<17>

Impact of the Financial Crisis. The enduring and expanding financial crisis may endanger the prospect of keeping world markets open. The crisis that was once regional has gone global, and has sparked a heated debate among economists and economic officials about roots of the crisis and appropriate cures. In Asia, Thailand and South Korea are gradually improving with more stable exchange rates, declining interest rates and rising trade balances, although tremendous challenges in restructuring the financial and corporate sectors remain. Indonesia has halted its steep decline and is very slowly dealing with restructuring, and Malaysia's imposition of currency controls in early September has, at least temporarily, stopped the hemorrhaging of its currency and equity markets. All of the region, however, remains extremely vulnerable, and there is a strong sense that it is not out of the woods yet.

The "most serious financial crisis in half a century," as President Clinton characterized it in a speech in early September, is particularly notable for the crisis that has attended not only the "patients," but the "doctors" as well. With Asia in recession, and the Russian crisis bearing down on Brazil, critics of the IMF's tight money policies are growing more numerous every day. Chairman of the U.S. Federal Reserve, Alan Greenspan, admitted during Congressional testimony in September 23 that "I think [the IMF] misread the depth of some of the really fundamental problems that were involved in the crisis that evolved...I think their actions were somewhat misguided in the early stages."<18>

The IMF argues that it has altered policy guidance in the face of emerging new realities, and that its advice has at times been implemented incorrectly. Whether right or wrong, however, the close relationship between the IMF and the U.S. Treasury Department does affect American credibility in dealing not only with Asian countries, but for its leadership of the global economy more generally. One can only hope that lack of confidence in America's global economic leadership does not grow to the point that other countries are tempted to "go it alone" as Malaysia has, which could erode the gains in opening markets painstakingly achieved in the last 40 years. Nor that the recessionary pressures in a majority of the world's economies infect the health of the U.S. economy. The possibility of a world-wide recession that would pale in comparison to the 1930s still lingers.

In the midst of the debate about IMF and U.S. policy prescriptions, enter new challenges in U.S. economic relations with Japan and China. Japan’s inability to achieve a domestic consensus on economic reform, and the U.S. Congress’ inability to support the U.S. Administration’s pledge of $18 billion to the depleted coffers of the International Monetary Fund (IMF), both send the message that the world’s two largest economies are too parochial to do their parts to not only help relieve the crisis but to ensure that there is not a backlash toward open economies as countries struggle with recovery.<19> As noted elsewhere, Japan should, however, get more credit for the much appreciated funds that it has provided to the IMF and the region in the wake of the crisis.

Leaders throughout the Asia-Pacific region have voiced frustration at this state of affairs in Japan and the U.S. If the U.S. Congress doesn’t believe the IMF is a viable economic manager of the global economy, why should they? If Japan’s economic reform is too difficult politically, how can other governments be expected to make the necessary bold decisions? Asia-Pacific leaders also lament the lack of cooperation between the U.S. and Japan on measures to relieve the economic crisis. Two particular incidents are troubling: one was the U.S. negative reaction, inappropriate in our view, to Japan’s proposal in October 1997 to create an Asian Fund or Asian IMF. It has never been clear what Japan felt such a fund could accomplish that the IMF couldn’t — but then the U.S. effectively squashed any debate on the issue, and as a consequence squandered an opportunity for Japan to develop economic leadership in the region, which could play a positive complementary role to U.S. leadership in the security arena.

More recently, during the Jiang/Clinton summit in China in late June 1998, both President Bill Clinton and Secretary of Treasury Robert Rubin made comments expressly intended to applaud China’s contribution to regional economic stability by maintaining the renminbi exchange rate and to embarrass Japan on its inaction on domestic reform. The palpable frustration of U.S. officials with lack of progress in Japan should not have been delivered in such a deliberate and public a way, especially while visiting in China, whose leaders delighted in the admonition. President Clinton had already offended Japanese leaders by conceding to China’s request that he not visit any other country after the China trip. Perhaps worse, in their eagerness to promote more positive relations with China, the Clinton and Rubin statements led the U.S. down a vicarious path of legitimizing the politicization of exchange rates; after all, the decision to devalue or not is not an act of “statesmanship,” as Clinton and Rubin characterized it, but is driven by economic national interest. And as Chinese economists have attested, a devaluation now or in the near future would do more harm than good — and China should not accrue political credits for a purely economically rational decision.

In addition, there were no U.S. statements urging financial sector reform in China to set the stage for full convertibility of the renminbi, which the crisis forced China to postpone from the year 2000 to sometime several years later, at best. Clearly, given the volatility in financial markets this is a rational economic decision, but China should be reminded that convertibility remains a U.S. policy goal to facilitate foreign investment. In short, what U.S. leaders said publicly in China about the crisis did not bode well for our interests with Japan, for our interests with China, or for our own interests.

These two incidents reflect a notable and troubling strain in U.S.-Japan economic relations since the financial crisis broke, and both countries need to pay attention to regional perceptions that their lack of joint effort may portend a stronger rift between the world’s two largest economies than in the past. In fact, private bilateral conversations are probably more positive than public pronouncements might indicate; joint efforts to strengthen the yen in June 1998 go relatively unmentioned when regional leaders complain about lack of U.S.-Japan joint response. In addition, the history of U.S.-Japan economic conflict suggests that the entirety of the relationship is mature enough to withstand temporary political strains caused by economic differences.

At the Trilateral Project conference held in Beijing in November 1996, participants discussed the heated U.S.-Japan negotiations to open Japan’s automobile market, which were finally concluded to the satisfaction of both sides in July 1995. The protracted dispute, which at times seemed to threaten the very fabric of our bilateral relationship, including the security alliance, in the end demonstrated the resilience of U.S.-Japan ties. Indeed, Chinese participants were perhaps surprised to learn that U.S. and Japan participants perceived no long-term fall-out. As Professor Atushi Kusano noted in his paper presented at that conference, “Japan has conflicted with the U.S. on trade, investment, and finance for more than thirty years.”<20> Professor Kusano identified three periods of conflict since the 1960s, concluding that “similar to U.S.-E.U. relations, Japan and the U.S. might be able to handle economic and security issues separately.”<21>

Nevertheless, the premise that U.S. and Japan economic differences won’t affect the alliance is tested time and time again, including in the current crisis. In the ideal world, the U.S. would refrain from lecturing to Asia on the need for internal restructuring and appreciate the tremendous political difficulties in building new economic relationships; and Japan would realize that the regions’ eyes are upon its own efforts to restructure an economic model they largely imported as their own. Indeed, more than the economic contribution it can make by aggressively restructuring to spur domestic demand and absorb exports from the region is the political confidence it can help promote by showing that such restructuring is possible. Ultimately, confidence in the global trade and investment regime is at stake, and the U.S. and Japan are responsible for its endurance, health, and perceived fairness.

This is particularly essential for China’s continued integration into the regional and global economy. In many ways, U.S.-Japan economic policy coordination towards China, while desirable, has shown to be a pipedream: their economic relations with China derive from distinct histories and political relations. While the United States and Japan share an abiding common interest in integrating China into the global economic system, they have distinct national interests, distinct policy tools at their disposal, and distinct domestic political points of view to deal with in achieving their common goal. Japan-China economic relations are more sensitive to each others’ crises and are also apt to share concerns that are not of priority to the U.S. It is also constructive for trilateral relations that Japan and China conduct their own dialogue and build confidence between them on economic issues.<22> Similarly, Sino-U.S. economic relations are driven by their own set of concerns; the U.S. has a greater stake in global systemic issues, such as the WTO, which has greater consequences for the U.S. economy and political leadership.

During the Trilateral Project discussions, several examples of distinct bilateral economic approaches towards China were noted during the three conferences. Differing reactions to the Tiananmen crisis was one. In the U.S., the annual U.S. Congressional debate on Most Favored Nation (MFN) status became a vitriolic attack on China for four years until President Clinton was able to disassociate trade and human rights in 1996. Japan, meanwhile, did cancel its Overseas Development Assistance (ODA) to China in July 1989 but restored it in August 1990, arguing that it wasn’t productive to isolate China from the international economic system. In response to the Chinese nuclear weapons tests of July 1995, Japan put on hold the grant (not the loan) portions of its Overseas Development Assistance (ODA) to China and only reinstated ODA grants when China announced a moratorium on such testing in August 1996, prior to signing the Comprehensive Test Ban Treaty (CTBT). The United States, meanwhile, had no economic reaction to the Chinese tests. Regarding intellectual property rights, the U.S. wanted Japan’s support to pressure China to crack down on pirated technology, but Japan was fairly silent during that 1995 confrontation. And on China’s accession to the WTO, Japan concluded bilateral discussions in August 1997, leaving the United States to carry the ball on the tough issues.

These instances demonstrate that the U.S. and Japan do have distinct strategic rationales underlying their economic relations with China. Yet frustration over acting at cross-purposes tends to be dealt with on an issue-by-issue basis and does not infect the basic mutual respect and confidence the two countries share. In contrast, China has at times charged that the U.S. and Japan are “politicizing” economic relations, or that their policies are unified toward “containing China,” when the U.S. or Japan believe that legitimate interests are at stake. We hope that with more experience in negotiating solutions to economic problems, Sino-U.S. and Sino-Japan economic relations can undergo a “learning curve” so that economic differences do not infect broader political ties.

A slightly positive sign in Sino-U.S. economic relations is that the shouting match over China’s WTO accession has ended, and China seems to have accepted the need for painstaking negotiations instead. U.S. Trade Representative Charlene Barshefsky noted in April 1998 that the discussions were “back on track” following “mixed signals” at the November 1997 APEC meetings in Vancouver.<23> In the months since that announcement, the two sides are not any closer to agreeing on an array of issues, from opening up the telecommunications and agricultural sectors to restructuring the banking, securities, and insurance industries. China has even done some backsliding recently by banning a type of joint venture that has allowed U.S. companies to invest in the potentially profitable telecommunications industry.<24> And recent reports suggest that dissension among powerful interest groups in China may also be causing a delay on an agreement.<25> If the U.S. is sufficiently frustrated with the lack of progress, it may decide to support approval of Taiwan’s entry to the WTO ahead of China. This may well put China’s invective back into the negotiations, and we believe would be counterproductive. If China is having to manage dissension among domestic “winners and losers” in order to meet WTO commitments, then this is the kind of political preparation that is needed to get a deal worth signing and requires patient prodding by U.S. negotiators.

One would hope that the U.S., China, and Japan take advantage of their participation in the APEC Leaders Meeting in Kuala Lumpur in November 1998 to practice trilateral cooperation. So far, that doesn’t appear likely. To date, the meetings among APEC trade ministers to negotiate reduction of tariffs in nine priority areas -- the so-called Early Voluntary Sectoral Liberalization (EVSL) plans -- are going extremely well, with tariff reductions in six sectors already agreed upon. U.S. Trade Representative Charlene Barshefsky said the June meeting was “one of the more remarkable APEC trade ministers meetings of the last 10 years,”<26> noting that even hard-hit economies reaffirmed their commitment to market opening. The only laggard seems to be Japan; the U.S. has argued that Asian economies need Japan’s markets to be more open more quickly than it has agreed to.<27> If Japan’s relatively conservative commitments on tariff reductions isolate it at the APEC Leaders’ Meeting, it will be a further blow to the possibility of trilateral cooperation.

In short, bilateral economic relations seem complicated enough at the present time that the prospects of trilateral cooperation appear dim. Given the strained economic ties between the U.S. and China and Japan and China that endured for nearly a decade, this is perhaps natural. We can only hope that the recent summitry in 1997-98 will mark a new beginning in fulfilling the promise of what economic cooperation can accomplish.

Even as economic problems simmer on, the potential for outright conflict in the region, while currently low, cannot be ignored. As noted earlier, there has been great progress in recent years in improving state-to-state relations throughout Asia. Nonetheless, as we survey the East Asian landscape today, we still see contested borders between China and Vietnam and among several of the ASEAN states. We see the Spratly, Senkaku/Diaoyu, Tokdo/Takashima (and other contested island) disputes, a potentially explosive Burma, an unsettled and unsettling Cambodia where democracy has yet to achieve a firm footing, an ever explosive Korean Peninsula, and a firm rejection by Taiwan of the "one country, two systems" formula that appears to be working well in Hong Kong and which Beijing wants in some form to apply to Taiwan.

Meanwhile in South Asia, the trend toward global denuclearization was dramatically reversed in May of 1998 when India's new government choose to defy world public opinion by conducting a series of nuclear weapons tests. This prompted neighboring Pakistan to follow suit, raising the risks of nuclear warfare in this extremely volatile region. India cited fears of China and Chinese involvement in Pakistan as among the primary justifications for their action, creating broader tensions and setting back (if not unraveling) ten years of confidence building efforts between Beijing and previous governments in New Delhi.

We also see broad "have versus have-not" gaps between and within nations which have been exacerbated by the current Asia financial crisis. The financial crises being experienced by many of the Asian tigers will also mandate corrective actions which may generate domestic unrest, as well as increased tensions between Southeast Asia and the major Western financial powers over the sources of, and solutions to, the crisis.

As one examines current trends and developments in Asia, additional security questions and concerns also arise. Some of the most prominent potential areas of concern are briefly stated below:

- North Korea's formidable conventional and suspected potential nuclear military threat and its potentially dangerous economic and political crises which could lead to economic or political implosion or to a devastating military explosion;

- Instability and uncertainty surrounding Russia's still-tentative emergence as a democratic free-market society;

- The Chinese-Russian "strategic partnership" which Professor Seiichiro Takagi has described as "an interesting mixture of confidence-building" between China and Russia and with their common Central Asian neighbors on the one hand, juxstaposed with less constructive Sino-Russian "cooperation against U.S. domination";<28>

- Wide-ranging disputes between the United States and China over trade, human rights, and proliferation issues, which often lead to Chinese counter-charges that the U.S. is attempting to hold back or contain China;

- Disagreements between the U.S. and China over the pace of Chinese economic and political liberalization, to include the promotion of greater democracy in Hong Kong;

- Uncertainty regarding the PLA's growing military capability and over China's long-term intentions, especially vis-a-vis Taiwan and the South China Sea;

- Concerns about potential remilitarization in Japan fed, in part, by the Defense Guidelines revision and by periodic comments by Japanese officials that suggest they have yet to come to grips fully with their history;

- Ongoing and still pending leadership transitions throughout Asia, but particularly in Southeast Asia, where a new generation of leaders waits impatiently in the wings (or in prison) and where a repeat of earlier riots could occur again in Indonesia and possible spread to Malaysia and elsewhere;

- Differences between ASEAN and the West (and occasionally within ASEAN) over how best to deal with the current regimes in Myanmar and Cambodia;

- The downsides of economic development: increased migration (a sizable portion of it illegal or uncontrolled), graft and corruption within the private and governmental sectors, overheated or boom-bust economies, competition for exploitable (including human) resources, and perhaps even destabilizing trade wars;

- The downsides of the Asian financial crisis, given that actions (or inactions) by one state can adversely impact other states' economies, raising questions about the continued relevance of the time-honored Asian principle of non-interference in one another's internal affairs;

- Competition for natural resources and for market access, intense even in the best of times and now exacerbated by the Asian financial crisis;

- Potential future threats to the sea lanes that link the economies of East Asia to one another and to the world at large, including piracy and unilateral or multilateral attempts to prevent transit through international straits, plus simple congestion, and resultant accidents, oil spills, and other environmental challenges;

- Arms modernization efforts that add a new dimension to historic concerns over maritime passage and the security of strategic straits and could prompt arms races, especially if the pace of modernization accelerates or tensions in the South China Sea increase.<29>

There are also a growing number of non-traditional security concerns above and beyond those raised by the current economic crisis. According to Seiichiro Takagi, "so-called unconventional security threats, such as cross border pollution, greenhouse gases, drug smuggling and illegal migration have become increasingly apparent serious problems in the region."<30>

To this list of regional uncertainties and concerns, Chinese security specialists add Cold War military alliances -- most specifically the U.S.-Japan alliance -- that are being readjusted and strengthened in a manner that necessitates "vigilance and apprehensions."<31> Xie Wenqing outlines Chinese concerns through his comparison of military alliances with a second form of security pattern, namely cooperative security:

The Chinese response to the "threat" caused by the U.S. bilateral alliance system has been to seek their own "strategic partnership" with Russia. The "Sino-Russian Joint Statement on Multilateral World and Establishing the New International Order" signed by Presidents Jiang Zemin and Boris Yeltsin during the Chinese leader's visit to Russia in late April, 1997 is quite transparent in this regard. In the Joint Statement, both parties "argue for the abolishment of the `Cold War thinking,' oppose alliance politics, [and] share concerns on the efforts to expend and strengthen the military blocs, since such tendency may pose a threat to the security of some countries and aggravate regional and global tensions."<33> Russian officials have played down this agreement since then, privately acknowledging that it was aimed at gaining some leverage in Moscow's unsuccessful quest to prevent NATO expansion. Our own view is that the Sino-Russian relationship is more a shaky marriage of convenience (in which both sides will likely feel compelled to sleep with one eye open) than a true strategic partnership.

Any of the above potential conflicts could place strains on the three-way relationship, although in some instances -- the Korean Peninsula in particular -- they also provide opportunities for cooperation built upon mutual interests and common objectives.

However, a few lingering areas of concern either are, or could quickly become, major points of contention pitting China against the United States and, most probably , Japan as well. They are reviewed below, under the premise that a clear understanding of one another's positions as regards these potential flashpoints is essential to minimize their prospects of disrupting the current harmony that all have worked so hard to preserve.

Specifically, we will first address the overall Taiwan situation since this is the area of greatest sensitivity where a common understanding is essential. Second, we will look at the continuing territorial dispute in the South China Sea, given international concern over freedom of the seas and the peaceful settlement of territorial disputes. Finally, given Xie's concerns about the U.S.-Japan military alliance, we will examine the 1996 Joint Declaration and 1997 U.S.-Japan Defense Guidelines aimed at revitalizing the U.S.-Japan alliance.

This is by no means an exhaustive list of potential contentious issues. Disagreements continue over human rights, trade (including WTO accession), and proliferation issues. However, while such issues are continuing irritants that disrupt regional harmony, they are unlikely to prompt a serious breakdown in the relationship or lead to conflict or a new Cold War.

Finally in this section, we will briefly discuss the growing tensions between the U.S. and Japan caused by each nation’s approach toward dealing with the ongoing Asian financial crisis. This is included not because these disagreements are likely to degenerate into conflict between these two allies but because their increasingly vocal disagreements can chip away at the base of public support required to sustain the alliance in both democracies. The impact of regional perceptions of Japan on the alliance structure must also be analyzed.

Taiwan. Taiwan remains the most contentious and potentially disruptive issue. Sino-U.S. relations reached a low point during and immediately after the spring 1996 Taiwan Straits "crisis" which involved Chinese military exercises and missile firings during the run-up to Taiwan's first ever fully democratic presidential elections. The Chinese actions were countered by the announced "precautionary deployment" of two American aircraft carrier battle groups to ensure stability and presumably to deter an invasion that few thought to be imminent. Even if one accepts Takagi's description of the crisis as "a very well choreographed one," the importance of this series of actions and reactions (and some would say overreactions) should not be underestimated. As Professor Takagi notes, "this course of events served as a wake-up call for both the U.S. and the Chinese. The U.S. side realized anew how important the Taiwan question was for the Chinese and the Chinese side was reminded of the seriousness of the U.S. commitment to the security of Taiwan."<34>

The U.S., Japan, and China all support the "one China" principle and all remain dedicated to the peaceful settlement of the dispute between Beijing and Taipei over Taiwan's current and ultimate status. However, Beijing refuses to completely rule out the use of force in settling this dispute for what from Beijing's perspective are sound reasons -- to do so limits Beijing's sovereign options and, more importantly, might encourage Taipei to be even bolder in challenging the current status quo.

From a U.S. perspective, however, the U.S. acceptance of "one China" is, in fact, "predicated on the PRC's pursuit of a peaceful resolution on issues between Taipei and Beijing."<35> "Peaceful resolution" and "one China" are inseparable elements in the three U.S.-China joint communiques and Tokyo shares Washington's concern for a peaceful resolution.<36> Even President Clinton's contentious "three no's" comment in Shanghai in June 1998 was immediately followed by the reminder that "our only policy is that it has to be done peacefully. That is what our law says."<37> Regardless of the soundness of its reasons, Beijing's unwillingness to renounce the use of force will remain a source of tension -- one that Beijing's foes (in Taiwan and elsewhere) will continue to try to use to their best advantage.

There is no question that the cross-straits issue can only be solved by the two sides, acting in good faith, and with respect to the concerns, hopes, and aspirations of all concerned. The wild card in all this, of course, is Taipei. Taiwan President Lee Teng-hui's stark pronouncements to The Washington Post last fall that Taiwan is already "a sovereign, independent nation" appeared to many as unnecessarily antagonistic, even if he added the standard Taiwan caveat "... and therefore there is no need to declare independence."<38> Such remarks serve to reduce rather than to enhance the prospects of a resumption of high-level cross-straits dialogue which both sides profess to desire but, at least until recently, seemed incapable of arranging.

The rhetoric coming from Taiwan turned even more strident immediately after President Clinton's Shanghai “Three No’s” pronouncement. While senior U.S. officials have made this statement before, this was the first time it has been made by an American president, and on Chinese soil to boot. Taiwanese officials, rightfully in our view, proclaimed that Taiwan's future was not for Washington and Beijing to decide. Some even speculated openly that Taiwan might be forced to explore the nuclear weapons option if it believed that American de facto security guarantees could no longer be depended upon.<39>

Taiwan President Lee Teng-Hui has since tried to put Taiwan's position in better perspective in advance of impending cross Straits talks that both sides have promised to resume in October 1998.<40> In a July 1998 address to the National Unification Council, Lee stated that "China must be reunified." But, he added, "this reunification must be under a system of democracy, freedom, and equitable prosperity that will safeguard the rights an interests of all Chinese." "Reunification of China should proceed in a gradual and orderly fashion," Lee continued, noting that "when conditions are ripe, success will come naturally."<41 >

President Lee was even more specific in an August 1998 Asian Wall Street Journal editorial when he stated flatly that accusations that Taiwan was pursuing "independence," "two Chinas" or "one China, one Taiwan" are "a total distortion of the truth."<42> In this major policy pronouncement, Lee in effect validated two of the three no's, adding that "China must reunify in the future, but it must be reunified under a democratic system." Noting that the "reality is that China is divided," Lee argued that "today, there is only `one divided China,' with Taiwan and the mainland each being part of China. Because neither has jurisdiction over the other, neither can represent the other, much less all of China."<43> With this pronouncement, President Lee is carefully trying to redefine "one China" in terms that are acceptable to the people on Taiwan, while also pressuring Washington to, in Lee's words, "safeguard the balance in its triangular relationship with both sides of the Taiwan Strait."<44>

While Jiang Zemin is not likely to immediately endorse the phrase "one divided China" as a suitable replacement for the mainland's current "one China" definition -- "there is only one China; Taiwan is a part of China" -- Lee's pointed denunciation of "independence," "two Chinas" or "one China, one Taiwan" should be welcomed in Beijing. It should help set the stage for more productive discussions when cross-straits dialogue resumes.

Both sides have a great deal of suspicion to overcome if the talks are to provide an ultimate resolution to the China-Taiwan problem. Some in Beijing (and elsewhere) argue that Taipei believes that good relations between Washington and Beijing work against Taiwan's interests and that Taiwan is intent on undermining closer Sino-U.S. ties. The timing of Lee's November 1997 Washington Post interview, so soon after the Clinton-Jiang summit, lends credence to this interpretation. Others argue that Lee is merely reacting negatively to what he may perceive as a great deal of external pressure to compromise Taiwan's position in the wake of the successful Sino-U.S. summits.<45>

It is our belief that many in Beijing fail to understand that, while Lee's personal mandate as the popularly elected leader of Taiwan is unquestioned, his Kuomintang (KMT) Party's political base is less secure. As a result, Lee no doubt feels compelled to broaden his own and the KMT’s appeal by playing to the genuine aspirations of the people of Taiwan for greater international recognition of their accomplishments and unique status. It appears that neither side fully understands or appreciates the other's challenges and concerns. The fact of the matter is, any long-term solution to the cross-Straits issue must take Taiwan domestic attitudes and conditions into account, just as Taipei, no less than Washington and Tokyo, must continue to recognize the unyielding nature of Beijing's commitment to eventual reunification.

Whatever the solution, it can best (and perhaps only) be reached through direct dialogue between the two sides. The surest way to get Washington, Tokyo, and others out of the middle of this issue is for the two sides to stick to their promise to resume their cross-straits dialogue (the so-called Koo-Wang Talks) and then to genuinely work toward a solution that respects the concerns of all parties. Otherwise, the U.S. cannot help but be involved in this otherwise internal issue, given our moral and legal obligations regarding a peaceful solution to this problem.

Finally, it should be noted that periodic Chinese assertions that the U.S. has hegemonic intentions and is trying to turn Taiwan into a U.S. sphere of influence, or that the U.S. has already officially adopted a "two Chinas" or "one China, one Taiwan" policy, do not contribute positively to the debate between the two nations, or to a greater understanding by either nation's people about the true nature of the disagreement between the U.S. and China on this issue.<46> The Chinese penchant to brand any alternative views as "Cold War mentality" also adds little toward the development of common understanding of differing security perceptions.

South China Sea Dispute. The peaceful settlement of the South China Sea territorial dispute remains the responsibility, first and foremost, of the involved claimants. In the final analysis, they must resolve the problem among themselves. This in no way implies, however, that a continuing failure to solve the problem does not have international implications. A failure to peacefully resolve the dispute, especially if it leads to renewed military actions by any one or more of the claimants, would have much broader regional, if not global consequences, given the integrated nature of the world's economy, and the increasingly important position the vibrant economies of Asia play in the overall global picture.

A use of force by the PRC in the contested territories, which Beijing has not ruled out, would have a particularly far-reaching destabilizing affect. The impact would be greatest on China's current policy of constructive engagement with its Southeast Asian neighbors. PRC relations with the United States and Japan (among others) would also be severely disrupted. For these and other reasons, it seems clear that China's self-interest argues against PRC military action to resolve conflicting claims -- especially since China's neighbors continue to view PRC actions in the South China Sea as a "litmus test" for determining China's long-term intentions.

China's declared willingness to peacefully resolve lingering disputes through multilateral dialogue in accordance with international principles such as the U.N. Convention on the Law of the Seas (UNCLOS) has been warmly received.<47> But, China's refusal to clarify its claims or provide specifics regarding joint development proposals have caused suspicions to linger. China's refusal to remove the military-looking "fisherman's shelters" constructed by the PLA Navy on Mischief Reef also stands in sharp contrast to its professed willingness to honor the ASEAN Declaration on the South China Sea, which prohibits destabilizing unilateral actions. <48> Increased Chinese willingness to participate in multilateral dialogues aimed at defusing this potentially explosive situation could build regional confidence and reduce the probability of deliberate or inadvertent conflict among the claimants.<49>

Of particular concern is the absence of dialogue aimed either at better understanding the security implications of conflict in the South China Sea or at identifying and avoiding potential triggers of conflict.<50>

U.S.-Japan Alliance. The U.S.-Japan alliance lies at the center of U.S. security policy in Asia. As the Pentagon's East Asia Strategy Report (EASR) notes, "there is no more important bilateral relationship than the one we have with Japan. It is fundamental to both our Pacific security policy and our global strategic objectives." The Pentagon report further identifies the U.S.-Japan alliance as "the linchpin of U.S. security policy in Asia."<51>

The U.S.-Japan Mutual Defense Treaty commits both sides not only to the defense of Japan but also to the promotion of regional stability. With the significant reduction of external threats to Japan's security, the alliance's focus today must shift from defense of Japan to the broader regional goal. This will require a greater willingness on the part of Japan to increasingly share in the risks and responsibilities, in order to keep the alliance robust and relevant.

Also needed is greater trust and understanding on the part of Japan's neighbors, and an increased acceptance in Japan and in the region of a more active, responsible Japanese security role. This is particularly true as pertains to China. As Professor Takagi notes, “the Chinese are particularly concerned with the Japan-U.S. Security Alliance, saying that its continued existence after the disintegration of the Soviet Union must mean that its new mission must be the containment of the rising power of China.” However, Takagi continues,

Joint Declaration. The April 1996 Clinton/Hashimoto Joint Declaration was a significant step forward both in educating the general publics about the importance of the security relationship and in paving the way for greater defense cooperation. It recognized close bilateral defense cooperation as a "central element" in the security relationship and went on to say that "the two leaders agreed on the necessity to promote bilateral policy coordination, including studies on bilateral cooperation in dealing with situations that may emerge in the areas surrounding Japan and which will have an important influence on the peace and security of Japan.<53>

Japan can and should accept more of the defense burden . . . and is in the process of doing so, but in a gradual, responsible manner consistent both with its own psychological and constitutional restrictions and with its neighbors' concerns. This effort is not aimed at any third country and especially not against China. In fact, the Joint Declaration stressed the need for close cooperation with the People's Republic of China: "The two leaders ... emphasized that it is extremely important for the stability and prosperity of the region that China play a positive and constructive role, and, in this context, stressed the interest of both countries in cooperating with China."<54>

China remains apprehensive nonetheless. In his report to the 15th Party Congress on September 12, 1997, Chinese President Jiang Zemin once again criticized the U.S. alliance structure as a vestage of the Cold War:

The interpretation of the Joint Declaration and subsequent Defense Guidelines Review provided by Xie Wenqing during the third Trilateral Project meeting is also typical of Chinese complaints (and misunderstandings) of the revitalization effort:

Defense Guidelines. Contrary to Xie's contentions, we would argue that the 1997 Defense Guidelines promote regional stability by enhancing the viability of the strictly defensive U.S.-Japan alliance. The Guidelines Review represents a praiseworthy attempt by military planners in Japan and the United States to find common ground between the type of support U.S. planners desire from Japan and the level of support Japan is willing and feels constitutionally capable of providing. Their common goal is enhanced defense cooperation in the maintenance of peace and stability.

A leading Chinese expert on American affairs, Dr. Chu Shulong, recently spelled out China's continuing concerns regarding the Defense Guidelines, despite several years of American and Japanese explanations and unprecedented transparency:

Chu overlooks many facts and counter-arguments in repeating old Chinese assertions. Not the least of these is the fact that the U.S.-Japan alliance, since its inception, has had (and has served) a dual mission: defending Japan and promoting regional stability. These twin objectives remain unchanged since 1960.

The new Defense Guidelines Report does not obligate Japan (or the U.S.) to do anything new. Nor does it guarantee that Japan will provide the envisioned support under any and every conceivable circumstance. It merely provides "a general framework and policy direction." To emphasize this point, a line in the most controversial section dealing with "situations in areas surrounding Japan" notes that "in responding to such situations, measures taken may differ depending on circumstances."<60>

In other words, there is no guarantee that steps outlined in the Defense Guidelines will ever be taken; they are, after all, only guidelines aimed at providing a "framework" for defense cooperation. They clearly delineate what Japan should not be expected to do but provide no guarantees of Japanese support under any and all circumstances. Japanese participation requires "a common assessment of the state of each situation."

In response to the concerns of Beijing and others, the Guidelines also specifically states that "Japan will conduct all its actions within the limits of its Constitution and in accordance with such basic positions as the maintenance of its exclusively defense-oriented policy and its three non-nuclear principles." The framework's boundaries are clearly delineated. Only defensive actions in accordance with "relevant international agreements such as the Charter of the United Nations" are envisioned. Japanese forces will not participate in direct combat operations beyond the immediate vicinity of Japan and are not expected to conduct rear area support or even search and rescue operations in "areas where combat is being conducted." The Guidelines also stress the importance of diplomatic efforts to prevent situations from occurring or further deteriorating.

These caveats are aimed at allying the fears and suspicions of Japan's neighbors, while assuring maximum transparency as to the new Guidelines' purpose and intent. The Guidelines review is not a cover for Japanese remilitarization. The review was conducted in accordance with Japan's November 1995 National Defense Program Outline which, as previously noted, called for a 25% reduction in the level of Japan's armed forces.<61>

What the Guidelines review effort did entail was an effort by Japan to more clearly lay out what it can and will do -- within the context of the U.S.-Japan Treaty, Japan's Peace Constitution, and Japan's current force structure -- to enhance defense cooperation with the U.S. in the event of an attack against Japan or during "situations in areas surrounding Japan that will have an important influence on Japan's peace and security." If a crisis were to erupt in the region that threatened U.S. and Japanese interests -- conflict on the Korean Peninsula being the most obvious example -- and Japan were to refuse to adequately support U.S. efforts, this would tear away at the fabric of the alliance. Defining "adequately support" to the satisfaction of both nations, and in a manner not threatening to Japan's neighbors, remains the goal of the revitalization effort.

Some have argued that the U.S. and Japan should state unequivocally in advance that the guidelines do not apply in certain areas or under certain circumstances. Given the above comments about the Guidelines' functional rather than geographic or situational nature, such demands appear inappropriate. Of particular concern, such assurances could be viewed as a Japanese or American "green light" for others to conduct military operations in certain areas or could be read as a declaration that certain areas automatically fall outside their area of strategic interest or concern. This is politically impossible and strategically unwise (recall the consequences in 1950 when the U.S. seemed to be giving assurances that South Korea fell outside its area of security concern).

To candidly address the scenario which remains the principle focus of Chinese concerns, in the unlikely event that hostilities erupt in the Taiwan Strait (or elsewhere), it will be for the U.S. and Japan separately and collectively to decide if or how to respond, based on their individual national security interests and perceptions regarding the nature and intention of the conflict and whose actions are most responsible for prompting the confrontation. For others to dictate the U.S. or Japanese response in advance constitutes interference in their internal affairs.

Please do not get us wrong or misread these remarks. No one is looking for a conflict. We are merely stressing that the Defense Guidelines is not a scenario-dependent contingency plan. A revitalized or redefined alliance does not assure that the U.S. and/or Japan will respond in the event of any specific contingency (be it over Korea or Taiwan or elsewhere); nor was there any guarantee that either or both would not respond to such contingencies under the old Guidelines. In this regard, nothing has changed beyond a clearer definition of what constitutes the most that the U.S. can expect from Japan in reaction to any crisis. Meanwhile, as long as all sides remain committed to a peaceful resolution and all honor the "one China" principle, there should be no problem in the first place.

One suspects that, these arguments notwithstanding, the Chinese remain unconvinced. Chu’s objections to the U.S. alliance structure seem absolute:

Nonetheless, even Chu offers some hope for future accommodation. If, he asserts, the U.S.-China bilateral relationship significantly improves and the U.S. can somehow convince China that it is not out to contain or otherwise threaten China, “in such a bilateral and strategic situation, the alliances and American military presence may be acceptable to the Chinese, even though they are still not desirable.”<63>

Asian Financial Crisis. The Asian financial crisis has had and will continue to have profound political-security as well as economic implications for the Asia-Pacific region. It has contributed to changes in national leadership, through the democratic process (in Thailand and the Republic of Korea) and through forced resignation (Indonesia, where the other shoe has yet to drop). China’s insulation from the worst aspects of the volatile crisis does not mask the extreme vulnerability of its own banking and financial sectors, which are susceptible to crises of their own. Apart from whether China decides to devalue its currency, China economic developments have the potential to add to further regional economic instability.

Meanwhile, the Japanese government’s failure to deal with both Japan’s domestic economic difficulties and broader regional financial woes were also major factors in the stunning defeat of the Japanese Liberal Democratic Party in upper house elections this summer which compelled Prime Minister Hashimoto to resign (even though the LDP, atleast temporarily, remains at the helm). The impact on the prospects for broader regional recovery caused by Japan’s continued failure to effectively address the financial crisis has been widely documented. The U.S. and broader global economies are already beginning to show the effects of the continuing Asian financial crisis.

A broader assessment of the crisis is beyond the scope of this paper. Instead, we would like to focus on the current and potential future impact that continued disagreements betweeen the United States and Japan over the nature, extent,and adequacy of Japan’s response to the crisis may have on the overall U.S.-Japan alliance.

U.S.-Japan Alliance. If one were to ask today, “is the alliance in serious trouble?”, the quick answer is “no, not yet.” But, the trends are all going in the wrong direction. True, U.S.-Japan relations today have not approached the low experienced in the 1993-1995 period when a variety of events -- increasingly vitriolic trade disputes, the rape of an Okinawan schoolgirl by three American servicemen, and President Clinton’s decision not to attend the Japan-hosted APEC Leaders’ Meeting -- raised serious questions about the long-term viability of the alliance. But, the upward momentum achieved by the corrective actions of 1996-1997 -- the 1996 Clinton-Hashimoto Joint Declaration, the Special Action Committee on Okinawa or SACO (which laid out a plan to reduce the U.S. “footprint” on Okinawa by 29 %), and the 1997 Defense Guidelines Review -- has stalled and increasingly appears to be moving in reverse.

The centerpiece of the SACO plan -- moving the Marine airbase at Futenma to an off-shore floating facility -- has been undercut by Okinawan Governor Ota’s refusal to approve the floating base plan (despite the surprise victory of a pro-base mayor in the township that was to host this facility). No viable alternative plan has yet to emerge, and Japan’s current leadership problems and precoccupation with economic challenges leave the central government in a weakened position to challenge Governor Ota or to push for credible alternative solutions.

Meanwhile, the legislation necessary to implement many of the procedures outlined in the Defense Guidelines has only recently been submitted to an increasingly fractured Diet which remains preoccupied with other matters. It is becoming increasingly unlikely that there will be any serious debate on this legislation this year. Japan’s failure to follow through on these key defense initiatives has been cited as a contributing factor in the White House’s decision to by-pass Japan when President Clinton made his historic journey to Beijing in June. Japan’s failure to legislatively implement the Defense Guidelines remains a minor, manageable irritant today but could quickly become a major issue were another regional crisis to occur -- a not unthinkable possibility, given North Korea’s continued strange, unpredictable behavior.

Finally, as alluded to earlier, one cannot underestimate the psychological impact on Japan and on Japan’s (and the region’s) faith in the U.S.-Japan alliance caused by President Clinton’s decision to by-pass Japan during his trip to Beijing in June. This decision, and Clinton’s willingness to openly criticize Japan during his China visit, are seen by many in the U.S. and in the region as “proof” that the U.S. is making a strategic shift toward China and away from Japan. The fact that Clinton missed every opportunity during either one of his summits with Jiang to publicly proclaim the importance of the U.S.-Japan alliance reinforces this misguided view.

This point was reinforced by noted Asian scholar Ezra Vogel. Commenting on President Clinton’s failure either to visit Japan or to extol the virtues of the alliance while in China, Vogel noted that [Clinton’s]

Of equal importance, Washington and Tokyo, in command of the world’s two largest economies, have squandered numerous golden opportunities to demonstrate the value of U.S.-Japan cooperation by their failure to deal jointly with the continuing Asian financial crisis. Instead, growing criticism of each side’s actions (and inactions) by the other has become increasingly reminiscent of earlier trade disputes.

For example, when U.S. Deputy Treasury Secretary Larry Summers made his highly-publicized swing through Asia in early 1998, he was publicly critical of Japan’s refusal to do its share in resolving the crisis, criticisms which Asian states continue to repeat today. Summers did not even visit Japan during his trip.

Also missing was any sense of coordination between the visit of former U.S. Vice President (and former Ambassador to Japan) Walter Mondale to Indonesia to persuade President Suharto to abide with IMF recommendations and Japanese Prime Mininster Hashimoto’s similar mission to Jakarta soon thereafter. A joint visit might have been more effective, and it would have sent the region an important message.

The finishing blow was Treasury Secretary Rubin’s swing through Asia immediately after his visit to China as part of the Clinton entourage. Throughout his visit to various Asian capitals (Tokyo conspicuous by its absence), Rubin repeatedly criticized Japan, taking American gaiatsu (foreign pressure) to new heights, matched only by his and Clinton’s criticism of Japan in China. This type of foreign pressure, which is becoming increasingly less effective even when applied directly, quickly becomes counterproductive when delivered to foreign audiences. Small wonder that Rubin’s August 1998 meeting with Japan’s new Finance Minister Kiichi Miyazawa in San Francisco was so unproductive.

This is not to say that America’s frustrations with Japan’s inability to move forward are not genuine. Clearly Japan needs to get on with the long overdue task of implementing promised reforms for its own good and for the good of its neighbors (the U.S. included). Americans can be excused a certain amount of skepticism when reacting to Miyazawa’s pledge to Rubin to “act rapidly in fiscal measures.”<65> Japan has been promising to “act rapidly” to institute broadly-acknowledged banking and other fiscal reforms for over a year now with little forward movement being recorded.

But Japan has contributed $42 billion to ease the financial crisis, including IMF support as well as $19 billion for Thailand, Indonesia and South Korea, as compared to $8 billion from the U.S. Japan also underwrites almost 90% of all export credits extended by G7 countries to Asian countries, helping to ease the credit crunch and revive exports.<66> Japan remains a major importer of Asian goods, especially when compared with China. Most importantly, it is hard to imagine how creating discontent and distrust with Japan among the nations of Asia serves U.S. long-term national security interests. The signal such one-sided criticism sends about the viability of the alliance relationship is even more counterproductive.

On the slightly positive side, at least Secretary of State Albright had the good wisdom of stopping in Japan both en route to her pre-summit coordinating visit to Beijing and, more importantly, on her way home from the China summit. Albright said all the right things about the centrality of the U.S.-Japan alliance, but such remarks would have had much more resonance if delivered by President Clinton, if not in Japan then at least at some point during his China visit. The Chinese press is filled with criticism of the U.S.-Japan alliance; criticism that has not been muted by the two summits. Clinton had a great opportunity to make the counter argument before a captive Chinese audience and failed to do so.

If the U.S.-Japan alliance really is “the world’s most important bilateral relationship - bar none,” it’s high time both sides started acting like it was by closer consultation on responses to the Asian crisis so that the region’s most important economy and the world’s most important economy are talking from the same script. Both allies need also to continue to stress the alliance’s importance as the base upon which their respective relationships with China will be built. “Infighting” between allies does not help Japan or the region regain badly shaken confidence; it could also put the broader security relationship at risk. We were pleased that the tone of the meeting between President Clinton and Prime Minister Obuchi in October 1998 suggested a corrective effort from previous U.S. statements.

Thus far, this review of the Asia-Pacific security situation has focused on the past and present. Before closing, some attention is needed on the future as well. More specifically, what is each nation's vision of the most desirable future Asia? Are these visions complementary or at least compatible? Are they based on shared objectives?

Near-Term Common Objectives. The U.S., Japan, and China have certain interests and objectives in common. As General Xu Yimin noted at the last Trilateral Project meeting,

All three states have a common interest in promoting peace and stability regionally and globally; seeing an end to ethnic, religious, or territorial disputes; halting the proliferation of weapons of mass destruction on the Korean Peninsula and elsewhere; maintaining a generally benign Northeast Asian security environment; and continued economic progress and reform. All three also want to see the China-Taiwan issue settled by peaceful means. All also have a vested interest in ensuring freedom of navigation and the security of the vital Asia-Pacific sea lanes upon which their respective economies rely.<68> As a result, all have a vested interest in a peaceful settlement of the South China Sea territorial dispute.

During the third Trilateral Project meeting, Dr. Ronald Montaperto further spelled out these common objectives as follows:

All three states have also embraced multilateral dialogue mechanisms as an increasingly important vehicle for promoting regional security through enhanced dialogue and confidence building. As Professor Ryosei Kokubun notes,

If harmony is to be maintained over the near to mid-term, and if mutual trust and confidence in one another is to be built, all three nations must concentrate their efforts on building upon these common objectives. They must also identify and jointly exploit opportunities for closer trilateral economic cooperation.

Opportunities for Economic Cooperation. Participants in the third Trilateral Project meeting devoted a session to investigate possibilities of cooperation on a series of economic issues that have become widely recognized as “non-traditional security concerns” -- energy, environment, and food security. These are not purely domestic issues, since their effects cross national borders; they may also offer important opportunities for mutually beneficial trilateral cooperation.

While the U.S. and Japan have domestic problems in these three areas, China’s economic development challenges are of such magnitude that it simply cannot solve all of the problems alone. As this section shows, all three countries will benefit from further cooperation in these three areas, but it is relatively unexplored territory at the diplomatic level. There have been some bilateral agreements on energy, environment, and agriculture, but fuller cooperation is absolutely essential to address common problems.<71> Discussion on these issues at the Trilateral Project in November 1997 did provide a quieting respite from more contentious security issues -- the scope of economic development problems in China are not well appreciated, and participants seemed sombered by the challenges and receptive to further trilateral cooperation necessary to address these issues.

China’s leaders have recognized that the costs of rapid economic growth on its productivity are tangible, and potentially huge. With 22% of the world’s people living on just 7% of the world’s arable land, China’s agricultural, energy, and water resource base is considerably lower than the world average and cannot afford to be wasted.<72> Air pollution in China’s cities remains two to five times above World Health Organization (WHO) guidelines as well as developing country averages, about 40% of the river sections passing by urban areas do not meet minimum standards for drinking or lower standards for irrigation, and the government acknowledges that acid rain affects 29% of its land area.<73> It has more than a quarter of the world's population and less than one-twentieth of its fresh water sources.

Senior Chinese officials have acknowledged that the situation is “severe” and that despite some accomplishments, the situation could constrain future economic growth and improvements in welfare. President Jiang Zemin told a March 1997 meeting of the Chinese Communist Party Central Committee that overpopulation, coupled with breakneck economic growth, has caused serious environmental damage and said China needed to improve a legal framework to help protect the nation's ecology. At the same meeting, Premier Li Peng stated that in the five years to 2000, China would allocate 450 billion yuan (US$80.82 billion) for environmental protection and plans to set new goals of containing pollution and ecological damage by 2000 to bring about fundamental reversal by 2010.<74>

Whether China can meet this budgetary goal for fixing environmental degradation in the current economic downturn remains to be seen. But apart from funds for clean-up costs, a comprehensive 1997 World Bank study argues that even more critical is for China to adopt better market and regulatory mechanisms, and to better harness the global economy to solve environmental problems and meet energy and food demand. While international cooperative efforts underlie some of China’s strategies to deal with these issues, opening markets has been selective and uneven. China is better off by developing sound competition and technology policies that “reward innovation, risk taking, and good management” rather than to rely on protection or subsidies.<75>

Where do the United States and Japan fit into this challenge? So far, cooperation is limited to scattered bilateral initiatives that may be helpful or promising, but fall short of China’s development needs. Joint initiatives on research, technology transfer, expertise and training, and financial assistance are all needed and welcomed, but real change must occur at the policy level, a more difficult goal to achieve. Japan is particularly affected by China’s food, energy and environmental policies, and so has a particular incentive to develop cooperative mechanisms. As Japan is the world’s largest grain importer, and is dependent on oil imports for the majority of its energy needs, “Japan is extremely sensitive to those elements and factors that may disturb the market conditions for energy and food,” argued Professor Yoshinobu Yamamoto at the third Trilateral Project meeting.<76> The summitry during 1997 and 1998 between China and Japan and between China and the United States appears to have set the stage for a more positive climate for the U.S. and Japan to participate more broadly in China’s challenging transition. Some of these challenges are outlined below.

Agriculture. China’s goal is to maintain 95% self-sufficiency in grain production, yet the World Bank argues that further integration with international markets would permit food security at lower cost, and that cereal self sufficiency could decline to 90% without jeopardizing legitimate food security concerns.<77> The World Bank’s best estimate of China’s long-term cereal demand in 2020 is 608 million tons, and with significant reforms in a variety of sectors, China will likely be able to produce 90% of these requirements, with the balance of about 60 million tons imported by 2020, triple what they are today. (This contrasts with Lester Brown’s 1995 shocking forecast that by 2030, China would likely need to import between 200 and 369 million tons, an estimate the Bank admits helped to motivate their study.)

The World Bank study further notes that agricultural production has lagged behind economic growth rates during the last two decades, with output in noncereal production (fruits, vegetables, livestock, and aquatic products) rising more than 9%, while cereals averaged only about 3%. While demand for noncereal products has grown due to rising incomes, production and marketing in that sector is relatively free of government intervention and competitive markets are thriving, whereas the government retains monopoly control in cereal production, where it has also been slow to embrace foreign investment. The reforms the Bank suggests include more advanced research, land-use reform and reclamation of land, development of water resources including irrigation reform, as well as infrastructure development of port and inland transportation facilities.<78> In addition, from a world supply point of view, the major grain-exporting countries could rapidly meet China’s demand if they expected steady growth in export demand. Yet China’s current practice of contracting only six months out curtails its options of sourcing grain at more reasonable costs and creates short-term volatility.

Regarding water policy, there are some bilateral efforts to address the dire situation of water resources in China. China itself recognizes the problem and has pledged 180 billion yuan (US$21.7 billion) in a project to treat the most heavily polluted rivers and lakes in the country in the effort to keep the total pollutant discharge at current levels.<79> Yet inadequate wastewater treatment facilities, faulty sewer systems, and uneven enforcement of regulations have contributed to widespread pollution.<80> These are all technologies that the U.S. and Japan have successfully developed, and market liberalization could help draw foreign capital in to help solve polluted water problems.

Although China’s exports of agricultural products to Japan have declined significantly in recent years, there has been an increase of Japanese investment in food production and processing in China, largely destined for re-export back to Japan. Over the longer term, Japanese agribusiness in China may increasingly cater to the local market, providing further impetus to cooperate on matters of food security.

Ultimately, APEC could lead the way in the elimination of agriculture and energy subsidies, and reduce cross-country differentials in environmental standards.<81> According to one study, if agricultural production subsidies were eliminated across APEC economies, income would increase by $106 billion annually. Subsidies for drinking water and irrigation in APEC’s developing countries are estimated at $45 billion per year; reforming these subsidies will have spill-over effects on more productive land use and make water use more efficient. A 1997 study by the Pacific Economic Cooperation Council (PECC) that analyzes the entirety of the food system in PECC countries supports the notion that broad liberalization in agricultural-related industries will boost regional food security and help create more sound economies.<82> It will be unquestionably difficult to deal with these kind of far-reaching reforms until the region’s economies are back on solid footing.

Energy. There are many current and potential areas for U.S. and Japan cooperation on meeting China’s energy demands. China’s extreme dependence on coal – which supplies 80% of China’s energy needs and is a major source of air pollution – could be mitigated by importing coal-washing technologies and higher-efficiency boilers. This could be accomplished by altering price and tax structures of not only coal, but gasoline and diesel fuels, to more adequately reflect health costs and provide a market incentive to adopt cleaner technologies. In general, China is underpricing its scarce resources of natural gas (and water) and raising prices would use the market to clean the environment.

The Jiang/Clinton summit in November 1997 cleared the way for China’s importation of U.S. nuclear plant technology, which could amount to $1.6 billion a year in exports given optimistic plans. China’s total energy consumption is expected to triple over the next 25 years, and to help meet demand a total of 141 power plant orders are planned by the year 2000. Yet even if these ambitious plans are realized, nuclear power would provide just 4-6% of electricity demand, rising from the current less than 1%. This compares to Japan’s reliance on nuclear power of about 30% of total electricity needs, and U.S. reliance on nuclear power of about 21% -- which is expected to fall below 10% by 2020. Other options for China to meet energy demand include hydroelectric power, but the World Bank study argues that even were it able to develop every viable hydroelectric power site, it would amount to just 8% of energy demand in 2020. The fact remains that for China, the lack of affordable energy alternatives suggests that coal will continue to play a major role in meeting energy demand. China’s adoption of cleaner technologies for burning coal should be a priority for trilateral cooperation, given Japan’s and the U.S.’ expertise in this area.

China’s oil imports are a particular area that affects trilateral relations. China currently consumes about 150 million tons of oil a year, accounting for about 17% of total energy requirements. China is already a net importer of oil and its oil demand will likely grow somewhat faster than total energy demand given increased automobile use; with productive capacity in 2020 estimated at about 200 million tons, China could easily need to import 300 million tons a year in 2020. The current sources – Indonesia and the Middle East – will need to be diversified, and a new agreement between Japan and Russia is important to China in this regard. Former Prime Minister Hashimoto and President Yeltsin have agreed in principle to a three-year $30 million feasibility study to develop a $12 billion, 2100 mile natural gas pipeline that would carry 20 billion cubic meters of natural gas from the Koviktinskoye field, 250 miles north of Irkutsk, to Beijing and the China coast, where it would be piped into Japan or compressed for shipment by tanker. Chinese officials meeting with Yeltsin have approved of the idea, and the initiative has important positive implications for energy cooperation among the three countries. The plan is key to Japan’s goal to increase usage of natural gas (11% of total energy supply) and to reduce its reliance on other fossil fuels which fell from 78% to about 57% of total energy supply following the 1979 oil shock. Japan’s exports to China of refined petroleum products have risen four-fold between 1990 and 1994, increasing the interdependency in that market as well.<83>

Acid Rain. Japan is also making strides with China in addressing the long-standing battle over acid rain. In addition to China’s exposure to its own acid rain, Japan has argued that it is also subject to acid rain drifting over from China, particularly in Kyushu, which in 1992 was reported to be subject to fully 30% of the total acid compounds released into the air by Chinese industries. While the Japanese National Institute for Environmental Studies has conducted extensive studies detailing these patterns, it remained a controversial issue.<84> Japan has now announced the establishment of the “Acid Deposition Monitoring Network in East Asia.” In part, the project will enhance the capabilities of a network of environmental centers it has established over time to develop better information gathering. Specifically in the case of China, former Prime Minister Hashimoto and Primer Li Peng agreed in principle on a project where Japan would provide 100 Chinese cities with computers to help monitoring techniques, and will help to equip Chinese factories with desulfurization devices.<85>

One result of the Hashimoto/Jiang September 1997 summit in China was the agreement to establish the "Japanese-Chinese Environmental Cooperation toward the 21st Century" project, which was agreed to in principle by Chinese officials. In addition to the acid rain project, it envisions creating a model cities program, which in jointly selected cities, the Chinese side will strengthen regulations and law enforcement, and the Japanese side will provide financial aid and technical support focused on building recyling-oriented industrial and social systems so that coal will burn more cleanly.<86>

At both the Washington and Beijing summits, Clinton and Jiang agreed to strengthen cooperation in a variety of energy and environmental issues through such initiatives as accelerate clean energy projects and the appropriate transfer of related technologies in areas such as urban air pollution control, and foster cooperation on global environment issues such as climate change, desertification and bio-diversity.

China has a great need for pollution control technology; between 1994 and 1995, China's imports of air-cleaning equipment jumped 44%, while imports of water-treatment systems rose 27%. Foreign firms in 1996 sold $1.8 billion worth of environmental equipment and services to China, but much of China’s environmental budget is spent on the low-tech sector such as trash removal, sanitation, and the provision of potable water and recycling, sectors which are inaccessible to foreign firms. Japanese firms are experimenting in China with lower-tech versions of pollution control technologies used at home, and China should encourage this practice with additional economic incentives.

New Governmental Approaches to Transnational Issues. Tackling the issues of environment, energy, and food security are difficult for developed and developing countries alike. Each area is sufficiently complex to warrant attention by separate government agencies and policies, but effective problem solving requires that the areas be approached as an inter-related set of issues. No government has mastered this challenge, but they are increasingly required to respond to crises that wed these seemingly disparate areas. In addition, transnational economic issues should teach us that contrary to “losing” sovereignty, or that the nation-state is weakened or comes under attack by globalization, governments are being challenged to upgrade their role in managing national affairs to a new level of expertise – precisely to put in place sound economic practices that can weather the unpredictability of external events. Whether that new management role requires decentralization strategies to transfer some responsibilities to localities, or cooperation at the supra-national level on issues once deemed purely domestic, governments will be strengthened in their ability to deliver a better standard of living to their citizenry.

Long-Term Strategic Visions. While near- and mid-term range of common objectives and opportunities for economic cooperation provide both the basis and the necessary incentive for three way cooperation and confidence building today, long-term cooperation is also contingent on compatible long-term strategic visions -- we stress compatible not identical. American, Chinese, and Japanese long-term visions will likely differ in many aspects; they will not always directly coincide. But they must be compatible; they must be able to co-exist. By this we mean that the respective long-term visions must not be seen as threatening or working against the interests or aspirations of the others.

U.S. Long-Term Vision. When American policy-makers envision East Asia at the dawn of the 21st century, they hope to see a stable, prosperous region in which the United States is still a primary (although not necessarily the only) stabilizing factor and is seen as such by most (if not all) regional states; an Asia in which the United States remains fully engaged politically, economically, and militarily; an Asia which continues to welcome the presence of U.S. military forces and alliances; where military-to-military cooperation is the order of the day, not just with U.S. forces but intra-regionally as well; an Asia where stability is underwritten in no small part by the continued security partnership between the U.S. and Japan.

From a U.S. perspective, the future Asia is one where multilateral cooperation has taken hold; where the ASEAN Regional Forum has evolved into an Asian Regional Forum, not to demean ASEAN's key role but to underscore that their true legacy was in developing a vehicle that permits all the nations of the Asia-Pacific region to come together and address their broad-based security concerns; where confidence building measures undertaken today have resulted in greater security cooperation and mutual trust region-wide; but where emerging multilateral regimes continue to recognize and build upon -- and not seek to undermine or replace -- the key bilateral security alliances which provide the foundation upon which peace and stability and multilateral cooperation rest.

In the economic environment, U.S. long-term strategic vision centers on building an international system out of the current turmoil that is considered both equitable and indispensable for economic development in developed and developing countries alike. The U.S. wants to see an international trade and investment regime that is more reciprocal to its own openness, but also where this openness benefits domestic economies as well through the establishment of accountable financial systems and good corporate governance.

Futurists also see a Japan that has more effectively and publicly come to terms with its past; a Japan which is an accepted political as well as economic leader in Asia (and globally); a Japan that is more willing and able to play a positive role in promoting and protecting regional security, but within clearly defined boundaries that remain both transparent and reassuring to Japan's neighbors; a Japan which is a more equal security partner to the U.S., but one that continues to prefer a complementary military force to a "stand-alone" force that could prove destabilizing (Japan's peaceful intent notwithstanding); and a Japan whose markets are considerably more open and integrated than they are today.

We believe American policy-makers also seek a peaceful, prosperous, reunified Korean Peninsula that continues to view the U.S. both as an ally and as a regional balancer, and hopefully as an honest broker promoting improved relations between Tokyo and Seoul as well -- we of course assume that Seoul will be at the center of this reunified Korean Peninsula, the ROK's political and economic system having already clearly prevailed over that of the DPRK's.

American policy-makers also seek a prosperous, cooperative, more politically-tolerant China that continues to see its fortunes inextricably intertwined with the rest of Asia and the West; a China that is as much a partner for peace in Asia as they hope Russia will be in Europe; a China which may not joyously welcome, but is at least accepting of and not actively working against, a continued American security role in the region -- a role that has been enhanced by a revitalized U.S.-Japan relationship whose objectives (continued regional peace, prosperity, and stability) complement China's own future hopes for the region.

Frankly speaking, our crystal ball becomes less clear as we try to envision Taiwan a decade from now. Clearly the U.S. wants a Taiwan that remains prosperous, democratic, and at peace with its cross-Strait brethren. It is not impossible to envision some type of compromise formula which keeps the Chinese nation intact and recognizes Beijing's sovereignty concerns, while still respecting the hopes and aspirations of the people on Taiwan. Getting there from here remains a formidable challenge, however, one that calls for patience and pragmatism from both sides.

In short, U.S. interests are best served by an Asia in which cooperation and managed competition are the defining characteristics of state-to-state relations; an Asia in which the focus is not on power politics or balance of power relationships but on maintaining and building upon the sense of regional equilibrium that exists, however tentatively, today.

Other Visions. If the views expressed by Japanese participants during the Trilateral Project are any indication, the long-term vision of most Japanese policy-makers closely coincides with the U.S. vision just-described. At a minimum, this vision does not appear contrary to Japan's long-term interests or aspirations as we understand them. We believe most Southeast Asian policy-makers also feel comfortable with (and are comforted by) this vision.

Japan, along with the nations of Southeast Asia, routinely place more importance on the future role of multilateral security mechanisms, but not at the expense of the existing U.S. alliance-based structure. As Professor Takagi explains,

Southeast Asians also see the ARF evolving first into a preventive diplomacy mechanism and eventually into a crisis resolution vehicle within the Asia-Pacific region.<87> Most ASEAN officials agree, however, that this transition from the ARF's current confidence building mandate will be a long, slow (and by no means assured) process.<88>

Few Koreans residing south of the 38th parallel would argue about the desirability of a peacefully reunified Peninsula under Seoul's rule, although convincing their brothers to the north that this is a good idea remains a significant challenge. The advisability or feasibility of a continued U.S.-Korea security relationship or U.S. military presence on the Peninsula post-reunification is more subject to debate, although many South Korean policy-makers (including ROK President Kim Dae-Jung) profess a preference for a continuation of this particular status quo.

Chinese Vision. From our perspective, this vision of the future is one that Beijing should not see as threatening, even if Chinese leaders, perhaps understandably, might prefer a different Asia; one in which China and not the U.S. plays the primary regional balancer role; where Seoul looks to Beijing for its security guarantees; where U.S. military forces no longer reside on the Korean Peninsula (or elsewhere in Asia); and where Japan's regional leadership role (politically and economically, as well as militarily) is kept to a minimum.

China's view of itself as the primary future regional balancer is not necessarily threatening, although it has the capability of becoming so if Beijing tries to force this role on the region rather than letting it evolve (or fail to evolve) naturally. However, if China's preferred end-state is substantially diminished U.S. presence and influence in the Asia Pacific region, this vision clearly runs counter to U.S. interests or aspirationsand thus places both nations on a potential collision course.

Chu Shulong, in laying out China's new security concept, notes that China now embraces a new "four no's" policy: no hegemonism, no power politics, no arms races, and no military alliances.<89> Chu then continues,

In other words, while China's new security concept goes way beyond merely being against the U.S. alliance structure in Asia, China's non-acceptance of the U.S.-Japan and other U.S. bilateral security arrangements lies at its heart. Clearly, our long-term visions, as currently defined, are incompatable at their core.

Lest we be misunderstood, let us hasten to add that we do not subscribe to the "Coming Conflict with China" school of thought. We do not believe a U.S.-PRC collision is inevitable or unavoidable. However, we do believe that both sides must acknowledge their differences of strategic perspectives and long-term vision and seek to define a common ground where one another's aspirations and objectives can coexist. We would further argue that Chinese recognition that the U.S. has permanent interests in Asia and is intent on defending them -- and that Japan and others share this desire for active U.S. engagement and a continuation of U.S. bilateral alliances and the regional security they provide -- lay at the base of future Sino-U.S. cooperation.

Dr. Montaperto summed it up nicely during the third Trilateral Project meeting when he stated:

As noted at the onset, maintaining a harmonious three-way relationship requires, first and foremost, that all three sets of bilateral relationships remain amicable. The challenge for U.S. policy makers, therefore, is to balance the critical need to sustain and revitalize the U.S.-Japan relationship with the equally compelling need to continue to strengthen Sino-U.S. relations, while at the same time encouraging both Japan and China to manage more effectively and harmoniously the third leg of this triangle.

U.S.-Japan Relations. The key to U.S. security strategy in Asia, the "linchpin" or foundation upon which America's broader national security policy rests, is the U.S.-Japan alliance relationship. Japan is and should continue to be seen as America's principal strategic partner and should be referred to, and refer to itself, in those terms. Top priority must be assigned to the maintenance of this all-important political-economic-military relationship both in Washington and in Tokyo. Without demeaning the importance of either nation's relations with China, we repeat our basic assumption: if, during the effort to improve Sino-U.S. or Sino-Japanese

Sustaining and nurturing the overall U.S.-Japan relationship requires continued efforts to reinvigorate the U.S.-Japan alliance in order to make it more relevant in the post-Cold War world and to make it more equal in the eyes of both partners. Also needed from both sides is greater effort to place some of the more contentious aspects of the relationship (including ever-present trade disputes) in the broader context of the overall security relationship.

Greater public awareness of the nature, importance, and continued relevance of the security relationship is also needed. More frequent high-level meetings between both nations' senior officials appear crucial both to promoting greater public awareness and to keeping the relationship on solid footing. This is especially important today, given the key role of U.S.-Japan cooperation in helping the rest of Asia -- China included -- to recover from the effects of the Asian financial crisis.

U.S. and Japanese politicians also need to recognize the detrimental affect that gaiatsu and America-bashing or Japan-bashing (or Japan-passing) can have on public support for the security alliance relationship in both countries. Unfair or unbalanced public criticism or too much foreign pressure (especially when delivered by senior U.S. officials during visits to third countries) can chip away at the level of public support and confidence essential to sustain the alliance.

Defense Issues. Japan also needs to set a clear, mutually-acceptable timetable to move forward in the Diet with its already-submitted Defense Guidelines implementation package. As argued earlier, Japan's failure to legislatively implement the Defense Guidelines is only a minor (and thus manageable) irritant today but could quickly become a major issue were another regional crisis to occur. Therefore, Japan must also be prepared to move more quickly if necessary, should tensions once again heat up on the Korean Peninsula or elsewhere.

Absent such stimulus, it appears doubtful that there will be any immediate forward progress on the Guidelines package. This may not be all bad, however. One important aspect of Defense Guidelines implementation is the national debate it should spark in Japan about Japan's future security role and the continued centrality of the alliance relationship in Japan's long-term national security strategy. Such a debate, while long-overdue, would be difficult today, given the current preoccupation with domestic economic problems (and the current state of partisan Japanese domestic politics).

Once the Prefecture elections are completed in Okinawa in the Fall of 1998, the central government in Tokyo also needs to confront Okinawa's governor (whether it be a re-elected Governor Ota or someone else) with the realities of needing to move forward to enact the SACO provisions. In an odd way, Governor Ota now seems to be playing the role of the U.S. Marine Corps' best friend. The Marines are in no rush to depart from Futenma; they objected to the plan to leave in favor of the floating base that Ota has since rejected. Until Okinawans come up with a suitable relocation plan, the Marines will likely remain at Futenma, and nothing would please them more. But, staying in Futenma is not the long-term solution and political courage is going to be needed on both sides if the U.S. plan to reduce the American military's "footprint" in Okinawa is to be realized.

Economic Issues. Our longstanding bilateral ties mostly keep economic conflicts from poisoning the security alliance. But equity issues do arise by some people in both countries. American Congressmen have been known to ask why our troops are defending Japan when we can't have free access to Japanese markets or otherwise complain about Japan getting a "free ride."<92> Meanwhile, Japanese politicians are also beginning to question why they should be providing over $5 billion in host-nation support to underwrite American heavy-handedness, and some are openly questioning the need for a continued American military presence,<93> given the high political and economic cost. It is becoming increasingly impossible to separate economic and security issues, both in reality and in the minds of both nations' legislators and general publics.

There are two other key issues that emerged during the Trilateral Project. In their dealing with each other, the U.S. needs to be mindful that the asymmetry in their military relations not spill over into their economic relations by heavy-handed lecturing on economic policy. As one Japanese participant noted, the younger generation of Japanese perceive of the two countries more as equals, and they will not follow the old "father-son" approach. Instead, the United States can refocus its legitimate economic concerns into what is good for the Japanese people -- a more consumer-oriented economy that will result in increased imports. For its part, Japan must realize that the U.S. cannot sustain the steady increase in trade deficits without a political backlash -- or an economic backlash from American isolationists. Second, in their relations with the region, it is clear that Japan naturally feels a closer economic relationship with Asia than the United States, just as geographic proximity draws the U.S. economy close to Canada and Mexico. The U.S. should give Japan the diplomatic space to further develop this role rather than feel threatened by it. The reaction of the U.S. to Japan's proposal of an "Asian IMF"which we raised previously is demonstrative of how the U.S. pub