Robert A Manning & Paula Stern. Foreign Affairs. Volume 73, Issue 6, November/December 1994.

Timing is Everything

When President Clinton steps off Air Force One into the steamy tropical heat of Bogor, Indonesia, to attend November’s Asia-Pacific Economic Cooperation summit, there will be buoyant talk of free trade areas embellished with bold rhetoric heralding a new Pacific community. The notion of a burgeoning community encompassing both sides of an ascendant Pacific Rim has become a veritable article of faith over the past quarter-century and has been a core assumption of U. S. policy toward the Asia-Pacific since 1989. High profile events like the July 1983 summit for the Group of Seven leading industrialized nations (G-7) in Tokyo and the November APEC meeting in Seattle that same year let President Clinton put his imprimatur on the concept of an American-led Pacific community based on free trade and political cooperation. He articulated a view of the region not only as key to a foreign policy centered on geoeconomics, but as a market opportunity to advance his domestic agenda of revitalizing the American economy.

The Asian “economic miracle” and the attendant idea of a “Pacific century,” which gave rise to the Pacific community idea, have become almost cliches. But the region’s economies are breathtakingly powerful. Consider the four newly industrialized “tigers” (South Korea, Singapore, Taiwan, and Hong Kong), which averaged almost six percent annual growth over the course of a generation, or the Japan boom, or China’s takeoff since 1979, or the “new tigers” of Malaysia, Thailand, Indonesia, and maybe even Vietnam. They are monuments to the Asian export growth approaches to development that shattered the North-South paradigm. East Asia has become an engine of the global economy and a defining part of the post-Cold War international system.

Yet even now, as the Asia-Pacific’s regional institutions are in embryonic form, a host of economic, political, military, and psychological trends suggest that the cherished aspiration—a common psychology of belonging, reflecting shared interests, responsibilities, values, and mutual respect—may prove to be a chimera. The Pacific community idea may be pulled apart by more power forces: from above by global economic integration, extra-regional political and security mechanisms, and democratization; and from below by intra-Asian and subregional economic and financial networks and by local security dynamics that are supplanting the U. S. balancing role. For the United States, there is a particularly unfortunate bit of timing at work here. Not only do these conflicting pulls make the very term “Pacific community” an elusive concept, but U. S. power in the Asia-Pacific arena is declining at a historical moment when the American stake in the region is rising.

Trade, investment, and a Pacific coastline do not necessarily make for a broader sense of community. As a recent report warned, might the Pacific “remain more of a rim than a community”? It is perhaps instructive, as that report points out, that there is no Asian word equivalent to “community.” Indeed, APEC’s decision to include Mexico and Chile among its members, while excluding Russia, India, Vietnam, and Burma, reveals profound ambiguity about where the Pacific community begins and ends. And five years after APEC’s inception, the institutional centerpiece of this notional community has yet to produce concrete results beyond creating a secretariat and holding regular top-level meetings.

The Asia-Pacific’s vast geographic expanse and its cultural, political, and historical diversity stand in sharp contrast to today’s Europe. The contrast with the Atlantic community begs the question of what the Pacific community is as much as where it is. To begin the process of turning the region into a community, its two giants, China and Japan, will have to work out their relationship’s formidable security problems, just as France and Germany did 40 years ago.

Moreover, to the degree that there is a sense of identity, it tends to be Asian, not Pacific: an assertive Confucian culture; an informal, nonconfrontational style; and the self-confidence of the newly industrializing economies as successful postcolonial, nonwhite societies. The unintended consequences of U. S. policies—unilateral pressure on trade, deepening Japanese economic integration into the region from the strengthening of the yen, insistence on prescribing human rights behavior, and inconstant leadership that undermined credibility—sparked a self-defensive Asian reaction. Things improved somewhat with recent midcourse corrections stabilizing relations with China and Japan. But the United States still faces the challenge of defining a workable Pacific partnership that advances both economic growth and regional security.

Rising in the East

The sheer volume of Asia-Pacific commerce animates U. S. dreams of a Pacific community. To put the region’s economy in context, the East Asian economies in 1960 comprised 4 percent of the world’s GNP. By 1991 they comprised some 25 percent of the world’s GNP (roughly equal to that of the United States). By the year 2000, they are projected to account for a third of the world’s GNP. Already, the seven leading East Asian economies have 1 percent of global bank reserves, up from 17 percent in 1980. The average savings rate of Asian economies is 30 percent, compared to 8 percent for the G-7 economies. According to World Bank estimates, Asia will account for half of the global GNP growth and half of the global trade growth in the decade from 1990 to 2000.

Moreover, Undersecretary of Commerce Jeffrey E. Garten has pointed out, “East Asia could grow twice as fast as the United States in the next decade, and three times the rate of Europe.” For the United States, whose two-way trade across the Pacific reached $361 billion in 1993—over 50 percent more than its transatlantic trade—Asia is of critical importance. Equally impressive is the sustained growth of U. S.-Asia trade: from 1978 to 1991, U.S. transpacific trade almost quadrupled to $361 billion from $80 billion. It must be noted that, until 1994, trade in services (where the United States generally runs a large surplus) has not been calculated in standard trade balance figures.

But the notion that Asia’s dynamism is drawn largely through the Pacific to the United States—a notion on which the idea of a Pacific community rests—is simply false. European Union trade with the Pacific Rim is also growing substantially: in 1992, EU trade with the Pacific Rim economies totaled $249 billion, surpassing its $206 billion in trade across the Atlantic with the United States.(3) Moreover, the book value of EU investment in the region has not lagged far behind that of the United States over the past decade, and Asians rushed to invest in Europe before 1992 to better position themselves in that market. A glimpse at the trade patterns of most East Asian economies reveals trade roughly equally distributed between the United States, Europe, and the rest of Asia, but with intra-Asian trade and investment growing markedly faster than any other. This globalization factor undermines grandiose notions of a distinct Pacific community.

Clusters of Growth

Perhaps the most remarkable aspect of the Asia-Pacific’s economic dynamism over the past decade is the exponential advance of “horizontal” integration, which has created an intra-Asian trade and investment network. As each East Asian economy has moved up the ladder of development, it has tended to accelerate the growth of those at the next tier of development. For example, South Korea has for some time competed with Japan in shipbuilding and steel manufacturing, and increasingly competes with it in semiconductors and consumer electronics. Japan has relocated production facilities for autos and electronics to Thailand, Malaysia, and other Association of Southeast Asian Nations members, both to use as global export platforms and to import products back to Japan. The newly industrializing “tigers” have been relocating labor-intensive industries such as textiles, athletic footwear, toys, and electronic assembly to China, other ASEAN members, and, increasingly, Vietnam.

This pattern is evident in the trade and investment figures. Intra-Asian trade now accounts for about 45 percent of East Asia’s total trade. But official figures for intra-Asian trade are understated, as many significant relationships—China-Taiwan China-Vietnam, North-South Korea, China-Russia—are not fully reported. Taiwan is now the largest foreign investor in Malaysia and Vietnam. The other “tigers” are major investors in ASEAN economies; Hong Kong and Taiwan account for more than two-thirds of foreign direct investment in China. Taipei, which has been one of the East Asian economies most heavily dependent on U. S. export markets, now has a larger volume of trade with Beijing than with Washington. More broadly, the share of East Asian exports to the U. S. market fell to 24.2 percent in 1992 from 34.1 percent in 1986, underscoring the erosion of the region’s dependence on the United States. These flows of trade and investment have led to the emergence of “growth clusters,” subregional economic networks forming without regard to—and often despite—national borders.

Against the backdrop of North American and European regional integration, it is hardly surprising that East Asian nations are considering their own regional economic entities, especially given intra-Asian trade and investment patterns. In 1990, Prime Minister Mahathir bin Mohamad of Malaysia proposed creating an East Asian Economic Group (which has since evolved into a caucus, know as EAEC), although it remains unclear how its purpose might differ from APEC’s. U. S. officials were stunned last spring when ASEAN presented Washington with detailed plans for an EAEC Structure. The region’s propensity to hedge against uncertainty has turned EAEC into the beast that will not die.

In practice, APEC is inclusive, transpacific, and focused on expanding trade. Several ASEAN states are reluctant to embrace an APEC-Wide free trade area because of their suspicions of some hidden American agenda. Such a proposal was put forward in August by the Eminent Persons Group (EPG), an august assembly with unofficial status tasked by APEC governments with designing a vision for the future. While the plan appealed to Indonesian President Suharto, who will host the 1994 APEC meeting, as a cost-free way to achieve international prominence and historical symbolism, it raises more questions than it answers.

The EPG’s proposal purports to advance “open regionalism.” But is that very concept an oxymoron in light of the completed Uruguay Round and the forthcoming World Trade Organization? Would such a futuristic exercise divert efforts from expanding global free trade or from the hard slogging of more modest, unsexy building blocks of liberalizing trade in key growth sectors, or harmonizing standards and customs procedures? Such incremental steps are generally preferred by American business. While incremental trade liberalization yielding concrete results would likely be cheered in Congress, the idea of a massive free trade arrangement that allowed China and Indonesia, with their vast pools of cheap labor, to phase in reciprocal liberalization over two decades after America assumed its obligations is certain to raise the hackles of Congress, which barely approved a free trade agreement with Mexico, whose economy is four percent the size of America’s. A free trade area including Japan, whose barriers tend to be informal, invisible, and cultural would be an even tougher sell.

America’s Shrinking Role

The key variable in the Asia-Pacific equation—and in the debate over what institutions and political mechanisms would best safeguard the region’s prosperity and stability—is the United States. But there is a powerful irony behind the renewed American interest in the region at this point in history. Today, the two traditional pillars of American predominance in Asia—U. S. economic muscle from its markets and overall financial presence and U. S. security muscle from its bilateral alliances and military bases—are both diminishing assets. A further irony is that while in absolute terms U. S. economic engagement in the Pacific is steadily increasing, it is declining in relative terms. What stands out in the region is a shared unease at perceived trends: a contraction of the central economic and military role played by the United States, simultaneous with the ascendance of China and Japan as multifaceted powers. Asian calculations tend to be based on long-term trends. It is not that East Asians do not envision or even want the United States to be a major player in the post-Cold War shaping of the region. But they see the traditional U. S. economic and security role as declining amid rising U. S. demands.

Indeed, notwithstanding rhetoric about a transoceanic friendship, the increasingly self-confident Asian partners at the APEC summit will view the United States warily—as illustrated by tensions with the host, Indonesia, over human rights, worker rights, press freedom, the environment, and Jakarta’s repression in East Timor. These strains show the potential for an unfolding, unappealing dynamic in which a declining American role shapes East Asian responses to a gradual but pronounced transformation of the Pacific’s defining realities: dependence on U. S. markets and security commitments. Washington’s challenge is to redefine and sustain its active engagement in a critical region—a region in which it will be an important actor, but no longer the singularly dominant one.

The Clinton administration’s approach to East Asia has added to Asian ambivalence about the United States. Despite its auspicious promise of reinvigorated engagement, relations quickly soured, as a leaked memo from Assistant Secretary of State Winston Lord explained, precisely because Asians “are beginning to resist the nature of that engagement.” As Lord’s incisive memo catalogued, over the course of the administration’s first 15 months in office, American sensitivities found voice in unusually public economic and political disputes with China (over most-favored-nation trade status, human rights, proliferation), Japan (trade), North Korea (nuclear proliferation), Singapore (the caning of a U. S. citizen), Indonesia (labor rights, trade, and human rights violations in East Timor), Thailand (proliferation and drug trafficking), Myanmar (political legitimacy), and more generally over differing approaches to human rights, labor rights, and the environment. In practice, difficulties balancing the pursuit of interests and the imposition of values have robbed U. S. policy of cogency and resolve even when the right decision is made—as seen dramatically last May, when Clinton boldly reversed his stance on China’s human rights record to grant it MFN status. Lord’s memo warned of an emerging malaise, arising from East Asian perceptions of Washington as “an international nanny if not bully.” The risk, however, is not one of malaise but of marginalization—not as the result of a “clash of civilizations,” but rather from a lack of understanding of Asian dynamics and the difficulties of fashioning enlightened strategy, tactics, and style to best advance American interests.

While preaching multilateralism, the administration has practiced unilateralism in pursuit of trade and human rights objectives. Its initial “results-oriented” demands allowed Japan, amazingly, to posture before other fearful Asian nations as the defender of free trade. The public spectacle of the United States repeatedly rebuking Singapore for applying its own law—hitherto unnoticed as a human rights violation when only Asians were caned—was a direct confrontation with a government unabashedly advancing U. S. economic and security goals, suggesting the absence of a comprehensive Asian strategy. U. S. Trade Representative Mickey Kantor’s subsequent opposition to having Singapore, a free trader, host the initial meeting of the World Trade Organization underscored the point. In apparent response to widespread criticism, the Lord memo cautioned that “we must weigh the impact of pursuing short-term goals on our overall long-term interests.”

Indeed, however right the policy goals, Washington’s behavior worked directly against its own interest in building a community of which the United States is an integral part. Rather, it seemed to galvanize Asian contrariness. At a February 1993 human rights conference in Bangkok, many Asian delegations took a defiant, anti-American stance, emphasizing the role of culture and stages of development, placing economic and social rights ahead of individual rights, and criticizing the hypocrisy of human rights lectures coming from the nation leading the world in rates of murder, per capita incarceration, and gun ownership. American efforts to inject labor and environmental rights at the signing of the Uruguay Round led to an unusual communique at the end of a meeting of ASEAN labor ministers, who condemned linking labor and environmental rights to trade as closet protectionism.

The Insecurity Council

The unfortunate intersection of Pacific disharmony and waning American influence matters most in the arena of security, which offers greater challenges than the economic dimension. Here, the strains and suspicions among fellow members of the supposed Pacific community are exacerbated by the waning security structure anchored in America’s military presence.

The security realm, as a result, is riddled with paradoxes. Ironically, in the area where the alteration of the U. S. role, both real and anticipated, is perhaps most pronounced, most Asians would actually welcome more American unilateralism. Yet Washington pursues a humble multilateralism. Even though Asia is more peaceful than at any time in this century—apart from the heavily armed standoff on the Korean Peninsula—all the major actors, and most importantly China and Japan, are devoting more of their respective national resources to the military.

If APEC is still a rudimentary organization, the nascent 21-nation ASEAN Regional Forum (ARF)—the principal host of the multilateral security dialogues that President Clinton has described as one of several “overlapping plates of armor”—has yet to address any substantive issues, let alone fashion enduring conflict resolution mechanisms or regional security institutions. While more discussion of threats, doctrine, and military procurement is indeed necessary, here too the idea of a Pacific community is likely to be deconstructed by extraregional mechanisms (such as the U. N. Security Council or the International Atomic Energy Agency, or IAEA) from above, and bilateralism and ultimately Asian balances of power from below.

This situation stems from several factors: the amorphous historical fears of the major powers in the region; uncertainty about generational political transitions in China and North Korea; the divisive and bilateral character of security concerns; and not least, the perception of a reduced U. S. role in the Asia-Pacific. For more than four decades, the U. S. network of bilateral alliances and relationships has essentially been the core security system in the region, rooted in Washington’s alliances with Japan and South Korea and its relationship with China. For Washington, its forward-deployed presence in the western Pacific was part of its global strategy of Soviet containment, but the secondary aspect of U. S. political and military engagement—the role of regional security guarantor—continues to entice and benefit local actors. In the aftermath of the Cold War, this ancillary effect has become the principal rationale for a modestly adjusted presence whose importance has not diminished. In 1990, the Bush administration’s East Asian Strategy Initiative projected phased reductions in America’s military presence, beginning with a 15 percent cut in U. S. troops based in Asia, down to 100,000 troops. But the intensifying crisis over North Korea’s nuclear program led then-Secretary of Defense Dick Cheney to freeze a planned 1992 withdrawal of 6,000 troops from Korea.

A Reckoning on Korea

As the prospect of North Korean nuclear proliferation has mounted in recent months, Washington has bolstered its military posture in Korea. The looming North Korean threat has quelled any domestic pressure to further downsize the U. S. security presence in Asia. While the most urgent issue is Pyongyang’s nuclear weapons program, the nuclear issue is inextricably bound up in the longer-term question of Korean reunification—with scenarios that run the spectrum from implosion and a Romania-type collapse to explosion and a second Korean war. As the interests of the four major powers in Northeast Asia intersect on the Korean Peninsula, the way reunification occurs will have major implications for the region and may determine the future of the U. S. forward-deployed military presence in the region.

In the case of either implosion or explosion, the result would be a rapid unification by absorption. Even a more gradual “soft landing” scenario would result in a reunified Korea, probably by the end of this decade. Such an outcome would resolve the nuclear issue. However it occurs, reunification will lead to a reassessment of the U. S. troop presence in Korea. While some in the American and South Korean defense establishments envision a regional role for the United States in Korea, a U. S. troop presence would be politically hard to sustain after a stable, reunified Korea takes shape—unless China replaces the Soviet Union as a full-blown ideological and strategic adversary. A strategic alliance with a unified Korea, however, may be possible.

An American troop withdrawal from Korea would, in turn, put new pressures to reassess, if not restructure, the U. S. military presence in Japan, which would then be the regional host for forward-deployed U. S. bases. Such a dynamic cod have a destabilizing impact on the East Asian balance or at a minimum heighten the suspicions of the region’s major actors. It would also require rethinking the U. S. role in the regional security architecture. Would the United States be defending one democratic, free-market ally against another?

China and Japan’s Moment of Truth

Above all, a U. S. withdrawal from Korea could force a moment of truth in relations between China and Japan. The mutual need for a peaceful environment and the growing weight of Sino-Japanese economic relations—with some $38 billion in two-way trade in 1993, rapidly expanding investment, and $30 billion in aid since 1980—have shaped a stable and steady improvement in relations. This was dramatized in November 1992 with the unprecedented visit to China of Japanese Emperor Tsugunomiya Akihito, and highlighted more recently by the red-carpet treatment given to Chinese Vice Premier Zhu Ronji, Beijing’s chief economic planner, during a February 1984 visit to Tokyo.

This deceptive serenity in post-Cold War Sino-Japanese relations is premised on the maintenance of the U. S.-Japan security alliance and accentuated by the volatility of U. S.-China ties. An independent Japan, operating in the absence of the bilateral alliance or a credible multilateral security arrangement, could resurrect historical Sino-Japanese tensions. These have thus far been dormant even without the Soviet threat.

But one only need glimpse China’s behavior—its expansive claims of Chinese sovereignty, forward defense doctrine, continued nuclear modernization, and efforts to attain rapidly force projection capabilities amid the most peaceful environment it has seen in two centuries—to conclude that historic suspicions of Japan still linger beneath the surface.

For its part, Japan, with its hefty defense budget, is acquiring sophisticated dual-use technologies. With the launch of its H-2 rocket last February, Tokyo has a potential ballistic missile and independent reconnaissance capability. Its civilian nuclear reprocessing program will give it access to perhaps 50 or more tons of plutonium. It is also increasingly interested in theater missile defenses. While Tokyo is becoming a more independent actor, it does not seek complete autonomy. Rather, it seeks to embed its role in bilateral, regional, and global institutions. The volatility of Japan’s surrounding neighbors—Russia in transition, China facing post-Deng uncertainty and turmoil, and reunification ahead in Korea—reinforces Tokyo’s desire to maintain the U. S. security umbrella. But it is hedging its bets on the future.

The evolution of Franco-German relations provides a useful historical analogy for viewing Sino-Japanese ties. For much of the century prior to World War II, Europe was unstable and engulfed in conflict because the two major powers were adversaries. After 1945, France and Germany finally came to terms, permitting the emergence of NATO and the evolution of the European Community. The analogous relationship in the Pacific over the next two or three decades is that between China and Japan.

Moreover, because of their bilateral character, most of the plethora of outstanding territorial disputes—Russo-Japanese, Chinese-Taiwanese, Sino-Vietnamese, Indonesian-Malaysian—do not usually lend themselves to multilateral solutions. No Asian version of the Conference on Security and Cooperation in Europe is likely to resolve them. Multilateral efforts have made little progress in resolving the over claimed by region-wide dispute the Spratly Islands, which are China, Vietnam, Malaysia, the Philippines, Brunei, and Taiwan. That issue is more likely to be resolved by consecutive bilateral deals with China or by the World Court than by ASEAN or the ARF. On the other hand, the attempts of the four major regional powers—America, Russia, China, and Japan—to confront the compelling security challenge in Korea suggest that possibilities for a Northeast Asia framework for political and security cooperation have not been adequately explored.

Other major security concerns tend to have a large extra-regional dimension. In Cambodia, the five permanent members of the U. N. Security Council combined with regional diplomacy to produce the 1991 Paris peace accord. The Security Council and the IAEA are also key instruments in managing the North Korea nuclear issue. And China’s nuclear weapons cannot be addressed except on a global basis by the Security Council’s five nuclear powers. None of this suggests that it is ill-advised to try forging regional political forums and multilateral instruments to resolve conflicts, strengthening security cooperation, and shaping Asia-Pacific partnership. But it is an overlapping, multitiered system—bilateral, intra-Asian, transpacific, and global—that provides order and stability in the Pacific.

Pacific Order, U.S. Engagement

If the pacific community idea appears more aspiration than reality, this negates neither the importance attached to it by President Clinton nor the possibilities of trans-Pacific cooperation. Nor does it negate the new dialogue and experiments in regional institution-building by a maturing East Asia. The challenge for East Asia is to assume responsibility commensurate with its growing economic success, both within the region and globally. Neither the United States nor East Asia will benefit by drawing a line down the middle of the Pacific.

While American military engagement will likely remain key to stability in East Asia for at least two more decades, the challenge for the United States is to balance competing interests and to utilize its many assets—economic, political, and strategic—to provide leadership and to help shape an emerging order in the Pacific with Washington woven into its political fabric. For all its tentativeness, APEC remains the focal point for governments to build on what has been a largely market-driven process of economic integration.

The U. S. private sector will be the keystone of sustained American engagement in the Pacific in the 21st century. The priority of international economic policy should not only be to enhance U. S. exports to the region, but also to establish an on-the-ground business presence in areas the Commerce Department has identified as key emerging markets. Beyond the urgent need for Congress to grant the president fast-track” trade negotiating authority, there are four guidelines critical to solidifying the U. S. position in the region and strengthening global free trade:

* Pursue a “building block” approach, aimed at concrete, achievable goals to transform APEC into a regional framework for enhancing trade by negotiating major tariff reductions by the leaders’ 1996 meetings; adopt an investment code free of escape clauses with a termination date for exceptions to national treatment; and harmonize customs and certification standards and procedures. No long-term goal should divert attention from the urgent challenge of demonstrating near-term results.

* Forge a link between the North American Free Trade Agreement countries and Asia to demonstrate that NAFTA is not discriminatory and to reinforce the U. S. presence in Asia. Singapore, Korea, and Taiwan have all expressed interest in NAFTA. Such moves could induce East Asians to accelerate economic liberalization.

* Further advance an open regionalism compatible with multilateral trade principles by sharing information and designing dispute settlement mechanisms between regional groups to assure that regional rules and regulations reinforce open, nondiscriminatory regionalism, not regional trading blocs.

* Develop sources of domestic support to underpin U. S. engagement in Asia. Some seven million Asian-Americans are a largely untapped link, resource, and constituency for expanded engagement in Asia. This means explaining goals and consequences to the American people, preparing workers for economic competition in an open trade environment, cogent export promotion, and export financing aimed particularly at small and medium-sized businesses.

The widespread hope is that the compelling force of geoeconomics and information age flows of capital, information, and people is creating a new calculus and redefining interests in the Pacific in a way that will offer new possibilities for cooperation. Certainly, long-standing suspicions and historic rivalries have not evaporated. But a clear-eyed pursuit of U. S. interests is likely to lay the best basis for realizing broader political goals in a region that is certain to be one of the decisive voices in the emerging international system.