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While In Tokyo and Seoul, Clinton Must Assert American Leadership In Asia

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Richard Fisher

Distinguished Fellow in China Policy

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No. 127 June 30, 1993

M4ME IN TOKYO AM W011ag CLVqTON MUff AMMCAN IJEA F.M. IN ASIA

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Bill Clinton soon will make his first trip to Asia as President. He win visit Japan from July 7 to 10, for the annushl summit of the Group of Seven (G-7) industrialized countries, continu- ing after that to South Korea on July 10 and 11. 1 Asia is appropriate as Clinton's first foreign destination. Ensuring a strong and stable relationship with the Far East is key to America's fu- ture prosperity and security. Asia is America's largest trading partner, in 1992 U.S. total trade with the region exceeded $360 billion-more that 50 percent greater than America's $227 bil- lion total trade with Europe. That same year $132 billion in exports to the Far East supported about 2.6 million American jobs. America must also deter threats to its security interests in Asia. The most serious threat today is North Korea's nuclear weapons prop an which eventually could deliver nuclear bombs into the hands, of terrodsts. But just as serious is the growing doubt among Asians that America will continue its traditional role not only as a leader, but as a fair and effective ar- biter in Asia. Given thew enduring U.S. interests in Asia, Clinton should use his trip to Japan and South. Korea to reverse doubts about American leadership. Thew doubts flow from several sources. As a result of Clinton's proposals for managed Uide with Japazi to reduce its $50 billion trade surplus with the U.S.,Tokyo is seeking support from Asia to oppose Clinton's trade policies. This represents the first time since World War 11 that Japan has so openly organized Asisin op- position to an American policy. Opening wider this fissure betweenWashington and Tokyo, Clinton also has beezi slow to artimilate his Asia policy. For example, the Clinton Administra- tion did practically nothing when violence threatened, to scuttle Cambodia's elections in late May. Asian doubts about Clinton are -, ounded by his indecision over such crises as Bos-(Archived document, may contain errors)

No. 127 June 30, 1993

M4ME IN TOKYO AM W011ag CLVqTON MUff AMMCAN IJEA F.M. IN ASIA

INMODUMON

1 7be Cumv of Seven (G-7) includes Britain, Coned- France. Itsly, Gennany, Japan, and &c United Stales.

nia, as well as statements from his' top aides that suggest an American retreat from global. leadership accompanied by sharp reductions in U.S. military forces. When he visits Japan and South Korea, President Clinton must turn around Asian doubts about his and America's leadership. He should lay the foundation for improving America's trade and security relationships in Asia over the next three years by emphasizing two themes. In Japan and Korea, Clinton needs to: 1) Link America's goals for freer trade in Asia with the democratic aspirations of younger Japanese and Koreans. In the current political ferment, citizens of both countries are demanding political reform. Their demands offer a historic opportunity for genuine two-party political sys- tems, strengthened popular representation, and economic deregulation. America has a chance to reduce trade barriers in both countries by stressing that free trade between Asia and America will advance the democratic aspirations of Koreans and Japanese.

2) Stress America's commitment to positive economic and strategic engagement in Asia. Clinton should declare America's willingness to work toward a new era of Asian-American economic prosperity through a trans- Pacific free trade agreement. At the same time, he must reaffirm America's commitment to the security of Japan and South Korea. Developing these two themes, Clinton should take a number of specific actions in Tokyo and Seoul. In Japan, the President should: * Invite Japan to join the U.S. in negotiating an Asian-American free trade agreement. * Praise the Japanese people's desire for more accountable government and emphasize the benefits to the Japanese of eliminating their nation's system of informal trade barriers. * Urge Tokyo and the other G-7 industrial nations to complete this year the current round of the General Agreement on Tariffs and Trade (GATT) negotiations. # Reaffirm the U.S.-Japan security treaty. * Ask Japan to support the emerging democratic government in Cambodia.

In South Korea, Clinton should: * Praise Korean President's Kim Young-sam's commitment to strengthen Korean democracy and promote economic deregulation. # Tell the South Korean people that America will honor its long-standing to South Korea's security. * Call on North Korea to end its nuclear weapons program and begin the process of peacefully reunifying the Korean Peninsula. # Seek Seoul's cooperation in advancing an Asian-American free trade agree- ment.

AMERICA9S VITAL STAKE IN ASIA

Americans have vital interests in Asia. They are to promote free trade between Asia and America, prevent the domination of Asia by any single power, and prevent North Korea from obtaining nuclear weapons.2With the passing of the Cold War America's primary interest in Asia is to ensure that economic interaction with Asia promotes increasing prosperity for Americans. Defending and promoting these interests requires that the U.S. help shape and respond to events in Asia that directly affect the prosperity and security of Americans. America's interest in free trade with Asia is clear. In 1992 the U.S. imported $96.3 billion more from Asia than it exported-$50 billion from Japan alone. Clinton and other neo-protec- tionists overlook the benefits to Americans of seeking greater trade with Asia. The $132 bil- lion in U.S. merchandise exports to Asia in 1992 supported over 2.6 million American jobs- an increase of 100 percent since 1985.3In 1992, U.S. exports to Asia grew over 9 percent from 199 1, adding 146,000 jobs to the U.S. economy.4 These data point to an obvious con- clusion. Growth in trade with Asia leads to increasing prosperity for Americans. By stimulating U.S. trade with Asia, America would be linking itself to the fastest growing commercial region in the world. Asia's economies are expanding at an annual rate of 5 per- cent to 6 percent. Last year China's economy grew at the breathtaking rate of 12 percent. The World Bank estimates that if China, Hong Kong, and Taiwan maintain their current pattern of growth, their combined economies will be larger than that of the U.S. in ten years. Four of America's top ten trading partners are in Asia: Japan (second), Republic of China (sixth), the People's Republic of China (seventh), and South Korea (eighth). In order to obtain the benefits of expanded trade, commercial barriers must be removed by the U.S. and its Asian trading partners. Doing this will allow U.S. businesses to compete more effectively in Asia and help promote economic growth in Asia. Free trade and economic growth are good for Asians and Americans. Since trade is the primary engine of economic growth in Asia, growing Asian economies are likely to spur more American imports.

Security Interests America has not only vital economic interests in Asia, but security interests as well. Indeed, the end of the Cold War has changed, but not greatly diminished, American security interests in Asia. The U.S. retains its interest in preventing any other country from becoming the dominant power in Asia. Such a development could deny Americans commercial access to Asia. It might also prompt Japan to rearm. Possessing the world's second largest economy, a rearmed Japan would cause wide anxiety in Asia, force other states to choose between Japanese and Chinese leadership, and effectively shut America out of the Asian power equa- tion.

2 American security interests in Asia are finther described in Kim R. Holmes, ed., A Safe and Prosperous America: A U.S. Foreign and Defense Policy Blueprint (Washington, D.Q The Heritage Foundation, 1993), pp. 24-27. 3 Richard D. Fisher and Jason E. Bruzdzinski, eds., U.S. and Asia Statistical Handbook 1993 Edition (Washington, D.C.: The Heritage Foundation, 1993), pp. 1, 6. 4 Ibid

But the most urgent threat to American security interests in Asia is North Korea's ambition to build nuclear weapons. In February, CIA Director James Woolsey warned that North Korea may have enough nuclear material to build one nuclear weapon. When North Korea's two known nuclear reactors begin operation, they may produce enough plutonium to build about seven nuclear weapons a year. Possession of nuclear weapons will allow North Korea to threaten South Korea and the 36,000 U.S. troops stationed there. This may prompt South Korea, and such other countries as Japan, to build nuclear weapons to deter North Korea. Also, North Korea could sell its nuclear weapons to terrorist groups that would use them against Israeli or American cities.

GROWING DOUBTS ABOUT AMERICAN LEADERSHM IN ASIA

Preoccupied with his unpopular economic program, President Clinton has largely ignored a prudent defense of American interests in Asia. Several of Clinton's emerging trade and foreign policies have sparked concern about the future of U.S. leadership in Asia. If con- tinued, these concerns could endanger long-term American interests in the region.

Concern #1: Managed Trade Instead of FreeTrade Until Clinton's Administration, America was widely viewed in Asia as the only country capable of leading the protectionist European Community and Japan to freer trade. George Bush's support for the North American Free Trade Agreement and significant reductions in trade barriers under the Uruguay Round of the GATT confirmed this commitment. However, to reduce Japan's persistent large trade surpluses with the U.S., Clinton is shifting U.S. trade policy from support for "rules oriented" five trade to interventionist "results oriented" or "managed" trade policies. Clinton wants to "focus sector by sector" on getting U.S. goods into Japan.5Administration officials have suggested setting numerical targets for the import of particular U.S. goods like auto parts and supercomputers, and prodding Japan to cut its global trade surplus from its current 3.2 percent of gross domestic product (GDP) to 2 percent of GDP within three years.6These efforts would depend not on market forces, but negotia- tions to achieve the desired results. Managed trade is fraught with dangers for the world trading system and for American busi- ness. The incentive for businesses would shift from gaining a competitive edge in foreign markets to seeking political clout in Washington. As a result, demands would be placed on bureaucracies by the private sector to secure shares of specific markets. This pressure inevitab- ly would displace market forces and lead inexorably to inefficiency and less competitiveness. Moreover, a trading system between the U.S. and Japan based on the collusion of Washington's bureaucracies and large American companies increasingly would poison rela- tions between the U.S. and such valued friends as Australia and South Korea. These and other trading partners of Japan would lose their share of the world's market as a result of Tokyo's agreements to purchase a specified portion of American products.

5 "Choices for Shrinking Japan's Trade Surplus," 7he Wall Street Journal, May 8, 1993, p. 1. 6 Susumu Awanohara and Jonathan Friedland, "How to Handle America," Far Eastern Economic Review, June 24,1993, p. 67.

Clinton's shift toward managed trade already is prompting a response that could damage U.S. economic interests in Asia. In opposing Clinton's managed trade policies, Japan is mobilizing Asia against the U.S.-the first time since the end of World War H that Japan has organized an Asia-wide opposition to a U.S. proposal. 7In Canberra in late April, Australian Prime Minister Paul Keating and Japanese Prime Minister Kiichi Miyazawa agreed to oppose the setting of numerical targets for trade.8 Clinton's trade policies threaten to turn more Asian countries to support Malaysia's proposal to form an Asian economic bloc that would be led by Japan and exclude the U.S. Such a trade zone might deny Americans commercial access to the burgeoning Asian market. Clinton also endangers Asian support for his goals within the fifteen-nation Asia-Pacific Economic Cooperation (APEC).9 This organization was formed in 1989 to promote broad economic cooperation in Asia. As the U.S. is chairman of APEC this year, the Clinton Ad- ministration has proclaimed its desire to use APEC to seek general reductions in trade bar- riers. But an emphasis by Washington on managed trade is likely to discourage Asians from cooperating in the APEC forum.

Concern #2: Slow to Articulate an Asia Policy The Clinton Administration's disorganization and uncertain grasp of domestic economic is- sues as well as its high-profile but ineffective handling of the Bosnia crisis has deflected U.S. attention from its interests in Asia. As a result, Clinton has been slow to articulate an in- tegrated policy for Asia or make appointments to key policy positions. When, for example, Clinton visits Tokyo and Seoul in July, a half year after taking office, his chosen ambassador will not greet him in either capital. Inattention to Asia also has forced Clinton to reverse posi- tions he took during the presidential campaign, such as the one that would have attached con- ditions to the renewal of Most-Favored-Nation (MFN) trade status for China. 10 In the cam- paign, Clinton pledged that he would use MFN to force changes in China's human rights policies. To his credit, Clinton realized that using MFN for such purposes would be ineffec- tive, and he eventually reversed his position. However, conditions were established for next year's decision on whether to renew China's MOFN status. Thus, the question of MFN status for China ultimately remains open. By delaying his final policy on MFN, Clinton is embroil- ing his China policy in yet another year of controversy, which transmits an unmistakable im- pression of indecision to Asian friends and allies.

Concern #3: Multilaterallsm as an Excuse for Inaction The Clinton Administration professes support for increased multilateral security coopera- tion in Asia. 11 For example, it is seeking multilateral action between South Korea, Japan, Rus-

7 David E. Sanger,"'Japan Is Rallying Asian Nations Against Now U.S. Trade Policies," The New York Times, June 7, 1993, p. Al. 8 "Against Numerical TradeTargets," Kyodo, April 30,1993, in FBIS-EastAsia-Pacific, April 30,1993, p. 40. 9 APEC's members include: Australia, Brunei, Canada, China, Hong Kong, Indonesia, Japan, Malaysia, Now Zealand, Philippines, Singapore, South Korea, Taiwan, Thailand, and the United States. 10 "Bush, Clinton OfferViews of PoliciesToward Asia," The Asian Wall StreetJournal Weekly, October 26,1992, p. 4. 11 Informal Remarks on U.S.-Asia Relations by Assistant Secretary of State for Ent Asian and Pacific Affairs Winston

sia, and the U.S. to stop North Korea's nuclear weapons program. Nevertheless, there is a danger that multilateralism could lead to U.S. inaction in Asia. This danger was demonstrated earlier this year during the 44-country United Nations peacekeeping effort in Cambodia when feeble U.S. support for pro-democracy groups emboldened the Khmer Rouge and the Viet- namese-installed State of Cambodia (SOC) government to violence as the May 23 national elections drew closer. Fortunately, the SOC was defeated. However, by hiding behind the U.N., Clinton very nearly lost Cambodia to further violence and oppression. Multilateralism should not become an excuse for inaction.

Concern #4: Clinton Officials Suggest a Diminished U.S. Global Leadership Role Asians are also concerned by statements from U.S. State Department and Def6nse Depart- ment officials that America is abandoning its role as a global leader. In late May, Under Secretary of State for Political Affairs Peter Tarnoff told reporters the U.S. was going to reduce its global leadership role. He said, "... [O]ur economic interests are paramount.... [The U.S. must] define the extent of its commitment and make a commitment commensurate with those realities...." 12 His remarks were quickly disavowed and contradicted by Secretary of State Warren Christopher, who two days later said, "Make no mistake, we will lead." 13' But the message that Tarnoff conveyed is easier to broadcast than retract. Reinforcing his remark, and troubling to Asians, are Clinton's planned reductions in 14 defense forces and defense missions-$120 billion over five years from the Bush plan. Secretary of Defense Les Aspin believes that the U.S. defense budget should be shaped by "macroeconomics" instead of "threat perceptions," offering strong evidence that Clinton seeks a defense posture to fit his domestic goals, not America's defense needs. 15 Moreover, South Korea is especially worried that defense cuts will reduce the U.S. capability to come to its aid if attacked by North Korea. The South Koreans are particularly concerned whether America could defend South Korea against an attack from the North if the U.S. were engaged simultaneously in a conflict in the Persian Gulf 16

RESTORING AMERICAN LEADERSHIP IN ASIA

When he visits Tokyo and Seoul, President Clinton must restore Asia's eroding confidence in America's wise and traditional commitment to strong leadership in Asia. Clinton must also take advantage of Asia's rapidly growing economies to develop more markets there for U.S. goods. The alternative is to lose access to Asia's vibrant markets, which would threaten America's future prosperity. Clinton's visit to Japan and South Korea occurs at a historic mo- ment in the political development of both countries. Clinton can greatly improve relations

with both Japan and Korea, and begin to r estore confidence in American leadership, by con- centrating on two themes. They are: 1) Link America's goals for freer trade in Asia with the democratic aspirations of younger Japanese and Koreans. Long simmering popular revulsion with the corrupt politics of Japan's Liberal Democratic Party (LDP) is threatening to end that party's 38-year hold on power. On top of this, younger Japanese are growing weary of their highly structured and cartelized economy, which has kept the living standards of ordinary Japanese relatively low. Meanwhile, South Korean Presi- dent Kim Young-sam. has begun a wave of political reforms to increase the accountability of government and eventually to reduce its control over the economy. Bill Clinton should stress that America's quest for open markets in Asia complements the desires of both Japanese and Koreans for greater economic freedoms. Better access by American businesses to Japanese and Korean markets will lower prices and increase con- surner choices for the peoples of these countries. 2) Stress America's commitment to positive economic and strategic engagement in Asia. The worst baggage Bill Clinton could carry to Japan and Korea is a threat to retaliate if they do not import a specified fraction of American goods. Such a message will stir nationalist resentments, not just in Japan and Korea but throughout the Far East, increasing Asian leaders' difficulty in opening their markets to American trade. Clinton instead should chal- lenge Japan and Korea to join America in seeking radical reductions in trade barriers throughout Asia within an Asian-American free trade alliance. Clinton also should stress America's continued commitment to the security of Japan and Korea, as well as his under- standing that trade and security among allies am impossible to separate.

Praise the Japanese people'9s desire for greater democratic and economic freedoms, and emphasize the benefits to Japan of eliminating its informal trade barriers. Without interfering in Japan's domestic political turmoil, Clinton should praise the Japanese people's desire for greater democratic and economic freedoms. The President's theme: The current political upheaval over Prime Minister Miyazawa's downfall does not demonstrate weakness in Japan, but the strength of Japanese democracy. Instead of making demands or issuing threats against Japanese trade barriers, Clinton should stress the cost to Japanese consumers of that nation's informal but supremely efficient system of trade barriers. He should note publicly, for example, that the Japanese pay an average 200 percent mark-up on clothes because of the added costs imposed by government tariffs and informal trade bar- riers. 17 He should state that the removal of these barriers will benefit Japan's consumers by lowering consumer prices. V Urge Tokyo and the G-7 leaders to seek a completed GATT agreement this year. Clinton's top priority during the G-7 summit in Tokyo should be to press the leaders of Britain, Canada, France, Germany, Italy, and Japan to complete the current round of the GATT negotiations. It is estimated by The Economist that the GATT's reductions in trade bar- riers will spurVobal trade by $120 billion annually-a $35 billion increase in America's an- nual income.1

V Reaffirm the 1960 U.S.-Japan Mutual Security Treaty. Clinton should reaffirm publicly the 1960 U.S.-Japan Mutual Security Treaty. This treaty obligates the U.S. to come to Japan's assistance if it is attacked and provides the framework for U.S.-Japan defense cooperation. It is the cornerstone of strategic stability in Asia. The President should say that America will honor its treaty commitments to come to Japan's aid in the event of conflict. Moreover, he should thank Japan for its generous financial support for keeping U.S. forces in Japan; Tokyo currently foots 70 percent of the bill for U.S. forces based in Japan. In particular, Clinton should reassure Japanese leaders that the U.S. remains committed to basing the 7th Fleet, with its aircraft carrier, in Yokosuka Naval Base, just south of Tokyo. To defend against new, longer range North Korean ballistic missiles, Clinton should offer not only to sell Japan upgraded anti-missile systems, but to integrate them into U.S. space tracking and targeting systems. He should also emphasize strategic cooperation by urging Japan to cooperate with the U.S. in developing advanced defenses against ballistic mis- siles.

*/ Ask Japan to support the emerging democratic government in Cambodia. Clinton should praise Japan's leadership and financial support for the United Nations peacekeeping mission in Cambodia. Japan is paying about half the $2 billion bill of the U.N. peacekeeping effort. As the U.N. effort assisted in the victory of pro-democratic forces, Clin- ton should ask Tokyo to disburse quickly the $150 million in economic development aid it pledged last year for Cambodia. Clinton should askTokyo to increase its pledge to $250 mil-

17 Robert J. Samuelson, "Why AmWe Fighting With Japan," 7he Washington Post, June 16, 1993, p. A21. 18 "GATT will build America," The Economist, June 27,1992.

lion. As an incentive for more Japanese aid, Clinton should promise to increase from $135 million to $200 million the aid Washington also pledged for Cambodia last year. Cambodia's democratic forces need financial support to begin to promote economic development in rural areas to undermine support for the heavily armed Khmer Rouge. A democratic Cambodia will check the ambitions of Vietnam and China in Southeast Asia, promoting peace in this region.

The Message to South Korea While in Seoul, Clinton should:

Vigorously support South Korean President Kim Young-sam's commitment to strengthen Korea's democracy and deregulate its economy. When he visits Seoul, Clinton should congratulate Koreans on their successful presidential election last December. He should also praise President Kim Young-sam's commitment to strengthen Korea's democracy. Kim has revolutionized Korean politics by raising the stand- ards of accountability for public officials, and by refusing to accept direct political donations from businesses. While cautioning Kim about the excesses of political retribution, Clinton should express support for Kim's reforms, which are overwhelmingly supported by the Korean people. Clinton also should praise Kim's commitment to deregulate the Korean economy. The new Korean president believes that excessive government control is stifling economic growth; he is correct. He often notes in public speeches that it takes 300 bureaucratic approvals to start a factory. 19 Kim plans to create a more equitable tax system that removes tax burdens from Korean business, creates a more market-based banking and financial system, and replaces the maze of regulations that stultify Korean business. If successful, Kim's economic reforms will result in tremendous opportunities for U.S. business and investors. For example, current regulations and barriers prevent Americans from making potentially profitable investments in Korea's banking and telecommunications sectors. Of Tell the South Korean people that America will honor its security co to their country. It is vitally important that Bill Clinton emphasize publicly America's continued commit- ment to help defend South Korea. Impoverished North Korea, the last Stalinist dictatorship on earth, is beginning its terminal, and thus most dangerous phase. But as North Korea becomes poorer and more desperate, it maintains its one-million-man armed forces and 700 combat aircraft. South Korea long has carried its share of defense burdens, maintaining a modem, 700,000 man armed force and recently assuming leadership of the combined Korean-U.S. armed force command. However, it is also the vitality of America's commitment to defend Korea that helps deter North Korean aggression. Clinton must repeat this t force- fully enough to be heard clearly in North Korea. In addition, Clinton should tell South Korean leaders that the U.S. will maintain the ability to move five U.S. Army divisions and sixteen Air Force tactical squadrons rapidly to reinforce South Korean forces.20

19 Interview, Far Eastern Economic Review, June 24,1993, p. 20. 20 Holmes, op. cit., p. 62. v/ Call on North Korea to end-its nuclear weapons program and begin the process of peacefully reunifying the Korean Peninsula. While in South Korea, Clinton should call on North Korea to end its nuclear weapons pro- grain, which he should identify as the gravest threat to peace in Asia. On June 12 North Korea averted a diplomatic crisis when it reversed its March 12 decision to quit the Nuclear Non- proliferation Treaty (NPT). However, in doing so, North Korea did not agree to allow the in- ternational inspections of its nuclear facilities which the NPT requires. Clinton should call on Pyongyang to resume such international inspections immediately. He should say that the world is prepared to improve relations with North Korea only if it ends its nuclear weapons program. Clinton should also call on North Korea to begin the process of the Korean Peninsula's peaceful reunification. He should urge Pyongyang immediately to allow inter- Korean family reunions, for example. Seek Seoul9s cooperation in advancing an Asian-American free trade agreement. Clinton should ask South Korea to support an Asian-American free trade agreement. This would complement President Kim's economic deregulation plans by increasing opportunities for Korean exporters at the same time that Korean deregulation provides opportunities for foreign businesses. Clinton also should stress that an Asia-wide free trade agreement is the best path to trans-Pacific prosperity and long-term trade peace in Asia. Achieving broad reductions to tariff barriers and non-tariff barriers to trade in Asia reduces trade as a source of political tension and allows for increased opportunities for trade and investment by all.

CONCLUSION

No. 127 June 30, 1993

M4ME IN TOKYO AM W011ag CLVqTON MUff AMMCAN IJEA F.M. IN ASIA

INMODUMON

1 7be Cumv of Seven (G-7) includes Britain, Coned- France. Itsly, Gennany, Japan, and &c United Stales.

AMERICA9S VITAL STAKE IN ASIA

GROWING DOUBTS ABOUT AMERICAN LEADERSHM IN ASIA

RESTORING AMERICAN LEADERSHIP IN ASIA

17 Robert J. Samuelson, "Why AmWe Fighting With Japan," 7he Washington Post, June 16, 1993, p. A21. 18 "GATT will build America," The Economist, June 27,1992.

The Message to South Korea While in Seoul, Clinton should:

CONCLUSION

While in Asia for the G-7 meetings, Bill Clinton will be attending to other business as well -shoring up U.S. relations with two valuable U.S. allies, Japan and South Korea. In these two countries, he should stress two enduring themes of U.S. policy in Asia: one, that better relations between the U.S.and Japan and South Korea will enhance the prosperity of all; and two, that America will continue its security commitment to Asia. By seeking these goals, Clin- ton can create more American jobs and advance the day when the entire Pacific is united by a comprehensive free trade agreement. He also will strengthen America's security position in Asia. As a result, America will have turned a critical comer in its post-Cold-War Asian policy, es- tablishing the groundwork for continued prosperity and security for Asia well into the next century. Richard D. Fisher, Jr. Policy Analyst }} 2 American security interests in Asia are finther described in Kim R. Holmes, ed., A Safe and Prosperous America: A U.S. Foreign and Defense Policy Blueprint (Washington, D.Q The Heritage Foundation, 1993), pp. 24-27. 3 Richard D. Fisher and Jason E. Bruzdzinski, eds., U.S. and Asia Statistical Handbook 1993 Edition (Washington, D.C.: The Heritage Foundation, 1993), pp. 1, 6. 4 Ibid But the most urgent threat to American security interests in Asia is North Korea's ambition to build nuclear weapons. In February, CIA Director James Woolsey warned that North Korea may have enough nuclear material to build one nuclear weapon. When North Korea's two known nuclear reactors begin operation, they may produce enough plutonium to build about seven nuclear weapons a year. Possession of nuclear weapons will allow North Korea to threaten South Korea and the 36,000 U.S. troops stationed there. This may prompt South Korea, and such other countries as Japan, to build nuclear weapons to deter North Korea. Also, North Korea could sell its nuclear weapons to terrorist groups that would use them against Israeli or American cities.

GROWING DOUBTS ABOUT AMERICAN LEADERSHM IN ASIA

No. 127 June 30, 1993

M4ME IN TOKYO AM W011ag CLVqTON MUff AMMCAN IJEA F.M. IN ASIA

INMODUMON

1 7be Cumv of Seven (G-7) includes Britain, Coned- France. Itsly, Gennany, Japan, and &c United Stales.

AMERICA9S VITAL STAKE IN ASIA

GROWING DOUBTS ABOUT AMERICAN LEADERSHM IN ASIA

RESTORING AMERICAN LEADERSHIP IN ASIA

17 Robert J. Samuelson, "Why AmWe Fighting With Japan," 7he Washington Post, June 16, 1993, p. A21. 18 "GATT will build America," The Economist, June 27,1992.

The Message to South Korea While in Seoul, Clinton should:

19 Interview, Far Eastern Economic Review, June 24,1993, p. 20. 20 Holmes, op. cit., p. 62.

v/ Call on North Korea to end-its nuclear weapons program and begin the process of peacefully reunifying the Korean Peninsula. While in South Korea, Clinton should call on North Korea to end its nuclear weapons pro- grain, which he should identify as the gravest threat to peace in Asia. On June 12 North Korea averted a diplomatic crisis when it reversed its March 12 decision to quit the Nuclear Non- proliferation Treaty (NPT). However, in doing so, North Korea did not agree to allow the in- ternational inspections of its nuclear facilities which the NPT requires. Clinton should call on Pyongyang to resume such international inspections immediately. He should say that the world is prepared to improve relations with North Korea only if it ends its nuclear weapons program. Clinton should also call on North Korea to begin the process of the Korean Peninsula's peaceful reunification. He should urge Pyongyang immediately to allow inter- Korean family reunions, for example. Seek Seoul9s cooperation in advancing an Asian-American free trade agreement. Clinton should ask South Korea to support an Asian-American free trade agreement. This would complement President Kim's economic deregulation plans by increasing opportunities for Korean exporters at the same time that Korean deregulation provides opportunities for foreign businesses. Clinton also should stress that an Asia-wide free trade agreement is the best path to trans-Pacific prosperity and long-term trade peace in Asia. Achieving broad reductions to tariff barriers and non-tariff barriers to trade in Asia reduces trade as a source of political tension and allows for increased opportunities for trade and investment by all.

CONCLUSION

}} 5 "Choices for Shrinking Japan's Trade Surplus," 7he Wall Street Journal, May 8, 1993, p. 1. 6 Susumu Awanohara and Jonathan Friedland, "How to Handle America," Far Eastern Economic Review, June 24,1993, p. 67. Clinton's shift toward managed trade already is prompting a response that could damage U.S. economic interests in Asia. In opposing Clinton's managed trade policies, Japan is mobilizing Asia against the U.S.-the first time since the end of World War H that Japan has organized an Asia-wide opposition to a U.S. proposal. 7In Canberra in late April, Australian Prime Minister Paul Keating and Japanese Prime Minister Kiichi Miyazawa agreed to oppose the setting of numerical targets for trade.8 Clinton's trade policies threaten to turn more Asian countries to support Malaysia's proposal to form an Asian economic bloc that would be led by Japan and exclude the U.S. Such a trade zone might deny Americans commercial access to the burgeoning Asian market. Clinton also endangers Asian support for his goals within the fifteen-nation Asia-Pacific Economic Cooperation (APEC).9 This organization was formed in 1989 to promote broad economic cooperation in Asia. As the U.S. is chairman of APEC this year, the Clinton Ad- ministration has proclaimed its desire to use APEC to seek general reductions in trade bar- riers. But an emphasis by Washington on managed trade is likely to discourage Asians from cooperating in the APEC forum.

RESTORING AMERICAN LEADERSHIP IN ASIA

Lord, Asia Society Meeting, Tokyo, May 13, 1992. 12 Daniel Williams and John M. Goshko, "Reduced U.S. World Role Outlines but Soon Altered," 7he Washington Post, May 26,1993, p. A I. 13 John M. Goshko, "Christopher: U.S. Leadership Role Intact," The Washington Post, May 28, 1993, p. AX 14 Barton Gellman and John Lancaster, "U.S. May Drop 2-War Capability," 7he Washington Post, June 17, 1993, p. 1. 15 Les Aspin, Statement before a hearing of the House Armed Services Committee, March 30, 1993. 16 Gellman and Lancaster, op. cit. with both Japan and Korea, and begin to r estore confidence in American leadership, by con- centrating on two themes. They are: 1) Link America's goals for freer trade in Asia with the democratic aspirations of younger Japanese and Koreans. Long simmering popular revulsion with the corrupt politics of Japan's Liberal Democratic Party (LDP) is threatening to end that party's 38-year hold on power. On top of this, younger Japanese are growing weary of their highly structured and cartelized economy, which has kept the living standards of ordinary Japanese relatively low. Meanwhile, South Korean Presi- dent Kim Young-sam. has begun a wave of political reforms to increase the accountability of government and eventually to reduce its control over the economy. Bill Clinton should stress that America's quest for open markets in Asia complements the desires of both Japanese and Koreans for greater economic freedoms. Better access by American businesses to Japanese and Korean markets will lower prices and increase con- surner choices for the peoples of these countries. 2) Stress America's commitment to positive economic and strategic engagement in Asia. The worst baggage Bill Clinton could carry to Japan and Korea is a threat to retaliate if they do not import a specified fraction of American goods. Such a message will stir nationalist resentments, not just in Japan and Korea but throughout the Far East, increasing Asian leaders' difficulty in opening their markets to American trade. Clinton instead should chal- lenge Japan and Korea to join America in seeking radical reductions in trade barriers throughout Asia within an Asian-American free trade alliance. Clinton also should stress America's continued commitment to the security of Japan and Korea, as well as his under- standing that trade and security among allies am impossible to separate.

The Message to Japan While in Tokyo, Clinton should: Inform Tokyo that Washington will abandon managed trade for free trade, supporting an Asia-Pacific Free Trade AgreemenL Clinton should abandon policies of trade management before they poison America's wider economic and strategic interests in Asia. These policies threaten to force Asians into economic alliances that will exclude the U.S. Managed trade will stifle the creativity of American businesses, and thus, the ability of American firms to compete successfully. It also will create dependence on government bureaucracies to fight for market share abroad- bureaucracies which ultimately cannot force Asian consumers to buy U.S. goods. Clinton should offer Tokyo an alternative: an Asian-American free trade agreement. Such an agreement will seek to reduce barriers not just in Japan, but in all of Asia, thus allowing the entire region to benefit from greater export opportunities. In both Tokyo and Seoul, Clin- ton should ask for support to turn the APEC meeting in Seattle this November into a summit of APEC leaders. Clinton should urge the leaders of Japan and Korea to join him in proposing to establish an Asian-American free trade alliance at the APEC meeting. Praise the Japanese people'9s desire for greater democratic and economic freedoms, and emphasize the benefits to Japan of eliminating its informal trade barriers. Without interfering in Japan's domestic political turmoil, Clinton should praise the Japanese people's desire for greater democratic and economic freedoms. The President's theme: The current political upheaval over Prime Minister Miyazawa's downfall does not demonstrate weakness in Japan, but the strength of Japanese democracy. Instead of making demands or issuing threats against Japanese trade barriers, Clinton should stress the cost to Japanese consumers of that nation's informal but supremely efficient system of trade barriers. He should note publicly, for example, that the Japanese pay an average 200 percent mark-up on clothes because of the added costs imposed by government tariffs and informal trade bar- riers. 17 He should state that the removal of these barriers will benefit Japan's consumers by lowering consumer prices. V Urge Tokyo and the G-7 leaders to seek a completed GATT agreement this year. Clinton's top priority during the G-7 summit in Tokyo should be to press the leaders of Britain, Canada, France, Germany, Italy, and Japan to complete the current round of the GATT negotiations. It is estimated by The Economist that the GATT's reductions in trade bar- riers will spurVobal trade by $120 billion annually-a $35 billion increase in America's an- nual income.1

17 Robert J. Samuelson, "Why AmWe Fighting With Japan," 7he Washington Post, June 16, 1993, p. A21. 18 "GATT will build America," The Economist, June 27,1992. lion. As an incentive for more Japanese aid, Clinton should promise to increase from $135 million to $200 million the aid Washington also pledged for Cambodia last year. Cambodia's democratic forces need financial support to begin to promote economic development in rural areas to undermine support for the heavily armed Khmer Rouge. A democratic Cambodia will check the ambitions of Vietnam and China in Southeast Asia, promoting peace in this region.

The Message to South Korea While in Seoul, Clinton should:

CONCLUSION

Authors

Richard Fisher

Distinguished Fellow in China Policy

Asia

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