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Executive Summary #1236es on Asia

November 13, 1998

BG1236ES:  Clinton's Trip to Asia:  Time to Show U.S.Leadership

By , and

President Bill Clinton must address the Asia-Pacific region's pressing economic and security challenges when he travels to Asia later this month. In the wake of their most serious economic crisis since World War II, Asian countries need strong encouragement to implement market-opening economic reforms, and America's allies in Northeast and Southeast Asia need to be reassured that the United States will remain vigilant in the face of new threats from North Korea and China.

APEC Summit. APEC must prove that it can create greater free trade throughout Asia. But leadership is needed also to refocus its efforts on reforms based on free-market principles and policies. President Clinton should press Asian leaders to strengthen free-market reforms in order to address the economic crisis that is causing great suffering across the region. This crisis, which began when insufficient free-market reform in their financial and banking sectors caused a decline in investor confidence, caused currency values to fall and led to hard recessions in many Asian countries. Specifically, at the APEC Leaders' Meeting in Malaysia on November 17 and 18, President Clinton should:

  • Urge APEC countries to rely more on free-market reforms and less on aid from the International Monetary Fund to revive their economies. Asian leaders should increase banking sector transparency, allow bad banks to close, and strengthen free trade.

  • Urge APEC to adopt a more results-oriented approach to trade liberalization. If APEC does not change its non-binding approach and start insisting on real commitments to open trade and investment, its efforts to create a free trade zone by 2020 are likely to fail, and the United States will be forced to focus on the World Trade Organization (WTO) to achieve trade and investment liberalization.

  • Warn Asian leaders that any retreat from reforms that increase economic freedom, such as Malaysia's actions barring foreign currency trading, only delay economic recovery.

  • Endorse a millennium round for the WTO in 2000 to lower trade barriers. The Clinton Administration has been reluctant to do this.

Japan Visit
President Clinton's visit to Tokyo on November 19 and 20 will test his ability to demonstrate America's concern about threats to Japan's economic and military security. Japan has been unable to revive its economy, which could contract over 2 percent this year and continue contracting next year. It also faces a growing missile threat from North Korea. China is building new cruise missiles and anti-satellite laser weapons, which also could endanger U.S. forces in Asia. Japan has no defense against such North Korean or Chinese weapons. In addition, while in Tokyo, President Clinton should:

  • Tell the Japanese that the alliance with Japan remains the most important U.S. alliance in the region and that Japan's economic recovery is vital to ensure that other economies do not fall victim to the spreading recession.

  • Urge the Japanese government to implement deeper tax cuts and more sweeping deregulation of its economy as key measures to help reverse its economic decline.

  • Urge the Japanese government to approve implementing legislation for the 1996 Defense Guidelines that would allow better support for U.S. military forces based in Japan but engaged in other combat zones like Korea.

  • Explain to the Japanese that they must cooperate with the United States and spend more to build missile defenses that will deter North Korea or China from using their missile forces in Asia.

South Korea Visit
While in South Korea on November 20-22, President Clinton should help newly elected President Kim Dae Jung formulate a response to difficult economic and security challenges. South Korea's economy, once a model for developing nations, is beset with recession and needs fundamental reforms. South Korea and the United States continue to face a heavily armed North Korea, which is building new missile--and possibly nuclear--threats. President Clinton's 1994 Agreed Framework with Pyongyang, which sought to get North Korea to halt its nuclear weapons program in exchange for economic and energy aid, has not reduced the North Korean threat. To help South Korea meet its economic and security challenges, President Clinton should:

  • Praise President Kim for his commitment to bring down protectionist barriers. Tangible progress has been made, as shown by the recent agreement on automobiles. Other areas requiring action include the lack of adequate intellectual property protection for foreign pharmaceuticals and the remaining tariff and non-tariff barriers to agricultural imports.

  • Caution President Kim against providing government subsidies for failing companies. Painful as bankruptcies are, they are a part of the reform and restructuring that will produce a stronger, more competitive economy. Clinton should ask South Korea's businessmen to embrace and support Kim's free-market policies.

  • Propose an alternative to the failed Agreed Framework with North Korea, in close concert with Seoul and Tokyo, to include a package of trade and aid offers.

  • Link a new aid package to the fulfillment of the Basic Agreements ratified by the North and South in 1992, including expansion of North-South trade, citizen exchanges, a pullback of troops from the border, and phased reductions of armaments and troops.

  • Announce the appointment of a special U.S. presidential envoy to oversee these policy adjustments and communicate with the Pyongyang regime at high levels.

--Richard D. Fisher, Jr., is former Director of The Asian Studies Center at The Heritage Foundation; Robert P. O'Quinn is a consultant on international trade issues; and Daryl M. Plunk is a Senior Fellow in The Asian Studies Center at The Heritage Foundation.

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