Challenges and Opportunities in a Changing Asia

Released by the Office of Policy Planning

Thank you, Ellen.  And thank you to all of the members of this distinguished bipartisan panel.

I’m particularly delighted to speak on “U.S. Policy Challenges and Opportunities in Asia” to a group led by two of America’s finest diplomats: Ambassadors Michael Armacost and Stapleton Roy. Across several Administrations and several decades, they have matched insight and creativity to effectiveness and wisdom. They truly are among the very best that American diplomacy has produced.

This panel on “America’s Role in Asia” will confront the challenges of a region in the midst of rapid change. I say “change” because although Asia comprises some of the world’s oldest and most enduring civilizations, the region is today being reshaped by trends that are unprecedented.

Taken together, these trends have the potential to permanently alter the strategic landscape that confronts American policymakers. And so in the brief time I have with you today, I’d like to reflect a bit on five of these important trends. I’ll also talk about how the Bush Administration has worked to shape these trends in support of American interests and values.

Asia Goes Global
The first of these trends is the unprecedented globalization of Asia. Today, Asian governments, industries, NGOs, and militaries are bursting old boundaries and taking up new roles on a global stage. Asians are contributing to stability and prosperity beyond their region and across the world – from Africa to Latin America to the Middle East.

Consider, for instance, that behind the headlines about outsourcing and industrial restructuring, China has become a workshop of the global economy. India is its emerging software laboratory. And Japan, the world’s second-largest economy, is a global leader in many promising new technologies, such as nanotechnology, that have the potential to change the very face of the global economy.

Likewise, Asian diplomacy and security policy have begun to “go global.” Standing with us in Afghanistan and Iraq are Japan, South Korea, the Philippines, Mongolia, Australia, New Zealand, Singapore, and Thailand. Japan plays a pivotal role in supporting key infrastructure projects, such as construction of the Kabul-Kandahar highway. And many others are providing less direct, but important, forms of support.

These new roles, especially among East Asians, are emerging in nearly every region of the world: Japan is the largest aid donor to Jordan and Pakistan. China has bailed out struggling grain producers in Kenya and contributed peacekeepers to Liberia. China is providing tents, generators, and electric lighting for electoral polling stations in Afghanistan. Asians are spreading aid and development assistance across Africa. They are making big-ticket oil investments in Kazakhstan, Sudan, and Iran. Indeed, Asian consumption increasingly is a dominant influence on the price of major commodities, such as iron, steel, and strategic minerals.

For our part, the Administration views this global engagement as a benefit for the United States because we ourselves are wrestling with so many challenges that are global in scope: terrorism, a cleaner environment, secure energy supplies, and the spread of disease are transnational challenges, not just regional ones. Al-Qaeda operates on six continents. High oil prices affect global consumption. As we learned all too well from the spread of SARS, infectious disease can move aboard the planes, trains, and ships that circle the world.

Secretary Powell likes to say that the United States is pursuing “a strategy of partnerships” around the world. And against this backdrop, I think you will agree that Asians are among our very best allies and partners. Together, we are working to tip the balance in favor of a world where democracy and markets prevail, where terrorism is rare, women’s rights are protected, WMD is controlled, and the realm of human freedom can expand across the globe.

These are not just Asian challenges but global challenges. And it is clear that Asians are contributing a great deal beyond the borders of their region and on a worldwide scale. 

Major Power Cooperation, Improved Bilateral Relations
The second major trend is that for the first time in two centuries, Asia’s major nations are at peace. The United States is simultaneously transforming its relations with Asia’s major states – Japan, China, India, and Russia. And we are remaking many other key bilateral relationships, including Pakistan. In fact, these states are themselves remaking their relations with one another. And thus, as President Bush’s National Security Strategy declared, “We have our best chance since the rise of the nation-state in the 17th century to build a world where the great powers compete in peace instead of prepare for war.”

We are hardly complacent about this opportunity. We can’t afford to be. We understand well the powerful legacy of perception, emotion, and history. And we know, too, that the potential for large-scale inter-state conflict remains: most notably, on the Korean Peninsula, in the Taiwan Strait, and across the India-Pakistan Line of Control in Kashmir.

But by and large, Asia’s major powers are forging more complex – and peaceable relations than ever before. And on more issues than ever before, they increasingly find themselves on the same side.

For the United States, this means, above all, that we do not view our relations with Asia’s major states in zero-sum terms. We seek strong and productive relations with all of them.

In East Asia, the backbone of our strategy must remain the enduring U.S. commitment to our five bilateral alliances and key security partnerships. We view our alliances with Japan, South Korea, Australia, Thailand, and the Philippines, as well as our partnership with Singapore, as the key to assuring peace in East Asia and stability and prosperity for the entire region.

In South Asia, our new strategic relationship with India and enhanced relations with Pakistan are proving crucial to assuring American interests while promoting stability and dialogue.  Let me just touch briefly on four of these key bilateral relationships: with Japan,  China, India, and Pakistan.  Japan remains our key ally in the Pacific. But more, we believe it is a great power with global interests and a natural partner for the United States around the world.

Japan has the world’s second-largest economy. It is the world’s second-largest donor of overseas development assistance. It is the second-largest naval power in the Pacific. And as our distinguished Ambassador to Tokyo, Howard Baker, has pointed out, Japan’s achievements, influence, and interests have earned it a seat at the top table for the negotiation of international relations.

That is why we continue to support Japan’s permanent membership in the UN Security Council. It is why we have welcomed Japan’s support of peacekeeping operations in East Timor, Cambodia, Mozambique and the Golan Heights. And it is why we are so very pleased and grateful that Japan has provided important support in the war against terrorism, for operations in Afghanistan, and as part of the coalition in Iraq.

We are bound by shared interests and democratic values. And it is imperative that we seek to define a more global basis for the U.S.-Japan alliance so that we can continue to lead together on the international stage.

China, too, is making important choices about how it will use its growing power.  Above all, we want a rising China to rise also to the challenges of global responsibility. And we must measure success not just by whether we have shared interests but by the tangible decisions and actions we take in support of those common interests. Where once we defined our relationship by our common opposition to the Soviet Union, we have the best opportunity in a generation to redefine those relations on the basis of the common interests we both are working for.

Indeed, as never before, we are combining our resources, power, influence and prestige. We are pursuing complementary – and sometimes common – policies around the world: China donated $150 million in bilateral assistance to Afghanistan and $25 million in multilateral assistance to Iraq. It is helping to forgive Iraqi debt. And of course, we are coordinating in the regional effort to end North Korea’s nuclear weapons programs.

The Administration is challenging China each and every day, raising the bar of our expectations from talk to action. We want China to step up. As Secretary Powell has said, “we welcome a global role for China so long as it shoulders the burdens and assumes the responsibilities commensurate with that role.” This means, however, that we must speak candidly about our differences, even as we work to ensure that those differences do not preclude cooperation where we agree.  We cannot, for instance, shy away from or understate our concerns about human rights, where we have seen backsliding over the past year, or nonproliferation, where we are looking to China to enforce its laws, commitments, and export controls.

Likewise, we differ on Taiwan, where, as my colleague, Assistant Secretary James Kelly, said in his recent testimony to the House: “Our foremost concern is maintaining peace and stability in order to advance U.S. interests, spare the region the dangers of war, safeguard Taiwan’s democracy, and promote China’s constructive integration into the global system, as well as the spread of personal freedom in China.”

We are committed to the pillars of a policy that have worked so very well for both China and Taiwan these past thirty years. Indeed, it is, in part, the very success of American policy that has allowed both to prosper and Taiwan to make its transition to democracy: We adhere to our “one China” policy, based on the three joint communiqués and the Taiwan Relations Act. We do not support Taiwan independence. We oppose unilateral moves by either side that would change the status quo as we define it. And we insist on a peaceful resolution of differences and no threat or use of force. That, too, is an abiding U.S. interest. And it is an interest we believe Beijing, too, should share.

With India, we are looking forward to working closely with the new government. And our goal remains to develop a new strategic relationship.  This “de-hyphenation” of our policy – dealing with India and Pakistan individually rather than as part of some hyphenated “Indo-Pakistani conflict” – is a pivotal part of our approach.  We share democratic traditions and interests with an India that is developing into one of the most important nations of the 21st century. India is a potential partner for the United States on issues of global scope. And we have more at stake bilaterally than ever before.  To this end, we are pursuing a variety of steps designed to expand our dialogue, including enhanced civil nuclear and space cooperation and more high-technology trade.

Likewise, with Pakistan, we are pursuing a bilateral relationship on the merits, even as we remain attentive to the broader issue of India-Pakistan relations. This is a moment of enormous opportunity for both countries. And we see hopeful signs, including more people-to-people exchanges and other new forms of economic and social interaction. It is imperative that both sides seize this historic moment, for neither India nor Pakistan can realize its full potential when their relations are fraught with the potential for destructive conflict.

Our goal is a Pakistan that is a secure, prosperous and moderate democracy. We seek a Pakistan that contributes to growth and stability in the region and is a robust partner in the shared fight against terrorism. Pakistan has been a key ally in that struggle and we will continue to look to it to wage the fight vigorously and on all fronts.

Of course, we remain concerned about the overall direction of Pakistan’s political development. And with our initial success against A.Q. Khan’s proliferation network, we are working with Pakistan to ensure that its system of export controls and its legislation come up to the necessary standard. But we are determined to work together on shared interests. There is much at stake, including a stable future for a country with nuclear weapons that stands astride the crossroads of the subcontinent and the Islamic world.

Accelerating Regional Integration
A third major trend is the growing integration of the region, particularly of East Asia.  We all recall the strategic debates of the 1990s, when so many analysts blithely dismissed the prospects for economic and institutional integration in Asia. Asians, we were told, were handicapped by traditional strategic fault lines among the powers. The region lacked “meaningful” institutions and could not be expected to overcome the divisive “legacies of history.”

Well, Asia is not 19th century Europe. And Asians are proving it every day. East Asians, in particular, are developing a distinctive path to regional integration. And the United States, as a traditional western Pacific power, must remain involved.  It has not escaped our notice, for example, that a regional trade and financial system is emerging, pushed forward in part by accelerating intra-Asian trade and investment.

China has become a regional growth engine. And China and Japan both seek to convert their economic weight into political influence, proposing a variety of ideas such as free-trade agreements with Southeast Asia. Asians are coordinating currency swaps through the Chiang Mai initiative – this, in a region with nearly $2 trillion in foreign exchange reserves. ASEAN countries, too, are integrating their own sub-region, working to define an identity among all of Southeast Asia’s states, including newcomers to the grouping : Burma, Cambodia, Laos, and Vietnam.

This poses some new challenges for the United States. We seek an East Asia that is open and inclusive. We want a regional architecture that allows states to build partnerships with each other as well as partnerships with the United States. The Administration is working to ensure that we remain a pivotal part of the region’s major institutions. And we want those institutions to foster partnerships to solve problems, not just talk about them.

In fact, some of these partnerships already exist, and we are working with our allies and others to improve them. There is APEC, and there is the ASEAN Regional Forum.  But we also are creating new mechanisms – sometimes informally – to combine the power of those countries best positioned to wrestle with specific challenges.

Take the Six-Party Talks. For the first time, all of North Korea’s neighbors are sitting at the same table:  those with the most immediate equities in its behavior; and those with the most tangible ability to demonstrate that there will be costs to non-compliance with its commitments.

We have succeeded, as Secretary Powell has said, in defining the North Korea issue as primarily a regional problem for the North Pacific community of which we are a part.  We speak with a common voice.  And we all are hearing the same message back from Pyongyang’s representatives across the table.  Thanks to the Six Party format, we have developed a common understanding and approach to the problem. No longer can the North tell Beijing one thing, Tokyo another, and Washington yet another. No longer can it harbor any illusions that its nuclear weapons program is – as it so often claims – a purely “American” concern.

On the contrary. North Korea is hearing the same message again and again from Seoul, Tokyo, Beijing, and Moscow.  Nuclear weapons on the Korean Peninsula are unacceptable.  Full stop. And North Korea now must ask itself: Is it prepared to transform its behavior and, its relations with all of these neighbors?  Or will it cling to an outdated approach that can only deepen its self-isolation from the region?

Indeed, even as we seek progress in these Talks, we also have an historic opportunity to build on them, and thus capture the promise of cooperation among the region’s major powers. Whether it is energy security or environmental pollution, shared transnational and economic interests increasingly bind at least five of these Six Parties together. If the 20th century was marked by the struggles among the powers, we now have an opportunity to define a new pattern of cooperation in Northeast Asia, while addressing common challenges as a group.

By building on our experience with the North Korean nuclear issue, we five can hold out to Pyongyang the prospect of joining in this cooperation if it makes the right strategic choice – to embrace the economic dynamism that has transformed the rest of the region while passing North Korea by.

The Flowering of Asian Democracy
A fourth major trend is the spread of democracy through both East and South Asia. This week’s headlines are abuzz with stories about India’s impending change of government.  But it is remarkable that in recent months and into next year, executive and legislative elections (or both) have been or will be held in Afghanistan, Indonesia, India, Japan, South Korea, the Philippines, Malaysia, Mongolia, Sri Lanka, Taiwan, and Thailand. An impressive list.

Some of you may have attended Secretary Powell’s recent B.C. Lee lecture at the Heritage Foundation. He spoke to just how unthinkable the spread of democracy in Asia once was. Forty years ago, he noted, there was just one genuine democracy in East Asia – Japan – one compromised democracy, in the Philippines, and one young and incomplete democracy, in Malaysia. In South Asia, India was democratic, but the prospects for democracy elsewhere in the region were not at all promising. Simply stated, indigenous democratic traditions were weak throughout the region.

Today, democracy has blossomed.  And the emergence of distinctive Asian democracies spans both culture and creed:  We see it in predominantly Buddhist Thailand, in predominantly Hindu India, in predominantly Muslim Indonesia, and in the predominantly Catholic Philippines.  We see it in constitutional monarchies, such as Japan, and in former Communist states, such as Mongolia.  We see democracies emerging in states with vastly different political cultures and traditions.  We see it in ethnically homogeneous states, such as South Korea, as well as in ethnically diverse countries, such as Malaysia.

In short, the spread of democracy in Asia demonstrates once again that democratic ideas are universal. Democracies can take distinct forms and emerge from diverse political traditions. But clearly, as the Secretary has said, “no-one can now claim that political liberty is beyond Asian interests and capacities. The record speaks for itself.”

Just take Indonesia, now one of the world’s most populous democracies – and, I should add, a majority Muslim democracy. Indonesia is now conducting its second set of elections since the fall of Suharto – elections that already have involved the largest single-day balloting in the world: India may be more populous but its multiweek election means that more people went to the polls in Indonesia’s first round of presidential and legislative balloting on April 5th than in any democracy on Earth.

That demonstrates some things that are important: First, while no-one can deny that Indonesia faces many challenges, neither should observers deny its extraordinary successes. I hope this panel will highlight those successes and opportunities in your report, for Indonesia has, after all, come a long way in a very short time.

Second, together with Malaysians, Indonesians are proving day-by-day that there is nothing incompatible about Islam and democracy. In fact, there are more Muslims living in Indonesia than in the entire Arab world, and these majority Muslim countries have achieved economic growth and are setting ever deeper the roots of democratic traditions.

Finally, as the threat of terrorism has spread throughout Southeast Asia, these countries have continued to nurture democracies, representative governments, and longstanding traditions of tolerance. At a time when democratic societies everywhere are striving to find the right balance between openness and security, Southeast Asians are at the forefront of that debate. And this is equally true of South Asians: We have India, where one of the world’s largest Muslim populations is a vital part of a successful democracy. And there is Bangladesh – a fragile democracy, to be sure, but one that has improved literacy, reduced its birth rate, and empowered women through employment and education.

Asians are providing these lessons in democracy to the world. And they are providing them, too, to the remaining outliers of Asia: We hope, for instance, that Burma’s ruling junta will draw the right conclusions, starting with the national convention scheduled for May 17th, and begin a real transition to democracy at long last. Likewise, Americans look to the day when countries such as China, Vietnam, and Laos achieve representative government for their people.

I do not pretend this will be easy. And there is, of course, an enormous amount of work yet to be done. But as the people of these nations clamor for justice, representation, and the rule of law, the United States can help the process along. We are doing so through our own rule of law and civil society programs. We are making efforts with NGOs to promote free and fair elections. And of course, we have the Millennium Challenge Account, a new multibillion dollar aid fund for which 63 countries were initially eligible. 11 of those 63 countries are in Asia.

Evolving Economic Openness
Fifth and finally, we need to highlight the trend toward greater economic openness in Asia: Barriers to trade are dropping. We see greater investment in scientific research. And we see the emergence of several free-trade proposals. China and Japan have each offered FTAs to ASEAN. Japan has concluded an FTA with Mexico. The United States leads the way with our FTAs with Australia and Singapore and our negotiations with Thailand that will commence this year. We have offered our broader vision of a network
of bilateral FTAs in Asia, anchored by our “Enterprise for ASEAN” initiative, which aims to begin the process in Southeast Asia. This is good for everyone: The rising tide of enhanced trade, expanding capital flows, accelerating growth, and new investments in research and development has the potential to lift all Asian boats.

But there are challenges aplenty. For one thing, it is too easy to forget just how vital Japan remains to Asia’s prosperity. Japan is in the midst of a painful economic restructuring. And we are trying to be supportive of Prime Minister Koizumi’s reform efforts. But it is essential that Japan tackle these challenges, not least because a vital economy underpins Japan’s expanding leadership role in the world. To lead, Japan must be strong. And a robust Japanese economy remains the cornerstone of Japanese strength.

Ultimately, I am bullish on Japan because it has risen to the challenge each time the analysts have glibly counted it “out.” In fact, as anyone who has driven Toyota’s hybrid Prius will tell you, Japan’s immense R&D efforts have begun to pay off. It quietly leads the world in many areas of hydrogen, fuel cell, and importantly, nanotechnology research. This R&D will foster the new industries that will drive economic growth over the next generation, and Japan is well-positioned in most of them.

And then there is China, which is fueling much of Asia’s explosive growth. I don’t have to repeat to this audience our strong concerns about and the efforts we have undertaken to ensure WTO compliance and intellectual property protection. We have a compelling interest in ensuring that China functions well within the global economy. In the view of many economists, China’s overheating economy is headed for a fall, taking increasingly China-dependent countries in Southeast Asia with it. They argue that China is burdened by a vulnerable banking system, under-funded pensions for its aging population, and inefficient industries tied to the apron strings of the state.

I’m not an economist. But it’s worth noting several factors that may make China far less vulnerable to a hard landing, much less a financial meltdown, than it was in 1997-98, when it emerged virtually unscathed from the financial crisis that afflicted most of its neighbors: China’s reserve war chest has grown to over $400 billion, up from $100 billion in 1997. It has a vital private sector that increasingly drives its investment surge.

Its capital controls make a run for the border impossible. Its trade is growing rapidly and is increasingly diverse. And its economic management team, from Premier Wen Jiabao on down, is committed to finding prudent ways to sustain economic dynamism while restraining overexpansion in a number of sectors.

A China that grows at sustainable levels would pose less risk to the increasingly China-dependent countries of Southeast Asia who, I would add, have also built up reserve war chests to avoid a repeat of 1997-98 and, in the view of many, maintain undervalued exchange rates or dollar pegs.

India, too, is growing rapidly, but we have yet to realize the full potential of our commercial relations. Let me give you some revealing figures: In 2000, U.S. exports to India were valued at $3.8 billion, more or less where they had been for the previous five years. U.S. exports to China are about five times greater. In fact, U.S. exports to Ireland in 2001 were almost twice as great as exports to India. And the situation is even worse with U.S. direct investment.

We have the ambition to do better. And we know we can. But more will be needed, including deepened economic reforms, trade liberalization, and a more predictable investment environment. Still, the economic potential of this region remains enormous.

Conclusion
We are at a moment of remarkable change and exciting opportunity in Asia. And the United States remains an essential partner for Asians to meet the challenges of their evolving region. Indeed, as Asia “goes global,” Asians and Americans must expand our partnership in wrestling with the challenges of an increasingly turbulent world.

While America’s role will adapt as new challenges evolve, some things must – and will – endure: Our commitment to our allies and partners. Our efforts to secure peace and prosperity for all Asians. And our desire to help spread the blessings of liberty. We must continue to play a vital role in Asia’s tomorrow that is taking shape today.

Thank you very much.