2.20.2009

Mrs. Clinton Goes to Asia











by Douglas H. Paal

U.S. Secretary of State Hillary Clinton’s choice of Asia for her first overseas trip has surprised and largely pleased her Asian hosts. With little in her background predisposing her to a special interest in the region, Secretary Clinton’s choice of destinations—Tokyo, Jakarta, Seoul and Beijing—signals that President Obama is likely to take a more activist approach toward the region than his predecessor. Moreover, the trip reflects the widespread notion that the global center of gravity has been sliding toward Asia, and even more so after the economic crisis emerged last year.

Mrs. Clinton, only a month into the job, will be taking on a complex region and its issues with only minimal staffing. Most of her substantive lieutenants have not even been announced as candidates for Senate confirmation, let alone confirmed and read into their new briefs. This indicates she will stick to generalities, setting out goals envisioned by the new administration, but not yet the details of how to get there. Nonetheless, we can expect a renewed emphasis on Asia-U.S. cooperation and a return to the basics of American diplomacy in the region. Here’s what she can expect in each capital she visits:

Tokyo: As America’s premier ally in the region, Japan is the natural starting point for Mrs. Clinton’s Asia trip. All the more so, because she got off to an awkward start with the Japanese at the beginning of her primary campaign with an article she signed for Foreign Affairs outlining her foreign policy priorities that omitted any reference to Japan.

Lacking an ambassador in Tokyo and dealing with a severely weakened Liberal Democratic party (LDP) government under Prime Minister Taro Aso, there is not much to be expected from their brief encounter other than to pronounce positive sentiments about future cooperation. Reference can also be made to the need to follow through on the military base realignment commitments agreed under Bush. Sustaining momentum on this important adjustment could become very difficult if, as many believe, elections in the coming year bring the opposition Democratic Party of Japan (DPJ) to power.

Differences may surface between Tokyo and Washington over how to handle North Korea and the related issue of Japanese abductees seized by Pyongyang. It is premature for Clinton to float a specific solution, but both sides would do well to refer to their respect for each other’s priorities.

Jakarta: Indonesia could prove to be the sleeper that surprises observers during Mrs. Clinton’s travels. American expectations of Indonesia have been low for decades. Despite the country’s physical extent and 200 million plus Muslim population, it rarely registers in Washington.

But President Obama’s personal history of having lived as a child there combines with considerable domestic political progress in recent years to create a moment of opportunity, which Mrs. Clinton can signal during her visit. Indonesian President Susilo Bambang Yudiono outlined his ambition to fashion a U.S.-Indonesia “strategic partnership” in a speech made during the G-20 meeting in Washington in November. And President Obama has repeatedly indicated his desire to fashion more productive relationships with the globe’s Muslims. He can look forward to visiting Indonesia next November, before or after the annual APEC summit, in neighboring Singapore.

The idea of creating a “strategic partnership” with a Muslim-dominant population, the most important country in Southeast Asia, one that has successfully emerged from decades of dictatorship, which has an important role in global energy supply, and in which Mr. Obama also has personal roots, is too good to miss. Mrs. Clinton will need to handle this circumspectly, of course, preparing the stage for her boss, and not upstaging him in Jakarta. It’s conceivable she can help lay the foundations in Indonesia for possibly the most visibly successful foreign visit by a U.S. president ever, with millions lining the streets to greet him.

Seoul: There are bilateral issues between the U.S. and South Korea, most prominently the current impasse over implementation of KORUS, the draft Korean-U.S. free trade agreement. Both Mr. Obama and Mrs. Clinton cast doubts on the agreement during the election campaign, and President Lee Myung-bak appears to understand that now is not the time to press it on a reluctant administration and Congress. He has not raised the issue in his phone calls with President Obama.

For this visit, it will be more important to get Seoul and Washington to develop a common agenda of basic objectives for future dealings with North Korea. North-South tensions are currently rising, with the North seeking to turn President Lee’s hard line approach to denuclearization into a liability for him at home and with the Americans.

The Obama administration has yet to settle on a policy course for dealing with North Korea, let alone select a “special envoy” to handle the detailed talks. So it will be premature to expect more than general references to the need to seek an outcome that reduces tensions for all the parties to talks with the North and continues to offer Pyongyang security assurances and economic benefits in exchange for complete denuclearization.

Beijing: The final stop in China will combine personal and policy tests for Secretary Clinton. Personal, because she has long been critical of China for human rights abuses and trade issues, and Beijing has been trying to puzzle her out. Policy, because President Obama has set high goals for additional cooperation with China, beyond what President Bush achieved.

The stakes are very high between the U.S. and China, because friendly cooperation can yield outsized benefits, especially in the current economic environment. This is also because relations, if they turn adversarial, can truly become costly.

In a phone conversation with Chinese President Hu Jintao, President Obama outlined broad areas for international cooperation, including the economy, climate change, Iran and non-proliferation, Darfur, Burma and North Korea. Judging from the official readouts, President Obama said there is no more important relationship than between Washington and Beijing, and did not choose to raise Taiwan, Tibet or human rights.

It will be difficult, however, for Mrs. Clinton to avoid recording standing U.S. positions on these sensitive issues in her capacity as a visiting secretary of state. The key will be in the balance she strikes between these tough issues and the promising areas of increased cooperation.

One area she might encourage the Chinese leadership to consider is to make the U.S.-China economic relationship a model for the economically stressful period we are now in. China will need to reduce its export capacity over the next few years, costing millions of jobs, and the U.S. will reduce its imports and consumption generally, also costing jobs. The potential for trade friction and recrimination is not small.

Beijing and Washington should consider giving each other bilateral mutual assurances that they will work hard to smooth the extended adjustment period and not take unfair advantage of each other’s situations. In other words, the U.S. will undertake to refrain from anti-Chinese protectionism, and China will refrain from dumping and other illegal export promotion. These will underscore the general commitments already made within the G-20, but provide more overt political support to uphold them.

Mrs. Clinton can put this idea on the table, with a view to an agreement at the London G-20 meeting in April between President Obama and President Hu. If it can be done, it would also put her standing with the Chinese in a constructive and productive light for future cooperation.

Douglas H. Paal is director of the China program at the Carnegie Endowment, a former special assistant for national security affairs to President George H.W. Bush and senior director for Asian Affairs on the National Security Council.


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Why America Can't Save Asia











by Brian P. Klein

Tokyo—The U.S. Congress has finally passed a much anticipated stimulus bill for $787 billion. While desperately needed, it is unlikely to lift America or Asia out of the rapidly deteriorating economic crisis anytime soon. Government efforts at this stage are still focused on stopping the hemorrhaging rather than reviving the patient.

Wishful thinking aside, the wild ride of export-led growth is over and Asian countries need to start taking serious action to shore up their own economic futures while the U.S. slogs through its domestic-induced crisis which is likely to take years to repair.

Despite the disappointment, a notable success was the speed with which the legislation was passed, flaws and all. Less than a month into office U.S. President Barack Obama carried out a major piece of legislative heavy lifting that is a critical first step in repairing the economy. Taking quick action is clearly a lessoned learned from previous crises.

The stimulus plan went through the typical partisan political washing cycle coming out the other end shrunk and wrinkled. Despite best intentions the core purpose of the bill was lost somewhere in all the zeros of hundreds of billions of dollars—namely to get people working again.

President Obama’s early call for bipartisanship went unheeded by the Republican minority, which despite their poor showing in 2008 elections remain a potent political force. The vote fell almost entirely down party lines. Tax cuts, approximately 38% of the entire package, featured prominently to win over the several Republican Senators and conservative Democrats vital to passing the bill.

More money in consumers’ pockets always sounds good. Who doesn’t want to pay less in taxes? But the highly indebted American consumer is far more likely to take the $400 per person and pay off immediate bills or save it as concerns over job losses mount. This does not bode well for Asian exporters of consumer goods.

With many people left wondering what, if any effect this would have on ending the economic crisis griping the country, U.S. markets continued their downward trajectory falling 4% in the last week alone (13% from the start of 2009).

Many economists are now estimating that a stimulus with teeth would need to be on the order of $2 trillion to $3 trillion over the course of several years. No one knows for sure and the need for another stimulus by year’s end is increasingly likely.

Generally speaking, last year wasn’t even the worst of the U.S. downturn. Real GDP growth slowed to 1% while imports actually rose 0.5% (versus 0.1% in 2007). U.S. economic growth has been decelerating since 2004. It has not, however hit zero or turned negative as it did during previous downturns in the mid 1970s, early ’80s, and early ’90s. The current crisis is far deeper, more widespread, and potentially destabilizing than any based on oil price shocks or standard business cycles.

Fourth quarter 2008 was the leading edge of the recession, not its bottom, signaling more tough times ahead. Predictions now turning into mere hopes coalesce around a 2010 turnaround. Early or late is anyone’s guess.

Since Asia’s economies are still disproportionately dependent on exports, some more than others, U.S. consumption is still a critical driving force for the region’s growth. The current stimulus is highly unlikely to get U.S. consumers buying again in the short term, especially with less than 25% of the stimulus focused on core spending, the biggest driver of actual job creation.

The effects of the current crisis on Asia are significantly different both in terms of size, speed, and composition than ones in the past.

Asia is far more dependent on trade than a decade ago. While the going was good export earnings and remittances from abroad set off a global chain reaction of growth. Unfortunately much of these gains were never reinvested in building strong domestic-driven economies.

Asia needs to start planning for its own future rather than hoping for a U.S. recovery to pull it out of the global downturn. This means serious investment of their stimulus packages on critical social infrastructure—education, health care, and a social safety net to stimulate consumption. To date Asia has yet to achieve even these modest successes.
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