Transcript
M. Armacost: Without further ado, we will commence with this briefing. So, those of you who want to hit both, may perhaps do so. I would simply want to say that, it seems to me, that this is an important visit. The briefing is focused on the visit and what may be accomplished by it. If it weren't important, I have no doubt the president would probably not be going, given the looming crisis in another region of the world. It seems to me it's in part important symbolically. After all, it was the president who commenced these heads-of-government-level meetings in APEC five years ago, and that tradition has acquired a certain momentum. He was unable to attend in 1995, so that generates additional pressure for his presence.
But quite apart from symbolism, the substance of this meeting, I think, is very important in APEC, because, as you recall, five or six weeks ago, bankers gathered along with financial officials in Washington, spread a lot of gloomy prognostications, and went home without doing anything about it. And that unsettled markets and raised questions, not least about American leadership. And therefore, APEC represents another opportunity to address these questions in, one hopes, a more positive spirit.
Happily, there's been some good news since then, including action by the Congress, decisions by the Fed, proposals for quick-disbursing aid through another IMF facility, which seems to have acquired some support from within the G-7, evidence of some Japanese movement on banking legislation, European interest rate reduction. So the climate or the setting for this meeting is somewhat more favorable than was true when bankers arrived here in early October.
I would say, having spent a fair amount of time in Northeast Asia, that this is a timely moment for the president's meetings in both Seoul and Tokyo as well. As you all know from following the financial crisis, on macroeconomic policy we have been somewhat at odds, and rather publicly, with the Japanese government over the past year, and the result has been a measure of frustration in Treasury and a measure of resentment in Japan at the frequency and specificity and often public character of advice. So there's some bridge-building to be done, happily, in the wake of some legislation, but without certainly all the details having been filled in.
There was also a China trip, as you'll remember, in the spring, which didn't include a Japan leg or need it necessarily. And I don't think that was what troubled some Japanese. It was more the juxtaposition, I suspect, of the president's standing shoulder to shoulder with Chinese leaders criticizing Japanese economic policy, on the one hand, and no sturdy public defense of the alliance with Japan on the other during that Chinese sojourn. So I think there's some repair work. More importantly, there's still substantive work to be done in getting our macroeconomic policies straight and some security matters to attend regarding guidelines which other briefers will address.
Finally, I think, in Korea, this is also timely. There's a potential disconnect in the way in which we are looking at North Korea now. The U.S. Congress in particular, but not just the Congress, along with the Japanese, have regarded the tunneling activities near a known nuclear facility and a missile or satellite firing across Japanese territory without notification as evidence of something awry on the nuclear framework agreement and has raised questions about the future efficacy of that agreement, on the one hand.
The South Korean government, on the other hand, has responded to the recent trip by President Chung Hundai [ph] to the north as confirmation that the sunshine policy may work. So you've got a real need for assuring that we are coordinated in the way in which we respond to developments in the North that impinge on the security and political interests of all of us.
So I think, having simply noted the importance of the trip, our purpose here today will be to brief on the various aspects of the trip. We'll ask each of our speakers to confine their remarks to five, six minutes at the outset, leaving plenty of time to direct the discussion in whatever direction you prefer.
Bates Gill will go first. Bates has come to us recently as a senior fellow from the Monterey [sp] Institute. He's the director of our new Northeast Asia Policy Studies Center and has gotten that center off to a very robust start. Ed Lincoln, who will brief second, has been long a Brookings stalwart, working on Japanese economic and political issues. And he will brief principally on APEC, but I'm sure you will get some comments from him on Japanese economic developments.
Mike Mochizuki is a specialist on Northeast Asia, particularly Japan and Korea, and he will touch on the politics and security aspects of the trip in Northeast Asia. And then, thereafter, you will be asked to identify yourselves. We'll have mikes. And you can carry the discussion, as I say, in whatever direction you wish. I've got a plane to catch, so I will leave the moderation to Bates as the center director, and appreciate your presence and hope you'll get a good brief. I know you will.
Bates?
B. Gill: Well, I hope I can at least offer moderation after Mike departs. My brief today will be to give a slight overview. Also, I'd be happy to field questions on proliferation-related issues as well as part of the president's trip.
This is a very important 10-day swing through East Asia for the president. It comes, I think, at a time of strategic and economic uncertainty in the region. And while our current attentions, of course, are focused on other problems, we know that the East Asia region is going to remain important, and those problems out there are not going to go away.
I think it'll be important for the president to make sure that this trip is one of reassurance, to reassure our allies and friends about a continued U.S. presence for financial recovery, for political stability and for regional security, all in preparation for what I think may well be a turbulent 1999.
I think there will be lesser pledges and kinds of political side-shows associated with this meeting, or with these set of meetings, but I think the president ought to keep his mind on three important topics: First, of course, to continue to steadily but not patronizingly support the notion of open trade and economic restructuring in the region. As you all know, the hoped-for goals of tariff reductions that were to be met at this APEC meeting are unlikely to be met. And indeed, open trade and investment or liberalization are seen by many in the region to be the cause, not the solution, of their economic plight.
The president will have to convincingly assert a continued U.S. strategic support for steady liberalization of trade, but while also generating near-term support for initiatives to stem capital flight, to relieve debt, to boost inward capital flows and stimulate flagging economies through continued international assistance plans.
I'll leave it to Mike and Ed to talk more specifically about Japan and South Korea, but I would just note that the president needs to be extremely cautious in his criticism, if that's going to be what happens, especially in Japan, at a time of some concern and sensitivities which Mike Armacost has already discussed.
I would also note that with a nearly $60 billion trade deficit each in our trading relationship with Japan and China, that the president will certainly have to convey the concerns of the United States to both of these leaders, Jiang Zemin, whom he'll meet in APEC, and, of course, Keizo Obuchi, who he'll meet in Tokyo, about the political unsustainability of this level of trade deficit.
On the topic of regional security, Mike has already noted the growing concern we have with the recalcitrance of North Korea with regard to missile tests, missile proliferation, as well as their suspect nuclear programs. This is an opportune time for the president to showcase the continued resolve of the United States and its allies to stand up to these potential problems from North Korea and to shore up what may be some flagging confidence in the alliance relationships.
The president ought to strongly urge the early passage of the U.S.-Japan security guidelines by the Japanese Diet while also roundly condemning the North Korean missile or satellite tests which intimidated Japan at the end of August of this year. And I think we'll also likely hear the president seeking to strengthen U.S.-Japan cooperation to develop theater missile defense.
I think it's interesting that the president has chosen not to go to the DMZ on this visit, which he has done before in Korea, but rather to visit with the U.S.-South Korean Joint Forces Command, which I think is an interesting symbolic gesture to show that the United States and South Korea are working closely to defend against possible aggression from North Korea.
A third problem in the regional security area, of course, is the United States is going to have to express its continued support for a range of different channels which we have with the North Koreans; for example, our bilateral — [brief audio break] — the continued success, hopefully, of the U.S.-North Korea agreed framework, and the Korean Peninsula Energy Development — [brief audio break] — in addition to the Kim Dae Jung sunshine policy. I think over the next year, the harmonization, or at least a continued argument in favor of the strategic wisdom of all these various programs with North Korea, will come under a very severe test.
And finally, I think the president ought to see this as an opportunity not to simply shake hands with the — [brief audio break] — to offer specific initiatives and proposals for economic recovery, but rather to note that in these 10 days, the president will be meeting with the four major leaders of the Northeast Asia region. He'll meet with Primakov. He will meet with Jiang Zemin. He will meet with Keizo Obuchi and with Kim Dae Jung as well.
The fact that these five principal leaders of Northeast Asia will be meeting in these next 10 days, I think, is something we should not ignore. And it's a great opportunity for the United States and the president to express a U.S.-oriented vision for economic recovery, political development and continued regional security in Northeast Asia.
Let me turn it over to Ed.
E. Lincoln: Okay. I'm going to move over here to the podium for the initial part. Let me start by saying that I think in many ways the economic agenda at APEC, and even on the visit to Japan, are overshadowed by the political and security aspects of this. But at least in theory, the reason the president is going on this trip is because of APEC, and APEC is all about economics.
I'd like to make four quick points about the APEC part of this. First of all, APEC meeting this year is significant just because it's current. Since the region as a whole is undergoing such economic turmoil, the fact that these countries are willing to get together and to continue a routine process that has, as its intent, to make the region more open to trade and investment is a reasonably significant step to be happening.
If you find much of the APEC meeting insufferably boring, it's supposed to be. An awful lot of what's happening in APEC is simply a myriad of committee meetings that are doing little things to try to facilitate trade, improving the flow of information, expediting customs procedures and all that kind of thing. And that tends to be pretty boring even if it is at least modestly useful.
The second point is that on the trade side, as most of you or all of you probably know by now, the big emphasis is on something called the early voluntary — EVSL, this package of nine product areas where there is supposed to be agreement to drive the tariff levels of all APEC member countries to zero in a very short period of time.
As a concept, this is an important piece of the message of having APEC continue at a time of trouble. It is a signal — supposed to be a signal that APEC countries are not going to back off of their agenda of trade and investment liberalization just because they happen to be going through an economically difficult time.
That said, this package is currently in great danger, because out of all of the APEC countries, Japan has chosen not to endorse two of the product areas that are involved, wood products and fish. And the U.S. government, believing that this package is important, has chosen to put a lot of pressure on the last few weeks to try to get it through.
A couple of comments about this. Number one, I happen to view this as a diplomatic failure by Japan in the following sense: That if the Japanese government truly believed that these two product areas were beyond the political realm in its ability to lower tariffs, then it should have kept them out of the package from the beginning.
This notion of having a package of significant tariff cuts emerged last year at APEC and moved through a low working-level agenda for a while. That's the point where the Japanese government should have said, "No, don't even put those on the agenda." They didn't. They waited until too late. Now they are stuck in a position where they don't look good because they are the sole holdout on this package.
And the second point about this is that even though the package is in danger, I am still assuming that it will go through, that this will play out according to fairly normal Japanese diplomatic routine. The government will say no up until the last moment and then finally, at the leaders' meeting, Obuchi will cave in. He'll apologize back home and say, "Well, I'm terribly sorry. We tried our best, but we had to do it for the sake of international harmony."
I hope that that is the outcome, because having gotten to this point, it is now important that this package does go through. If it doesn't, then all of you sitting in this room are likely to leave APEC saying, "Oh, it was a failure. These countries are going to turn away from trade liberalization." That would be a very bad image for everyone to take away from this.
The third point about APEC is that on the non-trade side, on the financial side, there'll be a fair amount of heavy PR work by the Japanese government on the so-called Miyazawa plan. The Japanese government is offering up $30 billion worth of loans and loan guarantees for Asian countries to demonstrate its willingness to help the region get out of its current economic problems.
I assume that the U.S. government will say nice things about this package. If you snoop around a little bit, you are likely to find that there is less to the package than meets the eye. One could be fairly cynical and say that the Japanese government, like all governments, most governments operating on a bilateral basis, will end up largely bailing out Japanese banks in their loans that have gone sour in the region. That shouldn't surprise us. But nevertheless, I think this will be a relatively non-controversial thing.
The fourth and final point on APEC is that there will be discussion beyond the bailout package of the issue of capital controls. And I think this could be quite interesting. On the one hand, it seems to me that this meeting is going to slap down Mahathir and his particular brand of capital controls. But it is quite likely that the APEC meeting will end up endorsing at least a relatively vague notion of the viability of some form of short-term capital controls, or capital controls on short-term capital flows, reflecting, I think, the status of discussion of these issues right here in Washington, where certainly, as an economist, I believe that no controls are the best way to go in principle. And yet anybody who looks at what's happened in Asia over the last couple of years has to admit something went wrong. And if something went wrong, then maybe we need some kind of a regulatory fix of at least a mild sort. And I think that endorsement of that view is likely to come out.
Let me end up with just a couple of words on the bilateral situation with Japan, for when the president or the vice president gets to Japan after APEC. There are relatively few issues here. And that may sound surprising. We do have a large and rising bilateral trade surplus. But let's start with trade.
There aren't very many big issues on the agenda right now except perhaps for the trade imbalance, but that's a macro issue, which I'll get to in a second. We're continuing the bilateral discussions on deregulation policy. That's kind of percolating along. There is nothing that's particularly big at the moment. That's not going to heat up until next spring. There's monitoring of existing agreements going on. But we've had those meetings. There's some concerns, but nothing particularly big.
Second, on the financial side, we have put tremendous pressure on Japan over the past 12 months. The record of Japanese government policymaking on trying to deal with the bad debt problem in the financial sector was, quite frankly, pretty bad until at least last summer. And many people, including myself, have been fairly harsh in their criticism.
But the situation now is quite different. The Japanese government has passed a set of new banking laws aimed at cleaning up dead banks and bailing out banks that are presumed to be still solvent but in very weak shape. I believe those laws are flawed, but they're certainly better than nothing. They're much better than where we were just a few months ago.
Therefore, I think the president is in a position where he's not going to make an issue of that. All he's going to say is, "Thank you very much. You've taken an important step forward. Now just get on with it. Use your new laws. Deal with these issues." This is not a time for criticism of Japan. This is going to be a time for kind of patting Japan on the back and encouraging them to get going with the tools that they now have.
And then finally, on macroeconomic policy, sure, the president could criticize Japan and say, "You've got to do something to keep your trade imbalance from going up. You've got to do something to grow and suck in more imports from the rest of Asia." But let's look at reality instead. The reality is Japan is going to shrink this year. For the current fiscal year, which ends March 31st, the economy is likely to shrink between 2 and 3 percent. Nothing that the president says is going to stop that. There's too short a period of time left.
Next year, most economists are predicting a flat economy or at best very, very low growth. Meanwhile, the government will have announced — the rumors are out already; the official announcement comes on Monday — a new stimulus package of tax cuts and spending increases. So again, the president is going to get to Japan at a point when he can't complain to the Japanese and say, "You've got to do more." He's going to have to say, "Thank you for doing something."
Now, again, this package — at least the rumors of the package that came out yesterday have not been received very warmly by financial markets in Tokyo. This is a flawed package. But it is a package. And given the cycle of these things as it just came out, it would not behoove the president to go around saying, "I don't like your package. I don't think it's good enough. You've got to do something more." He's going to have to say, "You did something. Now pass the legislation and carry it out." So I think that overall, on the economic side, the bilateral meeting in Tokyo will go relatively smoothly.
Thank you.
M. Mochizuki: Although much of the public attention over the last year on East Asia has focused on the economic crisis, I think the most important aspect of the president's upcoming visit to East Asia is really to shore up our alliance relationships with Japan and South Korea, and really to focus on the strategic dimension of our relationship with the various countries in East Asia.
And first of all, I think it's quite necessary for the president to make up for some of the shortcomings of his trip to China, where he failed to really make a point about how important the U.S. alliance arrangements with Japan and South Korea are to the stability of East Asia. And so the purpose of this trip is not just to reassure Japanese and South Koreans of our commitment to those two countries, but also to signal to China the best and most effective way to engage China is on the basis of a very solid U.S.-Japanese relationship and a solid U.S.-South Korean security relationship.
When the president is in Japan I think he has a great opportunity to revive the work that he started back in April 1996. And this is the first trip that the president will be making to Tokyo since April 1996 when he issued the joint declaration on security for the Asia Pacific region. And by making this trip he will draw public attention in Japan for what I see as a very critical bilateral security agenda.
And let me just go through some of the critical items. First of all, it's the implementation of the U.S.-Japan defense cooperation guidelines. Those guidelines were drafted and approved last year in September of 1997. It's been over a year. But the Japanese government has not moved at all in terms of legislating — pushing through the legislative package that will be necessary to implement these guidelines. So as they stand now they are just a piece of paper, and without the implementing legislation it will be impossible for Japanese and U.S. forces to begin their joint planning to deal with a possible regional contingency.
And unfortunately in the Japanese Diet, because of the preoccupation with some very critical economic issues, the guideline legislation has been put on the back burner. And I think by the president going to Japan and making a point of stressing how important it is to further security cooperation between Japan and the United States this will give a greater push for the Japanese leadership to move as quickly as possible in passing this legislation.
A second critical area on the security agenda deals with our U.S. military presence in Japan. One part of it of course is to reassure the Japanese of our defense commitments and of the continuation of our military presence there. But also there is the task of making the Japanese much more willing to continue to host our military assets. And just before the president's arrival there will be a very important gubernatorial election in Okinawa, which will really determine the trajectory of our U.S. military presence in Okinawa. As you know, Governor Ota, who has been very critical of our military presence in his prefecture, is running for reelection, and he is now facing a very strong challenge from a conservative candidate named Mr. Ina Mine.
Now, the critical issue here, although the two candidates are not talking about it, is what to do about the U.S. and Japanese government plan to build an off-shore heliport as an alternative to the Fatema [sp] Marine Air Station. At this point both candidates are against the off-shore heliport idea. But Mr. Ina Mine is willing to move the Fatema [sp] heliport facilities to the northern part of Okinawa, which is relatively underdeveloped, and in so doing he will try to get the Okinawa citizens to accept a movement of the Fatema [sp] base within the prefecture.
If such an outcome as Mr. Ina Mine winning, happens, then I think it's quite important that the president indicate flexibility from shifting away from the off-shore heliport idea. If Governor Ota wins reelection, however, then it really makes it very difficult to implement the special action committee's recommendations on dealing with the Okinawa base problem, and I think the administration will have to go back to the drawing board in terms of coming up with a much more flexible future-oriented approach.
A third issue that will be very high on the agenda when the president is in Japan will be Japanese participation in the theater missile defense program after the North Korean missile launch the Japanese have become much more favorable about participation in a theater missile defense program. But there is one hitch — is that at the same time the Japanese have been much more interested in developing their own surveillance satellite capability, and it will be very important for the U.S. administration to talk candidly with the Japanese about if this is the best use of resources for Japanese and U.S. security interests. My personal opinion is that the emphasis should be put on joint research and development for theater missile defense.
And finally I think it's absolutely important for the president to talk with the Japanese and the South Koreans about coming up with a coordinated approach to the North Korean problem. It's very unfortunate that over the last three years Seoul, Tokyo and Washington have never been in step as far as policy toward North Korea. If you remember two years ago it was the Japanese who took the lead in terms of constructive engagement towards North Korea by pushing the sale or provision of rice to North Korea. And this was adamantly opposed at first by Seoul. Now it is Seoul that has taken a more positive approach to North Korea through a sunshine policy, and in the interim relations between Japan and North Korea have deteriorated to the worst point in many decades. And as a consequence I think it will become very difficult for the three countries to work together first to maintain the agreed framework that was signed between the United States and North Korea and to implement the KEDO light-water reactor program. So a lot of work needs to be done on that. But, secondly, there needs to be much greater coordination and discussion about how to deal a possible crisis on North Korea if the KEDO agreement began to collapse.
And finally there has to be some frank discussion if there is an opportunity to pursue a policy of constructive engagement again with Pyongyang, if the situation becomes ripe for that.
Now, finally let me just say one thing about the nature of our dialogue with the Japanese and the recent developments in Japanese politics. In Japan this last summer there was an upper-house election which was an historic election in the sense that now Japan for the next five to six years will be experiencing their version of divided government. The Liberal Democratic Party lacks a working majority in the upper house, and therefore it needs to compromise with the opposition in order to get through legislation.
Now the Japanese government of course is trying to figure out a way to come up with a workable coalition, but I believe that it will be impossible to come up with a working majority. And this really puts a dilemma on U.S. policy towards Japan. In the past you could pretty much work with the Liberal Democratic Party to try to promote a bilateral agenda; but now with the divided government I think it's absolutely necessary for the U.S. government to reach out beyond the Liberal Democratic Party to opposition forces. Just like in the United States, bipartisanship has been essential to deal with a number of its fundamental problems; in Japan too their version of cross-partisanship is absolutely necessary. And so I think it is time that the U.S. government broaden the dialogue with Japan beyond just the Liberal Democratic Party. Thank you.
Moderator: Thank you, Mike. And thank you, Ed, also. We do have portable microphones available for persons to take questions. Please do wait until we are able to provide that to you. And once we do we would ask that you identify yourself and your affiliation and then address the question either to the panel or to a specific individual. Please.
Question: Jim Mann [sp] with the LA Times. Mr. Lincoln, let me put you on the spot. You've been critical in the past of Japan on economic policy. Do I understand you to say in effect that on this trip the president should give Japan a pass on its economic policy? Should it rein in its criticism?
E. Lincoln: Yes — partly because the president is not me. It's one thing to have sort of outside analysts criticizing what's going on, but this is not a time at a level of high diplomacy to be expressing irritation and anger. And it's probably just a matter of timing. Things have happened since last summer, and that calls for a response from the president of a more favorable nature. That doesn't mean that he can't add that second sentence that says, "but," but do something with your banking legislation — you have got to move forward quickly or great you've got a stimulus package, but boy I really hope you get it passed and you spend the money, or you get the tax cuts in place quickly. He can do that. But he certainly is not in a position to say, "I don't like what you're doing, I don't think it's enough — I think you have to do more." He might be able to say some of that privately, but he's certainly not — this is not a time to be saying this in public.
Question: Gary — [inaudible] — with AP. President Clinton will be in Asia during the week when the House Judiciary Committee looks at the impeachment inquiry. How does this impeachment cloud — does it affect the dynamic of APEC or his trips to either Japan or South Korea?
M. Mochizuki: Well, I think that — I just came back from Japan and the Japanese have been quite impressed by the degree to which the president has come back. He is seen as the comeback kid in Japan — and especially with the impressive showing in the mid-term elections. And I don't think that there is as much an obsession with this crisis — the scandal in the Asian capitals as there is in the United States. And so I do not believe that this is really going to harm his credibility in East Asia at all.
E. Lincoln [?]: I might add that there does seem to be almost a greater concern that I have been able to pick up about the change in leadership in the House of Representatives that there may be a less internationalist — even less internationalist tone in the House of Representatives. Please sir — please wait for the microphone.
Question: Paul Mann [sp] at Aviation Week. Would each of you please just give a brief assessment of what you — how serious you think the proliferation problems are now with respect to North Korea and China? And, secondly, how accurately does the U.S. assess the military modernization of China? Does the administration understate it and the congressional Republican right wing overstate it? Or how would you put it?
E. Lincoln [?]: Let me take a first crack at that. I think we have to be very concerned about the possibilities of a roll-back — I should say a possibility of reversion to previous behavior on the part of the North Koreans. I think while we don't have any physical evidence to assure us that the underground activity near Yongbyon may have nuclear related aspects to it. I think it's important that we at least get as clear an indication of what's going on there as we possibly can. It's simply not politically sustainable here in this country I don't think for the North Koreans to continue its types of activities which are clearly aimed at simply extracting greater concessions out of the entire negotiation process. And I don't think that this president is going to be able to withstand pressures here at home without getting even stronger clarifications about the intentions of the North Koreans and their proliferation activities.
With regard to the Chinese modernization, I think it's an interesting question, because I think throughout many of the discussions related to security that will unfold in the next 10 days out in East Asia, China is going to be a presence not seated at the table, but will be a presence in the minds of many in trying to consider our future regional security commitments. My personal view you know quite well, Paul, I think, and that is I do believe that the Chinese military modernization tends to be overstated by many in this country, and that when you look far more carefully at the fundamental resources, infrastructural questions, technology-absorption questions and then other important aspects which are critical to any military modernization process, we see that while the Chinese certainly have high aspirations, they have intentions to become a more powerful force in the region, that this is going to be a very long and drawn-out process which history has shown to us has been extremely difficult for the Chinese to achieve in the past. There's little indication, except perhaps for a more liberalized access to technologies that China now enjoys. But other than that there is little to indicate that China is going to be able to overcome many of the defense industrial problems they have had in the past.
Let me turn it over to Mike.
M. Mochizuki: Well, I just would like to make a comment about the way the Japanese see the proliferation issue. It's not so much whether North Korea or China is proliferating missiles — selling missiles or missile technology to other parts of the world that concern the Japanese. I think the biggest issue is the degree to which the development of missile capabilities by both North Korea and China — how that affects the direct security interests of Japan — and especially the North Korean missile launch. I think this was a big shock. It's a wake-up call to the Japanese, and it's amazing how it has transformed the terms of debate in Japan. And because of the North Korean missile launch dovish politicians who up until recently have been very skeptical about Japanese participation in the theater missile defense program have now embraced it as a defensive system. And many of these people had opposed it because the Chinese opposed it. Well now they are publicly saying that the Chinese cannot really oppose Japan participating and possibly even acquiring a system which is designed to protect itself from a ballistic missile attack. And so I think this was a positive thing in terms of the change in the Japanese debate.
Question: One quick follow-up if I may. Probably all of you saw the Pentagon report that came out last week about China allegedly pursuing more or less exotic weapons for them, like sophisticated lasers and so on. Is the Pentagon scare-mongering, or is this at least semi-realistic?
B. Gill [?]: I'm familiar with the persons who were conducting these studies, and I am confident that they, based on the sources available to them, are making a reasoned judgment. It's important to notice though that these projections are caveated in many respects. For example, the systems you are speaking about are spoken of as coming on line no earlier than, say, 2015. And anything can happen between now and then. Please.
Question: Chris Nelson [sp] with — [inaudible] — and the Nelson Report. I had a quick question on the Korea thing — North Korea coordination. Is it your sense that the administration is on board with Congress, going in the same direction as to a new look at the policy, better coordination? Or do you think there is still some resistance there? Are you hearing anything more about a — you know, whether it's going to be Shali and Perry or maybe Mike? I wouldn't wish that on you. Number one.
And number two, if for some reason the president is not able to go this weekend and the vice president pinch hits for him, you have outlined a pretty important series of psychological messages and strategic psychological messages. Can Gore provide this function? Will it work the same way?
Moderator: You want to take that, Mike, to begin? Or —
M. Mochizuki: (?) Well, let me answer the first — the second question first about the president is unable to go. I think this is very different. If the president decides not to go is very different from the situation in 1995 when — in November when the president did not go to the Osaka APEC because of a government shutdown at home. He will not be going this time because he has to work with a very critical security crisis, and I think that is something that both the Japanese and the South Koreans would understand. And I think if Vice President Gore does go to Japan or South Korea it wouldn't have as much weight in terms of shoring up the alliance and putting an emphasis on the importance of the strategic relationship.
In terms of the policy towards Korea and the KEDO problem, I am still not convinced that the administration has adequately addressed the concerns in Congress, and I think it's very important that you have a person — someone like former secretary of defense William Perry who can coordinate the policy and mobilize support within Congress for KEDO, and at the same time being able to convince North Koreans that they can't kind of string us along and try and use all of these various tactics that they've been using as a way of soliciting more support from the United States in terms of food aid and the like.
I think alternatives are probably not very appealing — one being that we simply go on as we have with the rather bumpy and fragile set of policies that are constantly held hostage to both domestic politics, but more importantly held hostage to North Korean negotiating tactics. We need to try to straighten up our house and this policy at home in order to be more effective negotiators with the North Koreans. I think that's extremely important, and I think this is a good step in the right direction to have sort of a policy czar on this issue who might be able to handle it more effectively. Other questions, please.
Question: But by implication, we are not there yet in your view?
[Unclear]: No, we're not. As far as I know, I don't think any decisions have been taken on this as yet.
Question: Just to follow up, why not? There has been talk of having Perry do this for probably six weeks now. What's the hold up?
[Unclear]: I'm not certain what the hold up would be. There may well be some concerns and continued consultations to assure that the choice, given that this president's concern with political perceptions domestically, I think it probably very concerned that the choice not be a troublesome one, and that for whatever reason the process go forward smoothly. Do you have any comment on that, Mike.
M. Mochizuki [?]: I stopped long ago trying to second guess why the administration does things or doesn't do things.
Question: I think it's ABC: Anybody but Carter.
Moderator: Do we have any other questions please? There is a hand in the back I believe.
Question: If you could talk a little bit about whether the political situation in Malaysia is likely to — what impact that is likely to have on the APEC forum. I am Bob Duram [sp] with LA Times.
E. Lincoln: Well, I'll take a bit of a stab at it. I try to avoid these things as an economist. I think the president is obviously stuck in the sense that Malaysia is the host, Mahathir is the head of state, which makes him the host. We have locked ourselves into this process. We have reasons to believe in APEC that the goals of APEC are worthwhile — [audio break] — it is a critical time for us to demonstrate that the process is continuing to go forward, and so therefore it behooves us and the rest of the leaders not to snub Mahathir by declining to show up at the meeting.
But that of course then leaves a delicate political game of how do you go there but try to distance yourself from the man personally. They have to stand in the photograph together. But other than that, and having their meeting and discussing the economic issues of APEC obviously the president and I think most of the other leaders are going to be looking for ways to ensure that they are not perceived by the press as personally endorsing Mahathir and his policies at the moment.
[Unclear]: I think — you know, this was a meeting at which President Clinton himself is sort of being seen as the founder for, and it's supposed to be a meeting about economics and trade. This will be the most — or could be the most politicized APEC meeting that we have had yet, and I would think the president might want to try to avoid setting a precedent for politicizing this type of event, but that will be very difficult to do. Already I am aware of some other governments seeking to distance themselves from any effort on that part of the United States that might be perceived as embarrassing — the host in Malaysia. And so behind the scenes I think there are going to be a lot of smaller political controversies no matter what the president and his staff choose to do with regard to the Mahathir-Anwar situation.
M. Mochizuki [?]: First of all I don't think that this is at all of a problem in terms of the president going to Malaysia because of the Anwar Ibrhaim problem. In fact it's probably better that he goes. First of all, he is there to attend a meeting of APEC. This is not a bilateral meeting with Mr. Mahathir. And, secondly, he can use the APEC meeting to really push the notion that democracy is not just limited to the Western countries, that Asian democracies are on the upswing, despite the economic crisis many of the transitional states have managed to maintain the democratic momentum. What took place in South Korea is really miraculous and you can also make the argument that Thailand — even Indonesia despite the crisis has been moving forward on the democratic front. And therefore you know rather than the president being defensive while he is in Malaysia he could really be offensive and speak up on behalf of Asian democracy.
Moderator: Do we have another question? At the back at all? A question here. Please.
Question: What is the likelihood that whatever modest progress is achieved at APEC will be completely dwarfed or wiped out by a Chinese economic tailspin, or even a collapse in the next few months? If there is a major banking failure, what are the chances that China is going to come out right to the Asian flu?
[Unclear]: Well, China has one major advantage that seems to me would make its economic problems somewhat different than what happened in Thailand and Indonesia, and that is that China does not have a convertible currency. If you take Thailand, Indonesia, South Korea, if they did not have convertible currencies they would be in recession right now, but probably wouldn't have suffered to the extent that they have with the flight of foreign capital and the collapse of their exchange rates. That's one reason why capital controls will be on the agenda for this.
So that although we may see China moving into a period when — [audio break] — difficulties, I don't think we're going to see the kind of quote/unquote "collapse" that we've seen in Indonesia.
Second, do keep in mind that the Chinese government does have the financial resources to at least buy their way out of some of this. They have banks collapse — they can put money into the system. They are not operating at a large government deficit at the moment for example. So they have got the room to maneuver on some of these things, at least in the short run, which may help them through a little bit.
Moderator: We have time for one more question. This gentleman —
M. Mochizuki: Could I just respond to the APEC issue? I mean, I am not a specialist on China, and I'm not an economist, but as a political scientist I find it somewhat surreal that so much of the discussion about APEC has been focusing on whether the trade liberalization process is going to continue to stay on track when the region is now in the woes of a serious financial crisis and an economic depression. And I hope that the outcome of APEC is not judged on whether or not Japan agrees to modest tariff cuts on marine and forestry products. I mean, I just find it senseless to be focusing on this issue. And the critical issue should really be on how to solve the credit crunch problem in East Asia. You know, Japan has made a modest commitment of $30 billion. I think it's a good start. More needs to be done, and there has to be some macroeconomic policy coordination. That's what APEC should be talking about, and not focusing so much on the trade liberalization issue. Of course that's something that's important as a goal to be reached in the year 2020, but the fastest way to get to trade liberalization is to get the economies going again.
Moderator: All right, we have time for one last question, sir. Please.
Question: Another China-related question. During his visit to Beijing last June the president apparently extended an invitation to the Chinese Premier Zhu Rongji to come to the U.S. One, do you expect that to be finalized and a date to be announced when they meet in KL, assuming there is a meeting next week?
And, secondly, given China's foot-dragging on both WTO issues and human rights issues since the president's trip, do you think in fact there is some political risk for the president if he continues to have these high level bilateral meetings, but little to show for in terms of real results?
B. Gill: As far as I know Zhu Rongji's visit is still at least planned. The latest news I've heard is that he may well wait until the end of the fiscal year, which is in March, and the next National People's Congress in March — that perhaps it will wait until as late as April. That's just what I hear on the streets. I don't have any inside knowledge on that.
The visit of Zhu Rongji I don't think will have the same type of negative impact as, say, the head of state's visit would. Zhu Rongji simply isn't, let's say, tainted in the same way as is a gentleman like Jiang Zemin, who is not only the head of the Chinese military, as the chairman of the Central Military Commission, but is also the head of the Chinese Communist Part, as general secretary and the head of state.
Zhu Rongji, I think, has an international image as a reformer, as a man who is trying to put in place some very difficult economic liberalization and decentralization plans, and who's facing enormous problems, both at home and in facing the international system, in trying to achieve these goals. I think his image will be one of a little bit more positive than that of Jiang Zemin.
Overall, my view is that in spite of modest gains or no gains at all, or even reversion in some areas of concern to the American people, we can't forget that the policy of engagement has, in other respects, reaped quite significant gains in our relationship with China. And to stop the process, I think, would probably be, in the long term, detrimental to U.S. interests.
Ladies and gentlemen, I want to thank you very much for coming today. And we look forward to welcoming you back at another time.