Over two decades, Americans have come to expect dynamic economic growth and relative political stability in East Asia. Until recently, China was the perennial exception, and the Soviets had no regional role to speak of. Today, these judgments are being reexamined. The region is not necessarily in trouble, but it is in ferment, and the future is less sure—for itself and for American interests—than it seemed even a short while ago. Furthermore, the economic and political stirrings are not of a short-term nature; they involve generational and systemic transitions within the region and shifting roles for external actors, including the United States and, now, the Soviet Union.

The year’s most dramatic development in Asia was the introduction of truly revolutionary social and economic reforms in China. The ultimate success of this undertaking by Deng Xiaoping is of historic significance and will have a major impact on the rest of Asia and on the United States. But while Deng scored some major victories in 1985, these were not unambiguous, and future challenges seem sure to arise.

Of more immediate concern to most countries in the region was the general downturn in their own economic performance. With few exceptions, annual real growth of seven to eight percent over the past two decades had led observers to tout East Asia as a region of "economic miracles" and a model for others. This past year, as growth dropped to five percent or lower, the question arose whether this was not far more than a cyclical downturn—whether, indeed, a new era had not dawned, one of considerably slower growth with potentially significant social and political consequences.

Individual economies suffered from individual problems: a high-wage policy and inappropriate investments in Singapore; questionable industrialization policies in Malaysia and Indonesia; a crisis of confidence in government and an inadequate financial and regulatory structure in Taiwan; and a host of problems in the Philippines. With time, and proper decisions, these can be overcome. More worrisome is the fact that, with shrinking world demand and growing excess productive capacity, all East Asian economies face an indefinite period of depressed markets not only for traditional commodities such as sugar, rubber, palm oil and metals, but also in manufacturing sectors such as garments, steel, shipbuilding and semiconductors, on which many have counted to provide employment and raise standards of living for their burgeoning populations.

The export-oriented countries of Asia can no longer take for granted the open and generally growing American markets that have been crucial to the expansion of their economies over the years. On the heels of huge 1984 deficits in U.S. trade with Japan (and the rest of the world as well), and facing even worse projections for 1985, a Japanese announcement that auto sales to the United States would rise by almost 25 percent triggered a protectionist outpouring on Capitol Hill last spring. Anger against Japan was only part of a more pervasive mood. A number of politically sensitive U.S. industries are in trouble, and a wave of resentment has been building against those who benefit from our open markets while keeping theirs closed.

President Reagan succeeded in deflecting immediate protectionist demands by adopting a more aggressive policy. His decision in September to redress "unfair" practices of U.S. trading partners, and the Group of Five’s agreement that same month to realign exchange rates, represented significant policy departures and Congress decided to give them time to work. But by the end of the year, the Hill was restless again, threatening swift and harsh action early in 1986.

The Asian reaction to U.S. pressure was largely negative. Some, like Taiwan, acted preemptively to offset the effects of a large trade surplus with the United States by giving satisfaction on such sensitive issues as protection of intellectual property rights and freer markets for cigarettes, wine and beer. But where the United States began to raise specific trade complaints, one began to see an unprecedented degree of irritation. In smaller countries, the sense of being punished for Japan’s sins and America’s profligacy began to grow, and anger along with it. Although he took a hard line against Japan’s trade practices, Singapore’s Prime Minster Lee Kuan Yew dedicated most of his address to the U.S. Congress in October to scolding America for seeking to resolve its problems at the expense of others, and to warning of the negative political, as well as economic, consequences of such actions.

Most of the countries of East and Southeast Asia face major political transitions over the next five years, in some cases changing leaders for the first time in a generation, and "social compacts" allocating economic and political power are beginning to fray. A whole generation of more assertive and better educated young people has come of age, impatient with the domestic and international bargains struck by their elders. They are already demanding a greater political voice in decisions affecting their future. Should there be a prolonged economic downturn, pressures for rapid political change would increase sharply. Stability and security are still paramount in Asian societies, but from Korea to Taiwan, from the Philippines to Singapore, Malaysia and Indonesia, a groping for new political structures, indeed, for a new sense of national identity, is creating pressures not only in domestic politics but in relations with the United States as well.

With the growing Soviet presence in Asia, the United States confronts new challenges. Even before 1985, Moscow had deployed its largest naval fleet, one third of its combat forces (including at least 135 SS-20 intermediate-range nuclear missiles), 2,000 combat aircraft, and some 80 long-range bombers in north Asia. It had also deployed 20 reconnaissance and attack aircraft to facilities in Vietnam, along with a squadron of MiG-23s and a vast electronics intelligence apparatus. This past year saw Moscow’s increasing use of the Vietnamese air and naval facilities, provision of at least one squadron of MiG-23s to North Korea in return for overflight rights (facilitating transport to Vietnam as well as reconnaissance of China), and increasing modernization of Soviet forces in Asia.

Soviet diplomatic flexibility in Asia represented a new trend in a region where Moscow has often blundered in the past. Sino-Soviet relations improved notably. The Soviets also showed a new smiling face to Tokyo, and they dispatched their highest-ranking visitors in two decades to Southeast Asia, offering technical assistance—and markets—for troubled export products, and pressing a variant of their former Asian Collective Security proposal. While many nations in the region were wary of going too far, even Thailand, worried about shrinking markets, began to argue for separating economics from politics. The Soviet Union scored a notable success when it took advantage of a dispute with U.S. tuna fishermen to buy fishing rights in waters around the island nation of Kiribati (formerly the Gilbert Islands). Though only for one year, and with no provision for onshore facilities, few doubted that this was but the beginning of a long-term effort to expand Soviet naval presence. Congress reacted by ratifying a pact with Micronesia and the Marshall Islands before the end of the year, denying the Soviets access to other vast areas of the Pacific.

Moscow is also the potential beneficiary of the U.S. dispute with New Zealand over the new Labour government’s exclusion of all nuclear-powered and nuclear-armed ships from its ports. Military cooperation was suspended in February, and with the introduction of a bill in Wellington that codified the ban, chances are high that the United States will eventually terminate its defense commitments to its long-time ANZUS (the Australia-New Zealand-U.S. security pact) ally.

Ironically, while dialogue with friends and allies took on a somewhat sharper edge in 1985, Vietnam and North Korea appeared to reach out for closer links with the United States. Hanoi and Pyongyang were probably both motivated in part by hopes of economic benefit. But Vietnam’s decision to accelerate resolution of the lingering problem of Americans missing in action and North Korea’s pursuit of dialogue with the South also seemed motivated by a desire to generate U.S. interest in peace agreements in Cambodia and on the Korean Peninsula.

Thus, while 1985 may not have brought many dramatic changes to Asia, a number of factors emerged with both immediate and longer-range implications for the United States. Whether presenting challenge or opportunity, they required reexamination of many of the complacent assumptions on which U.S. policy had rested for years past.


Although the U.S.-Japan trade problem is often cast in terms of the huge bilateral imbalance or specific market-access questions, in economic terms bilateral balances are generally irrelevant, and Japanese trade barriers are not terribly significant either. In fact, what really upsets Americans most is the issue of "fairness." There is a strong sense among businessmen, labor leaders, politicians and diplomats that Tokyo manages its trade in either illegal or simply selfish ways to seize U.S. markets while protecting their own. Most administration and congressional leaders recognize that the largest part of the trade imbalance is caused by the U.S. budget deficit. But that has not reduced the emotional content of the fairness issue or eased the strains.

The Japanese have been particularly stung by charges of unfairness—"nothing is more shameful" than to be so labeled, Prime Minister Yasuhiro Nakasone has said. They also recognize they have a tremendous amount at stake. Thus, though they believe the United States is mainly at fault, the Japanese have taken a number of steps to reduce frictions.

In his meeting with President Reagan in January 1985, Nakasone took the initiative to discuss trade issues and to establish sectoral negotiations on some of the longest-standing problems. In April, the prime minister made an unprecedented appearance on Japanese television to announce the seventh market-opening package in three years and to appeal to the Japanese people to buy more imported goods.

On July 30, Nakasone announced an "Action Program," which not only looked to reduce tariffs on over 1,800 items, but, more important, mandated procedural, regulatory and even legal changes to facilitate imports. These improvements included easing of testing, standards and certification requirements, simplification of import procedures, more reasonable arrangements for those seeking government contracts, further liberalization of financial and capital markets, and measures to actively promote imports of goods and services.

Despite the far-reaching potential of these changes and the fact that the United States had sought many of them for years, the American reaction to Nakasone’s initiatives has been skeptical. However important to the specific industries involved, the impact of the sectoral talks on the overall picture will not be significant. And market-opening packages are all too familiar—and all too disappointing.

Thus, these measures paled in significance to Tokyo’s announcement on cars. Many in Congress blamed the President for not seeking a fifth year of auto restraints; the resolutions, which passed overwhelmingly (92-0 in the Senate), calling on the President to retaliate, laid down a marker for both governments that "free trade" is an inadequate policy if practiced by only one side. If fair trade means managed trade, they said, so be it. Although the President’s more active trade policy and agreements in most of the sectoral negotiations by the end of the year eased immediate pressures, the battle will be joined on the Hill once again when the 1985 trade figures are released in the first months of congressional election year 1986. Among others, Senate Majority Leader Robert Dole (R-Kans.) concluded at year-end that "it is time to take stronger action" against Japan.

Even if the harshest protectionist measures are avoided in 1986, the problems will not go away. Despite the fact that some Japanese producers have already begun to raise export prices, many observers doubt the 15-percent improvement in the yen-dollar exchange rate since September can be sustained without further changes in the underlying fundamentals in both economies. Meanwhile, attitudes are hardening. While over half of Americans agree that Japan is being made a scapegoat for U.S. problems, almost half also think that trade with Japan is bad for the United States and almost two-thirds favor trade action against Tokyo. In Japan, the substance and, particularly, the tone of American criticism have angered even government and business executives generally friendly to the United States.

Thus, as both economies slow down, and as they compete ever more fiercely in traditional areas and new technologies, the two governments will find it increasingly difficult to manage the multiplicity of trade problems unless the "Pearl Harbor" rhetoric fades from American statements and a more responsible and activist attitude is adopted by Japan.

Discontent over trade relations has had only marginal spill-over to defense issues. There is general agreement even in Congress that, while Japan can and should do more to upgrade its defense efforts, it is an excellent and valued ally. Contributing to this positive assessment was an implementing agreement for the transfer of Japanese military technology to the United States that was reaching completion at year-end; the first transfer is planned for early 1986.

A new element in Washington’s evolving relationship with Tokyo is the increased activism of Japanese foreign policy. Japan placed great emphasis on Soviet Foreign Minister Eduard Shevardnadze’s visit in January 1986 as the first step in resumption of regular foreign-minister-level talks with the Soviet Union, suspended since 1978. During that visit, it was agreed to resume negotiations on a peace treaty, but the long-standing dispute over the four islands off Japan’s northern coast occupied by the Soviet Union was not resolved. Nonetheless, Nakasone seems determined to deal Japan directly into the major power game. He lifted sanctions imposed against Moscow after the invasion of Afghanistan and the imposition of martial law in Poland, and agreed to resume scientific and trade cooperation with the Soviets. An exchange of visits between Nakasone and Soviet Party General Secretary Mikhail Gorbachev was proposed. Similarly, Tokyo will give new attention to Latin America and Africa, and Japanese foreign policy initiatives will increasingly go beyond strictly economic issues, as seen in Tokyo’s recent imposition of sanctions against South Africa. Although Japan will want to be an independent actor on the world stage, at this point there is no reason to believe that the close coordination of policy between Washington and Tokyo will suffer. If anything, as a partial counterweight to trade frictions, it is likely to be closer than ever, as Japan will want to make a positive contribution to resolution of issues such as arms control, Korea, Indochina and the Middle East—not complicate them.

Many Asians fear that new Japanese political activism will lead to remilitarization. For them, historical memories of Japan’s "Greater East Asia Co-Prosperity Sphere" are still vivid, and Prime Minister Nakasone’s honoring of the war dead in mid-August, in the first official postwar visit to the Yasukuni Shrine, occasioned a sharp outcry, especially in China. (As a result Nakasone canceled a subsequent shrine visit in October.) Yet, the current aversion to militarism is strong in Japan, and confidence in U.S. security commitments remains high. Rearmament is, therefore, unlikely. But the coming generation of Japanese political leaders does not have a particular sense of guilt about the war or a strong sense of indebtedness to America for generosity in its aftermath; one ought not, therefore, assume that current constraints will always outweigh other considerations if, over time, Japan feels isolated and besieged.

In any case, for some time to come it will not be in the area of political or security issues that Japan will have the greatest international impact, but in economics. And it is there that developing and developed countries alike feel Tokyo has a responsibility to lead. Japan’s decision to devote $40 billion to overseas development assistance between 1986 and 1992 is important in this respect, but it will not substitute for further steps to liberalize trade.

As Mr. Nakasone told the U.N. General Assembly in October, "Today it is Japan’s turn to help others." He and his government will have an opportunity to give substance to that sentiment when they host the next annual economic summit in May 1986 and during the General Agreement on Tariffs and Trade (GATT) trade round due to open in the fall. If they do not do so, the consequences for American trade policy—and for broader aspects of U.S.-Japan relations as well—will be severe.


Of all the stirrings in Asia in 1985, none were more important than those in the People’s Republic of China. Japan’s problems were a product of its international economic involvement; China’s international economic involvement was a product of its efforts to reshape its entire society.

Deng Xiaoping has called the current Chinese economic and political reform an experiment and a revolution. It is clearly the former, and potentially the latter; China is trying to maintain a delicate balance between central political and economic control on the one hand, and individual initiative and reliance on market forces on the other. In 1985 Chinese planners shifted attention from successes in the crucial but comparatively easy area of agriculture to begin reforms in the more complex urban and industrial sectors.

Guidelines for the seventh Five-Year Plan (1986-90) introduced in September are designed first and foremost to support reform. Scheduled for adoption early in 1986, the plan calls for movement away from micro-management of industry by administrative fiat toward guidance through macroeconomic tools such as tax, credit, interest rate, and foreign exchange policies. Beyond providing jobs for 140 million people over the next five years, the objective is a geographically and sectorally balanced, technologically advanced and steadily developing base for economic take-off in the 1990s and beyond.

The first easing of controls in late 1984 and early 1985 brought an explosion of consumer buying and new capital construction, causing serious resource dislocations and a sharp drop in foreign-exchange reserves. Beijing declared initial success in handling these problems, and reported that industrial growth had dropped from an annual rate of over 22 percent in the first half of 1985 to 8.8 percent in November. Elder statesman and economist Chen Yun nevertheless felt it necessary to lecture his colleagues about controlling the pace and direction of reform. He warned that too much emphasis on individual and local initiative would lead to economic distortions, corruption and social inequities. In a year when China altered its grain procurement system, Chen pointed to lower production and echoed Mao Zedong’s warning: "Grain shortages will lead to social disorder."

Nonetheless, the majority view was reflected in the statement of another Politburo member who said: "We are bound to encounter some trouble. It is unavoidable that we shall pay some price. However we must adhere to the orientation of reform because we have no way out without reform."

Price reform was a major element of the 1985 effort and a key to its eventual success. However, both for ideological reasons and for fear of losing control, price changes were allowed only for some products and within fairly strict limits. Although wages have generally stayed ahead of inflation, there was considerable concern when, at midyear, authorities reported nationwide price increases of 7.7 percent, with the figure reaching over 11 percent in large cities. It was therefore decided that no new measures to increase prices would be introduced in the second half of 1985 or in 1986.

As China sought to move ahead and not simply to correct dislocations, it was clear that technical fixes would not suffice—attitudes needed to be changed as well. Not only was corruption a problem, but so were the inroads of "bourgeois liberalism" and the excessive promotion of individual gain rather than common prosperity. New emphasis was placed on developing a "spiritual civilization," embodying socialist values and Marxist-Leninist ideology. Some powerful figures used this theme to criticize and slow down the reformers, but Deng Xiaoping typically co-opted his critics by stressing the need to apply ideology "creatively" in line with China’s circumstances rather than as fixed dogma.

In September, Deng pushed major leadership changes through a crucial party conference. Not only did he hope to institutionalize the succession process but also to guarantee continuation of his reforms. The core group of the six most senior party leaders in the Politburo Standing Committee was altered only by the retirement of the frail 88-year-old Ye Jianying, but Deng used the wholesale shake-up of senior government and party cadres at local levels under way since 1982 as the basis for major changes in the entire Politburo, the Central Committee and the Party Secretariat. He brought in younger, more technically qualified successors and sharply reduced the role of the military in the national political leadership. (A major reform of the People’s Liberation Army itself was announced in June involving a reduction of 25 percent—or one million troops—over the next two years, major organizational shifts, and replacement of most of the senior military commanders.)

The leadership changes were not entirely trouble free. Media attacks reflecting resentment at the unceremonious dumping of the older cadres and insufficient attention to creation of a consensus suggest there is further educational and organizational work to be done. A near-crisis developed in the closing months of 1985 when students severely criticized various aspects of the reform. Facing what threatened to become mass demonstrations reminiscent of the Cultural Revolution, the leadership undertook an intensive campaign to stress the need for discipline, explain the reform’s objectives more clearly, acknowledge the urgent need for ending official abuses, and assure the students that lines of communication remained open.

The economic reform’s twin emphases on "opening to the outside world" through trade and investment and the maintenance of a peaceful international environment are the key elements of China’s foreign policy. Alternating cycles of "blindly worshipping everything foreign" and quasi isolationism are to be replaced by a consistent "basic" policy of interaction with other countries grounded in equality and mutual benefit. While not totally without precedent, the deep commitment to permanent interdependence and its elevation to a place of central importance in China’s overall economic policy is new. So too is the degree of explicitness with which Beijing now conditions its reforms on the maintenance of peace. Both elements underlie China’s policies toward the Soviet Union and the United States.

Following two decades of estrangement and occasional hostilities, in the early 1980s Moscow and Beijing began groping their way back, not to the erstwhile alliance of the early 1950s, but toward a more normal relationship. Animosities remain deep, with both historical/geostrategic and political/ideological roots. Deng Xiaoping is among those most suspicious of Moscow’s long-term objectives, and the feelings are reciprocated. Having pulled back from the brink of war in 1969, however, neither side has seen direct military confrontation as in its interests, and tentative moves to improve relations were made in Leonid Brezhnev’s last days and during Yuri Andropov’s brief tenure. But the effort only gained real momentum at the end of 1984 with the visit of First Deputy Premier Ivan Arkhipov, a man closely identified with pre-1960 Soviet aid to China, and the signing of agreements on economic, technical and scientific cooperation.

With Gorbachev’s installation as Soviet general secretary in March 1985, the relationship was given a further boost. In his first official statement, Gorbachev called for "serious improvement" in Sino-Soviet relations, a sentiment immediately echoed in greetings to him from Chinese General Secretary Hu Yaobang.

Semiannual talks on normalizing relations, begun in 1982, continued, with the sixth session in Moscow in April, the seventh in Beijing in October. Although the scope of these talks expanded somewhat (to include "politics" and "international issues"), there has been no breakthrough on the three security-related "obstacles" Beijing says must be overcome before relations can be normalized: removal of Soviet forces (including those in Mongolia) from the Chinese border; withdrawal of Soviet forces from Afghanistan; and cessation of Soviet support for Vietnam’s aggression against Cambodia. Nonetheless, the first exchange of visits by foreign ministers in over 25 years was agreed to in principle and is anticipated during 1986.

The pace of meetings and agreements on economic, consular, cultural and scientific questions accelerated throughout the year, and rhetorical stridency subsided. There was even a military dimension to the thaw, as soldiers at border stations exchanged visits, Chinese World War II victory anniversary celebrations highlighted the Soviet role in China (and hardly touched on the far more extensive U.S. effort), and a Soviet "friendship group" touring China turned out to be headed by a Soviet air force lieutenant general.

In July, Vice Premier Yao Yilin signed a five-year trade agreement in Moscow, the first long-term trade agreement in two decades. It provided for $14 billion in trade, doubling the annual figure to $3.5 billion by 1990. The Soviets also agreed to refurbish 156 factories they had built in China a quarter century earlier. In addition, early 1986 was set as the date for the first meeting of the joint commission on economic, trade, and science and technology cooperation created during Arkhipov’s visit. While Yao’s trip was hailed in China as "a new breakthrough," one Chinese journal going so far as to proclaim, "The years of estrangement in Sino-Soviet relations are now over," Yao himself gave a more sober appraisal of the long-term implications: "I think many things remain to be done to realize normalization."

Although Hu Yaobang occasionally seemed more hopeful about Sino-Soviet relations during the year, Yao’s more cautious view reflected Deng Xiaoping’s consistent skepticism. As early as April, Deng saw no fundamental change in Soviet policy and said the "true face" of the new Soviet leadership would only become clear after several years. Looking back on the Kremlin’s policy as the year wore on, he observed, "Six months later there has been no sign of improvement." Despite Vice Premier Li Peng’s meeting with Gorbachev in Moscow late in December, there is no reason to expect a sudden change in this assessment.

Though strategic concerns and its position in the U.S.-Soviet-Chinese triangle are not absent from China’s calculations toward the United States, promotion of its economic reform was Beijing’s principal objective in the generally steady, if unspectacular, course of improvement in U.S.-China relations in 1985. Trade through the first three quarters was up over 25 percent, heading for an annual total exceeding $7 billion. Although high technology shipments have increased since China was placed in a normal export control category in 1983, Beijing has continued to be frustrated in its efforts to speed such transfers. Commerce Secretary Malcolm Baldrige and Vice President George Bush, who both traveled to China during the year, pledged their efforts to accelerate the process. Despite some progress in 1985 and significant improvement predicted for 1986, at year-end Foreign Minister Wu Xueqian was still complaining about U.S. "discrimination" against China as a "potential adversary."

Except for offshore oil, American investment remained minimal, at about $150 million. Despite certain advantages—cheap labor and a generally positive attitude toward foreign investment—the legal and administrative framework in China was still inhibiting.

Chinese President Li Xiannian’s visit to the United States in July began amidst a controversy over Washington’s withholding of $10 million from the U.N. Fund for Population Activities because of alleged forced abortion and sterilization in China. The issue was at the center of several months’ delay in Senate confirmation of Winston Lord as the new U.S. ambassador to Beijing. Although it has not seriously damaged Sino-American relations, it will be hard to put to rest given its political sensitivity in both countries.

Nonetheless, the trip of this reputed hard-liner was hailed in China as a "complete success," and Li was particularly appreciative that President Reagan met with him within days after Mr. Reagan’s cancer surgery. Four agreements were signed during the visit, the most important of which was the Agreement for Cooperation on Peaceful Uses of Nuclear Energy, pending since President Reagan’s trip to China in spring 1984 because of American concerns over China’s nonproliferation policy. Although the Administration was finally satisfied, many in Congress considered the agreement’s inspection and other safeguards provisions inadequate. In the end, Congress reluctantly went along.

Beyond an active exchange of high-level military visits throughout the year, attention focused on possible U.S. military sales to China. In June 1984, President Reagan had approved China’s eligibility for government-to-government military sales. Twenty-four civilian helicopters and five naval gas turbine engines had been sold commercially, but the first Foreign Military Sales (FMS) transfer was not approved by Congress until October 1985—an ammunition factory worth $6 million (with potential sales to $98 million). Antiarmor, antisubmarine and upgraded air defense systems remained under consideration.

The first visit to China by a U.S. Navy ship was scheduled for late spring, but it had to be postponed amid controversy over whether the ships carried nuclear weapons. China claimed it had assurances they would not; the United States disavowed any deviation from its firm policy of neither confirming nor denying the presence of nuclear weapons on its ships. Flaunting U.S. sensibilities, Hu Yaobang announced the U.S. "agreement" in an interview with reporters from New Zealand, with which Washington was in the midst of a major confrontation on this precise issue.

The "Taiwan question" was generally quiescent in Sino-American relations during 1985. U.S. arms sales to Taiwan exceeded Beijing’s preferences and fell short of Taipei’s but were at levels tolerable to both. A nagging issue and potential major problem seemed headed for resolution when Taipei announced that within six years it would produce an indigenous fighter plane roughly equivalent to the American F-20, denied them in 1982.

In a May interview with the editor of a Hong Kong journal, Hu Yaobang raised the prospect of eventually attacking or blockading Taiwan, but his words seemed designed more for effect than a reflection of considered policy. And while the issue received renewed attention when Vice President Bush was in Beijing, it did not dominate the trip. By year-end Chinese officials were once again highlighting positive aspects of Sino-American relations "despite" the Taiwan issue, expressing patience over a time frame for resolution. Meanwhile, indirect trade between Taiwan and the mainland probably exceeded one billion dollars in 1985, and Beijing agreed to Taiwan’s continued participation in the Asian Development Bank after Beijing joins; whether Taiwan will agree to stay under the designation "Taipei, China" remains to be seen.

Throughout 1985 China laid great stress on its "independent foreign policy," and for most of the year tended to lump the United States and the Soviet Union in the same hegemonist category. In part it was an effort to burnish its Third World credentials, in part a message to Washington and Moscow that it would ally with neither one. It also seemed a gesture of reassurance to internal critics who saw reform leading down the capitalist road. However, as U.S.-Soviet relations began to improve toward the end of the year, China began to underscore that "independent" did not mean "equidistant" and, at least in private, to warn once again of Soviet expansionism.

If one accepts that China’s modernization is in U.S. interests, a Chinese foreign policy which supports the economic reform is also in U.S. interests. Thus, so long as specific elements of that policy are not overly troubling, cooperation with China will continue. At the same time, it is well to keep in mind that Deng Xiaoping’s vision is long-term: "By the middle of the next century, when we approach the level of advanced countries, then there will have been really great changes. At that time the strength of China and its world role will be quite different."


If China is looking to the next century, the Philippines is looking to next month, and America’s most troubled ally was the site of high drama as 1985 was drawing to a close. President Ferdinand Marcos, in power for 20 years, had called "snap" elections for February 1986, over a year before his current term of office was due to expire. Nonetheless, at year’s end it was still uncertain if there would be elections; if there were, whether they would be free and fair; if they were free and fair, who would win; if Marcos lost, whether the entire process would be voided; and no matter what the eventual result, whether the Philippine government could cope with its host of economic, political and security problems.

Marcos’ initial motivation for the early vote seemed to be to convince American critics he still had a popular mandate. But as it became clear that he would have to hold a real election (as opposed to a referendum, with no opponent), as the opposition finally united behind the popular Corazon Aquino, widow of slain opposition leader Benigno Aquino, and as longstanding questions regarding Marcos’ health arose once again, the outwardly confident Philippine president may have concluded that his only assurance of victory would be a degree of electoral manipulation exceeding American—and Philippine—tolerance. So as December came to a close, although the Marcos-appointed Supreme Court allowed the election to go forward, its seven-to-five split vote was indicative of continuing uncertainty about the ultimate course of the election.

Popular beliefs to the contrary, the United States had not pushed for early elections. What Washington had pressed for, with increasing intensity, was economic, military and political reform to cope with a rapidly growing communist insurgency. It is estimated that over the past two years the New People’s Army (NPA) has expanded by 20 percent annually, and that it now has some 15,000 to 20,000 full-time armed guerrillas and a like number of paramilitary forces operating in almost all of the Philippines’ 73 provinces. Many of the new recruits and the vast majority of the nonmilitary supporters neither understand nor endorse the communist ideology of the guerrilla leaders and their political sponsors in the Communist Party of the Philippines. But they do know they are getting worse off under the present system.

Particularly following the Aquino assassination in August 1983, which was widely believed to have been ordered by the government, and in light of Marcos’ uncertain health, the normal outflow of talent and capital swelled to a torrent, further debilitating an economy already characterized by an extreme concentration of wealth and widespread poverty and plagued by high-level corruption and economic mismanagement. Unemployment ran at an estimated 20 percent, underemployment another 45 percent. The Philippines’ GNP actually dropped five percent in 1984 and a further four percent in 1985.

Thus, without adequate means of livelihood, abused and exploited by both their economic overlords and an underpaid, ill-trained and poorly led military, and with little hope of rectifying their situation through elections, large numbers of people began to join, or at least support, the NPA. Even in those areas where the guerrillas’ Robin Hood image gave way to a harsher reality of intimidation and coercion, government passivity left many Filipinos little option but to acquiesce in insurgent operations.

Indeed, one of the main problems was Marcos’ tendency to dismiss the NPA threat and to view the insistent and unwelcome warnings from Americans as malign interference by bureaucratic and political enemies. Although his defense minister disagrees, Marcos has said the NPA could be wiped out in a year.

As the situation deteriorated, and as U.S. intelligence estimates gave Marcos no more than five years to effect fundamental controls or else face an unstoppable insurgency, civil unrest or both, President Reagan dispatched his close personal and political associate Senator Paul Laxalt (R-Nev.) to Manila in October 1985. Laxalt carried a supportive message, but one that conveyed unmistakable concern of Mr. Marcos’ friend in the White House.

Mr. Reagan’s concern went beyond America’s historical association with the Philippines, beyond the extensive economic and political ties and the increasing family bonds (Filipino-Americans are fast becoming the single largest group of Asian-Americans). The President’s concerns were strategic.

Clark Air Force Base and Subic Bay Naval Base are the largest overseas American air and naval facilities, and they are vital to the projection of U.S. force not only in the Pacific but in the Indian Ocean and Persian Gulf as well. Their loss would be a serious blow to effective military presence in the region, a prospect also disturbing to Manila’s neighbors.

The threat to Clark and Subic does not come only from the NPA. Although most Filipinos apparently favor the bases, many of Marcos’ political opponents identify them with U.S. support for him and thus oppose their continued presence. Even though Mrs. Aquino has begun to hedge her position, without resolution of the multifaceted problems now facing the Philippines, the bases will be at increasing risk.

Whether there is an election, and regardless of who wins, these problems and the policy dilemmas they pose for the United States will not go away. The election results may alter the parameters somewhat, but the economy remains a shambles, the insurgency is becoming ever more aggressive, and political unity is elusive.

The October 1984 International Monetary Fund (IMF) standby agreement contributed importantly to successful rescheduling of the Philippine debt, to the drop in inflation from 50 percent in 1984 to single-digit rates by the end of 1985, and to the decline in interest rates from 45-50 percent to near normal levels of 17-19 percent over the past 12 months. But the Philippines’ political future is obviously uncertain, and despite various steps to break up monopolies over key sectors of the economy such as sugar and coconuts, Marcos’ "cronies" are still apparently in charge. Business confidence, therefore, remains low.

On the military side, following the Laxalt mission Marcos announced that he would "completely reorganize" the armed forces. But he has reinstated as its head the discredited General Fabian Ver, recently found innocent of involvement in Benigno Aquino’s murder by a highly controversial judicial process. Marcos has indicated that Ver and other generals who have been held in office beyond their tenure will be retired. But it is far from clear that he will replace them with competent professionals who will put the necessary reforms ahead of their personal loyalty to the president.

And if Mrs. Aquino wins, while her moral authority will be great, her virtually total ignorance of domestic and foreign policy issues and her evident naïveté about the insurgents do not bode well for the future, either. But given the view of many Filipinos that Marcos will "do what he has to do" to win the election, this may only be an academic concern.

The Philippine people are divided between those who plead for the United States to solve their problems and those who resent overweening American interference. The fact is that U.S. interests are greater than U.S. influence, and while U.S. policy will be shaped to help the Philippines to the maximum extent, Filipinos must be responsible for their own future. Taking account of their talent and resilience, a senior American official has warned against pessimism and foreboding, noting "it would be foolhardy to embrace self-fulfilling prophecies of doom."

Fair enough. But the path ahead is strewn with obstacles and risks. The first is the election, and it is only the first.


Many analysts have drawn parallels between South Korea (the Republic of Korea) and the Philippines. Both are run by authoritarian regimes closely identified with the United States. Both have active political opposition movements whose leaders have sometimes found refuge in the United States. Both have radical student movements that are becoming increasingly anti-American. Both are U.S. treaty allies and host major U.S. military bases.

But there the similarities stop. The South Korean economy is dynamic and has achieved remarkable successes, raising per capital GNP from under $100 in 1960 to over $2,000 in 1985. Although peaceful transfer of power has been virtually unknown in the past, there is good reason to believe President Chun Doo Hwan will abide by his commitment to step down following elections in 1988. And in the face of a continuing threat from a larger military force to the north, South Korea has a highly trained, well-motivated and disciplined armed force.

Still, there was a restiveness in South Korea in 1985 affecting both its domestic and foreign affairs. At home, four days after opposition leader Kim Dae Jung returned in early February from two years of "medical treatment" in the United States, the political scene was transformed by National Assembly elections in which the fledgling New Korea Democratic Party scored a stunning upset victory in the cities and garnered a solid minority block of seats.

Seoul’s initial reaction was constructive, as the ban on political activity of Kim and 13 other opposition leaders was lifted. But despite the encouragement Chun was given when he visited the United States in April to continue along that line, it was not long-lived. In the face of growing opposition pressure for direct elections in 1988, and in the wake of a student sit-in at the U.S. Information Agency library in Seoul in May, Chun launched a crackdown. Officials were sacked, jailed students and correspondents were brutally treated, and charges were brought under severe national security laws rather than under normal criminal statutes.

Although plans to enact a "campus stabilization law" were shelved in response to an outcry from various quarters, including the United States, tensions remained high. There were increasingly frequent and violent student demonstrations—many with a growing anti-American tone, and in the last weeks of 1985 students occupied the American Chamber of Commerce offices in Seoul and the USIA cultural center in Kwangju. As the year drew to a close, a peak level of some 500 students were in jail, and the opposition was hinting that student demonstrations might occur in the spring if Chun did not publish a clear timetable for moves toward democratization.

Chun is ever fearful of Pyongyang’s efforts to stimulate social disorder in the South, and his crackdown, in part, reflects a genuine concern that at least the hard-core student activists are being manipulated by propaganda from the North. In part, he wants to assure that the peaceful transfer of power in 1988 is to a trusted colleague, and not left to the whims of a direct election. Having succeeded in hosting the annual IMF-World Bank meetings in Seoul during the fall, he also wants to maintain tranquility as Korea looks to hosting the Asian games and possibly GATT meetings in 1986 and the summer Olympics in 1988.

Contributing to the overall mood was growing economic friction with the United States at a time of slowdown in the Korean economy. While South Korea is still booming by world standards, many jobs were lost, and a great many more were threatened by proposed protectionist legislation in the United States and by American pressure to expedite implementation of Korea’s import liberalization plans.

A factor that affects virtually every aspect of R.O.K. policy is its relationship with North Korea. In the wake of Pyongyang’s assassination of 17 high-level South Korean officials in Burma in 1983, and its continuing forward deployment of forces in offensive positions near the demilitarized zone dividing North and South, Seoul’s suspicions remain high. But the development of a multifaceted North-South dialogue over the past year gave some hope of ameliorating tensions.

A tangible result of the various conversations was a weekend reunion for 65 families in September. Talks on further reunions and on establishment of economic links continue, but they are encountering difficulty over the North’s effort to stress the broad principle of "one Korea" as against the South’s emphasis on practical, step-by-step measures. Similarly, Pyongyang’s insistence on co-hosting the Olympics has stymied sports talks, and different conceptions of the goals of parliamentary talks have held them only to the stage of preliminary meetings. Far more important, however, was the reported effort to set up a summit meeting between Chun and North Korean leader Kim Il Sung. Although denied by both sides, press reports suggested senior officials held at least two preparatory meetings during 1985.

The United States issued visas to three North Koreans attending an academic conference in October, but Washington has continued to avoid official contacts with Pyongyang, maintaining its position of refusing to negotiate with the North unless Seoul is a full and equal partner. Nonetheless, while the United States has firmly supported the R.O.K.’s step-by-step approach to eventual reunification, that is a distant prospect at best. In the meantime, it is not entirely clear that Washington and Seoul have a shared view of where the current North-South dialogue should lead, or even necessarily how it should proceed. Given the vital U.S. interests in Korea, including a treaty commitment to R.O.K. security, a misunderstanding over this question could have serious consequences.


American interests in Asia have never been greater. But recent developments in the region strongly suggest that while U.S. influence can still bring us many short-term benefits, abandonment of a leadership role—a failure to conceive of these interests broadly and in a long-term context—might well contribute to the transformation of a dynamic, stable and hospitable region into a troubled and hostile place. The issue involves both style and substance.

Most sweeping in its reach and most immediate in its urgency is the question of U.S. trade policy. If the only response for noncompetitive industries is protectionism, the U.S. must be prepared to pay the costs—costs that will go well beyond the billions of dollars in higher prices and lost export markets to include damage to long-term political and strategic interests as well.

The countries of the region, particularly Japan, need to face up to their economic achievements and the responsibilities they carry with them. But the United States must keep in mind the impact that its narrowly confined domestic problems have on broad segments of some Asian economies, and of the social and political significance they assume. As Washington seeks greater market access and pursues remedies for unfair practices of its trading partners, the United States will benefit far more from approaching those problems in a spirit of mutual respect than from transforming legitimate negotiating pressure into bullying or "bashing."

Congress is generally more vocal on trade issues than the executive branch—in any administration—and is often used by the executive as a foil to threaten reluctant dragons. But Congress is not a finely tuned instrument, miscalculations are not impossible, and the risks of overzealousness were all too evident in the mutual resentments generated over the past year.

U.S. relations with East Asia are not about to collapse over hurt feelings. But just as New Zealand may not have anticipated the genuine and deep anger its policy on naval ship visits aroused in Washington, Americans ought to give greater heed to the outcries of Asian friends in seeking to relieve political pressures and remedy fiscal indiscipline through actions against them. In the case of textiles, the Administration was steadfast in its opposition to blatant and illegal protectionism. Even Congress pulled back enough to eliminate the possibility of a veto override—at least for now. But with the Multi-Fiber Arrangement coming up for renewal in 1986, and with the vast array of other protectionist legislation pending, the concern remains an active one.

Moreover, contentiousness will not solve the fundamental problems of competitiveness that increasingly plague U.S. trade relations with Japan and other Asian countries. There, most observers agree, beyond macroeconomic measures, the answer will be found largely in adoption of other appropriate policies to strengthen American industries and to make structural adjustments where they can no longer compete.

American relations with China are far broader, and far more complicated, than in the heady days of mutual opposition to the "polar bear," when some held the mistaken notion that Beijing had suddenly been transformed from enemy to ally. Today the basic issue for U.S. policy is how to balance general support for China’s economic modernization and defensive military strength with wariness over the course of Sino-Soviet relations, its policy toward Taiwan, and its ultimate economic and military role in Asia.

The fact is that China’s current approach to all of these questions is consistent with long-term U.S. interests, and talk of "punishing" Beijing, for example, for reducing tensions with Moscow, is misguided. To the contrary, an economically weak, politically troubled and militarily insecure China would be far more inclined to adopt contentious policies. Thus, though the United States should not exaggerate its role, it is to U.S. benefit to help Beijing modernize.

At some future time the United States may differ with China or others over solutions to the tragic situations in Cambodia and Afghanistan. If Hanoi or Moscow shows any serious intent of pulling its forces out and accepting a reasonable settlement, the United States should be prepared to act accordingly, even if others do not share its assessment. But despite recent hints, it is difficult to see quick political solutions to either problem, and in the absence of any such movement, the United States should continue to support the indigenous resistance forces, albeit in ways that do not raise the issues to the level of direct East-West confrontation.

In South Korea, too, the United States must exercise patience and not press for quick fixes. Long-term U.S. interests call for continuing support for political and economic liberalization, but not at a destabilizing pace. The impulse may be to favor full democracy now. But the realities of Korea suggest that resumption of the pre-May 1985 course should be the immediate goal, not withdrawal of support for Chun Doo Hwan, as student activists demand, or immediate revision of the constitution, as the opposition wants. Chun should be held to his promise of a peaceful transfer of power in 1988; in the meantime he should be encouraged to meet his nation’s security concerns without resorting to the repressive measures his hard-line advisers have successfully urged on him since last spring. But it would be feckless and even irresponsible for the United States to press a course that will inevitably lead to political retrogression and a stifling of economic dynamism.

In addition, while the United States should strongly support Seoul’s moves to ameliorate tensions with the North—and may need to actively encourage progress on occasion—the greatest contribution to that dialogue at this point is unwavering reassurance to Seoul that the United States will neither weaken its military support nor act behind its back. National policies cannot be made hostage to another country, but the future of U.S. force deployments in Korea should primarily be a function of the contribution they make to reduction of tensions on the peninsula. Some day that may mean they should leave; right now it means they should stay.

New Zealand argues that it is not an issue of their alliance responsibility that currently divides Wellington and Washington, but a question of U.S. alliance management. And one is indeed compelled to urge that the United States work constructively to try to shape Wellington’s proposed legislation to permit resumed alliance cooperation if at all possible. But the simple fact is that New Zealand precipitated this crisis. While they have every right to adopt whatever policies they wish within their own territory, and while the sincerity of their antinuclear feelings is not to be questioned, it is hard to see how New Zealand’s political leaders really think they have contributed to the well-being of their country or to world peace.

The most challenging foreign policy dilemma for the United States in Asia is the Philippines. The possible permutations and combinations of the February 7 election results and their consequences are too many to outline here, much less place in a U.S. policy context. Whoever wins, political tensions will remain high, the need for economic and military reform as urgent as ever. It will be in U.S. interests to promote solutions, though American decisions will be particularly wrenching if there is obvious fraud or coercion.

The problems are not hard to identify; it is the solutions that challenge imagination and ingenuity. The choices for the United States eventually come down to three, none of them happy: much deeper involvement, with far greater resource commitments than currently seem realistic and with far greater responsibility for outcomes than seems wise; muddling through with jawboning and judicious use of much exaggerated American leverage, with all the attendant risks of failure; and disengaging. This last choice would leave the Philippine people adrift in a world far more unfriendly and complicated than many of their political and intellectual leaders will admit. And it would create a major strategic problem for the United States and for the countries of Asia. It is clearly not the preferred solution, but as American policymakers draw up contingency plans, it is not an option that can be totally dismissed.

As the nations of Asia adjust to new economic realities, as they move toward new leadership, and as they play a more active and independent role in regional and world affairs, strains with Washington will increase. It is incumbent upon all to recognize that each has a responsibility to channel its energies along constructive lines. Interdependence is no longer a cliché; it is a critical fact of life.

All will have to bear some degree of political pain at one time or another and to make adjustments—sometimes quite difficult ones. And all will have to temper nationalistic pride. Just as no nation should be expected to ignore its own legitimate interests, none can afford to ignore those of others. At this difficult turning point, leadership will be an important determinant of success or failure. This is true for the nations of Asia. It is no less true for the United States.

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  • Allan D. Romberg, Senior Fellow for Asia at the Council on Foreign Relations, recently left the State Department, where much of his work centered around East Asia. He was Deputy Spokesman at the Department from 1981 to 1985.
  • More By Alan D. Romberg