The extraordinary events in the Pacific-Asian region over the past year pose two overarching challenges for U.S. foreign policy: how to respond to the crisis in Asia's Leninist societies, and how to confront the problems arising from the accelerating economic interdependence of the region's market economies. In addition, there is the question of gauging the basic political trends throughout the Pacific-Asian region-in particular, whether a recent general movement toward greater political openness is likely to endure.

The question of how to respond to the diverse developments within the Leninist world has assumed critical importance. For the first time since the Bolshevik Revolution, a peaceful evolution beyond Leninism seems under way. It is important to note, however, that while such a prospect appears close at hand in most East European societies, as one travels further east the possibilities lessen for a near-term establishment of parliamentary democracy. The political fault line runs through that great Eurasian power, the Soviet Union.

The recent stirring upheavals in Eastern Europe were stimulated by changes in Moscow's policies: Mikhail Gorbachev's bold extension of political openness and his repeal of the Brezhnev Doctrine, which had proclaimed that no nation was free to leave the socialist camp. But uncertainties for the future are embedded in Gorbachev's rejection of political pluralism for the U.S.S.R. and, more important, in difficulties arising from ethnic conflicts within the Russian empire and Gorbachev's efforts to revive the Soviet economy. Still farther east, Asia's Leninist leaders proclaim that experimentation shall be confined principally to the economic realm, with the vital political ramparts to be protected at all cost.

What accounts for the growing cleavage within the Leninist world? Is it that one major stream of the Western cultural tradition has now reasserted itself in those societies that border on Western Europe? Have traditions of individualism and quasi-independent social institutions (including the Christian church) kept the spark of pluralistic politics alive? Should one give equal credit to the proximity to Eastern Europe of the examples of dynamism and renewal to be seen in the open societies of Western Europe and the United States? Socialist leaders have recognized for some time that the competition for power and influence is being lost to such societies.

Meanwhile, at the mass level, the titanic information revolution sweeping the world has made popular comparison between societies possible, changing forever the techniques of control available to authoritarian systems. The reliance of such regimes on the blind faith of the people, imbued by cradle-to-grave indoctrination and buttressed by isolation, is giving way to a realization that they can retain legitimacy only through improved performance. Increasingly the citizen in Leninist societies is asking his leaders, "What have you done for me lately?" Demands for economic advances and an expansion of cultural-intellectual perimeters constitute a popular challenge to the old order. The shift from faith to a consciousness of what might be has been rapid-and here lies the essence of the revolution that now assaults Leninism.

Thus, more urgently than at any time in the past, the question of whether the United States can and should assist that ongoing revolution must be an important item on the American policy agenda. Simple answers to this question will not suffice. Is a complex set of incentives and disincentives on the part of the United States feasible and warranted? To what extent can the United States and other open societies influence the course of events at a time when Leninist societies are in upheaval? Conversely, if Leninist societies retreat from openness or show an unwillingness to adjust to new currents, should there be a negative U.S. policy response?

The relevance of these questions to Asia is no less than to Europe, but the present context in which they must be answered differs significantly. In Asia either there has been no movement toward political openness (Mongolia and North Korea), or there has been some progress followed by a retreat (China and Vietnam). The strong prospect for the intermediate future is that the Asian Leninist states, rather than moving toward parliamentary government, will evolve toward an authoritarian-pluralist system. In such a system politics would remain authoritarian, more open than under the Stalinist model yet retaining numerous restrictions, while the society's economic and social institutions would become more pluralistic. This model, it should be noted, has been characteristic of a majority of Asia's developing nations. Moreover, societies like South Korea and Taiwan scored such advances under authoritarian-pluralist governments as to lay the socioeconomic foundations for an experiment in democracy.

II

The political upheaval in the People's Republic of China in the spring of 1989, and the regime's military crackdown that ended it, demonstrate how extraordinarily delicate a time it is for politics in China.

In Leninist societies today, those dedicated to basic change must periodically test the frontiers of permissible criticism of governments having a heritage of strong authoritarianism. If they push too hard too fast, a violent reaction from the state is possible, followed by retrenchment and repression. On the other hand, if the government concerned resists change or misses the opportunity for accommodation, it risks a drastic erosion of its legitimacy and an increased likelihood of bloody confrontation with its own people.

The events that unfolded recently in China were the culmination of years of a reform program producing mixed results. Despite major achievements since 1978, economic conditions had begun to reflect mounting problems by late 1985. Serious structural imbalances, explosive increases in money supply, an impasse in price reform, huge subsidies and corresponding budget deficits, unemployment, rising inflation and omnipresent corruption all worsened in tandem. Increasingly, the government and party leaders wrangled over what to do, creating fissures in top ranks. Of course, Chinese leaders were not alone in facing such dilemmas. No communist state has yet found a painless way to move away from the Stalinist economic strategy, or an effective method of combining command economics and a free market. Yet in China the urgency of change was heightened because a growing number of people, especially those in intellectual circles, were receiving word of the phenomenal material success of South Korea and Taiwan as well as of the new tides in Eastern Europe.

But despite all the deeply rooted causes, the tragic events in Tienanmen Square and elsewhere in China were not inevitable. Insufficient credit has been given to the element of human error. If the government had established an early and earnest dialogue with the students; if it had avoided the incendiary People's Daily editorial of April 26; if it had refused to declare martial law or applied more humane riot control measures, the outcome would have been greatly altered. And if the students, having generated massive urban support and possessing the capabilities of further political action, had vacated Tienanmen Square by the latter part of May, the result would also likely have been different.

Political disunity at the top of the Chinese political structure further complicated any coherent governmental response to the burgeoning unrest. Nor is the crisis over. As 1989 came to a close, estimates of China's future varied widely, but most observers agreed that the immediate future promised years of transition with further changes-and quite possibly a number of changes-likely in both leadership and policies. Not merely one man, but a generation of old revolutionaries will soon pass from the scene. There is scant evidence, however, that present succession plans will be more successful than those attempted in the recent past. The legitimacy of the party and state is at its lowest level since the communists came to power, and the problem naturally casts a shadow over all who now occupy top party and state posts.

In the policy realm, the prevailing theme of continuing to open up economically while holding fast to sinicized Leninist political values has limited viability. To be sure, the current efforts to cool down the overheated economy are eminently rational, and certain economic maladies may be corrected in the course of the next several years by means of the rigorous retrenchment now under way. Moreover, one should never underestimate the underlying vigor, the enterprising spirit, the survivability of the Chinese people. The time-honored Chinese method of development is first a surge ahead, then retreat and consolidation, a method well encapsulated in the phrase, "Two steps forward, one step backward."

Unfortunately this expression tells us little about the length or timing of the steps. One thing is certain. Whatever the degree of success of the present stringent measures, very considerable sacrifices are being demanded of the Chinese people, both urban and rural. Under such circumstances, political liberalization is difficult. Yet in some form, and certain to take its own Chinese path, further political change is inherent in the combination of China's domestic economic goals and international political trends. Even now, different leaders of the Chinese government are sending out diverse political and economic signals.

It is in this context that one must examine the present status of U.S.-P.R.C. relations, and the prospects for their future.

The strategic factor so important in underwriting the original Sino-American rapprochement, while it has not disappeared, has declined. Moreover, President Nixon's suggestion that Washington and Beijing should consider together the need for a strategic counterforce against rising Japanese power will have limited appeal either to China or the United States. Whatever the problems that the two countries face with Tokyo, neither would benefit from an adversarial posture toward Japan, nor find in the other an adequate substitute for Japan.

There is a factor that should persuade rational Chinese leaders to maintain Beijing's tilt toward both the United States and Japan despite repeated proclamations of nonalignment and the recent downturn in Sino-American relations. These are the two nations in the best position to provide the key products, capital and technology essential for China's long march to development. There are other possible sources for these things, to be sure, and China is reaching across ideological-political lines to Taiwan, South Korea and Western Europe. Yet the United States and Japan remain the strongest long-term prospects, assuming P.R.C. policies follow a logical course. In addition, the low-level strategic relationship established earlier between China and the United States has certain advantages for both parties. To some extent, China might find a substitute in Western Europe, at least for hardware. It is not likely to turn to the Soviets, despite normalization of relations. The United States remains at the forefront, however, both in terms of state-of-the-art technology and strategic reach. And it poses no threat.

Despite these facts, U.S.-P.R.C. relations seem at low ebb. Political considerations have had the upper hand. The American response to the June 4 Tienanmen Square massacre was instantaneous and massive. No event has ever had greater simultaneous media coverage. Virtually overnight, the American people saw the Chinese system in a new and strongly negative light. In one reputable U.S. poll taken a few weeks after the bloodshed in Beijing, three-quarters of the respondents voiced condemnation of the P.R.C. government. The Bush Administration issued its own criticism of the P.R.C. government's actions, provided sanctuary to dissident Fang Lizhi and his wife, cut off military sales, suspended high-level official contacts, expressed its opposition to international loans to China and issued advisory notices against American tourists going there. A majority in Congress desired to go further, and in a series of actions, sought to toughen economic measures against China and alter the conditions applying to cultural exchanges.

Once again, and in dramatic form, a classic American dilemma unfolded. More than any other people, American citizens demand that their country's foreign policy rest on moral foundations. It may be claimed that certain U.S. policies are in fact immoral, or that contradictions in the application of American principles abound. But the underlying sentiment of Americans for "moral policies" remains, and is frequently given voice by the Congress.

In dealing with China in recent months, the Bush Administration has searched for a balance between an adequate expression of moral disapproval and actions that reflect long-term U.S. national interests. They see these interests in policies that are at once "realistic and flexible," acknowledging the fluidity of the Chinese scene and avoiding any irrevocable steps. Adherents to this position emphasize the danger of "isolating China," or driving that country into further "irrational acts." Broad economic sanctions have been opposed, with the additional argument that without extensive international support, which is lacking, they cannot be effective, and that the most meaningful sanctions are those applied by the private sector-of America and other countries-as the business community reaches economic judgments on the Chinese future. Actions that would serve to severely restrict cultural exchanges have also been vetoed. Yet President Bush sent National Security Adviser Brent Scowcroft and Deputy Secretary of State Lawrence Eagleburger to Beijing twice, the first time secretly, the second openly, ostensibly to brief P.R.C. leaders on the December Malta summit meeting.

The Chinese response has been mixed. Publicly, harsh words have been uttered. Infuriated by the sanctuary given Fang, stung by the repeated American charges of basic human rights violations and apprehensive over the actions of Chinese students and refugees now in the United States, Beijing adopted a traditional tactical position. It asserted that because the United States "interfered" deeply in its internal affairs, China was the aggrieved party and thus it was up to Washington to take the initial steps to remedy the breach. "Face" had to be preserved. This is "morality," Chinese-style.

To make their shaky case, Beijing's authorities have argued that the "counterrevolutionary rebellion" against the Communist Party and state was fomented both by domestic subversives and by certain foreign forces. Prominent among the latter, they charge, was the Voice of America. More recently, the official argument has been broadened by the assertion that human rights is a domestic, not an international, issue. Cultural differences, it is argued, give each state the right to define human rights for itself. More ominously, leaders of the Chinese Communist Party have reissued an old call to the people, giving them the choice between "an independent China" or support for "bourgeois liberalism," a course that allegedly will lead once again to the domination of all Chinese by foreign powers.

This charge is expanded as P.R.C. spokesmen join with North Korean and Vietnamese authorities to assert that, having abandoned efforts at military hegemony, the capitalist nations led by the United States are now pursuing "the insidious policy" of destroying socialism by encouraging "peaceful evolution" in the direction of liberalism. In these messages are contained appeals to that element of xenophobia that lies just beneath the surface of this very ancient, very proud society. They also contain warnings to those "comrades" in Eastern Europe who are leaving the Leninist fold. Taken together, the official pronouncements represent an effort by a weak and beleaguered government to summon up a racially tinged nationalism at a time when other weapons short of outright coercion are of limited effect.

On the other hand, certain top Chinese leaders are also sending clear signals that they do not want relations with the United States to deteriorate. Meetings with prominent Americans are widely publicized. Accounts of new economic ventures by U.S. entrepreneurs, however modest, are heralded. And, more important, in a quiet, unobtrusive way, new cultural arrangements are being approved together with the renewal of old ones. Moreover, the initial pronouncements after the public U.S. visit in December were clearly positive, figuratively a sigh of relief that the worst might be over.

Caution in making predictions about China has rarely been more warranted. Once again, a struggle over power and policy lies ahead. A single party line does not exist today, nor is the complex situation adequately described as a struggle between two lines. Many voices are being heard. Disjointed decisions and subtle sabotage coexist with efforts at recentralization and old-fashioned methods of control. Thus the situation serves to amplify the discrepancies between words and actions that have always been a vital part of Chinese political culture.

The future of U.S.-P.R.C. relations naturally depends heavily upon domestic developments in China, but in the long term, as previously asserted, a compatible, supportive Sino-American relationship has an innate logic that cannot easily be vitiated. Thus the times call for the exercise of diversity and sophistication in U.S. policy in both the public and private sectors. Policies consciously plural in nature must speak to various constituencies in a China that is by no means monolithic nor centralized, despite recent events.

III

Meanwhile, in North Korea, there is limited but persuasive evidence that Kim Il Sung's regime seeks greater contact with the United States, in company with further alterations in its past autarkic policies. Pyongyang has two deep worries at present. First, it is appalled by developments in Eastern Europe and the Soviet Union and equally concerned about the spreading contacts between South Korea and both China and the U.S.S.R. The diplomatic recognition accorded the Republic of Korea by Hungary and, more recently, Poland, may be only the first instances of "treason to socialism," in Pyongyang's view. Second, North Korea is aware of the progressively widening gap between its economic strength and that of the South, a product of its clinging to an archaic Stalinist economic strategy and of extremely heavy military expenditures.

Slight progress was recorded in North-South relations at the end of 1989. In the Red Cross negotiations over visits between divided families, an agreement in principle was announced in November, but the North's insistence on performing revolutionary operas in the South at the time of the visits held up a final accord. South Korean sources believe that the North was seeking an excuse to postpone visits, possibly waiting for political developments in the South to indicate the stability of President Roh Tae Woo's government.

On a more general level, there remains a very large difference between the two Korean governments on the basic issues relating to reunification. The South favors the creation of a "climate of trust" through a growing network of economic and cultural contacts, while the North calls for far-reaching political and military agreements at the outset. Both sides have advanced frameworks for reunification, the North's proposal labeled a "Confederation of Koryo," the South's more recent plan outlining a "Korean Commonwealth."

Yet once again one is made aware of the current gap between developments in Europe and Asia. The extraordinary changes underway in East Germany suggest that German reunification may be possible at some point in the future through institutional fusion. In Asia, on the other hand, the formula advanced by the communists, both Korean and Chinese, is "one nation, two systems," reflecting the continuing, indeed widening, differences between political developments in North and South Korea, and between China and Taiwan. One can only be deeply skeptical of the feasibility of the one-nation-two-systems formula, especially if the Leninists insist upon a monopoly of power in their sector. But will the current trends in socialist Europe ultimately make their appearance in socialist Asia?

The present situation contains elements of promise. Another Korean War seems most unlikely, given the credibility of the U.S. commitment, the growing strength of the South and the attitudes of both China and the U.S.S.R. Like China, moreover, North Korea now signals that it wants increased trade and foreign investment with capitalist countries, as well as many more tourists. Almost certainly, the process of reaching out to the advanced market economies will accelerate as a younger, better educated elite emerges into positions of authority and efforts are made to improve the North's lagging economy. To be sure, the deep fear of being polluted by "bourgeois liberalism" may well result in an unpredictable policy course. And leadership will be a critical variable.

The qualities of the "Dear Leader," Kim Jong Il, the son of the aging Kim Il Sung, are matters of very considerable doubt despite the fact that North Korean spokesmen insist that he and a younger team are already in charge of day-to-day affairs. Like Deng Xiaoping, Kim Il Sung may soon step down officially while continuing in fact to be the final authority. The broad pattern is one of second-generation technocrats rising in governance and older military "loyalists" guarding the throne. Whether succession will be smooth when Kim Il Sung dies is an unanswerable question at present.

Under these conditions, what should be the position of the United States? First and foremost, the United States should continue to signal that relations with North Korea will neither move greatly ahead nor fall significantly behind developments in Korea's North-South relations. Every encouragement should be given to those negotiations. In close collaboration with the South Korean government, moreover, the United States should develop a timetable for troop reduction and reposition in South Korea, making it clear to the North that Washington's basic security agreement with Seoul will remain intact and that the timing and extent of troop reductions will relate to progress in reducing military and terrorist threats from the North.

Meanwhile the official contacts via the two countries' respective embassies in Beijing should be continued, and as soon as conditions warrant, be given greater substantive content. In addition, there is every reason to increase U.S.-North Korean cultural contacts. Pyongyang has recently invited certain Americans whom they consider to be politically mainstream, and having ties with governmental and intellectual circles, to visit North Korea. The dialogues that took place were nonpolemical and fruitful in signaling current North Korean views. Intellectual and cultural contacts can now be usefully expanded. Washington needs an exchange of views and greater knowledge about trends in the North, and North Korea's needs in these respects regarding the United States are at least equally great. The time when North Korea, or any nation, can completely isolate itself is ending, and U.S. policies should take advantage of that fact.

Efforts at normalization of U.S. relations with Mongolia have as yet produced very minimal results, despite the hopes of some Mongols, especially younger intellectuals. For no very good reason, benign neglect continues to mark American attitudes and policies. The Mongols, meanwhile, naturally watch developments in the Soviet Union with the greatest interest since their primary ties remain-and are likely always to remain-with Moscow. No other nation is a credible defender of Mongol independence against China. Improvement of Mongolia's relations with China has accompanied Sino-Soviet normalization, but a strong legacy of suspicion remains on both sides. Like other parts of Asia, however, Mongolia is preparing to expand its contacts with the external world and, not surprisingly, Japan is stepping forward with augmented economic assistance. Here too the United States could fruitfully advance cultural ties including educational exchanges.

IV

Indochina presently provides the world with some very knotty problems. Yet the United States remains a relatively marginal player in this region despite the exhortations of various parties, including some Americans, for more active involvement.

U.S. relations with Laos, a country politically close to Vietnam but economically attracted to Thailand, are now in a state of limited normalcy. Policies regarding Vietnam and Cambodia remain on a course set earlier. Hanoi ardently wants the United States to remove its opposition to international loans and lift the embargo on American trade. It would be pleased if Washington were to accord the Democratic Republic of Vietnam diplomatic recognition. Yet recent trends in Vietnam's political stance scarcely encourage such policies.

All Vietnamese troops were supposedly withdrawn from Cambodia by the end of September, but international inspection has not been allowed. In addition, Hanoi continues to take a hard-line, uncompromising stand on the Cambodian issue. Evidencing deep concern over developments in Eastern Europe and the U.S.S.R., moreover, Hanoi has issued open warnings to comrades in Poland and elsewhere against the abandonment of Leninism. A retreat in Vietnam's domestic political policy in recent months is perceptible, despite Hanoi's continued commitment to a more open economy. Further, Hanoi has charged, as have other Asian Leninist regimes, that the United States is seeking to defeat socialism by insidious means, providing aid to anticommunist elements so that power can be shifted to "the enemy." Some improvements in the economy have been reported in 1989, but Vietnam remains one of the poorest countries in the world, with inefficiency, waste and corruption omnipresent. The political apex remains controlled by a poorly educated gerontocracy whose wartime unity has now unraveled.

The United States will undoubtedly accord diplomatic recognition to Vietnam at some point. The current position of the Bush Administration is that until Vietnamese withdrawal from Cambodia can be verified by an independent inspection, and until some indications of Hanoi's cooperation in a peaceful resolution of the Cambodian problem are forthcoming, recognition would only confirm the Vietnamese in their present course while undermining the peace effort of the Association of Southeast Asian Nations (ASEAN). This would widen the breach with China and make a peaceful resolution in Cambodia more difficult. Some Americans demur. They argue that Vietnam's military withdrawal from Cambodia should suffice, and that the United States could assist in inducing a greater harmony in Southeast Asia by pursuing Thai Prime Minister Chatchai Choonhavan's earlier exhortation to turn Indochina from a battlefield into a marketplace. Some observers also suggest that a heightened American presence in Vietnam would enable the United States to compete with the Soviet Union for Vietnamese affections.

Whatever merits there may be in the arguments of the Bush Administration's critics, the idea of a superpower competition for influence in Indochina is of very dubious value. There is no great intimacy between the Soviet Union and Vietnam today. To be sure, militarily and economically, Vietnam is heavily dependent upon the U.S.S.R, but the Soviets deeply resent the drain on their precious resources-aid to Vietnam has totalled nearly $3 billion annually. They might well be grateful if the United States would share the burden, especially since their current goals are a reduction of tension with China and improved relations with ASEAN, both of which goals dictate greater care in their relations with Hanoi. But in any case, it is inconceivable that the U.S. government or people would sanction official assistance to Vietnam. Under improved circumstances, Japan will play such a role.

Meanwhile the Soviet bases are of some value, but they would be of scant use in the event of war, and the new defensive strategy being advanced by the U.S.S.R. raises additional questions about their utility. It is not surprising that Gorbachev offered to give up these positions in exchange for American withdrawal from bases in the Philippines, and it is possible that further Soviet overtures in this matter will be forthcoming.

Cultural relations with Vietnam can and should be expanded as the United States seeks to learn more about the diverse elements in this troubled, tempestuous society. Nor should there be any barrier to nonstrategic private interaction between Americans and Vietnamese in the educational and humanitarian fields. Diplomatic recognition now, however, would detract from, rather than contribute to, the resolution of Southeast Asia's problems.

This brings us to Cambodia. Whatever the future possibilities, the Paris conference in July-August 1989 was a failure. The surprising intransigence of the allied Vietnamese and Cambodian government representatives reflected a calculated gamble. Perhaps the Phnom Penh government, with major Soviet and Vietnamese military assistance, can defeat the Khmer resistance forces (the Khmer Rouge, the Sihanoukists and Son Sann's noncommunist troops). Perhaps this anti-Vietnam coalition-always fragile-will break apart. Perhaps key Western nations and other prominent states, including some ASEAN members, will abandon support of the resistance. (That did not happen, however, at the fall U.N. General Assembly meeting, where 124 nations supported the ASEAN-sponsored solution.) If these events were to occur, the gamble taken at Paris will pay off, at least for the immediate future. But if Phnom Penh's troops do not hold, the coalition does not crumble and international support is not forthcoming, the gamble will have failed. In any case a combination of further fighting and political maneuvering now seems certain-although at year's end an Australian proposal for U.N.-sponsored elections was on the table.

U.S. policy regarding Cambodia is under increasing pressure, at least at home. Once again the moral argument has risen to prominence. In Phnom Penh, it is asserted, a moderate Khmer government is emerging, one prepared to encourage private enterprise, work with certain noncommunists and provide assistance in restoring Buddhism. The murderous Khmer Rouge must be kept entirely out of power, it is argued. Although knowledgeable critics admit that a very high percentage of the Phnom Penh government leaders are ex-Khmer Rouge-who did not, incidentally, break with their comrades over the issue of genocide-they argue that the leaders of the Phnom Penh regime are reformed at this point. Prince Norodom Sihanouk, the skeptics assert, is too mercurial to be trusted, has lost his support among the Cambodian people and could find his proper (subordinate) niche in the present Phnom Penh regime.

These arguments cannot be dismissed, but there are other considerations that greatly complicate the picture. If the Khmer Rouge and their allies cannot be defeated and they are not brought into a coalition, the civil war will go on, at great cost to the Cambodian people. Further, it can be argued that if a portion of the Khmer Rouge, along with the noncommunist factions and the Phnom Penh regime, is brought into a four-party coalition headed by Sihanouk, the chances are stronger that the Khmer Rouge can be defeated politically-providing that an international peacekeeping force is permitted to supervise elections and the political processes leading up to them. Moreover, it is asserted, such developments should satisfy China-a vital consideration, since unless China is minimally satisfied there can be no permanent peace in the region.

The current position of the United States implicitly accepts this argument. Adamant opposition to a return of the Khmer Rouge to power is proclaimed, modest assistance to the non-communist resistance is proffered and support for a neutral, four-party Cambodian coalition government, with developments monitored and assisted by an international body, is espoused. But the debate as to whether such a policy is realistic or sustainable will continue and will ultimately be determined by events over which the United States has exceedingly limited control.

V

The second major issue for U.S. policy in Asia is that of the progressive economic integration that binds market economies in this era. The challenges posed here primarily affect U.S. relations with aligned nations--Japan, the Newly Industrialized Countries and the ASEAN nations. And while those challenges center upon economic matters, they cannot be separated from political and security issues.

It is ironic that at the very time when Beijing authorities are stridently condemning the United States for interfering in China's internal affairs, the United States and Japan are reaching a new level of frankness, each telling the other what it should do at home to improve the economic climate between them. The central U.S. complaints have been Japan's archaic distribution system; discriminatory pricing practices that amount to "dumping"; land and tax policies favoring the farmer, penalizing the consumer and inhibiting the expansion of the domestic market; inadequate enforcement of antitrust measures, and the weakness of the Fair Trade Commission. In late 1989 Japan responded with its own list of grievances, citing areas where the United States needed to take immediate remedial action: America's budget deficit; its rampant consumerism and low savings rate; its deficient educational standards; and the general lack of effort on the part of the American private sector to seek foreign markets aggressively, combined with its declining competitiveness.

U.S.-Japanese economic negotiations have proceeded through several stages in recent years: first, removal of tariff barriers; then, currency readjustments; and now, the removal of structural (and policy) impediments. Under the terms of the 1988 Omnibus Trade and Competitiveness Act, the United States has been rigorously pursuing "results-oriented," sector-specific negotiations, having recently used the legislation's "Super 301" provision to cite Japan, along with India and Brazil, as countries engaged in unfair trade practices in key fields. And while insisting that it intends to become "an import superpower," Japan is currently saying officially what it has long proclaimed unofficially: If the United States expects to revitalize its international standing and improve its domestic health, the country must set its own economic house in order.

There is enough blame to be shared by both sides. Japan, like most of the developing countries that have adopted its model, achieved great success through mercantilist policies that it has been reluctant to abandon, at least until external pressure reached explosive proportions. In addition, cultural traits combined with traditional "backward" sectors of the economy (both defended and decried as part of Japan's "uniqueness") have inhibited openness of markets-and in a broader sense, of the society at large. At the same time the United States has mismanaged its macroeconomic policies for many years, slighted education and, through a combination of "cultural traits" and policies, maintained a meager savings rate, a priority on short-term profits and insufficient interest in international markets.

The emotionalism surrounding U.S.-Japanese economic issues continues to grow. The very rapidity with which Japanese capital has penetrated some highly sensitive American areas-most recently, the entertainment industry and prime real estate that includes famous landmarks-has led to growing apprehension on the part of many Americans, a fact clearly evidenced by opinion polls. Even American security is touched by Japanese dominance of the computer memory-chip field, and by the desire of some Japanese to build their own advanced military aircraft. For Congress and the American people, the equivalent to "morality" in this sphere of foreign policy is "fairness" in trade, and one can be certain that Congress will carefully scrutinize the results obtained from the negotiations now in a new phase.

Meanwhile Japanese emotionalism is also on the rise. The 1989 publication in Japan of a book entitled A Japan That Can Say No brought the existing mixture of Japanese resentment and pride into the open. Throughout their history, Japanese have wrestled with feelings of inadequacy or weakness on the one hand, and a strong belief in their superiority on the other hand. The paradox frequently leads to high levels of tension. One of the book's authors, Shintaro Ishihara, a prominent political figure, claims that "American prejudice against the yellow race" is a principal cause of the economic friction. He advocates a rejection of "unreasonable" U.S. demands together with a policy of playing one superpower against the other when necessary. In his "exposé," he pays very limited attention to protectionism in its various forms at home, ignores the powerful element of racism in Japanese society (upon which he subconsciously plays) and, in advocating Pan-Asianism, also overestimates the delicacy of Japan's relations with other Asians. Yet his opinions are not to be dismissed. While Ishihara does not represent Japan's mainstream, he speaks for a significant body of Japanese, both young and old.

In sum, nationalism in various forms is rising in both the United States and Japan. And this signals a much broader phenomenon. The interplay between nationalism and internationalism will constitute one of the great dramas of coming decades for the world at large. Can international institutions and decision-making mechanisms be strengthened so that vital economic issues can be resolved or alleviated before they are thrust into the heat of the domestic political arena? And can both the policies and the practices of the major market economies be altered to provide for what Americans call "a level playing field," an essential condition if economic integration is to proceed smoothly?

There can be no doubt that the challenge is difficult. Cultural as well as policy changes are being demanded. Cultures do change, but usually at a pace slower than the circumstances of this extraordinary era require. Moreover both Japan and the United States have weaker governments today than in the recent past, hence, governments inhibited from taking bold measures. And there is a more general problem. Democratization as it unfolds in various forms in Japan and the newly industrialized countries is not generally supportive of the dismantling of protectionism. Special interest groups proliferate and increase in power. Even more than the once-supreme bureaucrat, the professional politician must heed their voices. In democracies, including the United States, only limited rewards accrue to those who espouse farsighted solutions that have no short-term payoff.

Despite the problems, however, the integration of the American and Japanese economies seems destined to continue. The two nations now exchange goods and services exceeding $130 billion annually. And while the U.S. trade deficit with Japan hovers at an unsustainable $50 billion, some American industries such as agriculture and aircraft depend heavily upon Japanese purchases. A considerable portion of the U.S. budget deficit is funded by Japanese bond purchases. And there are supplementary but no less important ties. Two million Japanese visit the United States and its territories annually, and about 500,000 Americans take trips to Japan. Japanese students currently in American universities number over 20,000, with U.S. students in Japan around 1,800, a figure that should be greatly increased. A serious economic downturn in either country would greatly affect the other (and the rest of the world). Indeed, the Japanese stake in the economic health of the United States is steadily growing. Thus, a divorce is unthinkable even if the marriage remains troubled. The task immediately ahead is to reduce or remove as many of the grievances as possible.

U.S.-Japanese security issues are increasingly intertwined with economic matters. As the United States seeks to reduce its military budget, an urgent call has gone out to all U.S. allies to share defense burdens. With the risk of a great-power war at its lowest level in the twentieth century, the American people see the need to readjust this priority. It is thus not surprising that the Congress insists that Japan bear a greater share of the costs of its own defense and beyond this, of assisting in maintaining such a military balance in the region as conditions require.

It remains unclear, however, precisely what the United States would have Japan do in the security realm. It does not want Japan to become a nuclear power. And neither the United States nor the rest of Asia want Japan to have the region's foremost military force. At present, Japan is spending some $30 billion annually on defense, making it third in the world in terms of expenditures, after the United States and the Soviet Union. The military budget, however, totals only approximately one percent of Japan's GNP (or 1.6 percent if calculated on the same basis as NATO). Included is some 40 percent of the costs of maintaining about 60,000 American military personnel in Japan, together with the bases they operate. This support could be increased, and Japan could also achieve more quickly its commitment to carry out air and sea surveillance in Northeast Asia. Yet in most other respects, Japan's present status in the military field seems appropriate. The coordination of U.S.-Japanese defense planning and operations has advanced substantially in recent years, and Japan is developing the type of ultra-modern defense force that is best suited to its needs and current strategic-political conditions.

As the United States urges Japan to do more in the military realm, most Asians urge Japan to do less. They fear that history will repeat itself with military supremacy following the development of economic prowess. They are probably wrong.

Japan is in the process of playing the leading role in the economic integration of East Asia, perhaps the most momentous development of this period. In its use (or withholding) of economic power, moreover, it is having a strategic impact. This is what recent Japanese leaders have intended when they speak of the need to treat security in a "comprehensive" manner. It is certain that Japan's direct political role will grow both globally and regionally. For a nation to confine itself to economic actions on the international stage, whatever the side effects, conveys to others the image of excessively self-serving actions and cannot be satisfying to the Japanese themselves. Already, Japan is beginning to speak out on such diverse issues as policies toward the Third World, approaches to the Leninist states and possible solutions to regional crises. Soon, it will take a more active role in these matters including participation in peacekeeping.

Yet Japan has neither the need nor the desire to become an independent military power. The great majority of Japanese are well aware of the hazards of such a course. Nor do they feel a great sense of threat. While the Soviets are not popular in Japan, an invasion by the U.S.S.R. is not feared. If, as some expect, the Soviets decide to offer concessions in the dispute over the four northern islands that lie off Hokkaido, this could resolve (or, alternatively, divide) Japanese opinion on the key territorial issue. And if Moscow holds to its newly proclaimed defensive strategic policy, concerns may be further allayed. In any case, unless the United States totally abandons its Pacific-Asian security policies (a very unlikely prospect), Japan will choose to remain a security partner, not a solo performer, with its priorities shaped accordingly.

VI

Let us now turn to the other nonsocialist Asian states. As various nations of Asia move toward the final decade of this century, two considerations dominate the scene. Development-catching up with those ahead-represents the foremost goal to second and third generation leaders. They have generally placed economics in command of policy-making, demoting ideology in favor of pragmatic, results-oriented policies. This trend characterizes not only the Newly Industrialized Countries but also ASEAN and the major states of South Asia.

The new premium is upon reducing the role of the state in the economic sphere, thereby liberating the private sector. In place of loans, foreign investment is being encouraged, with a search for advanced technology. The trend is away from import substitution policies and toward export orientation-but with varying combinations sought. Like Japan, these states in different degrees attempt to protect their backward or newly created economic sectors. Meanwhile most market economies are finding themselves increasingly involved in an international horizontal division of labor, while seeking at some time to climb up the technological ladder.

It is thus not surprising that in economic relations with many of these countries, the United States confronts problems similar to, albeit of lesser magnitude than, those it experiences with Japan. On a range of issues-from intellectual property protection to market access-the United States presses for remedial measures on the part of its trading partners, with a "stick" in the form of Super 301 but only a small carrot in hand. Today Japan, not the United States, provides the great bulk of economic assistance to Asia.

Understandably, therefore, U.S. policy evokes mixed emotions in the nonsocialist Asian societies. The predominant sentiment is that the United States, as the world's foremost economic and military power, remains essential to the development and stability of the region. No other major nation is seen as an acceptable substitute (only as a supplement), and for the present at least, the medium-size powers of the region do not have the ability, or in most cases the will, to play a greatly enhanced regional role-although the responsibilities of these countries are increasing irrespective of their readiness. Thus, generally speaking, more is expected of the United States in Asia than Washington is prepared to give, and the fear of American withdrawal-first raised after the U.S. abandonment of South Vietnam-has abated little despite its improbability.

On the other hand, a renewed Asian nationalism keeps company with a reinvigorated American nationalism and manifests itself from the political right as well as from the left. American pressure for "fairness" in economic intercourse has recently had some of the same repercussions in South Korea and Thailand as it has in Japan. In addition, radical students in South Korea and the Philippines, and certain politicians anxious to appropriate nationalist banners in the latter country, demand an end to American bases and other manifestations of U.S. "dominance."

One should not exaggerate these trends. Protectionism has its exponents everywhere but, thus far, more rational policies have usually prevailed. Whatever the case for a readjustment of the American security strategy in Asia, future policies are likely to be worked out on the basis of a timetable jointly agreed upon by the governments of the nations immediately concerned. Nor are a majority of citizens or elites in the nonsocialist Asian countries favorable to a precipitous American withdrawal. On the contrary, the bulk of opinion in Japan, South Korea, and in the Philippines and most of the other states comprising ASEAN favors a continued American security presence. Adjustments in that presence will not be dictated by anti-Americanists but by a combination of U.S. economic considerations, advancing military technology and the changing nature of security threats.

Meanwhile, in wrestling with the problems of economic interdependence, the Pacific-Asian states including the United States will be forced to operate simultaneously at bilateral, regional and global levels. Whatever the progress on the latter two fronts, bilateralism is not going to disappear as the principal instrument of economic negotiation in the near future. The countries of Asia are too heterogeneous in their development levels, economic systems and degrees of power to permit otherwise.

Nevertheless, as the events of the past year illustrate, the struggle to create an official association for more effective regional economic cooperation will go forward. Australian Prime Minister Bob Hawke's proposal directed to that end resulted in a 12-nation ministerial meeting on Asia-Pacific Economic Cooperation held in Canberra in early November. Concrete results were slight other than an agreement to continue meeting, hopefully with an enlarged membership.

Asian economic regionalism has a long way to go in terms of an official structure. Even at the subregional level, organizations like ASEAN, the South Asian Association for Regional Cooperation and the South Pacific Forum have very limited economic accomplishments to their credit. Yet they continue to survive and, as the process of Asianization (a growing network of economic, political, cultural and security ties within the region) unfolds, the roots of economic cooperation will extend more deeply-with Japan almost certain to serve as the principal catalyst for a soft economic regionalism of the type that has already emerged in Northeast Asia and is well under way to the south.

At the same time, through vehicles like the General Agreement of Tariffs and Trade, the Group of Seven leading industrialized democracies and the World Bank, the quest for more comprehensive approaches to global economic problems will continue. Contradictions between and among these various levels of international activity are inevitable, and the task of reconciling or minimizing them is but one of the challenges ahead. Perhaps this issue assumes greatest importance in the uncertainties that surround the impact upon others of the post-1992 European Community and the North American free trade agreement. Will stronger regionalism assist or inhibit economic intercourse on a global level?

VII

The second broad goal of Asian nations is stability. For many of the developing Pacific-Asian states, this issue takes on a new urgency as they experiment with parliamentarism. One of the most important political phenomena of recent years, equal to that of the crisis in Leninist states, has been the movement of many Asian states from an authoritarian-pluralist system toward that of parliamentarism. In this category one can place South Korea, Taiwan, Thailand and Pakistan, among others. When these nations are coupled with the "old democracies" of Asia-Japan, India, Sri Lanka, the Philippines, Singapore and Malaysia-the growth of political openness assumes striking proportions. Moreover, various countries may stand on the threshold of a similar move, among them Indonesia.

Asian democracy, even with its various modifications, did not invariably emerge as a product of socioeconomic development. The tutelage of colonial rulers, shaping the ideas and values of indigenous elites, was the crucial factor in a number of these societies. To be sure, such tutelage did not always succeed. There have been failures and retreats from parliamentarism, some of them still ongoing. No one ever said that democracy was an easy system to institutionalize. Concepts such as majoritarianism, tolerance for one's opponents, freedom to criticize or even peacefully remove one's leaders and adherence to a government of law rather than of men are generally foreign to traditional Asian political culture. Moreover, democracy entails the acceptance of a greater element of instability than comes with authoritarian systems.

As the 1990s begin, how are the new and old democracies of Asia doing? The picture is mixed, with a complex medley of advances and problems. Yet there is reason for hope, particularly if the central criterion is the responsiveness of the political system to the popular will.

Surprisingly, Japan has moved into a period of greater political uncertainty, with a relatively weak government and the long-dominant Liberal Democratic Party more severely challenged than at any time in its history.

Since a majority of the electorate do not appear to believe that the Socialists can yet be trusted with national power, however, the Liberal Democrats will probably weather the next elections with a reduced parliamentary majority, having possibly learned some political lessons about life under more inclusive politics. But the quest for effective new leaders is likely to extend across the political landscape. The signs accumulate that Japan is entering a new political era as Japanese-style democratization unfolds.

In South Korea, there have been alternate vocal complaints of governmental weakness and of increased political repression. Generally, however, both the government and the major opposition parties have displayed responsibility under difficult circumstances. While those who traveled to the North against government orders are being prosecuted, not a single radical student has been killed in the confrontations of recent months, including one incident in which six police lost their lives. Meanwhile, a conservative reaction to the radical excesses of the student protest movement has manifested itself.

Flat predictions regarding the future would be unwise, but the crucial opening years of South Korean democratization have been navigated with reasonable success, and if the economy avoids a sustained downturn-an issue creating concern at present-the prospects seem reasonably promising. On the fringes, to be sure, both left and right elements exist who would discard parliamentarism-but they do not represent mainstream public opinion. Here too, however, there is a rising desire for fresh leaders across the political spectrum.

In Taiwan, political developments also warrant cautious optimism. As in all societies, certain special circumstances prevail, in this case the division between mainland refugees and their children on the one hand, and the Taiwanese on the other. But the Taiwanization process has now encompassed the ruling Kuomintang itself, and the December 1989 elections went smoothly if raucously, with genuine political competition yielding a dominant party system for the present. The Kuomintang received just under 60 percent of the vote with its chief rival, the Democratic Progress Party garnering 30 percent. Over 75 percent of the eligible voters participated. The situation is one demanding wisdom on the part of those wielding power. The independence issue was openly debated for the first time. Constitutional revision lies ahead, an extremely delicate matter, but the moderates both in the Kuomintang and in the opposition have thus far prevailed.

Moving into Southeast Asia, the dramatic events in the Philippines at the close of 1989 reveal the serious problems that continue to engulf this society. Yet another attempted military coup, the most serious to date, has been put down, with the United States displaying its military muscle on behalf of the government of President Corazon Aquino. No one should underestimate the deep troubles that afflict this state and society. Aquino is an honorable, well-intentioned person, but she has proven to be an amateur in a situation demanding a professional. The social and economic reforms so desperately needed are wanting. Many of Aquino's advisers lack competence, and corruption is still rife in and out of government. Regional and ethnic problems cry out for remedial measures as does the huge gulf between the rich and poor. Under these circumstances, faith in democracy weakens. Neither internal nor external exhortations will suffice. Meanwhile, the temptation by Aquino opponents is to appeal to nationalism with an anti-American twist. There is little here to engender strong confidence in the immediate future despite certain economic improvements.

In Singapore and Malaysia there has also been some political slippage. Singapore's President Lee Kuan Yew dislikes opponents even more than most politicians and he has grown more crotchety and no less dominant with age. Malaysian Prime Minister Datuk Seri Mahathir bin Mohamad, while politically adroit, is a confrontationalist by nature, and as one result, political factionalism has proliferated in his country, with ethnic divisions also continuing to represent a smoldering volcano. Yet in both societies, the institutional framework holds, and it has shaped the political habits of several generations. Moreover strong economies support the political system.

Thailand's transition to a government responsible to the electorate appears to be succeeding despite the continuing power of military men like General Chaovalit Yongchaiyut, and often tense relations between Prime Minister Chatchai Choonhavan and Foreign Minister Siddhi Savetsila. Bolstered by a vigorous economy and an expanding middle class, Thailand has a reasonably good chance to maintain its political openness.

Meanwhile Indonesia, the largest of the states comprising ASEAN, appears to be reaching a late phase of its authoritarian-pluralist era. All eyes are focused on the early 1990s, with the central question whether President Suharto will retire after holding office for more than a quarter of a century. Military men remain in key positions of power, and are likely to influence and possibly control the succession process, at least in its opening phases. A government-sponsored organization, Golkar, dominates the legislature with all other parties subordinate. Political rights are circumscribed, with the government attentive both to the possible resurrection of the communists and the activities of the Islamic fundamentalists. Yet political discourse is expanding as a growing community of articulate citizens evidences a desire to participate more meaningfully in the political process. Indonesia's enormous stretch of territory, its heterogeneous cultures and ethnic groups and the mixed results of its economic policies to date may serve to keep the country in its current political mold for the near term, but greater political inclusiveness is en route.

In India, the largest electorate in the world has just participated in elections that resulted in a peaceful change in power. Rajiv Gandhi and the Congress party have been replaced by a coalition government headed by V. P. Singh, leader of the Janata Dal. Almost everywhere, Indian voters registered their dissatisfaction with those in power. Congress lost heavily in the north, its traditional stronghold, but gained in the south where it had occupied minority status. With greater fragmentation at the center, India's political future is unclear. There can be no doubt, however, that the Indian voter has been heard, with leaders of all political persuasions accepting the verdict.

Politics in Pakistan remains fragile in the aftermath of General Zia ul-Haq's still-mysterious death in an air crash. Under Benazir Bhutto, however, democratic processes have been reestablished, and despite the numerous tensions with which this society must contend, civilian rule and competitive politics are in operation, albeit precariously.

Among Asia's open societies, some political failures may ensue. Almost certainly, retreats will continue to take place on occasion, given the fragility of political institutions and the enormity of socioeconomic problems still unresolved. It will be important for Americans to avoid extreme reactions to future political developments in Asia. Yet no one should minimize the broad trend toward greater political inclusiveness and expanded political freedom that has unfolded in Asia in recent years. The task ahead is to match freedom with responsibility, especially at elite levels. Further, the democratic system must be made to function in such a way that it can provide the stability required for effective governance and continued economic growth. To this end the premium is still heavily upon leaders as well as policies. Politics remains at least as much an art as a science.

VIII

In facing the crisis in Leninism, the problems implicit in the spiraling interdependence among market economies and the needs of Asia's democracies, the United States has barely begun to reshape its priorities and rethink its policies. Yet notwithstanding the problems awaiting attention, the current U.S. position in the Pacific-Asian region is relatively good. More than any other major power, the United States remains an object of hope. No other state is so cultivated, regardless of the steady flow of criticism directed against it. Moreover, within America lies the potential for helping the Asian community to make a successful transition from recurrent warfare to the uninterrupted peaceful diplomacy required in these times.

To realize this potential, certain steps are now essential:

-The American house must be put in better order, and this requires serious reforms in the social and political as well as the economic sphere.

-With such reforms underway, the United States will be more justified in insisting upon the removal of other nations' structural blockages to openness-and that is a legitimate request. In an interdependent age, "uniqueness" is not an acceptable excuse. One nation's domestic structure and policies impinge upon those with whom it is intertwined.

-Since the United States wants to see collective responsibility advanced, it must accept collective decision-making, moving away from its past proclivity for unilateralism. Patron-client relations are giving way almost everywhere to diverse forms of partnership.

-With both military technology and the nature of the security threat rapidly changing, U.S. strategic policies in the Pacific-Asian region should be thoroughly reexamined in concert with allied and aligned states. The United States must also prepare for the greater integration of Asian security issues with those now being negotiated in the West, despite important regional differences.

-Toward Asian democracies, new and old, the United States should make every effort to increase the network of private as well as governmental ties, with special attention to technical training and other types of cultural interaction. Support for diverse forms of multilateral economic assistance are also crucial in the period ahead.

-Accepting the fact that there is no longer a unified Leninist world, and that Asian Leninism is currently pursuing a different political course than that of most European socialist states, the United States should base its policies on the probability that the Leninist states of Asia will enter a protracted phase of authoritarian pluralism. In reacting to this likelihood, the premium in U.S. policies must be upon sophistication, flexibility and the proper timing of policy alterations. Even with respect to a single state, moreover, pluralistic approaches may be appropriate, with official and private policies sometimes pursuing separate courses.

-Finally, while the United States must be deeply aware of its limitations in influencing events in this revolutionary era, it should not shrink from boldness in the realm of the ideas and institutions needed to strengthen the new international order into which the world has already entered.

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  • Robert A. Scalapino is Robson Research Professor of Government and Director of the Institute for East Asian Studies of the University of California at Berkeley. He is also Editor of Asian Survey.
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