Courtesy Reuters

The United States and Asia

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A seismic shift is under way in the Asian-Pacific region, a shift in the structure and balance of political and economic power. This transformation has fundamental implications for America’s future position in the region. For more than four decades U.S. engagement in Asia was based on two pillars: a Cold War commitment to Asian security and America’s extraordinary economic power. Both of these foreign policy premises are now gone: the Cold War ended suddenly and dramatically; American economic hegemony has waned more slowly but with no less drama.

Should America attempt to conduct its relations with the region as in the past, its capacity for effective leadership will rapidly shrink; the foundations of the style and type of leadership America previously exercised no longer exist. As the political leverage of military power decreases, economic power will count for more. The United States must come to terms with the fact that its relative economic weight in a region that has seen an unprecedented era of economic progress has substantially declined. The economic power of Japan and many other Asian nations has increased enormously. No other recent event demonstrated this point more vividly than President Bush’s controversial mission to Japan in January 1992.

At the same time American security interests in Asia seem in better shape today than at any time in nearly a century. After three major wars and a long standoff with the Soviet Union, the Asian-Pacific region is stable. The Soviet Pacific fleet that appeared so formidable just a few years ago is now rusting at its moorings in Vladivostok and Cam Ranh Bay. There is no major threat to regional security, except perhaps the still unresolved division of the Korean peninsula, and for the first time since before Pearl Harbor U.S. military forces in the Pacific have no readily identifiable opponent.

Any future American military presence in the Asian-Pacific region will thus translate into far less, in terms of political influence and leadership capacity. Washington insists that it will continue to exercise leadership in the region, and most Asian nations appear to hope that it will. Both sides recognize their own interests in healthy trans-Pacific relations; they fear the uncertainty that would accompany any substantial weakening of America’s regional engagement. But America’s own ability and willingness to maintain a significant regional military presence is increasingly called into question.

A strong overall American presence in the Asian-Pacific region will require new structures of cooperation and fresh attitudes on both sides of the Pacific. Despite growing domestic concerns and its Cold War victory, America cannot afford the illusion that Asia is now unimportant to its national interests. For more than four decades the United States tended to view its interests in Asia principally in Cold War terms. In an important sense, however, U.S. relations with Asia, particularly northeast Asia, transcend that struggle. Even before the Cold War, U.S. foreign policy was predicated on the idea that stability in western Europe and northeast Asia was critical to America’s own interests. It was this conviction that originally compelled America’s policy of containment, and that objective national interest remains true today.

II

The Asian-Pacific region as a whole enjoyed the highest rate of economic growth in the world in the 1980s. A few countries such as the Philippines still lag behind, severe income disparities remain within the region and some countries, but nearly all Asian nations have made impressive progress in reducing poverty. There is every reason to believe this strong economic performance will continue into the next century: savings rates are high; market-oriented policies prevail; national economies are increasingly open; and trade within the region is growing strongly.

Economic progress has been accompanied by movement toward more democratic political systems. China is of course the major exception, and communist regimes still hold on stubbornly in Vietnam and North Korea, as does a brutal clique in Burma. There is also an occasional setback to democracy, such as the military coup in Thailand in February 1991. But much of Asia saw a growing political pluralism in the 1980s, a loosening of authoritarian systems as well as a marked increase in the transparency and accountability of government.

Asians themselves are primarily responsible for their own economic and political successes. They have made the short-term sacrifices necessary to mobilize savings and raise investment rates, and Asian political leaders and citizens have taken the personal risks necessary to bring political liberalization. The United States, however, can also claim considerable credit for Asia’s economic and political accomplishments. Throughout the Cold War America provided a security umbrella for the region that enabled Asian countries to concentrate on national development. The American private sector has provided capital, technology and managerial skills to Asian economies, and U.S. taxpayers have contributed billions of dollars in official development assistance—bilaterally as well as through multilateral lending agencies. Moreover a huge American market absorbs a large share of the commodities and manufactured products exported by the newly industrialized Asian economies.

At the same time the United States has been a major beneficiary of Asia’s economic and political dynamism. U.S. trans-Pacific trade now exceeds trade with Europe by nearly a third. The U.S. economy has also accrued substantial benefits from American investments in Asia. And Asia’s capital surpluses, principally Japan’s, have in recent years helped cover essential U.S. investment needs in the face of huge federal deficits and a falling national savings rate.

Given this favorable assessment it is perhaps understandable that Asia ranks far down on the current list of American concerns. The uncertain prospects for political and economic transformation in the former Soviet Union, the challenges of eastern Europe and the instabilities of the Middle East seem to demand most of the time and energy of senior Bush administration officials. America is also now more preoccupied with its own domestic condition than at any time since the beginning of World War II, and as it struggles with an accumulation of domestic issues it appears to have scant energy left for foreign policy concerns.

III

Although the region’s security outlook has improved since the end of the Cold War, when viewed from Asia it is actually somewhat less benign than it appears at first glance. An intransigent Stalinist regime in North Korea seems bent on acquiring a nuclear capacity. The fragility of the political settlement process in Cambodia risks the threat of further conflict in Indochina. There exists concern over both the possible effects of internal Chinese political struggles on Beijing’s behavior toward its neighbors and the longer-term consequences for regional stability of growing Chinese economic power. Notwithstanding the disintegration of the Soviet Union, Russia will remain a major presence in northeast Asia. Its own internal turmoil and unsettled territorial disputes with eastern neighbors could make it a cause of regional insecurity.

Among Asians there is also an unfocused yet nonetheless real concern that America will precipitously scale back its regional military presence, possibly sparking a regional race to fill the resulting vacuum. The Bush administration insists that America will stay militarily engaged in the western Pacific, but the future of U.S. deployments in the region appears uncertain.

The United States currently has about 130,000 military personnel deployed in Asia, mostly in Japan, South Korea and the Philippines. Secretary of Defense Dick Cheney announced in 1990 that by the end of 1992 those forces would be reduced by 12 percent. At that time it was generally recognized that this reduction probably presaged a more substantial but gradual drawdown of American forces. But events since Cheney’s original announcement make it likely that the actual force reductions will be both more substantial and more rapid than predicted even a year ago.

Earlier Pentagon planning assumed a continued American military presence in the Philippines, an assumption overturned by the eruption of Mount Pinatubo and the action of the Philippine senate. It now seems likely that by the end of 1992, for the first time since 1898 (with a brief interruption during World War II), the United States will have no significant military presence in the Philippines. Some of those forces may be relocated elsewhere in Asia, but many of them are likely to be pulled back to Hawaii or even the continental United States, as was the case in 1990 with the fighter squadrons redeployed to Alaska from Clark Air Base. The costs of relocating forces and physical installations to Guam or other U.S. Pacific territories would probably be prohibitive, especially given the budget climate likely to prevail in Washington over the next several years.

Political considerations in the region will also play a role in determining future levels of U.S. deployments, particularly in South Korea and Japan. To signal U.S. concern over North Korea’s nuclear program, for example, the Bush administration recently announced a delay until after 1992 of the previously anticipated withdrawal of some American forces from South Korea. Over time, however, political considerations are more likely to act in the opposite direction. Any serious move toward ending the division of the Korean peninsula, for instance, would likely bring a substantial drawdown or even complete withdrawal of U.S. forces from South Korea.

The future of the large American military presence in Japan is also subject to political uncertainties. Many Japanese and most Asians continue to regard those American forces as important to regional security and a symbol of constructive collaboration between the two nations. But many Americans ask why, with Japan’s economic power and the end of the Soviet threat, the United States should continue to provide for Japanese security, particularly when American companies and workers face growing competition from Japanese producers.

In the short term, political and budgetary pressures will undoubtedly cause Washington to seek a larger contribution from Japan toward the costs of the U.S. military deployment there. But Japan is already paying virtually all of the local costs of those U.S. forces, and some Japanese are already asking: If Filipinos will not accept a continued American military presence when the United States is willing to pay them to do so, why should Japanese accept a continued American deployment for which Japan is expected to pay?

Even if both Japan and the United States see their interests in continuing an American military presence, this will almost certainly be on a smaller scale. Any long-term stationing of American military forces will require a redefinition of the rationale of the U.S.-Japanese security alliance and a politically acceptable agreement as to the purpose of those forces. More important, any revitalized security agreement will have to be part of a strong well-managed U.S.-Japanese relationship, the construction of which will be a challenging task.

As forward deployments of U.S. air and land forces in Asia are scaled back, Washington will rely more on the navy to provide evidence of America’s continuing security interest in the western Pacific. The navy’s capabilities are also likely to decline significantly over the next several years. While the navy may escape the full impact of defense spending cuts, its total number of active ships is slated to fall to about 350 by the mid-1990s from about 600 today. Given the requirements for an American naval presence in other parts of the world, there will almost certainly be a reduction in naval stationing in the western Pacific.

In sum this combination of factors will in the relatively near future bring about a sizeable reduction in the U.S. military presence in Asia. As a result the American bilateral security commitments with key Asian countries, which have provided the basic framework of regional security, will be changed at least superficially, if not substantially. The question thus arises whether some type of new multilateral security structure is needed as an important political supplement to the U.S. bilateral arrangements.

Geography and history make it unlikely that Asian countries could develop multilateral security arrangements similar to those likely to emerge in western Europe. It may nonetheless be appropriate that the United States lead in encouraging a regional forum on security to address issues such as territorial disputes and arms limitation. Such a forum could only be developed incrementally and should include both China and Russia. One of its primary aims would be to reduce the likelihood that Japan or any other regional power might feel the need to develop the capacity to project military power within the region as the U.S. military presence declines. Another advantage of such a forum could be to address cost-sharing for regional security on a multilateral basis, rather than bilaterally, where it is inevitably a more contentious issue. A multilateral approach could thus make it easier to blunt U.S. domestic political opposition to any continued American contribution to Asian security.

IV

America’s future role in the Asian-Pacific region must also take into account the pronounced shift of national economic weight that has occurred over the past decade. This changed balance of economic power has implications for America’s leadership capacity that are perhaps more important than those in the security realm.

In the late 1940s the United States accounted for nearly 50 percent of world output in goods and services. By 1990 that share had fallen to about 24 percent, roughly the same level as in the period just before World War II. This is not necessarily a sign of national failure. America’s postwar economic preeminence was an aberration caused by the fact that the United States was the only industrial power to emerge economically unscathed from the war. Moreover America’s current share of global output is 24 percent of a far larger total than before, and America’s standard of living is immeasurably higher than a half century ago.

More startling is the rise of Japan’s relative economic weight, which has grown to about 16 percent of world production from virtually zero immediately after the war. While Japan is still Asia’s dominant economic power, accounting for at least two thirds of regional output, much of the rest of Asia has grown rapidly as well. South Korea, Taiwan, Hong Kong and Singapore—the so-called Asian Tigers—have expanded impressively for more than a decade. Thailand, Malaysia and others are now approaching the status of newly industrialized countries. China has also achieved rapid economic growth over the last decade. The region as a whole is now roughly an economic equal of both North America and western Europe.

Americans are acutely aware of Asia’s growing global economic weight. Asian consumer goods and capital equipment have won increasing shares of the U.S. market, and American companies find themselves in fierce competition with Asian producers in international markets. U.S. trade deficits with several Asian countries, especially Japan, have strained bilateral relations, particularly as the overall U.S. trade deficit grew in the 1980s. Less understood by Americans, however, is how substantially the balance of economic power within the Asian-Pacific region itself has shifted away from the United States and how that inevitably changes the distribution of political influence in the area. Indeed economic transactions among the region’s nations are now more important to many Asians than those with the United States.

A major shift, for example, has already occurred in the investment roles of the United States and Japan in the Association of Southeast Asian Nations: Indonesia, Malaysia, Singapore, Thailand, the Philippines and Brunei. ASEAN has long been an area of interest for both Japanese and American companies. Direct investment by American companies in ASEAN nations in 1980 was about $5 billion, not much less than the roughly $7 billion invested by Japanese firms. Even as recently as 1986 U.S. direct investment doubled to $10 billion; Japan’s rose apace to just under $15 billion. But by 1989 American investment had stalled at the same level while Japanese investment soared to $23 billion.

The most important reason for the surge in Japanese investment was the rise beginning in 1985 in the value of the yen. Japanese companies were desperate to get out from behind an appreciating yen as the currency traded at 125-130 to the dollar from its previous 260. In order to remain competitive in U.S. and European markets they embarked on a massive redeployment of production facilities from Japan to Thailand, Malaysia, Indonesia and to a lesser extent the Philippines. The strategy worked, and in the process Japanese firms also positioned themselves to meet the growing demand for capital equipment and consumer goods in those large southeast Asian markets.

It is more difficult to understand why American direct investment stagnated in the last half of the 1980s. ASEAN nations as a group constitute the fifth largest U.S. trading partner. While America’s firms did not have the same powerful incentives to expand their presence in southeast Asia, U.S. investment there had been steadily rising since the end of the Vietnam War. Indeed American private investment in ASEAN economies more than tripled in 1976-86, to $10 billion from $3 billion. A fall in the value of the dollar—the other side of the yen’s rise—would account for only a part of sluggish American investment; the currencies of most other Asian nations remained relatively stable against the dollar, and the dollar cost of investment in those countries was nearly constant. The failure of American investors to keep pace with both the Japanese performance and southeast Asia’s vigorous economic growth must lie in the U.S. economy itself: growing budget deficits, a declining national savings rate and of course the high cost of investment capital, particularly relative to the capital costs enjoyed in the second half of the 1980s by the Japanese.

Japan is not the only Asian source of new investment capital for southeast Asia. While the data are incomplete, it is clear that both South Korea and Taiwan are also moving rapidly to invest in ASEAN nations, as well as in China. Thus the developing countries of southeast Asia in need of investment and technology for modernization are now looking north, not across the Pacific. Moreover trade within Asia, particularly that with Japan, is beginning to reflect this new pattern of investment flows. The United States remains a vital market for Asian exports, including those produced at facilities in southeast Asia owned by Japanese, Koreans and Taiwanese. But for all Asian nations, exports to other Asian countries account for a growing share of total sales abroad. Asian exports to the United States are declining in percentage terms.

Korea is a good example. It sold 40 percent of total exports to the United States in 1986 and only 25 percent to the rest of Asia. By 1990 the percentage of Korean exports going to the United States had fallen to 30 percent, and sales to Asia had risen to 34 percent. Even the Philippines, a country with historical links to the United States, is experiencing a shift in the structure of its foreign trade. In 1986, 24 percent of Philippine imports came from the United States. By 1989 that figure had declined to 19 percent, and the share coming from other Asian nations rose to 46 percent from 42 percent.

A corresponding shift has also been underway for some time in the flow of official development assistance within the Asian-Pacific region. In the first couple of decades after World War II the United States was far and away the principal source of foreign aid to developing Asian countries. In the 1970s Japan rightly began to assume more of the burden of regional development assistance, and U.S. foreign aid was focused more in other areas, including the Middle East and Central America. And by 1980 Japanese bilateral aid to Asian countries was slightly above that of the United States, $1.4 billion versus $1.3 billion.

Total Japanese development assistance is now roughly equal to that of the United States, about $10 billion annually. By 1989 U.S. bilateral aid to Asia had risen slightly, to $1.8 billion. But Japanese bilateral aid flows to Asian nations had more than tripled, to $4.3 billion. Moreover the share of American aid to Asia can be expected to decline with the withdrawal of U.S. military installations from the Philippines and a likely corresponding reduction in American assistance to that country.

V

After some hesitancy the United States has placed its political weight behind the new Asian Pacific Economic Cooperation, an emerging organization that includes both Asian and non-Asian countries of the trans-Pacific community. APEC is billed as a regional institution that will serve as a vehicle for consultation on a full range of economic and other nonsecurity issues including trade, investment, macroeconomic policy, the environment and energy.

While the eventual institutional shape and content of APEC are still not defined, U.S. support for the organization shows that America has begun to realize that, as U.S. economic power in the region declines, new structures must be found to advance its economic interests. Other countries will no longer automatically follow the American lead. U.S. leadership will now depend more on consensus building within multilateral institutions. Moreover a number of relatively new international issues such as environmental protection can only be addressed on a multilateral basis.

The effort to launch APEC as the major trans-Pacific economic institution has become linked to recent developments in international trade. Many Asian leaders are worried by an apparent trend toward the formation of regional economic blocs as the primary intergovernmental frameworks for trade, perhaps at the expense of the global trading regime codified in the General Agreement on Tariffs and Trade (GATT).

The U.S. decision to expand its original bilateral trade agreement with Canada into a North American Free Trade Area that also includes Mexico has been particularly disconcerting to Asians. The combination of NAFTA, the European Community’s move toward a single market and the protracted stalemate of the GATT’S Uruguay Round raises serious questions about the durability of the multilateral trading system that has been in place since soon after World War II. To Asians NAFTA seems suspiciously like an American attempt to construct a neighborhood trading system as an alternative to a troubled global regime. Both NAFTA and EC integration strike some Asians as protectionist responses to their surging competition in European and American markets.

The United States argues strongly that NAFTA is not intended to be a regional trading bloc and that it will be compatible with GATT and lead to increased trade within the region without restricting access from abroad. From a strictly legal perspective those arguments are correct: NAFTA will be consonant with the rules of GATT. Over the long term, however, Asians are probably justified in their concerns. Factories in Mexico will have a significant advantage over those in Asia regarding access to U.S. markets. More new jobs will thus be created in Mexico and fewer in Malaysia, Thailand, the Philippines and other developing Asian countries.

It is alternately argued that the growing web of intra-Asian trade and investment centered heavily around Japan has itself begun to constitute a de facto Asian trade bloc. Japan and the other Asian nations are nonetheless global traders and have a major stake in the continued primacy of the global trading system. Their growing trade with one another is a function of economic imperatives, not governmental agreements. Yet it is not surprising that some Asian leaders have begun to talk about the need for a formal Asian grouping as a counterweight to a deepening EC and emerging NAFTA.

The Malaysian proposal for the creation of an East Asian Economic Caucus that would explicitly exclude the United States is the most visible manifestation of Asian concerns. So far Asians have been careful to disavow publicly any intention to create a formal regional trading bloc. There is nonetheless the risk that an EAEC could become just that in reaction to NAFTA and the EC, particularly if the Uruguay Round fails. Even Japan, which had been wary of the Malaysian proposal out of concern for its own global trade interests and opposition from the United States, has signaled a tentative interest in the EAEC.

If the United States wants to head off the development of an East Asian trading bloc, it will need to employ more than rhetoric. It should try, for example, to put some real content into APEC, such as a major initiative in environmental policy. The United States might also explore ways in which Asian countries could be formally associated with western hemispheric trading arrangements. Most important, there should be a redoubling of efforts to bring the Uruguay Round to a successful close.

VI

The U.S.-Japanese relationship is fundamental to the future of America’s position in Asia. Given Japan’s large and ever-increasing economic presence throughout the region, the United States cannot hope to exercise constructive leadership without a healthy and harmonious relationship with Japan. Few things are as unsettling to other Asians as evidence of dysfunction in U.S.-Japanese relations, and in the aftermath of President Bush’s recent trip such evidence is all too apparent.

Current difficulties between the United States and China also trouble Asians. Serious instability in China would jeopardize the well-being of China’s neighbors. That sense of anxiety is only heightened by sharp Sino-American disagreements over trade, human rights and Chinese transfers of nuclear and missile technology. For American policy the challenge with regard to China is to manage the relationship in the short term while maintaining a base for the development of a broader set of policies with an eventual successor regime. That is a formidable task.

Americans tend to view problems with China as far less threatening to their own well-being than the growing strains in Japanese relations. The U.S.-Japanese bilateral relationship has been one of the most successful in recent history. The American security commitment, as well as Japan’s own Peace Constitution and self-imposed limits on defense spending, sheltered Japan to a considerable extent from global politics and allowed the Japanese to concentrate on building their economy. They did so with great success. For the United States the mutual security alliance with Japan was the most important Asian link in its global containment of the Soviet Union. Washington was able to count on Japan to support its political, economic and security leadership. For the rest of Asia close U.S.-Japanese relations provided implicit assurance against Japan again becoming a threat to regional security.

The U.S.-Japanese relationship still works well on one level. The flows of goods, people, technology and capital between the two countries are enormous and growing. More than 350,000 Americans now work for Japanese companies in the United States. Japan is the largest overseas American trading partner and the largest single market for American agricultural products. Most American financial institutions with global aspirations have sought Japanese equity partners. And more and more American companies working at the upper rungs of the technological ladder, including relatively small firms, seek access to Japanese capital and markets.

Despite this unprecedented interdependence, relations are increasingly troubled. Former Assistant Secretary of State for East Asian Affairs Richard Holbrooke put it well: "There is a general sense among many outside observers that the overall relationship is drifting slowly downward." The weakening of the glue once provided by the common security threat from the Soviet Union is one obvious cause of current problems; the stabilizing benefit of the security ties has greatly diminished. But there were growing strains even before that threat declined, and problems in U.S.-Japanese relations go far beyond the loss of a common adversary.

The American and Japanese economic systems are similar in some ways, but they are rooted in very different national cultures and sets of assumptions. Attitudes and practices concerning basic questions such as the relationship between government and private sector, ties between and among individual firms, and corporate governance are substantially different. Despite Japan’s own efforts to open its economy and a steady rise in Japanese purchases of American products, the persistent trade imbalance strengthens the perception in the United States and elsewhere that Japan’s is a closed system and that the Japanese enjoy far more access to the U.S. economy than Americans do to theirs. Such perceptions lead to further American pressures for Japan to change and to increasing Japanese resentment. Japanese perceive American demands as self-serving: Why should the Japanese adapt their own economic practices when, based on current performances, these seem just as good as or even superior to those of the United States?

The situation is complicated by the fact that the two national economies are in different phases. The United States is suffering a decline in real wages and a squeeze on middle-class family incomes; Japan is recording rapid growth in per capita incomes and a rising national living standard. The U.S. economic performance has caused a growing frustration among Americans and a tendency to scapegoat. The Japanese are conveniently available. In Japan, alternately, one finds an almost palpable disdain for what is seen as the inability of the United States to address its own problems.

Most of the strain between the two countries has thus far been confined to the bilateral relationship. Japan has long been content to play a subordinate role to the United States on most regional and global issues. But there are new domestic and foreign pressures on Japan to begin playing a larger role on the international stage, a role more commensurate with its economic power. Washington urges Japan to accept greater international responsibility, yet there has been little progress in devising the new bilateral and multilateral structures that would help Japan do so. This failure creates still another potential for disagreement between the United States and Japan over both means and goals. The bilateral controversy over the form and size of Japan’s contribution to the U.S.-led coalition in the Gulf War is but the most visible example.

In part the problem lies in different world views. Despite its relative youth as a country, the United States has a well-established tradition of involvement and interaction with the international community. Moreover during the past 40 years America has become accustomed to leading and Japan following. Despite its long history as a nation-state, Japan lacks a strong tradition of constructive international engagement. It is accustomed to dealing with the rest of the world as something "out there," not as a wider community in which Japan has a natural role.

Americans tend to assume that the legacy of mistrust and resentment left by Japanese aggression earlier in this century inhibits Japan from exercising leadership in Asia independently of the United States. Until now, that has been the case. Suspicion and mistrust of Japan and its motives indeed exist in Asia, and there is no doubt that both Japan and its neighbors would strongly prefer that Japan’s regional position and influence evolve in close cooperation with the United States. It is also clear, however, that memories of World War II are less and less acute among new generations of Asian leaders. As Japan’s economic power rises, Asian countries are increasingly looking to Japan rather than the United States for support in their own drives toward economic modernization. Japanese economic power inevitably translates into political power.

There is no easy formula for mutually satisfactory relations between the United States and Japan, either bilaterally or on a regional basis. Frank dialogue and farsighted political leadership are required of both countries. So far both have occurred in insufficient quantities, allowing emotionalism to build in each nation. The impact of President Bush’s recent visit to Japan may be especially damaging in this regard. In the past the United States has carried many unpleasant messages to Japan about what the Japanese should or should not do regarding trade policy and other issues. No matter how gracelessly these messages may have been delivered, they were usually accepted and acted upon by the Japanese because they were fundamentally right. This time the message was wrong. The American recession was not made in Japan, and if American manufacturers want to sell more automobiles in Japan, those companies will have to design, build and market the automobiles the Japanese want to buy. A further unintended but likely effect of President Bush’s message will be to diminish the credibility within Japan of those Japanese who want to continue giving high priority to maintaining good relations with the United States.

Japan needs to build a domestic consensus to support its constructive engagement in the international security and economic systems from which it derives such obvious benefit. Gradual liberalization of rice imports, for example, is not simply an American demand on Japan; it is a necessary Japanese contribution to strengthening the multilateral trading regime in which Japan has a fundamental stake. The United States needs to adopt a new style of leadership based on real consultation and consensus building. The two countries together need to find new areas of concrete cooperation to compensate for the diminished importance of their bilateral security ties as a balance to their economic competition. The environment, research and development in new energy technologies, and disaster relief are a few possibilities. The joint launching of such initiatives in APEC would help to give that organization a sense of purpose.

VII

The shifting weights of the United States, Japan and other Asian nations in the regional and global economies, the lifting of the common security threat and the strained U.S.-Japanese relationship—all emerging more or less simultaneously—have combined to create new perceptions on both sides of the Pacific about America’s relations with the region.

There is, however, a final cloud of uncertainty that looms over America’s future position in Asia, one that is more difficult to describe and virtually impossible to document empirically. It may nonetheless be the most important factor in determining the U.S. role in the region: America’s moral authority. The United States is in danger of losing that stature, not so much for anything it is doing in Asia, but for what Asians perceive America is doing to itself.

In Asia, as in few other regions of the world, the moral authority of U.S. leadership was founded on the attraction of American ideals and the unique successes of the American political and economic system. Generations of Asians saw the United States as a model toward which they should strive in their own efforts at nation building. The durability and underlying equity of America’s social contract, the nation’s economic dynamism and expanding middle class as well as its confidence in the principles on which its government was founded were all once widely admired.

But today America’s inability or unwillingness to summon the national resolve to address serious social and economic problems corrodes its ability to exercise effective international leadership. Asian leaders find it incomprehensible that the United States does not recognize the inevitable consequences for its national power of its mounting debt, declining savings rate, crumbling infrastructure, growing income disparities and inadequate educational system. This Asian concern over America’s domestic problems has gained considerable resonance in the United States.

There is now a tendency among Americans to attribute many internal problems to excessive international commitments. This line of reasoning creates a false and even dangerous choice. The already evident reduction of American commitments abroad, perhaps desirable on its own terms, is not a panacea for domestic problems. Even slashing U.S. defense spending by half—a development that seems increasingly likely over the next several years—frees up no more than three percent of America’s gross national product. While that is a significant savings, America spends more than 12 percent of GNP on health care, some 8-9 percent on education and 3.5 percent to service its national debt. The size and effectiveness of these expenditures must also be addressed on their own terms. Defense savings do not translate directly into cures for domestic ills; reducing defense spending and foreign aid should not be mistaken as a strategy for solving America’s internal problems.

Americans increasingly feel the need to pursue a narrower international agenda. Absent a global adversary, U.S. national security is no longer at the same risk it was during the Cold War. National priorities can and should be adjusted accordingly. America’s unaddressed list of domestic social and economic concerns increasingly impacts on its capacity for effective international leadership. If the United States is to continue to influence favorably the future economic and security structures of a region as dynamic as the Asian-Pacific, much will depend on its own economic strength, renewed social cohesion and the foresight of its political leadership.

In the meantime there is a growing feeling among Asians that the United States may no longer be all that relevant to their future. But America is a Pacific nation, and it has a fundamental interest in the security and economic well-being of the Asian-Pacific region. Even while increasingly focused on domestic concerns, Americans must keep in mind that what happens in Asia is of great importance to the United States. The narrow dictates of self-interest alone argue that the United States cannot afford to be cut off from Asia’s economic dynamism: the region provides a rapidly growing market for American products; Asian competition is a powerful force for greater American efficiency; and the federal budget deficit mandates that America tap Asian savings for the foreseeable future. The form and nature of America’s commitment to the Asian-Pacific region must adapt to changed domestic and international circumstances, yet America cannot afford the luxury of disengagement.

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