The COVID-19 pandemic has disrupted economies and expectations for economic growth and development the world over. But even before the pandemic, Asian economies were reassessing their growth strategies.

In a podcast conversation about the new edited volume Shifting Gears in Innovation Policy: Strategies from Asia, APARC's Korea Program Deputy Director Yong Suk Lee discusses some of the impediments Asian countries face in trying to encourage economic development and entrepreneurship, but also the inherent strengths that could allow innovative strategies take hold and grow in East Asia. Listen to the full conversation below.

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Edited by Lee, Gi-Wook Shin, and Takeo Hoshi, Shifting Gears in Innovation Policy is the first of three volumes resulting from APARC's Stanford Asia-Pacific Innovation project that produces policy research to promote innovation and entrepreneurship in East Asia and the greater Asia-Pacific region.

Lee explains, “Many Asian countries achieved economic growth by importing new technologies from advanced economies like the U.S., using them very effectively, and then expanding exports. But now where East Asia stands, many of these countries have already successfully caught up to the technological frontier of advanced economies, so if they want to maintain growth, there needs to be a shift in their strategies.”

The shift Lee and the other volume authors propose is one towards economic growth that is driven by innovation and entrepreneurship rather than the ‘catch-up’ model that Asian economies have commonly relied on. Unlike startup hubs such as the San Francisco Bay Area of California, Asian countries often lack an entrepreneurial tradition because of antagonistic financial structures and differences in cultural definitions of success. These additional financial and social risks have cast entrepreneurial endeavors in an unattractive light for multiple generations of workers.

But encouraging entrepreneurship and endemic innovation are crucial to maintaining stable economic growth. With rapidly aging populations, greater interconnections in both trade and diplomacy, and transformation in the workforce, workplace, and work itself, effectively adapting development strategies to meet present and future challenges remains a central priority for East Asia policymakers and innovators alike. As Lee advises, “There’s strong infrastructure in East Asia, both physically and digitally, which is a great advantage. But they’re now at a frontier with no trajectory to follow, and there needs to be indigenous growth and continuous innovation in order to not be surpassed by competitors.”

President Trump hosted Chinese President Xi Jinping last week at Mar-a-Lago for their first meeting which set out to address economic, trade and security challenges shared between the two countries. Shorenstein Asia-Pacific Research Center (APARC) experts offered analysis of the summit to various media outlets.

In advance of the summit, Donald K. Emmerson, an FSI senior fellow emeritus and director of the Southeast Asia Program, wrote a commentary piece urging the two leaders to prioritize the territorial disputes in the South China Sea in their discussions. He also suggested they consider the idea of additional “cooperative missions” among China, the United States and other countries in that maritime area.

“A consensus to discuss the idea at that summit may be unreachable,” Emmerson recognized in The Diplomat Magazine. “But merely proposing it should trigger some reactions, pro or con. The airing of the idea would at least incentivize attention to the need for joint activities based on international law and discourage complacency in the face of unilateral coercion in violation of international law.”

Kathleen Stephens, the William J. Perry Fellow in Shorenstein APARC’s Korea Program, spoke to the Boston Herald about U.S. policy toward North Korea and a potential role for China in pressuring North Korea to hold talks about denuclearization. She addressed the purported reports that the National Security Council is considering as options placing nuclear weapons in South Korea and forcibly removing North Korean leader Kim Jong-un from power.

“The two options have been on the long list of possible options for a long time and they have generally been found to have far too many downsides,” Stephens said in the interview.

Writing for Tokyo Business Today, Daniel Sneider, the associate director for research at Shorenstein APARC, offered an assessment of the summit. He argued that two events - the U.S. airstrike on an airbase in Syria following the regime's chemical weapons attack and the leaked reports about tensions between White House staff - shifted the summit agenda and sidelined, at least for now, talk of a trade war between China and the United States.

“Instead of a bang, the Mar-a-Lago summit ended with a whimper,” Sneider wrote in the analysis piece (available in English and Japanese). “On the economy, the summit conversation was remarkably business-as-usual, with President Trump calling for China to ‘level the playing field’ and a vague commitment to speed up the pace of trade talks. When it came to North Korea…the two leaders reiterated long-standing goals of denuclearization but ‘there was no kind of a package arrangement discussed to resolve this.”

Stanford scholars are encouraging the new administration to consider steps to alleviate the uncertainty and anxiety felt by countries in East Asia about U.S. intentions toward the region.

President Donald Trump’s anti-China rhetoric during his campaign and his recent withdrawal of the U.S. from the Trans-Pacific Partnership have contributed to the unease in the region, which is drifting in ways that are unfavorable for American interests, they said.

Stanford’s Walter H. Shorenstein Asia-Pacific Research Center (APARC) recently published a 27-page report with recommendations on topics of trade and defense that would improve relations between the U.S. and Asian countries. The report, co-authored by eight Stanford scholars, is aimed to help shape U.S. policies in the region.

“The advent of any new administration provides an opportunity to reassess policy approaches,” wrote Gi-Wook Shin, director of the Shorenstein center. “A new mandate exists, and it is our hope that that mandate will be used wisely by the new administration.”

Trade and defense

The biggest trade concern for experts in the region is President Trump’s decision to withdraw the U.S. from the Trans-Pacific Partnership (TPP) and his intention to focus on bilateral agreements instead of multinational pacts.

The agreement, which bound 12 countries in the region by a set of international trade and investment rules, had problems, Stanford scholars said. For example, some have criticized the treaty for not requiring full compliance with international labor standards for all the participating countries. Also, the rules of origin, which were supposed to give preferential treatment to countries in the TPP, were deemed to be weak by many, allowing goods produced outside the TPP to receive benefits.

But it would not be wise or efficient for the U.S. to start negotiations from scratch in the region because the U.S. withdrawal from the agreement, which was touted as a model for the 21st century, already has hurt its credibility with other Asian countries, said Takeo Hoshi, director of the Japan Program at the Shorenstein Center. In addition, Asian countries view the idea of bilateral agreements as an attempt to force trade deals on them that disproportionately benefit the U.S., he said.

“The TPP was not perfect and many problems remain, but they are not removed by abandoning the TPP,” Hoshi wrote in the report. “Completely abandoning the TPP could hurt not only the U.S. economy but also erode U.S. leadership in Asia.”

Hoshi said the U.S. should rely on aspects of TPP that are consistent with the current U.S. trade policy when creating new bilateral agreements, while maintaining and improving existing free trade agreements with other Asian countries.

Another immediate concern for scholars is the maintenance of security and stability in the region.

“The region is unsettled because of uncertainty about us,” said Thomas Fingar, a Shorenstein APARC fellow. “The U.S. has long served as the guarantor of prosperity and security in the region but Asians are no longer convinced that we have the will or ability to do so. This has real consequences … It’s not simply because they are already beginning to act as if we intend to play a less active or positive role.”

If China’s national power and economy continue to expand, it will become increasingly difficult to maintain stability in the region if the U.S. does not continue to play a constructive role. Possible dangers include escalation of tensions between China and the U.S. or its allies following accidents or tactical encounters near areas over which China claims sovereignty.

In the report, scholars recommend a comprehensive review of security in the region to make sure military plans are in place that prioritize management of a possible collapse of North Korea or a sudden military strike coming from the country. Other priorities should include peaceful resolution of China-Taiwan differences and ensuring military access in the South China Sea and East China Sea, wrote Karl Eikenberry, director of the U.S.-Asia Security Initiative at the Shorenstein Center.

“The United States also should engage in a more long-range, exploratory strategic dialogue, first with allies and partners, and then with Beijing, to identify potential areas of mutual interest that can help prevent the unintended escalation of conflicts and reduce already dangerous levels of misperception and mistrust on both sides,” Eikenberry wrote.

China is key

Maintaining a peaceful, productive relationship with China should be of the utmost importance for the U.S., according to the Stanford scholars.

“Managing America’s multifaceted relationship with China is arguably the most consequential foreign policy challenge facing the new administration,” Fingar said.

Although President Trump’s anti-China rhetoric during his campaign made Asian countries anxious about the future, China has been criticized by many American leaders before. Ten previous U.S. presidents were critical of China during their campaigns, but once they assumed office, their tone changed and they adopted a more pragmatic view of U.S. interests in the area, Fingar wrote.

However, while in the past China’s political moves have been predictable for the most part, now that its economy is slowing, the country is increasingly relying on social control and nationalism to reinforce regime legitimacy. This makes China less predictable, according to Fingar.

But the scholars say that there are several opportunities to approach the relationship with China in a way that is beneficial for the U.S. and the rest of the region.

One such opportunity would be for the U.S. to declare its willingness to join China’s newly created Asian Infrastructure Investment Bank, which was formed in early 2016 to support construction projects in the Asia-Pacific region. This would be an “any outcome we win” opportunity that would showcase the U.S. desire to cooperate with China and help establish the region’s confidence in the U.S., Fingar said.

The new administration should also consider pushing for a quick completion of a Bilateral Investment Treaty with China – something that two previous U.S. administrations were not able to achieve. Creating this agreement would help protect things that are important to the U.S. businesses and reassure the willingness of the U.S. to deepen its relationship with China, according to Fingar.

“In my view, how we’re going to establish or reestablish relations with China is key,” Shin said. “Will there be more tension? That’s really important. This affects not only the U.S., but also our allies in the region.”

Alex Shashkevich is a writer for the Stanford News Service.

As a new U.S. administration assumes office next year, it will face numerous policy challenges in the Asia-Pacific, a region that accounts for nearly 60 percent of the world’s population and two-thirds of global output.

Despite tremendous gains over the past two decades, the Asia-Pacific region is now grappling with varied effects of globalization, chief among them, inequities of growth, migration and development and their implications for societies as some Asian economies slow alongside the United States and security challenges remain at the fore.

Seven scholars from Stanford’s Shorenstein Asia-Pacific Research Center (APARC) offered views on policy challenges in Asia and some possible directions for U.S.-Asia relations during the next administration.

View the scholars' commentary by scrolling down the page or click on the individual links below to jump to a certain topic.

U.S.-China relations

U.S.-Japan relations

North Korea

Southeast Asia and the South China Sea

Global governance

Population aging .

Trade

U.S.-China relations

By Thomas Fingar

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Alarmist predictions about China’s rise and America’s decline mischaracterize and overstate tensions in the relationship. There is little likelihood that the next U.S. administration will depart from the “hedged engagement” policies pursued by the last eight U.S. administrations. America’s domestic problems cannot be solved by blaming China or any other country. Indeed, they can best be addressed through policies that have contributed to peace, stability and prosperity.

Strains in U.S.-China relations require attention, not radical shifts in policy. China is not an enemy and the United States does not wish to make it one. Nor will or should the next administration resist changes to the status quo if change can better the rules-based international order that has served both countries well. Washington’s objective will be to improve the liberal international system, not to contain or constrain China’s role in that system.

The United States and China have too much at stake to allow relations to become dangerously adversarial, although that is unlikely to happen. But this is not a reason to be sanguine. In the years ahead, managing the relationship will be difficult because key pillars of the relationship are changing. For decades, the strongest source of support for stability in U.S.-China relations has been the U.S. business community, but Chinese actions have alienated this key group and it is now more likely to press for changes than for stability. A second change is occurring in China. As growth slows, Chinese citizens are pressing their government to make additional reforms and respond to perceived challenges to China’s sovereignty.

The next U.S. administration is more likely to continue and adapt current policies toward China and Asia more broadly than to pursue a significantly different approach. Those hoping for or fearing radical changes in U.S. policy will be disappointed..

Thomas Fingar is a Shorenstein Distinguished Fellow and former chairman of the U.S. National Intelligence Council. He leads a research project on China and the World that explores China’s relations with other countries.

U.S.-Japan relations

By Daniel Sneider

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Three consecutive terms held by the same party would certainly preserve the momentum behind the ‘pivot to Asia’ strategy of the last few years, especially on the security front. Still there are some dangers ahead. If Japan moves ahead to make a peace treaty with Russia, resolving the territorial issue and opening a flow of Japanese investment into Russia, that could be a source of tension. The new administration may also want to mend fences early with China, seeking cooperation on North Korea and avoiding tensions in Southeast Asia.

The big challenge, however, will be guiding the TPP through Congress. While there is a strong sentiment within policy circles in favor of rescuing the deal, perhaps through some kind of adjustment of the agreement, insiders believe that is highly unlikely. The Sanders-Warren wing of the Democratic party has been greatly strengthened by this election and they will be looking for any sign of retreat on TPP. Mrs. Clinton has an ambitious agenda of domestic policy initiatives – from college tuition and the minimum wage to immigration reform – on which she will need their support. One idea now circulating quietly in policy circles is to ‘save’ the TPP, especially its strategic importance, by separating off a bilateral Japan-U.S. Free Trade Agreement. Tokyo is said to be opposed to this but Washington may put pressure on for this option, leaving the door open to a full TPP down the road. .

Daniel Sneider is the associate director for research and a former foreign correspondent. He is the co-author of Divergent Memories: Opinion Leaders and the Asia-Pacific Wars (Stanford University Press, 2016) and is currently writing about U.S.-Japan security issues.

North Korea

By Kathleen Stephens

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From an American foreign policy perspective, North Korea policy challenges will be inherited by the next president as “unfinished business,” unresolved despite a range of approaches spanning previous Republican and Democratic administrations. The first months in a new U.S. president’s term may create a small window to explore potential new openings. The new president should demonstrate at the outset that North Korea is high on the new administration’s priority list, with early, substantive exchanges with allies and key partners like China to affirm U.S. commitment to defense of its allies, a denuclearized Korean Peninsula and the vision agreed to at the Six-Party Talks in the September 2005 Joint Statement of Principles. Early messaging to Pyongyang is also key – clearly communicating the consequences of further testing or provocations, but at the same time signaling the readiness of the new administration to explore new diplomatic approaches. The appointment of a senior envoy, close to the president, could underscore the administration’s seriousness as well as help manage the difficult policy and political process in Washington itself.

2017 is a presidential election year in South Korea, and looks poised to be a particularly difficult one. This will influence Pyongyang’s calculus, as will the still-unknown impact of continued international sanctions. The challenges posed by North Korea have grown greater with time, but there are few new, untried options acceptable to any new administration in Washington. Nonetheless, the new administration must explore what is possible diplomatically and take further steps to defend and deter as necessary. .

Kathleen Stephens is the William J. Perry Distinguished Fellow and former U.S. ambassador to the Republic of Korea. She is currently writing and researching on U.S. diplomacy in Korea.

Southeast Asia and the South China Sea

By Donald K. Emmerson

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A new U.S. administration will be inaugurated in January 2017. Unless it wishes to adapt to such outcomes, it should:

(1) renew its predecessor’s refusal to endorse any claim to sovereignty over all, most, or some of the South China Sea and/or its land features made by any of the six contending parties—Brunei, China, Malaysia, the Philippines, Taiwan, Vietnam—pending the validation of such a claim under international law.

(2) strongly encourage all countries, including the contenders, to endorse and implement the authoritative interpretation of the U.N. Convention on the Law of the Sea (UNCLOS) issued on July 12, 2016, by an UNCLOS-authorized court. Washington should also emphasize that it, too, will abide by the judgment, and will strive to ensure American ratification of UNCLOS.

(3) maintain its commitment to engage in publicly acknowledged freedom of navigation operations (FONOPs) in the South China Sea on a regular basis. Previous such FONOPs were conducted in October 2015 by the USS Lassen, in January 2016 by the USS Wilbur, in May 2016 by the USS Lawrence, and in October 2016 by the USS Decatur. The increasingly lengthy intervals between these trips, despite a defense official’s promise to conduct them twice every quarter, has encouraged doubts about precisely the commitment to freedom of navigation that they were meant to convey.

(4) announce what has hitherto been largely implicit: The FONOPs are not being done merely to brandish American naval prowess. Their purpose is to affirm a core geopolitical position, namely, that no single country, not the United States, nor China, nor anyone else, should exercise exclusive or exclusionary control over the South China Sea.

(5) brainstorm with Asian-Pacific and European counterparts a range of innovative ways of multilateralizing the South China Sea as a shared heritage of, and a resource for, its claimants and users alike. .

Donald K. Emmerson is a senior fellow emeritus and director of the Southeast Asia Program. He is currently editing a Stanford University Press book that examines China’s relations with Southeast Asia.

Global governance

By Phillip Y. Lipscy

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Global economic activity is increasingly shifting toward Asia – most forecasts suggest the region will account for about half of the global economy by the midpoint of the 21^st century. This shift is creating important incongruities within the global architecture of international organizations, such as the United Nations, International Monetary Fund and World Bank, which are a central element of the U.S.-based international order and remain heavily tilted toward the West in their formal structures, headquarter locations and personnel compositions. This status quo is a constant source of frustration for policymakers in the region, who seek greater voice consummate with their newfound international status. 

The next U.S. administration should prioritize reinvigoration of the global architecture.  One practical step is to move major international organizations toward multiple headquarter arrangements, which are now common in the private sector – this will mitigate the challenges of recruiting talented individuals willing to spend their careers in distant headquarters in the West. The United States should join the Asian Infrastructure Investment Bank, created by China, to tie the institution more closely into the existing architecture, contribute to its success and send a signal that Asian contributions to international governance are welcome. The Asian rebalance should be continued and deepened, with an emphasis on institution-building that reassures our Asian counterparts that the United States will remain a Pacific power. .

Philip Y. Lipscy is an assistant professor of political science and the Thomas Rohlen Center Fellow. He is the author of the forthcoming book Renegotiating the World Order: Institutional Change in International Relations (Cambridge University Press, 2017).

Population aging

By Karen Eggleston

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China’s recent announcement of a universal two-child policy restored an important dimension of choice, but it will not fundamentally change the trajectory of a shrinking working-age population and burgeoning share of elderly. China’s population aged 60 and older is projected to grow from nearly 15 percent today to 33 percent in 2050, at which time China’s population aged 80 and older will be larger than the current population of France. This triumph of longevity in China and other Asian countries, left unaddressed, will strain the fiscal integrity of public and private pension systems, while urbanization, technological change and income inequality interact with population aging by threatening the sustainability and perceived fairness of conventional financing for many social programs.

Investment in human capital and innovation in social and economic institutions will be central to addressing the demographic realities ahead. The next administration needs to support those investments as well as help to strengthen public health systems and primary care to control chronic disease and prepare for the next infectious disease pandemic, many of which historically have risen in Asia. .

Karen Eggleston is a senior fellow and director of the Asia Health Policy Program. She is the editor of the recently published book Policy Challenges from Demographic Change in China and India (Brookings Institution Press/Shorenstein APARC, 2016).

Trade

By Yong Suk Lee

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Anti-globalization sentiment has ballooned in the past two years, particularly in regions affected by the import competition from and outsourcing to Asia. However, some firms and workers have benefited from increasing trade openness. The U.S.-Korea Free Trade Agreement of 2012, for example, led to substantial growth in exports in the agricultural, automotive and pharmaceutical sectors. Yet, there are winners and losers from trade agreements. Using an economist’s hypothetical perspective, one would assume firms and workers in the losing industry move to the exporting sector and take advantage of the gains from trade. In reality, adjustment across industries and regions from such movements are slow. Put simply, a furniture worker in North Carolina who lost a job due to import competition cannot easily assume a new job in the booming high-tech industry in California. They would require high-income mobility and a different skill set.

Trade policy needs to focus on facilitating the transition of workers to different industries and better train students to prepare for potential mobility in the future. Trade policy will also be vital in determining how international commerce is shaped. As cross-border e-commerce increases, it will be in the interest of the United States to participate in and lead negotiations that determine future trade rules. The Trans-Pacific Partnership should not simply be abandoned. The next administration should educate both policymakers and the public about the effects of trade openness and the economic and strategic importance of trade agreements for the U.S. economy.

Yong Suk Lee is the SK Center Fellow and deputy director of Korea Program. He leads a research project focused on Korean education, entrepreneurship and economic development.