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It was meant to be a celebration not a showdown, let alone a showdown that the brutal junta in Burma (Myanmar) would win. In August 2007, the Association of Southeast Asian Nations (ASEAN) turned forty. On November 20, to mark the occasion, the heads of government of the association's ten member states-Brunei, Burma, Cambodia, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand, and Vietnam-met in Singapore for the thirteenth ASEAN Summit. A day later the heads of government from Australia, China, India, Japan, New Zealand, and South Korea joined them for the third East Asia Summit (EAS).

The summitry had three purposes. The first was to commemorate ASEAN's first forty years. From only five members at its inception in 1967, the association had by 1999 grown to encompass all of Southeast Asia's formerly quarrelsome states. For the first time in the region's history, a single indigenous organization could claim to stand for all of Southeast Asia-albeit only by overlooking just how variously accountable ASEAN's diverse regimes were to the peoples whom they presumed to represent.

But ASEAN was not content to rest on these laurels. The second reason for the summitry in Singapore was to prepare the organization for the future. The ASEAN summit's peak event was to be the unveilingand signing of a first-ever charter for the organization.

Finally, the packed schedule in Singapore was meant to project the best possible image of ASEAN to the assembled foreign guests and the wider world. By inaugurating a charter meant to enhance the association’s effectiveness, the organizers of the celebrations hoped to belie Western criticism that ASEAN was little more than a “talking shop.” They also hoped that showcasing the charter would distract attention from the presence in Singapore of ASEAN’s most widely castigated member, Burma, and thereby gain some relief from Western charges of guilt by association with that pariah state.

It was not to be. The summit was convened and the charter was signed. Plans to implement the ASEAN Economic Community were announced. But the Burmese junta stole the spotlight from these accomplishments in a way that tainted the anniversary, embarrassed the association in front of its foreign guests, and reminded analysts just how tenuously regionalism is related to democracy in Southeast Asia.

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Christian von Luebke is a political economist with particular interest in democracy, governance, and development in Southeast Asia. He is currently working on a research project that gauges institutional and structural effects on political agency in post-Suharto Indonesia and the post-Marcos Philippines. During his German Research Foundation fellowship at Stanford he seeks to finalize a book manuscript on Indonesian governance and democracy and teach a course on contemporary Southeast Asian politics.

Before coming to Stanford, Dr. von Luebke was a research fellow at the Center of Global Political Economy at Waseda (Tokyo), the Institute for Developing Economies (Chiba), and the Center for Strategic and International Studies (Jakarta). He received a JSPS postdoctoral scholarship from the Japan Science Council and a PhD scholarship from the Australian National University.

Between 2001 and 2006, he worked as technical advisor in various parts of rural Indonesia - for both GTZ and the World Bank. In 2007, he joined an international research team at the Institute of Development Studies (IDS) analyzing the effects of public-private action on investment and growth.

Dr. von Luebke completed his Ph.D. in 2008 in Political Science at the Crawford School of Economics and Government, the Australian National University. He also holds a Masters in Economics and a B.A. in Business and Political Science from Muenster University.

His research on contemporary Indonesian politics, democratic governance, rural investment, and leadership has been published in the Bulletin of Indonesian Economic Studies, Contemporary Southeast Asian Affairs, Asian Economic Journal, and ISEAS. He regularly contributes political analyses on Southeast Asia to Oxford Analytica.

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We are pleased to bring you the first dispatch of the new year in our series of Shorenstein APARC Dispatches. This month's piece comes from David Straub, this year's Pantech Fellow. Straub served thirty years in the U.S. Department of State, specializing in Northeast Asian affairs, including as the Department's director of Korean and of Japanese affairs. Since leaving the State Department last year, he has taught U.S.-Korean relations at Johns Hopkins School of Advanced International Studies and Seoul National University's Graduate School of International Studies. At Shorenstein APARC, he is writing a book on U.S.-South Korean relations.

In December 2007, for the first time ever, South Koreans, anxious about the economy, elected a businessman as their president. Pro-growth conservative Lee Myung-bak won a resounding victory, with 49 percent of the vote, over left-center candidate Chung Dong-young, who won only 26 percent. Lee's margin would have been even greater had it not been for the late entry into the race by another conservative, Lee Hoi-chang, who finished third with 15 percent.

Korean voters had become tired of ten years of rule by the left-center, and they saw incumbent President Roh Moo-hyun as confrontational and ineffective. By contrast, Lee, a former Hyundai Engineering and Construction CEO, has a reputation for being a pragmatic, can-do leader. As mayor of Seoul (2002-2006), he beautified the city and reformed its mass transit system.

Lee is scheduled to be inaugurated on February 25 for a single five-year term, but he faces two early challenges. First, just before the election, the left-center camp passed a bill establishing a special prosecutor to investigate allegations that Lee had been involved in business fraud and other corruption. The special prosecutor is supposed to announce his findings before the inauguration. A regular prosecutor earlier found the charges to be unfounded, and most observers think that the special prosecutor will not turn up significant new information.

Second, President-elect Lee must counter centrifugal forces in the conservative party ahead of parliamentary elections on April 5. Lee Hoi-chang's defection has already split the conservative camp, and now President-elect Lee and former conservative party leader Park Geun-hye (daughter of the late President Park Chung Hee) are feuding over how much say each should have in choosing candidates for the parliamentary election.

If President-elect Lee is cleared by the special prosecutor and if he successfully manages relations with Park, Lee's party will likely win a very large majority in the parliamentary election, offering him the opportunity to be a strong and effective executive.

As president, Lee will face two long-term challenges. First, as Lee has promised Korean voters, he must strengthen the economy. While the Korean economy has been growing at a rate of about 5 percent in recent years, the average Korean has felt hard-pressed by large increases in housing and education costs. Lee plans to focus on deregulation and attracting foreign investment. He has, however, already been forced to scale back his promise of 7 percent annual growth to 6 percent at least for his first year in office.

Second, although North Korea was not a major issue in the election campaign, due to the apparent progress in Six-Party talks to end North Korea's nuclear weapons program, many experts are skeptical that North Korea will fully abandon its nuclear ambitions. Lee supports engagement of North Korea and continued humanitarian aid, but he has said he will not provide major economic aid to North Korea until it ends its nuclear weapons program. This marks a significant departure from the policy of his predecessors Roh Moo-hyun and Kim Dae-jung. A renewal of tensions with North Korea could threaten South Korean economic growth and Lee's popularity.

Lee strongly supports South Korea's alliance with the United States. He may seek talks with the United States to adjust or delay implementation of agreements reached in recent years to reduce the United States' role in South Korea's defense. Lee also supports early ratification of the U.S.-Korea Free Trade Agreement (FTA), the largest U.S. free trade agreement since NAFTA. (The U.S. Congress has not yet approved the U.S.-Korea FTA.)

Many experts believe that the near coincidence of Lee's election and the inauguration of a new U.S. administration in January 2009 offers a major opportunity to strengthen U.S.-South Korean relations. Shorenstein APARC and the New York-based Korea Society recently announced the formation of a study group of senior former U.S. officials and experts to issue a report and recommendations on how the next U.S. administration can work with President Lee. The study group will travel to Seoul in early February for meetings with President-elect Lee and his economic, foreign policy, and security advisors.

Perhaps the most remarkable aspect of the election of Lee was that Koreans did not think it remarkable. They simply took it for granted that the election would be free, fair, and peaceful. Yet it has only been twenty years since South Koreans literally forced a military-backed government to allow them to vote democratically for their chief executive. In those two decades, there have been five presidential elections, with Lee's victory making the second full-fledged transfer of power between political camps. Moreover, this election was conducted at very low cost, using public funds; companies were not "squeezed" for campaign contributions as in the past. South Korea has demonstrated itself to be, along with Australia and New Zealand, the most democratic country in East Asia and a model of political development for the entire international community.

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John Thomas "Tom" Schieffer was sworn in as the 27th U.S. Ambassador to Japan on April 1, 2005, and presented his credentials to the Emperor on April 11, 2005. Since arriving in Japan, he has worked to strengthen the U.S.-Japan alliance, increase trade, and facilitate the realignment of U.S. forces stationed in Japan, among other issues.

Before being appointed Ambassador to Japan, Schieffer served as the U.S. Ambassador to Australia from July 2001 until February 2005. During his tenure in Canberra, he coordinated closely with the government of Australia on efforts to fight global terrorism and helped to deepen cooperation on rebuilding efforts in Afghanistan and Iraq. He was also heavily involved in the conclusion of a free trade agreement between the U.S. and Australia in May 2004.

Prior to his diplomatic service, Ambassador Schieffer was an investor in the partnership that bought the Texas Rangers Baseball Club in 1989, with George W. Bush and Edward W. "Rusty" Rose. He served as team president for eight years, was responsible for day-to-day operations of the club and overseeing the building of The Ballpark in Arlington, Texas. Ambassador Schieffer has also had a long involvement in Texas politics. He was elected to three terms in the Texas House of Representatives and has been active in many political campaigns.

The Ambassador attended the University of Texas, where he earned a B.A., and a M.A. in international relations, and studied law. He was admitted to the State Bar of Texas in 1979. He is married to Susanne Silber of San Antonio, Texas, and they have one son, Paul.

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Japan's ruling party suffered a historic defeat Sunday. For the first time since the conservative Liberal Democratic Party (LDP) was formed in 1955, an opposition party has become the largest party in the upper house.

The powerful message delivered by Japanese voters has significant implications not only for Japan but also for the rest of the world, not least for its close ally, the United States.

The election result revives momentum in Japan toward creation of a viable two-party system, potentially ending the conservative postwar monopoly on power. Japanese voters expressed deep anxiety about the impact of economic change upon their treasured social order. They embraced the campaign of the Democratic Party (the main opposition) against growing income inequality and the failure of the state to take care of an aging population.

Equally important, the vote was a humiliating defeat for Prime Minister Shinzo Abe's agenda of giving priority to revising Japan's antiwar Constitution and allowing its military to take on a global role in support of the US. Democratic Party leader Ichiro Ozawa effectively portrayed Mr. Abe as a man out of touch with the concerns of ordinary Japanese. But he also articulated an alternative vision of Japan's international role, calling for closer ties to its Asian neighbors and sending troops overseas only under the auspices of United Nations peacekeeping missions.

Since 9/11, Japan has been among the most loyal, if not unquestioning, of US allies. It sent troops to Iraq, provided logistical support to the war in Afghanistan, and outdid the US in putting pressure on North Korea. Most recently, Abe echoed the rhetoric of the Bush administration, calling for formation of a "values-based" alliance of democracies along with India and Australia, implicitly aimed at containing a rising China. The election results will certainly slow, if not reverse, this tight synchronization.

For the business community, the vote will raise concerns that needed economic policy actions such as fiscal reforms will get stalled in a gridlocked parliament. The vote reminds politicians that the economic recovery has left an awful lot of Japanese behind, with real wages falling, youth unemployment high, and the elderly drawing down their savings to survive. Abe's feel-good rhetoric and focus on security just angered those Japanese.

There remains strong support for gradual change. Most Japanese want the country to take on a more "normal" security role, but one that will stop far short of overdrawn fears of a remilitarized Japan. And many Japanese, particularly in the younger generation, back economic reform, though not at the expense of social stability.

The most intriguing question is the future of Japan's democracy. Abe is resisting calls for his resignation, attributing the vote to a series of scandals in his Cabinet and most of all to the revelation that the government's national pension system had lost the records of some 50 million people. The election result was bad luck, Abe claimed, not a repudiation of his administration's overall policies -- a view shared by Washington policymakers.

Exit polls do confirm that voters were strongly motivated by these issues. But they also express little faith in the personal leadership of Abe, who tried to cover up the pension debacle. He suffered from an unfavorable comparison to his predecessor, Junichiro Koizumi, one of Japan's most popular postwar leaders.

But the election suggests that Mr. Koizumi's personal charisma only temporarily reversed a longer trend of drift away from the ruling conservatives, particularly by unaffiliated swing voters in Japan's cities and suburbs. Mr. Ozawa, one of Japan's most brilliant politicians, managed to both regain those voters and steal away traditional conservative backers in rural areas among farmers and pensioners worried about their future.

Ozawa, whom I have known for more than two decades, is a man of uncommon political vision. He is a former LDP stalwart who has relentlessly pursued the goal of creating a clearly defined two-party system that can create real competition. He was the architect of a split in the LDP that briefly brought the opposition to power in the early 1990s.

Over dinner last fall, Ozawa laid out to me what seemed then like an incredibly audacious plan to regain power. First to win a series of local elections, leading up to a defeat of the LDP in the upper house election, forcing in turn the dissolution of the lower house and new elections. He clearly hopes to split the LDP again and pry away its coalition partner, the New Komeito Party, as part of his strategy of realignment.

The Democratic Party has yet to demonstrate its own ability to rule, but it would be unwise to underestimate Ozawa. And it would be foolish to dismiss the desire for change delivered by Japanese voters on Sunday.

Reprinted with permission by the Christian Science Monitor.

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This paper investigates whether there is a non-linear relationship between income and the private transfers received by households in developing countries. If private transfers are unresponsive to household income, expansion of public social security and other transfer programs is unlikely to crowd out private transfers, contrary to concerns first raised by Barro and Becker. There is little existing evidence for crowding out effects in the literature, but this may be because they have been obscured by methods that ignore non-linearities. If donors switch from altruistic motivations to exchange motivations as recipient income increases, a sharp non-linear relationship between private transfers and income may result. In fact, threshold regression techniques find such non-linearity in the Philippines and after accounting for these there is evidence of serious crowding out, with 30 to 80 percent of private transfers potentially displaced for low-income households [Cox, D., Hansen, B., and Jimenez, E., 2004, How responsive are private transfers to income? Evidence from a laissez-faire economy, Journal of Public Economics.]. To see if these non-linear effects occur more widely, semiparametric and threshold regression methods are used to model private transfers in four developing countriesChina, Indonesia, Papua New Guinea, and Vietnam. The results of our paper suggest that non-linear crowding-out effects are not important features of transfer behaviour in these countries. The transfer derivatives under a variety of assumptions only range between 0 and -0.08. If our results are valid, expansions of public social security to cover the poorest households need not be stymied by offsetting private responses.

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The 14th Informal APEC Economic Leaders' Meeting concluded on Nov. 19, 2006, and the participants had their photo taken in colorful Vietnamese traditional costumes called ao dai. Still in the shadow of the congressional election failure, President George W. Bush, realizing that a stable Asia is very important for the U.S. geostrategy, took advantage of the occasion to enhance the prestige of the United States. Just as American experts said, the Bush administration has probably become a lame duck now, but even a healthy duck needs to find a quiet pond.

"APEC's uniquely trans-Pacific character is an important political reason for U.S. to strengthen the group," Donald Emmerson, director of the Southeast Asia Forum of Shorenstein APARC at Stanford University, explained. "While APEC has lagged, East Asian regionalism has boomed. That has been good for East Asia. But U.S. and East Asian interests alike could be hurt if the Pacific Ocean ends up being split between rival Chinese and American spheres of influence."

However, the U.S. effort to save the Doha Round of trade talks with the Asia-Pacific Free Trade Agreement has yielded little. The Doha Round aimed to remove trade barriers in the world but was suspended due to some countries' agriculture protection policies. Washington had wanted to model the Doha Round upon the Asia-Pacific Free Trade Agreement. But U.S. officials never expected that there would be so many differences among the Asia-Pacific leaders, and that the economic development of Pacific Rim countries differ in thousands of ways. Despite the fact that the Hanoi Statement reiterated that supporting the Doha Round was APEC's priority, no material progress has been made.

"The U.S. is urging a last ditch effort to restart the talks through APEC," Professor Charles Morrison, president of the East-West Center located in Hawaii, says. "Whether or not APEC can do more than make a rhetorical statement of support is unsure. I feel that the APEC economies should agree to prepare new offers within a short period of time -- three weeks, for example -- to challenge the Europeans, Brazilians, Indians and others."

United States Steps Out to "Please" ASEAN

Seventeen years after its establishment, APEC now plays a decisive role in the international political arena. It has 40 percent of the world's population, 48 percent of the world trade volume and 56 percent of the world GDP. Since 1989, the economy in this region has grown by 26 percent, compared to only 8 percent economic growth rate in the rest of the world. With the double advantage of economic strength and rapid growth, China, being one of APEC's main economies and its "engine," has fully taken the limelight. On the other hand, the United States has been weighed down with countering terrorism in the Middle East.

"China has done very well in enhancing its relations with Southeast Asia in recent years," Sheldon Simon, professor of the Program in Southeast Asian Studies at Arizona State University, points out. "China has not only established a free trade forum for China and ASEAN countries, but also helped and influenced the area with its economy and culture. But I think that the United States has realized the importance of this area and come back to fasten its friendly relationship with the region."

The United States coming back to Southeast Asia and repairing its relations with the ASEAN countries is partly activated by China's increasing influence in the area.

"The naissance and growth of some democratic countries in Southeast Asia has received sympathetic response of democratic values from Washington," said Simon. "With the traditional friendly relations between the area and the United States, these countries value their friendship with the United States sometimes more than the trust in their neighboring countries. Geopolitics is also very important factor. The Asia-Pacific area is a very important to the world economy and the U.S. power structure. Therefore, the United States will not easily give it up."

Another motive for the United States to foster closer relations in the area is the common interest of countering terrorism. There are still some terrorist groups in Indonesia, the Philippines and southern Thailand.

"President Bush has a perfect attendance record at APEC meetings (Clinton missed two of them), which says that he does take APEC seriously and believes Asia is important to U.S. interests," Ralph Cossa, president of the Pacific Forum Center for Strategic and International Studies, said in an interview with the Washington Observer Weekly.

Besides attending the APEC summit meetings annually, Washington has recently activated several plans to "please" the ASEAN countries, including setting up a ministerial dialogue system with them and a platform for maintaining contact at the deputy finance minister level, even increased exchanges at the deputy defense secretary level.

The extent of U.S. efforts to foster cordial relations with Southeast Asian countries can also be seen in the increasingly friendly U.S.-Vietnamese economic and trade relations. The Bush administration is not only supporting Vietnam to enter the WTO, but has even proposed giving Vietnam Permanent Normal Trade Relations (PNTR) status.

"The reason that Bush failed to bring the gift of PNTR status to the APEC Hanoi summit is that the Congress dominated by the Republicans was lacking efficiency and could not pass the proposal in time," Simon explained. "But I think that it will be passed as soon as possible in the next month or by the Democrats who begin to dominate the Congress from next January."

Simon and Cossa both admit that Burma is an unharmonious element in U.S. relations with ASEAN. The Burmese dictatorial military government is really the most typical negative example of democracy for the United States. But ASEAN countries are reluctant to see Burma "punished" by the United States for ideological reasons. So Burma has become a sensitive issue in U.S.-ASEAN relations.

"This is a good way for him to interact with ASEAN since Myanmar is not there and this issue does not have to be addressed," said Cossa.

Simon, an expert of Southeast Asia affairs, points out ASEAN countries should be happy about the advantage they have with China and the United States vying for their attention. Being able to juggle the two big powers, Southeast Asia has gained many practical interests and financial aid for its economy, trade, security, culture and education.

"In a short period, there will not be any serious interest conflicts in the triangle balance of China, the United States and ASEAN," Simon told the Washington Observer Weekly. "ASEAN countries' only worry, if there is any, is an accidental spark in the U.S.-China military interaction in Southeast Asia such as the confrontation across the Taiwan Straits."

Turning the Asia-Pacific into a "Gigantic Enterprise?"

"The United States wants to demonstrate its continuing interest in the Asia-Pacific region. It is urging for a study of an Asia Pacific free trade area and support for an APEC business card, and both shifts of approach, illustrate its interest in and support for the APEC process," said Morrison.

An important subject for the APEC Hanoi summit is the "active discussion" of establishing an APEC free trade region. Former U.S. President Bill Clinton proposed for the first time in 1993 the setting up of such an economic zone. Before Bush's visit, Deputy U.S. Trade Representative Karan Bhatia suggested that establishing an APEC free trade zone would be a subject worth serious discussion. But his proposal did not receive a warm response from the host. The Vietnamese Deputy Foreign Minister Le Cong Phung stressed that establishing a free trade zone is a long-term objective and will not affect progress of negotiations with the WTO or other bilateral trade agreements.

"Regarding the study of the Asia Pacific free trade area, a number of economies were skeptical because it would be such a large undertaking," said Morrison. A similar plan was once axed in an APEC ministerial statement and the leaders attending this summit do not seem to have much interest in it.

Simon explained Bush's thinking on the subject: "Washington reiterated its intention to establish an Asia-Pacific free trade zone in order to save the precarious WTO Doha Round. Breaking the tariff barriers in the Asia-Pacific region will help continue to press relevant countries to concede in granting agricultural tax subsidies and hopefully open the door to the Doha Round."

The five-year Doha Round was suspended in July this year because six major WTO members -- the United States, the European Union, Japan, Australia, Brazil and India -- failed to reach agreement on market access for agricultural and non-agricultural products. Given the situation, the organizer said that the informal APEC economic leaders' meeting would provide a "good opportunity" to help restore the Doha Round talks. However, the Hanoi summit joint declaration just vaguely indicated that APEC will pursue further integration on issues such as energy in 2007. It would be extremely optimistic to expect that APEC will be able to remove all the tariff barriers in the region before 2010. Although the area produces 50 percent of the world's economic value, the styles and stages of economic development, the cultural backgrounds and political systems of the countries in the region vary a great deal, making it very difficult for these Asian countries to eliminate all these discrepancies and become fully integrated.

"Out of different worries, many Southeast Asian countries are actually not interested in the proposal though they do not speak out. Or we may say that it's not time yet now to change the Asia-Pacific region into a gigantic enterprise," Simon told Washington Observer Weekly.

Quite apart from who concedes what in return for what concession over the APEC free trade mechanism, the question arises: What geographical scope should a regional trade arrangement have? Who should be a party to the agreement and who should not?

There would appear to be three different ideas on the table: (a) the APEC-wide free trade area that the United States proposed at the recent summit in Hanoi; (b) the East Asia Summit-wide framework that Japan reportedly favors, which would include ASEAN + 6 (China, Japan, South Korea, India, New Zealand, Australia) but not the United States; and (c) the ASEAN Plus Three (China, Japan, South Korea) context that China seems to prefer, in which the exact positions of Tokyo and Beijing are not entirely clear.

"Without discussing the merits or demerits of each of these arrangements, suffice it to note that since ASEAN is common to all of them, the net effect of these alternative ideas is to strengthen the negotiating position of ASEAN," said Emmerson. "Then again, ASEAN will not necessarily be unified as to its preference for the three proposals. It will be interesting to look for the positions to be taken by individual ASEAN countries and for their collective effort to arrive at a single negotiating position, e.g., in the run-up to the ASEAN summit and the second the East Asia Summit in the Philippines next month."

Cossa has hope for 2007. "The U.S. in particular would like to see APEC moving faster, and will look ahead to next year, with Australia in the chair, for some real progress."

American Public Doesn't Share Washington's Interest in Southeast Asia

The prospect of economic and strategic cooperation brought about by APEC made for a lively week in Southeast Asia. But it stirred little response in the United States. According to the interviewed experts of Southeast affairs, the American public is still haunted by the situation in Iraq and the mid-term election. Even the U.S. media framed the event as Bush's first visit to a foreign country since the Republicans were defeated in the mid-term election.

"Because of the Congressional election, President Bush will want to show leadership rather than simply respond to the new Congress. Both Doha and the nuclear proliferation issue are examples," said Morrison.

Cossa holds a different view: "I don't think the elections will have any major impact on what Bush does or how he does it during this trip. Iraq is his legacy. What he does in Asia can make things better or worse at the margins but will likely be overshadowed by Iraq."

Simon echoed the sentiment. "On one hand, the Republican Party's defeat in the election cannot directly influence Bush's trip to Asia. On the other hand, Bush's economic achievements in the Southeast region will not add to his political record. In Asia, only the North Korea issue may sway the public opinion in the United States."

Yan Li, Washington Observer weekly - Issue No. 201, November 22, 2006

Reprinted by Permission February 12, 2007.

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China's economy has experienced remarkable growth since its economic reform and is expected to maintain high growth in the coming decades. This paper looks at the implications of China's rapid growth and emergence in the global economy for its own economy and for the rest of world, with specific focus on Australia. The conclusion is that China will emerge as the second largest importer and exporter in the world by 2020. Although imports of many land-intensive agricultural products are projected to rise, exports of most labor-intensive products (eg horticulture, fishery and processed foods) are also going to grow in the future, which implies that China needs to continue restructuring its agricultural sector as the economy moves towards globalisation. The results also show that the opportunities from China's economic growth for the rest of world are projected to far surpass the adverse effects. With the exception of Russia, it is predicted that Australia will be the single biggest winner from China's rise in world markets.

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The alliance between the Republic of Korea and the United States has been facing new pressures in recent months. Leaders in Washington and Seoul are visibly out of synch in their response to the escalatory actions of North Korea, beginning with the July 4 missile tests and leading to the October 9 nuclear explosion. South Korean leaders seem more concerned with the danger that Washington may instigate conflict than they are with North Korea's profoundly provocative acts. American officials increasingly see Seoul as irrelevant to any possible solution to the problem. Officials on both sides valiantly try to find areas of agreement and to paper over differences. If attempts to restart the six-party talks on North Korea falter again, it is likely this divide will resurface.

There is a tendency on both sides of the Pacific to overdraw a portrait of an alliance on the verge of collapse. Crises in the U.S.-ROK alliance are hardly new. As I have written elsewhere, there never was a "golden age" in our alliance that was free from tension. Korean discomfort with an alliance founded on dependency and American unease with Korean nationalism has been a constant since the early days of this relationship. Clashes over how to respond to North Korea have been a staple of the alliance since its earliest days.

Korean-American relations today are much deeper than at the inception of this alliance. Our interests are intertwined on many fronts, not least as major players in the global economic and trading system. We share fundamental values as democratic societies, built on the rule of law and the free flow of ideas. There is a large, and growing, contact between our two peoples, from trade and tourism to immigration.

The current situation is worrisome however because it threatens the security system that lies at the foundation of the alliance. Though our interests are now far broader, the U.S.-ROK alliance remains military in nature. The founding document of this alliance was the

Mutual Defense Treaty signed on October 1, 1953, following the conclusion of the armistice pact to halt the Korean War. That treaty has been significantly modified only once - 28 years ago in response to American plans to withdraw its ground forces from Korea - to create the Korea-U.S. Combined Forces Command (CFC).

The two militaries have a vital legacy of decades of combined command, training and war planning. American military forces in significant numbers have remained in place to help defend South Korea from potential aggression from the North. South Korean troops have deployed abroad numerous times in support of American foreign policy goals, including currently in Iraq and Afghanistan.

This foundation of security is not only essential to this alliance but is the very definition of the nature of alliances in general, as distinct from other forms of cooperation and partnership in international relations.

"Alliances are binding, durable security commitments between two or more nations," Dr. Elizabeth Sherwood-Randall, a Stanford scholar and former Clinton administration senior defense official, wrote recently. "The critical ingredients of a meaningful alliance are the shared recognition of common threats and a pledge to take action to counter them. To forge agreement, an alliance requires ongoing policy consultations that continually set expectations for allied behavior."

Alliances can survive a redefinition of the common threat that faces them but not the absence of a threat. Nor can alliances endure if there is not a clear sense of the mutual obligations the partners have to each other, from mutual defense to joint actions against a perceived danger. "At a minimum," Sherwood-Randall says, "allies are expected to take into consideration the perspectives and interests of their partners as they make foreign and defense policy choices."

By this definition, the U.S.-ROK alliance is in need of a profound re-examination.

The 'shared recognition' of a common threat from North Korea that was at the core of the alliance is badly tattered. As a consequence, there is no real agreement on what actions are needed to counter that threat.

There is a troubling lack of will on both sides to engage in policy consultations that involve an understanding of the interests and views of both sides, much less setting clear expectations for allied behavior. Major decisions such as the phasing out of the CFC have been made without adequate discussion.

Americans and Koreans need, in effect, to re-imagine our alliance. We should do so with the understanding that there is still substantial popular support for this alliance, despite conventional wisdom to the contrary. The problems of alliance support may lie more in policy-making elites in both countries than in the general public. That suggests that a concerted effort to reinvigorate the alliance will find public backing.

The results of the Chicago Council on Global Affairs 2006 multinational survey of public opinion show ongoing strong support for the American military presence in South Korea. Some 62 percent of Koreans believe U.S. troop levels are either about right or too few; some 52 percent of Americans share that view. A slightly larger percentage of Americans - 42 percent compared to 36 percent of Koreans - think there are too many U.S. troops. Along the same vein, 65 percent of Americans and 84 percent of Koreans favor the U.S. providing military forces, together with other countries, in a United Nations-sponsored effort to turn back a North Korean attack.

The crack in the alliance comes over the perception of threat from North Korea.

While some 79 percent of Koreans feel at least "a bit" threatened by the possibility of North Korea becoming a nuclear power, only 30 percent say they are "very" threatened. Fewer Koreans feel the peninsula will be a source of conflict than the number of Americans. More significantly, nuclear proliferation is viewed as a critical threat by 69 percent of Americans, compared to only half of Koreans (interestingly, Chinese are even less concerned about this danger).

The opinion poll was conducted before the nuclear test so it is difficult to judge the impact of that event. These survey results do clearly indicate however that while the security alliance still has support, there is an urgent need for deep discussion, at all levels, about the nature of the threat.

The crisis that faced the NATO alliance in the wake of the end of the Cold War has some instructive value for Koreans and Americans today. At the beginning of 1990, I was sent by my newspaper, the Christian Science Monitor, from Tokyo, where I had been covering Japan and Korea since the mid-1980s, to Moscow. The Berlin Wall had fallen a few months earlier and the prospect of the end of a half-century of Cold War in Europe was in the air. However, I dont believe anyone, certainly not myself, anticipated the astounding pace or scale of change that took place within just two years.

Within less than a year, in October of 1990, West and East Germany were reunited.

The once-mighty Soviet empire in Eastern Europe disintegrated almost overnight. By July of 1991, the Warsaw Pact had come to an end. Perhaps most astounding of all - not least to officials of the administration of George H.W. Bush - the Soviet Union fell abruptly apart in December 1991.

These tectonic events triggered a debate about the future of the NATO alliance that had provided security to Europe since it was founded in April of 1949. Soviet leader Mikhail Gorbachev somewhat famously - and perhaps apocryphally - anticipated this debate. "We are going to do something terrible to you," he is said to have told Ronald Reagan. "We are going to deprive you of an enemy."

In those early days, the very continued existence of NATO was under active discussion. The Soviet leadership called for the creation of entirely new "pan-European" security structures that would replace both NATO and the Warsaw Pact. Some in Europe favored the European Union as a new vehicle for both economic integration of the former

Soviet empire into Europe, along with creating new European security forces that would supplant NATO's integrated command.

A more cautionary view argued for retaining NATO without change as a hedge against the revival of Russia as a military threat or the failure of democratic and market transformation in the former Soviet Union. American policymakers opted instead for the ambitious aim of expanding NATO membership to absorb, step by step, the former Soviet empire, including the newly freed western republics of the Soviet Union.

Along with expansion, the United States pushed NATO to redefine the "enemy." Americans argued that new threats to stability and security from ethnic conflict - and international terrorism - compelled NATO to "go out of area or out of business." NATO did so first in the Balkans, in Bosnia and Kosovo, though reluctantly. The alliance has moved even farther beyond Europe to Afghanistan, where NATO commands the international security forces. This draws upon the invaluable investment made in joint military command and operations that are the foundation of the alliance.

Certainly NATO's transformation is far from complete. As was evident at the most recent NATO summit in Riga, considerable differences of opinion remain between many European states and the United States over the mission of NATO. Europeans tend to still see NATO as an essentially defensive alliance, protecting the "euro-Atlantic" region against outside aggression, with an unspoken role as a hedge against uncertainties in Russia. They are resistant to continued American pressure for expansion - including a new U.S. proposal to move toward global partnership with countries such as Japan, South Korea and Australia.

But the reinvention of NATO after the Cold War provides some evidence that even when the nature of the threat has changed, security alliances can preserve a sense of common purpose.

A re-imagined U.S.-ROK alliance could draw from the NATO experience by including the following elements:

HEDGE - The alliance remains crucial as a 'hedge' against North Korean aggression, even if the dangers of an attack are considered significantly reduced. If North Korea retains its nuclear capability, that hedge will need to expand to include a shared doctrine of containment and deterrence, including making clear that the U.S. will retaliate against use of nuclear weapons, no matter where it takes place. Strategically the alliance is also a 'hedge' against Chinese ambitions to dominate East Asia and a guarantor of the existing balance of power;

EXPANSION - The alliance can reassert its vitality as the basis, along with the

U.S.-Japan security alliance, of an expanded multilateral security structure for

Northeast Asia;

NEW MISSIONS - The alliance should take on new missions, most importantly to participate in military and non-military counter-proliferation operations;

OUT OF AREA - A re-imagined alliance might formalize an "out of area" role, elevating the deployments of peacekeeping and other forces to Iraq and Afghanistan into more systematic joint global operations between the two militaries. In this regard, the participation of South Korea in a program of global partnership with NATO, most importantly in the area of joint training, merits serious discussion.

There is another alternative: South Korea and the United States can chose to bring their alliance to a close. If we cannot agree on the common threats that face us, this alliance cannot endure. What we should not do is to allow the alliance to drift from inattention into a deeper crisis that would only benefit our adversaries.

(This article is based on a presentation by the author to the 1st ROK-U.S. West Coast

Strategic Forum held in Seoul on Dec. 11-12, 2006).

This article appeared on the website of the Maureen and Mike Mansfield Foundation.

Reprinted with permission from the Maureen and Mike Mansfield Foundation.

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Agricultural economists sometimes have a choice of using either unit values or community prices when analysing food price policy. Unit values (ratios of household expenditure on a food to the quantity purchased), and community prices, which are enumerated from vendors in local markets, are both proxies for market prices. While it is believed that biases may result from the use of unit values, due especially to measurement error and quality effects, evidence on this issue is lacking. Even less is known about community prices. This paper provides empirical evidence that suggests that economists should exercise caution when using unit values as proxies for market prices. Community prices in our two case studies have a number of properties that make them more reliable in our two case study countries: Vietnam and Papua New Guinea. Price elasticities calculated from unit values provide poor approximations to those calculated with community prices. If the unit value-based (or community price-based) elasticities are biased, they may distort food policy analysis. In our study, the use of unit values (if wrong) could lead policy makers to decide to liberalize rice exports which could generate unexpected adverse nutritional consequences because price elasticities were understated.

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Scott Rozelle
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