Trump’s Seoul Speech: All the Right Points, Still No Way Forward

President Trump’s speech in South Korea’s National Assembly on Wednesday, November 8, 2017 was likely the best foreign policy speech he has ever given. And that is not only because expectations were low. It would be more accurate, perhaps, to say that fears were high. After months of unpredictable diplomacy-by-Twitter—calling Kim Jong-un names, making seemingly off-the-cuff-threats, undermining diplomatic efforts by Secretary of State Rex Tillerson—many feared that Trump’s speech would be yet another moment of this sort.

But rhetorical strength is no replacement for policy. Even though Trump’s speech largely checked all the necessary boxes for what a U.S. president should say during a state visit in South Korea, a fundamental divide remains between him and South Korea’s President Moon Jae-in over how to deal with North Korea, and whether military strikes should really be on the table. Trump expressed a will to talk, but also continued to push North Korean denuclearization as a precondition for improved relations. North Korea has repeated time and time again that its nuclear weapons are non-negotiable. President Moon, on the other hand, has expressed several times a will to engage with North Korea despite (or perhaps because) of its nuclear progress. This is a policy difference about as big as they get and though symbolically important, Trump’s speech did little to change matters.

First, let us look at some of the good parts of the speech, of which there were many. Some have criticized Trump’s speech for being akin to a Wikipedia page on South Korean history. Such criticisms miss the genre, context, and point of speeches such as this one. Trump did not go to Seoul to lay out new, ground-breaking policy lines. This state visit was highly symbolic, especially after all the ups and downs of U.S.-Korea relations over the past few months. By speaking on South Korea’s history, and the history of U.S.-Korean relations, Trump tried, and succeeded, in affirming American respect and recognition of both.

By anchoring the U.S.-Korea alliance in the Korean War (1950–1953), the speech signaled that the countries’ relationship is about more than strategy and geopolitics. Take, for example, the following lines, almost right at the beginning (my emphasis):

“Almost 67 years ago, in the spring of 1951, they recaptured what remained of this city, where we are gathered so proudly today. It was the second time in a year that our combined forces took on steep casualties to retake this capital from the Communists. Over the next weeks and months, the men soldiered through steep mountains and bloody, bloody battles. Driven back at times, they willed their way north to form the line that today divides the oppressed and the free. And there, American and South Korean troops have remained together holding that line for nearly seven decades.”

In other words, the alliance is steeped in shared sacrifices on the battlefield. South Korea’s war—for the Korean War was never formally ended, fighting only stopped following an armistice—remains America’s, too.

Trump also dedicated significant time to extolling South Korea’s economic and political development. This part of his speech served an important purpose: it gave recognition to a national narrative of modern South Korea that is an important source of pride for many. This narrative obscures a great deal of suffering and oppression at the hands of the country’s military dictators, but you can’t demand full and perfect academic nuance from a presidential speech during a foreign visit. The success story, next to the failed, oppressive and poor hermit kingdom, is a powerful story.

But Trump repeated the same policy the U.S. has held onto for decades, and in very clear terms. Complete and verifiable denuclearization is the beginning of better relations, and not even a guarantee (my emphasis):

“And to those nations that choose to ignore this threat—or worse still, to enable it—the weight of this crisis is on your conscience. I also have come here to this peninsula to deliver a message directly to the leader of the North Korean dictatorship. The weapons you are acquiring are not making you safer. They are putting your regime in grave danger. Every step you take down this dark path increases the peril you face. North Korea is not the paradise your grandfather envisioned. It is a hell that no person deserves. Yet despite every crime you have committed against God and man, you are ready to offer—and we will do that—we will offer a path to a much better future. It begins with an end to the aggression of your regime, a stop to your development of ballistic missiles, and complete, verifiable, and total denuclearization.”

The leadership in Pyongyang sees things differently, to put it mildly. They see the nuclear weapons as the reason they haven’t met the same destiny as leaders like Saddam Hussein and Muammar Gaddafi. Moreover, while Trump’s “message directly to the leader of the North Korean dictatorship” was at least in part meant to reassure South Korea that the U.S. stands behind it, South Koreans know full well that they, and not the U.S. president or population, are the ones in greatest risk should tensions escalate into armed clashes or nuclear war. This difference underlies the basic but crucial tension between the U.S. and South Korean administrations, where there has been little visible coordination of statements and measures during the last months’ tensions around North Korea’s nuclear program.

Of course, there is probably more flexibility in reality than can be gleaned from major speeches. Secretary of State Tillerson, when talking to reporters in Vietnam on Friday, seemed to imply that the U.S. is open to talks with relatively few preconditions. He would look for a “relative period of quiet and an indication from Kim Jong Un himself that they would like to have some type of a meeting,” reported Bloomberg. Trump’s emphasis on the U.S. being open to talking to North Korea, under the right conditions, was also a change of nuance, if not of words, from his usual tone against the North Korean regime. Perhaps more is going on under the surface. But as of now, the deadlock remains.

For other articles related to the Korean Peninsula, see Russia-North Korea Economic Ties: Is There More Than Meets the Eye? and Time for Decisions on North Korea.

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Clouded Reassurances in Asia

Last week, Secretary of Defense James Mattis made his first official foreign visit as a member of the Trump administration. It was also the first overseas visit by any member of the new cabinet. The new Defense Secretary spent time in both South Korea and Japan, two of America’s most important allies in Asia. The choice of these two countries was deliberate: both countries are needed to help contain the nuclear threat of North Korea, and Japan is facing an encroaching Chinese presence in the East China Sea. Mattis’ goal was to reassure Seoul—which is currently facing a full-blown political crisis—and Tokyo of American commitments to their security.

Despite Trump’s rhetoric during the campaign about certain allies not pulling their weight, as president, he must now work with these two countries to keep the region stable. The trip could be described as quite successful. Mattis reaffirmed American commitments to deploy the Terminal High Altitude Area Defense system (THAAD), a missile defense system that could protect South Korea from a potential attack by North Korea. His comments about U.S. commitments were clear: “Any attack on the United States or on our allies will be defeated and any use of nuclear weapons will be met with a response that will be effective and overwhelming.” That’s about as stalwart of a commitment or reassurance as any country can get. The secretary’s visit to Japan struck similar tones. In a joint press conference with Tomomi Inada, the Defense Minister of Japan, Mattis specifically mentioned U.S. policy toward  islands that both Japan and China claim sovereignty over: “I made clear that our long-standing policy on the Senkaku Islands stands — the US will continue to recognize Japanese administration of the islands and as such Article 5 of the US-Japan Security Treaty applies.” Article 5 “recognizes that an armed attack against either Party in the territories under the administration of Japan would be dangerous to its own peace and safety and declares that it would act to meet the common danger in accordance with its constitutional provisions and processes” If the U.S. recognizes Japanese sovereignty over these islands, then the U.S. would have to use force to defend the Japanese territory if the Chinese attacked in some way.

While Mattis reaffirmed American commitments to both countries, China expressed concern and outrage over his comments in both South Korea and Japan over THAAD and the Senkaku Islands. In regards to THAAD, China believes its implementation would “undermine the strategic security interests of regional countries including China, disrupt regional strategic balance, and help in no way peace and stability on the Korean Peninsula.” The Chinese see THAAD as not limited to containing the North Korean threat. THAAD potentially could be used to take out or track Chinese missiles in the region. The United States and South Korea are not likely to heed Chinese complaints. China released a statement challenging Mattis’ remarks about U.S. commitment to Japanese sovereignty of the Senkaku Islands: “Diaoyu [the Chinese name for the Senkaku Islands] and its affiliated islands have been Chinese territory since ancient times. These are historical facts that cannot be changed. The so-called US-Japan security treaty was a product of the Cold War, and it should not harm China’s territorial sovereignty and legitimate rights.” This statement is nothing new, and the issue will not go away any time soon, so it is important to Japan to receive such unwavering reassurance from the United States.

As China continues to contest sovereignty over islands in the East China Sea and the South China Sea and build artificial islands in the South China Sea, it is necessary not just for Asian nations to receive American reassurances of support, but also for the United States to continually and explicitly express its commitment to maintaining a major role in the region, especially with the transition between administrations. China will likely attempt to take advantage of the Trump administration while it is still getting its feet on the ground and begins to formulate Asia policy. Having Secretary Mattis make a trip to South Korea two weeks into the new administration demonstrates continued understanding of America’s role in keeping the Asia-Pacific region stable. While the Defense Secretary offered firm reassurances to both nations, Mattis also expressed hesitation to escalate beyond the status quo. In Japan, he also noted that the administration does not “see any need for dramatic military moves” and that both the U.S. and China should “exhaust all diplomatic efforts to try and resolve this properly and maintain open lines of communication.”

Unfortunately, other cabinet members and advisors have made troubling remarks about the region and U.S.-China relations. Though Mattis made the most recent of statements in regards to U.S. policy towards Asia, in the very recent past, other people in the administration have made remarks that undercut and conflict with what Mattis said. During his confirmation hearing, Secretary of State Rex Tillerson said, “Building islands and then putting military assets on those islands is akin to Russia’s taking of Crimea. Its taking of territory that others lay claim to. . . .We’re going to have to send China a clear signal that first, the island-building stops, and second, your access to those islands also not going to be allowed.” Such a policy would be a dramatic change from previous administrations. In December 2016, it was revealed that China had installed anti-aircraft and other weapons systems on its artificial islands in the South China Sea. If the United States were to adopt Tillerson’s policy of denial of entry, then confrontation of some sort will likely erupt since China has a significant military presence on its islands. Is the Trump administration willing to risk war to prevent China from doing what it has already done for years? What positive outcome can the new administration expect by adopting such a policy? It is especially unnerving because a Chinese official at the Central Military Commission noted that “A war within the president’s term’ or ‘war breaking out tonight’ are not just slogans, they are becoming a practical reality.”

Moreover, in March 2016, Steve Bannon, President Trump’s chief strategist and now a member of the National Security Council, remarked that war between the United States and China in the South China Sea is inevitable: “We’re going to war in the South China Sea in five to 10 years, aren’t we? . . . There’s no doubt about that. They’re taking their sandbars and making basically stationary aircraft carriers and putting missiles on those. They come here to the United States in front of our face — and you understand how important face is — and say it’s an ancient territorial sea.” Although Bannon’s remark predated his joining the Trump campaign in August 2016, it is dangerous for a key member of the Trump administration to have such hawkish views on China. With Bannon in the White House and influencing national security policy, such an opinion could become a self-fulfilling prophecy: Bannon thinks war is inevitable, so he purposefully or accidentally makes it so.

Different members of the administration have made conflicting statements about China and the Asia-Pacific region in general. Is diplomacy possible or not? Is war inevitable? Will the United States needlessly antagonize China? What are Japan and South Korea supposed to believe is the prevailing opinion or policy stance of the Trump administration? It appears that the left hand doesn’t know what the right hand is doing.  As Mattis was visiting Asia, the news broke about Bannon’s previous statements. Can U.S. allies in Asia count on Mattis’ reassurances and commitments? Now that Tillerson has been confirmed as Secretary of State, we must hope that he listens to his diplomats—and Secretary Mattis—and does not advocate for such an aggressive stance in the South China Sea. Branding China as the enemy this early in the administration limits how the United States can cooperate with China on important issues, including the nuclear threat from North Korea. What the United States and its allies can hope for is that Secretary Mattis’ reserved and cautious approach prevails.

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Obama’s Visit to Asia and U.S. Alliances

As foreign trips go, President Barack Obama’s visit to Asia in April 2014 was more important than most.  It was originally scheduled to coincide with the APEC summit in October 2013, but domestic problems prevented him from travelling at that time.  But even then, such a trip was needed.  Many in Asia already had become concerned over his administration’s commitment to its strategic “pivot” or “rebalancing” towards the region.  Both its economic and security legs had come to little.  Despite the administration’s goal to complete the Trans-Pacific Partnership (TPP) free trade talks in 2013, they were nowhere near a final agreement (and still are far from one).  Meanwhile, doubts emerged about the seriousness of the U.S. military rebalance.  A major part of that rebalance hinged on the U.S. Navy’s shift from a force that was equally balanced between the Atlantic and Pacific Oceans to one that would be tilted, 60 percent, toward the Pacific.  But given that the administration’s concurrent efforts would reduce the overall size of the U.S. Navy, many wondered whether its tilt would provide any boost to U.S. capabilities in the region.  And, more broadly, the United States still seemed more willing to engage itself in places like Libya and Syria, than in the East or South China Seas.

During the intervening six months, tensions in Asia have climbed even higher: from China’s declaration of an air defense identification zone over the East China Sea (November 2013) and its quasi-maritime blockade of the Philippine-held Second Thomas Shoal (March 2014) to Japan’s decision to build a new radar base on Yonaguni Island (April 2014) to North Korea’s artillery barrages and missile tests (March and April 2014).  Layered on top of all that has been the Ukraine crisis, in which the Obama administration has allowed Russia to violate Ukrainian sovereignty without any serious repercussions.  That itself follows Obama’s failure to act in 2013 after Syria crossed his “red line” on the use of chemical weapons.  Little wonder that such worrisome events have made U.S. allies in Asia nervous.

Such was the backdrop for Obama’s visit to Asia over the last week.  Without a doubt, his main objective was to reassure U.S. allies in the region.  Obama visited all three U.S. security treaty partners during his trip: Japan, South Korea, and the Philippines.

In Japan, Obama plainly stated that the U.S.-Japan Security Treaty would cover all territories administered by Japan.  That means the Senkaku Islands (or Diaoyu Islands in China) in the East China Sea would be defended, since they are administered by Japan (though his later reply to a press question as to whether his statement represented a “red line” in the East China Sea slightly muddied its impact).  Still, it was the first time that an American president directly addressed the issue.  That must have heartened Japanese Prime Minister Shinzō Abe.  And though there was no breakthrough in the bilateral TPP negotiations between Japan and the United States during Obama’s stay, some incremental progress was made in the days afterwards.

Obama then touched down in South Korea, where he warned Pyongyang against further military provocations.  Already this year, North Korea fired artillery into and short-range ballistic missiles over South Korean waters.  Now, there is the prospect of a North Korean nuclear test.  And so, Obama sought to do more warning.  He also worked to coax Japan and South Korea into overcoming their historical animosities.  Given that both countries and the United States must deal with the threat from North Korea (and perhaps China in the future), the administration hoped that America’s two security treaty allies could find a way to work together, rather than against each other.  Lastly, Obama’s presence in Seoul helped South Korean President Park Geun-hye demonstrate the strength of the U.S.-South Korean alliance to the Korean National Assembly.  That was important, since it soon will consider a major increase in its financial support of U.S. forces in South Korea, as part of a larger agreement reached seven years earlier in which wartime operational control of combined U.S.-South Korean forces would transition from an American general to a South Korean one.

Finally, just before Obama’s arrival in Manila, American and Philippine representatives signed a ten-year accord called the Enhanced Defense Cooperation Agreement.  Under negotiation for much of the last two years, that agreement was originally dubbed the Increased Rotational Presence Framework Agreement, largely because that was its intent: to enable U.S. forces to more regularly rotate through the Philippines in order to conduct joint exercises with the Philippine armed forces.  The final agreement also allows the United States to keep the equipment that it uses for those exercises at Philippine military bases.  The frequency of those exercises could be increased to the point at which there would be a near-continuous American military presence in the Philippines.  That would represent a meaningful change in U.S. force posture in the region and send a strong signal of American commitment to the Philippines.  The successful conclusion of the agreement was a victory for Philippine President Benigno Aquino III, who faced domestic opposition to it.  The agreement offers the Philippines some breathing space to rebuild its own external defense forces and pursue greater security cooperation with its Southeast Asian neighbors.

While in Southeast Asia, Obama also began to build new economic and security bridges to Malaysia, which had developed somewhat cozier relations with China than the United States since the 1990s.  Hence, it was notable that Obama and Prime Minister Najib Razak elevated their countries’ relationship to one of a “comprehensive partnership.”  (That matched the status which Malaysia conferred on China a year earlier.)  But little more was accomplished for the time being, due to popular resistance in Malaysia to the American-led TPP.

Upon Obama’s return to the United States, he can rightly claim that American allies in the region feel more reassured.  But American reassurances will ultimately need to be matched with American deeds.  Sadly, Obama’s reticence to persuade members of his own party to grant him “fast track” authority to streamline the TPP’s ratification process belies to some degree his own words of commitment.  An even bigger question is whether his words will impress China or North Korea.  No doubt, his words will be tested.  Questions about American commitments to its Asian allies were not fashioned overnight, nor will they be dispelled with a presidential visit.

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Where Will It End?: China’s East China Sea Air Defense Identification Zone

More lines were drawn in the East China Sea (or rather in the skies above it).  With very little notice, China declared a sweeping air defense identification zone (ADIZ) over much of the East China Sea as of November 23 at 10:00 a.m. (local time).  Countries typically use such zones to expand their early warning against potential airborne threats.  Aircraft that fly within those zones are required to file flight plans and identify themselves to the appropriate authorities; otherwise those authorities may dispatch combat aircraft to intercept them.  China’s new ADIZ covers an area that contains two disputed maritime territories.  The first consists of islands, called Diaoyu in China and Senkaku in Japan, that are claimed by both Beijing and Tokyo.  The second is a small submerged rock, called Suyan in China and Ieodo in South Korea, which is claimed by both Beijing and Seoul.  South Korea has operated a small research station there for the last decade.  Shortly after China’s new ADIZ went into effect, its air force mounted its first patrol of the area; Japan spotted a Y-8 maritime patrol aircraft and a Tu-154 electronic intelligence aircraft over the East China Sea.

China’s demarcation follows a widely-publicized 18-day Japanese military exercise across southern Japan.  The exercise was one of an annual series that is normally held in November.  In 2011, a similar exercise was held that involved 35,000 Japanese personnel and the U.S. aircraft carrier George Washington.  After tensions were ratcheted up between China and Japan over the disputed Senkaku Islands in September 2012, Tokyo shelved that year’s exercise.  This year’s iteration involved 34,000 military personnel, six ships, and 360 aircraft.  The exercise featured air defense missile battery drills on Okinawa as well as an amphibious landing, supported by a Japanese helicopter carrier, on the uninhabited atoll of Okidaitōjima, about 250 miles southeast of Okinawa.

China’s new ADIZ requires aircraft operating within the zone to register flight plan, radio, transponder, and logo information with its Civil Aviation Administration.  But the Ministry of National Defense is the “administrative organ” responsible for the zone.  Aircraft that violate the rules of the ADIZ could prompt the Chinese air force to adopt “emergency measures.”  Japan maintains a similar zone around its nearby islands.

Certainly China’s action has reverberated across the Asia-Pacific.  As one South Korean official noted, the focus of South Korea’s upcoming talks with China will likely shift from strengthening trust and cooperation to the ADIZ controversy.  Even Australia summoned the Chinese ambassador in Canberra to express its concern.  But those that could ultimately end up facing a similar situation might be the countries of Southeast Asia.  In announcing the ADIZ, the Chinese Ministry of National Defense referred to its authority over “the area enclosed by China’s outer limit of the territorial sea.”  Of course, there is another “territorial sea” that China claims—the South China Sea.  Within that sea, China has many other maritime disputes.  The most recently visible one is between China and the Philippines over Scarborough Shoal, which led Manila to challenge China’s maritime claims before a United Nations tribunal earlier this year.  There are also the long-running disputes between China and Vietnam over the Paracel Islands as well as among China, Brunei, Malaysia, the Philippines, and Vietnam over the Spratly Islands.  But by mentioning the “outer limit of the territorial sea” China also revives a long-dormant dispute between it and Indonesia over the waters along the northern edge of Indonesia’s Natuna Islands, which have offshore natural gas fields.  China’s use of an ADIZ to strengthen its sovereignty claims in the East China Sea suggests that it might try a similar approach in the South China Sea too.  China’s Ministry of National Defense spokesman, Colonel Yang Yujun, failed to dispel such notions when he said that China would establish additional zones “at the right moment after necessary preparations are completed.”

More practically dangerous for the United States is that China’s ADIZ creates a situation in which American reconnaissance aircraft, which regularly patrol the East China Sea, may increasingly encounter Chinese fighter jets.  (Such patrols have long annoyed China.)  To appreciate the danger, one needs only to recall the April 2001 incident when a Chinese J-8 fighter jet collided with a U.S. Navy EP-3 reconnaissance aircraft over the South China Sea.  The EP-3 was forced to land on China’s Hainan Island where it was interned, triggering a two-week long crisis between China and the United States.

Little surprise, then, that China’s demarcation drew an immediate response from the United States.  Secretary of State John Kerry commented that he was “deeply concerned” and that China’s “unilateral action constitutes an attempt to change the status quo in the East China Sea”; Secretary of Defense Chuck Hagel flatly stated that the United States would not recognize China’s control over the zone.  To make that point clear, the United States ordered two B-52 bombers to make an unannounced transit of the East China Sea on November 26.  No doubt, Washington also wanted to set a precedent for American combat aircraft to operate within the zone without notifying Chinese authorities.

Tokyo took an equally stern tone.  Prime Minister Shinzō Abe said that Japan would not recognize the zone.  He even persuaded Japan’s major airlines not to file flight plans with Chinese authorities on routes through the East China Sea.  Both Japan and South Korea flew military aircraft into the zone on November 27.  Soon after, China announced that it sent more aircraft to patrol the area, including a KJ-2000 early-warning aircraft and several J-11 and Su-30 fighters.

Most likely, China is trying to use the ADIZ to not only respond to Japan’s recent military exercise, but also enhance its sovereignty claims to the East China Sea (and the islands within it).  Earlier, it began maritime law enforcement patrols in the area to do the same.  Hopefully, China understands that it is setting the stage for future conflict if it pushes its claims too hard.  Already, China has chipped away at the credibility of its own diplomatic charm offensive in Southeast Asia, which Beijing just launched at the Asia-Pacific Economic Cooperation forum in October.  Even Southeast Asian countries with less-apprehensive views of China, like Indonesia and Malaysia, cannot help but take notice.

China’s establishment of its air defense information zone in the East China Sea raises another question: why take such a step now?  Is it because China feels the need to immediately respond to Japan’s recent military exercise; or because Beijing knows that the world’s attention is focused on the successful international negotiations in Geneva over Iran’s nuclear program rather than its actions in the East China Sea; or because China sees the Obama administration’s commitment to its Asian allies as fundamentally weak (and wants to test it)?  Thankfully, Beijing decided to declare its ADIZ after Japan concluded its military exercise.  At least, there will be a full year before Japan conducts its next set of military drills in the area.

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Looper: The Asian Financial Crisis Redux?

Financial crises and their associated economic disruptions (or vice versa) can alter the international political order among countries by changing their relative power relationships.  What precipitates these crises and disruptions have many origins; but in many cases their underlying causes slowly build up pressures that suddenly erupt in a ruinous episode.  Decades of declining economic productivity, big budget deficits, and an overvalued currency eventually led Russia to default on its sovereign debt in 1998.  Following on the heels of the demise of the Soviet Union, the default led Russia into a particularly nasty recession as well as a particularly dark eclipse of its power across Asia and Europe for over half a decade.

Another crisis that began a year earlier, the Asian financial crisis, also changed what many had at the time expected to be the political trajectory of Southeast Asia.  The proximal cause of the crisis was the devaluation of Thailand’s currency, when its central bank ran short of U.S. dollars needed to defend its pegged exchange rate.  That triggered several similar crises across Asia and ultimately derailed Southeast Asia’s “tiger economies.”  Also derailed was the internal stability that Southeast Asian governments had attained after decades of conflict during the Cold War.  After the crisis, Indonesia’s long-ruling President Suharto was removed from office, and Malaysia’s equally long-serving Prime Minister Mahathir Mohammed was weakened (leaving office in 2003).  Thailand, whose prosperity in the early 1990s allowed it to become the first East Asian country to acquire an aircraft carrier in 1997, saw its wider ambitions thwarted.  Indeed, most countries in the region turned inward, as they shelved military modernization plans and their citizens clamored for political change.  On reflection, had the region made those military investments and developed the political self-confidence that often comes with internal stability, it would have been in a better position to balance China’s rise today.

Instead, Southeast Asia grasped at China’s refusal to devalue its currency during the crisis as a sign of friendship and inspired hope that they need not balance China’s rise and could assimilate their giant neighbor into the region’s multilateral norms.  Fifteen years on, that hope has proven misplaced.  China emerged from the Asian financial crisis relatively unscathed and ultimately became more assertive.  While it had to write off a mountain of bad loans on the balance sheets of its state-owned banks, Beijing really had no other choice, since those banks play a key policy role in its management of the Chinese economy.  Fortunately for China, continued foreign direct investment and major domestic infrastructure spending allowed it to grow out of its economic problems.

Southeast Asia was not so fortunate.  As the economies of countries like Thailand expanded during the first half of the 1990s, they also attracted a great deal of speculative investment and credit.  Eventually Thailand’s economy cooled, as less productive investments were made, U.S. interest rates rose, and Japan sharply devalued its currency.  As a result, the stability of Thailand’s leveraged economy and the ability of its central bank to defend its exchange rate peg became dubious—prompting money to flow out of the country and credit to suddenly contract.  A similar logic played out in other East Asian economies, causing a domino effect that engulfed Indonesia, Hong Kong, Laos, Malaysia, the Philippines, and South Korea.  Within a few months, local currencies plummeted, hundreds of businesses were shuttered, and millions found themselves unemployed.

Today, economic clouds are once again gathering over East Asia.  And Mark Twain’s quote seems particularly apt: “history does not repeat itself, but it does rhyme.”  The region’s economic growth is slowing.  Yet Southeast Asian countries continue to pile high consumer and sovereign debt.  They are even considering issuing U.S.-dollar denominated obligations, which are more difficult to pay off if their local currencies devalue.  But, of course, that may not occur this time, since the countries of Southeast Asia learned to amass large U.S. dollar reserves to forestall any run on their currencies.  As China and Taiwan showed during the 1997 Asian financial crisis, large U.S. dollar reserves can help avert the worst effects of such an event.

But such financial defenses are now starting to be tested, as Japanese Prime Minister Abe Shinzō’s economic policies have caused the yen to sharply fall against currencies across Southeast Asia (whether intentional or not).  As a result, Southeast Asian exporters are feeling the strain and have already called upon their respective central banks to match the Japanese effort.  But without an overt exchange rate peg to defend, Southeast Asian central banks have more leeway than they did in 1997.  And fortunately for them, U.S. interest rates are unlikely to jump in the coming year.  Still, the groundwork for a second Asian financial crisis is in place.  This time, China may not be spared, as many of its exporters are already barely profitable, the structural distortions in its economy are as big as ever, and it seems to lack a clear way to grow out of the next crisis (apart from even more domestic infrastructure spending).  But should Southeast Asia again turn inward, the United States should be prepared to do more to maintain the region’s balance of power.  A wider Asian financial crisis that ensnares Japan or South Korea may require an even larger American effort.  But this does not mean that American military power will be what is needed.  Rather, the region’s countries are keen on other sorts of American engagement, particularly economic ones.  And it is precisely those ties that will be most wanted if a crisis does occur.

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North Korea Moves to War Footing

It seems like we’ve all seen this movie before.  North Korea feels affronted and blusters; South Korea and the United States respond with negotiations and a concession or two; China and Russia seek a peaceful resolution (plus the survival of their buffer neighbor); and Japan just wants the problem to go away, which it does—until the next time North Korea feels affronted.

But this time North Korean Supreme Leader Kim Jong-un has ratcheted up tensions beyond the country’s usual bluster.  On March 11 North Korea invalidated its sixty-year armistice with South Korea.  And after the participation of two B-2 nuclear-capable bombers during a joint exercise between American and South Korean forces, on March 29 Pyongyang declared a “state of war” between it and South Korea, threatening to strike not only its southern neighbor, but also the United States (nominally Alaska, Guam, and Hawaii, since North Korean missiles can only reach that far).  With a modern military of its own, South Korea has vowed to respond if attacked.  And, of course, there are about 25,000 American troops stationed in the country, too.

So what strategy should the United States pursue in this latest crisis on the Korean Peninsula?  Surely, in crafting its approach, Washington should keep in mind its most important long-term interest in the region which, in my opinion, is the strengthening of the American alliance with South Korea and Japan.  That alliance is crucial to counterbalance a rising China and resurgent Russia in Northeast Asia.  But to arrive at a practical strategy for this crisis, it is informative to start by considering some strategic extremes and what effect they may have on that alliance:

The United States could advance an escalatory strategy to demonstrate to North Korea that it cannot continue to bluster at every perceived slight.  And if war comes, so be it.  The United States has adequate anti-ballistic missile defenses aboard Navy warships to defend Hawaii and Army air defense batteries could be dispatched to protect Alaska and Guam.  Of course, Seoul may not feel as secure if North Korea launches a large-scale conventional attack or nuclear weapons against it; but more likely Pyongyang will take more limited military action.  Such an outcome would likely lead South Korea and Japan to further bolster their defenses, though perhaps not with nuclear weapons (unless North Korea uses them first).  And a militarily stronger South Korea and Japan could better maintain the balance of power in Northeast Asia, removing some of the burden from the United States.

At the other end of the spectrum, the United States could adopt an appeasement policy—giving North Korea what it wants in exchange for a de-escalation of tensions—and return to waiting for Kim Jong-un’s regime to collapse.  While appeasement may not please the American ear, it is an option that would remove the specter of armed conflict and would be practical if one believes that time is on one’s side.  Of course, there may be a big knock-on effect: America’s guarantee of extended deterrence would ring a bit hollower in South Korea and Japan (not to mention in Taiwan, the Philippines, and Southeast Asia).  Still, South Korea and Japan would likely further bolster their defenses, this time probably with nuclear weapons.  In this case, the balance of power outcome in Northeast Asia might still resemble the former, but the level of trust among South Korea, Japan, and the United States would likely suffer.

Ultimately, the approach the United States will take is likely to fall in between the two extremes.  The Obama administration’s “strategic patience” is one.  It seeks to break the cycle of North Korean bluster by simply waiting for North Korea to back down and seek negotiations without any concessions from South Korea or the United States.  Kim Jong-un is now putting that strategy to the test.  In the meantime, the United States deployed F-22 fighters to South Korea on Sunday.

However this crisis ends, South Korea and Japan are likely to strengthen their armed forces.  In the long run, that should benefit the United States, if it can keep the alliance strong.  So, in dealing with this crisis, Washington would be wise not to take an approach without first learning and integrating the views of South Korea and Japan—because not only will they bear most of the consequences (both intended and unintended) of any strategy to deal with North Korea, but also the United States would benefit from avoiding any approach that may create divisions between it, South Korea, and Japan, and in doing so inadvertently weaken the alliance that is so vital for the broader regional balance of power.

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