CONGRESSIONAL PROGRAM America’s Rebalance toward Asia: Trade, Security & Resource Interests in the Pacific April 11-18, 2014 CONGRESSIONAL PROGRAM America’s Rebalance toward Asia: Trade, Security & Resource Interests in the Pacific April 11-18, 2014 Vol. 29, No. 2 Dan Glickman Vice President, The Aspen Institute Executive Director, Congressional Program Washington, DC This project was made possible by grants from the Asia Foundation, the Sasakawa Peace Foundation USA, the Ford Foundation, the William and Flora Hewlett Foundation, the Henry Luce Foundation, the John D. and Catherine T. MacArthur Foundation, Rockefeller Brothers Fund, and the Rockefeller Foundation. Copyright © 2014 by The Aspen Institute The Aspen Institute One Dupont Circle, nw Washington, DC 20036-1133 Published in the United States of America in 2014 by The Aspen Institute All rights reserved Printed in the United States of America ISBN: 0-89843- Pub #14/009 1992/CP/BK Table of Contents Conference Overview ...................................................................1 China’s Rebalancing: Implications for U.S.-China Economic Relations ............................5 David Dollar, Ph.D. The U.S. and Japan: Strategic Partners in Building a 21st Century Economic Architecture in the Asia-Pacific Region ......................................................9 Charles D. Lake, II Japan’s Decision to Remain as a Tier One Nation; Seeking a New Framework for Dialogue with China; What’s Really at Stake after Abe’s Remark in Davos...........................................15 Tsuyoshi Sunohara Energy and Environment in Northeast Asia .................................................25 Sharon Squassoni Nuclear Threats in Northeast Asia ........................................................29 Sharon Squassoni Energy Security for the 21st Century: The Role of Nuclear Power after Fukushima...................33 Nobuo Tanaka Quiet Deterrence: Japan Needs a Careful Strategy to Manage its Strained Ties with China ............53 Yoichi Funabashi Can China Rise Peacefully? .............................................................57 Susan Shirk, Ph.D. Multilateral Security Cooperation in Northeast Asia: Relevance, Limitations, and Possibilities ..........63 Kim Tae-Hyo, Ph.D. Addressing the U.S.-China Security Dilemma ...............................................69 Wang Dong, Ph.D. America’s Rebalance toward Asia: Trade, Security & Resource Interests in the Pacific ................71 Ambassador Chan Heng Chee, Ph.D. Straight Forward: The Political Implications of Taiwan-Mainland Economic Integration ..............75 Chu Yun-han, Ph.D. The Changing Security Environment in Northeast Asia and the Dynamic Role of Regional Relationships ................................................81 Shen Dingli, Ph.D. Navigating Conflicting Signals Sent Out by Japan, the United States, and China ....................89 Akio Takahara, D.Phil. Watch the Russian and Japanese Diplomatic Dance; Asia Enters an Age of Increasing Uncertainty; Watch the Rise of Asia’s National Security Councils; How China and America can Keep a Pacific Peace; North Korea is an Asian Hybrid of Orwell and Hobbes; How American should handle a Changing Japan ......................................................................91 Kurt Campbell, Ph.D. Conference Participants ...............................................................101 Conference Agenda...................................................................105 Conference Overview America’s Rebalance Toward Asia to cyber attacks. The conference provided an impor- The Aspen Institute Congressional Program con- tant strategic conversation one week before the visit of vened a conference in Japan April 11-18, 2014 to President Obama to Tokyo. focus on America’s Rebalance toward Asia: Trade, The proposed trade agreement called the Trans- Security and Resource Interests in the Pacific. Twenty Pacific Partnership has animated economic discus- members of Congress engaged with 22 U.S. and sions throughout the Asia-Pacific region. The TPP Asian scholars on a number of issues affecting Asian is viewed by many in Japan as a mechanism to bind and U.S. security, economic and energy interests. The the U.S. to the security of its Asian partners. Some Prime Minister of Japan, Shinzo Abe, addressed the argue that the TPP has the potential to fundamentally group; as well as U.S. Ambassador to Japan, Caroline change the face of economic interactions in East Asia, Kennedy. Participants also visited the operations at a region accounting for roughly 40% of global trade. In each potential member country, various stakehold- Yokosuka Naval Base and engaged with a 22 mem- ers have concerns over certain provisions of the agree- bers of the Japanese Diet. In Kyoto the delegation ment, including investor-state dispute mechanisms, visited a range of educational sites arranged by eight agriculture tariffs, tariffs and regulations on automo- teams of students. Each team, led by an American biles, as well as the role of State-Owned Enterprises. student studying in Japan, and a Japanese student, Negotiators are working to achieve consensus on experienced a unique educational itinerary. The con- these and other areas of concern central to this gressional delegation was one of the most senior and agreement such as environmental conservation and diverse delegations to visit Japan in decades. pharmaceutical regulatory frameworks. While these Many of the scholars contended that the history areas are proving to be some of the most challenging of the 21st century will largely be written in the Asia- for negotiators, their eventual resolution could lay Pacific region. East Asia is home to some of the most the groundwork for a more robust and resilient trade innovative and dynamic economies in the world. architecture in the Asia-Pacific. With billions of citizens looking for a better life, the Japan formally joined the TPP negotiations as part prospects for growth and prosperity are nearly infi- of a larger Japanese economic stimulus and regulatory nite. Despite these opportunities, endemic security overhaul program, centered on the so-called “Three concerns persist from North Korea’s nuclear provoca- Arrows” policy, including quantitative easing (macro- tions to growing challenges in the maritime domain economic stimulus), public spending, and structural and nontraditional challenges from natural disasters reform. The market has responded positively to Prime 1 Minister Abe’s reforms. The Nikkei rallied to nearly increasingly more free market-oriented economy. Xi’s 50% of its total value, inflation targets were met, next goal is for China to become the first Asian nation and consumer confidence rose. Abe hopes to push to make a full transition from an export-oriented to forward “shovel ready” projects to improve Japan’s a consumer-driven economy. While China has made aging infrastructure, create more jobs, and encourage some progress on this front, Asian trade relations are growth. Some of the targets, including agriculture, more explicitly defined by their robust cross-border labor markets, immigration, healthcare, and female exchanges, especially between Japan and China, as participation in the workforce, involve tackling deep- well as between Japan and China and South Korea. ly entrenched aspects of Japanese industry reticent to This dynamic is fundamental to the political environ- foreign competition or regulatory reform. Japanese ment of Northeast Asia. The trade regimes of these policies to increase the participation of women in countries are deeply intertwined and create a complex the workforce are a key element of Abe’s restructur- dynamic for political interactions in Northeast Asia ing and were repeatedly raised as important steps by and beyond. many participants. On top of this multifaceted economic relation- Nonetheless, the TPP faces hurdles in the U.S. ship, the Northeast Asian political climate is growing Congress based on concerns about the potential more complex and tense by the day. Sino-Japanese domestic impact on jobs, and the challenge of relations have reached an all-time low in the post war approving Trade Promotion Authority, which the period, defined by increasingly tense exchanges over administration contends is essential to secure a lasting territorial disputes at the Senkaku/Diaoyu islands— agreement. animated by growing Chinese assertiveness. While Across the Sea of Japan, President Park Geun-hye Japan has not fired a shot in anger in nearly 70 years, also faces a unique set of challenges in South Korea. there has been an increasing appetite amongst Japan’s A key plank of Park’s domestic agenda is her com- senior leadership to play a more active role in push- mitment to underwrite a vast social welfare scheme ing back against perceived Chinese assertiveness and to care for South Korea’s aging population. Other at the same time enhance its regional security and commitments include continuing high rates of eco- peacekeeping capabilities. Abe’s strategy involves nomic growth, aiding the continued global expansion investing in more robust defense capacities as well as of Korean companies while also supporting Korean taking steps to strengthen the U.S. alliance by resolv- small and midsized companies. ing outstanding issues on base relocation and taking Chinese economic growth (while slowing) con- initial steps to normalize Japan’s defense identity. tinues to drive forward and generate wealth across Several participants stressed that budget pressures in a large spectrum