07-11-95 11:36AM

TO KAI

P004

18

and economies based on the market. In the end, the nations of the Atlantic area need each other in their own self-interest. Without America, Europe turns into a peninsula at the tip of Eurasia, unable to find equilibrium much less unity and at risk of gradually subsiding into a role similar to that of ancient Greece in relation to Rome--the only outstanding question being whether America or Russia will play the role of Rome. Without Europe, America will become an island off the shores of Eurasia, condemned to a kind of pure balance-of-power politics difficult to reconcile with its national genius. Without America, Europe's role will shrink. Without Europe, America's path will be precarious and lonely; after all, we fought two world wars to prevent the domination of Europe by potentially hostile powers.

A major American role in Europe is a prerequisite for European coherence. Without it, the European Union would founder on the fear of German domination; France would see

JUL-11-1995 11:29

97%

P.04

07-11-95 11:36AM

TO KAI

P005

19

reinsurance in a Russian option; historic European coalitions would form, compounding their traditional tenuousness with irrelevance; Germany would be tempted into a nationalist role, Russia into revanchism.

An American presence in Europe provides a measure of equilibrium. It gives France assurance against German hegemony and Germany a security anchor against Russian pressure as well as protection against excessive European nationalism.

Europe by itself cannot handle the two most dangerous Russian contingencies: resurgence of nationalism or implosion. A Russia facing a divided Europe would find the temptation to fill the vacuum irresistible. Even Russia has much to gain from an American presence, which is one of the best guarantees against the reemergence of historical European temptations.

JUL-11-1995 11:29

97%

P.05

07-11-95 11:36AM

TO KAI

P006

20

There are new challenges as well. While technically a subject outside NATO competence, Muslim fundamentalism, were it to dominate North Africa, would pose a grave challenge to Western security. Nor is it necessary to define every threat in detail to seek to preserve the Atlantic system of regular consultation and an infrastructure of military forces, logistics systems and experience in crisis management which provides a vital, perhaps indispensable, resource in a period of transition.

But the importance of close relations with Europe goes beyond the traditional catalogue of threats. Though I believe the time has come for America to develop a concept of the national interest and apply it in a balance-of-power context, I believe it equally necessary to limit this kind of foreign policy to regions where no alternative exists and to stress the areas where a more cooperative--even Wilsonian--approach based on common values is feasible.

JUL-11-1995 11:30

97%

P.06

07-11-95 11:36AM

TO KAI

P007

21

The two regions where moral consensus can undergird cooperative relationships are the Western Hemisphere and the North Atlantic area. In both, the key countries have, to all practical purposes, forsworn the use of force in their relations with each other. In each, institutions already exist capable of serving as building blocks of a cooperative world order: NAFTA and Mercosur in the Western Hemisphere, NATO and the European Union in the Atlantic region. But while the Administration has put forward an imaginative vision for the Western Hemisphere, it has failed to do the equivalent for the North Atlantic area, in part because it has never resolved its own ambivalence between relying on traditional alliances and its preference for multilateralism. This is why it has fudged the key issue: how to define the Europe to which America should relate itself--especially over the issue of NATO expansion--and what should be Russia's relationship to that Europe. But

JUL-11-1995 11:30

97%

P.07

07-11-95 11:36AM

TO KAI

P008

22

unless America assumes a real leadership role, the nations bordering the North Atlantic will gradually drift apart; the two sides of the Atlantic will grow more conscious of their rivalries than of their common purposes.

With respect to NATO expansion, the Administration has been reluctant and ambivalent, torn between the alliance policy which it inherited and the multilateralism which it prefers. It is aware of the German distaste for having the border of NATO on the eastern border of Germany and of the pressures of the Visigrad countries (Poland, the Czech Republic, Slovakia and Hungary) to join NATO. But it really is not comfortable with traditional alliances; indeed, some of its policymakers seem to believe that NATO may have contributed to causing the Cold War rather than to ending it. They would like to reverse what they consider the key error of the Cold War which, in their view, was the exclusion of Russia from Europe. They seek to build Europe

JUL-11-1995 11:30

97%

P.08

07-11-95 11:36AM

TO KAI

P009

23

from east to west based on Russia, rather than from west to east and based on the nations bordering the North Atlantic.

This explains the Administration's reluctance to expand NATO. President Clinton put forward as an alternative the so-called Partnership for Peace which, in his view, is not about security but about reconciliation: to "use our military power to do something never before done in the history of the nation state on the European Continent: to unify truly free and independent nations of their own free will in a Europe that is truly free together rather than have some new and different divisions of Europe..."

To use military power to unite nations of their own free will would, until our time, have been considered a contradiction in terms--especially when the area envisaged is vast, covering most of the Northern Hemisphere: the Atlantic Alliance, the former satellite orbit, the successor republics of the Soviet Union, the European neutrals and, of

JUL-11-1995 11:31

97%

P.09

07-11-95 11:36AM

TO KAI

P010

24

course, Russia itself. In any event, such a grouping is an
altogether different animal from the Atlantic Alliance as
heretofore conceived; it is in many respects contradictory
to it.

NATO was designed for security; its purpose was to
resist a definable danger. The Partnership is designed not
for defense but for reassurance. The Partnership's joint
military planning is an end in itself and assumes no
specific peril; it is undertaken bilaterally between NATO
and each partner. Yet what is the common threat or purpose
that unites, say, Uzbekistan and Spain? The Atlantic
Alliance assumed that its threats came from outside the
treaty area, while the Partnership seeks to avoid threats
within its area by affirmations of good intentions. No
wonder that the Partnership is based on the proposition that
the extension of NATO to Eastern Europe is "provocative" and
"divisive."

TII -11-1995 11:31

99%

P.10

07-11-95 11:36AM

TO KAI

PO11

25

If present trends continue, NATO policy will become increasingly contradictory. Despite ritualistic assertions to the contrary, the Partnership for Peace creates two categories of frontier in Europe: those that are guaranteed are not threatened, and those that are threatened are not guaranteed. The result is a gray area in Eastern and Central Europe that the nations affected find severely demoralizing.

The nations of Central and Eastern Europe are joining the Partnership for Peace because they see it as a steppingstone into NATO. Russia is joining to drain NATO of content, as is evidenced by various Russian proposals amounting to a veto over NATO decisions. Thus, when America's leaders imply to Poland that NATO membership is just around the corner and to Russia that it can participate in any security arrangement open to its former satellites (in other words, that it may be able to join NATO

JUL-11-1995 11:31

97%

P.11

07-11-95 11:36AM

TO KAI

P012

26

eventually), confusion (and worse) is inevitable when the
promissory notes fall due. In any event, the prospect of
Russia's eventual membership in NATO removes NATO as a
safety net against what Russia's neighbors fear most. NATO
was designed to defend its members against threats from
outside the NATO area, not against threats from other NATO
members.

The Partnership for Peace runs the risk of diluting
what is left of the Atlantic Alliance into a vague
multilateralism. When Russia is as eligible for NATO
membership as Poland, what is left of any common purpose?
If Uzbekistan is eligible, why not India? If everybody
between Vladivostok and Vancouver is eligible--if everybody
is allied with everybody--why even have an Atlantic
Alliance? Either NATO has in fact become vestigial or,
alternatively, Asia will see the new grouping as ranging the
white races against the peoples of the Far East. Or, more

JUL-11-1995 11:32

97%

P.12

07-11-95 11:36AM

TO KAI

P013

27

likely, we will get the worst of all worlds by trying (or pretending) to include Russia in NATO: an ineffective NATO that nevertheless gives Asians the sense that we are trying to organize Eurasia against them.

In recent months, the Administration seems to have recognized the impossibility of maintaining its original position. It announced first that the subject of expansion should be studied. It has more recently advocated expansion but avoided a timetable which is the only basis on which serious planning can begin. It is not clear, at least to me, whether the Administration is seeking to navigate between domestic advocates of NATO expansion and Russian opposition by embracing the concept while avoiding a timetable, thus keeping open all options.

If that is the case, NATO will continue to languish. Until the question of NATO membership is settled, the revitalization of the core Atlantic Alliance will mark time.

JUL-11-1995 11:32

97%

P.13

07-11-95 11:36AM

TO KAI

P014

28

So long as NATO and the Partnership are merged organizationally, it will prove very difficult to define common objectives for the core Alliance. Twenty-two nations have already applied for membership in the Partnership; scores are eligible. Each nation is supposed to come up with its own program of bilateral cooperation with NATO. No one familiar with how NATO operates can believe that, as now constituted, the Alliance bureaucracy can plan individual Partnership programs and simultaneously generate a creative adaptation of the Alliance itself to the new circumstances. Gresham's Law will apply: the bad currency will drive out the useful one.

The Administration needs to face the implications of its rhetoric. If the purpose is to avoid "blocs" and "discrimination," there will never be a good time for East European membership without Russia; and if it is made dependent on Russia, Moscow will have been given a veto or

JUL-11-1995 11:32

97%

P.14

07-11-95 11:36AM

TO KAI

P015

29

the option of watering down the existing institutions to the point of irrelevance. And if later on Eastern Europe is taken into NATO because Russia has become a declared threat, the crisis would surely be exacerbated.

It is therefore necessary to take another look at a Russian policy which stakes everything on a kind of psychoanalytic social engineering. A realistic approach to Russia policy would recognize that integrating Russia into the international system has two components that must be kept in balance: influencing Russian attitudes and affecting Russian calculations.

The Administration's attempts to return Russia to the international community are laudable. I agree with Secretary Christopher's statement that "helping democracy prevail in Russia remains the wisest--and least expensive--investment that we can make in American security." I

JUL-11-1995 11:33

98%

P.15

07-11-95 11:36AM

TO KAI

P016

30
strongly support the Administration's program of economic
assistance to Moscow.

Russia should indeed be made welcome in institutions
that foster economic, cultural and political cooperation
with the West. The Conference on Security and Cooperation
in Europe would be a far better home for this than a
Partnership for Peace that invents nonexistent military
missions.

The tendency to treat Russian leaders as if they were
fragile novices easily flustered by exposure to the
realities of international politics is an invitation to
disillusionment and misunderstanding. These are tough men
who have survived the brutal school of Communist and Russian
politics; they are quite capable of comprehending a policy
based on mutual respect for each other's national interest
and strict reciprocity. In fact, they are likely to

JUL-11-1995 11:33

97%

P.16

07-11-95 11:26AM

TO KAI

P002

31
understand such a calculus better than appeals to an
abstract and distant utopianism.

Perhaps the most serious misapprehension has been that
a Russian government that declares itself reformist would
automatically abandon traditional foreign policy goals. For
the incentives of the most well-meaning Russian government
are quite different from most American expectations.
Nationalism is on the rise inside Russia, and there is a
great temptation to ease the pain of transition to market
economics by appealing to that basic instinct.

At the moment, Russian armies are in Moldova, Georgia,
Azerbaijan, and Tajikistan and participate in some of the
local civil wars with a strategy that seems designed to make
the new republics--all of them members of the United
Nations--rue their independence and return to the womb of
imperial Russia. The foreign minister of Russia has
repeatedly put forward a scheme for a Russian monopoly on

JUL-11-1995 11:19

97%

P.02

07-11-95 11:26AM

TO KAI

P003

32

peacekeeping in the "near abroad," indistinguishable from an
attempt to reestablish Moscow's domination. By its silence
and its repeated invocation of an American-Russian
partnership, the United States has come close to acquiescing
in these actions.

A moderate Russian foreign policy will be impeded, not
helped, by turning a blind eye to the reappearance of
historic Russian imperial pretensions. Russia's effort at
reform cannot exempt it from accepted principles of
conducting international relations. It is ambiguity about
dividing lines, not their existence, and ambivalence about
Western reactions, not their certainty, that tempt
militarists and nationalists alike. Reform will be
strengthened if moderates are put in a position of being
able to highlight the dangers of a nationalistic Russian
policy.

JUL-11-1995 11:19

97/4

P.03

07-11-95 11:26AM

TO KAI

P004

33

Russia and the United States have parallel interests in Central Asia, in nonproliferation, and in stability in the Middle East. All these subjects should be the focus of intensive consultations at all levels, including the summit. Finally, Russia and America share a mutual interest in a stable Europe and Central Europe. This can be achieved best by America's presence in Europe, which is based on NATO. Stability in Europe requires reaffirming the centrality of NATO rather than diluting it in an abstract multilateralism.

This leads to the following conclusions:

* The crisis in the Atlantic Alliance can be solved only by opening a dialogue on fundamentals; previous American vacillations complicate the ability to restore confidence.

* The structure of American-European relations needs to be modified. With the military threat receding and the

JUL-11-1995 11:19

97%

P.04

07-11-95 11:26AM

TO KAI

P005

34

risk of political crises growing, the political role of the Atlantic Alliance should be given greater emphasis.

* The most sensitive immediate issue is NATO expansion, which the Administration put before recent NATO ministerial meetings. But it must take care lest, in seeking to please every constituency and respond to every pressure, it winds up in the same dead end as Bosnia.

* The current policy of carrying water on both shoulders, of hinting at expansion to Western and Central Europe while trying to placate Russia with prospects of a protracted delay--is likely to accelerate the disintegration of Western unity without reassuring Russia. NATO expansion requires a decision, not a study.

* Having been approved by the NATO Council, joined by Russia and a host of other Central and East European countries, the Partnership for Peace is now a fact of life. But it is not too late to prevent the Partnership from

JUL-11-1995 11:20

97%

P.05

07-11-95 11:26AM

TO KAI

P006

35

submerging the Atlantic Alliance by separating its
organization from that of NATO.

Nevertheless, security can no longer be the principal
unifying bond of the Atlantic nations because, fortunately,
there no longer exists a unifying threat. Common purposes,
not common fears, must provide the cohesion in the new era
in which economic and social issues will dominate.

One such initiative that would give a new impetus to
North Atlantic relations would be a North Atlantic Free
Trade Area for manufactured goods and services, with
negotiations on agriculture to follow. Such a grouping
would accelerate the movement toward the principle of free
trade to which the members of the World Trade Organization
have committed themselves. In the meantime, it would foster
cooperation among the nations of the North Atlantic.
Conditions are propitious. Labor standards and wage scales
on the two sides of the Atlantic as well as environmental

JUL-11-1995 11:20

97%

P.06

07-11-95 11:26AM

TO KAI

P007

36
concerns are comparable. Prime Minister John Major of Great Britain and Foreign Minister Klaus Kinkel of Germany have expressed their interest in such a project.

In time, NAFTA and the North Atlantic Free Trade Area could be merged, and new consultative machinery could be created in the political and social fields between the Western Hemisphere and the European Union. As Russia's economy develops and its policy becomes more national, associate membership for it in such a free trade area would be a distinct possibility--much more so than in NATO.

In short, America should return to what it has traditionally done best: putting forward its vision for how the nations of the North Atlantic can create a new world worthy of their democratic principles.

Asia

JUL-11-1995 11:20

97%

P.07

07-11-95 11:26AM

TO KAI

P008

37

When American policymakers think about how to achieve these objectives, they generally focus on Asia's economic dynamism. Asia is indeed the fastest growing region in the world, containing half the world's GNP and population. It has been growing at an average rate of 7.5 percent a year, with China alone increasing its GNP by more than 10 percent a year, every year since 1980. It accounts for 40 percent of America's overseas trade (a third more than the European Union), and the percentage is still rising (see Appendix for more details).

But American interests in Asia go far beyond the economic realm. The United States has a vital interest in peace and stability in Asia and in constructive relations with the nations bordering the Pacific. It has an even more fundamental interest to prevent the nations of Asia from forming a bloc inimical to America's purposes either because

JUL-11-1995 11:21

97%

P.08

07-11-95 11:26AM

TO KAI

P009

38

of the emergence of a hegemonical power or by ill-judged American policies and pressures.

In focusing on economics, we overlook at our peril the crucial reality that the political situation in almost every Asian country is extremely fragile. The majority of them find themselves in a state of transition. These transformations are producing in each country a tension between nationalism and internationalism and, at a minimum, will modify existing alliances including the Japanese-American alliance.

Japan is in the process of transforming its political institutions and probably the orientation of its postwar foreign policy. The electoral system is changing with as yet unpredictable consequences. When the process is completed, after one or two more elections, it is likely that a new dominant political party will appear. But its character will change from what has heretofore been

JUL-11-1995 11:21

97%

P.09

07-11-95 11:26AM

TO KAI

P010

39

familiar. The postwar generation of Japanese leaders lived
with the trauma of defeat, sheltered its foreign policy
under the American security treaty, and emphasized the
economic rebuilding of the shattered country. But the
period of political self-abnegation is clearly ending.
Japan's policy is bound to become more national and, above
all, more political.

China may already have completed most of the transition
from Deng Xiaoping to the next generation of leaders.
Nevertheless, the process of consolidation has its own
logic. Above all, the extraordinary rate of growth of the
Chinese economy is bound to bring with it political
adaptation to an industrial information age.

Indonesia's President has just started what many
believe to be his last term--a prospect his advanced age
makes all the more probable.

JUL-11-1995 11:21

97%

P.10

07-11-95 11:26AM

TO KAI

PO11

40

India is shifting towards a greater readiness to
embrace market economics.

All these changes are with variations taking place in
all the countries of Asia and will produce certain common
features:

-- tension between the internationalism required by
global economies and the nationalism which many of the
leaders believe is needed for political cohesion.

-- pressure on existing alliances and alignments,
especially as there is a perception in every Asian nation
that American policy is itself in a state of flux and for
their leaders increasingly unpredictable.

As I have said, Japanese policy will take on an
increasingly national character. The shock of defeat in
World War II has worn off; the end of the Cold War has
destroyed the conviction that American and Japanese
perceptions of their national interest are inevitably

JUL-11-1995 11:22

97%

P.11

07-11-95 11:26AM

TO KAI

P012

41

parallel. The rise of China, the unification of Korea, the
possible shift of the center of gravity of Russian policy
towards Siberia--all have a different significance for Japan
than they have for the United States. The size of the
Japanese defense budget--already the third largest in the
world--reflects this reality, and a Japanese nuclear program
in the next century cannot be excluded. Japanese and
American political purposes are far from irreconcilable.
But there is a need for an explicit effort to bring them
into closer harmony with each other--a task inadequately
addressed until now.

Korea--the last remaining divided country--will be
beset by the challenge of unification. It faces a North
Korean strategy to delegitimize it and to settle problems
directly with the United States, as with the North Korean
nuclear program. South Korean unease with this process,
though publicly understated, clashes to a quite considerable

JUL-11-1995 11:22

97%

P.12

07-11-95 11:26AM

TO KAI

P013

42

extent with the Administration's apparent conviction that
North Korea's rigidity is caused by its exclusion from the
world economy and that the United States has a special
responsibility (or obligation) to soften their sense of
isolation by increasing its own contacts with Pyongyang.

South Korea too is aware that China and even more Japan do
not share, to put it mildly, its own aspiration toward
unification, thereby magnifying its own nationalism. And if
China and the United States continue or increase their
confrontation, the situation in Korea could turn ugly.

The nations of Southeast Asia can be divided into those
which are above all afraid of China and those which are more
concerned about Vietnamese nationalism. The first group
cultivates close relations with Vietnam, the latter
emphasizes friendship with Beijing.

As India emerges into great power status, it can be
expected to return to the policies of the British raj which

JUL-11-1995 11:22

97%

P.13

07-11-95 11:26AM

TO KAI

P014

43

were after all conceived by the Indian civil service under
the viceroys located first in Calcutta and, toward the end
of British rule, in New Delhi. It will seek an influential,
if not dominant, role, in the arc extending from Aden to
Singapore. This will produce clashing perceptions with
China in Tibet and Burma, and with Indonesia, Vietnam and,
to a lesser extent, China in Southeast Asia.

This fragmentary survey underlines two realities which
American policy has so far neglected. The first concerns
the basic difference between the nations of Europe and those
of Asia. During the Cold War period, Europe developed
regional structures for economic and political cooperation
for which there is no ______ in Asia. More recently, the
European nations have organized themselves into the European
Union; whatever their differences, military conflict between
them is inconceivable; strategic considerations are a

JUL-11-1995 11:22

97%

P.14

07-11-95 11:26AM

TO KAI

P015

44

negligible aspect of the conduct of their relations with
each other.

The opposite is true in Asia. Ritualistic
protestations at APEC meetings of the existence of a Pacific
Community notwithstanding, the nations of Asia have never
organized themselves into an Asian Economic Community or an
Asian Defense Pact. Too, they lack the common historical
experience shared by most European nations represented by
Rome, Charlemagne, the Church. As a result, the nations of
Asia perceive each other as strategic rivals and potential
threats (excluding the relations of the ASEAN nations--
except perhaps Vietnam--to each other). They are at least
as conscious of their mutual rivalries as they are of any
potential common purposes.

This state of affairs has caused the United States to
play the principal stabilizing role in Asia since the Second
World War. Unlike in Europe, the United States has done so

JUL-11-1995 11:23

97%

P.15

07-11-95 11:26AM

TO KAI

P016

45

through a series of bilateral security and political arrangements which, if discarded, could collapse the whole structure.

Even in the post-Cold War world, the United States is in an excellent position to advance American long-term interests. Because the conflicts of the Asian nations with each other are more deep-seated than any disagreements they might have with the United States, in a well-conceived policy, the United States bargaining position is excellent - an advantage reinforced by the fact that America provides the principal market for all Asian nations.

Yet in recent years, the United States has not only failed to draw benefits from this state of affairs, it has permitted itself to become embroiled in conflicts with many of the key Asian nations. Some of these conflicts are generated by ad hoc domestic pressures on the Congress unrelated to a long-term strategy; others reflect an

JUL-11-1995 11:23

97%

P.16

07-11-95 11:26AM

TO KAI

P017

46

Administration tendency to equate foreign policy with
domestic politics. It ought to be a settled maxim of
American foreign policy not to take on the principal Asian
nations simultaneously. The opposite has been the case.
During calendar year 1995, the United States has been in
confrontation with Japan and China simultaneously and, in
recent days, has managed to throw in a glancing blow at
Thailand as well.

In recent years, relations with Japan have been
characterized by seemingly endless confrontations. On many
of these, the American position has had much merit. It is
surely a legitimate objective of the US Government to gain
greater access to the Japanese market. But we have lost
track of the equally important interest in developing
political state-to-state relations as one element of Asian
stability.

JUL-11-1995 11:23

97%

P.17

07-11-95 11:26AM

TO KAI

P018

47

Foreign policy always involves trade-offs. [Giving more weight to] the economic side has produced a confrontational style that accentuates the impression of potentially clashing national interests. This may come back to haunt us as Japan increasingly articulates its national foreign policy. Moreover, many of the economic "victories" are more apparent than real, and more public relations coups than substantive achievement. In the process, there has been next to no scope for the elaboration of parallel political strategies on which close American-Japanese relations will increasingly depend. We may pay for this short-term approach in the years to come.

But by far the most worrisome policy area concerns Sino-American relations. For over twenty years after 1949, China and the US had no relations at all. Between 1971 and 1989, they achieved something approaching a strategic partnership. Since then, relations have steadily declined

JUL-11-1995 11:24

97%

P.18

07-11-95 11:26AM

TO KAI

P019

48

as a result first of the impact of Tiananmen Square and
Congressional pressures and, more recently, a cycle of
action and reaction over Taiwan. Having just returned from
Beijing, I want to say in the most solemn way that our two
countries are again on a collision course. A general review
of American foreign policy does not afford the opportunity
to go into the details of every issue. But it makes it
necessary to stress in the most insistent manner why US-
China relations are important and why they must not be
jeopardized lightly, if indeed at all.

Stability in Asia is most likely if both China and the
United States participate in shaping Asia's future.
Conflict with China would tempt each side to organize the
rest of Asia against the other, encouraging virulent
nationalism. While an overbearing Chinese foreign policy
could at some point ______ in the future drive American

JUL-11-1995 11:24

97%

P.19

07-11-95 11:26AM

TO KAI

P020

49

foreign policy to such an expedient, nothing in the contemporary world calls for a policy of isolating China.

For the next decade at least, America and China have a parallel interest in equilibrium in Asia. Both countries have their reasons for opposing the domination of Asia by a single power. China wants the United States to help balance its relationships with powerful neighbors--Japan, Russia and India--at least until it is strong enough to do so on its own. America needs Chinese cooperation on these matters as well as on a peaceful evolution of the future of Taiwan, on nuclear proliferation, and on the transfer of weapons technology.

These are the sorts of issues which should be key elements of the Sino-American dialogue at least for the next decade. If they moved to the center of Sino-American relationships, they would facilitate dealing with human rights and proliferation issues by providing a strategic

JUL-11-1995 11:24

97%

P.20

07-11-95 11:26AM

TO KAI

P021

50

context. In the course of their country's long history,
China's leaders have frequently taken account of the special
needs of their counterparts provided such an action also
served Chinese interests. What they will not accept, or
will accept only under extreme duress, is the implication
that America bestows its cooperation as a special favor
without reciprocity to be withdrawn at will.

But this is precisely what has been happening. At the
moment, Sino-American relations are in a free fall. The
immediate cause has been the granting of a US visa to
President Lee Teng-hui of Taiwan. But the issue would not
have taken on such dimension had the visit not been the
culmination of a series of US actions perceived as
unilateral and high-handed in Beijing over recent years.
That Chinese actions are being interpreted as provocative in
Washington only accentuates the problem.

JUL-11-1995 11:25

97%

P.21

07-11-95 11:26AM

TO KAI

P022

51

The central issues now looming before the two governments are proliferation, human rights and, overshadowing everything else, Taiwan. A general review of post-Cold War foreign policy is not the occasion to go into detail on each of these issues. I will take another occasion to elaborate my views.

But I need to explain why the issue of Taiwan is so fraught with risks. To many Americans, the immediate issue appears as the sovereign American right to determine the entry of visitors. To Beijing, it is seen as a challenge to the territorial integrity of China, a challenge to which it is particularly sensitive because the alienation of Taiwan was an early stage in the process by which Imperial Japan sought to dominate China. It is also viewed as a violation of formal American undertakings by six American presidents of both parties over 23 years. As China proved in the Korean War and in its reaction to the Vietnamese occupation

JUL-11-1995 11:25

97%

P.22

07-11-95 11:26AM

TO KAI

P023

52

of Cambodia, it tends to react neuralgically to any
perceived slight to its sovereign rights. Engaging in
actions that China views as an insult to its dignity can
therefore be a costly enterprise, even if the process also
does severe damage to China: in 1950--a year after ending
the exhausting civil war--China entered the Korean War
against the unchallenged American superpower in possession
of a nuclear monopoly; in 1959, it expelled all Russian
advisors at the cost of setting back its economic progress,
even though it had no diplomatic relations with America; in
1979, it "taught Vietnam a lesson," even though its army was
inferior in technology and suffered heavy casualties. If
China perceives that Taiwan is being alienated, it would
prefer to fight even at the risk of a setback than to be
perceived as acquiescing. Beijing and Washington seem now
on a collision course which, if continued, will prove

JUL-11-1995 11:25

97%

P.23

07-11-95 11:43AM

TO KAI

P002

53
extremely costly to both sides and threatening to
international stability.

We are on the verge of producing a reversal of the
policies pursued by six presidents which have contributed to
peace and stability in Asia. All parties must step back
from the brink before it is too late and irreparable damage
is done.

-- The Congress should stop its ad hoc measures of
harassment.

-- The Administration should at last define what it
means by a "one China" policy as the prelude to resuming the
political dialogue with Washington.

-- Taiwan should think again before pressing America
on a course that, in the end, may isolate it totally and
force it to take the blame for consequences some of its
backers apparently do not foresee.

JUL-11-1995 11:36

97%

P.02

07-11-95 11:43AM

TO KAI

P003

54

— Beijing should end its invective and take seriously issues about which Americans feel deeply, such as the fate of Harry Wu, as a prelude to resumed negotiations with Washington.

The danger of the existing ______ to confrontation to both China and the United States and to stability and progress in Asia is incalculable. A containment policy toward China under present circumstances is a pipe dream. Unlike the containment policy of a generation ago, it will have no takers except perhaps Vietnam, turning the history of the last two decades on its head. It will force every nation of Asia to take sides with uncertain outcomes and with a guaranteed enhancement of Asian nationalism. America's ability to influence Japan will dramatically decline. Korea may turn into a tenderbox. Nations with hegemonical aspirations--or even territorial claims--will sense new opportunities.

JUL-11-1995 11:36

97%

P.03

07-11-95 11:43AM

TO KAI

P004

55

China will try to organize the nations of Asia into a grouping to oppose America--a process whose beginning can already be noticed. The European nations will eagerly step into the economic vacuum--a process whose outlines are already discernible. The economic damage to America will be horrendous.

To be sure, China may suffer even greater economic damage, and it is even more vulnerable to unleashed Asian nationalism. But this will prove little consolation in the midst of the decline in restraints that collapsing confidence in American leadership will produce. I am aware that there is a school of thought holding that China will in the end recoil or perhaps even collapse as the Soviet Union did. I do not believe in the analogy, and I warn against playing chicken with the fate of nations. I believe there must be a moratorium on further unilateral steps in Washington by both the Congress and the Executive Branch and

JUL-11-1995 11:36

97%

P.04

07-11-95 11:43AM

TO KAI

P005

56

an end to invective from Beijing and pressures from Taiwan
to permit a calm reassessment.

* * * * *

Mr. Chairman:

I have attempted to describe the overall condition of
American foreign policy, as well as two major problem areas.

I want to conclude with an appeal for bipartisanship. The
national interest of the United States does not change every
four years; foreign leaders judge our country by its insight
and its constancy.

We have as a nation failed this test in recent years.

The Administration has not given a conceptual lead and has
too often subordinated foreign policy to domestic politics.

The Congress has sought to micromanage foreign policy-
-a task for which it is not organized.

At the end of the Second World War, it took America
four years to develop the policies which saw us through the

JUL-11-1995 11:37

97%

P.05

07-11-95 11:43AM

TO KAI

P006

57

Cold War. Some of the current controversies are therefore
the mechanism by which a ________ shapes the vision of its
future. Let us dedicate ourselves to accomplishing our task
with the same success that shaped the postwar world. The
American people deserve no less.

JUL-11-1995 11:37

98%

P.06

07-11-95 11:43AM

TO KAI

P007

# APPENDIX

The following statistics show the increasing importance
of Asian economic progress.

## Asia's Importance to the World Economy

* APEC represents half of the world's GNP and population, and soon half of its trade.

* The World Bank estimates that developing countries in Asia will average growth of 7.5 percent in 1995 and 1996, faster than anywhere else.

* In 1993, East Asia and the Pacific received 55 percent of total Foreign Direct Investments (FDI) into the developing world. China alone accounted for 38 percent of the total FDI into the developing world.

JUL-11-1995 11:37

97%

P.07

07-11-95 11:43AM

TO KAI

P008

2

Asia Surpasses Europe as the US' Largest Trading Partner

* The US now does 40 percent of its trade across the Pacific, up from 24 percent in 1980. Transatlantic trade represents one-third of US total.

* In 1994, US exports to Asia, including Japan, were approximately $150 billion, 30 percent greater than exports to the European Union (EU).

* US exports to Asia had an annual average percentage growth of 10 percent from 1982 through 1993; to the EU and Japan, US exports grew 5 percent and 7 percent, respectively, for the same period.

South and Southeast Asia Are Good Customers

JUL-11-1995 11:37

97%

P.08

07-11-95 11:43AM

TO KAI

P009

3

* ASEAN is the US' fifth largest export market (US-ASEAN trade has grown 17 percent per year for the past decade).

* The US now exports more to Singapore than it does to Italy; more to Malaysia than to the former USSR; and more to Indonesia than to Central and Eastern Europe.

* Trade between Singapore and Taiwan and the US is now 20 percent greater than US trade with Germany.

* The US is India's largest trading partner, taking 18 percent of its exports and the source of 12 percent of its imports.

## Asia Attracts Substantial US Investment

* The US holds the largest stock of direct foreign investment in Asia. Japan is the recipient of approximately half of the US total.

JUL-11-1995 11:38

97%

P.09

07-11-95 11:43AM

TO KAI

P010

4

* Total stock of US FDI in the region grew from $14 billion in 1980 to $78 billion in 1994.

* Accounting for less than 7 percent of accumulated US FDI in 1980, by 1993 the proportion had reached 13 percent.

* US companies favored Asia in the 1990s above other regions. US outward stock of FDI in Asia grew between 1990-1992 at 18 percent compared to 12 percent in Latin America and 6 percent in Europe.

* US exports to Asia support more than two and one-half million American jobs. One in fifty US workers was employed as a result of US exports to countries of Asia and the Pacific Rim.

* More than one-sixth of all US jobs created between 1989 and 1993 can be attributed to trade with this region.

JUL-11-1995 11:38

97%

P.10

07-11-95 11:43AM

TO KAI

P011

5
US Largest Equity Investor in Asia's Developing

Markets

* Total market capitalization of regional exchanges, not including China or Japan, could rise to $5 trillion by 2000, a 430 percent increase from current levels and the equivalent of US exchanges today.

* Asia received 43 percent of portfolio equity flows into the developing world in 1993.

Asia and US Business Opportunities

* China is becoming the primary engine of economic growth in the region. Southern China, Hong Kong and Taiwan are fast becoming the world's fourth major "growth pole" after US, Western Europe and Japan. Chinese imports grew 25 percent in each of the last two years.

JUL-11-1995 11:38

97%

P.11

07-11-95 11:43AM

TO KAI

P012

6

* It is estimated that infrastructure needs in Asia will absorb $600 billion in investment over the next five years.

* Asia will place 45 percent of all global orders for power generation equipment over the next ten years.

* China is fast becoming the world's largest market for commercial aircraft.

* Asia is the world's fastest growing area in terms of disposable income, with growth rates three times those of the US and Europe.

JUL-11-1995 11:38

97%

P.12