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powers. Without America, Europe's role will approach irrelevance.

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 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

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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.

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

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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
based on common values/
Wilsonian--approach is feasible.

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 Clinton Administration has put forward an
imaginative vision for the Western Hemisphere, it has failed
the equivalent to do so for the North Atlantic area, in part because it has
never resolved its ambivalence between relying on

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traditional alliances and its preference for multilateralism.

Now But 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.

Unfortunately, American policy has failed even in the minimum task of holding the alliance together, much less adapting it to new realities. This is above all because 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.

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

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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 key members clearly 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
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

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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 more enlightened 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
In any event,
European neutrals and, of course, Russia itself. Such a
grouping is an altogether different animal from NATO and the
Allies as defined;
European Union 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

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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." The Partnership is, in fact, a replay of the
Locarno Treaty of the 1920s, when Great Britain, eager to
avoid an alliance with France, settled for recognition of
the French frontier by Germany, the country of which France
was most fearful.

If present trends continue, NATO policy will become
increasingly ~~rudderless~~. Despite ritualistic assertions to
the contrary, the Partnership for Peace creates two
categories of frontier in Europe: those that are guaranteed

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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 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

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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
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. Though the Administration

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implies that the core NATO group of 16 will be held

together, it has been silent as to what their specific

functions will be other than to participate in the

~~Partnership for Peace~~ Indeed, how can they have a function

if blocs are to be avoided?

In recent months, the Administration has 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. ~~Lincoln~~

until the question of NATO membership is settled, the revitalization of the core Atlantic Alliance will be hampered.

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;

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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'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
strongly support the Administration's program of economic
assistance to Moscow. Also accept Yeltsin as a plausible
leader of reforms.

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But 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 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 ~~the~~ 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.

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The Clinton Administration deserves support in extending generous economic assistance to Russian reform.

Jinn

P29

And Russia should 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 non-militarized

Peace that invents common military missions, within the framework of NATO, whose essential irrelevance underlines the artificiality of the conception.

The Administration's 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.

In fact, they are likely to understand such a

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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 institutions.

Nationalism is on the rise inside Russia, and there is
a great temptation to ease the pain of transition to market
economics for the Russian population by appealing to that
basic instinct. This is reflected in President Boris
Yeltsin's refusal to go along with NATO in punishing Serbia,
in his treatment of Chechnya, and in his reaction to the
Tenderoy
e
Partnership proposal as a form of blackmail over
Eastern Europe.

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

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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
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

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strengthened if moderates are put in a position of being able to highlight the dangers of a nationalistic Russian policy.

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.

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

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countries, the Partnership for Peace is now a fact of life.

But it is not too late to prevent the Partnership from
submerging the Atlantic Alliance from Doha Round.

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

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on the two sides of the Atlantic as well as environmental 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.

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Asia

The key reality of Asia is that economic dynamism exists side-by-side with political fragility. American policy must never lose sight of both of these facts.

Asia is 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).

The United States has therefore a vital interest not only in peace and stability in Asia but in constructive relations with the nations bordering the Pacific. It has an even more fundamental interest to prevent the nations of

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Asia from forming a bloc inimical to America's purposes either because of the emergency of a hegemonical power or by ill-judged American policies and pressures.

When American policymakers think about how to achieve these objectives, they generally focus on Asia's economic dynamism. But we overlook at our peril the equally crucial reality that the political situation in almost every Asian country is extremely fragile, and most often finds itself 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

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that a new dominant political party will appear. But its
character will change from what has heretofore been
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 in an industrial information age.

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

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

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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 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

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directly with the United States. South Korean unease with this process, though publicly understated, clashes to some extent. After considerable 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 + the United States continue to increase their involvement in Korea, it could mean ally.

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.

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As India emerges into great power status, it can be expected to return to the policies of the British raj which 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. The European nations have organized themselves into the European Union; whatever their differences, military conflict between them is inconceivable; strategic considerations are a negligible aspect of the conduct of their relations with each other.

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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 (most European nations represented by Rome, Charlemagne, the Church. As a result, (nations of Asia) perceive each other as strategic rivals and potential threats (excluding the relations of the ASEAN nations--except (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 through a series of bilateral security arrangements which, if discarded, could collapse the whole structure. (Even in the post-Cold War world, the United States has considerable

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win an excellent position to advance American scope for a creative long-range policy. For the conflicts long-term interests 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 should therefore be in an excellent bargaining position for an excellent long-term--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 unrelated to a long-term strategy; many are a reflection of inadequate priorities, others reflect the 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

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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.
No other country is challenging the economic role
Nevertheless, the confrontational style accentuates the
result produced.
This
impression of potentially clashing national interests, which
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.

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But the most worrisome policy area concerns Sino-
American relations. For 25 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 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. Conflict with China would

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United States participate/ 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 foreign

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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

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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 Teng-hui of Taiwan. But the issue would not
have taken on such dimension had there not been the
culmination of a series of US actions perceived as
unilateral and high-handed in Beijing, just as Chinese
actions are being interpreted as provocative in Washington,
only to aggravate the problem.
The central issues now looming before the two

governments are proliferation, human rights and,

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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. As China proved in the 1950s, American策动分裂China is not sufficient to maintain the status quo in Korea and in its reaction to the Vietnamese occupation 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

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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 in Beijing and Washington seem now on a collision
course which, if continued, will prove extremely costly to
both sides and threatening to international stability.

We are on the verge of producing a several
A general review of American foreign policy is not the
of the policies pursued by its Competing Powers could be found
occasion to review the merit of individual decisions. It
to peace + stability in Asia. Before it is too late
is, however, appropriate for a general appeal to all parties

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to step back from the brink before irreparable damage is
made. The danger 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. Nations with hegemonical
aspirations--or even territorial claims--will sense new
opportunities.

China will try to organize these nations 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

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already discernible. The economic damage to America will be
Lavender.
_grievous_ (2)

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 an end to invective from Beijing to permit a calm
reassessment.

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# 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.

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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

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* 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.

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* 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.

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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.

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* 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.