U.S. and Hong Kong (1985-1997)

ROTH AT CLOSING SESSION OF WORLD ECONOMIC FORUM

Following is the transcript of Roth's remarks:

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REMARKS BY STANLEY ROTH
ASSISTANT SECRETARY OF STATE
FOR EAST ASIAN AND PACIFIC AFFAIRS
TO THE CLOSING PLENARY SESSION
WORLD ECONOMIC FORUM
HONG KONG
October 15, 1997

MR. ROTH: I'll try to stick to within the 6-minutes allotted to me. We've come to the end of many sessions and I don't want to overstay my welcome. But you really set the stage for me quite perfectly, because my initial line has already been said by you, which is that a prerequisite for the economic growth that is characterized the region for the last decade or more has only been possible because of the peace and stability that has prevailed in the region for more than 20 years.

But I think there is a paradox, and that paradox is that although the Asia-Pacific region has been remarkably peaceful, there is enormous, and I would say growing concern in the region that this peace and stability might not endure. And so a lot of time is spent focusing on the prospects that things might change, rather than assuming that things are going to stay the way they are at the moment. And I just want to share a few thoughts of what could endanger the regional stability that has characterized the Asia-Pacific region for so long. And I've come up with four basic factors.

The first is the most obvious, so obvious that it may seem ridiculous as stated, but it's war. And I think that, if we're talking about war in the Asia-Pacific region, the only scenario that I think is even remotely worth talking about is some type of conflict on the Korean peninsula, which of course, is a classic Cold War confrontation. It is a residual of the Cold War that has not yet been solved. And I'm talking about the conventional aspect, not the nuclear aspect, because I think the Agreed Framework has largely put the nuclear issue to rest. That logic suggests that the prospects for conflict on the peninsula have been greatly reduced. The collapse of the North Korean economy -- and I don't use that word lightly -- the food shortages which are endemic, not just a result of weather; the international isolation of the North, all suggest that this is not a country that would be capable of waging an offensive conflict.

And yet, logic could fail us, and the Korean peninsula remains dangerous. There are more than a million men under arms in North Korea, and we do not know what the trigger might be for a North Korean decision to use force. We have to worry about a scenario where the North gets so desperate that it might feel that using force, seizing some territories and suing for peace would be worth it. This is a crazy scenario. It is not one the North talks about, and I hope it is not one they will consider, but it is one that policy-makers at least have to think about. And I think it is why the Korean peninsula remains the most serious immediate threat to peace and stability in the region. And it is why the United States, its allies -- Japan, the ROK, and increasingly in cooperation with the People's Republic of China -- have all focused on trying to get peace talks started and to reduce tensions on the peninsula.

The second threat to regional stability -- less severe than a war, but still severe, I think, would come from the use of force to resolve territorial disputes. There is no shortage of territorial disputes in the region. The ones I'm worried about in particular are the ones in the South China Sea and in the East China Sea. And the danger is not so much that countries would go to full-scale war over any of these islands -- or in some cases, rocks -- but rather that there could both be a polarization of diplomacy as a result of one country using force to try to enforce its claim, and that you could have a reversal of the momentum, which has been towards regional integration and towards confidence building measures, instead more to traditional blocks if it's viewed that one country is behaving belligerently. The other implication -- and it relates directly to the economic theme that, of course, has been the mainstay of this conference -- is that it could encourage conventional arms races in the region. That, despite the fact that you see a lot of articles talking about the arms race in Asia, the remarkable fact to me is how modest military spending has been considering the economic growth and the potential to spend on weapons if countries chose to do so. You look at a country like Indonesia, and it has absolutely tiny armed forces, and as a percentage of GNP or GDP, it's been encouraging low. But it is not inherent that it has to remain this way. And if these territorial disputes get out of control and become hot disputes, you can have a major impact on military spending, which of course will impinge negatively on economic growth.

The third threat to stability -- and my greatest worry -- is the danger of an adversarial U.S.-China relationship. This could possibly be precipitated by a confrontation over Taiwan, although that is not the only scenario. As undesirable as such a scenario may be, we saw a year ago March just how quickly tensions could escalate in the Taiwan Strait. And, I think, history is not particularly encouraging on this point. If you look at the last hundred years, the international system does not have an impressive track record in terms of absorbing the rise of a new major power peacefully. I'm not falling into presumptive pessimism. I think the U.S.-China relationship can and will be managed. For, when I look at this situation, it suggests three things to me.

First, it suggests the urgent need for resumption of serious cross-straits dialogue. None of us want to have to deal with the consequences of confrontation in the strait, and the best way to avoid it, is for the two parties to get back on the path of negotiations, where they were prior to 1995.

The second, obviously, is a major strengthening and improvement in the bilateral U.S.-China relationship, and that is exactly what the upcoming summit two weeks from now is about, trying to put the relationship on a much more even keel, and to put it on a strategic framework where we identify the areas of cooperation rather than the problems in areas of confrontation.

And the third is something -- I don't want to steel Kishore's thunder -- so I will only mention it in passing. But it is facilitating the integration of the People's Republic of China into regional institutions like the ARF and APEC, that such membership and participation -- active participation -- can only encourage moderation in Chinese behavior. And the goals should be a China that plays by the rules, rather than a China that seeks to make and enforce the rules, and I think these regional institutions are a key.

Fourth -- and I'm closing in my 6-minutes -- but the fourth threat, I think, is not one of these traditional country scenarios, but rather is a threat of the proliferation of weapons of mass destruction. And this has been one where, I think, the region has recently gotten a reprieve because of the at least temporary -- and I hope permanent -- resolution of the North Korean nuclear issue. I don't see any signs of the emergence of any other nuclear power in the region in any time in the foreseeable future. The dynamics aren't there. But nevertheless, when we talk about weapons of mass destruction, we are not just talking about nuclear weapons. We're talking about chemical weapons which are cheap and increasingly easy to produce. We're talking about biological weapons which are absolutely terrifying in their implications -- and unfortunately all too easy to produce. And we're talking about the delivery systems, including missile systems, whether they're intermediate or long-range systems. And I think we have to give great attention in the region, but even as we focus on the country problems, that we continue to strengthen the international regimes to deal with this spread, to prevent this spread of proliferation of these weapons of mass destruction. And we'll try to see if we can supplement that on a regional level, just while we still hope to work with ASEAN on the Southeast Asia Nuclear Weapons-Free Zone. Let me stop at that point.

QUESTION: I have a question for Stan Roth, regarding U.S.-China relations. The U.S. trade deficit with China has been increasing very rapidly, and will probably exceed that of U.S. trade deficit with Japan in the near future. My questions are first, what is the effect of this on U.S.-China relations; second, if it does increase tension between U.S. and China, what can be done about it?

ROTH: First, in terms of the facts, it is becoming pretty apparent that next year the trade deficit with Japan will dwarf the trade deficit with China, just given what is going on with the Japanese economy and the incredibly slow growth, the lowest since the 1970s, so we won't quite have the situation you've described. I think the Japan deficit will get a lot more attention next year than that it has for the past two years. That does not change the fact, however, that there is a lot of political dimension to the growing China trade surplus with United States.

There is an academic answer to it, which is that what you're really seeing is not so much the loss of American jobs as the transfer of Asian jobs. These American jobs have been lost twenty or thirty years ago. Instead, what you're seeing is the transfer of jobs from Korea to China, from Taiwan to China, even from Malaysia and some of the ASEAN countries. And it is wide despite this dramatic increase in surplus. You see, our employment figures are really remarkable, that is it's not a major problem for us in economic terms. But politically, we have to deal with it.

I think the best way to deal with it is by getting an accession package to the WTO which is viewed as commercially viable. I believe that, if this is accomplished, the perception will be that there is a level playing field and that American firms can compete fairly in the Chinese market. And I think if we get such agreement, we will be able to manage the political fallout. Needless to say, it also won't hurt if China purchases more from the United States, and I think there will be a buying mission in advance of the summit, a trade mission, and that will help, but it will deal only with a small fraction of the overall surplus.

QUESTION: Mr. Roth, you mention one possible hot spot and two warm spots in East Asia. There is a fourth one I would like to hear your comment on. Not so much a hot spot, but a perception. That is revitalization of the Japanese military strength. The presence of the U.S. in the Pacific has been seen generally as a stabilizing influence. But is that going to be seen . . . will the alliance with Japan be seen as a doubly stabilizing influence or, on the other hand, will it be seen as either an encouragement of certain faction that would like to see Japan becoming military again, or maybe even worse, that you may be shifting your stabilizing influence to a country which -- fair or unfair -- has not been accepted as a such?

ROTH: I am glad you asked the question, because there has been enormous misunderstanding, indeed I would even say hype about the recently-concluded guidelines between Japan and the United States. This is not a revolutionary transformation of the military alliance. It is in fact merely a logical extension of how to make it relevant into the next century, and particularly how you deal with the realities of the post-cold war period. The old alliance had, as you know, a lot of emphasis on things like stopping a Russian tank attack coming into Hokkaido, and defending the sea lanes out to a thousand miles from the Soviet Fleet. Those concerns are gone.

The question is: is there still relevance to the U.S.-Japan security relationship? And the answer we felt was: Yes, that there certainly is relevance in terms of discussing new roles and missions, such as, for example, peacekeeping elsewhere in the region, where Japan has only begun to make a mark. But there is also relevance in terms of support which Japan can provide to us in the event of contingencies in the region. And we very specifically refused to choose individual scenarios, because we wanted to emphasize not geographically-based contingencies, but capabilities. And the example we use, of course, is the Persian Gulf War.

Find anyone who had predicted six months before the invasion of Kuwait that the United States would have half a million troops in the Persian Gulf and Saudi Arabia; he would have said we were dreaming; and yet it happened. You have to have the capabilities, and that is what the guidelines are about -- how we can respond together as allies if there are contingencies in the Asia-Pacific region.

This is by no means an anti-China containment mechanism. The discussion started in 1993, not in 1996. I think the fact that the timing -- that the guideline got launched, as it were, during President Clinton's summit in April, 1996, right after the carrier incident in March, made it look to some people that this was somehow a new dramatic response to China. The answer is nothing of the sort.

QUESTION: My question is also to Mr. Roth. On that issue of last March in Taiwan. Yesterday we heard about the Japan, China, U.S. triangle. You've listed Taiwan as number 3, I believe, below the Southeast Asia islands, and certainly below what is a very tense situation in Korea. I wonder whether something has changed fundamentally on any side of the equation because here in Asia, it is often commented -- certainly in Hong Kong among analysts -- that all that we're seeing is that Taiwan is moving more away from a path that China would like to see. China is ...(inaudible) force, and the U.S. is the policeman of Asia. Has anything changed in that equation that would make this less a flashpoint than it was last March?

ROTH: I think what's changed more than anything else is the fact that all the participants realized just how high the stakes were. I think the most surprising aspect of the situation was how quickly we got to a situation of high tension. Again, talking about unpredictability -- I don't think any one would have predicted that the U.S. would have felt the need to send the largest naval presence since the Vietnam War to the vicinity of the Taiwan straits in order to ensure that our policy -- the peaceful resolution of that dispute -- not be violated. And yet, that was what happened. I think as a result of that, there was some pulling back by all of the parties, that you saw, I believe, an effort by Taiwan to downplay some of the cross-strait issues. You saw a very aggressive effort by the United States and the PRC to improve their relationship. From that low point, I think, you can see a steady, straight line upwards in the bilateral relationship, including an announcement only a few months later that there would be the State visit. So this got people's attention, reinforced what some of us may have forgotten -- that this is a volatile, hot issue. And I think in that sense led to a greater prudence by all the participants.

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