From the CIAO Atlas Map of Europe Map of Asia 

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The United States, Europe, and Asia  

Robert D. Blackwill and Kristin Archick

Council on Foreign Relations

"The Asia Crisis: Economic and Political Implications"
New York
April 15, 1998

Introduction

Despite Asia's recent currency troubles, most strategists and economic experts believe that in the period ahead Asia will continue to be one of the most dynamic regions of the globe and pose one of the biggest strategic challenges for the West. The United States and Europe are already closely intertwined with East Asia economically, and the region's future potential for economic development remains extraordinary. As Asia's global economic weight increases, its political influence on the world stage will likely do the same. Similarly, as the West's economic interdependence with East Asia grows, any breach of the peace in the region will importantly affect the United States and Western Europe.

Consequently, some analysts argue that given the security, political, and economic issues both the United States and its European allies will face with respect to East Asia in the coming decades, the transatlantic community should be working more closely together to meet the opportunities and threats emanating from the region. They think that the United States and Western Europe share vital and important interests in Asia: maintaining peace and security in the region; managing the rise of China (the PRC) as a regional and perhaps eventually global power; slowing the proliferation of weapons of mass destruction (WMD); preventing military conflict on the Korean Peninsula; promoting Asian economic stability; firmly entrenching Asia in the international free trade system; and expanding market access in Asia. Furthermore, these observers assert that it will be difficult if not impossible for either side of the Atlantic to address their concerns in the region without the other's doing so, given the sheer number and scope of these challenges. Thus they reason, the United States and Europe should develop an intimate partnership to protect adequately their interests in Asia.

However, in light of the end of the Cold War, which united the West behind common purposes and against a common adversary, some commentators question whether the United States and its European allies can sustain their cooperative relationship in Europe, let alone expand it beyond Europe's borders. Regarding East Asia in particular, they note somewhat differing transatlantic policies on issues such as how best to deal with the strategic implications of an emerging China, arms sales to the region, China's accession to the World Trade Organization (WTO), trade disputes with countries of East Asia, and human rights. In addition to these policy differences, these skeptics point to Europe's internal preoccupations, the European Union's lack of a common foreign and security policy, and the growing competition for new markets in East Asia as additional factors that decrease the likelihood of greater transatlantic collaboration regarding the area. Some worry that in the long term, policy disagreements between the United States and Europe toward East Asia might prove so divisive as to undermine to some degree the cohesion and unity of the Atlantic community.

This paper explores the potential for both transatlantic cooperation and discord in Asia. Of the region's numerous issues, it concentrates on U.S. and European policy similarities and differences toward the following key challenges facing the West:

Managing An Emerging China

The rise of China as a major economic, political, and military power in the coming decades will confront the West with myriad new challenges. Many analysts perceive a number of troublesome differences in transatlantic policies toward China, particularly on issues that intersect security and economics. They suggest that these policy divisions could undermine the effectiveness of the United States and Europe in managing China's emergence as a key regional and global actor. Others discount these worries, asserting that while the United States and its European allies differ at times on tactics vis-à-vis China, both share a core interest in ensuring China's peaceful integration into the international system. In this debate, the following issues have been salient: the trade-offs between managing the rise of Chinese power and seeking broad commercial interaction with the PRC; slowing WMD proliferation; Taiwan; China's accession to the WTO; Western arms sales to China; human rights; and Hong Kong.

The Trade-Offs between Managing the Rise of Chinese Power and Seeking Broad Commercial Interaction with the PRC

Two major schools of thought exist among foreign policy analysts and Asia experts on how the West should deal with the rise of China as a regional and then global power. The engagement school argues that China seems to want to become an integrated part of the international community, and therefore encouraging greater economic and political interaction with the PRC represents the best way to increase the likelihood of responsible Chinese international behavior. Supporters of this view assert that expanded commercial relations and bilateral and multilateral dialogues on issues such as regional security and human rights are most likely to produce gradually a more open, democratic, and cooperative China. They also argue that "premature adoption of belligerent policies risk creating a self-fulfilling prophecy--treat China as an enemy and it will be one." 1 To isolate China, they contend, would not only be counterproductive but also impossible given its growing economic and political power. David M. Lampton states, "To put it bluntly, China is too big to push around and too big to ignore, and that's what the engagement policy reflects." 2

The other predominant school of thought claims that China seeks to become a regional hegemon in Asia, and consequently, the United States and its Western allies should pursue policies aimed at containing China's geopolitical aspirations. 3 Those in this camp, such as Robert Kagan, stress that China "does not want to be `integrated' into the U.S.-dominated international order; it does not want to accommodate itself to what the West considers international `norms.' Rather, it wants to change the world to suit its own special needs as a powerful dictatorship on the rise." 4 Furthermore in the long term, analysts assert, China seeks, in David Shambaugh's words, "to disperse global power and particularly to weaken the preponderant power of the United States in world affairs. . . . China's primary foreign policy goal today is to weaken American influence relatively and absolutely." 5 Thus these experts believe it is imperative that the United States and its allies seek to curtail Chinese hegemonic ambitions.

At present, governments on both sides of the Atlantic have chosen to pursue engagement as a means to manage the rise of Chinese power. U.S. Secretary of State Madeleine Albright puts it like this: "China will be a rising force in Asian and world affairs. The history of this century teaches us the wisdom of trying to bring such a power into the fold as a responsible participant in the international system, rather than driving it out into the wilderness of isolation." 6 Recently, the Clinton administration has emphasized that its policy attempts to overcome significant U.S.-Chinese differences but that no single issue should control the multifaceted bilateral relationship between the two countries. 7

While Europe has consistently sought to engage China politically and especially economically, the Clinton administration has not always subscribed to such an approach. When the administration took office in 1993, it initially made the centerpiece of its policy toward the PRC linking the continued extension of U.S. trade preferences to China to improvements in China's human rights practices. 8 As U.S.-Chinese relations deteriorated sharply, however, by 1994 the administration announced that it was delinking trade and human rights. In establishing this reversal in policy, President Clinton stated, "That linkage has been constructive during the past year. But I believe, based on our aggressive contacts with the Chinese in the past several months, that we have reached the end of the usefulness of that policy, and it is time to take a new path toward achievement of our constant objectives. We need to place our relationship into a larger and more productive framework." 9 Some observers have noted that one of the factors driving this shift in policy was the fact that "Washington increasingly needed Beijing's help in managing global security issues (such as halting the North Korean nuclear programme)." 10 In short, they assert, the United States came to believe it shared several interests with China--such as preventing conflict on the Korean Peninsula, promoting continued regional prosperity, and preempting a regional arms race--that could be better be served through broad engagement with the PRC. 11

Critics contend, however, that America's new emphasis on developing its multifaceted engagement policy toward China is largely intended to disconnect U.S.-Chinese commercial interactions from other elements of the bilateral relationship, thereby enabling the United States to pursue burgeoning economic opportunities in China. Some claim that the Washington has been driven to adopt such a policy in part because of a lack of support from its allies, particularly those in Europe, for attaching noneconomic conditions to business relations with China. These experts maintain that another contributing factor to the Clinton administration's decision to delink U.S. trade preferences from China's human rights record was Washington's realization of the growing importance of maintaining access to China's emerging market in an increasingly competitive international economic environment. U.S. business interests argued intensely that the trade opportunities lost by American companies because of the administration's linkage strategy would be quickly acquired by their global competitors, many of whom are in Europe. Airbus, for example, is one of the U.S.-based Boeing company's major competitors in the Chinese commercial aircraft market. 12 Lampton notes that "There was absolutely no support for Washington's China policy among foreign governments. . . . Not one of America's traditional allies supported Washington's approach. On the contrary, they seemed to be cashing in on Washington's problems." 13 Consequently, many perceived few benefits in jeopardizing U.S. economic interests in China, especially if Washington did not have the support of its allies.

Those critical of this new tack in U.S. policy toward China, which seeks to engage China on a broad range of issues while preserving and expanding U.S. commercial relations, worry that the United States is sacrificing its long-term security and political interests for short-term economic gains. They opine that engagement has produced few results anywhere but in the economic realm and that the Clinton-Jiang Summit in October 1997 did not yield any political breakthroughs, only commercial gains such as the conclusion of an $84.1 million deal with Boeing for 50 aircraft and the lifting of the ban on peaceful nuclear cooperation between the two countries. 14 Kagan asserts that "the mere fact that these dubious assurances [regarding Chinese nonproliferation] were the "centerpiece" of the summit is the surest sign that engagement with China is producing nothing." 15

Question 1. Are there important differences between the United States and Europe regarding how best to manage the rise of Chinese power? If so, will these differences affect the ability of the transatlantic allies to deal with the PRC in the period ahead?

Question 2. Does the European Union or individual European nations have strategies to deal comprehensively over the long term with the PRC?

Slowing WMD Proliferation

Since the 1980s, China has been supplying nuclear and missile technology to countries suspected of having clandestine nuclear weapons programs. 16 Topping this list are Iran and Pakistan. In February 1996, it was discovered that China had sold 5,000 ring magnets, used in centrifuges to enrich uranium for weapons use, to Pakistan. Reportedly, China was helping Pakistan build a factory to make M-11 short-range ballistic missiles. 17 China has sold Iran several calutrons, magnetic isotope separation devices used to derive enriched uranium for an atomic device, and is also believed to have exported to Iran chemical weapons technology and equipment. 18 Prior to the Gulf War, China transferred dual-use nuclear technology to Iraq. 19 Furthermore, the PRC has concluded a contract to provide Pakistan with a nuclear power reactor; has supplied Silkworm antiship missiles to Iran and Iraq; and transferred ballistic missile technology to Pakistan, and perhaps to Iran and North Korea. 20

The United States has been a consistent and vocal critic of such sales and assistance by China to countries known to desire weapons of mass destruction (WMD). It has imposed sanctions on China intermittently in response to specific instances of Chinese proliferation. In 1991, after discovering that China was shipping missile components to Pakistan, the Bush administration blocked the sale of high-speed computers, suspended the issuance of U.S. satellite licenses, and prohibited U.S. missile technology and equipment sales to the state-run company involved; in 1993, in response to similar charges regarding Chinese transfers to Pakistan, the United States blocked the sale of $500 million of communications satellites and satellite technology to Beijing. 21 The United States has also prohibited until recently the sale of nuclear technology for civilian purposes to China, despite a 1985 Nuclear Cooperation Agreement negotiated with Beijing. When this agreement was submitted to Congress for approval later that year, Congress attached two conditions before nuclear cooperation could be permitted: the president must first certify in writing that the United States had arranged effective measures to verify that China would use American technology only for peaceful purposes and that China had agreed to stop its proliferation activities. 22

In initiating sanctions against China for what some view as reckless proliferation, the United States has largely done so unilaterally, without the support of its European allies. Indeed, several U.S. officials and numerous American commentators have expressed irritation with European policy, or lack thereof, toward Chinese sales of nuclear-related materials. In particular, they perceive many European countries as undercutting U.S. nonproliferation sanctions with respect to China by continuing to sell products to China that have been embargoed by the United States. For example, following the imposition of sanctions on U.S. satellite sales to China in 1993, Germany sold $1.5 billion in satellites to the PRC. 23 In 1996, when Washington was considering imposing sanctions on China for allegedly shipping more nuclear-related equipment to Pakistan (as well as for not providing greater protection of intellectual property rights), then assistant secretary of state for East Asian and Pacific affairs Winston Lord asserted that the administration's efforts to pressure China to respect trade accords and halt the spread of WMD were being exploited by Europe and Japan, which he said were happy to "gobble up our contracts" while "we take on the Chinese." 24

Some analysts, however, assert that the United States can no longer claim the moral high ground with respect to its European allies on the issue of slowing the proliferation of weapons of mass destruction by China. They argue that Clinton's China policy is now driven by "trade over everything" else, including concerns about Chinese proliferation. 25 This is the same accusation that many Americans have often directed at Europeans. These American analysts note several instances since 1994 when U.S. intelligence discovered renewed shipments of nuclear technologies and missile components by China to Pakistan but the United States declined to impose sanctions, claiming it was satisfied with Chinese promises to cease such activities. 26 More recently, in October 1997 during the summit meeting between President Jiang Zemin and President Clinton, the United States announced that it would certify to Congress that China had met the conditions attached to the 1985 Nuclear Cooperation Agreement, thereby allowing the agreement's implementation and permitting the sale of peaceful nuclear technology sales to China. Subject to government monitoring, American companies, on a case-by-case basis, would now be allowed to apply for licenses to sell nuclear reactor equipment to China. 27 In undertaking this decision, the Clinton administration stated that it was satisfied that China was making progress in halting nuclear proliferation.

To justify its change of policy, the administration cited a series of concrete steps agreed to by China to prevent nuclear proliferation. Among the most important were confidential written assurances that China would not engage in any new nuclear cooperation agreements with Iran and would rapidly complete two existing projects. 28 Also key to this policy reversal were China's reported adoption in September 1997 of a comprehensive nationwide nuclear-related export control system, which is consistent with international standards and requires all sales of nuclear technology abroad to be approved by the State Council; and its May 1996 commitment not to provide nuclear assistance to unsafeguarded nuclear facilities (that is, facilities not subject to international monitoring) in Pakistan or anywhere else. 29 In addition, the Clinton administration noted China's decision to participate in multilateral export control discussions, such as those the Zangger Committee, a group of approximately 40 nuclear supplier nations that abide by certain export restraints; China's 1994 renewed promise to observe the guidelines of (but not officially join) the missile technology control regime (MTCR), which seeks to prevent the spread of missiles capable of carrying WMD warheads along with the technology and equipment to build them; the PRC's adherence to the Nuclear Non Proliferation Treaty (NPT) regime since 1992, and its support for the NPT's indefinite extension in 1995; and the PRC's signing of the Comprehensive Test Ban Treaty in 1996. 30

Some commentators have remarked that China's alleged promise in mid-October 1997 to stop selling antiship cruise missiles to Iran was another factor that likely influenced Washington's decision, although the administration has been reluctant to link the two officially, arguing that the certification necessary to proceed with nuclear cooperation requires improved performance on nuclear issues. 31 On January 12, 1998, President Clinton signed the formal certifications required by U.S. law to implement the Nuclear Agreement and submitted the documents to Congress, which has 30 legislative working days to pass legislation blocking the lifting of the embargo. 32

The administration's decision to waive the ban on U.S.-Chinese nuclear cooperation has been criticized by some experts, who argue that it was undertaken largely in response to pressure from the American nuclear industry. China is expected to build 40 to 50 nuclear power plants over the next two decades to meet its rapidly expanding energy needs; it is predicted that this market will be worth an estimated $60 billion. 33 In the months prior to Jiang's visit to Washington, U.S. business interests launched a lobbying campaign to end American sanctions on nuclear energy sales, arguing that they prevented the U.S. nuclear industry from competing with European, Canadian, and Russian companies for lucrative contracts in China's growing nuclear energy market. 34 As a recent example, they pointed to China's contract with a French company, Framatome, to supplying nuclear reactors for China's latest nuclear power plant at Ling'ao in southern China (construction began in May 1997). 35

This lobbying effort has now turned its focus on Congress. It stresses that access to China's multibillion dollar energy market is crucial to the survival of the U.S. nuclear power supply industry and that a continuation of nuclear sanctions would result in the loss of tens of thousands of jobs across 28 states and the gradual disappearance of the trained personnel base that supports more than 100 U.S. nuclear power plants and military nuclear installations. 36

It is unclear at this writing whether Congress will be so persuaded. Several members have already publicly expressed concerns that certification would seriously undermine U.S. national interests, given China's past proliferation record and its purported string of broken assurances. In an op-ed piece in the Washington Post, Congressmen Edward Markey, Benjamin Gilman, and Christopher Cox wrote, "China has continually assured the United States that it would stop providing technologies for weapons of mass destruction to countries such as Iran and Pakistan. China has continually failed to live up to its promises. . . . We believe that providing access to American technologies that could end up assisting Iran's nuclear weapons programs would constitute an intolerable risk to U.S. national security." 37 They also observe that in July 1997 the CIA identified China as being "the most significant supplier of Weapons of Mass Destruction (WMD)-related goods and technology to foreign countries." 38 In November 1997, the House of Representatives passed a resolution to extend the mandatory certification investigation period from 30 days to 120 days; this legislation has not yet been considered by the Senate. 39

Furthermore, critics argue that the U.S. decision to certify that China is complying with nonproliferation agreements will send yet another signal to European nations that they can continue to provide investment with impunity to regimes, such as Iran, that are intent on developing WMD capabilities. A.M. Rosenthal writes, "America's friends, allies and Jospins know billions in U.S. trade go straight to the Chinese Army. How can we complain about Russians and other Europeans making billions in strengthening Iran?" 40

For its part, the Clinton administration maintains that its decision to end the U.S. ban on nuclear cooperation with China is part of its broad engagement strategy toward China, which stresses that common interests must outweigh any single point of conflict in the U.S.-China relationship. 41 Immediately prior to the summit meeting, journalist R. Jeffrey Smith observed that the agreement "has recently been depicted by officials from both countries as a symbol of a new and closer relationship, not just a matter of commerce. For Washington, it would be tantamount to saying that China . . . has earned the right to better treatment. For Beijing, it would say that solidifying trade ties with Washington is more important than maintaining a supply arrangement with a key Middle East ally." 42 As such, some administration officials also portrayed the plan to end the embargo on U.S. nuclear technology sales to China as "a victory for hard-nosed containment of Iran" because by securing China's pledge no longer to sell nuclear equipment or technology to Iran, Washington had succeeded in denying Iran one of its key suppliers. 43

Question 3. How effective are U.S. policies in discouraging China from contributing to the proliferation of weapons of mass destruction?

Question 4. Do European economic policies undercut U.S. nonproliferation strategies toward China?

Question 5. Does Europe have an increased role to play in persuading China not to contribute to WMD proliferation?

Taiwan

The United States does not officially recognize Taiwan, nor do any European Union (EU) countries. Both the United States and its European partners adhere to a "one China" policy, acknowledging that there is only one China and that Taiwan is part of China. The United States established relations with the People's Republic of China in 1979, transferring diplomatic recognition from Taipei to Beijing. At the same time, however, both sides of the Atlantic have retained close commercial, cultural, and other unofficial contacts with the people of Taiwan. Similarly, the transatlantic allies stand united in their rhetorical support for a peaceful solution to the Taiwan issue.

The United States and the European Union have economic and political interests in Taiwan. In 1996, two-way U.S. merchandise trade with Taiwan totaled $49.5 billion, while such trade between the EU and Taiwan was $30.4 billion. 44 Washington and Brussels view Taiwan's continued security as important not only to protect the West's commercial relations with Taiwan but also, and more importantly, to maintain peace and stability in the region. America has taken the lead among Western nations in managing the Taiwan issue, although the United States has never definitively stated that it would defend Taiwan if China attempted to reunite the island with the mainland through the use of force. Washington has preferred to encourage cross-strait dialogue and to maintain a policy of "strategic ambiguity" regarding its intentions toward the defense of Taiwan, stating only that it is committed to providing Taiwan with the capacity to defend itself in accordance with the Taiwan Relations Act of 1979, which enabled unofficial U.S. relations with the island. Among other things, the act specifies that the United States will continue to sell weapons to Taiwan that are "defensive" in nature. (In 1992, the United States sold 150 F-16 fighters to Taiwan). 45

Some argue that the European Union has been a strong and consistent backer of U.S. policy toward Taiwan. Perhaps the best example of Europe's support in this respect can be found in its actions during the March 1996 crisis in the Taiwan Strait that preceded the island's first-ever direct presidential election. By the 1990s, Taiwan was evolving into a modern, democratic society and a major trading power. Taiwan increasingly became dissatisfied with the status quo in its relations with Beijing, and, spearheaded by President Lee Teng-hui, began a campaign to gain greater international recognition. (For example, Taiwan reportedly offered the United Nations $1 billion for a seat in the General Assembly). Beijing interpreted these initiatives as moves toward an eventual declaration of independence by Taiwan. In the weeks preceding the election, Beijing began conducting military exercises (including missile firings) in the Taiwan Strait. These exercises were widely viewed in the West as attempts to intimidate the Taiwanese electorate.

In response, the United States deployed two aircraft carrier battle groups to the area "in order to underscore the abiding American interest in a peaceful settlement between Chinese on both sides of the Taiwan Strait," according to sinologist Chas. W. Freeman. 46 During an emergency session, the European Parliament adopted a resolution urging China to stop all preparations for any military action directed against Taiwan, expressing support for the people of Taiwan and calling on both parties to open a dialogue to diffuse the tense situation. The Parliament also announced that it was "seriously concerned" about the Chinese government's "constant refusal" to renounce the use of force to resolve the Taiwan issue. 47 Some pundits noted that the European Parliament took this stand in support of Taiwan in spite of the intense lobbying efforts exerted by Beijing to prevent European political parties from adopting the resolution. 48 Thus they claim that the relatively united front of the Western powers vis-à-vis Taiwan demonstrates that when faced with a clear challenge to its common interests in Asia, the transatlantic community can act with united purpose. 49

But some commentators are skeptical about the value of what they view as merely declarative support, arguing that given Europe's weak force projection capabilities, in the event of a military crisis in the Taiwan Strait the United States would entirely shoulder the burden. In the March 1996 crisis, although Britain and France were consulted as tensions in the Strait escalated, "in the end it was two American aircraft carriers and supporting warships that sailed into harm's way." 50 These critics assert that in the absence of providing direct military assistance in support of the U.S. effort, the passage of the Parliament's declaration was the least the European could do. They also note that a number of European countries have stopped selling some military equipment to Taiwan. In 1994, after France was excluded for more than a year from the Chinese market because of its decision in November 1992 to provide Taiwan with 60 Mirage jets, the French government announced it would not allow further sales of French military goods to Taiwan (the sale of the Mirages, however, went for forward, and the first Mirages were delivered to Taiwan in 1997). 51 And after the German government vetoed the sale of warships to Taiwan, the Germany was awarded $4 billion in new contracts from Beijing. 52

Thus these experts do not perceive a serious European commitment to maintaining security in the Taiwan Strait. And others argue that European decisions on whether to sell weapons to Taiwan are purely commercially motivated. They observe that despite France's supposed pledge, this past year French companies were vying with Russian and U.S. manufacturers to sell up to 100 transport helicopters and related weaponry to Taiwan. 53

Question 6. Does Europe have a role in managing the Taiwan problem?

Question 7. What is the likelihood that European nations would participate militarily with the United States in the event of a future crisis in the Taiwan Strait? Could they do so given their force projection capabilities? What would be the effect on the transatlantic alliance if Europe stood aside?

China's Accession to the WTO

China's accession to the World Trade Organization has been discussed and negotiated for 11 years, since China applied for membership to the WTO's predecessor, the General Agreement on Tariffs and Trade (GATT) at the beginning of the Uruguay Round. For China, WTO membership would not only provide trade benefits such as nondiscriminatory treatment in its trade relations with other member countries but also represent its formal arrival as a leading economic power on the world stage. Consistently, however, negotiations have failed to produce an accession agreement. For many years, the United States has taken the lead among WTO members in insisting that China has not yet met the commercial criteria for membership, arguing in particular that significant barriers to trade with China still exist. Furthermore, Washington has objected to PRC demands to be admitted as a developing country, which would allow it to maintain certain protectionist policies for a longer transition period--necessary, according to Beijing, because of its large population, low per capita income, and weak economic base. 54 Washington claims that as the tenth largest trading nation in the world, China should be considered as a developed country for the purposes of joining the WTO and that admitting the PRC as a developing nation would set a precedent of lax standards for membership. Beijing has asserted that the impediments posed by the United States to its membership are solely political, meant to undermine China's position as an emerging power.

Meanwhile, the European Union has taken a less confrontational position regarding China's membership in the WTO. Analyst Michaela Eglin states that the EU has traditionally advocated "a flexible strategy aimed at easing China into the international political and economic system while paying due respect to the gradual pace of economic reform that has been chosen by the Chinese government." 55 The vice president of the EU Commission, Sir Leon Brittan, has long been a proponent of a phased admission process for China, in which China would accept some WTO commitments upon entrance into the organization (such as tariff reductions and better copyright protection) but be granted a longer period of time to meet the other requirements. In late 1996, Brittan commented, "We recognize that China is still developing, therefore China can't be asked to accept all the obligations" of the WTO at the outset. He argued that the United States was being unrealistic in its expectations. 56 Washington has insisted that China meet a majority of the WTO's free trade requirements up front. 57

The Union also objected to the American policy of at times trying to link Chinese membership in the WTO to improvements in China's human rights performance. Many Europeans assert that Chinese membership in the WTO would enable the West to better manage China's emergence as an economic power because it would bind China into the rules-based global trading system.

Recently, however, it appears that the United States and the Union have achieved a degree of rapprochement regarding their positions on China's accession to the WTO. 58 A number of commentators note that the EU has begun to stress that China could only be allowed into the organization if it followed "all the rules." 59 Some believe that fiscal and unemployment problems in Europe contributed to this shift in EU policy, as did the growing realization by European nations of the importance of guaranteeing significant Western market access to emerging economies, especially China's. 60 This united Western stand has been credited by some with spurring the PRC to table new proposals aimed at resuming the stalled negotiations. The Financial Times reported that "China appeared to be taking a more constructive stance in response to recent moves by the U.S. and EU to close ranks in the negotiations, after a long period in which they were often openly at odds." 61 Recent PRC proposals have included offers to cut its import tariffs by more than one-third, to below developing countries' average; ban agricultural export subsidies; and provide licenses to foreign financial services companies. 62 Although encouraged by China's new flexibility regarding WTO membership requirements, both the United States and the countries of the European Union maintain that China's concessions still do not go far enough, particularly in the services sector. It appears, therefore, that the negotiations for Chinese membership in the WTO still face considerable obstacles. Nevertheless, some cite this U.S.-European approach to Chinese membership in the WTO as indicative of the potential capacity of transatlantic cooperation to facilitate China's peaceful integration into leading international institutions.

Question 8. Will the transatlantic community be able to maintain a cooperative approach to China's accession to the WTO? What differences might emerge? What is the likelihood that the United States and Europe will succeed in integrating China into the WTO essentially on Western terms?

Arms Sales to China

Following the crushing of prodemocracy demonstrators at Tiananmen Square in June 1989, the Bush administration imposed a ban on all U.S. government and commercial sales of military equipment and weapons to China, among other sanctions. Congress later codified this prohibition in the State Department Authorization bill for fiscal year 1990-91. This law remains the primary source of existing U.S. sanctions against China. 63

Following Tiananmen, the European Community imposed a similar ban on the government-to-government sale of arms to Beijing. By the early 1990s, these restrictions on arms sales took on added significance as the PRC objective to expand and modernize its armed forces became apparent. At present, both the American and European arms embargoes remain in place. However, some experts acknowledge that both sides of the Atlantic are increasingly under pressure from their respective defense industries to lift these embargoes as domestic demands for defense-related equipment slow. 64 They assert that European countries such as France, Britain, and Italy recently have been advocating a review of the EU arms embargo. 65 Although France has pledged for the time being not to circumvent through unilateral action the EU embargo on arms exports to China, it has voiced hopes that the embargo would be lifted in the near future. 66 Recognizing China's growing military appetite, France apparently does not intend to be left out. One observer noted, "China has embarked on a massive military build-up, and France is anxious to win a slice of the cake." 67 It is believed that China has already opened exploratory contacts with some European countries regarding future arms sales in the event that the arms embargo is lifted. 68 And in 1996, Britain revised its interpretation of the embargo to permit the sale of all military technology except that which applies to explosives or their delivery vehicles. 69

Recently, the U.S. manufacturer of Black Hawk helicopters, Sikorsky Aircraft, has been lobbying Washington to make a special exemption that would allow it to sell China replacement engines and other spare parts. (In 1984, prior to the U.S. ban on arms sales, China bought 24 Black Hawks, many of which are now in need of repair). 70 According to media reports, U.S. Secretary of Defense William Cohen supported this request, but the administration rejected the idea as premature. However, government officials stated that the matter would remain under review. Some argue that this would appear to indicate that the United States does not intend to sustain sanctions prohibiting arms sales to China indefinitely. 71 In addition, it was observed that the secretary's willingness to consider an exception to the U.S. arms embargo "underscored the extent to which he is prepared to find ways to improve relations with Beijing in general and its military in particular." 72

Critics view the motivation for a review of the ban on military sales to China as purely commercial and indicative of a trend they perceive in Europe as well as increasingly in the United States toward pursuing economic opportunities at the expense of Western security interests in Asia. They note that China's desire to modernize its military and increase the capabilities of the People's Liberation Army (PLA) poses less of a direct threat to the nations of Europe than to the United States. Europe does not maintain military forces in the region nor is it responsible, as is America, for buttressing Asia's peace and security. Analyst Richard Fisher states, "Since the interests . . . of the nations of Europe are not threatened directly by a more powerful PLA, these countries need focus only on the short-term benefits of selling military technology to China to support their domestic arms industries." 73 Given China's growing military power and regional aspirations, many members of Congress also oppose any loosening of the U.S. restrictions on weapons exports and have expressed concerns even about the sale of some dual-use technologies, although they are not covered by the ban. 74 One member of the House of Representatives Committee on National Security described a recent decision by the U.S. government to allow the sale by Westinghouse of navigation equipment that could be used on Chinese cruise missiles as "egregiously irresponsible." 75 In addition, skeptics argue, the United States has done little to discourage its European partners from relaxing their prohibitions on weapons-related trade with China. One wrote that the United States must "stress to China's arms suppliers that a more powerful PLA could threaten peace in Asia as well as their own interests. U.S. friends and allies must understand that if, by selling their weapons to China, they create a larger threat to peace in Asia, the United States might not be able to meet future military requirements in either the Middle East or Europe." 76

Question 9. Should the United States and the European Union sustain their respective bans on military equipment sales to China? If so, for how long?

Question 10. What would be the effects on the transatlantic relationship if either the United States or Europe lifted its weapons embargo without the support of the other?

Human Rights

Since Tiananmen, human rights in China have been a major point of tension in relations between Beijing and some Western capitals, especially Washington. The United States is viewed by both China and its European allies as the most vociferous of all the Western nations in its condemnation of Chinese violations of human rights. Immediately following Tiananmen, President Bush announced a number of actions to protest Beijing's actions, such as the suspension of arms sales noted above, a cessation of high-level U.S. government exchanges with Chinese officials, and the initiation of steps to postpone consideration of new loans for China by international financial institutions. 77 Much to the consternation of some members of Congress and American human rights activists, however, the Bush administration did not impose wide-ranging economic sanctions on China. The administration argued that doing so would only isolate China, decrease PRC contacts with the United States, and thereby reduce America's ability to promote strategic cooperation with the PRC and support democratic and free-market ideals in China. In 1990, when China's Most Favored Nation (MFN) trading status came due for renewal, the U.S. Congress attempted to revoke the president's extension of MFN to China. Congress has repeatedly failed to muster enough votes to pass such legislation, but the yearly battle continues to put the spotlight on China's human rights abuses, much to Beijing's annoyance. Washington also maintains public pressure on China to improve its human rights record through the yearly publication of the U.S. State Department's Country Reports on Human Rights Practices, which always generates a vitriolic reaction in Beijing, and through high-level discussions with Chinese leaders. In addition, many in the United States are vocal supporters of Tibet, challenging China's claims to sovereignty over the province. Indeed the position of "Tibet coordinator" was recently created within the State Department. 78 Since 1994, however, when the Clinton administration announced that it was abandoning its policy of linking continued extension of MFN with "overall, significant progress" in Chinese human rights practices, administration rhetoric on Chinese human rights violations has been largely toned down. 79 Thus it would appear that in many respects, U.S. human rights policy toward China has moved closer to the quiet diplomacy traditionally favored by European countries.

Nevertheless, some Americans are resentful of what they perceive as European myopia on the need to balance the pursuit of economic gains vis-à-vis the PRC with the requirement of continuing to promote human rights and the rule of law in China, which they feel is necessary to increase the likelihood that China will develop into a nation that respects the norms of the international community. When prominent Chinese dissident Wei Jingsheng visited Britain and France in early January 1998, key policymakers such as British foreign minister Robin Cook and French president Jacques Chirac, prime minister Lionel Jospin, and foreign minister Hubert Vedrine refused to meet with him. 80 Cook claimed that his schedule simply did not permit such a visit at this time as he was too busy with Britain's succession to the presidency of the European Union. 81 Beijing had delivered stern warnings against holding any high-level meetings with Wei, and critics accused London and Paris of putting commercial interests ahead of humanitarian concerns. 82 These actions stand in contrast to Wei's reception by President Clinton at the White House in early December 1997. Another relevant development occurred last spring when the European Union for the first time failed to support unanimously a resolution before the U.N. Human Rights Commission criticizing China's human rights record. At the end of March 1997, France announced that it would not back EU-sponsorship of the resolution. Germany, Greece, Italy, and Spain also withdrew their support. Although Denmark eventually submitted an independent resolution in April 1997, seconded by the United States and supported by the United Kingdom, Ireland, and the Netherlands, China's vigorous lobbying campaign succeeded in defeating the resolution (by a vote of 27 to 17 with nine abstentions) on a procedural matter that prevented even debating the issue. 83

While Beijing retaliated against Denmark and the Netherlands, postponing previously scheduled trade missions to those countries, France was promptly rewarded for its stance according to many observers. Chinese Foreign Ministry spokesman Shen Guofang praised France's "sensible" decision and stated, "Sino-French relations are extremely good . . . and in the future, there will be increased cooperation between the two countries in all fields." 84 During a state visit to China by French president Jacques Chirac in May 1997, China granted $1.8 billion in contracts to French companies. Meanwhile, France asserted that that there had been some improvement in China's human rights performance over the past year that justified its less confrontational approach toward China in the Human Rights Commission. France cited, for example, China's promise to sign the U.N. Covenant on Economic, Social, and Cultural Rights and to consider acceding to the Covenant on Civil and Political Rights. 85 Critics found these French justifications hollow. In any case, the Clinton administration admonished its European allies for their failure to support the human rights resolution. Although he refused to name any nations in particular, State Department spokesman Nicholas Burns asserted, "We regret very much that other democratic countries--particularly some in Europe--refused to stand up" and support the resolution censuring China for its human rights practices. 86

Question 11. Are there now differences in U.S. and European human rights policies toward China? Does the EU have a strategy for improving China's human rights record? Does the Clinton administration have such a strategy?

Question 12. Where should human rights fit in Western policies toward the PRC?

Hong Kong

Both the United States and the European Union have been vocal advocates of the continuation of Hong Kong's political and economic freedoms following its hand over to China in July 1997, in accordance with the promises made by Beijing to respect its declared "one country, two systems" Hong Kong policy. Immediately prior to the transfer of power, U.S. Secretary of State Madeleine Albright stated that the United States expects "that China will keep its word and maintain Hong Kong's autonomy and way of life for decades to come. Certainly the United States will continue to pursue our interests here, including our support for democracy, long after the hand over ceremony has been completed and the partying is done." 87 In the months preceding Hong Kong's return to China, the European Union announced a long-term strategy for future relations with Hong Kong that focused on maintaining direct links and ensuring the protection of human rights. The Union will closely monitor the Special Administrative Region and report yearly on its human rights conditions. 88

Besides the moral imperative Western countries feel to support Hong Kong's liberties, both the United States and the European Union have strong economic interests in the perpetuation of Hong Kong's free-market system and civil society. Hong Kong is the EU's tenth largest trading partner and home to over 100 European financial companies and manufacturers as well as to more European citizens than any other Asian city. 89 It is one of the few places in Asia where the United States enjoys a trade surplus (about $4 billion in 1996). U.S. investment in Hong Kong is approximately $14 billion, and almost 40,000 Americans live in Hong Kong. 90 Some observers surmise that the common U.S. and European stand in promoting Hong Kong's economic and social freedoms demonstrates the promise of broader transatlantic cooperation in East Asia.

Others suggest, however, that with Great Britain's departure from Hong Kong, "Washington has steadily taken over from London the role of main advocate for Western concerns--whether they be humanitarian or economic--in the territory." 91 Journalist Christopher Lockwood has said that although "one might have hoped that it would be Europe taking the lead on Hong Kong," the actions of several European countries toward Hong Kong in the months preceding the hand over once again demonstrate the inability of the European Union to pursue a common and coherent foreign policy. 92 As an example, he notes the last-minute cancellation by French president Jacques Chirac of his visit to Hong Kong following his trip to Beijing in May 1997, during which he secured billions of dollars of contracts. British leaders were reportedly particularly irritated by this decision, believing that Chirac's visit six weeks before the colony was to revert to China would have been an important indication of Western Europe's commitment to safeguarding Hong Kong's freedoms. One anonymous British official asserted that "Chirac is not prepared to take any risks in the relationship he is trying to build with China." 93

Many who share this view also point to the fact that prior to the hand over Britain had lobbied other EU members to boycott the swearing-in ceremony for Hong Kong's new provisional legislature, an unelected body whose representatives were selected by Beijing. But Britain received no support from its European partners. 94 These critics claim that given such divisions within Europe, it is unlikely that Europe will be a suitable partner for the United States in managing the challenges to that China may pose to Hong Kong over the long term.

Question 13. How would the EU respond if China begins to curtail political and economic rights in Hong Kong? What would be the U.S. reaction?

Maintaining Peace And Security In East Asia

The United States and Europe arguably share a vital interest in maintaining peace and stability in East Asia. 95 This is true not only for reasons relating to traditional security concerns but also because of their ever-increasing trade and investment relationships with the countries of the region. Any breach of the peace would at a minimum certainly affect these economic ties. Moreover, if a crisis were to erupt, the United States could be drawn into military conflict, given its defense commitments to several countries in the area, most notably Japan and South Korea. In such an event, some think it conceivable that the United States would look to its transatlantic allies for both military and economic assistance. 96 Whether such support would be forthcoming, especially given Europe's limited force projection capabilities, is the subject of much doubt. This is an especially salient issue with respect to Japan's security orientation and the Korean Peninsula.

Sustaining a Security Relationship with Japan

Since the end of World War II, Japan's military alliance with the United States has guaranteed not only Japan's security but also, many argue, peace and stability in much of the Asian-Pacific region. The U.S. Department of Defense has stated, "Our security alliance with Japan is the linchpin of United States security policy in Asia. It is seen not just by the United States and Japan, but throughout the region, as a major factor for securing stability in Asia." 97 U.S. officials argue that the American guarantee to the security of Japan has been instrumental in preventing an arms race in the Asia-Pacific region and that the presence of approximately 100,000 U.S. troops in East Asia (47,000 of which are stationed in Japan) has ensured broad regional stability. 98

The U.S. security commitment to Japan was originally defined in the 1960 Mutual Security Treaty between Japan and the United States. The United States agreed to defend Japan from external attack and maintain the security of the East Asian region in exchange for access to military bases on Japanese soil. By the early 1990s, however, the disappearance of the East-West confrontation and increasing trade disputes between the United States and Japan led observers in both countries to question the continued necessity and viability of the U.S. military presence in Japan. 99 U.S.-Japanese tensions reached their height in 1995, following the rape of a 12-year-old Okinawan schoolgirl by three U.S. servicemen. This incident resulted in a public outcry throughout Japan, an antibase movement in Okinawa, and new doubts about the continued value of the U.S. military presence in Japan. 100 In an attempt to reaffirm U.S.-Japanese security cooperation in light of these difficulties, in April 1996 Japanese prime minister Ryutaro Hashimoto and President Clinton issued a Joint Declaration on Security that endorsed the American military presence in the Asia-Pacific region as "essential for preserving peace and stability." 101 It reaffirmed that the United States would maintain its current troop strength in Japan and East Asia and directed the commencement of a review (completed in September 1997) of the security relationship aimed at broadening U.S.-Japanese defense cooperation. 102

For the most part, the countries of the European Union have been accepting of, and some might argue grateful for, U.S. leadership in maintaining the security of both Japan and the Asia-Pacific region. In the years immediately following World War II, the extension of the American security guarantee to Japan and East Asia allowed Western Europe to concentrate on rebuilding itself and shoring up its defenses against the Soviet threat. Most analysts predict that in the short term the United States will continue to play a dominant role in protecting Japan militarily and in maintaining peace and security in the region. 103 Recently, however, a number of European strategists have advocated that in light of East Asia's ever-growing economic importance, Europe does have a greater role to play in support of Asian stability and that the key to doing this is to expand European political ties to Japan. They stress that of all the nations in Asia, Japan's values and interests are the closest to those of Europe. Vice President of the European Commission Sir Leon Brittan recently remarked,

For Japan, the United States remains clearly the most important international partner, in politics, security relations, and economics. In Europe we are conscious that the United States is the privileged interlocutor of Japan. We would like there to be greater balance. . . . Japan is not only a vital economic partner for the EU. It is an established democracy sharing many of Europe's deepest political values. . . . Indeed it is striking how many ways Japanese and European interests coincide. . . . Japan and the EU both have a vital interest in the future of China and in the integration of China into the international system. This is obviously near the very top of Japan's international agenda. I believe it should also be higher in European priorities. . . . I believe it may prove to be increasingly advantageous for Japan also to deepen and broaden the relationship with the EU as a whole. 104

Sir Leon also noted that although EU and Japanese ministers have begun a process of regular dialogue on a range of foreign policy issues--from the Middle East, to Cambodia and Myanmar, to global problems such as drugs, crime, and the environment--they must try "to find ways, wherever possible, to agree on joint operational follow up to this dialogue." 105

Moreover, some analysts assert that the cost for Europe of not assuming a greater share of the burden of protecting Western interests in East Asia could be a withering of the U.S. commitment to the region. François Godement and Gerald Segal argue, "If the Americans are left alone to bear the security burden in the Pacific, they are more likely to complain about `free riders' and pack their bags and leave"; on the other hand, "An active European contribution can help keep U.S. armed forces engaged in Asia, and might even help persuade Americans to continue to bear burdens in places of direct security interest to the European Union, such as Bosnia." 106 Godement and Segal comment that an obvious starting point in this respect would be for Britain and France (the only European countries that either permanently station or periodically deploy military forces in the region and adjoining areas) to participate in regular defense exercises not only with Japan and the United States but also with South Korea and other countries in Asia. 107 Several experts have observed that some European nations, among them Britain, France, Germany, and Sweden, have developed bilateral security dialogues with Japan. Britain also helps to train Japanese peacekeeping operations personnel. 108

Finally, some on the eastern side of the Atlantic have suggested that a greater European role in Asian security would be welcomed not only by Japan but by its neighbors. An editorial in the International Herald Tribune asserted,

The flaws of the U.S.-Japan defense treaty, the only existing security arrangement in Asia, are obvious. Japan resents the idea of having to be regional assistant to Global Cop. . . . In addition, Pax Americana-Nipponica does not have much appeal for many countries in the region. The prospect of Japan helping police the region is unpopular with nations that vividly remember Japanese invasions. . . . In its own way, Europe can contribute to the discussion. Its colonial past now more or less forgotten, the EU rather looks like a refreshing newcomer in the field, despite its arcane economic regulations. There is a real demand for new ideas and for a European initiative in security. 109

A number of strategists opine that the mere fact that some in Europe are putting forth such suggestions regarding a more active European role in maintaining peace and stability in East Asia is an indication that Europe is beginning to recognize its global responsibilities. Consequently, they contend, the possibility exists that the United States and its European partners will cooperatively pursue strategies to protect their common interests in Asia. Analysts Paul Stares and Nicolas Regaud stress that "Europe can contribute in important ways that serve U.S. goals as much as its own" in Asia. 110 However, these commentators also acknowledge the difficulties Europe faces in pursuing a larger role in Asia's security arena, namely its continental preoccupations, limited force projection capabilities, and lack of a common foreign and security policy. 111 In addition, they note, "With sluggish economic growth and high unemployment in much of Europe, there is likely to be little enthusiasm for bold new initiatives and commitments for anywhere other than Europe. This seems especially true for the Asia-Pacific, which is still seen as politically removed and, on security matters, the principal domain of the U.S." 112

Question 14. Does Europe have an increased role to play in continuing Japan's positive contribution to Asian security?

Question 15. How serious a problem is burden-sharing among the Western nations with respect to security responsibilities in the Asia-Pacific region?

Maintaining Stability on the Korean Peninsula

The United States has been the main guarantor of peace and security on the Korean Peninsula for over 40 years. The American alliance with the Republic of South Korea (ROK) is viewed as the cornerstone of U.S. policy toward the peninsula, which seeks, according to Assistant Secretary of State for East Asian and Pacific Affairs Stanley Roth, "to build a durable and lasting peace on the Korean Peninsula by facilitating communication and progress among the Korean people themselves toward national reunification." 113 To this end, the United States continues to encourage and support South-North talks on the reduction of tension and the establishment of a permanent peace on the peninsula. Most recently, Washington was instrumental in establishing four-party talks (among the two Koreas, China, and the United States) that began in December 1997 in Geneva. The European Union has also voiced its support for these negotiations. 114 Nevertheless, given their slow progression, deterrence remains the key to U.S. strategy; 37,000 U.S. troops are deployed in South Korea. These forces guarantee U.S. engagement in the event of an attack by the North.

Recently, the peninsula's political and economic stability has grown more tenuous. The South has been buffeted by the Asian currency crisis, which has caused stocks and confidence to plummet, in the context of a spate of government corruption scandals. South Korea's financial hardships have also dimmed the prospects for reunification with the North in the short term, since many believe it is unlikely that the South would be willing or able at present to assume the significant costs of such an enterprise. 115 And the economic crisis in the South has caused some defense experts to warn that it could embolden the North into taking military action. 116

Meanwhile, North Korea continues intermittently to experience serious famine that has resulted in widespread starvation. In 1997, the European Union provided North Korea with $69 million in food aid in response to an appeal by the United Nations; this assistance represents the most generous offer of any donor so far. 117 The United States has donated about $50 million. 118 The EU clearly views the benefits of this assistance as measured in security as well as humanitarian terms. One EU official commented, "While this aid operation has been prepared on purely humanitarian grounds, it should also help avert a possible deterioration in the security situation on the Korean Peninsula." 119 Thus some cite the provision of this assistance as evidence of an evolving realization by the European Union of its own security interests in the Asia-Pacific region.

Several commentators also cite the European Union's decision in September 1997 to join the executive board of the Korean Peninsula Energy Development Organization (KEDO), established in March 1995 by the United States, South Korea, and Japan, as an indication of the growing EU awareness that it must take a more active role in promoting the security of the area. KEDO was founded as part of an October 1994 Framework Agreement between the United States and the Democratic People's Republic of Korea (DPRK) in which North Korea promised to freeze its suspected nuclear weapons program in exchange for the construction of two light-water nuclear reactors to meet the country's growing energy needs. The United States agreed to provide the DPRK with 500,000 tons per year of heavy oil for heating and electricity development while the light-water reactors are under construction. This was judged necessary to offset the energy foregone because of the freeze of Pyongyang's nuclear facilities. North Korea also announced it would comply with its obligations under the Non-Proliferation Treaty, including permitting the International Atomic Energy Agency to monitor the nuclear weapons program suspension and inspect those facilities not subject to the freeze.

Although ground was broken on the first reactor in August 1997, KEDO has consistently run into financing problems. The consortium is already nearly $50 million in debt and unable to meet its 500,000 ton annual shipping obligation. KEDO estimates that the cost of the reactors will be $5.2 billion; other experts predict the price is likely to exceed $7 billion. 120 Many worry about the effects of the ROK's economic difficulties on the consortium, as Seoul had been expected to assume the bulk of the funding for the reactors. 121 Since 1995, the United States has contributed about $82 million for heavy oil shipments as well as for canning and storing spent North Korean nuclear fuel, but it has announced that it will not contribute to the construction costs. 122 Japan is likely to offer less than $200 million in 1998. 123 At the time the EU acceded to KEDO's executive board, it pledged to provide about $17 million every year for the next five years of the project's existence (a total of about $85 million). 124

Although this contribution by the EU to KEDO's success is modest, it demonstrates to some degree Europe's commitment to maintaining stability on the peninsula and should ease somewhat the burden on the United States, which fears having to pick up South Korea's share. 125 In order to meet the predicted shortfall in funds, however, commentators have suggested that board members will likely lobby other well-off countries, such as the oil-rich Gulf states, for contributions. 126

Despite these positive trends with respect to an increased European interest in the security of the Korean Peninsula, observers question to what extent the countries of Europe would be willing (or able) to support militarily the United States in the event of a crisis. They note that with the exception of Britain and France, all other European signatories to the 1953 Korean Armistice Agreement (Belgium, Greece, Luxembourg, the Netherlands, and Turkey) have withdrawn from the U.N. Armistice Commission and Advisory Group. Furthermore, "what importance London and Paris still attach to their commitments . . . as well as their continuing involvement in the UN presence in Korea, is difficult to gauge." 127 Several analysts have also observed that if a crisis on the peninsula arose and Britain and France were to decide to support South Korea with force, their troop contributions would probably be less than they provided in Desert Storm, given the greater distance they would be required to project their forces. 128 Others have suggested that the dispatch of British and French air-defense and ground-attack aircraft and naval units might be more feasible. 129 Nevertheless, the skeptics assert that the relative lack of European force projection capabilities into East Asia would result in the United States once again shouldering all the security burden.

Question 16. Can Europe further contribute to the maintenance of peace and security on the Korean Peninsula? Does it have a security, as well as economic, role to play? Would European allies assist the United States militarily if war were to break out on the Korean Peninsula?

Dealing With The Current Asian Financial Crisis

The Asian currency crisis began in July 1997 in Thailand and over the next six months spread to Malaysia, Indonesia, the Philippines, Hong Kong, and South Korea. Attributed largely to reckless public spending, stagnating exports, and widespread corruption in the banking and finance industries, all of which contributed to rampant speculation, the crisis has also affected stock markets in the United States, Europe, and Japan. 130 In late October, as the Hong Kong stock market plunged by 10 percent in one day because of selling by nervous investors, Tokyo's market fell by 3 percent, major stock indexes in London, Paris, and Frankfurt dropped by more than 3 percent, and the Dow Jones index lost 2.3 percent. 131 These tumbles in world financial markets served as a wake-up call to many governments, economists, and international bankers. Until then, some financial analysts and experts argued that Asia's economic problems were specific to Asia and that their effects on other global markets would be minor. 132

Following the financial turmoil in the region, Western experts began to assess more closely the potential long-term impact of Asia's economic convulsions. As growth in Asia slows significantly as a result of the region's financial difficulties, several observers noted, world economic growth and stock values will likely be negatively affected. 133 Others cautioned that the already fragile Japanese economy might experience further shocks because half of Japan's exports go to the rest of Asia and Japan is heavily invested in the area. 134 This, in turn, could force Japanese banks to sell their enormous holdings of foreign bonds and currencies in order to raise cash and avoid bankruptcy, perhaps seriously rocking world financial markets and possibly producing recessions in many countries. 135 Reports have surfaced recently in the press that Asia's financial crisis is beginning to affect Europe, reducing European exports to Asian countries and creating price pressures. Some worry this will dampen European appetites for investment and spending. 136 Finally, some strategists began warning that Asia's financial crisis might threaten the security of the region, including that of the Korean Peninsula. In December 1997, U.S. Secretary of Defense William Cohen advised that continued market instability in South Korea might trigger an invasion by the desperate and starving North if it perceives that the South has been severely weakened by the crisis. 137

The growing realization of the potentially negative global economic and security consequences of Asia's financial free fall has caused some countries, especially the United States, to become increasingly active in managing the crisis. Initially, Washington allowed the International Monetary Fund (IMF) to take the lead in handling the problem. In August 1997, the IMF arranged a $17 billion bailout package for Thailand; in September, it assembled a rescue package of $40 billion for Indonesia; and on December 3, the IMF announced it had organized a $57 billion bailout for South Korea. 138 Prior to the new year, the official U.S. approach to the Asian crisis was to provide policy advice to the stricken countries but not direct loans.

Many have asserted that the economic reforms required by the IMF to stabilize South Korea and the other Asian economies affected by the crisis have largely been drafted by Washington. 139 Although Washington played a key role in persuading South Korea's lame-duck president Kim Young Sam in late November to accept the IMF terms for the bailout, the United States limited its financial involvement in the IMF-arranged loans to contributing a "second line of defense" to the rescue effort--that is, funds that would be tapped only after all other aid was exhausted. 140 For South Korea, the United States offered up to $5 billion in such "back-up" funds and for Indonesia, up to $3 billion. 141 Twelve other industrialized nations, including Japan and a number of European countries, also pledged back-up financing for the bailout of Seoul, bringing total supplementary contributions for the ROK to approximately $22 billion. 142 The December 30, 1997, International Herald Tribune reported that for the United States this commitment to provide supplemental funding if the need arose "conveyed the symbolism of U.S. commitment to Asia's stability, but allowed the administration the political cover of arguing that no U.S. cash was at risk." 143 Regarding South Korea, the United States hoped that if it supported in principle the IMF rescue effort, international banks and global investors would be persuaded to keep money and credit flowing to Seoul, in which case the bailout might not be needed at all. This theory caused U.S. Treasury Secretary Robert Rubin to reject a request by the South Korean finance minister in early December to speed up the timetable for the bailout. 144

However, the announcement of the IMF package for South Korea failed to restore investor confidence and stabilize the country's plummeting currency. 145 Instead, by mid-December, only 10 to 15 percent of the banks were rolling over their short-term loans, and up to $1 billion was flowing out of South Korea each day. 146 U.S. officials began to recognize that the severity of the crisis would require Washington to do more in order to stem the erosion of South Korea's financial markets. Consequently, in late December in a fundamental shift in policy, the United States announced that it would support the disbursement of a $10 billion international emergency aid package to Seoul by January. The administration characterized this decision as an acceleration of aid already committed in the original $57 billion IMF-organized bailout. 147 The IMF was to contribute $2 billion to this package, with 13 industrialized countries making up the other $8 billion (from the $22 billion committed previously by these countries as a "second line of defense" in the December 3 bailout). 148 Of this $8 billion, Japan offered $3.3 billion; the United States, $1.7 billion; and Australia, Belgium, Canada, France, Germany, Italy, the Netherlands, New Zealand, Sweden, Switzerland, and the United Kingdom would provide the remaining $5 billion. 149 This emergency aid package was intended as a stopgap measure; in exchange for the immediate cash infusion, South Korea agreed to further liberalize its markets, close failing banks and businesses, and accept layoffs. 150

At the same time, Treasury officials in the Clinton administration increased pressure on U.S. banks to speed up their efforts to renegotiate their loans to South Korea's financial institutions, which were coming due at the end of the year, in order to prevent a default that could have sent further shock waves throughout the global banking industry. 151 According to the press, also participating in this effort to renegotiate the deadlines by which South Korean banks must repay their debts were Japanese, Canadian, German, French, Italian, and Swiss banks. 152 On December 30, 1997, international commercial and investment banks reached an agreement with South Korean financial institutions to roll over up to $15 billion of short-term loans, due by the end of the year, for one month. At that time, the troubled debt was to be repackaged as bonds guaranteed by the South Korean government. 153 On January 8, 1998, these international financial institutions granted another extension to South Korea, for up to 90 days, recognizing that one month was not a sufficient period of time to complete the refinancing and restructuring of South Korea's debt. 154 On the same day, the IMF approved its $2 billion share of the emergency aid package agreed to in December; the United States and the other advanced nations will release the other $8 billion as soon as the banks involved in the roll-over and South Korea agree to the terms of this refinancing. 155

Europe's role in managing the Asian currency crisis has mostly mirrored and followed that of the United States. An article in the Jakarta Post observed that "in the beginning, the United States and European countries were generally apathetic about the hardships of Southeast Asia, thinking that their economies would not be directly affected by the crisis." 156 Like the United States, no European nation contributed to the IMF bailout package for Thailand. 157 But once the United States started to play a more direct role in stemming the crisis that was spreading throughout Asia, European countries followed suit, also contributing to the emergency aid package for South Korea. In addition, European banks began to work with the American and Japanese institutions to prevent a disastrous default by South Korea on its billions of dollars of short-term loans.

The United States has been eager to involve Europe further in supporting the restoration of Asian financial stability, "reflecting U.S. fears that . . . it risks shouldering most of the burden," especially in light of Japan's financial difficulties. 158 However, a concerted European response has been largely lacking because of internal EU differences. Journalist Anne Swardson observes, "Although Europe's largest nations together have contributed nearly as much money as has the United States to the various Asian rescue packages, they have had much less influence on the shape of those packages. In part because they have had difficulty in agreeing on a unified stand, European nations have been relatively silent about proposing solutions to the crisis." 159 If the economic situation in East Asia were to worsen, drawing Japan in even deeper, some analysts worry about the effects of the crisis on the transatlantic partnership, especially if Europe were not to assume a greater share of the responsibility for stabilizing the region. They note that the Americans would likely be resentful in such a scenario, given the fact that European banks, along with Asian ones, hold the bulk of private-sector debt in many East Asian countries, including South Korea. 160

Question 17. How extensively has the United States consulted with its European allies regarding the steps it has taken to address the Asian currency crisis?

Question 18: What has been the European role in managing the Asian financial crisis?

Question 19: What more, if anything, can the United States and Europe do to restore Asia's economic well-being?

Promoting Liberalization Of East Asian Markets

Despite East Asia's recent financial problems, economists still believe that the region will experience dynamic growth in the coming decades. As globalization of the world economy proceeds and international trade and investment become even more important in maintaining healthy national economies, ensuring greater access to East Asia's markets has become an important goal for both the United States and Europe. In 1996, the EU's share of total exports to Asia's emerging economies was 15.7 percent, Japan's share was 18 percent, and the United States' share was 12.3 percent. 161 Many barriers to trade with the countries of East Asia remain, however, including excessive regulation and anticompetitive behavior. This is certainly true of Japan's highly developed economy, which still protects many sectors. 162 Such barriers are believed to be the primary cause of substantial U.S. and European trade deficits with many East Asian nations. In 1996, the U.S. trade deficit with Japan was $50.5 billion (ranking first among all U.S. trade deficits) while that of the European Union with Japan was $27 billion. 163 The United States and the Union also registered trade deficits with China in 1996; according to U.S. figures, the American trade deficit with China totaled $39.5 billion, while Europe's reached $16.2 billion that year. 164 The U.S. deficit with China for the first ten months of 1997 was $31 billion. 165

Some experts argue that the United States and Europe have displayed a high degree of cooperation in seeking to liberalize the markets of East Asia further. Most recently, in December 1997 the United States and the European Union joined forces to complete a WTO Financial Services Agreement. The agreement aimed at allowing banks, securities, and insurance companies to establish and operate in foreign markets, by providing them with the same "national treatment" received by domestic service providers, and facilitating the cross-border supply of financial services between countries. Negotiations for such an agreement were initially begun as an extension of the Uruguay Round but were derailed in June 1995 by the United States, which argued that Asian (as well as Latin American) countries were not providing enough opportunities for foreign access. 166 When the talks resumed this past April, Washington and Brussels were dissatisfied with the lackluster participation of many WTO member countries, especially Malaysia and Indonesia. In an intense and coordinated lobbying effort, U.S. and European officials emphasized that market liberalization was essential to economic stability, which was especially important for Asian nations suffering from stock market crises and currency fluctuations. 167 The final agreement, signed by 102 countries, is estimated to involve $18 billion in global securities assets, $38 billion in international bank lending, and about $2.5 billion in worldwide insurance premiums. 168 Furthermore, U.S.-EU leadership was essential in achieving the Information Technology Agreement (ITA) and the Basic Telecommunications Agreement in the WTO in 1997, each of which liberalize about $500 billion in global commerce. 169 Policymakers such as Under Secretary of State for Economic, Business, and Agricultural Affairs Stuart Eizenstat have asserted that the U.S.-European understanding achieved on the necessity and parameters of these two agreements created pressure on Asian countries to offer their support as well. 170

Nevertheless, some experts fear that U.S.-European competition for Asia's emerging markets will divide the West. 171 In 1995, the European Union had 16 percent of the Chinese market, while the United States had 12 percent. 172 For years, both sides of the Atlantic have been seeking greater market access to China's growing economy, large sectors of which are still under state control. However, some observers assert that rather than working cooperatively to achieve this goal, the United States and the European Union often pursue strategies in this realm that serve to undercut each other's efforts. 173 Washington sometimes views the EU as portraying itself as less demanding than the United States in its trade policies toward China and accuses the Union of seeking commercial contracts as a reward. 174 In the spring of 1996, while the United States threatened to block Chinese imports valued at over $1 billion if the PRC did not institute better IPR safeguards and enforcement mechanisms, European and Chinese officials were engaged in securing closer commercial relations. That April, Beijing signed a contract worth $1.9 billion with the European consortium Airbus for 33 aircraft, choosing it over America's Boeing. 175 EU officials, in turn, sometimes object to U.S. negotiating styles and tactics, which they often view as too public and missionary in tone. 176 Nevertheless, some have observed that "the EU does not hesitate to claim a share of whatever new market opportunities Washington may negotiate." 177 Americans again point to the outcome of the 1996 dispute with China over intellectual property rights. Ellen Frost has remarked, "After distancing themselves from Washington's vehement public campaign, EU officials hastened to Beijing to ensure that the gains that the United States had negotiated to settle the crisis would cover European companies as well." 178

Similarly, the United States and the European Union often find themselves vying for Japanese markets. Brussels sometimes views Washington as too quick to revert to unilateral sanctions in its trade and investment negotiations with Japan. 179 The United States, meanwhile, is irritated by EU attempts to claim a share of America's hard-won concessions. For example, in 1995 the EU condemned the Clinton administration's decision to threaten Japan with imposing high tariffs on its imports of luxury cars. The New York Times reported that in response, then U.S. trade representative Mickey Kantor accused the Union of "looking for a free ride in siding verbally with Japan even as it hoped the United States would do the dirty work to open Japanese markets for all." 180 Kantor was quoted as stating, "Our European friends are always willing to hold our coats while we get our nose bloodied." 181

Other analysts are less troubled by the implications of such trade tensions regarding East Asian markets for the overall transatlantic relationship. They stress that U.S.-European competition is both natural and good for the global economy. EU Commission vice president Sir Leon Brittan recently stated, "It is a simple fact that the EU and the United States are in many areas natural competitors. We compete for political influence, and for markets. There is nothing wrong with this. Competition is healthy and a spur to achievement." 182 He also cautioned that Europe and the United States must not let the competitive aspects of their relations eclipse the overall partnership, noting that "if we view each other solely as rivals, our perspective will be narrow and distorted." 183 Nor do those in this camp believe that U.S.-EU trade competition will harm the West's ability to stand firmly together in the face of a potential threat from East Asia to common U.S.-European security interests.

Question 20. How successful has U.S.-European cooperation been in liberalizing markets in Asia and creating a more open world trading system? What remains to be done?

Question 21. How divisive will be growing competition between the two sides of the Atlantic for emerging markets in Asia? What effect, if any, will this competition have on the broad transatlantic relationship?

Developing Western Multilateral Relations With East Asia

The Asia-Pacific Economic Cooperation (APEC) process, the Association of South East Asian Nations (ASEAN) Regional Forum, and the Asia-Europe Meeting (ASEM) provide forums for U.S. and European political and economic interaction with the countries of the Asia-Pacific region. Founded in 1989, the 18-member APEC, to which the United States belongs, is an economic forum; its goal is to establish free and open trade and investment among its members by 2020. In 1993, the United States raised APEC's profile by initiating annual heads-of-state summits. Established in 1994, the 21-member ASEAN Regional Forum is the only one of these three venues, however, that brings the United States and the European Union together with the countries of Asia-Pacific informally to discuss political, diplomatic, and security issues. The newest of the three, ASEM, was created in March 1996 when Asian and European leaders held their first summit in Bangkok. Europeans stress that unlike APEC, ASEM can address political and security as well as economic issues; at the same time, they acknowledge that so far ASEM has given little detailed thought to its security agenda. 184

A number of analysts caution that if the growing ties and interrelationships between the United States, Europe, and Asia are not handled properly, these forums could undercut rather than enhance U.S.-European collaboration. Some Americans are worried that forums such as ASEM might offer Asia and Europe a greater ability to "manage" together their relations with the United States. Dong-Ik Shin and Gerald Segal have remarked, "For all its obvious importance to the security of East Asia and Europe, the United States cannot be a formal part of any security dialogue in ASEM. A core but publicly underplayed motive for ASEM is to keep the U.S. sufficiently concerned about Asia-Europe cooperation that it remains committed to open multilateralism," in both the economic and security arenas. 185 Nevertheless, they also recognize that such Asian-European discussions "about measures to help the U.S. play a more cooperative and genuinely multilateralist role, while well-intentioned, might well trigger the very policies [they are] meant to prevent." 186 In Shin and Segal's view, "The trick is to suggest to the U.S. that ASEM is not ganging up against it to exclude its influence in both regions. . . . It needs to be understood that the initiatives for promoting growth and stability in Asia and Europe through ASEM will also be beneficial for the United States." 187

Others argue that rather than driving the two sides of the Atlantic apart, these fledgling regional organizations might foster more transatlantic cooperation vis-à-vis Asia. Shin and Segal claim that by engaging Europe and Asia in a dialogue, venues like ASEM have the potential to produce a greater degree of European and Asian involvement in maintaining Asia-Pacific security. This, in turn, would reduce America's global security burden, decrease the resentment of some in the United States who view the European nations as "free-riders," and consequently promote continued U.S. engagement in both Europe and Asia. 188 They state, "One of the main challenges for Asians and Europeans is to find ways to sustain the U.S. commitment to the security of Asia and Europe. The most important thing the Europeans can do is to make a greater contribution to their own security, thereby freeing the U.S. to focus more on Asia. Europeans can also engage in Asian security together with the U.S., and thus show the Americans that they have allies who also see the value in contributing to global security." 189

There are other indications as well that these multilateral organizations might provide forums for closer transatlantic cooperation on the region's multiple challenges. Some commentators, for example, point to a change in attitude in Washington regarding APEC. Recently, the Financial Times remarked that while Washington "once saw the grouping as an exclusive regional club which could use its market power to squeeze Europe over trade issues," during the 1997 APEC Summit in Vancouver this past November, U.S. officials such as Trade Representative Charlene Barshefsky "struck a different note," suggesting that "the aim of APEC trade initiatives should be to attract the support of Europe." 190 In other words, APEC, rather than viewing APEC as a forum through which to gain a competitive advantage over Europe in trade with Asia, the United States might regard it as an instrument for U.S.-European economic cooperation. The newspaper questioned, however, whether the U.S. motivation behind this apparent shift in approach was transparent, suspecting that it had a good deal to do with Washington's desire to involve Europe more closely in restoring global financial stability, thereby decreasing some of its own burdens in this respect. But regardless of the reasons for this change, others believe it might be a sign of a trend toward greater U.S.-European cooperation in East Asia.


Note 1: Robert Ross, "Beijing as a Conservative Power," Foreign Affairs, vol. 76, no. 2 (March/April 1997), p. 33. Back.

Note 2: Transcript, "China," Talk of the Nation (NPR), October 23, 1997. Electronic Version. Back.

Note 3: Richard Bernstein and Ross H. Munro, "The Coming Conflict with America," Foreign Affairs, vol. 76, no. 2 (March/April 1997), p. 31. Back.

Note 4: Robert Kagan, "China: The End of Engagement," The Weekly Standard, November 10, 1997, p. 21. Back.

Note 5: As quoted in Kagan, "China: The End of Engagement," p. 22. Back.

Note 6: Thomas W. Lippman, "U.S. Bets on Firmer China Ties," Washington Post, July 1, 1997, p. A1. Back.

Note 7: Ibid. Back.

Note 8: David M. Lampton, "America's China Policy in the Age of the Finance Minister: Clinton Ends Linkage," The China Quarterly, no. 139 (September 1994), pp. 597-598. Back.

Note 9: Office of the Press Secretary, "Press Conference of the President," The White House, May 26, 1994. Electronic Version. Back.

Note 10: Lampton, "America's China Policy in the Age of the Finance Minister," p. 599. Back.

Note 11: See Joseph S. Nye, "China's Re-emergence and the Future of the Asia-Pacific," Survival, vol. 39, no. 4 (Winter 1997-98), p. 76. See also Henry A. Kissinger and Cyrus R. Vance, "The Right Decision on China," Washington Post, June 6, 1994, p. A19. Back.

Note 12: Craig R. Whitney, "China Awards Huge Jet Order to Europeans," New York Times, April 11, 1997, p. A1. Back.

Note 13: Lampton, "America's China Policy in the Age of the Finance Minister," pp. 599, 611. Back.

Note 14: Andrew Phillips, "Back to Business," Maclean's, November 10, 1997, p. 30.c Back.

Note 15: Kagan, "China: The End of Engagement," p. 20. Back.

Note 16: See John Pomfret, "U.S. May Certify China on Curbing Nuclear Exports," Washington Post, September 18, 1997, p. A28. Back.

Note 17: "Clinton's Troubled China Deal: Why Congress Is Suspicious of Promises of Good Behaviour," Jane's Information Group, Foreign Report, November 27, 1997. Electronic Version. Back.

Note 18: Chris Hedges, "Iran May Be Able to Build an Atomic Bomb in 5 Years, U.S. and Israeli Officials Fear," New York Times, January 5, 1995, p. A10; Pomfret, "U.S. May Certify China on Curbing Nuclear Exports"; and R. Jeffrey Smith, "CIA Report Calls China and Russia Key Suppliers of Most Destructive Arms, Technology," Washington Post, July 2, 1997, p. A24. Back.

Note 19: Robert Shuey and Shirley A. Kan, "Chinese Missile and Nuclear Proliferation: Issues for Congress," CRS Issue Brief 92056, July 6, 1995, p. 12. Back.

Note 20: Ibid., pp. 4-8, 9-12. Chinese officials claim that construction of the nuclear power facility in Pakistan will be completed by 2000 (work reportedly began in 1993). China has also provided Algeria with the larger of two nuclear research reactors that it possesses. See Richard Falkenrath, "The United States, Europe, and Weapons of Mass Destruction," in Allies Divided: Transatlantic Policies for the Greater Middle East, ed. Robert D. Blackwill and Michael Stürmer (Cambridge, MA: MIT Press, 1997), pp. 211-212. Back.

Note 21: Tim Weiner, "China Sold Parts for Nuclear Arms, U.S. Officials Say," New York Times, February 8, 1996, p. A1; and Ann Devroy, "President to Renew China's Trade Status; Other Actions against Beijing Announced," Washington Post, May 28, 1991, p. A1. The 1991 ban was lifted less than a year later, after China pledged to abide by the MTCR; the 1993 sanctions on satellite technology were lifted in 1994. See also Elaine Sciolino, "U.S. and Chinese Resolve Dispute on Missile Sales," New York Times, October 5, 1994, p. A1. Back.

Note 22: "Clinton's Troubled China Deal," Jane's Information Group. Back.

Note 23: Sam Gejdenson and Toby Roth, "Arsenals Abroad; Export Control for the 1990's," New York Times, July 18, 1994, p. A15. Back.

Note 24: David E. Sanger, "U.S. Blames Allies for Undercutting China Policy," New York Times, June 12, 1996, p. A1. See also Hearing of the House Ways and Means Committee, Subcommittee on Trade, Federal News Service, June 11, 1996. Electronic Version. Back.

Note 25: See A.M. Rosenthal, "China's Poisonous Lie," New York Times, May 27, 1997, p. A17. Back.

Note 26: See Steven Erlanger, "U.S. Won't Punish China over Sale of Nuclear Gear," New York Times, May 11, 1996, p. A1; A.M. Rosenthal, "The Nuclear Gamble," New York Times, October 11, 1996, p. A39; and Richard W. Stevenson, "U.S. Debates Whether to Punish Pakistan and China on Missiles," New York Times, June 13, 1996, p. A5. Back.

Note 27: See Office of the Press Secretary, The White House, "Press Conference by President Clinton and President Jiang Zemin," October 29, 1997; and Office of the Press Secretary, The White House, "Background Briefing by Senior Administration Officials," October 29, 1997. Electronic Versions. Back.

Note 28: The two projects China was permitted to complete with Iran were a zero-power research reactor and a related zirconium tube factory, neither of which, according to administration officials, pose proliferation concerns. In addition, U.S. officials said that the two sides agreed that China would not sell Iran two nuclear power reactors, despite a 1991 agreement in principle by China to do so. See Joseph Fitchett, "A New China Embracing Nuclear Nonproliferation," International Herald Tribune, December 11, 1997, p. 1; and Mark Hibbs and Michael Knapik, "China Agrees to End Nuclear Trade with Iran When Two Projects Completed," Nuclear Fuel, November 3, 1997. Electronic Version. Back.

Note 29: Ibid.; "China's Broken Promises," The Economist, July 8, 1995, p. 17; "China Issues Nuclear Export Rules," Washington Post, September 12, 1997, p. A29; R. Jeffrey Smith, "Limits on Iran Ties Open Way for China to Buy U.S. Reactors," Washington Post, October 25, 1997, p. A1. Administration officials argue that China has kept its May 1996 pledge not to provide help to any "unsafeguarded" nuclear facility--one not open to inspection by the International Atomic Energy Agency (IAEA), such as those in Pakistan, which is not a signatory to the Nuclear Non-Proliferation Treaty (NPT). However, the ambiguities in this promise were a key factor in U.S. insistence that China explicitly state it would forego new nuclear cooperation with Iran. Because Iran is a member of the NPT and permits IAEA monitoring of its nuclear facilities, Iran's nuclear power plants do not fall into the "unsafeguarded" category specified by China. Thus the question was left open at that point as to whether China's 1996 commitment would be extended to Iran as well. See Steven Erlanger, "U.S. Says Chinese Will Stop Sending Missiles to Iran," New York Times, October 18, 1997, p. A1. Back.

Note 30: Ibid. Although China initially pledged to abide by the MTCR in 1991, it apparently broke this promise in 1993 by transferring missile components and technology to Pakistan. After the United States imposed sanctions on the export of high-technology satellites to China in response, Beijing in 1994 renewed and expanded its promise to observe the MTCR guidelines as part of a deal with the United States to remove these sanctions. In this agreement, China for the first time accepted the internationally recognized definition of what constitutes a violation of the missile accord. See Sciolino, "U.S. and Chinese Resolve Dispute on Missile Sales." Back.

Note 31: Office of the Press Secretary, The White House, "Background Briefing by Senior Administration Officials"; Erlanger, "U.S. Says Chinese Will Stop Sending Missiles to Iran"; and Smith, "Limits on Iran Ties Open Way for China to Buy U.S. Reactors." Some argue that the United States still has a way to go in fully securing China's assurance on missile sales and guidance systems to Iran. During his mid-January 1998 trip to China, U.S. Secretary of Defense William Cohen stated that he was satisfied with Chinese assurances that Beijing would not continue to sell anti-ship missiles to Iran; however, it remains somewhat unclear whether China has agreed to cancel any existing missile deals with that country. See John Pomfret, "Cohen Hails Achievements in China Visit," Washington Post, January 20, 1998, p. A11. Back.

Note 32: "Beijing Calls for Early Implementation of China-U.S. Nuclear Agreement," Agence France Presse, January 16, 1998. Electronic Version. Back.

Note 33: "Clinton's OK of Nuclear Reactor Sales Opens Huge Potential Market in China," The Energy Report, November 7, 1997; "Chinese President Jiang Zemin Visits U.S.," Facts on File World News Digest, November 6, 1997. Electronic Versions. Back.

Note 34: Martin Kettle, "U.S. to End Sanctions," The Guardian (London), October 28, 1997. Electronic Version. Back.

Note 35: "France's Chirac Urges More EU Dialogue with China," Reuters North American Wire, May 18, 1997. Electronic Version. Back.

Note 36: Dan Morgan and David B. Ottaway, "U.S. Reactor Firms Maneuvering to Tap China's Vast Market," Washington Post, October 21, 1997, p. A1. Back.

Note 37: Edward J. Markey, Benjamin A. Gilman, and Christopher Cox, "China and Nuclear Trafficking," Washington Post, October 29, 1997, p. A23. Back.

Note 38: Ibid. Back.

Note 39: "Clinton's Troubled China Deal," Jane's Information Group. Back.

Note 40: A.M. Rosenthal, "On My Mind: What They Do Get," New York Times, October 3, 1997, p. A15. Back.

Note 41: Steven Erlanger and David E. Sanger, "U.S. Lowers Goals on China after Glitches in Early Talks," New York Times, October 27, 1997, p. A1; and John F. Harris and Thomas W. Lippman, "Clinton Faces Challenges on China Policy," Washington Post, October 24, 1997, p. A1. Back.

Note 42: Smith, "Limits on Iran Ties Opens Way for China to Buy U.S. Reactors." Back.

Note 43: Edward Mortimer, "Dealing with Iran," Financial Times, October 22, 1997, p. 20. Back.

Note 44: Trade figures derived from International Monetary Fund, Direction of Trade Statistics Yearbook, 1997. See also "Chang Pleas for Taiwan to Get Proper International Status," Agence France Presse, May 22, 1997. Electronic Version. Back.

Note 45: As of November 1997, Taiwan had taken delivery of 24 F-16s. See "Taiwan Seeks U.S. Training for F-16 Pilots," Agence France Presse, November 11, 1997. Electronic Version. Back.

Note 46: Chas. W. Freeman, Jr., "Sino-American Relations: Back to Basics," Foreign Policy, no. 104 (Fall 1996), p. 14. Back.

Note 47: "China Seeks to Defuse Tension, but Seen Intensifying Manouevres," Agence France Presse, March 14, 1996. Electronic Version. Back.

Note 48: P.C. Tang and Debbie Kuo, "European Parliament Condemns Beijing Intimidation to Taiwan," Central News Agency, February 16, 1996. Electronic Version. Back.

Note 49: In the last few years, the European Parliament has taken other steps demonstrating its support for Taiwan, passing a resolution backing Taiwan's bid to join international organizations such as the United Nations and approving the opening of a representative office in Taiwan. See Flor Wang and P.C. Tang, "Long-Term ROC-EU Relationship," Central News Agency, May 27, 1997. Electronic Version. Back.

Note 50: François Godement and Gerald Segal, "A European Security Role in Support of East Asian Stability," International Herald Tribune, July 6-7, 1996, p. 6. Back.

Note 51: Roger Cohen, "France Bars Taiwan Sales, Warming China Ties," New York Times, January 13, 1994, p. A11. See also David Buchan, "Sweet and Sour Banquet in Paris," Financial Times, April 13, 1996, p. 7; "Dassault Weighs Sale of Warplanes to China," New York Times, October 10, 1997, p. D6; "France Delivers Jets to Taiwan," Washington Post, May 6, 1997, p. A16; "More Mirage Jets Arrive," China News, July 5, 1997; and "Taiwan Takes Delivery of Mirage Fighter Jets," Reuters North American Wire," May 5, 1997. Electronic Versions. Back.

Note 52: Cohen, "France Bars Taiwan Sales, Warming China Ties." Back.

Note 53: Barbara Opall, "Copter Builders Chase Taiwan Market; China Pressures Nations on Sales," Defense News, August 18, 1997. Electronic Version. Back.

Note 54: China argues that it is still in the process of transforming itself into a market-based economy and, therefore, it needs a longer period in which to end the huge subsidies it provides to state-run enterprises, which employ a significant portion of the country's workers. Chinese leaders say they fear that a rapid attempt to eliminate these subsidies would create rampant unemployment and internal chaos, especially in urban areas that have been the destinations for massive influxes of peasants seeking work in recent years. See Guy de Jonquie'res and Tony Walker, "New Dawn in the East: Chinese Membership of the World Trade Organisation Now Looks Closer," Financial Times, March 3, 1997, p. 21; Kevin Platt, "China Debates the Price of Joining World Body," Christian Science Monitor, December 31, 1996, p. 6; and David E. Sanger, "China Reported Ready to End Some Barriers," New York Times, February 12, 1997, p. D1. Back.

Note 55: Michaela Eglin, "China's Entry into the WTO with a Little Help from the EU," International Affairs, vol. 73, no. 3 (October 1997), p. 495. Back.

Note 56: "EU Official Urges USA to Follow Europe on WTO Membership for China," BBC Summary of World Broadcasts, November 19, 1996. Electronic Version. See also Shada Islam, "China-Europe: Good News, Bad News and Human Rights," Inter Press Service, October 10, 1995. Electronic Version. Some U.S. analysts, such as Nicholas Lardy, have also suggested that the best the United States could hope for is that China makes some progress by the time of its accession to the WTO in further opening its markets and reducing state control of its economy and promises to complete this readjustment in the next 10 to 15 years. See "China Plays the Europe Card," The Economist, May 11, 1996, p. 33; Steven Pearlstein, "Meeting Advances U.S. Trade Little," Washington Post, November 25, 1996, p. A16; and Platt, "China Debates the Price of Joining World Body." Back.

Note 57: Elizabeth Pisani, "U.S. Asked to Back China's WTO Bid," Asia Times, November 26, 1996. Electronic Version. Back.

Note 58: Eglin, "China's Entry into the WTO with a Little Help from the EU," p. 497. Back.

Note 59: Ibid.; and Pearlstein, "Meeting Advances U.S. Trade Little." See also Robert O'Quinn, "Integrating China into the World Economy," Heritage Foundation Reports, June 2, 1997. Electronic Version. Back.

Note 60: Eglin, "China's Entry into the WTO with a Little Help from the EU," p. 497. Back.

Note 61: Guy de Jonquie'res, "Beijing Urged to Speed Tariff Cuts," Financial Times, December 1, 1997, p. 7. Back.

Note 62: "Chinese Traders at the Door," The Economist, October 11, 1997, p. 45. Back.

Note 63: Kerry Dumbaugh, "China: Current U.S. Sanctions," Congressional Research Service, April 14, 1995, p. 1. Back.

Note 64: Bruce Clark and Tony Walker, "Pressures Grow to Ease Curbs on Arms Sales to China," Financial Times, December 15, 1997, p. 4. Back.

Note 65: Ibid. See also Richard Fisher, "How America's Friends Are Building China's Military Power," The Heritage Foundation Backgrounder, no. 1146, November 5, 1997. Electronic Version. Back.

Note 66: "China Hails Relations with France," Agence France Presse, April 8, 1997. Electronic Version. Italy has also called for the EU embargo to be reviewed. Back.

Note 67: Christopher Lockwood, "Chirac's Sales Trip to China Attacked by Rights Activists," The Daily Telegraph, May 16, 1997. Electronic Version. Back.

Note 68: Ibid. Back.

Note 69: Fisher, "How America's Friends Are Building China's Military Power." Back.

Note 70: Steven Lee Myers, "U.S. Is Reviewing Ban on the Sale of Arms to China," New York Times, January 18, 1998,p. A1. Back.

Note 71: Ibid. Back.

Note 72: Ibid. Back.

Note 73: Fisher, "How America's Friends Are Building China's Military Power." Back.

Note 74: Clark and Walker, "Pressures Grow to Ease Curbs on Arms Sales to China." Back.

Note 75: Ibid. Back.

Note 76: Fisher, "How America's Friends Are Building China's Military Power." Back.

Note 77: Dumbaugh, "China: Current U.S. Sanctions," summary page. Back.

Note 78: Edward N. Luttwak, "Why We Need an Incoherent Foreign Policy," The Washington Quarterly, vol. 21, no. 1 (Winter 1998). Electronic Version. Back.

Note 79: In 1993, President Clinton extended China MFN status for another year but conditioned its future renewal on improvements in China's human rights practices, such as accounting for political prisoners, allowing them to be visited by the International Committee of the Red Cross , and ending the use of prison labor in the production of goods exported to the United States. In 1994, although admitting that China had not met these conditions, President Clinton announced that his administration was reversing this policy. In reaction to China's serious human rights abuses, however, the Clinton administration announced that it would maintain the U.S. sanctions imposed after Tiananmen still in force , ban imports of Chinese munitions (mainly guns and ammunition worth approximately $200 million a year), increase support for nongovernmental organizations working in China, and work with the American business community to develop a set of voluntary principles for commercial activity in China. See Thomas L. Friedman, "Trade vs. Human Rights," New York Times, February 6, 1994, p. A18; Douglas Jehl, "U.S. Is to Maintain Trade Privileges for China's Goods," New York Times, May 27, 1994, p. A1; and Lampton, "America's China Policy in the Age of the Finance Minister," p. 602. Back.

Note 80: "Cook's WTO Vote of Confidence," South China Morning Post, January 18, 1998; and "French Officials Shun Chinese Dissident," Washington Times, p. A12. Electronic Versions. Back.

Note 81: Instead of Cook, Wei met with the U.K.'s junior foreign minister, Derek Fatchett. See "Cook's WTO Vote of Confidence," South China Morning Post. Back.

Note 82: Steve Crawshaw, "China: Cook Feels Pinch over Human Rights," The Independent (London), January 14, 1998; "China Warns UK, France Against Official Contacts with Dissident Wei," AFX News, January 13, 1998; and "Wei Jingsheng Arrives in France Slamming Chirac," AAP Newsfeed, January 13, 1998. Electronic Versions. Back.

Note 83: Owen Bennett Jones, "Beijing Escapes Rebuke on Abuses," The Guardian (London), April 16, 1997. Electronic Version. Back.

Note 84: "China Hails Relations with France," Agence France Presse. Back.

Note 85: Ibid. Back.

Note 86: "U.S. Disappointed with France, Germany," United Press International, April 16, 1997. Electronic Version. Back.

Note 87: Office of the Spokesman in Hong Kong, U.S. Department of State, "Press Briefing by Secretary of State Madeleine K. Albright and British Foreign Secretary Robin Cook," June 30, 1997. Electronic Version. Back.

Note 88: David Wallen, "EU Maps Out Brave New Words," South China Morning Post, July 1, 1997, p. 12. Back.

Note 89: Shada Islam, "Europe Wants `Direct Links' with Hong Kong after Handover," Deutsche Presse-Agentur, April 25, 1997. Electronic Version. Back.

Note 90: Bruce Clark, "Terms of Engagement," Financial Times, June 16, 1997, p. 8. Back.

Note 91: Ibid. Back.

Note 92: Christopher Lockwood, "China Exposes the EU's Lack of Diplomacy." Back.

Note 93: Christopher Lockwood, "Chirac's Sales Trip to China Attacked by Rights Activists," The Daily Telegraph, May 16, 1997. Electronic Version. Back.

Note 94: Ian Black and John Gittings, "Cook's Plea on Hong Kong," The Guardian (London), June 25, 1997. Electronic Version. Although British Prime Minister Tony Blair and Foreign Secretary Robin Cook were not present at the swearing-in ceremony, Britain did send other government officials. Similarly, U.S. Secretary of State Madeleine Albright did not attend, but the United States was represented by other diplomats. See "Future Hong Kong Rulers Get New Boost on Last Lap to Handover," Agence France Presse, June 26, 1997. Electronic Version. Back.

Note 95: See Dong-Ik Shin and Gerald Segal, "Getting Serious about Asia-Europe Security Cooperation," Survival, vol. 39, no. 1 (Spring 1997), p. 144; Godement and Segal, "A European Security Role in Support of East Asian Stability"; and Office of International Security Affairs, U.S. Department of Defense, "United States Security Strategy for the East Asia-Pacific Region," February 1995, p. 5. Back.

Note 96: See Paul Stares and Nicolas Reguad, "Europe's Role in Asia-Pacific Security," Survival, vol. 39, no. 4 (Winter 1997-1998), p. 125. Back.

Note 97: Office of International Security Affairs, "United States Security Strategy for the East Asia-Pacific Region," p. 10. Back.

Note 98: Ibid., p. 2. Back.

Note 99: Mike M. Mochizuki, "A New Bargain for a Stronger Alliance," and Mike M. Mochizuki, "American and Japanese Strategic Debates: The Need for a New Synthesis," in Toward a True Alliance: Restructuring U.S.-Japan Security Relations, ed. Mike M. Mochizuki (Washington, D.C.: Brookings Institution Press, 1997), pp. 12, 56-57 respectively. Back.

Note 100: Mochizuki, "A New Bargain for a Stronger Alliance," pp. 10-11. See also Satoshi Morimoto, "A Tighter Japan-U.S. Alliance Based on Greater Trust," in Toward a True Alliance: Restructuring U.S.-Japan Security Relations, ed. Mike M. Mochizuki (Washington, D.C.: Brookings Institution Press, 1997), pp. 137-138. Back.

Note 101: Text of Japan-U.S. Joint Declaration on Security Alliance for the 21st Century, Japan Times, April 17, 1996. Electronic Version. Back.

Note 102: The review produced revised defense guidelines for the relationship and committed Japan to provide logistical and intelligence support for American military operations in the event of a "situation in areas surrounding Japan." This support includes allowing U.S. troops to use Japanese civilian airports, ports, and hospitals in emergencies. Japan also agreed to participate in minesweeping efforts, enforce economic blockades, evacuate civilians, and promote U.N. peacekeeping or humanitarian assistance operations in the region. Some American commentators hailed these revisions as an important achievement because they obligated Japan to engage in military activities outside its borders for the first time since World War II. Others worry about the guidelines for precisely that reason. In keeping with the Japanese constitution, however, no Japanese forces would be required to fight or enter into combat areas, and Japan would not be expected to provide U.S. troops with weapons or ammunition. See John M. Goshko and Kevin Sullivan, "U.S., Japan Expand Pact on Security," Washington Post, September 24, 1997, p. A1; "Highlights of Japan-U.S. Defense Guidelines," Japan Economic Newswire, September 23, 1997; and Text of the Guidelines for U.S.-Japan Defense Cooperation, M2 Presswire, September 24, 1997. Electronic Versions. Back.

Note 103: Simon Nuttall, "Japan and the European Union: Reluctant Partners," Survival, vol. 38, no. 2 (Summer 1996), p. 119. See also Francis Deron, Philippe Pons, and Jean-Claude Pomonti, "An EU Voice in the East Asia Security Debate," International Herald Tribune, July 22, 1996, p. 6. Back.

Note 104: "Sir Leon Brittan Calls for a Global Partnership Between the EU and Japan," RAPID, September 29, 1997. Electronic Version. Back.

Note 105: Ibid. Back.

Note 106: Ibid. Back.

Note 107: Godement and Segal, "A European Security Role in Support of East Asian Stability"; Stares and Reguad, "Europe's Role in Asia-Pacific Security," p. 125. Back.

Note 108: Stares and Reguad, "Europe's Role in Asia-Pacific Security," pp. 122-123. Back.

Note 109: Deron, Pons, and Pomonti, "An EU Voice in the East Asia Security Debate." Back.

Note 110: Stares and Reguad, "Europe's Role in Asia-Pacific Security," p. 135. Back.

Note 111: Ibid., pp. 125-129, 132. Back.

Note 112: Ibid., p. 132. Back.

Note 113: Stanley Roth, assistant secretary of state for East Asian and Pacific affairs, Testimony before the House International Relations Committee, Subcommittee on Asia and the Pacific, Federal Document Clearing House, September 30, 1997. Electronic Version. Back.

Note 114: Kim Kyung-ho, "Korea, EU Agree on Early Negotiations for Industrial Pact," The Korea Herald, October 30, 1997; and "Japan-EU Summit: Joint Press Statement," RAPID, January 13, 1998. Electronic Versions. Back.

Note 115: See Steven Mufson and Mary Jordan, "Crisis Alters Asian Political Aspirations," Washington Post, December 17, 1997, p. A1. Back.

Note 116: Daniel Schorr, "When It Comes to Korea, the Balking Stops," Christian Science Monitor, January 2, 1998, p. 19. Back.

Note 117: Stares and Reguad, "Europe's Role in Asia-Pacific Security," p. 124. Back.

Note 118: John M. Goshko, "UN Asks for $378 Million in Food Aid for North Korea," Washington Post, January 7, 1998, p. A9. Back.

Note 119: Stares and Reguad, "Europe's Role in Asia-Pacific Security," pp. 124-125. Back.

Note 120: Barbara Opall, "Economic Crisis Pushes KEDO to Brink of Insolvency," Defense News, December 8, 1997. Electronic Version. Back.

Note 121: Ibid. Back.

Note 122: Ibid.; and "KEDO Needs Cash," Jane's Information Group Limited, Foreign Report, December 4, 1997. Electronic Version. Back.

Note 123: "KEDO Needs Cash," Jane's Information Group Limited. Back.

Note 124: Press Statement by James P. Rubin, "Korea-European Union Joins KEDO," Office of the Spokesman, U.S. Department of State, September 19, 1997. See also "European Union Joins Korean Reactor Project Board," M2 Presswire, September 22, 1997. Electronic Versions. Back.

Note 125: "U.S. Lawmakers Concerned about Financial Turmoil Affecting KEDO," Agence France Presse, December 16, 1997. Electronic Version. Back.

Note 126: "KEDO Needs Cash," Jane's Information Group Limited. Back.

Note 127: Stares and Reguad, "Europe's Role in Asia-Pacific Security," p. 120. Back.

Note 128: Ibid., pp. 129-130. Back.

Note 129: Ibid., p. 130. Back.

Note 130: Floyd Norris, "Thailand's Currency Flutters, and Wind Is Felt in the U.S.," New York Times, October 24, 1997, p. A1; Bill Powell and Ellyn E. Spraigins, "Crossed Fingers," Newsweek, November 3, 1997, p. 38; Jeffrey D. Sachs, "The Wrong Medicine for Asia," New York Times, November 3, 1997, p. A23; and "How Far Is Down?" The Economist, November 15, 1997, p. 19. Back.

Note 131: Norris, "Thailand's Currency Flutters, and Wind Is Felt in the U.S."; and Powell and Spraigins, "Crossed Fingers." See also Tom Buerkle, "Hong Kong Drop Chills Europe; Frankfurt Shares Fall 4.66%, with Other Bourses Close Behind," International Herald Tribune, October 24, 1997, p. 15. Stocks on the London market fell by 3.06 percent, while French stocks dropped by 3.42 percent. Back.

Note 132: For example, Newsweek reported that until the end of October "for the United States . . . the fallout from the chaos had been minimal. The markets most badly hit were small, and besides, America's trade relationship with Asia is mostly as a buyer. If anything, some analysts have argued, far from feeling Asia's pain, Americans should revel in it. The devaluations are good news because they mean prices of everything from computers to TV sets will drop." See Powell and Spraigins, "Crossed Fingers." Back.

Note 133: Ibid.; Norris, "Thailand's Currency Flutters, and Wind Is Felt in the U.S." Back.

Note 134: Steven Pearlstein, "Asian Crisis' Long Reach," Washington Post, October 25, 1997, p. A1; Powell and Spraigins, "Crossed Fingers." Back.

Note 135: Pearlstein, "Asian Crisis' Long Reach." Back.

Note 136: Edmund L. Andrews, "Europe Feeling Effects of Asia's Financial Turmoil as Exports Slow," New York Times, January 20, 1998. Electronic Version. Back.

Note 137: Schorr, "When It Comes to Korea, the Balking Stops." Back.

Note 138: Of the $57 billion IMF-arranged bailout for South Korea, the fund was to contribute $21 billion; the World Bank, $10 billion; and the Asian Development Bank, $4 billion. The remaining $22 billion from 13 industrialized countries was committed as supplemental funds that would be released much later, if at all. See Paul Blustein, "$10 Billion in Loans Rushed to South Korea," Washington Post, December 25, 1997, p. A1; David E. Sanger, "In a Shift by U.S., Aid Will Be Sped to South Koreans," New York Times, December 25, 1997, p. A1; and "IMF Bail Outs: Truth and Fiction," IMF Fact Sheet, January 12, 1998. For each country receiving a bailout package, the IMF imposed conditions requiring major and painful economic reforms to make their economies more competitive and more resistant to external shocks. In addition, the IMF requirements included further trade liberalization and easing the rules in these nations that limit direct foreign investment. See Peter Passell, "South Korea Is Facing Some Difficult Economic Choices," New York Times, December 18, 1997, p. D2; and Louis Uchitelle, "A Bad Side of Bailouts: Some Go Unpenalized," New York Times, December 4, 1997, p. D6. Back.

Note 139: David E. Sanger, "Clinton's Personal Touch in Asian Rescue," New York Times, December 18, 1997, p. D8. Back.

Note 140: Ibid. Back.

Note 141: David E. Sanger, "The Asian Crisis: Moving from Boardroom to the Street?" International Herald Tribune, December 30, 1997, p. 15; and Richard W. Stevenson, "Washington to Directly Contribute $5 Billion, at the Low End of Expectations," New York Times, December 4, 1997, p. D6. Back.

Note 142: See Blustein, "$10 Billion in Loans Rushed to South Korea"; and "IMF Bail Outs: Truth and Fiction," IMF Fact Sheet, January 12, 1998. Back.

Note 143: Sanger, "The Asian Crisis: Moving from Boardroom to the Street?" Back.

Note 144: See Paul Blustein and Clay Chandler, "Behind the South Korean Rescue: Pressure, Speed and Stealth," International Herald Tribune, December 29, 1997, p. 4. Back.

Note 145: As far as the Clinton administration and the IMF were concerned, responsibility for this failure lay almost entirely with Seoul, whose Finance Ministry was balking at reforming the finance system, despite the fact that it was awash in bad loans. Adding to investors' pessimism was the fact that prior to the South Korean election, held December 18, 1997, then candidate Kim Dae Jung (who won) had suggested that he would demand a renegotiation of the IMF package if elected. See Blustein and Chandler, "Behind the South Korean Rescue: Pressure, Speed and Stealth." Back.

Note 146: Ibid. Back.

Note 147: Blustein, "$10 Billion in Loans Rushed to South Korea"; and Sanger, "In a Shift by U.S., Aid Will Be Sped to South Koreans." This $2 billion contribution from the IMF was accelerated from the fund's pledge of $21 agreed to earlier in December. See "IMF Bail Outs: Truth and Fiction," IMF Fact Sheet; "Korea Strengthens Economic Program; IMF to Activate Additional Financial Support," IMF News Brief, December 24, 1997; and "Rubin Sees South Korean Reforms Having Real Impact," Japan Economic Newswire, January 21, 1998. Electronic Versions. Back.

Note 148: Ibid. Back.

Note 149: Ibid.; and Sanger, "In a Shift by U.S., Aid Will Be Sped to South Koreans." Back.

Note 150: Sanger, "The Asian Crisis: Moving from Boardroom to the Street?"; and Sanger, "In a Shift by U.S., Aid Will Be Sped to South Koreans." Back.

Note 151: Sanger, "The Asian Crisis: Moving from Boardroom to the Street?" Back.

Note 152: Timothy L. O'Brien, "Lenders to Allow Koreans to Delay Debt Repayments," New York Times, December 30, 1997, pp. A1, D4. O'Brien notes, "The agreement, which essentially bent the rules for large borrowers near default, was the only realistic alternative for these banks. They would have faced the prospect of losing much more and perhaps causing a far greater crisis had they demanded repayment." Back.

Note 153: Ibid. Back.

Note 154: These refinancing negotiations have recently encountered some difficulties, as South Korea has opposed the proposal by its creditor banks to convert the loans extended to South Korean companies into government-backed bonds, preferring instead to guarantee the private loans. Timothy O'Brien, "Korea Opposes Plan by U.S. Banks to Repackage Loans," New York Times, January 16, 1998, p. D4. See also "ROK, Creditors Apart on Debt Extension," Jiji Press Ticker Service, January 22, 1998; and "South Korea Prefers Loan Guarantees to Sovereign Debt," AAP Newsfeed, January 20, 1998. Electronic Versions. Back.

Note 155: "Rubin Sees South Korean Reforms Having Real Impact," Japan Economic Newswire. See also "$2 Billion Dollar IMF Disbursement to South Korea Approved," Japan Economic Newswire, January 9, 1998. Electronic Version. Back.

Note 156: Eiichi Furukawa, "Crisis Drives East Asia to Unite," Jakarta Post, December 2, 1997. Electronic Version. Back.

Note 157: Ibid. Back.

Note 158: "Clinton Team Wins Most of the APEC Tricks," Financial Times, November 27, 1997, p. 6. At the November 1997 Summit of the Asia Pacific Economic Cooperation (APEC) forum in Vancouver, Canada, Japan refused Washington's entreaties to play a bigger role in helping other Asian economies to recover by doing more to stimulate Japanese domestic demand. Japan's prime minister Ryutaro Hashimoto opined, "We certainly are not complacent enough to think we can be a locomotive for the Asia-Pacific region." Back.

Note 159: Anne Swardson, "Tide of Asian Crisis Rippling; Europe Only Beginning to Feel Repercussions, Economists Say," Washington Post, January 20, 1998, p. A16. Back.

Note 160: "Bank of Korea Head to Visit UK, Germany, France," Reuters, January 3, 1998. Electronic Version. In South Korea, for example, the combined exposure of European banks amounts to $33.8 billion; that of Japanese banks total $24.3 billion; while U.S. banks are owed only $9.36 billion. See Andrew Gill, "Europe's Top Banks Throw South Korea Lifeline," AAP Newsfeed, December 31, 1997. Electronic Version. Back.

Note 161: Nancy Dunne, "U.S. Slips Behind in Key Emerging Markets," Financial Times, October 29, 1997, p. 10. Back.

Note 162: Ellen Frost, Transatlantic Trade: A Strategic Agenda (Washington, D.C.: Institute for International Economics, 1997), p. 57. Back.

Note 163: Deficits derived from the International Monetary Fund, Direction of Trade Statistics Yearbook, 1997. Back.

Note 164: International Monetary Fund, Direction of Trade Statistics Yearbook, 1997. Back.

Note 165: Nancy Dunne, "Congress Seeks to End China Trade Status Battle: Attempt to Nudge Beijing to Enter the WTO on U.S. Terms," Financial Times, November 5, 1997, p. 1. Back.

Note 166: Tani Freedman, "Financial Services Talks Inch towards Finale, but Problems Remain," Agence France Presse, November 12, 1997. Electronic Version. Back.

Note 167: Ibid.; and "Top-Level Financial Services Negotiations Set for December 8," Agence France Presse, November 14, 1997. Electronic Version. Back.

Note 168: See "New Rules for a Trillion-Dollar Game," Financial Times, December 15, 1997, p. 17. Some observers, however, question whether in the absence of Asia's recent financial problems, the agreement would have been completed. They argue that Asia's need for international assistance in stemming the crisis provided WTO negotiators with greater leverage in pressing for further liberalization of their financial services market, thereby enabling the conclusion of the agreement. See William V. Roth, Jr. and Fred Bergsten, "The (Potential) Asian Silver Lining," Washington Post, December 28, 1997, p. C7. Back.

Note 169: The ITA will eliminate all tariffs in 43 participating countries on over 300 information technology goods by the year 2000, thus liberalizing over $500 billion of trade in this sector. The Basic Telecommunications Agreement will open the telecommunications services markets of 69 countries to foreign investment, covering $500 billion in global commerce and representing more than 95 percent of world telecom revenue. Kenneth James, "Historic Tariff-Free IT Accord Is in the Bag," Business Times (Singapore), December 13, 1996, p. 1; and Office of the U.S. Trade Representative, Statement of Ambassador Charlene Barshefsky, "Basic Telecom Negotiations," February 15, 1997. Electronic Version. Back.

Note 170: Stuart Eizenstat, under secretary of state for economic, business, and agricultural affairs, Remarks before the U.S. Chamber of Commerce, Federal News Service, June 20, 1997. Electronic Version. Back.

Note 171: Charlene Barshefsky, representative-designate U.S. trade, Testimony before the House Ways and Means Committee, Trade Subcommittee, Federal Document Clearing House, March 18, 1997. Electronic Version. Back.

Note 172: David Rothkopf, acting under secretary of commerce for international trade, Prepared Statement before the House Committee on International Relations, Federal News Service, December 14, 1995. Electronic Version. Back.

Note 173: See Frost, Transatlantic Trade, pp. 55-57; and Richard H. Steinberg, "Transatlantic Management of the Global Trading System," in Open for Business: Creating a Transatlantic Marketplace, ed. Bruce Stokes (New York: Council on Foreign Relations, 1997), pp. 103-105. Back.

Note 174: Frost, Transatlantic Trade, pp. 55-56. See also Steinberg, "Transatlantic Management of the Global Trading System," p. 105. Back.

Note 175: "China Plays the Europe Card," The Economist. Back.

Note 176: Frost, Transatlantic Trade, pp. 54, 56. Back.

Note 177: Ibid., p. 20. Back.

Note 178: Ibid., p. 56. Back.

Note 179: David E. Sanger, "Trade Fight with Japan Is Widening," New York Times, May 19, 1995, p. D1. Back.

Note 180: Ibid. Back.

Note 181: Ibid. Back.

Note 182: Sir Leon Brittan, vice president of the European Commission, "Europe and America: Staying Together," RAPID, November 21, 1997. Electronic Version. Back.

Note 183: Ibid. Back.

Note 184: Shin and Segal, "Getting Serious about Asia-Europe Security Cooperation," p. 138. Back.

Note 185: Ibid., pp. 151-152. Back.

Note 186: Ibid., pp. 152. Back.

Note 187: Ibid., p. 152-153. Back.

Note 188: Ibid., pp. 153. Back.

Note 189: Ibid. Back.

Note 190: "Clinton Team Wins Most of Apec Tricks," Financial Times. Back.

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