Committed: U.S. Foreign Policy in Asia and Completing The Rebalance

Committed:
U.S. Foreign Policy in

Asia and Completing
the Rebalance
Edited by Shihoko Goto

Committed:
U.S. Foreign Policy in
Asia and Completing
the Rebalance
Edited by Shihoko Goto
www.wilsoncenter.org
Available from:
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Contents
1 Preface
2 Managing U.S.-China Relations

Robert Daly
12 Economic Leadership in the Pacific Century:

The United States as Northeast Asias Stabilizer
Shihoko Goto
23 U.S. Policy in South Asia: Imperatives and Challenges

Michael Kugelman
37 Managing U.S.-ASEAN Relations

Sandy Pho
49 U.S. Success in Asia Depends on Innovation

and Integration, Not Isolation
Meg Lundsager
58 North Korea: A Failed State with Nuclear Weapons

Robert Litwak
69 Going Beyond Sanctions to Denuclearize North Korea

James Person
76 About the Contributors

Preface
The United States is a Pacific power. It may be so reluctantly, but its con-
tinued military, political, and economic engagement has been key to Asias
stability and prosperity. Ensuring that the Asia-Pacific remains robust po-
litically and economically will be in the United States own interest, and
will be a key foreign policy challenge for any administration.
The realities on the ground in Asia, though, are rapidly changing. The
region has become increasingly divided, and rivalries are manifesting them-
selves in territorial disputes, competition for resources, as well as a growing
arms race. Having overtaken Japan as the worlds second-largest economy,
China has sought to become as much a political and military power as
much as an economic one. Beijings vision for the region puts China at its
center, which has led to rifts in relations among Asian nations, not to men-
tion Sino-U.S. relations.
Continued stability in the region cannot be taken for granted.
Washington must continue to be committed to Asia, not least amid grow-
ing concerns about North Koreas nuclear aspirations, maritime disputes,
and alternative visions for economic development.
This book is a collection of essays by researchers at the Wilson Center
engaged in issues related to Asia. It is a collaborative effort between the
Asia Program, the Kissinger Institute on China and the United States, the
Hyundai Motor-Korea Foundation Center for Korean History and Public
Policy, and International Security Studies to identify some of the challenges
ahead for the United States to remain a Pacific power and what policies
Washington might pursue to ensure regional stability.
September 2016
Washington DC
1
Managing U.S.-China Relations
By Robert Daly
SUMMARY
Chinas own perception of its insecurity is destabilizing, even if it is un-

founded. As such, China must play a larger role in the security architecture
of the Asia Pacific. The difficulty is that any meaningful alteration to that
architecture could threaten the United States core interests in the region:
exercising freedom of navigation and honoring treaty commitments to allies.
Failing in either task would call the United States power into question and
could even escalate to a nuclear arms race in northeast Asia.
RECOMMENDATIONS
A near-consensus of minimal steps the United States should take to en-

sure constructive relations with China has emerged over the past eight
years, namely:
Rebuild U.S. credibility (political, economic, military, cultural)

through domestic budgetary and tax reform, addressing income in-
equality and social injustice, investing in U.S. infrastructure, R&D, and
education at all levels, and maintaining U.S. pluralism and openness.
Strengthen the Rebalance to Asia by committing more resources

to the region, particularly on the diplomatic and economic fronts.
Ratify the UN Convention on the Law of the Sea to build U.S.

credibility in maritime disputes.
Ratify the Trans Pacific Partnership at the earliest possible date
2
Strengthen regional alliances by improving allies capabilities
and maritime domain awareness.
Strengthen partnerships with India, ASEAN, and the European

Union.
Continue strong support for Taiwan under the Taiwan Relations

Act and One China policy.
Broaden and deepen engagement with China by supporting the

China exchange programs of local governments, universities, NGOs,
and professional associations.
3
THE CHINA CHALLENGE
U.S. policymakers must assume that Chinas rise will prove sustainable
despite the domestic and foreign difficulties confronting the Chinese
Communist Party. The pace of Chinas development doesnt matter much;
the law of large numbers means that Chinas growth and expansive appe-
tites will be major U.S. concerns for decades. As the Earth Policy Institutes
Lester Brown has said, 1.3 billion times anything equals a whole hell of a
lot. Yes, and 1.3 billion times Chinas purchasing power, talent, geostrate-
gic ambition, and persecution complex equals something larger still.
As a wealthy continental power, Chinas military expansion is neither
unexpected nor unreasonable. The PRC depends on the sea lanes of the
Western Pacific for food, energy, and natural resources. Now that it can
protect this vital trade for itself, it is no longer content to rely on U.S. good
offices for its security. It is building aircraft carriers, submarine bases, and
islands that call into question the durability of the U.S.-led balance of
power that has benefited the region for over seventy years. Oddly, China
now feels less secure than it did before it became the worlds top trading na-
tion. Having invited the United States into China forty years ago to provide
investment, technology, and expertise, and having sent three generations
of students to Americas obliging universities, China now claims that the
United States is trying to harm it.
Chinas insecurity may sound unwarrantedwhy would anyone invade
China?but it cannot be wished away. Because Chinas perception of inse-
curity is destabilizing even if it is unfounded, China must play a larger role in
the security architecture of the Asia Pacific. The difficulty is that any mean-
ingful alteration to that architecture could threaten Americas core interests
in the region: exercising freedom of navigation and honoring treaty commit-
ments to allies. Failing in either task would call the United States power into
question and could even escalate to a nuclear arms race in northeast Asia.
Managing conflicting U.S. and Chinese interests in the Western Pacific
is the greatest challenge in the bilateral relationship confronting the next
president. The president must work with allies, and with China, to ask:
what can Washington do to decrease Chinas threat perceptionsor curb
its ambitionsin the Western Pacific such that China will be mollified and
not emboldened? No workable answer to that unavoidable question has yet
4
Robert Daly
been proposed.1 In its absence we have a dangerous muddle of mutual bom-

bast, testing, and potentially lethal games of chicken.
The reason no plausible answer to this question has been hazarded is
that the United States and most of Chinas neighbors assume that China
cannot be mollified: it will interpret any adjustment to the regional secu-
rity structure as a weakness to be exploited rather than as a step toward
peace. The assumption is that China is determined to become the regional
hegemon, which it cannot do if the United States remains the primary stra-
tegic actor in the Western Pacific and honors its commitments to its allies
(Japan, South Korea, the Philippines, Australia, Thailand) and to Taiwan.
This assumption is fueled on a nearly weekly basis by Chinese statements
and actions, despite Chinas declaration of a peaceful rise and Xi Jinpings
assertion that seeking hegemony is not in the genes of the Chinese people.
For its part, the PRC is convinced that U.S. policy is to encircle and contain
China, regardless of Washingtons claims that it seeks only a rules-based
order that promotes peace and prosperity.
Chinas leaders believe that a Sino-centric Asia is natural, inevitable, and
desirable. Natural means China cant be blamed for seeking a hegemony
that is its birthright. Inevitable means resistance is futile. Desirable reflects
Chinas confidence that it will be a benign hegemon.
On the count of inevitability, many nations fear that China may be right.
POLICY FRAMEWORKS
Possible American approaches to this challenge fall along a strategic

spectrum:
Acknowledgement: The United States admits that changes in China

require changes to the security architecture
Adjustment: The United States and its allies allow an enhanced Chinese
role within the existing architecture
Accommodation: The United States pulls back from some traditional

regional commitments to placate China
5
Appeasement: The United States allows China to play a larger regional

role than itself
Abandonment: The United States decides it can no longer be a

guarantor of security in the Western Pacific
Depending on regional developments and changes within China, there is a

range of solutions that might prove acceptable to the United States. There
are interests in Washington, however, which claim that even acknowledg-
ing Chinas security needs is tantamount to appeasement. This view is as
dangerous as the belief of some Chinese that only American appeasement
or abandonment are acceptable to the PRC.
U.S.-China relations are a complex, uncertain dynamic in which (A)
China learns to be a responsible world power despite its instinctive insular-
ity, and (B) the United States adapts to Chinese power and to multilateral-
ism despite its preference for preeminence. To manage this relationship, the
next President will need advisors who approach China on multiple tracks.
The following frameworks are essential to U.S.- China policy, but none of-
fers a solution to the primary challenge described above. The frameworks
must be balanced day-to-day, with security issues foremost in mind:
Security
The two nations face a security dilemma in the Western Pacific which can
be managed, but not solved. The United States must continue to uphold
freedom of navigation and to strengthen its regional alliances and partner-
ships. Chinas proximity, will, capability, and legitimate interests demand,
however, that Washington be prepared for China to play a larger military
role in the region.
World Order
The United States and China now assess their power based on their ability
to influence regional and world orders through (1) shaping laws, norms,
and practices; (2) building multilateral institutions; and (3) providing in-
ternational public goods. Washington should acknowledge Beijings con-
tributions to global welfare in all of these areas, but it must also remain
6
Robert Daly
vigilant. It has become clear that Chinas instinct and strategic preference
is to treat individuals, information, and institutions in the international
realm as it treats them at home. China seeks, often in tandem with Russia,
to have its authoritarian domestic practices accepted as alternatives to
modern, liberal norms on the global stage. The United States should op-
pose such encroachments as adamantly as it opposes Chinese militariza-
tion of the South China Sea.
The Values Debate

The United States and China are not merely strategic competitors; they
are engaged in an ideological contest as well. Each wants other nations to
espouse values similar to its own in order to reduce obstacles to their stra-
tegic ambitions. The United States pursues this goal with missionary zeal,
while China is more transactional, but both governments describe their
domestic legitimacy and global leadership in moralistic terms. The United
States stresses individual freedom and political pluralism, while China
inclines toward collective stability under an authoritarian state. These op-
posed visions produce ideological distrust that pervades the relationship,
coloring judgements of each others intentions and limiting scope for co-
operation. Ideological distrust clearly drives debates about human rights
and civil society, but it also underlies Chinese accusations of American
hegemony and American warnings about Chinas assertive foreign policy.
The United States has the upper hand in the values debatein global soft
power. It should protect that advantage through strengthening its demo-
cratic institutions, welcoming immigration, investing in infrastructure
and research and development, improving its public schools, ensuring
that its system of higher education remains the best in the world, and nar-
rowing economic and social disparities within its own borders. Progress
toward these goals will enable Washington to continue to inspire Chinas
own human rights advocates.
Managing Perceptions: Rise & Rebalance

The United States and China both think that most friction in the re-
lationship is the fault of the other side. This attitude breeds diplomacy
(and, in Chinas case, propaganda campaigns) that is too often based
7
on finger pointing, shaming, and the claiming of moral high ground.

Mutual distrust might diminish if both sides would acknowledge what
is reasonable in the others core interests. Americans should understand
that Chinas rise is legitimate and results, in the main, from the Chinese
peoples desire to flourish, which the United States has encouraged and
enabled. China should admit that the rationale for the U.S. Rebalance
American interests are concentrated in Asia and will likely remain
thereis uncontestable. If Washington regularly tells Americans that the
intent of Chinas actions, if not all of their effects, is to benefit Chinese
and not to threaten foreigners, and if Beijing does the same with regard
to American policy, public and elite perceptions of the relationship will
improve in both countries and national governments will have greater
scope for compromise.
Cooperation
The bilateral relationship has always been competitive and coopera-
tive. Since 1979, it has been American policy, under Democratic and
Republican administrations, to keep a thumb on the cooperative side
of the scale. As U.S. global influence declines relative to Chinas, this is
harder to do. Still, cooperation must be expanded. By working together
to combat climate change and pandemics, to improve the terms of invest-
ment and trade, to provide public goods, and to enhance communication
between militaries, the United States and China foster perceptions and
strategic dispositions without which the security dilemma in the Western
Pacific cannot be managed well. Both sides should be careful not to over-
state the benefits of cooperation, however. Presenting rosy scenarios to
Chinese and American publics will leave politicians and citizens alike ill-
prepared to face unpleasant realities and to make trade-offs that may be
necessary to avoid conflict.
Implications of Chinas Purchasing Power

China has a larger middle class than the United States. Its corporations
can scale up new technologies faster than the American companies that
invent them. Because of its market and manufacturing power, China
will increasingly be the tastemaker to the world: Chinese consumers will
8
Robert Daly
influence what Americans see on their store shelves, their dinner plates,
and their screens. Through global markets, Chinese talent and traditions
will enrich American culture, but there are dangers, too: as American film-
makers, game designers, publishers, and tech companies pursue Chinese
profits and design products to accord with Chinese law, China is handed a
channel through which it can export censorship to the rest of the world. A
blockbuster isnt a blockbuster if it doesnt play in China, and it cant play in
China unless the State Administration of Press, Publication, Radio, Film,
and Television clears the script. Welcome to Chinese Communist Party
storytelling, aesthetics, and encryption. Welcome to boring, and worse.
This pernicious effect of trade results from the market decisions of free U.S.
companies, and cannot be regulated. It is an emerging threat to American
freedom of speech and cultural dynamism just the same. It also harms
American soft power; American art and entertainment that is acceptable
to Chinas grim officials will be less attractive to Chinese consumers, who
enjoy it precisely because it is exuberant and free.
Continued Engagement
Over the past three years, American critics of engagement have attacked
this bipartisan policy because of its purported failure to bring Chinese prac-
tices in line with modern liberal norms. This is a straw man; no serious
proponent of engagement ever claimed that it would turn the Chinese into
Americansthe argument was that engaging was better than isolating the
United States from China. Engagement does not give Washington policy
levers it can pull at certain times to achieve distinct outcomes, but keep-
ing American models present to Chinese and inviting China into multilat-
eral organizationswhich engagement does dohas improved the lives of
Chinese in ways that advance American interests. Engagement is catalytic,
gradual, and uncertain. Through engagement, the United States gets less
than it would like and China gets more than it bargained for. The next
president should strengthen engagement with Chinacorporate, cultural,
professional, and academicin confidence that engagement serves U.S.
goals, even if its success cant be precisely measured.
The Wilson Centers Kissinger Institute can play a significant role in
bridging relations between Beijing and Washington. The United States
9
must conduct a comprehensive study of its ability to achieve its de-

clared goals in Asia over the next 50 years in light of:
Chinas growing economic and military strength
Americas looming structural budgetary crisis and low growth rate
The complexity and urgency of U.S. commitments and security

concerns worldwide
The willingness of U.S. citizens to bear the cost of retaining strategic

primacy in Asia-Pacific
If the United States cannot afford its Asian commitments over the long-
term, those commitments must be modified. Bluffing invites conflict, as
Beijing will measure American power in the region carefully even if the
United States does not conduct the recommended self-audit.
RECOMMENDATIONS OF THE KISSINGER INSTITUTE

ON CHINA AND THE UNITED STATES
Launch a dialogue with North Korea, without preconditions.
Deepen U.S.-China dialogues on nuclear policy to ensure that the

logic of mutual assured destruction does not drive bilateral nuclear
escalation.
Provide sustained, robust budgets for Chinese-language study

(and study of other critical languages) in American public schools,
beginning at the primary level.
Strengthen U.S.-China cooperative provision of global public

goods, including joint work on disaster relief, environmental
protection, public health, and food and consumer product safety.
10
Robert Daly
NOTE
1 The best treatment of the subject to date was offered by Michael Swaine of the Carnegie
Endowment for International Peace in 2015 (http://carnegieendowment.org/2015/04/20/
beyond-american-predominance-in-western-pacific-need-for-stable-u.s.-china-balance-
of-power-pub-59837). His recommendations were viewed as non-starters by readers at
the Pentagon.
11
Economic Leadership in the
Pacific Century: The United
States as Northeast Asias
Stabilizer
Shihoko Goto
SUMMARY:
Asian economies are more closely intertwined than they have ever been. At
the same time, a surge in nationalism, a growing arms race, and competition
for resources are increasing tensions across the region. As such, possibili-
ties for political conflict spilling over into economic relations should not be
discounted. The United States has a key role to play to ensure that Asian
nations, especially in East Asia, continue to remain engaged in dialogue
on economic as well as political and military issues. Meanwhile, there is
growing concern among U.S. allies that Washingtons commitment to the
rebalance to Asia is tepid at best. Ratifying the TPP will be the first step to
demonstrate U.S. commitment as a Pacific power, and it will be critical to
assure its allies that the United States has an economic vision for the region
to counterbalance the ever-growing influence of China.
POLICY RECOMMENDATIONS:
It is in the United States national interest to ensure stability and

continued growth in Northeast Asia. The current disconnect between
political tensions and economic relations should not be assumed. The
surge in nationalism and manipulation of national pride for political gain
12
could lead to trade and broader economic frictions. Washington has a
significant role to play in ensuring that governments continue to engage
with one another despite diplomatic tensions.
U.S. ratification of the TPP is critical for Washington not just for domes-
tic growth and U.S. trading interests in the Asia-Pacific. It also sends
a clear signal to Asian partners that the rebalance to Asia remains a
foreign policy priority, and that Washington is prepared to counterbal-
ance Chinas dominance in the region.
Even as a non-member, Washington must be prepared to work closely

with the AIIB so long as the bank continues to be a transparent inter-
national organization committed to providing loans to much-needed
infrastructure projects across Asia.
From tackling demographic challenges to meeting energy needs, there

are a number of major issues facing Asia that would benefit from closer
multinational cooperation. Washington can act as a broker to ensure
that Asian nations continue to engage in dialogue with one another as
well as with Washington.
The United States must leverage its position as the worlds center for
technological innovation and entrepreneurship. It must introduce edu-
cational and immigration policies that not only attract some of Asias
most ambitious and brightest minds, but also allow them to flourish on
both sides of the Pacific.
13
Economic Leadership in the Pacific Century: The United States as Northeast Asias Stabilizer
FROM RISING NATIONALISM TO A BUBBLING ARMS RACE, ten-

sions are mounting across the Asia-Pacific, especially in Northeast Asia. But
in spite of looming threats of potential military clashes in the South and
East China Seas, not to mention uncertainties about North Koreas nuclear
ambitions, Asia still remains the worlds most economically robust region.
One key reason for this disconnect between military and economic realities
is that while there are growing fears across the region about Chinas increas-
ing military power and territorial aspirations, China has also become the
single most important trading partner for most Asian nations. So a shared
commitment among Asian governments to further economic integration
and continued growth has been seen as key to regional stability.
Yet Chinas drive to exert greater regional influence not just economi-
cally, but also politically and militarily is increasing regional tensions. There
is, of course, the reemergence of great power politics, with Washington and
Beijing each vying for hegemony in Asia. But the politicization of national
identity and competition for natural resources in East Asia are also contrib-
uting heavily to regional unrest, and could potential have adverse impact on
regional growth. Over the decades, Washington has come to take economic
stability in the Asia Pacific for granted.1 Yet possibilities for the convergence
of military tensions and economic competition should not be dismissed,
and continued U.S. economic engagement will be key for growth as well as
for security on both sides of the Pacific.
NORTHEAST ASIA REMAINS EAGER FOR A U.S. REBALANCE
The Obama administrations endeavors from late 2011 to refocus U.S. atten-
tion on Asia has come under much scrutiny over the years, not least because of
wariness about Washingtons basic calculation that it could begin to distance
itself from the turmoil in Iraq and Afghanistan. In actual fact, the White
House has been unable to disentangle itself from the legacies of the Iraq and
Afghanistan wars, and is being forced to engage even more, not less, in the
Middle East since the policy to rebalance focus to the Asia-Pacific was first
outlined. What has remained constant instead is the enthusiasm for deeper
U.S. engagement in the region amongst its allies as they continue to look to
Washington as a counterbalance to Chinas growing influence across Asia.
14
Shihoko Goto
Japan in particular has been enthusiastic about Washingtons renewed

commitment to engage in the region, as friction between Tokyo and Beijing
continues to mount. Plans to redefine U.S. commitment to the Asia-Pacific
region also happened to come the year after Japan lost its spot as the second-
largest economy in the world to China, after over four decades of being sec-
ond only to the United States. As Japans global rank slipped and industrial-
ized nations continued to grapple with climbing out of the aftermath of the
global financial meltdown, Chinas military spending steadfastly rose and
its efforts to become a political as much as an economic power increased.
Numerous initiatives to bring continental Asia closer together under the
leadership of Beijing have since been put forward on the one hand, while
Washington failed to flesh out exactly how the U.S. rebalance to Asia would
look like beyond increased military presence in the region. For instance, for-
mer U.S. Secretary of State for East Asian and Pacific Affairs Kurt Campbell
noted that China was quick to quick to promote its own economic invest-
ment ideas in Asia, while the United States failed to attend the ASEAN
meeting in October 2013 for no reason except for its own troubles at home
regarding the domestic budget, which led to a government shutdown.2
President Obamas absence from the 2013 ASEAN summit meeting in
Brunei appeared too to be a symptom of a larger issue facing the United
States in Asia: while Washingtons foreign policy experts may recognize the
need to follow through on the rebalance initiative, the political will and
certainly public support for the United States to remain a strong Pacific
power both economically and militarily has been seen as tepid at best. So
while China may have grand initiatives to promote its own vision to lead
Asia, U.S. policy towards the region has been more reactionary, and not
strong enough to counterbalance Beijings strategies to become the regions
hegemony. Vehement public U.S. opposition against the Trans-Pacific
Partnership deal, which has been touted by the Obama administration as
the single most important economic component of the rebalance, has fur-
ther stoked fears in Asian capitals about U.S. indifference towards Asia.
Such concerns have been accentuated further still as even Hillary Clinton,
as presidential candidate, abandoned her support for the TPP, despite
championing for the trade deal as the critical part of the rebalance when she
was Secretary of State.
15
RISKS OF EXPECTING CONTINUED ECONOMIC

AND POLITICAL DIVERGENCE
There is an underlying assumption that Asian economies are now simply

too closely intertwined, and that strong economic interdependence espe-
cially among the major Asian powers would prevent any political tensions
from flaring out into outright conflict. There is a seemingly unwavering
belief that common expectations in East Asia for continued growth would
overcome any political tension between Japan, South Korea, and China.
There is a track record to support that assumption of pragmatism prevail-
ing at the end of the day. For instance, even at the height of conflict over
the Senkaku/Diaoyu islands in the East China Sea in late 2013, Japanese
share prices remained largely unaffected, and there was no sell-off of assets
either in Japan or China as a direct result of territorial disputes. Similarly,
when Korean President Lee Myung-bak visited Dokdo island in August
2012, there were howls of fury from the Japanese who claimed it as theirs.
Nevertheless, animosity between Seoul and Tokyo at that time were not re-
flected in the financial markets. Granted, Japanese capital flow into China
have fallen since riots flared across the country in protest of Prime Minister
Shinzo Abes decision to nationalize the Senkakus. However, the protests
simply accelerated a broader trend of Japanese investment moving toward
Southeast Asia in search of cheaper costs, rather than being spearheaded by
concerns about political risks.
Still, it is premature to assume that investment decisions and political
realities will remain at two opposite ends, and that they will not converge.
After all, western Europe had been more integrated economically than it
ever had been on the eve of World War I, yet those ties were not strong
enough in 1914 to overcome the power of nationalism and the network
of alliances in Europe. As political scientist Barry Posen argues, economic
interdependence in itself is not a reliable tool against conflict.3
With nationalist sentiment increasingly being manipulated for political
gain not just in China, but in Japan and Korea as well, the risks of miscal-
culation of intentions, deliberate or otherwise, have increased. For instance,
cooler minds should in theory prevail if there were to be an accidental colli-
sion of fishing boats in the East China Sea, especially given the prospects of
major economic losses any outright conflict could bring. But that may not
16
Shihoko Goto
be possible politically. After all, the other parallel between the realities fac-
ing Asia today and the situation in Europe in 1914 is the network of alliance
systems. The downside risk of the vast web of collective security, of course,
is that the number of countries that could get roped into conflict increases.
The real lesson of World War I, though, may well be what its conclusion
brought about, rather than why it began in the first place: namely social
change and most notably the changes to the political process its aftermath
brought about. Large-scale democracy and the rise in the power of public
opinion in shaping policy, including foreign affairs, were legacies of the
Great War, and continue to sway foreign policy today.4 Meanwhile in Asia,
there have been considerable technological and social changes which have
given far greater power to public opinion. So while averting military con-
flict may be the more rational choice in dealing with territorial disputes, the
tide of nationalist fervor swayed by public opinion may lead to less rational
decisions in the case of Sino-Japanese relations, and indeed in many Asian
countries dealing with China. The United States can play a key role to en-
sure that governments remain engaged in dialogue and build trust to avert
such conflict in the first place.
WHY TPP MATTERS
Continued engagement is most easily achieved by being united to achieve a

common objective, and the Trans-Pacific Partnership can certainly be that
common goal that binds the diverse group of Asian nations together. The
TPP has been touted as the most ambitious trade deal in history, with a total
of 12 countries agreed on the deal to represent over 40 percent of global
GDP. According to the Petersen Institute for International Economics,
TPP would add 0.5 percentage points to U.S. GDP by 2030, and boost ex-
ports by over 9 percent, to the tune of $357 billion.5 TPP supporters are also
quick to point out that the deal is ambitious not just because of the sheer
size of the global economy it would represent, but also because it is not
just a trade deal focused on reducing tariffs. Rather, the most revolutionary
aspect of the deal is how it is tackling non-tariff issues, including environ-
mental regulations, labor standards, intellectual property, and state-owned
enterprises. Also, U.S. public support for TPP is not as weak as it may seem
17
at first blush. According to the Pew Research Center June 2015 survey, 49
percent of Americans believe TPP would be a good thing for the nation.
That is far less than the 89 percent of Vietnamese who support TPP, or 70
percent of Peruvians.6 Nonetheless, it does suggest that vehement opposi-
tion to this ambitious trade deal is not as strong as it appears to be in the
U.S. media.
Yet the real significance of TPP is not about how much it could add
to economic growth. Rather, it is the fact that it has brought an incred-
ibly diverse group of countries together, united by a shared belief in open
markets, and that the pact itself would be open to new members joining in
the future. After all, TPPs members range from the Sultanate of Brunei to
Communist Vietnam, as well as the United States and Japan. All members
have signed on to the principles of free markets, transparency, and the will-
ingness to adhere to clearly defined rule of law that have been determined
by consensus. It is a tangible result of closer cooperation among nations that
are willing to put aside their political differences, and cooperate on issues
of mutual economic difference. As the worlds biggest economy, the United
States has played a leading role in ensuring that TPP negotiations came to a
successful conclusion. As Congress now mulls whether or not to ratify TPP,
U.S. credibility in Asia is at stake, and not just as a global leader of free
trade. Having declared repeatedly the U.S. rebalance is not merely a mili-
tary repositioning to the Asia-Pacific region, and that a successful conclu-
sion to the TPP is a key part of the economic dimension of the U.S. rebal-
ance to Asia, U.S. rejection of the TPP would be regarded as a failure of the
U.S. rebalance to Asia strategy itself. It would also be seen as a U.S. failure
in consensus-building, at a time when U.S. engagement in the Asia-Pacific
is looking more towards greater cooperation among like-minded states not
just economically, but militarily and politically as well.
Meanwhile, the United States is competing head-on with China, and
not just as an economic rival. Just as Washington is looking to strengthen
its ties to regional allies, and also promote greater cooperation amongst its
partners in its efforts to remain a leading Pacific power, Beijing too is seek-
ing out new partnerships and strengthening existing ones.
So it is no surprise that at a press briefing ahead of President Obamas
visit to China to take part in the G20 meeting in September 2016, Deputy
18
Shihoko Goto
National Security Advisor for Strategic Communications Ben Rhodes

made clear the diplomatic case as much an economic one for concluding
the TPP successfully.
TPP is seen as a litmus test for U.S. leadership. TPP allows us to es-
tablish the rules of the road for trade and commerce. Its also seen as a
demonstration of Americas commitment to be a Pacific power, Rhodes
said, adding that we would be stepping back from that leadership role.
We would be ceding the region to countries like China, who do not set the
same types of high standards for trade agreements, were we to not follow
through with TPP.7
There is no doubt that China would be eager and quite able to step into
any economic leadership vacuum the United States would leave behind if
TPP did not move forward. In fact, an alternative vision to TPP is already
in place. While China is not a member of the TPP, it has a leading role
in developing the Regional Economic Comprehensive Partnership (RCEP)
free trade deal, consisting of all 10 ASEAN countries as well as Japan,
South Korea, Australia, New Zealand, and India. Critics of RCEP, espe-
cially in the United States, are quick to point out that the deal is simply
focused on lowering tariffs, and not as comprehensive or as ambitious as
TPP. But if TPP is not ratified, RCEP would be the next best regional trade
deal that is available and could be ready for implementation much sooner,
while the United States would not be party to the deal. China has a number
of other trade negotiations up its sleeves too, including ongoing negotia-
tions for a trilateral pact with Japan and Korea. Given the political tensions
with Tokyo, that pact may face even more hurdles than any other trade
negotiation on the table. However, Beijing completed a bilateral free trade
agreement with Seoul in 2015, which has not only led to stronger economic
ties between the two countries, but also to firmer political relations as well.
THE AIIB CONUNDRUM
Ratification of the TPP is critical for the United States to remain a leading
economic power and trading partner in the Pacific. But in the area of devel-
opment assistance, the United States may already be losing ground. White
House officials quickly came to regret its public skepticism about Beijings
19
initiative to establish a new development bank in order to meet Asias ever-

growing infrastructural needs. The United States was caught flat-footed
when Britain, France, Germany, and other European nations joined the
Asian Infrastructure Development Bank in March 2015, while Washington
questioned the Chinese initiatives standards of transparency and sustain-
ability. The White House had also been wary of Beijings undue influence
on a development agency that it has established itself. More significantly,
though, AIIB has been seen as a direct challenger to long-established in-
ternational development agencies, namely the World Bank and the Asian
Development Bank, which have until now been led by a U.S. and Japanese
national, respectively.
Granted, U.S. criticism of the AIIB have subsided as membership to the
bank increased to 57, with Canada joining most recently in August 2016.
The United States and Japan are actually the only major countries that have
still not joined, even though both countries have now acknowledged that
the AIIB could meet the significant infrastructure development financing
gap worldwide. The World Bank estimates that up to $67 trillion will need
to be spent by 2030 just to meet global infrastructure needs, and an addi-
tional $1 trillion would need to be spent per year just to keep up with the
demands of urbanization in emerging markets, many of which are found in
the Asia-Pacific region.8 Under the leadership of Jin Liqun, the AIIB would
help fill that large financing gap in Asia.
Given that it took five years, until December 2015, for the U.S. Congress
to ratify IMF reforms to give greater voting power to emerging markets, it
is highly unlikely that legislators would give the green light to the United
States joining the AIIB and paying dues to the Beijing-led institution.
Nonetheless, as a non-member, it will be in the U.S. interest to work closely
with the AIIB so long as the bank continues to pursue its current path of
being committed to provide loans for infrastructure development to proj-
ects across Asia.
IDENTIFYING NEW ECONOMIC AGENDAS
Active U.S. engagement is critical for continued growth in East Asia. But
trade and development assistance are not the only areas that could gain
20
Shihoko Goto
from strong U.S. commitment. But it is not U.S. leadership per se that is
needed. Rather, it is a willingness for the United States to work together on
an equal footing, or even to take a more diminished role, on addressing is-
sues of mutual concern without disengaging outright.
One major economic challenge facing Japan, South Korea, Taiwan, and
even China is in demographic shifts, as their societies age rapidly and the
birthrate declines. Encouraging female participation in the workforce at all
levels and addressing the need to accept more migrant workers to fill the
labor shortage are issues that could benefit from concerted regional efforts.
East Asian nations must be more engaged in global discussions about the
risks and rewards of tackling migration, and Washington could play a key
role in ensuring there is dialogue not only among Asian nations, but also be-
tween the Asia-Pacific, Europe, Africa, and the Middle East. That could also
tie in well with another major challenge facing global economies, namely the
growing wealth gap and the social instabilities that the divide poses.
Energy security too will continue to loom large as an issue to secure
growth in East Asia. Fracking has made the United States a net exporter of
natural gas which invariably will further U.S. influence in resource-poor
nations. But it can also be used to highlight the real gains made from tech-
nological innovation, and it can create opportunities for collaboration on
ensuring energy security in East Asia.
Technological innovation has, of course, been at the core of the economic
success not just the United States, but also Japan and Korea as well. Silicon
Valley remains the worlds undisputed leader in harnessing technology to
entrepreneurship, both Tokyo and Seoul as well as all other Asian capitals
are eager to create their own innovation hubs as well. Success stories of start-
up entrepreneurs are now what attracts more young, ambitious Asians to the
United States and embrace Americans values. Tapping into the magnetism
of entrepreneurship will be a key driving force for U.S. diplomacy in Asia
and beyond. Ensuring that the United States continues to attract some of
Asias best minds, and encouraging them to contribute to both the United
States and Asia will lead to growth on both sides of the Pacific Ocean.
The biggest challenge for the United States is not about identifying
opportunities for economic cooperation in Asia. Rather, it will be for
Washington to hold up to its commitments to see through its vision of an
21
economic rebalance to Asia, and to embrace a more multilateral approach

to cooperation by sharing its leadership role with other nations.
NOTES
1 Brad Glosserman and Scott A. Snyder. The Japan-South Korea Identity Clash: East Asian
Security and the United States. 2015.
2 Kurt Campbell. The Pivot: The Future of American Statecraft in Asia. 2016.
3 Barry R. Posen. Restraint: A New Foundation for U.S. Grand Strategy. 2015.
4 David Reynolds. The Long Shadow: The Great War and the Twentieth Century. 2013.
5 Peter Petri and Michael Plummer. The Economic Effects of the Trans-Pacific Partnership:
New Estimates. Working paper 16-2, 2016. Petersen Institute for International Economics.
6 Joshua Poushter. Americans favor TPP, but less than those in other countries. Fact Tank
News in the Numbers. June 23, 2015. Pew Research Center.
7 Ben Rhodes. White House press briefing with Press Secretary Josh Earnest, Senior
Advisor Brian Deese, and Deputy NSA for International Economics Wally Adeyemo.
August 29, 2016. https://www.whitehouse.gov/the-press-office/2016/08/29/
press-briefing-press-secretary-josh-earnest-deputy-nsa-strategic
8 Otaviano Canuto, Anderson Caputo Silva, and Catiana Garcia-Kilroy. Long-Term Finance
in EMEs: Navigating Between Risks and Policy Choices. Economic Premise. June 2014,
Number 152. Poverty Reduction and Economic Management Network. The World Bank.
22
U.S. Policy in South Asia:
Imperatives and Challenges
Michael Kugelman
SUMMARY
Sustained bilateral and multilateral U.S. engagement in South Asia is of

the essence. Three major factors amplify the importance of placing South
Asia on the crowded front burner of U.S. foreign policy priorities: Threats
to stability emanating from the region, the overall strategic significance of
South Asia, and several notable geopolitical shifts. These shifts are the U.S.
combat withdrawal from Afghanistan, an accelerating American rebalance
to Asia, and resilient and expanding global terrorist networks.
At the same time, sustained engagement presents policy challenges
for Washington. These include addressing definitional disagreements with
India about what should constitute a strategic relationship, crafting a proper
policy for engaging Bangladesh in that countrys highly fraught political and
security environment, and identifying ways to help promote stability in two
troubled countriesAfghanistan and Pakistanwhere Washington is likely
to have a lighter footprint in the months and years ahead.

Hold high-level exchanges with New Delhi that seek to find common
ground on what should characterize a U.S.-India strategic relationship,
and how to get there.
Step up security cooperation with Bangladesh, and press Dhakaon

counterterrorism groundsto exercise restraint in its dealings with
23
the political opposition. Cracking down on political opponents and
cutting off peaceful channels to air grievances heightens prospects
for radicalization.
Continue to provide security and civilian assistance to Afghanistan,

even if in reduced amounts. Such support plugs away at gaping holes
in Afghan governance and security capacities, and provides reassur-
ance to a country that fears abandonment by the United States.
Identify and pursue areas of cooperation with Pakistan based on genu-

ine shared interests, such as joint efforts to combat ISIS, al-Qaeda,
and other terror groups that directly threaten the United States and
Pakistan. U.S. development assistance, which helps strengthen civilian
institutions in Pakistans fragile democracy, should not be phased out.
Make substantive efforts to help improve the hostile Afghanistan-

Pakistan relationship. Better bilateral ties would boost stability along
their porous border, and help lessen cross-border violence and terror.
Be more present in South Asia within multilateral settings, in order to

maintain credibility in the broader region. Continue to provide robust
support for the Turkmenistan-Afghanistan-Pakistan-India gas pipeline
and the CASA 1000 power transmission project. Take better advan-
tage of Washingtons association with the South Asian Association
for Regional Cooperation and the Heart of Asia-Istanbul Process,
regional initiatives with objectives that align with U.S. regional goals.
Additionally, signal unequivocal U.S. support for the India-led transport
corridor project under development in Iran and Afghanistan.
24
Michael Kugelman
THE UNITED STATES HAS LONG STRUGGLED with South Asia.1

This is no surprise, given the regions size and complexity.
It is a struggle that plays out in policy circles, but also within the U.S.
bureaucracy of statecraft and national securitywhich has long had trou-
ble conceiving of South Asia as a single, distinct region.
Consider that the State Departments regional bureau for South Asia
also includes Central Asia. Similarly, USAID has an Office for South and
Central Asian Affairs. Both State and USAID have separate offices focused
on Afghanistan and Pakistan. Meanwhile, the two U.S. military commands
split the region right down the middle: Central Command (CENTCOM)
oversees Pakistan, while Pacific Command (PACOM) oversees India.
All this said, there is razor-sharp clarity about the chief U.S. policy ob-
jective in South Asia: The pursuit of stability.2 Its an admittedly ambitious
goal in a region riven with interstate tensions, including between nuclear-
armed neighbors; rife with insurgency and other violent conflicts; and flush
with security problems ranging from Islamist militancy to organized crime.
A COMPELLING CASE FOR CONTINUED ENGAGEMENT
These clear and present threats to stability underscore why the United States
cannot afford to take its eye off the South Asia balleven as developments
in the Middle East will undoubtedly and understandably continue to con-
sume the attention of U.S. policymakers.
Another compelling reason to ensure sustained U.S. engagement is
South Asias overall strategic significance. South Asia sits astride the Indian
Ocean regionan area, in the words of noted foreign affairs commentator
Robert Kaplan, that may comprise a map as iconic to the new century as
Europe was to the last one.3 This region boasts some of the youngest and
fastest-growing populations in the world, in an era when many countries
are experiencing slower growing and ageing demographics. It abuts critical
sea lanes for trade. It serves as a gateway to the Middle East and to China.
And it enjoys some of the worlds greatest wealthyet also suffers from
some of its worst poverty. South Asia is also acutely vulnerable to natural
resource stress and the effects of climate changethreats that will define
the 21st century.
25
U.S. Policy in South Asia: Imperatives and Challenges
Three Geopolitical Shifts

Furthermore, three geopolitical shifts underfoot in South Asia and the
broader world amplify the inevitabilityor at least, for the sake of U.S.
interests, strong desirability of continued engagement with the region in
the coming months and years.
U.S. Combat Withdrawal from Afghanistan

The first shift, perhaps ironically, relates to the scaled-down U.S. role in
Afghanistan, ever since the American combat war ended in 2014. A lighter
U.S. military footprint in Afghanistan has led to a decreased U.S. policy
focus on Afghanistan.4 This is concerning, given the countrys deteriorating
security situation.
And yet, at the same time, this presents a silver lining for U.S. South
Asia policy. Less focus on Afghanistan means that the U.S. strategic lens ap-
plied to South Asia during the early years of the Obama administrationa
narrow optic centered on Afghanistan and Pakistanis being redirected
elsewhere in the region, and particularly to India. Perhaps not coinciden-
tally, U.S.-India relations have been deepening ever since U.S. combat
troops began departing Afghanistan in 2014 (and also since Indian Prime
Minister Narendra Modi, a strong proponent of warmer bilateral ties, took
office that same year). The receding of the Afghanistan-Pakistan-focused
lens also provides openings to hone in more on Bangladesha powder keg
of a country that U.S. policy has long neglected. Washingtons widening
South Asia optic also presents opportunities for the United States to make
more concrete contributions to regional connectivity projects like transport
corridors and energy infrastructure. U.S. officials periodically articulate
support for such initiatives, depicting them as stabilization projects.5 And
yet little has been done on operational levels.
An Accelerating Asia Rebalance

A second notable shift that accentuates the importance of American en-
gagement with South Asia is a redoubled U.S. focus on the Asia rebalance.
This much-ballyhooed pivot, intended to allocate more American re-
sources to the Asia-Pacific, has been painfully slow in coming. However,
concrete U.S. actions over the last yearmultiple high-level trips to the
26
Michael Kugelman
Asia-Pacific, successful efforts to solidify new friendships (such as with

Burma and Vietnam), and intensified U.S. participation in joint exercises
with friendly militaries in the regionsuggest the policy is gaining steam.6
Additionally, the Transpacific Partnership trade accord, if ratified, would
not only incentivize, but also necessitate, a more intense U.S. focus on the
Asia Pacific. And yet it is growing U.S. unease about Chinas provocative
moves in the Asia-Pacific that arguably constitutes the most powerful in-
centive to push forward with the rebalancea concern that will remain
paramount regardless of who is in the White House come January 2017.
India, and by extension South Asia, plays a critical role in the Asia re-
balance policy, because Washington views India as a useful counterweight
to China. The Modi governments articulation of a new Act East pol-
icysuggesting a more active and robust policy in the Asia-Pacific than
the Look East policy embraced by previous administrationsis music
to Washingtons ears, because it amplifies how the United States and India
intend to rebalance to the same region, and for the same reason: to provide
a counterweight to China.7
Resilient and Expanding Terrorist Networks

A third geopolitical shift that provides Washington with a strong incentive
to remain focused on South Asia is the resurgence and expansion of global
terrorist syndicates. At first glance, this may seem like a questionable asser-
tion, because today international terror networks arguably pose the greatest
threats outside of South Asia. Al-Qaedas presence and clout in South Asia
are a far cry from the pre-9/11 era. Its central leadership in the Afghanistan-
Pakistan region has been decimated, and some of its remaining top officials
have reportedly relocated to Syria.8 Today, the greatest strength of al-Qaeda
lies in its regional affiliates, and the most powerful ones (some of which have
plotted attacks on the United States) are based in the Middle East and North
Africa, not South Asia. Meanwhile, the territorial advances of ISIS have
largely been limited to the Middle East, and its relentless onslaught of at-
tacks has mostly taken place in the Middle East, North Africa, and Europe.
And yet, al-Qaeda has not exactly shriveled up and died in South Asia.
In 2014, it announced the launch of a new South Asia affiliate. In 2015, the
U.S. military claimed to have discovered probably the largest al-Qaeda
27
training camp in Afghanistan since American forces entered the country in

2001.9 Additionally, al-Qaeda retains deep ties to many of the regions most
vicious terror groupsincluding the Haqqani network and Afghan and
Pakistani Talibans, all of which have targeted Americans in Afghanistan.10
Meanwhile, ISIS has formally declared its expansion into the
Afghanistan-Pakistan region. While its physical presence in South Asia is
modest, ISIS boasts considerable brand appeal among disaffected local mil-
itantsmany of them former Taliban fighters in Afghanistanhappy to
carry out attacks in its name, and possibly with guidance and other non-op-
erational support from ISIS central authorities in the Middle East.11 With
ISIS increasingly on the defensive as it struggles to manage its shrinking so-
called caliphate in Syria and Iraq, it has a strong incentive to demonstrate
its continued clout by staging (or at least claiming association with) attacks
elsewhere in the world, including South Asia. In the summer of 2016,
ISIS claimed responsibility for mass-casualty atrocities in Afghanistan,
Bangladesh, and Pakistan.
Ominously, in the coming months, the presence and influence of al-
Qaeda and ISIS could strengthen in South Asia. Deteriorating security in
Afghanistan could enable the Taliban to carve out new sanctuaries that
double as safe havens for its al-Qaeda ally. This means that an early key U.S.
achievement in Afghanistanthe elimination of al-Qaeda sanctuaries
could well be reversed. Additionally, ongoing fragmentation and splintering
within the Taliban could spawn new militant factions that reject their par-
ent organization and pledge allegiance to ISIS. Finally, the possibility exists
that if ISIS leader Abu Bakr al-Baghdadi is killed, al-Qaeda could extend
an olive branch to its erstwhile Iraq affiliate. If ISIS feels sufficiently on the
defensive and vulnerable, it could well opt for reconciliation.12 A reunited
al-Qaeda and ISIS would spell big trouble for South Asia.
The uptake? Writing South Asia out of the U.S. foreign policy script
would be not just unfortunate, but downright dangerous.
THE CHALLENGES OF CONTINUED ENGAGEMENT
Washington has compelling reasons to stay engaged in South Asia, but sus-
tained engagement also presents a series of policy challenges and conundrums.
28
Michael Kugelman
India: Definitional Dilemmas About Strategic Partnership

Prime Minister Modis visit to Washington in June was meant in part to
showcase the many shared values and interests between the two countries,
and to make the case that U.S.-India relations enjoy sufficiently deep re-
positories of goodwill to flourish deep into the future, regardless of who is
Americas next president. This may well be true; the U.S.-India relationship
is one of the few U.S. foreign policy issues that enjoys widespread bipartisan
support. However, for U.S.-India relations to truly take off, Washington
and New Delhi will need to work through some definitional disagreements
about the nature of their relationship. These disputes are quite separate
from, and more fundamental than, the policy-focused bilateral disagree-
ments that revolve around U.S. visa laws for Indian workers, Indias posi-
tion on global trade negotiations, and Washingtons relationship with the
Pakistani military, among other points of tension.
The core definitional disconnect in U.S.-India relations is what exactly
constitutes a strategic relationship. Both countries claim to want one, but
without defining what this meansand yet each country has a different
expectation of what strategic partnership entails. For Washington, generally
speaking, strategic partnerships are expected to involve close operational se-
curity cooperation, including the possibility of joint operations. For India,
this type of cooperation is off the table, at least for now. When PACOM
commander Admiral Harry Harris, in a 2016 speech in New Delhi, pro-
posed joint patrols between the U.S. and Indian navies in the South China
Sea, Indian officials promptly responded that such options would not be
welcome.13 Indias idea of a strategic partnership, meanwhile, involves high
levels of technology transfers and arms deals. For Washington, such trans-
actions, while essential, are only part of a broader package. An inability to
reconcile these differing views of strategic partnership could constrain U.S.-
India security cooperation, and more broadly complicate efforts to move
the relationship forward.
The two countries could benefit from several high-level exchanges that
seek to find some common ground on what should characterize a U.S.-
India strategic relationship, and how to get there.
29
Bangladesh: A Delicate Dance with Dhaka

Over the last decade or so, Washington has relegated its relations with Dhaka
to the backburner of South Asia policy, where they have been subordinated
to Americas relationships with Afghanistan, Pakistan, and India (though to
be fair, the United States has provided ample aid to Bangladeshmore so
than to any country in Asia other than Afghanistan and Pakistan14). Until
recently, this relative inattention to Bangladesh made sense, particularly
given serious stability concerns in Afghanistan and Pakistan. Bangladesh,
despite great political volatility, did not pose major threats to U.S. interests.
However, deprioritizing Bangladesh has now become an untenable policy
as the country suffers through an increasingly violent campaign of Islamist
terrorism, culminating in an ISIS-claimed attack on a popular Dhaka caf
in July. Like several other attacks that preceded it, the assault on the Holey
caf targeted foreigners. In effect, in Bangladesh, Americas core interest
stabilityand American lives are both at risk.15
These developments suggest the need for greater U.S. engagement with
Bangladesh. How to orient this engagement, however, is a delicate matter.
In an ideal world, Washington would ramp up counterterrorism coopera-
tion with Dhaka in order to help Bangladesh identify local extremists and
probe possible links between homegrown militants and global terror outfits
like al-Qaeda and ISIS. However, Bangladeshs government frequently uses
counterterrorism sweeps as pretexts for cracking down hard on the political
opposition. If Washington does choose to increase security cooperation
and particularly security assistancethen it will need to work to ensure
that its dollars do not end up being used to bankroll draconian measures
against Dhakas political opponents. U.S. officials should press Dhaka to
exercise restraint in its dealings with the oppositionnot just to safeguard
human rights, but also to forestall terror. By cracking down on political
opponents and cutting off peaceful channels to air grievances, prospects for
radicalization are heightenedand particularly when these channels are
denied to the likes of Jamaat-e-Islami, an anti-government Islamist party
that harbors hard-line views and harbors violent factions. Unfortunately,
given Bangladeshs notoriously polarizing political environment, fueled in
part by an ugly vendetta between the countrys prime minister and its top
opposition leader, Dhaka is unlikely to relent anytime soon.
30
Michael Kugelman
Afghanistan and Pakistan: Sustaining Stability with a Smaller Footprint

Afghanistan and Pakistan are arguably the two greatest sources of instabil-
ity in South Asia, and yet U.S. relations are destined to be downgraded
with both of them. A smaller U.S. military mission, coupled with consider-
able donor fatigue, portends less engagement with Afghanistan. This means
that Washingtons relations with Islamabad, which tend to be viewed
through the lens of Afghanistan, could also grow more distantand per-
haps more tense as well.16 When the United States was fighting a combat
war in Afghanistan, it sought to build more trust with Islamabad to help
secure its assistance there. And yet now, with U.S. forces no longer in a
combat role, Pakistans help isnt as crucialand Washington can afford
to take a tougher line. Predictably, in 2016, the United Statesfor the first
timelaunched a drone into the Pakistani province of Baluchistan, killing
Afghan Taliban leader Mullah Mansour, who enjoyed sanctuary there; it
refused to subsidize the sale of an F16 package to Pakistan; and it threat-
ened to cut back financial assistance to the Pakistani military for failing to
adequately crack down on militancy.
In Afghanistan and Pakistan, Washingtons core challenge is to find ways
to help promote stability with a lighter footprint. This is no easy task, given
the scale of the challenges that Washington confronts in both countries.
In Afghanistan, the Taliban insurgencysustained by its sanctuaries in
Pakistan, fueled by drug money, and emboldened by struggling Afghan se-
curity forcesrages on. Afghanistans government, regarded by many across
the country as feckless and corrupt, has little capacity to weaken the insur-
gency, which now controls more territory now than at any time since 2001.
And in Pakistan, the militarys counterterrorism offensives have helped re-
duce terrorist violence, but the state still refuses to cut ties to Pakistan-based
terror groupslike the Haqqani Network and Lashkar-e-Taibathat have
staged attacks in India and especially Afghanistan that kill Americans. More
broadly, Pakistanwith its hardline religious institutions and clerics, its
climate of intolerance toward religious minorities, and above all its refusal
to crack down on terror groups of all formscontinues to provide an en-
trenched, enabling environment for the extremist ideologies that fuel terror.17
Indeed, another big U.S. challenge in Afghanistan and Pakistan may be
to admit that there is only so much Washington can do. It cant m agically
31
transform beleaguered Afghan armed forces into a war-fighting power-

house. It cant magically refashion the Afghan government into a paragon
of good governance. Meanwhile, Washingtonno matter how much aid it
danglescannot compel Pakistan to sever its ties with, or deny sanctuary
to, terror groups on its soil. Pakistans core strategic interest is to keep India
at bay, and it believes maintaining links to terror groups can help it do so.
American weapons or dollars are unlikely to alter the cold, hard calculus of
Pakistans unshakeable strategic interest. In fact, providing arms and cash
just causes Pakistan to double down.
The United States should continue providing security and civilian as-
sistance in Afghanistan, even if in modest amounts. The presence of U.S.
troops provides psychological reassurance to a military, government, and
population that fears abandonment by the United States, and it helps plug
away at gaping holes in Afghan warfighting capacities. As bad as things are
now, they could well spiral out of control in the event of a full U.S. with-
drawalfrom mass desertions within the military to an acute economic
crisis and, perhaps, civil war.
In Pakistan, the United States should identify and pursue areas of co-
operation based on genuine shared interests. These may include, for ex-
ample, joint efforts to combat ISIS, al-Qaeda, and other terror groups
that directly threaten the United States and Pakistan. Bilateral exchanges
on softer areas of cooperationwater, energy, educationcan be useful
to build goodwill, though with U.S. troops no longer needing as much
Pakistani assistance in the Afghanistan war effort, it may be difficult to
justify expending so much diplomatic capital to cultivate that goodwill.
Still, U.S. development assistance to Pakistan, which could face significant
cuts, should not be altogether phased out, given the important role it seeks
to serve: strengthening civilian institutions in a nation where democracy is
dangerously fragile.
Furthermore, Washington should actively pursue efforts to improve the
hostile Afghanistan-Pakistan relationship. Better ties would boost stability
along their porous border, and help lessen cross-border violence and terror.
The United States is better off serving as an intermediary in this troubled
relationship than it is in the India-Pakistan one, given New Delhis rigid
opposition to any outside efforts to help ease its tensions with Pakistan.
32
Michael Kugelman
India worries that any external mediation would mean bringing up the
Kashmir dispute, which New Delhi believes has long been settled.
Overall, sustained U.S. engagement in Afghanistan and Pakistan pres-
ents three fundamental policy conundrums.
Maintaining U.S. troops in Afghanistan helps Afghan forces, but

also provides propaganda coups for the Talibanwhich vows to fight
until every last foreign occupier leaves Afghanistanand gives it an
excuse not to pursue peace talks with Kabul. Washington, aware that
Afghanistans war cant be won militarily, fervently supports talks.
In 2016, Obama announced measures giving remaining U.S. troops

in Afghanistan more flexibility to go after the Taliban. This move
could produce tactical counterinsurgency successes, but it could
also strengthen ISIS. This is because the Taliban, to this point, has
effectively fought off ISIS-aligned militants in eastern Afghanistan. By
weakening the Taliban, the United States weakens an anti-ISIS ally of
Americas in Afghanistan.
So long as Washington keeps sending military assistance to Pakistan, it

runs the risk of having this aid used to fund or arm groups, such as the
Haqqani Network, which threaten U.S. lives in Afghanistan, or those
like Lashkar-e-Taiba, which threaten India. Such outcomes would
undermine the very stability that U.S. military assistance is meant to
promote. Even worse, such outcomes could endanger American lives.
Ultimately, U.S. policy challenges in Afghanistan and Pakistan boil down

to an uncomfortable yet critical question: How much diplomatic, security,
and financial capital is Washington willing to expend in pursuit of stability
that has long been elusive, despite ample American largesse?
REMAINING RELEVANT IN THE REGION
In South Asia, despite its best efforts, the United States remains a relative
outsider. It has been out-engaged and outmaneuvered by China, which is
33
busily building out its One Belt, One Road projectan enterprise that
entails deep levels of infrastructure investments across Afghanistan and
Pakistan, including the $46 billion China-Pakistan Economic Corridor.
Meanwhile, India is developing its own, more modest, regional infrastruc-
ture project, with efforts underway to construct Chabahar port in south-
ern Iran along with roads and railroads up to the Iranian border with
Afghanistan. South Asia, much like Asia on the whole, has become a battle-
ground for influence between Asias two rising powers.
In fact, these Chinese and Indian regional infrastructure projects are
both good for Washington, because they aim to produce the same out-
comes the United States wishes for in South Asia: more infrastructure and
development, enhanced regional connectivity, and, above all, stability. In
this sense, theres nothing wrong with Washington playing second fiddle to
China and India in South Asia.
At the same time, within broader regional settings, the United States
risks losing credibility by not being more present. To this end, U.S.
engagement with South Asia should be multilateral as well as bilat-
eral. Washingtons robust backing for a gas pipeline project involving
Turkmenistan, Afghanistan, Pakistan, and India is a good start, as is its
financial support for CASA 1000, a power transmission project involving
Afghanistan, Kyrgyzstan, Pakistan, and Tajikistan. It should also take full
advantage of its association with the South Asian Association for Regional
Cooperation (SAARC), where it holds observer status, and with the Heart
of Asia-Istanbul Process, where it is a supporting member. The objectives
of these two initiatives are to promote South Asian regional trade and co-
operation (in the case of the former) and cooperation between Afghanistan
and its neighbors (in the case of the latter). Both align with U.S. regional
goals. Furthermore, Washington should signal its unequivocal support for
the India-led Chabahar deal.18 Endorsing it would telegraph Washingtons
support forand awareness ofIndias growing regional footprint.
To be sure, sustained bilateral and multilateral U.S. engagement in
South Asia is a very tall order, and especially at a time when the attention of
American foreign policymakers is consumed by crises in the Middle East,
Europe, and Russia. And yet, numerous critical factorsbearing on issues
of stability, strategic significance, and geopolitical shiftsamplify the im-
34
Michael Kugelman
portance of placing South Asia on the crowded front burner of U.S. foreign
policy priorities.
NOTES
1 South Asia is comprised of Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal,
Pakistan, and Sri Lanka. These are also the countries that make up South Asias regional
organization, the South Asian Association for Regional Cooperation.
2 This theme of advancing and safeguarding regional stability is a consistent one in
policy statements on South Asia issued by top U.S. officials in recent years. See Robert
O. Blake Jr., The Obama Administrations Policy on South Asia, September 9,
2009, https://web.archive.org/web/20090910054720/http://www.state.gov/p/sca/rls/
remarks/128753.htm and Nisha Desai Biswal, U.S. Foreign Policy in South Asia: A
Vision for Prosperity and Security, April 16, 2014, http://www.state.gov/p/sca/rls/
rmks/2014/224914.htm.
3 Robert D. Kaplan, Monsoon: The Indian Ocean and the Future of American Power (New
York: Random House, 2010).
4 For a discussion of why Afghanistan has fallen off the radar in Washington, see Michael
Kugelman, Bringing Afghanistan Back into the Spotlight, Foreign Policy, August 10,
2015, http://foreignpolicy.com/2015/08/10/bringing-afghanistan-back-into-the-spotlight/.
5 See, for example, Nisha Desai Biswal, The New Silk Road Post-2014: Opportunities and
Challenges, January 22, 2015, http://www.state.gov/p/sca/rls/rmks/2015/236214.htm.
6 See White House, FACT SHEET: Advancing the Rebalance to Asia and the Pacific,
White House Office of the Press Secretary, November 16, 2015, https://www.whitehouse.
gov/the-press-office/2015/11/16/fact-sheet-advancing-rebalance-asia-and-pacific; Simone
Orendain, Philippine-U.S. Military Exercises Begin with Greater Regional Presence, Voice
of America, April 4, 2016, http://www.voanews.com/a/philippine-us-miliatary-exercises-
begin-with-greater-regional-presence/3268080.html; and Tiffany Ap, Jennifer Rizzo, and
Kevin Liptak, Obama Lifts Arms Ban on Vietnam, CNN, May 23, 2016, http://www.
cnn.com/2016/05/23/politics/obama-vietnam-trip/.
7 In fact, it was Hillary Clinton, not any Indian official, who first proposed an Act East
policy for India, back in 2011 when she was secretary of state. For more background
on Indias relations with the Asia-Pacific and the implications for Washington, see
Michael Kugelman, India Acts East, Foreign Policy, May 17, 2016, http://foreignpolicy.
com/2016/05/17/india-acts-east/
8 Charles Lister, Al-Qaeda is About to Establish an Emirate in Northern
Syria, Foreign Policy, May 4, 2016, http://foreignpolicy.com/2016/05/04/
al-qaeda-is-about-to-establish-an-emirate-in-northern-syria/.
9 Dan Lamothe, Probably the Largest al-Qaeda Training Camp
Ever Destroyed in Afghanistan, Washington Post, October 30, 2015,
https://www.washingtonpost.com/news/checkpoint/wp/2015/10/30/
probably-the-largest-al-qaeda-training-camp-ever-destroyed-in-afghanistan/.
35
10 Michael Kugelman, Al-Qaeda is Alive and Well in Afghanistan and Pakistan,

War on the Rocks, February 13, 2014, http://warontherocks.com/2014/02/
al-qaeda-is-alive-and-well-in-afghanistan-and-pakistan/.
11 Michael Kugelman, How ISIS Could Become a Potent Force in South Asia,
Foreign Policy, February 20, 2015, http://foreignpolicy.com/2015/02/20/
how-isis-could-become-a-potent-force-in-south-asia/.
12 Bruce Hoffman, The Coming ISIS-al-Qaeda Merger, Foreign Affairs, March 29, 2016,
https://www.foreignaffairs.com/articles/2016-03-29/coming-isis-al-qaeda-merger.
13 Anjana Pasricha, India Rejects Joint Naval Patrols with U.S. in South China Sea, Voice of
America, Marcy 11, 2016, http://www.voanews.com/a/india-rejects-joint-naval-patrols-with-
us-in-south-china-sea/3231567.html.
14 U.S. Relations with Bangladesh-Fact Sheet, Bureau of South and Central Asian Affairs,
U.S. State Department, February 10, 2016, http://www.state.gov/r/pa/ei/bgn/3452.htm.
15 For a deeper dive on Bangladeshs worsening terrorism problem and the reasons behind it,
see Michael Kugelman, Troubling Trendlines, The Cipher Brief, July 26, 2016, https://
www.thecipherbrief.com/article/asia/troubling-trendlines-1089.
16 Strikingly yet unsurprisingly, analysis on Pakistan from Washingtons South Asia hands
is growing increasingly critical. See, for example, Jeff M. Smith, Dont Be Afraid to
Squeeze Pakistan, The National Interest, June 8, 2016, http://nationalinterest.org/feature/
dont-be-scared-squeeze-pakistan-16518 and Daniel Markey, Stop Writing Pakistan
Blank Checks, Foreign Policy, February 18, 2016, http://foreignpolicy.com/2016/02/18/
pakistan-corker-military-aid-blank-checks-corruption-terrorism/.
17 Michael Kugelman, Why Extremism Still Haunts Pakistan, CNN, January 20, 2016,
http://www.cnn.com/2016/01/20/opinions/pakistan-attack-kugelman/.
18 For more discussion of why Washington should support the Chabahar deal, see Michael
Kugelman, Modis Play in Iran and Afghanistan, Foreign Affairs, June 5, 2016, https://
www.foreignaffairs.com/articles/india/2016-06-05/modis-play-iran-and-afghanistan.
36
Managing U.S.-ASEAN Relations
Sandy Pho
SUMMARY:
U.S. strategy toward Southeast Asia continues to posit the region as a sub-
set of U.S.-China relations, but the United States relationships with the 10
member countries of ASEAN are of growing importance in their own right
even without China in the picture. The challenge for U.S. policymakers in
the new administration will be maintaining support for Southeast Asias piv-
otal role in promoting regional peace and security, which begins with rein-
forcing ASEAN unity.
POLICY RECOMMENDATIONS
The new Secretary of State and Secretary of Defense should make

their first overseas trips to the Asia Pacific and include a Southeast
Asian country.
The United States should host a second U.S.-ASEAN Leaders Summit.
U.S. businesses, universities, and NGOs must deepen existing

partners hips in the region and with U.S. allies, especially Thailand
and the Philippines.
The administration must work closely with Congress to ratify TPP.
37
THE OBAMA LEGACY: GETTING IT RIGHT,

BUT NOT RIGHT ENOUGH
For most of the past century, the United States Asia policy focused on
Northeast Asia. After the Second World War, conflict on the Korean
Peninsula, tension in the Taiwan Strait, and, most recently, Chinas rise,
have made Northeast Asia the primary U.S. security interest in the region.
In spite of the United States entanglement in the Vietnam War, Southeast
Asia remained a secondary regional priority for Washington.
This changed with the September 11, 2001 attacks. With sizeable
Muslim populations, including the worlds most populous Muslim coun-
try,1 Southeast Asia suddenly became the second front in President
George W. Bushs Global War on Terror. Following 9/11, Americas ap-
proach to Southeast Asia was almost entirely dictated by its overarching
preoccupation with terrorism.2
Today, Southeast Asia is receiving the attention it deserves in DC pol-
icy circles, thanks in large part to Americas first Pacific president.3 In a
speech to the Australian Parliament in 2011, President Barack Obama for-
mally introduced his administrations rebalance to Asia, declaring that,
as a Pacific nation, the United States will play a larger and long-term role
in shaping this region and its future, by upholding core principles and in
close partnership with our allies and friends.4 Southeast Asia is key to a
successful rebalance strategy.
Obama laid the groundwork for sustained engagement with Southeast
Asia by visiting nine out of the ten Association for Southeast Asian Nations
(ASEAN) member countries in his two terms in office.5 This years first-
ever, stand-alone meeting between Southeast Asian leaders and President
Obama in California further solidified ASEANs importance to the United
States. In spite of Obamas eight-year charm offensive however, Southeast
Asians still question Americas commitment to the region. At the same
time, domestic critics question whether engaging ASEAN countries is the
best use of limited U.S. resources.
U.S. strategy toward Southeast Asia continues to posit the region as a
subset of U.S.-China relations, but the United States relationships with
the 10 member countries of ASEAN are of growing importance in their
own righteven without China in the picture. The challenge for U.S.
38
Sandy Pho
olicymakers in the new administration will be maintaining support for

p
Southeast Asias pivotal role in promoting regional peace and security,
which begins with reinforcing ASEAN unity.
At a minimum the next administration should sustain the level of engage-
ment established by the Obama administration. In order to fully capitalize
on the past eight years however, the next president will have to prioritize the
U.S.-ASEAN strategic partnership, while at the same time, strengthening
relations with key member countries bilaterally. This starts with understand-
ing Southeast Asian countries individually, their unique histories and demo-
graphic makeup, as well as their shared goals for the Asia Pacific.
ASEAN AS THE MANAGER OF REGIONAL ORDER
The Association of Southeast Asian Nations was created in 1967 to es-

tablish a firm foundation for common action to promote regional coop-
eration in South-East Asia in the spirit of equality and partnership.6 Since
its founding, ASEAN has established habits of cooperation that make
bilateral disputes easier to manage. It has given countries ranging in size
from Indonesia (nearly 255 million people) to the tiny sultanate of Brunei
(less than 500,000) sufficient cohesion to stand up to great powers such
as China. By coordinating their efforts, ASEAN countries have inhibited
the powerful countries of Northeast Asia from dividing and conquering
the smaller countries to the south. In the absence of a comprehensive secu-
rity architecture in Asia, ASEAN worked toward maintaining a balance of
power in the face of rising great power rivalry.
To accomplish this task, Southeast Asian nations put forth a number of
community-building initiatives and spearheaded ASEAN-led multilateral
platforms. These include the ASEAN Regional Forum (ARF), ASEAN Plus
Three (ASEAN plus China, Japan, and South Korea), the East Asia Summit
(EAS), the ASEAN Defense Ministers Meeting-Plus, and the Chiang Mai
Initiative. Southeast Asian countries understand that they cannot act inde-
pendently of big powers. Instead of competing with them, ASEAN nations
have brought larger countries in as full dialogue partners. Their strategic
imperative is to enmesh the great powers in a stable, ASEAN-led regional
order that big powers have a stake in preserving.7
39
ASEANs role as manager of regional order8 grows in importance as

the great power rivalry in Asia heats up. Unlike in the Middle East, the risk
of great power confrontation in East Asia is high. The region is home to
big powers harboring mutual suspicions and historical grievances that are
feeding a wave of nationalism. Relations between East Asias two strongest
resident powers, China and Japan, are in their worst state since they estab-
lished diplomatic relations in 1972.9 Strategic rivalry between the United
States and China show no sign of abating: mutual accusations of outmoded
thinking and bad faith proliferate, even as each side assures the other of its
good intentions. North Korea continues to defy the international commu-
nity by pressing ahead with its nuclear program and test-launching missiles.
These developments threaten to fracture ASEAN and undermine its role
as manager of regional order. A divided Southeast Asia would allow big
powers, such as China, to shape the region in ways that could be detrimen-
tal to Americas interests. The next administration must therefore advance
ASEAN unity in the face of growing strategic tensions.
ASEAN unity is at highest risk in three areas:
Trade and Economic Engagement

Southeast Asia is home to nearly 633 million people and covers an area
more than half the size of the continental United States.10 Sixty-five percent
of Southeast Asians are below the age of 35. The ten ASEAN member states
have a combined GDP of $2.4 trillion, making the bloc the third larg-
est economy in Asia and the seventh largest in the world.11 Bilateral trade
between the United States and ASEAN reached $226 billion in 2015 and
supported more than 500,000 (or 7 percent of all) American jobs.12 The
East-West Center estimates that 21 U.S. states export at least $1 billion in
goods to ASEAN each year.13
Southeast Asia is also the top destination for U.S. investment in Asia,
totaling almost $190 billion in 2012 and surpassing U.S. investment in
China, India, South Korea, Hong Kong, Taiwan, and New Zealand com-
bined.14 ASEAN investment in the United States increased 1,440 percent
from $1.8 billion in 2001 to $27.5 billion in 2012more than five times
that of Chinas and exceeding the combined investments of China, Hong
Kong, India, Taiwan, and New Zealand. 15
40
Sandy Pho
The Organization for Economic Co-operation and Development (OECD)

projects an average growth rate of 5.2 percent for ASEAN between 2016 and
2020.16 Individual country rates range from a low of 0.9 percent in Brunei
(fewer than half-a-million people) to a high of 8.1 percent in Laos.17 With a
middle class expected to double by 2020 (to 400 million), ASEAN will con-
tinue to be an important market for U.S. exports and investments.18
The Trans Pacific Partnership (TPP) was intended to capitalize on these
economic opportunities and reinforce U.S.-Southeast Asian linkages. Four
ASEAN members are signatories to the deal: Singapore, Vietnam, Malaysia,
and Brunei. Even though the U.S. Congress approved Trade Promotion
Authority legislation in June 2015, the American electorate is becoming
hostile to trade deals in general and TPP in particular. Presidential candi-
dates from both parties have come out against the deal, vowing to oppose
TPP if elected.
The importance of TPP goes beyond economic benefits. Ratifying the
deal will enhance American leadership in the region, both economically
and politically. In global affairs, robust trade relations are building blocks
of strong, peaceful relations and have been a key factor in reducing pov-
erty worldwide. If Washington fails to ratify the TPP after seven years of
negotiations and domestic horse trading by all the parties, U.S. credibility
and leadership will suffer a major blow in the Asia Pacific. As one senior
Southeast Asian diplomat put it, there is no plan B.
It is imperative the next commander in chief work with Congress to
ratify the TPP; or at the very least, submit it for ratification. The president
will have to educate the American public on the economic benefits of TPP
using plain language backed by data. The next president should also ac-
knowledge any negative economic impacts of the deal and propose concrete
ways of addressing them.
Failure to pass TPP would allow other regional powers to reap the
benefits of economic leadership of this dynamic region. As Beijing con-
tinues to flex economic muscle in the form of the Asian Infrastructure
Investment Bank (AIIB) and the One Belt, One Road (OBOR) ini-
tiative, its political influence will also grow, creating divisions within
ASEAN and having a disproportionate impact on its most vulnerable
membersCambodia and Laos.
41
A basic principle outlined in the ASEAN charter is that of consultation

and consensus in decision-making. All 10 member states and dialogue
partners must agree to the final text in order for a statement to be issued
after major meetings. ASEANs foreign ministers failed to issue a joint
statement for the first time in its 45-year history under the chairmanship
of Cambodia in 2012,19 following a disagreement on whether to include a
statement about disputes in the South China Sea. The Philippines wanted
the communique to include language on the confrontation between the
Philippines and China at Scarborough Shoal and to note Vietnamese
concerns over exclusive economic zones (EEZs). Cambodia, pressured by
China (Cambodias leading source of investment),20 used the power of the
chair and rejected mention of Scarborough Shoal and the EEZs in the
statement. In the end, no joint communique was issued.
A strong, united ASEAN can only be built by ASEAN countries
themselves, but the United States can support the Association by ramp-
ing up its economic engagement with the region. Sustained U.S. en-
gagement in the form of TPP, U.S.-ASEAN Connect, 21 and the Lower
Mekong Initiative offers Southeast Asian countries an alternative to
Chinese preponderance.
Geopolitics and Maritime Security

The Strait of Malacca is a vital waterway that flows along the coasts of
Indonesia, Malaysia, and Singapore (the latter two are signatories to
the TPP). It measures just 900 kilometers long but is the main shipping
channel linking Asia with the Middle East and Europe. The U.S. Energy
Administration estimated in 2013 that 15.2 million barrels of oil passed
through the Malacca Strait each day.22 One-third of the worlds liquefied
natural gas, the bulk of which originates in the Persian Gulf, makes its way
through the strait as well.23 50,000 ships ferry 25 percent of the worlds
traded goods through the Malacca Strait every year.24
In addition to commercial shipping, the Malacca Strait is the main ar-
tery through which U.S. naval ships travel between the Pacific and Indian
Oceans. With more than 78,000 U.S. military personnel stationed in East
Asia and the Pacific,25 and a commitment to deploy 60 percent of all U.S.
Air and Navy forces to the region by 2020,26 unfettered access through
42
Sandy Pho
this Southeast Asian chokepoint into sea lanes in the region is crucial to
Americas expanding military footprint in Asia.
Unfettered access to the Western Pacific through the Malacca Strait
is all the more important as tensions rise between China and many of its
Southeast Asian neighbors over the status of disputed islands in the South
China Sea. In the past two years, Beijing has undertaken destabilizing land
reclamation projects on land features it claims in the South China Sea. In
2015, China ramped up reclamation efforts on seven reefs in the Spratly
Island chain: Fiery Cross, Cuarteron, Hughes, Johnson South, Mischief,
Gaven, and Subi.27 The Asia Maritime Transparency Initiative reported in
September 2015 that China had completed construction of an airstrip on
Fiery Cross Reef, its first on the Spratly Island chain.28 Operational run-
ways have also been identified on Subi and Mischief Reefs.29 Other claim-
ant states such as, Malaysia, the Philippines, and Vietnam have also con-
structed airstrips on disputed land features in disputed South China Sea
territory. These developments have led to tense stand offs between Beijing
and its neighbors, most notably the Philippines and Vietnam.
Manila and Hanoi have repeatedly expressed frustration over ASEANs
inability to address South China Sea issues. In 2013 the Philippines filed a
cased against China at the Permanent Court of Arbitration in The Hague
following an incident off of Scarborough Shoal in which a Philippines
naval vessel attempted to intercept Chinese fisherman.30 Although the tri-
bunal did not rule on issues of sovereignty, on July 12 it rejected Beijings
claims of historic and economic rights in the South China Sea.31 Despite
this strong rejection of Chinas claims, China blocked ASEAN from in-
cluding the tribunal case in a July 24 joint communiquethe first to be
issued following the ruling.32
Although the United States does not take a position on sovereignty is-
sues, the disputes have strained U.S.-China relations and precipitated a
5.4 percent rise in military spending in Asia last year.33 According to the
Stockholm International Peace Research Institute, Heightened tensions
with China over the South China Sea are reflected in substantial growth
in military expenditure in 2015 by Indonesia (16 percent), the Philippines
(25 percent) and Vietnam (7.6 percent).34 A divided, increasingly milita-
rized Southeast Asia makes conflict much more likely in East Asia. The next
43
a dministration will need to work closely with its Southeast Asian partners
to create a regional architecture that is stable and deters unilateral changes
to the status quo.
Understanding Regional Diversity

Southeast Asia is home to nearly 633 million people speaking an estimated
1,000 languages across 11 different countries.35 Its location at the strategic
crossroads between the Pacific and Indian Oceans makes it a melting pot
of world religions and cultures. According to a 2014 Pew Research poll,
Singapore and Vietnam are two of the most religiously diverse countries
in the world (numbers one and three respectively).36 85 percent of Filipinos
are Roman Catholic. Thailand is more than 95 percent Buddhist.37 87
percent of Indonesians are Muslim, making it the worlds most populous
Muslim nation. Islam is the most widely practiced religion in Southeast
Asia, with over 240 million worshippers, which is 40 percent of the regions
population.38
Varying geographies and historical experiences have produced social and
cultural diversity and political systems ranging from an absolute monarchy
in Brunei to the worlds largest Muslim democracy in Indonesia. Economic
development across the region is also mixed. Singapores GDP per capita
is 30 times higher than in Laos and 50 times higher than Cambodias and
Myanmars.39 While Indonesia accounts for 40 percent of Southeast Asias
economic output and is part of the G20, Myanmar is emerging from de-
cades of isolation and working to integrate itself into the global economy.
The ASEAN principle of consultation and consensus in decision-making
grew out of respect for these differences. U.S.-China strategic rivalry exac-
erbates these differences and diminishes ASEANs ability to maintain cohe-
sion. Laos and Cambodia tend to support Chinese positions because they
depend on Chinas aid and investment and because they share ideological
leanings with the PRC. Vietnam and Myanmar, which have some of the
same affinities, have moved away from China in recent years toward balanc-
ing between Beijing and Washington. Indonesia, Malaysia, and Singapore
have long maintained strong, neutral relations with both Washington and
Beijing, balancing security and economic cooperation with both powers.
The Philippines and Thailand, the United States only two formal allies in
44
Sandy Pho
Southeast Asia, were designated as major non-NATO allies during Bushs

Global War on Terror,40 although Thailand has drawn closer to Beijing
since the military coup in 2014.
The developmental, cultural, and political diversity of the region poses
challenges and presents opportunities to the next president. Vietnam will
require especially close attention. Hanoi values its economic relationship
with the Peoples Republic of China, but prefers an enhanced American
regional security role to Chinese military dominance. Although President
Obama made an historic visit to Hanoi in May and lifted the decades-old
arms ban on Vietnam, mutual mistrust still pervades the relationship. The
Communist Party of Vietnam remains suspicious of U.S. intentions and
of the American penchant for spreading democracy. More importantly, it
does not want to provoke its northern neighbor if it can be helped. Only by
nurturing U.S.-Vietnam relations for their own sake, and not as a corollary
to U.S.-China relations, can American strategists develop the sensitivities
needed to promote American interests.
The next administration needs to be mindful of Southeast Asias diver-
sity and to understand the histories and demographics of Southeast Asian
countries individually. Only then can it effectively strengthen relations with
key member countries bilaterally and promote ASEAN cohesion.
The United States, after all, is a Pacific Power. Washingtons strategic
and economic engagement in the region is robust and welcomed by most
regional actors. A 2015 Pew Research poll shows that public opinion of
America is strongest in many ASEAN countries, notably the Philippines,
Vietnam, and Indonesia (92, 78, and 62 percent favorability ratings respec-
tively).41 American Pacificness goes beyond U.S. strategic and economic
engagement however. The Pacific is central to American culture and identity.
20.3 million Americans identified as Asian or Asian-American in 2014;42
thirty-six percent of all Asians trace their ethnicity to an ASEAN country.
The United States is home to the largest Vietnamese,43 Thai,44 and Laotian45
communities outside of their respective countries. The largest Cambodian
population outside of Southeast Asia is in Long Beach, California.
Asians are the fastest-growing racial group in the United States, hav-
ing experienced a 46 percent increase between 2002 and 2014.46 Nielsen, a
global information and measurement company, projects a 150 percent rise
45
in the Asian American population between now and 2050.47 Asians are not
only woven into the fabric of America life, they are also the vectors for
cultural and economic ties across the Pacific. Asian Americans anchor the
United States to the Pacific and insist on an involved, effective Asia policy.
This starts with getting Southeast Asia right.
NOTES
1 Indonesia has over 200 million Muslims, or 87 percent of their 255 million resident
population.
2 Evelyn Goh, The Bush Administration and Southeast Asian Regional Strategies, in George
W. Bush and East Asia: A First Term Assessment eds. Robert Hathaway and Wilson Lee,
Wilson Center, 2005.
3 The White House, Remarks by President Barack Obama at Suntory
Hall, November 14, 2009, https://www.whitehouse.gov/the-press-office/
remarks-president-barack-obama-suntory-hall.
4 The White House, Remarks By President Obama to the Australian Parliament,
November 17, 2011, https://www.whitehouse.gov/the-press-office/2011/11/17/
remarks-president-obama-australian-parliament.
5 During his two terms, President Obama visited: Singapore, Indonesia (twice), Thailand,
Myanmar, Cambodia, Malaysia (twice), the Philippines (twice), Myanmar (twice), Vietnam,
and Laos.
6 The Association of Southeast Asian Nations, The ASEAN
Declaration (Bangkok Declaration), August 8, 1967, http://asean.org/
the-asean-declaration-bangkok-declaration-bangkok-8-august-1967/.
7 Bill Gates, Evelyn Goh, Chin-Hao Huang, The Dynamics of U.S.-China-Southeast Asia
Relations, The United States Studies Centre, June 2016, http://ussc.edu.au/ussc/assets/
media/docs/publications/2016_DynamicsOfUSChinaSoutheastAsiaRelations.pdf.
8 Rizal Sukma, A Post-ASEAN Regional Order in East Asia? The Jakarta Post, May 18, 2016,
http://www.thejakartapost.com/news/2016/05/18/a-post-asean-regional-order-east-asia.html.
9 Teddy Ng, Little Chance of Thaw in Sino-Japanese Ties at G20 Summit, South China
Morning Post, August 22, 2016, http://www.scmp.com/news/china/diplomacy-defence/
article/2004500/little-chance-thaw-sino-japanese-ties-g20-summit.
10 United Nations, Department of Economic and Social Affairs, Population Division, World
Population Prospects: The 2015 Revision, World Population 2015 Wallchart, https://esa.un.org/
unpd/wpp/Publications/Files/World_Population_2015_Wallchart.pdf.
11 East-West Center, ASEAN Matters for America, http://www.asiamattersforamerica.org/sites/
all/themes/eastwestcenter/pdfs/Asean_Matters_for_America_brochure2.pdf.
12 The White House, FACT SHEET: Unprecedented U.S.-ASEAN Relations, February 12,
2016, https://www.whitehouse.gov/the-press-office/2016/02/12/fact-sheet-unprecedented-
us-asean-relations; East-West Center, ASEAN Matters for America.
46
Sandy Pho
13 East-West Center, ASEAN Matters for America.

14 East West Center, ASEAN Matters for America, U.S.-ASEAN Investments, http://
www.asiamattersforamerica.org/asean/data/trade/investments.
15 Ibid.
16 The Organization for Economic Co-operation and Development Center (OECD),
Economic Outlook for Southeast Asia, China and India 2016, http://www.oecd.org/dev/
asiapacific/SAEO2016_Overview%20with%20cover%20light.pdf.
17 Ibid.
18 The White House, Fact Sheet: Unprecedented U.S.-ASEAN Relations, https://www.
whitehouse.gov/the-press-office/2016/02/12/fact-sheet-unprecedented-us-asean-relations;
Nielson Company, ASEAN 2015: Seeing Around the Corner in a New Asian Landscape,
2014, http://www.nielsen.com/content/dam/nielsenglobal/apac/docs/reports/2014/
Nielsen-ASEAN2015.pdf.
19 ASEAN Nations Fail to Reach Agreement on South China Sea, BBC News, July 13,
2012, http://www.bbc.com/news/world-asia-18825148.
20 Cambodia: Foreign Investment, Santander Trade Portal, https://en.portal.
santandertrade.com/establish-overseas/cambodia/investing-3.
21 U.S.-ASEAN Connect was introduced at Sunnylands with the aim of supporting
increased commercial engagement between the United States and ASEAN, foster
innovation and entrepreneurship, and expand sustainable energy cooperation.
22 U.S. Energy Information Administration, World Oil Transit Checkpoints, November
10, 2014, https://www.eia.gov/beta/international/analysis_includes/special_topics/
World_Oil_Transit_Chokepoints/wotc.pdf.
23 CSIS Asia Maritime Transparency Initiative, South China Sea LNG Flows, https://
amti.csis.org/atlas/.
24 Patrick Winn, Strait of Malacca is Worlds New Piracy Hotspot, March 27, 2014,
http://www.nbcnews.com/news/world/strait-malacca-worlds-new-piracy-hotspot-n63576.
25 Defense Manpower Data Center, Active Duty Military Personnel by Service by Region/
Country-September 2015, https://www.dmdc.osd.mil/appj/dwp/dwp_reports.jsp.
26 Sam LaGrone, Sixty Percent of U.S. Navy and Air Force Will be Based in Pacific
in 2020, USNI News, September 30, 2014, https://news.usni.org/2014/09/30/
work-sixty-percent-u-s-navy-air-force-will-based-pacific-2020.
27 Center for Strategic and International Studies (CSIS), Asia Maritime Transparency
Initiative (AMTI), Island Tracker, https://amti.csis.org/island-tracker/.
28 CSIS, Asia Maritime Transparency Initiative, Airstrips Near Completion: New
Towers, Construction on Subi and Mischief Reefs, 2015, https://amti.csis.org/
airstrips-near-completion/.
29 Tom Mitchell, Photos Add to Doubts on Chinas Maritime Pledge, Financial Times,
August 9, 2016, http://www.ft.com/cms/s/0/13ec876e-5e05-11e6-bb77-a121aa8abd95.
html#axzz4J72RR6u4.
30 Ben Westcott, Philippines vs China: Why the South China Sea May
Change Asia, CNN, July 12, 2016, http://www.cnn.com/2016/07/04/asia/
south-china-sea-un-case-explainer/.
47
31 Jane Perlez, Tribunal Rejects Beijings Claims in South China Sea, New York Times, July
12, 2016, http://www.nytimes.com/2016/07/13/world/asia/south-china-sea-hague-ruling-
philippines.html?_r=0.
32 Joint Communique of The 49th ASEAN Foreign Ministers Meeting, July 25, 2016, http://
asean.org/joint-communique-of-the-49th-asean-foreign-ministers-meeting/.
33 Stockholm International Peace Research Institute, Trends in World Military Expenditure,
2015, April 2016, http://books.sipri.org/files/FS/SIPRIFS1604.pdf.
34 Ibid.
35 United Nations, Department of Economic and Social Affairs, Population Division, World
Population Prospects: The 2015 Revision, World Population 2015 Wallchart, https://esa.un.org/
unpd/wpp/Publications/Files/World_Population_2015_Wallchart.pdf.
36 Pew Research Center, Religion and Public Life, Global Religious Diversity, April 4, 2014,
http://www.pewforum.org/2014/04/04/global-religious-diversity/.
37 Vinayak HV, Fraser Thompson, and Oliver Tonby, Understanding ASEAN: Seven
Things You need to Know, McKinsey & Company, May 2014, http://www.mckinsey.com/
industries/public-sector/our-insights/understanding-asean-seven-things-you-need-to-know.
38 Pew Research Center, Religion and Public Life, Region: Asia
Pacific, January 27, 2011, http://www.pewforum.org/2011/01/27/
future-of-the-global-muslim-population-regional-asia/.
39 Vinayak HV, Fraser Thompson, and Oliver Tonby, Understanding ASEAN: Seven Things
You need to Know.
40 Bill Gates, Evelyn Goh, Chin-Hao Huang, The Dynamics of U.S.-China-Southeast Asia
Relations.
41 Pew Research Center, Mostly Favorable Ratings for U.S.,
June 22, 2015, http://www.pewglobal.org/2015/06/23/
global-publics-back-u-s-on-fighting-isis-but-are-critical-of-post-911-torture/bop-report-32/.
42 United States Census Bureau, Asian/Pacific American Heritage Month: May 2016, April
21, 2016, http://www.census.gov/newsroom/facts-for-features/2016/cb16-ff07.html.
43 Karl Miller, From Humanitarian to Economic: The Changing Face of Vietnamese
Migration Migration Policy Institute, April 29, 2015, http://www.migrationpolicy.org/
article/humanitarian-economic-changing-face-vietnamese-migration.
44 Chanchanit Martorell, Thais in Los Angeles, (Arcadia Publishing, 2011).
45 Gennie Gebhart, Seattles Lao refugees reconnect with their homeland, The
Seattle Globalist, March 26, 2014, http://www.seattleglobalist.com/2014/03/26/
seattles-laotian-diaspora-reconnects-with-homeland/21982.
46 Nielsen, Meet the Fastest-Growing Multicultural Segment in the U.S.: Asian-Americans,
June 11, 2015, http://www.nielsen.com/us/en/insights/news/2015/meet-the-fastest-growing-
multicultural-segment-in-the-us-asian-americans.html.
47 Ibid.
48
U.S. Success in Asia Depends
on Innovation and Integration,
Not Isolation
Meg Lundsager
SUMMARY:
The United States shares many economic priorities with Asian countries
that should lead to building mutually supportive policies and outcomes.
Pursuing international economic agreements such as the Trans Pacific
Partnership and maintaining high level engagement in the G20 and other
groupings demonstrates U.S. policymakers awareness of the international
economic linkages among our economies. That engagement should be sus-
tained and deepened. The United States and Asian countries can also ac-
tively participate in many international organizationsglobal and regional
and play key roles in setting institutional agendas.
Asian partners do not, however, always share the sense that the United
States understands their challenges or accommodates their priorities. With
relatively little effort U.S. officials could look first to finding shared solutions
to shared problems and then use the enhanced mutual understanding to
tackle some of the more difficult bilateral and regional economic issues.
This would facilitate addressing U.S. priority concerns.
No efforts will succeed without public support and commitment from the
U.S. Congress. Therefore, policy makers should forestall any perception
that the United States is making concessions to foreign negotiators by
demonstrating the national benefit of agreements and providing assurances
that those benefits will be shared throughout the U.S. population. The new
Administrations domestic economic agenda and international economic
agenda should be complementary with interlinkages well thought out and
49
disparities in outcomes addressed. The following policies would help put
the American economy on a sounder footing and would sustain U.S. global
leadership. Economic strength will help enhance the priority for Asian na-
tions of good relations with the United States.
Put international policy consultation at the forefront of strengthening

the U.S. economy. Without stronger growth globally, the United States
will be unable to achieve export growth, and will find other countries
increasingly reliant on selling their products to the United States. While
the TPP has become an unwelcome issue in this years election, many
TPP countries are already changing their domestic policies to meet the
new higher standards demanded by this agreement. Sustaining that
liberalizing trend in Asia will be critical for long run U.S. regional and
global competitiveness. Asian economies remain among the fastest
growing globally. India tops the charts currently but trade and invest-
ment with India still face impediments. As India moves forward on
economic reform, the U.S. should focus on finding shared objectives
that achieve deeper market opening in India while assuring India of its
access to the U.S. economy.
Pursue engagement with younger, dynamic Asian economies such as

Indonesia to anchor their preferences for American goods and ser-
vices. Regionally, the focus is on infrastructure to promote more internal
and external trade and economic activity. Washington should find
ways to support U.S. firms in meeting that demand for capital invest-
ment, whether through regional or global institutions, or U.S. financing
mechanisms such as the Export-Import Bank.
Use the international financial institutions to achieve agreed goals, in-

cluding supporting larger stakes in the International Monetary Fund for
rapidly growing Asian economies. The work of the IMF should be more
closely coordinated with the World Trade Organization to generate a
50
more coherent environment for fair trade globally. Press for IMF and
WTO cooperation to reduce exchange rate competition and reduce
reliance on export led growth.
Put our own house in order: Pursue tax reform to promote fairness
while generating some increase in revenues to cover improvements
in infrastructure and enhance the productivity of American workers.
Prepare for our own changing demographics.
Innovate and integrate domestically to better prepare for global com-

petition. Lead by keeping markets open, while going after unfair trade
practices. Compensate American workers impacted by technological
innovation or trade and facilitate continued employment.
Look to the future. Prepare American students to adapt to future

changes in the workplace.
51
U.S. Success in Asia Depends on Innovation and Integration, Not Isolation
U.S. ACCEPTANCE OF ASIAN ECONOMIC INFLUENCE was vis-

ible in two IMF related areas; namely IMF quotas, or ownership shares
in the institution, and IMF policy on economic controls on cross border
capital flows.
First, the United States shift towards appreciating the growing economic
role of Asian countries began ten years ago, when the Bush Administration
recognized that the fastest growing economies were grossly under-repre-
sented in the international institutions, the International Monetary Fund
in particular. While the first effort to rebalance IMF governance benefit-
ted just four countriesChina, Korea, Mexico and Turkey, the next two
rounds negotiated during the global financial crisis, led to increases in the
voting power of several Asian economies, including Korea, India, China,
Malaysia, and Indonesia While Europe remains over-represented in the
IMF, the balance in voting power better reflects the higher economic
growth of a number of Asian emerging markets yet preserves the influence
of the U.S. economy.
Second, IMF policy recommendations during this period became more
nuanced, as IMF staff and leadership were increasingly aware of the chal-
lenges faced by countries in dealing with large and at times volatile capital
flows. IMF sensitivity to this policy challenge led it so soften its stance
against capital controls, recognizing that at times, good macroeconomic
and regulatory policies may not be able to counterbalance the strength of
capital inflows or outflows, generated primarily by developments in ad-
vanced economies.
These are just two examples of the experiences and trends in Asian econ-
omies shaping the global policy architecture and a demonstration of the
United States ability to work closely and negotiate effectively with coun-
terparts to achieve mutually beneficial outcomes. From the United States
viewpoint, securing stronger Asian commitments to the International
Monetary Fund helps maintain this global institution as the primary forum
for debating and deciding key issues related to the international financial
architecture. Furthermore, larger quotas, or ownership shares in the IMF
means Asian economies are larger sources of financing for IMF lending,
which enhances their stake in the stability of the global financial system
and their stake in international cooperation.
52
Meg Lundsager
Looking ahead, United States economic priorities should include deep-

ening trust and relationships throughout the region. Domestic challenges
in the United States and other countries may impede success, but the cost
of withdrawing from economic engagement with Asia would be high.
How should a new Administration proceed?
First priority should be to ratify the Trans Pacific Partnership. This
agreement opens doors for U.S. exports of goods and servicesin agricul-
ture, in manufacturing, and in the many services that U.S. firms produce
so well. The countries in the TPP are committing to reduce their barriers
to U.S. exports, including regulatory barriers that have limited agricul-
tural and services exports. Many countries such as Vietnam are already
changing their domestic laws to comply with their treaty commitments.
With U.S. tariffs and other trade barriers already low, these countries will
continue to export their products to the United States, regardless of U.S.
ratification. With U.S. ratification, the United States secures their bind-
ing commitments to lower their much higher barriers to U.S. goods and
services exports.
In addition, once the TPP comes into force, other countries will seek
membership. With the agreement already negotiated, these prospective
members will have little choice but to change their laws to adapt to the
higher standards of the TPP. Korea for example already has a free trade
agreement with the United States, but joining the TPP would require Korea
to make deeper reforms to its regulatory restrictions that impede trade and
investment. Indonesia has indicated interest and its large population with
many moving into higher income brackets and middle class lifestyles could
be a significant future market for a broader array of U.S. goods and services.
Finally, if China decides to pursue joining the TPP, it would need to make
far deeper structural reforms and market opening measures which would
remove many of the obstacles now faced by U.S. firms, obstacles which the
World Trade Organization does not address.
If the United States commitment to the TPP withers away, Asia will not
forgo the benefits of market opening trade agreements. Asian countries,
including China, are negotiating the Regional Comprehensive Economic
Partnership (RCEP). This negotiation, while including many countries,
falls far short of the reforms entailed in the TPP. If the United States fails
53
to ratify the TPP, RCEP will take center stage, deepening regional ties with
the risk that trade and economic engagement with the United States is dis-
placed, or at best grows much more slowly, thereby limiting job creation
and growth in U.S. export sectors.
To add one more little understood benefit of TPP, a side declaration
made by finance officials commits TPP members to report intervention in
their currency markets. This means reporting publicly on government or
central bank purchases of foreign currency (selling their own currency) as
a means to depreciate their currency, making their exports more attrac-
tive abroad and raising the domestic price of imports. The commitment to
report, and the scrutiny exercised by other TPP countries, will contribute
to inhibiting such unfair currency practices. To illustrate, press reports cite
Korean intervention in the foreign exchange market to drive down the won
and help Korean exports even though Korea already has one of the largest
external surpluses in relation to its economy. But the Korean central bank
does not report such activity, making it more difficult to prove such unfair
practices. If Korea seeks to join TPP once the agreement is enacted, Korea
should be required to immediately report regularly on its intervention in
foreign exchange markets. Without the TPP, there is no other organization
requiring Korea to report intervention not the International Monetary
Fund and not the World Trade Organization.
Second, join with fast growing Asian economies and support fur-
ther increases in their IMF quotas. This will entail further reducing the
collective quota share of European countries, which remains above Europes
share in the global economy while the US quota share remains below the
US weight in the global economy. The large emerging markets, the BRICS
(Brazil, Russia, India, China and South Africa) recently established their
own joint fund, the Contingency Reserve Account (CRA), of $100 billion,
with each country able to draw an initial amount from the collective funds
upon request. Frustration with slow moving IMF reforms could push these
countries to expand this agreement and drop the CRA requirement for par-
allel IMF engagement if a country seeks a second draw. While this is fairly
unlikely to happen, given that IMF engagement spreads the burden of deal-
ing with a crisis, the fact that the BRICS have managed to make binding fi-
nancial commitments to each other in the CRA and in the AIIB (see below)
54
Meg Lundsager
demonstrates a growing level of trust with each other and frustration with
the European and U.S.-dominated Bretton Woods system.
Third, use the Asian focus on promoting infrastructure spending
to galvanize Europe to increase internal spending to generate growth
and create jobs. China just hosted the G20 meeting and used the oppor-
tunity to highlight its commitment to spending more on infrastructure,
not just in China but throughout the region. China was the impetus be-
hind the Asian Infrastructure Investment Bank (AIIB) which the United
States did not join although many close allies did, with Canada the latest
to apply. The United States does not need to join the AIIB, but the priority
set on building and modernizing infrastructure in a region which is already
growing much more quickly than Europe could help build a strong global
consensus for stronger spending that both generates jobs and incomes and
enhances the productivity of the economy. Asian G20 members can point
to their spending commitments to increase growth, further highlighting
the inadequate response in Europe to the need for much stronger domestic
stimulus. The United States should also prioritize infrastructure spending,
which would create new jobs and increase our future economic potential.
Hosting the G20 provides countries with the opportunity to showcase
their economy, culture, and most importantly, their role in the global econ-
omy. Chinas changing self-perception is evident. Not too long ago China
hid behind the claim of being a poor developing country to fend off criti-
cism of its economic impact internationally. Now China is acutely aware of
how closely the rest of the world follows Chinese economic developments
and policies. This international scrutiny helps push for more transparency,
and more collaborative policies, especially given the sensitivity of many
emerging market economies to Chinas ups and downs
When India chairs the G20, likely in the next few years, the United
States should make every effort to find common ground and shared ob-
jectives. India has begun a long needed domestic reform effort, and could
complement that with deeper international engagement to help bring more
rapid development and higher living standards throughout the country. As
these reforms unfold, U.S. business can be expected to seek out opportuni-
ties in India. At the same time, supporting Indias goals in international in-
stitutions as noted above could also generate stronger bilateral relationships.
55
The recent G20 summit did not produce a joint effort across countries to
stimulate their economies and reduce the burden on central banks to sus-
tain economic performance. Nonetheless, the G20 does build cooperation
on core aspects of financial sector regulation and has succeeded in mutual
encouragement of reforms needed to enhance the resilience of financial in-
stitutions. While not all countries have open capital markets, all realize that
it is impossible to wall off their financial sectors from international activity.
Regulatory bodies are independent of their governments in several coun-
tries, but are not independent of the economic activity in their own and
other countries. The 2008-2009 financial crisis showed how deeply inter-
twined all our economies are and remain today. While not the top headline
news of G20 summits and other meetings, cooperation on regulatory mat-
ters has enabled policy makers in all countries to exercise better oversight
over activity and enhance their ability to take needed actions to preserve
stability in their financial systems.
The United States and Asian economies also participate in other group-
ings such as the Asia Pacific Economic Cooperation forum (APEC) which
was the initial regional grouping across the Pacific. The relationships and
mutual understandings built in these organizations have help facilitate the
rapid reaction to international economic crisis. Officials were able to speak
openly and negotiate quickly to reach common conclusions on the required
policy response. Those relationships are extremely valuable, and help in dis-
cussions of non-economic issues as well.
Of course, in the end, all politics is local and each leader or govern-
ment seeks to sustain its domestic support. That domestic support can be
underpinned by broadening the understanding throughout an economy of
the impact of international engagementboth the positive and the negative.
By providing for those adversely impacted by international agreements,
governments might find stronger support. If new job opportunities are
forthcoming as one industry shrinks, whether from technological change
or trade, workers could be given the opportunity to adapt to change. But it
is this latter challenge that many of our governments, not just in the United
States, have been unable to meet.
No matter the direction of the United States, Asian economies will re-
main faster growing than some of the United States historically important
56
Meg Lundsager
trading partners. Sustained engagement can generate long term benefits,

if complemented by domestic policies to smooth transitions. Persuasive
leadership can build the political will to bring the domestic and interna-
tional agenda into a unified approach. The question is, can that political
will emerge?
57
North Korea: A Failed State with
Nuclear Weapons1
Robert Litwak
SUMMARY:
North Korea has the potential to sell its nuclear technology to another country
or terrorist group, and will soon acquire the capabilities to directly threaten
the U.S. homeland. Preventing Pyongyang from engaging in nuclear terrorism
necessitates a deterrent policy that threatens regime-changing retaliation in
tandem with the revival of arms control negotiations to freeze North Koreas
nuclear program. The challenge for U.S. policymakers will be to manage ten-
sion between the twin policies of punishment and denial. Despite significant
political impediments, U.S. diplomacy should aim to negotiate a freeze on
both North Koreas nuclear as well as missile programs.
Learn from the Iran nuclear deal process and engage diplomati-
cally. As with Iran, the end goal with North Korea will be to prevent a dete-
riorating situation from getting worse. A complete rollback of North Koreas
nuclear program in the near term is not feasible with a regime that sees
nuclear weapons both as a deterrent vital to its survival on the one hand,
and as a bargaining chip to extract economic concessions on the other.
Cooperate with China to limit Pyongyangs capabilities.

Washington and Beijing have a mutual interest in preventing a North
Korean strategic breakout. Possibilities for coordinated diplomacy to
freeze North Korean capabilities are high. But that will require China
not just to apply meaningful pressure on Pyongyang, but also to a cap-
ping of its own influence.
58
Robert Litwak
NORTH KOREA DEFIES THE NEAT TYPOLOGY OF STATES that

American officials have employed since the end of the Cold War. The
Democratic Peoples Republic of Korea (DPRK) is a failed state, where
endemic crop failures have precipitated famine, and chronic fuel short-
ages have meant that the lights are literally out in the country.2 Yet this
failed state also possesses a small nuclear arsenal and is unpredictably
aggressivecharacteristics that made North Korea a charter member of the
countries that the United States designated as rogue states. The perverse
incongruity of nuclear weapons and mass starvation is emblematic of the
challenge posed by North Korea.
North Korea is on the verge of a strategic breakout. Its mastery of war-
head miniaturization and long-range ballistic missile technology will allow
the North to threaten the U.S. homeland with a direct attack. At the same
time, though estimates vary, the Economist reported the DPRK has an arse-
nal of around 20 devices and is adding about one weapon every six weeks.3
The nexus of nuclear weapons and impoverishment has raised the spec-
ter of the cash-starved Kim family regimes selling a nuclear weapon to
another irresponsible state, or even a terrorist group. As then Secretary of
Defense Robert Gates bluntly observed, the North Koreans will sell any-
thing they have to anybody who has the cash to buy it.4 Preventing North
Korean nuclear terrorism will require a strategy incorporating both variants
of deterrencepunishment (through a declaratory policy that threatens
regime-changing retaliation should the North transfer a nuclear weapon
to a terrorist group) and denial (through revived arms control negotiations
to freeze its nuclear program and forestall a strategic breakout). As with the
other states examined in this study, the challenge is managing the tension
between these twin policies.
FROM STRATEGIC PATIENCE TO STRATEGIC BREAKOUT
President Obama campaigned on a platform of diplomatically engaging

adversary states. His inaugural address metaphor of extending a hand
to unclenched fists was a stark contrast to the Bush administrations re-
gime-change rhetoric. Dropping the rogue state rhetoric, Obama re-
ferred to North Korea and Iran as outliersstates defying international
59
North Korea: A Failed State with Nuclear Weapons
onproliferation norms. In practice, the emphasis on behavior change sig-

n
naled a willingness to offer North Korea an assurance of regime security
to seal a denuclearization deal. But the Obama administrations gesture
of conciliation was met by renewed North Korean provocations to force
concessions, including international recognition of the DPRKs status as a
de facto nuclear weapons state. In 2009-2010, the fist remained clenched.
North Korea carried out long-range ballistic missile launches, a second
nuclear weapons test, an attack on a South Korean naval vessel (killing 46
sailors), and the shelling of a South Korean border island.
When Kim Jong-un succeeded Kim Jong-il after his death in December
2011, the window for diplomatic engagement appeared to open. A Johns
Hopkins University study approximates the current number of North
Korean nuclear weapons at 10-16 devices (comprised of 6-8 fashioned from
plutonium and 4-8 from weapons-grade uranium). The report estimates
that the Norths nuclear arsenal (depending on the growth scenario) could
range from 20-100 weapons by 2020.5 In addition, in early 2015, American
and South Korean intelligence officials concluded that North Korea, which
by that point had conducted four nuclear tests, had crossed another impor-
tant thresholdmounting a small nuclear warhead on a missile capable of
hitting Japan. In February 2016, a month after a fourth nuclear weapons
test, North Korea launched a small satellite on a three-stage ballistic mis-
sile, but experts believe the deployment of an intercontinental ballistic mis-
sile capable of striking the U.S. homeland is years away.6 The Norths robust
development program has also included preliminary testing of submarine-
launched and land-mobile ballistic missiles.
North Korea is on the cusp of a strategic breakout that poses a twin
threat. Qualitatively, the Norths mastery of warhead miniaturization and
long-range ballistic missile technology will allow the Kim Jong-un re-
gime to threaten a nuclear strike on the U.S. homeland in the near future.
Quantitatively, the uninterrupted growth of North Koreas nuclear arsenal
elevates the risk that this unpredictable regime could sell a nuclear device or
weapons-grade fissile material to a terrorist group.
60
Robert Litwak
NUCLEAR WEAPONS AND REGIME SECURITY
For Kim Il-sung, the Great Leader who founded the North Korean state,
domestic exigencies created an imperative for external engagement. The
Great Leader moved to ease relations with the outside world, which meant
putting the nuclear program on the negotiating table with the United States
as a means of alleviating the countrys acute economic crisis. But the strat-
egy carried the risk of political contagion that could weaken the regimes
totalitarian grip over North Korean society. The ruling elite have been insu-
lated from the adverse consequences of North Koreas failed autarkic poli-
cies through a court economy that distributes food and foreign consumer
goods to the regimes most loyal cadres.7 But because North Korea, unlike
oil-exporting Iran, does not have a ready source of hard currency, the re-
gime has engaged in criminal activities (including counterfeiting and drug
smuggling) to sustain its court economy. This illicit pattern prompted Time
magazine to dub Kim Jong-il the Tony Soprano of Asia.8
North Koreas nuclear intentions must be viewed through the prism of
regime security. The nuclear program is, at once, a driver of the countrys
international isolation and the primary source of its bargaining leverage
with the outside world. Does the Kim regime regard nuclear weapons as
a deterrent capability vital to regime survival or as a bargaining chip to
extract economic inducements from the United States, South Korea, and
Japan? An International Institute for Strategic Studies study of North
Koreas WMD programs concluded, The historical record suggests that
the answer is both, and the emphasis that Pyongyang places on one or the
other varies with domestic conditions and external circumstances.9
Since conducting its first nuclear test in 2006, North Korea has de-
manded that it be accepted as a nuclear weapons statea condition flatly
rejected by the Bush and Obama administration. After the NATO inter-
vention in Libya in 2011, North Korea said that Qaddafi had been tricked
into disarmament in 2003 through a U.S. assurance of regime security.10
In 2013, the Kim Jong-un regime declared that its nuclear arsenal was not
a bargaining chip and would not be relinquished even for billions of
dollars.11 Nonetheless, North Korea has pursued negotiations in response
to an internal crisis (such as the famine in the 1990s) to extract additional
aid from South Korea, Japan, and the United States. As a seasoned U.S.
61
negotiator put it: North Korea does not respond to pressure, but with-
out pressure North Korea does not respond. The question is whether the
combination of coercive diplomacy and revitalized diplomacy can forestall
North Koreas imminent strategic breakout.
ASSESSMENT AND IMPLICATIONS
The North Korean nuclear crisis is embedded in the broader issue of re-
gime survival. Though the privations of North Korean society have led to
periodic predictions of regime collapse, the Kim family regime has proved
remarkably resilient. The dilemma is that the regime-change and prolifera-
tion timelines are not in sync. Though the threat posed by North Korea de-
rives from the character of its regime, U.S. policymakers cannot wait for an
indeterminate process of regime change to play out while the Kim Jong-il
regime achieves a strategic breakout.
Underlying the Obama administrations offer to Pyongyang of nor-
malization of relations for denuclearization was an assessment that the
nuclear and societal-change timelines were not in sync and that the two is-
sues therefore needed to be decoupled. The Obama administration sought
to test North Koreas intentions by offering a structured choice to obtain
a nuclear agreement curtailing the DPRKs capabilities in the near-term;
it relegated the internal process of societal change to play out on an inde-
terminate timetable. North Koreas second nuclear test in May 2009 was
a direct rebuff to the new U.S. administrations overture. Pyongyangs
hardened position indicated an emphasis less on using its nuclear pro-
gram as a bargaining chip to extract concessions than on obtaining in-
ternational recognition as a de facto nuclear weapons state. Secretary of
State Hillary Clinton, reiterating the U.S. objective of denuclearization,
rejected Pyongyangs nuclear assertiveness: Its leaders should be under
no illusion that the United States will ever have normal, sanctions-free
relations with a nuclear armed North Korea.12
The Pyongyang regime has been able to defy the international commu-
nity because it has also been able to defy its chief patron, China. The North
Korean nuclear test in 2006 crossed what Western analysts widely viewed
as a Chinese red line given Beijings logical apprehension that Pyongyangs
62
Robert Litwak
provocative action could drive Tokyo and Seoul to reconsider their non-
nuclear status. The Kims have likewise rebuffed Chinese calls for economic
reforms and have maintained the North Korean economys military first
orientation. In North Korea expert Andrei Lankovs succinct judgment,
Reforms mean death.13 Kim Jong-un has maintained this defiant rejection
of economic reform, while a senior North Korean official told the Chinese
in May 2016 that the countrys policy of expanding its nuclear arsenal was
permanent.14 Against the backdrop of the Kim regimes political intran-
sigence and military advances, Secretary of State John Kerry called North
Korea the most important proliferation problem in East Asia and under-
scored that China has the most leverage to address it.15
China has long viewed an uneasy status quo in North Korea as pref-
erable to change. A so-called hard landingregime collapsewould, at
minimum, create a refugee crisis for risk triggering a conflict on the Korean
peninsula. Alternatively, a soft landingpeaceful reunification between
North and South Koreawould end North Koreas status as a buffer state
and leave China with a formidable pro-Western regional power on its bor-
der. Facing unacceptable alternatives, Beijing made a strategic decision to
prop up the vulnerable Kim family regime through economic assistance via
food and fuel, and investments in politically connected North Korean trad-
ing companies. China turned a blind eye to UN sanctions adopted after
the 2006 and 2009 nuclear tests by allowing the transshipment of North
Korean military goods and technology to Iran, and by serving as the pri-
mary conduit for luxury goods to maintain the lavish lifestyle of the re-
gimes elite. An International Institute for Strategic Studies study suggested
that North Korea had increasingly become a de facto satellite of China.16
Chinas sustaining assistance has allowed the North Korean regime to avoid
the hard choice between impoverished autarky and destabilizing integra-
tion into the international system. In so doing, Beijing effectively undercut
the ability of the international community to bring meaningful pressure
to bear on Pyongyang to alter its conduct. Will North Koreas imminent
strategic breakout alter Chinas strategic calculus?
The projected growth of North Koreas nuclear arsenal creates an in-
creased risk of nuclear terrorism. Since 9/11, North Korea has both offered
assurances that it would not transfer nuclear weapons to terrorists and
63
threatened to do so. In 2005, two years after the U.S. invasion of Iraq to
topple the Saddam Hussein regime, a North Korean vice foreign minister
warned that the regime had no plans to transfer but would not rule it out if
the United States drives [us] into a corner.17
Director of National Intelligence James Clapper warned about the pos-
sibility that North Korea might again export nuclear technology.18 Though
information about North Koreas record of nuclear exports is scant, two
prominent state-to-state transfers are known: first, in 2001, the Pyongyang
regime sold uranium hexafluoride (the feedstock for centrifuges) to Libya
via Pakistans A.Q. Khan; and second, in September 2007, the Israeli Air
Force bombed a nuclear reactor in Syria (not yet operational) provided by
North Korea.19 The urgent threat is that Norths increased production of
weapons-grade uranium potentially creates a new cash crop for the finan-
cially strapped regime.20
After North Koreas nuclear test in 2006, the Bush administration de-
clared that the Kim regime would be held fully accountable if it trans-
ferred nuclear weapons or material to states or non-state entities. An alter-
native to calculated ambiguity would be an explicit red line: the deliberate
transfer of WMD capabilities by a state to a non-state actor could trigger
a non-nuclear, regime-changing response from the United States. Such a
stance, which goes beyond current U.S. declaratory policy, could prove an
effective form of deterrence by punishment. Further advances in nuclear fo-
rensicsthe ability to attribute fissile material to its country of origin
would bolster the credibility of this threat.
Tightened UN Security Council sanctions, passed in March 2016 after
North Koreas fourth nuclear weapons test, requires states to inspect all
cargo passing through their territory to or from the DPRK.21 This interdic-
tion measure, in tandem with sanctions curtailing North Koreas access to
funding and technology for its nuclear program, falls under the rubric of
deterrence by denial. As with the four other major UN sanctions imposed
on North Korea since 2006, effectiveness depends on Chinese enforcement,
which has been tepid. China has turned a blind eye to the DPRKs sophis-
ticated procurement network utilizing front companies and transshipment
arrangements to import sensitive dual-use (i.e., civilian and military) tech-
nologies prohibited under UN sanctions.22
64
Robert Litwak
The most effective form of deterrence by denial would be an agreement,

such as that concluded with Iran, to curtail North Koreas nuclear capa-
bilities. Though U.S. and North Korean diplomats met secretly to discuss
a possible resumption of negotiation, a diplomatic impasse has persisted
over Pyongyangs non-starter insistence that the DPRK be recognized as
a nuclear weapons state.23 Yet, strategic patience has resulted in acquies-
cence as North Korea builds up its nuclear arsenal and makes substantial
progress in miniaturizing warheads and acquiring an intercontinental bal-
listic missile capability.
With North Korea on the verge of a strategic breakout, the United States
should pivot to serious diplomacy. The objective should be to prevent this
quantitative and qualitative breakout by negotiating a freeze on North
Koreas nuclear and missile programs. Siegfried Hecker, former director of
the Los Alamos National Laboratory, calls these goals the Three Nos:
(1) no new weapons (freezing North Korean production of plutonium and
enriched uranium); (2) no testing of weapons or ballistic missiles; and (3)
no exports of nuclear technology or weapons.24 A freeze would preclude the
additional testing that North Korea still needs to master miniaturization
and reliable long-range missiles.
North Koreas strategic breakout would be a game-changer not only for
the United States, but would also have adverse consequences for China
(such as U.S. deployment of THAAD antimissile system to South Korea).
The United States and China have a mutual interest in preventing a North
Korean strategic breakout. This conjunction of interest creates the politi-
cal space for coordinated diplomacy to freeze North Korean capabilities.
That will require China applying meaningful pressure on the Kim Jong-un
regimenot to promote regime collapse (with its attendant negative conse-
quences for Beijing), but to accept a capping of its capabilities.
The nuclear agreement with Iran is a relevant precedent. As with Iran, the
goal of reinvigorated nuclear diplomacy with North Korea would be to buy
time and prevent a deteriorating situation from getting worse. Negotiating
with North Korea has its pitfalls: Pyongyang has cheated on past agree-
ments and any American concessions, such as providing sanctions relief in
return for a freeze, will be characterized as propping up an odious regime.
While North Korea has stated that it is not interested in an Iran-type
65
deal and that its situation was quite different, Chinese Foreign Minister
Wang Yi stated that the nuclear agreement concluded between Iran and
the worlds major powers (the P5+1) in 2015 was a positive reference for
negotiations with Pyongyang.25
A Harvard Kennedy School study on preventing nuclear terrorism laid
out alternative futures for 2030: a high-security scenario in which North
Koreas nuclear capabilities have been verifiably eliminated or capped at a
low level, pending elimination; and a low-security scenario in which the
North continues to expand its arsenal, to well over 100 nuclear weapons.26
A complete rollback of North Koreas nuclear program in the near term is
not feasible with a regime that regards nuclear weapons both as a deterrent
vital to regime survival and as a bargaining chip to extract economic con-
cessions. That policy duality for North Korea has its analogue in the United
States twin strategy of deterrencea punishment variant that threatens
regime-changing retaliation should a North Korean-origin nuclear weapon
or weapons-grade fissile material be transferred to a terrorist group; and a
denial variant (through a negotiated freeze) that requires North Korean
compliance and entails U.S. concessions (i.e., sanctions relief) that are po-
tentially regime-extending.
A former senior U.S. official once quipped: problems have solutions;
dilemmas have horns. North Koreas nuclear challenge poses a dilemma
because it is embedded in the broader question of the Norths societal evo-
lution. For the United States, managing this tension (as it works toward a
negotiated freeze of North Koreas program) will require Washington to
decouple the nuclear issue from the question of regime change and rely on
internal forces as the agent of societal change.
NOTES
1 This essay draws from the authors monograph, Deterring Nuclear Terrorism (Wilson Center,
2016), section 4.
2 Chris Weller, This satellite photo shows just how blacked-out North Korea
is at night, Tech Insider, October 15, 2015 <http://www.techinsider.io/
north-korea-is-pitch-black-at-night-2015-10>.
3 Economist Data Team, The clear and present danger of a nuclear North Korea,
Economist, May 26, 2015 <http://www.economist.com/blogs/graphicdetail/2016/05/
daily-chart-20>.
66
Robert Litwak
4 Cited in Graham T. Allison, North Koreas Lesson: Nukes for Sale, New York Times,
February 12, 2013 <http://www.nytimes.com/2013/02/12/opinion/north-koreas-lesson-
nukes-for-sale.html>.
5 Joel Wit and Sun Young Ahn, North Koras Nuclear Futures: Technology and Strategy,
US-Korea Institute at SAIS, 2015, p. 7 < http://38north.org/wp-content/uploads/2015/02/
NKNF-NK-Nuclear-Futures-Wit-0215.pdf >.
6 David E. Sanger and Choe Sang-hun, As North Koreas Nuclear Program Advances, U.S.
Strategy is Tested, New York Times, May 6, 2016 < http://www.nytimes.com/2016/05/07/
world/asia/north-korea-nuclear-us-strategy.html?_r=0 >.
7 Kongdan Oh and Ralph Hasig, North Korea: Through the Looking Glass (Washington, DC:
Brookings Institution Press, 2000), p. 66.
8 Adam Zagorin and Bill Powell, The Tony Soprano of Asia, Time, July 12, 2007 <http://
content.time.com/time/magazine/article/0,9171,1642898,00.html>.
9 International Institute for Strategic Studies (IISS), North Koreas Weapon Programmes: A Net
Assessment (London: IISS, January 2004), p. 24.
10 Mark McDonald, North Korea Suggests Libya Should Have Kept Nuclear Program, New York
Times, March 24, 2011 <http://www.nytimes.com/2011/03/25/world/asia/25korea.html>.
11 Emma Chanlett-Avery, Ian E. Rinehart and Mary Beth D. Nikitin, North Korea: U.S.
Relations, Nuclear Diplomacy, and Internal Situation, CRS Report for Congress, no.
RL41259 (Washington: Congressional Research Service, Library of Congress, November 7,
2006), p. 8 < https://www.fas.org/sgp/crs/nuke/R41259.pdfpdf >.
12 U.S. Department of State, Secretary of State Hillary Clinton, Remarks at the
United States Institute of Peace, October 11, 2009 < http://www.state.gov/secretary/
rm/2009a/10/130806.htm >.
13 Mark McDonald, North Koreans Struggle, and Party Keeps Its Grip, New York Times,
February 26, 2011 < http://www.nytimes.com/2011/02/27/world/asia/27northkorea.html >.
14 Jane Perlez, North Korea Tells China of Permanent Nuclear Policy, New York Times,
May 31, 2016 <http://www.nytimes.com/2016/06/01/world/asia/china-north-korea-ri-su-
yong.html?_r=0>.
15 White House, Press Briefing with Secretary Kerry, Deputy NSC Advisor Ben
Rhodes, and Principal Deputy Press Secretary Eric Schultz, Ho Chi Minh City,
Vietnam, May 24, 2016 <https://www.whitehouse.gov/the-press-office/2016/05/24/
press-briefing-secretary-kerry-deputy-nsc-advisor-ben-rhodes-and>.
16 International Institute for Strategic Studies (IISS), North Korean Security Challenges: A net
assessment (Strategic Dossier launch statement summary), July 21, 2011, p. 4.
17 Quoted in Sheena Chestnut, Illicit Activity and Proliferation: North Korean Smuggling
Networks, International Security 32, no. 1 (Summer 2007), p. 99.
18 James R. Clapper, Director of National Intelligence, Worldwide Threat Assessment of the
US Intelligence Community, Statement to the Senate Select Committee on Intelligence,
May 12, 2013 <http://nsarchive.gwu.edu/NSAEBB/NSAEBB424/docs/Cyber-090.pdf>.
19 Joshua Pollack, North Koreas Nuclear Exports: On What Terms? 38 North, special
report 9, October 14, 2010 < http://38north.org/wp-content/uploads/2011/08/38North_
SR9_Pollack2.pdf>. David E. Sanger and William J. Broad, Evidence is Cited Linking
67
Koreans to Libyan Uranium, New York Times, May 23, 2004 <http://www.nytimes.
com/2004/05/23/world/evidence-is-cited-linking-koreans-to-libya-uranium.html>.
20 Graham T. Allison, North Koreas Lesson: Nukes for Sale, New York Times, February
12, 2013 <http://www.nytimes.com/2013/02/12/opinion/north-koreas-lesson-nukes-for-
sale.html>.
21 Somini Sengupta and Choe Sang-Hun, U.N. Toughens Sanctions on North Korea in
Response to Its Nuclear Program, New York Times, March 2, 2016 < http://www.nytimes.
com/2016/03/03/world/asia/north-korea-un-sanctions.html >.
22 Stephanie LieggiRobert ShawMasako Toki, Bulletin of the Atomic Scientists
66, no. 5, September 1, 2010 < http://thebulletin.org/2010/septemberoctober/
taking-control-stopping-north-korean-wmd-related-procurement>.
23 Anna Fitfield, U.S. and North Korea have been secretly discussing having talks about
talks, Washington Post, February 2, 2015 <https://www.washingtonpost.com/world/
asia_pacific/us-and-north-korea-have-been-secretly-discussing-having-talks-about-
talks/2015/02/02/ecf935ab-df23-44fd-998d-551cb47d9af4_story.html>.
24 Interview with Siegfried Hecker: North Korea complicates the long-term picture, Bulletin
of the Atomic Scientists, April 5, 2013 < http://thebulletin.org/interview-siegfried-hecker-
north-korea-complicates-long-term-picture >.
25 Anna Fitfield, North Korea says its not interested in an Iran-style nuclear deal,
Washington Post, July 21, 2015 <https://www.washingtonpost.com/world/asia_pacific/north-
korea-says-its-not-interested-in-an-iran-style-nuclear-deal/2015/07/21/63626f6a-9d4d-
421b-9ada-ec5509344a43_story.html>.
26 Matthew Bunn, Martin B. Malin, Nickolas Roth, and William H. Tobey, Preventing
Nuclear Terrorism: Continuous Improvement or Dangerous Decline? (Cambridge, MA: Project
on Managing the Atom, Belfer Center for Science and International Affairs, Harvard
Kennedy School, March 2016), pp. 8,12.
68
Going Beyond Sanctions to
Denuclearize North Korea
James Person
SUMMARY
While denuclearization should remain the goal of U.S. policy, freezing

North Koreas nuclear and ballistic missile programs should be a priority.
However, sanctions alone will not be enough to get North Korea to freeze
these activities.
Recognizing the limits of sanctions on North Korea:
Washington should remain willing to negotiate with Pyongyang if talks

offer a serious prospect for achieving the goal of freezing the nuclear
and ballistic missile programs.
Only direct talks with North Korean leaders have any chance of chang-
ing North Korean policy.
Additional sanctions that will hurt the North Korean people but do little
to stop further development of nuclear and ballistic missile programs
without the complete buy-in of China.
The United States must engage directly with the DPRK and
maintain pressure.
69
Going Beyond Sanctions to Denuclearize North Korea
THE UNITED STATES HAS LONG SOUGHT TO OUTSOURCE its

North Korea policy to China, beginning in the late 1970s as Washington
prepared to normalize relations with Beijing, declassified U.S. records sug-
gest. This approach reflects a poor understanding of the relationship be-
tween China and North Korea, exaggerates the docility of Pyongyang to
Beijing, and enables China to reassert its traditional hegemony in the stra-
tegic region and directly challenge U.S. strategic interests. Without a doubt,
China has more leverage and access to North Korea than any other country.
However, that leverage does not translate to the ability to, at will, influence
North Koreas policies. U.S. policymakers should consider three critical fac-
tors as they seek a resolution to the North Korean nuclear conundrum.
First, China and the United States have very different interests on the
Korean peninsula and in East Asia. While China prefers a nuclear-free
and more compliant North Korea, it is not willing to bring the DPRK to
its knees to achieve this goal. Chinas leverage over North Korea, which
is primarily gained through the economic lifeline it provides, is a double-
edged sword. Cutting off this lifeline could lead to state and societal col-
lapse in North Korea. This is the last thing Bejing wants. It would invite
instability on Chinas borders and precipitate a refugee crisis in Northeast
China. The collapse of North Korea would also be a national security
nightmare for China, which would then have to live with a U.S.-allied
unified Korea on its border at a time when Beijing aspires to be the pri-
mary security actor in East Asia.
Second, there are limits to Chinas leverage, despite North Koreas eco-
nomic dependence. In any unequal alliance relationship, there exist clear
limits to the ability of the patron ally to influence, at will, the policies of
the protg. One of the major lessons of the Cold War is that smaller, de-
pendent countries were able to pursue their own interests despite pressures
from patron allies. Protg allies on both sides of the Cold War conflict
often exhibited a far greater degree of autonomy than had been previously
assumed. Throughout the 1950s and 1960s, both South Korea and Taiwan,
two key anti-communist allies of the United States, were utterly dependent
on the U.S. economic and security assistance. Yet, U.S. officials, to their
great frustration, were unable to impose their will on either Syngman Rhee
or Chang Kai-shek. Indeed, so limited was the ability to restrain South
70
James Person
Korean and Taiwanese officials that U.S. officials even feared becoming en-
tangled in conflicts instigated by their allies. As Victor Cha has argued, the
need to constrain anti-communist allies in South Korea and Taiwan led
to the development of the unique hub and spokes security network that
continues to exist in Asia today.1 Chinas ability to utilize its support to
North Korea to influence Pyongyangs policies throughout the Cold War
was similarly limited. The same remains true today.
Third, and perhaps most importantly, declassified Cold War-era records
from the archives of the former Soviet Union, East Germany, Mongolia,
Romania, and othersall former allies of North Koreareveal that North
Koreas relationship with China has been fraught with tension and mis-
trust. As early as the Korean War, Pyongyang viewed Beijings interference
as heavy-handed.
In the late fall of 1950 the so-called Chinese Peoples Volunteers, who
had taken command of field operations in Korea, vetoed North Korean
proposals to continue offensive operations against U.S. and South Korean
troops in 1951.Consequently North Korean leaders blamed Chinese mili-
tary officials for failing to reunify the Korean peninsula, even though
Chinese forces had in fact rescued the DPRK from certain annihilation.
During the war disagreements also arose over control of North Koreas
railroad system. Chinese forces prohibited their use for anything other than
military operations, including reconstruction after battle lines stabilized, a
decision North Korean officials disputed, especially as many trains, stand-
ing still, fell prey to U.S. bombs.2
After the war, North Koreas founding leader Kim Il-sung (grandfa-
ther of current leader Kim Jong-un) demoted and arrested key officials
in the ruling Korean Workers Party (KWP) who had close ties to the
Chinese Communist Party (CCP), despite the continuing presence of
tens of thousands of Chinese Peoples Volunteers in the DPRK after the
Korean War armistice.
In December 1955, Kim introduced the concept of Juche, an expres-
sion calling for the establishment of an autonomous national subjectiv-
ity, as a method of minimizing Chinese and Soviet influence on political,
economic, and cultural developments. The next year, more pro-Chinese
and pro-Soviet party officials were purged for challenging Kims autarkic
71
economic development strategies and personality cult at a plenary meet-

ing of the KWP.3 This time, however, Beijing and Moscow dispatched a
joint Sino-Soviet party delegation that forced Kim Il-sung to convene a new
meeting, reappoint purged officials, and release two others from prison to
accompany the delegation back to China. Decades later Kim was still sim-
mering with resentment in conversations with foreign communist leaders
from Bulgaria and Mongolia.4
Relations between Pyongyang and Beijing briefly improved in the early
1960s when the North Korean leadership had a falling out with Moscow,
whose leadership of the Communist world China was by then disputing.
But by the mid-1960s, during Chinas Cultural Revolution, Kim Il-sung
became a direct target of criticism for Chinas Red Guards for allegedly
sitting on the fence in the ongoing Sino-Soviet split. Chinas leaders, who
were in disarray, tolerated and even abetted these attacks. Relations deterio-
rated to the point where the Chinese and North Korean militaries clashed
in the vicinity of Paekdu Mountain in 1969. According to a 1973 conver-
sation between Kim and Bulgarias Todor Zhivkov, on another occasion
Chinese troops crossed into North Korean territory and occupied a town.
Kim ordered an attack, but the Chinese slipped back across the border.5
Relations showed signs of improving again by the early 1970s, and China
even apologized for its behavior, but Kims trust in the Chinese leadership
was never restored. Kim, during an April 1975 visit to Beijing, reportedly
tried to enlist Chinese help in a renewed bid to liberate South Korea. Deng
Xiaoping, however, emphasized that China would not commit itself be-
cause the PRC was facing the tremendous challenge of promoting socialist
economic reconstruction at home.6
Dengs policy of modernizing the Chinese economy led Beijing down a
very different path from Pyongyangs as China abandoned revolution for a
place in the existing international system. Especially when trade with South
Korea became a priorityeven before the end of the Cold WarBeijings
policy promoted stability in the Korean peninsula.
Since the Cold War, China retains real leverage on North Korea because
of North Koreas economic dependence, even though the countries inter-
national stances have continued to diverge. Economic leverage, however,
does not enable the Chinese leadership to impose policy directives upon
72
James Person
North Korea at willprecisely what North Korea most resisted throughout

the Cold War.
More creative diplomatic solutions would use all available instruments,
including the United States own under-appreciated influenceNorth
Korea has been trying to speak to the United States since 1974. The United
States can sit down with foes and hammer out a deal, as is demonstrated by
the Iran nuclear agreement, however imperfect. Similar robust engagement
with North Korea is needed to prevent the emergence of conditions under
which North Korean leaders feel that military adventurism is the most ef-
fective way to achieve their diplomatic, political, and economic goals.
While denuclearization should remain the goal of U.S. policy, freezing
North Koreas nuclear and ballistic missile programs should be a priority.
However, sanctions alone will not be enough to get North Korea to freeze
these activities. In considering North Korea and sanctions, we should be
mindful of five points:
North Korea has lived under sanctions-like conditions since the Korean
War armistice in 1953. They have developed the ability to make do
with little;
Under such sanctions-like conditions, North Korea was cut off from
advanced technology from the West. Moreover, they didnt even
have regular access to advanced technology from fellow communist
countries. When relations were poor with Moscow, the Soviets and
their Central and Eastern European satellites reduced their supplies of
advanced goods to North Korea. China wasnt able to supply advanced
technology. North Korea responded with a lot of ingenuity and with a
lot of reverse engineering;
North Korea is a unique case when sanctions are concerned because it

is not integrated into the international economic community. North
Korea even resisted integration into the socialist economic bloc, the
Council for Mutual Economic Assistance (COMECON) during
the Cold War because if feared the exploitation of advanced socialist
countries. This fact limits the effectiveness of many sanctions;
73
If push comes to shove, the North Korean regime will mobilize human
and material resources to make up for the lack of outside aid, goods,
trade, etc.
If things get really bad, the North Korean regime is willing to sacrifice
a segment of the population, as long as the Kim regime and its
patronage network remains intact.
Recognizing the limits of sanctions on North Korea, Washington should

remain willing to negotiate with Pyongyang if talks offer a serious pros-
pect for achieving the goal of freezing the nuclear and ballistic missile pro-
grams. U.S. officials should also recognize that only direct talks with North
Korean leaders have any chance of changing North Korean policy. And
whenever the DPRK cheats or violates agreementsand they willthe
United States should not withdraw, nurse its bruised ego, call the North
Koreans names, and apply additional sanctions that will hurt the North
Korean people by curtailing the humanitarian work of NGOs but do little
to stymie the further development of nuclear and ballistic missile programs
without the complete buy-in of China.The answer is for the United States
to directly engage the DPRK and to maintain pressure.
NOTES
1 See Victor Cha, Powerplay: The Origins of the American Alliance System in Asia (Princeton:
Princeton University Press, 2016).
2 See Shen Zhihua, SinoNorth Korean Conflict and Its Resolution during the Korean
War, trans. by Dong Gil Kim and Jeffrey Becker, Cold War International History Project
Bulletin, No. 14/15 (Winter 2003Spring 2004), pp. 924.
3 See the collection of declassified diplomatic records from former Communist bloc archives
on the events of 1956, http://digitalarchive.wilsoncenter.org/collection/116/north-korea-
august-1956-plenum-incident. See also James F. Person, We Need Help from Outside: The
North Korean Opposition Movement of 1956, Cold War International History Project
Working Paper #52 (August 2006).
4 See Memorandum on the Conversation between Kim Il Sung and Todor Zhivkov,
October 30, 1973, History and Public Policy Program Digital Archive, From the personal
collection of former Bulgarian diplomat Georgi Mitov. Translated by Donna Kovacheva.
http://digitalarchive.wilsoncenter.org/document/114533 and Record of Conversation
between Comrade J. Batmunkh and Kim Il Sung, November 20, 1986, History and Public
74
James Person
Policy Program Digital Archive, Mongolian Foreign Ministry Archive, fond 3, dans 1, kh/n
173, khuu 123-164. Obtained and translated for NKIDP by by Sergey Radchenko and
Onon Perenlei. http://digitalarchive.wilsoncenter.org/document/116671.
5 See Memorandum on the Conversation between Kim Il Sung and Todor Zhivkov,
October 30, 1973, History and Public Policy Program Digital Archive, From the personal
collection of former Bulgarian diplomat Georgi Mitov. Translated by Donna Kovacheva.
http://digitalarchive.wilsoncenter.org/document/114533.
6 See Ria Chae, East German Documents on Kim Il Sungs April 1975 Trip
to Beijing NKIDP e-Dossier, https://www.wilsoncenter.org/publication/
east-german-documents-kim-il-sungs-april-1975-trip-to-beijing.
75
About the Contributors
ROBERT DALY is Director of the Kissinger Institute on China and the

United States at the Wilson Center. Previously, he was Director of the
Maryland China Initiative at the University of Maryland. Prior to that,
he was American Director of the Johns Hopkins University-Nanjing
University Center for Chinese and American Studies in Nanjing. He began
work in U.S.-China relations as a diplomat, serving as Cultural Exchanges
Officer at the U.S. Embassy in Beijing in the late 80s and early 90s. After
leaving the Foreign Service, he taught Chinese at Cornell University, and
he also directed the Syracuse University China Seminar. From 2000 to
2001 he was American Director of the U.S.-China Housing Initiative at the
Department of Housing and Urban Development.
SHIHOKO GOTO is the Senior Associate for Northeast Asia at the Wilson
Centers Asia Program. She is also a contributing editor at The Globalist,
and a fellow of the Mansfield Foundation/Japan Foundation U.S.-Japan
Network for the Future for 2014 to 2016. Prior to joining the Wilson Center,
she was a journalist writing about the international political economy with
an emphasis on Asian markets. She received the Freeman Foundations
Jefferson journalism fellowship at the East-West Center and the John S.
and James L. Knight Foundations journalism fellowship for the Salzburg
Global Seminar. She obtained her BA from Trinity College, University of
Oxford and MA in international political theory from Waseda University.
MICHAEL KUGELMAN is the Senior Associate for South Asia at the Wilson
Centers Asia Program, where he manages research, publications, and pro-
gramming on the region. His main specialty countries are India, Pakistan,
and Afghanistan. He is a columnist for Foreign Policys South Asia Channel
and for War on the Rocks, a website devoted to national security analysis.
76
Additionally, he is a regular contributor to the Wall Street Journals Think

Tank blog. He has an MA in international relations from Tufts Universitys
Fletcher School, and a BA from American University.
ROBERT LITWAK is Vice President for Scholars and Director of International

Security Studies at the Woodrow Wilson International Center for Scholars.
He is also a consultant to the Los Alamos National Laboratory. Dr. Litwak
served on the National Security Council staff as director for nonprolifera-
tion in the first Clinton administration. He is the author of Irans Nuclear
Chess: After the Deal (2015) and Outlier States: American Strategies to Contain,
Engage, or Change (2016), and has held visiting fellowships at Harvard
Universitys Center for International Affairs, the International Institute for
Strategic Studies, the Russian Academy of Sciences, and Oxford University.
He is a member of the Council on Foreign Relations, and received a doctorate
in international relations from the London School of Economics.
MEG LUNDSAGER is a Public Policy Fellow at the Wilson Center, focus-

ing on international economic and financial issues. Previously, she served
as the United States Executive Director on the International Monetary
Fund Executive Board from 2007 to 2014. At the IMF, she focused on
achieving lasting reforms in European crisis countries, securing adequate
IMF resources, supporting low income countries, and strengthening IMF
oversight of exchange rate policies. She negotiated increased emerging mar-
ket representation at the IMF and promoted enhanced ethical standards
and internal oversight functions. As deputy assistant secretary for trade and
investment at the U.S. Treasury Department from 1996 to 2000, she nego-
tiated multilateral financial services agreements and aspects of Chinas entry
into the World Trade Organization. She also analyzed portfolio allocation
decisions of institutional investors as an Atlantic Fellow in London. She
has a Masters in International Economics from the University of Maryland
and a BA from American University.
JAMES PERSON is Deputy Director for the History and Public Policy
Program and coordinator of the Hyundai Motor-Korea Foundation Center
for Korean History and Public Policy. He is also editor of the North Korea
77
International Documentation Project (NKIDP) Working Paper Series

and co-editor of the Cold War International History Project Bulletin and
History and Public Policy Program Critical Oral History Conference Series.
He received his Ph.D in modern Korean history from George Washington
University, M. Phil from Moscow State University, and BA from George
Washington University.
SANDY PHO is a Program Associate for the Kissinger Institute on China

and the United States at the Wilson Center, where she manages projects
that focus on the Sino-U.S. bilateral relationship, China-U.S.-ASEAN re-
lations, and U.S. foreign policy in the Asia Pacific. In this capacity, she is
responsible for research, grant management, and Congressional outreach.
She is also the editor of The Month in U.S.-China Relations newsletter
and The Weighing the Rebalance policy brief series. Pho received her BA
from Arizona State University, and graduated from the London School of
Economics and Political Science and Peking University with a dual MSc in
International Affairs.
78
Asia Program
Woodrow Wilson International Center for Scholars
One Woodrow Wilson Plaza
1300 Pennsylvania Avenue NW
Washington, DC 20004-3027

Committed: U.S. Foreign Policy in Asia and Completing The Rebalance

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Committed: U.S. Foreign Policy in Asia and Completing The Rebalance

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Committed:

U.S. Foreign Policy in

Edited by Shihoko Goto

Edited by Shihoko Goto

Jane Harman, Director, President, and CEO

WILSON NATIONAL CABINET

2 Managing U.S.-China Relations

12 Economic Leadership in the Pacific Century:

23 U.S. Policy in South Asia: Imperatives and Challenges

37 Managing U.S.-ASEAN Relations

49 U.S. Success in Asia Depends on Innovation

58 North Korea: A Failed State with Nuclear Weapons

69 Going Beyond Sanctions to Denuclearize North Korea

76 About the Contributors

Chinas own perception of its insecurity is destabilizing, even if it is un-

A near-consensus of minimal steps the United States should take to en-

Rebuild U.S. credibility (political, economic, military, cultural)

Strengthen the Rebalance to Asia by committing more resources

Ratify the UN Convention on the Law of the Sea to build U.S.

Ratify the Trans Pacific Partnership at the earliest possible date

Strengthen partnerships with India, ASEAN, and the European

Continue strong support for Taiwan under the Taiwan Relations

Broaden and deepen engagement with China by supporting the

THE CHINA CHALLENGE

been proposed.1 In its absence we have a dangerous muddle of mutual bom-

Possible American approaches to this challenge fall along a strategic

Acknowledgement: The United States admits that changes in China

Accommodation: The United States pulls back from some traditional

Appeasement: The United States allows China to play a larger regional

Abandonment: The United States decides it can no longer be a

Depending on regional developments and changes within China, there is a

The Values Debate

Managing Perceptions: Rise & Rebalance

on finger pointing, shaming, and the claiming of moral high ground.

Implications of Chinas Purchasing Power

must conduct a comprehensive study of its ability to achieve its de-

Chinas growing economic and military strength

Americas looming structural budgetary crisis and low growth rate

The complexity and urgency of U.S. commitments and security

The willingness of U.S. citizens to bear the cost of retaining strategic

RECOMMENDATIONS OF THE KISSINGER INSTITUTE

Launch a dialogue with North Korea, without preconditions.

Deepen U.S.-China dialogues on nuclear policy to ensure that the

Provide sustained, robust budgets for Chinese-language study

Strengthen U.S.-China cooperative provision of global public

It is in the United States national interest to ensure stability and

Even as a non-member, Washington must be prepared to work closely

From tackling demographic challenges to meeting energy needs, there

FROM RISING NATIONALISM TO A BUBBLING ARMS RACE, ten-

NORTHEAST ASIA REMAINS EAGER FOR A U.S. REBALANCE

Japan in particular has been enthusiastic about Washingtons renewed

RISKS OF EXPECTING CONTINUED ECONOMIC

There is an underlying assumption that Asian economies are now simply

WHY TPP MATTERS

Continued engagement is most easily achieved by being united to achieve a

National Security Advisor for Strategic Communications Ben Rhodes

THE AIIB CONUNDRUM

initiative to establish a new development bank in order to meet Asias ever-

IDENTIFYING NEW ECONOMIC AGENDAS

2 Managing U.S.-China Relations

12 Economic Leadership in the Pacific Century:

49 U.S. Success in Asia Depends on Innovation

58 North Korea: A Failed State with Nuclear Weapons