The Real Crisis in North Korea–A Perspective


May 21, 2017

The Real Crisis in North Korea–A Perspective

by Gianluca Spezza

PhD candidate at the International Institute of Korean Studies, University of Central Lancashire, and founding contributor at NK News

https://www.irinnews.org/opinion/2017/05/18/real-crisis-north-korea-not-one-you%E2%80%99ve-been-hearing-about

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The Democratic People’s Republic of Korea has been in the news a lot lately, with the DPRK testing new missiles and the United States moving a naval strike group off the Korean peninsula. The commentary almost always revolves around strategic issues, especially North Korea’s nuclear programme.

In focusing so narrowly on the country’s military and its leader, Kim Jong-un, however, the debate largely overlooks the North Korean people.

This has two major implications. First, it perpetuates an image of the country that is not in line with reality. In fact, the younger Kim does not enjoy the kind of monolithic influence held by his grandfather, Kim Il-sung, or his father, Kim Jong-il. Power structures in North Korea began to disintegrate under Kim Jong-il and are now widely ramified. Security apparatuses are no longer under one single point of command; neither are military corps. This is something that the administration of US President Donald Trump seems to be oblivious to, but it should take into account when formulating policy.

Second, and most important, the world’s myopic attention to Kim Jong-un precludes recognition of the nearly 26 million people that live in the country. They represent the true issue at stake, once the current regime – which is living on borrowed time – is gone.

What do we know about DPRK and its people?

Oddly enough, since the early 1990s the international community has accumulated a larger knowledge base on North Korean society than intelligence agencies have ever had on its military. Yet, most media insist on reporting obsessively on the latter. This is shortsighted.

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The Hermit Nation–Kim and his Military Men

The questions we ought to ask instead, if we are to understand where the country is headed, are: What is the current state of North Korea? What do we know about its society and economy? What kind of country will emerge once the regime is gone?

These questions matter, because with each crisis, the possibility of regime change or collapse becomes more real. With that, the risk of a humanitarian catastrophe increases, and neither South Korea nor China are well prepared to respond.

North Korea represents an anomaly, for both aid organisations and experts of international politics. But things are changing.

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For a long time, the country may have deserved its moniker of the hermit kingdom. But today, after 22 years of humanitarian assistance and development, the DPRK is an aid-dependent country, stuck in a paradoxical situation. Its economy crashed in the mid-1990s and never recovered, while its social indicators went from good, to terrible, to decent over the last two decades.

The North Korean development indicators for children’s welfare, as well as immunisation and education, are well above countries with a much higher GDP, but the economy does not reflect this relatively healthy development status. The DPRK produces very little of value, and its people find survival in the black market rather than state-provided jobs.

North Korea, in other words, has the economy of an underdeveloped country, with levels of social development of a middle-to-high income country. It is time to take a look at the country beyond military parades.

How did North Korea get so poor?

Upon the demise of its first leader, Kim Il-sung, in 1994, the DPRK faced a combination of domestic and international factors that negatively affected all sectors of society and state institutions. External circumstances included the loss between 1991 and 1993 of its main allies and economic partners, the Soviet Union and China. In addition, in 1993, China started to demand payments at regular market rates for oil and fuel, which had until then been provided at very low prices and constituted the main source of energy for the DPRK.

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In this rapidly changing international scenario, the DPRK, which had become heavily dependent on subsided trade with its former communist partners during the Cold War, found itself with no economic safety net. At the same time, the country was hit by a series of droughts and floods, along with a sudden shortage of energy sources. This devastated an agriculture system almost entirely dependent on chemical fertilisers and mechanised irrigation.

With diminishing amounts of food, the effectiveness of the Public Distribution System that regulated the allocation of basic goods decreased gradually, forcing the population to seek alternative means of subsistence. Housewives, factory workers, doctors, nurses, teachers and students alike had to fend for themselves in order to secure food and heating material during winter.

The crisis caught many North Koreans by surprise, and it was aggravated by economic mismanagement. It should be noted that the Public Distribution System did not collapse altogether, but the degree of functioning of the system varied between different provincesBetween 1994 and 1998, GDP declined by almost half. This, in combination with the progressive dysfunction of the PDS, severely reduced access to food, medications, and primary goods, leading to a famine and to the general deterioration of the population’s ability to withstand further calamities.

The economy: China dominates

Today, it is safe to say that, in effect, China runs North Korea’s economy. Chinese currency is widely used in the unofficial markets that have mushroomed around the country since the crisis of the mid-1990s.

China gets the lion’s share of trade with North Korea and provides the bulk of its food and energy. Luxury items, if and when they manage to come into the DPRK, do so from across the border region of Yanbian or Chinese ports.

To be sure, North Korea does have a few economic niches, but these too are largely influenced by China’s presence. The DPRK’s significant mineral resources are almost exclusively exploited by Chinese companies, and Chinese visitors make for the majority of customers in North Korea’s trade fairs and Special Economic Zones.

In other words, simply by looking at the economy of North Korea, one could surmise that as long as China is there to support it, the country could muddle along with no substantial changes for a very long time. A look at North Korean social indicators, however, offers a different perspective.

Demography is destiny

The key indicators of a country’s state of health and future prospects are its social statistics, particularly those on demographics. According to combined data from the Central Bureau of Statistics in Pyongyang, the World Bank Institute, and the UN gathered in 2008, and data by UNICEF gathered in 2014, the DPRK’s average population growth rate for 1990-2004 was 0.9 percent, or equivalent to that of upper middle-income countries. The same data provide trends for 2004-2020 that place growth at 0.4 percent, or equivalent to that of high-income countries.

At the same time, North Korea’s birth rate dropped to 16 per 1,000 people in the late 2000s – the level of middle-income countries – whilst the fertility rate is slowly approaching the levels of most Western countries. It sits between parity – two children, which is the minimum requirement for a population to continue replacing itself over time – and one child or none per couple, which is deemed not enough to avoid extinction in the long run. The latter is where Germany, Italy, and most EU countries are at present.

What does this mean for the future of North Korea?

If we read population increase as an indication of economic and social stability, the DPRK looks further removed from the so-called “failed states” it is often compared to – like Somalia, Yemen, or South Sudan – which are all on the verge of famine (or, in the case of parts of South Sudan, already experiencing it). North Korea is in fact undergoing the same “cradle crisis” that characterises advanced countries, from Japan to Germany.

However, the same statistics, viewed from the standpoint of overall death rates and infant mortality rates suggest the DPRK is right there with low-income countries. Its average death rate is as high as 11 per 1,000 people, and rates of infant mortality that have not yet fully recovered from the 1990s crisis.

This has a number of implications: North Korea doesn’t have the problems that South Korea has at the moment, with an increasingly aging population placing stress on the social welfare system. As a matter of fact, the DPRK welfare system has been simply downsized and slowed to a minimum since the 1990s. Today, North Koreans live on average six to eight years less than South Koreans and about nine years less than the Japanese.

In Malthusian terms, this means that the government has less to worry about in the short-term. Considering the chronic economic stagnation, most North Koreans alive today could well get old before they even have a chance to elevate their economic status.

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At the same time, with a slow but steady recovery from the famine and the crisis of the mid-1990s, the DPRK seems to have reached a level of relative social comfort at which most middle-to-high income countries stop having enough children for the maintenance of native population. At this stage, they will slowly begin to fade out unless they adopt open immigration policies – an option that is unpopular in South Korea and Japan, and next to impossible in the DPRK.

If the trend continues – and the figures from 2008 and 2014 suggest it will – North Korea may one day run out of people to maintain its workforce. That would be one more reason for the regime to push towards reunification. While its rival state south of the demilitarised zone is also growing older, it is still twice as populous, and immensely richer by comparison. Still, if nothing changes at the economic level, any effort of reunification will require the equivalent of a mini-Marshall Plan for the entire peninsula.

This is the real North Korean conundrum: The country has faced challenges it is hard to imagine any other regime surviving: famine, floods, droughts, economic collapse, energy shortages, sanctions, and leadership changes. This has left a North Korea that is a mass of contradictions.

Few consider that the country making headlines for its nuclear technology has a basket case economy, but also one of the highest literacy rates in the world. There is no other country with such low economic indicators that can at the same time build and at test nuclear devices and achieve universal literacy, while still being aid-dependent.

Is aid the answer?

To explain the North Korean anomaly, we have to look at the nature of aid itself with three key questions: What is aid? Why is aid provided? Is it accomplishing what it is supposed to?

From an economic perspective, we can think of aid as a measure of socioeconomic welfare, like the one used for families and individuals, but on a much bigger scale. Welfare policies are supposed to work as a safety net in times of emergency – fostering growth and preventing recession when families and individuals go through hardships. At any rate, welfare is conceived to be a temporary measure and aid doesn’t come for free.

Aid represents an extension of foreign policy from donor states to recipient nations. Donors and international organisations expect recipients to correct their course and adopt policies that move them towards a free market economy, and adherence to international treaties on human rights, environmental protection and sustainability.

North Korea has become chronically dependent on aid since the mid 1990s. Yet, it has remained impervious to outside pressure for change. When it shows any degree of compliance with international norms, it does so only in fields where its interests converge with those of international organisations. Education and environmental protection are two examples.

On the other hand, North Korea has no relationship with global economic bodies like the World Trade Organization and the International Monetary Fund. It makes no concessions on the issues of nuclear proliferation and allows no inspections from human rights organisations. But its population does require foreign assistance in order to survive.

The socioeconomic emergency that swept the country between 1995 and 1999 was rooted in a combination of political, climatic, structural, and geopolitical factors. By 2005, the government declared the food emergency to be over and asked a number of NGOs – but not UN agencies – to leave. Nevertheless, the country has continued to rely on foreign assistance, just as the UN agencies at work in the DPRK kept monitoring a situation that requires periodical emergency assistance, year in-year out, in combination with development programmes.

If North Korea were a family, or an individual who has been in need of aid for 22 consecutive years, would this be considered normal? It’s unlikely. Yet, aid needs to reach the people of the DPRK on a yearly basis or a new humanitarian emergency may break out, according to the UN.

There is a consensus among humanitarians that as the North Korean people have no say on their government policies, they should not be the ones suffering the consequences. Therefore, the international community has responded with aid. However, a look at what North Korea has become since 1995 reveals that aid has not made North Korea strong enough to stand on its own.

This is the most pressing problem with North Korea, aside from its periodically aggressive military posture. The country needs aid because what once was a functioning infrastructure for a command economy, in which the state plays the primary role, has ceased to exist. More than this, it needs important economic and political reforms. Currently however, North Korean politics withhold economic restructuring and growth. At the same time, aid agencies and donors tend to look at technical issues and do not tackle the lack of political decisions that could steer the country away from perpetually looming humanitarian disasters.

 A new approach?

Aid has been invaluable in pulling the country out of the humanitarian catastrophe of the mid-1990s, and it has helped North Korea maintain decent levels in development indicators such as health and education since then on. But aid cannot help the country provide a decent standard of living on its own for its people. That can only be done through political reform.

The real political story about North Korea today is that the “Stalinist fortress” – the impenetrable polity devoted to hardline communism – is no longer Stalinist, nor a fortress. North Korea scholars and South Korean government experts concur in saying that Kim Jong-un holds a fraction of the power that his father and grandfather wielded.

The elites that have emerged from two decades of black market activity are aware that there are only a few obstacles to a reunification that could see them prosper, while lifting millions of North Koreans out of poverty. These factors are their “political guilt” (for they contributed to keeping the country in a state of repression over decades), and the risk of losing whatever wealth they have accumulated.

If the United States and South Korea could agree to leave some of these families in power, providing them amnesty, they could ask in return for a soft removal of the Kim family, and open the door for a gradual economic rebuilding of the country. Financial incentive, or the lack thereof, in North Korea is the key issue. The average annual income in North Korea is a little below $1,000. In the South, it is over $30,000. No amount of foreign aid can ever bridge this difference.

The Coming Technology Policy Debate


May 7, 2017

What is really needed are new and improved institutions, policies, and cooperation between law enforcement and private firms, as well as among governments. Such efforts must not just react to developments, but also anticipate them. Only then can we mitigate future risks, while continuing to tap new technologies’ potential to improve people’s lives.–Michael J. Boskin

The Coming Technology Policy Debate

by Michael J. Boskin@www.project-syndicate.com

*Professor of Economics at Stanford University and Senior Fellow at the Hoover Institution. He was Chairman of George H. W. Bush’s Council of Economic Advisers from 1989 to 1993, and headed the so-called Boskin Commission, a congressional advisory body that highlighted errors in official US inflation estimates.

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What do the leaks of unflattering email from the Democratic National Committee’s hacked servers during the 2016 US presidential election campaign and the deafening hour-long emergency-warning siren in Dallas, Texas, have in common? It’s the same thing that links the North Korean nuclear threat and terrorist attacks in Europe and the United States: all represent the downsides of tremendously beneficial technologies – risks that increasingly demand a robust policy response.

 

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It is the Fourth Revolution–The Only Certainty is Change

The growing contentiousness of technology is exemplified in debates over so-called net neutrality and disputes between Apple and the FBI over unlocking suspected terrorists’ iPhones. This is hardly surprising: as technology has become increasingly consequential – affecting everything from our security (nuclear weapons and cyberwar) to our jobs (labor-market disruptions from advanced software and robotics) – its impact has been good, bad, and potentially ugly.

First, the good. Technology has eliminated diseases like smallpox and has all but eradicated other, like polio; enabled space exploration; sped up transportation; and opened new vistas of opportunity for finance, entertainment, and much else. Cellular telephony alone has freed the vast majority of the world’s population from communication constraints.

Technical advances have also increased economic productivity. The invention of crop rotation and mechanized equipment dramatically increased agricultural productivity and enabled human civilization to shift from farms to cities. As recently as 1900, one-third of Americans lived on farms; today, that figure is just 2%.

Similarly, electrification, automation, software, and, most recently, robotics have all brought major gains in manufacturing productivity. My colleague Larry Lau and I estimate that technical change is responsible for roughly half the economic growth of the G7 economies in recent decades.

Pessimists worry that the productivity-enhancing benefits of technology are waning and unlikely to rebound. They claim that technologies like Internet search and social networking cannot improve productivity to the same extent that electrification and the rise of the automobile did.

Optimists, by contrast, believe that advances like Big Data, nanotechnology, and artificial intelligence herald a new era of technology-driven improvements. While it is impossible to predict the next “killer app” arising from these technologies, that is no reason, they argue, to assume there isn’t one. After all, important technologies sometimes derive their main commercial value from uses quite different from those the inventor had in mind.

Optimists, by contrast, believe that advances like Big Data, nanotechnology, and artificial intelligence herald a new era of technology-driven improvements. While it is impossible to predict the next “killer app” arising from these technologies, that is no reason, they argue, to assume there isn’t one. After all, important technologies sometimes derive their main commercial value from uses quite different from those the inventor had in mind.

For example, James Watt’s steam engine was created to pump water out of coal mines, not to power railroads or ships. Likewise, Guglielmo Marconi’s work on long-distance radio transmission was intended simply to create competition for the telegraph; Marconi never envisioned broadcast radio stations or modern wireless communication.

But technological change has also spurred considerable dislocation, harming many along the way. In the early nineteenth century, fear of such dislocation drove textile workers in Yorkshire and Lancashire – the “Luddites” – to smash new machines like automated looms and knitting frames.

The dislocation of workers continues today, with robotics displacing some manufacturing jobs in the more advanced economies. Many fear that artificial intelligence will bring further dislocation, though the situation may not be as dire as some expect. In the 1960s and early 1970s, many believed that computers and automation would lead to widespread structural unemployment. That never happened, because new kinds of jobs emerged to offset what dislocation occurred.

In any case, job displacement is not the only negative side effect of new technology. The automobile has greatly advanced mobility, but at the cost of unhealthy air pollution. Cable TV, the Internet, and social media have given people unprecedented power over the information they share and receive; but they have also contributed to the balkanization of information and social interaction, with people choosing sources and networks that reinforce their own biases.

Modern information technology, moreover, tends to be dominated by just a few firms: Google, for example, is literally synonymous with Internet search. Historically, such a concentration of economic power has been met with pushback, rooted in fears of monopoly. And, indeed, such firms are beginning to face scrutiny from antitrust officials, especially in Europe. Whether consumers’ generally tolerant attitudes toward these companies will be sufficient to offset historic concerns over size and abuse of market power remains to be seen.

But the downsides of technology have become far darker, with the enemies of a free society able to communicate, plan, and conduct destructive acts more easily. The Islamic State and al-Qaeda recruit online and provide virtual guidance on wreaking havoc; often, such groups do not even have to communicate directly with individuals to “inspire” them to perpetrate a terrorist attack. And, of course, nuclear technology provides not only emissions-free electricity, but also massively destructive weapons.

All of these threats and consequences demand clear policy responses that look not just to the past and present, but also to the future. Too often, governments become entangled in narrow and immediate disputes, like that between the FBI and Apple, and lose sight of future risks and challenges. That can create space for something really ugly to occur, such as, say, a cyber attack that knocks out an electrical grid. Beyond the immediate consequences, such an incident could spur citizens to demand excessively stringent curbs on technology, risking freedom and prosperity in the quest for security.

What is really needed are new and improved institutions, policies, and cooperation between law enforcement and private firms, as well as among governments. Such efforts must not just react to developments, but also anticipate them. Only then can we mitigate future risks, while continuing to tap new technologies’ potential to improve people’s lives.

Hong Kong: Coming soon, One Country, One System


May 6, 2017

Hong Kong: Coming soon, One Country, One System

by Asiasentinel.com

http://www.asiasentinel.com/politics/china-hong-kong-one-country-one-system/

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Carrie Lam (pic center),Hong Kong’s future Chief Executive

Despite strong official backing by Beijing, Hong Kong’s future Chief Executive, Carrie Lam Yuet-ngor, promised to heal the divisions in society. Yet in the run up to her installation on July 1, it appears increasingly that the healing of divisions is going to be accomplished by silencing one half of that divide. Actions and words in recent days have shown the current Chief Executive CY Leung bent on vengeance, and a central government bent on squeezing the life out of the Two Systems concept.

Quite what Lam feels about these moves is unclear, but they have raised concerns in many traditional pro-government circles as well as among the direct target, the advocates of more democracy and the autonomy promised in the Basic Law and Joint Declaration.

Not content with using legal procedures to have two young elected pro-democracy legislators disbarred from office, the authorities had them arrested for “unlawful assembly”  and “attempted forced entry” for trying to attend a Legislative Council meeting. The government then followed this up with the arrest of nine other activists from the pro-democracy faction who took part in a Nov. 6 demonstration against the court decision to ban the two elected legislators. The nine are charged with “unlawful assembly” for taking an unauthorized route during a march to the Liaison Office, Beijing’s power center in Hong Kong.

These charges come in the wake of 18 previous ones against activists, some dating back to the 2014 Umbrella movement, and it is widely believed that more such charges are in the works to cripple the pro-democracy movement and further reduce its numbers in the Legislative Council, thus using loosely framed laws to counter its stunning success in elections last September.

Four other lawmakers face disbarment on the basis of being in conflict with a November 2016 decision by Beijing’s National People’s Congress. If these cases succeed, the ranks of elected legislators would be again thinned, giving the government complete control of a Legislative Council half of whose members are chosen mostly by small, pro-government electorates. Hong Kong’s political system would have no more credibility than that of the military junta in Thailand.

Just possibly, harsh measures by the outgoing and highly unpopular Leung are a deliberate ploy to enable Lam to start her rule with some concessions, such as a general amnesty for those – including policemen – involved in legal actions related to Umbrella and related demonstrations. But that is probably over-optimistic. An autocratic Xi Jinping appears in no mood for compromises with insubordinate Hong Kong residents, of whom there are many.

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Hong Kong Skyline Digital Art – Hong Kong Skyline Fine Art Print

Adding further to Hong Kong concerns was a speech by a legal advisor to Beijing’s Liaison Office, Wang Zhenmin, which threatened the end of  the domestic autonomy promised under Two Systems if it was perceived to undermine the interests of One Country. Wang suggested that separatist sentiment in Hong Kong has damaged national security and that the territory “needs to actively defend the sovereignty, national security and development interests of the country in accordance with law.”

Wang seems deliberately to exaggerate the extent of separatist sentiment in the territory, confusing demands for genuine autonomy with ones for independence, an entirely impractical proposition supported only by a few naïve youngsters. The “independence” canard and the priority to One Country have thus become sticks to beat those wanting the sustain genuine autonomy and the freedoms of speech and publication which Hong Kong enjoys. Soon it may be impossible to have open debate on issues such as the status of Taiwan, Xinjiang, Tibet or the South China Sea.

What Beijing consistently declines to recognize is that the Umbrella movement itself, and the anti-government vote in the 2016 elections, was a direct response to Beijing’s earlier interference quashing efforts to extend representative government.

The implication that Hong Kong may be a threat to national security has to be seen in the context of China’s National Security law. This is so broadly drafted that it can be used against almost any criticism of the Communist party and its leadership and policies.  For instance, Article 15 reads:

“The State persists in the leadership of the Chinese Communist Party, maintaining the socialist system with Chinese characteristics, developing socialist democratic politics, completing socialist rule of law, strengthening mechanisms for restraint and oversight of the operation of power, and ensuring all rights of the people as the masters of the nation, and strengthening restraint and oversight mechanisms on the operation of power.

“The State guards against, stops, and lawfully punishes acts of treason, division of the nation, incitement of rebellion, subversion or instigation of subversion of the people’s democratic dictatorship regime; guards against, stops, and lawfully punishes the theft or leaking of state secrets and other conduct endangering national security; and guards against, stops, and lawfully punishes acts of infiltration, destruction, subversion or separatism by foreign influences and other conduct endangering national security; and guards against, stops, and lawfully punishes acts of infiltration, destruction, subversion or separatism by foreign influences.

“The State persists in the leadership of the Chinese Communist Party, maintaining the socialist system with Chinese characteristics, developing socialist democratic politics, completing socialist rule of law, strengthening mechanisms for restraint and oversight of the operation of power, and ensuring all rights of the people as the masters of the nation, and strengthening restraint and oversight mechanisms on the operation of power.”

Wang’s speech elicited a quick rebuke from a former leader of the pro-business and generally pro-government Liberal party Allen Lee Peng-fei. “What authority does he have to speak to Hong Kong people?” and to lay down his view about constitutional reform, a matter for the territory itself. Lee is long retired so has little to lose from speaking up, but his views reflected those of many fearful of expressing views for fear of retribution in one form or another.

In particular, Hong Kongers increasingly resent the overt interference of the Liaison Office which is supposed to keep Beijing informed of Hongkong peoples’ views, not act as the hand guiding a puppet regime.

Such levels of interference and the constant talk of “national security” are worrying traditionally conservative groups such as lawyers and accountants, and those want to see Hong Kong remain attractive to open minds and free expression, essential if its future is to be more than just one of several large cities on the south China coast.

As it is, the territory is spending large sums to celebrate the 20th anniversary of return to Chinese sovereignty. President Xi will be on hand as Lam takes over. But for many in Hong Kong there is a diminishing cause for celebration as the demand for One Country, as ruled by the party, dominates discourse, and the related concept of “Hong Kong People Ruling Hong Kong” is constantly undermined by Beijing’s spokesmen and their army of parrots in the local media. Doubly worrying, it comes at a time when President Xi is bent on reducing or eliminating foreign influence in social, political and cultural domains. Hong Kong is by this measure a gateway for undesirable ideas. For sure, closing the windows will keep out foreign flies, but so are fresh air and fresh ideas. Deng Xiaoping must be turning in his grave.

 

Lessons from the Anti-Globalists


May 6, 2017

Lessons from the Anti-Globalists

by Joseph E. Stiglitz@www.project-syndicate.org

The likely victory of Emmanuel Macron in the French presidential election has elicited a global sigh of relief. At least Europe is not going down the protectionist path that President Donald Trump is forcing the United States to take.

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But advocates of globalization should keep the champagne on ice: protectionists and advocates of “illiberal democracy” are on the rise in many other countries. And the fact that an open bigot and habitual liar could get as many votes as Trump did in the US, and that the far-right Marine Le Pen will be in the run-off vote with Macron on May 7, should be deeply worrying.

Some assume that Trump’s poor management and obvious incompetence should be enough to dent enthusiasm for populist nostrums elsewhere. Likewise, the US Rust Belt voters who supported Trump will almost certainly be worse off in four years, and rational voters surely will understand this.

But it would be a mistake to conclude that discontent with the global economy – at least how it treats large numbers of those in (or formerly in) the middle class – has crested. If the developed liberal democracies maintain status quo policies, displaced workers will continue to be alienated. Many will feel that at least Trump, Le Pen, and their ilk profess to feel their pain. The idea that voters will turn against protectionism and populism of their own accord may be no more than cosmopolitan wishful thinking.

Advocates of liberal market economies need to grasp that many reforms and technological advances may leave some groups – possibly large groups – worse off. In principle, these changes increase economic efficiency, enabling the winners to compensate the losers. But if the losers remain worse off, why should they support globalization and pro-market policies? Indeed, it is in their self-interest to turn to politicians who oppose these changes.

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So the lesson should be obvious: In the absence of progressive policies, including strong social-welfare programs, job retraining, and other forms of assistance for individuals and communities left behind by globalization, Trumpian politicians may become a permanent feature of the landscape.

The costs imposed by such politicians are high for all of us, even if they do not fully achieve their protectionist and nativist ambitions, because they prey on fear, inflame bigotry, and thrive on a dangerously polarized us-versus-them approach to governance. Trump has leveled his Twitter attacks against Mexico, China, Germany, Canada, and many others – and the list is sure to grow the longer he is in office. Le Pen has targeted Muslims, but her recent comments denying French responsibility for rounding up Jews during World War II revealed her lingering anti-Semitism.

Deep and perhaps irreparable national cleavages may be the result. In the US, Trump has already diminished respect for the presidency and will most likely leave behind a more divided country.

We must not forget that before the dawn of the Enlightenment, with its embrace of science and freedom, incomes and living standards were stagnant for centuries. But Trump, Le Pen, and the other populists represent the antithesis of Enlightenment values. Without blushing, Trump cites “alternative facts,” denies the scientific method, and proposes massive budget cuts for public research, including on climate change, which he believes is a hoax.

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Can Emmanuel Macron stop Marine Le Pen and keep France in the EU?

The protectionism advocated by Trump, Le Pen, and others poses a similar threat to the world economy. For three-quarters of a century, there has been an attempt to create a rules-based global economic order, in which goods, services, people, and ideas could move more freely across borders. To the applause from his fellow populists, Trump has thrown a hand grenade into that structure.

Given the insistence of Trump and his acolytes that borders do matter, businesses will think twice as they construct global supply chains. The resulting uncertainty will discourage investment, especially cross-border investment, which will diminish the momentum for a global rules-based system. With less invested in the system, advocates for such a system will have less incentive to push for it.

This will be troublesome for the entire world. Like it or not, humanity will remain globally connected, facing common problems like climate change and the threat of terrorism. The ability and incentive to work cooperatively to solve these problems must be strengthened, not weakened.

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Openness is the key to rapid economic growth and prosperity–Joseph E. Stiglitz

The lesson of all of this is something that Scandinavian countries learned long ago. The region’s small countries understood that openness was the key to rapid economic growth and prosperity. But if they were to remain open and democratic, their citizens had to be convinced that significant segments of society would not be left behind.

The welfare state thus became integral to the success of the Scandinavian countries. They understood that the only sustainable prosperity is shared prosperity. It is a lesson that the US and the rest of Europe must now learn.

Asia’s Rise and America’s Decline


May 5, 2017

Asia’s Rise and America’s Decline

 by Jessica T. Mathews
May 11, 2017 Issue : nybooks.com

Easternization: Asia’s Rise’s Rise and America’s Decline from Obama to Beyond Trump

by Gideon Rachman
Other Press, 307 pp., $25.95
Image result for trump and xi at mar a lagoPresident Xi’s Geo-Economics vs Trumpism

Gideon Rachman’s Easternization, his new survey of a transformed Asia, admirably does what so little writing on foreign affairs attempts. It treats with equal facility economics, geopolitics, security, enough history for needed background, official thinking, and public attitudes. Rachman, Chief Foreign Affairs columnist for the Financial Times, has an eye for the telling statistic and for the memorable detail that makes it stick. He packs an enormous amount of information into a short book and opens windows of understanding for non-experts onto this immensely important three fifths of humanity. And while not directly concerned with the new American administration, the story he tells shows well why Donald Trump’s foreign policies could end so badly for the United States and for the world.

But Rachman does not, in the end, make a convincing case for the book’s thesis—embodied in its one-word title. The central issue, he writes, is “how the rise in Asian economic power is changing world politics.” His momentous answer is that “the West’s centuries-long domination of world affairs,” stretching back to 1500, “is now coming to a close.” Without doubt, Asia’s economic ascent has been extraordinary, but Westernization—the spread of the West’s influence and values—has rested on much more than its wealth and the military power derived from it. Those other elements—including open governments, readiness to build institutions, and contributions to others’ security and growth—are weak or absent in Asia today. Easternization is neither here nor coming soon.

Asia is the world’s largest continent and home to 4.4 billion people. But its story is disproportionately about China’s economic growth. Beijing’s official statistics are notoriously unreliable, but by most reckonings, China became the world’s largest economy (measured by purchasing power parity, PPP) in 2014. What isn’t so well known is how astonishingly fast the end came for the 140-year reign of the American economy as the world’s largest. According to numbers Rachman cites, China was just 12 percent of the size of the US economy in 2000 and only half as big as late as 2011. Such meteoric growth has been enough to lift hundreds of millions out of poverty, finance the US deficit, and still allow China to increase its military spending at double-digit rates every year for two decades.

In matters of national security the momentum of Chinese growth has meant, for example, that while Japan’s military spending was triple China’s in 2000, it was only half as large by 2015. A rapidly expanding military has underwritten Beijing’s surging confidence in its own strength vis-à-vis both its neighbors and the US, and increasingly aggressive behavior in the South and East China Seas, where it has claimed islands, rocks, and waters also claimed by Japan, Vietnam, and the Philippines. It has built artificial islands and constructed runways and other dual-use facilities on them. It has deployed planes and ships to assert its rights and challenged others’ rights to fishing areas, oil resources, and even freedom of navigation in areas of open ocean. It has vehemently rejected a strong ruling against its claims by a tribunal under the United Nations Convention on the Law of the Sea.

Though Chinese leaders have not specified exactly what waters they claim and insist that China wants a peaceful, negotiated solution to these disputes, it is easy to see their actions in a very different light. Beijing has notably failed to clarify its goal: whether to assert its newfound strength, to test others’ resolve, to extend its regional sway, or to claim sovereignty over everything within the so-called nine-dash line (a demarcation of China’s claims to the South China Sea that dates back to 1947) and attempt to push the US out of the western Pacific—an outcome Washington will not accept. In the atmosphere of profound strategic mistrust that defines US–China relations, the potential for tragic miscalculation by both sides is obvious.

This is not the only or even the most immediate security risk in the region. Taiwan’s official status as part of mainland China—known as the One China policy—is nonnegotiable for Beijing. Trump’s biggest blunder to date was to suggest that he might no longer accept that policy, which has kept the peace among the US, Taiwan, and China for four decades while allowing Taiwan to flourish. Beijing instantly—and entirely predictably—froze all communication with the US, and Washington was forced to back down.

Assuming that the Trump administration has permanently learned this lesson, the far more serious threat is North Korea’s advancing nuclear capability (it could soon have enough nuclear fuel for one hundred warheads) and its progress toward nuclear-armed ICBMs that could reach the US. Though it is formally China’s ally and largely dependent on it, Pyongyang routinely ignores Beijing. In a rare misjudgment, Rachman devotes only a few short paragraphs to what may well be the first major crisis the new US administration confronts, and a source of acute contention between it and China.

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China’s Geo-Economics

Rachman links China’s newly aggressive policies to President Xi Jinping, noting that the month after he took office “Chinese military aircraft entered Japanese-controlled airspace for the first time since 1958,” and that in his first eighteen months Xi “paid more official visits to the People’s Liberation Army than his predecessor had done in a decade.” Xi has paid equal attention to building public support for his newly assertive policies, bolstering decades of Communist Party propaganda that China, at long last, is claiming its rightful place as a world power after more than a century of foreign humiliation.

This “aggrieved nationalism” coexists with an equally strong feeling of insecurity within the Chinese government—a dangerous mixture. The Communist Party’s legitimacy no longer rests on ideology but on economic growth, which is slowing. The Party is convinced that the West fomented the string of so-called color revolutions demanding democratic governance that took place during the 2000s—from Ukraine, Georgia, and Kyrgyzstan to Lebanon and Iran. It fears and expects similar subversion in China. Outrage at elite corruption was a common feature of these movements, and corruption is rampant in China. So Xi has launched a vigorous campaign against it—conveniently jailing many of his political opponents. The difficulty, as Rachman points out, is that “arresting more than one hundred thousand people…risks creating political instability by another route.”

China may appear an economic and military powerhouse but it is confronting critical challenges at home. Environmental pollution—especially of the air—is not only hugely unpopular and economically costly; it is a killer, responsible for the deaths of a staggering million to a million and a half Chinese annually. China also faces a looming demographic crisis with its aging population, shrinking workforce, and huge number of people who will retire with only a single child and a drastically inadequate social safety net to support them. The cost of pensions and health care will balloon. Anticipating the coming cliff, Beijing changed its one-child policy to a two-child policy in late 2015, producing a small increase in births but not yet what is hoped for. Stalled economic reform also belongs on this list of weaknesses, as does widening inequality and continuing deep poverty in rural areas.

Not surprisingly, China’s recent belligerence has intensified long-standing fears among its neighbors. Many of these fraught relationships stretch very far back. Rachman recounts the Vietnamese joke that the shape of its coastline reflects a spine bent under the weight of China, with which it has fought seventeen wars. In Southeast Asia, too, countries fear China, look to the US for support, and hope that they will not be forced to choose between them. In China, the memory of Japan’s brutal World War II occupation remains fresh, while Japan fears that China’s new militarism may be a repeat of its own mistakes of that period. And India, Asia’s other superstate—and one of China’s four nuclear-armed neighbors—sits across the longest disputed border in the world.

India’s Act East Policy

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India is growing faster than China and may one day surpass it as the world’s largest economy, but today it is far behind. Indeed, the country faces a list of challenges so long that one is forced to conclude that it is little short of a miracle that a unified, democratic state exists at all. But in Narendra Modi, India now has dynamic leadership for the first time in many years. Led by the Hindu nationalist BJP party, the Modi government has come under criticism for its restrictions on civil liberties and its failure to protect religious minorities. But with his recent landslide win in state elections, particularly in Uttar Pradesh, India’s largest state, Modi may be consolidating enough political strength to force through long-needed reforms in New Delhi.

Though Rachman takes India’s growth as more evidence for Easternization, culturally and politically India is facing west. In contrast to its wary and sometimes actively contested relationship with China, India’s relations with the US have been growing steadily closer since the George W. Bush years. Russia is no longer India’s major arms supplier; the US is. And the stunning success of Indian immigrants in the US, from Silicon Valley to Wall Street to academia, is a powerful draw for others to follow.

Russia, too, is turning east, Rachman argues. Its doing so is “part of the same phenomenon” as China’s increasing assertiveness, namely relative Western economic and political decline. Evidence includes joint Russian–Chinese military exercises, shared pressure against color revolutions, and, in 2014, a loudly trumpeted natural gas deal (though the latter has yet to be implemented). In reality, Moscow’s latest turn toward China happened because it could not get what it wanted—respect as a great power and equality in NATO—from the West. Then Russia’s actions in Crimea and Ukraine triggered tough sanctions that the US and its allies show no sign of lifting. Thus, the turn is at least as much a push from the West as it is a pull toward the East.

Asia is the World’s Economic Center

With India, China, and Japan accounting for three of the world’s four largest economies (as measured by PPP), and rapid growth in two of them, Asia is becoming the world’s economic center, though today the US and the EU together remain substantially larger. Arms purchases and greatly increased military strength have followed Asia’s growth. China, in particular, is closing the gap, though the US retains a huge advantage. When alliances are added to the picture—as they should be—the picture becomes much more lopsided and more complicated since Japan and South Korea and several other Asian states, together with the twenty-eight members of NATO, number among America’s vast global alliance network. China’s main allies, Pakistan and North Korea, may be a net burden.

But, as Rachman shows, the West’s ability to impose order on the world is not what it once was. Among the many reasons is its relative decline in military power, the advent of asymmetrical warfare, decades of under-spending on defense by European powers, and the salutary disappearance of the artificial order imposed first by colonial empires and later by the cold war. America’s European allies have placed such a strong priority on social spending over defense spending that in many cases their individual military capabilities have become negligible. Rachman notes that when Britain’s cuts are completed next year, its army would fit comfortably in London’s Wembley Stadium with 16,000 seats to spare. Even collectively, the EU has been content to largely offload its strategic responsibilities to the US.

For its part, the US is still fighting the longest and most expensive wars in its history in Iraq and Afghanistan. The Trump administration may well escalate US military operations in Iraq, Yemen, and Syria, but special operations and even missile strikes can only achieve so much. The American public has little appetite for any new commitment of ground troops, especially in the Middle East. Taken together, these trends do create an unsettling new environment in which the Western powers are less in charge. But this does not translate into a greater influence for Asian nations.

More telling, though, is that throughout history, the dominance of the West has been driven as much by values, ideas, and political attraction as by economic and military power. The West has stood for open, usually democratic and secular polities and a shared culture that places a high value on individual freedoms. Western nations have preferred open trade to mercantilism. They have evolved a uniquely successful capitalist economic system and been devoted to the rule of law. They have prioritized education and technological innovation. And in the decades since World War II, Western nations have invested enormous effort and money into building a liberal, rules-based world order and a panoply of international institutions whose work benefits all countries. In short, Westernization has spread as much through the positive attraction of its model as through overt or implicit coercion.

What does Asia-based Easternization look like in this light? The first thing to be said is that Asia is not remotely cohesive. There is no “East” comparable to “the West.” Though the region is integrating economically, it is riven by active conflicts, bitter historical memories, and deep cultural divisions. Economic and political systems vary widely. Adherence to the rule of law is extremely uneven. One result is the rampant flight of capital—to the West. Wealthy Russians and Chinese flock to put their money in US securities or real estate in London or Miami. Education lags behind the West. Not a single Asian university ranks in the globe’s top tier.

China is becoming much more active in international governance and many Asian  countries have staffed United Nations peacekeeping missions.   But by and large Asians have been the beneficiaries rather than the creators of the regimes, agreements, and institutions conceived and built by the West, whether to manage global finance, underwrite economic development, control nuclear proliferation, govern the Internet, slow climate change, detect epidemics, preserve shared natural resources, manage air travel, and so on. And except for the city-states of Singapore and Hong Kong, there is no Asian nation whose governance stands as a model others seek to emulate.

Rachman sees Asian countries choosing to “reassert their own histories and heritages, and scrape away some of the accumulations of Westernization.” Others see the opposite. Kishore Mahbubani, an influential former Singaporean diplomat, has been writing about the dawn of Asia and the “sunset” of the West for two decades, urging the West to learn to share power gracefully. In his book The New Asian Hemisphere: The Irresistible Shift of Global Power to the East (2008), he argues that the fast-growing Asian economies owe their success to having finally adopted the “pillars of Western wisdom,” namely open polities, free markets, and the rule of law. (This was easier to say about China nine years ago than it would be today.)

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Powered, above all, by China’s economic dynamism, Asia is stronger than it has ever been. At the same time, the United States and much of Europe are struggling with deep challenges to their democracies. The EU faces what may be existential threats from Brexit, from populist, right-wing parties, and from member states in Eastern Europe that have turned away from democracy. NATO is in disrepair. The US is more divided now than it has been at any point in the past century, with no discernible path out of what appears to be a political dead end. Yet the West still provides the robust institutional infrastructure that undergirds the global economy. And as it has for decades, the United States still provides global leadership and the security that has enabled Asia to achieve its tremendous growth.

Rachman writes that China’s long-term goal is “overturning America’s global role.” If he means that Beijing sees itself as a strategic competitor and wants to replace the US as world leader, he has gone too far. China would like to see a weaker US where US policies threaten its interests, especially in its neighborhood, but it has shown no desire to possess America’s global preeminence. China is a challenge to the United States on several fronts; not an enemy. However, the relationship is riven with tensions that could escalate into open conflict. Neither side understands or trusts the other. Avoiding these thorns will depend on steady leaders and skilled diplomacy in reading each other’s behavior. Improvisation or short-sighted deals made for a domestic audience are likely to end badly. History also warns that success will not be easy. Most often, in the past, rising new powers have clashed with reigning ones. The US–China relationship will remain the most consequential in the world for decades to come.

So far President Trump has sent decidedly mixed signals about how he intends to deal with China. He attacked China throughout the presidential campaign, promising to designate it as a currency manipulator on his first day in office and to slap on punishing tariffs—a step that would have ignited a trade war. He stumbled into a needless hole by suggesting a US reversal on the status of Taiwan. He appointed several top officials known for their fierce anti-China views, but also a treasury secretary, Steven Mnuchin, with different ideas. While Trump had called the Chinese “grand champions” of currency manipulation, Mnuchin promised a review based on established criteria that will show that China has not, in recent years, been devaluing its currency. Notwithstanding an early summit with Japan’s prime minister, the president’s frequent derogatory remarks about allies and alliances left Asians fearful and guessing about American intentions.

And then, at his summit with President Xi in early April, Trump reversed himself in tone and substance from all he had said before. There was no mention of unfair trade, of China “raping” the US economy or failing to do enough about North Korea. The two presidents stressed their personal relationship and the basis they had laid for future progress in resolving issues between the two countries. It could not have been a more conventional preliminary meeting, or more distant from what candidate and even President Trump had earlier promised. While presumably relieved by this, Xi surely did not appreciate being taken by surprise and completely overshadowed by a US missile strike on Syria in the middle of the meeting. And who can know whether this welcome traditional approach—new to this administration—will last when the governments actually tackle the differences between them?

Several of the administration’s actions, however, have been unequivocal and unequivocally harmful. The president followed through on his campaign promise to take the United States out of the Trans-Pacific Partnership. The TPP would have made a relatively small economic difference—most of its members already have low trade barriers—but it was geopolitically important. The partnership, which did not include China, was a means of drawing America’s Asian allies closer together and of signaling US resolve and permanent engagement in Asia. China wasted no time in taking advantage of the diplomatic gift it was handed with the TPP’s demise. At January’s global forum in Davos, President Xi appeared as the spokesman for globalization and open trade. A few weeks later, China sent high-level officials to a meeting of the eleven remaining TPP members to discuss forming a new regional trade regime in which it, and not the US, would be a member.

The administration’s reversal of measures to reduce greenhouse gas emissions created a similar opportunity for China. Whether or not the President decides to formally renounce the Paris climate accord, these steps will make it unlikely that the US will be able to meet its commitments under the agreement, moving the US from leader to outlier. Here, too, China immediately acted to reassert its own commitments and, by default, international leadership.

The President’s policy choices, as revealed in the budget he submitted to Congress in mid-March, promise more of the same. Draconian cuts to the State Department, to foreign aid, to most international institutions, and to the international programs of most domestic agencies suggest that Trump holds a dangerously one-dimensional view of what constitutes US security.

Both Democrats and Republicans have underinvested in diplomacy relative to the military for decades, but both have generally recognized the immense value of the nation’s nonmilitary assets to securing the whole gamut of its interests. As General James Mattis, then the head of the US Central Command and now Trump’s defense secretary, famously put it in shorthand to a congressional panel in 2013, “If you don’t fund the State Department fully, then I need to buy more ammunition ultimately.”

Never before has a President suggested handing over most of the currency of US global leadership to others, free of charge. China will not hesitate to seize every opportunity offered. A much diminished and less influential America, and consequently a much less secure Asia, would be the result.

—April 11, 2017

RCEP will put ASEAN centrality back on track


May 1, 2017

RCEP will put ASEAN centrality back on track

by Yizhe (Daniel) Xie, Waseda University

As ASEAN celebrates its 50th Anniversary in 2017, business leaders in multinational corporations await a clear sign to boost business activities and international expansion efforts. Having missed deadlines twice, RCEP is apparently not an easy agreement to conclude. But the world desperately needs a quick and big globalisation win, and RCEP is the best possible choice.–Yizhie Xie

http://www.eastasiaforum.org/2017/04/25/the-world-needs-rcep/

Global trade needs a win to fend off rising tides of protectionism and anti-globalisation. The Regional Comprehensive Economic Partnership (RCEP) offers the best ammunition to achieve this.

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 US Vice President Mike Pence at the ASEAN Secretariat in Jakarta

The quick conclusion of this regional mega-free trade agreement (FTA) will signal Asia’s commitment to free trade — from which it has benefited greatly — as well as boost ailing confidence in globalisation.

US President Trump’s withdrawal from the Trans-Pacific Partnership (TPP) three days after his inauguration was a major blow for the other 11 signatories — whose leaders expended substantial political capital on the deal. But this does not discourage Asia’s bid for deeper economic integration.

In March 2017, senior officials from non-TPP countries (China, South Korea and Colombia) joined the TPP summit in Chile. This gave trade watchers some hope for an even broader trade pack — the Free Trade Area of the Asia-Pacific (FTAAP). But increasing global uncertainty makes it difficult, if not impossible, to picture the complex FTAAP. RCEP is the best offering for an ambitious mega-FTA.

Without the United States, the TPP is on the brink of death. Originally, the TPP was initiated by four small economies (Singapore, Brunei, Chile and New Zealand) and it attracted little attention. It was then-US President Bush’s decision to participate in the TPP that revitalised the deal and lured seven other countries (Australia, Peru, Vietnam, Malaysia, Mexico, Canada and Japan) to join the pact. Access to the world’s largest market was the key reason for all countries to take part, while Japan and Vietnam also hoped the deal could contain a rising and assertive China.

Now TPP members are divided on whether they should continue the deal without the United States or embrace China. Japan — the largest market among remaining economies — was initially reluctant to push for ‘TPP 11’. Even though Tokyo has since reversed its course, the possibility of reaching a consensus document with only months before the February 2018 ratification deadline is low — especially given that members like Vietnam and Malaysia would not make the same concessions now as they did to gain access to the US market. The TPP cannot set a new standard in trade and investment without the participation of the two largest regional economies – the United States and China.

The flexibility and gradualism of RCEP is what Asia needs now. It is true that the TPP has a higher standard, more coverage and more aspiration than RCEP, but world leaders can no longer afford such an expensive bid for globalisation. Britain’s decision to leave the European Union, Donald Trump’s rise and Marine Le Pen’s increasing popularity offer cautionary tales for rapid globalisation.

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RCEP recognises the reality of different needs among members, and offers a differentiated package that allows its 16 member countries to have flexibility in opening their economies. The ‘ASEAN way’ approach in RCEP has proved itself to be the best consensus building mechanism in Asia.–Yizhe (Daniel) Xie

Unlike the TPP, RCEP recognises the reality of different needs among members, and offers a differentiated package that allows its 16 member countries to have flexibility in opening their economies. The ‘ASEAN way’ approach in RCEP has proved itself to be the best consensus building mechanism in Asia. Even if the TPP set a visionary long-term standard, it may not be feasible at the moment.

Finally, RCEP is less political and ASEAN centrality is welcomed. While TPP was often quoted as a tool to contain China in the US ‘pivot to Asia’ strategy, RCEP is seen as an extension of the ASEAN+1 FTA model in promoting regional trade and investment. All regional powers — China, Japan and the United States — are comfortable with ASEAN centrality, at least in regional economic integration. Moreover, ASEAN has already established FTAs with all six other countries and its experience in trade negotiations will help expedite the conclusion of RCEP.

Yizhe (Daniel) Xie

Yizhe (Daniel) Xie is a doctoral candidate at the Graduate School of Asia-Pacific Studies, Waseda University and a non-resident fellow at the Pacific Forum, Center for Strategic and International Studies.