Try as we might, the diverse complexity of the region we call "East Asia" defies easy, generalized policy choices. East Asia comprises the world's second largest economy, some of the world's most underdeveloped economies, as well as newly-emerging economies in transition. It contains fledgling democracies, reforming states, repressive and authoritarian regimes, and what we might call "failed states" or highly unstable civil societies. From a security perspective, the region encompasses close U.S. allies and friends, tenuous political-military relationships, and avowed opponents. Even within various countries of the region, great socioeconomic diversities, regional rivalries, income gaps, and domestic political tensions add to the region's overall complexity. Moreover, the pace of change in the region - social, economic, technological, political, and military - demands U.S. foreign policy flexibility, forward thinking, and ability to swiftly penetrate and understand emergent strategic trends.

As such, U.S. policy toward East Asia must evolve to serve U.S. interests and those of our friends and allies in a diverse and rapidly changing region. Ten years on into the post-Cold War era, the United States continues to grapple with policies which take full account of new realities in the region. In recent years, and especially over the past six to twelve months, there is a sense of drift for U.S. policy, especially in certain parts of the region, which needs to be righted to avoid even greater difficulties in the years ahead.

In an effort to bring some clarity to this picture, these brief remarks will lay out those broad interests and challenges which frame a comprehensive U.S. foreign policy for the region on the one hand, and recommend measures for U.S. foreign policy to deal with those challenges on the other. Above all else, it is critical that U.S. foreign policy become far more aware of the region's diverse breadth and recognize the pace of across-the-board change which will challenge old assumptions and demand visionary thinking.

II. Economic interests and challenges

With an enormous stake in the economic and commercial viability of East Asia, U.S. interests require strong and stable markets in the region. The United States promotes globalization, free trade and open markets as a means to advance U.S. economic and political interests, while fostering global appreciation for the economic and political benefits of good governance, transparency and the rule of law. Given the nature of the U.S. economic system, the growth it enjoys, and the competitive environment it thrives upon, it makes sense that U.S. interests should seek more open, balanced, transparent, and accountable economic and trade relations in the region.

At the same time however, given its current economic strengths, the United States is in a remarkable position to provide regional leadership in a way that builds confidence in a more open system while helping restructure financial systems both regionally and within economies weakened by the Asian financial crisis. Now more than ever, U.S. foreign economic policy must deftly forge ahead in promoting the benefits of commercially viable, private-sector led, open markets, while at the same time taking action to bolster regional confidence and restructure the inter- and intranational financial and trading system to provide it a greater degree of stability.

Of course, the continuing impact of the Asian financial crisis presents difficult challenges before these interests. The region's economies - especially those of Indonesia, Thailand, South Korea and Hong Kong - have suffered negative growth rates and a shaken confidence in the world financial and trading system. (I am reminded of my recent visit to South Korea where the term "IMF" is used pejoratively to describe cheap and austere goods and conditions.) Moreover, the economic conditions have led to greater degree of political unease and unrest as the situation in Indonesia amply demonstrates; unstable political and economic conditions also rattled bilateral ties between Singapore and Malaysia.

Some of the United States' greatest economic concerns for the region center on Japan and China. As our principal trading partner in the region, the world's second largest economy, and as a long-standing political and military ally, Japan's economic strength and a mutually advantageous bilateral trading relationship with Tokyo is especially important to the United States. But the Japanese economy has yet to overcome several years of degeneration, and its woes are far from over. What's more, inadequate stimulus measures and continued protectionist tendencies in Japan have sparked sharp reactions between U.S. and Japanese officials. In a weakened position, protectionist sentiments may gain ground in Japan, which would have spillover effects in the rest of the region.

The Chinese economy poses a number of potential challenges to U.S. interests as well. At the end of 1998, the U.S. trade deficit with China mounted to some $60 billion and will continue to rise in 1999. Moreover, recently implemented Chinese economic and fiscal policies create new impediments for foreign investors, dampening even U.S. business spirits. These issues assure that this spring's annual Congressional debate on China's most-favored-nation trading status will focus on strictly economic concerns as well as the usual linkage of MFN to China's human rights record. Worrisome questions persist as to the near-term viability of the Chinese economy, faced as it is with a deteriorating state-owned sector, rising unemployment, and a nascent banking crisis. Devaluation of the yuan remains an option for the Chinese leadership in the face of these developments.

Debate also continues between China and the United States over China's entry into the World Trade Organization (WTO). Principal concerns focus on accessibility to markets and distribution networks, certain sectors such as agriculture, telecommunications and automobiles, and the question of China's entry status as a developed versus developing economy. Owing to these concerns, China may not gain entry to the WTO before the fall 1999, when a new round of trade negotiations will open, and the requirements for joining the group will stiffen, pushing Chinese membership further into the future. The tone and success of the planned April visit to Washington of Chinese Premier Zhu Rongji will depend very much upon progress in negotiations over these issues.

A related point concerns the admission of Taiwan to the WTO. Beijing strongly opposes Taiwan's entry to the trade organization before China. However, Taiwan has nearly completed its entry negotiations, qualifying it to join the WTO at an early date. International politics will likely preclude Taiwan's admission before China's, as Taiwan must vault procedural votes demanding consensus at one stage, and a two-third majority of the WTO membership at a subsequent stage. However, Chinese intransigence toward WTO accession negotiations may prompt calls of foul from Taiwan's many supporters in the United States and elsewhere.

III. Security interests and challenges

As in the case of economic issues, the United States faces a long list of security interests and challenges in the region. Several are long-standing in nature, such as U.S. interests in deterring aggression on the Korean peninsula and contributing to a stable situation in the Taiwan Straits. However, these "traditional" security concerns in the region have become increasingly complex and fluid in recent years. In addition, other "non-traditional" security concerns arise in the context of the post-Cold War era and pose more uncertainties into U.S. strategic calculations.

At a broad level, U.S. security interests are challenged by the changing nature of security threats in the region. First, with the diminution of Soviet and Russian challenges in the region, it is an opportune time to work more closely with Moscow to alleviate suspicions about U.S. motives and build a cooperative relationship that may partially balance a nascent Sino-Russian partnership. Second, the presence of forward-based U.S. troops will increasingly come within range of more and more sophisticated ballistic and cruise missiles in the region, especially from North Korea and China. This not only raises a greater degree of support for theater missile defenses (TMD) in the region, but also raises important broader questions about the nature of U.S. forward basing posture and security strategy.

Third, in the absence of a well-defined "Cold War" bilateral security stand-off in the region, U.S. security interests must address problems posed by less tangible, but nonetheless threatening, challenges. These include the security consequences of economic failure (such as in North Korea), breakdown (such as in Indonesia) or significant disruption (signs of such emerging in China). Moreover, other transnational problems related to crime, drug trafficking, terrorism, and resource shortages will also impose new burdens on U.S. security interests in the region.

Of course, more traditional security challenges pose some of the greatest near-term concerns for U.S. interests, but these too are evolving in ways which make them more problematic. Most prominent among these are the confrontation with North Korea, U.S. security-related differences with China, and plans to develop and deploy theater missile defense in the region.

The Korean peninsula stands out today as the most troublesome potential flashpoint for the region. North Korea's provocative activities include ballistic missile testing and exports and covert armed incursions into South Korea. Moreover, the past several months have seen intensified efforts to resolve questions about the North's nuclear weapons program, including the possible construction of nuclear facilities in an underground site at Kumchangri. While the U.S.-South Korean standoff with the North soon enters its sixth decade, the specter of Pyongyang's WMD arsenal as well as a more accommodationist "sunshine policy" in Seoul together create a far more complex and difficult situation for U.S. foreign policy on the peninsula that has been the case in previous years.

Because of these and other problems with the North, the Agreed Framework and its support for the Korean Peninsula Energy Development Organization has increasingly come under fire in Washington as inadequate to deal with U.S. concerns about Pyongyang's actions and intentions. As a result, in 1999, several critical developments loom for U.S. foreign policy on the peninsula: the imminent release of the Congressionally-mandated Perry report to reevaluate U.S. North Korea policy, the marking of certain key certification deadlines for continued Congressional support for the Agreed Framework, and ongoing negotiations with North Korea on missiles, the suspect underground site at Kumchangri and peace on the peninsula. The coming several months will be critical for forging and sustaining a consensus - both in Washington and with U.S. allies in the region - for the future security policy on the Korean peninsula.

With China, the U.S. also needs to address a number of security-related differences which have the potential of spinning out of political control over the course of 1999. Across the security horizon, the U.S. and China face a number of difficulties, many of which reflect the new and changing security realities of the region and elsewhere. Beijing opposes American tendencies toward unilateralism in resolving outstanding security problems and does not support U.S.-led military interventions in hotspots such as Kosovo and Iraq, and has expressed grave concern about the possibility of U.S military action to resolve the current North Korean nuclear imbroglio. Moreover, U.S. decisions to proceed with theater missile defenses in cooperation with its allies and friends in East Asia - such as Japan, South Korea and Taiwan - are seen in Beijing as politically-motivated efforts to confront and contain China over the long-term.

In the United States, the recent release of findings and recommendations from the U.S. Congress Cox Committee will foster a critical re-evaluation of U.S. high-tech trade and scientific exchanges with China, spotlight U.S. security concerns with China, and urge stricter limits on this aspect of U.S.-China ties. Importantly, these developments clearly illustrate the emergent post-Cold War conundrum of balancing high-tech, globalized trade on the one hand with U.S. national security interests on the other.

U.S. support for Taiwan, in the form of arms sales and other commitments to the island's defense, are a constant source of tension in the U.S.-China relationship, and is viewed in Beijing as a violation of U.S. pledges. With the mainland reveling in national pride on the country's 50th anniversary just as Taiwan heats up for the March 2000 presidential election, Chinese military posturing can be expected, reminiscent of the Taiwan Straits exercises and missile tests of 1995 and 1996. Moreover, these developments unfold as the remarkable democratization and economic success of Taiwan introduces new strategic calculations at odds with long held assumptions about cross-Straits relations. Unfortunately, however, it is not clear that the policy leadership in the three capitals - Taipei, Beijing, and Washington - has a very clear and nuanced understanding of each other's complex domestic contexts which drive their respective attitudes and approaches toward cross-Straits relationship. Under such conditions, chances for misperception and miscalculation rise considerably.

In the coming months, the issue of theater missile defenses in the region will underscore new security threats in the region, American commitments in East Asia, and how best to secure U.S. and allied interests in a rapidly changing security environment. In this process, U.S. interests will come under close scrutiny in Washington, amongst our allies, and most critically from those likely to see the greatest threats from U.S. TMD systems - China, North Korea and Russia. North Korean missile testing substantially weakened Chinese objections to U.S.-led TMD deployments in East Asia, and Chinese interlocutors are not entirely opposed to such defenses under certain conditions. Nevertheless, Beijing's long-term concerns persist, and China probably stands in the best position to undermine U.S. interests if chooses to do so in response to TMD developments. China's greatest current concerns are political in nature, reflective of Beijing's perceptions of how U.S. TMD deployments strengthen and sustain Washington's long-term political commitments to Japan, and, more importantly, to Taiwan. This issue could also strengthen Sino-Russian cooperation, a partnership already on record against U.S. TMD deployments in the region.

IV. Interests and challenges for democratization

Finally, as an fundamental underpinning of U.S. interests in East Asia, it is important to stress the role of supporting the expansion of pluralization and democratization in the region. Not only is the United States more likely to enjoy stable foreign relations with others who share these values, but well-founded principles of transparency and accountability lend to domestic political and economic continuity and stability inside the region, hence contributing to U.S. interests as well. As in the case of economic and security interests, rapid change defines regional developments for democratization and pluralization.

Again, the impact of the Asian financial crisis is meaningful in this context. At one level, the unforeseen crisis fostered transitions to more open societies, such as in Indonesia, and prompted peaceful democratic successions such as in South Korea. But more critically, the devastating socioeconomic effect of the crisis in some countries could stem the all-important role which economic growth and prosperity has had in enlarging the middle class and giving governments the confidence to expand the acceptable parameters of civil society. Given the continuing importance of militaries as potentially intrusive political factors in many East Asian countries, it is important that the crisis not offer the justification for politically-motivated martial law or other military-led measures which cut into the significant past gains in political, economic and human rights.

Developments in Indonesia bear careful scrutiny in this regard. For decades, the Suharto regime stood representative of other governments in the region - such as in Malaysia and Singapore - dominated by single leaders and ruling parties. The post-Suharto transition and June 1999 parliamentary election process in Indonesia will be carefully watched throughout the region as an indication of the benefits and drawbacks for more pluralized societies and expanded civil and human rights. Likewise, the handling of Indonesia's East Timor secession dilemma, and the international communities reaction to it, will set out important markers for the future of democratic and human rights development for the region.

On the issue of democratization and human rights, China also looms large in the minds of U.S. policymakers. On the one hand, there should be little doubt that the day-to-day lives of tens of millions of Chinese offer far more individual liberty and opportunity than at any other time in contemporary mainland history. Still, China is a long way from institutionalizing these steps for the long-term. Indeed, the recent crackdown on opposition parties in China, the government's nullification of certain direct township-level elections, and official strictures on Internet usage all speak to continuing concerns over Chinese policies on human rights and civil liberties. The annual State Department report on human rights, due out at the end of February, will likely be harsher than usual, and the U.S. may revive its efforts to denounce China's record before the United Nations Commission on Human Rights. In addition, key dates in 1999 - particularly the 80th anniversary of China's seminal democratic event, the May Fourth Movement, the tenth anniversary of the Tiananmen crisis in June, and the 50th anniversary of the People's Republic in October - will have an important bearing on pluralization and human rights in China. These events will raise calls in China and abroad for greater democratization, which in turn will likely result in hardened positions by Chinese leaders who sense a political, economic and moral weakening of their power.

V. Policy choices

Economic policies: While the United States appears to have weathered the worst aspects of the Asian financial crisis, it has experienced lowered economic growth as a result. An already large trade deficit with the region will likely grow in 1999 while the region continues its recovery. As such, it is important for the United States to more readily acknowledge the interdependence it shares with regional partners while also continuing its efforts to open markets and gain greater access for U.S. exports to the region. The importance of the region as an economic partner will grow even greater in the years ahead, placing further demands on well-considered U.S. foreign economic policy. These policies should include:

• promote the recovery of at-risk economies through financial assistance and expertise, assurances against protectionist tendencies in the United States and in the region, and advocacy of greater transparency, accountability and predictability in markets;

• continue support for long-term trade liberalization efforts and bolstering national and regional organizations, such as the Asia Pacific Economic Cooperation (APEC) forum, aimed at open markets and trade practices;

• support appropriate reforms of international institutions to better prepare them to read and act on warning signs of imminent financial turmoil and dislocations;

• persistent but patient U.S. policies aimed at opening Japanese markets should also acknowledge Tokyo's contribution to alleviating the excesses of the Asian financial crisis in the region through its loans and other forms of financial assistance, in spite of its problems at home;

• achievement of WTO accession agreement with China which is commercially viable, helps assure significant reduction in the trade imbalance with China, and effectively integrates China into the global economic and trading system;

• strengthen our alliance and basing agreements with countries in the region;

• intensify consultative arrangements with key allies such as Japan and South Korea, and expand consultations in the U.S. government to draw in Congress and cut across interagency lines;

• proceed prudently with TMD discussions for the region to assure strong, well-considered financial and political support from friends and allies in the region of the deployments;

• step-up financial and political support for multilateral consultations among countries in the region at both official and "track two" levels;

• focus greater efforts to build regional consensus, especially among South Korea, Japan and China, and between the Administration and Congress to address threats emanating from nuclear, chemical, biological and missile proliferation;

• expand policy debate about future of U.S. military posture in the region in light of missile developments, changing nature of security threat, and post-unification scenarios on the Korean peninsula;

• devote more realistic efforts to reaching common ground, if possible, with China, with a special focus on strategic dialogue and world view.

• Acknowledge and act on the socio-political impact of the Asian financial crisis, in order to bolster nascent democratic institutions in the region and quell possible societal instabilities;

• Provide U.S. political and moral support to important elections in the region over the coming year, including those in Taiwan and Indonesia;

• Boost support for programs in China focusing on rule of law, grass roots elections, religious freedom, and the development of more independent citizen organizations;

• Garner, through more active diplomatic channels, broader consensus amongst friends and allies on encouraging a Chinese human rights record more consistent with its pledges on the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights;

• Expand efforts to engage regional militaries on the values of the rule of law, professionalism, human rights, and stable, civilian-led political structures.