The Williamsburg Conference 2001

Report from the 2001 Williamsburg Conference, Okinawa, Japan, March 17-19, 2001.

Agenda
The 29th Williamsburg Conference was held in Okinawa, Japan from March 17 to March 19, 2001. The conference, hosted by the International House of Japan, was convened by Carla A. Hills of the United States, Tommy T. B. Koh of Singapore, and Minoru Murofushi of Japan.

Saturday, March 17
Opening Reception and Dinner

Keynote Speech: Asia/Pacific and Japan in the 21st Century
Takeo Hiranuma, Minister, Economy, Trade & Industry


Sunday, March 18
Session 1: U.S.-Asia Policy and the New President

  • How will the new administration order its priorities in Asia and are there likely new emphases that will emerge?
  • Are national/theatre missile defense (NMD and TMD) the most effective ways for the U.S. to approach security concerns? Are there better ways to address the challenges posed in the region?
  • What are the domestic factors in the U.S. driving NMD and TMD?
  • Will the next administration pursue a new trade round and how aggressive will it be in linking environmental and labor concerns to trade?
  • How will U.S. relations with Asia's major powers (China, India, Indonesia, and Japan) change under a new administration?

Chair
Carla A. Hills, Chairman, Hills & Company

Opening Discussants

Desaix Anderson, Executive Director, KEDO
Norman J. Ornstein, Resident Scholar, American Enterprise Institute for Public Policy Research
Stanley O. Roth, Former Assistant Secretary of State for East Asia and Pacific Affairs

Lead Commentator

Yoshio Okawara
, President, Institute for International Policy Studies


Session 2: Asia's Economic Prospects: Policy, Politics, and
Information Technology

  • What are the prospects for the economies of Asia? Will growth return?
    If not, why not?
  • What are the constraints on economic reform in Asia? Are politics
    enhancing or hindering economic progress?
  • What are the long-term implications of the IT revolution for future
    economic growth in Asia? Will it provide the engine of growth for Japan and others?
  • How can countries in Asia broaden participation in the IT revolution and overcome the so-called digital divide?

Chair

Nicholas Platt, President, Asia Society

Opening Discussants

Han Seung-soo, Member of Parliament, Committee on Unification, Foreign Affairs and Trade, Former Deputy Prime Minister and Minister of Finance, Republic of Korea
Arun Mahizhnan, Deputy Director, Institute of Policy Studies
Hugh M. Morgan, Chief Executive Officer, WMC Limited
Keiji Tachikawa, President & CEO, NTT DoCoMo, Inc.

Lead Commentator

Catherine L. Mann
, Senior Fellow, Institute for International Economics


Monday, March 19
Session 3: Japan

  • What are the prospects for the Japanese economy? Are policies in place for a return to sustained growth? What are the implications of the "new economy" for Japan?
  • How will Japan's political parties and structures address the challenges posed by the aging population? The greater presence of women in the workforce? Falling birthrates? What are the implications of these trends for the future of Japan?
  • How do Japan's emerging leaders envision Japan's role in the region and the world? See the future of the U.S.-Japan relationship?

Chair

Minoru Murofushi, Chairman, ITOCHU Corporation

Opening Discussants

Toru Hashimoto, Chairman of the Board of Directors, The Fuji Bank, Limited
Noboru Hatakeyama, Chairman & CEO, JETRO
Akira Kojima, Managing Director, Chief Editorial Page Editor, Nihon Keizai Shimbun, Inc.
Toshiaki Ogasawara, Chairman & Publisher, The Japan Times

Lead Commentator

Ronald J. Anderson
, Senior Vice President & Chairman, AIG Companies in Japan and Korea


Session 4: Political and Security Prospects

  • What are the long-term political and security prospects for the Korean Peninsula, and what are the implications for long-term peace and stability in the region?
  • How will the situation across the Taiwan Strait evolve?
  • How can regional organizations, including ASEAN, APEC, SAPTA, and SAARC, be developed to bring parties with different agendas together in a setting that offers opportunities for dialogue?
  • What is the future of Australia's engagement with Asia?
  • What is an appropriate level of U.S. military presence in the region?
  • What are the prospects for political and security stability in Southeast Asia, especially Indonesia, Malaysia, and the Philippines?

Chair

Tommy T. B. Koh
, Ambassador-at-Large, Ministry of Foreign Affairs, Singapore

Opening Discussants

Dewi Fortuna Anwar, Associate Director for Research, The Habibie Center Tatsuo Arima, Representative of the Japanese Government, Ministry of Foreign Affairs
Paul M. Evans, Director, Canada Asia Studies, Institute of Asian Research, University of British Columbia
Jang Chang Chon, Director-General, Department of American Affairs, Ministry of Foreign Affairs, DPRK
Yang Bojiang, Professor and Deputy Director, Northeast Asia Division, China Institute of Contemporary International Relations (CICIR)

Lead Commentator

Richard A. Woolcott, Former Secretary for Foreign Affairs and Trade, Founding Director, AustralAsia Center of the Asia Society


Foreword


In March 2001, the Asia Society, in partnership with the International House of Japan, brought together 51 leaders in government, business, academia, and journalism from 17 countries and economies on both sides of the Pacific for the twenty-ninth Williamsburg Conference. Held in Okinawa at the Bankoku Shinryokan, the venue of the 2000 Group of Eight summit, from the 17th to the 19th of March, the conference was the first to be convened in Japan since 1992.

The Williamsburg Conference continued the tradition of transpacific dialogue on key issues in Asia. At the crossroads of Northeast and Southeast Asia and with 2001 being the 50th Anniversary of the U.S.-Japan Alliance, Okinawa provided an excellent venue to convene the Williamsburg Conference. As this report reveals, the building of new relationships and the solidifying of old ones is crucial to stability in the region. Relationship building requires strong leadership to look for new and improved ways to work with others. Such leadership is further needed to find fresh ways to grow economies, while addressing the social needs and diversity of countries in the region. The critical importance of the United States and Japan to the economic and security situation in East Asia was the subject of considerable discussion.

Williamsburg Conference coconvenors Carla Hills of the United States, Tommy Koh of Singapore, and Minoru Murofushi of Japan enlisted a superb group of conference participants and set forth a sharply focused and thorough agenda. In addition, their efforts resulted in the first North Korean delegation at a Williamsburg Conference. All of our coconvenors chaired their sessions with great skill and impartiality. As our local host, Minoru Murofushi went above and beyond the call of duty to ensure that all of the arrangements for the conference were carried out graciously and masterfully. The Asia Society owes him a deep debt of gratitude for his vision and leadership of the twenty-ninth Williamsburg Conference.

After the conference, Carla Hills spoke in San Francisco under the auspices of the Commonwealth Club and the Asia Society to take the conference discussion to a broader audience. This report extends further the reach of the Williamsburg discussions.

The International House of Japan, under the able leadership of its executive director Mikio Kato, was an outstanding co-organizer. Special thanks go to the entire staff of International House, ably led by Kimihiro Sonoda, for all of their excellent work, with additional thanks to Yuriko Kato, Mr. Kato's wife, for all of her efforts on behalf of the conference.

From the Asia Society, Marshall M. Bouton, who is stepping down shortly as executive vice president of the Asia Society to become president of the Chicago Council on Foreign Relations, deserves accolades for again masterminding the substance of the meeting. Marshall has provided leadership to the Williamsburg Conference for many years. He has strengthened and diversified both the Conference agenda and the pool of participants. Rob Radtke oversaw the coordination and organization of the meeting. Hee Chung Kim managed all the details with unwavering grace and skill. Mike Kulma also provided invaluable assistance to the conference secretariat before donning his cap as conference rapporteur. Karen Fein and Hee Chung Kim deserve credit for their hard work in bringing this report to print, as does Chae Ho Lee for his work in its layout.

The coconvenors and I are most grateful to the conference funders, whose names are listed in the back of this report. Without their support, this year's Williamsburg Conference would not have been possible.


Nicholas Platt
President, Asia Society
May 2001

SESSION 1

U.S.-Asia Policy and the New President

Meeting less than two months into the Bush administration, Williamsburg Conference participants assessed the state of American political, economic, and security concerns and their implications for U.S. policy toward Asia. A number of key issues were addressed in considering the Asia policy of the new Bush administration: the importance of the U.S. political situation, the care that needs to be taken in analyzing the situation so early in the administration, the pressing issues with which the administration must deal, and the ideas the U.S. needs to implement as seen through the eyes of its Asian neighbors.

The U.S. Political Situation

Participants stressed that the U.S. domestic political situation was crucial to its policy toward Asia. In considering the domestic political situation, two areas of discussion received most prominent treatment. These two areas included the tenuous nature of the Republican Party's hold on power and the possible differences of policy viewpoints within the Bush administration.

The 2000 U.S. elections resulted in the most closely contested U.S political situation in the last 30 years. The narrow victory for President Bush, a House with a slim Republican majority, and a Senate split 50/50, indicates just how tightly contested politics will be in the U.S. for some time to come. These close margins pose a challenge to economic and trade policy, as a few votes across party lines could change the way America does business with Asia. Besides votes across party lines, this delicate balance in Congress could further be challenged by any number of potential upcoming events. In particular, participants pointed to two things that could shift the balance of political power from the Republicans to the Democrats. First, it was suggested that due to health and age considerations Republican senators Jesse Helms and Strom Thurmond might seek early retirement. If this were to happen, the balance of power in the Senate would switch to the Democrats, as the Democratic governors in the senators' respective states would undoubtedly appoint Democrats to the empty Senate seats. This would result in a 52/48 advantage for the Democrats in the Senate with subsequent policy implications. Second, much as the United States experienced in the midterm congressional election of 1994, in which the Republicans scored a decisive victory, the 2002 midterm elections could swing congressional power to the Democrats. Compounding the challenge of a narrowly divided Congress was the fact that 75 percent of its members are seen as relatively new arrivals, who have joined since the end of the cold war. This being the case, it was suggested that a global perspective might not be as important to them as it was to previous generations of leaders. The possibility of a more insular U.S. foreign policy was a cause of great unease to leaders around Asia.

The possibility of policy divergence within the decision-making hierarchy of the Bush administration and its impact on Asian policy need to be addressed. Conferees pointed out that there were early signs of policy divisions among personnel at the highest echelons of power. For example, there seemed to be disagreement between the White House and Secretary of State Powell in their recent contradictory remarks regarding South Korea's policy of engagement with North Korea, to help the North economically and otherwise, foster goodwill between the two Koreas, and bring permanent peace to the peninsula (known as the sunshine policy). This divisiveness, coupled with the president's purported propensity to take a position and stick to it, could complicate U.S.-Asia policy, sending mixed signals to both allies and competitors alike. This makes the perspectives of the personnel who fill the numerous still vacant positions in the State Department and at the Pentagon all the more important.

What Have We Seen and Where Will We Go?


All conference participants believed that it was too early in the administration to suggest a definitive Bush policy toward Asia. However, they suggested that one might shed light on the path of future policy by looking at confirmed and nominated personnel, watching meetings between the Bush administration and Asian leaders, and understanding the place of campaign rhetoric in the making of policy. Conferees agreed that among the first-tier of power in the Bush administration, which includes Vice President Cheney, Secretary of State Powell, Secretary of Defense Rumsfeld, Secretary of the Treasury O'Neill, and National Security Advisor Rice, there exists great foreign policy experience and integrity, but not much Asia experience.

However, participants were very pleased with the presence of numerous nominees (Wolfowitz, Armitage, Zoellick, and Kelly) who have Asia experience in the second-tier of power. In fact, personnel at this level were seen as more knowledgeable about Asia than their most recent predecessors were initially.

Participants stressed the need to watch the president's growing personal relationships with leaders from Asian countries in current and planned meetings. It was suggested that President Bush appeared to have a way with people that might soften the blow of his anticipated hard-line policy. A number of opportunities to build such relationships had occurred, were occurring, or would occur soon after the completion of the conference. For example, South Korean President Kim already met President Bush, Japanese Prime Minister Mori was meeting him, and China's Vice-Premier Qian Qichen was scheduled (March 23) to meet with him. Furthermore, President Bush was scheduled to attend meetings with world leaders in Quebec and with leaders of the G-8 nations in June, and he has agreed to attend the APEC summit later this year in Shanghai. While there was debate over the ramifications of the meeting between presidents Bush and Kim, at the very least, the meeting was seen as an early indication of the importance President Bush placed on U.S. relations with Asian nations.

Others expressed overwhelmingly negative sentiments when considering future Asia policy under a Bush administration. For example, during President Kim's visit to Washington, President Bush seemed to distance himself from South Korea's sunshine policy by emphasizing his concern with North Korean behavior. At the same time, President Bush suggested the need for a review of U.S. policy toward the Korean Peninsula. These steps were viewed by some to be particularly damaging to any prospects for reconciliation between North and South Korea or for a normalization of relations between the U.S. and North Korea.

Finally, those who showed concern for President Bush's forceful campaign rhetoric interpreted his early moves as indications that his policy would proceed as suggested. However, it was stressed that over time one can expect to see continuity in policy (from one administration to the next) despite earlier pronouncements. The most often noted example of this was President Clinton's move from his vitriolic campaign rebuke of George Bush Sr.'s China policy, to an eventual suggestion of "strategic partnership" with China.

Issues of Concern at Home and Abroad

While there existed many important regional issues for the new administration to deal with regarding its Asia policy, the participants' list of the most pressing issues included: national/theatre missile defense; the situation on the Korean Peninsula; the slowdown in economic growth, particularly in the United States; India and Pakistan; the sale of weapons to Taiwan; and trade policy issues. Asian participants were overwhelmingly opposed to the national/theatre missile defense system proposed by the Bush administration. U.S. participants undoubtedly held mixed views, and some who were critical were more critical of the process employed than the objective sought. The implementation of such systems has considerable implications for security and stability in the Asia-Pacific region. Most significantly, it was feared that the building of NMD or TMD might lead to a major arms buildup in the region, both conventional and nuclear. Such systems seemed set to sour relations between the United States and China. China fears two things: one, that the missile defense system would contain its small nuclear arsenal, and two, that the defense shield might be extended to protect Taiwan.

Thus, the building of a missile defense system could lead to an arms build-up in China, which would lead to an arms build-up in India, which would induce other countries to increase defense spending. In addition, Asian countries perceived the U.S. decision to proceed with the development of these systems as unilateral in nature, which has the potential to threaten the nature of the U.S. alliance system. According to conferees, the lack of dialogue between the U.S. and other countries was reflected in the weak U.S. domestic debate on these systems. Participants called for a more intelligent discussion in the United States on the pros and cons of these systems. Among other things, the public in the United States needs to question the viability of these systems, their monetary costs, and their nonmonetary costs.

Relations on the Korean Peninsula were seen as being at a critical stage and there were concerns that the Bush administration, with its seemingly tough-line rhetoric, might negate the many positive steps taken over the last few years. Participants pointed to the meeting between the leaders Kim, growing reciprocity in the relationship, the possibility of a missile agreement between the U.S. and North Korea, the recent normalization of relations between North Korea and many European countries, and the South's sunshine policy as hopeful steps in the right direction. However, there were still many unresolved issues that the administration needs to address.

The current slowdown in the U.S. economy was of great concern to Asia. Different reports suggested varying conclusions on the future direction of the U.S. economy. However, an Asia still working its way out of the economic woes of the 1997-98 crisis, and an Asia inextricably linked to the global and U.S. economies, voiced concern over slowed U.S. growth and its ramifications for domestic economic and security environments. In fact, exports from Asia to the United States have already started to decline as a result of the rather abrupt slowing of the U.S. economy.

The discussion about India and Pakistan was brief. There were opinions that the implementation of NMD or TMD would lead to an arms race between India and China. Furthermore, there was some suggestion that the Bush administration might take stances less confrontational to India, for example, by not wishing to intervene in conflicts, such as that in Kashmir. The discussion of Pakistan revolved around this issue of Kashmir and concern over the possible disintegration of the Pakistani state.

Participants were also wary of possible arms sales to Taiwan. At the time of the conference, the new administration was already involved in the process of deciding whether or not to sell advanced weapons to aid in Taiwan's defense. The most contentious of these proposed sales are Aegis destroyers equipped with advanced radar technology, adaptable to future missile defense technology. There was concern that, if such sales took place, relations between the United States and China would be severely damaged with subsequent implications for peace and stability in the region. Regarding Taiwan, there was further concern about suggestions that the Bush administration will not adopt the "three no's" policy (no Taiwan independence, no two Chinas, and no participation by Taiwan in any organization for which statehood is a prerequisite of membership) in its relations with China and Taiwan. As this has served as one of the foundation stones of China's relationship with the U.S. and other nations in recent years, any undoing of this policy could further fray relations.

Finally, trade policy issues were of some concern. In particular, issues of free trade and fast-track authority were discussed. Some believed fast-track authority would be granted. Most Republicans, it was felt, will vote for it and the hope is to get a sufficient number of Democrats on board. Others were not as optimistic. Labor and environmental movements are against it, while the general public in the United States is still largely split over, if not flat-out dubious about, the benefits of free trade. Participants were also somewhat divided as to how crucial fast-track authority was to successful trade negotiations. A few panelists believed that the U.S. could get what it wanted from other countries regardless of whether or not the president had fast-track authority. Others maintained that, the president lacking fast-track authority, the United States received other countries' second-best offers in trade negotiations.

As Asia Sees It


Participants from around the region acknowledged that the United States needs to do a number of things in the process of developing its Asia policy. The U.S. must work with allies (for example, Japan and South Korea) and others (for example, China and Russia), particularly on the issue of national/theatre missile defense to avoid a possible arms race. At the same time the U.S. also needs to have a richer domestic discussion of these systems and other Asia-related topics. It needs to ensure that its economy has a soft landing, as it is generally believed that the continued growth of the U.S. economy is vital to the region's economies and thus stability and security. The United States also needs to address the possibility of military cooperation with Indonesia and improved relations with Cambodia and Myanmar in light of recent positive events. Finally, the U.S. needs to build on the positive outcomes from the last year in its relations with North Korea.

SESSION 2

Asia's Economic Prospects: Policy, Politics, and Information Technology

Asian countries have come a long way since the economic crisis of 1997-98. In fact, most of the Pacific Rim economies enjoyed robust economic growth in 2000. Hong Kong and Singapore grew 10 percent; China, Malaysia, and South Korea 8 to 9 percent; and the other economies (except for Japan, which hovered at about 1 percent) recorded a very respectable 5 to 7 percent growth. However, this year's growth throughout the region is expected to drop precipitously. In particular, drops in exports as the U.S. economy slows will result in job loss and depressed economic demand at home.

With a roller coaster economic situation confronting policy-makers it should come as no surprise that participants were divided on the future prospects for the economies of Asia. Some were guardedly optimistic. For example, restructuring, while begun, needs to continue. There need to be good macro policies in place and the U.S. economy needs to be growing. Also, while dot-coms are hurting, the old economy is starting to grow again. Others pointed to the move by China toward greater privatization, the growth potential of Japan, the relative health of Taiwan, Hong Kong, and Singapore economies, and the integration of the rest of Southeast Asia, as reasons for optimism. But others proved much more pessimistic in their analysis of Asia's economic prospects, citing the lack of capital flows to ASEAN markets, the lack of fundamental changes in the regional economies, the rise in unemployment throughout the region, and the general lack of growth in productivity.

Continued Constraints on Economic Reform

Many obstacles to economic reform still exist. These include: a lack of political leadership to make the changes necessary to complete or begin the reform process (this weak leadership is evidenced by the impeachment of Philippine president Estrada, the near-impeachment of the presidents of Indonesia and Taiwan, and the election in Thailand of a new premier after his indictment by his government's Anti-Corruption Commission); culture and the need for cultural preconditions for economic reforms, one example being the need to realize that failure is to be expected; politics and its concentration on short-term as opposed to long-term considerations; the widespread lack of independent judiciaries; the widespread distortion of the market through government intervention; the lack of institutions to enforce contracts; and (one participant suggested) that democracy in Asia resulted in greater market instability, which investors would prefer to avoid.

Asia and Information Technology

Whether Asia stands fully ready to embrace the information technology revolution or not, the revolution is here to stay. Most participants agreed that Asia was actively embracing information technology. Some went so far as to say that IT would serve as the future engine of growth for economies in the region. All believed that becoming part of the information technology revolution was inevitable, although there was some debate as to whether or not becoming a part of the IT boom is a choice for governments to make.

This led to a discussion of the proposed economic benefits of information technology. The U.S. served as the IT-benefits poster child. Benefits to the U.S. economy were seen in a decade of growth largely driven by a policy environment that enabled the use of technology, thereby leading to greater productivity, lower unemployment, and other positive economic results. More generally speaking, possible benefits to computer networking included increased efficiency and competitiveness, more effective public services, exploitation of factor costs, and increased social capital.

To grow the IT sector and reap these benefits effectively, participants suggested a number of necessary preconditions. The need for political leadership or a political visionary is paramount. Such strength of vision was seen as necessary to setting a precedent for the people to follow, while at the same time battling the bureaucracy and old economy paradigms, leapfrogging old ideas and technology. Part and parcel of this leadership effort was a perceived need for leaders to establish electronic governments as an example to constituents that information technology is not to be feared, rather it is to be embraced. However, a top-down approach, while necessary, was not sufficient to ensure success. At the same time, countries need to institute a bottom-up approach, actively engaging local communities.

A number of regional efforts were pointed to as examples of such leadership in policy-making. One important step that Japan has taken in an effort to address the importance of information technology was "e-Japan," which serves as the basis for Japan's national information technology strategy. Among e-Japan's many objectives is increasing broadband subscriptions in Japan from 5 million in 2002, to 30 million in 2005. Furthermore, the e-Japan initiative attempts to increase Internet access in Japan through the development and production of "information appliances" (non-PC), the type of technological innovation that Japan has thrived on over the last 50 years.

Similarly, ASEAN recently instituted the "e-ASEAN" framework agreement. The goals of e-ASEAN include: the promotion of cooperation to develop, strengthen, and enhance the competitiveness of the ICT (information and communications technology) sector in ASEAN; the promotion of cooperation to reduce the digital divide within individual ASEAN member states and among ASEAN member states; the promotion of cooperation between the public and private sectors in realizing e-ASEAN; and the promotion of the liberalization of trade in ICT products, ICT services, and investments to support the e-ASEAN initiative.

Finally, Malaysia's Multimedia Super Corridor (MSC) serves as an example of another innovative regional initiative. The Super Corridor was created to help companies of the world test the limits of technology and prepare themselves for the future. Conceived as a corridor 15 kilometers wide and 50 kilometers long, it starts from the Kuala Lumpur City Center (KLCC) and proceeds down to Kuala Lumpur International Airport (KLIA). Two cities are being developed in the corridor: Putrajaya, the new seat of government and administrative capital of Malaysia, and Cyberjaya, a city with multimedia industries, R&D centers, a Multimedia University, and operational headquarters for multinationals wishing to direct their worldwide manufacturing and trading activities using multimedia technology.

The spread of information technology and the need for economic reform were discussed at length. Generally speaking, participants believed that the diffusion of new technology required the same things called for in other areas of the economy in the past. Governments need to: develop institutions that can effectively deal with the economic, political, and social ramifications of information technology; provide human resource development programs to help train a new generation in the ways of information technology, as well as to re-train those whose jobs are made extinct by the introduction of new technology (both points are part of an improved government capacity to deal with the impact of informational technology); and deregulate, thereby reducing internal obstacles to the use and entrepreneurial development of information technology, while enhancing the opportunity for external investment in the IT sector.

Perhaps most interestingly, participants found that information technology affects not only people's livelihoods, but also the ways in which people choose to participate politically. This idea was looked at from opposite ends of the spectrum. On the one hand, a participant suggested that Internet expansion slowly led to the loss of government control over the distribution of information while increasing the possibility for cyber-terrorism (the use of computing resources to intimidate, coerce, or control others). On the other hand, the diffusion of information technology to the general public was seen as a conduit for public participation in the political process. This is evidenced by daily Web surfing, political discussions in online public chat rooms, and the use of modern tools of technology (e.g., mobile phones and pagers) to facilitate the coordination of political demonstrations.

The Digital Divide

There was a lengthy discussion on the digital divide and whether it was deepening or diminishing, its implications for other "divides," and concrete suggestions and prospects for closing the divide. Data on the digital divide and on its deepening or diminishing was sketchy at best. For example, penetration of cellular phone use was suggested to be high in Hong Kong, Taiwan, Singapore, South Korea, and Japan, while it was lower in countries such as Malaysia, the Philippines, Thailand, China, and Indonesia. This indicates that the digital divide is increasing. However, with the cellular markets of the former countries more fully saturated than those of the latter, the future expected growth rate in the latter was such that the digital divide was expected to decrease in the years to come. The same case was made for the market penetration of the Internet in these countries.

Perhaps more important than whether we can adequately judge the widening of the digital divide, a number of participants stressed that the digital divide is indicative of other divides throughout Asia and the rest of the world. As such, the notion of "digital divide" can be noted and perceived in the following divisions: between the developed and the developing economies in terms of technological level and capacity profile; among the developed economies in terms of lack of interconnectivity and harmonization of standards; of philosophies in terms of risks and opportunities on information technology and quality vis-à-vis quantity of available information; of public policies in terms of acceptable risks and the pace of policy change; and as part and parcel of the education, gender, and environmental divides.

In attempting to decrease the divide, one needs to simultaneously address these issues as well. Suggestions for closing the divide were many and varied, covering a wide range of public and private initiatives, including the need to: provide computers and mobile services to those without access; train and educate people to be individuals and risk takers; set up digital opportunity taskforces; push for more non-English Web pages (as one participant suggested that upward of 70 percent of all Web pages were in English); and learn from universities that are taking advantage of IT, even in lesser developed countries. Some concrete steps in organizations such as ASEAN are already being taken. For example, there are a Framework Agreement in place, an increasing proliferation of "cyber laws," and a task force to deal with the digital divide issues.

SESSION 3

Japan

On the 50th Anniversary of the U.S.-Japan Alliance and with Okinawa as its venue, this panel served as an appropriate forum for a major discussion of Japan. Following almost 10 years of economic malaise, the Japanese situation is fragile but hopeful. After the United States, Asia looks to Japan for guidance and as an example for prosperity. From the "flying geese" model of economic development, to donations during the economic crisis, to addressing nonperforming loans, to promoting democracy, Japan was viewed as a leader, albeit a leader that sometimes needs to lead better. This resulted in a lively discussion about the prospects for the Japanese economy, its reform, the changing social landscape, and the role of Japan in the region.

Prospects for the Japanese Economy

Participants were positive, if guarded, in their hopes for the future of the Japanese economy. Most believed that the Japanese economy would not indefinitely continue the average one percent growth found over the last decade. In fact, while economic numbers did not necessarily reflect reforms undertaken, a number of participants suggested that we have seen real progress in a number of areas, including: government encouragement of changing business practices; improved corporate performance; maximization of shareholder value; recent increases in inward direct investment; and structural reforms, particularly in the business sectors. Optimism was expressed about prospects for a sustained economic recovery.

However, a number of issues still needed to be addressed. While structural reform is ongoing, the protracted pace at which it is being undertaken was seen by some as a cause for concern. Worries persist over recent polls showing a continued lack of consumer confidence among the Japanese public. Nonperforming loans were among the most serious concerns. In the 1990s Japan retired upward of $570 billion in nonperforming loans, but the Japanese acknowledge that there are still upward of $250 billion on the books at Japanese banks. There was continued concern over the performance of the stock market. The need for political leadership (hurt by the constant turnover in leadership at the highest levels of government, 13 prime ministers in the last 13 years) was a constant theme. Worries were expressed on whether a political leader able to tackle Japan's problems would ever emerge. There was a view of Japan's crisis as a "creeping" crisis, which is seen as harder to deal with than a major crisis. Disinterest in the Japanese political process (particularly in urban areas) compounded this problem. Finally, the changing demography of Japan, particularly the aging of the Japanese population, left cause for concern.

Unfortunately, Japan is not the only country in the region that needs to further reform its economy. Many Asian countries are in the process of reform, most as a result of their ongoing struggle to deal with the ramifications of the economic crisis. However, in comparing Japan's difficulties to those in other Asian countries it was suggested that Japan's are different, because its economy is now fully mature and has the added pressure of dealing with such issues as a declining birthrate and an aging society.

Reforms Undertaken and Ongoing


When discussing economic reform in Japan it is helpful, if not necessary, to break the processes down into three different areas: monetary, fiscal, and structural reform policies. Participants believed that most of the work that had been done in Japan was in the realm of structural reform. Most believed that little has been done in the area of monetary reform. Current efforts that have been undertaken have not worked due to a lack of demand for business investment resulting from excess capacity in the economy.

Successful fiscal reform has also been lacking. While the Japanese government has funneled trillions of dollars into the economy via eight emergency spending packages over the past decade, most conferees believed that the greater portion of this money was poorly targeted or wrongly spent for political reasons. For example, largely unneeded bridges, roads, and tunnels were just a few of the ways that we saw pork barrel spending in Japan and the waste of such funds.

Structural reform, however, has been much more wide-ranging than monetary or fiscal reform. Participants viewed deregulation as improving Japan's economy: in the areas of mobile communications, financial services and the airline industry; in the area of foreign exchange liberalization; in the breakup of sectoral regulation; in some blurring of the keiretsu alliances; in increased mobility amongst executives; and in companies moving toward more meritocratic promotion systems. The growth of the Japanese economy does not yet reflect the impact of the reforms, but there was widespread belief that they will serve as a basis for future growth.

Finally, discussion moved to the state of the Japanese stock market. With stock prices in Japan recently dropping to their lowest levels since 1984, stock market revitalization marked another area of economic concern that the government needed to address. Japan needs to create an environment for individuals to put more money in the stock markets. An emergency economic package, unveiled on March 9 in Tokyo, was seen by some conferees as a positive step in this direction.

Demographic Change and the Future of Japan

Conferees believed that Japan was a country faced with numerous demographic challenges in the years to come. Discussions focused on Japan's decreasing birth rate, aging population, and the role of women in the workforce. Concern over Japan's declining birth rate coincided with a concern over Japan's future labor needs and the need to provide social services for the aging population. According to current estimates, if Japan's population continues to shrink at its current rate over the next 50 years, Japan will have approximately 40 million fewer people in 2050 than it has today. One way to address this downward trend would be through tax incentives to have more than one child. However, if this fails, Japan needs to open its labor market to foreign laborers. In addition, there was concern about the ability of the shrinking younger population to provide for the longer living older population, both through government social safety nets and more traditional familial responsibilities.

Most participants viewed the aging population as a cause for concern. Different policy suggestions to alleviate ramifications from this included the need to change Japan's immigration policies to free up the labor market. However, others suggested the productivity and leadership of people in their 50s and 60s was a positive rather than a negative, believing that people in this age range could continue to be active participants in the Japanese workforce. Furthermore, by successfully dealing with the issue of a rapidly aging population now, Japan could display regional and global leadership, since many other countries would soon be faced with similar concerns.

In addition to the discussions on Japan's decreasing birth rate and aging populations, there was a lively discussion about the role of women in the Japanese workplace. The conferees overwhelmingly believed that over the last ten to fifteen years women have made great inroads into the Japanese workforce (there were no female Japanese conferees present). Conference participants, including Japanese and foreign businessmen and government officials, agreed that women have increasingly been seen as a highly skilled, educated, and valued part of the Japanese economy and social structure, with increasingly prominent positions in the work world and with growing consumer impact. The increase of women in the workforce further helped address labor market pressures caused by the decrease in population. However, others held the increase of women in the workforce responsible for lowering the birthrate in Japan (as more women enter the workforce they are having fewer and fewer children). While excited about the progress of women in Japan, some participants expressed their concern about the ability of the Japanese economic system to accommodate women in the workforce, both culturally and socially. Culturally, as in many other countries, women in Japan have many obstacles to overcome as they move from primary caregiver to co-provider. Socially, the government must address the gender specific needs of women ranging from provisions for maternity leave to enforcing rules against sexual and salary discrimination. While these topics were a focal point of discussion at Williamsburg some worried that they were not much discussed in Japanese political circles.

Japan's Role in the World and in the Region

A lengthy discussion about Japan's role in the region took place at Williamsburg. For starters, people questioned whether Japan was a declining power and China a rising power, and if this would result in a Japan that chooses or is forced by circumstance to play a secondary role in world affairs, much as we saw for Britain after World War I. Most conferees agreed that both Japan and its neighbors have no clear idea of what they want Japan to be and what they'd like Japan to do. Others suggested that taking leadership positions was a double-edged sword for Japan, because when it has taken policy stances, it has often been criticized for doing so.

However, still others suggested that even if Japan does play a secondary role in the traditional power areas of security and economics, it could lead in less traditional areas. Japan could lead in the global promotion of democracy and human rights. As most Asian nations have problems with nonperforming loans, Japan could set an example by developing successful ways to address this issue. Japan could further lead the region (and other industrialized nations) in addressing demographic concerns, as other countries will soon face similar circumstances.

Japan's relations with its neighbors also served as the topic of an in-depth conference discussion. For example, participants from Japan and the ASEAN nations focused on the importance of relations between the two. In addition to the expressed gratitude of ASEAN nations for Japan's help in bringing these countries out of the financial crisis with both bilateral and multilateral assistance, people of ASEAN nations understood and appreciated Japan's more general role as the major provider of foreign direct investment in the region. Japan's role and impact in regional organizations such as APEC were seen as positive and increasingly creative.

Perhaps Japan's most crucial relations are with the United States, South Korea, and China. First, people were of two minds regarding U.S.-Japan relations and the trip of Prime Minister Mori to see President Bush during the conference proceedings. Some people believed that relations were off to a promising start in the Bush administration as the two leaders have already met. This at the very least showed the importance the Bush administration attached to the relationship between the United States and Japan. However, others believed that, with the focus of the Bush-Mori agenda on economics instead of security issues, the mission had already failed.

Second, while South Korea's relationship with Japan could be better, both countries are believed to be sincere in their desire to move the relationship forward. The dynamic leadership abilities of Kim Dae-jung might make this possible. Third, participants summed up the important issues between Japan and China by describing them as the many "T" issues. There was Taiwan, the focal point of China's relations with any other country, TMD and its ramifications for security and a possible arms race in the region, Japan's textbooks and the possible revisionary nature of new editions, territorial disputes, transparency and the need to make positions and policies (between governments) more clearly known, and the need for the building of greater trust between the two countries. Japan's relations with Russia and the issue of territorial disputes were only mentioned in passing.

 


SESSION 4

Political and Security Prospects

The General Security Situation in East Asia

Since the end of the cold war the world has been witness to numerous encouraging events that have contributed to peace and security in the region:
  • Many state-to-state relations have been normalized (South Korea and China, the United States and Vietnam, North Korea and many European countries);
  • Peace has returned to Cambodia;
  • ASEAN has been expanded to include Vietnam, Cambodia, Laos, and Myanmar;
  • The creation of the ASEAN Regional Forum (ARF), now with North Korean involvement;
  • The establishment of the Korean Peninsula Energy Development Organization (KEDO);
  • Track II and Track III dialogue expansion, particularly those including Chinese and North Korean delegations; and
  • The Korean summit last year.

This last issue may be of overwhelming importance to the overall security situation in the region, as we can now begin to discuss how East Asian security might look after the last vestige of the cold war is put to rest. This, in turn, led to questions about the future status of the alliance system in the region and the possible move to greater multilateral security cooperation in East Asia generally, and Northeast Asia, in particular.

The U.S.-Japan Relationship

In Japan and through much of Southeast Asia the U.S.-Japan relationship is seen as indispensable to regional security. That said, there was some concern among participants that the United States might turn away from Asia, particularly if the U.S. economy continues to weaken. There was a perceived need for the U.S. to consider the peace of the region as in its own national security interests. However, even for those that looked positively toward the role of the U.S.-Japan security alliance there was cause for concern. For example, it has become increasingly important to address the sentiments of the Okinawan people, whose best interests have been sacrificed for the sake of national security. This was evidenced by the disproportionate presence of U.S. forces (1 percent of the Japanese population hosting 75 percent of the U.S. forces stationed in Japan) in Okinawa.

In this panel, the issue that received the most discussion, however, revolved around the question of a possible amendment to Article 9 of the Japanese Constitution and whether this would be a positive contribution to regional peace and stability. Article 9 states that aspiring sincerely to an international peace based on justice and order, the Japanese people forever renounce war as a sovereign right of the nation and the threat or use of force as a means of settling international disputes. In order to accomplish this aim, land, sea, and air forces, as well as other war potential, will never be maintained and the right of belligerency of the state will not be recognized. As such, an amendment to this article would allow Japan to field offensive forces, both conventional and nuclear. Some participants from Southeast Asian nations said this would be a disaster. Memories of Japanese aggression in the Pacific War were still vivid, and a militarized Japan could lead to a devastating arms race in the region. Others believed that the impact would be minimal and that Japan had a right to become a normal country. Instead, these conferees argued that the concern among many countries in the region now focuses on China. However, it was further suggested that the entire issue of amending Article 9 was academic, as there existed no public support in Japan for the requisite constitutional change. The original question stemmed from perceived U.S. desires for a more assertive Japan. This resulted in statements suggesting that the relationship between Japan and the U.S. is unequal, and, in fact, the U.S. was not looking to share leadership in the region, rather, it was simply looking to Japan to share the monetary costs of leadership in the region. If this is the case, the onus rests with the U.S. to share real leadership capacity with Japan.

The Korean Peninsula

Is the cold war on the Korean Peninsula coming to an end? Are we seeing the first steps toward reunification? While most participants would not go so far as to suggest that reunification was imminent, they were overwhelmingly of the mind that over the last few years, and more specifically over the last year, we have seen major movements in the right direction on the Korean Peninsula. These include:

  • The sunshine policy spearheaded by President Kim Dae-jung;
  • Last year's summit between the leaders of North and South Korea;
  • The subsequent family reunions after almost 50 years of separation;
  • The normalization of relations between the DPRK and a growing number
    of countries;
  • The efforts by China to help secure peace on the peninsula;
  • A seemingly increased interest in North Korea to learn about economic reform; and
  • A desire in North Korea to work with other countries to develop their economy.

While, these efforts have moved the relationship in directions unforeseen just a few years ago, there are still many obstacles to be overcome:

  • The perception by the new U.S. administration of North Korea as an enemy and a threat to U.S. national security, as the administration has often cited North Korea as one of the reasons why the U.S. needs to protect itself with the NMD and TMD;
  • A renewed North Korean demand for the withdrawal of U.S. forces from South Korea; and
  • The need to address the divergence between North Korea's domestic and external policies, in which domestic policies are still tightly regulated and opaque, while external policies are becoming increasingly liberal.

While most believed that the situation on the Korean Peninsula and peace in the region is the work of the two Koreas and the powers that be (United States, China, Japan, and Russia), there were those that separated the two issues. These participants believed that Korean reunification needs to be handled only by North and South Korea, while peace in the region was the work of all countries.

Southeast Asia

The discussion of Southeast Asia focused largely on the situation in Indonesia and the role of ASEAN in the region, but also included brief discussions on the role of Australia, New Zealand, and Islam. The discussion on Indonesia stressed that despite what one sees in the popular press, Indonesia is not on the edge of collapse. That said, there is a need to understand better the size, diversity, and vast population of Indonesia in order to comprehend its political, social, and economic situation. For example, conferees viewed Indonesia as a pluralistic society, which over the last 30 years has been entirely focused on economic development at the expense of social and political development. Indonesia's transition to democracy will be long and difficult. In the past, Indonesia has dealt with its internal cohesion problems by sending in troops. This culture of violence needs to be changed. There was a call to train and supply Indonesia's security forces for the protection of the populace, something that the United States needs to address, as the U.S. had cut off ties to Indonesia's National Defense Forces (TNI).

As the most populous and diverse country in Southeast Asia, the importance of Indonesia and its stability was seen as not only vital to the unity of the Indonesian state but its leadership was also seen as crucial to the successful functioning of ASEAN. ASEAN was largely viewed as an over-30-years success story. It has survived the 1997-98 economic crisis and was integrating its economies through AFTA. At the same time, it was driving important regional vehicles such as ARF and ASEAN + 3.

There was also some discussion of the role of Australia and New Zealand in East Asia. While acknowledging that they might not be Asian countries, it was also recognized that their interests and fortunes were inextricably linked to those of East Asia.

Finally, the role of Islam was brought to bear on the discussion. One participant suggested that there was a growing role for Islam in the politics of Southeast Asia, particularly in Malaysia. However, unlike exclusionary forms of Islam found elsewhere, this form of Islam was suggested to be inclusive, and thus not a threat to democracy or capitalism in the Asia-Pacific region. It was therefore important for the Williamsburg Conference to engage the region's Muslim intellectuals.

The Future of Multilateral Institutions

Much of the discussion in this area focused on ASEAN, ARF, and ASEAN + 3. Participants agreed that the ARF should be nurtured and encouraged to make the transition from confidence building to preventive diplomacy. Participants also felt that the ASEAN + 3 process could contribute to peace in East Asia.

Participants

AUSTRALIA
Hugh M. Morgan, Chief Executive Officer, WMC Limited
Richard A. Woolcott, Founding Director, Asia Society, AustralAsia Center, Former Secretary for Foreign Affairs and Trade

CANADA
Paul M. Evans, Director, Canada Asia Studies, Institute of Asian Research,
University of British Columbia

CHINA
Ding Yifan, Deputy Director, Institute of World Development, Development Research Center of the State Council
Yang Bojiang, Professor and Deputy Director, Northeast Asia Division, China Institute of Contemporary International Relations

DEMOCRATIC PEOPLE'S REPUBLIC OF KOREA
Jang Chang Chon, Director-General, Department of American Affairs, Ministry of Foreign Affairs

HONG KONG
Ronnie Chan, Chairman, Hang Lung Group of Hong Kong
Christine Loh, Chief Executive Officer, Civic Exchange

INDIA
N. N. Vohra, Director, India International Centre

INDONESIA
Ali Alatas, Former Minister of Foreign Affairs, Counsel, Makarim & Taira. S.
Dewi Fortuna Anwar, Associate Director for Research, The Habibie Center
Rizal Sukma, Director of Studies, Centre for Strategic & International Studies

JAPAN
Tatsuo Arima, The Special Advisor, Mitsubishi Corporation, The Representative of the Government of Japan, Ministry of Foreign Affairs
Kazutoshi Hasegawa, Senior Advisor, ITOCHU Corporation
Kiichiro Hasegawa, President & CEO, Proudfoot (Japan) Ltd.
Hiroshi Hashimoto, Ambassador Extraordinary Plenipotentiary in Charge of Okinawan Affairs, The Representative of the Government of Japan
Toru Hashimoto, Chairman of the Board of Directors, The Fuji Bank, Limited
Noboru Hatakeyama, Chairman & CEO, Japan External Trade Organization
Mikio Higa, President, Busena Resort Corporation
Akira Kojima, Managing Director, Chief Editorial Page Editor, Nihon Keizai Shimbun, Inc.
Minoru Murofushi, Chairman, ITOCHU Corporation
Toshiaki Ogasawara, Chairman & Publisher, The Japan Times
Yoshio Okawara, President, Institute for International Policy Studies
Keiji Tachikawa, President & CEO, NTT DoCoMo, Inc.
Nobuo Tanaka, Executive Director, Research Institute of Economy, Trade & Industry

MALAYSIA
Mahfuz Omar, Member of Parliament, Chief of Youth, Islamic Party of Malaysia
Karim Raslan, Partner, Raslan Loong

NEW ZEALAND
Philip Burdon, Chairman, Asia 2000 Foundation of New Zealand
Phillip Gibson, Ambassador of New Zealand to Japan, New Zealand Embassy
Tim Groser, Chief Executive Officer, Asia 2000 Foundation of New Zealand

PHILIPPINES
Chito B. Salazar, President and Chief Operating Officer, Systems Technology Institute, Inc.
Rodolfo C. Severino, Jr., Secretary-General of ASEAN, Association of Southeast Asian Nations, The ASEAN Secretariat
Alfonso T. Yuchengco, Chairman, Yuchengco Group of Companies

REPUBLIC OF KOREA
Han Seung-soo, Member, Korean National Assembly, Committee on Unification, Foreign Affairs and Trade, Former Deputy Prime Minister and Minister of Finance
Lee Hong-Koo, Chairman, Seoul Forum for International Affairs, Former Ambassador of Korea to the U.S.

SINGAPORE
Arun Mahizhnan, Deputy Director, Institute of Policy Studies
Tommy T. B. Koh, Ambassador-at-Large, Ministry of Foreign Affairs

TAIWAN
Man-Jung Mignon Chan, Director General, Pacific Economic Cooperation Council International Secretariat
Yun-han Chu, Vice President, Chiang Ching-Kuo Foundation for International Scholarly Exchange
Douglas Tong Hsu, Chairman & CEO, Far Eastern Group

THAILAND
Pote Videt, Managing Director, Credit Suisse First Boston (Singapore) Limited

UNITED STATES
Desaix Anderson, Executive Director, The Korean Peninsula Energy Development Organization (KEDO)
Ronald J. Anderson, Senior Vice President & Chairman, AIG Companies in Japan & Korea
Harry G. Barnes, Jr., Senior Advisor & Consultant, Asia Society
Marshall M. Bouton, Executive Vice President, Asia Society
Carla A. Hills, Chairman & CEO, Hills & Company
Catherine L. Mann, Senior Fellow, Institute for International Economics
Norman J. Ornstein, Resident Scholar, American Enterprise Institute for Public Policy Research
Nicholas Platt, President, Asia Society
Stanley O. Roth, Former Assistant Secretary of State for East Asia and Pacific Affairs

OBSERVERS
Timothy Betts, U.S. Consul General of Okinawa
Justin P. Brown, International Researcher, Information & Analysis Department, Research & Information Group, ITOCHU Corporation
Lucy Cummings, Program Associate, Asia Society Hong Kong Center
Masayuki Endo, President's Office, NTT DoCoMo, Inc.
Hwang Thae Hyok, Interpreter, Ministry of Foreign Affairs, DPRK
Shinji Ishii, Assistant to the Chairman, ITOCHU Corporation
Jang Song Il, Researcher, Ministry of Foreign Affairs, DPRK
Jong Thae Yang, Researcher, Ministry of Foreign Affairs, DPRK
Mikio Kato, Executive Director, The International House of Japan
Christopher J. Lafleur, Minister, U.S. Embassy, Tokyo
Katherine McHugh Lichliter, Director, Asian Affairs, Salzburg Seminar
Chris Livaccari, Public Affairs Officer, U.S. Consulate General in Naha
Keiichi Ozawa, Special Assistant to the Chairman, The Fuji Bank, Ltd.
Sheila Platt, Director of External Relations, Community and Family Services International
Robert W. Radtke, Vice President, Policy & Business Programs, Asia Society
Olin Robinson, President, Salzburg Seminar
Kotaro Shiomi, General Manager, Information & Analysis Department, Research & Information Group, ITOCHU Corporation
Mary Lee Turner, Director, Asia Society Hong Kong Center

RAPPORTEUR
Michael G. Kulma, Program Officer, Policy and Business Programs, Asia Society