30 September 1988 - 02 October 1988

The Significance for the Trans-Atlantic Relationship of the Economic Rise of East Asia

Chair: Ambassador Theodore L Eliot Jr

A joint conference with the World Affairs Council of Northern California to be held at the Bodega Bay Lodge, Bodega Bay

This conference, the start, I hope, of a continuing partnership with the World Affairs Council of Northern California, was asked to consider whether the increasing preoccupation in the US with East Asia and the Pacific, resulting from the expanding economies of Japan and others in the area, would be at the expense of traditional US links across the Atlantic. Inevitably, however, the conference strayed into other areas, notably pressures on US force levels in Europe and concerns about the European Community's single market.

In the opening session, three elements were identified as relevant: the continued, although originally temporary, deployment of US forces in Europe; the pressures for fairer (in the US view) burden-sharing; and, more significant in the US relationship with East Asia than in Europe's, the expanding trans-Pacific trade and the economic strength of Japan. Japan, however, though the centrepiece, was not the only actor. Nor was East Asia monolithic. The case for continued US military involvement, as a contribution to the balance of power, appeared stronger in Europe than in the Pacific (it was suggested too that US guarantees of Israel depended in part on US forces in Europe). Four possible scenarios emerged: first, no significant change in the present pattern; second, reduced US military involvement in the Pacific, its European deployments remaining unchanged; third, a reduction in both areas (because the US saw the possibility of indigenous balances of power); and, fourth, a reduction in the Atlantic area alone.

Japan, it was noted, though by temperament and constitutional limitation more given to following than leading, was already the third largest defence spender in the world, her defence budget linked to her rising GDP. Soon to be the largest provider of overseas development aid, Japan should "untie" more of that aid. A yen-trading bloc, in effect, already existed. That said, other factors needed to be taken into account, notably the new policies in China and the Soviet Union. Finally, it was suggested that US/East Asian/European ties were not a zero-sum calculation: relations between the three regions could develop on a triangular basis without necessarily damaging relations between any of them.

The three groups into which the conference divided considered, respectively: the influence in this context of political and demographic shifts within the US; the military aspects; and the economic considerations. On the first, we concluded, perhaps surprisingly, that there was no clear evidence of a political shift within the US, and that demographic changes would not affect the equation between the Atlantic and the Pacific, partly because American Asians did not act as lobbies for their countries of origin and partly because the influence of the other main element, the Hispanics, would operate more in relation to Latin America than the Pacific.

The second group looked at the questions posed in the light of the world situation, especially developments in Soviet policy, and against that considered the threat or threats in the Pacific and their implications. While some argued that there was a new situation in that Soviet foreign policy, for whatever reason, was no longer perceived by public opinion as expansionist, others countered that there had been no actual reduction in Soviet military strength - Soviet forces in the Pacific were being modernised - and it was only prudent to maintain the West's guard. Even so, the group had difficulty in defining a military threat in the Pacific. Rather the threat was economic, putting at risk political stability in the region. New Soviet approaches were significant, but their trend was still not clear. China, though perceived as a long-term threat by some in the region, was still feeling its way. Japan's increasing military strength had to be fitted into any Western strategy, but given the perceived threat, it might be better to channel her resources more into development aid than into defence, even if that was confined to the air and sea. Moreover, it might be desirable to find some "basket" or framework for all this, though the conference was not able to suggest any practical approach, some indeed expressing scepticism about the concept.

Against that background, the US was not shifting military resources to the Pacific, and would not do so. It was clear, however, that both for budgetary reasons and because of dissatisfaction, not only on the Hill, at the perceived failure of West Europe to carry its fair share of the defence burden, there would be reductions in US forces in Europe, even if that was an illogical response to the perceived continuing Soviet threat, and even if, to realise savings, forces withdrawn would have to be disbanded. While some disputed the facts behind these arguments, none disputed the conclusion: ideally any US reductions should be bartered for Soviet reductions in a comprehensive agreement, difficult as that might be.

The group devoted to economic aspects argued that continuing trade surpluses created problems wherever they occurred. The US reaction, especially if the EC turned protectionist, might also be protectionist, and isolationist, especially if a recession ensued. None of this however would of itself lead to a US shift towards the Pacific. Despite assurances that the single European market would not increase protection, but by dismantling non-tariff barriers, would enhance access, strong scepticism was expressed by all the non-Europeans. For their part, the Europeans noted that if called upon to assume greater economic responsibilities, they would expect greater consultation - a point which applied no doubt in the field of military burden-sharing also. Over agriculture, all nations were sinners: we must work together to master that problem and more generally to build a triangle of forces between the US, West Europe and Japan, "a three-legged stool".

To conclude, the conference considered the relationship between the three regions against a background of changes in four areas; the new Chinese and Soviet policies; shifts in political and demographic patterns in the US, and its reduced relative economic strength; and the single market in Western Europe. The easily understood threat of Soviet expansionism had held the West together: if the world became convinced that the threat had changed, Western policies would face problems of adjustment, having larger implications for trans-Atlantic relations than any other factor. Failure to deal with the US fiscal deficit - and the difficulties were clear - could lead to recession, protection, isolationism and increased pressure on the allies of the US over burden-sharing. Finally the European single market and the US-Canadian trading area increased the danger that the world might divide into protectionist trading blocs. Of the four scenarios described in paragraph 2, the first, little change, was the most probable in the short term, leading in the longer term to the last, a reduction of US involvement in the Atlantic, without any corresponding increase in the Pacific and eventually to the third, reductions in both regions. In any event, it was inevitable and right that Japan should play a greater role, in the IMF, in the World Bank, probably in the UN Security Council and as leader of the Asian world both economically and, despite disclaimers, militarily.

This Note reflects the Director’s personal impressions of the conference.  No participant is in any way committed to its content or expression.

Conference Chairman: Ambassador Theodore L Eliot Jr
Former Executive Director, Center for Asian Pacific Affairs, The Asia Foundation


Professor Robert O'Neill

Chichele Professor of the History of War, University of Oxford and Fellow, All Souls College, Oxford

Mr Denys Bennett

Regional Director (North America), British Telecom
Mr David Gillmore CMG
Deputy Under-Secretary of State, Foreign and Commonwealth Office
Sir John Graham Bt GCMG
Director of the Ditchley Foundation
The Rt Hon the Lord Jenkin of Roding PC
Life Peer (Conservative); Chairman, Friends Provident Life Office; UK Co-Chairman, UK-Japan 2000 Group; Member, UK Advisory Board, National Economic Research Associates Inc; Member of Council, UK Centre for Economic and Environmental Development
Sir John Leahy KCMG
Retired as High Commissioner in Australia (1984-88)
The Rt Hon Bruce Millan MP
Member of the Commission designate (from 1 January 1989), Commission of the European Communities, Brussels; Member of Parliament (Labour), Glasgow, Govan
Mr Peter Ricketts
First Secretary (Chancery), British Embassy, Washington
Mrs Heather Weeks
Deputy Director of the Ditchley Foundation
Mr Nicolas Wolfers
Group Adviser (Asia and Pacific), Midland Bank Group; Member, British Overseas Trade Board’s Japan Trade Advisory Group, Sino-British Trade Council, Opportunity Japan Campaign Steering Group; Chairman, Young China Business Group; Member, UK-Japan 2000 Group, UK-Korean Economic Cooperation Group
Dr Michael Yahuda
Senior Lecturer in International Relations, London School of Economics and Political Science

Mr Maurice Copithorne QC

Associate Counsel, Ladner Downs, Barristers &Solicitors, Vancouver

Professor Jacques Barrat

Professor of Political Geography, University of Paris II

Dr Klaus Rupprecht

Deputy Consul General, Los Angeles

Mrs Anson Chan

Secretary for Economic Services, Government of Hong Kong

Mr Kasahiro Fujiwara

Director, International Economic Affairs Department, Keidanren, Tokyo
Dr Taizo Yakushiji
Professor of Political Science, Graduate Institute of Policy Science, Saitama University, Japan; Member, Japan Association of International Law and Diplomacy, Japan Political Science Association, Japan Association of International Politics, Behavioural Society of Japan

Mr William J Barnds

President, Japan Economic Institute
Mr Leslie G Denend
Principal, McKinsey & Co Inc
Dr Patricia Dinneen
Regional Vice President, British Telecom International Inc
Mr William G Gaede
Managing Partner, Touche Ross & Company
Mr Peter T Jones
Director, Consortium on Competitiveness and Co-operation, University of California, Berkeley
Mr Sherrod McCall
Foreign Affairs Consultant
Mr Loyd W McCormick
McCutchen, Doyle, Brown & Enersen
Mr John B M Place
Retired Chairman, Crocker National Bank
Dr Nelson W Polsby
Director, Institute of Governmental Studies, University of California, Berkeley
Mr Rollin Post
Political Correspondent, KRON-TV
Mr Jim Rohwer
Asia Editor, The Economist, London
Mr Paul S Slawson
President and Chief Executive Officer, InterPacific, Inc
Dr David Teece
Berkeley Roundtable on International Economy, University of California, Berkeley
Mr Roy A Werner
Manager, Program Planning Development and Analysis, Northrop Corporation
Mr Mason Willrich
Executive Vice President, Pacific Gas and Electric Company
Mr Frederick Wyle
Former Deputy Assistant Secretary of Defense
Mr Casimir A Yost
Executive Director, World Affairs Council of Northern California