<html><body>The Revitalization of the U.S.-Japan Alliance: An American, Japanese, Chinese, and Australian Perspective April 4, 2005 Unedited transcript prepared from a tape recording. <TABLE width="100%" border=0> <TBODY> <TR> <TD vAlign=top align=left width="12%">9:45 a.m.</TD> <TD vAlign=top align=left width="88%" colSpan=2> Registration</TD></TR> <TR> <TD vAlign=top align=left width="12%"> </TD> <TD vAlign=top align=left width="18%"> </TD> <TD vAlign=top align=left width="70%"> </TD></TR> <TR> <TD vAlign=top align=left width="12%">10:00</TD> <TD vAlign=top align=left width="18%">Discussants:</TD> <TD vAlign=top align=left width="70%">Nobukatsu Kanehara, Embassy of Japan</TD></TR> <TR> <TD vAlign=top align=left width="12%"> </TD> <TD vAlign=top align=left width="18%"> </TD> <TD vAlign=top align=left width="70%">Andrew Shearer, Embassy of Australia</TD></TR> <TR> <TD vAlign=top align=left width="12%"> </TD> <TD vAlign=top align=left width="18%"> </TD> <TD vAlign=top align=left width="70%">Lanxin Xiang, Graduate Institute of International Studies, Geneva</TD></TR> <TR> <TD vAlign=top align=left width="12%"> </TD> <TD vAlign=top align=left width="18%"> </TD> <TD vAlign=top align=left width="70%">Balbina Y. Hwang, Heritage Foundation</TD></TR> <TR> <TD vAlign=top align=left width="12%"> </TD> <TD vAlign=top align=left width="18%">Moderator:</TD> <TD vAlign=top align=left width="70%">Dan Blumenthal, AEI</TD></TR> <TR> <TD vAlign=top align=left width="12%"> </TD> <TD vAlign=top align=left width="18%"> </TD> <TD vAlign=top align=left width="70%"> </TD></TR> <TR> <TD vAlign=top align=left width="12%">Noon</TD> <TD vAlign=top align=left width="88%" colSpan=2> Adjournment</TD></TR></TBODY></TABLE> Proceedings: MR. BLUMENTHAL:  My name is Dan Blumenthal and I'm here with the American Enterprise Institute, a resident fellow in Asian studies. I am very pleased to be moderating this very distinguished panel on this very important subject. Today, what we are going to do is discuss the implications of the revival and transformation of the U. S.-Japan alliance.  As many of you know, Secretaries Rice and Rumsfeld met with their Japanese counterparts on February 19th of this year to adopt a joint statement on common strategic concerns, common strategic objectives and defense cooperation. What this was, was really a culmination of extensive review both in Japan and in the United States and bilaterally of the two countries' defense postures respectively and also on how the alliance can transform to meet the both global and regional threats of today.  So, the statement, in a sense, really ratified an ongoing process of alliance transformation and revival. There has been significant controversy over the significance of the [audio break].  In particular, observers and analysts of the region and the region's security have focused on the statements indirect and direct references to China and Taiwan, really the first joint statement that included those kinds of references in, I believe, in the alliance's history. The statement calls for the resolution of, the peaceful resolution of the Taiwan Straits issue and also calls upon China to improve its military transparency.  China objected swiftly to this statement, calling it basically government spokesmen saying that they firmly oppose this U. S.-Japan statement on the Taiwan issue and others within the foreign ministry and also throughout the Chinese press called the statement irresponsible and untenable. The statement did not merely focus on China and Taiwan.  The two sides also made official and ratified their ongoing work in transforming the U. S. force posture on Japan as part of the U. S.'s bottom moves throughout the region and also more agreement on areas of common security concerns, such as, missile defense. Secretary Rice recently went to Japan and reaffirmed the U. S. commitment to supporting a more global Japanese role, a more normal Japanese role in international security affairs, including she called for the unambiguous, she said, support for a permanent Japanese seat on the UN Security Council. So, our conversation today really is going to cover a handful of issues.  Some of the issues raised are what role will Japan play in regional and international security going forward.  We will touch on the issue of Sino-Japanese relations and if they really are in a downward spiral.  We are going to touch on issues of how other U. S. allies throughout the issue view this transformation of the alliance.  Is it a contribution to regional security? Also, we are going to touch briefly on the path to sustained security in a very fluid strategic situation throughout the region, both in terms of the North Korean challenge, the emergence of China and the threat of terrorism.  We are going to try to get at the question of should the U. S. continue to upgrade its bilateral alliances in the mold of the hub and spoke system or should we be moving to more multi-lateral security structures. We are fortunate today to have a very distinguished panel to discuss all these issues.  We have Nobukatsu Kanehara, who is the Minister for Political Affairs at the Embassy of Japan, who will speak, obviously, from a Japanese perspective.  We have Andrew Shearer, who is the Minister-Councilor for Political Affairs at the Embassy of Australia, who will touch on the Australian point of view of the alliance transformation and regional security issues.  We are pleased to have Lanxin Xiang, who is a professor of international relations at the Graduate Institute of International Studies in Geneva and we have Balbina Hwang, who is a Japan and Korea expert at the Heritage Foundation. Their distinguished biographies are all in the packets you have, so you can read more about them in those packets.  These speakers are all true experts and I'm honored to share the floor with them today. What I think we will do is begin with Minister Kanehara, his statements and follow that with Minister Shearer and then have Balbina Hwang and Lanxin Xiang do clean up for us. After they finish, we are going to open it up to questions.  So, with that, let me turn it over to Minister Kanehara. REMARKS BY NOBUKATSU KANEHARA,MINISTER EMBASSY OF JAPAN MINISTER KANEHARA:  Well, thank you, Dan. It is a great honor and pleasure to be here today.  After the last [inaudible] meeting in Washington, I was invited to several times to talk about the meeting.  Every time I started saying that I was the duty officer of the day, I was not in the meeting. Now, it is time I spoke about the meeting again here.  So, I am here today.  I am not speaking about the contents of the meeting.  Rather, I'd like to talk about the strategic background of the [inaudible] meeting.  So, it is not always the government's position, but personal positions, opinions are [unintell]. I am pointing to five points today.  The first two are the historic trends in East Asia.  The second two points are the elements that could shape the strategic environments in East Asia in the 21st century.  Last, is the future revolution of Japan's alliance.  Let me start with two historic trends here in East Asia. The very first one is globalization and economic integration in East Asia.  The industrial revolution gave huge national power to Europeans and Americans.  Globalization in Japan started only in the late 19th century and Japan had a big leap in the 1960s.  In the 1980s, four tigers in Asia, such as, Hong Kong, Korea, Taiwan and Singapore took the suits.  Asian nations followed.  In the 1990s, the end of the cold war swept away old barriers to free trade.  The Internet brought about Asia's globalization. The spectacular event today is the [unintell] China.  [Unintell] China is on the wave of globalization.  It's limited as cheap, but skilled labor markets are throughout all over the world.  From all over the world money and technology, everybody exports to China raw material and parts.  China assembles them and exports them to industrial nations' consumer markets.  The technology is becoming very quickly indigenous and China's prosperity is moving from the coastal prosperous area to the continental hinterlands.  This new dynamism has been pushing further economic integration of the whole Asia Pacific region.  East Asia would be soon the third economic peer of the world's economy before and after Americans and Europeans. But we should not see East Asia as a fortress.  It is only a part of the prosperity achieved by the global and open economic system.  East Asia would wither when it is isolated, as a flower would when it is cut off from its stem. The second trend here to remark is democracy in East Asia.  This is an important strict trend.  It is sometimes less spectacular than the economic expansion, but it is, in a sense, more important.  Industrialization goes hand in hand with democracy.  Organization and industrializations are painful experiences.  People should depart from traditional values and society that is closely united in the rural parts towards mechanized massive production and cool urban societies. Those who could not endure the pain of industrialization go back towards the dark, anti- [unintell] and extreme fundamentalism.  Asians face those pains.  In many nations, newly created middle class or politically opinionated reformers pushed open the door for democracy.  The so-called dictators [unintell] after achieving their historic missions failed one by one in the region. At the turn of the 1990s, we saw Korea emerge as a proud industrial democracy and then Taiwan had free elections.  The Philippine Islands have become proud and confident democracies.  The largest Muslim nation, Indonesia and neighboring Malaysia are now proclaimed democracies. In some authoritatian [sic] regimes, the Internet and [unintell] are giving a meaningful space for freedom of speech, as Dr. Rice proclaims in Tokyo recently.  East Asia is marching towards flourishing democracies, of course, only with some exceptions. These are the big two historic trends in East Asia.  One is globalization, expansion of the economy, integration.  A second is the march towards democracy. Now, let me turn to two strategic elements that could shape the strategic setting of East Asia in the 21st century.  The first is Japan's return and the second is the Chinese rise.  Let me talk about Japan's return first. After Japan was defeated 50 years ago, its empire was then composed of three parts.  Some say by Russians, but basically three parts, Japan proper, Korea and Taiwan.  Japan was reduced roughly to half in terms of its territory and population.  It lost three million lives in the war.  Its military was disbanded; its economy devastated. Japan joined, during the cold war, the free nations.  It engaged upon a strategic chance for its revival.  Now, its economy has attained the second largest on earth.  Japan's economic assistance is reaching globally, reducing illiteracy, infantile mortality and absolute poverty in every corner of the globe. Japan held a strong pacifism after the war and restrained its use of force to zero for five decades.  It is now modestly expanding its political [unintell] aura again and let me explain. Japan's peacekeeping operations started in 1992, sending civil defense forces to Mozambique, around to Kenya.  The Golan Heights, they are still there and Eastern [unintell], too.  After 9/11, Japan sent for the first time since the Pacific War, five warships during war time to the Indian Ocean to participate in enduring freedom operations to fight against international terrorism. Three, under the new Japan-U. S. defense guideline redefined in 1997, Japan assumed even partially, the responsibility for the regional security that Japan surrendered to the Americans in 1945.  It has, in fact, agreed to assist the U. S. forces in contingencies in the area surrounding Japan. Four, in the Iraqi War, Japan sent, for the first time again since the last war, ground troops to Iraq for humanitarian operations. Five, in Colombia's disaster last year, Japan-U. S. forces, Australians and others dispatched their forces swiftly [unintell] to rehabitate [sic] the devastated region. Not only that, Japan [unintell] the oldest democracy and the biggest industrial democracy in East Asia.  This element dates back to 1898, only one hundred years later than the U. S. Congress.  Despite some deviations, today's Japanese are proud of the long tradition of their own modern democracy.  Japan was a precursor in the internationally in terms of modernization, but also in terms of democracy. Japan today is not a challenger to the international status quo.  Japan has come back as a mature political power.  Japan is now sustaining prosperity and stability in the region and pushing the historical mainstream of freedom and democracy in the region. The vehicle for this is and will be for Japanese the Japan-U. S. alliance.  Let me tell you why.  One, the alliance has sustained for half a century stability in the region, keeping the region of [unintell] against the communist continental [unintell].  It is the biggest weight in the Asia Pacific power scale. Two, the U. S. Seventh Fleet based in Japan has kept open indifferently sea lanes of East Asian nations, guaranteeing steady oil flow from the Gulf region.  Three, consumer markets and technological progress of the Japanese and American national economies were locomotives of regional prosperity.  Their combined economic size is still three times bigger than the whole Asian economy, including China and India. Four, the alliance has been a beacon of freedom and democracy.  During the cold war, it showed what [unintell] and a transparent society is to other Asian nations.  After the last century, winning the freedom in Asia came always from the sea, not from the continent. In a word, the Japan-U. S. alliance has been and will be the spine of Asia Pacific stability and prosperity as well as a beacon of freedom and democracy.  Japan is the greatest beneficiary of this strategic framework and to sustain is to Japan's vital interests as well as, we hope, Americans'.  Any other East Asian nations, including China, are also great beneficiaries of the same strategic setting. Now, let me turn to the Chinese rise.  In the 1970s China joined the free nations as a communist, but strategic partner after China got freed from the Soviets.  Then the great leader Deng Xiaoping took a bold turn toward a free and open economy, keeping the communist faith.  It was an amazing success. China got an [unintell] for expansion.  It is now a world factory, absorbing investment, technology and jobs through outsourcing from many industrialized and surrounding nations, which should not complain, not only because it is to our consumers' benefits.  It is not our [unintell] benefits, but also because it was our own strategic choice. The choice's name was and is engagement policy.  The salient point of this theory is that, the more China develops the more responsible, the more transparent, the more [unintell] China would be.  Would it be a case where [unintell] China challenge against the international status quo, as the Germans did against the British or the Japanese did against the U. S. in Asia or the Soviets did against the U. S. Globally.  It depends upon the strategic choice over China. On our part, we should firmly stay the course of engagements, bleeding in a fruitful relationship with the present and future China, for China simply shares a fundamental interest with Japan and the United States, such as, maintaining a vision of prosperity, stability, a vision [unintell], open economic systems as well as open sea lanes and a steady flow of oil from the Gulf region. The truth is that, China has no [unintell] score to challenge.  China is already in the house of freedom, reaping huge rewards from there.  China is a part of it, not outside of it.  But the engagement policy may be a very wrong term in the [unintell] policy, because modernization, maturity are not the model of the day for any nations. Rome was not made overnight.  Japan was not.  The United States was not.  China would not be. During this wrong time of transition, we might have to face maybe the following three things.  One is rapidly modernizing the People's Liberation Army.  The second is surging nationalism and a third is painful and huge mutation of the Chinese society.  We might have to be prepared. Let me touch on them one by one briefly, but first is the PLA.  China is looking at the eastern sea for the first time in history.  They were always looking at the north.  The strong [unintell] nations like the Mongols for [unintell], the Japanese [unintell] Corps in the 1930s and most recently, the Soviets after the 1970s. While building up the nuclear arsenals made in Mao's era, China is now modernizing in particular its sea and air power.  The PLA has acquired or will acquire [unintell] oceans of the many destroyers, Russian Kilo class submarines, indigenous Zong class submarines, Russian Sunburn[ph] cruise missiles and Russian Fanta[ph] fighters and J-10 fighters as well as huge SRBM and IRBM arsenals.  The PLA is becoming critical and important military forces in the region.  It is still a baby nuclear unicorn [?] dragon, but their [unintell] and [unintell] are sharper.  Scales are hotter. As the history in any nation state shows, the military is usually the fastest part to grow down any other branches of the government.  Their national budget's opacity complicates our analysis, too. The second is China's surging nationalism.  It is quite natural that the Chinese take pride in the recent economic expansion, but nationalism is a matter of emotion, not a matter of policy.  When combine with international responsibility, nationalism puts most of China into a much higher place in the international community in the future, but it needs skillful leadership to guide it, not to ride upon it. The last is non-stop, enormous change over the Chinese society.  That happened in Japan and Korea in the last decades.  It is now the turn of China.  China grew out of the communist [unintell].  This is the other way around over what happened in Europe.  Now, China has to face the pains and social mutations caused by the modernization and the industrialization. China has many frailties inside to overcome, such as, wealth gap, agrarian hinterlands lagging badly behind prosperous coastal parts, black stream of people from the hinterlands to the coast, unemployment, water shortage, corruption, environmental problems, [unintell] energy of [unintell], weak jurisdictional power over central governments and the badly performing [unintell] and so on.  Only the economic growth could contain the social frustration for some time. We hope that Chinese society would continue to grow stably to maturity and we are ready to share both our goods and bitter experiences for the success.  But the success will not be achieved without any social pains. Let me turn my eyes briefly to the Taiwan Straits.  If there are reporters here today, I'm sorry.  I can't give you the headlines to tomorrow's paper.  This is quite often repeated [unintell].  Let us look quietly and objectively at what is happening over the straits. It is a new dynamism there since the 1990s and could possibly be out of control.  The danger of the Taiwan Straits is half political and half military.  One is political; the first is political. Political tension consists of nationalism on both sides of the straits.  On the Taiwanese side, in 1996, there was the first free elections and [unintell] was elected and he was an indigenous Taiwanese.  In fact, 80 percent of Taiwanese are indigenous Taiwanese who lived a different history from Kuomingtang people who came to the island in 1945, after the defeat of the Japanese.  They experienced modernization under Japanese rule. Under Kuomingtang's rule, this indigenous identity of political feelings were oppressed simply.  But now, through democracy, it comes up through the surface of smearing the mystic [unintell].  This is the Taiwanese eyes. On the Taiwanese side, Taiwan is largely [unintell] islands of Kuomingtang who fought against Mao Zedong.  It is a matter of unfinished civil war and cannot be the one of a self-determination war, independence.  China cannot abandon the goals set by hundreds of people in the Republic of China.  Their resolve culminated in the recent anti-secession goal. Taiwanese emotions are vivid under new democracy and Chinese emotions are [unintell] up by surging nationalism based upon the recent economic achievement.  This is a political [unintell] that we have to face over the strait. Let me turn my eyes to the military aspect, too.  As I said about the PLA [unintell], it is evident that China will soon out number the modern weapons of the Taiwanese.  China's national defense budget would have far surpassed not only that of Taiwan, but that of Japan if the estimates of the Pentagon are correct. In addition, the balance of power, the military one, is fragile, especially when the political tension is on an upward spiral.  There should be no mischaracterization, as good generals know well.  It is one thing to choose the best time to start a war, but it is quite different to find a quick way to cease fire.  Any disruption of stability affects every other nation in the region. The Japan-U. S. alliance has maintained the peace and stability of the region for half a century.  The answer of the alliance to the East Asia issue has been the same for five decades and it could never be clearer today. The positions are as follows.  Japan-U. S. continue to uphold the legal position defined at the time of normalization with China.  The second is, they also continue to uphold the principle that is the only peaceful solution is the answer, the single possible answer to the situation.  This should be all the more true with [inaudible] situation.  Wisdom and restraint on both sides is the remedy.  Reason shall prevail over the strait.  This connection is spanning developments of economic integration over the straits should play a mediating role in today's political tensions. Finally--I have five minutes more. Finally, let me talk about the future of the Japan-U. S. alliance.  Any alliance is based upon the common strategical objectives.  They were defined in the last [unintell] meetings.  I don't repeat them one by one again.  I stress only the principle point.  That is, the alliance here has the common cause to enhance freedom, democracy, stability and prosperity in the region.  It is not only American or Japanese vital interests, but also it is a historic mission of the alliance, because it is pushing the back of the basic trend of history in East Asia. We share the same goals with other democracies in the region, too, like Australia, [unintell], Korea, Thailand, Indonesia and Mauricia.  We share a large part of our southeast interest with reforming the nations who came out of the cold, such as, China and Russia.  The alliance should take a lead in the new turn of history in East Asia.  To achieve this, the Japan-U. S. alliance should go through transformation farther away down the road. The posture and doctrine of the alliance are still very much hostage of the cold war.  It was too single mindedly focused on the potential threat of the Soviet Red Army, not only that, but the alliance was always on the paper and, in fact, luckily, it has never been tested by fire. If Japan and the United States had fought any war together, there should be more coordination, more core planning, more operability, more core uses of bases and more coordination of ROEs. But the cold war is over.  It is now history.  Now, from the India Ocean to Iraq, from contingencies in the area surrounding Japan to the tsunami disaster, the military cooperation alliance is evolving into a far more flexible and multifunctional one.  The alliance needs an overhaul and mutation. In addition, as Enduring Freedom and Iraqi Freedom showed it, Japan should learn to act in coalition.  It had experiences in the First World War and in some other occasions.  Let me remind you that Japan sent several warships, frigates in the First World War and like democracies like Australia, would always be a good candidate to cooperate with.  Australia, in fact, agrees to protect the Japanese forces in Iraq.  We are very thankful. Now, let me conclude.  I have a dream.  I'm not Father King, but I have a dream.  One day, if a [unintell] community would appear like an Atlantic community, they step on the same university values, the same [unintell] interests and the shared economic framework of free trade.  You may laugh at me, but it is not an impossible dream. Europeans were killing each other by millions only 50 years ago.  Europe was [unintell] severely by ideology only 15 years ago.  Now, we see the European Union emerging.  If they [unintell] my country, Asia can be the one that can do it.  East Asia in the 21st century should be the [unintell], transparent, stable and prosperous community with a high standard of human rights and good governors.  And it will be a major part of the [unintell] community. An [unintell] the region could and should cooperate in a variety of occasions for the common causes or to cope with the common challenges vertically, economically and militarily.  A Japan-U. S. alliance could and should be at the core of such efforts. Thank you for listening. [Applause] MR. BLUMENTHAL:  Thank you, Minister Kanehara for--I think you accomplished the impossible, which is an excellent, substantive presentation without making any new news. [Laughter] MR. BLUMENTHAL:  A skilled--very, very well done.  Thank you very much. Now, let's turn it over to Minister Shearer from the Embassy of Australia. REMARKS BY ANDREW SHEARER, MINISTER EMBASSY OF AUSTRALIA MINISTER SHEARER:  Thanks, Dan. I will aspire to achieve the same goal.  I was very conscious that you were sitting there, Chris. What I'd like to do today is just sketch out for you an Australian perspective on some of these questions.  The Australian alliance and the Japanese alliance have been seen traditionally as respectively the southern and northern anchors of the U. S. alliance system in Asia.  The thrust of what I want to say today is that, I think we need to sort of start looking at that a bit differently because to me, an anchor connotes a kind of passive supporting role.  I think both alliances are evolving in a different way. So, that I can have a stab at the difficult question Dan has posed about multilateral security arrangements, what I'd like to do is talk a little first about the U. S.-Japan alliance, although Nob has set that out in such masterly terms that there is little that I can add.  I then want to talk about two other legs of what you might see increasingly, I think, as a strategic triangle.  That is the Australia-U. S. alliance and the growing defense relationship between Japan and Australia. I think the first thing is just to sort of take stock, if I may, of the radical changes that we've seen in Japanese security policy and in the alliance between Japan and the United States.  I was struck when I did some reading to get ready for today that, it was only really in the 1980s that Japan even talked about a security treaty with the United States as an alliance.  And since then, I think we've seen a very profound change. We've seen a move away from a very sort of asymmetric alliance to an alliance that is based much more on reciprocity and we've seen development of Japanese capabilities that complement U. S. capabilities in the region.  We've seen an increasing degree of integration, military integration in terms of capabilities, command and control, intelligence relationships.  I think that is very important. We've also seen a broadening, a gradual degree of broadening of the scope of the alliance between Japan and the United States.  We've seen an increase in the roles that are embraced by the alliance. Finally and, I think this is the most significant aspect of the two plus two statement in February.  We have seen a much less ambiguous articulation by Japan of its strategic interest in the extent to which they align with those of the United States. All of these things have come together.  I mean, one indicator, at least, is the progression in Japan's deployments.  Australia was a key coalition partner for some of Japan's break through deployments, Cambodia, East Timor, where our forces were privileged to serve alongside Japanese forces.  Those were very profound steps when they were taken and we kind of take it for granted now we've got Japanese forces operating in Iraq, Japanese maritime forces supporting coalition vessels in the [unintell].  I just think it's worth kind of reminding ourselves how far this has come. Nob has set out, as I said, very clearly the strategic reasons for that. Just to go down another layer of detail, I think you can see an evolution in Japan's military force structure as well here.  It's moving to a much more flexible force structure.  It's developing capabilities that are appropriate for responding to regional contingencies, for participating in UN peacekeeping operations, but also providing niche, what we in Australia call niche contributions to U. S. [unintell] coalitions, as Japan is doing now very successfully in Iraq. I see this trend continuing and I think Japan's cooperation with the United States in missile defense is going to drive further change, because the sorts of command and control arrangements that you need, you need the sensor systems, the intelligence sharing and back up strain, the research and development and defense industrial collaboration that is required for successful missile defense cooperation is going to drive the defense relationship in other areas much more broadly. I'd like to come back to that. Australia has obviously--the Australia-U. S. alliance has a very different historical and institutional context.  But I think it is quite interesting just to reflect on some of the changes that are happening there, too.  Australia has also shifted to a much more global interpretation of our alliance.  This is a relatively recent phenomenon. In fact, the only time the Anzus Treaty has been formally invoked was in response to attacks on the east coast of the United States, so out of region.  Again, I think that fact points to some profound changes. We, too, are developing a range of capabilities that could be categorized as more expeditionary in nature.  That's kind of a loaded word, term in Australia, the ability to move forces more quickly to where trouble spots are and anticipate instability.  We have placed a premium on interoperability with the United States.  You can see that, I think, operating at a whole lot of levels. In our acquisitions, we are moving to systems which are interoperable with the United States, the joint strike fighter, AWACS aircraft and one tanks and the list goes on.  It is all driven by a very clear view in the government that it is increasingly likely that when Australia operates militarily, it will do so in conjunction with the United States and most likely in a broader coalition. You can see that also in our doctrine and our planning in Iraq, for example.  Australian special forces operated seamlessly with U. S. air assets in the western desert in Iraq.  They did the same in Afghanistan and Australian F-18 aircraft flew as part of a package in U. S. aircraft in Iraq as well, seamlessly.  Again, I think that is a pointer as to where the future lies. The least developed leg of this kind of strategic triangle that I have set out is the Australia-Japan defense relationship and there are various reasons for that.  That, too, is developing.  Australia has long been a supporter of a more active Japanese security role regionally and globally, strongly support Japan's UN Security Council candidacy. As I've said, we have been involved in some of Japan's most important deployments.  We are building up the range of exercises we do with Japanese forces.  We work with Japan in the proliferation security initiative.  The Japanese Coast Guard personnel participated in the first exercise for PSI in Australia and we are very active together on counter-terrorism in our region, building capacity and so on.  So, there is a lot going on. Something that I think will take this cooperation to a new level is the deployment that we mentioned of Australian personnel to help provide a secure environment for Japanese forces in Methana Province in Iraq, where they are doing a great job providing reconstruction and humanitarian assistance.  I think when you all pray together on the ground like that, that you really take forward this sort of cooperation. I think there are some synergies for the future, too.  We both have a shared interest in stability across Asia.  We have a particular interest, I think, together in stability in Southeast Asia and building institutions and capacity there. We have an interest, a profound interest together with the United States in maritime security in Asia and keeping open sea lines of communication.  That, I think, points to new areas that are prospective in terms of our bilateral cooperation, maritime surveillance, intelligence, surveillance reconnaissance and, again, missile defense, where Australia is in the process of acquiring warfare destroyers, equipped with the Aegis Combat System, which will open up, at least theoretically, the prospect of collaboration there. I guess it is my personal view--I think there is a lot going on in that leg of the triangle, but I think there is a lot more we could be doing.  We should be sort of aggressively looking for opportunities to take that forward. What does all this mean for the big question that Dan said to us? I guess what I'd say is that, both alliances are in the process of transforming themselves and they are tacking on, as I said, a much more flexible, global and integrated character.  They are both pursuing interoperability with the United States as a major priority.  Given our profound shared strategic interests and perspectives and, I think it's fair to say, degree of integration of our respective military capabilities, where does all that go? Now, one ultimate destination may be some sort of multilateral security arrangement in the region.  I personally am not convinced that the conditions or the need exists presently for that sort of arrangement.  So, part of the outset, perhaps, is that we just see a further strengthening of the bilateral alliances in the region.  I think Australia would strongly support that process. I think, I'd have to qualify that I'd like to see that third Australia-Japan link thickened up a bit as well. One other possibility, though, is to build on the sort of synergies in this triangular relationship.  Short of a formal alliance, we already have trilateral security dialogue, which is held regularly at the deputy secretary, vice minister level.  I think we are approaching the point where we need to be thinking--and this is a personal view--about how we sort of operationalize that dialogue.  There are some obvious areas.  I have mentioned some, PSI, counter-terrorism, exercises, perhaps with more focus on maritime surveillance and sea lanes and so on, ISR, interoperability where, as I said, working together on the ground will bring real gains. But also I think--I come back to missile defense where there is real potential for the technology to be a driver.  All three countries will have Aegis class ships.  The scope for collaboration on sensors and so on, I think we all recognize that those systems and they work as well as we are able to, to put together a comprehensive information picture, which means more intelligence sharing.  I think, as I said before, there is scope upstream for more collaboration on things like research and development and industry. I think missile defense is going to be genuinely transformational capability.  It means working out command and control arrangements that are capable of decision making within tens of seconds rather than tens of hours or tens of days.  It means having compatible rules of engagement.  It means having all the right hardware and software in place.  I think our experience is, once you start getting to that level of integration, it spills over into other areas and drives further development. So, perhaps, that is a bit of a coward's way up then, but I think I'd say the process is a kind of bottom up rather than a top down one, that's maybe an Australian bass coming out for pragmatism over form.  Yeah, that's right. But I think here, just to touch on events of late last year, the tsunami response and the way that was developed and implemented points to the way ahead in terms of this sort of trilateral cooperation as well. Thanks. MR. BLUMENTHAL:  Thank you very much, Andrew.  I think you came a little bit closer to making news.  You didn't quite--for those reporters out there, he did not say that Australia is pushing forward with Japan's dream of a Pacific community.  But I will say that, as a U. S. observer, that is an idea worth pursuing. So, thank you very much, Andrew, for a very comprehensive Australian point of view on what is going on with the U. S. and Japan and what that means for the region. Now, let's turn it over to Balbina for an analysis from an American point of view, perhaps touching on some of the other security challenges the countries of the region face, such as, North Korea. REMARKS BY BALBINA Y. HWANG, THE HERITAGE FOUNDATION MS. HWANG:  Thank you very much, Dan.  We also thank AEI for putting together this very important panel.  For the sake of ingratiating myself with the host, let me just congratulate Dan in being brilliant for in choosing this panel. Without actually hearing what we were all going to say, I think you've struck a perfect balance, because what I would like to do is offer the counterpart to Minister Kanehara by offering a U. S. perspective on what the two plus two statement really means, as well as the role of Japan in insuring regional security and implications of the U. S.-Japan alliance in the region. Now, in order to shed light on these complex and profoundly important issues, it is important, I believe, to spend a few minutes reflecting on how we arrived to where we are today, which was, of course, culminated in the statement coming out of the two-plus-two meeting.  The statement was significant because it reflects more than four decades of evolution.  It did not just come out of thin air. So, in order to understand the statement, we really have to go back and examine, I think, this relationship.  I would like to offer the counterpart to Minister Kanehara, which is the U. S. perspective on the changes that we have experienced. As we begin to analyze the relationship today, it is important--we can essentially consider three sources regarding the evolution of this administration, the Bush administration's relationship with Japan.  Now, the first and most obvious is at the level of leadership. It is very clear that the personal characteristics and personalities of both President Bush and Prime Minister Koizumi have been critical in shaping a new and dynamic bilateral relationship.  But it also helped that President Bush staffed his first foreign policy team with old Japan hands, who had a deep and long comprehension of Japan, which I might note, is not often the case among American foreign policy practitioners. The second source to consider are factors of the domestic level.  Here the bilateral relationship in the 1980s and 1990s was dominated by economic issues.  First, in the 1980s, it was the trade frictions as an outgrowth of Japan's vast economic growth.  Then in the 1990s, it switched over to frictions over Japan's economic decline. The Bush administration, when it came into office in 2001, was clearly determined to shift the focus away from these economic issues, perhaps, out of a sense of resignment that not much could be accomplished in this area.  But Japan also focused its shift away from solely an economic identity to a security identity, perhaps, as a function of its perpetual economic inertia.  Nevertheless, the shift was palpable and discernible. Now, let me turn to the third source to consider as factors affecting the evolution.  Those are factors at the international level. Both Japan and the United States struggled in the 1990s to come to terms with the end of the cold war and its impact on the bilateral relationship.  There was real skepticism on both sides of the Pacific about the future viability of the U. S.-Japan alliance.  In Japan, there was a sense of a waning lack of interest in the alliance.  The Japanese saw increasing costs with decreasing benefits to hosting or maintaining the alliance.  Therefore, you saw U. S. civil military relations becoming increasingly tense in the focus of the relationship. There were also concerns in Japan-- [End tape 1, side 1 and continue with tape 1, side 2, as follows.] MS. HWANG:  [In progress] --rising phenomenon.  This was rooted much earlier in Nixon's detente with China in the 1970s and there was real trepidation, not just in Japan, but also in South Korea and in Taiwan that the United States was now looking past Japan towards China. These concerns only became solidified by the Clinton administration during the 1990s, in which it seemingly badgered Japan on numerous economic issues, but at the same time, turned to China and embraced China's economic role. Now, the release of the Armitage [unintell] report in late 2000 was one indication that a decade of inertia in the security realm was finally coming to an end.  Then suddenly September 11, 2001 changed everything.  It is notable that prior to September 11th, terrorism as a security issue in Asia had been a second or even third tier issue. In Asia, terrorist threats and, I might add for the United States as well in the west, terrorist threats ranked well behind the first tier of potentially hot issues, such as, Taiwan or Korea.  And even behind the second tier issues, the territorial disputes, such as, the [unintell] and [unintell], I might add.  Terrorism ranked more with third tier issues, such as, transborder migration, piracy, demographic concerns, environmental issues. It is in this international context that I would like to turn to Japan's emerging role, emerging security role in Asia. Today, in the post cold war and now post 9/11 world, new and different threats challenge the region along with the same old security threats.  Despite the strong statements declared in the two-plus-two statement, it is not at all clear whether the U. S.-Japan alliance can effectively deal with the new threats of terrorism nor the perpetual one of North Korea and Taiwan.  It is also not clear that Article 9 is as useful as it once was in providing stability in the region. The very factors that allowed for Japan's prosperity and stability during the cold war ironically spawned domestic institutions within Japan, both political and social, that left Japan ill-prepared to deal with the post cold war environment, much less the 9/11 environment.  Japan never really had to squarely address many unresolved issues, its history issues of militarization, issues of normalcy because of its reliance on the United States for its security. Thus, domestic political institutions and the society itself in Japan were unprepared to deal with a conceptualize Japan's national role in a changed international environment.  Now, the 1991 Gulf War was essentially a wake up call for Japan.  In a way, this was a dress rehearsal for Japan's current security role.  Despite how painful an experience that was for Japan, it was arguably necessary for how Japan responded to the current Iraq War and international crises in general. The 1991 Gulf War was also the impetus for Japan's attempt to rectify the perception that Japan was not pulling its weight in the alliance.  Thereafter, it established new guidelines for the alliance.  Notably these new guideline considerations included plans for handling a crisis on the Korean Peninsula. This now leads me to the single most pressing and immediate issue in Northeast Asia, which will be--which will prove to be the true test of the alliance.  That, of course, is North Korea. North North Korea's Tepidome[ph] launch in August, 1998 as well as the following North Korea spy boat incidents further brought to light the limitations of Japan's Article 9 and the U. S.-Japan alliance.  The missile launch raised difficult questions about Japan's right to self-defense versus collective defense and also the right to preemption. The spy boat incursions and followed up most recently by the Chinese nuclear sub incursion last November, these brought up issues of rules of engagement and whether Japanese self-defense forces would, in fact, even be able to fire first.  These intricate debates and the anxiety over confronting the peace constitution revealed how ill-prepared both Japan and the United States were to address a crisis in North Korea. What is dismaying is that we may not be any more prepared today than we were a decade ago, during the last nuclear crisis.  Indeed, I am struck by how remarkably similar and consistent American considerations are today, as they were ten years ago. Many of you already heard me account this story before.  But I recall that in a conversation with Robert Galucci[ph] several years prior to October, 2001 when the current crisis erupted.  He recounted for me the primary American concerns in 1993.  As you all know, he was the chief negotiator during that earlier crisis. First, he pointed out that, American alliances with both the ROK and Japan were potentially in jeopardy.  There was real concern at the time that, if the United States did not act properly to resolve the crisis with North Korea, it would cause serious problems for both alliances, in particular the future of the mutual security treaty with Japan.  This, then, would bring into doubt American credibility with other alliances in the region.  Without the American security guarantee, both Japan and South Korea with capabilities to pursue nuclear programs could easily do so, with the potential to trigger a nuclear arms race in Northeast Asia. The second concern.  All of these previous concerns I just outlined would then threaten the global non-proliferation treaty regime.  Third, another serious concern was North Korea's conventional force deployment as well as its nuclear capabilities and fourth, making the nuclear threat more palpable were its ballistic missiles as well as North Korea's export of these missiles. Now, this is very striking, because amazingly this is precisely where we seem to be today, ten years later.  None of these concerns have changed and they all exist. On the bright side, however, it is that it may not necessarily be deja vu all over again.  While the issues with North Korea remain perennial and vexing, the U. S.-Japan alliance is undoubtedly in a far better position today than it was ten years ago to address this challenge.  The question, though, is, is this enough? For its part, the United States, as part of its global defense posture review has begun the difficult task of working with partners to encourage new thinking about the purpose and value of alliances.  In Asia, Washington has encouraged allies to contribute more to their own defense by identifying key areas in which the interests of both partners are better served by assigning a leadership role to the alliance partner. Moreover, the United States is asking that alliance partners reduce structural factors that impede full cooperation.  These include land and basing access for military maneuvers and constitutional and institutional limitations. Now, as simple as these principles sound, it is an idea that is very new to the Japanese and one that will require bold changes in attitude and practice.  Yet, all indications are that the Japanese leadership have embraced this new initiative and are rising to the challenge.  This is quite evident in the Iraqi report, followed by the new national defense outline issued last December and, of course, most recently, the two-plus-two statement with the United States. North Korea will ultimately prove to be the true test for the viability and necessity of the U. S.-Japan alliance.  And further along the road, we hope, perhaps Taiwan will as well. One of the unexpected benefits of making our way through the other side of the North Korean problem may very well be a bilateral U. S.-Japan relationship we never even dared to dream possible. Thank you very much. MR. BLUMENTHAL:  Thank you very much, Balbina.  Now, let's move on to Lanxin to clean up and give us a perspective from the Chinese, a renown Chinese scholar.  Please, over to you. REMARKS BY LANXIN XIANG, GRADUATE INSTITUTE OF INTERNATIONAL STUDIES, GENEVA MR. XIANG:  Thank you very much, Dan, in inviting me here. The previous speakers, it seems to me, were talking in a very confident way, talking about certainty, optimism.  I'd rather focus on uncertainties, confusion, what is the problem from the Chinese perspective. Since I am not a diplomat, therefore, I can say whatever I want to say. [Laughter] MR. XIANG:  The first point--I want to make three points.  Let me state briefly, one is what is our assessment, again, from the Chinese perspective?  In particular, what is the Chinese assessment of the current nationalistic campaigns between Japan and China?  I'm referring to not just nationalist campaigns on China's side, but there is also the nationalistic campaign on the other side.  What is the current status of that campaign and what is the status of the current relationship? The second point I want to emphasize is another confusion or uncertainty is the current revival of the Japan-U. S. alliance primarily aimed at the Taiwan issue as a part of the grand containment strategy of the United States.  Now, this is an issue, I think, I'm sure is very much in the minds of the leadership that are most concerned. The third issue I want to emphasize is, does the United States truly think it is to its advantage or it is a good strategy to actually encourage the rapid deterioration of the relationship between China and Japan? Now, how do we assess these issues?  My own feeling is that the Chinese side actually is not quite clear.  The confusion caused their policy contradictions as well.  As we can see, several weeks ago Prime Minister Wen Jiabao says the Japan-China relations are the most important one.  He is not even saying one of the most important ones.  At the same time, you will see the Chinese website collecting signatures, within a week, twenty some million against Japan's UN seat.  So, these of course are encouraged by the official websites as well. Why they are so confused about this issue about nationalist campaigns?  I believe there are domestic sources.  There are also the sources from their international policy.  I tend to believe that we should not assume that a system like China, which is always--its internal politics always border on confusion can actually produce a non-confused foreign policy.  So, I would always caution you against the judgment saying Chinese actually really know what they are doing when they are dealing with Japan in such a nationalistic way since the last--well, at least, for about ten, twelve years. Now, what other issues are actually involved in this nationalist campaign between Japan and China?  World history, of course; we all know that.  I don't want to get into the esoteric, complicated religious issues here, but I must emphasize that it seems to me that the western assumption that Chinese or Japanese know each other so well, culturally they are so close.  It is a myth. The question of a Shinto shrine, as a Chinese I must say, on that issue I'm actually willing to be sympathetic with the Japanese position, that is, the Japanese view about death.  Life and death is entirely different from the Chinese view which, of course, we should not deny that difference.  That is to say, the Shinto shrine is not a temple, a Chinese temple for worshipping the dead. I know it is a very sensitive issue, but I simply want to emphasize that.  That is truly a misunderstanding between the two peoples, especially because the Shinto shrine also had the name placard, which very much looked like the Chinese name placard that is used for ancestral worshipping.  Therefore, the logic is that, obviously you are not just soothing the soul, as the Japanese will say or comforting the soul.  You really want to call the soul back.  Then you can add something like calling the militarism the soul of militarism back.  You can add anything you want. So, that, I think, is, in my judgment it is a wrong approach from China's side. The second, I think these nationalist campaigns also are motivated by real politque considerations.  Now, here again, I think it is a very complicated issue.  That is, the debate in China, at least, the recent debate is whether or not we are arriving at the age of two rivals in East Asia, the official rivals or instead of rivalry, necessary.  I do believe there are a substantial group of people, including policy leaders, seem to believe we need a rival. When you have a domestic problem, it is already easy for them to say, well, we have a problem with Japan.  So, this is the first point I want to make. The second point is a second uncertainty.  Is this revival of Japan-U. S. relations actually aimed or primarily aimed at Taiwan?  That is an issue I think has not been clear to me.  It has not been clear to me.  But certainly, I think it is very important to notice two-plus-two, which builds upon the earlier, new guidelines.  We see the escalation or I believe we see the progressive development on that issue. Now, strategic ambiguity is over, in my judgment, because of the passing of the law.  So, will that revival of U. S.-Japan relations, alliance actually help the cross strait stability when the strategic ambiguity is over? Admittedly, of course, the revival of that alliance occurred way before the Chinese passing this law.  I'm not so sure.  Again, I don't have enough time to elaborate on this, but this all depends upon the objectives on both sides between United States and Japan.  That is, do they agree on a grand strategy of containment against China.  I know nobody wants to use that word, containment, but if you notice from the "National Times" last week basically saying everybody passively understood that is what the alliance is supposed to do. So, again, I leave that question open.  I do believe the Chinese are not certain on this issue. The third point is, does the United States truly think that they should encourage this confrontation between China and Japan?  Now, on that issue, I believe we have to base our judgment or whoever analyzed this relationship based on their own judgment about the status of the relationship. I believe this relationship has reached a stage of what I would like to call Edwardian complex.  That is, the Anglo-German relations before the first World War.  That is a very complicated relationship, yet at the very beginning there is not quite a clearly--there was no clearly defined strategic confrontation or conflicts or conflict of interest between Britain, Edwardian Britain and the Kaiser of Germany. Then, of course, one thing led to another and they misjudged each other's intentions.  I think Henry Kissinger made the best argument.  That is, that sentiment dominates this relationship, the nationalist campaigns or that is, you end up with one side offering something to the other side that the other side does not need.  Then you demand from the other side something you, yourselves, do not even consider as your vital national interests. This is, I think, what I see.  This is the prehistory of Edwardian confrontation between Japan and China.  Now, whether or not this should be encouraged, I'm sure the United States has to consider this issue.  Do we want to have an actual scenario of a long term strategic rivalry between Japan and China on every level, as Britain and Germany, the other nation, Anglo-German relationship amply demonstrates. So, these, I believe, are really the issues very much in the minds of the Chinese.  I think there is a need to assess these issues from a historical perspective as well as from the current development. Do I have two minutes or so?  Okay, yes. The last point, I think, aside from these three uncertainties, confusions, I want to add one more thing.  That is, I haven't heard much about the other major international player or global player in the current international system.  That is the European Union. Does the European Union have a role in Eastern Asian security arrangements?  My understanding is that, America seems to say, you guys are being too nosy.  Don't get involved.  This is our business and the European Union so far has not gotten into the Korean talk, which they actually wanted.  They haven't gotten into the Taiwan issue.  They are only doing some security talk with--on the sidelines with Southeast Asia and in South Asia. My personal view is that, maybe we do need the European Union in this current situation.  With the very difficult relations between China and Japan, with the Korean problem, with the U. S. bilateral alliances developing so fast, I think it would be very unsafe to leave China alone, dealing with the Pacific region on their own terms. Now, if you say, well, are you actually demanding a kind benign containment against China?  Well, maybe.  Containment, I don't really think containment is always a bad term.  Sometimes it is even useful.  The question is, are you going to pursue a policy of a military-dominated approach or are you going to adopt a multilateral approach and try to anchor China relatively safely in a new system in the Asian Pacific? Now, the European Union is known to be modalis, confused, very difficult in their decision making, but I believe the Chinese have finally discovered advantage of modelism the last few years.  China for a long time was known as a G-1 country, meaning China is really the original unilateralist.  They have far more experience in unilateralism than anybody, even more than the United States.  But they are discovering the advantage of modelism, multilateral [unintell] work, not for the same reason, perhaps, as the Europeans, with certain idealistic thinking, certain dreams, certain Utopian elements.  But this is for real politique considerations. They need Europe.  So, if China needs Europe, as you can see the strategic relations between China and Europe developed so fast the last couple of years, ending with--I mean, culminating with this entente[ph] against the Iraq War, which has a remarkable strategic coordination between China and the European, major European powers. So, whether or not the United States should welcome the Europeans getting into the business, if the U. S.-Japan and the European Union's objective is to accommodate China peacefully into the international system [sic].  So, this is the, I think, the one issue I think we should also consider.  I think China certainly placed Europe very high on their own foreign policy agenda. Thank you very much. [Applause] MR. BLUMENTHAL:  Thank you very much, Lanxin, for that very, very provocative analysis and very candid--we thank you very much for your candid analysis as well. I am going to exercise the moderator's right to both make a comment and then transition into a question. I think that Lance's [unintell] because that is easier for me and that is what he calls himself in English, made the point that--asked the question of whether the EU has a role in this emerging and fluid, very fluid security environment that the U. S. and Japan and the U. S. and Australia are responding to.  I think Americans are learning more and more that Europe does have a role. We learned it the hard way because of the very difficult process over the last year in terms of trying to convince Europe not to lift the arms embargo against China.  Because of many of the issues you had actually mentioned, we don't want the situation in the Taiwan Strait or vis-a-vis China and Japan to be fueled by even more military power on the part of the PRC.  In that process, I think we learned that Europe didn't really understand American intentions in the Pacific and the Europeans do have a constructive role to play. So, I will just make that comment and, of course, open that up for the other panelists as well. My question is really towards Andrew and I'm not going to sort of let you off the hook on this one, which is that one of the things that Americans analyzed that Japan has done and why it has done these things is because of a view in Japan by the security elite that China has become more aggressive in pursuing its ambitions.  There are many naval incursions into Japanese waters.  People on Japan are concerned by the Taiwan Straits issue and just the general military modernization program in China has, of course, raised questions about the path of China. I'm wondering if Australia, as you so articulately put it, which is actually looking to develop a close relationship with Japan is taking note of Japanese concerns with respect to China and whether Australia is rethinking its own approach in terms of--or if it is being forced to because of Chinese concerns that were instigated by the U. S.-Japanese alliance transformation and if Australia is beginning to take note of the Japanese and U. S. concerns vis-a-vis the Taiwan Strait? MINISTER SHEARER:  Thanks, Dan.  That is what we would call rising delivery in Australia. Perhaps the best place to start is our own approach to China.  We see no incompatibility between having a good, strong relationship with China, particularly a commercial relationship and our alliance with the United States.  I think also we see the transformation of our own alliance with the United States very much in, to use the sort jargon, capability-based planning rather than threat-based planning terms. So, to us, the transformation of the Australia-U. S. alliance is about equipping us to deal with the broadest possible range of contingencies.  We obviously are following closely developments with Chinese military modernization.  For example, on the question of the arms embargo, we made it clear that we wouldn't want to see any developments which imperiled the strategic balance in the region. I don't really want to comment on Japan's perceptions of that issue.  I think it is [inaudible].  Nobody does that. [Audio breaks] MR. BLUMENTHAL:  Oh, I'm sorry.  I was going to open it up to the panelists to respond to a very interesting comment made by Lance on whether the United States is actually fueling a simmering Sino-Japanese rivalry by pushing, by transforming the alliance.  I hope I am not mischaracterizing the comment. So, either Nobu or Balbina, please. MINISTER KANEHARA:  I don't think that the United States Government is fueling the rivalry between China and Japan.  The truth is, the strategic picture is changing very quickly. In 1945, when Japan was defeated, Japan was cut into three parts, Japan, Korea and Taiwan.  Korea was developed into two by the communist part and South Korea and Taiwan.  The Kuomingtang came in and took [inaudible] and it became one China and to governments.  This was in 1945. Japan came back in 1952, as an independent nation again, but at its very, very weak point.  Japan could not take care of security issues in the region at all. So, the U. S. came in.  The U. S. took over this region together with the Philippines who are borne from the United States.  So, Japan, Korea, Taiwan and the Philippines were Americans sort of skilled in defense.  They took care of security issues of this area and they paid the price in the Korean War.  Thirty-seven soldiers died in the Korean Peninsula, U. S. soldiers [sic].  Then in the 1970s, China came out of the cold and joined the free nations club and then we kept the balance with the Russians.  The U. S. could finish the Vietnam War thanks to that.  This was the situation in the 1970s and continue that. The Soviets are gone.  China is rising.  Japan came back.  This today is the situation.  We have to configurate again how to make this region stable and prosperous and marching towards democracy.  This is the main message of Dr. Rice, I believe, in Tokyo and we totally concur.  Everybody concurs.  I think the Japanese Government is happy to see the continuity of stability, prosperity, the march toward democracy in the region and everybody is happy and China, too. China is not challenging [unintell]. China is in this total framework.  China is a part of this, a major part of this, especially economically.  We can't do without China any longer these days.  Our factories are all transferred into China's continent.  Everybody's factories are in China's continent, but we are still seeing that Chinese social and political societies are changing very quickly.  We want them to be a success. This is the strategic object of the alliance. I want to respond very quickly to Professor Xiang's points.  If I understood correctly he said, China was not quite sure whether the alliance, the Japan-U. S. alliance was, in fact, for Taiwan's [inaudible].  It is not.  The alliance is much bigger.  The alliance's purpose is much, much bigger and strategic.  We are sustaining the whole region's prosperity and stability there. The regional contingencies are the region's contingencies.  If the stability, the strategic stability is guaranteed, we could handle many difficult regional issues, such as, North Korean nuclearization, the stability over the strait, the Taiwan Straits and some other issues, too. The alliance is the spine of the whole stability, the weight of it.  If the stability is guaranteed, we can handle the smaller regional contingency issues.  It is not [inaudible]. MR. BLUMENTHAL:  Do you have a comment? MS. HWANG:  Thank you. I think that most Americans would probably be shocked to hear that they are actively supporting the U. S.-Japan alliance as a way to contain China.  That does not mean that there are not individuals, certainly within Washington and maybe very high up in policy making that actually personally have that view. I think the more important point here is, first of all, that question is still open.  I think, in other words, that it is quite ambivalent and ambiguous.  In other words, the debate has not actually been finalized.  We may actually be moving in that direction, but more importantly is the perception. I think that whether or not that is a reality, I think the perception in Asia exists, particularly in China, but I think also to some extent in Korea.  I think that actually explains in great part Nomiuns's[ph] statement just last week.  Some of you may be familiar with it, where he stated quite bizarrely or quite perplexingly, I think--even the South Korean Government didn't quite know how to explain his statement. But he talked about South Korea as being a balancer in Asia.  I think in many ways that is a reaction to the perception.  The fear in South Korea that the U. S.-South Korean alliance will somehow drag South Korea into creating, you know, this battle between the U. S.-Japan on one side and China on the other side. So, my point is simply that, I don't think it is necessarily true, but the perception is there.  If it is, then U. S. passivity--in other words, not articulating that it is not true or actively trying to dismiss this perception, I think, may actually fuel the perception more. MR. BLUMENTHAL:  Response to either one? I would just make one more comment before I open it up to questions and that is that Balbina has a good point, but I would put it a little bit differently.  That is, the United States is doing a lot in the region.  It actually is upgrading its alliances with China in mind.  We are doing it or we are trying to be more subterranean about it, I think.  It is no coincidence that you have seen a lot of comments recently come out from the intelligence community and from the Department of Defense, which is undergoing its quadrennial defense review that is really taking note with quite a lot of concern about Chinese military modernization. I don't think it is a coincidence that the U. S. and Japan are upgrading their alliance.  The U. S. and Australia are upgrading their alliance.  The U. S. is looking to demote India and demote Singapore. One of the questions that I kind of want to leave out there before turning it over is whether this kind of containment without really calling it containment is a better way to go about it than calling it the benign containment or whatever kind of containment in terms of Chinese military aggrandizement that it appears to be. With that, I will open it up to questions.  I'm sure we will have quite a bit.  Let me just lay the ground rules.  I want to make sure that you actually ask a question, rather than make a comment.  Keep the question on point to the extent possible.  Obviously, a lot of issues were raised, but on point as much as possible and identify--wait for the microphone and identify yourself and your affiliation. Thank you. Let's start over here. [Whereupon, there was a question and answer period.] QUESTION:  [Unintell] with the [unintell] Times, one of the nationwide, daily newspapers back in Korea. I'd like to ask to Minister Kanehara.  You touched upon why the variety of issues, except North Korea nuclear issue and the relationship between Japan and Korea.  Do you have any special reason to do that? Then one more [unintell].  [Unintell] and the Japanese history textbook issue have become feelings to the development of the relationship between Korea and Japan.  So, what is your government's position on the issue of [unintell]?  Do you have any plan to reduce the tension between South Korea and Japan by touching upon the textbook issue? Thank you. MR. BLUMENTHAL:  You could reply to those five questions and-- [Laughter] MINISTER KANEHARA:  Well, I wanted to talk about North Korea, but I was given only 20 minutes.  I couldn't continue.  Let me give answers one by one quickly. As for Japan-South Korean relationship, I am very confident that we could realize national reconciliations.  It started in 1965.  We worked together for several decades.  In five years' time we have the hundred years of the [unintell] of Korea.  It was 1910.  We are seeing 2010 and we have to realize national reconciliation with [unintell]. We share strongly the strategic interest here.  South Korea is about our only two industrial democracies in the region and we share the fates.  We have to see the strategic stability here, the continuation of open markets, the globalization, everything and we are.  The only two nations that can lead in the region in that direction and we have two.  We have to recognize national reconciliation. On that point, I want to remind you that I was legal director in 1968.  President [unintell] came to Tokyo and that opened really the new chapter of Japan-Korean relationship.  Prime Minister [unintell] apologized--I'm sorry.  Prime Minister Ouji[ph] apologized and President Kim accepted that.  And he just opened up Japan's [unintell] and there was a big change since then. I was deeply moved by the courage of President Kim, because making apologies, the one thing is to accept that is sometimes much harder and he did.  He could do so because he was elected to president and he could speak for the people of Korea.  I was really, really deeply moved. Of course, we have the old Buddhist scriptures that these cannot be raised.  It follows you like a shadow follows the body and like [unintell] follows fields. But to those Japanese that are confident of a new Japan, democratic, free and they have the courage to look into the past and we believe that we can achieve the new chapter of Japan-Korean relationship. As to Dakto, I'm not going to make headlines tomorrow.  Simply, I wish to say that we have our own position on Dakto.  As you know, the islands were under your control since the end of the war.  The Korean Government took the islands and we proposed--this is simply the facts.  We proposed to go to the International Court after we got independence.  Since then, it is in dispute over there and been in dispute for a half a century.  It's just there. QUESTION:  Yes, Wayne Schroeder, Lockheed-Martin Corporation. I was wondering if the panel could address the prospect of the European Union lifting the arms embargo on China and the impact that would have on security relationships in the region in general and arms trends for policies in particular. MINISTER KANEHARA:  We are not happy seeing Europeans lifting the embargo.  There are, of course, the human rights issue there.  Europeans should understand that they are in the strategic picture globally and they cannot escape from that. When NATO was there, when NATO was in victory there and they were seeing Soviets together, they were cooperating with each other.  Now, they are happy because there are no enemies around and they are quite [unintell] and they are happy. But they should understand that they are the one tier strategically, globally and they are responsible and anything that they could do.  They are a huge power, the Europeans and anything that they could do can change the balance in East Asia.  They should feel the responsibility for that.  We understand that.  The Americans are going to talk strategically with the Europeans and we hope sincerely that they talk in-depth about what the implications are if the Europeans do those kinds of things. As I said, the Taiwan issue has caused a strategic issue that could affect everybody if anything happens there.  That is something that we have to avoid at all costs.  We are trying to do so.  This is a psychological and military and a political issue.  This is very delicate.  They have to understand this delicacy. MINISTER SHEARER:  I think I touched on this earlier, but I've decided that we have underlined that we would be concerned if that state were to lead to any destabilization of the balance in the region.  We have asked our European colleagues to consult with us before they make any decisions reflecting our own sort of direct strategic interest in that issue. QUESTION:  [Unintell] News Agency, Korea.  My question is to Ms. Balbina Hwang. You said that most [unintell] the ultimate challenge to the system [unintell] years shipping alliance.  If the U. S.-Japan alliance cannot solve the North Korean nuclear problem as they wanted, it will jeopardize the viability of the alliance? My second question is, the current Dakto disputes, how do you think it will affect Korea-Japan cooperation against most [unintell] issue? Thank you. MS. HWANG:  Well, actually, let me be clear.  I'm sorry if you misunderstood me.  I didn't say that North Korea was the ultimate issue.  I said it is the most immediate and pressing.  Taiwan is also, I think, equally important.  It's just sort of lingering in the background. The reason that I say that is, I agree with Minister Kanehara completely.  I think that his view of the U. S.-Japan alliance, that it is not about singular issues.  It is not just about containing China, preventing a war on the cross straits or on the Korean Peninsula.  It really, the future vision really is much broader and much more strategic.  I think that is exactly the view that Washington has and wants.  That is the ultimate goal for the alliance. He described it as the spine for stability in the broader region and even extra-regional issues.  I think Iraq and Afghanistan are wonderful examples of that. But I think herein lies the problem, because that is exactly the perception in Korea and to some extent, in China.  I think South Koreans and North Korea, for that matter, that exactly views the U. S.-Japan alliance in a far different way.  Actually, they find it far more threatening. The U. S.-Japan alliance has this broader, I think, more positive role. As far as the Dakto goes, I think that it is indeed ironic that this is what the 40th year--the 40th year of amity and friendship between South Korea and Japan.  Given the most recent yungsama[ph] craziness, mania that occurred in Japan, it is quite staggering that suddenly you have this explosion of hatred over an issue, as Minister Kanehara pointed out, that is decades old.  I think that actually the biggest problem of Dakto is precisely that; is that it will inhibit cooperation on North Korea and cross strait relations. I'm extremely concerned primarily for that reason. QUESTION:  James Sao[ph], General Asia Economics. I have a multiple choice question for all the panelists and the moderator about the possible affect of the U. S.-Japan alliance on the tensions in the Taiwan Strait.  Do you think that the alliance would escalate or de-escalate the tension.  The [unintell] choice is not--it has no effect on the tension.  In other words, there is no relation between these two [unintell]. MR. BLUMENTHAL:  Did everyone hear that?  The multiple choice question is, whether the U. S.-Japan alliance will escalate or de-escalate tensions in the strait. It is for each one of us. T2/S1  [End tape 1, side 2 and begin tape 2, side 1, as follows.] MR. BLUMENTHAL:  [In progress] --go down the line here. MINISTER SHEARER:  I think I'd go back to first principles in tackling that question.  As I said when I was speaking earlier, we see the alliance and the broader alliance system in [unintell] as fundamental to maintaining stability across the region and to, as I said in answer to a previous question, not being a response to any one particular contingency. So, I think my answer would be, which was de-escalate the [unintell], because I think the alliance system creates the broader framework, as Nobu was saying, within which together we maintain stability across the region, including across the straits. MS. HWANG:  You didn't offer choice D, which is none of the above.  No, I'm just kidding. Well, obviously the United States is not investing all of this effort in strengthening the alliance if it felt that it would de-escalate stability in the region.  So, obviously it is--I'm sorry--escalate instability in the region. Obviously, the purpose of it is very much to create an environment where we are de-escalating stability.  But again, I come back to perception.  That may very well be the intent on both the U. S. and Japan's side.  But if the perceptions, the way it is received in Asia is different, then there may be a fundamental problem. MR. XIANG:  Well, I said before, I'm not sure.  It is uncertain for me.  The point is that, U. S.-Japan alliance has contributed, so far, has contributed very little to the actual stability of the strait's relationship.  What has really contributed to that relative stability is the strategic ambiguity, a very complicated mechanism. So, therefore, my question is, now that the strategic ambiguity is over, if you accept that it is over, then you have to think whether or not the U. S.-Japan alliance will actually start to contribute to a new framework there.  So, I don't know at this point. MINISTER KANEHARA:  Well, I think that is the--my government and the U. S. Government are both trying to de-escalate the tension over the strait, because it is to nobody's interest.  If you see--this issue is half a century old, the issue, but new dynamism is here.  We know the issue and the turn of events are a bit scary. So, we are trying to cease down the issue of not where it is ready to stop.  If you see neighbors quarreling for half a century and then the nations changed.  The new ones aren't there, but these days we see guns and knives.  Excuse me, but what is going there.  The instant view is to de-escalate that.  That is quite natural as neighbors. MR. BLUMENTHAL:  I'm going to take B as well, de-escalate.  I think it is de-escalate tensions, rather than de-escalate--well, whatever.  De-escalate tensions and I think for the following reasons. The first is that [audio break] peacefully and successfully [audio break]. We will come back on. The choice is, in fact, a region led by the United States saying to China, we welcome you, but the path to great power is not through military aggrandizement.  I think to that extent, we are going to see a de-escalation.  China is going to find itself strategically isolated if it continues down that particular path. QUESTION:  Yes, I am Neal [unintell]. I was fascinated by Professor Shearer's insightful analysis of the current state of affairs regarding the Sino-Japanese-American security relationship.  One aspect of the prognosis that I would feel a little different about, however, is that you are framing all the worsening situation, worsening relationship between Japan and China in the security field as something close to the strategy rivalry.  It is certainly true that China has been protesting against Japan over a series measures and statements that Japan has taken in the security field.  None of the major statements that Japan has recently made has been made alone.  They have all been made in tandem with the United States, sometimes after prodding or urging of the United States.  So, I don't know if there is such a thing as a Sino-Japanese [unintell] rivalry, even in the offings in East Asia. What I see, rather, is the Sino-American rivalry, strategy.  I emphasize this strategy part rivalry.  Japan sometimes becomes some kind of a scapegoat or an excuse for Chinese, especially dealing with the United States. Would you have any comment on this? MR. XIANG:  Yes. If you notice, what I said is that I use the Edwardian analogy, which is Anglo-German strategic rivalry, which is actually historically an unnecessary strategic rivalry, which is brought about by misunderstanding, misjudgement of each other's intentions, rather than by actual conflict in the interest. Now, we all know that relationship, economic relationship and many other even strategic relations with China and Japan in the long term and even the short term is a parallel rather than in conflict.  We all know that. My worry is that, because of that historical issue--if you recall, Mr. Hu raised the issue to the very, very high level of political issue with Japan now.  You know, I don't want to comment on which side is right or wrong, but as I already said, I'm most sympathetic with the Japanese position on that shrine issue of not saying the Japanese are always historically sensitive, though. So, here, we have the questions that once they misjudge each other's intentions, believe on that issue everybody--the one side considers the other side hiding their strategic intentions.  Therefore, accumulate--you know, in a certain period of time we are entering an Edwardian strategic rivalry. Now, this is something I want to avoid, in fact.  So, I'm not using this political science term or security study term about strategic rivalry. QUESTION:  Okay, my name is Hannah and I am an intern at AEI.  I would like to comment on his words a little bit, because it is kind of confused. You said that after World War Two, South Korea tried to get territory or sovereignty of the Dakto Island.  But before the Chinese-Japanese occupancy, we already had the right to have island.  After that, you know, the only time the Japanese have the right to have Dakto Island is for 50 years, which means a Chinese occupancy.  I'd like to mention about it, because maybe it can resolve more disputes on us. And also, as Dr. Hwang said before, its-- MR. BLUMENTHAL:  Can I just ask you to ask a question, because--okay. QUESTION:  Yes. If South Korea can be the [unintell] and the [unintell] between the--there is no sister agent area.  Then if that kind of problems happens, such as, Dakto problem or something then South Korea is try to be close to China or North Korea even.  As North Korea said before, North Korea even can attack instead of--Japan instead of USA. Do you think this kind of dispute around, about the Dakto Island can be--can harm the relationship between South Korea and China and even North Korea and USA? MS. HWANG:  I'm not certain that I understood the question, but I will simply say that, yes.  I mean, Dakto is a huge problem, but it is really symptomatic of a much greater problem in Northeast Asia, which is this matter of history.  If we don't resolve it, we will perpetually come back to--I don't mean to trivialize these points, but simply saying these historical issues will continue to be politicized on all sides and they will inhibit very serious and immediate security concerns like the North Korean nuclear threat. QUESTION:  I'm Jonathan Stole[ph] from Hogan and Hartson here in Washington. My question is a more practical one, which is given the ongoing beef dispute between Japan and China and the current Bush administration's problems in some of its relations, was is the practical possibility for strengthening of the U. S.-Japan relationship in the Bush administration?  I think he has a pretty short window to move on that and I wonder what vehicles might be a possibility for doing that. MR. BLUMENTHAL:  I'm not clearing your question. QUESTION:  I think basically that time is somewhat short in terms of the administration, the current administration.  So, I think most people would agree that the U. S.-Japan relationship should grow.  What are some vehicles in which we might see growth, given that some of the political dynamics have been affected by beef. MR. BLUMENTHAL:  By beef, okay. I think there is a lot more meat to the relationship than just the beef question.  But if somebody wants to tackle that, go ahead. [Pause] MR. XIANG:  Beef is to become with a handle.  I'm a great beef eater anyway. Tradition is there.  Tradition is always there, but we don't have to consume too much of our energy to the extent that will affect strategical operations.  Even under the Clinton administration, there were harsh trade debates, because at that time, China was [unintell] gone.  Japan is riding high on its economy just before it [unintell] down.  The Clinton administration was looking into Japanese eyes saying, that next to you, it is us. Excuse me, but it was the atmosphere of the 1990s.  The [unintell] here was saying that Japan is not a democracy.  Japan is a very close [unintell] society with the targets again in the 1990s.  But even at that time, they are worried.  The cooperation on nuclear issues on the Korean Peninsula. About that time, Japan sent the minesweepers into the Gulf and then agreed upon the new guideline to help U. S. forces fighting around Japan.  This is a huge step forward in strengthening the Japan-U. S. alliance.  It's not one single administration.  This change is occurring through the time all the way.  It is going broader, going to be broader and broader and deeper and deeper. Of course, [unintell] Bush personal relationship is very strong.  It is giving a huge whip to the process, but this is not only the personal matter of leaders.  This is the strategic nation to nation cooperation going on. MS. HWANG:  Just offer a brief statement. I think that the beef issue is very fascinating, because what it shows is exactly how far we have come in the bilateral relationship.  If this were the 1990s, the beef would be every headline of every newspaper and this would be the nexus of U. S.-Japan relations.  It's not; it's buried in the back pages.  In the "Financial Times" and the "Wall Street Journal" it is a very singular, small, isolated issue. Again, not to trivialize it, but I think again it shows how far we have evolved in the broader relationship. MR. BLUMENTHAL:  There is someone in the back over there, sitting patiently.  He's been raising his hand there for the last 20 minutes, I think. QUESTION:  Michael Taylor, Association for Members of Congress. Basically, this is to anyone on the panel.  My question focuses on looking at the Chinese communist party.  Some people tend to look at it in a monolithic way.  I tend to not look at it that way.  I was just curious as to what thoughts you might have of various factions that do exist within the CCP and how that might look at the U. S.-Japan alliance situation differently, perhaps with a different outcome or perhaps might even look at the Sino-Japanese relationship in a different manner. MR. XIANG:  Well, when you look at the U. S. press, what strikes me most is that, the actual new theoretical model developed by Chairman Xiaoping, which was written into party and the state constitution is absolutely absent in the American press.  That is something called the three represents. I was surprised even leading China scholars in this country pay absolutely no attention to it.  That is to say--well, when you look at the translation into English, the three represents--it is a kind of new [unintell] that says the party should do something, represented by one, two, three, the majority of the people interest, advanced culture, advanced technology, economy and so on. It may absurd.  There is not much of a logical link between these three represents.  In reality, it is to me an indication that the party is fundamentally changing.  In the past, the party is supposed to be great, glorious and correct all the time.  There is no question about this.  Now, they say the party should do this.  Now, the implication here is, if you don't do it or for some reason you fail to do it, let's look perhaps for other alternate ways of governance. That is, to me, really a major break through.  Now as far as the factions are concerned, every political party has factions, I'm sure.  The communist party is very much faction ridden.  How about it would affect Japan's relationships? With Japan, I think it's very difficult to say for the moment.  My feeling is that the new leadership, that is Hu and the Wen leadership desperately need to rebuild relationship with Japan, as compared with the previous leadership under Deng Xiaoping.  I don't know how it is going to work out.  That's another thing. MR. BLUMENTHAL:  I would just add to that, coming out of the U. S. Government that there is a lot of sort of Kremlinology that goes on and there is a real lack of transparency obviously.  So, for example, as Hu and Wen were taking over the leadership, there was a lot of optimism early on that take a softer line to Taiwan and so on.  But in fact, obviously, this anti-secession law was passed under their leadership and so on. So, I think that one of the problems and one of the contributors to a lot of regional suspicion is the fact that the United States does not really have a good understanding of the three represents and the inner party politics. We have time for one more question.  So, wow.  This man over here is raising his hand the most enthusiastically.  So, he wins. QUESTION:  Thank you.  [Unintell] a Korean newspaper. First of all is to Minister Kanehara.  Do you have any plans or intentions to build military relationships with any countries other than U. S.? The second question is to Mr. Shearer. In case U. S. attacks North Korea, do you think China's Government would defend North Korea by sending troops? [Laughter] MR. BLUMENTHAL:  Two easy questions to wrap up.  So, talk to the diplomats who, of course, can speak most candidly. MINISTER KANEHARA:  Military cooperation apart from the United States.  I have to tell you that, the [unintell] is now working in coalition Enduring Freedom and Iraqi Freedom, both arms.  It is beyond the traditional framework of Japan-U. S. alliance in East Asia and, yes, we are doing so to realize the cause, the international cause or to keep the stability and prosperity in the region. It is natural to work with the other like-minded nations in the coalition.  This is just what we are doing so. Beyond that, for exercise for confidence building measures, we are doing with everybody.  I saw in Tokyo Bay, before I came here, I saw Kilo class subs of the Russian Navy in Tokyo Bay.  To build up the confidence, we are doing that with every nation. MR. BLUMENTHAL:  Go ahead and let Andrew gather his thoughts some more.  No, no, you go ahead. Will China--[audio break] if the U. S. attacks. [Laughter] MINISTER SHEARER:  I'm diplomatic. MR. BLUMENTHAL:  Well, that will be for another session. MR. XIANG:  I doubt.  I don't think you will see volunteers this time.  For the majority of Chinese--this is my impression--came less than normal. [Laughter] MR. XIANG:  So, yeah, I don't think there is a market there for any possibility of sending troops. MR. BLUMENTHAL:  I'd like to thank our panelists very much for their very candid and very interesting comments.  I would like to thank the crowd for coming out and asking some very good questions.  Of course, you can always go online and watch it, the transcript, watch the video if you have missed anything. Thank you very much. [Applause]</body></html>