Things generally went from bad to worse in the Asia-Pacific this past quarter. The Six-Party Talks began on a low note and went steadily downhill from there as Pyongyang stonewalled against even a moderately intrusive verification regime.  Crippling demonstrations in Bangkok not only dealt a severe blow to Thailand’s economy (and image) but forced ASEAN to postpone both its annual round of summitry (including ASEAN Plus Three and the East Asia Summit) and its planned celebration of its Charter ratification. The Plus Three (China, Japan, and South Korea) did manage to hold their first non-ASEAN-affiliated summit and the Asia Pacific Economic Cooperation (APEC) Leaders Meeting did go off without a hitch, but neither had much impact on growing regional (and global) economic woes as economic forecasts kept being revised downward. Many in Asia saw a possible light at the end of one tunnel with the election of Barack Obama as the next U.S. president, although elite opinion, especially in Northeast Asia, remained mixed as they kept a watchful eye out for Asia policy pronouncements and the names of those who will be chosen to implement them.

The U.S. decision to rescind the designation of North Korea as a state sponsor of terrorism tested the bilateral relationship this quarter as the Bush administration was perceived in Japan as having softened its commitment to the abductee issue in favor of a breakthrough on denuclearization in the Six-Party Talks, which ultimately proved elusive.  The Aso government managed to extend the Maritime Self-Defense Force (MSDF) refueling mission in the Indian Ocean for one year, though bilateral discussions on defense issues continued to center on whether Japan could move beyond a symbolic commitment to coalition operations in Afghanistan.

Japanese domestic politics remained tumultuous as the opposition led by the Democratic Party of Japan (DPJ) thwarted the Aso legislative agenda to increase pressure for a snap election.  Prime Minister Aso’s approval rating plummeted over the course of the quarter due mostly to frustration with the response to the financial crisis, prompting him to postpone the widely anticipated Lower House election in an attempt to shore up support for the ruling Liberal Democratic Party (LDP).  Public opinion polls revealed increased interest in offering the DPJ a chance at the helm with most observers predicting an election sometime next spring.  Other polls at the end of the quarter showed the Japanese public less sanguine about the U.S.-Japan alliance, a sobering development as President-elect Obama prepared to take office.

The U.S. and China held the 5^th Strategic Economic Dialogue and the 6^th Senior Dialogue this quarter.  The global financial crisis was a focal point of discussion in both dialogues, as well as in the meeting between Presidents Bush and Hu Jintao on the sidelines of APEC in Lima, Peru. Beijing responded to the announced U.S. sale of $6.5 billion in arms to Taiwan by suspending bilateral military exchanges between the U.S. and China and talks on nonproliferation.  China’s internal debate about the international structure of power and the status of the U.S. was revived as the two prepared to celebrate the 30^th anniversary of the establishment of diplomatic ties.

The last four months of U.S.-ROK relations under the Bush administration saw the completion of a mission that helped to define the broadening global scope of the alliance as well as the final resolution of the troublesome “beef issue.”  Tough negotiations were completed on a new defense cost-sharing agreement and the ruling party in the ROK began the process of passing the implementing legislation for the free trade agreement.  All of this amounts to President Obama’s inheritance of an alliance relationship that is in fairly strong shape, but a North Korean nuclear negotiation that remains unfinished.  Despite the best efforts of the U.S., Pyongyang remained unwilling to accept standard verification procedures as part of the six-party denuclearization agreement.  This was despite the fact that on Oct. 11, the U.S. removed the country from the terrorism blacklist.  Obama’s team will need to adhere to seven key principles as it continues to navigate the labyrinth of these difficult negotiations and bolster the strength of the alliance.

As documented in this chapter during the last quarter (and over the last several years), U.S.-Russian relations have deteriorated to post-Cold War lows.  Given the number of distractions over the last few months, relations stabilized somewhat in that the usual number of caustic barbs hurled across the oceans was limited.  The leaders of the two nations are increasingly preoccupied with finding solutions to the economic ills affecting their respective nations and the entire world.  As the Obama administration comes to office there seems to be a determination to reestablish a working relationship with the Kremlin, something that was obviously lacking during the August crisis when Russian troops invaded Georgia.  President-elect Obama and future Cabinet members – as well as members of Congress – have publicly stated the need to recalibrate relations with Russia, starting with arms control.

Political conflict in Thailand between the ruling, rural-based pro-Thaksin People Power Party (PPP) and an urban elite coalition calling itself the People’s Alliance for Democracy (PAD) – though actually opposing democratic elections – turned violent in November and shut down Bangkok and the capital’s airports for several days.  The PPP government was forced to postpone the ASEAN summit scheduled for early December because of the violence and rescheduled the meeting for February 2009 to the dismay of other ASEAN leaders.  Nevertheless, the new ASEAN Charter, which provides the Association with a legal personality for the first time, was activated at a special meeting of ASEAN foreign ministers in Jakarta on Dec. 15.  Southeast Asian leaders welcomed Illinois Sen. Barack Obama’s election as the next U.S. president although some commentators noted that the Democratic Party has sometimes followed a trade protectionist policy when the U.S. economy is in difficulty.  The Democrats have also taken a tougher position on human rights.  In general, though, no significant change is foreseen in U.S. policy for Southeast Asia under President-elect Obama.

Asian commentators who asserted that China and its neighbors could ride out the economic crisis in U.S. and Western financial markets appeared in retreat during the quarter as the impact of the financial turmoil and recession in America and Europe began to have a major effect on China and the region’s trade, manufacturing, currency values, and broader economic stability. The hope that China could sustain stable growth independent of the U.S. and Europe and thereby provide an engine of growth for export-oriented Southeast Asian countries was dented by Chinese trade figures that nosedived in November, especially Chinese imports, which fell by 18 percent. The financial crisis also dominated the discussion at the ASEM summit in October.  Meanwhile, China continued to pursue infrastructure development projects with its neighbors to the south, resolved the land boundary dispute with Vietnam, and signed a free trade agreement with Singapore. Talk of a planned Chinese aircraft carrier caused some controversy, but on the whole assessments of China’s rise were notably more balanced than in the past.

Beijing and Taipei continued to work cooperatively through various dialogue channels to improve cross-Strait relations.  The focus this quarter was on the first ever visit by a “designated representative” of the Chinese government to Taiwan – the visit of ARATS Chairman Chen Yunlin in November, when four agreements were signed.  This process is gradually establishing a degree of trust in this long-troubled relationship.   However, a vocal opposition minority in Taiwan disrupted the Chen visit and forced President Ma Ying-jeou to make adjustments. Despite the progress, there is still no evidence that Beijing has taken any steps to reduce its military threat directed at Taiwan. President Hu’s new six-point statement and Taipei’s initial reaction to it highlight the continuing gap between their positions. The global economic crisis is confronting the relationship with new challenges, the scope of which is not yet clear. Internationally, Taiwan’s desire for participation in the WHO will be a test of this evolving relationship next spring.

The final three months of 2008 saw relations between the two Koreas continue to worsen, as they had since South Korean voters in December 2007 elected the conservative Lee Myung-bak as their next president, ending a decade of rule by liberals. Official ties remained frozen as Pyongyang media continued to heap childish insults on Lee. Upping the ante from words to deeds, but also shooting itself in the foot, from December the North placed restrictions on cross-border traffic and expelled most Southerners from the joint Kaesong Industrial Complex (KIC), just north of the Demilitarized Zone (DMZ). But the end of the year brought a possible way forward, with hints from both sides that they are considering a deal where the South would pay for the release of abductees and prisoners of war held by the North. It remains to be seen whether this will fly or how soon the two Koreas can tone down the enmity stoked over the past year. Meanwhile, nongovernmental interaction continues, albeit on a far smaller scale than during the former “Sunshine” policy.

High-level interaction between Presidents Hu Jintao and Lee Myung-bak continues to intensify following the upgrading of the Sino-South Korean relationship to a “strategic cooperative partnership” in August of 2008.  The increase in the number of meetings between top leaders is in part a by-product of the proliferation of regional forums in which China and South Korea both have membership and in part an affirmation of the rising importance of the relationship to both sides.   This quarter Hu and Lee participated in the Asia-Europe Meeting (ASEM) in Beijing in October as well as the G20 meeting in Washington and the Asia Pacific Economic Cooperation (APEC) forum in Peru in November. Lee and Premier Wen Jiabao also met as part of the first trilateral meeting among Chinese, South Korean, and Japanese leaders held in Dazaifu, Fukuoka in mid-December.  In contrast, Chinese and North Korean leaders rarely meet these days, and Chinese officials confess ignorance regarding the health of Kim Jong-il despite being North Korea’s closest of neighbors.

The global financial crisis and the widespread effects of China’s tainted food exports are the latest wild cards in the Sino-South Korean relationship.  Likewise, North Korea’s intransigence brings China and South Korea closer together, while its vulnerability may pose insurmountable contradictions between Seoul and Beijing. Chinese analysts suggest that their government has reconciled itself to maintaining relations with North Korea at some level in order to preserve stability and secure its own strategic interests, although some suggest that things will never be the same as before as long as North Korea retains its nuclear weapons capability.  Chinese analysts voice heightened concern about the deterioration of inter-Korean relations, South Korean expressions of “extreme nationalism,” and South Korea’s apparent tilt toward the U.S. under President Lee. In order to meet emerging challenges as a by-product of intensified relations, China and South Korea continue to develop new mechanisms for  bilateral and multilateral engagement, both to address “strategic issues” and  emerging nontraditional security issues like public health.

In early December, the Japanese Foreign Ministry released its annual survey of public opinion on Japan’s international relations, which revealed that over 70 percent of the public considered relations with China to be in poor shape.  The survey likewise revealed a record high, 66.6 percent of the Japanese public, as feeling no affinity toward China. Meanwhile, the Ministry of Defense reported increasing PLA naval activities in the waters around Japan, including the incursion of research ships into Japanese territorial waters in the Senkaku Islands chain. There were also reports that China would begin the construction of two aircraft carriers in 2009. Japanese and Chinese leaders met in Beijing in October and in Japan in December, but beyond commitments of best efforts, failed to make any demonstrable progress on food safety and sovereignty issues.    

The year ended fairly quietly in Japan-Korea relations with no major events marking the last few months of 2008. Japan-North Korea relations remained stagnant and Japan-South Korea relations essentially ignored the Dokdo/Takeshima dispute, instead focusing on dealing with the widening global economic crisis. The biggest diplomatic event was the successful trilateral summit in December among China, Korea, and Japan, which may set the stage for further diplomatic movement. Whether 2009 will bring dramatic progress on these issues remains to be seen, but with new leaders in Japan and South Korea entering their first full years of rule, the continued concerns about the health of North Korea’s leader, and a new U.S. president, the new year holds the possibility for progress on at least some of these issues.

In contrast to the hectic third quarter of the Beijing Olympics and South Ossetia, the last quarter of 2008 was calmer for Russia and China. Their bilateral relations, nonetheless, seemed to become more substantive.  The 13^th annual Prime Ministerial Meeting in Moscow in late October and the 13^th session of the Russian-Chinese Intergovernmental Commission on Military-Technical Cooperation in Moscow in early December provided some fresh impetus for the impasse in two important areas of bilateral relations: the long-awaited oil pipeline to China and military relations. Separately, the quarter also witnessed the final, albeit low-key, ceremony for settling the last territorial issue when Russia officially transferred to China control of one and a half islands of the disputed territory near Khabarovsk.  However, the world around Russia and China was in turmoil not only because of the financial tsunami that was leaving no nation behind, but also because of regional crises between India and Pakistan as well as Israel and Palestine, and the stagnation in the Korea denuclearization process.

India’s relations with the U.S. and East Asia during 2008 took place amidst remarkable flux domestically, within the South Asian region, and around the world – all of which directly and indirectly influenced developments in bilateral relations. The two issues that dominated U.S.-India relations during 2008 were the civilian nuclear cooperation deal and, at the end of the year, the U.S.-India-Pakistan triangle including the issues of terrorism and Kashmir. India’s relations with East Asia were quiescent during 2008. A notable development was the completion of an India-ASEAN free trade agreement, although its economic implications remain uncertain. India accentuated the positive with Myanmar as bilateral relations became more cordial while relations with China seemed to be on hold for most of the year as the border dispute remained unresolved and India responded cautiously to the Chinese handling of unrest in Tibet.