The agreement to conduct an expanded round of direct cross-Strait charter flights during the 2006 Lunar New Year could have marked the resumption of progress on practical cross-Strait ties. However, reacting to his party’s defeat in the recent county elections, President Chen announced Jan. 1 his intention to more “actively manage” – meaning to tighten restrictions on – cross-Strait economic ties.  Nevertheless, President Hu Jintao and other Chinese officials continued to signal their interest in expanding cross-Strait transportation, economic, tourism, and cultural ties. In late January, President Chen announced his intention to abolish the National Unification Council (NUC). His motives were primarily domestic, but the implications of this proposal sparked a sharp response from Washington and Beijing. In the end, Chen stopped short of abolishing the Council.  Cross-Strait rhetoric has been heated, but tensions have not escalated. In late March, Chen began announcing steps to implement further restrictions on investment in China.  The most serious result of these developments has been that opportunities for expanding mutually beneficial economic ties and for making progress on practical cross-Strait issues have once again fallen victim to President Chen’s domestic political maneuvering.

The first quarter of 2006 saw inter-Korean relations brisk, in more senses than one. As the chronology illustrates, both the variety and density of interactions testify to ever-growing ties between North and South across a range of activities and on many levels: political and security, economic and business, social and cultural, and more. Rightly or wrongly, no one in Seoul (or at least in the ROK government) appears inclined to let the continuing impasse over the six-party nuclear talks – which have not met since November and show no sign of doing so any time soon – derail or even decelerate burgeoning North-South links.

However, it is not all plain sailing. From the Southern viewpoint, the North is not only reluctant to make concessions, but continues to stall on implementing matters to which it had agreed in outline. There are also quarrels: the past quarter saw several tiffs, and one major row that could have easily proved damaging. In the past any of these might have escalated out of hand, putting all ties on ice for months. That this did not happen is mainly due to the South’s vast reserves of patience, which to critics risks shading into appeasement.

Yet defenders of the Sunshine Policy can point to subtle changes in North Korea’s stance, too. Pyongyang’s noisily extreme rhetoric continues unabated, but its deeds talk louder. At least twice in the past quarter the North showed its displeasure with the South by actions which, if regrettable and uncalled for, were noticeably less extreme than in the past. This more careful calibration suggests a deepening commitment to the relationship as such. A more cynical view is that Kim Jong-il knows not to push the goose too far lest it stop laying golden eggs, in what remains financially and otherwise a very one-sided process.

With prospects for renewed Six-Party Talks diminishing, Kim Jong-il’s unannounced visit to China in January appears to have been a turning point for the Korean Peninsula and the North Korean nuclear issue. The rumors began as soon as Kim’s special train was sighted crossing the border into China Jan. 10, sparking a week of “Where’s Waldo” speculation and media sightings of Kim in various parts of China. Despite the rumors, Chinese officials followed precedent and kept mum until Kim’s departure on Jan. 18. The fact that Kim’s route overlapped with that of Deng Xiaoping’s famous 1992 southern tour stimulated further speculation about North Korean efforts at economic reform. Chairman Kim got the red carpet treatment: he was accompanied throughout his visit by all nine members of the Central Committee of China’s Politburo, and capped the trip with a meeting with President Hu Jintao in Beijing. But unlike Korea’s tributary relationship with the Middle Kingdom in dynastic times, Chairman Kim seemed to come with empty suitcases, prepared more to pack and take home China’s reward for good behavior than to offer gifts of his own.

China’s embrace of Kim has produced considerable angst in South Korea, which fears that North Korea will become “China’s fourth northeastern province,” and thwart South Korean hopes for enhanced influence and eventual unification with North Korea. South Korea’s “China threat” usually refers to China’s rapid erosion of critical Korean technological advantages even as China’s overall growth remains a boon to South Korean producers in many sectors. South Korean businesses face the dilemma of figuring out how to benefit from China’s rise, while fending off its effects on Korea’s competitiveness.

The quarter ended as it began – with Prime Minister Koizumi Junichiro expressing his inability to understand why China and the Republic of Korea refused to hold summit meetings just because of differences over Yasukuni Shrine. He also could not understand why he should not pay homage at the shrine simply because China and South Korea said he should not do so. Meanwhile, China’s leadership made clear that it was writing off the next six months and looking to a post-Koizumi future. During the quarter, Beijing hosted a number of high-level political delegations and courted potential Koizumi successors. Reflecting the political stalemate, diplomatic efforts to resolve issues related to the exploration and development of natural gas fields in the East China Sea failed to make progress.  China rejected Japan’s proposal for joint development, and when Chinese diplomats presented their ideas, Japanese diplomats found little they could agree to beyond agreeing to take them back to Tokyo, where the political reception proved decidedly frosty.

Despite the government adopting the position that China was not a threat to Japan, the political debate continued. The opposition Democratic Party of Japan adopted a party platform that China represented an “actual threat” to Japan. At the end of March, the Foreign Ministry released the 2006 Diplomatic Blue Book, which called attention to the lack of transparency in China’s military budget and in the modernization of the People’s Liberation Army. In the face of “cold politics,” economic relations continued “hot.” For the seventh consecutive year, Japan’s trade with China hit a record high in 2005, reaching $189.3 billion.

The first quarter of 2006 produced no real movement in Japan-South Korea relations, nor Japan-North Korea relations. Politics remained chilly while economic and cultural relations were somewhat warmer. Japan-North Korea relations remained stalled over the abductee issue, and Japan-South Korea political relations remain stalled over Yasukuni Shrine. The Japanese and South Korean economies continue to integrate and interact, and cultural relations experienced no real controversies. The next quarter looks to be a continuation of this one. Japan and North Korea have not scheduled another round of bilateral talks, and Roh Moo-hyun and Koizumi Junichiro show no signs of extending the olive branch that will allow them to resume summit meetings. South Korea and Japan will continue discussions about a free-trade area, although such negotiations are likely to make little progress.

By any standard, China’s “Year of Russia” is unprecedented. The year-long celebration was officially inaugurated with President Putin’s fourth visit to China in March, with more than 200 cultural, business, science, and political activities unfolding throughout China. Both sides hailed the relationship as being at the “highest level” and as the “strongest ever,” which are both probably true.

Beyond the extravaganza, which will be followed by Russia’s “Year of China” in 2007, Russia’s energy politik continued. Political elites in Beijing and Moscow were faced with the challenging task of bridging misperceptions and dislike between ordinary Chinese and Russians that persist despite a decade of strategic partnership. This is particularly needed when the world, according to Moscow and Beijing, is overshadowed by the gathering “nuclear storm” of Iran and North Korea. Both have friendly relations with Russia and China while continuing to be at odds with the U.S., which is getting increasingly impatient with the nuclear potential, peaceful or not, of the two “rogue” states.

President Bush made his first trip to Asia in two years, attending the Asia Pacific Economic Cooperation (APEC) Leaders Meeting in Busan, South Korea and also visiting Japan, China, and Mongolia. In Japan, he gave a major Asia policy speech which reinforced his “freedom and democracy” theme, but missed the opportunity to shed much additional light on Washington’s future defense transformation plans or to ameliorate growing China-Japanese tensions. Other significant multilateral events this quarter included another (abbreviated) round of Six-Party Talks that made little headway (another missed opportunity); the World Trade Organization’s (WTO) Doha Round session in Hong Kong, which was only slightly more productive; an ASEAN Plus Three (A+3) and various ASEAN Plus One summits that added, at least marginally, to the East Asia community-building process; and the inaugural East Asia Summit (EAS), which did not.  All in all, 2005 was a good (but not great) year, politically and economically, for East Asia and for Washington’s relations with its Asian neighbors. The economic forecast for 2006 looks generally bright; the political forecast perhaps a bit more cloudy.

The last quarter of 2005 will be remembered as a historic moment for the U.S.-Japan alliance. In October, the Security Consultative Committee (the “SCC” is the meeting of secretaries/ministers of foreign affairs and defense, sometimes referred to as the “2+2”) ratified an interim report on the realignment of U.S. forces in Japan that could usher in a new era in relations between the two countries. If realized, the report will transform the alliance.

That’s a big “if.” This is only an “interim” report and the problems it “solves” have plagued the alliance for a decade. Seeing the agreement implemented will be difficult. Moreover, the weeks before the agreement was reached were marked by rancor and rhetoric that matched that of the dark days of Japan bashing. Petulance and posturing are a poor foundation for a “rejuvenated” alliance.

President George W. Bush’s November visit to Beijing produced no concrete deliverables, but provided an important opportunity for U.S. and Chinese leaders to engage in a strategic conversation about the bilateral relationship and the changing world in which it is embedded. After almost six years as secretary of defense, Donald Rumsfeld traveled to China, where he sparred with Chinese military researchers from the Central Party School and the Academy of Military Sciences and became the first foreigner to visit the Second Artillery Corps. In Washington, D.C., the second round of the Senior Dialogue was held, broadening and deepening strategic discussions between senior Chinese and U.S. officials and holding out hope that a new framework for the relationship could help manage U.S. and Chinese differences.

The Six-Party Talks on North Korea’s nuclear program suffered a major reversal this quarter as Washington and Pyongyang unleashed verbal attacks on each other over activities outside the scope of the negotiations – counterfeiting U.S. dollars, drug trafficking, and Pyongyang’s dismal human rights record. North Korea said it would boycott the talks until it obtained a high-level meeting with U.S. officials to discuss financial sanctions related to North Korea’s alleged counterfeiting.

Factions in the Bush administration that oppose the Six-Party Talks or seek to rein in Ambassador Christopher Hill (who achieved the September agreement to eliminate North Korea’s nuclear program) escalated U.S. rhetoric to a high pitch in early December. After U.S. Ambassador to South Korea Alexander Vershbow termed North Korea a “criminal regime,” Pyongyang fired back that his remarks constituted “a provocative declaration of war on our people.”

By the end of the quarter, it appeared that the apparent disarray within the U.S. government over policy toward North Korea had seriously undercut the ability of U.S. negotiators to reach a diplomatic resolution of the nuclear issue. It was not clear whether or when a new round of the Six-Party Talks could be scheduled.

South Korea’s Defense Ministry sought National Assembly approval in December for its plan to cut the number of South Korean forces in Iraq by 1,000 – approximately one-third of the contingent of 3,250 troops South Korea has sent to Iraq to support the U.S.-led coalition. Although the U.S. protested this decision, South Korea’s defense minister justified it by citing the success of the Oct. 15 referendum in Iraq, which laid the basis for adopting a new national constitution.

On economic and trade matters, Presidents Roh Moo-hyun and George W. Bush, at their meeting in mid-November in Gyeongju before the APEC summit in Busan, agreed to put a U.S.-South Korea free trade agreement (FTA) on a fast track, with negotiations beginning this spring. Their decision reflected the desire of both governments to strengthen U.S.-South Korea relations at a time when differences over strategy toward North Korea have caused major strains in the alliance.