North Korea’s capacity to wrongfoot the analyst should never be underestimated. Three months ago, extrapolating from recent trends, it seemed reasonable to conclude that inter-Korean talks are now institutionalized. In the longer term that remains true, but in July, Pyongyang reverted to its old bad habit of boycotting most major formal channels of North-South dialogue and, by late September, had not relented. It acted, as ever, out of anger – especially at a mass airlift of DPRK refugees to Seoul from Vietnam, plus assorted other gripes. While some contacts continued, this hiatus, along with North Korea’s virtual refusal to allow the six-party talks on the nuclear issue to reconvene, made this a summer during which the Korean question in all its manifold complexities mostly marked time.

None of this was apparent when the quarter began. A third round of six-party talks, held in Beijing in late June, committed to meet again by end-September, preceded by working meetings in August. With the U.S. for the first time offering a detailed proposal, the DPRK Foreign Ministry noted “common elements helpful to making progress.” Bilaterally, after the second quarter’s major breakthroughs – the first ever high-level military talks, setting up a naval hotline (albeit with teething problems) and starting to dismantle propaganda displays and speakers at the Demilitarized Zone (DMZ) – the last week of June alone saw a density of contacts that seemed the new norm. In quick succession: both Koreas agreed to march together at the Athens Olympics; their central bank chiefs met in Basel, Switzerland, while at home, foreign trade banks agreed to payment clearance mechanisms; 350 dignitaries came to a ground-breaking ceremony for the first phase of the Kaesong Industrial Zone (KIZ); and working-level talks on road and rail links began at Mt. Kumgang. It all looked good.

The debate over the history of the relationship between Korea and China dramatically took center stage this quarter – not as part of the official commemoration of the 12^th anniversary of normalization between the Republic of Korea and the People’s Republic of China in August – but as part of an escalating dispute between Seoul and Beijing over the origins and legacy of the Goguryeo kingdom (37 B.C. to 668 A.D.).  PRC claims that Goguryeo is part of China’s history and a decision by the PRC Ministry of Foreign Affairs to excise all references to the history of Korea prior to 1948 engendered a caustic public reaction in Seoul.  The first major political dispute to arise between Seoul and Beijing since the decision to normalize in 1992 (aside from the “garlic wars” trade dispute of 2002; see Comparative Connections, October 2002) led to a number of high-level exchanges designed to calm the situation while continuing to coordinate efforts to keep alive six-party talks.

Despite continued benefits from the “Korean Wave” in China in various sectors, the sensitive South Korean reaction to the Goguryeo history dispute also reflects increasing worries in Seoul on the economic front:  twelve years of dramatic double-digit growth in trade and investment between the two countries has resulted in increasing South Korean dependence on exports to China both through trade and as a destination for South Korean investment.  However, Chinese firms are rapidly closing the technological gap with South Korea not only in low-end manufacturing but also in sectors such as IT, automobiles, and high-tech sectors that represent the core of South Korea’s export trade earnings.

Both Tokyo and Beijing looked for ways to advance cooperation this quarter. The ASEAN Plus Three framework provided one venue.  North Korea provided another.  Commercial and economic relations provided a third: two-way trade in the first six months of 2004, for the fifth consecutive year, hit a new high.

But a series of events, such as resource exploration in disputed areas in the East China Sea, Chinese maritime research activities in Japan’s claimed Exclusive Economic Zone (EEZ), significant anniversaries – the Marco Polo Bridge Incident (July 7), Aug. 15 visits by Japan’s political leaders to the Yasukuni Shrine, the Mukden Incident, (Sept. 18) –combined with Japan’s 3-1 victory over China in the China-hosted Asia Cup soccer tournament to keep nationalist emotions at a high state in both countries.  Other issues of history, munitions abandoned by the Imperial Army in China, court decisions on compensation claims for wartime forced labor, and Taiwan also played into the relationship. It was not the best of times.

Tokyo joined the ranks of cities (including Los Angeles and Seoul) bestowed with the dubious distinction of being threatened with being turned into a nuclear sea of fire by the DPRK.  This rhetoric, often chalked up to harmless bluster, reflected real tension this quarter over a possible DPRK missile test and continued stalemates on the abductee dispute.  Tokyo’s relations with Seoul were capped this quarter by a summit.  Good relations at the highest levels, however, still could not overcome history issues and potentially tectonic shifts in the character of relations.

The third quarter turned out to be a period of mixed record for China-Russia relations: military relations moved ahead, high-level exchanges were busy as usual, while economics continued to cloud China’s “pipeline dream.” The 10 years of talk of an oil pipeline from Russia’s Siberia to northeastern China came close to an end in this quarter as Russia was finalizing a multibillion-dollar deal with Japan, a latecomer to Russia’s oil feast. Even an official visit to Russia by China’s “gung-ho” Premier Wen Jiabao in late September failed to reverse the tide.

While Moscow and Beijing were trying to find a way out of this pipeline scramble, internal dynamics affected both nations, though in different ways. In Russia, terrorist attacks shocked the nation. In China, Russian-educated strongman Jiang Zemin finally released his hold of the 2.5-million person People’s Liberation Army (PLA).

Six-party talks about North Korea’s nuclear weapons programs dominated the multilateral agenda this quarter. The two working-level and one senior officials meetings in May/June constituted as much movement as had been seen in the entire 21 months since the stand-off began in October 2002.  Whether this movement constituted real progress was still not clear at quarter’s end, however.  Meanwhile, Washington’s efforts to develop a broader global consensus in support of its campaign against weapons of mass destruction (WMD) saw some progress with the passage of a United Nations Security Council (UNSC) resolution and the convening of a first anniversary Proliferation Security Initiative (PSI) plenary session, even as the regional implications of its Global Posture Strategy were beginning to be felt.

Elsewhere in Asia, the democratic process moved forward, albeit unevenly. Taiwan President Chen Shui-bian’s reelection was certified, as was Philippine President Gloria Macapagal-Arroyo’s, and a subsequently unimpeached President Roh Moo-hyun saw his preferred Uri Party win a majority of seats in the ROK National Assembly.  A huge upset took place in India and perhaps in Mongolia as well. Meanwhile, Indonesia’s largely peaceful parliamentary elections set the stage for its first direct presidential election in July, demonstrating that democracy is alive and well in Jakarta. Events in Burma were less encouraging.  Despite promises to the contrary, Aung San Suu Kyi remained under house arrest in Rangoon, making Burma’s constitutional convention an even bigger sham than it otherwise promised to be, and China’s leaders took one step backward regarding the introduction of more representational democracy in Hong Kong.

There was a flurry of other multilateral activity, including an ASEAN Regional Forum (ARF) ministerial at quarter’s end.  Several major track-two events were boycotted by the PRC, demonstrating that its “fourth no” still applies, despite conciliatory gestures from Chen Shui-bian during his May 20 inauguration address.

In economic developments, Asia continues to be the most dynamic area in the world, with a forecast annual growth of 6.8 percent for 2004.  Confidence remains high despite concerns over the regional impact of China’s attempts to curb overheating and the region’s growing thirst for oil.

Finally, in the Middle East, President Bush promised to “stay the course” in Iraq, even as the U.S.-installed governing coalition was replaced at quarter’s end by a UN-arranged new sovereign entity, thus opening the door for broader global participation in the effort to reconstruct and democratize Iraq.  NATO took a small step toward joining the “coalition of the reluctant” but how many, if any, additional Asian nations would be willing to walk through this door remained to be seen.

Relations between the United States and Japan were very good this quarter, even though a number of events threatened to derail the solid ties between the two governments. A hostage crisis in Iraq and the discovery of an alleged al-Qaeda network in Japan brought home to Japanese the reality of the war on terror. No longer could they disassociate themselves from events half a world away. By the end of the quarter, both governments could point to their relationship as an example of how an alliance is supposed to work; Prime Minister Koizumi Junichiro could finally make the case that his close relationship with President Bush paid tangible dividends. Not only was his strategy vindicated, but he could point to an outcome on a key policy that a majority of Japanese could support.

Vice President Dick Cheney made a long-awaited visit to China this quarter and engaged in strategic dialogue with China’s top leaders, who underscored the dangers of Taiwan independence in the aftermath of the re-election of Taiwan’s President Chen Shui-bian.  Despite U.S. efforts to allay Beijing’s fears, Chinese dissatisfaction with U.S. policy toward Taiwan spilled over into other policy arenas, influencing its handling of Iraq and North Korea.  This quarter also saw a host of activity in the economic realm, with the convening of the 15^th U.S.-China Joint Commission on Commerce and Trade, June visits to China by U.S. Secretary of Labor Elaine Chao and U.S. Secretary of Commerce Don Evans, and the signing of numerous bilateral economic agreements.

North Korea conducted an impressive diplomatic campaign during this quarter to improve its relations with China, South Korea, and Japan, and thus strengthen its position in the six-party talks.  In late June, under pressure from South Korea and Japan, the Bush administration made its first detailed negotiating proposal on the nuclear issue since taking office. The proposal called for a three-month freeze of North Korea’s nuclear program, accompanied by energy aid from South Korea, China, and Japan, as well as a “provisional security guarantee.” If North Korea readmits inspectors to verify compliance and meets specific deadlines for nuclear dismantlement, the U.S. would agree to continue energy assistance, provide permanent security guarantees, and take a variety of other steps to normalize relations.

The pressure on the U.S. from Japan and South Korea to negotiate seriously with Pyongyang enabled the State Department’s moderates to overcome the internal paralysis that has long marked U.S. policymaking on North Korea.  Whether the neo-conservative hardliners, located mainly in the White House and Defense Department, will now abandon their efforts to torpedo the six-party talks and to seek regime change in North Korea remains to be seen.

North Korea reacted to the U.S. proposal by characteristically demanding more energy assistance, more time for implementation, greater security assurances, and more incentives of other kinds.  But it expressed a willingness to “compromise” and “show flexibility” on the U.S. proposal if the Bush administration increases the incentives and specifically gives energy aid of its own.

The U.S.-South Korea alliance suffered serious strains during this quarter, as the U.S. announced, with little forewarning, that it would send a brigade of 3,600 troops from the Demilitarized Zone to Iraq and withdraw a total of 12,500 troops from South Korea by the end of 2005. The proposed withdrawal represents about one-third of the approximately 37,000 troops that the U.S. now keeps on the Korean Peninsula.  South Korean officials felt blind-sided by the announcement, although they stuck to their plan to send 3,000 South Korean troops to Iraq, at U.S. request, to bolster U.S.-led coalition forces.

Friction continued in U.S.-South Korea trade relations during this quarter over Washington’s efforts to improve Seoul’s enforcement of intellectual property rights (IPR).  South Korea expressed “regret” at the U.S. decision to keep it on the “priority watch list” for countries that do not adequately protect IPR.  Despite this ongoing dispute, the U.S. and South Korea were able to resolve a contentious internet issue and appeared to make progress on the problem of “screen quotas” that has held up completion of a Bilateral Investment Treaty for several years.  After months of resistance, South Korea’s minister of culture said his ministry would re-examine the screen quota system, drawing a harsh response from the South Korean film industry.

As noted in last quarter’s edition of Comparative Connections, “Elections Bring Tensions,” U.S.-Russian relations experienced a trying winter in 2003-2004. This spring seemed to offer some hope that relations could be brought back onto a more conciliatory track. At the G8 Summit on Sea Island, Georgia, both Presidents Bush and Putin expressed a determination to continue the partnership in the war on terror and in non-proliferation efforts.  Prior to the Sea Island summit, Russia endorsed the U.S.-U.K.- sponsored UN Security Council resolution on Iraqi sovereignty. Additionally, Putin seemed to give Bush a shot in the arm with his revelation that Russian intelligence had passed information on Iraqi plans to attack U.S. targets before the March 2003 invasion.  Nevertheless, there are still serious obstacles for the bilateral relationship in the months ahead, particularly as neither nation seems to be able to get a grip on its respective “occupation” duties in Chechnya and Iraq.