Although Beijing was distracted this quarter by the SARS epidemic, there was still progress in U.S.-Chinese relations. Dealing with North Korea’s nuclear weapons programs continued to top the bilateral diplomatic agenda with China orchestrating and hosting trilateral talks in Beijing. Presidents Bush and Hu Jintao agreed to seek a peaceful solution to the nuclear weapons issue in a summit on the sidelines of the G-8 meeting in Evian and exchanged views on other international and bilateral issues. In an unprecedented joint effort between the U.S. Drug Enforcement Administration (DEA) and law enforcement authorities in China and Hong Kong, the U.S. and China succeeded in dismantling a massive heroin smuggling organization that targeted the U.S. and Canada.  On the negative side of the ledger, the U.S. expressed displeasure at Beijing’s lax enforcement of its export control laws, promulgated almost one year ago, by slapping sanctions on Norinco, one of China’s biggest and most prestigious state-owned conglomerates.

The “nuclear issue” with North Korea continued to dominate U.S.-Korea relations this quarter, although it appeared no closer to resolution at the end than the beginning.  When China, the U.S., and North Korea met together in April for their first “multilateral” dialogue, North Korea continued its strategy of making nuclear-related threats while offering to dismantle its nuclear facilities in exchange for U.S. concessions.  Refusing to negotiate under Pyongyang’s gun, the U.S. pursued a policy of enlisting its allies to ratchet up diplomatic pressure on North Korea. The Bush-Roh summit in mid-May aimed to strengthen the U.S.-Korea alliance, and while affirming the need for a peaceful resolution of the nuclear issue, committed both countries to consider taking unspecified (and impliedly coercive) “further steps” against Pyongyang.  At the end of the quarter, diplomats pushed for a new round of multilateral talks with North Korea, with the U.S. threatening to seek condemnation of Pyongyang at the UN Security Council if North Korea rejected U.S. negotiating demands.

In early June, Washington and Seoul agreed on major realignments and redeployments of U.S. forces in South Korea over the next several years.  U.S. troops will be withdrawn from the Demilitarized Zone (DMZ) and from Seoul’s Yongsan garrison, to be redeployed south of Seoul. The redeployment followed mainly from the Pentagon’s view that it was no longer necessary to maintain a military “tripwire”on the DMZ in view of new U.S. warfighting capabilities.  Finally, a trade conflict over Korean sales of memory chips in the U.S. simmered throughout the quarter, after the U.S. imposed heavy punitive tariffs on Hynix corporation. The Korean government vowed to contest these penalties at the World Trade Organization (WTO).

After a period of diplomatic limbo and uncertainty in July, China brokered the first round of six-party talks on the North Korean nuclear issue during this quarter. North Korea used the late August multilateral talks to rattle its nuclear saber and otherwise threaten the U.S. On the margins of the general meeting, North Korean diplomats met bilaterally with U.S. officials, but their discussion did not foster any apparent progress.  The main achievement of the talks was a tentative, as yet unconfirmed, agreement to meet for a second negotiating round in the fall.

U.S. and South Korean military officials continued during the quarter to fine-tune the redeployment of U.S. troops away from the Demilitarized Zone (DMZ) and from Yongsan Army Base in downtown Seoul. The talks were characterized by mutual agreement on the redeployment plan and transfer of military missions to South Korea but differences over its timing.  Finally, South Korea challenged the U.S. decision to impose high tariff penalties on Hynix Corporation for its export of semiconductor chips to the United States.  South Korea will appeal the U.S. decision at the World Trade Organization (WTO) and attempt to reverse it.

In the second quarter of 2003, the war in Iraq brought to light fundamental differences between the United States and Russia that some seasoned observers had been claiming existed between the two erstwhile allies, even as Moscow and Washington forged a partnership in the war against terrorism. It has become clear that Russian President Vladimir Putin, with an eye to upcoming Duma and presidential elections, has heeded advisors that have been warning him about being too accommodating with the United States.  In addition, the Russian public has clearly voiced its opposition to the actions of the United States government across the globe.  This was reflected in the coolness toward Washington prevailing in ruling circles in Moscow during the Iraq war, and the official refusal to back U.S. actions in the Middle East. Washington, however, has steadfastly maintained its strategy of accommodation with Moscow, and has been eager to enlist Russian support in the Middle East and maintain the partnership in the war on terrorism.

With the end of hostilities in Iraq, the Russian government has again changed tack somewhat and has publicly reaffirmed its desire to maintain a constructive relationship with the United States. The June summit meeting between Presidents Bush and Putin in St. Petersburg smoothed over the tense spots in the relationship somewhat.  Energy issues continue to unite the two nations economically.  Meanwhile, Moscow and Washington remain actively engaged on the Korean Peninsula, and have both called on Pyongyang to not develop nuclear weapons.

The past quarter has witnessed growing antiterrorist cooperation by the core ASEAN states (Philippines, Singapore, Malaysia, Indonesia, and Thailand) with the United States to apprehend the Bali bombers and others bent on attacking Western interests.  Although Indonesia, Malaysia, and Thailand were reticent about supporting the U.S. war in Iraq because of concern about the political backlash from their own Muslim populations, these states as well as Singapore and the Philippines – openly enthusiastic about Washington’s quick Iraq victory – are looking beyond the war to economic reconstruction opportunities there.  American plans to reduce and reposition forces in the Pacific may have a Philippine component if Manila agrees to prepositioning military supplies there.  The United States also expressed concern over Indonesia’s military assault on Aceh province, Cambodian violence against Thai residents, and Burma’s crackdown on the pro-democracy opposition.

The quarter began on a negative note with escalating concern about the spread among ASEAN countries of severe acute respiratory syndrome, or SARS, a new viral disease that originated in China and carried a death rate of up to 15 percent, and was transmitted by means that were not well understood. It threatened to create panic and devastate regional economies just as most were emerging from the economic crisis that began in 1997.  ASEAN played a key role in persuading China to take more effective action to halt the spread of SARS, and can take satisfaction that its often-maligned “way” of diplomacy, low key and nonconfrontational, was well suited to this particular crisis.

At the annual ASEAN ministerial meetings in Phnom Penh in June, China proposed the establishment of a new Security Policy Conference, comprised of senior military as well as civilian officials from the 23 ASEAN Regional Forum (ARF) countries. The objective would be to draft a new security pact to promote peace and stability in the region. Also at the ASEAN meetings, China won points by becoming the first major power to agree to sign ASEAN’s 1976 Treaty of Amity and Cooperation. Further steps were recorded in the march toward a China-ASEAN Free Trade Area as Thailand became the first country to gain concrete benefits from “early harvest” tariff reductions. A nascent Asian Monetary Fund emerged, including China and the original ASEAN five countries, among other members. China conspicuously stayed out of the growing consensus that pressure must be increased on Burma to institute democratic reforms. High-level visits between Hanoi and Beijing produced no new developments.

Throughout this quarter, Beijing and Taipei struggled to contain the spread of severe acute respiratory syndrome (SARS).  SARS dramatically reduced cross-Strait travel; its effects on cross-Strait economic ties appear less severe but remain to be fully assessed.   SARS intensified the battle over Taiwan’s request for observer status at the World Health Organization (WHO). Although the World Health Assembly (WHA) again rejected Taiwan, the real problems of a global health emergency led to the first contacts between the WHO and Taiwan.  Beijing’s handling of SARS embittered the atmosphere of cross-Strait relations and created a political issue in Taiwan that President Chen Shui-bian is moving to exploit in next year’s elections.

The most emblematic moment in inter-Korean ties during the past quarter occurred June 14. In a low-key ceremony timed to mark the third anniversary of the first North-South summit, the two sides reconnected their railway tracks in two corridors across the Demilitarized Zone (DMZ), near the west and east coasts of the Peninsula. If rejoicing was muted, this reflected not just the ongoing nuclear blight, but the fact that this relinking was so far only symbolic. On the Southern side, all is ready to roll, whereas north of the DMZ, large chunks of track have yet to be built.  So the much-hyped “iron silk road,” across Siberia to Europe, will not be ready any time soon.  South Korea still hopes to see the western Kyongui rail link completed this year.  Yet that will depend not only on Pyongyang’s willingness to realize a project it has persistently delayed – although latterly it has seemed keener again – but (in all probability) also on developments over the nuclear issue, which continues to overshadow everything.

In that sense this rail “link” is symptomatic of the ambiguous state of inter-Korean relations currently. While the nuclear shadow has by no means ended all North-South contact – in fact there was more this quarter than in some pre-crisis periods, especially in 2001 – it inevitably colors and inhibits dialogue. Thus both ministerial and economic talks spent much time discussing this – or rather, with the South raising it and the North refusing to discuss it. In a related twist, in the first full quarter of the Roh Moo-hyun administration in South Korea Pyongyang took strong exception to the new president’s harder line after he met George W. Bush in Washington in mid-May.  Inter-Korean meetings then witnessed a new sight:  a tough-minded Seoul digging its heels in and demanding an apology before proceeding to business.

This quarter marked a period of transition and tumult in China-Korea relations.  Beijing revealed its own diplomatic initiative to settle the North Korean nuclear problem with a surprise announcement that it would host representatives from Pyongyang and Washington in multilateral talks.  But that effort was set back by an embarrassing North Korean threat during the talks, warning that it had nuclear weapons and might test them in the near future.  The economic and health threat from severe acute respiratory syndrome (SARS) was a major concern at the beginning of the quarter, but dissipated by the end of the quarter with little apparent lasting effect.  South Korea’s new Foreign Minister Yoon Young-kwan took his first trip to Beijing in April to meet newly installed counterpart Li Zhaoxing for the first of several meetings.  The dates are now set for President Roh to follow in early July.

Despite the apparent volatility of events this quarter, however, there has been little apparent change either in the seriousness of the North Korean nuclear issue or in continued bullish prospects for buoyant China-Korean economic relations.  Still, one can’t help but feel that more volatility is on its way, and that tensions with North Korea will rise as events unfold in the second half of the year.

Political relations broke out of the Yasukuni-induced deep freeze. Prime Minister Koizumi Junichiro met with China’s President Hu Jintao in St. Petersburg, Russia, on May 31 during ceremonies marking the city’s 300^th anniversary.  Less than three weeks later, during meetings of the ASEAN Regional Forum (ARF) in Phnom Penh, Foreign Minister Kawaguchi Yoriko invited China’s new Foreign Minister Li Zhaoxing to visit Japan in August to commemorate the 25^th anniversary of the Japan-China Friendship Treaty; Li accepted. Japan also successfully lobbied China to support Japan’s admission to the multilateral U.S.-China-North Korea talks that opened in April in Beijing.

But across the board, the severe acute respiratory syndrome (SARS) epidemic in China dominated the relationship.  Japan extended emergency medical assistance and personnel to help China cope with the epidemic.  SARS also affected Japanese business operations in China as well as in Japan, which is now increasingly dependent on low-cost component imports from China.  Throughout the quarter, economists repeatedly tried to assess the bottom-line impact of SARS.  Through mid-May, the prospects were judged to range from bad to catastrophic. However, by the end of the quarter as the epidemic appeared to come under control, economic forecasts brightened.