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.

The last quarter of 2005 was a relatively quite time in U.S.-Russia relations. The malevolent rhetoric that marked the bilateral dialogue over the past two years subsided somewhat. Instead, the leaders of the two nations focused some of their energy on shoring up relations with nations across East Asia. Both George Bush and Vladimir Putin visited the region; Putin on two occasions. The two leaders met in South Korea on the sidelines of the APEC summit. Central Asia and the Middle East, however, remain the primary focus of strategic maneuvering for both nations, and top officials from Moscow and Washington continued to visit these regions with regularity.  Meanwhile, Russian-Japanese relations have advanced in the economic sphere, but the territorial dispute remains at an impasse, and no progress was made during Putin’s visit to Tokyo in November.

Full-scale military relations have been restored with Indonesia, including Foreign Military Financing for lethal equipment, in recognition of the country’s democratic practices and its importance for the U.S. global war on radical Islamic extremism. Although not a member of the first East Asia Summit (EAS), Washington launched an Enhanced Partnership with ASEAN by agreeing to a multi-dimensional Plan of Action that includes additional cooperation on security, trade, and investment. U.S. relations with the Philippines were complicated by reports in the local media of classified U.S. assessments of Philippine politics that emphasized vulnerabilities in President Arroyo’s government. While Philippine-U.S. joint military exercises continued, the arrest of five U.S. marines on rape charges led to calls in the Philippine Congress for amending the Visiting Forces Agreement. The U.S. may provide some equipment and training for anti-piracy patrols in the Malacca Straits conducted by Singapore, Indonesia, Malaysia, and Thailand. Under Secretary of State Karen Hughes’ visit to the region led to her enthusiastic endorsement of Malaysia’s politics of inclusion as a possible model for Iraq.

Chinese officials and official commentary this quarter continued the positive message of reassurance to Southeast Asian neighbors that China’s rising power was not a threat to the region but a source of multifaceted economic and trade related opportunities. The Chinese government’s decision in December to value upward by a significant margin the size of China’s economy was accompanied by a reassuring White Paper issued by the Information Office of the State Council that emphasized that China’s economic and other power sought a “benevolent” order at home and abroad that posed no danger to neighbors or others. This year’s White Paper contrasted markedly with the tougher language about Chinese determination and resolve in the face of threats to Chinese interests in Asia and elsewhere that appeared in a White Paper issued by the same office a year ago regarding China’s National Defense.

Backed by burgeoning trade and a dizzying array of meetings and contacts involving Chinese and Southeast Asian leaders, generally adroit Chinese diplomacy integrated Chinese activities and interests further with those of individual Southeast Asian states and with the growing range of regional multilateral organizations headed by ASEAN. The Chinese approach continued to be publicly praised and welcomed by the leaders of Southeast Asian governments and regional organizations. The result has been a steady stream of assessments by prominent pundits and specialists highlighting Southeast Asia as the leading area of Chinese gains in influence around its periphery in the post-Cold War period, and claiming that Chinese progress in Southeast Asia is a clear indicator that a China-centered order is emerging in Asia that reduces America’s longstanding preeminence in the region.

The capstone of the quarter’s activities in Chinese policy was the whirlwind of events surrounding the visit of Chinese Prime Minister Wen Jiabao to Malaysia Dec. 11-15. Following the 11^th ASEAN summit that took place in the Malaysian capital, Wen participated in the ninth ASEAN plus China meeting, the ninth ASEAN Plus Three (China, Japan, and South Korea) meeting, and the inaugural East Asia Summit (EAS) that formally involved leaders of the ASEAN Plus Three (A+3) along with those from India, Australia, and New Zealand, with Russia’s President Vladimir Putin also participating. Wen held a bilateral summit with his Malaysian counterpart, and had formal meetings with most heads of the visiting delegations with the notable exception of Japanese Prime Minister Koizumi Junichiro. Differences with Japan were behind China’s decision not to hold the meeting of Chinese, Japanese, and South Korea leaders that usually accompanies the ASEAN Plus Three summit.

The Chinese government had many reasons to be satisfied with the results of the meetings, but the sessions also illustrated some of the limitations and shortcomings in China’s actual influence in Southeast Asia after many years of growing trade, “win-win” diplomacy, and regional integration. Though not addressed often in formal meetings involving Chinese and Southeast Asian leaders, recent media and scholarly assessments and international conferences examining China-Southeast Asian relations have put some emphasis on the fact that the actual behavior of Southeast Asian governments shows that China’s rise and regional activism have been accompanied by varying degrees of wariness on the part of China’s neighbors. This, in combination with keen awareness of salient negative implications of Chinese development for Southeast Asian governments and their people, poses serious and continuing obstacles to the emergence of any sort of China-centered order in Southeast Asia.

While 2005 has seen a fundamental shift toward more stable cross-Strait relations, developments were largely on hold for much of this quarter. Beijing continued to pursue cooperation with the opposition parties and to minimize dealings with the Chen Shui-bian administration. Beijing did not implement any further unilateral steps to expand cross-Strait exchanges. Economic ties continued to grow but at a slower pace. Then in November, working though private associations, Beijing and Taipei agreed to renew and expand the arrangements for charter flights at the coming Chinese New Year. With Taiwan’s local elections over, Taipei and Beijing will each need to decide whether to build on that base, as was not done in 2005, to tackle the other charter and tourism issues on the table. At present, it seems Beijing may be more willing to do so than President Chen. Progress on these and other economic decisions long pending in Taipei would serve Taiwan’s interests.

In general the last quarter of 2005 brought even less joy to the world from North Korea than usual. September’s euphoria over a hard-won agreement of principles at the Six-Party Talks soon dissolved in wrangling, and as of early 2006 this on-off dialogue again looks to be off. Elsewhere, the DPRK abruptly told those who had generously fed it for a decade that humanitarian aid was no longer needed, emboldened, critics claimed, by half a million tons of rice sent by South Korea (ditto China) with minimal monitoring.

Amid this generally worsening picture, unlike in the recent past (e.g., mid-2004 – mid-2005) Pyongyang did not suspend links with Seoul, yet neither did it rush to expedite them. By the numbers, North-South intercourse hit new records in 2005: inter-Korean trade topped $1 billion, while three times more Southern visitors headed North than in 2004. Yet frustration continued in the South over Northern slowness to implement matters nominally agreed on earlier, ranging from military talks to the delayed opening of the two new cross-border railways – physically ready, but with no sign that trains will run any time soon. But the Kaesong industrial zone continued to grow, and North Korea partially patched up what threatened to be a damaging row (of its own making) with its main benefactor, Hyundai.

Completion of the Sept. 19 Joint Statement at the Six-Party Talks set the stage this quarter for top-level Chinese diplomatic interaction with the two Koreas. PRC President Hu Jintao made successive visits to Pyongyang and Seoul in October and November.  Hu’s visit to Pyongyang at the end of October was the first visit by a Chinese president since Jiang Zemin’s visit in September 2001, and his state visit to Seoul in conjunction with the APEC meeting in Busan was his first as president of the PRC. Both visits boosted China’s diplomatic aims and strengthened China’s relations with Pyongyang and Seoul, respectively.  But the visits also highlighted the economic, diplomatic, and policy gaps in China’s relationships with the two Koreas and shed new light on the difficulty of reaching a satisfactory solution to the DPRK’s ongoing nuclear development efforts.

The economic balance sheet illustrates the differences in China’s relationship with the two Koreas: Hu’s visit marked an intensification of China-DPRK economic ties, with reports of PRC pledges of up to $2 billion in investments in the DPRK within the next few years to enhance stability and promote economic reform in North Korea, while indirectly stimulating greater PRC-DPRK trade that could expand as much as 30 percent to $2 billion in 2005. During Hu’s visit to Seoul, South Korea formally gave the PRC “market economy” status. The PRC-ROK bilateral trade balance will reach over $100 billion for 2005, three years earlier than had been anticipated. In addition, South Korea has emerged in 2005 as one of the top three leading investors in China. The issue of North Korea’s counterfeiting of U.S. dollars also involves China since U.S. sanctions on a bank located in Chinese-controlled Macao became a central challenge for Chinese diplomats responsible for overcoming an emerging stalemate in the Six-Party Talks.

Despite continued growth in the bilateral trade volume, tensions reemerged with the outbreak of public and symbolic “kimchi wars” over phytosanitary standards for South Korean imports of kimchi made in China. There were also a number of private-sector developments in the automobile and high-tech sectors that illustrate the complexity and likely challenges that intensified bilateral trade relationships may bring to the China-South Korean economic relationship.

Prime Minister Koizumi Junichiro’s Oct. 17 visit to the Yasukuni Shrine effectively put Japan-China relations into a political deep freeze. Meetings on sensitive East China Sea issues were cancelled and prospects for a Japan-China leadership summit before the end of the year went from slim to none. In December, Foreign Minister Aso Taro and Democratic Party of Japan President Maehara Seiji raised the issue of a China threat, which Beijing dismissed as irresponsible and without foundation. China’s diplomatic White Paper, issued at the end of December, announced that China has never been a threat and that it never had and never would seek hegemony.

“Japan-Korea Friendship Year” limped to a close, with petty unresolved problems between Japan and South Korea continuing to overshadow the relative stability of the actual relationship. The media in both countries had a field day with the various spats, almost gleefully highlighting disputes over territory, textbooks, and history. Japan-Korea relations have worsened, not improved, in the past year.

It is important to keep these diplomatic disputes in context: very few of these disputes had actual consequences for policies on either side. Although South Korean President Roh Moo-hyun’s frigidly polite interaction with Japanese Prime Minister Koizumi Junichiro at the East Asia Summit was noted throughout East Asia, most policies between the two countries remained unchanged. South Korean-Japanese economic interaction proceeds apace, and the long-discussed free trade agreement (FTA) between the two countries is victim, not of sentiment over history, but of much more mundane domestic politics and an unwillingness by either side to give ground on agricultural issues. Policy toward North Korea is stalled, but that is because the Six-Party Talks themselves have not made progress. Thus, although relations are hardly warm, these disputes remain the province of rhetoric and showmanship. It is too early to tell whether 2006 will see renewed leadership between the two leaders or a slide further into diplomatic squabbling.

By any measurement, 2005 elevated China-Russian relations to a higher level across various fields: Presidents Hu Jintao and Vladimir Putin met four times; they issued a joint declaration on the international order in the 21^st century; began strategic dialogues (February and October), held their first-ever military exercises (August), recorded trade of $29 billion (up 33 percent), and coordinated foreign policy (30 consultations between the foreign ministers).

These high-profile and glittering interactions, however, were overshadowed at yearend by a serious pollution accident in the Songhua River, a tributary of the Heilong River (Amur in Russia) dividing Russia and China – a painful reminder that high-profile diplomacy is not the only priority between the two powers that share more than 4,000 kilometers of border. The China-Russian strategic partnership relationship, though far from derailed, was at times tested and strained by the accident.

Measured by criteria such as the number of high-level visits, new dialogue mechanisms, initiatives, and major agreements, U.S.-India relations during 2005 could certainly be characterized, in the words of Ambassador David Mulford, as at “an all-time high.” But a careful review of the year confirms that while the tone and atmospherics of the bilateral relationship have undergone a profound, positive change, there is significant work to be done in transforming visits, mechanisms, initiatives, and agreements into sustainable progress in the relationship. This sense of there being more to do is perhaps what Prime Minister Manmohan Singh alluded to when, in an interview on the Charlie Rose Show, he said of his discussions with President George W. Bush that “we both agreed that the best is yet to come.”

The year just completed, 2005, saw the signing of a new framework agreement for defense cooperation, a major initiative to pursue civilian nuclear cooperation and a state visit by Prime Minister Singh to the U.S. at the invitation of President Bush. It remains to be seen how the processes launched on the defense and nuclear fronts will be implemented and whether a visit by President Bush to India in 2006 (as is widely expected) will continue the momentum in bilateral relations. Meanwhile, U.S. and Indian trade and investment ties, though growing swiftly, remain far below their potential and the U.S. and India continue to search for the same “wavelength” on a range of regional and international issues. One issue that did not interfere significantly with U.S.-India relations during the year, as it had during the first Bush administration, was the India-Pakistan dispute.