American Enterprise Institute

March 7, 2008

[Edited transcript from audio tapes]

9:45 a.m.	Registration
10:00		Panel I: The Alliance and Regional Institutions
	Panelists:	Dan Blumenthal, AEI
		Kent Calder, Johns Hopkins University, School of Advanced International Studies   Satoshi Morimoto, Takushoku University
	Moderator:	Christopher Griffin, AEI
11:30	Luncheon
	Keynote Remarks:	Paul Wolfowitz, AEI
12:30		Panel II: U.S.-Japanese Capabilities and Constraints
	Panelists:	Paul Giarra, Hicks & Associates Makoto Iokibe, National Defense Academy
		Lt. Gen. Noboru Yamaguchi, Japan Ground Self-Defense Force
	Moderator:	Michael Auslin, AEI
2:00	Adjournment

Proceedings:

Michael Auslin: Good morning, ladies and gentlemen.  If you could take your seats, please. We would like to get started.  We have a full morning and early afternoon.  We appreciate you coming out, so we want to get started right off the bat.  My name is Michael Auslin.  I'm a resident scholar here at AEI and the head of the Japan Studies program.  We're very happy that you've all joined us this morning for what we know will be an interesting and truly revelatory set of talks, we hope, about the state of the alliance between Japan and the United States, and the future of that alliance. 

We're at a point in time, in both countries, because of domestic politics as well as foreign politics; because of dynamics within the alliance itself; and because of issues that we're all aware of that have recently come up in the alliance, where we think it's time to step back and take stock.  The alliance that is 60 years old is one of the most successful bilateral alliances in the history of the world.  And yet, like all alliances, it evolves and it changes according to the needs of the time.  And so at AEI, in a project that we are doing on the future of the alliance -- what next steps it needs to take, where it should go in order to maintain its viability and its robustness for the next half-century -- we decided to pull together two extremely distinguished panels today, as well as a keynote speaker, to both put the alliance in a larger global context, as well as drill down into some of the more important issues facing both countries with the changes in Asia and changes in the military requirements that both countries face.

So without further ado, I'm going to turn it over to the Chair of our first panel, my colleague, Chris Griffin.  We look forward to a good set of morning talks and then the afternoon, and of course a lunch as well.  Thank you very much.

Panel I - The Alliance and Regional Institutions

 Chris Griffin [Moderator]:  Thank you.  Good morning and welcome again to the American Enterprise Institute.  My name is Chris Griffin.  I'm a research fellow here in Asian Studies.  I'm very glad to see all of you here and actually even more delighted to be chairing this panel this morning, which is a particular pleasure, because I have a former professor of mine, and the fellow for whom I worked when I first came to AEI a few years ago.  So a nice reminder to be modest and appreciate the people that helped me along the way.  I look forward to introducing this panel to you.

 Just a few small thoughts along the way.  Misha used the term "evolution" to describe what the U.S.-Japan alliance is going through at this point.  When you talk about evolution, one of the first questions that come to mind is the environment.  And the environment in Asia is changing very rapidly, and probably one of the defining features of that change is the emergence of regionalism.  Whenever we think about regionalism, I think it's very easy for us to be somewhat enamored by a concept that really drives from the European experience, in which regionalism is seen as a process of building a common identity overcoming historical antagonisms and figuring out ways to solve all the problems that we once had, but will no longer have, now that we have regional institutions, etcetera. 

 It seems particularly interesting in Asia that oftentimes regionalism is a form of rivalry.  When you look at how the countries relate to the principal regional institutions, how the institutions relate to one another, I think is a very important dynamic that all of our discussants, our presenters, will be able to provide some insight on as well to how regionalism is solving some of the problems in Asia, because it can't be all bad.

 To start from my side, down the table: Dan Blumenthal is a resident fellow here at the American Enterprise Institute in Asian Studies.  He was previously a Senior Country Director for China, Taiwan, Mongolia and Hong Kong at the Department of Defense, before coming to AEI in 2004.  He recently published, along with Randy Shriver, a report on the U.S.-Taiwan relationship and how to think of that in the coming administrations, both in Taiwan and the United States, which is available on the AEI website.

Professor Satoshi Morimoto is a professor at Takushoku University.  He has taught at other universities in Japan.  Before entering into academia, he had a career in Japan's Air Self-Defense Forces and he also worked at Japan's Ministry of Foreign Affairs, where he was responsible for security studies, in the equivalent of Japan's INR, in their foreign ministry. He's written extensively on South Asia, which in particular, I hope he'll offer a word or two today on, since that's an emerging relationship that Japan has, looking at India. 

 Next  will be Kent Calder, who is the director of the Edwin O. Reischauer Center for East Asian Studies at the Johns Hopkins School for Advanced International Studies.  He previously taught at Princeton University and has a very extended period in which he was a Special Advisor, I believe, to the Ambassador in Tokyo.  And with that, I will hand the mike over to Dan Blumenthal.

 Dan Blumenthal:  Thank you very much, Chris.  I'd like to thank both Chris and Misha Auslin for putting together a wonderful program today.  We really are developing a very strong Asian-Japan studies program, thanks to Chris and Misha, so I'd like to especially thank them, and also our friends from Japan who have come from afar to attend today.  So I'd like to start with that.

 In terms of talking about the U.S. alliance and regional institutions, I thought it would be wise to begin with what U.S. and Japan have set for themselves, in terms of what they wish to accomplish.  In the last seven years, we've set a quite an ambitious common agenda, starting with President Bush and Prime Minister Koizumi's statements of common objectives and then the February 2005 2+2 common objectives.  Then I want to go on and talk about how different institutions in the Asia-Pacific might meet those objectives; are meeting those objectives; could prospectively meet those objectives in the future.

 I won't read all the ticks off the statements of common objectives.  There are many, and it's very ambitious and it shows how far the alliance has come, at least in terms of its aspirations.  The two countries' Prime Ministers and Presidents stated: they want to win the war on terror; maintain regional prosperity; promote free market ideals in institutions; secure freedom of navigation in commerce, including sea lanes; support a peaceful unification of the Korean Peninsula; develop a cooperative relationship with China, welcoming the country to play a reasonable and constructive role; encourage the peaceful resolution of issues concerning the Taiwan Strait through dialogue; and encourage China to improve transparency of its military affairs. 

And then there's a set of global objectives too, which is: promote fundamental values, such as human rights, democracy, the rule of law in the international community.  It's a very broad agenda set out for years to come.  But what's notable is not just the common security interests of the two, but the way in which Japan has started to talk about its interests in terms of universal values and not just in terms of very narrow self-interest.  And not only talk about them, but in fact, start to engage in diplomacy to set up institutions around the region that, in fact, are grounded in universal values.  And I'll come back to that in a moment.

 When you read between the lines of the objectives of the two nations, you can speak more clearly about the common interests of the two and you see a lot of convergence.  Of course, insuring that China's rise is peaceful and that no one country, in this case China, dominates the Asia-Pacific as a common interest.  If the United States continued unfettered military access to the region to keep the peace, which increasingly requires reliance upon allies and partners; continued prosperity through trade, globalization, inclusive trade institutions and expanding democratic institutions to promote stability, and then specifically in the context of Japan, which really is, and will continue to be, the lynchpin of U.S. strategy in the Asia-Pacific, is to promote Japan's resurgence and the way Japan likes to talk about a normalization in a manner that reassures the region and doesn't create security competition. 

For Japan, a lot of these interests are held in common with the United States.  They want to become a ‘normal’ country, meaning they want to play a greater role in regional security and diplomacy, as well as international security and diplomacy; seeing China rise peacefully and not dominating the region; and as an island nation, the interests in continuing the freedom of commerce and the freedom of the sea lanes and navigation and therefore its energy security are very, very important, as well as given where its located -- close to North Korea and close to China -- interests in not seeing the proliferation or continued deployment of things like ballistic missiles and weapons of mass destruction.

 Again, so there are many, many common interests between the United States and Japan.  As I noted before, what's notable is not so much the two have so many common interests, it's also that Japan is not only talking in different ways about its diplomacy, grounding it in universal values, but also being diplomatically active in trying to promote institutions grounded in universal values.

 One example is the short-lived attempt by Japan to create the quadrilateral dialogue among Japan, Australia, the United States, and India.  The ongoing trilateral between Australia, Japan, and the United States is another example, where Prime Minister Howard, then Prime Minister of Australia, and then the Prime Minister of Japan, Abe, spoke very much in terms of the relationship between Australia and Japan going to another level, not just because of common interests, but just because they're two Asian-Pacific democracies.  Japan does this, I think, in part, it's found this kind of language to help reassure other nations that its own resurgence will be anchored in some greater values rather than pure self-interest.  It also does so to attempt to resist some of the Chinese attempts to create Asian-only institutions and downgrade institutions that are more inclusive, such as APEC.

 The United States has a very strong interest in encouraging Japan in this type of diplomacy, again, because for the United States to succeed in the Asia-Pacific, it needs Japan's resurgence to be grounded in a framework-- in a multilateral alliance in a framework that reassures the region and doesn’t spark fears in the region that Japan is attempting some sort of new hegemony or new type of domination.  Unfortunately, I'd say that we, in the United States, have not done our utmost to reinforce this Japanese instinct in our diplomacy.  We were, at first, lukewarm about the quadrilateral dialogue, to say the least.  We agreed to it eventually.  Eventually we agreed to it. Unfortunately, it was recently   Australia, under a new leadership, actually pulled the plug on it.  Let's just say we weren't as strong and embracing of this Japanese attempt as I think we should have been for long-term interests.  We have not given great attention, although we've paid lip service to it.  Certainly at the last APEC meeting in Australia, this past year, we paid lip service to a partnership of Asian-Pacific democratic countries.  But we certainly haven't done anything since paying lip service to it.  Again, this is something that the Japanese have a great interest in, and for reasons I stated earlier.

 So I think in some ways we undermined a more activist Japanese diplomacy.  I think here, our approach to North Korea had some residual effects on Japan's attempts to really lay out a vision for its resurgence within this more comforting framework.  We cut Japanese confidence in its activist diplomacy towards North Korea, and therefore I think we cut Japanese confidence in general in taking a more activist stance. 

 Now in terms of where we go from here, I think that, when you think of regionalism in the Asia-Pacific, there is certainly, as Chris said, an element of rivalry to it.  Asia is not yet Europe.  There still is a lot of unsettled great power conflict territorial disputes and so forth.  But Asia-Pacific is very much a region where other countries, our own first and foremost, have deep interests, which is why institutions, we believe in the United States, must be inclusive.  And the worry in the United States is that some of the regional institutions being built are meant to be either Sinocentric or, in general, non-inclusive, "Asia just for Asians."  I think the Asia-Pacific is becoming too important a region economically, security-wise, demographically, and politically, for it to succeed or for U.S. interests to be met, if it's Asia just for Asians.

 I sort of break down America's interests and how institutions can serve those interests into three dimensions.  There's security interests, which can be advanced.  I think it's high-time; and Chris Griffin and Misha recently did a piece in your packets, in terms of moving towards a more security multilateralism, because the "hub and spoke" model of U.S. alliances is fraying and it is time, with many of the U.S. allies wanting to play more of an active security role.  It is time to institutionalize some of these defense arrangements. 

 We have, as I mentioned, the trilaterals going on with Australia and Japan.  There's some hope for reinvigorating a trilateral dialogue, perhaps even more with South Korea and Japan.  And of course, there are exercises that we've begun to institutionalize, such as the Malabar exercises, which this year includes Singapore, Japan and Australia, besides India.  In addition to India, I should say.  These exercises really speak to deep interests and concerns among all the participants, one of which is the uncertainties regarding China's military modernization and what it means for their continued interests in freedom of the seas and freedom of navigation, and just basic interests in not having a dominant hegemon in the region, as well as other concerns, as other nontraditional security concerns.  But these exercises are ongoing and I think it increasingly important for the United States, realizing that it's going to be more relying upon its allies and other countries stepping up and playing more of a security role in the region.

 Economics is not my forte, but obviously we have a huge economic interest in the Asia Pacific; are very interested in inclusive and open trade regimes, as opposed to exclusive ones.  Then political and diplomatic institutions, again, both the U.S. and Japanese attempts -- I think the Japanese have more active attempts than the United States -- to build more values-based institutions such as we're seeing in other parts of the world.  I think Asia may be the only major region in the world without such an organization.  Think about what you have without a values-based organization.  You will not be able to deal properly with human rights atrocities in Burma and North Korea, or for that matter, shape the type of Korean unification that we all want to see. 

As we've seen in the last couple of years, we're not properly able to deal with the consolidation of democracies in Southeast Asia or deal with reversals of democratic processes such as in Thailand.  And a values-based institution will help such countries as India and Japan, who take pride in their own democracies, overcome some of the more troubling instincts in such places as Burma, which have really seen a race to the bottom, in terms of geo-political competition.

 Now, of course, the elephant, or the dragon, or the panda in the room is always China, because a lot of times these institutions don't come off for fear of provoking China.  But I think this is really misplaced.  All the countries in the region, including the United States, deeply engage China through different institutions and through bilateral relationships.  We shouldn't preemptively stop ourselves from building the types of relationships and institutions we need to build for fear of buying the argument that China says that these are containment organizations.  It's simply not the case.  What the region is trying to do is build a stronger framework into which China can integrate over time.  And again, China is building many of its own institutions that do exclude the United States and do attempt to exclude Japan.  I think everyone can be clear-eyed about the building of institutions in Asia.  Clearly, China builds institutions to serve its own interests; and the United States and Japan should not be shy about building institutions that serve their interests as well.  Sometimes those will converge with the Chinese.  But on some of the key issues that I ticked off, many times they will not.  I'll stop there.

 Satoshi Morimoto:  Next, my turn.  My name is Morimoto.  I'm a Professor of Takushoku University in Tokyo.  I'm very happy to be here today.  It's a great honor to make my remarks on this occasion.  I have served the Embassy for almost 4 1/2 years at REA.  We have many change of environment surrounding us since then.  However, the importance of the U.S.-Japan alliance has not changed at all. It is the most crucial alliance for peace and stability, not only for Asia also our international committee.

 We believe that it is also fundamental principle, Japan's Secretary in Foreign Policy and basic PR of the U.S. policy toward the Asian Pacific region.  Currently, we have many security agenda for both countries, including a host of nations supporting missile defense; North Korea and China intelligence management and U.S. defense transformation and the alignment process, RMG dialogue and our defense budget and our contribution to the Iraq or Indian Ocean and Afghanistan as well.

Some are common interests but some are issues, which both sides has a little bit of different kind of feeling and sentiment.  But we have to recognize that even if our alliance is not in good shape, it is better shape rather than the best situation of the Japan-China relationship.  We have to explore how to reinforce the incredibility of our alliance and continue to make effort for a better shape for the alliance every day. 

 Anyway, I don't have much time and then I would like to raise just three points, which I wish to emphasize in the context of Asian regionalism.  The first six party talks in Northeast Asia, regional remarks.  As you know, the North Korea missile and nuclear development is most serious threat for our security policy.  I believe that North Korea will not abandon their nuclear weapons, although they intend to utilize some disablement of nuclear reprocessing facility as a diplomatic leverage to get any assistance from another country.  If so, what is the rationale?  What is the extreme objective of the six party talks?  Our American friends say that this is, issue a complete, verifiable, reversible dismemberment of nuclear weapon program.  But so far, North Korea has no intention to submit a complete and correct list of nuclear related facility. 

 We, in Japan, are seriously concerned the nuclear weapon itself, and also the development testing facility and deploying site storage facility and the development of ballistic missile rather than disablement of a reprocessing facility and the proliferation

 Then so far we intend to modernize our missile defense to encounter this kind of menace.  In the future, we will try to modernize conventional weapon, especially mobile size PGM to meet an incoming ballistic missile of North Korea.  But the problem is we are relatively reluctant to upgrade the six party talks to the ministerial meeting, which will be discussed sub-regional architecture to deal with the reunification process of both Koreas, as long as North Korea never take substantial steps for dismantlement of nuclear weapon and ballistic missile and make progress in the abduction issue .  That is quite frankly my headache.

 I joined six countries’ Northeast Asia Corporation Dialogue meeting in Moscow last November to discuss how to establish a sub regional framework in the future.  American friend and the Chinese are very-- how to say it? -- energetic discussion, how to make a sub-regional architecture in our region, sub-region.  But exclusively Japan relatively reluctant.  A North Korea participant strongly says, "Okay.  If you are reluctant, you don’t have to join with us."  That is what North Korea says, "That is a pass point." 

Second, on China, as you know, PLA military modernization program is a more serious problem for our security policy.  This modernization program is a military offensive and offensive nature and the more than defense requirement for Chinese territory.  But I look at the Chinese strategy in our post-Cold War period.  They shift the strategy by importance from the North to the South, land to ocean, to modernize power production capability in the ocean to manage Taiwan issues and to secure the mineral resources in the ocean and the sea-lanes of communication for China.

 But I don't think that kind of implication for this modernization programs to the security of Taiwan's security in the future, especially after the 2010, when the military balance between mainland China and Taiwan will be [indiscernible] in times of sea control and air superiority.  We don't know which direction that China is going to.  But the fact is that they increased the defense budget and the build up of POA.  That is a serious destabilizing fact of the Asia-Pacific region as a whole. 

 So my answer is very simple.  We have to hold up by U.S. hedging strategy rather than the stakeholder approach to the China, in order to support for the U.S. defense transformation and the realignment process in your area.  But in the context of Asian regionalism, as all of you know very well, we established some sort of a regional framework in 1994.  Since then, the U.S. and Japan joining this regional framework, especially a dialogue framework, to make very serious contribution to the dialogue itself.   When I passed the stage of, especially CSCAP, we discussed CBM and also PD, the second phase.  But they always, the most serious obstacle is how to proceed with the institutionalization.  China and some ASEAN countries were reluctant to institutionalize for a definite cooperative measure, to improve security in our region such as a common approach to send military forces for the maritime safety and so on. 

 So far, we made almost 15 years of security dialogue among all Asia Pacific members, but quite frankly we cannot depend on our national security to the regionalism or regional framework.  Our side, it's very simple.  We have to reinforce our U.S. and Japan alliance, otherwise we cannot secure our territory by our self.  But on the other hand, look at the environment.  We have to improve the regional security cooperation and dialogue in our region, but how to?  So far, it's almost stalled.  What is our dynamism or momentum to make progress of a more regional framework, a more regional security dialogue framework in our region?  That is a very serious common problem for Asia-Pacific.  That is the second point.

 The last point is look back at our alliance, I think a rationale of alliance and the future prospect of the multinational approach of alliance is still important but should be redefined.  Both the U.S. and Japan redefined alliance in 1996 and issued the joint declaration of the U.S.-Japan Security Alliance; however, the 9/11 incident happened 5 years after that declaration.  Since then, every concept and strategy and definition of military and defense and the war have been absolutely changed.  Now I'm not confident the rationale of alliance, especially how to do deal with terrorism and the weapons of mass destruction by a common approach and the alliance.  Japan's support of the U.S. and the multinational effort in Iraq or the Indian Ocean.  I personally think that that is enough.  But the problem is, what is the rationale and objective of additional international contribution, is it necessary?  Maybe we have to redefine the rationale of alliance in the possible future.

 So far, in Tokyo, we have started to discuss a permanent role that is a guideline in East Asia for the dispatching of security defense forces in overseas.  If we can make, reach the conclusion of this reservation sometime by the end of this year, I expect that our international situation will expand, based on this reservation.  But as long as I join the PT team, a policy team of ruling parties to draft this reservation, especially the Komei party and some key member of the Democratic party, strongly insists that we should not dispatch Self Defense Forces through overseas, except with a mandate imposed by the United Nation Security Council resolution.

 We have to overcome this obstacle.  That is our domestic problem and our political problem.  Otherwise, we cannot make our healthy reservation to dispatch Self-Defense Forces or procedure. This is a most critical political agenda for the next several months in Tokyo.  If we can manage well, then I think we expect to explore the possibility to make a regional security framework among the U.S.-Japan, Australia or U.S.-Japan and some other country, which can share the same interests in the values in the area of peacekeeping or maritime security or search and rescue or patrol in the warning on intelligence or natural disaster relief in the humanitarian aid and joint training also.

 Anyway, if you look at Asia, still the regionalism is stalled, but we have another approach that is the more likeminded countries’ cooperation for security in the region to share the common interests and values, based on the center of the U.S.-Japan alliance.  That is my tentative conclusion.  So, thank you.

 Chris Griffin [Moderator]:  Thank you, Dr. Morimoto, and I need to apologize, that while I could thank Dr. Calder for giving me an education, I didn't bother to say that he just has a book out, a very important plug, Embattled Garrisons.  It looks at the future of the U.S. military alliances throughout the world and the foreign posture of the basing of American forces.  One of the disadvantages of having a book out that directly affects the interest in the Department of Defense is that they want you to come brief them about it.  So he's going to be leaving a few minutes early.  Thank you very much, both of you.

 Kent Calder:  Thank you very much, Chris.  It's a real pleasure to be here, I must say.  Of course, I have known AEI for many, many years.  But in the last year, the last two years, it seems to me, it's become one of the most dynamic and broad-based institutes in Washington, working on issues of Pacific affairs.  We're right close by, of course, our Reischauer Center is just half a block away, and it's a real pleasure to working with AEI.  It's also good to see Morimoto-sensei, whom I knew and from whom I learned a great deal when I was in the U.S. Embassy, Tokyo.  It's good to see so many friends also, of course, here.

 I'm a student of Edwin Reischauer.  He said, right at the beginning of his book, the United States and Japan   In fact, the first lines of that book are, a statement that it seems to me defines both the problem and the opportunity of U.S.-Japan relations,  “The United States and Japan face each across an ocean, only across an ocean, but it's the widest ocean of them all."  That, of course, creates opportunities, a certain detachment, particularly in a global world, an ability to cooperate in far-flung ways, particularly given that these two countries are the two largest economies in the world, and they have tremendous complimentarity between them.  But, of course, it also creates an unusual problem of communication and political coordination, which is substantively different, it seems to me, from the kind of problems that exist in America's relations, or in Japan's relations, with most of the other nations that they have to deal with.

In the course of my book, that Chris mentioned, Embattled Garrisons, which deals with the basing, comparatively, the problems for deployment that the United States has politically in different parts of the world.  This struck me very strongly. So I think we need to, in thinking about regionalism and the alliance, we need, first of all, to see what are the distinctive embedded elements of the alliance, and then to see the nature of the winds, the forces, that are blowing on the alliance from the economic and the political side, in order to think about policy and where we might be headed. 

I would be willing to bet, given that this is the spring of 2008, that two years from now, we probably will, of course, we'll have the continuity of the alliance, but we probably, on both sides of the Pacific, will be looking at this from insignificantly different ways, and possibly with significantly different policies than we have today.  I think to get to that issue, both of what forces are operating and, then, what is going to change, and what is going to stay constant, particularly against the backdrop of the region, we have to think first about the nature of the alliance itself, comparatively speaking. 

I want to go through this very, very quickly.  I hope I don't take more than 10 minutes or so to get to my conclusions.  There are two basic aspects, it seems to me.  They are the heritage of what I call, "The San Francisco System," which was created by John Foster Dallas, well over half a century ago.  It's remarkable that it has persisted.  I think his genius and the genius of our counties in cooperation, that we could sustain it.  It is distinctive, and we have to look, I think, at the core of that distinction.

 Two parts.  First of all, the United States, broadly speaking, provides the power projection outside Japan.  And secondly, Japan provides a very substantial portion of the finance and the economic banking, of course particularly in host national support; but secondly, in ODA cooperation with various parts of the world.  So I think that's where we start from.  Now what is changing economically?  Of course, the rise of China: that is often mentioned.  Trade interdependence between the U.S. and Japan, which was of course, a major part of the original bargain. That was part of the attractiveness for Japan, of the original system, back in the 1950's.  That has fallen quite sharply.

 In 1988, about 39% of Japan's exports went to the United States.  Today, this is something like 22.  In overall trade, Japan's aggregate trade with China is just about what it is with the United States.  Of course, there are important spheres, extremely important spheres, where interdependence with the U.S., of course, remains very dynamic and very large.  Technology, particularly, and of course, our security relationship.  But what I would want to stress is that the economic parameters of the alliance, it seems to me, are changing in some rather fundamental ways, some dramatic ways. Intra-Asian interdependence between Japan and China, of course, Southeast Asia also.  But since the Asian financial crisis, much more toward Northeast Asia, that that interdependence is rising.  And, of course, China is growing very rapidly.

 I think it's way overstated.  I wish we could get people to appreciate that the Japanese economy, of course, remains three times roughly the size of China.  It'll be more than a decade, and probably significantly more, before Japan or China catches Japan in its economic scale.  There is a change that's underway, that I think needs to be in the background as we think about the future of the alliance.

 The politics is changing.  Now, domestically speaking, within the United States, I hope that we're internationalist, regardless of which party is in power.  I have some degree of confidence that that would be case.  The ethnic politics relating to Asia, of the United States, I think those are significantly changing.  There's now about 3 1/2 million Chinese-Americans in the U.S.  There are about 800,000 Japanese-Americans.  That balance has shifted from rough equality to about a little more than a decade ago.

 The way that economics and politics interact with the rising Chinese economy, but not so much because of its scale, but because American multinationals are heavily involved, and because American multinationals are very active on Capitol Hill on a whole series of issues, there, it seems to me, we have some changing politics to think about.  Japan, of course, is uncertain.  We have so many good friends, particularly friends of the alliance, in the ruling LDP.  But there is the possibility, of course, that we could be on the cusp of some sort of major political change, either a new coalition arrangement or, conceivably, a new configuration in power.  It's not impossible that the political parameters, and then of course, with the possible political party change here in the United States.  I would say probably, even if John McCain is elected President, we will see   on some issues, I would predict one might be Korea, a significantly different stance perhaps than the recent policies of the Bush administration.

 So where does that leave us, in terms of policy, given that regional integration is rising in Asia, which, of course, is the subject that we're looking at here.  Just four points that I'd like to make very briefly. 

First of all, fortunately, the U.S. and Japan live in a multi-tiered world.  We have the alliance, which has to be enduring and is quite crucial, but we've also got the WTO; we've got APEC; we've got multilateralism.  I think there is a very useful piece that a lot of you have seen, that Michael Auslin and Chris Griffin did, a couple of days ago, on U.S.-Japan-Korea, which seems to me, given the new political changes in Korea, is certainly an important part of the overall architecture.

 Then there's the functional, the various kinds of functional organizations.  Now, given that this is true, I think the United States needs a significantly more complex regionalist strategy.  I think in most cases it involves the U.S.-Japan partnership and the U.S. and Japan both being members, and key members.  I guess I may differ slightly from some, in believing that whatever we do -- and here I echo something that Dan Blumenthal said -- he talked about the U.S. being slow to appreciate Japanese diplomacy.  My corollary to that would be that whatever we do, we shouldn't de-legitimate Japanese diplomacy.  The world is changing in some significant ways.  And in terms of the overall U.S.-Japan partnership, I think inevitably, its dynamics are going to have to shift to some degree from what they have been, in terms of a San Francisco system that's over half a century old.  This involves some degree of recognition of Japanese diplomatic initiatives, exactly as Dan said.

 I guess I would even go so far as to say it doesn't mean in a multi-tiered system, that the United States has to be in everything.  For example, I don't think necessarily that an East Asia Summit, as long as it includes Australia and New Zealand and India, the way its been configured, that that's necessarily such a bad thing.  In fact, occasionally for Japan to be a member of certain things that the U.S. is not may give Japanese diplomacy more traction, in a way that could aid the alliance. So it's a more complex regional architecture, I think, and a more complex American strategy regarding regionalism.

 Then, finally, I think to offset that partly, we have to think more about the domestic politics of partnership in both countries.  Because, as I say, I think both countries could be on the verge of significant political change.  I also think that given the way the Pacific is changing, the whole issue about Japan-passing and about dialogues that short-circuit Japanese interests or American interests in Japan, this is becoming a much more serious problem that we're not giving enough attention to.  There's plenty of cases we could draw.  It might have to do with, say, strategic dialogues on a multitude of issues with China that don't exist with Japan, for example.  Or it could exist with respect to, and Morimoto-san I think alluded to this, certain six party talk issues, in which Japanese interests perhaps are not sufficiently considered.

 So I'll just flag it.  It's a very complex issue and I don't want to go on too long.  But the domestic politics of partnership in both countries, in a region where trade interdependence is getting less, where ethnic politics is changing, where Japan potentially could be on the verge of some kind of significant political change.  In this kind of a world, I think we need a whole series of things to deepen domestic partnership.  We're not simply in a multilateral world.  That's not enough.  Concretely, I think some of the things that the former foreign minister Aso mentioned a couple of days ago, that there's some good things in a lot of that.

 Energy, an issue that I've talked about, energy dialogue. Morimoto-san talked about emergencies and coordination on disaster relief and things like that.  I don't want to go on and on, but I do think from a political point of view, given that the politics of the alliance are changing, and also that the coordination requirements, as we proceed towards missile defense and toward a whole series of things, that from a strategic point of view, are important.  That thinking about the political base of the alliance increasingly is very important.

Questions & Answers

 Chris Griffin [Moderator]:  Great.  Thank you.  We have some time for questions and answers, and I'm going to selfishly abuse the prerogative of the moderator, and ask the first question myself.  Then there will be some microphones going around the audience.  When they come to you, please, state your name, your organization, and phrase your statement as a question.

Very quickly, Dr. Morimoto, one of the points that you made was this huge agenda, that the United States and Japan have, that everything from host nation to support, a restructuring of bases, to roles and missions.  In all of this -- this is for any of you to answer -- where does the question of thinking about regionalism, as an alliance, fit in?  We're doing it today as a panel, and in doing so, we're talking much more about the alliance than we are about regionalism.  Now I would assume that people that work on the alliance focus only on that, and we have a very limited branch of people that truly work on regional issues in Asia and the United States government.  I suspect that may be the same in the Japanese government.  Do you see any way to prioritize this issue?  Or should it be given priority in the U.S.-Japanese relationship?

 Satoshi Morimoto:  First of all, as I said, we have many security agenda within in the U.S. and in Japan, some are seriously a concern, and some are a different kind of interest in open to review, especially as he mentioned, the host of nation support is a quite serious discussion for several months.  We couldn't reach a single conclusion, but then we made a compromise to sustain the same framework for the next three years.  During that time, we promised to make a comprehensive review of how to deal with the host of nations in the future.

 But that sort of serious security, I think we have many concerns. On the other hand, the priority is how to reinforce our alliance.  But regionalism, it was the second priority.  Because, as I said, even if Asian regionalism is going along well, we cannot depend on national security by regionalism.  It's quite different with the European front.  Asia is a very diverse nature.  We have  many framework, such as a CSCAP.  But that means that a single framework cannot play a role to deal with everything, such as EU and NATO.  So Asia, the many framework, but all cannot deal with everything.  So we have to seek for the national interest through each architecture, but we cannot -- how to say -- concentrate the single framework in Asia.  We have a dilemma.  Then back to the subject.  Okay. Alliance, it's the best approach and a top priority for us.  That is so far our conclusion.

 Chris Griffin [Moderator]:  Okay.  Questions from the audience, please. General Yamaguchi, please?

 Noboru Yamaguchi:  My name is Yamaguchi.  I'm from the Japanese Ministry of Defense.  I'm an Army Officer.  I have two quick questions related to the points made by my mentor, who is Morimoto.  One, I guess as Professor Morimoto told us, not to go too far on stakeholder strategy.  Rather, we should go with the hedging strategy.  Am I correct, if I understand this in this way, we need to do something for hedging, in addition to shaping.  If that is correct, this is what I have been thinking about.  I'm wondering if there are any panelists thinking about, "It's too late to shape, so we need to go hedging.

 The second question is Professor Morimoto, I a hundred percent agree with Morimoto-sensei's point on the importance of the U.S.-Japan alliance.  This is the first priority, the single-most important security policy for Japan, next, maybe far more important than multilateral approach.  Having said that, do any panelists disagree with me on the point that the multilateral approach and the alliance would not necessarily be mutually exclusive?  Or both mutually-- rather, my point is, they could be mutually reinforcing.  Thank you.

 Dan Blumenthal:  The terms “engaging,” “shaping,” “hedging” and “deterring,” are sometimes not so clear.  I think the basic point is that there certainly has been a shift in the military balance of power in the last 10 years.  There's no question about it.  The Chinese military has-- we just recently saw the recent Defense Department Annual Report on Chinese Military Power.  If you read between the lines there, you see that the Chinese ability to control the waters and air around the Taiwan Strait and around Japan.  As you well know, the constant probing and activities around Japan's waters and seas continues the contestation of space and cyber power.  There's no question that the Chinese have changed the military balance of power, and that the United States and Japan and its allies, you can call it hedging.  You can call it deterring.  Whatever it is, you have to work very hard to make sure that there is a favorable balance of power again.  It's rebalancing, or you can call it hedging against all kinds of outcomes.  We must, first and foremost, work very, very hard among our militaries to, defense forces, to make sure that there are no temptations to use all that military capability.  I would put that at the top of the agenda.

 To answer, sort of your second question, the U.S. and Japan, I think, have the most, the foremost responsibilities and capabilities there through the alliance.  What we've been doing on an ad hoc basis is including other countries who share those concerns, albeit quietly.  That's been ongoing and as we've seen through different multilateral exercises, through I think the U.S.-Japan-Australia trilateral, through Japanese attempts to include India in that trilateral. 

Again, every country is going to continue to follow their pragmatic economic interests with China.  Containment is this loaded Cold War term that doesn't apply to China.  But I think all the countries I just mentioned, plus others, also have a very strong interest in maintaining a favorable balance of power and making sure that the Chinese military expansionism is checked.  In that sense, multilateralism, not in the sense of meeting for meeting sake, but multilateralism, in terms of trying to link up these different defense exercises and dialogues and networks, has a very big role to play in reinforcing the Japanese alliance also because Japan has an interest in-- the U.S. and Japan both have an interest in other countries who would be inclined to be friendly to the alliance, in viewing Japan as resurging and taking a greater role within a multilateral context.  I think that very much reinforces the alliance and very much reinforces deterrents, in terms of the China's military modernization.

 Kent Calder:  Just briefly, and to your second point.  I agree very much.  There are certainly cases where multilateralism can reinforce the alliance.  One of the major objectives, of course, of the alliance is stability in the region.  There's a whole-- and the world -- and there's a whole series of things where broader cooperation really is needed.  Needless to say, the terrorism-related agenda.  What Japan this day of course is doing in the Indian Ocean, the MSDF, for example, that's a broader-- it's not just a bilateral operation.  Some of the nuclear security-related things; the PSI container security.  There's a whole series, I think, of those.  So aid stability, in some cases, it can be valuable.  I think politically there's another agenda of multilateral activities that can be valuable in dealing with the problem I mentioned, of the domestic political base of the alliance.  For example, the environment, or energy security; more on the soft security kind of things.  A lot of those things can be productively dealt with in a multilateral framework. 

That said, the last point, I think, is that we should also think about the political context of multilateralism in the two countries.  You know, what effectively, what results does it produce?  Just to cite one example, I'm a little critical.  I'm not in the Bush administration.  I'm just a little critical of the six party talks and how they operate.  I think, given the political context in the United States right now, as I said, I think the politics are changing.  It can be that U.S.-Japan interests can be time-sacrificed, or not given, in a multilateral context, the kind of attention that they deserve.  But as a general matter, there are many ways that multilateralism and the alliance are consistent.

 Chris Griffin:  Upfront, if you could wait for a microphone, please.

 Bernard Gordon:  Bernard Gordon, the University of New Hampshire.  I don't want to pick on what Dr. Calder said, because most of what he said I agree with but I'll get to one small point of disagreement.  I think we need to recall that the initial movement to establish Asian organizations or institutions that were excluding the United States goes back to efforts of former Prime Minister Mahathir in Malaysia.  It was very much on the agenda between the United States and Japan.  It was clear to the Americans and Korea as well.  It was a clear stressed by the United States at that time, in the late '80's, to avoid anything that resulted in what Secretary Baker's most famously called, "anything that would draw a line down the Pacific."

 Now I think we need to recognize that that emphasis is begun by a small state, Malaysia, of really no consequence, has been in the period since 2000; picked up and moved with great skill and great momentum by China.  Japan attempted to initiate some regional developments, but all recall the movement towards a so-called Asian Monetary Fund.  But Japan essentially dropped the ball, for reasons that we don’t have to go into.  China has picked up that ball.  We need to recognize that there is a--  I'll stop now, because the main point is to say that there is a longstanding attempt to build Asian regional organizations that are exclusive of the United States.

 When Professor Calder said, at the end of his remarks, it would be okay to have non-U.S. participation in an Asian Security or Asian security developments, I think we need to recognize that that is very much a flawed notion.  Last year, in this month, it was February of last year, I did a piece in the Wall Street Journal, called "Ignore Me at Your Peril."  That was at the time of the Asian Summit.  There was no United States participation in that meeting in Sabo.  It was remarkable, and the Chinese and the Thai and the Indonesians, there have been many splits within that attempted coalition, but the one constant factor is a continuing Chinese emphasis on excluding the United States.

 And to pick up what Dan Blumenthal said a few moments ago, New Prime Minister Rudd has given very unfortunate signals in his indications, a few weeks ago, that he's not interested in a trilateral relationship.  I'll stop there, but it's a very important point and I think we need to address it.

 Chris Griffin [Moderator]:  I think you may have touched on a sensitive point. I know that both Kent and Dan want to comment on.  I think you took the first order.  I think that's the reason people come here is to debate a bit, so we thank you.

 Ken Calder:  First of all, let me accent the points on which I very much agree with you.  I agree that there are certain kinds of multilateralism, not including the United States, which are pernicious, in which I would strongly oppose. One concretely that has, I think, too much momentum, and that we should try to divert is the increasing role of ASEAN Plus Three.  Now, ASEAN Plus Three includes China right at the center, and of course the-- well, literally the ASEAN Plus Three nations.  That is precisely the reason why it seems to me we should at least admit the possibility of certain other configurations that don't involve the United States.

 The problem with insisting, you know, so strongly that the U.S. be involved in everything, is that it puts our allies in the face of rising domestic nationalism in those countries, that it puts them in a rather difficult position.  That was exactly why I’m suggesting a more complex regionalism strategy, to achieve what I suspect are our real common objectives.  To be specific, the East Asia Summit, and maybe we need an even broader configuration, including counties like India, for example, , is a major potential future ally.  I think, of course, President Bush was deepening ties there.  It includes some people and I would include Japan among them, who for their own reasons, they want to see U.S. leadership in the broader world.

 So it's a question of the architecture, is the point that I would make.  If we simply insist on being in everything, then we just confirm people's view of us, as the huge elephant on the block, you know, that has these sort of unilateralist, imperialist overtones to its policy and that's counter-productive, I think, to our broader national purposes.

 Dan Blumenthal:  I'm going to make this fun and disagree with Kent a little bit, and say that--  I don't know if I'm disagreeing with Kent or not, but the East Asia Summit is, in fact, a prime example of-- what happened there was the United States didn't participate.  That really blew up.  I mean, I don't see-- the Japanese worked hard too-- I don’t think they dropped the ball there.  I think they actually worked hard to get the Indians, Australians, New Zealanders in there and essentially make it so that it wasn't a Sinocentric organization.  In fact, it accomplished nothing.  It frustrated the Chinese.

 I agree with the Professor's comments that China's trying hard to set up exclusive organizations.  I think countries are, at this point, more fearful of the near hegemon than the far hegemon, that those efforts are not succeeding.  The one organization that I would say that I would keep my eyes on, more than the East Asia Summit, is the Shanghai Cooperation Organization.  They have an organization where you have Russia and China and others actually conducting military exercises, actually sending out statements that the United States should leave Central Asia.  That invites Iran.  One would hope that the Indians would play a greater role in trying to attempt some of those sentiments down, but that hasn't occurred yet.  That's an organization that I think the United States has to keep a watchful eye on. 

 The response when we support, as we should support a quadrilateral or other types of trilaterals to China saying that "this is a containment strategy," is, "Well, invite us into the Shanghai Cooperation Organization, to be observers and we'll call it even."

 Chris Griffin [Moderator]:  The Shanghai Cooperation Organization, what's a few enunciations among friends?  But you did touch on a very sensitive point.  The question of ASEAN Plus Three and the East Asian Summit.  Every time I go to Japan, I talk to my friends who work on this issue.  The point that's driven home again and again and again is that, "Look.  We're going to have one of the two.  We're doing everything we can to strengthen EAS as a counterbalance against the ASEAN Plus Three.  And if you look at Sabo, we got some actual sustentative agreements that are energy issues, that are harmless, serve American interests.  They have India, Australia and Japan as participants.  If you let things run through, if you hurt us, ASEAN Plus Three is going to pick up the ball that we drop."  It's a sensitive issue and we haven't figured it out.  Sorry.  The next question.  Upfront.

 Mike Miyazawa:  My name is Mike Miyazawa.  I have a question for Professor Morimoto.  You often talk and write about the joint military capabilities of the United States and Japan.  My question is have these joint capabilities ever been tested?  Yes, there are joint exercises, but as everybody knows, Japan’s Self Defense Forces have never fired a single shot in a real war.  There could be some success in the area of intelligence sharing, like in the case of the North Korean missile launch and so on.  But my question, again, is: (A) how these joint capabilities have been tested; and (B) how do you know that these joint capabilities will really be effective in the case of real war?

 Satoshi Morimoto:  Real war.  First of all, I have no idea how our joint capability does work in a war.  But I would like to point out several crucial issues.  One is that, as you know, the U.S. and Japan defense transformation and realignment process.  Both countries has made a progress of RMG dialogue; a  roles and mission capability dialogue under which the both country are discussing seriously what kind of role to compensate each other in an emergency contingency and in the peace time.  As you know, the problem is that we have some legal framework not to use of force beyond our territory, even we wish to play a role to compensate the U.S. force in the Pacific.  That is a problem.  I think that this is a legal and political problem exclusively for ourselves, Japan. 

 Second is that even so, we have to expand our defense capability to compensate U.S. military forces in the Pacific.  In this sense, we expand international peace cooperation activity beyond our territory.  In that sense, we have to review our defense outline programs in the future to procure the new and additional defense equipment exclusively for the defense of Japan, as well as the compensation of U.S. forces in the Asia-Pacific region.

 That is the current status of joint capability. But so far, I'm not familiar with, on this issue, but so far, both countries have been discussing what kind of play a role and share the defense capability in the contingency under this RMC dialogue. So far, we discuss 15 areas.  But I think the conclusion is that some sort of a defense sharing in our contingency under the new defense plan, which is sometimes called 5055.  The code number 5055, I think.  Quite frankly, I don't know when this dialogue will be concluded.

 Dan Blumenthal:  Just quickly, I'd add one thing.  That is, as you well know, the U.S. and Japanese forces have been cooperating since the beginning of the Cold War and Japan has formed a wealth of capabilities that it's used in anti-submarine and tracking submarines throughout the Cold War.  Now, in the last few years, the Japanese have been quite formidable in chasing Chinese vessels and aircraft out of its own, without U.S. help.  I think there's some formidable capabilities that Japan has that everybody knows about.  Hopefully, they'll never be tested in a war.  That's the reason to keep building up these capabilities, but certainly Japan hasn’t sat there idly while others have come into their waters.

 Chris Griffin [Moderator]:  I think that Dr. Morimoto put it best, this dialogue will continue.  But I'm afraid that we'll take a quick break right now and go ahead and transition into lunch.  After we have a hot bite to eat, we'll have Paul Wolfowitz come in and give some Keynote Remarks.  Thank you.

 Mike Auslin [Moderator]:  Thank you, Chris.  And to our panel, just a few brief notes.  We will have a hot buffet outside, so please come back in with your meal.  Before that, I do just want to make one note, and that is to note Dan Blumenthal, who is about to leave the room, but I want to catch him before.  And for those of you who are new to AEI and to our programs, Dan has really been the one who has spearheaded Asian Studies here at AEI and is responsible for so much of our programming.  I just want to say thank you to Dan and thank you for participating today.  Thank you.  I believe the buffet is ready, so please come on back in, and then we will have Paul Wolfowitz in a little while.  Thank you.

 [Break for Lunch]

 Michael Auslin [Moderator]: Ladies and gentlemen, I hope you enjoyed lunch.  I'm very glad there was enough for everyone.  Though I did hear that the cookies ran out, so we apologize.  We hope no one left because of the cookies.  We'll see if we can get some more.  I did want to mention one person though, I'd forgotten up till now, and that is the person who really makes all of this happen and is responsible, and that's Jennifer Greg, my assistant, over here by the windows.  Thank you.  As you know, without someone like Jenni, really the lights aren't on and the food isn't here.  So we're very grateful for her.

Keynote Remarks

 We do have an afternoon panel that we'll be moving to around 12:30.  But before that, we are particularly pleased to have Paul Wolfowitz give some keynote remarks for this conference.  Paul is really someone, of course, who needs no introduction here.  He is currently a visiting scholar at AEI, but has had a lifetime, literally, of service in different positions throughout the government, particularly apposite for our purposes today was his service as Deputy Assistant Secretary of State for East Asian-Pacific Affairs back in the Reagan administration, and then of course, serving as our Ambassador to Indonesia during the same period. 

But after that, Paul, of course, held a number of increasingly important positions, including Under-Secretary of Defense for Policy, Deputy Secretary of Defense in the second Bush administration and then President of the World Bank.  We are very grateful to Paul for taking time to come and try and put some of the issues we've been talking about into a larger context about Asia.  So please join me in welcoming Paul Wolfowitz to this podium.  Thank you.

 Paul Wolfowitz: Some of you may be old enough to remember that Ronald Reagan in the famous -- I think it was the New Hampshire primary debate said, "It's my microphone and I paid for it."  Well, it's neither my microphone, nor did I pay for it.  But I prefer to be able to see as many of the people in the audience as possible, just so I can check that you're awake.  With that, let me speak from here.  Is that all right, sir?

 Michael Auslin:  Absolutely.

 Paul Wolfowitz:  I figured to you'd say that.  I've been around this issue for quite a while now.  By American standards, I'm an old-timer.  I realize I'd barely make it in Japanese circles.  But I went to my first security consultative committee in Honolulu in the summer of 1978, 30 years ago.  I know you've invited me to speak at a conference about the future of the alliance, and I will do some of that.  But you're going to have to endure a little bit of history.  That's the privilege of age, I think. 

 As one looks back at the history of this alliance, it really is a remarkable one and I know everyone knows this.  But I think it's important enough to bear repeating, that it is extraordinary that such a close and friendly relationship was built on the ashes of such a horrible and brutal war.  It's equally extraordinary that such an amazing vibrant economy was built on the destruction of that war.  The post-war recovery of Japan economically and its embracing of democratic institutions, we sort of take for granted, from the perspective of 60 years.  But I don't think it's anything that should be taken for granted.  It really is a remarkable achievement by any historical standard. 

While the Japanese deserved the lion's share of the credit, I think wise American policies contributed as well.  So to those who were present at the creation, my respects.  And it has amazing durability through enormous changes in the region, in the world, and despite more than a few shockus (shocks) -- I'd guess you'd say in Japanese.  There was the shocku of 1972, with the opening to Japan; and the shocku of 1977, when the President of the United States, rather prematurely, announced that we were taking all of our troops out of Korea, something which fortunately didn't quite come to pass.

 It's all the more remarkable, I think, because-- and I hope I'm not going to be culturally insensitive in what I'm about to say.  Because I think we are culturally very different.  There's a wonderful story, it's unfortunately hypocriful, though it might be true, about a consultant, an American consultant, who's invited to give a speech in Japan to a big Japanese company.  He doesn’t know much about Japan so he consults another consultant, who's an expert, and who tells him, "Well, the one thing to remember is the Japanese put enormous pride on humility, even maybe a little bit of false humility.  So you should absolutely make clear at the beginning of your speech that you're humble; that you don’t mean to preach to anyone and so forth." 

Well, the consultant takes this advice to heart and he goes and he's presented to the 500 top employees of the company and he begins his speech, as advised, by saying, "I’m not quite sure why you invited me.  I'm sure there are at least a dozen of you in this audience who know more about this subject than I do.  I'm really in awe of what you've accomplished and I want to apologize in advance for many mistakes I may make in my talk."  At which point, 500 employees burst out in uproarious laughter. 

The poor man can't understand what he's done.  He turns red as a beet.  He staggers through the rest of his speech.  He finally makes it off the podium and the CEO of the company comes up to him hurriedly bowing, and says, "Mr. Smith, we are so sorry, but before you came, we briefed all of our employees that Americans always like to start their speeches with a joke, 'so whatever he says, laugh.'”

 Now I've told that story many times in many other settings, because to me it illustrates that there's more challenges in the area of cross-cultural communication than merely linguistic ones.  But it's not an accidental comment.  As the old Soviets would say that this story comes out of U.S.-Japanese interactions.

 On a more serious note, I remember actually being rather deeply moved, many years ago, when I was Assistant Secretary of State and my Japanese counterpart and I, we were having a private dinner, a very informal non-business one.  And he said, with real emotion in his voice, he said, "We, Japanese, will never be as close to you as the Chinese.  We're simply not as open."  At first, I was just taken aback.  I had just been through any number of fingernail-pulling sessions with very tough Chinese negotiators, including over the issue of their demand that we return -- this tells you how old I am -- some of you may remember, the demand that we return a tennis player, a woman tennis player named Hu Na, to China, who was demanding asylum here.  I didn't think of them as open at all. 

But as I reflected on what my colleague was saying, it did seem to me that Chinese are more direct and Americans are direct, and it's both a strength and I guess a challenge of Japanese culture, that I believe Japanese are very indirect.  In fact, to this day, I marvel at how efficient a society can be when people are nonetheless so indirect.  I think that's a mystery that is worth penetrating.

 But we should be more concerned about substance than about style.  And on substance, I believe that the U.S.-Japan relationship still is, as that late great American Ambassador to Japan, Mike Mansfield, who I'd remind you was a wonderful model of bipartisanship.  He was a former Democratic Senate Majority Leader, appointed by Democratic President, Jimmy Carter, and kept in office for another eight years by President Reagan.  He liked to say the U.S.-Japan relationship is the most important relationship in the world bar none.  In his time, we used to joke that the American Embassy was better called the, "Bar None Ranch."

 Now, I think that some people in the Treasury and Commerce Departments, particularly, thought he'd gone a bit too far with all of this and developed "clientitis."  But I think it's interesting that he was the first of Ambassadors that I know of to pass the George Schultz test.  I don't know how many of you have heard about the George Schultz test.  Secretary Schultz had an enormous globe in his office that stood on the floor about three or four feet high.  Before each Ambassador went out to take up his post initially, Schultz would invite him in for a courtesy photograph, which the Ambassador then proudly displayed on his wall to show his close personal relationship to the Secretary of State and he'd say, "Before I take the picture, why don't you turn the globe to your country?"  And he went through a couple of dozen such Ambassadors. 

Finally, Mike Mansfield -- who really didn't need another picture -- he had many.  He came in and George said, "Let's take a picture.  Turn the globe to your country."  Ambassador Mansfield was the first one to turn it to the United States.  I think Ambassador Mansfield understood that it was an American interest, not just a Japanese interest, to have this close relationship.  I believe what was true in his time 20 years is equally true today.

 In my view, it is a great mistake to underestimate the importance of Japan, but it's a mistake that I think we make all too frequently.  It's not just a recent phenomenon.  It goes to back, to my knowledge, and maybe earlier, at least 40 years.  During the Cold War, we seem to forget at times, that China needed us much more than we need China and we seem to project in our own minds that China was the key to dealing with the Soviet Union.  When in fact, I believe Japan played at least as important a role.

 During the 1980's, it became a popular view, although fortunately not President Reagan's, that Japan was an emerging rival, if not an enemy.  I believe Ezra Vogel didn't mean it that way in his book, Japan as Number One, but a lot of people thought of it as a threat.  We flipped the other way in the 90's, with a view that Japan was too weak and caught up in its own problems to be worth paying much attention to.

 Today, I think there's a danger that the fascination with what is unquestionably the remarkable growth of China, may lead us to, once again, underestimate the importance of Japan.  I was very fortunate, when I was Assistant Secretary of State, to have a counterpart of the White House, Gaston Sigur, who very sadly passed away much too young at the age of 70.  He was a good deal older than I was though, and he had the experience of having been in Japan with General McArthur.  He had some wonderful stories about that period and about what I think was the wisdom of McArthur's policies.  Not always a wise man, but certainly in the case of his administration of Japan, a remarkably wise man.  And Gaston was always keeping us on the straight and narrow, and it was fortunate.  It paid off as early as, in my experience, 1983, at the Williamsburg Summit of what was then G-7 -- since, we've become the G 8. 

That Summit, which was the Summit of the Industrial Democracies, that was supposed to focus exclusively on economic issues, for the first time ever I made a political statement and that political statement was on the subject of the importance of deployment of intermediate range nuclear forces in Europe.  Hearing those words, hearing what a strange thing it would be for the Japanese to participate in such a statement in the Summit that was supposed to be apolitical, people said, "Japan will never agree to this."  But to the great credit of Japan, and particularly Prime Minister Nakasone, the Summit came out with a consensus statement, on what was at the time, perhaps the most important and contentious issue within the Western alliance, and between the Western alliance and the Soviet Union.

 I believe the Japanese solidarity at that time helped to produce the result at the Summit that played a significant role in bolstering western resolve, in dealing with that issue. Nakasone had the vision to see that even though the issue was in Europe, it was a global issue and Japan was affected by it.

 One more little bit of history.  A long time ago, but later that same year, in other words, 1983.  Maybe it was early '84, Secretary Schultz gave his first speech on Asia, on Asian policy.  American reporters read the speech.  As far as they were concerned it might as well been written for Japanese, or translated from Japanese.  They said, "There's no news here."  It was written though for an Asian audience, and particularly a Japanese audience.  I remember the Far East Economic review had a cover story describing the speech.  It was a cartoon of George Schultz on the cover, leaning against a signpost pointing in one direction to the Tiananmen, the other direction to the Ginza, and the headline was, "Leaning Toward the Ginza." It was one of those gentle leans that Americans miss, especially -- well, Americans miss -- let me leave it there -- but which Asians are very sensitive to.  He wasn't trying to say we're indifferent to China, or we're hostile to China, or we're not interested in developing a close relationship with China, but Japan comes first.

 It was on that recognition that, in fact, during Schultz's tenure, I believe we built one of the closest and best relationships we've had with China.  It wasn't just by ignoring difficult issues, everything from the issue of the asylum of an obscure tennis player, all the way to much more difficult problems about Taiwan arms sales and major trade issues.  They were handled, in my view, much more effectively because the Chinese realized that we had a close relationship with Japan.

 Of course, this conference is not about the past, so I should at least talk a little bit about the present and the future.  Some might say that if we're talking about the future, then the key fact is certainly not Japan.  It's the rise of China.  We're beginning to hear talk about China that almost has that old ring of, "Now it's China that's number one."  Whether that proves to be just as wrong as the predictions about Japan, and I think it probably has, just by sheer size, probably more substance to it.  But it's certainly premature. 

 In fact, China's rise and the rise of the rest of Asia, I believe, makes Japan all the more important, not less. Let me give three reasons.  I'll just give some briefly. 

First, I believe that it makes the U.S.-Japan alliance all the more important for preserving stability and balance, and what is rapidly emerging is the most important source of strength and power in the world.  We hear a lot about the emergence of Asia and not enough that refers to the fact that Asia is anything but a unity - anything but a common area.  There's still very deep and dangerous divisions throughout the region.  It's remarkable actually that one can refer to the Pacific Basin as a pacific in the Latin sense of the term "peaceful region."  It certainly wasn’t that way until about 30 years ago.  It's very important to try to manage this emerging balance, which will emerge in also some unpredictable ways.  I believe the stability and solidity of the U.S.-Japan alliance will help all of us to manage it better.

 It may be that Asia, over time, will become a more unified region.  We've certainly seen that in Europe, in spite of many predictions that European unity was not possible.  I personally think that certainly less division than we see now would be greatly desirable, but only if that unity is unity and diversity.  Not if it's the product of hegemony by one country over all the other countries.  In that regard, Japan is absolutely crucial and all the more true to the extent that, as many people would say, power in Asia is much more to be measured in economic terms than in military terms.

 CIA projections, Japan will remain the largest economy in Asia until the year 2020.  I guess it depends on your perspective.  Some people would say that's not so far away. Others might say it's well past the second term of the McCain administration [laughs], or any other Presidents.  Goldman Sachs, which actually makes more money on its predictions than the CIA, says it will happen in 2015, so that's a bit closer.  Both of them might be wrong. 

There's a tendency, I think, to    in looking at China's economic growth -- to project the present to the future, without much regard to how things can change.  It might be a helpful reminder to recall that in the 20 years from 1950 roughly to 1970, Japan's economy grew at a spectacular rate of 9-1/2% a year. Those were a long time ago, but things can change.  As that famous American baseball player, Yogi Berra said, "It's dangerous to make predictions, especially about the future," and I guess especially in economics.

 That also says that we should be cautious about predictions, about the evolution of the military balance in Asia.  I share a concern that many people have, although maybe with a little more equanimity, that we are definitely going to see, we are seeing, a steady and substantial increase in Chinese military power.  It remains very much to be seen how long that continues and how that power is used.  In that regard, some people might say, "Well, if it becomes a military issue, then Japan really isn't very important; that it's an economic giant but a military midget, and that for all the talk about increasing joint capabilities, that there's a lot of talk, but not so much has happened."

 I think, in many ways, that's not a bad situation to be in, facing a future that has so much ambiguity in it.  Hopefully, it's a reminder to China and any other country that thinks we can go back to the old days where military power is what really counts in Asia.  But there's enormous latent military capability in Japan, particularly as long as that U.S.-Japan alliance is strong.

 The second reason why I think Japan is so important, and particularly if Asia, over time, becomes a more unified community, is that it's hard to think of another country in Asia whose interests align so closely with the United States.  Whether that's in commercial areas, although one would like to see a little more commitment to free trade; but on the other hand, there's been a lot of progress.  Whether that's in geo-strategic interests, about access to energy resources or commitment and concern about stability on the Korean Peninsula; or whether in political terms, in support for the development of free economies and free societies in Asia. I think it's very much in the American interests, as Asia evolves, if it evolves, into a more unified entity, that Japan be a very active player in that regard.

 And third, I think Japan is important because I believe Japanese success is a valuable model, hopefully to some extent an inspiration for the development of free societies elsewhere in Asia.  I suspect that that's been the case even in the development, for example, of Korea, as much as Koreans and Japanese may rub each other the wrong way at times.  I think the fact that Japan developed the kind of democracy it did, a distinctively Asian democracy, but a democracy -- I shouldn't say Asian- - a distinctively Japanese democracy, but a democracy nonetheless.  I think it must have had an impact on Korea.

 I think that the future evolution of China politically is a matter of enormous concern, not just to the billion-plus Chinese, but to everyone else who lives in the neighborhood.  I do believe that China will evolve to a more free and open place.  That may be hard to believe when you see some of the repression there today.  If you remember China as it was when I first visited in 1983, however, you would say it's already moved a spectacular distance.  I believe it's going to have to continue to move, particularly if it wants to sustain anything like those rates of economic growth, which mean inevitably a more educated population, a more demanding population and I think a more open society.

 I think that tensions in the whole region will be less if China evolves in that direction.  In that regard, I think Japan can be a useful role model, even though the Japanese brand of democracy is unique and certainly not a precise model that China would follow.  But to speak frankly here, I also believe it could be a much more valuable role model if Japan could better come to terms with its own history. 

One thing that is not healthy is that Japan has never really come to terms with the past the way, for example, Germany -- with a different past -- I don't want to start making comparisons -- different circumstances -- has done so admirably.  It's not only because the Prime Minister's visit to the Yasukuni Shrine, that there's anti-Japanese sentiment in China.  I think candor would require saying that a good deal of that is generated by the Chinese authorities for their own purposes.  I believe it would be greatly helped with a different Japanese approach.

 I do think overall that the U.S. interests are advanced when Japanese-Chinese relations improve, at least as long as they improve on the basis of equality and not on the basis of    I'm not saying it never has, but it might in the future    not on the basis of Chinese hegemony, and that makes, I think, the partnership with the U.S. and Japan very important for the future.  It's not in our interests for a sign of Japanese tensions to increase, even if that might push Japan closer to us.  It's best for us if those relations improve, but on a basis of equality.  For that to happen, it's critical for this alliance to remain strong.  Hence, the importance of talking about taking it to a higher level, which I trust you are doing today.

 I'll just conclude these comments by quoting, as best I can, because it's from memory, from Prime Minister Howard's excellent speech the other night when he received the Irving Kristol Award.  He concluded, first by quoting that British Foreign Minister of, I think the 19th Century, Lord Palmerston, who said, "Nations have no permanent friends, only permanent interests."  But he said, "The U.S. and Australia have interests that are derived from permanent values, belief, democracy and freedom."  I believe that's true also of the U.S. and Japan today, and may it be so for another century.  Thank you.

 Michael Auslin:  Paul, thank you very much.  When we asked you to look forward, I didn't realize you'd also be giving us some history and I think much needed historical reminiscence of the importance of certain periods in the alliance.  So we thank you.  I've been told that because we're running a little bit late, we are actually going to forego the few questions we thought Paul might take, just in the interest of time, so we can move expeditiously.  But please join me, again, in thanking Paul Wolfowitz for those very thoughtful remarks.

Panel II: U.S.-Japan Capabilities and Constraints

Michael Auslin:  And with that, we're going to move into our next panel.  We'll ask the panelists to come on up.  I think we're getting refreshed and the refreshment’s back there, I'm hoping we'll be getting some more.  We'll move right on, so please.

 Okay.  Thank you.  I think we'll get started, as people are getting their coffee.  The afternoon panel that we have put together is on Japan capabilities, U.S.-Japanese capabilities and constraints.  The first panel obviously tried to take a slightly larger look at the regional situation in Asia; tried to take a look at the institutional questions and how the alliance would fit itself into this progress that has been moving along in changing, both the way that the Asian nations interact with each other, but also spreading some of the different values that Japan and other democratic nations in Asia bring to the table.

What we thought we'd do now is narrow down a little bit, to directly into our topic on the U.S.-Japan alliance, and look a little bit more, specifically at the military equation.  We have put together for that actually a quite distinguished panel.  I'm very happy to say not only some old friends and teachers of mine, but some voices that aren't always heard in Washington, and so being able to bring some new perspectives. 

From my right, moving down the table, we begin with Lieutenant General Noboru Yamaguchi, who is currently the Commanding General of the Japanese Ground Self-Defense Force -- That's the Army, of course -- Ground Defense Force Research and Development Command.  General Yamaguchi has had an extremely distinguished career, previously being Vice President for the National Institute of Defense Studies, or NIDS, with which many of you, I believe, are familiar; Director of Research of the Research Department of the Self-Defense Forces Research and Development Command; Deputy Commander of the Aviation School for the Ground Self-Defense Forces; and for some of you who have been around town long enough, may remember that he was Defense and Military Attaché at the Embassy of Japan here in Washington and is widely written on issues of Defense Transformation, one of the key topics that Japan is dealing with, and will be talking about today.

 To his right is Professor Makoto Iokibe.  Professor Iokibe is currently the President of the National Defense Academy of Japan.  That's the combined Defense Academy, so wrapping up what would be our equivalent of West Point, Annapolis and Colorado Springs all together in one educational institution.  Professor Iokibe is Japan's most distinguished diplomatic historian, serving for 25 years at the University of Kobe as well as teaching at Hiroshima University, spending several stints as well at Harvard as visiting fellow and lecturer there. 

On top of that, in addition to being extremely widely published and writing some of the key volumes on Japanese diplomatic history in the post-War; also serving on a number of Prime Ministerial Commissions, particularly the Prime Minster's Commission on Japan's goals in the 21st Century, which was set up at the end of the last century and completed its work just at the turn of the century; and currently, as well, serving as the head of Prime Minister Fukuda's foreign policy informal research think-tank for Cabinet policy.  It's a great pleasure to welcome here to AEI as well.

 And then finally, although not last by any means, at the end of the table is Paul Giarra, with whom I think many of you are familiar, who have been in Washington.  Paul is currently the Senior Program Manager and Director of Global Strategies and Transformation at Hicks and Associates, but Paul has extensive experience in the United States Military serving in the Navy as well as in the Office of Secretary of Defense at the U.S. Joint Forces Command, NATO Headquarters and NATO Allied Command Transformation.  That is, specifically, Paul's focus is on transformation issues, and has served both as a strategic planner, a political military strategic planner related to Asia and managing the U.S.-Japan alliance issues in the Office of Secretary of Defense.

 So as you can see, I've taken up most of the time just introducing our distinguished panel, so I think we want to move right into the presentations and we're going to ask General Yamaguchi to begin first.

 Noboru Yamaguchi:  Thank you, Misha.  I'm very much glad to be here with AEI colleagues.  It is really good to get back to Washington, DC, here to see old friends of mine and to know new friends.  I was so anxious to come to the States.  Before I left Japan, I told my wife that I was so glad to talk to the people at the AEI, and she said, "You talk to them more than you talk with me."  Then I said, "Well, they listen."  Besides, it's my good pleasure to be with one of my mentors, Professor Iokibe and all the comrades from the U.S. Navy. Paul, we have been fighting together for the alliance for--

 Paul Wolfowitz:  On the same side.

 Noboru Yamaguchi:  Yeah, that's right.  Not necessarily the Navy, but the U.S.-Japan side.  Perhaps I'm going to limit my points on the operational and military perspective.  So let me start with a question, "What kind of capabilities are relevant to the alliance?"  In answering this question, there are a number of documents, which the two governments have published.  Let me quote one of them.  The QDL 2006 says, and I quote, "The United States, in concert with allies, will promote the aim of tailoring national and military contributions to best employ the unique capabilities and characteristics of each ally; achieving a new defined effort greater than the sum of its part."  This is exactly what the U.S. needs from its allies. 

 Then the question to me is, "What are the unique capabilities and characteristics of Japan?"  That would be one of the questions to answer.  Of course, on the other side of the coin is that Japan needs the United States.  "What are the capabilities Japan needs from the United States in times of military capabilities?"  Let met talk about Japanese capabilities first. 

I'd like to quote another document, which was signed or agreed upon in October 2005 between 2 + 2 Security Consultative Committee.  2 + 2 means two countries’ Defense and the Foreign Ministers.  They agree on the document for alliance transformation, which included the realignment of the bases of the U.S. forces in Japan; and that document laid out the areas, possible areas, of the cooperation in the future.  That document specifically laid out 15 areas of cooperation for the future, possible cooperation to be improved.

 Let me talk about this.  Number one is the air defense.  Number two is ballistic missile, ballistic missile defense.  Those two are quite relevant for sort of war fighting capabilities for Japan and the United States.  Whatever happens in the area surrounding Japan or in the area in Northeast Asia.  It follows, number three, counterproliferation the proliferation security initiative.

 Number four, counter terrorism.  Number five, minesweeping, shipping inspections.  Number six, search and rescue operations.  Those are the pre-military, maybe pre-military but maybe para-military operations.

 Number seven, eight, nine are significant.  Seven says intelligence. But eight, number eight is humanitarian-leaning cooperation.  Number nine is reconstruction assistance operations.  And number ten is peacekeeping operations and capability building for other nations' peacekeeping effort. Then following by other, several areas of cooperation to be improved.

 If we look at number seven, eight, nine, peacekeeping operations, humanitarian relief operations or the reconstruction operations, those are what we have actually done in Samawa, Iraq or Indian Ocean, after the Tsunami hit the area.  We worked with the United States in Pakistan to rescue the people in Pakistan after the earthquake hit, by helicopters brought by the Self-Defense Forces and bought by the U.S. forces.  So those are the areas we need to improve.

 If we talk about the defense of Japan, we have been working very, very hard with our colleagues of U.S. forces in Japan preparing for a possible contingency.  Now, it's almost the time to think about a planning of those cooperations in peacekeeping or reconstruction of humanitarian and relief operations, which we have not done enough, although we have done a very good job recently because of our experience of bilateral planning or bilateral exercise.  That worked in the case of the tsunami in Sumatra, even some in Samawa, Iraq with the GSD of operations.  What we might be getting better in doing these kinds of operations in the future.  Those are what the U.S. and Japan can cooperate in the future. 

In that context, what are the capabilities of Self-Defense Forces relevant to those operations?  If you look at the number of P 3C's, patrol aircraft, we have more than 80 P 3C's while the U.S. Navy in the Pacific, has some 40 aircraft.  Our Navy has 80 P 3C world-class patrol aircraft, American patrol aircraft.  That would be the international asset.  In addition, this is not because I'm a helicopter pilot, but this is a real fact.  There are around 700 heavy-lift helicopters CH 47's in the world.  Out of 700, 450 belong to the U.S. military forces.  How many do we have? I'll tell just on the GSDF, in total have more than 60.  In that sense, Japan is the second-largest country, in terms of the number of heavy-lift helicopter.  That would be an international common asset, which can be utilized in case of emergency like the tsunami or the earthquake in Pakistan, as well as the reconstruction or peacemaking operations.

 What is the U.S. side?  Let me take, only one thing.  In the 1997, we revise the so-called defense guidelines, the guidelines for the U.S.-Japan bilateral operations.  It says, "The U.S. forces and the Self-Defense forces will cooperate and coordinate closely to respond to a ballistic missile attack."  It was 1997.  "The U.S. forces will forward Japan with necessary intelligence and consider, as necessary, the use of forces providing additional strike power."  That is one of the examples Japan really needs from the United States.  When we really want to work together, side-by-side.

 Then constraint.  Of course, I don't want to talk about the Constitutional or a legal basis, but rather a military constraint.  A couple of points.  We, Self-Defense Forces have the organic problem in limited power production capabilities, and extremely small logistic support element.  That is quite natural, because Self-Defense Forces were born as a national police reserve, which is supposed to depend on the national infrastructure, such as transportation or logistic support. 

So the Self-Defense Forces are designed to fight on the ground of Japan, depending upon Japan's civilian infrastructure, for our logistic support.  That is why the logistic support elements are so small.  That causes a problem, when we dispatch troops abroad.  Whenever we dispatch our troops abroad, we have to organize a special unit to match the mission.  Rather than sending a particular unit, such as a regimen, or battalion, a logistic company or so.  Rather than that, we form a new unit to work in Iraq, or to work in Cambodia.  Because of the characteristics, sort of born as a constabulary force with limited logistic capabilities, as opposed to specialty for big wars.

 And I might have to tell one thing at last.  There are some sorts of reluctance among government officials, whenever we are asked to send our colleagues to the mission abroad.  A number of reasons, to be really, really honest.  In 1992, when we dispatch the first peacekeeping mission to Cambodia, we were asked to send our troops to Cambodia for peacekeeping.  But, we didn't want to look too enthusiastic, we’re guys willing to go abroad with rifles.  That was not what we wanted to see. 

Then we rather tried to look reluctant.  But having been looking reluctant for more than 10 years, that may have become the sort of nature.  Among other reasons, there are reasons why we are not reluctant but cautious.  Because of legal basis, we have a very limited, very strict rules of engagement.  So whenever I am asked to send my troops abroad, I may have to ask for a more flexible rules of engagement.  That is what we have been doing for the last 15 years.  So current ROE's are much more flexible than in 1992.  But having been in that position, it came to sort of a character for us, to ask more flexible ways because of this mission or area that could be.

 So there are a number of other reasons why we might be reluctant.  We have a couple of good news.  Last year, up until January of last year, international missions were miscellaneous sort of missions, rather than one of the core missions, such as defense of Japan, or disaster relief, or a police activities.  But the miscellaneous missions, like supporting the Olympic Game in Nagano. But that changed, in January last year.  It became one of the core missions.  We can probably say this.  We are sending troops for performing the core missions, one of the core missions of Self-Defense Forces.

 Another good news is in March last year, the GSDF established a Center of Readiness Forces Command.  There are two major missions.  There are two missions for Central Readiness Forces to go on.  One is international missions.  Another is reinforcement, in case of domestic emergency, to reinforcement to regional armies.  So there are two Deputy Commanding Generals.  One is exclusively in charge of international missions.

 I am not telling my feeling that the raison d’etra of sort of a theory of how it works, but once an organization is created in charge of international missions, that organization naturally intends to look at possible missions for the future, and tends to prepare for the possible missions.  I can't say that my colleagues, in the army in particular, are getting more ready to accept international missions.  Thank you very much.

 Michael Auslin:  Thank you very much.  Professor Iokibe?

 Makoto Iokibe:  Thank you, Mike.  Though I'm genuine Japanese, I don’t apologize at the beginning of my talk, except for my poor English.  I'm going to talk about my academy, the National Defense Academy.  I became President one and a half years ago.  The National Defense Academy, as Mike said, is integrated academy -- Army, Navy, Air Force -- and born in 1953, immediately after Japan's interdependence after the occupation, and the main actor was Prime Minister Shigeru Yoshida, and the past President Professor Maki.  Maki is a great person.  He was transferred from Keio University Professor. 

The post-war National Defense Academy was the product of, or the counter-product to the prewar Japanese military tradition.  The lessons of wartime history was the starting point of the National Defense Academy.  For instance, maybe you know, rivalry between Army and Navy is popular anywhere.  Here, I visited academies this past year and the "Beat Army, Sink Navy" is very popular.  It's quite common.  But the pre-war Japanese Army and Navy rivalry is beyond rational level.

 For instance, in 1931, the Army started the Manchurian incident.  The next year, the Navy started the Shanghai incident, to keep the budget and the organization competing, that's the top priority.  To fight against the United States is the secondary importance.  Such terrible rivalry.  We expanded the Japanese military action in the Chinese continent and at last, there's no great war against the world, that can be reached.

 So learning from this terrible experience, Yoshida and Maki decided we should have a combined academy.  The Army-Navy-Air Force leaders