Bumpy road ahead
Zhao Dawei

China-Japan relations have gone through two stages in 2006. In the first nine months of this year, as Junichiro Koizumi was finishing his term as Japanese prime minister, bilateral relations hit a historical low point since they were normalized in 1972. However, as Shinzo Abe took the reins of government, a new page in relations was opened, as evidenced by his “ice-breaking” tour of China 13 days after he assumed office. In a nutshell, the relationship between China and Japan took a turn for the better after going through twists and turns.
Plummeting relations
China-Japan relations were chilly during Koizumi’s last nine months in office. Politically, bilateral exchanges of high-level visits were suspended. After Chinese Vice Premier Wu Yi visited Japan in May 2005, no other high-ranking officials stepped on the soil of each other’s country. Even on multilateral occasions, the leaders of the two countries did not hold any meaningful meetings.
On the security front, distrust between the two countries deepened. Japan repeatedly touted “China threat” rhetoric. It held a joint military drill with the United States near the disputed oil and gas fields in the East China Sea in February this year, a move that was clearly directed at China. On August 1, it published the Defense of Japan 2006 white paper, exaggerating “China’s military threat.”
Economic cooperation between China and Japan slowed down. From January to September this year, China received $3.27 billion worth of direct investment from Japan, down 30 percent from the same period of the previous year. The bilateral trade volume from January to October stood at $168.5 billion, far lower than that between China and the United States, which was $214.5 billion, and that between China and the EU, which was $218.9 billion. The figures provide evidence that economic relations between China and Japan, which have been close, were greatly dampened in the wake of the political standoff.
The tipping point
However, bilateral relations took a turn for the better when Abe took office on September 26 and visited China shortly after that. First, the door to top-level dialogue was opened. Abe was received by Chinese President Hu Jintao and other leaders during his visit on October 8. On November 18, Abe and Hu met again in Hanoi, Viet Nam on the sidelines of the summit of the Asia-Pacific Economic Cooperation forum. The two meetings held in the space of about one month spoke of the shared will of China and Japan to improve bilateral relations.
Second, the areas for bilateral dialogue and cooperation were reaffirmed. The leaders expressed a common intention for future cooperation and exchanges during their meetings.
On the economic front, the governments of the two countries will facilitate ministerial meetings and consultations between departments as well as non-governmental dialogues. They are committed to increasing bilateral economic cooperation and exploring the possibility of creating a free trade area between the two countries.
On the issue of the East China Sea, the two countries pledged to speed up consultation, stick to the principle of jointly developing the oil and gas resources in the sea and seek commonly acceptable solutions.
The two countries also agreed to launch a joint historical research program by the end of this year. Organized by the Institute of Modern History of the Chinese Academy of Social Sciences and the Japan Institute of International Affairs, the joint research is aimed at making a new breakthrough in the hot-button issue of wartime history.
China and Japan will build mutual trust in the security field through security dialogues and defense exchanges, the countries announced. Military exchanges, such as dialogues between the two militaries, visits by naval fleets, exchanges between military officers and joint military drills, are expected to resume soon.
The two countries will also hold a year of cultural and sports exchanges in 2007 to mark the 35th anniversary of the normalization of diplomatic relations. The program is designed to promote people-to-people and youth exchanges, enhance mutual understanding and improve the perception of each other’s country.
At the same time, they will strengthen coordination on regional and international affairs. The two countries are expected to reach a consensus on East Asian regional cooperation and integration, strengthen dialogue on UN reform and maintain that the North Korean nuclear issue should be resolved peacefully through dialogue in the framework of the six-party talks with the aim of denuclearizing the peninsula.
Third, bilateral political relations have been brought back on track. Chinese Foreign Minister Li Zhaoxing exchanged views with his Japanese counterpart Taro Aso on implementing the common understanding reached by President Hu and Prime Minister Abe over the phone on October 9, one day after Abe’s visit to Beijing. On October 15, a delegation led by President of the Japanese House of Councilors Chikage Oogi visited China to enhance parliamentary exchanges. On the same day, Wang Jiarui, Minister of the International Department of the Central Committee of the Communist Party of China, visited Japan, where he and delegation members attended a five-day meeting convened under an exchange mechanism between the ruling parties of the two countries. Chinese Premier Wen Jiabao received the members of the New China-Japan Friendship Committee for the 21st Century, encouraging them to put forward suggestions on establishing mutually beneficial strategic relations between the two countries. The foreign ministers of the two countries met in Hanoi on November 16.
Thanks to the exchanges, visits and meetings at various levels, China and Japan have overcome the barriers formed in the Koizumi era, as their relations were restored and strengthened.
Fourth, friendship is taking root in the two nations. According to an opinion poll of the Sankei Shimbun newspaper, 14.6 percent of the Japanese public expect the Abe Cabinet to improve Japan’s relations with China and South Korea and 52.2 percent believe the prime minister should not visit the Yasukuni Shrine. A survey conducted by China Youth Daily showed that 76.9 percent of the Chinese public believes that China-Japan relations are important and 45.2 percent said Abe’s visit to China had positive implications. After the stalemate during Koizumi’s tenure, the two nations have once again embraced reasonable views of bilateral relations. The high percentage of respondents valuing China-Japan relations in China in particular is a clear indication that the friendly ties between the two countries conform to the will of the general public.
Toward a new relationship
There are several reasons for the stalemate in China-Japan relations during Koizumi’s term. First and foremost, Japan was unable to adapt to the changes in the two countries’ respective national strengths. Japan scored steady and rapid economic development after World War II. By the 1980s, it had risen to become the world’s second largest economy. However, in the 1990s, as the economic bubble broke, Japan suffered a persistent economic stagnation, which resulted in a decline in its international influence.
China, however, has seen an average annual economic growth of some 10 percent since it adopted the reform and opening-up policy 28 years ago. While becoming increasingly engaged in the international economy with its share of the world economy and trade constantly growing, China has greatly bolstered its national strength. Some analysts believe that the Chinese economy is set to overtake that of Japan.
Finding it difficult to face up to the fact, the Koizumi Cabinet became suspicious of China’s development. It worried that an ascendant China would pose a threat to Japan’s status in the Asia-Pacific region. Given these concerns, the government was always thinking of ways to contain China in certain areas.
Moreover, right wing forces gained the upper hand in Japan, fueling the government’s hard-line policy toward China. The negative effects of the Japan-U.S. alliance are also responsible for the chilly relations between China and Japan. Closely following the footsteps of the United States, Japan tended to regard China as a potential rival. The alliance was strengthened during Koizumi’s term with his frequent visits to the United States.
Abe, however, reversed his predecessor’s policy toward China when he took over. As a new prime minister, he was actually expected to find a solution to the deadlock in China-Japan relations, as it not only jeopardizes the interests of the two countries but also affects peace and stability in the Asia-Pacific region at large.
Most Japanese, officials and private citizens alike, had expressed the view that the problems caused by Koizumi’s shrine visits should be cleared up as quickly as possible. An opinion poll conducted by the Japanese Foreign Ministry in March showed that 77.9 percent of the respondents agreed that Japan-China relations, which had worsened because of Koizumi’s visits to the Yasukuni Shrine, needed to be improved.
The U.S. factor also contributed to Abe’s change of course. The Committee on International Relations of the U.S. House of Representatives held a hearing in September to discuss Asian affairs. During the hearing, experts pointed out that the deteriorating relations between China and Japan were disastrous to U.S. interests. The United States, which does not want to see Japan alienated in Asia, welcomes an improvement in China-Japan relations in the short term.
Moreover, Japan ended its economic stagnation with a notable recovery largely because of the rapid expansion of its economic and trade relations with China. It is in the interest of the two nations that they continue to upgrade their mutually complementary economic ties under a sound political relationship.
For China and Japan, 2006 was an eventful year, during which the climate for their relations turned from chilly to balmy. However, the road ahead is still bumpy. The two nations face a pressing task to establish a new type of bilateral relations by sustaining the positive trend that has just emerged.

(The Daily Mail-Beijing Review Articles Exchange Item)


What new agenda?
Paul A. Samuelson

AFTER the Democratic Party’s 2006 election victories, it was evident that US voters have turned against President George Bush. The Republicans lost their control of both chambers of Congress: lost the House of Representatives, and lost the Senate.
At every level of voting — state governors and state legislatures — incumbent Republicans were on balance voted out of office. Why? I deem the No. 1 cause was America’s disastrous and unnecessary war in Iraq.
This colossal error traced directly to President Bush and his principal advisers. Vice President Cheney seems now to be regarded as a sinister background manipulator of a juvenile president. Names of further incompetent zealots include Secretary of Defence Donald Rumsfeld, dumped from office one day after the Republican debacle. Karl Rove, earlier touted as a Machiavellian genius who knew how to discredit any critic of Bush-style plutocratic democracy, is understandably blamed by disappointed Republicans.
The dishonour roll is long and rightly deserved. I need only specify one archetypal case. The Securities Exchange Commission has the impartial task of preventing and punishing corporate misgovernance. Its double duty is to protect the investing public and to protect corporate shareowners against predations by their CEOs and top executives.
Whom did President Bush first approve to monitor against gross fraud? It was Harvey Pitt, who had previously been a lawyer for the big four accounting firms.
What did Pitt first say on taking office? In paraphrase: I intend to run a kinder and gentler SEC. What did this mean to (1) lobbyists, (2) accountants, (3) lawyers; and (4) corporate CEO’s? Reach for it. Reach for it. You won’t be punished for using obvious tax loopholes. Employ finite insurance schemes that involve no risk to hide your actual losses. Ignore your own corporate shareowners’ interest and funnel an unprecedented fraction of corporate profits into overblown and concealed CEO options and golden parachutes. Were such dodges necessary or sufficient to promote genuine capitalistic efficiency, growth and sustainability? No. I speak as an economist familiar with all the alternative patterns of incentives and motivating devices.
Corporation managers were right to read what SEC Chairman Pitt was saying to them. Feather your own nest. Pump up current reported profits by every accounting dodge and deception. Award yourself and board directors with options flexibly dated. Even if this decimates true profits and torpedoes Wall Street pricing of your company, don’t fret. Use any such low share low prices as an excuse to redefine options secretly in your own favour.
Later when and if your artificial bubble pops and you do get fired, laugh all the way to the bank with your awarded swollen severance pay.
This plutocratic capitalism a la Machiavellian Karl Rove could have gone on until 2010. Why not? Debate against and for abortion could be counted on to bring out the Republican vote. Debates for and against stem cell research to help find cures for cancer and heart attacks would also be keeping the Republicans in power through 2008 and beyond except for two realities. Reality No. 1 is that Iraq is not a winnable option. Were we to pull out US troops tomorrow, chaos and civil war would explode there.
However, if we were to send in more troops or “stay the course,” chaos and civil war would still explode. Like Vietnam and Afghanistan, guerilla warfare engenders a price in human deaths and casualties that the great American public will not pay. That’s what the voters everywhere were telling Washington on Election Day. Reality No. 2 is that a centrist Democratic congress will come under intense political pressure to do something for the many victims of free trade globalisation. Raising the minimum wage won’t solve that problem.
What the 2006 elections did accomplish was to move America towards the center, away from the extreme libertarian and theocratic right. That is of vital importance. But this still leaves us, and the world around us, with the perils of nuclear proliferation and the evolving spread of suicidal terrorists. Enough about the past. Besides extricating Americans from the Iraq occupation, what new economic programmes should centrist Democrats and Republicans agree upon? Here are some non-utopian changes that middle-of-the-road economic experts can recommend.
On the taxation front, probably retain the lowered tax rates on dividends and long-term capital gains legislated during young Bush’s watch. This does slightly increase the flexibility and the efficiency of the capital market.
In truth, the poor and lower-income families will receive no direct benefit from retaining these Bush tax cuts. But neither are such tax cuts targeted to favour grossly the class of billionaires and multimillionaires.
What then is the first Bush tax give-away that definitely needs repealing? My first nomination would be the permanent abandonment of all estate taxation. No single other tax giveaway would contribute so much to making America a stratified, caste society. Benjamin Disraeli, England’s prime minister in the Victorian Age, spoke truly of the “Two Englands — the England of the rich aristocrats and the England of workers and honest trade people.”


Reflections on war and peace
M. J. Akbar

The last time Switzerland went to war was over five centuries ago. We are at the Geneva Center for Security Policy, in the sunlight of the Alps, to discuss what is politely called the “security” environment of South Asia. What they mean of course is insecurity, and South Asia extends up to the arc of Central Asia: The epicenters of the latest conflict are Afghanistan and Iraq . Geneva is arguably the world capital of peace, a safe haven for the United Nations and NGOs. Peace is a militant ideology of Switzerland, a far stronger virtue than morality for a country that has sidestepped the rough winds of high militarism, rampant imperialism and barbaric Nazism to place itself on the lofty peak of neutrality. When such a nation feels the surge of war at its doorstep, then the shadows have stretched far beyond the epicenter. The sequence is lethal, the consequence bitter. War kills, maims and, perhaps worst of all, dehumanizes, since it treats death, rather than life, as normal.
It is a myth that the world has been at peace since World War II. War merely shifted its theater of operations to Asia, Africa and Latin America. What is the corpse count of the last 60 years? No one knows, except that we are still counting in the bloodstained crevices of Rwandan memory, or the daily bulletins of Iraq. I have not checked the dictionary, but it seems logical that bulletin should be a philological cousin of bullet. How many have died in Iraq already? Half a million? Less? This much is certain: Each dead man, woman and child, whether Arab, American or British, has relatives and friends who will live the pain and alchemize their anger into some stream of political lava. This lava has already scalded the principal architects of this war, George Bush and Tony Blair. Both have aged twenty years in five. Both have been defeated by Iraq, although their nations fight on. Both are in the process of handing over leadership of this conflict to a successor. Blair will go in a few months. Bush will struggle through a blinding mist for a little longer, having, in the words of Lee Hamilton, co-chair of the American Iraq Study Group, depleted America’s blood and treasure. And moral authority.
Sequence dominates the headlines, consequence rarely gets honored by similar attention, since it kills deviously, in silence, with a slow poison that courses through the sinews of society. One of the most startling statistics I heard is that there are now five million heroin addicts in Pakistan. That means, roughly, that one out of 30 Pakistanis is an addict. Heroin is a war crop of Afghanistan, a byproduct of a quarter century of invasion, turbulence, civil war and occupation. The Taleban have much to answer for, but in one respect they were right: They burned out poppy cultivation. Before they were defeated Afghanistan’s share of the world’s drug supply was down to seven percent. This year, Afghanistan will supply 90 percent of the world’s street drugs, and production is at such a record all-time high that prices of heroin are going to fall in the dark alleys of America, Europe and Australia.
What is the cash flow of the Afghan drugs trade? Not billions, but trillions of dollars. Who gets rich from this business? Not the Afghan farmer, who gets a pittance. The value addition from field to Amsterdam street is 500 times. How does Afghan poppy reach every corner of the civilized world? On Aladdin’s flying carpet? In the secret pouches of medieval “Islamic fundamentalists” in the pay of some dreaded “caliph”? The business and cash flows are run by men who drink gin and tonic, or bourbon and rye, or shampers in their yachts before they write a check to political lobbies of their choice in flourishing democracies.