The U.S.-Japan Alliance in the Twenty-First Century

Yoichi Funabashi, chairman of the Rebuild Japan Initiative Foundation, and CFR President Richard N. Haass join Forbes Asia's Tim W. Ferguson to discuss the future of the U.S.-Japan relationship. Haass and Funabashi consider shifting dynamics in Japanese politics, the state of the U.S.-Japan military alliance, and the avenues by which Tokyo and Washington can respond to a shifting security landscape in the Asia-Pacific.

This symposium is held in collaboration with CFR’s Japan Studies program.

FERGUSON: Well, thank you all. And welcome back for the concluding discussion of this very informational meeting this morning at noontime. We are going to build on the very rich discussions in the two panels this morning about the economic and foreign policy implications of the relationship with the U.S. and Japan, and perhaps explore some of the other regional aspects of that important developing relationship.

With me today on the far end is Yoichi Funabashi, the chairman and spearhead of the Rebuild Japan Initiative Foundation, who is collaborating in this program today. He is also the former editor-in-chief of Asahi Shimbun in Japan, which many of you recognize as, I’ll say it, occupying an equivalent position to The New York Times in terms of size and its position within the overall debate in Japan over the years. Dr. Richard Haass, the president of the Council on Foreign Relations, who probably needs no introduction to this group or just about any other group, but—

HAASS: Go ahead. (Laughter.)

 FERGUSON: With a long history of—

HAASS: I’m only kidding you.

FERGUSON: —academic, intellectual and governmental service, and 40 years of visits and engagement with Japan.

HAASS: And with Yoichi personally.

FERGUSON: And with Yoichi personally.

Let me start this today, Funabashi-son, with a question which may allow you to speak briefly as to the intents and desires of the rebuilt initiative—the Japan initiative. But let me do it in a bit of a challenge. It seems to me that there is another Japan that is—much as we as internationalists might wish to have a robust Japan on the global stage, both economically and otherwise—there is another Japan which—the size of which I can’t tell you, but it is substantial—that is not so discontent with the way things have gone over the last generation, that is to say an aging, affluent society, at peace in the world, generally able to enjoy the fruits of the great Japanese rebound of the post-war years, and not so interesting, perhaps more insular or internally focused, not so interested in the sort of Abe experiment in sort of re-engaging and re-establishing Japan’s presence in the world. I wonder, in that respect, do you and your associates see any risk of getting essentially out ahead of your countrymen in what you’re trying to accomplish with your initiative?

FUNABASHI: Tim, thank you for that question. I think what we are witnessing, the Japanese political dynamics and social dynamics, very much different are now being framed from the one we have known in the past 70 years. For instance, just take an example of Okinawa. Shiraishi, actually, is an authority on Okinawa, you know, anybody else—better than anybody else. The debate line has not been framed either right or wrong—left any longer, even that most conservative LDP politicians in Okinawa now have argued that the Futenma Air Station be transferred beyond Okinawa. And that’s against government policy—LDP government policy.

That identity politics has really now set in as Okinawans versus mainland Japan—us versus them. It’s very, very now strong. So this just microscopic Okinawa case. But overall in Japan, I think that identity politics has actually really emerged, particularly since early this century, perhaps since the advent of Koizumi administration. Before Koizumi administration, Japanese politics actually has been more moderate conservative politics.

But since then, has been changing. One of the reasons is I think the demographics and the Japanese fiscal situation—worsening fiscal situation, that politicians have not been able to resort to fiscal measures as a lubricant placate this disgruntled, dissatisfied franchise. So they have looked to identity symbols and the others. And nationalism actually has been the most—I think that it’s been a convenient tool for some of those people. And then rise of China actually has really contributed to that—this strange thing, this identity politics too.

So I think that this is fundamental long-term change—tectonic change we are now witnessing in Japan. So Abenomics and Abe politics should be seen as a part of this. But nonetheless, having said that, I think that Prime Minister Abe also has been compelled to get back Japan. That means get over the—end the deflation, OK? And in order to strengthen the balance of power vis-à-vis China, you have to create that power first, before strengthening the balance of power. That means that wealth, OK? So this Abenomics is a pro-growth strategy. And that actually has been working, to some extent, as we listened in this morning’s session.

So I think that he—even though he went to Yasukuni Shrine once, as Professor Shiraishi said, I don’t think he’ll visit any longer, because he already I think satisfied his constituents. But basically, I think he believes in realpolitik. And this is a very, very elite Japanese politician who really does not hesitate to appeal to the public that geopolitics is important, Japan’s power matters, and the U.S.-Japan alliance matters most. Very, very visible, very, very, I think, strong message.

So I think that over the past two years or so, I think that we have had this TPP conclusion and President Obama’s Korea bridge to defend Japan, based on obligation to defend on the Article 5. And then, I think that the United States sending that vessels through—sailing through—within that, through nautical miles, which Japan has requested repeatedly to the United States, to conduct. So I think that’s—overall that relationship between Japan and United States have been very much stabilized, very, very—Japan, we have been very much assured.

Perhaps except, for, you know, the United States presidential election campaign. That’s really—we’re concerned a lot. Particularly Japanese conservative who have been traditionally very friendly to Republicans, OK? So I think that by directly responding to your inquiry, I think, yes, we are seeing this very much sort of different kind of political dynamics, much more right-wing, much more identity-politics based. But at the same time, I think the realpolitik and I think politics also is emerging as a new dynamics.

FERGUSON: I want to get Richard’s view on this as well, but just to follow on that point, because Prime Minister Abe is seen, at least here and in much of the world, as so representative of this quest for a robust Japan, his return to power was in the face of an imploded opposition. Effectively, he had no real material opposition in that campaign. We’re only seeing some of the resistance in the fight over Article 9 and such and the attempt to reestablish the Japanese military presence. Is the quest for a robust Japan properly identified with Prime Minister Abe, or is this—are we, perhaps, or at least I, personifying it into too narrow of a way?

FUNABASHI: I think Abe’s personality and Abe’s sort of, you know, challenge politics—that means come-back kid, you know—really resonates to that public, who have felt that Japan is being lost, has been lost. And we really feel compelled to get something back. And we need some strong leadership to stand tall vis-à-vis China’s aggressiveness and China’s challenge. So I think his personality really fits and sits well with the Japanese psyche at this moment. So even if we would not have Prime Minister Abe, I think somebody like Abe would emerge, and should emerge perhaps in the future.

FERGUSON: So, Richard Haass, you have written in the American context about foreign policy reach extending beyond grasp in terms of some powerful forces in the American government perhaps getting ahead of their countrymen. Do you see any parallel in the current Japanese experience?

HAASS: Parallel in terms of what the U.S. is doing in Asia, or—

FERGUSON: No, in terms of some elements—powerful elements exceeding what their countrymen really are prepared to—the burden they’re prepared to bear.

HAASS: It’s still early in the Japanese debate. Japan didn’t have a national security debate for a long time. And what I think has come to the fore, I think it didn’t begin with Prime Minister Abe but it’s reached a different level, is that now these issues are being discussed quite publicly in Japan. What 10 or 20 years ago was almost unmentionable has now become pretty common, about Japan’s role, about expressions of its defense posture beyond narrow concepts of self-defense, constitutional revision, Japan pressing the United States at times to be a little bit more present and muscular.

You don’t have a consensus in Japan from the public on these things. So this will—this will take time. But it’s not as though Japan is still yet doing that much. You know, when we in this country have had tremendous disconnects, we were trying to remake countries that resisted being remade. And we had hundreds of thousands of troops over—around the world. This is not even remotely akin to that. This is far, far more modest. Now, historians 50 years from now may look back on it and say this was a—these were early data points on a certain trajectory, but I think what Japan is doing and what it’s contemplating is still extraordinarily modest by our standards.

FERGUSON: Is Japan’s stepping up and stepping back out an unvarnished good for the United States, would you say?

HAASS: All things being equal it is good, for several reasons, and I’ll come to the caveats in a second. But I think it’s good. The United States needs partners in general. The face that Japan is willing to take on a slightly larger role, more commensurate with its capacities, economic and military, I think is good. A significant source of friction over the past few decades, in addition to the economic competition, has been this sense that Japan didn’t quite carry its weight. So the idea that Japan might be willing to do more around the world, or might be, in particular, willing to do a little bit more in this region—whether it’s vis-à-vis China or something we haven’t talked about today really, North Korea—I think is healthy.

The area where it potentially gets a little bit complicated for the United States and for Japan is, it’s essential though that if Japan does more that the United States and Japan say really close. We don’t want to have situations where Japan’s behavior perhaps gets—triggers something with China, and the United States and Japan are not exactly on the same page. So for the United States, I actually think it’s a very difficult foreign policy challenge. It’s not one we will ever solve, but it’s one we will constantly have to work, is that we need to welcome Japan to do more, both to have more capacity and to use that capacity to be more present in the region. We need to be supportive of Japan, as we properly have been.

On the other hand, we also have to be mindful, and Japan has to be mindful too, with that American support comes obligation on the part of Japan to also act in fashion—in a fashion that is responsible, because we don’t want to get into situations where we have crises that are unwarranted, that we—that essentially—to put it bluntly, that some Japanese aircraft or naval vessel would do things that it ought not to do. So for the United States to be supportive of Japan, there’s got to be—somewhere there’s a difference between conditionally and unconditionally supportive. And I think that’s the area where the United States and Japan have to have regularly close conversations about what it is they are trying to bring about and what it is they are trying to avoid in this part of the world.

FERGUSON: Yoichi, where does a robust Japan and its projection of influence and power and economic might—where does it necessarily lead in regards to China and the relationship bilaterally and in terms of the U.S. and global alliances?

FUNABASHI: First of all, a robust Japan’s posture, particularly military posture, actually will remain to be very much limited, for various reasons. One is that I think fiscal constraint, budget constraint. As Japanese population is aging precipitously, so rapidly, I don’t think that Japan will be able to increase that defense budget, perhaps not significantly. It’s still under 1 percent of total GDP. Even though Abe government has been in power for three years it has not changed.

Second, I think that even though Abe administration’s passed security legislation bills, which they—Japan is now allowed to exert according to self-defense. And that’s actually—that is long overdue in my view. Perhaps it will contribute to—at least create more mutuality between the allies in terms of responsibility and obligation. But nonetheless, I think that it has been very much tied up to the limitations, three conditions being imposed. So it’s basically incremental. And also, it still remains to be defensive, primarily Japan being tasked with real support for Japan ally, the United States, in any operation.

So I do not think that Japan’s robust posture will be revolutionary. It think it’s evolutionary. I think it’s in the right direction. And I think that perhaps is very much important in that it can also help Japan and the United States strengthen the deterrence vis-à-vis—particularly vis-à-vis China. If Japan will too much rapidly, visibly acquire that robust military posturing or capability, I think that could not be conductive to strengthening that deterrence. Japan being a somewhat vulnerable, and Japan being tied to the alliance itself, I think would be part of assuring effect to China.

HAASS: So I think—can I say one thing? I think for Japan the needle it has to thread, and it’s a challenging one, is to do more so the United States feels it has a real partner. We don’t want to have, for example, a version of the old burden sharing debate come out about the United States and Japan, which is why in part also the whole Okinawa issue and all that, you know, is a sensitive issue. On the other hand, Japan doesn’t want to do things that are unsettling to the region. And how it balances that, I think for the Japanese, will become a—you know, that’s a good example, where diplomacy and statecraft—more than actually diplomacy, statecraft really comes into play.

FERGUSON: And, as was brought out this morning, I mean, the economic influence of China’s rise vis-à-vis Japan, by far Japan’s largest trading partner. That’s going to only increase, one expects, despite the slowdown in China over time. Yoichi, isn’t this going to naturally draw Japan in terms of seeking this renewed economic strength toward China, despite the alliances that you were just referring to?

FUNABASHI: Well, Japan’s trade with China is about $370 billion. And the U.S.-Japan bill is about $190 billion. So soon, I think the U.S.—Japan-China trade will be twice as big as Japan’s trade with the United States. So naturally, inevitably, Japan will have much larger stake in China, even, you know, in the United States. So we have to very—take care of tending to the equities and interests in China and elsewhere, the other countries too.

But at the same time, you know, I think Japan, it has been actually a rude awakening—it was a rude awakening to Japan when they—Japan was exposed to China’s economic pressure in 2010, when China banned rare earth to Japan in retaliation of a Japanese authority detaining a Chinese boat captain over Senkaku issues. I still remember People’s Daily’s long commentary actually a couple days after China decided to ban the rare earth to Japan, export.

So that Japan is now lack of immunity to China’s economic pressure. And later, you know, Japanese government brought this case into the WTO. China lost, because it’s so glaring violation of GATT rules. But this revealed a real China—(inaudible)—China. If China regards the economic interdependence as a sort of manifestation of other trading partners’ weakness, vulnerability, then it will be extremely difficult for the political leaders in the other countries to pursue engagement policy toward China.

In contrast to Japan-South Korea relationship, which was based on peace—democratic peace concept, we cannot apply that democratic peace concept to Japan-China, because China is not a democracy. So instead, we actually have resorted to interdependence peace strategy. The more modern, more affluent, more open China will be in the best interests for Japan, as well as the region. So that should be the strategic objective.

That principle has been, I think, the main pillar of the Japanese foreign policy toward China since early 1970s, when Japan and China normalized their relationship. But then we were shocked to see that China, at a very critical juncture, resorted to that economic ban of rare earth in retaliation. So this is not lost on Japan. I think that—since then, I think Japanese business have tried to transfer their investment from China to elsewhere, particularly India and Indonesia and Southeast Asian countries. I think it will not stop.

FERGUSON: So South Korea just entered the discussion, I believe for the first time today. Richard, you’d mentioned North Korea and its strategic presence in this whole discussion in the region. Talk about Korea and the potentially combined Korea and what role this might play in a future U.S.-Japan-China triangulation?

HAASS: I’m much more worried about it while it’s still a separated Korea. (Laughter.) And it actually feed on what Yoichi just said. I think it’s important that in the Japanese-China relationship and the—effectively, the U.S.-Japanese-China triangle, and in the Japanese-North Korea-South Korea-U.S. quadrilateral, if you will, that, again, the U.S. and Japan stay on the same page. With China, we have to avoid a situation where Japan goes so organically close economically with China that that in some way constrains Japanese freedom of maneuver strategically. And we don’t want to get in a situation, we’ve talked about this before, akin to what was often the case across the Atlantic between the United States and the NATO allies where their ties to the Soviet Union became a source of friction between the United States and Europe. It’s just something that we have to work with Japan.

In the case of North Korea, we don’t want to get in a situation where, for example, Japan is so focused, as it is, on the abductee issue, which is so emotional, that they lose strategic perspective. It hasn’t come up in the debates, but I think it’s—not a lot has come up in the debates today—(laughter)—but one of the things that has not come up in our debates is that it’s quite possible that during the first term of who’s ever elected in 2016 here, that he or she will face the challenge of a North Korea that can put small nuclear warheads, or smaller nuclear warheads, on vessels that can reach the West Coast of the United States. Is that a situation we are prepared to live with? Well, the United States and Japan had better talk about this. And Japan cannot approach them, the problem—if it doesn’t happen then, by the way, it’ll happen during the next term of who’s ever president.

But Japan and the United States have to have this conversation. And they’ve got to coordinate what they would do about sanctions and so forth, and what kind of—what conditions under which they might use military force, what would be war termination goals. The United States and Japan need to have a serious strategic dialogue about North Korea. I actually think it’s premature to have the conversation about how we would manage a unified Korea, except for one thing.

I think the United States, Japan and the Republic of Korea need to have a serious conversation about what would be the characteristics in the strategic sense of a unified Korea—about, for example, not having any nuclear capacity, about what, if any, foreign presence—military presence. If so, where? What kind of forces? And so forth, what would be the strategic orientation, because that’s something that the three of us, the United States, Japan, and South Korea, should be communicating to Beijing because one of our goals ought to be, I believe, to influence what has been to me far too unconditional Chinese support for North Korea. But again, we can only do that if Seoul, Tokyo, and Washington are very much coordinated in the messages that they send to China. But that means Japan needs to have a broader approach to North Korea, and not one dominated so much by the abductee issue.

FERGUSON: We’re going to go to the audience in a moment for a spirited, I hope, Q&A. But let me, if I can pivot, to use that word—(laughter)—just back to economics for a moment. The very good discussion this morning raised various aspects of the effort to essentially revive the Japanese economy, expansionary policies for the most part. I thought that could be extended a bit by asking about the currency value. This is—can be a dry subject, but it also is very material to business interests and strategic interests in the region. Yoichi, is there a sort of bottom line or baseline of how far back the yen can go as part of this expansionary effort? Dr. Allen Sinai at the Japan Society was using the 130 to 135 range yesterday as a short run likelihood. It’s about 120 now, if I’m not mistaken. But is there—is Japan, to use my robust term again, as it grows more robust, is there some limit as to how much weakening of the yen is tolerable?

FUNABASHI: I don’t have any good crystal ball on the exchange rate level, but I think Governor Kuroda is very careful not to depreciate the yen precipitously at this point. The yen is under 21—around that, right? One of the reasons why he has been very careful, but he has not been too much inclined to mobilize another bazooka QE. And I think this current level is acceptable to the United States, and perhaps to the other trading partners. If it would say should be—should go up to 135, 40, I think that inevitably I think this will emerge as a serious political issue. Then we just have concluded the TPP. And then the Japanese yen being depreciated 135, 40, it would not be helpful that Congress, you know—

HAASS: You have a future in diplomacy. (Laughter.) I got to say, that’s why we all have such a stake in the third arrow, not just Japan, because all around the world in this country and virtually every European country, but also Japan, there’s been an overreliance on monetary policy. We’re often unable to do things fiscally for political purposes and reform is the hardest for everybody to do, whether it’s Americans, Europeans, or Japanese. So we constantly then put too much emphasis on what central bankers do. So if the Central Bank essentially in Japan, Mr. Kuroda, has to bear the full burden of Japanese economic growth, that’s going to force him to do quantitative and qualitative easing, as he would put it, on steroids.

The result will be to weaken the currency, but it’ll have a big impact on the trade. And it’s not just—it’s TPP, but as we see again in the debate on both sides, by the way—this is bipartisan. People want bipartisanship, you’ve got it here. In both parties in the United States right now, there are powerful protectionist entities. And this would be—this would be just the ammunition they would need. So again, it’s not just Japan, but the United States I think has a real stake in the reformist dimension of Mr. Abe’s agenda.

FERGUSON: Yes. Last night we heard Mr. Trump make reference to Japan taking jobs from America. We haven’t heard that one for a while, so—(laughter)—

HAASS: Yeah, we had a conversation one morning—he and I on Morning Joe. And he said that Japan was killing us. And I pointed out that roughly it’s a two-to-one ratio of Japanese exports to U.S. exports to Japan. But we kind of went back and forth on it. But I was surprised because I hadn’t heard that kind of language for 25 years. And I pointed out that the Japanese economy wasn’t exactly killing anyone except Japan for most of the last 25 years. But it was—again, to me it was a signal of what—you know, in some cases the reality doesn’t matter, whether it’s this debate or the immigration debate. It’s what people feel or think they know. And it’s just—it’s latent. I really think this is latent in the American body politic.

FERGUSON: So the inside word is no more bazooka shot tomorrow from Kuroda? OK, we’ll see. You can hedge your bets on that.

Well, interventions, questions, comments from the middle front there.

HAASS: Mr. Siegel.

FERGUSON: Mr. Siegel.

Q: I am Lee Siegel. Yoichi, this question is for you.

You talked about nationalism. And I want to ask you two questions about it, rising nationalism in Japan. One is, what’s the implication for dealing with South Korea if you have rising nationalism in Japan? Second question is, rising nationalism on the right and the left, not the center where Abe is, isn’t that anti-U.S. nationalism?

FUNABASHI: On the first question, I think unfortunately we are seeing that nationalism in both countries, Japan and South Korea, are being sort of empowered, emboldened, and feeding each other. And that will put constraint on the political leader’s maneuverability, room to maneuver. And that the main reason why we really got stuck that—a much better relationship between Tokyo and Seoul. I don’t know how we really can extricate ourselves from this situation. The best scenario would be somehow miraculously Abe and Park Geun-hye, they will meet, will come up with some final solution, closure on comfort women issue, but it’s highly unlikely. I don’t think the Japanese government is prepared for that final—to some compromise in return for final solution and vice versa.

I think that perhaps we should strengthen that military-to-military cooperation if not coordination, security dialogue. And as Richard mentioned, that perhaps we really should try to come up with contingency planning in case of the instability scenario of North Korea. And that, you know, judging from my conversation with the minister of defense and Korean military top high-ranking officers and officials, they actually are quite interested in strengthening this dialogue, but they actually have been very much constrained by Blue House politicals.

Second question, very intriguing question. You are completely right in saying that Japan’s nationalism always has been very much latent in both sectors of right or left. For instance, in 1960 when we had that huge anti-American demonstrations on the revision of U.S.-Japan Security Treaty, Abe’s grandfather Kishi at that time was the prime minister. Basically, it was a sort of nationalism on the left side, even though they focused on peace. Japan actually, you know, had, you know, become to be independent only eight years before. So that anti-occupation sentiment still really ran high.

Now, I think the—it’s not that strong anti-American sentiment in the nationalism in Japan. It’s more anti-China, to an extent anti-Korea. Up to 1989, Tiananmen incident, about 55 to 60 percent of Japanese had a favorable view of China. And that was a watershed moment, and it has really—the support level, favorable view has decreased. Now only—now I think more than 90-some percent of the Japanese has an unfavorable view of China. This is actually—it’s not nationalism in itself, but this has really laid, I think, a foundation for that nationalistic sentiment. I think it’s the core of the nationalist sentiment. It’s anti-China—fear of China is at, I think, the base of the nationalism—not anti-American.

FERGUSON: There was a question over here, please. And a reminder that we are on the record today, so please identify yourself.

Q: Masazumi Nakayama, Citigroup.

If the income gap in Japan is widening—Mr. Funabashi, the question to you. And if the income gap is widening in Japan, will there will an impact to the Japanese sentiment to United States?

FUNABASHI: I don’t think so. I think income gap has widened to some extent in Japan in the past decade or so. But still, I think Japan’s income gap is not as glaringly huge as the other countries, such as the United States, or China, or elsewhere. But having said that, certainly that has become a political issue these days, as you said. And some people certainly have tried to explain that as Japan becoming to be more Americanized. Japanese bankers mimicking Wall Street investment banks, and Japanese entrepreneurs, upstarts, emulating that Silicon Valley entrepreneurs. And that’s the reason why we have, you know, resulted in widening the income gap.

But that’s—look, the income gap in Japan is most, I think, visibly pronounced in the elderly sector, segment, OK? The income gap is the widest about that generation 60-years old. I don’t think it has anything to do with the American issue. So I think it’s a political argument. And I don’t think there is much germ to truth to that.

FERGUSON: Question over here.

Q: Sorry. (Laughter.) Upside down. (Laughs.) Marshall Bouton, Asia Society Policy Institute.

I’d like to bring you back to the East China Sea, South China Sea. I think it was Professor Takashi this morning talked about the goal at this point should be the ritualization of the way Japan and China, China and the U.S. operate around those features in the middle of the sea. And I really have to question that if I look back at how much surprise there was here and elsewhere when China started building those islands that it was a much more assertive, aggressive step that China took. And I’m not sure that one guided missile destroyer moving through the 12-mile zone is going to dissuade China from that kind of position. And I’m worried that ritualization as a status quo is going to be very difficult to maintain over time. I’d love to hear your thinking about where we should be trying to go, how we create a more stable situation over the longer term.

FERGUSON: Richard, do you want to start on that?

HAASS: Well, first of all, the island project, shall we say, is not sui generis. You also had the unilateral declaration of the air defense identification zone. So you’ve now had multiple examples of what you might call unilateral assertiveness on the part of China. And what we did more quickly with the air zone, but in both, is we demonstrated our willingness and ability to essential ignore it. And I think that’s the sort of thing that ought to be done with whatever frequency. I do think, though, it suggests the need more broadly to still flesh out the security, quote, unquote, “system,” that is the Asia-Pacific.

Again, a lot of my background is with Europe, but it’s hard not to be struck by the gap between the degree of collaboration and formality of European security structures, and those of the Asia-Pacific. And you don’t have the confidence-building measures. You don’t have—either in terms of preventive mechanisms. You don’t have the communications mechanisms in place. And you certainly don’t have formal architecture in place about obligations. And so I just think that’s something that ought to be on the agenda. So, yeah, you can deal with the China island issue as a kind of narrow one-off, but my view is that it’s part of a larger pattern of, quote/unquote, “Chinese strategic assertiveness.”

Well, that suggests to me that there’s going to be something else then next year, and something else the year after that. So it’s not good enough or not adequate—it’s necessary, but not sufficient, to deal with this with tactical responses. I think you need a larger conversation about what is—what’s the nature of strategic order in this part of the world? And then countries like the United States, Japan, South Korea, and others, particularly as we have alliance relations with, have to decide what it is we’re going to do either formally together or in parallel in order to maintain that order, or to bring about the order we want. So I think, again, it’s fine that we do these ritualized, or whatever the word is, flights or sailings, but I would think that’s—at the end of the day, that’s not enough.

FERGUSON: Are the other parties in the region—India mentioned, Australia potentially, Southeast Asian powers such as they—are they meaningful to this strategic equation, other than as symbolic sort of stopping points in the circle, as you will?

HAASS: I think so, yes. Now, it may not be as part of a formal Asia-Pacific architecture, but I think India is particularly important. I think that—and, again, I’m not talking about U.S.-Indian anti-Chinese alliance. The Indians would want no part of it. We shouldn’t want that either. But a strong India and a robust U.S.-Indian relationship I think is simply a strategic factor that a China needs to take into account. And that’s what it is.

But we want—the whole purpose ought to be that the Chinese should not either embark on courses or action or come to define success that we would come to view that would be detrimental or unacceptable for our interests. And the ways we bring that about may in some cases be formal alliances. In other cases it may be through security talks. In other cases, it may simply be with strong relationships. So when Vietnam does what it does and then India does what it does. And China simply has to take that into account.

I never want a Chinese leader to come into office to think that China can do certain things and that the risks are worth running because the benefits would outweigh the risks and the costs. I never want that calculation to enter into someone’s head. Now, we got to be careful that we don’t overload it the other way. And we want to avoid situations where it looks like it’s a kind of self-initiated containment of China. We don’t want to do that. We want to make clear that China does have a place in the regional order, both in defining it and in maintaining it. It’s the reason that the Asia Infrastructure Bank Initiative on our part was so seriously misguided.

But this is—this is the long-term conversation with China, which is: As China gets stronger, as it emerges and plays a larger role beyond its borders, what are—what is the definition of order? What’s appropriate? What’s acceptable and what’s not? And that’s not a negotiation. That is a long-term consultation that we have with China. But we’re much better off if we also have it from the context of a close U.S.-Japanese-Korean-India set of relationships. But that’s the serious—that’s the serious diplomatic challenge for the next couple of decades, I would think, in this part of the world.

FERGUSON: Question in the back, please.

Q: Hi. I’m journalist with China Central Television.

China just abandoned its one child policy today, after 35 years of restriction, when most Chinese families are restricted to have more than one child, because the Chinese government has the fear that the aging population cannot provide adequate labor supply. So could you help—could you—how do you evaluate the effectiveness of this policy to help stimulate the Chinese economy? Do you think it’s effective? Thank you.

FERGUSON: Policy of rising fertility again.

HAASS: Well, I can say one or two things. First of all, any effect it’s going to have is going to be extremely delayed. (Laughter.) See, not just—not just anyone can become president of the Council on Foreign Relations. It takes really deep insights like that. (Laughter.) Secondly, I have to do this in a PG sort of way here—(laughter)—just because people have this option—in lots of other societies where you can have whatever number of children you want, people don’t avail themselves of it because the situations like the cost of education, the cost or limits to housing and jobs and so forth. So simply to change the policy doesn’t mean that Chinese families are going to start rushing out and having babies.

So many people, for example, in South Korea only have one child because the feeling is, we’ve got to husband all of the family’s resources to make sure that one child can compete in the educational system. So there’s a self-imposed, if you will, one child policy or limited child policy in certain countries. So China can change the policy in terms of declaration. But my hunch is, people in China will only have larger families when they feel that that’s a sustainable future. And that has everything to do with education, with housing, with jobs. Also they’re going to have to care for elderly people too. Whatever the political impact in the short run of this change, I actually think much bigger things will have to change in China before this actually has a demographic and economic impact.

FERGUSON: Yoichi, on the Japanese front on this regard, with the as ever finely engineered society developing a sort of army of robotics to look after its aging population, is there any real prospect that we’re going to see a bump up again in Japanese fertility?

FUNABASHI: Well, it takes a long time, as Richard mentioned, even though—(laughter)—

FERGUSON: And the future lies ahead. Let’s not forget. (Laughter.)

HAASS: You don’t have to defer to me on that issue. (Laughter.)

FUNABASHI: But I’m most intrigued with the possibility of this rapidly aging and decreasing population, and its implication for that military robustness for the society, nation. I actually have a sense that one of the major reasons why the anti-security legislation was so strong in the past summer in Japan was perhaps due to that aging society. Only 18 percent of the Japanese population above 65 years old supported that bill, even though in general 30 to 36 percent supported the bill. So it’s lopsidedly very much—they’re lopsidedly against the elderlies, the bills.

That may be perhaps some symptom of pointing to the rapidly aging society, Japan society, is not too much interested in strengthening that robust military capability, for various reasons. In Japan, of course, you know, those elderlies have regarded that their history, life I should say, as a very much success story, and that in that narrative that Article 9 of the peace constitution is an essential part. They just do not want to change the status quo. They’re very conservative, OK?

But perhaps more prosaic reason, they very much are afraid of financial resources transferred—being transferred from caring for the ageing into the military budget. So very, very—they are very much alarmed with this prospect. I don’t know how the Chinese situation will be. Perhaps Xi Jinping’s declaration to decrease that army by 300,000 may be a part of this demographic aspect because it’s more difficult for the army to recruit, you know, new soldiers.

That actually has been happening in Japan in the past particularly 15 years. It’s so acute, OK? The police agency, fire department, and civil defense forces are competing fiercely to recruit graduates of senior high schools in Japan. That seems, I think, to be happening in China too. So I don’t know. Maybe, I may be completely wrong here, but I’m very much intrigued with this aspect of demographics and its military capability.

HAASS: Can I just make one point and then ask—can I—I just want to hear—

FERGUSON: Sure you can.

HAASS: Thank you. I want to ask—I want to ask something from Yoichi, but I want to make one point, which is one thing we haven’t talked about a lot today is the U.S.-Japanese relationship can’t just be bilateral and it can’t just be regional. It really has to be global. And we have got to spend serious amounts of time talking about things like what’s kind of the order for cyberspace, what about climate change. This has got to be a larger relationship if this relationship is going to have, I think, the significance and the role that it needs to.

But in the sort—there’s going to be one issue, I’d love to hear your view—what happens if Congress does not support TPP? What is the—what is the implications on Japanese views of this relationship in the United States? What are the repercussions?

FUNABASHI: I think it would be devastating to Japan, and as well as America’s partners in Asia-Pacific, if TPP should fail.

HAASS: What does devastating mean?

FUNABASHI: I think that the rebalancing strategy, I think, will be—with a huge set-back, first of all. Nobody would be serious about the U.S. rebalancing strategy any longer. So that’s one. Also, I think that China will—certainly will become to be more assertive in pushing for their perimeter, imposing that, perhaps that Monroe Doctrine kind of Sino-centric, very hierarchical older vision to Asia-Pacific. And it would be almost unstoppable if the TPP should fail. Korea, I think, would perhaps gravitate even further in China orbit. But Korea is not a member of the TPP, OK. There have emerged intense debates within Korea whether Korea should also sign up or not. And I hope that Korea also should be a part. Eventually I think China should be a part.

But I think that we will see more Korea divide line between China camp and the U.S.-Japan camp or the U.S. camp in the Asia-Pacific. So I think that Ash Carter was right in saying that the TPP is, you know, really an aircraft carrier, megaton. I think that really will be the case. ASEAN could also run risk of being divided further. I think it is imperative for us, particularly after this South China Sea (agitation ?), to maintain the unity of ASEAN. ASEAN’s integration and the process of integration has been a major pillar of stabilizing effect in Asia-Pacific, in addition to U.S.-Japan alliance and Deng Xiaoping’s peaceful rise strategy, in my view. And ASEAN is really now strained as South China Sea issues has really become to be tense. So TPP actually really is the most strategic concept we have seen in generations, in my view.

FERGUSON: So the fate of this whole enterprise we’ve been discussing today really comes down to rest of the United States Congress? That’s a—(laughter)—that’s an encouraging thought. (Laughter.)

Well, we have reached the fateful end of our discussion today. Please join me in thanking our panelists.

(END)

This is an uncorrected transcript.