They have a lane in the road but the curbs are pretty short. And they cover issues as they see fit. Matt goodman is Senior Advisor for asia and economics, and the us Governments National security staff, director for International Economics, white house coordinator for apack, Senior Advisor to the undersecretary for Economic Energy and Agricultural Affairs and department of state. The list goes on as well as private sector worked at goldman sachs, the Government Affairs office in london and jim show is with the carnegie education program. Previously served in the pentagon the office as Senior Advisor for east asia policy, the office of the secretary of defense and there he was responsible for Strategic Planning and policy Development Relations for japan. And spearheaded Regional Security cooperation issues, north korea, Missile Defense, Disaster Relief and Maritime Security and lived in japan and other parts of asia for a number of years. Past cronin holds the asia pacific security chair and before that and think tank and government, as well as the institute for National Security studies at the National Defense university and director of studies at londonbased International Institute for strategic studies and before that Senior Vice President at csi s. In 2000 when he was confirmed by the senate as their drinking position at the agency for international development. Really, three perfect experts to discuss round 2 of this issue so i will turn it over to you. Thanks to the Heritage Foundation for having us here today on an important, interesting, and sensitive issue. It is a challenging thing. The Previous Panel covered a lot of ground, so im not going to go through all the economics that appear. I wont go through all of this data and so forth. I will start by telling a story which i will come back to which is february 22, 2013, newly reinstalled Prime Minister shinzo abe came to a certain think tank in washington, its initials are csi s, which gave a speech in which he said japan is back, and the trade teams, negotiating japans entry into the Transpacific Partnership and in beijing 3 weeks after that i had a meeting with a colleague at a government think tank, had been saying the last couple years that tpp, initially a whale and a bunch of minnows and started saying the opposite which is it was a threat to china designed to contain or isolate china but this meeting 3 weeks after abes, china should consider joining tpp and raise eyebrows so i will come back to it. Im not going to talk about the merits of the case, korea and japan have a good case on the story of export controls which i am focused on, japan think theres a concern about technology leakage, north korea or china or other trustworthy countries, korea feels this tool is used by japan as retaliation, not for reasons stated but im not going to pick sides but both of those positions i genuinely held, questioning the viewpoint of the other is not really productive. First of all, this dispute continues to have an Economic Impact. You have to take it with a grain of salt because nothing has happened yet. There is high dependency as riley laid out for some of these materials for Semi Conductor production and a lot of basic chips you getting your phones and other technological devices. There is a theoretically big impact and the spinoff spillovers like the korean boycott against japanese tourists and that could be an impact. The macroeconomic, and the biggest and worst case. There is microimpact on some of those sectors. And macroeconomic way, the third and 12 largest economies of the world and if they are in a trade war, it will put another straw in the camels back of global risk that is putting the Global Economy at great risk. Theres a lot of uncertainty about trade and other countries and geopolitical risks and others in the Global Growth is fragile. This could be another strain on Global Growth and that is what i worry about. The uncertainty this will cause more than anything but it will have an Economic Impact and there is one concern. The baker concern is what i call the strategic Economic Impact. There is a lot korea and japan and the United States have shared interest and concern about in the International Economic space that i consider strategic and trade is one of those things where we have a strategic interest in working together to advance High Standard rules of 21stcentury trade. Infrastructure is another space in which we have a shared interest in highquality Infrastructure Investment around the world and open procurement and highend social environmental safeguards and sustainable debt conditions. And i shared interest in the future of the Digital Economy, it is more than just a Digital Economy. It is everything, everywhere. How the economy is going to function according to whose rules and standards and norms for all 3 countries. We have some disagreements over a few aspects of this question of how to allow data flow freely and data should flow freely whether financial data, purely used in production or technology and health data and philosophically we all believe and practically, that should flow freely on top of a sensible foundation of privacy and security. Exactly what that means and how it is defined, korea and japan, fundamentally we agree on how to do that, open internet with no localization of data requirements, no taxation on crossborder. I think it is a clear and compelling shared interest. Those are to me strategic things, not a matter of a little commerce here and there but really important issues for our futures and we share an interest in those things and so for us to be taking our eye off the ball of those things and having bilateral disputes within that group that are potentially very damaging, distracting, i think is really missing the bigger interests. For both japan and korea i urge them to look at those broader interests and see this situation in perspective. The final thing i will say is what do we do about this . Both sides, what mark says about being calm and confident, i agree with scott snyder that is being statesmanlike. This issue is important, both sides need to look at those broader interests, take a step back and think how we manage the situation. We may not be able to solve the underlying conditions but they are different in international affairs, the ones that arent you need to find a way to manage and i would say the way to manage them, talked about by other panelists in the previous round was to find some way to get a conversation among technical level people about the concerns japan has raised. And i would say if it cant be done bilaterally, it seems both sides, japan and korea, at the moment, dont have an appetite for that, certainly dont want to meet in a garage and talk past each other. It gets technical people from state dod together with counterparts and have technical discussion about these things. Something was emerging that was a practical set of solutions, maybe korea undertakes, and the strength of the korean regime on export control and undertakes to do something, more people in export control. Get gives japan the idea to say korea is moving in the opposite direction and find some way forward. I think Something Like that is in grasp of possibility. I urge the two sides to find a practical solution like that. I will just wrap by saying the reason i told the story about Prime Minister abe, that is the first moment i saw the possibility of a japan that was going to be looking beyond a narrow parochial interest, looking at broader strategic interests. What i can call strategic economics. You saw that in particular of course when they got come work with us to get tpp done but that we pulled out, getting the cptpp done and who wouldve predicted that . I certainly didnt think even though i was as if interested in japan playing this greater role, i didnt think they could pull this off or try to. That was dramatic. I mention infrastructure. Japan just have had the g20 ant president xi jinping to endorse quality infrastructure principle that included things as the mentioned like social and a viable safeguards, lifecycle cost procurement, no corruption, debt sustainability and so forth. That was a who did that. Got discussed together. President moon also signed that and president trump. And on the Digital Economy simile japan put forward this notion of data free flow with trust which is a little clunky and illdefined but its a good start of the conversation of global conversation about Data Governance which i think abe gets a lot of credit for putting on the table. I think against all of that the japan in particular as the senior partner in this relationship should be the one that steps forward or that i expect to step forward and find a way to move towards some kind of practical way of controlling and managing this situation. Thats what im looking for, and will leave it there. Jim, take it from there. Thank you very much. Its a real pleasure to be with you, bruce, and with my fellow panelists. Im going to pick up from there and talk about a strategic ramifications and Security Issues. Unfortunately i come at this with a bit of a pessimistic view having just been in tokyo a couple weeks ago. I actually am not optimistic theres a practical solution to this export control issue of this particular trade dispute between japan and korea at this time, because i dont think its about export controls per se, as was mentioned theres a lot of vagueness about exactly what the reasons for the announcement and the subsequent decision, was it Korean Companies not up to snuff for the queen, that was not satisfying certain conditions or was it Japanese Company set were not sufficiently dealing with this . And the lack of willingness to engage in a bilateral or maybe trilateral dialogue on gee, lets fix the export control issue and restore trust. This particular issue, i dont think thats whats really at the heart of this i think this is a symptomatic, this issue on this topic is symptomatic of a broader dynamic that in my mind is counterintuitive and should not be happening. If you have a situation that we have now where theres some real question about the longterm u. S. Commitment to its leadership in east asia, its commitment to International Institutions when you have u. S. Administration that is complaining about trade deficits, you know, bullying or putting pressure to agree to certain trade agreements under the threat of sanctions, actually applying sanctions on our allies, browbeating on host nation support and demanding more and more money to support u. S. Troops, and other measures that undermined some of the shared interest that i think matt talked about and are very true, that should be driving japan and korea closer together. This should be a moment where as part of their strategy for dealing with this Current Situation and chinas rise and russian activity and questions about north koreas future, but we dont see that. Instead we see essentially each country pursuing a hedging strategy or a balancing strategy of managing their alliance with the United States but also exploring other opportunities for dealing with these challenges that dont include the other country significantly. And i think thats primarily because of this, some of the things mentioned in the first panel here this buildup of a decline of mutual trust and in particular i think for the japanese side, yes, there was the agreement and that falling apart, the radar lock on incident that happened late last year was a significant blow because traditionally that its been an area where japan and korea have had pretty solid cooperation and trust. That was a situation where actually japan and korea and the u. S. , japan and korea final format practiced search and rescue operations before. This is something that was actually part of the new feature of our Alliance Relationships was to be able to exercise or handle situations like the one that happened in the sea of japan. And that did not come together. And certainly the forced labor cases and the inability to address that, wto fisheries decision and a variety of other issues, and i think the g20 was hoped for and token to be maybe this one last chance where they could address these issues and some of the outstanding issues, and that has not happened. So, added to want to give japan a pass and put the blame on south korea because obviously these issues are much deeper and more nuanced than that. But in giving you a bit of a sense of i think some of the japanese motivation for this. To some extent practical export control issues involved, and to some extent japan would emphasize we are not embargoing anything and many other countries have the same status and this just means instead of notify as you are exporting something, you i to get approval to do it, and made it could be handled relatively smoothly and it would not be a big deal. To me its more of an indication of japan looking at this list of all the trusted countries, on the white list and saying we dont think south korea should be there anymore based on the way that relationship has evolved over the last couple of years. And building on other elements of the past. Its our decision who gets to be on that list and im not saying this is what japanese, officials told me. This is an impression that i i get, and so thats why theres no specific effort to fix this particular problem or at the few inspectors into with this. This is a deeper fundamental problem where i think the japan side fairly, clearly has decided, again this is just my impression, that they are willing to accept a significantly diminished strategic and economic relationship with south korea. And in effect south korea has made a similar decision, albeit over a much longer period of time and perhaps if not a crystal moment, theres no one decision they made. But escott alluded to earlier, this testing or teasing with some of the foundations and fundamentals of bilateral relationship, that both countries have excepted, have decided they are willing to accept they dont want to be this way but theyre willing to accept a diminished strategic and economic relationship with each other. The United States remains as of the node between the. Its ironic also because the u. S. Japan alliance and you south korea lines are quite strong. And i believe they will sustain themselves beyond the Trump Administration and proved to be quite valuable. So how do we deal with the situation, what is potentially a turning point in u. S. Alliance relations in east asia where we had since both agree was developing Nuclear Weapons and missiles from the late 1990s and the development of the other trilateral venues that was driving us together, we have accomplished quite a lot in terms of improving our interoperability and what we can do together and we cooperate, we have policy planning meetings and we share strategies visavis afghanistan or Development Goals and eight effort around the world. Are we in a situation where we have to recalibrate how we handle this Going Forward . In the short term my main message is to go with an analogy, and i couldnt come up with a more effective analogy but ive come up with the detached garage. This is a building thats part of an estate or such that serves a a valuable purpose, but it is damaged. It is lacking care. It is not looking as good as it used to be and there may be some structural and foundational problems with it, but its still a valuable part of your estate. But in my view, in this analogy, the concern is if we do not always maintain a certain level of quality of this asset that you have, it will dk further. Sooner or later and it will house is going to come along and will have new leadership in korea, have new leadership in japan, new leadership in the United States over the next decade, two decades, three decades, et cetera and was time all these different problems and challenges that we face. And future owners of the cells may look at the garage and say thats just not worth saving, im not going to the money into that. Im not going to put Political Capital into what it takes to rebuild this asset in our relationship. We have this asset now, and if we work collectively together to preserve the asset, then its more easily repaired and utilized in the future. What is the garage for us right now . I think the trilateral piece is a significant part of that. Its the japankorea is a part of that, thats one of the brics or foundation in this garage. Its the exercises we conduct, search and rescue. It is that the fence trilateral talks, the j5 strategy talks, the policy planning meetings we have. It is caucuses that we bring together. When i was in government we would have u. S. Japansouth korea trilateral summit and we would kind of coordinate our positions and does not talked about theres a a bright of otr issues on technology, controls and norms in the future. Arms control in east asia is inchoate important now as the inf treaty falls away, where his new start, with the future of arms control in northeast asia . So i think building the free and open indopacific, dealing with china, et cetera. Building a protective wall around and sustaining this asset, while it may take a little bit of Political Capital, a little bit of statesmanship, a little bit of effort in the short term is worthwhile for the longerterm future. Because we will need it again, whether its because of north korea, china, or the regional comments or shared commons issues. So i think minimizing the potential impact of this current trade dispute is my priority and i would like to encourage ways to address this particular dispute. Im just less optimistic than the short term we can manage that and im a little more focus on maintaining this asset that we have a protecting it for the future. Hanky. Patrick . Bruce, thank you very much, and thank you to let me commend you for the panel he put together today, this whole program today. The paper you just put out is a very excellent analysis you do here at heritage on these issues, and i mean that sincerely. I was asked by you to talk about the impact of this dispute, and not willing really the trade dt the overall downturn in japan south korean relations for u. S. Strategy policy in the indopacific. I think it really does undermine u. S. Strategic objectives in the indopacific region. So thats my basic argument here we could start with simply the fact that the Foundation UseRegional Policy begins with ironclad bilateral alliances in northeast asia. This is not my statement. This is the Trump AdministrationDefense Department indopacific strategy report statement, which is at the a struggling which a calling u. S. Japan alliance the cornerstone and u. S. Rok allies the linchpin for peace and prosperity in the region, peninsula. And its true, but thats also a statement that puts the cart before the horse because alliances are means to an end. Im telling you as the administration has argued that these alliances really matter but now we had to say why does it matter . If they really matter then we should be doing more to try to deal with this issue of dispute between our two key allies. If the cornerstone and the linchpin of your strategy our weekend, then your objectives are going to be harder to obtain. It just follows logically. Jim wisely said we may not be able to solve these problems, but as my wife would tell me, i dont want you to solve the problem, patrick. I want you to listen. I want you to come here indicate and show you try to care about these issues. Thats much of life, much of life is trying to manage through these issues. We all know about this to the policy world. There are at least four challenges for use regional strategy and policy that flow from a week japansouth korean relationship. Even though admittedly in the three legs of this trilateral relationship this has always been by far the weakest link. Thats not me. Its always been the one that needs more work and weve been working on it consistently, gradually over the decades. All of us has done work but jim has done some terrific work in the last administration on the trilateral security cooperation. But first of all as has been mentioned, dealing with north korea is no picnic. North korea is a persistent challenge for the region. Its what drove japan more into this to develop in the 1990s. Because once north korea started to develop missiles that could hit japan, as a start in the 90s, then we realize this was a regional problem for northeast asia. We had to come together and we did over Missile Defense issues, which we did over the initial trilateral track 1. 5 can also track one official trilateral defense discussions to try to think through how do we deal with different contingencies. Theyve been hampered, limited. Wed like to see them go further but the reality is that japan has always been simpler. Simple. I see jim over there, we hosted Kim Jae Young, the first progressivist of the first such a policy, the original in trying to reach out to north korea. We sat down at the National University had a very serious private discussion about the commitment of south korea to our other alliance with japan and to the security concern of the u. S. Rok alliance. It was solid, sincere and it was one of the things that helped Kim Jae Young win over washington early on. He was well known. He was a public figure but still he really won them over and is a realist in the sense of continuing these. This is the thing were hoping that i think scott snyder others reported there were hoping to see out of the Moon Administration now and from all of our friends in the region here but korea is, can jump on lobbing shortrange missiles into the open wound of the japanu. S. Relationship. Rok relationship and the japan and the u. S. Problem with our allies, if you will, sorry. The point is that theres some reason by kim jongun is doing a missile firing, obviously to show that he can, you know, to increase his leverage, to try to win more concessions out of us before he is given us anything still. But at the same time its an insult. He knows we are hurting. He knows theres a a weakness n this relationship. Our two key allies not getting along well together and he is sort of spitting interface. This is heraldic. We have to do with kim jongun from a position of unity and strength, and thats one reason why its important for the United States to try to get our two closest allies back on the same sheet of music, and the same record. A second problem weve heard about already, talked about china, major power competition, and this has been intersecting several points made on this panel and the earlier panel, but the appointment unless panel, the fact bruce and your paper with riley, the idea that we could be pushing south korea to greater dependence and High Technology in china and or russia is exactly what we dont want to do. Why . Because he strategic competition especially with china now over these revisionist powers, we want a different set of rules from the established post world war set into his it is an economic competition that has technology in command of emerging technology the 21st century so at the center of its strategy, thats what made in china 2025 was all about. If the United States and the republic of korea and japan, these three advanced hightech market democracies cannot come together and think through and fashion the rule set, that matt was talking about, youre going to lose it. We lose a lot. We lose far more than the things weve been talking about causing this dispute. These are very serious stakes. Its not a war but its a huge competition or technology in the rule set of the 21st century. This is why these alliances met this is why they use has to do more to get involved. This is why we cannot let this run amok and this is a time to do it. Third, the sort of tension between our northeast asian allies perpetuates general sentiments sentiment of rising nationalism protection and unilateralism some which are being perpetually out of the United States to make sure, but we have to put down barriers about how far we let this go. We can criticize the United States of the Trump Administration policy for America First, unleashing these forces. My criticism would be, of that would be look, the Trump Administration simply call America First because it saw this as a every asian country pursues its interest in it just doesnt sit there are mistake is we set it in our administration policy. Thats not the whole story, but the point is there some truth in the fact every country puts its interest first, but we have to understand that we also have shared interest at the same time its not a zerosum game. We have to pursue both our National Interest and a regional interest in global interest. Its again a false choice to think we can just have one and not the other. This is where japan and south korea and the United States need to come together against these forces. And finally a fourth point that these alliances matter so much and why a fractious state of relations with our key allies, our foremost in east asia is the whole three of Network Security. Also in the same Defense Department indopacific Strategic Report that image in one of the three pillars is this whole promoting and Network Security. If our two best most important strategic allies in all of the region are not getting along and were not able to control that, were not able to move that ita positive direction, what does that say about the value with the Network Security . That trilateral relationship albeit the weakest leg of the three bilateral relations of this japan republic of koreau. S. Relationship, is still a growing gathering very serious one as image with ballistic Missile Defense. Thats no trivial issue. Sometimes she could cooperation. So we have to be able to show that we can do this. Marc knapper mentioned the southern policy of south korea, republic of korea and, of course, the Top Administration free and pacific was a term, an idea borrowed from the Abe Administration and from Prime Minister abe. We do have overlapping interests in terms of trying to figure out the principles of equality, summary, selling disputes peacefully, the things were trying to work with a Southeast Asian friends in austria against unilateral changes to the status quo through coercion and force eccentric the rules change by revisionist powers. This becomes very important for our Network Security. Its an opportunity cost when suggesting is its not what is taking away. Its what is denying us the opportunity for seoul and washington and tokyo to be thinking about cases like vietnam or indonesia, the mekong delta, place of warming may be able to convert our interest into something more than we already doing to kind to demonstrate the enduring value of rule set that is open and transparent and moving in the direction we want. Not antichina but proorder in terms of rulesbased systems. My basic point is the United States cannot afford the extravagance of choice among our closest allies. Instead of managing the proliferated north korea and unassertive rising china we must now manage the perception that the declining superpower and Regional Security architecture, thats what its risk. The narrative is china is using against this is we are declining, differences go system is archaic and anachronistic, no, not true. We need to be adapting, creative, agile, working together and working around these problems. Im going to into my comments there but but i think the impan you strategic goals is significant enough for us to be far more active than we are now so that we prevent this from actually truly undercounting the kind of objectives on north koreachina russia, Network Security i been talking about. Thank you very much. Really great, three really superb recent tensions did exactly what i was hoping would delve into the implications and the ramifications. Just triggered some thoughts. First, i think we need to realize and emphasize its not just the current administrations, not just a moment think of not just a abe thing. Its not just their the currens of the detached garage. All of us have been through any number of iterations of these flareups, including the dpj government in japan in 2002 and five and all the other years they were. It is cyclical. And if we do try to look at it dispassionately and i think thats very hard, particularly in the two countries is theres economic issues, Security Issues and history issues. On economic issue, i think First Talking to japan if you say these export control issues are not related the Supreme Court ruling, which some statements into initial indicate thing to pull back, if they are not related to that, okay, then lets address the export control issues. Forget, did someone i have meetings come to some refuse meeting for three years . Did someone now refuse the meetings . Just sort of moved beyond that. First the hippocratic oath of do no more harm, put on hold some of the white list removal, put on hold the export control and the three chemicals and just okay, lets have the working group bilateral, trilateral Work Together and just focus on the issues as were talking about. Identify the concerns and then both sites government steps to make the export control not an issue. It removes all the concerns both nations as well as the u. S. Might have. So kind of focus on the technical aspect of it, remove from compressor underlying causes. On security as jim was saying, is i think emphasize the common threats, the flybys are perfect examples. The north korean missiles. Theres the threat from the wolf closest to the sled is north korea and the chinese dragon is a one further away but much bigger. We need to emphasize the need to keep, emphasized the people that really just a fairly boring technical agreement. It doesnt force either side to give military or intelligence secrets to the other. Its really just a classified information control document. Its the kind of document eia and Defense Intelligence agency probably have written between thin. If i of my own choosing give you classified information, you are required to treat it in this way. It really is not forcing divulges of information, its just protecting it once its given to we need to emphasize that, and then really expand it beyond the current focus on ballistic Missile Defense. People have heard me probably for years say korea should integrate its ballistic Missile Defense system into the broader more effective more comprehensive ally missiledefense system than the analogy often use is its like having three outfielders talking to each other as a fly ball comes out. If youre talking to each of you each of different angles on the ball or the missile coming out. You are more likely to catch it were intercepted. But really a lot of the focus has been on Missile Defense but i think expand in some areas jim was talking about as sort of maritime and error domain awareness, particularly given that only north korea but chinese and russian actions. The history issue is the toughest. And thats how do you address the two Court Rulings as well as all the other ones that could come from that. And in the comfort agreement,o try to recreate it d2 into another round of negotiations . Or, and then i would say dont reopen the 1965 treaty, maintained that. Obviously its all very much easily said than done. We will throw it open for. Thank you for coming. Im japan native, u. S. Citizen. By the way, matt, i read your article a couple days ago and i liked what i read, just to let you know. What jim said is right. This is beyond just a trade dispute. History is involved. But i want to share my experience when i was in orange county, california, please keep it to a question. I will. 2012, 2014, the early elections biggest and is about to gavel and so we believe this discussion for a moment and take you live to the senate floor,