The North Koreans have been disturbing my sleep. One of the dangers in writing a book—with Steve Bosworth—on current policy and making recommendations is that you apprehensively open the papers each day to see if something happened that makes you wrong or passé. Over the past few months North Korea has put us on a roller coaster. First a missile test, then a nuclear test, and today they declare they are returning to the six-power talks they had abandoned for over a year. Getting the North back to talks is one thing, getting an agreement on ending their nuclear programs is another. Some are skeptical that they actually will return.

The cognoscenti were quick with their pens the day after the nuclear test, saying that East Asia would be going to hell as Japan, South Korea, and Taiwan would be driven to acquire nuclear weapons, driving home to me again the need, impossible to satisfy, to keep quiet for awhile after major, usually surprising events. Nevertheless I have changed my planned remarks somewhat to accommodate the impact of all this. The North’s nuclear weapons test adds a great measure of uncertainty to the East Asian strategic situation and complicates our management of the Iran nuclear issue.

I will discuss sketchily four big issues which will dominate our relations with East Asia for the next decade or so.

I want to start, however, by emphasizing that East Asia despite the North Korean alarums is in the best shape it has been in our lifetime. With Japanese recovery taking place it is the most dynamic area in the world. There has been enormous steady growth, countries are largely focused internally, and a new dynamo—Vietnam—is on the horizon. There has been no war in thirty years. There is increasing openness and mobility including in China and democracy is advancing if unevenly. Of course there are two bad states—North Korea and Burma—and two intractable issues—North Korea and Taiwan—which we have managed so far without hostilities—and a few lagging countries. The United States had a big role in creating this situation. The moral of this story is not to screw it up.

But it is difficult getting our hands around the magnitude and implications of change and recognizing that however important we are, the United States is no longer the dominant presence in East Asia it once was. There are now two magnetic norths for most of East Asia—Beijing and Washington.

The most fundamental issue, of course, is how we deal with China. Working out a relationship with China and with the Middle East are our most difficult foreign policy challenges. Whatever the uncertainties of China’s evolution, and governing China and just keeping the place together are no easy matters, we have to learn to live with a new, big time player. Unlike the Soviet Union whose only world impact was its military power, China is a world player in almost all realms, affecting the daily life of many Americans and billons of others—from its impact on prices of oil and other commodities to the profitability of Walmart and the benefit of consumers everywhere.

Its China policy is one of the few good things I can say about Bush foreign policy. Like the Clinton administration it started out being tough on human rights and democracy, but as they discovered the multifaceted nature of the relationship, they retreated to a more modest posture. It is easier to beat up on Burma than China. The administration also started out treating China as the central strategic enemy, but that changed after September 11, when we wanted cooperation against terrorism and no diversion from Iraq. The administration has worked hard and effectively to improve relations, establish a better dialogue, and remarkably—Bush publicly himself, with China’s prime minister standing next to him—dampened Taiwan’s capacity to roil relations in defiance of the president’s strongest political supporters. In its more lucid moments it recognizes that the United States cannot control China or manage it. What we can do is get along with it, which does not mean catering to China’s obscenities, and we can influence China—the way it develops and fits in to the international system. China remains as always a divisive issue here politically—human rights concerns, major economic differences, policy quarrels—that can severely complicate relations and also needs tending.

I certainly am not smart enough to know what China will do with its capacity over time to generate military power, and we constantly hear the historical refrain about rising powers. And there are others who believe China will implode and the Communist party will be delivered to the trash heap. Whatever the soothsayers, China has made it abundantly clear it needs us, is deeply interested in getting along with us, and wants to focus on enormous domestic problems. It likes tranquility on its borders and by and large China has been a non-interfering neighbor. It has also shown itself to be absent humanitarianism judging by its friends— Sudan, Burma, Zimbabwe, Uzbekistan, etc. Certainly you can depend upon some U.S. hedging against China’s potential military power. But we have to be particularly watchful of those who want Japan to join us in alliance against China, and we must be wary of pseudo-strategic buzzwords and such phrases, which remarkably I heard from an outstanding China specialist, that China is trying to drive us out of East Asia, a ridiculous assertion. It is salutary that Treasury Secretary Paulson appears to have taken over the China portfolio.

The second issue is how the United States responds to regionalism in East Asia. The regionalization of East Asian economies is well under way, driven by China’s success and its economic integration of the region. This is almost entirely the result of private activity, not governments. Private companies inside and outside the region have been constructing production networks in East Asia. Few products today are produced in just one country. This process is drawing East Asian economies together. Also tying the region together is the huge growth in people to people contacts. Tourism is booming and labor from all countries is moving around. I don’t think I am gilding the lily by saying there is the growth of an East Asian consciousness.

While the regionalization of East Asian economies is well underway, the construction of new region-wide institutions is just beginning. We heard much talk in our travels about the creation of an East Asian Community somewhere down the pike, still to be defined but certainly not like the EU. There is still a long way to go and many hurdles to be overcome, particularly Chinese-Japanese tensions. Some Americans are shocked by the notion that this is a process for East Asians and the United States does not need to be involved. But this is a trend that will continue. We can encourage it or we can sink it by insisting on our involvement in any new East Asian institutions. I do not think this trend is threatening. East Asia is developing in ways that do not harm our interests. We want any new institutions in East Asia to be compatible with international norms and to remain open. That is likely to occur anyway because of East Asia’s stake in the United States and the rest of the world. One of the principal fears we found in our travels in East Asia, particularly Southeast Asia, was being forced to choose between China and the United States.

The third issue is dealing with the remnants of the Cold War: North Korea and Taiwan. Instead of concentrating on twenty-first-century issues like globalization and intellectual resources, a small, decaying, horrible state has become again the focus of our East Asian diplomacy. Our defense posture and military deployments in the region remain still bound up with contingencies in both countries. As much as the East Asian outlook has changed, these flashpoints could shatter our optimism. The U.S. centurion role here is critical and we must remain actively and deeply involved in managing both issues. I will focus more on the North Korea issue now much on our minds.

The Korean peninsula has changed radically, largely because of the huge economic disparity between the two Koreas, which had led to South Korea’s great confidence in their dominant position, to the view that the North is mostly a charity case, and to the need above all to avoid returning to the tensions of the past that could lead to war. That in turn has reduced their dependence on the United States and the power of the U.S. word. President Kim Dae Jong sought to change North Korea, not destroy it, through a long period of engagement, and with large-scale aid, making the North dependent on the South—the so called “sunshine policy.” He generated the first North-South summit, which he paid a half billion dollars for, and won a Nobel Peace Prize. In a meeting he sought early in the administration, instead of hearing that Mr. Bush would continue Clinton’s policy of engagement, Kim effectively heard that North Korea was a bad state and his “sunshine” policy was naïve. A few of us happened to talk to Kim after that meeting and he was shell shocked.

That meeting began another deep split between the United States and South Korea, which has grown worse with the more active engagement effort of Kim’s successor, making it difficult to manage a concerted strategy toward North Korea and its nuclear weapons program—one party handing out goodies one part denying them. China has pursued its own engagement policy—to turn the North into a mini, market-oriented China —and until the nuclear test refused to support the pressures America preferred. Interestingly enough Chinese consumer goods including cell phones and radios have been flooding the North, slowly helping open that opaque society.

The problem for any engagement policy with North Korea is that it is a long term effort—many will say a triumph of hope over reality—and runs up against the short term issue of the nukes so important to the United States and Japan. Moreover it is hard to see that South Korean largesse has been met with much North Korean engagement. We also do not know whether North Korea really wants to negotiate ending its nuclear weapons programs in exchange for specified benefits. And the Bush administration has not shown serious interest in getting rid of the North’s nukes by negotiations, whatever it says publicly. America and Japan have basically pursued an isolation policy. Over the past four years the North’s nuclear weapons program has grown.

We cannot say with certainty why North Korea tested a weapon, particularly against Beijing’s clear injunction. I believe the military and scientific establishment wanted to be sure they had a usable weapon to improve their deterrence against the United States. Perhaps they also thought they could tolerate condemnation and some isolation, believing China and South Korea after a slap on the wrist would come around, not wanting North Korea go to hell, and continue to provide aid as in the past. It would certainly catch the attention of the Americans. But right now a seriously isolated North Korea has agreed to return to six-power negotiations, which they have boycotted for over a year, and apparently without the Americans relaxing the financial sanctions that the North insisted on for its return.

It now all seems to have come down to what China, now a centerpiece of our security policy in East Asia, does. Beijing is clearly mad as hell at Pyongyang for sticking its finger in their eye twice. The leadership is deeply embarrassed. They also feel North Korea is imperiling their relations with the United States and Japan. Right now it appears that China has been limiting North Korean financial transactions and its oil supplies. Declaring that only negotiations can solve the problem, it has pressured, persuaded, or bribed Pyongyang —maybe all three—back to the table.

Now that China has succeeded in getting North Korea back to six-party negotiations, the United States will have to face whether it is prepared to seriously negotiate with North Korea. Neither China nor Russia will likely give the United States another free ride on that score. Both countries have openly complained about the American negotiating position. For the first time the United States will have to put down a serious negotiating proposal—setting forth the obligations of each party, the benefits each derive, the sequencing of their actions, and the verification. That will occasion a huge battle in our government, given the profound split on how to deal with North Korea. How it will end I am not sure. As for the North we do not know whether it wants to wait for another administration or is prepared to give up its weapons period. In the best of circumstances successful negotiations will be difficult to come by.

Clearly the best way to solve the nuclear issue is to get rid of this terrible state. My own view is that it is so brittle that sooner or later there will be an indeed an implosion. But you can’t base policy on such an uncertainty. And we have been wrong on this score in the past. Much damage can happen from inactivity. Short of force, which both South Korea and China would strenuously oppose, there is no sure way for getting rid of their nuclear threat. If serious negotiations fail because of the North, the United States should be able to bring more concerted pressure to bear on Pyongyang with what results it is hard to say. If negotiations resume without serious content, it likely looks that we will be left for the next few years with a more isolated North Korea with nuclear weapons, still being helped by China and South Korea, and the United States and others adjusting to it and trying hard to guard against any transfer of nuclear materials. This situation will continue to roil the strategic thinking of the neighboring countries and possibly produce a crisis on the peninsula.

As for Taiwan I have always expected that the enormous integration of its economy with China would lead to some sort of political resolution of their dispute. It hasn’t. Maybe one day. Taiwan’s desire for international recognition is natural given its enormous success. But it is not going to happen. As China’s influence grows it is harder for Taiwan to find international space. China has great ability to punish countries that try to deal with Taiwan. China does not care what a country does internally as long as it does not “play footsie” with Taiwan. However China also wants no trouble in the Taiwan Strait. Spikes of tension are bad for its image and hurts investment. Still, any Taiwan attempt to change its status will certainly provoke a huge outcry from Beijing. The likelihood of conflict is not great but it cannot be ruled out. So the United States has and will continue to maintain a dual posture of restraining Taiwan from doing something stupid and deterring China. But Taiwan is a flourishing democracy and the United States cannot simply wave a wand. As for China it is building its forces in the Taiwan area, and while it cannot yet challenge us, it is making things more difficult. The issue requires constant attention and management.

Last is the problem of helping the great powers of East Asia—China and Japan—manage their relations in ways that do not threaten the stability of the region. For all the attention paid to China, Japan remains the second largest economy in the world. It is recovering from a decade of stagnation. Japan has slowly but impressively increased its defense expenditures and has become the fourth biggest defense spender in the world. Prodded by the United States to do more in defense beyond its own territory and become a so-called normal nation, its leaders have done much of that, They are now seeking to change how Japanese should think about themselves, their history, their place in the world, and the threat to their security. Japanese nationalism seems on the rise; indeed nationalism is rising in all of Asia, and can be cynically employed in democratic as well as authoritarian countries. Japanese leaders often assert there is no militarism problem with the defense changes being proposed because Japan is after all a strong democratic country, and there is much to be said for that. Nevertheless concern abounds in East Asia and in many quarters in Japan.

That concern has obviously risen with North Korea’s nuclear test. Japan has become more bellicose than even the United States in dealing with the North. It has virtually abandoned trade and sometimes sounds as if it wants to nuke the North Koreans. Pyongyang’s nuclear test has raised the specter of Japan going nuclear quickly. We hear constantly from many U.S. commentators about its inevitability and in some quarters its desirability. But Japan quickly rejected developing weapons; that is what you would expect them to say at this time. A North Korean capability to marry a nuclear weapon to a missile would badly shake up the Japanese. And in the longer run they have to think about China and South Korea. There are strong factors mitigating Japan becoming a nuclear weapons state, namely the Japanese public and the attitude of the United States and all countries of East Asia. I think it reasonable at least to expect the nuclear debate in Japan to grow.

All this enters into the problem of Sino-Japanese hostility, which flared under Prime Minister Koizumi, and produced much hand wringing in the world. I frankly find it hard to figure out how this rivalry, which exists, will turn into real military hostilities. The fantastic level of economic integration of the two countries certainly mitigates against but does not preclude confrontation. There are disputes over islands that might produce sabre-rattling or a little violence. And nationalism in both countries can always rear its head. The impact of intensifying rivalry is mainly, I believe, on worsening the overall economic climate in the region, moving more resources to defense and perhaps nuclear weapons, and making region wide economic and political integration harder if not impossible. That problem would grow if the United States forms an avowed anti-Chinese military alliance and Japan becomes associated with the defense of Taiwan. The United States must be able to straddle maintaining a strong U.S.-Japan alliance without giving offense to China. Japan has real difficulty accepting a powerful China and values the American embrace. But it also does not want to be entirely in the arms of the Americans.

Nationalism is stirred by the legacy of history, which has been a big part of Japan’s problem in East Asia. Japan’s expressions of regret for the second war come grudgingly. Leaders are attuned to their domestic constituency, not to the feelings of foreigners. The visit of Japan’s leaders to the Yasukuni shrine are particularly provocative to the rest of East Asia and cost the Japanese dearly in regional influence, despite the billion of aid dollars Japan has provided East Asian countries, regional influence we would like to see grow. On taking office last month, Prime Minister Abe, moving deftly to reverse the decline in Japan’s relations with China and Korea, met with the leaders of both countries, meetings that had been denied to Koizumi. That was a promising first step and welcomed by the Japanese public. But it does not end the Yasukuni shrine issue, which despite China’s cynical use of it, has damaged Japanese foreign policy, however popular in nationalist quarters. If Mr. Abe resumes visits to Yasukuni, relations with China will really go down the tube. Although he made no commitment his sincerity is at stake. The United States has, I believe, been unduly quiet on the Yasukuni issue and should have said something to Koizumi a long time ago. With his departure I still think it is advisable to find an appropriate way to make clear to Abe American interest in having this issue put to rest and Japan finding an adequate substitute for commemorating its war dead.

The center of gravity of the world economy is shifting to Asia. We have big issues to manage in a complex frame work. We have to think differently about the region and reconsider carefully our role there. We have enormous interest and an important role, but Asians will be in greater charge of their destinies.

Morton Abramowitz is a Senior Fellow at The Century Foundation.