US-Pakistan Strategic Dialogue

The latest round of the US-Pakistan Strategic Dialogue confirmed the two countries' 'dedication to cultivating a strategic, comprehensive and long-term partnership,' according to a joint statement released at the conclusion of the three-day gathering. US Secretary of State Hillary Clinton and Pakistan Foreign Minister Makhdoom Shah Mahmood Qureshi, accompanied by high-level delegations, held the third ministerial-level meeting of the dialogue, following meetings in March and July.

The dialogue was preceded by sectoral-track engagement on agriculture, communications and public diplomacy, defense, energy, finance and economic cooperation, health, law enforcement and counter-terrorism, water and women's empowerment. Qureshi conveyed the gratitude of Pakistan to the United States for humanitarian assistance given in the wake of the Pakistan floods, and for mobilizing international assistance for relief, recovery, and reconstruction. Clinton 'commended the tenacity of the Pakistani people as they recover from the catastrophic flooding,' and pledged constant US support as relief efforts transition into the long-term recovery phase.

Wide Range of Issues
Sectoral meetings covered a range of subjects 'with a clear focus on socioeconomic development and the establishment of a mutually beneficial partnership.

The United States committed to redouble its efforts to seek US congressional enactment of legislation to create Reconstruction Opportunity Zones and for the establishment of an Enterprise Fund. Both sides sought to work closely and collaboratively with the international donor community and international financial institutions to extend economic assistance to Pakistan.

The United States commended the 'steadfast resolve' of Pakistan to defeat terrorists. Pakistan expressed appreciation for the Secretarys announcement to seek US. Congressional authorization for a Multi-Year Security Assistance Commitment, a five-year pledge by the United States.

Both sides said that 'a democratic, progressive and prosperous Pakistan was in the interest of the United States, the region and the world.' The officials 'renewed their resolve to promoting peace, stability and transparency throughout the region and to eliminate the threats posed by terrorism and extremism.

During the Pakistani delegations visit to the White House, President Barack Obama announced his plans to visit Pakistan in 2011 and welcomed President Asif Ali Zardari to Washington. The next round of the Strategic Dialogue is planned to be held in 2011, and the sectoral working groups plan to meet prior to the next ministerial-level meeting.

Pakistan is an important player in the ongoing global effort for countering terrorism in the Afghan-Pakistan region, which has implications for Pakistan's security, and regional and global politics. It opted for this strategy in September 2001, signifying the abandonment of its policy of supporting the Taliban movement and its government in Kabul.

While sharing the goals and the general direction of countering terrorism with the US, Pakistan has demonstrated autonomy on the issues that the army and the Inter-Services Intelligence (ISI) view as integral to Pakistan's internal political imperatives and external security with reference to Afghanistan and India.

The Pakistan-US Strategic Dialogue has more to do with discord than accord. It is more about distrust than trust. Way back in 2006, President George Walker Bush spent a few hours in Pakistan and spoke for an 'enduring' relationship between the two countries. This time we are told by Washington bigwigs that Americans will not walk away. They will continue to be good friends.

Positive indications given by Bush, however, have not yielded the desired results. Little headway has been made insofar as trade and investments are concerned. It is puzzling and, indeed, disappointing to find the US deliberately ignoring these vitals interests of a close ally. In addition to this, the promise to set up Reconstruction Opportunity Zones in the tribal areas has also not been fulfilled.

A major initiative, after the lapse of many years, has been the passing of the Kerry-Lugar Bill (KLB). But its conditions and the peculiar manner of its implementation have taken the sheen off an otherwise fairly attractive gesture. A clarification that part of the Friends of Democratic Pakistan funding and Flood Relief assistance will come from the KLB commitments has further affected the positive impression earlier created. The delay in disbursement of the coalition support installments too has downgraded the quality of relationship between the two countries.

The basic problem for any dialogue between the US and Pakistan is that the two countries remain as strategically far apart as they perhaps ever have been. A relationship of necessity based on fear of the other can never be the starting point for a true and meaningful partnership. Consider that beyond non-proliferation and counter-terrorism -- both 'negative' reasons to cooperate -- there is little that can be seen as long-term areas of cooperation in the strategic dialogue. Nevertheless, dialogue is always good. At least now the US and Pakistan have a regular forum to meet and discuss issues at a high level -- if nothing else, they may begin to understand each other's security concerns better.

$2 Billion Package for Islamabad
The new military aid plan or 'security assistance', as the US mandarins call it) was yet to be formally unveiled, but US media accounts suggest it is a done deal: That it would be a $2 billion package spread over five years, over and above the $7.5 billion non-military aid plan approved last year. The new security pact would have three parts: the sale of the US military equipment to Pakistan, a program to allow Pakistani military officers to study at American war colleges and counterinsurgency assistance to Pakistani troops.

Between 2001 and 2009, Pakistan had collected about $9 billion in US military assistance, in terms of aid and reimbursement for its operations in aid of the American-led war effort in Afghanistan. Another $3.6 billion funded economic and diplomatic initiatives. 'But US officials and journalists' accounts have raised concerns that such funds are not being used as intended, and not just because of the typical concerns about corruption,' a Newsweek investigative account said last year. 'Will any amount of money produce results?,' it posed, noting: 'A big part of that answer lies in determining how much bang the United States has gotten for its buck so far -- whether or not some of the money was siphoned off along the way to fund Army generals' new houses or the Taliban elements.'

That may have been about one kind of misuse, but the other misuse by diverting the money for beefing up Pakistan's military might against India has been confirmed by the Pentagon itself. Documents revealed last year how Pakistan had brazenly used billions of dollars meant to fight the war on terror for buying an array of conventional weaponry to develop its offensive capability against India.

Pakistan also used a large portion of funds provided under FMF (Foreign Military Financing) to purchase up to 60 mid-life update kits for F-16 A/B combat aircraft valued at $891 million. Of this, it paid $477 million from the FMF funds given by the United States.

Pakistan's Offerings
Pakistan agreed to the seven US demands but in reality, some of these demands were not fully complied with. For example, the US was not given 'blanket over flight and landing rights'. Instead Pakistan provided a corridor for US aircraft to fly over Pakistani territory on the way to Afghanistan. Similarly, Pakistan did not give unlimited use of its naval ports, air bases and strategic locations on the Pakistan-Afghanistan border.

Other facilities extended to the US included flyover and landing rights to American aircraft, support facilities, as well as transit of goods and personnel through Pakistan, the sharing of information between the intelligence agencies of the two countries and permission to the US Federal Bureau of Investigation (FBI) to function in Pakistan in collaboration with its Pakistani counterparts.

Pakistan gave two airports -- Shamsi in Balochistan and Jacobabad in Sind -- for logistical, communication and emergency support to counter-terrorism operations in Afghanistan. Though the US was not authorized to use these air bases for launching air raids into Afghanistan, the US military authorities did not always honor this commitment. A third airport, Pasni, was made available to them temporarily. Shamsi is said to be still in American use in 2010.

Obama's Janus-Headed Policy Toward Pakistan
Is it intended to be a sop to Pakistan in lieu of being overlooked for a US presidential visit that takes Barack Obama to its neighbor and arch-rival, India? The fact that Washington chose to convene a third round of US-Pakistan Strategic Dialogue less than a fortnight before Obama's India visit in November 2010 and pledge a hefty $2 billion military aid package may be nothing short of a balancing act.

For all the talk of de-hyphenation of America's policy approach toward India and Pakistan, it may still be a zero-sum game that Washington plays in the subcontinent, no matter the delinking of the Presidential visit to the two countries. The stratagem in the US corridors of power may also be aimed at keeping Islamabad in check, just in case Obama decides to unveil some goodies while in New Delhi, such as endorsing or signaling support for India's bid for a permanent seat in UN Security Council and/or easing high-tech export controls. For that very reason, India, also, may mute for the time being its concerns over the substantial military aid to Islamabad.

Whatever the American calculations, Indian worries are set to mount, given the likelihood of Pakistan again diverting much of the new aid to bolster its military machine against India instead of using it to combat terrorism. Defence Minister AK Antony apparently had an inkling of what was coming, so he made it a major talking point when he visited Washington last month and held parleys with three of the big guns of the Obama administration -- Secretary of State Hillary Clinton, Defence Secretary Robert Gates and National Security Adviser James Jones. But Antony's expression of concern appears to have fallen by the wayside.

ASEAN Defense Ministers' Meeting

At the first expanded Association of Southeast Asian Nations (ASEAN) Defense Ministers' Meeting, which came to a close in the Vietnam capital of Hanoi, the sense of caution toward China, which is striving to expand its maritime interests, once again surfaced. Japan, the United States, South Korea and other nations expressed concern about the territorial dispute in the South China Sea, while China, which is attempting to strengthen its encirclement, maintained the viewpoint that the dispute is 'a problem between two nations' and would not budge from its position of refusing to engage in multilateral deliberations.

The First ADMM-Plus drew officials from 10 ASEAN members -- Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam -- and their eight dialogue partners -- Australia, China, India, Japan, South Korea, New Zealand, Russia and the United States.

This was the first expanded Defense Ministers' Meeting for the ASEAN nations and also included officials from eight nations outside the ASEAN region including Japan, the United States, and China. The purpose of the meeting was to search for fields in which the nations can cooperate. Defense ministers from 18 countries clarified their opinions regarding security issues. During the meeting, at least seven nations, including Japan, the United States, South Korea, Singapore, Malaysia, Vietnam, and Australia mentioned the problem in the South China Sea and urged China, which is claiming sovereignty over the Spratly Islands and Paracel Islands, to reach a peaceful resolution based on international rules.

Arguably, leaders responsible for defending their countries and fighting wars know better than most the cost of allowing tensions to become conflicts. The importance of communicating clearly to avoid misunderstandings and building relationships that could prevent confrontation is preeminent among such leaders. Accordingly, the theme of the meeting is 'Strategic Cooperation for Peace, Stability and Development in the Region.' ADMM+8 leaders sought to avoid divisiveness between the United States and China over the South China Sea and currency valuation; between China and Japan over the Senkaku Islands; between China and Korea over North Korea; and over other tensions.

Practical Defense-Security Cooperation
Four years of preparation resulted in the five-hour official meeting to found a regional security structure to deal with new challenges, especially the issue of maritime security. What is the difference between the previous mechanisms and the ones that have just been established? What can the ASEAN community in general as well as Vietnam in particular expect from the ADMM-Plus model?

Acting contrary to the well-known Latin saying 'Si vis pacem, para bellum' -- 'if you want peace, prepare for war'-- the first ASEAN Defense Ministers' Meeting Plus in Hanoi changed this advice to 'If you really want peace, be unanimous in keeping the peace!'

The world has rarely seen the heads of national security of 18 countries together, not to discuss wars, but to share views and to discuss the practical defense-security cooperation for peace, stability and development.

Joint Statement Avoids Mention of Maritime Problems
Defense ministers and representatives passed a joint declaration at the end of the meeting, showing their trust and determination towards a strategic cooperation for peace and stability in the region. They exchanged views on regional and international security and had voluntary briefing on their own national defense and security policies.

The participants focused their discussions on cooperation in five areas including humanitarian aid and disaster relief, military medicine, maritime security, counterterrorism, and peace-keeping operations. They also decided to assign defense senior officials to set up experts’ working groups to boost cooperation in the aforementioned prioritized areas.

The problems in the East China Sea and South China Sea, where tensions are increasing because of advancements by China, were the focal point at the expanded ASEAN Defense Ministers' Meeting. Each of the ASEAN nations made statements regarding the problems in the South China Sea, but those problems were not an official item on the agenda for the meeting and were not incorporated in the joint statement. This clearly leads to speculation that the ASEAN nations did not want to provoke China.

Vietnam is in a territorial dispute with China over the Paracel Islands, and a series of fishing boats have been seized in the ocean waters surrounding those islands. Even so, in talks between Japan and Vietnam, Japanese Defense Minister Toshimi Kitazawa appealed for cooperation between the two nations to deal with the problems in the South China Sea, but Vietnamese Defense Minister Phung Quang Thanh avoided making any direct reference to the problems.

At the overall meeting, each of the nations expressed their opinions in alphabetic order. Japan was the only nation to mention the problems in the East China Sea, but over half of the nations raised the issue of problems in the South China Sea. However, those statements were all limited to expressions such as 'it is important that we secure navigational freedom and the disputes should be peacefully resolved.

ADMM-Plus Starts Later, Arrives Sooner
ASEAN defense-security cooperation started after other fields of activity, but it has become a milestone on the race track to 'ASEAN community,' including the political-security community. From the preliminary ideas about ADMM-Plus at the first ADMM in 2006, with practical experience and strategic vision, with political determination and sense of solidarity for the past four years, ASEAN has been confident and active to create a new architecture for regional defense-security cooperation. In this process, ASEAN plays the lead role, and hopes to gather the capability and brain power to face all kinds of security challenges.

The meeting's joint communiqué has only eight concise points, but illustrates the entire strategic determination. The meeting concentrated on discussing the potential and orientation of the defense cooperation in the ADMM+ framework, and gained a consensus that the priority should be cooperation on non-traditional security challenges.

With the flexible structure of the ADMM, which is composed of the10 ASEAN member countries and eight dialogue partners, ADMM+8 is a promising cooperative mechanism. It is a strategic consultative forum aiming to create trust and general awareness and to define the fields suitable for defense-security cooperation.

What makes ADMM+8 different? It is the structure of the highest level of regional defense cooperation, with the power to orient and direct practical steps to resolve common security challenges, particularly the emerging non-traditional ones. It is a level playing field for all participants, and performs the function of harmonizing relations, building capabilities, and enhancing military cooperation among countries. It is a forum that is compatible with and complementary to the other current regional security structures, such as ASEAN+1, APT, ARF, EAS, and the Shangi-La Dialogue, to create a new security architecture in the region.

US Calls For Restraint
There were hopes for collaboration at this first meeting, but before the meeting, there were almost no expectations for anyone bringing up the problems in the South China Sea, which could easily provoke China. However, it was the United States that changed the casual atmosphere.

According to a source from the meeting, on the evening of 11 October, the US Government contacted each nation separately and urged each of the other nations to take measures to restrain China with regards to the problems in the South China Sea. During the meeting, Defense Secretary Robert Gates began by stating, 'Of particular importance is the problem of maritime safety,' and he then emphasized, 'Differences in opinions regarding territorial lands and territorial waters are becoming an issue for the safety and welfare of the region.'

The Obama administration, which is strengthening its participation in Southeast Asia, is emphasizing new deliberations on a security standpoint and stated just like the Asia-Pacific Economic Cooperation (APEC) forum is important for the economy of Asia, the framework with ASEAN at the core is extremely important (in deliberations for the security field).

However, this does not mean that each of the ASEAN member nations, which are strengthening their relationships with China on an economic perspective, fully agree with the policies of the United States. Singapore and Malaysia, on their parts, voiced criticism of China's hard-line stance, Indonesia, which is a major nation in the region and other nations refrained from bringing up the problems in the South China Sea. The joint statement issued after the meeting did not mention the maritime problems and gave the impression that it would be extremely difficult to adopt policies against China.

Vietnam is the host nation this year for the ASEAN nations, and at a press conference after the defense ministers' meeting came to an end, Vietnamese Defense Minister Thanh applied the brakes to the territorial dispute issue so that criticism against China would not further increase. The problems in the South China Sea did not come up for discussion.

China Dodges Discussions
China did not openly oppose the action of the United States or other nations. China once again expressed its position that policy on territorial waters is outside the scope of multilateral talks and stated that this was explained at the ASEAN Regional Forum (ARF), held in Hanoi in July. The situation in the South China Sea is stable. Right before the meeting, China released the crew of a Vietnamese fishing boat that it had seized in the South China Sea, and by doing so, China sent a sign that it is trying to ease tensions.

The expanded Defense Ministers' Meeting will be held once every three years, and the next meeting will be held in 2013 in Brunei. However, according to ASEAN Secretary General Surin Pitsuwan, 'Some of the member nations are of the opinion that the meeting should be held at least once every two years.' The issue is finding a way to mitigate security related friction in the form of drawing in China.

US-China Currency War

The US dollar has dominated the world since the mid 20th century, but that something has recently changed in the so-called global currency war. The United States pressures China to float its yuan and Japan is working hard to keep the yen at bay not to harm its exports." For its part, the Chinese giant is making the mission more difficult by buying Japanese bonds at this critical stage and Brazil is also trying to stop the rising value of its currency. The other problem is that the euro is suffering severe blows because of Greece's indebtedness crisis, which raises fears that the currency may collapse.

The US banks have officially been accused of having contributed to Greece's financial crisis by hiding important data on the country's budget deficit, wondering if this means anything other than a global currency war that expands with each passing day. General Dominique Strauss-Khan, IMF (International Monetary Fund) director, has ruled out the outbreak of such a war and warned against interference in the financial market for purposes of revenge.

Song Hongbing, an American researcher of Chinese origin issued a book titled the Currency War in 2008 saying that the US Administration will be challenging China's miraculous economy by devaluating the dollar and raising oil and gold prices. As a result of the global economic crisis, firms have been shut down, the world trade has been crippled, investment projects have been paralyzed, and unemployment rates have increased all over the world. Nevertheless, China has found a way out of the crisis by achieving the highest growth rate in the world, thanks to its huge gold reserve and its huge investments in US and other international bonds. In one year, China succeeded in replacing Japan as the second largest economy in the world, Germany as a major exporting country, and the United States as the largest consumer market in the world. Moreover, the weak yuan has increased Chinese exports as the other major economies moan under the burden of the economic crisis. The US market has been overwhelmed by Chinese goods; currency is a more fatal weapon in economic wars than weapons of mass destruction.

Germany and Japan are joining the US in pressuring Beijing to let the yuan appreciate to prevent an international currency war from spiraling out of control. Still, China remains firm that a gradual rate change is all it will allow.

Causes of Concern
The US dollar has fallen by about 25 percent against the Brazilian real since the beginning of 2009, making the real one of the strongest performing currencies in the world. This is supposed to sharply contrast against a series of recent interventions by central banks in Japan, South Korea and Taiwan in an effort to make their currencies cheaper. China, an export powerhouse, has continued to suppress the value of the renminbi.

At the end of July 2008, before the global crisis erupted, the Brazilian real traded at 1.56 to the US dollar. In late September 2010 it traded at 1.71, that is, 10 percent lower. What then about the 25 percent, which had made the real one of the strongest performing currencies in the world? That was because during the crisis, the real was the worst performer against the US dollar: from 1.56 in July 2008 to 2.62 in early December 2008, a massive drop of 68 percent. In contrast, the euro fell 24 percent; the Indian rupee by 22 percent, the Korean won 55 percent and the Chinese renminbi by 0 percent. The Japanese yen appreciated during the crisis by as must as 23 percent at one point. In fact, all Asian currencies, having first lost much less (or actually gained) ground vis-à-vis the US dollar, have also recovered more ground — whether it be the yen, renminbi, rupee, Malaysian ringgit or Taiwan dollar. Only the Korean won is in a position comparable to the real.

US Frustration
Just 13 years ago, the IMF , supported by the developed West, sought to amend its articles to define currency convertibility away from current account convertibility toward “capital account liberalization,”, the term “liberalization” replacing “convertibility” at the last moment being a nod to the then ongoing Asian currency crisis. And today, we get advice from many in the West on how capital flows are a concern and controls may be a good idea. Of course, having so greatly profited from capital, developing a disdain now is not unexpected. It is an inevitable and defining characteristic of old elites.

The US frustration and anger over what it sees as Chinese “intransigence” seems understandable. On all occasions since November 2009 — when on a visit to Beijing President Barack Obama went to great lengths to placate his hosts in the hope that they would respond positively to his urgent request for a revaluation of the yuan, as the Chinese currency is named, but drew a blank — China has resolutely said no to the US demands for a revaluation of the yuan. Just a few days before the passage of the anti-China Bill Chinese Prime Minister Wen Jiabao, at a meeting with Obama on the fringes of the UN General Assembly flatly refused to budge from the Chinese position. To the passage of US law Beijing’s reaction was that it would retaliate and others would join the trade wars.

At the IMF ministerial meeting Governor of the Chinese People’s Bank, Zhou Xiaochuan, stated that the value of the Chinese currency had nothing to with the high rate of unemployment in the US and Europe. He advised the US to “practice self-criticism” about its economic policies. He wasn’t alone in pointing out that the US and its allies were concentrating on China but were reluctant to blame each other for “misalignments” in their currencies. This was a pointed reference the US Treasury Secretary Timothy Geithner’s refusal to comment on Japan’s decision to lower the value of the yen. Brazil has also done roughly the same thing.

Impact of Global Financial Crisis
Battered by the financial crisis and prompted by self interests, the United States and some European countries have been doing the opposite of what is right and trying to dump their problems on the laps of other countries. They have been pursuing trade protectionism and putting pressure on China to revaluate its currency. The result of their actions will be to hinder global economic recovery and growth.

The important point is how the current global economic crisis has affected the dollar? The crisis facing the US dollars is more serious than it was during the seventies of the past century. The problem are the indebtedness levels, which reached 375 percent in 2008, the highest since the Second World War, compared to indebtedness which reached 1 percent during the seventies of the past century.

According to economists, the crisis is extremely serious this time. The United States will have to export its dollar to the world in accordance with international agreements. As far as US currency reserves are concerned, the United States should achieve a trade balance by exporting its currency and getting goods, even if this may result in a trade deficit.

China's Role in International Economy
China's economy has a global influence. Today more than half of the commodities (both finished products and materials) consumed in the world today are made in China. If the renminbi appreciates too rapidly, the prices of Chinese products sold overseas will necessarily go up, which will certainly have a major impact on the bottom line of overseas operators and countless businesses involved will see a drop in profits or even go bankrupt. The damage that may be caused by an overly rapid appreciation of the renminbi cannot be underestimated.

The international community often wonders what prevents China from playing a greater role in the international economy. The reason they find that China pursues a cautious policy in making its decisions, especially since the United States is now pressuring it to raise the value of the yuan. Moreover, the United States has huge investments in China, which depends on the US market and technology, although it wants to have its own strong, stable currency.If the dollar continues to lose its purchasing power, the United States will lose its political influence and military power. The United States to draw up a responsible plan to reduce spending and indebtedness and increase tax in order to remain confidence in the dollar.