What to Do About Tensions in Asia

Event Description

China's recent declaration of an air defense identification zone and territorial disputes in the East China and South China seas have led to increased tensions between China and its neighbors. Jeffrey Bader of the Brookings Institution, former ambassador Karl Eikenberry, and Michael Green from the Center for Strategic and International Studies sit down with CFR President Richard Haass to discuss what actions the United States can take to ensure stability in the region.

This meeting is part of the "What to Do About" series, which highlights specific issues and features experts who put forward competing analyses and policy prescriptions in a mock high-level U.S. government meeting.

Event Highlights

Michael Green on whether China's territorial claims in the East China Sea portend increasing disorder in East Asia:

"But in the middle of it, you have a rising China that, for the most part, is not a revisionist power, that wants to benefit from the international system, despite frustrations with not having had a role in creating it, but not trying to overturn the prevailing order, which is an American-led order."

Jeffrey Bader on how the United States has tried to reduce the risk of conflict over the Senkaku Islands while also demonstrating support for Japan:

"And, you know, what we've tried to communicate to the Japanese is, the alliance is firm and seamless, but please don't make rocks the centerpiece of the alliance."

Karl Eikenberry on the inter-connectedness of the U.S. and Chinese economies:

"So I've heard people now talk about, do you remember during the Cold War days that we had mutually assured destruction with nuclear weapons? Now people talk about mutually assured economic destruction. And that's the world that we live in."

HAASS: Well, good evening. Welcome to the Council. I'm Richard Haass. And this is the second installment in our new "What To Do About" series. And tonight we're going to be talking about what to do about Asia or, more specifically, East Asia and the Pacific, the part of the world that I believe more than any other is likely to determine the character of this century.

And there's lots of things we could focus on tonight, but we are going to focus mainly on the dynamics between China and Japan, in many ways, the two most capable and important local states, long-time not just neighbors, but rivals. Tension has obviously been going up, given the sovereignty dispute in the East China Sea. Military capabilities are going up. Military presence is going up. And nationalism is going up.

You know, this competition or relationship does not take place in a vacuum. There's lots of other issues in the vicinity, including Dennis Rodman's favorite subject, which is North Korea, given other problems, say, in the South China Sea, but tonight, we are largely going to focus on them.

Now, what we're trying to do in this series is really look at two issues. One is, what can and should be done to prevent a crisis? And then, secondly, if for whatever reason or reasons prevention does not succeed, what is then done to help manage a crisis? And I guess we could be creative and say, if a crisis were to happen, what could also be done to take advantage of the crisis, not just—not just manage it?

And the way we're going to organize it is essentially have a version of what you might call a National Security Council meeting, but rather than representing this or that department, all three of these gentlemen I will ask to simply be smart. And they are particularly well-suited to be that, essentially, to be ministers without portfolio or counselors, but essentially wise men sitting around the table offering their advice, so not representing State or Defense or the intelligence community or what have you, but simply being wise, experienced hands, which—it's exactly what they are.

Mike Green, who's sitting at the far end, is at CSIS, where he's their senior vice president for this part of the world. Also, he divides his time with Georgetown University and in days past was the senior director on the National Security Council staff for this part, again, of the world.

To his right, Jeff Bader, who has a similar portfolio at the Brookings Institution, the John Whitehead senior fellow there. And Jeff was recently the senior director for East Asian affairs on the NSC.

And last but least, Karl Eikenberry. Karl's out at Stanford, so he's closer to Asia than the other two these days. He was most recently well-known as our ambassador to Afghanistan, but what's particularly relevant for the purposes of tonight's conversation, Karl was our defense attache in Beijing and was the senior, what, strategic adviser at PACOM?

EIKENBERRY: Strategic plans officer.

HAASS: Strategic plans officer at PACOM. So what you have here is an extraordinary combination of government experience both on the civilian and military side and people now who are firmly planted in the worlds of think-tanks and academia. And, again, the question is, what to do about Asia?

So let's start with the first part of it. We'll talk for a bit. And then we'll open it up and we'll get you out in plenty of time to prepare for the State of the Union, which I'm sure will be largely about this set of questions.

(LAUGHTER)

So this will put you in a very good position to impress your family and your neighbors later this evening.

So let's just start with the question of prevention, which is, how serious a challenge is this? I mean, you wake up in the morning. There's any array of domestic and international questions. I was just recently at Davos. You had the Japanese prime minister make reference to events of 100 years ago. This is the 100th anniversary of the outbreak of World War I, and many people are drawing parallels between the situation that existed in Europe prior to the outbreak of World War I, great power jockeying, a little bit of carelessness or recklessness and so forth, rising nationalism. We all know what that led to. Now we have the situation in the Asia Pacific. How worried should we be?

Why don't we start—Karl, we'll just go across.

EIKENBERRY: If we look back over the post-World War II history of the Asia Pacific region, it's an extraordinary success story. The economic development that's occurred there, some 60 percent of the world's GDP now in the broader Asia region. If you look at political success, great success stories and democracy like Japan, Korea, Taiwan, in through ASEAN, extraordinary success there, as well. And the fact is that today this is an area which is largely absent hot conflict.

But yet to your question, though, Richard, about how much should we be concerned, yes, I think we should be very concerned, because there are some trend lines that are not in the right direction at present. For example, last year marked the first year that in the Asia Pacific region the combined defense budgets are greater than Europe. That's the first time in modern history that's occurred.

There's a set of territorial disputes that exist in the Asia Pacific region that, if not handled properly, could lead to military conflict. There's the problem of on the Korean peninsula. So we could go on from there, and perhaps during the course of the discussion, I know we'll want to talk about those specifics.

HAASS: Sure.

BADER: Well, I'll try to say something different from Karl, though I agree with what Karl said. I mean, basically, you know, we've all been doing our speeches and articles on the Asia Pacific since the Vietnam War, and they've all been about this area as the success story of the world. And I think if you were writing—if you were writing a national security strategy right now on the region, you would—you would not be repeating that narrative. Instead, you'd be talking about an area with some storm clouds. You'd be talking about an area with—with some turmoil and some conflicts or potential conflicts.

I mean, the Japan-China situation, if you asked any of us 10 years ago, would we be in this situation? None of us—none of us would have saw this. Thailand is up in smoke, with seemingly no path to stability. The Japan-Korea relationship is not going to be—it's going to be kinetic, but it's very, very bad. And the China-Taiwan relationship is in decent shape at the moment, but you have elections in Taiwan in 2015, and who knows where the relationship goes after that? And behind this all, of course, you have a rising China with a very—how should we say—forceful and dynamic new leader, with a forceful and dynamic foreign policy.

Just the last thing I'd say in the opening here, Richard, is—I mean, I talk to a lot of Chinese and Japanese senior officials coming through, and I don't know anyone who is itching for a fight on either side. No one. That really is not the question. The question is, what happens when all these planes and ships circling around each other if someone has one or two—two or three many scotches one evening?

HAASS: Michael?

GREEN: Well, on the proximate issue that you introduced first, Richard, the Japan-China problem, I would—I would argue that the possibility of a clash, of shots being fired is significantly higher this year than it was the year before, and was higher the last year than it was the year before that, if only because the amount of stuff in the East China Sea and the rules of engagement are somewhat dangerous.

The Japanese reported that they have scrambled fighters to respond to Chinese fighters 80 percent more than they did the previous year. The operational tempo for the white-hulled coast guard ships is way up, and the gray-hulled ships, although they're keeping a careful distance, is way up. Polls in Japan and China both show that 90 percent of the public doesn't like each other.

Stepping back one level, does that mean that there's going to be a war? I'd say extremely low probability, even if there is an accident or something like that, for all the reasons Jeff said and because of our own power and presence.

Stepping back one level further, do these cracks and problems we see potentially represent the beginning of disorder in Asia over the longer term? Maybe. So we need to pay attention to it to prevent the short-term crisis and to make sure we're shaping the region for a more stable future in the long run.

HAASS: Let me just push you on one thing, and then we'll—I'll turn to some just specific policy questions. When you talk about it could be the precursor of some disorder in Asia, what does disorder in Asia look like?

GREEN: You have, as Jeff mentioned, the problems of democracy in Thailand. You have states in jeopardy. You have all the problems of—that other regions. But in the middle of it, you have a rising China that, for the most part, is not a revisionist power, that wants to benefit from the international system, despite frustrations with not having had a role in creating it, but not trying to overturn the prevailing order, which is an American-led order.

If you—what disorder looks like is that the coercive element in Chinese diplomacy today, arms—excuse me, mercantile embargoes, export embargoes to pressure countries on territorial issues, course of use of ships and planes, and diplomacy, it's one piece of what China does, and one piece of a much larger story, which has some good elements and bad elements.

That becomes the dominant narrative for the rest of the region, because of receding U.S. power. That's a very dangerous situation. That's what disorder looks like.

HAASS: OK, so let me ask, then, the basic question. We want to influence Japan, so we've got (inaudible) we've got an alliance relationship there. So if the economists would call it moral hazard, and it's the diplomatic counterpart of it, how is it we're supportive of Japan, so they don't feel they've got to do things on their own, whether it's militarily or nuclear or what have you, but without giving them a blank check? How do we basically signal American support that's—that's considerable, but not unconditional? Well, what is it we say? What is it we do?

EIKENBERRY: Well, I think—going back to what Mike had said about making sure that, first and foremost, our foundation for the entire Asia Pacific region is engagement and strength, and part of that is retooling our economy and ensuring that we remain economically relevant in the region, and that probably is one of the biggest threats that the United States is facing now.

Secondly, in terms then of our military posture in the Asia Pacific region, to ensure that we maintain the capabilities for base, that we maintain strong alliances and partners throughout the region, that also then gives a context for the relationship with Japan.

HAASS: Well, let me just push you on that. Does that entail increasing, for example, the quality or quantity of our air and naval presence?

EIKENBERRY: It does, yes. Japan's concerns right now—they have one concern with—as we all do—with the Korean peninsula and with North Korean threat, but I think their deeper long-term concern is the rise of China and the rise of China's military capabilities behind that. And that's a concern that's reflected throughout the Asia Pacific region.

And if we want to shape in a positive way the development of China and to try to encourage its further integration into regional architectures and global architectures, then you do need a position of strength to do that. And with that strength then comes reassurance to our allies.

HAASS: Let me ask a question, then, slightly different, Jeff, which is, OK, if we should maybe increase our military presence, which largely means air and naval—let's put aside the question of Marines at Darwin. I never quite understood how 2,000 Marines in the Asia Pacific was going to tip the military balance, but I'm sure that's my shortcoming.

The—what about diplomatically doing more? I mean, should we essentially—we, the United States—insert ourselves in any way, I mean, in this issue between Japan and China? Should we have an American diplomatic initiative about the legal political disposition of the disputed islands? Or should we simply stand back and let these guys try to sort it out? I mean, is this a place where we ought to, if you will, rebalance some of our diplomatic activity towards this part of the world?

BADER: A few thoughts, Richard. And when I was in the administration, we spent a lot of effort on rebalancing our diplomatic presence in Asia, particularly in Southeast Asia, but I think we're not in Southeast Asia here now, so I won't get into that, but there was a lot of effort to do that.

Now, the Japan-China situation and then the Japan-Korea situation, the administration has put a lot of effort into quiet diplomacy between the two. Joe Biden has been on the phone with all—you know, with the various leaders. He's been out there. John Kerry, as well. I would say the results have been somewhere between minimal and negative, judging by the trend lines. I say this not to be critical of the individuals, but let's face it, these are three (inaudible) Japan and South Korea, who are, I would say, very friction-tolerant. Each one, it's in their—it's in the interest of each one of them to have difficult relations with the others. It's in their political domestic interests, and that is something we cannot (inaudible) dynamic, we cannot overcome that.

HAASS: Can I just interrupt you on one point, just so I understand? So whatever level of diplomatic activity we've been carrying has had results that you describe between negligible, I think it was, or modest, whatever it was, and negative, would more diplomacy have a positive result? Or does more diplomacy actually risk having a larger negative?

BADER: I mean, I think—you know, I was being slightly facetious, but not entirely. We have to be engaged privately with them. We've certainly—between the Japanese and the Koreans, we certainly have to play a role, since they can't seem to work it out themselves. With the Japanese and the Chinese, clearly, as you—you know, you raised the issue of moral hazard, the administration's been trying to convey to the Japanese since the middle of 2011, don't do anything reckless with the islands. Kurt Campbell conveyed that message before Noda...

(CROSSTALK)

HAASS: It's kind of what we used to tell Taiwan.

(CROSSTALK)

BADER: Hmm?

HAASS: It was kind of what we used to often tell Taiwan, don't do anything reckless to change the status quo.

BADER: And then they went ahead and did it. I mean, look, as the great power in the region, we have no choice. We have to be engaged. The powers—each of the powers actually wants us engaged privately. None of them wants us out there publicly taking sides, seeking to embarrass, or putting forward formulas for them to come to, like the, let's say, Middle East peace...

HAASS: Well, it's worked so well there. We thought we might transfer it to this part of the world.

(LAUGHTER)

So then, what then is the nature of American diplomatic engagement, if it's not to resolve the questions of sovereignty? You know, I've heard everything from, you know, creating special types of environmental parks and, you know, sort of whatever to—I mean, is there a substantive initiative, do we think? Or is it simply, don't change the status quo unilaterally by force? Is that the substance of our diplomatic message?

GREEN: You're talking about the Japan-China piece and the Senkaku-Diaoyu-type problem? Look, for CFR or Brookings or CSIS, we ought to dive into the deep end of that pool and see what we can do in terms of intellectual facilitation. For the U.S. government, Japan's an ally, and we cannot be in a position of brokering between an ally and a power that is testing not only Japan on the Senkakus and Diaoyu ties, but all along the first island chain.

If you're worried about China grabbing the islands or doing something provocative, you want to hew close to Japan. If you read about Japan doing something provocative, you want to hew closely to Japan. We don't have a joint and combined alliance with the Japanese the way we do with NATO or with Korea. The Japanese didn't want it. And for decades, it was the Japanese that worried about being entrapped in our war in Vietnam or in China and Korea. And now, you know, for about the past decade, we've started worrying a little bit about maybe being entrapped in their war for the first time.

The answer is to move towards more jointness, more joint exercises, more concept of operations, so that we're inside the Japanese decision-making loops and we're making decisions together and we're dissuading China. The worst thing we could do is to step back and sort of leave it to the Japanese to sort out or to somehow broker, which would only encourage Japanese hedging, which is unhelpful, and Chinese hopes that perhaps there's a way to drive a wedge between us.

HAASS: Karl, you spent time in Beijing as the attache. What message do we give the Chinese about restraint? And then, if they go, well, hold it, does that mean under any and all circumstances, well, no way? What is it tell the Chinese in order to, again, behave responsibly, if they say, but what if the Japanese do X, Y and Z? Do you still expect us to show restraint, even if the Japanese are not?

EIKENBERRY: Yeah, this is a—look this is a very difficult problem with regard to the Senkaku and Diaoyu. And the consequences of getting this wrong, or as Jeff had said, a Japanese fighter pilot making a mistake and a shooting match starting, almost certainly not leading to a war, but really setting Asia back and our own position in Asia back tremendously, that it's rising with every day.

Last year, Mike talked about fighter sorties from the Japanese air self-defense force over the islands. Six hundred last year scrambled. That's two a day. And it's a matter of time until—it's just a matter of time until something happens.

Now, the tough part about this for us is that we do have an alliance with Japan, and that alliance specifically covers the Senkakus and Diaoyu. And if, according to the treaty, that if the Japanese are attacked in the Senkaku-Diaoyu, then we have a treaty obligation there.

Now, we don't go to war based upon lawyers' interpretations of treaties, of course. And a point I would like to make about this is that I remember as a colonel working in the office of secretary of defense when some island occurred—dustup occurred in the Asia Pacific region. I called an old State Department...

HAASS: It wasn't Kenmoya Matsu (ph), was it?

EIKENBERRY: It—no, I'm a little bit—a little bit beyond that one.

(LAUGHTER)

HAASS: OK. Just checking.

EIKENBERRY: But I called up a very senior retired diplomat, who I thought a lot of, and asked for his opinion. He said, Karl, remember the first rule here. The United States of America is a great power and great powers don't go to war over rocks. Having said that, though, these are not just rocks to the Japanese and the Chinese. We know how sensitive this issue is.

Your point about—then your question, what do we tell the Chinese? Well, I think that the Chinese are observing our diplomacy right now, and clearly they see how we're engaging with Tokyo, as we did in the aftermath that Prime Minister Abe's visit to the Yasukuni shrine. They are clearly getting messages from us that we want to see Tokyo and Beijing talking to each other about this.

Tokyo—Beijing's position is that, as long as Tokyo will admit there's a dispute here, then we can sit down and talk, and Tokyo has not found the way at this point to reach that formula, but I'd be optimistic that they could with some clever diplomacy.

HAASS: Let me ask two more questions on the prevention side of the coin. The Chinese recently—must be, what, several months ago now—announced the air defense identification zone. Is there anything we can or should do vis-a-vis that that would basically send messages such as, we believe, to decrease the chance of a crisis or an incident, in terms of respecting it, challenging it, what have you? What—the Chinese put that out here. It was, if you will, a unilateral challenge to the status quo. What should we be doing about it?

BADER: Well, the—I mean, DOD responded instantly, within 24 hours, by sending a B-52 over the area, which I think was absolutely the right—the right signal. I mean, I think it was—you know, there are two issues, military aircraft and civilian aircraft, and we got somewhat crosswise in our messaging on that. The military...

HAASS: Can you just explain where we came out on that?

BADER: Yeah, where we came out was—DOD was very clear, this was not going to affect in any fashion military aircraft operations inside the ADIZ, no notification, they would continue as before, which is absolutely the right call. We have a lot of—you know, a lot of operations in that zone, and we're not about to announce them to the Chinese or ask permission. We have no obligation under international law, international practices to do so.

On the civilian side, I mean, both Hagel and Kerry made clear statements that the way our ADIZ works is you only have a reporting requirement if you are flying towards the country, towards the United States. If you're just transiting the zone, no reporting obligation whatsoever. And the Chinese announcement makes no such distinction, so a plane—you know, an ANA flight from Tokyo down to Singapore that cuts through the zone nominally has to report or the Chinese can scramble something to see what's going on, which is not a healthy situation.

I think that the FAA put out a general guidance saying, we respect ADIZs and we expect civilian aircraft to honor them, OK? That wasn't very well coordinated within the U.S. government, frankly. It send confusing signals. The Japanese didn't know quite what to make of it.

HAASS: Should we amend it, now?

BADER: Should we have...

HAASS: Should we now amend it?

BADER: I mean, the FAA's view was, we don't use our civilian aircraft as experiments or, you know, that they're—we don't put civilians at risk because of diplomatic purposes. And I understood what the FAA was doing. It was the—I'm not sure, Richard. I don't know the answer to that. It was just badly coordinated. I don't know if I'd go beyond that.

EIKENBERRY: On my last United flight to Beijing, I actually supported the FAA position.

(LAUGHTER)

BADER: That's the point. I mean, you know, those of us who did KOL-7 (ph) 30 years ago...

HAASS: Exactly. I remember that.

BADER: But I think the important thing to warn China is, don't do this again in the South China Sea or in the Yellow Sea. I think that's the great risk, that they'll—particularly in the South China Sea, where you've got a whole bunch of claimants, not just one claimant, and that would really be—I think that would really be a provocation if they would do that.

HAASS: I guess this is the last question, and I'll start with Mike, which is, diplomatically, in the interests of preventing a crisis or conceivably better managing one, if it were to happen all the same, why not make a big push for introducing a set of confidence-building measures in this part of the world, incidents at sea, various types of communications, or even some version of the Conference on Security and Cooperation in Europe, some type of a more structured security system for this part of the world, which have certain rules of the road, certain obligations, certain mechanisms for stabilizing.

This part of the world is drowning, literally and figuratively, in economic arrangements and, in many ways, is extraordinarily thin in diplomatic and in political-military arrangements. So why not now the—why wouldn't we as a government—and to the extent we represent the United States government here—why wouldn't we take this initiative to introduce essentially a set of proposals to help regulate, if you will, or increase the structure of the Asia Pacific in a political-military sense? Why not do that?

GREEN: We should. There is more happening just in the last year or two on that front than those of us who watch the region have seen in decades. The ADMM-Plus, which is a Southeast Asian-based defense cooperation summit, is now holding regular multilateral exercises almost on a monthly basis, and that's—that's long overdue.

The U.S. has been urging China since Karl was a colonel in the Pentagon, working on China, to implement a piece of paper we signed on maritime military transparency and confidence-building. And the Japanese would like something like that, and the Chinese won't even talk to them about it.

So we should be doing that. I think the PLA—and Karl knows this well—have a different view of transparency and what it means. They would like, as a matter of principle for us, to stop doing surveillance, to stop doing things we've been doing for 60 years in the region. If we can agree on some of those principles, they'll talk to us about transparency.

So we'll make some progress in multilateral exercises. We'll have frustration with confidence-building. But that should be a central part of our effort.

And if I could real quick, the—the Chinese, as Karl said, want Japan to acknowledge de jure, not just de facto, that there's a dispute. I think the Japanese could do that, but they can't do it under coercion, and we shouldn't want them to do it under coercion.

So this is an area where the U.S. could have a role. It's not brokering, but with clear signals and organizing our friends and allies in the region and partners, make it clear to Beijing they're not going to get any progress and we're going to hold them accountable, as long as they resort to coercion to try to undermine Japan's claim to administrative control of those islands.

But if there's some basis to remove that coercive tool, there might then be a basis for Japan and China to have some—I mean, the game would be Japan would call on China to go to the international court, knowing the Chinese wouldn't go, but they will have made—so there is room for us to play, but it can't be ecumenical in the sense we need to recognize that the Chinese coercion is a major problem for all of us in this.

HAASS: OK, so let's—let's do something the U.S. government is not terribly good at, which is contingency planning. And so let's assume that at some point either some fighter pilot on one or another side will—his testosterone will get out of control and he will do something quite aggressive, or some ship captain will have too much to drink and he will do something quite dumb, and there's an incident, and there's a collision of aircraft, ships, whatever.

What do we do? What is it we immediately do? Because one of the things that's not obvious to me is the locals. They don't have dedicated communications links. They don't have a large amount of experience in managing crises. So what is it the United States does, if you will, to keep an incident just an incident, rather than the seed of escalation?

EIKENBERRY: You want to start with that one?

BADER: I'll start on that. We do have crisis communication links, the U.S. and China.

HAASS: The U.S.—yeah...

(CROSSTALK)

BADER: We have, you know, I think CNO with his—the chief of naval operations with his counterpart, president has a secure link with Xi Jinping. We've used them. And presumably, those would be activated right away. The Japanese and Chinese actually do have some links, but they just haven't utilized them—utilized them much.

You know, in 2010, when a drunken Chinese sea captain bumped a Japanese coast guard vessel, a few of us were out there immediately talking about Article V and mutual security treaty, to try to send the clear signal to the Chinese that this—that this had consequences. And, you know, what we've tried to communicate to the Japanese is, the alliance is firm and seamless, but please don't make rocks the centerpiece of the alliance.

You know, what you do in a crisis, I think, you know, this is really Karl's world, but I—I mean, I have no doubt there would be movements orchestrated from your coast guard and from the region to have some presence. But I think the assumption has been that the Japanese are reasonably capable of taking care of themselves in a small-scale incident, and the U.S. doesn't have to come and shouldn't come charging in, which would, you know, escalate...

(CROSSTALK)

HAASS: But do we move U.S. air and naval assets? I mean, quite honestly, if there is an incident—and say there's some scrambling of Japanese or Chinese aircraft, there's some movement of vessels, what do we do? And do we physically in any way try to interpose ourselves? Do we hold back? What's our role in this?

EIKENBERRY: Well, in terms of Japanese capabilities, military capabilities, should there be an incident around the Senkaku-Diaoyu, then initially the Japanese do have the capabilities to take care of themselves, so to speak.

The United States really wouldn't have to move forces, Richard, into the area. In fact, that could be—depending upon how the situation evolved, that could be very counterproductive, because the Chinese could be interpreting this, then, as a reinforcement of the Japanese. And until we understood better what Beijing's intents were, I think that that could be very escalatory.

On the other hand, we have a remarkable set of capabilities that are over the horizon up in space that we can be very useful to the Japanese military, in terms of helping them understand, get situational awareness.

I'd go a step further. If we'd—if we were to be sending signals, which we would immediately about trying to de-escalate rapidly and trying to get the Japanese and the Chinese to both be saying from Beijing and Tokyo that they wanted to de-escalate this, that we could also play perhaps a role in terms of providing transparency to all sides that would be reassuring that might help them to have the confidence to go forward diplomatically than—and to begin to talk.

GREEN: I may be the outlier, but—and it depends a lot on how this happened. You know, did the Japanese provoke by putting a lighthouse up? Did the Chinese, you know, land? I mean, a lot of it depends on how this happened.

But with that as a caveat, if this was—if this involves—if it looks like the Scarborough Shoal incident...

HAASS: Explain what that is.

GREEN: So what happened in Scarborough Shoal between the Philippines and China was, the Philippines and China both claimed the waters. The Philippines have been fishing it for a millennium. The U.S. tried to broker in that case an agreement for the forces to stand off. The Chinese side came in anyway. The Philippines Navy took one of these old Coast Guard cutters we gave them and went steaming with flags flying and drums and bugles playing right out into this horseshoe-shaped atoll, and the Chinese cut them off. They didn't have food and water, and they basically pulled out, and they haven't operated there since. The Chinese now have effective operational control.

If that happened with this East China Sea against Japan, the strategic implications for us across the region, in terms of how others view our staying power, the credibility of our security commitments, and how China views them, could be really devastating. So we'd have to take that into consideration. It doesn't mean we move forces. Probably we don't move forces into the immediate area, because my guess is, the Japanese will pull back.

But if we're going to ask the Japanese to stand down, we're going to have to do something. And I think, if this were a simulated NSC, there would be very serious consideration about flexible deterrent options, as they're called, B2s (ph), and so forth, moving to Guam. Not a lot of press necessarily, but there's going to have to be a little bit of muscle, not in the middle of the fight, maybe from space, maybe other assets, and declaratory policy that is just enough to let the Japanese feel confident and the rest of the region feel confident, but not so much that we provoke escalation. That's a tough call. That's why it depends on exactly how it unfolds.

HAASS: But isn't, then, the most complicated scenario one in which the Japanese seem to be the ones who have initiated it? It's one thing, if the Chinese do certain things, then it's almost more straightforward. But it seems to me by far the most complicated policy for—scenario for the United States is one in which the Japanese, quote, unquote, "seem to be at fault."

GREEN: Are you looking at me?

HAASS: I'll look at...

GREEN: As the Japan guy?

HAASS: Yeah.

GREEN: And then I started studying Korean again. No, I think then you get to the prevention problem. That's why I mentioned earlier, we need to be inside the planning loop. And...

(CROSSTALK)

HAASS: OK. This assumes—we assume that we missed that opportunity, for whatever reason.

GREEN: Then we have a problem. But then what we—we start to create it quickly, and we start talking about scenario planning, contingency planning. The other thing that I think...

HAASS: That's what we're talking about now. Mike, basically...

GREEN: No, I mean—I mean, in the crisis. That's what you have to do.

HAASS: Yeah. Yeah.

GREEN: The other thing I think that's important is to—this is not the right choice of words, in a way, but regionalize the problem. In other words, you could see with Prime Minister Abe that part of Japan's playbook to deal with a rising China is to strengthen ties with Australia, India, Philippines. Korea would be nice, but it's not happening.

I think in these kinds of crises, we want our Australian friends, other actors to weigh in and to echo the messages of reassurance and restraint. And that kind of external solidarity will help and also send a signal to Beijing that the region has a stake in how this plays.

BADER: Richard, if I could just add a word, I think that the basic formula would be to have highly visible support for Japan combined with extremely strong messaging behind the scenes to them, not to interpret this visible support as anything resembling a blank check or a green light.

I mean, I went through something like this in late 2010 with North and South Korea, after the North Koreans shelled the South Korean islands. And we had to face two questions. One is, do we support the South Koreans in a follow-up exercise? And we had a big debate about it and—most of us, and the consensus was, yes, we had to, and be visible, and we had a carrier in the region. But we also at the same time stuck, you know, put Mike Mullen on a plane to go out there and tell them, you can—don't you do any of the things that you are threatening to do that would escalate the situation. So there was a big difference between the public and the private messaging.

HAASS: Let me use the Middle East again as an analogy, in this case where a crisis did lead to extremely productive diplomacy, which was the '73 war. And you had certain things, and out of that, Henry Kissinger was able to do the disengagement agreements and ultimately it set in motion what years later became also an Egyptian-Israeli rapprochement.

Is there anything about a crisis in this part of the world that we can run with it, not that we want one to happen, but if you've got lemons, make lemonade? Is there any lemonade to be made here?

EIKENBERRY: I don't know, Richard. In the case of the Korean peninsula, I could see a path ahead where if there was to be a—if there were to be an act of war, that perhaps where we are with China right now and the Republic of Korea, there could be opportunity, but in this instance, where we're talking about the East China Sea or the South China Sea, I don't see very clearly where the opportunity would be. I think for now, as I see it, avoidance is critical here.

HAASS: Jeff?

BADER: The dispute between China and Japan is not about the Senkakus. The Senkakus is an excuse. I mean, from the Chinese perspective, I think there are three things, number one, is a visceral, gut resentment of Japan for its historic role vis-a-vis China in the last century. Number two is a tactical desire to use—to paint Japan as reverting to the 1930s, because they're trying to slow down Abe's building up of the security capabilities. So it's gut, and it's also highly calculated. And the third piece of it is just terror on the part of the Chinese leaders of being—of appearing to be soft on Japan, because of the impact that that might have on their leadership.

HAASS: So then why wouldn't the answer to your—if there were a crisis—I agree with you. So the answer's not to necessarily to—I wouldn't be against it—negotiating some new legal or whatever—political, legal framework for the islands, but that would be the time to basically say, this is a relationship that needs managing. And what we really want to do is put in a much thicker web of ties, whether it's to prevent crises or deal with crises, whether it's bilateral or regional, but that seems to me—if a crisis scared people about what could happen, and stock markets around the region plummeted, there is an argument—at least that would be the time to do some things that now might be resented, but in those conditions, there might actually be a greater opening.

GREEN: You might get that effect for a while, clearly, if the U.S. played its role rightly. There's a loss of face. If we—together with Japan—somehow force China to back down, that has very dangerous implications for us domestically, to a lesser extent, but still also true in Japan.

If we play it right, we might—especially if the stock markets crash and the economic players come in—we might start to get a sort of—a more stable situation, but it'll be like the 1995-'96 Taiwan Straits crisis, where the militaries were so calculating where their vulnerabilities were, where our vulnerabilities are, and how they build up their force posture over the next decade so they can win next time.

So there's almost—I hate to sound so pessimistic—there's almost no way we come out of this with a happy, you know, recognition of how dangerous things were. You know, I—it's—I don't see the Cuban missile crisis, you know, scenario necessarily. There's going to be learning. Some of it will be good; some of it will be how to hedge better and prepare better for the future.

EIKENBERRY: I think also that we need to look at Senkaku-Diaoyu in terms of broader Chinese policies now in the East China Sea, the South China Sea. Over the last three decades, China's been remarkably successful, with the exception of India, of finalizing and getting international recognition for its land borders, but it has not on the maritime front, and I think that's where it's turning to right now, and it has growing interest. It has growing capabilities.

And I think it's useful for an audience like this to think about American history and recall in 1823, when President Monroe declares the Monroe Doctrine, and a Monroe Doctrine is declared at a point where America started to define its interests as no European interference in the Western Hemisphere.

Now, if you go back to China, from the mid-1990s until today, you look at their behavior in the maritime domain, and is there—without anybody in Beijing having a Xi Jinping doctrine locked up in the safe—but just is there an evolution of their thinking based upon capabilities and interests that they're reaching a point where they—they don't want U.S. reconnaissance activities 12 nautical miles off of their coast. They have a different view of the Senkaku and Diaoyu. They have a different view of the Spratly Islands.

So I think it's going to be very difficult for us to manage these problems as they come up. You talked about the Philippines case. Now we're talking about Senkaku-Diaoyu. But we also have to bear in mind, in terms of the United States, our way of operating militarily in the Western Pacific since the end of the Second World War was that was an American lake. And I think the Chinese are reaching a point where they have a different interpretation of this.

That's not an argument for us to pull back on any of our commitments, but we have to be clear among ourselves in these kind of discussions that that's—that's the trajectory China is on, and that's going to be part of the equation here.

GREEN: There is a doctrine, by the way. It was called the Near Sea Doctrine. It's evolved. I was actually briefed on it at the Academy of Military Sciences a few years ago, Central Military Commission approved it. Not unlike the Monroe Doctrine, the ends, ways and means don't match. It's more aspirational. But that's the trend. I think it's pretty clear, yeah.

HAASS: Right. Well, on that note, let's open it up. Anything is fair game, either about the Chinese-Japanese relationship, or we can broaden it out to other potential scenarios. Winston? Ambassador Lord, excuse me?

QUESTION: Just call me Your Excellency, any of those things will work.

(LAUGHTER)

Win Lord, International Rescue Committee. It's good to see some old friends here. First, one quick comment. When Jeff was discussing what we did in 2010, it reminded me of the Taiwan missile crisis, where we—clearly, China was the provocative party there, but we moved two aircraft carriers, but at the same time, we sent strong message to Taiwan not to treat it as a blank check and to China that we weren't changing our one China policy. So there are echoes there.

But my question to any of you is the following, and you touched on it a little bit. What are the chances the following would work, that the—and maybe it's happening—I seriously doubt it, given the atmospherics—that China and Japan have secret talks, Japan comes up with some formula of great ambiguity, a la Shanghai communique, whatever it was, the '92 consensus with Taiwan, which basically says—I don't have the language, but our Chinese friends think there's a dispute over these islands. We don't think there's a dispute over these islands, so obviously we disagree. China takes that as saying Japan agrees there's a dispute. Abe tells his people, I didn't change our position, but it's enough, but that is only done by the Japanese in exchange for prior Chinese assurance they would then de facto start cutting down on their patrols and their probes and de facto making a more peaceful situation.

Could this work? And is anybody trying it?

BADER: I'll take the first shot. Winston, it's completely logical. Therefore...

HAASS: So it had no chance whatsoever?

(LAUGHTER)

BADER: I mean, I—I had this discussion with Japanese friends like a year ago, word for word. And the answer was—I mean, there were two problems, number one, that Abe wouldn't do it, no matter how artful the language was, and, number two, what was the expectation of how far back the Chinese would go. In conversations I had with Japanese visitors close to Abe, I—you know, I told them, I thought the best you're going to—you're not going to get status quo ante. The Chinese are going to continue to send a ship inside those territorial waters. Just they won't do it every week or two. They might do it once per six months or once a year. They're going to feel the need to continue to establish the principle that they have of presence there.

And the answer I got from this gentleman close to Abe was status quo ante is the only thing that is of the slightest interest to us. Now, I have no idea if this was an official position, but those were the kind of feelers I got. Now where we are now, in the wake of Yasukuni, is that almost any conversation is next to impossible for, say, some months.

GREEN: Yeah, I think in the near term, it's impossible. But there are people in the Japanese foreign ministry, I think, who are thinking along those lines and in the Chinese foreign ministry. The problem is that it will help to lower the temperature, but the problem ultimately will be that China's move is very reversible.

And it reminds me of something that was proposed to us when I was in the White House by the foreign ministry, if we stopped Taiwan arms sales, China would pull back its missiles. Some people thought that was a great deal, until they started doing the math and realizing our stopping Taiwan arms sales is much harder to reverse than a quiet, you know, return of some mobile missiles in Fujian.

So the foreign ministry in China tries these things. They had an agreement with the Japanese on joint oil exploration, for example. But as you know very well, Win, the foreign ministry has a very hard time actually implementing these.

So for this to happen, it's going to have to come out of Xi Jinping and the new national security council, or whatever they're translating it as, and for the reason Jeff said, the temperature is just all wrong right now. But in the next three years, I wouldn't entirely rule it out. It just doesn't solve the problem. All it does is lower the temperature.

EIKENBERRY: Yeah, the—I think the key right now is to find a way as rapidly as possible, if there is a way ahead, to demilitarize this dispute, because it's extraordinarily dangerous. I don't know—and, you know, my recent trips to Beijing, I'm not certain at this juncture, though, Win, whether the Chinese leadership is, as they've said, given up on Abe. Well, you can say you've given up on him and then things can change next week and they'll talk to him again.

But I do think we're at a point where it's going to require the very highest levels of leadership, Abe and Xi, to set the tone, give the signals for the two sides to sit down in a serious way behind closed doors, which you're talking about, and I think there could be formulas there. I think that one of the outcomes of that, though, would be a better outcome if there was also some kind of crises management mechanism established to where the combined militaries and law enforcement agencies were talking to each other on a daily basis, as I agree with you, Mike, that they'll—the Chinese will come back and they'll say, domestically, politically, they have to keep on trying to find ways to say that they're asserting their administrative control of Diaoyu, and with that, then, to have that crisis management mechanism established and agreed transparency between the two sides I think would be awfully important to try to sustain the agreement.

HAASS: Yes, sir?

QUESTION: Hi, Dan Rosen. Nice to see everybody. There seems to be a consensus that the domestic utility of this conflict is one of the major drivers here, that this is for domestic consumption on both sides. On the Chinese side, what's going on right now that's so different than a year ago that justifies, in terms of domestic utility, this level of tension? Because there's some Chinese optionality and choice in how high to turn the dial here, I would guess. It's not just a reaction to Japan. It's a choice on Beijing's side.

So what is it in the political economy in Beijing right now that makes this reasonable from a domestic, political perspective?

BADER: Well, let me take an opening shot, Dan. I would not answer the question directly. I mean, what I would say is that I think the reason why China's tone has changed so dramatically in the last two years is because of Abe and because of the perception of the security policies that Abe is pursuing. And the desire to depict Abe as a throwback to the 1930s to try to rally Northeast and Southeast Asian regional opinion against him as a way of sort of putting some spokes—some brakes on his intended direction on security policy. I think that's fundamentally what is underlying the volume coming out of Beijing now.

HAASS: You don't think it has to do, also, with the slowdown of economic growth, a new leadership trying to establish itself, cutting a closer relationship with the military, trying to harness nationalism for its own domestic political purposes?

EIKENBERRY: My own view would be, yes, that's a factor, and it certainly is. And I think, though, the Chinese leaders collectively, you know, led by Xi right now are also aware that they're facing an extraordinary array right now of domestic problems. They're trying to restructure their economy, which has got huge political consequences. They're facing an environment which is so polluted that they're worried about grassroots movements starting to form and network within China against the party's leadership. We all know what this array of problems is.

And what that leads to, then, is the conclusion of the third plenum of the 18th Party Congress that what they need for the next decade is they need stability. They need stability in China, and they can only maintain stability in China if they have a region that's stable and global security situation which is generally favorable.

So they're not in a real maverick mood right now. They also are very aware of second- and third-order consequences. When they try to play the nationalist card, if they do, they have a history of playing that card, and then the Japanese—the anti-Japanese protests suddenly take on an anti-party tone to them.

But all of that said, I would agree, Richard, that Xi Jinping taking over—and he's very activist. In every area, you hear—we used to hear about Hu and Wen, now you only hear about Xi. And that's in domestic politics. That's in terms of security policies and foreign policies, and perhaps part of it trying to be a strong commander-in-chief and get the People's Liberation Army lined up behind him.

HAASS: Just out of curiosity, where does the establishment or the declaration of the new air defense zone, what's your interpretation of that? Is that an exception to this? Is this part of it? I mean, did the Chinese miscalculate? What's your...

GREEN: I think this is part of a playbook that was established under this maritime doctrine, with ADIZs somewhere in our future in the West Sea or...

HAASS: Please explain—don't—you can't use that—you can't say ADIZs. No one knows what you're talking about.

GREEN: Sorry, air defense identification zone, which is a mouthful. Can I say ADIZ now? Because there's going to be another one in Yellow or West Sea, west coast of Korea, and in the South China Sea. And this is salami slicing.

I'm told—and Jeff or Karl may know better—that the leadership actually expected Vice President Biden to cancel his trip over this and that the U.S. response – though still quite firm on the military side, and I think if they felt that they misread our politics, our foreign policy, but that the U.S. response was perhaps less than they expected.

So I think this is—this is not a one-off. I think step by step, we're going to see more and more of these things. And we'll just have to take them as they come, but we have to put it in part of a larger strategic construct we don't quite have yet.

HAASS: Roger?

QUESTION: (OFF-MIKE) Capital. The tone, of course, in Washington, when I got there four years ago, was that they got a lot of economics at stake and they won't do anything to put that at risk. So I think that National Security Council meeting that you're convening here today, Richard, would have a lot on the economic aspects of it, particularly what kind of economic carrots and sticks can be brought to the table.

And you have to realize the Chinese have numerous grievances against us, and then generally, on many things, but it—the bullying started with the rare earth embargo in 2010. And the first grievances that we actually went forward a WTO case against China, on the case of rare earth, of market manipulation, and that's still ongoing.

But they have grievances on investment. They're very active in going to the Financial Times and other newspapers complaining that they're not treated fairly by the Committee on Foreign Investment in the United States, CFIUS. They have grievances that they—that we goaded them for support—financial support for countries in trouble at the IMF and the World Bank, but they don't get the quid pro quo of American support for them having greater influence on decision-making. And they think that TPP, the Trans-Pacific Partnership negotiations, is—one, the economic side of the pivot, namely, a containment policy against China, and they say they don't want to be contained.

So each one of those grievances gives an opportunity and a risk. The opportunity is, meet some of their objections. Open things up. Sell them more military high-tech products, which is in every speech that all of the Chinese leaders always say. You think that trade is about foreign exchange rates; we think it's because of the stuff that you won't sell us.

On the other hand, we need the Chinese on things like Iranian sanctions enforcement. And so we are in a much more complex economic and financial situation with China than any adversary you can dredge up from the Cold War. We didn't have any of these kinds of links with the Russians.

HAASS: Let me just mention one thing which Roger didn't, which is our dependence in part on Chinese dollar holdings and our need for them to participate in the—our lifestyle, essentially, sustaining our deficit and our debt. How much does that constrain us, if we were—if we wanted to suddenly side with Japan and we suddenly saw the set of the—the head of the Chinese central bank suddenly announce that they were going to cease dollar purchases until such a time as the United States backed off and reconsidered its deployment of forces, where would that put us?

GREEN: They can hurt us. They can hurt us.

HAASS: I meant Treasury purchases, but you know.

GREEN: They can hurt us, but if you continue down that escalation or up that escalation logic, a global economic meltdown is bad for us. It's terminal for the Chinese Communist Party. And obviously, we want to avoid that, but we shouldn't be more afraid of this than necessary.

And Abe spends 80 percent of his time on the economy. And I imagine that for Xi Jinping it's a comparable amount of his time. Abe's told people this. I imagine for Xi Jinping it's comparable.

So it's not like either leader—well, I think Jeff put it well. They have—there's a utility in a certain amount of friction. Abe would not have come back politically without China's pressure on Japan. But these economic factors, I think, are very heavy in both leaders' minds.

And we, for our part (OFF-MIKE) we're not checkmated. I don't think this fundamentally changes our toolkit in how we would deal with a crisis like this.

EIKENBERRY: I guess I'd make two points here, the first on the degree of interdependency, not only between the United States and China, but between China and Japan and China—and many other countries. It's pretty striking. Last year's bilateral trade, over $500 billion between the United States and China, the Chinese hold $1.2 trillion of Treasury notes. They're our largest source of imports. They're – China is our third-largest source of—or destination for our exports. In the case of Japan, their largest bilateral trading partner is China.

So I've heard people now talk about, do you remember during the Cold War days that we had mutually assured destruction with nuclear weapons? Now people talk about mutually assured economic destruction. And that's the world that we live in.

I would—I would take a little bit of note, though, on the points you had made about our economic relations with China. Actually, there are—maybe two years ago, I would have agreed. I don't think that I would, though. The currency problems that were really first on the agenda, those seem to be managed now in a pretty good way. The Chinese are very interested in a bilateral investment treaty with the United States, and now they've come forward in agreement, they'll have a negative list, rather than the positive, which we couldn't have moved forward with.

And interestingly, on TPP (inaudible) agree with you. Two years ago, you heard from the Chinese, TPP is part of containment. Now, increasingly, you're hearing the Chinese economists, political leaders say if we can get a BIT, then maybe TPP is next, because it could very well be in China's interest, because if you look at their reform package that they've announced with the third of the 18th, then the TPP could also be a very good model for them to follow for the enactment of reforms.

HAASS: I apologize for the use of acronyms. That's—BIT is a bilateral investment treaty. TPP is the trade agreement that's being negotiated across the Pacific. And I will try to get these people here to desist from the...

(UNKNOWN): We're from Washington.

HAASS: ... ADIZs and other such things, but clearly, I'm failing in my—in my efforts.

(CROSSTALK)

HAASS: There was somebody here. Yes, sir, John?

QUESTION: Thanks. John Makin, Cornwall Capital and American Enterprise Institute. Listening to you gentlemen makes me wonder if the island dispute isn't a red herring. That is, given the range of issues you've discussed, let's say we could—we solve the problem tomorrow and both China and Japan say we don't care about this pile of rocks—not likely, but it's a good thought experiment—in my view, we'd still have some serious problems. And as I think it's been pointed out, the Chinese leadership probably hasn't planned on how aggressive Mr. Abe is being, and yet Mr. Abe is where he is because he's being aggressive.

What role—and you've touched on some of this, but is there a role that the United States can play or can hope to play, or should we just assume that we'll—that there will be a conflict of some sort and do a lot more contingency planning?

GREEN: Well, we should do contingency planning, because there are probably 20,000 people in Washington who depend on that for their livelihood. No, because...

(LAUGHTER)

Because...

HAASS: Is this a jobs program?

GREEN: As I said earlier, we need to be thinking ahead about this jointly with the Japanese so that we can urge restraint and do it from a position where they'll be confident. The—the Chinese made Abe. He was in the wilderness. He was finished politically, most people think. He came back because the Chinese were beating up the government in power. Without China, there would have been no recovery for Mr. Abe.

But I would say it's important to briefly, very briefly define what he's doing. And people talk about it as being aggressive. And the shrine visit certainly didn't help with management of that issue for him.

But if you set that aside for a moment and just look at his actual policies, he's increasing the defense budget by about 0.8 percent this year after 11 years of decline. The Chinese defense budget has been double-digit for almost two decades. He said—not that he's going to revise the constitution—that will take time, he knows it—he's going to change some of the interpretations to allow a more collective defense with the U.S., so that we can have the kind of virtual joint and combined relationships and plan together and do more together that we do with Korea or Australia or Canada or any number of allies. He's actually slowed down that process, to the frustration of many in the Pentagon.

So it's important to keep it in perspective. He's not, you know, looking out for demons to slay. He's spending, as I said, 80 percent of his economy on what keeps him in power in a parliamentary system, which is growing the economy, and in that, not so unlike Xi Jinping.

HAASS: Yes, ma'am?

QUESTION: My name is Contessa Bourbon from the New York Times. How possible it is that the United Nations can settle the territorial dispute? Has the Philippines filed a case against China at the U.N.? And is it possible that conflict between Japan and China can also be settled through the United Nations?

HAASS: (OFF-MIKE) about the Philippine case (OFF-MIKE)

EIKENBERRY: Whether, you know, broadly...

HAASS: Whether that's a precedent in any way.

EIKENBERRY: ... whether these territorial disputes can be solved by the United Nations arbitration.

BADER: Look, you know, I think that the Philippines—you know, the Philippines did not consult us before they went to the U.N. Law of the Sea tribunal. And I think it's a good thing they didn't consult us. I think the U.S. would have discouraged them from going there, and I think it's a very good thing that they went there. I think it was very smart.

They have good lawyers, and they've come up with a very good set of arguments, which focus on the issue of the nine-dash line in the South China Sea. And for those of you who are not familiar with it, basically, that's a line that the Chinese inherited for the Kuomintang government, which covers 3.5 million square kilometers in the South Pacific and in which the Chinese assert some sort of unspecified claims perhaps to all of the waters. It's not clear.

Anyway, the Philippine case is challenging that. My guess is the Philippines will not do too badly in the outcome of the case. It won't be an unambiguous outcome, but they may do fairly well in it. And the Chinese will ignore the outcome.

But I think it will help spur a debate within China. There are a lot of lawyers in China, there a lot of people who are looking at these kinds of issues, and I think it will help the people who within China take international law seriously, who take globalization seriously, and it will provide an argument, not for immediate, you know, surrender to the Philippine position.

Now, this doesn't really go to the sovereignty issues. I cannot picture a situation where the parties go to U.N. tribunals on sovereignty issues. Look, I mean, the Japanese have offered to go to the world court on the Takeshima-Dokdo issue, and the South Koreans have refused. South Koreans would almost certainly win in the case where they go, but they refuse, even though they'd win. I mean, there's—the nationalism trumps the logic and the immediate advantage in most of these cases.

EIKENBERRY: And possession, also—also has something to do it, as the Koreans have got possession.

BADER: Yeah, that's right.

EIKENBERRY: So they don't want to take it into arbitration.

GREEN: If there's—if there's a diplomatic process that could help, aside from confidence-building, which Karl and I have discussed, between the militaries, it's all about fish. And Japan and Korea were at odds over Dokdo or Takeshima, but in '98, they signed a fisheries agreement, and the issue subsided until the fisheries agreement started falling apart. And it was local fishermen in Japan that started raising this issue.

Taiwan just reached an agreement with Japan. Taiwan also claims the Diaoyutai-Senkakus. That fisheries agreement has calmed down a lot of Taiwanese fishermen who were trying to agitate and cause trouble. So if there's an area for diplomacy that would make a difference, in addition to military-to-military confidence-building, it might be fish.

The stocks are moving north because of climate change, so it's the fishes' fault. If we can find a way to harvest them together more peacefully, that—that actually in the past has gone—in the recent past, with Japan and Taiwan, a long way towards lowering the temperature on these issues.

HAASS: I've been to a lot of Council meetings. I've never heard anybody blame a dispute on the fish before, and just—at some point, someone will speak up for the fish.

Jeff, you get the last question.

QUESTION: Jeff Laurenti. I wonder if you might tell us, what is the view in Tokyo, in Beijing, if any, of the American now phase-out, perhaps fade to black in Afghanistan? That is, is this seen as a sign of either lost American credibility? Is it a sign simply that the Americans have done their best and this is a hopeless situation, a little bit of sympathy?

And particularly for the Chinese, who actually have a border, small, but a border with Afghanistan, and that have in the Uighur parts of Xinjiang, major problems with jihadism, what is the stake for the Chinese in a post kind of American presence in Afghanistan in trying to keep the Taliban out? What is their likely role? One assumes the Japanese have no interest or stake at all there.

EIKENBERRY: Well, maybe I can talk from Beijing's view.

(UNKNOWN): Know something about Afghanistan?

EIKENBERRY: The—I think what the Chinese worry—the only thing they worry about more than Americans having a long-term presence in Afghanistan is the Americans not having a long-term presence in Afghanistan, because as the uncertainty now is out there for all of us to be concerned about, about what's going to happen to our military relationship and our security agreements with Afghanistan. After 2014, will we even have one? The Chinese are increasingly concerned.

And why would they be concerned? You already mentioned one, the possibility, then, of Al Qaida and their confederates. Specifically, they worry about the Uzbekistan independent movement gaining sanctuary, again, inside of Afghanistan. They're worried, also, I think, geopolitically about if they see the return of a great—new great game actors, but the return of the great game, that they should—they would have great problems on their western flank, and that could extend into Central Asia, where they've made extraordinary investments in terms of resource development, natural gas, and oil, pipeline development, and they also worry about the potential impact on instability in Pakistan.

So we are talking to the Chinese about Afghanistan. We talk about bilateral cooperation programs, where I think the bigger opportunity is—and the imperative is, I think the Chinese understand this, is that even if the United States of America and Beijing were to sit down and say that the two of us together and alone were going to solve this problem, it's beyond our reach, because there's a lot of other actors who get votes, Pakistan, India, Iran, Russia, and—and the European Union, NATO can help.

Each one of those actors that are out there, we probably—we, the Chinese and the Americans, have got comparative advantages in influence and leverage that we have, so can we sit behind closed doors and come up with a collaborative strategy, but knowing that it's not going to be bilaterally implemented, and see if, as Xi Jinping and our—and President Obama have talked about, a new kind of relationship going forward? It seems to me that's the kind of relationship we should be working for, that we don't want to minimize problems over Senkaku and Diaoyu. We certainly want to work to avoid a crisis catching us by surprise. But there might be some greater global opportunities for collaboration and alignment. I think Afghanistan's one of them.

HAASS: And on that...

GREEN: Just on—oh, sorry.

HAASS: Go ahead. No, go ahead.

GREEN: Real quick on Japan. The Japanese at our request invested very heavily in stability and development in Afghanistan, second largest after us, in terms of ODA. And so I'm sure they're frustrated and disappointed, as we are.

But the event in that part of the world that has struck at the Japanese and Korean confidence in the U.S. was not Afghanistan. It was Syria. And it wasn't that they wanted us to use force, necessarily, but the fact that we—that the president said we would use force and then threw it to the Congress, to the Koreans looking at North Korea with chemical weapons, by the way, and the Japanese looking at China, that was unnerving. And that is what you hear about when you talk to senior people in those capitals.

BADER: Just...

HAASS: Sure. Yeah, the last one.

BADER: The U.S. dialogue with China on Pakistan, which I have observed for years, is incredibly sterile. The Chinese do not wish to have a serious dialogue on Pakistan. They wish to own the Pakistan relationship, and they don't want us to have any visibility on it.

I think that Afghanistan is a bit of an offshoot of that in a sense. I think Karl is right, that we do in theory have more in common there, and we should be able to do more, but I fear that the Chinese approach to Afghanistan is somewhat reflective of their approach on Pakistan, which, of course, they use as a hedge against India.

HAASS: I don't know how to say be careful what you wish for in Mandarin, but anyone who wants to own the Pakistan relationship, I say, be careful what you wish for.

(LAUGHTER)

This is interesting. A little bit more sanguine than I thought, and I hope you're right. I'm not persuaded you are. But, again, I want to thank you actually for two things. I want to thank you for tonight, but amongst these three gentlemen, we have literally decades of service to our government and our country, so I want to thank them for that, as well.

(APPLAUSE)

HAASS: Well, good evening. Welcome to the Council. I'm Richard Haass. And this is the second installment in our new "What To Do About" series. And tonight we're going to be talking about what to do about Asia or, more specifically, East Asia and the Pacific, the part of the world that I believe more than any other is likely to determine the character of this century.

And there's lots of things we could focus on tonight, but we are going to focus mainly on the dynamics between China and Japan, in many ways, the two most capable and important local states, long-time not just neighbors, but rivals. Tension has obviously been going up, given the sovereignty dispute in the East China Sea. Military capabilities are going up. Military presence is going up. And nationalism is going up.

You know, this competition or relationship does not take place in a vacuum. There's lots of other issues in the vicinity, including Dennis Rodman's favorite subject, which is North Korea, given other problems, say, in the South China Sea, but tonight, we are largely going to focus on them.

Now, what we're trying to do in this series is really look at two issues. One is, what can and should be done to prevent a crisis? And then, secondly, if for whatever reason or reasons prevention does not succeed, what is then done to help manage a crisis? And I guess we could be creative and say, if a crisis were to happen, what could also be done to take advantage of the crisis, not just -- not just manage it?

And the way we're going to organize it is essentially have a version of what you might call a National Security Council meeting, but rather than representing this or that department, all three of these gentlemen I will ask to simply be smart. And they are particularly well-suited to be that, essentially, to be ministers without portfolio or counselors, but essentially wise men sitting around the table offering their advice, so not representing State or Defense or the intelligence community or what have you, but simply being wise, experienced hands, which -- it's exactly what they are.

Mike Green, who's sitting at the far end, is at CSIS, where he's their senior vice president for this part of the world. Also, he divides his time with Georgetown University and in days past was the senior director on the National Security Council staff for this part, again, of the world.

To his right, Jeff Bader, who has a similar portfolio at the Brookings Institution, the John Whitehead senior fellow there. And Jeff was recently the senior director for East Asian affairs on the NSC.

And last but least, Karl Eikenberry. Karl's out at Stanford, so he's closer to Asia than the other two these days. He was most recently well-known as our ambassador to Afghanistan, but what's particularly relevant for the purposes of tonight's conversation, Karl was our defense attache in Beijing and was the senior, what, strategic adviser at PACOM?

EIKENBERRY: Strategic plans officer.

HAASS: Strategic plans officer at PACOM. So what you have here is an extraordinary combination of government experience both on the civilian and military side and people now who are firmly planted in the worlds of think-tanks and academia. And, again, the question is, what to do about Asia?

So let's start with the first part of it. We'll talk for a bit. And then we'll open it up and we'll get you out in plenty of time to prepare for the State of the Union, which I'm sure will be largely about this set of questions.

(LAUGHTER)

So this will put you in a very good position to impress your family and your neighbors later this evening.

So let's just start with the question of prevention, which is, how serious a challenge is this? I mean, you wake up in the morning. There's any array of domestic and international questions. I was just recently at Davos. You had the Japanese prime minister make reference to events of 100 years ago. This is the 100th anniversary of the outbreak of World War I, and many people are drawing parallels between the situation that existed in Europe prior to the outbreak of World War I, great power jockeying, a little bit of carelessness or recklessness and so forth, rising nationalism. We all know what that led to. Now we have the situation in the Asia Pacific. How worried should we be?

Why don't we start -- Karl, we'll just go across.

EIKENBERRY: If we look back over the post-World War II history of the Asia Pacific region, it's an extraordinary success story. The economic development that's occurred there, some 60 percent of the world's GDP now in the broader Asia region. If you look at political success, great success stories and democracy like Japan, Korea, Taiwan, in through ASEAN, extraordinary success there, as well. And the fact is that today this is an area which is largely absent hot conflict.

But yet to your question, though, Richard, about how much should we be concerned, yes, I think we should be very concerned, because there are some trend lines that are not in the right direction at present. For example, last year marked the first year that in the Asia Pacific region the combined defense budgets are greater than Europe. That's the first time in modern history that's occurred.

There's a set of territorial disputes that exist in the Asia Pacific region that, if not handled properly, could lead to military conflict. There's the problem of on the Korean peninsula. So we could go on from there, and perhaps during the course of the discussion, I know we'll want to talk about those specifics.

HAASS: Sure.

BADER: Well, I'll try to say something different from Karl, though I agree with what Karl said. I mean, basically, you know, we've all been doing our speeches and articles on the Asia Pacific since the Vietnam War, and they've all been about this area as the success story of the world. And I think if you were writing -- if you were writing a national security strategy right now on the region, you would -- you would not be repeating that narrative. Instead, you'd be talking about an area with some storm clouds. You'd be talking about an area with -- with some turmoil and some conflicts or potential conflicts.

I mean, the Japan-China situation, if you asked any of us 10 years ago, would we be in this situation? None of us -- none of us would have saw this. Thailand is up in smoke, with seemingly no path to stability. The Japan-Korea relationship is not going to be -- it's going to be kinetic, but it's very, very bad. And the China-Taiwan relationship is in decent shape at the moment, but you have elections in Taiwan in 2015, and who knows where the relationship goes after that? And behind this all, of course, you have a rising China with a very -- how should we say -- forceful and dynamic new leader, with a forceful and dynamic foreign policy.

Just the last thing I'd say in the opening here, Richard, is -- I mean, I talk to a lot of Chinese and Japanese senior officials coming through, and I don't know anyone who is itching for a fight on either side. No one. That really is not the question. The question is, what happens when all these planes and ships circling around each other if someone has one or two -- two or three many scotches one evening?

HAASS: Michael?

GREEN: Well, on the proximate issue that you introduced first, Richard, the Japan-China problem, I would -- I would argue that the possibility of a clash, of shots being fired is significantly higher this year than it was the year before, and was higher the last year than it was the year before that, if only because the amount of stuff in the East China Sea and the rules of engagement are somewhat dangerous.

The Japanese reported that they have scrambled fighters to respond to Chinese fighters 80 percent more than they did the previous year. The operational tempo for the white-hulled coast guard ships is way up, and the gray-hulled ships, although they're keeping a careful distance, is way up. Polls in Japan and China both show that 90 percent of the public doesn't like each other.

Stepping back one level, does that mean that there's going to be a war? I'd say extremely low probability, even if there is an accident or something like that, for all the reasons Jeff said and because of our own power and presence.

Stepping back one level further, do these cracks and problems we see potentially represent the beginning of disorder in Asia over the longer term? Maybe. So we need to pay attention to it to prevent the short-term crisis and to make sure we're shaping the region for a more stable future in the long run.

HAASS: Let me just push you on one thing, and then we'll -- I'll turn to some just specific policy questions. When you talk about it could be the precursor of some disorder in Asia, what does disorder in Asia look like?

GREEN: You have, as Jeff mentioned, the problems of democracy in Thailand. You have states in jeopardy. You have all the problems of -- that other regions. But in the middle of it, you have a rising China that, for the most part, is not a revisionist power, that wants to benefit from the international system, despite frustrations with not having had a role in creating it, but not trying to overturn the prevailing order, which is an American-led order.

If you -- what disorder looks like is that the coercive element in Chinese diplomacy today, arms -- excuse me, mercantile embargoes, export embargoes to pressure countries on territorial issues, course of use of ships and planes, and diplomacy, it's one piece of what China does, and one piece of a much larger story, which has some good elements and bad elements.

That becomes the dominant narrative for the rest of the region, because of receding U.S. power. That's a very dangerous situation. That's what disorder looks like.

HAASS: OK, so let me ask, then, the basic question. We want to influence Japan, so we've got (inaudible) we've got an alliance relationship there. So if the economists would call it moral hazard, and it's the diplomatic counterpart of it, how is it we're supportive of Japan, so they don't feel they've got to do things on their own, whether it's militarily or nuclear or what have you, but without giving them a blank check? How do we basically signal American support that's -- that's considerable, but not unconditional? Well, what is it we say? What is it we do?

EIKENBERRY: Well, I think -- going back to what Mike had said about making sure that, first and foremost, our foundation for the entire Asia Pacific region is engagement and strength, and part of that is retooling our economy and ensuring that we remain economically relevant in the region, and that probably is one of the biggest threats that the United States is facing now.

Secondly, in terms then of our military posture in the Asia Pacific region, to ensure that we maintain the capabilities for base, that we maintain strong alliances and partners throughout the region, that also then gives a context for the relationship with Japan.

HAASS: Well, let me just push you on that. Does that entail increasing, for example, the quality or quantity of our air and naval presence?

EIKENBERRY: It does, yes. Japan's concerns right now -- they have one concern with -- as we all do -- with the Korean peninsula and with North Korean threat, but I think their deeper long-term concern is the rise of China and the rise of China's military capabilities behind that. And that's a concern that's reflected throughout the Asia Pacific region.

And if we want to shape in a positive way the development of China and to try to encourage its further integration into regional architectures and global architectures, then you do need a position of strength to do that. And with that strength then comes reassurance to our allies.

HAASS: Let me ask a question, then, slightly different, Jeff, which is, OK, if we should maybe increase our military presence, which largely means air and naval -- let's put aside the question of Marines at Darwin. I never quite understood how 2,000 Marines in the Asia Pacific was going to tip the military balance, but I'm sure that's my shortcoming.

The -- what about diplomatically doing more? I mean, should we essentially -- we, the United States -- insert ourselves in any way, I mean, in this issue between Japan and China? Should we have an American diplomatic initiative about the legal political disposition of the disputed islands? Or should we simply stand back and let these guys try to sort it out? I mean, is this a place where we ought to, if you will, rebalance some of our diplomatic activity towards this part of the world?

BADER: A few thoughts, Richard. And when I was in the administration, we spent a lot of effort on rebalancing our diplomatic presence in Asia, particularly in Southeast Asia, but I think we're not in Southeast Asia here now, so I won't get into that, but there was a lot of effort to do that.

Now, the Japan-China situation and then the Japan-Korea situation, the administration has put a lot of effort into quiet diplomacy between the two. Joe Biden has been on the phone with all -- you know, with the various leaders. He's been out there. John Kerry, as well. I would say the results have been somewhere between minimal and negative, judging by the trend lines. I say this not to be critical of the individuals, but let's face it, these are three (inaudible) Japan and South Korea, who are, I would say, very friction-tolerant. Each one, it's in their -- it's in the interest of each one of them to have difficult relations with the others. It's in their political domestic interests, and that is something we cannot (inaudible) dynamic, we cannot overcome that.

HAASS: Can I just interrupt you on one point, just so I understand? So whatever level of diplomatic activity we've been carrying has had results that you describe between negligible, I think it was, or modest, whatever it was, and negative, would more diplomacy have a positive result? Or does more diplomacy actually risk having a larger negative?

BADER: I mean, I think -- you know, I was being slightly facetious, but not entirely. We have to be engaged privately with them. We've certainly -- between the Japanese and the Koreans, we certainly have to play a role, since they can't seem to work it out themselves. With the Japanese and the Chinese, clearly, as you -- you know, you raised the issue of moral hazard, the administration's been trying to convey to the Japanese since the middle of 2011, don't do anything reckless with the islands. Kurt Campbell conveyed that message before Noda...

(CROSSTALK)

HAASS: It's kind of what we used to tell Taiwan.

(CROSSTALK)

BADER: Hmm?

HAASS: It was kind of what we used to often tell Taiwan, don't do anything reckless to change the status quo.

BADER: And then they went ahead and did it. I mean, look, as the great power in the region, we have no choice. We have to be engaged. The powers -- each of the powers actually wants us engaged privately. None of them wants us out there publicly taking sides, seeking to embarrass, or putting forward formulas for them to come to, like the, let's say, Middle East peace...

HAASS: Well, it's worked so well there. We thought we might transfer it to this part of the world.

(LAUGHTER)

So then, what then is the nature of American diplomatic engagement, if it's not to resolve the questions of sovereignty? You know, I've heard everything from, you know, creating special types of environmental parks and, you know, sort of whatever to -- I mean, is there a substantive initiative, do we think? Or is it simply, don't change the status quo unilaterally by force? Is that the substance of our diplomatic message?

GREEN: You're talking about the Japan-China piece and the Senkaku-Diaoyu-type problem? Look, for CFR or Brookings or CSIS, we ought to dive into the deep end of that pool and see what we can do in terms of intellectual facilitation. For the U.S. government, Japan's an ally, and we cannot be in a position of brokering between an ally and a power that is testing not only Japan on the Senkakus and Diaoyu ties, but all along the first island chain.

If you're worried about China grabbing the islands or doing something provocative, you want to hew close to Japan. If you read about Japan doing something provocative, you want to hew closely to Japan. We don't have a joint and combined alliance with the Japanese the way we do with NATO or with Korea. The Japanese didn't want it. And for decades, it was the Japanese that worried about being entrapped in our war in Vietnam or in China and Korea. And now, you know, for about the past decade, we've started worrying a little bit about maybe being entrapped in their war for the first time.

The answer is to move towards more jointness, more joint exercises, more concept of operations, so that we're inside the Japanese decision-making loops and we're making decisions together and we're dissuading China. The worst thing we could do is to step back and sort of leave it to the Japanese to sort out or to somehow broker, which would only encourage Japanese hedging, which is unhelpful, and Chinese hopes that perhaps there's a way to drive a wedge between us.

HAASS: Karl, you spent time in Beijing as the attache. What message do we give the Chinese about restraint? And then, if they go, well, hold it, does that mean under any and all circumstances, well, no way? What is it tell the Chinese in order to, again, behave responsibly, if they say, but what if the Japanese do X, Y and Z? Do you still expect us to show restraint, even if the Japanese are not?

EIKENBERRY: Yeah, this is a -- look this is a very difficult problem with regard to the Senkaku and Diaoyu. And the consequences of getting this wrong, or as Jeff had said, a Japanese fighter pilot making a mistake and a shooting match starting, almost certainly not leading to a war, but really setting Asia back and our own position in Asia back tremendously, that it's rising with every day.

Last year, Mike talked about fighter sorties from the Japanese air self-defense force over the islands. Six hundred last year scrambled. That's two a day. And it's a matter of time until -- it's just a matter of time until something happens.

Now, the tough part about this for us is that we do have an alliance with Japan, and that alliance specifically covers the Senkakus and Diaoyu. And if, according to the treaty, that if the Japanese are attacked in the Senkaku-Diaoyu, then we have a treaty obligation there.

Now, we don't go to war based upon lawyers' interpretations of treaties, of course. And a point I would like to make about this is that I remember as a colonel working in the office of secretary of defense when some island occurred -- dustup occurred in the Asia Pacific region. I called an old State Department...

HAASS: It wasn't Kenmoya Matsu (ph), was it?

EIKENBERRY: It -- no, I'm a little bit -- a little bit beyond that one.

(LAUGHTER)

HAASS: OK. Just checking.

EIKENBERRY: But I called up a very senior retired diplomat, who I thought a lot of, and asked for his opinion. He said, Karl, remember the first rule here. The United States of America is a great power and great powers don't go to war over rocks. Having said that, though, these are not just rocks to the Japanese and the Chinese. We know how sensitive this issue is.

Your point about -- then your question, what do we tell the Chinese? Well, I think that the Chinese are observing our diplomacy right now, and clearly they see how we're engaging with Tokyo, as we did in the aftermath that Prime Minister Abe's visit to the Yasukuni shrine. They are clearly getting messages from us that we want to see Tokyo and Beijing talking to each other about this.

Tokyo -- Beijing's position is that, as long as Tokyo will admit there's a dispute here, then we can sit down and talk, and Tokyo has not found the way at this point to reach that formula, but I'd be optimistic that they could with some clever diplomacy.

HAASS: Let me ask two more questions on the prevention side of the coin. The Chinese recently -- must be, what, several months ago now -- announced the air defense identification zone. Is there anything we can or should do vis-a-vis that that would basically send messages such as, we believe, to decrease the chance of a crisis or an incident, in terms of respecting it, challenging it, what have you? What -- the Chinese put that out here. It was, if you will, a unilateral challenge to the status quo. What should we be doing about it?

BADER: Well, the -- I mean, DOD responded instantly, within 24 hours, by sending a B-52 over the area, which I think was absolutely the right -- the right signal. I mean, I think it was -- you know, there are two issues, military aircraft and civilian aircraft, and we got somewhat crosswise in our messaging on that. The military...

HAASS: Can you just explain where we came out on that?

BADER: Yeah, where we came out was -- DOD was very clear, this was not going to affect in any fashion military aircraft operations inside the ADIZ, no notification, they would continue as before, which is absolutely the right call. We have a lot of -- you know, a lot of operations in that zone, and we're not about to announce them to the Chinese or ask permission. We have no obligation under international law, international practices to do so.

On the civilian side, I mean, both Hagel and Kerry made clear statements that the way our ADIZ works is you only have a reporting requirement if you are flying towards the country, towards the United States. If you're just transiting the zone, no reporting obligation whatsoever. And the Chinese announcement makes no such distinction, so a plane -- you know, an ANA flight from Tokyo down to Singapore that cuts through the zone nominally has to report or the Chinese can scramble something to see what's going on, which is not a healthy situation.

I think that the FAA put out a general guidance saying, we respect ADIZs and we expect civilian aircraft to honor them, OK? That wasn't very well coordinated within the U.S. government, frankly. It send confusing signals. The Japanese didn't know quite what to make of it.

HAASS: Should we amend it, now?

BADER: Should we have...

HAASS: Should we now amend it?

BADER: I mean, the FAA's view was, we don't use our civilian aircraft as experiments or, you know, that they're -- we don't put civilians at risk because of diplomatic purposes. And I understood what the FAA was doing. It was the -- I'm not sure, Richard. I don't know the answer to that. It was just badly coordinated. I don't know if I'd go beyond that.

EIKENBERRY: On my last United flight to Beijing, I actually supported the FAA position.

(LAUGHTER)

BADER: That's the point. I mean, you know, those of us who did KOL-7 (ph) 30 years ago...

HAASS: Exactly. I remember that.

BADER: But I think the important thing to warn China is, don't do this again in the South China Sea or in the Yellow Sea. I think that's the great risk, that they'll -- particularly in the South China Sea, where you've got a whole bunch of claimants, not just one claimant, and that would really be -- I think that would really be a provocation if they would do that.

HAASS: I guess this is the last question, and I'll start with Mike, which is, diplomatically, in the interests of preventing a crisis or conceivably better managing one, if it were to happen all the same, why not make a big push for introducing a set of confidence-building measures in this part of the world, incidents at sea, various types of communications, or even some version of the Conference on Security and Cooperation in Europe, some type of a more structured security system for this part of the world, which have certain rules of the road, certain obligations, certain mechanisms for stabilizing.

This part of the world is drowning, literally and figuratively, in economic arrangements and, in many ways, is extraordinarily thin in diplomatic and in political-military arrangements. So why not now the -- why wouldn't we as a government -- and to the extent we represent the United States government here -- why wouldn't we take this initiative to introduce essentially a set of proposals to help regulate, if you will, or increase the structure of the Asia Pacific in a political-military sense? Why not do that?

GREEN: We should. There is more happening just in the last year or two on that front than those of us who watch the region have seen in decades. The ADMM-Plus, which is a Southeast Asian-based defense cooperation summit, is now holding regular multilateral exercises almost on a monthly basis, and that's -- that's long overdue.

The U.S. has been urging China since Karl was a colonel in the Pentagon, working on China, to implement a piece of paper we signed on maritime military transparency and confidence-building. And the Japanese would like something like that, and the Chinese won't even talk to them about it.

So we should be doing that. I think the PLA -- and Karl knows this well -- have a different view of transparency and what it means. They would like, as a matter of principle for us, to stop doing surveillance, to stop doing things we've been doing for 60 years in the region. If we can agree on some of those principles, they'll talk to us about transparency.

So we'll make some progress in multilateral exercises. We'll have frustration with confidence-building. But that should be a central part of our effort.

And if I could real quick, the -- the Chinese, as Karl said, want Japan to acknowledge de jure, not just de facto, that there's a dispute. I think the Japanese could do that, but they can't do it under coercion, and we shouldn't want them to do it under coercion.

So this is an area where the U.S. could have a role. It's not brokering, but with clear signals and organizing our friends and allies in the region and partners, make it clear to Beijing they're not going to get any progress and we're going to hold them accountable, as long as they resort to coercion to try to undermine Japan's claim to administrative control of those islands.

But if there's some basis to remove that coercive tool, there might then be a basis for Japan and China to have some -- I mean, the game would be Japan would call on China to go to the international court, knowing the Chinese wouldn't go, but they will have made -- so there is room for us to play, but it can't be ecumenical in the sense we need to recognize that the Chinese coercion is a major problem for all of us in this.

HAASS: OK, so let's -- let's do something the U.S. government is not terribly good at, which is contingency planning. And so let's assume that at some point either some fighter pilot on one or another side will -- his testosterone will get out of control and he will do something quite aggressive, or some ship captain will have too much to drink and he will do something quite dumb, and there's an incident, and there's a collision of aircraft, ships, whatever.

What do we do? What is it we immediately do? Because one of the things that's not obvious to me is the locals. They don't have dedicated communications links. They don't have a large amount of experience in managing crises. So what is it the United States does, if you will, to keep an incident just an incident, rather than the seed of escalation?

EIKENBERRY: You want to start with that one?

BADER: I'll start on that. We do have crisis communication links, the U.S. and China.

HAASS: The U.S. -- yeah...

(CROSSTALK)

BADER: We have, you know, I think CNO with his -- the chief of naval operations with his counterpart, president has a secure link with Xi Jinping. We've used them. And presumably, those would be activated right away. The Japanese and Chinese actually do have some links, but they just haven't utilized them -- utilized them much.

You know, in 2010, when a drunken Chinese sea captain bumped a Japanese coast guard vessel, a few of us were out there immediately talking about Article V and mutual security treaty, to try to send the clear signal to the Chinese that this -- that this had consequences. And, you know, what we've tried to communicate to the Japanese is, the alliance is firm and seamless, but please don't make rocks the centerpiece of the alliance.

You know, what you do in a crisis, I think, you know, this is really Karl's world, but I -- I mean, I have no doubt there would be movements orchestrated from your coast guard and from the region to have some presence. But I think the assumption has been that the Japanese are reasonably capable of taking care of themselves in a small-scale incident, and the U.S. doesn't have to come and shouldn't come charging in, which would, you know, escalate...

(CROSSTALK)

HAASS: But do we move U.S. air and naval assets? I mean, quite honestly, if there is an incident -- and say there's some scrambling of Japanese or Chinese aircraft, there's some movement of vessels, what do we do? And do we physically in any way try to interpose ourselves? Do we hold back? What's our role in this?

EIKENBERRY: Well, in terms of Japanese capabilities, military capabilities, should there be an incident around the Senkaku-Diaoyu, then initially the Japanese do have the capabilities to take care of themselves, so to speak.

The United States really wouldn't have to move forces, Richard, into the area. In fact, that could be -- depending upon how the situation evolved, that could be very counterproductive, because the Chinese could be interpreting this, then, as a reinforcement of the Japanese. And until we understood better what Beijing's intents were, I think that that could be very escalatory.

On the other hand, we have a remarkable set of capabilities that are over the horizon up in space that we can be very useful to the Japanese military, in terms of helping them understand, get situational awareness.

I'd go a step further. If we'd -- if we were to be sending signals, which we would immediately about trying to de-escalate rapidly and trying to get the Japanese and the Chinese to both be saying from Beijing and Tokyo that they wanted to de-escalate this, that we could also play perhaps a role in terms of providing transparency to all sides that would be reassuring that might help them to have the confidence to go forward diplomatically than -- and to begin to talk.

GREEN: I may be the outlier, but -- and it depends a lot on how this happened. You know, did the Japanese provoke by putting a lighthouse up? Did the Chinese, you know, land? I mean, a lot of it depends on how this happened.

But with that as a caveat, if this was -- if this involves -- if it looks like the Scarborough Shoal incident...

HAASS: Explain what that is.

GREEN: So what happened in Scarborough Shoal between the Philippines and China was, the Philippines and China both claimed the waters. The Philippines have been fishing it for a millennium. The U.S. tried to broker in that case an agreement for the forces to stand off. The Chinese side came in anyway. The Philippines Navy took one of these old Coast Guard cutters we gave them and went steaming with flags flying and drums and bugles playing right out into this horseshoe-shaped atoll, and the Chinese cut them off. They didn't have food and water, and they basically pulled out, and they haven't operated there since. The Chinese now have effective operational control.

If that happened with this East China Sea against Japan, the strategic implications for us across the region, in terms of how others view our staying power, the credibility of our security commitments, and how China views them, could be really devastating. So we'd have to take that into consideration. It doesn't mean we move forces. Probably we don't move forces into the immediate area, because my guess is, the Japanese will pull back.

But if we're going to ask the Japanese to stand down, we're going to have to do something. And I think, if this were a simulated NSC, there would be very serious consideration about flexible deterrent options, as they're called, B2s (ph), and so forth, moving to Guam. Not a lot of press necessarily, but there's going to have to be a little bit of muscle, not in the middle of the fight, maybe from space, maybe other assets, and declaratory policy that is just enough to let the Japanese feel confident and the rest of the region feel confident, but not so much that we provoke escalation. That's a tough call. That's why it depends on exactly how it unfolds.

HAASS: But isn't, then, the most complicated scenario one in which the Japanese seem to be the ones who have initiated it? It's one thing, if the Chinese do certain things, then it's almost more straightforward. But it seems to me by far the most complicated policy for -- scenario for the United States is one in which the Japanese, quote, unquote, "seem to be at fault."

GREEN: Are you looking at me?

HAASS: I'll look at...

GREEN: As the Japan guy?

HAASS: Yeah.

GREEN: And then I started studying Korean again. No, I think then you get to the prevention problem. That's why I mentioned earlier, we need to be inside the planning loop. And...

(CROSSTALK)

HAASS: OK. This assumes -- we assume that we missed that opportunity, for whatever reason.

GREEN: Then we have a problem. But then what we -- we start to create it quickly, and we start talking about scenario planning, contingency planning. The other thing that I think...

HAASS: That's what we're talking about now. Mike, basically...

GREEN: No, I mean -- I mean, in the crisis. That's what you have to do.

HAASS: Yeah. Yeah.

GREEN: The other thing I think that's important is to -- this is not the right choice of words, in a way, but regionalize the problem. In other words, you could see with Prime Minister Abe that part of Japan's playbook to deal with a rising China is to strengthen ties with Australia, India, Philippines. Korea would be nice, but it's not happening.

I think in these kinds of crises, we want our Australian friends, other actors to weigh in and to echo the messages of reassurance and restraint. And that kind of external solidarity will help and also send a signal to Beijing that the region has a stake in how this plays.

BADER: Richard, if I could just add a word, I think that the basic formula would be to have highly visible support for Japan combined with extremely strong messaging behind the scenes to them, not to interpret this visible support as anything resembling a blank check or a green light.

I mean, I went through something like this in late 2010 with North and South Korea, after the North Koreans shelled the South Korean islands. And we had to face two questions. One is, do we support the South Koreans in a follow-up exercise? And we had a big debate about it and -- most of us, and the consensus was, yes, we had to, and be visible, and we had a carrier in the region. But we also at the same time stuck, you know, put Mike Mullen on a plane to go out there and tell them, you can -- don't you do any of the things that you are threatening to do that would escalate the situation. So there was a big difference between the public and the private messaging.

HAASS: Let me use the Middle East again as an analogy, in this case where a crisis did lead to extremely productive diplomacy, which was the '73 war. And you had certain things, and out of that, Henry Kissinger was able to do the disengagement agreements and ultimately it set in motion what years later became also an Egyptian-Israeli rapprochement.

Is there anything about a crisis in this part of the world that we can run with it, not that we want one to happen, but if you've got lemons, make lemonade? Is there any lemonade to be made here?

EIKENBERRY: I don't know, Richard. In the case of the Korean peninsula, I could see a path ahead where if there was to be a -- if there were to be an act of war, that perhaps where we are with China right now and the Republic of Korea, there could be opportunity, but in this instance, where we're talking about the East China Sea or the South China Sea, I don't see very clearly where the opportunity would be. I think for now, as I see it, avoidance is critical here.

HAASS: Jeff?

BADER: The dispute between China and Japan is not about the Senkakus. The Senkakus is an excuse. I mean, from the Chinese perspective, I think there are three things, number one, is a visceral, gut resentment of Japan for its historic role vis-a-vis China in the last century. Number two is a tactical desire to use -- to paint Japan as reverting to the 1930s, because they're trying to slow down Abe's building up of the security capabilities. So it's gut, and it's also highly calculated. And the third piece of it is just terror on the part of the Chinese leaders of being -- of appearing to be soft on Japan, because of the impact that that might have on their leadership.

HAASS: So then why wouldn't the answer to your -- if there were a crisis -- I agree with you. So the answer's not to necessarily to -- I wouldn't be against it -- negotiating some new legal or whatever -- political, legal framework for the islands, but that would be the time to basically say, this is a relationship that needs managing. And what we really want to do is put in a much thicker web of ties, whether it's to prevent crises or deal with crises, whether it's bilateral or regional, but that seems to me -- if a crisis scared people about what could happen, and stock markets around the region plummeted, there is an argument -- at least that would be the time to do some things that now might be resented, but in those conditions, there might actually be a greater opening.

GREEN: You might get that effect for a while, clearly, if the U.S. played its role rightly. There's a loss of face. If we -- together with Japan -- somehow force China to back down, that has very dangerous implications for us domestically, to a lesser extent, but still also true in Japan.

If we play it right, we might -- especially if the stock markets crash and the economic players come in -- we might start to get a sort of -- a more stable situation, but it'll be like the 1995-'96 Taiwan Straits crisis, where the militaries were so calculating where their vulnerabilities were, where our vulnerabilities are, and how they build up their force posture over the next decade so they can win next time.

So there's almost -- I hate to sound so pessimistic -- there's almost no way we come out of this with a happy, you know, recognition of how dangerous things were. You know, I -- it's -- I don't see the Cuban missile crisis, you know, scenario necessarily. There's going to be learning. Some of it will be good; some of it will be how to hedge better and prepare better for the future.

EIKENBERRY: I think also that we need to look at Senkaku-Diaoyu in terms of broader Chinese policies now in the East China Sea, the South China Sea. Over the last three decades, China's been remarkably successful, with the exception of India, of finalizing and getting international recognition for its land borders, but it has not on the maritime front, and I think that's where it's turning to right now, and it has growing interest. It has growing capabilities.

And I think it's useful for an audience like this to think about American history and recall in 1823, when President Monroe declares the Monroe Doctrine, and a Monroe Doctrine is declared at a point where America started to define its interests as no European interference in the Western Hemisphere.

Now, if you go back to China, from the mid-1990s until today, you look at their behavior in the maritime domain, and is there -- without anybody in Beijing having a Xi Jinping doctrine locked up in the safe -- but just is there an evolution of their thinking based upon capabilities and interests that they're reaching a point where they -- they don't want U.S. reconnaissance activities 12 nautical miles off of their coast. They have a different view of the Senkaku and Diaoyu. They have a different view of the Spratly Islands.

So I think it's going to be very difficult for us to manage these problems as they come up. You talked about the Philippines case. Now we're talking about Senkaku-Diaoyu. But we also have to bear in mind, in terms of the United States, our way of operating militarily in the Western Pacific since the end of the Second World War was that was an American lake. And I think the Chinese are reaching a point where they have a different interpretation of this.

That's not an argument for us to pull back on any of our commitments, but we have to be clear among ourselves in these kind of discussions that that's -- that's the trajectory China is on, and that's going to be part of the equation here.

GREEN: There is a doctrine, by the way. It was called the Near Sea Doctrine. It's evolved. I was actually briefed on it at the Academy of Military Sciences a few years ago, Central Military Commission approved it. Not unlike the Monroe Doctrine, the ends, ways and means don't match. It's more aspirational. But that's the trend. I think it's pretty clear, yeah.

HAASS: Right. Well, on that note, let's open it up. Anything is fair game, either about the Chinese-Japanese relationship, or we can broaden it out to other potential scenarios. Winston? Ambassador Lord, excuse me?

QUESTION: Just call me Your Excellency, any of those things will work.

(LAUGHTER)

Win Lord, International Rescue Committee. It's good to see some old friends here. First, one quick comment. When Jeff was discussing what we did in 2010, it reminded me of the Taiwan missile crisis, where we -- clearly, China was the provocative party there, but we moved two aircraft carriers, but at the same time, we sent strong message to Taiwan not to treat it as a blank check and to China that we weren't changing our one China policy. So there are echoes there.

But my question to any of you is the following, and you touched on it a little bit. What are the chances the following would work, that the -- and maybe it's happening -- I seriously doubt it, given the atmospherics -- that China and Japan have secret talks, Japan comes up with some formula of great ambiguity, a la Shanghai communique, whatever it was, the '92 consensus with Taiwan, which basically says -- I don't have the language, but our Chinese friends think there's a dispute over these islands. We don't think there's a dispute over these islands, so obviously we disagree. China takes that as saying Japan agrees there's a dispute. Abe tells his people, I didn't change our position, but it's enough, but that is only done by the Japanese in exchange for prior Chinese assurance they would then de facto start cutting down on their patrols and their probes and de facto making a more peaceful situation.

Could this work? And is anybody trying it?

BADER: I'll take the first shot. Winston, it's completely logical. Therefore...

HAASS: So it had no chance whatsoever?

(LAUGHTER)

BADER: I mean, I -- I had this discussion with Japanese friends like a year ago, word for word. And the answer was -- I mean, there were two problems, number one, that Abe wouldn't do it, no matter how artful the language was, and, number two, what was the expectation of how far back the Chinese would go. In conversations I had with Japanese visitors close to Abe, I -- you know, I told them, I thought the best you're going to -- you're not going to get status quo ante. The Chinese are going to continue to send a ship inside those territorial waters. Just they won't do it every week or two. They might do it once per six months or once a year. They're going to feel the need to continue to establish the principle that they have of presence there.

And the answer I got from this gentleman close to Abe was status quo ante is the only thing that is of the slightest interest to us. Now, I have no idea if this was an official position, but those were the kind of feelers I got. Now where we are now, in the wake of Yasukuni, is that almost any conversation is next to impossible for, say, some months.

GREEN: Yeah, I think in the near term, it's impossible. But there are people in the Japanese foreign ministry, I think, who are thinking along those lines and in the Chinese foreign ministry. The problem is that it will help to lower the temperature, but the problem ultimately will be that China's move is very reversible.

And it reminds me of something that was proposed to us when I was in the White House by the foreign ministry, if we stopped Taiwan arms sales, China would pull back its missiles. Some people thought that was a great deal, until they started doing the math and realizing our stopping Taiwan arms sales is much harder to reverse than a quiet, you know, return of some mobile missiles in Fujian.

So the foreign ministry in China tries these things. They had an agreement with the Japanese on joint oil exploration, for example. But as you know very well, Win, the foreign ministry has a very hard time actually implementing these.

So for this to happen, it's going to have to come out of Xi Jinping and the new national security council, or whatever they're translating it as, and for the reason Jeff said, the temperature is just all wrong right now. But in the next three years, I wouldn't entirely rule it out. It just doesn't solve the problem. All it does is lower the temperature.

EIKENBERRY: Yeah, the -- I think the key right now is to find a way as rapidly as possible, if there is a way ahead, to demilitarize this dispute, because it's extraordinarily dangerous. I don't know -- and, you know, my recent trips to Beijing, I'm not certain at this juncture, though, Win, whether the Chinese leadership is, as they've said, given up on Abe. Well, you can say you've given up on him and then things can change next week and they'll talk to him again.

But I do think we're at a point where it's going to require the very highest levels of leadership, Abe and Xi, to set the tone, give the signals for the two sides to sit down in a serious way behind closed doors, which you're talking about, and I think there could be formulas there. I think that one of the outcomes of that, though, would be a better outcome if there was also some kind of crises management mechanism established to where the combined militaries and law enforcement agencies were talking to each other on a daily basis, as I agree with you, Mike, that they'll -- the Chinese will come back and they'll say, domestically, politically, they have to keep on trying to find ways to say that they're asserting their administrative control of Diaoyu, and with that, then, to have that crisis management mechanism established and agreed transparency between the two sides I think would be awfully important to try to sustain the agreement.

HAASS: Yes, sir?

QUESTION: Hi, Dan Rosen. Nice to see everybody. There seems to be a consensus that the domestic utility of this conflict is one of the major drivers here, that this is for domestic consumption on both sides. On the Chinese side, what's going on right now that's so different than a year ago that justifies, in terms of domestic utility, this level of tension? Because there's some Chinese optionality and choice in how high to turn the dial here, I would guess. It's not just a reaction to Japan. It's a choice on Beijing's side.

So what is it in the political economy in Beijing right now that makes this reasonable from a domestic, political perspective?

BADER: Well, let me take an opening shot, Dan. I would not answer the question directly. I mean, what I would say is that I think the reason why China's tone has changed so dramatically in the last two years is because of Abe and because of the perception of the security policies that Abe is pursuing. And the desire to depict Abe as a throwback to the 1930s to try to rally Northeast and Southeast Asian regional opinion against him as a way of sort of putting some spokes -- some brakes on his intended direction on security policy. I think that's fundamentally what is underlying the volume coming out of Beijing now.

HAASS: You don't think it has to do, also, with the slowdown of economic growth, a new leadership trying to establish itself, cutting a closer relationship with the military, trying to harness nationalism for its own domestic political purposes?

EIKENBERRY: My own view would be, yes, that's a factor, and it certainly is. And I think, though, the Chinese leaders collectively, you know, led by Xi right now are also aware that they're facing an extraordinary array right now of domestic problems. They're trying to restructure their economy, which has got huge political consequences. They're facing an environment which is so polluted that they're worried about grassroots movements starting to form and network within China against the party's leadership. We all know what this array of problems is.

And what that leads to, then, is the conclusion of the third plenum of the 18th Party Congress that what they need for the next decade is they need stability. They need stability in China, and they can only maintain stability in China if they have a region that's stable and global security situation which is generally favorable.

So they're not in a real maverick mood right now. They also are very aware of second- and third-order consequences. When they try to play the nationalist card, if they do, they have a history of playing that card, and then the Japanese -- the anti-Japanese protests suddenly take on an anti-party tone to them.

But all of that said, I would agree, Richard, that Xi Jinping taking over -- and he's very activist. In every area, you hear -- we used to hear about Hu and Wen, now you only hear about Xi. And that's in domestic politics. That's in terms of security policies and foreign policies, and perhaps part of it trying to be a strong commander-in-chief and get the People's Liberation Army lined up behind him.

HAASS: Just out of curiosity, where does the establishment or the declaration of the new air defense zone, what's your interpretation of that? Is that an exception to this? Is this part of it? I mean, did the Chinese miscalculate? What's your...

GREEN: I think this is part of a playbook that was established under this maritime doctrine, with ADIZs somewhere in our future in the West Sea or...

HAASS: Please explain -- don't -- you can't use that -- you can't say ADIZs. No one knows what you're talking about.

GREEN: Sorry, air defense identification zone, which is a mouthful. Can I say ADIZ now? Because there's going to be another one in Yellow or West Sea, west coast of Korea, and in the South China Sea. And this is salami slicing.

I'm told -- and Jeff or Karl may know better -- that the leadership actually expected Vice President Biden to cancel his trip over this and that the U.S. response – though still quite firm on the military side, and I think if they felt that they misread our politics, our foreign policy, but that the U.S. response was perhaps less than they expected.

So I think this is -- this is not a one-off. I think step by step, we're going to see more and more of these things. And we'll just have to take them as they come, but we have to put it in part of a larger strategic construct we don't quite have yet.

HAASS: Roger?

QUESTION: (OFF-MIKE) Capital. The tone, of course, in Washington, when I got there four years ago, was that they got a lot of economics at stake and they won't do anything to put that at risk. So I think that National Security Council meeting that you're convening here today, Richard, would have a lot on the economic aspects of it, particularly what kind of economic carrots and sticks can be brought to the table.

And you have to realize the Chinese have numerous grievances against us, and then generally, on many things, but it -- the bullying started with the rare earth embargo in 2010. And the first grievances that we actually went forward a WTO case against China, on the case of rare earth, of market manipulation, and that's still ongoing.

But they have grievances on investment. They're very active in going to the Financial Times and other newspapers complaining that they're not treated fairly by the Committee on Foreign Investment in the United States, CFIUS. They have grievances that they -- that we goaded them for support -- financial support for countries in trouble at the IMF and the World Bank, but they don't get the quid pro quo of American support for them having greater influence on decision-making. And they think that TPP, the Trans-Pacific Partnership negotiations, is -- one, the economic side of the pivot, namely, a containment policy against China, and they say they don't want to be contained.

So each one of those grievances gives an opportunity and a risk. The opportunity is, meet some of their objections. Open things up. Sell them more military high-tech products, which is in every speech that all of the Chinese leaders always say. You think that trade is about foreign exchange rates; we think it's because of the stuff that you won't sell us.

On the other hand, we need the Chinese on things like Iranian sanctions enforcement. And so we are in a much more complex economic and financial situation with China than any adversary you can dredge up from the Cold War. We didn't have any of these kinds of links with the Russians.

HAASS: Let me just mention one thing which Roger didn't, which is our dependence in part on Chinese dollar holdings and our need for them to participate in the -- our lifestyle, essentially, sustaining our deficit and our debt. How much does that constrain us, if we were -- if we wanted to suddenly side with Japan and we suddenly saw the set of the -- the head of the Chinese central bank suddenly announce that they were going to cease dollar purchases until such a time as the United States backed off and reconsidered its deployment of forces, where would that put us?

GREEN: They can hurt us. They can hurt us.

HAASS: I meant Treasury purchases, but you know.

GREEN: They can hurt us, but if you continue down that escalation or up that escalation logic, a global economic meltdown is bad for us. It's terminal for the Chinese Communist Party. And obviously, we want to avoid that, but we shouldn't be more afraid of this than necessary.

And Abe spends 80 percent of his time on the economy. And I imagine that for Xi Jinping it's a comparable amount of his time. Abe's told people this. I imagine for Xi Jinping it's comparable.

So it's not like either leader -- well, I think Jeff put it well. They have -- there's a utility in a certain amount of friction. Abe would not have come back politically without China's pressure on Japan. But these economic factors, I think, are very heavy in both leaders' minds.

And we, for our part (OFF-MIKE) we're not checkmated. I don't think this fundamentally changes our toolkit in how we would deal with a crisis like this.

EIKENBERRY: I guess I'd make two points here, the first on the degree of interdependency, not only between the United States and China, but between China and Japan and China -- and many other countries. It's pretty striking. Last year's bilateral trade, over $500 billion between the United States and China, the Chinese hold $1.2 trillion of Treasury notes. They're our largest source of imports. They're – China is our third-largest source of -- or destination for our exports. In the case of Japan, their largest bilateral trading partner is China.

So I've heard people now talk about, do you remember during the Cold War days that we had mutually assured destruction with nuclear weapons? Now people talk about mutually assured economic destruction. And that's the world that we live in.

I would -- I would take a little bit of note, though, on the points you had made about our economic relations with China. Actually, there are -- maybe two years ago, I would have agreed. I don't think that I would, though. The currency problems that were really first on the agenda, those seem to be managed now in a pretty good way. The Chinese are very interested in a bilateral investment treaty with the United States, and now they've come forward in agreement, they'll have a negative list, rather than the positive, which we couldn't have moved forward with.

And interestingly, on TPP (inaudible) agree with you. Two years ago, you heard from the Chinese, TPP is part of containment. Now, increasingly, you're hearing the Chinese economists, political leaders say if we can get a BIT, then maybe TPP is next, because it could very well be in China's interest, because if you look at their reform package that they've announced with the third of the 18th, then the TPP could also be a very good model for them to follow for the enactment of reforms.

HAASS: I apologize for the use of acronyms. That's -- BIT is a bilateral investment treaty. TPP is the trade agreement that's being negotiated across the Pacific. And I will try to get these people here to desist from the...

(UNKNOWN): We're from Washington.

HAASS: ... ADIZs and other such things, but clearly, I'm failing in my -- in my efforts.

(CROSSTALK)

HAASS: There was somebody here. Yes, sir, John?

QUESTION: Thanks. John Makin, Cornwall Capital and American Enterprise Institute. Listening to you gentlemen makes me wonder if the island dispute isn't a red herring. That is, given the range of issues you've discussed, let's say we could -- we solve the problem tomorrow and both China and Japan say we don't care about this pile of rocks -- not likely, but it's a good thought experiment -- in my view, we'd still have some serious problems. And as I think it's been pointed out, the Chinese leadership probably hasn't planned on how aggressive Mr. Abe is being, and yet Mr. Abe is where he is because he's being aggressive.

What role -- and you've touched on some of this, but is there a role that the United States can play or can hope to play, or should we just assume that we'll -- that there will be a conflict of some sort and do a lot more contingency planning?

GREEN: Well, we should do contingency planning, because there are probably 20,000 people in Washington who depend on that for their livelihood. No, because...

(LAUGHTER)

Because...

HAASS: Is this a jobs program?

GREEN: As I said earlier, we need to be thinking ahead about this jointly with the Japanese so that we can urge restraint and do it from a position where they'll be confident. The -- the Chinese made Abe. He was in the wilderness. He was finished politically, most people think. He came back because the Chinese were beating up the government in power. Without China, there would have been no recovery for Mr. Abe.

But I would say it's important to briefly, very briefly define what he's doing. And people talk about it as being aggressive. And the shrine visit certainly didn't help with management of that issue for him.

But if you set that aside for a moment and just look at his actual policies, he's increasing the defense budget by about 0.8 percent this year after 11 years of decline. The Chinese defense budget has been double-digit for almost two decades. He said -- not that he's going to revise the constitution -- that will take time, he knows it -- he's going to change some of the interpretations to allow a more collective defense with the U.S., so that we can have the kind of virtual joint and combined relationships and plan together and do more together that we do with Korea or Australia or Canada or any number of allies. He's actually slowed down that process, to the frustration of many in the Pentagon.

So it's important to keep it in perspective. He's not, you know, looking out for demons to slay. He's spending, as I said, 80 percent of his economy on what keeps him in power in a parliamentary system, which is growing the economy, and in that, not so unlike Xi Jinping.

HAASS: Yes, ma'am?

QUESTION: My name is Contessa Bourbon from the New York Times. How possible it is that the United Nations can settle the territorial dispute? Has the Philippines filed a case against China at the U.N.? And is it possible that conflict between Japan and China can also be settled through the United Nations?

HAASS: (OFF-MIKE) about the Philippine case (OFF-MIKE)

EIKENBERRY: Whether, you know, broadly...

HAASS: Whether that's a precedent in any way.

EIKENBERRY: ... whether these territorial disputes can be solved by the United Nations arbitration.

BADER: Look, you know, I think that the Philippines -- you know, the Philippines did not consult us before they went to the U.N. Law of the Sea tribunal. And I think it's a good thing they didn't consult us. I think the U.S. would have discouraged them from going there, and I think it's a very good thing that they went there. I think it was very smart.

They have good lawyers, and they've come up with a very good set of arguments, which focus on the issue of the nine-dash line in the South China Sea. And for those of you who are not familiar with it, basically, that's a line that the Chinese inherited for the Kuomintang government, which covers 3.5 million square kilometers in the South Pacific and in which the Chinese assert some sort of unspecified claims perhaps to all of the waters. It's not clear.

Anyway, the Philippine case is challenging that. My guess is the Philippines will not do too badly in the outcome of the case. It won't be an unambiguous outcome, but they may do fairly well in it. And the Chinese will ignore the outcome.

But I think it will help spur a debate within China. There are a lot of lawyers in China, there a lot of people who are looking at these kinds of issues, and I think it will help the people who within China take international law seriously, who take globalization seriously, and it will provide an argument, not for immediate, you know, surrender to the Philippine position.

Now, this doesn't really go to the sovereignty issues. I cannot picture a situation where the parties go to U.N. tribunals on sovereignty issues. Look, I mean, the Japanese have offered to go to the world court on the Takeshima-Dokdo issue, and the South Koreans have refused. South Koreans would almost certainly win in the case where they go, but they refuse, even though they'd win. I mean, there's -- the nationalism trumps the logic and the immediate advantage in most of these cases.

EIKENBERRY: And possession, also -- also has something to do it, as the Koreans have got possession.

BADER: Yeah, that's right.

EIKENBERRY: So they don't want to take it into arbitration.

GREEN: If there's -- if there's a diplomatic process that could help, aside from confidence-building, which Karl and I have discussed, between the militaries, it's all about fish. And Japan and Korea were at odds over Dokdo or Takeshima, but in '98, they signed a fisheries agreement, and the issue subsided until the fisheries agreement started falling apart. And it was local fishermen in Japan that started raising this issue.

Taiwan just reached an agreement with Japan. Taiwan also claims the Diaoyutai-Senkakus. That fisheries agreement has calmed down a lot of Taiwanese fishermen who were trying to agitate and cause trouble. So if there's an area for diplomacy that would make a difference, in addition to military-to-military confidence-building, it might be fish.

The stocks are moving north because of climate change, so it's the fishes' fault. If we can find a way to harvest them together more peacefully, that -- that actually in the past has gone -- in the recent past, with Japan and Taiwan, a long way towards lowering the temperature on these issues.

HAASS: I've been to a lot of Council meetings. I've never heard anybody blame a dispute on the fish before, and just -- at some point, someone will speak up for the fish.

Jeff, you get the last question.

QUESTION: Jeff Laurenti. I wonder if you might tell us, what is the view in Tokyo, in Beijing, if any, of the American now phase-out, perhaps fade to black in Afghanistan? That is, is this seen as a sign of either lost American credibility? Is it a sign simply that the Americans have done their best and this is a hopeless situation, a little bit of sympathy?

And particularly for the Chinese, who actually have a border, small, but a border with Afghanistan, and that have in the Uighur parts of Xinjiang, major problems with jihadism, what is the stake for the Chinese in a post kind of American presence in Afghanistan in trying to keep the Taliban out? What is their likely role? One assumes the Japanese have no interest or stake at all there.

EIKENBERRY: Well, maybe I can talk from Beijing's view.

(UNKNOWN): Know something about Afghanistan?

EIKENBERRY: The -- I think what the Chinese worry -- the only thing they worry about more than Americans having a long-term presence in Afghanistan is the Americans not having a long-term presence in Afghanistan, because as the uncertainty now is out there for all of us to be concerned about, about what's going to happen to our military relationship and our security agreements with Afghanistan. After 2014, will we even have one? The Chinese are increasingly concerned.

And why would they be concerned? You already mentioned one, the possibility, then, of Al Qaida and their confederates. Specifically, they worry about the Uzbekistan independent movement gaining sanctuary, again, inside of Afghanistan. They're worried, also, I think, geopolitically about if they see the return of a great -- new great game actors, but the return of the great game, that they should -- they would have great problems on their western flank, and that could extend into Central Asia, where they've made extraordinary investments in terms of resource development, natural gas, and oil, pipeline development, and they also worry about the potential impact on instability in Pakistan.

So we are talking to the Chinese about Afghanistan. We talk about bilateral cooperation programs, where I think the bigger opportunity is -- and the imperative is, I think the Chinese understand this, is that even if the United States of America and Beijing were to sit down and say that the two of us together and alone were going to solve this problem, it's beyond our reach, because there's a lot of other actors who get votes, Pakistan, India, Iran, Russia, and -- and the European Union, NATO can help.

Each one of those actors that are out there, we probably -- we, the Chinese and the Americans, have got comparative advantages in influence and leverage that we have, so can we sit behind closed doors and come up with a collaborative strategy, but knowing that it's not going to be bilaterally implemented, and see if, as Xi Jinping and our -- and President Obama have talked about, a new kind of relationship going forward? It seems to me that's the kind of relationship we should be working for, that we don't want to minimize problems over Senkaku and Diaoyu. We certainly want to work to avoid a crisis catching us by surprise. But there might be some greater global opportunities for collaboration and alignment. I think Afghanistan's one of them.

HAASS: And on that...

GREEN: Just on -- oh, sorry.

HAASS: Go ahead. No, go ahead.

GREEN: Real quick on Japan. The Japanese at our request invested very heavily in stability and development in Afghanistan, second largest after us, in terms of ODA. And so I'm sure they're frustrated and disappointed, as we are.

But the event in that part of the world that has struck at the Japanese and Korean confidence in the U.S. was not Afghanistan. It was Syria. And it wasn't that they wanted us to use force, necessarily, but the fact that we -- that the president said we would use force and then threw it to the Congress, to the Koreans looking at North Korea with chemical weapons, by the way, and the Japanese looking at China, that was unnerving. And that is what you hear about when you talk to senior people in those capitals.

BADER: Just...

HAASS: Sure. Yeah, the last one.

BADER: The U.S. dialogue with China on Pakistan, which I have observed for years, is incredibly sterile. The Chinese do not wish to have a serious dialogue on Pakistan. They wish to own the Pakistan relationship, and they don't want us to have any visibility on it.

I think that Afghanistan is a bit of an offshoot of that in a sense. I think Karl is right, that we do in theory have more in common there, and we should be able to do more, but I fear that the Chinese approach to Afghanistan is somewhat reflective of their approach on Pakistan, which, of course, they use as a hedge against India.

HAASS: I don't know how to say be careful what you wish for in Mandarin, but anyone who wants to own the Pakistan relationship, I say, be careful what you wish for.

(LAUGHTER)

This is interesting. A little bit more sanguine than I thought, and I hope you're right. I'm not persuaded you are. But, again, I want to thank you actually for two things. I want to thank you for tonight, but amongst these three gentlemen, we have literally decades of service to our government and our country, so I want to thank them for that, as well.

(APPLAUSE)