Japan has been hit unexpectedly hard by the global economic  recession.  Although Japanese financial institutions were not  seriously damaged by the initial financial crisis in the United  States, the economy has been staggered by an unprecedented drop in  exports.  With the economy likely to shrink by five to six percent  in 2009, Japan faces the worst economic downturn in over a half  century.  Policy responses to this situation have been complicated  by the uncertain political situation, with an unpopular prime  minister and a looming election for the lower house of the national  Diet.

What does all this mean for relations with the United States?   There are several important developments.  First, one impact of the  crisis is a shrinkage of Japan's current-account surplus, implying  that (at least in 2009) Japan will be a much smaller net supplier  of capital to the United States and the rest of the world.  Second,  the government appears to be willing to respond to the crisis with  strong fiscal stimulus, which should please the Obama  administration.  Third, even with stimulus in Japan, economic  recovery will lag behind that of the United States because real  recovery will depend on an upturn in exports.  Fourth, it is China,  not Japan, that will be the key among Asian countries.  China will  continue to grow, and is also applying fiscal stimulus, so it will  likely play a significant global role in enabling an end to the  recession.
All of these factors will play into bilateral relations,  complicated by the political uncertainty in Japan.  Bilateral  relations are close, and will remain so in the Obama  administration.  But the administration is likely to view Japan as  playing only a limited role in the global effort to cope with the  consequences of the financial and economic crisis.

About the Speaker:

Edward J. Lincoln joined NYU in 2006 to be director of the Center for Japan-U.S. Business and Economic Studies and clinical professor of Economics at the Stern School of Business. Professor Lincoln teaches courses on the global economy.

Professor Lincoln’s research interests include contemporary structure and change in the Japanese economy, East Asian economic integration, and U.S. economic policy toward Japan and East Asia. His latest book, on the underappreciated importance of economic issues in international relations and American foreign policy, is Winners Without Losers: Why Americans Should Care More About Global Economic Policy, published in 2007. He is the author of eight other books and monographs, including East Asian Economic Regionalism (The Council on Foreign Relations and the Brookings Institution, 2004), Arthritic Japan: The Slow Pace of Economic Reform (Brookings, 2001), and Troubled Times: U.S.-Japan Economic Relations in the 1990s (Brookings, 1998). An earlier book, Japan Facing Economic Maturity (Brookings, 1988) received the Masayoshi Ohira Award for outstanding books on the Asia-Pacific region.

Before joining NYU, Professor Lincoln was a senior fellow at the Council on Foreign Relations, and earlier a senior fellow at the Brookings Institution. In the mid-1990s, he served as Special Economic Advisor to Ambassador Walter Mondale at the American Embassy in Tokyo. He has also been a professorial lecturer at the Johns Hopkins University School of Advanced International Studies.

Professor Lincoln received his Bachelor’s degree from Amherst College, his M.A. in both economics and East Asian Studies at Yale University, and his Ph.D. in economics also at Yale University.

Joshua Teitelbaum, PhD (Tel Aviv University, 1996). Senior Research Fellow at the Moshe Dayan Center for Middle Eastern and African Studies and Senior Lecturer in the Department of  Middle Eastern and African History, Tel Aviv University. Visiting Associate Professor, Department of Political Science, Center on Democracy, Development, and the Rule of Law, Stanford University. W. Glenn Campbell and Rita Ricardo Campbell National Fellow, Hoover Institution, Stanford University. Fields of specialization: the history of the Arabian Peninsula, specifically Saudi Arabia, Palestinian history and politics.

Author of The Rise and Fall of the Hashimite Kingdom of Arabia (2001) and Holier Than Thou: Saudi Arabia's Islamic Opposition (2000). Editor of Political Liberalization in the Persian Gulf  (2008).

Mired in political gridlock, battered by economic crisis, and uncertain about its foreign relations, Ukraine faces a difficult year, a year that will end with a presidential election.  How is Ukraine coping with these difficulties?  And how should the West respond in helping Ukraine meet the challenges before it?

Synopsis

Ambassador Pifer begins his assessment of Ukraine’s challenges by identifying the four key issues it will have to face this coming year. Firstly, Mr. Pifer argues that a serious problem is the incompatible relations between Ukraine’s president, Viktor Yushchenko, and Ukraine’s prime minister, Yulia Tymoshenko. Mr Pifer identifies the energy situation as a key battle issue between the two. Most seriously, Mr. Pifer believes that such feuding compromises Ukraine’s ability to deal with serious issues such as energy and the economic crisis. In addition, Russia seems to play the two against each other. Therefore, Mr. Pifer argues that the West begin by getting the two to cooperate on key issues. Mr. Pifer also stresses the need for a coordinated US-EU stance and also proposes the possible revival of a US-Ukraine bi-national commission.

An aspect of Ukraine clearly being affected by this feud is Ukraine’s handling of the economy. Mr. Pifer examines how Ukraine was suddenly hit hard by the global financial crisis in October 2008. This was partly caused by a fall in the global demand for steel, one of Ukraine’s key exports, and led to further inflation and investors avoiding the country. Ukraine also received $16 billion from the IMF on the conditions of having almost no budget deficit and fell short of this condition earlier this year leading to a delay in the transfer of funds from the IMF. While some believe in a possible recovery in 2010, Mr. Pifer argues the West can help in several ways. Firstly, it must push Ukraine to continue to follow IMF conditions to receive the vital funding. Mr. Pifer also proposes an international donor conference for Ukraine to receive the additional money it needs but will not receive from the IMF. He argues for the abolition of Ukraine’s “communist” commercial code and the freer sale of land to get the agricultural market flowing.

Another possible crisis point is Ukraine’s energy situation. Mr. Pifer examines Ukraine’s dependence on Russia and how during the January crisis it did not pass any reserve gas onto its Western neighbors, weakening its international reputation. Mr. Pifer does recognize Ukraine’s efforts to lessen its use of natural gas, particularly due to the increase in prices. However, he argues Ukraine is still very vulnerable, and this is not helped by the fact that Ukraine’s own energy agency is nearing bankruptcy as it maintains unsustainably low prices. Therefore, Mr. Pifer believes the first step forward is, although tough, for energy prices to be raised. Then, the West should offer technical assistance to improve the efficiency of Ukraine’s energy system. Finally, Ukraine should seek EU funding to modernize its pipelines.

The final issue Mr. Pifer addresses is Ukraine’s complex foreign policy. Mr. Pifer explains Ukraine’s difficult relationship with Russia is marred by differences over energy, NATO, and Georgia. Mr. Pifer also cites Russia’s resources in Ukraine to stir tension if it wants to weaken the country. Another serious aspect is Ukraine’s uncertain relationship with the EU consisting of support from the Baltic states and reluctance from the Western states such as France and Germany. Mr. Pifer feels it is important for the West not to give up on Ukraine but to push the country to forge a consistent line between president and prime minister. The US should also let Ukraine know how much support it would receive were it to become involved in an economic conflict with Russia.

Mr. Pifer concludes by stating that the US should be clear that this new attempt at resetting relations might not survive a Russian-initiated crisis with Ukraine.

In answering the audience's multitude of questions, a variety of issues were raised. Discussion included key points such as the receptiveness of Ukrainian leaders to international advice or the impact of Ukraine's membership of the World Trade Organization. One issue Mr. Pifer particularly emphasized was his belief that Ukraine should not be part of NATO as long as public opinion stands against it.

about the speaker

Steven Pifer is a visiting fellow at the Brookings Institution and a (non-resident) senior adviser with the Center for Strategic and International Studies. A retired Foreign Service officer, his more than 25 years with the State Department focused on U.S. relations with the former Soviet Union and Europe, as well as on arms control and security issues. His assignments included deputy assistant secretary of state in the Bureau of European and Eurasian Affairs (2001-2004), ambassador to Ukraine (1998-2000), and special assistant to the president and National Security Council senior director for Russia, Ukraine and Eurasia (1996-1997). He also served at the U.S. embassies in Warsaw, Moscow and London, as well as with the U.S. delegation to the Intermediate-Range Nuclear Forces negotiations in Geneva. He holds a B.A. in economics from Stanford University, where he later spent a year as a visiting scholar at Stanford's Institute for International Studies. He is a member of the Council on Foreign Relations.

Sponsored by the Forum on Contemporary Europe and the Center for Russian, East European and Eurasian Studies.