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Friday, November 26, 2010

U.S.-Australia Civilian Nuclear Cooperation: Issues for Congress


Mary Beth Nikitin
Analyst in Nonproliferation

Bruce Vaughn
Specialist in Asian Affairs


Australia and the United States have cooperated in the peaceful use of nuclear energy since the mid-1950s. The framework for this cooperation is a civilian nuclear cooperation agreement as required by section 123 of the Atomic Energy Act. President Obama transmitted the proposed text of the latest renewal agreement to Congress on May 5, 2010, along with the required Nuclear Proliferation Assessment Statement (NPAS) and his determination that the agreement promotes U.S. national security. Congress has 30 days of continuous session for consultations with the Administration, followed by an additional 60 days of continuous session to review the agreement. If not opposed by a joint resolution of disapproval or other legislation, then the agreement will be considered approved at the end of this time period. Congress also has the option of adopting either a joint resolution of approval with (or without) conditions or standalone legislation that could approve or disapprove the agreement.

The United States and Australia first concluded a civilian nuclear cooperation agreement in 1957. That agreement was updated in 1979. Australia sells around 36% of its $1 billion in uranium exports to the United States. The United States is also a major processor of Australian uranium sold to other countries. Australia does not currently possess any nuclear power plants, but it operates one research reactor.



Date of Report: November 18, 2010
Number of Pages: 13
Order Number: R41312
Price: $29.95

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North Korea: U.S. Relations, Nuclear Diplomacy, and Internal Situation

Emma Chanlett-Avery
Specialist in Asian Affairs

Mi Ae Taylor
Research Associate in Asian Affairs


North Korea has been among the most vexing and persistent problems in U.S. foreign policy in the post-cold war period. The United States has never had formal diplomatic relations with the Democratic People’s Republic of Korea (the official name for North Korea). Negotiations over North Korea’s nuclear weapons program have consumed the past three U.S. administrations, even as some analysts anticipated a collapse of the isolated authoritarian regime. North Korea has been the recipient of well over $1 billion in U.S. aid and the target of dozens of U.S. sanctions.

This report provides background information on the negotiations over North Korea’s nuclear weapons program that began in the early 1990s under the Clinton Administration. As U.S. policy toward Pyongyang evolved through the George W. Bush presidency and into the Obama Administration, the negotiations moved from mostly bilateral to the multilateral Six-Party Talks (made up of China, Japan, Russia, North Korea, South Korea, and the United States). Although the negotiations have reached some key agreements that lay out deals for aid and recognition to North Korea in exchange for denuclearization, major problems with implementation have persisted. With talks suspended since 2009, concern about proliferation to other actors has grown.

Meanwhile, North Korea’s reclusive regime has shown signs of strain under its ailing leader Kim Jong-il. Pyongyang may be struggling as a result of the impact of international sanctions, anxiety surrounding an anticipated leadership succession, and reports of rare social unrest in reaction to a botched attempt at currency reform in November 2009. North Korea has initiated a string of provocative acts, including an alleged apparent torpedo attack on a South Korean warship that killed 46 South Korean servicemen in March 2010. As the international community takes measures to respond to the aggression, pressure is building on China, as the North’s sole ally and benefactor, to punish North Korea by enforcing international sanctions or cutting off some aid.

The Obama Administration, like its predecessors, faces fundamental decisions on how to approach North Korea. To what degree should the United States attempt to isolate the regime diplomatically and financially? Should those efforts be balanced with engagement initiatives that continue to push for steps toward denuclearization, or for better human rights behavior? Is China a reliable partner in efforts to pressure Pyongyang? Have the North’s nuclear tests and alleged torpedo attack demonstrated that regime change is the only way to peaceful resolution? Should the United States continue to offer humanitarian aid?

Although the primary focus of U.S. policy toward North Korea is the nuclear weapons program, there are a host of other issues, including Pyongyang’s missile program, illicit activities, and poor human rights record. Modest attempts at engaging North Korea, including joint operations to recover U.S. servicemen’s remains from the Korean War and some discussion about opening a U.S. liaison office in Pyongyang, remain suspended along with the nuclear negotiations.

This report will be updated periodically.

(This report covers the overall U.S.-North Korea relationship, with an emphasis on the diplomacy of the Six-Party Talks. For information on the technical issues involved in North Korea’s weapons programs and delivery systems, as well as the steps involved in denuclearization, please see the companion piece to this report, CRS Report RL34256, North Korea’s Nuclear Weapons: Technical Issues, by Mary Beth Nikitin. Please refer to the list at the end of this report for the full list of CRS reports focusing on other North Korean issues.)



Date of Report: November 10, 2010
Number of Pages: 21
Order Number: R41259
Price: $29.95

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Monday, November 15, 2010

Indonesia: Domestic Politics, Strategic Dynamics, and U.S. Interests


Bruce Vaughn
Specialist in Asian Affairs

With a population of 240 million, Indonesia is the largest country in Southeast Asia and the most populous Muslim-majority nation in the world. Its size, its emerging democracy and economic vibrancy, and its strategic position across critical sea lanes linking the Middle East with East Asia have led many to consider it an emerging middle-tier power. The U.S. maintains close relations with Indonesia, with considerable security, economic, and trade ties, although human rights concerns about the Indonesian armed forces have long been a thorn in the relationship.

In the 12 years since a catastrophic economic crisis led to the fall of longtime President Suharto, Indonesia has undergone a remarkable transformation. It has held two successful direct Presidential elections, both of which were considered largely free and fair, and conducts dozens of actively contested provincial and local elections each year. Its economy regularly posts growth of better than 6% annually, although poverty remains considerable and corruption widespread.

Discussion of Indonesia has shifted from speculation about its possible breakup due to separatist sentiments in places such as Aceh, the Malukus, West Papua, and the now independent state of Timor Leste to admiration of its democratic transformation, its relatively strong performance in the recent global economic crisis, its cooperation in efforts to combat terrorism, and its growing role in regional diplomatic institutions, international efforts to combat climate change, and its membership in the G-20.

In recent years, U.S. policy towards Indonesia has focused on cementing ties with a geopolitically important state that can play an active role in regional diplomatic institutions, and encouraging Indonesia to combat terrorism and effectively counter the rise of violent Islamic militancy. The United States has also sought to promote democracy, the rule of law and human rights, and to further American trade and investment interests in Indonesia.

The election of President Barack Obama, who spent part of his childhood in Indonesia, did much to spur expectations in Indonesia that the U.S.-Indonesia bilateral relationship would be enhanced. Expectations have been dampened by planned Presidential trips that were postponed in 2010, but the President plans to visit in November 2010, and is expected to sign a Comprehensive Partnership Agreement with Indonesian President Susilo Bambang Yudhoyono (SBY). The agreement is expected to cover a range of issues including trade and investment, food security, science and technology, educational exchanges, and military cooperation.

Congressional concerns have included oversight of the Obama Administration’s policies towards Indonesia, including the Comprehensive Partnership, Indonesia’s role in regional diplomacy, the restarting of comprehensive military-military relations, and policies to encourage human rights performance, particularly in restive West Papua.



Date of Report: October 27, 2010
Number of Pages: 39
Order Number: RL32394
Price: $29.95

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Friday, November 12, 2010

China’s Currency: An Analysis of the Economic Issues

Wayne M. Morrison
Specialist in Asian Trade and Finance

Marc Labonte
Specialist in Macroeconomic Policy


Since 1994, the Chinese government has maintained a policy of intervening in currency markets to limit or halt the appreciation of its currency, the renminbi (RMB), against the U.S. dollar and other currencies. Critics charge that this policy has made Chinese exports to the United States significantly cheaper, and U.S. exports to China much more expensive, than would occur under free market conditions. Some policymakers argue that China’s currency policy is a major factor behind the large annual U.S. trade deficits with China and has lead to the widespread loss of U.S. manufacturing jobs. Some economists have argued that China’s currency policy is disruptive to global economic recovery because it induces many countries to intervene in currency markets in an effort to hold down the value of their currencies against the dollar in order to enable their firms to remain competitive vis-à-vis Chinese firms. Some economists have expressed concern that these actions may worsen economic imbalances and could undermine the world trading system.

From July 2005 to July 2008, the central bank of China allowed the RMB to appreciate against the dollar by about 21%. However, once the effects of the global economic crisis began to become apparent, China halted appreciation of the RMB in an effort to limit job losses in industries dependent on trade. From July 2008 to late June 2010, China kept the exchange rate of the RMB at roughly 6.83 yuan (the base unit of the RMB) to the dollar. On June 19, 2010, the China’s central bank stated that, based on current economic conditions, it had decided to “proceed further with reform of the RMB exchange rate regime and to enhance the RMB exchange rate flexibility.” From June 18 to October 29, 2010, China allowed the RMB/dollar exchange rate to rise by 1.9% overall. U.S. officials have criticized the slow pace of RMB’s appreciation, especially given the rapid growth in Chinese exports over the past year, and have urged China to quicken the pace of currency reform and flexibility.

Many Members of Congress have urged the Obama Administration take a more aggressive stand against China over its currency policy, including designating it as a “currency manipulator” under U.S. trade law. Several currency-related bills have been introduced in the 111
th Congress, including H.R. 2378, S. 1254, S. 1027, and S. 3134. On September 29, 2010, the House approved an amendment in the nature of a substitute to H.R. 2378, which would attempt to treat certain fundamentally undervalued currencies as an actionable subsidy under U.S. countervailing laws, which could result in higher tariffs on imported Chinese products. In addition to bilateral talks, the Obama Administration has sought to put more pressure on China by attempting to boost multilateral cooperation on addressing exchange rate policies and global trade imbalances.

Many economists contend that a sharp appreciation of the RMB would help to rebalance the global economy, but note that this must be accompanied by lower saving and greater consumption in China. An immediate and sharp appreciation of China’s currency could disrupt its export industries and lead to widespread lay-offs, which in turn could slow its economic growth and reduce import demand. However, if RMB appreciation occurred along with measures to boost domestic consumption, laid off Chinese workers in the export sector would be able to find jobs in other (non-export) sectors, which could help maintain healthy economic growth and boost Chinese demand for imports. While an appreciation of the against the dollar could help boost U.S. exports to China, it could also entail costs to the U.S. economy in the near term. China would not need to buy as many U.S. Treasury securities, which could cause real U.S. interest rates to rise. A more expensive RMB could also mean higher costs for U.S. consumers as well as firms that use Chinese-made inputs for their products. To reduce U.S. external imbalances (including with China), the United States would need to boost national saving.



Date of Report: October 29, 2010
Number of Pages: 38
Order Number: RS21625
Price: $29.95

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Wednesday, November 10, 2010

U.S.-South Korea Relations


Mark E. Manyin, Coordinator
Specialist in Asian Affairs

Emma Chanlett-Avery
Specialist in Asian Affairs

Mary Beth Nikitin
Analyst in Nonproliferation

Mi Ae Taylor
Research Associate in Asian Affairs


Since late 2008, relations between the United States and South Korea (known officially as the Republic of Korea, or ROK) have been arguably at their best state in decades. By the middle of 2010, in the view of many in the Obama Administration, South Korea had emerged as the United States’ closest ally in East Asia.

Of all the issues on the bilateral agenda, Congress has the most direct role to play in the proposed Korea-U.S. Free Trade Agreement (KORUS FTA). Congressional approval is necessary for the agreement to go into effect. Presidents Obama and Lee Myung-bak have announced their desire to resolve U.S. concerns over market access for autos and beef by the time they meet again in Seoul during the November 2010 Group of 20 (G-20) meeting. Obama said that he intends “in the few months” after the November meeting to present Congress with the KORUS FTA’s implementing legislation. If approved, the agreement would be the second largest FTA market in which the United States participates, after the North American Free Trade Agreement (NAFTA).

The two countries’ coordination over policy towards North Korea has been particularly close. The Obama and Lee Administrations have adopted a medium-to-longer-term policy of “strategic patience” that involves three main elements: refusing to return to the Six-Party Talks without an assurance from North Korea that it would take “irreversible steps” to denuclearize; gradually attempting to alter China’s strategic assessment of North Korea; and using Pyongyang’s provocations as opportunities to tighten sanctions against North Korean entities.

Additionally, the Obama Administration has said that an improvement in inter-Korean relations is a prerequisite for the United States to enter into meaningful negotiations with North Korea. Lee, in turn, has linked progress in most areas of North-South relations to progress in denuclearizing North Korea. South Korea halted almost all remaining forms of inter-Korean projects after the March 2010 sinking of the South Korean naval vessel, the Cheonan, an event the United States and South Korea have blamed on North Korea. Even before the sinking, most inter-Korean cooperation projects already were shrinking due to rising tensions between the two Koreas. The sinking further eroded the loose consensus that had prevailed in South Korea against openly discussing and planning for reunification in the short- or medium-term. While few South Koreans advocate actively trying to topple the Kim Jong-il regime, the Cheonan sinking has led many in the Lee government to view North Korea as much more of an immediate danger than previously thought.

The United States maintains about 28,500 troops in the ROK. Since 2009, the two sides have accelerated steps to transform the 56-year U.S.-ROK alliance’s primary purpose from one of defending against a North Korean attack to a regional and even global partnership, in which Washington and Seoul cooperate on a myriad of issues beyond the Korean Peninsula. The two sides have announced a “Strategic Alliance 2015” plan to relocate U.S. troops on the Peninsula and boost ROK defense capabilities. By 2015, the two allies plan to separate wartime operational control (OPCON) of the countries’ forces on the Peninsula into two national commands.

Much of the current closeness between Seoul and Washington is due to President Lee. It is unclear how sustainable many of his policies will be, particularly into 2012, when South Koreans will elect a new president and a new legislature. Bilateral coordination will be particularly tested if South Korea’s left-of-center groups, which bitterly oppose much of Lee’s agenda, retake the presidency and/or the National Assembly.



Date of Report: November 3, 2010
Number of Pages: 31
Order Number: R41481
Price: $29.95

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Friday, November 5, 2010

China Naval Modernization: Implications for U.S. Navy Capabilities—Background and Issues for Congress


Ronald O'Rourke
Specialist in Naval Affairs

The question of how the United States should respond to China’s military modernization effort, including its naval modernization effort, has emerged as a key issue in U.S. defense planning. Admiral Michael Mullen, the Chairman of the Joints Chiefs of Staff, stated in June 2010 that “I have moved from being curious to being genuinely concerned” about China’s military programs. The question of how the United States should respond to China’s military modernization effort is of particular importance to the U.S. Navy, because many U.S. military programs for countering improved Chinese military forces would fall within the Navy’s budget.

Decisions that Congress and the executive branch make regarding U.S. Navy programs for countering improved Chinese maritime military capabilities could affect the likelihood or possible outcome of a potential U.S.-Chinese military conflict in the Pacific over Taiwan or some other issue. Some observers consider such a conflict to be very unlikely, in part because of significant U.S.-Chinese economic linkages and the tremendous damage that such a conflict could cause on both sides. In the absence of such a conflict, however, the U.S.-Chinese military balance in the Pacific could nevertheless influence day-to-day choices made by other Pacific countries, including choices on whether to align their policies more closely with China or the United States. In this sense, decisions that Congress and the executive branch make regarding U.S. Navy programs for countering improved Chinese maritime military forces could influence the political evolution of the Pacific, which in turn could affect the ability of the United States to pursue goals relating to various policy issues, both in the Pacific and elsewhere.

China’s naval modernization effort, which began in the 1990s, encompasses a broad array of weapon acquisition programs, including anti-ship ballistic missiles (ASBMs), submarines, and surface ships. China’s naval modernization effort also includes reforms and improvements in maintenance and logistics, naval doctrine, personnel quality, education, training, and exercises.

The Department of Defense (DOD) and other observers believe that the near-term focus of China’s military modernization effort has been to develop military options for addressing the situation with Taiwan. Consistent with this goal, observers believe that China wants its military to be capable of acting as a so-called anti-access force—a force that can deter U.S. intervention in a conflict involving Taiwan, or failing that, delay the arrival or reduce the effectiveness of intervening U.S. naval and air forces. DOD and other observers believe that China’s military modernization effort, including its naval modernization effort, is increasingly oriented toward pursuing additional goals, such as asserting or defending China’s claims in maritime territorial disputes, protecting China’s sea lines of communications, displacing U.S. influence in the Pacific, and asserting China’s status as a major world power.

Placing an increased emphasis on U.S. Navy programs for countering improved Chinese maritime military capabilities in coming years could lead to one more of the following: developing and procuring highly capable ships, aircraft, and weapons for defeating Chinese anti-access systems; assigning a larger percentage of the Navy to the Pacific Fleet; homeporting more of the Pacific Fleet’s ships at forward locations such as Hawaii, Guam, and Japan; increasing training and exercises in operations relating to countering Chinese maritime anti-access forces, such as antisubmarine warfare (ASW) operations; and increasing activities for monitoring and understanding developments in China’s navy, as well as activities for measuring and better understanding operating conditions in the Western Pacific.



Date of Report: October 28, 2010
Number of Pages: 78
Order Number: RL33153
Price: $29.95

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