Foiled Clinton Meets Humbled Asia

Four years ago President Clinton kicked off a Pacific Rim summit by declaring that despite the end of the cold war "the United States is not about to pull up its stakes and go home - we will remain engaged in the world."

Today, as the president begins the same annual conclave in Vancouver, he finds it especially hard to live up to those words.

Some of Asia's most dynamic economies - including Thailand, Taiwan, and South Korea - have wobbled badly in recent months. In Japan, the fourth-largest brokerage house, Yamaichi Securities, is expected to collapse.

But at a time when leadership is needed, US credibility in Asia is taking a hit. And Asian leaders are increasingly concerned that the United States is shirking its vital role as a stabilizing force in the region, thereby encouraging greater assertiveness from Japan and China.

Mr. Clinton joins the two-day Asia-Pacific Economic Cooperation forum stinging from recent legislative defeats that weaken his hand. Congress - including many of Clinton's fellow Democrats - this month thwarted his efforts to win "fast track" authority to negotiate trade agreements. It also failed to approve a $3.5 billion contribution to the International Monetary Fund (IMF) and to make good on a long overdue, $926 million payment to the United Nations.

The blows from Congress come at an especially bad time. Indeed, Clinton's weakness hinders efforts by APEC leaders this week to dispel market jitters by endorsing a new IMF plan for restoring order, say US lawmakers and experts in global finance.

"The presidency has been weakened in its ability to respond to international crises," says Rep. Jim Leach (R) of Iowa, House Banking Committee chairman.

Clinton is "coming to the poker table without any chips," says Robert Dunn, a specialist in international finance at George Washington University in Washington.

Administration officials counter that Clinton still has plenty of leverage, and the current financial crisis proves it. The United States remains the most powerful voice at the IMF, the multilateral agency throwing lifelines to the most troubled East Asian economies. Also, countries aiming to export their way out of crisis depend on access to the huge US economy.

Still, the recent legislative defeats bolster a long-standing anxiety in East Asia that the United States is edging away from its traditional role of balancing conflicting interests in the region.

That impression has grown for several years over a broad range of issues, among them:

* The withdrawal of US forces from the Philippines.

* Clinton's flip-flop on tying most-favored-nation trade status to China's human rights record.

* The administration's silence over China's seizure of disputed reefs in the South China Sea.

* Initial hesitation in actively opposing China's "test" missiles fired at Taiwan.

* The decision in July not to take a strong role in IMF aid to Thailand.

* The failure in October to discourage Taiwan, which heavily relies on US military backing, from devaluing its currency by 10 percent to keep up with the weakening currencies of its trading rivals. Such "competitive devaluations" badly undermine financial stability.

Sensing a US withdrawal, both Japan and China have grown more assertive in Asia. China has acted on long-standing territorial claims and strongly backed recent IMF aid.

Japan proposed the creation of a $100 billion Asia Fund soon after Washington shied from the Thai rescue package.

Last week in Manila, US officials persuaded East Asian nations to reject Japan's proposal and support an IMF-sponsored surveillance forum and backup financing fund for the region. APEC is expected to endorse the measure this week.

The US success in Manila belies claims that rather than take the lead across the full spectrum of problems, Washington is more discriminating and apt to follow regional initiatives.

"It's not a selective policy," says David Lipton at the Treasury Department. "It is a policy to work with all countries in the region to try to create a framework for the restoration of stability."

The cautious policy shows how US officials in East Asia must be especially careful in reconciling national and collective interests. Many nations in the region are ambivalent toward the US. They want it to help them reach their goals, but not to make strong moves to shape their goals. Asian nations recall decades of colonialism and bristle at any hint of Western domination.

For example, South Korea resisted applying for IMF aid, concerned it would cede its sovereignty.

Also, Japan's aborted Asia Fund was just the latest sign of a stubborn desire to solve problems through a regional Asian organization rather than through an international organization run largely by Western nations.

Moreover, many Asian leaders shrink from the IMF because it requires aid recipients to ease state controls over the economy and move toward Western free-market capitalism. The Asian leaders favor their own state-guided capitalism.

But forces other than East Asian mistrust also hamper Clinton administration efforts to rein in financial markets.

Some economists and lawmakers say IMF aid backfires by encouraging officials and investors in unstable economies to continue their misguided ways in the belief the fund will ultimately rescue them from loss. Over time, therefore, tremors will grow in world markets.

But US officials are most inhibited in the crisis by the opposition of Congress to costly bailouts. The Clinton administration in 1995 failed to gain the support of Congress for a $50 billion IMF rescue package for Mexico, a neighbor and leading trading partner. It would be even more difficult to win support for distant, comparatively minor trading partners in Asia.

"It's always dicey trying to get congressional approval for IMF funding," says Mr. Leach.