1. Background
2. Setting up the Framework of Analysis
3. Results of Pairwise Comparisons in a Benefit/Cost Framework
4. Incorporating Risk Factors
5. Sensitivity Analysis
6. Concluding Remarks
7. Appendix
8. References

"If we withdraw our military force from the region, it would trigger an arms build-up race in Asia. If Japan embarks on a re-militarisation programme by scrapping the US-Japan Security treaty, China would take part in this race."
William Perry, U.S' former Secretary of Defence

Back to top

1. Background

The robust economic growth of East Asian countries has changed the region's relative position in the global economy. Such growth performance occurred along with increased intra-regional trade. By 1995 about half of the region's trade took place within the region itself, while only 26 percent of the exports went to North America, which is down from the approximately 30 percent in 1990. Although it looks as if the US is becoming a less important trading partner, the real reason is that East Asia has grown very rapidly and is becoming a more important trading partner everywhere in the world. In absolute terms, however, US exports and investment in the region have been on the rise.

Loosely speaking, East Asia is becoming more important to the US, but the US is becoming less important to these countries. However, such a picture of economic relations does not necessarily apply to security issues. The stability of East Asia holds a pivotal part in the region's economic progress. Until today, the importance of the US role, including but not restricted to its military role, is seen by most countries in the region as equally important as during the Cold War era, if not more so. After all, it was the region's stability that contributed significantly to the effective implementation of development policy during the period.

The process of creating a new order to replace the Cold War bipolar axis has started, and it will continue in the next millennium. In the context of East Asia, various challenges can not be overlooked during such a process. A stronger China is a fact of life, and territorial conflicts are still dormant, including the potential flashpoints in the South China Sea and Korean Peninsula.

On regional security issues, US interests are no less substantial, but it is also no secret that the prestige of the US in East Asia has eroded. This happened not only because of the strong pace of East Asian economic growth, but also because of the incoherent US strategy and lack of priorities for the post-Cold War environment. Yet, the US can not afford to let its role be marginalized. The repercussions of an unstable East Asia are highly undesirable from the US perspective. Even on the economic front, a slow down in the region's economic growth will adversely affect overall US trade and investment. Hence, East Asian countries strive for a peaceful environment in the region, and the US seeks growing markets and stable economic partners. The two parties do not want to face a risky destabilizing scenario--the impacts could be devastating for both.

The connection between trade and peace is widely supported by the evidence. Given no other disturbing factors at play (such as constant pressures on specific issues seemingly unrelated to trade, e.g., human rights), it is often the case that trading countries are less likely to have a motive for arms buildup as far as each other is concerned:

"There is considerable evidence that countries that trade have less chance for conflicts. Not only is this consistent with the evidence, but it also true that, on the whole, countries that trade perceive less hostility from each other."

But a scenario of co-operation is only one possibility. Domestic politics, the regained strength of isolationists, a distorted public image and superficial coverage in the US media may all contribute to completely different US perceptions about the region. The recent saga about the Clinton administration's ties to a network of Democratic fund-raisers with Asian connections may also increase the intensity of such perceptions.

Not with standing the two different scenarios, one thing is clear: the outcome of any security scenario in East Asia is greatly affected by US strategy, including those pertaining to US-Japan and US-Sino relations, irrespective of the kind of perceptions the American public might have.

What would then be the appropriate US strategy in the region? What is the likelihood of such a strategy? What kind of risks will be involved in issues of regional security, and under what type of US strategy are such risks more likely to occur? The analysis in this paper deals with these types of questions. A number of important elements are identified, and their intensity is measured through the use of ratio scales. More specifically, a pairwise-comparison method is applied within the constructed hierarchical framework. Subsequently, a benefit/cost ratio approach is proposed to help in formulating US security strategy in the region. In the last section, the dynamic and complex nature of the link between risk factor and strategy is handled through the use of network analysis involving feedback effects.

2. Setting up the Framework of Analysis

We begin by identifying critical elements in the selection of US security strategy in East Asia. In the next section, these elements are measured in terms of their intensities, by comparing each element with another with respect to a particular criterion (pairwise comparisons). The ultimate goal is to choose between two courses of action: adopt a strategy of engagement, or follow a disengagement approach. Since the occurrence of any strategy has some degree of probability, it is helpful to formulate the problem in a benefit/cost framework.

In the benefit hierarchy, there is a presumed goal of achieving gains from selecting a security strategy in East Asia. Under this goal, several objectives can be put on the table with respect to US interests in the region; they include openness, prosperity, the development of democracy, and good governance in the region. With respect to security maintenance, the US also expects that a richer East Asia will assume more of the burdens of global responsibility. Japan often has been requested to do so, and increasingly other newly industrialising economies (NIEs) fall into the same category. For all these objectives to be achieved, another needs to be affirmed, that is, preserving peace and stability in the region.

It is useful to disentangle these objectives into two broad categories: security-cum-political (labelled Sec-Pol) and economic (Economic). In each of these criteria a list of objectives noted above is identified :

• Maintain peace and stability in the region (Peace-St)
• Prevent an arms race and the spread of mass destruction weapons (ArmsRace)
• Encourage long-term development of democratic societies (De'cracy)
• Insure US benefits from investment and trade in East Asia's growth (Growth)
• Enable East Asia to assume a larger burden of global responsibility (BurdenSh)

The next question is how are these objectives achieved? What kind of security strategy must the US choose? Two beneficial courses of actions are:

• Maintain a network of bilateral and multilateral security alliances, i.e., an engagement policy (Engagemt)
• Play the role of neutral power broker to impede one country's power, i.e., disengagement policy (Disengmt)

A number of studies have shown that the choice of engagement and disengagement has not been clear under several US administrations. This is shown largely by the US's lack of priority and its incoherent policy towards East Asia. Sometime the region is associated with trading and investment opportunities, at other times it is a source of worry about security, about human rights abuses and even a trading threat. As a result, US policy towards the region has been plagued with a series of inconsistencies.

However, as indicated earlier, domestic politics, public image and media coverage in the US could produce completely different—even diametrically opposite—perceptions. These public perceptions may produce a set of alternative scenarios with respect to East Asia. Hence, we need to construct a different hierarchy representing the 'pain' (cost) of selecting security strategies in the region based on such alternative scenarios.

Unfortunately, it is not difficult to find Americans who still construe the region as an area of exotic cultures, inscrutable with bureaucratic empires and despotic rulers. Such a public image is there, creating a framework based on stereotypes. Accusing East Asian countries of practising unfair trade (e.g., closed markets, cheap labour and other non-tariff barriers) has increasingly become popular. On security issues, there are still many who convincingly argue that East Asia had had a free ride, by not bearing sufficient cost of maintaining security in the region. The coverage of some media is no less harmful, they often miss the true dynamics of the region's ultimate importance to the US. Often only immediate issues are published, e.g., tensions in the Taiwan Strait, anti-US demonstration in Okinawa, North Korean nuclear activities, US-Japan trade disputes, and involvement of Asian businessmen in fund-raising in the US presidential campaign.

The resulting outcome: some always tend to assess phenomena in the region within the framework of Western values and use ethnocentric assumptions. Such attitudes are reflected, among others, in clamours and outcries among some groups of isolationists. These attitudes also mingle with fear of East Asia. The source of the fear varies from a misconception that it is the region's cheap labour that displace jobs and undermine US living standards, to the possible emergence of pan-Asianism, associated with anti-Western attitudes.

Specifically on China and Japan, there exists complex and ambivalent feelings among some Americans. For all the admiration of Japan's economic and technological success, there is a parallel frustration about the increasing trade deficit. On the one hand Americans support increased economic interdependence between the two countries, yet they tend to be critical toward Japanese practices when they begin to see the domestic implication of such increased interdependence. China is ranked low in terms of contributing peace and stability to the whole region, and they are constantly accused of violating human and labour rights. But US consumers continue to enjoy buying inexpensive consumers goods from China. The US administration has continued struggling to find the balance between a policy of engagement and one of containment.

Fragmentation of regional security arrangements and alliances is another scenario one has to take into account. The formation of the ASEAN regional forum (ARF) in July 1993 was seen by many observers as an important development in the regional security framework. The forum was started as an "armchair discussion" rather than a full-fledged formal organisation. Since then, however, it has become an institution capable of deepening political and security dialogues, even forming a concrete regional co-operation for security. In July 1996, the secretary general of Japan's Liberal Democratic Party, Koichi Kato, remarked that ARF can fill the vacuum created by major reductions in the US presence in the region. His remarks were meant particularly as an appeal to the Japanese government to take part in such a system and, rather surprisingly, even revise its Constitution, providing other Asian countries desired so.

There is, however, a question whether the use of such a region-wide framework is the most effective way to solve individual conflicts and confrontations. The Japanese government has given a "no" answer this question. ARF is considered important and effective up to the point where enhancing mutual reassurance through a series of dialogues among the parties in conflict is needed. But solving a real conflict between two parties is another matter. In some sense Japan is "caught in the middle" between leaning toward ARF and securing the existing Japan-US Security Arrangements.

US response to ARF is more transparent. An ARF meeting in Jakarta last year was awash with US anguish over human rights abuses in Myanmar. Many observers contend that US outrage was ritualistic since they know that they do not have the means to bring about a political change in Myanmar. But a clearer sign was shown when William Perry, the then US Defence Secretary, threw a bombshell into the 1995 APEC summit in Osaka by stating that the Asia-Pacific trade group should be expanded to a regional defence forum (which, in effect would undermine ARF).

Security fragmentation is further corroborated by the presence of several bilateral security arrangements in the region. While a "logical" approach would be to construe ARF as complementing, not replacing, other existing arrangements, the scenario of fragmentation remains a possibility.

How do we construct the hierarchy for these alternative scenarios? Similar to the earlier (benefit) case, the overall goal is broken down into two criteria: security-cum-political criteria (Sec-Pol) and economic criteria (Economic). But here we need to take into account the role of public image (PubImage) and media coverage (MediaCov) in distinguishing the degree of importance of the alternative scenarios. The resulting hierarchy is shown , with the following definition of each element:

• Public image based on various poll data (PubImage)
• Coverage of East Asia in the US news media (MediaCov)
• Fear of a strong East Asia that may lead to an anti-Western form of pan-Asianism (StrongEA)
• Unfair trade practices will decimate US industries (UnfairTr)
• East Asia did not assume sufficient burden of maintaining region's security (FreeRide)
• East Asia's despotic rulers have little chance to be more democratic (Despotic)
• Fragmentation of security arrangements and alliances in the region (FragSec)

The relative importance of the above scenarios are to be ranked according to what would be perceived by policy makers, given the prevailing two affecting factors, i.e., public image and media coverage. This is done for both criteria, Sec-Pol and Economic. For example, under the security-cum-political criteria, we asked the question: If the public image is the guiding factor, are fragmented security arrangements perceived to be more likely than unfair trade practices in the region? What if the determining factor is the media coverage? Ultimately, with respect to the choice of security strategy, we asked the question: Of the two strategies, engagement and disengagement, which will contribute most to the alternative scenarios?

Having completed the rankings in the above framework, we proceed with a step to relate the first (benefit) hierarchy with the second (cost), by taking the ratios of the resulting scale from both hierarchies, i.e., the notion of benefit/cost ratio. The desirable choice would be the one entailing the largest ratio.

4. Incorporating Risk Factors

What is the probability that the five undesirable scenarios will take place? This question implies that there are some uncertainties involved in the outcomes described above. In other words, there are some risks that could either inflate or deflate the weight of each US strategy, thereby altering the benefit/cost ratio. To simplify, the kind of risks to be incorporated in the current analysis will be confined to those associated with only the cost or pain that may have to be incurred by the US when following a particular strategy.

What are the relevant risk factors that will affect the selection of a strategy? Under the security criteria, there are four scenarios, all of which are undesirable:

• A more nationalistic Japan with full range of military options (JapNat'l)
• Sino-US relations become tense and lead to a serious conflict (Sino-US)
• Crisis and tensions in Korea due to DPRK's attempt to deflect attention from its failing economic situation (KoreaCrs)
• Marginalization of the US role in the region, allowing East Asia to become a dangerous place (USMargin)

The risk factor under the economic criteria is the possibility of a slow down in East Asia's economic growth, which will adversely affect US investment and trade in the region. Hence:

• Slower economic growth in East Asia, affecting US investment and trade (Economic)

The ultimate priorities to be acquired are those associated with the strategy, but this time the relevant question would be: Which strategy incurs the greater risk with respect to the above scenarios? At the end, a strategy with greater risk (higher weight) is not likely to be favoured, since the benefit/cost ratio tends to be smaller than the ratio for the other strategy with lower risk. To arrive at such a conclusion, the cost has to be multiplied by the risk so that the benefit/cost ratio indeed will be smaller for a strategy with greater risk. Hence, the ultimate decisive ratio is [ Benefit/ (Cost X Risk) ]. That is, the degree of cost associated with a security decision can be expressed by the severity of the cost multiplied by the probability of incurring such cost.

Implicit in such a setting is a distinct feature between the risk factor and alternative scenarios in the cost hierarchy. Unlike the elements in the scenarios, those in the risk factor entail exogenous factors, i.e., their occurrence is not directly controlled by US decision on security strategy. Marginalization of the US. role in the region (USMargin) may be fuelled by increased interdependence of the region's economy with other countries rather than with the US or it also could be the result of internal dynamics in the security-cum-political development of the region, irrespective of US strategy. Increased nationalism and militarism in Japan (JapNat'l) may be prompted by the strength and popularity of the rightist group in that country, or may simply be based on the country's perception that the unpredictability and uncertainties of security conditions in East Asia have been rising. A Sino-US crisis (Sino-US) may also come about due to China's own recognition that at the end of the 20th century the country will have once again become a world power in its own right. The Korean crises (KoreaCrs) is also likely to be affected by diplomacy and politics in the two countries themselves.

Yet, despite the exogenous nature of the risk factors, the US choice of a strategy remains to have a significant influence on the above risk factors. In this respect, the question of "Which strategy incurs greater risk with respect to the above risk factors?" is posed in order to acquire a quantified weight of risk involved in each strategy. But a more telling point is that the selection of a US strategy will also influence the weight of the risk factors. In other words, it is almost like a two-way street between risk factors (the second level of the hierarchy) and strategy (the bottom level). This is the case where feedback and dependence of higher-level on lower-level elements are present. Obviously, we can not deal with such a situation by using the hierarchical approach as before. A framework using a network, rather than a hierarchy, is more relevant for such a situation.

But before embracing this special case, let's first proceed with the case where no feedback and dependence is found. As shown in the hierarchy , the most important risk factor appears to be the deteriorating Sino-US relations (.267) followed by the marginalization of the US role in the region (.143). Consequently, the policy of disengagement is perceived as incurring greater risk with respect to those risk factors. Incorporating these risks into the previous analysis provides an interesting result. Both Case 2 and Case 3 now yield a benefit/cost ratio in favour of the engagement policy. Hence, a decision based on Case 3 is completely reversed when the risk factor is incorporated into the analysis.

The relevance of the feedback case is almost self-explanatory. All elements in the risk factor can be influenced by the US decision on security strategy. Furthermore, from the overall regional stability stand point, these elements and the process by which their weights are measured are too critical to be unspotted, since the locus of power relations in East Asia now centres on the Sino-Japanese-American triangle.

Figure 1 shows the network (in orbital shape) for the feedback case. Notice that the arrows connecting all elements in the risk factor, including the Economic element, with the two optional strategies, Engagemt and Disengmt, point in both direction, indicating the presence of a feedback effect. Since a hierarchical setting is no longer relevant, pairwise comparisons can not be done with respect to certain criterion, because there is no such thing as independent criteria, where they can affect alternative strategies but are not affected by those strategies. Yet, any comparison among network factors will be meaningful only when there is an element with respect to which the comparison is made. Hence, the concept of a control criteria in a control hierarchy is used to represent those elements with respect to which pairwise comparisons are made.   In Figure 1 the control criteria are the two sets (called clusters) of elements, i.e., risk factors and strategies.

To arrive at a consistent ranking, a matrix of pairwise comparison still needs to be made. However, since the two clusters are now affecting each other, the relevant matrix would be a supermatrix, in which the scales denote the relative importance assigned to the strategies with respect to each risk factor ("Which strategies have the greatest risk?"), and those in the lower left block capture the relative likelihood of the risk factors with respect to each strategy ("Which risk factor is likely to appear?").

Having constructed the supermatrix, what we are aiming at ultimately is the limiting priority of the impact of each element on every other element in the matrix. It has been shown elsewhere that as long as the supermatrix is stochastic (each column sums to one), a meaningful limiting result can be obtained (Saaty, 1996). One way to arrive at such a limiting result is by taking repeatedly the power of the matrix, i.e., the original supermatrix, its square, its cube, etc., until the limit is attained (converges), in which case the numbers in each row will all become identical. In our particular case, such a limit is attained after raising the matrix to the 8th power.

It is clear that the perception of the disengagement policy being riskier than the engagement policy is overwhelming (.798 versus .202, see Case 4 ). With such a risk priority, the choice is clear: the benefit/cost ratio of engagement is overwhelmingly greater than the ratio for disengagement (4.76 versus 1.31). Hence, the US should follow the engagement policy course. This includes developing a coherent strategy with clear-cut priorities and goals, and facilitating the development of multilateral forums for security discussions in the region, as precisely exemplified by Secretary Perry's remarks in the APEC summit in 1995.

From the limiting supermatrix , we can also observe that marginalization of the US role in East Asia is perceived to be the most serious risk (.38) since isolationists won the argument for a US disengagement strategy. This is followed by deteriorating Sino-US relations.

It is interesting to learn of a conjecture made by a senior statesman from the region about a hypothetical prognosis whereby both marginalization of the US role and deteriorating Sino-US relations are taking place. It is predicted that the region could split into three camps: Taiwan would identify with the US, and so would Japan reluctantly, other countries such as Myanmar would side openly with China, and the rest, including the ASEAN countries, would stay in the middle, deciding which side to support issue by issue. further noted that if the US and China got on well, phenomenal economic growth could be brought about in the region, where countries like China, Vietnam and Myanmar would enjoy the fastest growth, followed by Malaysia, Thailand and Indonesia (if President Suharto prepares for a good succession).

5. Sensitivity Analysis

While the above exercise vigorously produces a clear message in terms of which strategy the US must choose, one should question the validity of the judgements used in the exercise. To ensure that the outcome not be construed as a result of whimsical judgements, we need to perform a sensitivity analysis.

There are at least two ways of doing the sensitivity analysis. First, is by deliberately changing the judgements about the criteria in such a way that the ultimate indicator, in this case the benefit/cost ratio, will change significantly. This can be done a number of times until the change in the ratio reverse the selection of a strategy. Basically, we followed this procedure when we tried to generate priorities in Case 2, Case 3 and Case 4. As has been shown, the cost priority for the strategies in Case 2 have been altered significantly from Case 1, such that an engagement strategy is now incurring a higher cost than disengagement, but the benefit/cost ratio remains favouring the engagement approach. In Case 3 and Case 4, the inclination to put a greater cost on engagement is made even stronger, but this time the priority for the benefit is also changed. The combination of both has reversed the selection of strategy before any risk factor is introduced.

The second sensitivity analysis is performed by evaluating the range of priority for the criteria, and appraise whether there is an inflection point beyond which the strategy selection is altered. We conducted such analysis for all three cases. A series of 2-dimensional graphs are generated, where the x-axis denotes the range of weights (ratio-scales) for the criteria, and the y-axis shows the associated priorities for the evaluated strategies. An example taken from the risk hierarchy of Case 3 is shown in Figure 2, which indicates that unless the security-cum-political criterion is abandoned (weighted zero), no other weight would reverse the dominance of disengagement. This ultimately means favouring the selection of the engagement strategy. We did the same for the economic criteria, then for each of the risk factors, and found no single case that leads to a shift in the strategy selection. Hence, the results are quite robust.

A similar procedure was applied to the benefit as well as cost hierarchies from Case 3. Again, all show the robustness of the results, i.e., an engagement strategy is consistently ranked highest for both, benefit and cost, but in no case does the benefit/cost ratio suggest a reversal in the strategy selection.

Policy makers may also be interested to find out about the different sensitivities of different criteria in shaping the final ranking of the strategies. Raising the weight of some criteria may increase the relative importance of a particular strategy, but raising the weight of some others my produce the reverse. Using Case 3 as an example, when we raise the weight of fragmented security arrangements under all criteria in the cost hierarchy, the relative importance of the engagement (disengagement) policy decreases (increases). In fact, if it is assumed hypothetically that this particular scenario is the only one available, implying that its weight is unity, we found both strategies will share equal weights, in which case the benefit/cost ratio will reverse the selection.

Still, in the cost hierarchy, under economic criteria, a weight increase in East Asia's unfair trade scenario tends to strengthen the cost-producing status of an engagement strategy. On the contrary, when scenarios such as anti-Western, free-ride and despotic governments are given greater weight in the judgement, the disengagement strategy appears to bear greater cost, meaning that such a strategy will contribute more to the likelihood of those detrimental scenarios. In other words, from the economic stand point an engagement strategy is perceived as likely to allow what they believe are unfair trade practices conducted by some East Asian countries. On the other hand, undesirable non-economic events in the region are more likely under a US disengagement strategy.