Pacific Rim Headline Predictions for 2011

The opening days of a new year always seem so pregnant with possibilities that they invite hope, trepidation and many vainglorious attempts at prognostication.

This year, though, should be particularly eventful. The Pacific Rim has roared out of the Great Recession stronger than ever. A booming China has become bolder in its dealings with the rest of the world and more paranoid about the insidious forces unleashed among its own people by the wireless revolution. The U.S. is breathing a sigh of relief at having avoided a double dip even as it casts a wary eye on the financial troubles of a Europe in inexorable decline. N. Korea has pushed brinksmanship to the breaking point.

The stage is set for some big developments. Here are a few headlines I think we will see during the coming year:

1. China Lets the Yuan Rise. What with Beijing’s growing worry over the social unrest produced by the inflation that inevitably results in a booming export nation with an undervalued currency, it has already decided that the only long-term solution is to let the yuan rise by another 6-8% during 2011. That will lower food prices for most Chinese while getting the U.S. and other trading partners off China’s back. And China’s planners will be surprised to discover that the yuan’s appreciation won’t hurt exports as much as feared.

2. Koreas Hold Reunification Summit. The North has painted itself into a corner with the artillery attack on Yeonpyeong Island and the South has done the same with what amounts to a pledge of all-out war at the next provocation. The only way to defuse a level of tension that hurts both sides is to do something big and dramatic — like a summit with the biggest possible agenda. There’s little likelihood of actual reunification during the coming year, but a Reunification Summit will help both sides ease themselves out of an unbearably tense situation that neither side can sustain for long. Lee has already alluded to reunification in recent speeches.

3. Japan Opens Doors to Immigration. Japan has the most stringent immigration policy of any major nation. The only people who can become Japanese citizens are those with at least one Japanese parent or who were born in Japan and are willing to denounce their ancestral culture by adopting a Japanese surname. Combine this policy with a social system that punishes individualism with ostracism and you have a population so static as to have lost its will even to replicate. Only drastic change can reverse its decline. As the leader of a nation that has logged a population decline of 123,000 in 2010, Prime Minister Naoto Kan can seize the initiative to liberalize Japan’s immigration policy, as he has hinted at doing.

4. U.S. Congress Approves Korea FTA. In light of the recent modifications negotiated by the Obama Administration and the GOP influx into the House, this long-overdue free-trade agreement will pass despite continuing objections from major labor unions. Not only will KORUS FTA give U.S. carmakers easy access to Korea, it will give financial companies a long-awaited opportunity to expand into Asia’s most vibrant developed market. And given the recent tensions with N. Korea, the S. Korean legislature isn’t likely to reject a pact that will knit U.S. interests even more closely with its own. And its first FTA with an Asian nation will prod the U.S. into becoming a more dynamic society as it embraces its Pacific destiny.

5. U.S. Joins the Trans-Pacific Partnership. The Trans-Pacific Partnership is likely to be the most significant free-trade agreement the U.S. will enter this decade, being virtually the same as entering into separate bi-lateral trade agreements with countries like Australia, Vietnam, Malaysia, New Zealand, Singapore and, possibly, the Philippines and even Japan. The TPP has been a project Obama has shown intense interest in pushing to conclusion as it is seen as providing a framework for a regional free-trade pact covering most of the Pacific Rim, thereby obviating the need to engage in time-consuming separate negotiations with our many trading partners in the region.