Written Responses to Questions Submitted by Southeast Asian Newspapers

April 24, 1986

Democracy in Asian Countries

Q. What do you think will be the impact of the Aquino revolution in the Philippines on the other countries in Asia? Do you think it will have a democratizing effect on the other Asian countries? If so, are you going to seize the opportunity to speed up the process of democracy in some of these countries?

The President. The U.S. has a fundamental commitment to the preservation of a stable environment conducive to continuing economic, political, and social progress in east Asia. We support the evolution of political processes that bolster popular participation and representative government, but we believe that Asian nations are the masters of their own fate. They must work out solutions to problems on their own according to their own particular, and often unique, circumstances. That is what happened in the Philippines.

Indonesia

Q. With the collapse of oil prices, Indonesia is facing a difficult economic situation. Exports to the United States, its second largest trade partner, are expected to decline this year, so will U.S. direct investment, especially in the oil sector. The Gramm-Rudman-Hollings act will further cut U.S. aid and concessional loans. Meanwhile, Indonesia's effort to increase its non-oil exports to the United States have met with increasing protectionist measures. Are you not worried that increasing economic difficulties might stir the revival of radical nationalism within Indonesia?

The President. United States trade with Indonesia last year amounted to $5.7 billion. As Indonesia's second largest trading partner, the U.S. accounts for 20 percent of its total exports. Indonesia enjoyed a trade surplus with the United States of over $4 billion last year. Petroleum products dominate our bilateral trade, with the U.S. importing $3 billion worth. Because of the high profile of oil exports in the trade between our two countries, the drop in oil prices will likely have a large impact over the short term on our bilateral trade. Indonesia's non-oil exports to the U.S. include rubber, coffee, plywood, textiles, and other products. Textiles represent Indonesia's largest and most rapidly growing manufactured export. The Government of Indonesia has compiled an admirable record of managing well unforeseen economic challenges over the past several years. Economic growth has been high. Indonesia has become self-sufficient in rice production. Despite the current difficulties, I am confident that Indonesian policymakers will handle the present economic challenge as well as they have handled past ones. We believe that the medium and longer term outlook for the Indonesian economy remains very favorable.

Q. Considering its present economic problems, what do you think of Indonesia's intention to buy U.S. F - 16 planes?

The President. Indonesia has requested a small number of F - 16 aircraft in order to remain current with present technology in the field of air defense, a basic requirement for a country with a territory as large as Indonesia's. Indonesian military leaders have said they want their pilots to acquire the technological skills needed for an effective air force through the end of the century. Singapore and Thailand are also acquiring the F - 16. While there will be a financial burden associated with acquiring these few advanced aircraft, the Government of Indonesia has stated that the cost is necessary for its basic defense requirements and to maintain skills associated with a modern air force.

U.S. Aid to the Philippines

Q. Is the United States considering a Caribbean Basin Initiative-type policy to foster economic and trade development in the ASEAN-South Pacific region? Specifically, are you going to promote a multilateral or bilateral development aid package for the Philippines?

The President. Generally speaking, the nations of ASEAN are blessed with more prosperous and broadly based economies than those in the Caribbean Basin. The Caribbean Basin Initiative, or CBI, was intended to address the specific and severe economic problems which affect that region, including inadequate flows of private investment capital and the vulnerability that comes with reliance on the export of a single commodity. In contrast, the ASEAN countries, taken together, already constitute our fifth largest trading partner. And U.S. investors have a stake in the region exceeding $10 billion. We are trying to support the economic development of this region by working with the ASEAN governments to maintain a free and fair international trading system for the benefit of all trading nations. The cornerstone of this work is our effort to begin a new round of multilateral trade negotiations in the General Agreement on Tariffs and Trade (GATT). We are also continuing our efforts to discourage the enactment of protectionist legislation by our own Congress and to persuade the Japanese and other nations to open their markets to our goods and those of other exporting countries.

Resolving the severe economic problems of the Philippines will require a sustained effort by the Philippine Government and people, supported by the international financial community, both public and private. We note that in recent weeks the financial community's confidence in the Philippine economy has increased, and we share that increased confidence. We have been discussing Philippine assistance needs and priorities with President Aquino's government and with major bilateral and multilateral donors. Based on these discussions, we are proposing a significant assistance program for the Philippines which would help to meet the country's immediate financial needs, support economic reforms, encourage private investment, and respond to the urgent requirements of the Philippine Armed Forces. However, we agree with President Aquino's advisers that a multilateral framework is necessary to support Philippine economic recovery. In this connection, we have agreed to participate in a World Bank-sponsored meeting which will help to coordinate donor efforts for the Philippines and will focus on Philippine economic problems and prospects for recovery.

International Monetary and Trade Issues

Q. Would you promote a worldwide return to the gold standard in order to redress international trade and financial imbalances? What are your personal thoughts on the gold standard?

The President. Some observers have advocated a return to the gold standard in order to bring ``discipline'' to nations monetary policies and, thereby stability to exchange rates. Prior to the adoption of the Bretton Woods regime after World War II, the major nations of the world were intermittently on the gold standard. The discipline required by adherence to the gold standard resulted in alternating and unpredictable periods of severe inflation and deflation. It was to avoid such episodes that most countries abandoned the gold standard in just those times when it would have disciplined their policies. Within the International Monetary Fund, we are working on ways to improve the functioning of the international financial system. Also, I have asked Secretary of the Treasury James A. Baker III to report back to me on whether the nations of the world would convene to discuss the role and relationships of our currencies.

Q. When [Prime Minister of Singapore] Lee Kuan Yew was here last October, one of the issues he discussed with you was the setting up of an ASEAN-U.S. free trade arrangement -- an idea, incidentally, that was first broached by former United States Trade Representative William Brock. What is your own view of the proposal, and has there been any forward movement on this since Mr. Lee was here?

The President. Preparations for the launching of a new round of trade negotiations in the GATT have been the focus of our efforts since last November and will continue to be one of our primary concerns on our trade agenda for some time to come. We are also engaged in discussions with Canada on the possibility of a free trade area. However, my administration is committed to a continuing dialog with the ASEAN countries on economic and trade issues and to strengthening trade with ASEAN.

Q. There is some grumbling in the ASEAN States that, although you and your administration often talk of how important ASEAN is, you don't always back up those words. For instance, Mr. Lee Kuan Yew recently accused the U.S. of overlooking ASEAN's economic interests, citing these examples: U.S. releases from its own tin stockpile; its threatening to withdraw tariff preferences from some countries; its insistence on renegotiating international textile agreements on terms that are tougher for ASEAN countries; and its withholding of support for an international program for maintaining rubber prices. Would you agree that the U.S. does overlook ASEAN's interests? And how would you respond to them when you meet the ASEAN foreign ministers in Bali?

The President. In fact, support for and cooperation with ASEAN remains the foundation of U.S. policy in Southeast Asia. Our relations with the ASEAN nations are based on our common dedication to the basic principles of freedom and independence and our shared recognition of the importance of free markets. My visit to Indonesia is intended to reaffirm the importance the United States places on our cooperation with ASEAN. I believe this is particularly important at a time when the ASEAN economies, and particularly that of Singapore, are experiencing slower growth or even contraction.

On balance, my efforts over the past few years to maintain a free and open international trading system have served the interests of both the United States and ASEAN well, despite the pressure of different and competing interests. The ASEAN countries, together, have become our fifth largest trading partner, and one with which we experienced a total trade deficit of over $7.7 billion last year, up from $2.3 billion in 1982. My administration remains committed to resist protectionist trade measures and to pursue efforts to liberalize further the international trading system, to benefit all trading nations. Our efforts in this regard are concentrated at the moment on the need to begin a new round of multilateral trade negotiations in the GATT. We have assured the ASEAN governments that we believe the new GATT round should address their key issues, as well as the new issues we have raised in Geneva, such as trade in services.

We have gone to some lengths to ensure that the release of tin from our strategic stockpile was managed so as to avoid disruption to the world tin market. In fact, the U.S. General Services Administration suspended its release of tin last October at the onset of the latest tin market crisis, to avoid exacerbating the situation. The tin producers in ASEAN appear generally satisfied with the way in which we have managed tin disposals during the collapse of the international tin market.

With respect to tariff preferences, the executive branch is obliged to carry out the legal provisions of our Generalized System of Preferences as enacted in the 1984 Trade Act. This will require that Brunei, which has not utilized the GSP, be graduated from the program by 1988 because its per capita GNP is well above the $8,500 limit contained in the statute. We recognize that there is concern on the part of Singapore that it may also face graduation on this basis before the authority for the GSP system expires in 1993. This mandatory provision was opposed by the executive branch but was in the end included in extension of the GSP program.

Many in the Congress believe that the multifiber arrangement (MFA) has failed to give our domestic industry sufficient relief. Quota bills have been introduced which would violate existing agreements. In the face of this situation, our policy has been to seek to ensure that it is the small producers and poor countries that benefit, relatively, within the parameters of our textile program.

Malaysia-U.S. Trade

Q. It is often the lament of Malaysia that the U.S. does not take into consideration Malaysian interests when it comes to drawing up quotas and tariffs on commodities and manufactured goods. Is Malaysia being unrealistic or unreasonable in its expectations?

The President. U.S. trade policy over the past few years has been generally favorable toward Malaysia's interests. Malaysia's exports to the United States did drop in 1985 by about $426 million, although we still experienced a deficit in our merchandise trade with Malaysia of more than $934 million -- in itself an increase of some 277 percent since 1982. Much of last year's fall in Malaysia's U.S.-bound exports was attributable to cyclical problems in our consumer electronics industry, for which Malaysian factories have become major suppliers of integrated circuits and semiconductors. The expansion of Malaysia's trade in such advanced manufactured goods was fostered, in no small part, by the tariff preferences available under our Generalized System of Preferences (GSP), as I mentioned earlier.

We should explore areas where U.S.-Malaysian ties can be strengthened. Our two sides have been negotiating a bilateral investment treaty, which still remains to be concluded. Investment links between companies of our two countries would serve our trade interests well. On a more general level, the U.S. remains committed to starting a new round of trade negotiations in the GATT this year as the best means of rolling back protectionism and preserving an open but fair international trading system, which benefits both our countries. We are continuing to consult closely with Malaysia and the other ASEAN countries regarding the new round and have reassured the Government of Malaysia that we believe the negotiations should address the key concerns of all the contracting parties. We are not seeking to limit the agenda to those areas, like trade in services and intellectual property rights, which are of particular interest to us.

China-U.S. Relations

Q. Given the Soviet military buildup in the Pacific and the U.S. decision to help China modernize its armed forces, the chances seem great for Southeast Asia to become a theater for greater superpower rivalry. Under these circumstances, how do you think ASEAN can act as a stabilizing influence in the region?

The President. The long-term, global Soviet military buildup, especially in the Pacific, is continuing unabated. It is of concern for all of us, including our friends and allies in Southeast Asia. The unilateral Soviet buildup is not a response to U.S. actions, but is designed to project Soviet power and influence throughout the region. However, U.S. Forces remain committed to promoting regional security by deterring Soviet expansionism. Our intention is to provide China with the capability to defend itself more effectively against the common threat to the region. The U.S.-P.R.C. military relationship helps develop and maintain China as a force for peace and stability in the region and the world, while not posing a threat to other U.S. friends and allies in the region. ASEAN provides a stabilizing role in many ways. It has taken a leadership role in opposing Vietnamese occupation of Cambodia and by establishing the principles upon which a political solution could be based. This is a goal we support. ASEAN's free market orientation and remarkable economic growth have led to the conditions of prosperity and stability, which will continue to benefit the region.

U.S. Bilateral Assistance

Q. The 1986 continuing resolution on foreign assistance which you signed in December 1985 includes a provision calling for the end of all U.S. assistance to any country whose duly elected government is deposed by a military coup or decree. If a coup took place in Thailand or another ASEAN country, would U.S. assistance be cut automatically? If not, why not?

The President. We prefer not to deal in hypothetical situations. The statute makes clear the intent of Congress; that is, no bilateral assistance will be provided to countries whose duly elected head of government is overthrown by military coup or decree. We would have to interpret the law against the changing political situation in an allied or friendly country on a case-by-case basis as the situation dictated. I do want to stress, however, the United States' firm support for democracy and constitutional processes.

Thailand-U.S. Trade

Q. Thailand has expressed disappointment over the rice provision of the U.S. farm act, which is adversely affecting a vital sector of our economy and has caused a feeling here that the U.S. is not a reliable friend. What assurances can you give that our economy, and consequently our national security, will not be similarly affected by future U.S. trade laws?

The President. Thailand remains our close friend and ally. We are deeply committed to the continuing health and vitality of the Thai economy, just as we are committed to Thai national security. The Food Security Act of 1985 was designed to assist American farmers, some of whom are experiencing the worst farm crisis in 50 years. There are aspects of the legislation which my administration disagrees; but overall, the act should assist American farmers. The rice provisions were designed to make U.S. rice more competitive in overseas markets, but we do not intend to disrupt those markets by engaging in predatory pricing policies. In administering this new law, we will be sensitive to the concerns of Thailand and other rice exporters. My administration will continue to work to ensure that future U.S. trade laws promote our mutual interests in free and fair trade. Protectionism will benefit neither of us. The maintenance of an open international trading system is the responsibility of both our countries, as well as of the rest of the world.

U.S. Air Strike Against Libya

Q. In your view, will the bombing of Libya's targets damage United States' relations with ASEAN, particularly with those countries which have diplomatic ties with Libya or strong Arab sympathies?

The President. We certainly hope not. We believe the nations of ASEAN share our repugnance for terrorism, regardless of the quarter from which it comes. As we made clear at the time, action taken against Libya was specifically related to direct evidence linking Qadhafi to the Berlin disco bombing and plans for a wave of terrorist actions targeted against Americans and American installations. Our preemptive missions against terrorist-related targets was an act of self-defense, fully consistent with Article 51 of the United Nations Charter. It was designed to disrupt Libya's ability to carry out terrorist acts and to deter future terrorist acts by Libya. It was both a necessary and proportionate response to an ongoing pattern of attacks by the Government of Libya.

We have explained the reasons for our actions to the ASEAN governments. While there have been critical popular reactions in several of the ASEAN countries, we believe the governments understand the legal and moral basis of our actions. We do not anticipate that any critical reaction these governments may have will harm our relations, and we appreciate additional security protection they have provided to American diplomatic and other official facilities since April 15.

U.S. Military Bases in the Philippines

Q. With uncertainty over the future of American military bases in the Philippines after 1991, is the United States exploring the possibility of setting up a military base in Brunei?

The President. No. The issue of U.S. bases has not arisen in our dialog with the Government of Negara Brunei Darussalam. Our military bases agreement with the Philippines remains in effect until 1991, after which either side may terminate it with 1 year's notice. In other words, the agreement continues indefinitely unless one party decides to end it.

At this point, it is not possible to predict the attitude of the Philippine Government closer to 1991. However, President Aquino has pledged to abide by the current agreement and to keep her options open. We believe we can work with the new Philippine Government to achieve resolution of any issues which arise in connection with the bases agreement. As is prudent for a world power, we regularly review our basing strategy worldwide and develop contingency plans. There are other possible locations for our facilities in the Philippines, but these locations would be much more costly and much less effective than our installations at Subic Bay and Clark Air Base.

Note: The questions were submitted by the Singapore Straits Times; the Malaysia New Straits Times; the Borneo Bulletin; the Bangkok Post; Business Day, of the Philippines; and Kompas, of Indonesia. The questions and answers were released by the Office of the Press Secretary on April 27.