EAST ASIA BIWEEKLY REVIEW

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00912A002200010011-3
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 18
• Document Creation Date: December 12, 2016
• Document Release Date: January 25, 2002
• Sequence Number: 11
• Publication Date: May 2, 1978
• Content Type: REPORT

National cret
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Assessment ORCON
Center
lax
East Asia
Biweekly Review
2 May 1978
Secret
RP EABR 78-010
2 May 1978
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STATOTHR
STATOTHR
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NOFORN-NOCONTRACT-ORCON
2 May 1978
An Historical Perspective on the Senkaku
Islands Dispute ................................. 1
The Senkaku Islands, a small group of
islets in the East China Sea claimed by
Japan, China, and Taiwan, have recently
been the focus of a renewed territorial
dispute between Peking and Tokyo.
Burma: Disenchantment with China ................. 4
The Burmese reportedly have sharply
protested Chinese support of Burmese
Communist insurgents.
Burma: Strains with Bangladesh ................... 6
Burma's efforts to expel illegal Muslim
residents of a state bordering on Ban-
gladesh could increase tensions with Dacca.
South Korea: Cautious Import Liberalization
Policy .......................................... 8
South Korea has announced a five-year
trade liberalization policy.
North Korea Chronology ............................ 12
This publication is prepared for regional specialists in the Washington community by
the East Asia/Pacific Division, Office of Regional and Political Analysis, with
occasional contributions from other offices within the National Foreign Assessment
Center. Comments and queries are welcome. They should be directed to the authors
of the individual articles.
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KAMCHATKA
PENINSULA,
-~~ 'JAPAN
1N okyo
ti,U
OKINAwA
OSenkaka
~ J
islands
rAIwANy
Nautical Mites
40418) 6233G6 L.
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NO FORN-NOCONTRACT-ORCON
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An Historical Perspective on the Senkaku Islands Dispute
The recent incursions of some 200 Chinese fishing
boats into Japanese-claimed waters off the Senkaku
Islands in the East China Sea have further delayed the
resumption of negotiations on the long-pending Sino-Japa-
nese peace and friendship treaty. The Japanese claim to
the Senkakus was virtually uncontested until 1968 when a
UN survey suggested that oil deposits might be found in
the vicinity. Since then, Taiwan and subsequently China
have claimed the islands.
Latest Incident
The incursions by Chinese fishing boats began on
12 April and ended two weeks later. Peking has claimed
that the incursions were "accidental;" according to the
Chinese, the fishermen strayed into the area as they
chased filefish--a species the Japanese do not catch.
Chinese officials also pointed out that when their boats
had fished near the Senkakus in 1977, Tokyo had not ob-
jected and that the recent incident could have been
resolved through normal diplomatic channels.
Notwithstanding Peking's explanations, the incident
stirred a strong reaction in Tokyo. Aside from gener-
ating strong domestic support for Tokyo's protest of the
incursions, it has raised questions concerning Peking's
motives and tactics. Demands by Japanese opponents of
the peace and friendship treaty that the Senkaku terri-
torial dispute be settled before resuming negotiations*
reportedly prompted the Chinese to reassert their claim
to the islands. In any case, the incursions have slowed
movement on the treaty for the time being. The Chinese
action may also affect the course of pending legislation
in the Japanese Diet for the implementation of the
Japan - South Korea Continental Shelf Agreement, which
*This demand conflicts with an earlier understanding reached by
Japan and China that the territorial issue would be treated
separately from the treaty.
2 May 1978
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deals with development of oil resources in another area
claimed by China.
Physical Setting
The Senkaku Islands--to the Chinese, the Tiao-yu
Tai--comprise a chain of eight uninhabited islets about
200 nautical miles from China, 100 nautical miles from
Taiwan, and 80 nautical miles from the nearest inhabited
island in the Ryukyu chain. The Senkakus are commonly
considered part of the Japanese prefecture of Okinawa.
From evidence collected in a 1969 Japanese geological
survey, there is little doubt that the islets are also
part of the continental shelf.
There is a submarine trench about 40 nautical miles
southeast of the islands separating the Senkakus and the
East China Sea continental shelf from the Ryukyu Islands.
This trench provides the basis for the Chinese claim
that the Senkakus are physically detached from the
Ryukyu chain.
Japan: In 1895, the Japanese Government installed
markers on the islands signifying that they belonged to
Okinawa and proclaimed the Senkakus as Japanese terri-
tory. Four of the islands were then leased for 30 years
to Japanese farmers. Tokyo alleges that it conducted
several investigations of the islands in order to con-
firm that they were uninhabited and outside Chinese
authority.
After World War II, the Ryukyus were placed under
US administration; they were returned to Japan in 1972
when the US relinquished its administrative rights to
the area. Since then, the Japanese Maritime Safety
Agency has patrolled the area routinely.
Taiwan: Taiwanese fishermen provided the only
Taiwanese contact with the Senkakus before 1969, when
the Japanese survey confirmed the findings of the UN
team. The Taiwanese have occasionally fished for bonito
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and shellfish in the waters near the Senkaku Islands;
for their part, Japanese fishermen seldom operate there
because the winds and currents are largely unfavorable.
The Taiwanese have also searched the islets for eggs,
feathers, turtle shells, and guano. In July 1969, Taiwan
simultaneously granted a concession to an American oil
firm to explore the area around the Senkakus for oil and
informally disputed the Japanese claim to the islands.
In doing so, Taipei based its case on the San Francisco
Peace Treaty of 1952, which limited Japan's sovereignty
to the four main Japanese islands.
In 1971, the Nationalist government took an even
stronger position by publicly claiming sovereignty over
the Senkaku Islands. Taiwan also requested that the US
"respect the sovereign rights of the Republic of China
over the Tiao-yu Tai islets and restore them to the Gov-
ernment of the Republic of China when the US occupation
of the Ryukyu Islands terminates."
China: China made no significant public statement
concerning the islands or the continental shelf when the
possibility of oil deposits in the area prompted the
dispute between Japan and Taiwan. In the fall of 1970,
however, Peking attacked business efforts in Tokyo,
Taipei, and Seoul to foster cooperation in the develop-
ment of the area. Subsequently, in a 30 December 1971
statement, the Chinese Foreign Ministry declared that
the Senkakus have been an inseparable part of Chinese
territory since ancient times, citing among other things,
Ming dynasty documents of 1403 that supposedly mention
the islands. When Okinawa reverted to Japan in 1972,
Peking once again proclaimed its sovereignty over the
_slands.
China's public claims to the Senkakus were motivated
by what was considered to be a dangerous foreign in-
fringement of Peking's territorial rights. China may
also have feared that Japanese-Taiwanese cooperation in
developing the continental shelf's oil resources would
strengthen Tokyo's interest and influence in Taipei,
thus complicating the ultimate settlement of the Taiwan
problem. (SECRET NOFORN-NOCONTRACT-ORCON)
2 May 1978
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Burma: Disenchantment with China
The Burmese Government reportedly has presented a
sharp note to the Chinese Ambassador in Rangoon protest-
ing Chinese backing of the approximately 10,000 Burmese
Communist insurgents in northeast Burma along the Chinese
border. Although China's direct involvement in the in-
surgency has been reduced since the early 1970s, Rangoon
has become increasingly frustrated over its inability to
persuade China to end its support for the insurgents.
The reported protest may stem from President Ne Win's
outrage over an upsurge in the insurgency immediately
following Chinese Vice Premier Teng Hsiao-ping's visit
to Rangoon early this year. While there is no evidence
that the Chinese were responsible for the stepped-up
rebel activity, Ne Win may have interpreted it as a par-
ticularly gratuitous show of Chinese insensitivity to
Burmese concerns. I
Burmese are prepared to publicize testimony from 82
Chinese troops captured in counterinsurgency operations
if the Chinese do not give some assurance of cutting back
their support.
We have no confirmation of the protest, and such a
forceful and direct approach would be out of character
for Burma. Anxious not to antagonize its powerful north-
ern neighbor, it has until now been notably oblique in
raising the matter and patient with Chinese evasiveness.
Ne Win has tried without success to draw out the Chinese
on the subject in his repeated trips to Peking. He also
hoped that he could work out a solution with Teng, and
his disappointment on this score may have prompted him
to order a change in diplomatic tactics.
A protest would be in line with other indications
of Rangoon's downgrading of its relations with China.
Recently Burma named a junior diplomat as new Ambassador
to China and published unusual if not unprecedented crit-
icism of China in its party journal. At the same time,
Burma is showing signs of greater openness toward its
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non-Communist neighbors and the US. Burmese diplomats
have also reportedly been instructed to sound out US
officials on a visit by Ne Win.
Despite its annoyance, it is unlikely that Burma
would risk provoking China by giving heavy play either
to its protest or to the statements of Chinese prisoners
it claims to hold. In the absence of sustained publicity
from Rangoon, Peking will probably respond by pigeonhol-
ing the Burmese protest. (SECRET NOFORN-ORCON)
2 May 1978
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25X1 A
Burma: Strains with Bangladesh
Burma's efforts to root out illegal residents in
Arakan State along the Bangladesh border have prompted a
flow of refugees into Bangladesh that has complicated
bilateral relations and could increase tensions.
In February, Rangoon moved to enforce immigration
laws against Arakan State residents of Bangladesh origin.
Burma claims there are 75,000 illegal residents in the
state, about one-half of them recent arrivals. The high-
handed manner of some of the 200 immigration officers
sent into the area apparently prompted the flight of up
to 20,000 refugees into Bangladesh by late last week,
and the press has reported that the flow increased over
the weekend.
The Bangladeshi press and government claim there
have been at least four incidents of firing between
Burmese and Bangladeshi forces. During one operation,
Burmese troops reportedly crossed the border and burned
three Bangladesh villages. Rangoon has expressed regret
for the incident and promised compensation. Bangladeshi
officials accept Burma's right to enforce its immigration
controls, but--overwhelmed with refugees--have urged
Rangoon to suspend the measures that have prompted the
flow of migrants.
There has long been a drift of Bangladeshis across
the border into underpopulated Arakan. Several hundred
thousand Bangladeshis live in Arakan and outnumber the
Buddhist Burmese in some areas. Rangoon sees illegal
immigration from Bangladesh as adding to existing Muslim
disaffection and separatist tendencies in the remote state.
Alert to Bangladeshi mischiefmaking among Arakanese
Muslims, Rangoon expelled the Bangladeshi military at-
tache last year for alleged involvement with separatists.
Although Rangoon has accepted a replacement, it remains
concerned over subversion among the large alien minority.
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There has been an exchange of official delegations
to discuss the problem, and another round of talks is
planned for this week. Bogged down with insurgencies
in all its other border areas, Rangoon would presumably
not want to inflame the situation along the Bangladeshi
border. It is also concerned over possible international
Islamic criticism of Burma's treatment of its Muslim
minority. Bangladesh apparently did not raise the issue
at the international Islamic conference in Guinea last
week, but the Bangladeshi press has charged the Burmese
military with atrocities against the refugees. The
government has told foreign diplomats in Dacca that the
press reports are "generally accurate." Although neither
side wants to push the situation to a confrontation,
Rangoon's determination to rid itself of unwanted
aliens--along with Dacca's compulsion to support its
ethnic kin--seems to rule out an easy solution. (SECRET
NOFORN)
2 May 1978
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25X1A
South Korea: Cautious Import Liberalization Policy
South Korea, which had a half-billion-dollar trade
surplus with the United States last year, is cautiously
liberalizing its restrictive import policy. A five-year
program, announced on 15 April, will remove curbs on 321
commodities by 1982. This follows an easing of barriers
on almost 200 items late last year. Commodities were
carefully selected for liberalization; many are already
freely imported in practice, and others are not competi-
tive on the Korean market.
Taken together, the liberalization measures should
result in about $700 million in additional imports in
1978, mainly industrial raw materials and capital equip-
ment. Japan stands to benefit most from the changes,
although Seoul is encouraging increased purchases from
US and West European suppliers.
Background
Since assuming power in 1961 the Pak Chong-hui gov-
ernment has maintained a wide array of nontariff import
barriers to protect domestic industries and keep out non-
essential goods. The semiannual trade plan with its list
of banned and restricted items is the most effective
barrier. Seoul also employs an export-import link sys-
tem, end user requirements, and import deposit require-
ments to restrict the inflow of foreign goods.
The Push for Liberalization
A dramatic improvement in South Korea's balance of
payments in 1976 and further gains in 1977 enabled the
government to consider easing import barriers. A dou-
bling of exports in two years and a sharp rise in re-
ceipts from overseas construction work pushed South
Korea's current account into the black in 1977 for the
first time in more than a decade. Moreover, rapidly
increasing foreign exchange inflows contributed to
inflationary pressures. Foreign exchange reserves
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increased 45 percent last year, leading to a 40-percent
hike in the money supply. Seoul resorted to extensive
price controls and tight credit restrictions to keep
within its 10-percent inflation ceiling and began to
consider import liberalization as an anti-inflation tool.
The government's liberalization policy also grew
out of rising pressure from its trading partners, espe-
cially the United States. Seoul wants to avoid trade
problems with Washington at a time when the Pak Tong-
sun scandal has strained relations and when military
aid decisions are being made by the US Congress. For
the first time, Seoul has set import as well as export
targets for its trade with the United States to hold
down its bilateral surplus.
The South Korean leadership has been widely split
on the liberalization issue. The Economic Planning
Board, concerned with slowing inflation and improving
Korean export competitiveness, has pushed hard for a
rapid easing of controls. The Ministry of Commerce and
Industry, citing the growing wave of protectionism in
the developed countries, has offered strong resistance.
Implementing Liberalization Measures
The measures implemented last year were narrow in
scope but becoming more substantial as the year ended.
The steps taken in June and July, namely, the removal
of 46 subitems from the restricted list, were largely
window dressing. The trade plan announced in late 1977
for the first half of 1978 went further, removing re-
strictions on 186 commodities. The trade plan and sub-
sequent administrative guidelines also lifted end-user
requirements on 40 machinery items, abolished the export-
import link system, lifted restrictions on certain types
of textile machinery, and dropped import ceilings on a
list of 300 items covered in specific commodity legisla-
tion.
The pressure for liberalization increased early
this year because of a pronounced rise in inflation,
from 10 percent in 1977 to.24 percent (annual rate) in
the first quarter of 1978. Responding to an order from
President Pak, a committee was established in January
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and quickly set up guidelines. Key considerations in-
cluded a desire to foster Korean export competitiveness
while at the same time protecting emerging industries,
especially heavy and chemical industries.
The liberalization program announced on 15 April
will remove curbs on 321 subitems over the next five
years--133 items this month, 78 in 1979-80, and 110 in
1981-82. The cautiousness of the program is reflected
in the categories singled out for early liberalization.
They include commodities in which Korea lacks compara-
tive advantage, commodities that are not produced in
Korea, and commodities in. which Korea is strongly com-
petitive.
Impact of the Measures
According to government estimates, the measures an-
nounced in November and December 1977 were expected to
boost 1978 imports by $500 million to $1 billion; in
practice, the increase probably will not exceed $500
million. The additional measures announced on 15 April
should add another $200 million to 1978 imports, raising
total purchases to about $13.5 billion. Given the changes
expected in exports and in the services accounts, the
1978 current account probably will show a deficit close
to the $300 million now estimated by the government.
The impact of the program is limited by the commod-
ities selected for liberalization. Many of the items
already are being freely imported in practice, while
others, such as black and white television sets, are
not competitive on the Korean market.
The increase in foreign purchases in 1978 will
primarily involve raw materials, capital equipment, and
technology, especially those items destined for Korean
export firms. Selected food products will be imported
more freely for stabilization purposes. In contrast,
imports will remain highly restricted for most agricul-
tural commodities, most consumer products, and those
industrial goods the government is trying to foster
domestically.
Japan, which supplies 37 percent of South Korean
imports, stands to benefit most from the reduction in
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barriers. Seoul, however, will attempt to divert bene-
fits to US and West European suppliers by actively en-
couraging purchases from those sources. A massive trade
deficit with Japan in January and February has intensi-
fied government efforts in this direction. Pressure is
being applied to Korean trading companies and Japanese
trading firms in Korea to meet specified targets to
close the trade gap.
Evaluation
The South Korean Government, while apparently
serious about moving toward a more open trading system,
is proceeding cautiously because of strong domestic
opposition to liberalization. Introduction of a new
surveillance category in the trade plan--in which com-
modities are monitored and could be moved back to the
restricted list--leaves the Pak government the option
of backtracking should payments problems arise.
(SECRET NOFORN-NOCONTRACT)
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25X1A
North Korea Chronology
2 April Soviet IL-62 passenger planes begin regu-
lar direct flights between Moscow and
Pyongyang. The flight time is reduced
from 12 to 8 hours, according to Moscow
radio. (U)
6 April The Yugoslav Ambassador to North Korea
presents Foreign Minister Ho Tam a message
from-President Tito to Kim Il-song, ac-
cording to a Yugoslav news agency dis-
patch from Peking. North Korea does not
report the message; Pyongyang has main-
tained a discreet silence on the proposal
for trilateral talks among the US and the
two Koreas, which reportedly was raised
by Tito when he was in Washington in
early March. (U)
12-13 April Romanian President Ceausescu meets with
President Carter. A White House spokesman
acknowledges that Korea is discussed, but
it is not mentioned in the communique
issued at the end of the talks. (U)
17 April The secretaries of the North Korean and
UN Command delegations to the Military
Armistice Commission hold their 450th
meeting at Panmunjom. The URIC delivers
a letter refuting charges by Pyongyang
of numerous minor violations along the
truce line during the past six months
contained in a North Korean statement of
24 March. (U)
Kim Il-song, in his first public appear-
ance in nearly three weeks, meets sepa-
rately with a Japanese labor union offi-
cial and the new Ambassador from Guyana.
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17 April Kim, who turned 66 on 15 April, oftentimes
withdraws from public view for periods of
two to three weeks, usually before enter-
ing into a heavy schedule of affairs of
state. (U)
1.8 April Pyongyang radio quotes remarks by Romanian
President Ceausescu that he had not pre-
sented proposals to President Carter on
Korean reunification because "this is the
right of the Koreans themselves." (U)
North Korea seizes a Japanese fishing boat
for allegedly violating the 50-mile coastal
security zone in the Sea of Japan. The
boat and crew are released six days later.
(U)
18-20 April The second session of the 6th Supreme
People's Assembly convenes in Pyongyang
with Kim Il-song in attendance. The As-
sembly adopts a labor law and a state
budget for 1978. The percentage of an-
nounced state expenditures for defense is
increased slightly, from 15.7 to 16
percent. (U)
19 April The Japanese daily, Yomiuri, reports that
the US Table Tennis Association is plan-
ning to send a team to participate in the
biennial world ping pang championship
games scheduled to be held in Pyongyang
in the spring of 1979. (U)
21-27 April Prime Minister Burnham of Guyana visits
North Korea following his trip to Moscow.
Burnham is the first of a number of
high-level visitors to Pyongyang expected
in the next month or so, including Chi-
nese party chairman Hua Kuo-feng and
Romanian President Ceausescu. (U)
25 April The North Korean Army, adhering to a de-
cision announced in February to adopt the
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founding date of the anti-Japanese guer-
rilla forces in 1932, marks its 46th an-
niversary. Kim Il-song does not attend
the meeting in Pyongyang but, as is cus-
tomary, makes an inspection visit to a
military unit accompanied by the top
military leadership. (U)
26 April North Korea, in relatively mild terms,
criticizes President Carter's statement
on 21 April announcing a delay in the im-
plementation of the first phase of the
US troop withdrawal scheduled for late
1978. (U)
26 April Former agriculture specialist Kim Man-kum,
speaking at a rally to welcome Prime Min-
ister Burnham, is identified for the first
time as chairman of the Pyongyang munici-
pal people's committee. Kim replaces
Vice Premier Chong Chun-ki, who was named
to the municipal post in March 1977. (U)
27 April North Korea broadcasts its first report
on the downing in the Soviet Union of a
South Korean airliner on 21 April. (U)
28 April South Korea sinks a North Korean boat
engaged in infiltrating a political agent
off the southern coast. (U)
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