U.S. Economic Engagement with the Asia Pacific

U.S. Economic Engagement with the Asia Pacific

Remarks

Robert D. Hormats
Under Secretary for Economic Growth, Energy, and the Environment 

Asia Society Global Forum

Washington, DC

June 12, 2013

As Prepared For Delivery

Thank you, Josette [Sheeran, President and CEO of Asia Society], for that gracious introduction. As this group is well aware, the U.S. rebalance to Asia is as much an economic rebalance as it is a political-security one.

Today, I am going to focus my remarks on our ongoing multilateral engagement through the Trans-Pacific Partnership (TPP), APEC, and ASEAN. I will also highlight recent developments in some of our bilateral relationships in the region.

Our engagement with regional multilateral institutions bolsters our bilateral ties in the region, just as our strong bilateral relationships provide a platform for our effective multilateral leadership.

Multilateral Engagement

TPP

The Trans-Pacific Partnership (TPP) has become a key component of our economic policy in the Asia-Pacific region. The TPP is intended to be a far-reaching trade agreement that brings together some of the largest and fastest growing economies of the Pacific Rim, including Japan, which will join the negotiations in about six weeks’ time. Indeed, the entry of Japan, the world’s third largest economy, substantially increases the economic significance of this already extremely important trade grouping, boosting its share of global GDP to nearly 40 percent and to about one-third of world trade.

Through the TPP, we are pursuing a rules-based and high-standard regional economic and trade architecture.

Strong U.S. trade and investment ties with the dynamic Asia-Pacific region will continue to be critical for our economic recovery and our long-term economic strength. As a strategic imperative, we will work to ensure the adoption of a regional economic and trade architecture that is rules-based and provides an open, fair, and transparent framework. Such a framework will allow U.S. businesses better to tap into growing trade and investment opportunities in the region.

We support the goal of completing successful TPP negotiations by the end of this year.

APEC

Moving from the TPP to APEC, we view APEC as the premier forum for economic cooperation in the Asia-Pacific region. In it, we are seeking to engage our partners to shape both APEC and the East Asia Summit into effective, complementary venues for cooperation. One of the ways that we have done this recently is to recognize areas where we can leverage the institutional experience and capacity of APEC, and leverage U.S. foreign assistance funding to expand capacity building activities to include participants from the three ASEAN Member States who are not yet part of APEC.

Indonesia is the largest member of ASEAN, and their 2013 host year of APEC has given us opportunities to do just that in areas such as food security and standards harmonization.

The many accomplishments in APEC during the past several years include: (1) lower tariffs on environmental goods and services, (2) promotion of market-based, non-discriminatory innovation policies, and (3) encouraging greater participation by women in APEC economies.

We are supportive of Indonesia’s agenda this year:

• to advance the “Bogor Goals” of free and open trade and investment;

• to enhance physical, institutional, and people-to-people connectivity; and

• to promote economic growth that is both environmentally sustainable and inclusive of larger and larger numbers of citizens of the APEC region.

The United States is also focused on continuing our cooperative work within APEC to increase trade and economic growth in the Asia-Pacific region. From steps to improve supply chain performance, to adopting better regulatory practices, to tacking the troubling trend of local content requirements, we continue to deepen our economic integration in the region.

I would also like to highlight two emerging issues that we are addressing through APEC:

• The first is fighting counterfeit pharmaceuticals. It is important to ensure safe and reliable supply lines for our pharmaceutical products. The United States imports 80 percent of the active ingredients in the pharmaceuticals we consume in this country.

• Second, we are fighting the trafficking of wildlife and wildlife products into and within Asia, by leveraging APEC to link enforcement networks, increase public awareness, and expand demand reduction campaigns in the region. Trade in wildlife is the third largest area of illegal trade after trade in arms and drugs. It is often conducted by organized criminal groups connected to arms, drugs, and terrorist organizations.

ASEAN

The United States has also sought to forge more open ties with Southeast Asia by institutionalizing the U.S-ASEAN Leaders meeting, now the U.S.-ASEAN Summit, and participating in the East Asia Summit.

And through our Lower Mekong Initiative (LMI), we are working with regional partners to foster capacity building in the areas of education and healthcare. This year, we also launched two new “pillars,” energy security and food security, that will serve to further our cooperation in the LMI.

The United States also supports greater connectivity across the Southeast Asian region by promoting transportation and infrastructure development.

We are also invested in helping ASEAN achieve its economic integration goals. The United States invests millions of dollars per year in technical assistance and capacity building activities with ASEAN on economic issues -- furthering ASEAN’s goal of an integrated economic community by 2015.

Examples include ongoing consultations centered on the U.S. ASEAN Trade and Investment Framework Arrangement, and the recently announced Expanded Economic Engagement with ASEAN initiative, or E3. Our activities under E3 will focus this year on trade facilitation, and information and communications technology principles and investment.

In fact, tomorrow, ASEAN Economic Ministers will be here in Washington for high level discussions on these issues.

We also have an annual series of standards and dialogues within ASEAN and APEC regarding compliance; these feature strong private sector participation. This year’s have focused on standards for food safety, energy efficient construction, and codes of conduct to promote ethical business practices for small businesses.

Energy

But U.S. economic engagement with the Asia-Pacific region is not limited to traditional trade and investment issues. It includes energy as well.

As part of the U.S.-Asia Pacific Comprehensive Energy Partnership, announced by President Obama at last year’s East Asia Summit, the U.S. Government has earmarked up to $6 billion in a line of credit over four years through the Export-Import Bank and the Overseas Private Investment Corporation. This will drive trade and investment in private sector and public-private energy-related projects across the region.

In addition to these resources, the United States will support capacity building programs through APEC and ASEAN, as well as with our bilateral partners, in the priority areas of interconnectivity, natural gas, renewables, and sustainable development.

Bilateral Engagement

In addition to our multilateral engagement, I’d like to highlight some important developments in the U.S.’s bilateral relationships with China, South Korea, and Myanmar.

China

President Xi Jinping was in California just a few days ago visiting with President Obama, where they discussed several important issues. They discussed cybersecurity and the theft by Chinese entities of U.S. intellectual property, and the President emphasized that establishing a set of rules outlining what was acceptable in the cyber realm was key to future economic relations between the two countries. They hailed the ninth round of the Bilateral Investment Treaty talks, which were also being held last week, and progress toward a high-standard agreement. Finally, they agreed to work together and to use the Montreal Protocol to phase down the consumption and production of hydrofluorocarbons (HFCs), which is an important step to confront global climate change.

We will also host senior Chinese officials in Washington next month for the Strategic and Economic Dialogue, where we will continue to work on building a cooperative economic partnership. Topics for discussion will include expanding trade and investment cooperation; promoting structural reform and sustainable, balanced growth; and financial market stability and reform.

We are especially focused on negotiating a high-standard Bilateral Investment Treaty that includes national treatment for our companies. And a top priority is protecting intellectual property rights. Cyber attacks are a particularly troublesome and persistent problem.

China has agreed to a cyber working group that will meet in July, and will include discussion of these issues.

We are also urging China to end market-distorting practices by some Chinese state-owned enterprises and to embrace data and regulatory transparency. In addition, we are working with Chinese officials to enhance our bilateral energy cooperation, including on both energy security and climate change.

South Korea

Just over a year ago, the U.S.-Korea Free Trade Agreement, or KORUS, went into effect. In just the first year of the agreement, we are seeing tangible benefits for businesses, workers, and consumers on both sides, as the agreement has boosted mutual exports and supported job-creating investments.

Thanks specifically to market opening provisions in the agreement, 12 U.S. law firms have received approval to open offices in South Korea for the first time ever. And U.S. service providers in sectors such as telecommunications, e-commerce, and international express delivery services are benefiting from the agreement as well.

Today, almost 80 percent of U.S. consumer and industrial exports to South Korea, and more than two-thirds of America’s agricultural exports, are already duty free. By 2016, South Korean tariffs on more than 95 percent of exports of U.S. industrial and consumer goods to South Korea will have been eliminated. Over the coming years, many more sectors will benefit as the agreement is phased in.

And South Koreans as well as Americans share these benefits—63 percent of South Korean exporters report taking advantage of U.S. tariff concessions under KORUS. More favorable treatment of South Korean goods lowers costs for American consumers and also creates jobs and supports small and medium-sized businesses in South Korea.

Myanmar

Given the recent positive developments in Myanmar, I would now like to discuss our increasing economic cooperation with that country. The development of trade and transit links between South, Southeast, and East Asia have been hampered for decades by poor regional infrastructure connectivity and the isolation of Myanmar. However, Myanmar’s recent political and economic reforms – punctuated by Secretary Clinton’s groundbreaking visit in November 2011, President Obama’s historic visit in November 2012, and President Thein Sein’s visit to the United States in May – have generated new opportunities to promote U.S. business interests and regional economic development.

We have taken steps to encourage inclusive, broad-based economic development and to strengthen economic relations between our two countries. Following the targeted easing in 2012 of economic sanctions, in consultation with Congress, we are supporting U.S. businesses as they apply their high standards in bringing responsible investment to Myanmar. We also seek to support reform by leveraging the talents and resources of the U.S. private sector to enhance economic development and extend the benefits of economic reform to all of the country’s people.

Indo-Pacific Economic Corridor

Finally, no discussion of engagement in the Asia-Pacific region would be complete without a reference to the Indo-Pacific Economic Corridor. The United States sees great value in integrating India into the Asia-Pacific architecture and strongly supports the Government of India’s efforts to improve trade and connectivity in Southeast Asia – a region with which it shares many historical and cultural links. The creation of an Indo-Pacific Economic Corridor, linking the economies of India, Bangladesh, and Southeast Asia, holds great promise for greater trade and cooperation throughout the region. The idea is to spur economic development, regional growth, and prosperity through closer economic connections, increased trade and investment, and better energy, transit, and communications links.

Efforts made by the Governments of Bangladesh and India to improve bilateral relations, whether through Sheikh Hasina’s landmark visit to New Delhi in January 2010, or the signing of an MOU on renewable energy during Prime Minister Singh’s visit to Dhaka in September 2011, are two examples of how the region is moving ahead.

While trade among the South Asian Association for Regional Cooperation (SAARC) countries remains far below its potential, current political and economic conditions in the region have created a potential watershed moment to strengthen the economies and enhance the economic prosperity of Bangladesh, Myanmar, and India through enhanced economic engagement with other Southeast Asian neighbors.

As everyone in this room knows, we live today in a world where economic vitality in many sectors of the U.S. economy depends increasingly on the ability of U.S. firms to tap opportunities in the growing Asia-Pacific region. We also live in a world where markets in this region provide the United States with unprecedented opportunities for investment and trade, as well as growing demand for cutting-edge U.S. technology.

Consequently, in the near term, as I have highlighted for you today, the United States continues to support strengthening the Asia-Pacific region’s institutions and continues to engage on trade and investment multilaterally. The TPP is our highest trade priority, as it offers a high-quality platform for deepening regional economic integration – not only by lowering tariffs, but also by addressing 21st-century trade and investment issues.

In addition, the United States has made strides in its bilateral relationships in the region – particularly in its relationships with China, South Korea, and Myanmar – and sees great potential and new opportunities in connecting India to Southeast Asia.

But this U.S. commitment to the Asia-Pacific region is not one for the mere short term. The U.S. government looks forward to forging closer multilateral and bilateral partnerships with the Asia-Pacific region not just this year, or the next, but in the long term as well.

Strong U.S. trade and investment ties with the dynamic Asia-Pacific region will continue to be critical for our economic recovery and our long-term economic strength. And only by committing ourselves in the long term to the Asia-Pacific region will we be able to promote successfully the economic prosperity of the United States and the world as a whole.

I welcome your questions.

Thank you.

ENDS

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