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ACROSS THE OTHER POND: U.S. OPPORTUNITIES

AND CHALLENGES IN THE ASIA PACIFIC

HEARING

BEFORE THE

SUBCOMMITTEE ON ASIA AND THE PACIFIC

OF THE

COMMITTEE ON FOREIGN AFFAIRS 

HOUSE OF REPRESENTATIVES

ONE HUNDRED FOURTEENTH CONGRESS

FIRST SESSION

FEBRUARY 26, 2015

Serial No. 114–8

Printed for the use of the Committee on Foreign Affairs

(

Available via the World Wide Web: http://www.foreignaffairs.house.gov/ or

http://www.gpo.gov/fdsys/

(II)

COMMITTEE ON FOREIGN AFFAIRS 

EDWARD R. ROYCE, California, Chairman 

CHRISTOPHER H. SMITH, New Jersey 

ILEANA ROS-LEHTINEN, Florida 

DANA ROHRABACHER, California 

STEVE CHABOT, Ohio 

JOE WILSON, South Carolina 

MICHAEL T. MCCAUL, Texas 

TED POE, Texas 

MATT SALMON, Arizona 

DARRELL E. ISSA, California 

TOM MARINO, Pennsylvania 

JEFF DUNCAN, South Carolina 

MO BROOKS, Alabama 

PAUL COOK, California 

RANDY K. WEBER SR., Texas 

SCOTT PERRY, Pennsylvania 

RON DESANTIS, Florida 

MARK MEADOWS, North Carolina 

TED S. YOHO, Florida 

CURT CLAWSON, Florida 

SCOTT DESJARLAIS, Tennessee 

REID J. RIBBLE, Wisconsin 

DAVID A. TROTT, Michigan 

LEE M. ZELDIN, New York 

TOM EMMER, Minnesota 

ELIOT L. ENGEL, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

ALBIO SIRES, New Jersey 

GERALD E. CONNOLLY, Virginia 

THEODORE E. DEUTCH, Florida 

BRIAN HIGGINS, New York 

KAREN BASS, California 

WILLIAM KEATING, Massachusetts 

DAVID CICILLINE, Rhode Island 

ALAN GRAYSON, Florida 

AMI BERA, California 

ALAN S. LOWENTHAL, California 

GRACE MENG, New York 

LOIS FRANKEL, Florida 

TULSI GABBARD, Hawaii 

JOAQUIN CASTRO, Texas 

ROBIN L. KELLY, Illinois 

BRENDAN F. BOYLE, Pennsylvania

AMY PORTER, Chief of Staff THOMAS SHEEHY, Staff Director

JASON STEINBAUM, Democratic Staff Director 

SUBCOMMITTEE ON ASIA AND THE PACIFIC

MATT SALMON, Arizona Chairman 

DANA ROHRABACHER, California 

STEVE CHABOT, Ohio 

TOM MARINO, Pennsylvania 

JEFF DUNCAN, South Carolina 

MO BROOKS, Alabama 

SCOTT PERRY, Pennsylvania 

SCOTT DESJARLAIS, Tennessee 

BRAD SHERMAN, California 

AMI BERA, California 

TULSI GABBARD, Hawaii 

ALAN S. LOWENTHAL, California 

GERALD E. CONNOLLY, Virginia 

GRACE MENG, New York 

(III)

C O N T E N T S 

Page

WITNESSES 

Karl D. Jackson, Ph.D., C.V. Starr Distinguished Professor of Southeast Asia 

Studies, director of the Asian Studies Program, Johns Hopkins School of 

Advanced International Studies ......................................................................... 8

Van Jackson, Ph.D., visiting fellow, Center for a New American Security ........ 18

Mr. Matthew P. Goodman, William E. Simon Chair in Political Economy, 

senior adviser for Asian economics, Center for Strategic and International 

Studies .................................................................................................................. 27

Mr. Abraham M. Denmark, senior vice president, Political and Security Affairs and External Relations, The National Bureau of Asian Research .......... 38

The Honorable Patrick Mulloy, trade lawyer (former Commissioner, U.S.-

China Economic and Security Commission) ...................................................... 56

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

Karl D. Jackson, Ph.D.: Prepared statement ........................................................ 10

Van Jackson, Ph.D.: Prepared statement .............................................................. 20

Mr. Matthew P. Goodman: Prepared statement ................................................... 29

Mr. Abraham M. Denmark: Prepared statement .................................................. 40

The Honorable Patrick Mulloy: Prepared statement ............................................ 58

APPENDIX 

Hearing notice .......................................................................................................... 86

Hearing minutes ...................................................................................................... 87

The Honorable Gerald E. Connolly, a Representative in Congress from the 

Commonwealth of Virginia: Prepared statement .............................................. 88

(1)

ACROSS THE OTHER POND: U.S. 

OPPORTUNITIES AND CHALLENGES 

IN THE ASIA PACIFIC 

THURSDAY, FEBRUARY 26, 2015

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON ASIA AND THE PACIFIC,

COMMITTEE ON FOREIGN AFFAIRS,

Washington, DC. 

The committee met, pursuant to notice, at 10 o’clock a.m., in 

room 2172 Rayburn House Office Building, Hon. Matt Salmon 

(chairman of the subcommittee) presiding. 

Mr. SALMON. The hearing will come to order. First, I’d like to 

take this opportunity to welcome everyone to the Asia and Pacific 

Subcommittee’s first hearing of the 114th Congress. 

As many of you know, I’ve spent a significant amount of time living and working in the region, and I’m honored to serve as the 

chairman of this important subcommittee. I look forward to working with all the committee members to conduct rigorous oversight 

of our nation’s foreign policy and spending decisions in this critical 

region of the globe. 

Since President Obama announced his administration’s rebalance 

to Asia several years ago, the United States has struggled to maintain its priorities to the region. While recognizing the significance 

of the Asia-Pacific, fiscal austerity at home, and instability and 

conflict in the Middle East and Eastern Europe have diverted U.S. 

attention away, and the United States struggles to convince our allies and security partners of our commitment to the region. 

Two thousand fifteen will be a pivotal year for U.S. engagement 

in Asia, presenting numerous economic, political, and security challenges. Today we hope not only to hear about the prospects and obstacles facing the rebalance, but how we could better operationalize 

our resources to lend greater credence to our objectives in Asia in 

the medium to long term. 

This year we may see the potential passage of the Trans-Pacific 

Partnership, a 12-member nation trade and investment treaty with 

Asia-Pacific countries. And there’s no doubt that the economic opportunities in the Asia-Pacific are unparalleled. Current negotiating member nations account for 37 percent of total U.S. goods 

and services trade, so its passage has the prospect to vastly bolster 

our economic well-being. 

Two thousand fifteen will also be a year of continued instability 

and conflict. In addition to persistent challenges in Asia such as 

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human trafficking, terrorism, human rights violations, catastrophic 

natural disasters, widespread corruption and ethnic strife, new conflicts and threats will most certainly emerge. 

North Korea continues to egregiously violate international 

norms; from its cyber-attack on Sony Entertainment Pictures late 

last year to its continued violation of human rights, to its continued 

pursuit of nuclear weapons capabilities. 

Pakistan continues to harbor terrorists and contribute to the instability in the region, and poses a threat to the United States. 

Various nations’ state-sponsored theft of U.S. intellectual property 

and citizens’ personal information presents an enduring, long-term 

threat to our economic and national security. 

This year marks the 70th anniversary of the end of World War 

II, and Japan’s Prime Minister, Shinzo Abe, has proposed revisiting 

its interpretation of collective self-defense, in light of unprecedented tension between Japan and China. At the same time, the 

United States and Japan are also revisiting their bilateral defense 

guidelines. I look forward to hearing what our witnesses think the 

implications are for the U.S.-Japan alliance. 

Later this year, we will also look forward to welcoming India’s 

new leader, Prime Minister Narendra Modi, to the United States. 

As the world’s third largest economy and major democratic power 

player in Asia, there is immense potential for collaboration and cooperation. Similarly, India also seeks to balance China’s growing 

dominance in the region, and the United States is poised to play 

a unique role in this space. 

We will see whether Burma’s reforms since we lifted sanctions 

have been genuine in its parliamentary elections later this year. 

And that said, I am concerned with the level of ethnic conflict in 

Northern Burma between the government and numerous ethnic 

minority opposition groups, especially the number of displaced refugees the conflict has caused. 

Elsewhere in Southeast Asia, political instability has elevated 

our concern. For example, in Thailand, two military coups over the 

last 8 years have disrupted our traditionally strong economic and 

security relationship with that country. Without a clear way forward and no strong domestic governance, Thailand may continue 

to face significant obstacles. 

Finally, China. China continues to gain leverage on the international stage and has challenged international norms of behavior 

in such areas as diplomacy and cyberspace alike. China has pressured American businesses in unfair, even hostile business environments, while simultaneously partaking in arguably the largest 

transfer of intellectual property theft in history through means 

such as cyber espionage. Internally, President Xi Jinping has a 

brutal anti-corruption campaign to weed out potential opponents 

while simultaneously clamping down on civilian freedom of expression and access to information. 

At the same time, China continues to modernize its military and 

weapons systems specifically targeted at Taiwan and the United 

States, and U.S.-allied assets. In the maritime space, China continues to aggravate tensions in the East and South China Seas 

with its buildup of islands in contested waters and with its aggressive expansionist behavior against its neighbors such as Japan, 

3

Vietnam, and the Philippines under the banner of sovereignty 

claims. As there is currently no clear solution, I would certainly be 

interested in hearing from our witnesses today how we can best 

prevent conflict from escalating and arbitrate these disputes. 

China is ostensibly a major factor of the U.S. rebalance, though 

by no means should our attention to China come at the expense of 

our other commitments in the region. Our alliances with Japan, 

South Korea, the Philippines, Australia, and Thailand could help 

secure cooperation and compliance with international norms. 

I really hope that the witnesses will be able to address how the 

United States can best focus our time and our assets to the rebalance, how we can improve commercial ties, how trade deals like the 

TPP can help, how we can support democratic governance and 

transitions, and how we can best support our allies and friends in 

the region. An improved understanding of U.S. opportunities and 

challenges in Asia will undoubtedly inform our engagement in the 

region. 

I look forward to hearing from the distinguished witnesses this 

morning and I now yield to Mr. Sherman, the ranking member of 

the subcommittee, for his opening remarks. 

Mr. SHERMAN. Asia and the Pacific, so many issues, so little 

time. Glad, Mr. Chairman, you’ve put together a survey of what 

our subcommittee will deal with as you begin your chairmanship, 

and I begin my, what do they call it, ranking membership. And I’m 

glad to see that so many of us from California and Arizona were 

able to get through the snow of the East. I don’t know if the gentleman from Ohio gets any special accolades for that or not in order 

to be here today. 

This committee’s jurisdiction is not only over half the world’s 

population, it is probably over half the world’s problems, and half 

the world’s opportunities. A lot of attention is focused on the Muslim world. Our jurisdiction includes Indonesia and Malaysia, the 

world’s two largest—or two of the largest, including Indonesia 

being the largest democracy in the Muslim world. 

Our jurisdiction includes the two nuclear powers that don’t have 

stable governments, North Korea and Pakistan. We are posed to 

deal with Prime Minister Modi, a new force in India, and the significant trade opportunities that that provides. 

And when I mention trade, I should point out that the Trans-Pacific Partnership which is basically a trade deal with Asia is, perhaps, the only legislation this Congress will pass other than, of 

course, keeping the doors open by passing appropriations bills. Unfortunately, it’s legislation we should not pass. 

We were told by the International Trade Commission that permanent most favored nation status for China would add $1 billion 

to our trade deficit. I guess $1 trillion would have been closer. Certainly, several hundred billion dollars per year has been added to—

as a result of that decision. And we were told in this room just yesterday by Secretary Kerry that this trade agreement was not a race 

to the bottom. Well, it’s a free trade deal with a country with 30-

cent-an-hour wages. how much more bottom do you need to go? 

How much lower a wage must American workers compete against? 

And we’re told that this trade agreement will confront China, but 

4

if you read the Rules of Origin provisions, it will tremendously benefit China. 

We can look to our trade agreement with South Korea and see 

that goods that are 65 percent made in China, sometimes higher, 

and finished in South Korea get duty-free entry into the United 

States. Business will eventually take advantage of that, and so 

China gets all the benefits of a free trade agreement. No, 65 percent of the benefits of a free trade agreement with the United 

States, and zero percent is what we get of a free trade agreement 

with China. 

It’s I think known that I’m a hawk on these trade issues with 

China. I’m also a dove on the military issues. Most of Washington 

is on the other side on both of these. The condescension and selfinterests of those on the trade issue is, I think, well known. Less 

well known is just how dedicated the Pentagon is to finding and 

building us up to confront a worthy adversary. Every time we have 

confronted a non-uniformed adversary since the Philippine insurrection, it has been an inglorious experience for the Pentagon. 

Every time we’ve confronted a worthy uniformed adversary, and 

there is only one available to us at the present time, it has been 

a glorious victory and none more glorious than when we defeated 

the Soviet Union without a major conflagration. So, when I talk to 

the Pentagon about research, about deployment, about training 

they say we don’t want to prepare for ISIS. There is no glory in 

Boko Haram; 100 percent of our research dollars are going into 

how to fight China. 

Well, we may get what some wish for; a confrontation with 

China, but keep in mind these little islands, islets, rocks that are 

the excuse, even if we win, they’re not ours. We build our whole 

military machine so that Japan, a nation of many islands, gets a 

couple more. And we’re told there’s oil there; there isn’t, but if 

there was, it’s not ours. So, this buildup to confront China is not 

in our national interest. It does meet the institutional needs of the 

Pentagon, and pivot toward Asia seems to be a cover. It is a slogan 

that conjures up a trade mission to Tokyo, but instead it means 

spending $1⁄2 trillion developing and deploying supersonic fighters 

that have no purpose other than to hit targets in a well-defended 

technologically advanced country. 

So many issues, so little time. I really haven’t mentioned Taiwan, 

the Philippines, barely mentioned Japan, Burma or Myanmar. 

We’ve got a big job to do, and the first step in helping to do that 

is to yield back to the chair. 

Mr. SALMON. There is a little bit of a difference in our opening 

remarks, and you know what, it’s a good thing, it really is. I have 

nothing but respect for the ranking member. And while we’re probably going to come to some different conclusions, I have nothing 

but respect for the positions that you’ve taken. I think they’ve always been principled, and I believe that unlike a lot of politicians 

here in Washington, DC, you actually believe what you say, and I 

have nothing but respect for that. 

Mr. SHERMAN. Can I use that in my next campaign? 

Mr. SALMON. I’m not sure it will help you coming from me. 

If other members would like to make an opening statement, go 

ahead, absolutely. 

5

Mr. CHABOT. I’ll be brief. I just wanted to, first of all, congratulate you on your chairmanship, your first hearing, and wish you 

the best. Having had the honor to chair this subcommittee in the 

last Congress, I know that you’re more than up to the job. Speaking Chinese is something that I never accomplished; I really never 

accomplished speaking in any other language other than English, 

but you’ve mastered it. And, I think you’re perfectly positioned to 

chair this subcommittee. I know you’re going to do it well. 

I also know that Mr. Sherman will do a great job, even though 

we may disagree on an issue here or there. He is principled, and 

one of the smartest guys in Congress. He’ll let you know that once 

in a while. No, I won’t say that, no. Just by your actions you’ll let 

us know, not by informing us. I know having traveled with Mr. 

Sherman to Asia in the last Congress, I think over time I would 

consider him not just a colleague, but a friend. And periodically, we 

find an issue to agree on, and that’s a good thing. 

I also want to congratulate and commend Mr. Bera for filling in 

for Eni Faleomavaega in the last Congress as ranking member. 

Eni, as we all know, had some serious health issues that he was 

dealing with much of that Congress, and Ami did a great job. At 

the same time, he had a barn-burner of a race back home, which 

I’m familiar since I’ve had a number of those over the years. My 

district has changed, and I hopefully won’t have that any time in 

the near future, but experience that time and again. When you are 

in one of those races, it can be challenging to really put in the time 

and effort up here, and I always try to do that. I know Mr. Bera 

did, as well, so I want to commend him for that. 

I actually having another hearing going on, so I’m going to be 

going between two places. I’m the new chairman of the Small Business Committee, the first time I’ve chaired a full committee, so 

that’s something that I’m going to be devoting a lot of attention. 

But Foreign Affairs is near and dear to my heart, having served 

on this committee for 19 years now; the full committee, and chaired 

the Middle East Subcommittee. That said, the Asia-Pacific region 

is critically important, and when you consider the amount of trade 

that goes through that area, and the world’s oil shipments—twothirds of the oil shipments—it’s a critical part of the world. 

The so-called ‘‘rebalancing’’ or ‘‘pivot,’’ I think in concept, at least, 

may be a good one. I think there’s some question about the followup, particularly when one considers the growing, for lack of a better term, chaos in the Middle East; whether it’s Yemen, which was 

touted as kind of a success story and recently we saw the government fall to an Iranian-backed Hoothi group; to Libya, where we 

saw 21 Christians literally beheaded on the beach there recently. 

There’s a whole range of things we can talk about in the Middle 

East, so I understand why the rebalance certainly may not be as 

it was originally envisioned—we’re not necessarily seeing that right 

now. 

Those are the kind of questions I’d ask, but I have to go to another committee. What can we expect from that rebalance when 

you consider what’s actually going on in the Middle East? It looks 

like not only are we going to be exiting that region to some degree, 

I think we’re going to be going back in, in considerable form in the 

very near future. 

6

So, anyway, thank you and congratulations on your chairmanship, and I yield back my time, Mr. Salmon. 

Mr. SALMON. Thank you, very much. Mr. Bera, would you like to 

make an opening statement? 

Mr. BERA. Sure, and I’ll keep mine short. I’m looking forward to 

a great session of Congress with you, Mr. Chairman, and the new 

ranking member. I’m also looking forward to the testimony of the 

witnesses. 

Obviously, I have a keen interest in the U.S.-South Asia, U.S.-

India relationship. Also, very interested in getting an update on, 

you know, some of the tensions in the South China Sea, as well as 

it does seem like things in the East China Sea have settled down 

a little bit, but again these unilateral moves that China has made, 

and getting that update. 

Again, I think we’re going to have a great session of Congress. 

I think there is huge opportunity both geopolitically and economically in a strong U.S.-Asia relationship. And, obviously, just having 

returned from India, I think there is huge opportunity and promise 

in the U.S.-India relationship, both strategically and economically. 

So, look forward to the testimony. 

Mr. SALMON. Thank you. Mr. Lowenthal, yes. 

Mr. LOWENTHAL. Thank you, Mr. Chairman, ranking members, 

and all the witnesses. It’s a real pleasure to join this subcommittee. 

I, like many of my colleagues, think that we have tremendous—

we’re at a pivotal point in U.S. foreign policy in Asia. I think there 

are lots of opportunities, but there are also great challenges. You 

know, as we continue to see greater involvement and engagement, 

especially through the TPP, that raises certain issues for me. 

I represent the Port of Long Beach and know how critical the engagement of all these countries are at an economic level. And while 

we grapple with issues of environment and the TPP, labor, currency manipulation, and state-owned enterprises, for example, we 

also now have unprecedented leverage in these negotiations to promote universal values of human rights. 

I believe if you want to gain favorable trading status with the 

United States and your neighbors, you must at least adhere to a 

minimal standard of respecting the basic rights of your own citizens. So for me in my district, and what I’m concerned about is, 

for example, Vietnam. It’s failed time and time again to meet anything close to a minimal standard. This one party authoritarian 

government represses, sometimes violently, anyone who speaks out 

against the regime. The government jails bloggers, labor activists, 

and religious leaders seemingly on a whim. 

You know, while Vietnam has been increasingly pressured by the 

international community to improve its human rights record in recent years, it seems like every step forward is also accompanied by 

two steps backward. 

I look forward to hearing the witnesses, not only in terms of economic issues, and security issues, but really how we can advocate 

for values that are not just important to us as Americans, but really are universal values. And I look forward to really the discussion 

that takes place on this committee. 

Mr. SALMON. Thank you. Representative Meng. 

7

Ms. MENG. Thank you, Chairman Salmon, and Ranking Member 

Sherman for welcoming me. I’m very honored to join the Subcommittee on Asia and the Pacific this term. 

Our hearing today is aptly named. This is an important time for 

many Asian countries that are rising in economic strength, and 

looking to increase their power in the region, and globally. The 

strength of our relationships with these countries will be a defining 

characteristic of the next century. 

I look forward to working with my colleagues as we navigate 

these relationships, and work with our allies in the region. 

Mr. SALMON. Thank you very much. We’re pleased to have such 

an excellent panel join us today to share their expertise on this 

very important region of the world. 

First, Dr. Karl Jackson serves as the Director of the Asian Studies Program at Johns Hopkins School of Advanced International 

Studies, where he founded the Southeast Asian Studies Program. 

Before he joined Johns Hopkins University, Dr. Jackson served as 

the Vice President’s National Security Advisor and as Special Assistant to the President. 

Dr. Van Jackson is currently a visiting Fellow at the Center for 

a New American Security. Prior to joining CNAS, Dr. Jackson 

served with distinction in the Office of the Secretary of Defense. 

Dr. Jackson also lectures at a number of highly regarded academic 

institutions, including Georgetown University and Catholic University of America. 

Mr. Matthew Goodman joins us from the Center for Strategic 

and International Studies, where he’s a Senior Advisor for Asian 

Economics. Mr. Goodman previously served in numerous roles in 

the administration, including the Departments of State and Treasury, as well as the White House. 

Mr. Abraham Denmark is the Senior Vice President for Political 

and Security Affairs at the National Bureau of Asian Research. Before his time at NBR, Mr. Denmark was a professional in both the 

private sector and the government, and worked in the Office of the 

Secretary of Defense. 

Mr. Patrick Mulloy was most recently a five-term Commissioner 

of the Bipartisan U.S.-China Security and Economic Review Commission. Mr. Mulloy is a trade lawyer and former Assistant Secretary in the Department of Commerce’s International Trade Administration. 

And without objection, the witnesses fully prepared statements 

will be made part of the record, and members will have 5 calendar 

days to submit statements, questions, and extraneous materials for 

the record. 

Let me just briefly explain the lighting system. I’m sure you’re 

all familiar with it. You each are given 5 minutes for your prepared 

statements. After 4 minutes, you’ll see an amber light, just to let 

you know that it’s coming close. When the light hits red, it’s time 

to conclude. I’ve not been a real stickler if you go a few seconds 

over because I really want to hear what you have to say. The same 

thing for members’ questions. We don’t want them to go on forever, 

but I really do have a light gavel. If you’ve got questions you want 

answered, that’s why we’re here, so if you go a few seconds over, 

don’t worry. Let’s just get as much as we can. 

8

So with that, we’re going to start with you, Dr. Jackson, and 

we’ll work our way over. 

STATEMENT OF KARL D. JACKSON, PH.D., C.V. STARR DISTINGUISHED PROFESSOR OF SOUTHEAST ASIA STUDIES, DIRECTOR OF THE ASIAN STUDIES PROGRAM, JOHNS HOPKINS 

SCHOOL OF ADVANCED INTERNATIONAL STUDIES 

Mr. KARL JACKSON. Thank you very much, Mr. Chairman, and 

other distinguished members of the committee. I used to testify as 

a government witness; now I’m a free man, but that was a long 

time ago in the age of Steve Solarz and Jim Leach. But, in any 

case, it’s good to be back in front of the committee, and I’m not 

going to read my statement. I’d like to just make a few points so 

that we can get on to my younger brother, Dr. Van Jackson. 

The first point I’d like to make is, Asia has in our lifetimes been 

a remarkably successful place. It’s been far more successful than 

we ever thought, at least I ever thought as a young adult. There’s 

been a larger increase in prosperity in a shorter amount of time 

than mankind has ever witnessed. 

This is an amazing turn of events, but with that turn of events 

comes greater complexity because China and India are going to be 

much, much more powerful in the next 25 years than we ever anticipated really 30 to 40 years ago. The so called uni-polar moment 

of the United States in Asia, in my opinion, has passed, and we 

will be facing a multi-polar balance of power in Asia, and we have 

to figure out how to deal with it so that we preserve our own interests, but also avoid conflict. 

Now, I’d say the last time the world faced the problem of integrating two new big rising powers we failed miserably. We have 

two World Wars, as a result, and the name of the game for us in 

the 21st century, and the assignment for the next generation, is to 

avoid repeating the follies of the 20th century. 

I would contend that we have to bring to the head table of international relations both India and China, and to combine them in 

a quadri-partite conflict prevention mechanism that deals only with 

security, not with trade, not with human rights, not with many 

other incredibly important issues, but I contend that the biggest 

problem we face in Asia is to prevent these disputes over worthless 

rocks escalating into warfare which would destroy both the peace 

and prosperity of the Pacific. 

Several members mentioned the rebalance. I think it’s very important to make sure that the rebalance is not under-resourced on 

the military side. I think it’s incredibly important to make sure 

that TPP and the trade side receive the prominence that they deserve. And I think it’s enormously important that the rebalance be 

conceptualized as running all the way from India around the Horn 

to Korea, and all the way down under; otherwise, it becomes just 

a synonym for a China containment strategy which, in my opinion, 

if that is approached unilaterally with just the United States, or 

just the United States and Japan, it won’t work. 

So, I would contend that U.S. policy over the next 5 years should 

give just as much attention to the U.S.-India relationship as it 

gives to the U.S.-China relationship, as it gives to the U.S.-Japan 

relationship. Why? We need to have four powers together potenVerDate 0ct 09 2002 11:55 Apr 07, 2015 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 F:\WORK\_AP\022615\93533 SHIRL
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tially in the same room at a very high level to insure that we will 

not allow some of the things that Mr. Sherman mentioned to escalate into warfare. Thank you. I yield to my older brother. 

[The prepared statement of Mr. Karl Jackson follows:]

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Mr. SALMON. Thank you. Dr. Jackson. 

STATEMENT OF VAN JACKSON, PH.D., VISITING FELLOW, 

CENTER FOR A NEW AMERICAN SECURITY 

Mr. VAN JACKSON. Thank you. Mr. Chairman, Ranking Member 

Sherman, distinguished members of the subcommittee, let me just 

say that I’m a great fan of both California and Arizona. And thank 

you for the opportunity to come address this topic today. 

U.S.-Asia policy should not be autopilot. Right? It merits regular 

critical scrutiny most intensely at times when the regional landscape is changing, and I would offer that that time is today. If I 

have a singular assertion it’s that over the next 2 years, keeping 

Asia stable should be the overwhelming priority for U.S. policy in 

Asia. 

The Trans-Pacific Partnership, human rights, fostering democratic political transitions in authoritarian regimes, all of this matters, but none of it’s possible in a region riven with conflict, so it 

may sound banal to prioritize keeping Asia stable, but it means 

adapting to what I would describe as greater structural risks facing 

the region. 

The chairman mentioned some of these. China is demonstrating 

an increased willingness to challenge the international status quo. 

At the same time, we have Japan seeking to expand its security 

role in the region after half a century of formalized pacifism in 

international affairs. Militaries across the Asia-Pacific are undertaking robust arms buildups, military modernization programs, increasing the latent capacity for rapid destruction in the event of 

conflict. And North Korea is expanding and improving its nuclear 

and ballistic missile programs completely unchecked, even as it 

finds novel ways to coerce, to probe the resolve of the United States 

and its South Korean ally. 

All of these developments are taking place against a backdrop of 

region-wide mistrust, uncertainty about the future, and longstanding unresolved territorial disputes. Taken together, these circumstances constrain the ability for even astute statesmen to navigate Asia peacefully. 

I would submit that keeping Asia stable amid these evolving circumstances require two things from the U.S. First, to be seen as 

a sure thing, as a reliable ally and partner. To the extent uncertainty drives regional security trends in a problematic or undesirable direction, certainty about the U.S. can help be an antidote for 

that. And then second, I think we need to do what we can to encourage the militarization of the region in a defensive direction. 

And I think this can be achieved by working with regional allies 

and partners to develop military capabilities and operational concepts that improves overall situational awareness, counter the ability of others to project power, and strengthen territorial integrity 

of sovereign borders. 

In short, I think it would benefit the region and the United 

States to empower the region’s smaller and middle powers to better 

defend themselves; particularly, as dominant military technologies 

evolve and spread. Despite growing economic interdependence 

among Asian states, the region remains a potential powder keg. 

19

China is still a lingering concern for most, but so are the longterm intentions of neighbors among middle powers, to say nothing 

of the risks that North Korea may pose as it develops a survivable 

nuclear force. The United States rightly seeks a peaceful, liberal 

order in Asia, and I would suggest that the minimal necessary condition for that to obtain is stability, which is facing greater structural risk. So, thank you again, and I look forward to answering 

your questions. 

[The prepared statement of Mr. Van Jackson follows:]

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Mr. SALMON. Thank you. Mr. Goodman. 

STATEMENT OF MR. MATTHEW P. GOODMAN, WILLIAM E. 

SIMON CHAIR IN POLITICAL ECONOMY, SENIOR ADVISER 

FOR ASIAN ECONOMICS, CENTER FOR STRATEGIC AND 

INTERNATIONAL STUDIES 

Mr. GOODMAN. Thank you, Mr. Chairman, Mr. Ranking Member, 

distinguished members of the subcommittee. I’m delighted to have 

a chance to talk about the economic dimension of the rebalancing 

of our economic opportunities and challenges in this important region, Asia-Pacific. 

As someone who works on economics in a foreign policy think 

tank, I sometimes joke that my colleagues work on life and liberty, 

and I work on the pursuit of happiness, and so that’s the way I 

look at the economic story in Asia, because it’s largely a positive 

one for us. So, I’d just like to make four points. 

First, the economic stakes for the United States in the Asia-Pacific are enormous. The region accounts for around 60 percent of 

global GDP, includes eight of the world’s $15 trillion economies, 

and it’s consistently been the fastest growing region of the world 

in recent times. By 2030, Asia will likely be home to 3 billion middle class consumers, which is a huge opportunity for us to export 

American goods and services, beef, pork, soybeans, aircraft, software, healthcare services, and the many other things that we are 

competitive in. But U.S. economic engagement with Asia also 

comes with a number of challenges. We have sizable trade deficits, 

as Congressman Sherman mentioned, with a number of Asian 

countries. Our companies face an array of barriers and unfair trade 

practices both at and behind the border in many Asian economies 

from regulatory impediments, to theft of intellectual property. And 

excess savings; I’m a former Treasury guy, so I have to say excess 

savings in Asia create macroeconomic imbalances that can be destabilizing, as we saw in the global financial crisis; which leads to 

my second point. 

Addressing these challenges and these opportunities, and maximizing these opportunities requires a robust U.S. economic diplomacy in the region. And, indeed, administrations of both parties 

over the past 40 years have pursued an active economic strategy 

toward Asia from Nixon’s opening of China, which really facilitated 

China’s reform and opening strategy, to the Obama administration’s pursuit of the Trans-Pacific Partnership, which I’ll come back 

to. 

The basic objectives of U.S. economic strategy across these administrations have been threefold. The first is growth and jobs. 

Stronger demand, rising purchasing power, and lowering trade barriers means more opportunities for U.S. exporters, which translates 

into growth and jobs at home. 

The second objective is upholding and updating the rules of the 

international economic order. Those rules have increasingly fallen 

out of step with the realities of today’s global economy which revolves around integrated value chains. This means trade agreements need to be updated, not just to cover things that happen at 

the border like tariffs and other border measures, but also behind 

28

the border issues, like the behavior of state-owned enterprises, regulatory practices, intellectual property protection, and so forth. 

Finally, U.S. economic policy in the Asia-Pacific has been aimed 

at underpinning America’s long-term presence in the region. Our 

alliances with Japan, South Korea, Australia and others have provided long-term stability and security in the region, and these 

trade investment and other economic arrangements help provide a 

critical economic equivalent enmeshing the U.S. in regional affairs, 

and reassuring our allies and potential adversaries of our longterm commitment to the region. 

My third point is that there is a new reality in Asia shaping our 

economic engagement, which is obviously the rise of China and 

India. I’ll focus mainly on China. Just 15 years ago, China’s economy was roughly one-ninth the size of ours. Today it is the world’s 

second largest economy, and could surpass ours in nominal terms 

in just a few years. 

China clearly has ambitions to resume its historical position as 

the Middle Kingdom at the heart of Asia, which has implications 

for the established order in the region and the U.S. role in it. 

Not all of this is a bad thing. China’s economic success has created a significant new source of demand for the United States and 

neighboring countries and, therefore, economic and export opportunities. Beijing has to date largely been a rule taker in the regional 

economic order, and has even been a constructive player in regional 

institutions such as APEC, but Beijing has also, of course, been selective in its compliance with international rules and norms, as 

others have mentioned; failing to honor the spirit of its WTO commitments, tilting the playing field in favor of its industrial champions, and harming the interests of U.S. companies. 

Moreover, Beijing is clearly seeking a greater voice in setting 

international rules and standards, and imbuing them with Chinese 

characteristics, setting up new institutions that raise questions 

about the sustainability of the Bretton Woods institutions that we 

champion for so long. So, this means we have to have this robust 

economic strategy to deal with both these challenges and opportunities of interacting with China. 

Final point is about TPP. It is obviously right now the sharp end 

of the spear of our economic engagement in Asia, and it serves all 

three of the enduring objectives that I mentioned of U.S. economic 

strategy in Asia, substantial economic gains, potentially, updating 

the rules of the regional trade with new disciplines in the areas I 

mentioned, and TPP would embed the U.S. more deeply in the 

Asia-Pacific region, and reassure our allies who are skeptical about 

our long-term commitment. 

As you know, TPP is near the end game, and it’s now believed 

this could be brought to you and Congress for consideration as soon 

as later this year. The stakes are very high. I think this is a critical component of the rebalance. Without the economic components, 

and TPP as the, as I say, the sharp end of the spear, then the rebalance is seen as a primarily military endeavor, and that’s not 

going to be acceptable to the region, so we need to pursue this 

agreement for a number of reasons. Thank you very much. 

[The prepared statement of Mr. Goodman follows:]

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Mr. SALMON. Thank you. Mr. Denmark. 

STATEMENT OF MR. ABRAHAM M. DENMARK, SENIOR VICE 

PRESIDENT, POLITICAL AND SECURITY AFFAIRS AND EXTERNAL RELATIONS, THE NATIONAL BUREAU OF ASIAN RESEARCH 

Mr. DENMARK. Thank you very much, Mr. Chairman, Mr. Ranking Member, and the distinguished members of the subcommittee. 

I agree with the ranking member that when we talk about Asia, 

we have so many issues and so little time. And since my time is 

ticking away rapidly, I’m going to just focus on three things, and 

look forward to our conversation later. 

The first is looking at China. As has been mentioned before, the 

rise of China is probably the most significant and profound geopolitical trend of the 21st century. Its economic rise, its rapid and 

profound military modernization program is really historically unprecedented, and something that is of tremendous importance to 

American interests. But the rising prosperity that China has experienced in recent years is forcing Beijing to adjust to the demands 

of a modern economy and rising expectations of its people. 

China is facing unprecedented levels of urbanization, privatization, marketization, globalization, and what they call 

informatization. It speeds in scale that we’ve really never seen before. This economic development is creating corruption, environmental degradation, social dislocation, economic disparity, and political unrest that is incredibly challenging for Beijing to manage. 

These are challenges that Beijing is very much aware of. These 

are Beijing’s absolute top priorities, and China’s leaders are engaging on several programs to address them; the most well known 

being Xi Jinping’s anti-corruption campaign. And this is a very serious campaign that Beijing is going through; tens of thousands of 

senior cadres have already been charged with corruption, hundreds 

of thousands of lower level officials have been charged with corruption, and the Bank of America has estimated that China’s GDP fell 

by 1.5 percent last year solely as the result of government officials 

no longer buying luxury goods and real estate, so this is a huge 

problem, but also a major program that Beijing is going through. 

It has important implications for the rule of—for Xi Jinping’s 

power, and for Chinese politics. And it informs Beijing’s ability to 

craft its approach to foreign policy and U.S.-China relations. 

I would argue that in the grand scheme of things, China is not 

pursing a radically revisionist agenda in the international system, 

and that it sees that it is this system that allowed it to grow prosperous, to remain stable. Where China is revisionist, however, is 

regionally. As has been said before, China is attempting to establish something what I call a neo-tributary system which places it 

at the center of the Asia-Pacific’s economic, political, and security 

destiny; a destiny that in China’s mind does not include the United 

States playing a major role. This is, obviously, something that is 

very problematic for American interests, and so we are engaging 

them in a wide variety of different activities that involve both cooperation and competition. 

The second issue I wanted to address with you has been brought 

up a little bit already, is American alliances and partnerships in 

39

the Asia-Pacific. Our alliances are absolutely critical to American 

interests going forward. They are at the center of our power, our 

influence, and our presence in the region, and something that we 

need to be able to maintain and update for the requirements of the 

21st century. 

Japan is, obviously, a very important alliance for the United 

States. Prime Minister Abe is revitalizing Japan’s economy, but 

also revitalizing the role that Japan can play in the geopolitical 

realm in the Asia-Pacific. By working with us on new defense program guidelines, we have a tremendous opportunity to bolster their 

capabilities, and find a new capable and more balanced alliance 

that will help our interests, help maintain stability in the region. 

It has also been mentioned that India is incredibly important to 

the United States. President Obama is the first American President to be invited to India to celebrate Republic Day. He’s also the 

first President to visit India twice while in office. Prime Minister 

Modi clearly sees the United States as incredibly important to India’s interests, and there are great opportunities for us to engage 

with them strategically, politically, and economically. India’s 

ACDIS policy has tremendous potential complementarities with our 

rebalancing policy, and I think those are complementarities that 

we need to address. 

Third and finally, there’s been a lot of questions and lot of ink 

spilled over questions about the long-term potential for American 

power. Many in Asia, some in the United States talk about potential American decline, that we are going to be overshadowed by the 

rise of China, the rise of other powers in Asia. And I actually wanted to make the point here that I think this is a very wrong analysis. I actually think that the United States has tremendous potential to remain powerful and dominant in the Asia-Pacific. Our economy is the most rigorous, the most powerful in the region, our military is the most powerful in the region. The key for us, though, is 

to take this potential and translate it into actual power. We have 

opportunities to maintain our power and dominance in the region, 

but it’s going to require the adroit leadership and good decision 

making from our leaders in the Executive Branch, and from you all 

in Congress. 

I look forward to talking with you about U.S. strategy and dynamics in the Asia-Pacific. Thank you very much. 

[The prepared statement of Mr. Denmark follows:]

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Mr. SALMON. Thank you. Mr. Mulloy. 

STATEMENT OF THE HONORABLE PATRICK MULLOY, TRADE 

LAWYER (FORMER COMMISSIONER, U.S.-CHINA ECONOMIC 

AND SECURITY COMMISSION) 

Mr. MULLOY. Mr. Chairman, Ranking Member Sherman, and 

members of the subcommittee, thank you for inviting me to testify 

about U.S. opportunities and challenges in the Asia-Pacific area. 

I had the great good fortune in my life to work 15 years on the 

staff of the U.S. Senate Banking Committee where I was General 

Counsel and Chief International Counsel, so I love working with 

the elected representatives of people. And I think some of my views 

about what’s happening in Asia may be reflective of the fact that 

I did have the chance to work for people who have to get elected 

to office. 

I have already submitted my written testimony to the subcommittee, and I just want to take a little time here to hit some 

of the key points that I made in my written testimony. 

I think America’s so called pivot to Asia and a TPP as one element of the pivot are grounded in concerns about the rapid rise of 

China’s economic, political, and military power. The pivot includes, 

among other things, beefing up our military capabilities, and building a closer working relationship with Japan and India. 

I understand that by 2020, the Navy and Air Force plan to base 

60 percent of their forces in the Asia-Pacific region. The pivot also 

makes a more vigorous attempt to integrate our economic relationship with Asian economies, such as those with whom we are negotiating the TPP. 

I should note that we presently have a combined total trade def- icit with the TPP countries of well over $100 billion. I hear a lot 

about the geopolitical reasons we must do the TPP, but I am not 

aware of any analysis that claims the TPP deal, if approved, would 

reduce our very large trade deficits with the TPP countries. 

I also hear a lot about how the TPP, whose provisions I have not 

seen, will bring about increased exports from the U.S., but I hear 

nothing, nothing about what we might expect in terms of increased 

imports. Most economists will tell you that when a nation runs 

large negative net exports, you are detracting from your GDP and 

job growth. 

The Chinese use a term called comprehensive national power, 

meaning that if you build your economy, then your military and political strength will come from that economic base. 

Our completely unbalanced trade and economic policies toward 

China are helping China to become a great power much more 

quickly than we ever thought imaginable. Let me explain. I think 

we must correct our totally unbalanced economic relationship with 

China if we want to strengthen America’s geopolitical position in 

Asia, and elsewhere. 

Last year, our nation ran a $345 billion trade deficit with China. 

Since China joined the WTO in 2001, we have run over $3 trillion 

worth of trade deficits with China. How has China done this? One, 

they manipulated their currency. Two, they’re stealing intellectual 

property. Three, they’re incentivizing American companies to transfer factories from here to there partially through their currency 

57

manipulation. The companies can make bigger profits by moving 

there and shipping back here. China also incentivizes our companies to transfer technology and R&D from here to China. This is 

building China’s military and industrial base. And then some people say then we have to arm ourselves because China is more powerful. I’m like the Congressman. I’m a trade hawk, and I’m not so 

keen on just using military means to rebalance this whole relationship. 

I had the great good fortune, as well, to be a Commissioner on 

the U.S.-China Economic and Security Review Commission. That is 

a bipartisan group appointed by the leaders of the House and the 

Senate, and they’re charged to look at the economic—at the national security implications of our economic relationship with 

China. 

Most of their reports have been unanimous. In their 2014 report 

to the Congress, which is unanimous, the Commission said this:

‘‘China’s rapid economic growth has enabled it to provide consistent and sizable increases to the PLA budget to support its 

military modernization. China’s defense budget has increased 

by double digits every year since 1989.’’

Let me just finish this last part. They said,

‘‘As a result of China’s comprehensive and rapid military modernization, the regional balance of power between China on the 

one hand, and the U.S. and its associates and allies on the 

other is shifting in China’s direction.’’

So, it is clear that our imbalanced trade with China, that has fed 

China’s extraordinary economic growth—over 10 percent a year for 

over 30 years—is contributing to a shift in the balance of power in 

Asia against our interests. 

To me, we’ve got to pay a lot of attention to rebalancing this 

whole economic relationship with China. I have provided some 

ideas on how we might do that in my written testimony. 

Thank you for giving me the opportunity to testify, and I look 

forward to taking any questions you may have. 

[The prepared statement of Mr. Mulloy follows:]

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Mr. SALMON. Thank you. That concludes the panel testimonies. 

We’d like to now be able to ask some questions. 

First of all, regarding these maritime disputes both in the South 

China and East China Seas, and in light of this month’s reports 

that China is building artificial islands, and potentially building up 

military installations, what is the administration’s response? And 

do you see it as effective? Start with you, Dr. Jackson, what are 

your thoughts? 

Mr. VAN JACKSON. Yes. 

Mr. SALMON. Yes. Okay, thank you. 

Mr. VAN JACKSON. Thank you. So, the administration has taken 

steps to shore up its alliances. It’s focused—it’s taken its own credibility in the region seriously. The challenge is not so much with the 

United States sort of showing up, or demonstrating resolve short 

of violence, or the threat of great violence. The larger issue is with 

the nuanced way that China is doing what it’s doing. 

It makes it much easier to stand firm or retaliate whenever the 

Chinese send in the PLA Navy. Right? Whenever they use traditional military force it’s easy to respond in kind. Signaling resolve 

in this kind of thing becomes a clearer exercise, but when you’re 

using unarmed drones, when you’re pressing assertive with the 

construction of artificial islands or water canons, or any of these 

sort of nontraditional means, it creates this dynamic where it’s 

very hard to respond without being seen as the bad guy, without 

being seen as escalatory yourself. 

I think there’s a way to remedy this by sort of forcing operational 

transparency to the extent possible through cooperation, information sharing regimes with allies and partners. It’s something that 

China can be a part of, too, if it wanted to. The question is does 

it want to? And as long as China operates coercion within this gray 

space, transparency is really the only solution without sort of risking escalation, I think. 

Mr. SALMON. Thank you. Yes, Dr. Jackson. 

Mr. KARL JACKSON. I would just say that, to amplify the answer 

of my fellow Jackson member here, that China really follows, if you 

look at it in a long term, a take and then talk strategy. It’s cyclical. 

The number of incidents go up in the South China Sea, or in the 

East China Sea, and then if there’s an APEC meeting coming in 

Beijing, suddenly things get quiet in the Pacific again. And then I 

would assume we’re moving into—in fact, we’re in the middle of the 

next phase of a take strategy, which is the creation of new islands 

in the South China Sea. And, you know, this is a very difficult 

problem to deal with, and it requires, in my opinion, that the administration provide more assistance to the Philippines, more diplomatic assistance, as well as military assistance. Thank you. 

Mr. SALMON. Thank you. Over the last few years, the tensions 

in the Taiwan Strait have de-escalated with the election of President Ma. He’s facing some political challenges of his own, and recently there’s speculation that the DPP candidate may gain a little 

bit of steam given some of his challenges. 

China has made no secret of its loathing of the DPP and what 

they stand for. If the DPP is successful in the next election, where 

do you see Taiwan-China-U.S. relations going? Any thoughts? Mr. 

Denmark, did you want to address that? 

69

Mr. DENMARK. Sure. Obviously, we’re still quite a ways away 

from the next Taiwan Presidential election, so it’s difficult to speculate on who may win. But I do think that the Mainland is being 

very careful to try to keep some space open in case a DPP candidate wins so that they’d be able to maintain a relationship with 

Taiwan. 

They, obviously, recognize that it’s very—it’s going to be very 

complicated if the DPP wins the next Presidential election in Taiwan. There’s going to be a lot of concern in China that the next 

candidate would show some of the more problematic tendencies 

that Chen Shui-bian showed when the DPP was last in power. But 

I also think that the Mainland would be trying to find a space that 

they can work with the DPP, so I expect them to be fairly quiet 

about the election. I’m not trying to put anybody in a corner, but 

I do think that they’re going to be very concerned about what happens. 

I also wanted to note that there’s going to be some real challenges in the next election, and if—whoever wins the next election 

in Taiwan, because of what’s happened last year in Hong Kong, because of the framework that China talks about these systems of 

one country, two systems; although, the proposals are not exactly 

the same. There are some important differences, but they are some 

very important similarities, as well; enough similarities that I 

think in Taiwan there will be a lot of concerns and questions about 

this formulation of one country, two systems, and how Taiwan can 

position itself within that context. 

Mr. SALMON. I completely concur. In fact, I think the Taiwan 

body has been really watching with interest how this whole one 

country, two systems has played out. And it hasn’t really played 

out the way that China said it would back in 1997. They have not 

been nearly as hands off, especially with the selection of the CEO, 

as they said they would be. And it’s prompted these protests and 

quite a bit of political unrest within Hong Kong. And I don’t think 

that is helping their case at all with Taiwan as they seek a peaceful reunification at some point in the future. I think it bodes very 

ill for them. 

In fact, I’m going to be leading a codel in May with Elliot Engel 

to Hong Kong, specifically, for these purposes, so stay tuned. I’ll 

yield to Mr. Bera. 

Mr. BERA. I want to thank my colleague from California for giving me this time. 

It is a very interesting time in this pivot to Asia, and as we look 

at the U.S.-Asia relationship, as we look at the opportunities and 

the challenges, listening to the opening testimony, the goal is twofold; stability in the region and prosperity in the region. And, certainly, that is to our advantage. 

Having had the privilege to travel to India with the President 

and, you know, just kind of up front looking at the dual interests 

on both sides; clearly, I think at the Executive level the Prime Minister and the President understand the importance of the relationship. I think the Prime Minister as he is looking at an ambitious 

agenda in India, is looking for reliable partners, and clearly is looking to the West. Certainly, is building a relationship with Japan, 

but also increasingly is looking at the importance of the relationVerDate 0ct 09 2002 11:55 Apr 07, 2015 Jkt 000000 PO 00000 Frm 00073 Fmt 6633 Sfmt 6633 F:\WORK\_AP\022615\93533 SHIRL
70

ship with the United States. And I think the President understands the opportunities to open up the Indian markets here. And 

then, also, the importance of India geopolitically and strategically 

in stabilizing South Asia, and helping bring some stability to the 

South China Sea and so forth. 

I think we make a mistake if we just look at these relationships 

in a bilateral way, though, because there are really trilateral, multilateral relationships. And when we think about the U.S.-India relationship, we should also think about the U.S.-India-Japan relationship because, again, it’s in our interests as allies. Certainly, 

India is looking at these relationships in a multilateral way. I 

think we make a mistake if we just look at India as picking the 

United States or China. Again, all these countries have major trading relationships with China, as well; and, again, I think we approach these in a multilateral relationship. 

You know, I’d be curious, you know, as we look at this growing 

relationship with India, as we’ve set the framework in moving forward with another 10-year bilateral defense treaty, looking forward 

to continuing progress on a bilateral investment treaty with India, 

and so forth, there’s real opportunities here in the U.S.-India space 

to protect our interests but also, again, to bring stability to the region. Maybe we’ll start with Mr. Denmark, your thoughts on this. 

Mr. DENMARK. Thank you, Congressman. 

I completely agree with the tremendous potential there is in the 

U.S.-India relationship. I actually happened to be in New Delhi 

when Xi Jinping was visiting and got to see what a problematic relationship that India has with China. 

Clearly, Prime Minister Modi is seeking to enhance his relationships with all the major countries in Asia, so he’s had important 

visits with President Obama, with Xi Jinping, but also with Putin, 

with Abe, and with Abbott down in Australia. But I think, clearly, 

that the United States occupies a special place in Prime Minister’s 

Modi’s outlook. And the bilateral defense agreement, the investment agreement that you mentioned I think have tremendous potential both in themselves, and what we can work with them, but 

also the precedents that they set; that the bilateral agreements 

that we’ve already put together with India, the Ash Carter push 

when he was the deputy, now his secretary, I think have tremendous potential to enhance our defense technology cooperation capabilities, potentially our interoperability, our planning. And because 

we share so many interests, especially in East Asia with India. On 

the investment side, encouraging India to look more outward as an 

exporter, to be a more integrated member of the international economy, I think is of vital importance. 

And I would just add, finally, you mentioned the trilateral and 

quadrilateral agreements, aspects of this relationship. Prime Minister Modi had very interesting and very close engagements with 

Prime Minister Abe, and with Abbott in Australia, and I think 

there’s real potential for that quadrilateral dynamic that I hope in 

the coming years we’ll see really getting——

Mr. BERA. Great. And I’m glad you mentioned the new Secretary 

of Defense, Ash Carter. I think we’ve got a great team in place that 

understands the complexity of the region, as well as the opportunity. Obviously, the Secretary of Defense understands the region 

71

and spent a lot of time there. Our new Ambassador to India, Rich 

Verma, certainly understands the complexity and the opportunities 

there, as well. 

Mr. Goodman, you talked about kind of a basis of economic stability and economic prosperity. In the extreme seconds that I have 

left, would you like to go ahead and expand on that? 

Mr. GOODMAN. Sure. Again, the same basic point, which is 

there’s huge potential in the U.S.-India relationship in the economic front. It’s been, frankly, under-exploited over a long period 

of time. I think that that’s for a number of reasons. I think one of 

them is that India has not until Prime Minister Modi in recent 

times had somewhat committed to the internal economic reform 

that Modi seems to be clearly committed to. And I think that’s a 

precondition to a stronger relationship. 

Then there are the direct bilateral processes you mentioned. The 

bilateral investment treaty I think has great potential. I think it’s 

going to be a challenging negotiation, but I do think it’s something 

that could provide a real foundation. 

There are number of outstanding concerns, particularly of our 

U.S. businesses in India with foreign investment restrictions, localization requirements, intellectual property problems, the patent 

protection and so forth. Modi has addressed some of those. There’s 

been some improvement on foreign direct investment in the railways and other infrastructure sectors, and I think that’s quite an 

important sort of down payment on an improvement. 

I also would just endorse the point that regionally there’s a big 

opportunity. You know, frankly, India has not been as engaged in 

certainly regional economic affairs to the extent that I think would 

be good for all of us. And they’re not a member of APEC, which 

is the fault of both sides really for their not being in there. But 

they’ve also been sort of lukewarm about some of these regional endeavors. And I actually think that there would be, if they were 

willing to invest in a more greater openness in their own economy, 

they could make a great contribution to rulemaking and principle 

in these regional arrangements. 

Mr. BERA. Great, and I would just close with this. As co-chair of 

the Caucus on India and Indian-Americans which is the largest 

country caucus in Congress, I think I can speak for members on 

both sides of the aisle that we view the U.S.-India relationship in 

a bilateral way, and see some of the opportunities there. Thank 

you. 

Mr. SALMON. Great. Thank you. Mr. Rohrabacher. 

Mr. ROHRABACHER. First and foremost, thank you, Mr. Chairman 

for holding this hearing, and with these five very informative witnesses. 

Dr. Mulloy, or Mr. Mulloy mentioned that in the TPP he did not 

see anything that was going to bring down the level of trade deficit 

with the Pacific, which is now $100 billion a year, and with China 

it is $350 billion a year trade deficit. Do any of you disagree with 

Mr. Mulloy’s assessment that there’s nothing in the TPP that will 

bring that down? Are you predicting that the trade deficit will go 

down if we pass this trade policy? Yes, whoever. Does anyone disagree with him on that? 

72

Mr. GOODMAN. Well, I think it’s very unclear how bilateral trade 

deficits and surpluses will be affected by trade agreements like 

this. I think in principle, a trade agreement like TPP which is 

opening markets in some of these key markets in Asia will increase 

our export opportunities. Of the 23 trade agreements that we’ve negotiated since 2000, all but one of them has led to a significant increase in U.S. exports. The one that hasn’t is the Korea free trade 

agreement, and that’s largely because Korea hasn’t been growing 

and, therefore, particularly our coal exports to Korea have really 

plummeted. Our corn exports have also plummeted because of 

drought here. But if you take out those factors, other exports to 

Korea have increased. There should be an expectation of greater 

trade and exports to those countries. 

I would like to take on one point——

Mr. ROHRABACHER. Before you do. 

Mr. GOODMAN. Yes? 

Mr. ROHRABACHER. Do you actually know what’s in the TPP, because——

Mr. GOODMAN. I mean, I haven’t read the actual agreement 

itself, but I have a general sense of what the contents are, yes. 

Mr. ROHRABACHER. Because we’re not even permitted to know 

exactly what it’s in the TPP. I mean, I’ve got people telling us what 

it’s about. It’s interesting they can read it and we can’t. What’s 

going on here? 

You were about to make a point. I’m sorry for cutting you off. 

Mr. GOODMAN. No, no, it’s all right. 

Mr. ROHRABACHER. I’d like Mr. Mulloy to have his chance to answer you, but go ahead. 

Mr. GOODMAN. Sure. No, I have not read the TPP agreement, so 

I am basing my understanding or assessment of it on the presentation by the U.S. Trade Representative Office, and by other players in TPP, what the contents are. 

Mr. ROHRABACHER. Have they been successful. You’re basing it 

on them; have they been successful in their predictions in the past? 

Mr. GOODMAN. Well, I mean, I think trade has increased with 

the countries with which we’ve negotiated free trade agreements, 

so I think in that sense yes. 

Mr. ROHRABACHER. Okay. 

Mr. GOODMAN. We’ll see what TPP actually does. 

I just wanted to respond to one thing about imports. So, I mean, 

this is a somewhat controversial statement to say, but imports are 

not as bad as people say in the sense that we’re all working—I 

mean, it’s like we work 5 days a week, that’s exporting, to have the 

weekend, that’s importing. We all want our iPhones. Right? We all 

want our, sorry, Smart Phones, which are made up of value from 

all around the world. You buy it for a couple of hundred dollars. 

When it arrives in Long Beach, it’s valued at about $170, and that 

is booked by customs as an import from China worth $170. The reality is only about $6 worth of this phone is actually produced in 

China, the rest is value-added from all over the world, including 

the United States. So, I think our trade data is not entirely an accurate reflection of global value chain production today. That’s the 

specific point I——

Mr. ROHRABACHER. Give Mr. Mulloy a chance to answer. 

73

Ordinary working people who have jobs producing high-quality 

products in the United States has enabled us to have a very 

wealthy, not a wealthy, but a middle class who lives at a decent 

standard of living. I personally see that in jeopardy, and by basically people who make analysis all based on what’s good for a business, which then translates sometimes just into very wealthy 

Americans are getting better, but middle class Americans are not 

because they don’t have these high-quality jobs. 

We’ve got just a couple of minutes, or a couple of seconds. Go 

right ahead. 

Mr. MULLOY. Thank you, Congressman. I remember the debate 

about whether to give China PNTR and bring them into the WTO. 

Many of the same groups, which are now behind the TPP, talk 

about increasing exports. I remember those same people were telling us that if we brought China into the WTO—we had an $80 billion trade deficit with China at that time, now we have a $345 billion annual trade deficit with China. So, they told us that it would 

help balance our trade. It didn’t, it made the situation much worse. 

I remember being on the staff of the Senate Banking Committee 

when we did hearings on NAFTA, and we were being told that it 

would help expand and improve our trade relationship with Mexico. We have about a $70 billion trade deficit with Mexico now after 

that, because there were no currency provisions in that agreement. 

And shortly after it was signed, Mexico devalued their currency. 

And that was—when we looked at it, we saw that wasn’t a trade 

agreement, that was an investment agreement. And that’s why 

they wanted those investor state provisions in that agreement to 

protect their right not to have to settle disputes in Mexican courts. 

So, I hear a lot of talk about the TPP exports. I never hear anybody 

talk about the trade balance that we’re going to get out of this 

TPP. And I think that’s very important for members to think 

about, and the impact that’s going to have on their constituents. 

Mr. ROHRABACHER. Well, thank you for bringing that up, and 

thank you, Mr. Chairman. 

Just a note; we were also told that with more trade with China, 

by bringing them into a close economic relationship with the 

United States, that we would have democratization. And I notice 

Mr. Denmark’s remarks, he went through all the isms that are 

happening in China, but democratization wasn’t one of them. And, 

in fact, I think what we see now is a regime in China that is politically just as oppressive that its ever been, and the theory that we 

were going to have more democracy by having this more open economic relationship, which they have manipulated, has not worked 

out. And what I call it is we were given the hug a Nazi, make a 

liberal theory, and it didn’t work. They’re no more liberal in China 

than they ever were. Thank you very much, Mr. Chair. 

Mr. SALMON. Thank you, Mr. Rohrabacher. Mr. Lowenthal. 

Mr. LOWENTHAL. Yes, I find the conversations fascinating. I 

think that there’s been a focus more—again, I’m going to bring it 

back to some of the—what’s important to me is some of the smaller 

countries in Asia. We focused on China, and we focused on India. 

I’ve listened a lot. But I’m concerned about, as I mentioned in my 

opening statement, I talked about, and I’ll give you some other examples. I’d really like to hear your thoughts. 

74

I talked about some of the, what I consider—I represent Little 

Saigon, and Garden Grove, and Westminster, and all I hear from 

my constituents are the fact that human rights violations that are 

going on, and prisoners of conscience. And I also just recently introduced the International Human Rights Defense Act to protect—to 

create a special envoy within the Department of State for LGBT 

rights; and, yet, you know, I also—and as that bill was just beginning to be moved forward, Senator Markey also had the same bill, 

Secretary Kerry picked it up and appointed a special envoy for 

LGBT rights. Yet, we’re talking about, just as Vietnam, we’re talking about Brunei. Brunei puts LGBT folks to death, you know. It 

recently made same-sex sexual activity punishable by death; yet, it 

continues to be part of the TPP negotiations. We have some real 

issues of human rights violations also in Malaysia, in Singapore. 

I’m wondering with this pivot is there a role that we can leverage, as I raised, on some of the smaller countries to—without imposing, but to really talk about, you know, you want to increase 

trade with the United States. What are you going to do about these 

issues, you know, that—and how are you going to really demonstrate beforehand that you’re really moving forward at this time; 

or is that just not really a reasonable request to make at this time? 

You know, does that destabilize the situation? 

We talked about needing—I think it was Mr. Jackson talked 

about—Dr. Jackson, about the need for stability. I mean, I’m more 

concerned about protection of human rights at this moment, so I’m 

just wondering. That would protect the stability within those nations. 

Mr. KARL JACKSON. Well, you’ve posed a difficult question. I used 

to work a lot on human rights problems in Vietnam, and I used to 

interview people in Westminster. 

Mr. LOWENTHAL. Right. 

Mr. KARL JACKSON. I used to hang out with Dana Rohrabacher 

working on the same issues. 

Mr. LOWENTHAL. And Dana has done a great job, and I now represent part of the—that Dana used to represent. So, I picked up 

the Dana Rohrabacher mantle; so, I’m following in the great tradition of Dana Rohrabacher. 

Mr. KARL JACKSON. All of that said, the whole business of making foreign policies is prioritizing, making choices, tough choices. 

And while it is possible for us to try to the best of our ability via 

the State Department, the Defense Department, et cetera, to push 

Vietnam toward being more reasonable toward its citizens, we have 

not been very effective. It’s been very difficult. 

Mr. LOWENTHAL. Yet, now we’re going to reward this bad behavior by having a special trade agreement. 

Mr. KARL JACKSON. No, I think what we’re going to do is reward 

ourselves by creating a more stable Asia-Pacific area by having this 

trade agreement. And, you know, nothing, nothing is going to come 

close to being perfect either with a trade agreement, or certainly 

with the human rights dimension. I’ve been doing this for a long 

time, and I wish I could say I’ve been 100% successful. It’s not for 

lack of trying, but I don’t think you’re going to be able to turn to 

the Vietnamese administration and say all right, if you don’t make 

75

the following six changes, there’ll be no TPP. I think that would 

be a counterproductive way to go. 

Mr. LOWENTHAL. For them, for us to say to them. What if I said 

to myself if you don’t make those changes, I won’t vote for it. 

Mr. KARL JACKSON. That’s your—you know, obviously——

Mr. LOWENTHAL. I’m just saying would that—do we have any leverage? 

Mr. KARL JACKSON. We have only very limited leverage over 

what goes on at the domestic level inside Vietnam. I wish it were 

otherwise, Congressman. 

Mr. MULLOY. Well, I think you have a lot of leverage because you 

haven’t given TPA yet, and in the TPA you can say what you want 

addressed in these trade agreements, because if you’re going to 

bring them back without having a chance to amend them, and you 

have to vote them up or down, you’ve got to be pretty clear what 

you want, and then follow-up and make sure that those items are 

on the agenda of the negotiators. 

My problem now is, I think the TPP is being put to bed even before the TPA is going to be enacted, so you’re going to come back 

without Congress really having a chance to put its input into this 

TPP in the way it should. 

Mr. LOWENTHAL. I yield back. 

Mr. SALMON. Thank you. Representative Meng. 

Ms. MENG. Thank you to the witnesses for being here today. 

My first question is for Dr. Van Jackson, or whoever, is welcome 

to answer, about North Korea. North Korea has been increasing its 

investment in nontraditional military weapons, chemical and cyber, 

in addition to its nuclear program. Is there any strategy that would 

dissuade North Korea from the further development of these weapons? I’m curious about your thoughts. 

Mr. VAN JACKSON. So, the short answer is probably no, not in the 

near term, anyway. They’ve put nuclear weapons in their constitution so it’s more than a bargaining chip at this point. It’s increasingly becoming part of who they see themselves as being. 

Chemical weapons, my interpretation has been that they see it 

not as a taboo the way we or the international community does, but 

as a sort of operational capability just like any other military capability. So, there’s some reasonable expectation that chemical weapons could be used in some sort of limited conflict because they don’t 

share the same taboo about it. But there is a larger pattern here 

where North Korean sort of egregious misdeeds, especially on the 

violence end, only occur in the context of sort of shared hostilities, 

which is very much the case right now, obviously. And we can—

we and our South Korean ally can only bend so far, obviously, but 

it takes two to cooperate. It takes two to have, you know, a rapprochement, or non-hostile relations, qua amity from enmity. 

Right? So, all of the bad things we see from North Korea tend to 

be arrested during periods of better relations. 

The question is, how can get there? And in the near term, I don’t 

see a path, so it seems the responsible thing to do in that context 

then is to be prepared for the range of possibilities with North 

Korea. 

Ms. MENG. My second question, anyone is welcome. the AsianAmerican diaspora is the fastest growing population in the United 

76

States. How do you think this will impact our point of view and relationships with our allies in Asia? 

Mr. KARL JACKSON. No, the increasing size of the Asian-American diaspora is a good thing. It’s a very good thing, because of the 

fact it makes us much more informed about this place called Asia. 

And I think that anything that can be done to facilitate the movement of more Asian-Americans, for instance, into our diplomatic 

service would be a great plus. 

We’re beginning to see Korean Americans as Ambassadors and 

things like that. And, frankly, they receive a different reception in 

Asia. They are 100 percent American, but they have a different reception, and it’s a very positive—it can be a very positive thing. 

Thank you. 

Mr. MULLOY. Governor McAuliffe has recently appointed me to 

the Commonwealth’s Asian Advisory Board in Virginia, so I’m having a great opportunity to meet a lot of very talented Asian Americans, and learn a lot. And I think they’ll be a tremendous asset for 

this country going forward on giving this broader perspective on 

how we should be integrated with these Asian economies. 

I’m a trade hawk, but I am very much in favor of balanced trade, 

and that’s what I think we ought to be doing. I’m very much in 

favor of a closer economic relationship with India. I went to India 

when I was in the Clinton administration. I was Assistant Secretary, and before the President went out there, I was out there 

trying to line up some deliverables that the President could sign 

when he went out later. And I always thought that we should be 

putting a lot more attention on India. They’re a democracy. Why 

are we putting all of our apples, and all of our effort into this 

China relationship? The imbalance in it I think is really harmful 

to this country, and I think we’ve got to rebalance that. But I think 

Asian Americans are going to be a tremendous asset to this country 

going forward. 

Ms. MENG. Thank you. I yield back. 

Mr. SALMON. Thank you. Mr. Connolly. 

Mr. CONNOLLY. Have you gone, Brad? Entirely up to you, whatever you have scheduled. Thank you, sir. 

Welcome to the panel and, Pat, great to see you again. Pat and 

I had the honor of serving together in the U.S. Senate as fellow 

staffers working with Senator Sarbanes, in particular; great preparation for this job, I’ll tell you. 

Pat, let me pick up on something you had to say about NAFTA. 

It sounded like what you were saying was Mexico deliberately waited until the ink was dry on the NAFTA agreement and then devalued its currency, thus, unfairly exploiting the opportunity 

NAFTA gave it. Is that your view of history? 

Mr. MULLOY. No, here’s my view. When we did the hearings in 

the Banking Committee on NAFTA, it was sold as a free trade 

agreement. But when you really held the hearings, you concluded 

that was really an investment agreement. It was to provide an opportunity for American companies to be able to invest more in Mexico, to have a lower base job—to have lower wages, and be able to 

compete with some of the Asian imports. That was kind of the theory of the thing. But we didn’t have any currency provisions in that 

agreement. And the fact that you had those investor state proviVerDate 0ct 09 2002 11:55 Apr 07, 2015 Jkt 000000 PO 00000 Frm 00080 Fmt 6633 Sfmt 6633 F:\WORK\_AP\022615\93533 SHIRL
77

sions in it to get outside of the Mexican courts to protect American 

investors was a good sign it was an investment agreement. Senator 

Warren has a big article about that issue in The Washington Post 

today. 

But shortly after that was done, Mexico ran into an economic 

emergency and devalued its currency, but we had no provisions in 

the NAFTA to deal with currency issues. I don’t think they necessarily planned it, but it happened, and I think it had enormous 

deleterious impact on the American economy, and particularly 

those jobs in the Midwest where the companies relocated to Mexico 

and shipped back here. 

Mr. CONNOLLY. Got it. Dr. Karl Jackson, sometimes in the world 

of political upheaval transformative change can happen virtually 

overnight. I mean, there may be lots of things that lead up to it, 

but the actual change happens very rapidly; witness the fall of the 

Berlin Wall, and everything that happened in Eastern Europe. I 

don’t know any experts who predicted the rapidity of that change, 

and the reintegration of the two Germanies. I mean, nobody I knew 

at that time. 

Are we prepared for something comparable in North Korea? 

What if change comes to North Korea, I mean, with lightning speed 

and the regime collapses, and now what do we do? 

Mr. KARL JACKSON. Well, you’ve hit upon a really good problem, 

because of the fact that if there were really rapid uncontrolled regime change, this would make China extremely nervous. It would 

make South Korea extremely nervous, and it would make the 

United States extremely nervous. And this is an instance where if 

there were the kind of security arrangement that I was advocating 

in my written testimony, then the phones would ring in New Delhi, 

Washington, Tokyo, and Beijing, and we would hopefully all say to 

one another let’s all be calm and take this one step at a time, no 

troop movements. Let us all try to let the situation sort itself out 

to the maximum degree possible. But it is a very worrisome thing, 

and Chinese officials worry about it just as much as you do, because uncontrolled change is the one thing they want to avoid. 

They don’t want a flood of refugees, and more than anything else 

they don’t want the kind of instability that might necessitate the 

south coming to the north. 

Mr. CONNOLLY. Thank you. Mr. Denmark, I wish we had more 

time, but real quickly, Mr. Mulloy has given a pretty cogent critique of a potential TPP, but I wonder if you might address both 

that critique and—but what’s the alternative? I mean, one of the 

things I wrestle with is, if we don’t set the standards through TPP, 

and we let this fall, then by virtue of the vacuum, it seems to me 

the Chinese then set them. And that is part of the choice, I think, 

we’re wrestling with up here. 

Mr. DENMARK. Thank you, Mr. Chairman. And an aside, I’m very 

glad that you asked about Korean unification. I think it’s an incredibly important issue. 

On TPP, I am not an economist. I am not even going to—it’s hard 

for a think tank person to admit his lack of expertise in something, 

but I’ll admit I’m not an economist. I leave that to my friend, Mr. 

Goodman, here. But I can talk about the geopolitics of TPP; that 

TPP is absolutely essential to the longstanding American power 

78

and influence in Asia; that economics is at the center of Asian geopolitics, and the United States needs to play a leading role in that 

area; that TPP would go a long way in setting the rules of the road 

for economic engagement in Asia that goes beyond the specifics of 

the agreement, but would really set the tenor for much of economic 

engagement across the Asia-Pacific. And if we don’t set the rules 

of the road, then China will. And if China is able to set the rules 

of the road, as it is already attempting to do by establishing things 

like the Asia Infrastructure Investment Bank and other sort of alternative institutions, we’ll see much lower standards for environmental protection, lower standards for—lower tariffs for tariffs, and 

just a lower quality mode of economic integration; something that 

would be very much detrimental to our broader interest for greater 

economic integration in the region. So, geopolitically I see the TPP 

as being incredibly important. 

Mr. CONNOLLY. I would only ask the chairman, Mr. Mulloy seeking recognition. It’s the chairman’s call, because my time is up. 

Mr. SALMON. Mr. Sherman. 

Mr. CONNOLLY. Thank you. 

Mr. SHERMAN. There is an alternative. It’s fair trade rather than 

free trade. The question is not TPP, or the status quo. The question 

is when we listened to Warren Buffet when he suggested that we 

require that for every dollar of imports there be a dollar of exports. 

The economic arguments for TPP are so bad that we have to be 

told that somehow we’re going to obtain a national security advantage. The benefit—China, actually, will be the beneficiary of TPP 

because, as I indicated in my opening statement, goods could be admitted to be 65 percent made in China, but actually 70, 80, 90 percent made in China, and get duty-free access to the United States 

under the ‘‘rules of origin.’’ You just ship it to a TPP country, the 

slap a Made in Vietnam sticker on it, and end it to the United 

States, and we get no access to China. 

And as to the joy of us writing the rules of the road, these are 

Wall Street’s rules. They have mutilated the American middle 

class, and the fact that they were made in Wall Street doesn’t 

change that. The rules of the road in the future ought to be fair 

trade. 

But moving on to another subject, Mr. Jackson, and whichever 

Mr. Jackson feels most focuses on this. Would China be less inclined to support the North Korean regime if they had a solid 

promise from the United States that American forces will never be 

deployed north of the DMZ, and that, in fact, a unified Korea would 

have substantially fewer American forces in it than South Korea 

does today? 

Mr. VAN JACKSON. That’s a good question. I don’t think no matter what we promise that they would find it credible, ultimately. 

Mr. SHERMAN. Even if it was a Senate-ratified treaty? 

Mr. VAN JACKSON. Anything is possible, I suppose. I think the 

reasonable hedge for China is to maintain a reasonably sized military garrison on the other side of its border, and as it has suggested, in the event of any kind of instability insert itself as a buffer. Their overwhelming concern is with refugee flows, so what do 

we do about that? 

79

Mr. SHERMAN. And we would hope that a prosperous unified Korean would be able to accommodate the resettlement of all residents of North and South Korea in a newly prosperous state, but 

I’m going to go on to another issue, and that is that we’re told exports are good, but imports don’t matter; that where the statistics 

indicate that exports will grow, we embrace the statistics; where 

the statistics indicate that imports will grow, well, we dismiss the 

statistics because there’s always something fuzzy about a statistic. 

We’re told that if we export 50,000 cars, that produces jobs. If we 

import 500,000 cars, well, that has no affect on our economy. 

Our school systems should be able to teach subtraction as well 

as addition. Every other country in the world knows that it’s about 

trade balances, that if you increase exports by 1 billion but you increase imports by 2 billion, you devastate your economy. And the 

only country that doesn’t understand that is the country that is experiencing the largest trade deficit in the history of mammalian 

life. 

We can hold up an iPhone as a symbol of trade, but the real symbol are the broken families in every district in this country where 

jobs have been lost, families have been broken up. 

Now, we’re told—we were told before MFN for China that the effect would be negligible on trade flows. That was off by $3 trillion. 

We were told that the deal with Korea would benefit us as far as 

our trade deficit and, in fact, we have had a spectacular increase 

in our trade deficit with South Korea. And now there apparently 

aren’t even any economic studies, they’re not even promising to 

help the U.S. economy. 

Mr. Mulloy, are there—what do the economic studies which have 

consistently understated the devastation of these agreements, what 

do these economic studies show about this agreement? 

Mr. MULLOY. I’ve been reading a lot about TPP. 

Mr. SHERMAN. Your microphone. 

Mr. MULLOY. Yes, I’ve been reading a lot about the TPP. What 

I see always in any spokesperson in favor of the TPP, they talk 

about increased American exports. I have not seen any studies, or 

what is going to be the impact on our trade balance with those TPP 

countries. Is it going to improve? 

We’re running a pretty major deficit with those countries right 

now. Will the TPP improve that? I have not seen any study that 

supports that. 

Mr. SHERMAN. The proponents of this can’t even figure out a way 

to lie to us. That’s exceptional, so there aren’t—the last few times 

they’ve been able to tell us that they’re going to increase net jobs 

in the United States, and now they’ve retreated. You and I would 

specify yes, these agreements will create increased exports to some 

degree. 

Mr. MULLOY. If I could speak to just one more thing. 

Mr. SHERMAN. Yes. 

Mr. MULLOY. Under the Constitution, you guys have control over 

trade. 

Mr. SHERMAN. Tell that to the administration, but go on. 

Mr. MULLOY. And my understanding is the majority of both 

Houses of Congress have written to the administration asking 

them to address exchange rates in the TPP. 

80

Mr. SHERMAN. Well, let me—because I’ve got a response from the 

administration, if the chairman will indulge me. Every time I talk 

about them cheating on their currency, China particularly, the response is, ‘‘But they’re cheating less.’’ Gentlemen, don’t try that on 

your wives. Honey, I’m cheating less. 

The idea that we would violate every day as the Executive 

Branch does the law compelling them to designate China as a 

trade—as a currency manipulator on the theory that they’re treating—that they’re cheating less demonstrates that no future trade 

agreement is going to be enforced no matter what the provisions 

might be. We’ll scurry around, we’ll file papers, but we won’t do 

anything serious. I believe my time has expired. 

Mr. SALMON. Thank you. Mr. Goodman, I’m going to give you a 

chance. We’re going to go through one more round. We have three 

folks, and we’ll go through another round of questions. But, Mr. 

Goodman, I’d like to give you a chance to respond to some of the 

issues that were raised. 

Mr. GOODMAN. Thank you, Mr. Chairman. I’d just like to make 

three quick points. 

First, there are studies that show the potential benefit of TPP. 

The Peterson Institute did a study a year or two ago that showed 

that the annual income gains from a completed TPP agreement in 

2025 would be roughly 225 billion U.S. dollars. That’s a global 

number. And for the United States, $76.6 billion. That’s based on 

an econometric analysis that covers both exports and imports. I’m 

happy to put that specific reference in front of you. I think I may 

have referred to it in my written testimony, but happy to get that 

citation to you. So, there are studies showing potential benefits. Of course, these numbers are not going to be absolute. The $.6 

billion I take with a grain of salt, but I do think there are studies 

showing there’s some significant income gains for the United States 

that come both from the export, and as I was trying to suggest earlier, the import side of the equation. So, that leads to my second 

point. 

Globalization is a reality. Globalization and technological change 

are realities regardless of trade agreements. They’re happening, 

and so the question in my mind is whether we are going to be able 

to positioned, and when I say we, I mean broadly the United 

States, including middle class workers, are going to be able to be 

competitive in that globalized technologically advanced, and changing world. And, to me, trade agreements run the possibility of establishing a set of rules which would level the playing field, and 

give us a chance to compete. So, that’s what they’re about. 

I don’t think they are going to make globalization or—the existence of them or nonexistence of them is not going to make 

globalization or change. 

Mr. SHERMAN. If I can interrupt for a second. 

Mr. GOODMAN. And I’m happy to——

Mr. SHERMAN. If I can interrupt for a second. The idea that the 

greatest companies in the world, the greatest workers in this world 

are losing by $300 billion or $400 billion a year in terms of our 

trade deficit, because they’re bad workers, and we have fair trade 

is one view. The other view is that we have the greatest workers, 

and we have the worst rules. But it’s clear we’re losing, and I don’t 

81

think we should blame our workers for that. I think we should 

blame our Government for that. 

Mr. GOODMAN. Totally agree. I think that it’s not our workers. 

Our workers are the best in the world, and our economy is the 

strongest in the world. We can compete if there’s a level playing 

field, which there is not. And that’s why trying to shape the rules 

is what these trade agreements are trying to do. Of course, they’re 

not going to solve every problem, but I think that’s what they’re 

aspiring to do. 

Just on currency really quickly, I would say that there is a currency problem in East Asia, a currency manipulation problem. 

Most countries in East Asia have engaged in that practice at some 

point or the other, and it has been a persistent problem and challenge. 

My own view is that using a trade agreement to solve that problem is unlikely to be successful, and that there should be other 

mechanisms explored to try to promote fairness in currency practices. 

Mr. SALMON. I’d like to move to a different issue. Several of you 

have mentioned that it’s critical that the U.S. be seen by our allies 

in the region as a stable, consistent ally. Do you believe that’s the 

view of the U.S. today in the region? Let me start with you, Dr. 

Jackson. 

Mr. VAN JACKSON. So, if you had asked me 2 years ago, there 

would have been much greater doubts. There are still hesitations, 

there are still concerns, not least because it’s kind of a bottomless 

well with some of our allies. But they feel much more confident 

about the U.S. today and the trajectory we’re on than 2 years ago, 

but it’s not constant. So, like if you’re checking in right now, I 

would say that we’re in a better place than we were, but there’s 

always room for improvement. 

Mr. SALMON. Mr. Denmark, do you have any thoughts on that? 

Mr. DENMARK. Sure. Our allies and our partners in the Asia-Pacific are in a very difficult geopolitical position in that there’s a 

major strategic rival or challenge very close to them, and their primary ally guarantor of their security is far away, so they’re very 

sensitive to indications that the United States be consistent, be reliable. So, the challenge that we have as being the dominant power 

is that if we demonstrate our reliability and consistency 90 times, 

and twice we stumble, all we’re going to hear about is the two 

times that we’ve stumbled. So, I’ve been hosting groups of people 

from our ally countries when we had government shutdown, and 

those sorts of events that we have when the government shuts 

down for reasons that are very difficult to explain to them, raises 

their concerns about how reliable we are, how we can act as a responsible country. 

Further, being able to pass TPP after we have encouraged them 

to do it, after we’ve been negotiating for so long, if we’re not able 

to pass it, that would send a signal to our allies that we’re not a 

reliable partner, that we’re not able to follow through with what we 

say we’re going to do. So, they’re very sensitive to that. They want 

to be able to work with us. They see themselves as needing us economically, politically, militarily, strategically, but they need to 

make sure that we’re consistent and reliable. 

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Mr. SALMON. Dr. Karl Jackson. 

Mr. KARL JACKSON. Yes, I guess I would have a twofold view on 

this. First of all, in the last 40 years of going back and forth, especially to Southeast Asia, I’ve almost never heard anyone say gee 

whiz, you guys are doing a terrific job. Now, we can’t have been 

wrong consistently all the time so there is a tendency to try to poke 

us a little bit to get us to do a little bit more. That’s one side of 

my answer, that is that this is a perennial complaint about us. 

The other side of the answer is that if, after having said that we 

will rebalance to Asia, we fall down on those commitments and 

under-resource the rebalance to Asia, then they will begin to really 

doubt whether or not we are at all reliable. Thank you. 

Mr. SALMON. Well, do you feel that right now our policies in our 

Government are adequately resourcing that pivot? 

Mr. KARL JACKSON. I think the pivot is under-resourced to the 

extent that the change is occurring slowly. The folks in Southeast 

Asia tend not to notice the changes, and they tend to pocket whatever the changes are and say but, what have you done for me lately? So, it’s a very careful balance, and if the Defense budget, particularly as it has an impact on U.S. presence in Asia, and particularly U.S. presence in the South China Sea were to go down, or if 

it wasn’t responsive to increased activities on the part of the Chinese Navy, then doubts would increase. And those increases in 

doubt would be based upon empirical fact rather than upon just a 

desire to get the Americans more involved. 

Mr. SALMON. I just have one last question, and then I’ll yield to 

the ranking member. We’ve seen a lot of very erratic and irresponsible behavior out of North Korea, and that’s probably the understatement of the century. But as far as threat level to the United 

States, how serious is the threat of Kim Jong-un? 

Mr. VAN JACKSON. So, I wouldn’t put too much credence on 

threats that they’re going to attack the White House, or the Continental United States, or even Hawaii today. In 5 or 10 years, it’s 

a completely different—my answer could be completely different. 

But when they make threats—so, their threat level is always at 

the, you know, intolerable level, and most of the time it’s incredible, but most of the time when they engage in sort of low-level violence, or the novel forms like the Sony hack, they do signal ahead 

of time that they’re going to do this. They do threaten that they’re 

going to do things like this. Like the Sony hack played out over a 

series of months, and then the question is, you know, how do you 

separate signal from noise? And that’s always the challenge with 

North Korea. But I would say that there is an upper limit, and so 

it’s reasonable to not take as seriously. Well, I mean, if you’re in 

the military you should take it all seriously, but you don’t need to 

take as seriously some of the bombast about, you know, global annihilation. But the stuff—if they’re saying they’re going to hack a 

South Korean bank, or if they say they’re going to go after a corporate actor in the U.S., I would take that extremely seriously, because they’ve shown that that’s—they’re willing to match word and 

deed on those smaller scale acts. 

Mr. SALMON. Thank you. I yield to the gentleman. 

Mr. SHERMAN. Mr. Jackson brings up this hacking of Sony which, 

of course, was designed to chill free speech in America. I’d point 

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out China has bought AMC, or a Chinese businessman working 

with the Chinese Government, and so I wonder whether we’ll see 

any more movies made about Tibet, or a movie made about 

Tiananmen knowing that so many of the screens around the country may not air it; this at the same time while the Chinese Government, while claiming to be part of WTO, doesn’t allow our movies 

free access to their screens. 

Mr. Denmark, I have to disagree with you on something that you 

probably don’t even realize you said. You said, ‘‘Asians will think 

we can’t get it passed.’’ We, means the Executive Branch in that 

sentence. That is a misunderstanding of the United States Constitution. We are the American people. We under Article I of the 

Constitution are the United States Congress. We in Congress are 

given the authority to deal with international commerce, and the 

only thing we have agreed on is that this currency manipulation 

has to stop. We—to say that the American President can go out 

there, make promises, and then say Congress is unpatriotic or letting America down, or besmirching America’s word because we 

don’t do what he says, is a device used to dismantle our Constitution, and has been done by many administrations. 

Again, Mr. Jackson, we’re now deploying, Mr. Mulloy says, 60 

percent of our Air Force, 60 percent of our Naval power to the Pacific mostly to fight over some rocks that Japan claims, as much 

as anything else. How much does Japan spend as a percentage of 

its GDP on its defense? Isn’t it below 1 percent? 

Mr. KARL JACKSON. It’s characteristically below 1 percent. Their 

defense budget, however, has been going up for the last 3 years. 

Mr. SHERMAN. And it still remains under 1 percent? 

Mr. KARL JACKSON. Yes. It once exceeded 1 percent, and I was 

there that afternoon and helped make it happen. 

Mr. SHERMAN. Congratulations. So, we spend 4 or 5 percent of 

our GDP, more if you throw in veterans benefits, which after all 

is part of our military pay structure. And, as I pointed out, there 

isn’t any oil under those islands, but if there was, we don’t get any 

of it. 

I want to go to this idea that this trade deal benefits us. Mr. 

Mulloy, in general, to the extent there have been benefits from 

trade, they’ve gone to Wall Street, and the harm of trade has hit 

American working families. Is there any study out there that 

shows that there are more jobs in the United States net after imports from TPP, as currently configured? 

Mr. MULLOY. First, the study that Mr. Goodman cited by the Petersen Institute, I know the administration used that. And then 

Glenn Kessler in The Washington Post investigated that claim and 

gave it four Pinnochios. It might be worthwhile to get that article 

from The Washington Post and put it in the record of the hearing. 

Mr. SHERMAN. Without objection we’ll do that. Go on. 

Mr. MULLOY. Now, I think when the TPP is concluded, it’s not 

concluded yet, I think under the law, the ITC is supposed to give 

an economic analysis looking at its total impact on the American 

economy, which I think will have to get into the whole business of 

a trade balance and jobs. 

There is a formula that economists use for determining GDP. 

They use investment, consumption, government spending, and then 

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net exports. When net exports are negative, they are detracting 

from GDP and job growth, and that means that your economy is 

not performing the way it would if you weren’t running the negative net exports. You’d probably grow your economy 2 or 3 percent 

more than it would happen if you run the major deficit in net exports. That would result in better paying jobs for Americans, and 

I think better communities. 

And I think the way we’ve run it now, the corporations are focused on shareholder value. Other countries put in place policies 

that make it good for them to outsource. For example, if you 

produce in China and then ship back, that underpriced currency 

gives you an export subsidy and helps you make greater profits. It 

also makes it more difficult for you to sell from here into China. 

Mr. SHERMAN. If I can interrupt, one good example is the Chinese realize they’re going to import planes from the United States, 

so they require Boeing to make the fuselages in China, and then 

those fuselages are shipped and used all over the world. And 

they’re able to do that while being in WTO because the government 

controls the decision as to whether they’re going to buy Airbus, or 

they’re going to buy Boeing. 

Here, our airlines will buy a Brazilian plane or a Canadian plane 

based on what’s in the interest of the airline; whereas, the Chinese 

airlines are doing what’s—based on what’s in the interest of China 

as defined by its government. And with those kinds of rules, we’re 

going to lose airplane manufacturing one airplane part at a time. 

Mr. MULLOY. One of my recommendations in my written statement is that we ought to give an antitrust protection, where if Boeing wanted to go to Airbus and say let’s both of us agree that we’re 

not going to be transferring technology as part of making a sale to 

China; that we should give them the right to do that, so that 

they’re not squeezed by the Chinese. The Chinese will say to Boeing if you don’t do this, then we’ll buy from Airbus. Well, the two 

of them ought to get together. And I think the Europeans might 

be interested in some kind of a relationship like that, because this 

is going on across the board. 

Our companies are told that if you invest more and move R&D 

into China, you’ll be considered friends of China. But what’s happening is, those transfers of technology and R&D are beefing up 

the Chinese ability to build their defense industrial base, and their 

military base. So, I think we need to really focus on this whole 

China relationship and get that as a key part of the rebalancing 

to Asia. And it will strengthen our whole geopolitical position if we 

get this relationship more balanced. 

Mr. SHERMAN. Thank you. 

Mr. SALMON. Well, thank you. It looks like the questions are 

through. I appreciate the distinguished panel coming and addressing many of our concerns. As you can see, this was the tip of the 

iceberg. We’ve got a lot to cover over the next couple of years, and 

we didn’t even get to a lot of the questions and the concerns that 

the committee will have. 

I appreciate everybody’s participation, and this committee is now 

adjourned. 

[Whereupon, at 11:58 a.m., the subcommittee was adjourned.] 

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