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S. HRG. 113–182

REBALANCE TO ASIA IV: ECONOMIC ENGAGEMENT

IN THE ASIA-PACIFIC REGION

HEARING

BEFORE THE

SUBCOMMITTEE ON EAST ASIAN

AND PACIFIC AFFAIRS

OF THE

COMMITTEE ON FOREIGN RELATIONS 

UNITED STATES SENATE

ONE HUNDRED THIRTEENTH CONGRESS

FIRST SESSION

DECEMBER 18, 2013

Printed for the use of the Committee on Foreign Relations

(

Available via the World Wide Web: http://www.gpo.gov/fdsys/

FOREI-43947 with DISTILLER

COMMITTEE ON FOREIGN RELATIONS

ROBERT MENENDEZ, New Jersey, Chairman

BARBARA BOXER, California 

BENJAMIN L. CARDIN, Maryland 

JEANNE SHAHEEN, New Hampshire 

CHRISTOPHER A. COONS, Delaware 

RICHARD J. DURBIN, Illinois 

TOM UDALL, New Mexico 

CHRISTOPHER MURPHY, Connecticut 

TIM KAINE, Virginia 

EDWARD J. MARKEY, Massachusetts 

BOB CORKER, Tennessee 

JAMES E. RISCH, Idaho 

MARCO RUBIO, Florida 

RON JOHNSON, Wisconsin 

JEFF FLAKE, Arizona 

JOHN McCAIN, Arizona 

JOHN BARRASSO, Wyoming 

RAND PAUL, Kentucky 

DANIEL E. O’BRIEN, Staff Director

LESTER E. MUNSON III, Republican Staff Director

——————

SUBCOMMITTEE ON EAST ASIAN AND PACIFIC AFFAIRS

BENJAMIN L. CARDIN, Maryland, Chairman

CHRISTOPHER MURPHY, Connecticut 

BARBARA BOXER, California 

TOM UDALL, New Mexico 

EDWARD J. MARKEY, Massachusetts 

MARCO RUBIO, Florida 

RON JOHNSON, Wisconsin 

JEFF FLAKE, Arizona 

JOHN McCAIN, Arizona 

(II)

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C O N T E N T S 

Page

Andersen, Hon. John, Principal Deputy Assistant Secretary for Global Markets, International Trade Administration, U.S. Department of Commerce, 

Washington, DC ................................................................................................... 13

Prepared statement .......................................................................................... 14

Cardin, Hon. Benjamin L., U.S. Senator from Maryland, opening statement ... 1

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

for Strategic and International Studies, Washington, DC ................................ 32

Prepared statement .......................................................................................... 34

Marciel, Hon. Scot A., Principal Deputy Assistant Secretary, Bureau of East 

Asian and Pacific Affairs, U.S. Department of State, Washington, DC .......... 5

Prepared statement .......................................................................................... 7

Rubio, Hon. Marco, U.S. Senator from Florida, opening statement .................... 3

Scissors, Dr. Derek M., Ph.D., resident scholar, American Enterprise Institute, Washington, DC .......................................................................................... 39

Prepared statement .......................................................................................... 41

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Prepared Statement of Walter Lohman, director, Asian Studies Center, The 

Heritage Foundation, Washington, DC .............................................................. 54

(III)

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FOREI-43947 with DISTILLER

(1)

REBALANCE TO ASIA IV: ECONOMIC 

ENGAGEMENT IN THE ASIA–PACIFIC REGION 

WEDNESDAY, DECEMBER 18, 2013 

U.S. SENATE, SUBCOMMITTEE ON EAST ASIAN AND PACIFIC AFFAIRS, COMMITTEE ON FOREIGN RELATIONS, Washington, DC. 

The subcommittee met, pursuant to notice, at 10:06 a.m., in room 

SD–419, Dirksen Senate Office Building, Hon. Benjamin L. Cardin 

(chairman of the subcommittee) presiding. 

Present: Senators Cardin, Murphy, Rubio, and McCain. 

OPENING STATEMENT OF HON. BENJAMIN L. CARDIN,

U.S. SENATOR FROM MARYLAND 

Senator CARDIN. Good morning, everyone. It is my understanding 

that Senator Rubio is on his way, so I am going to get started and 

welcome everyone to this hearing of the Subcommittee on East 

Asia and Pacific. 

I want to thank Senator Menendez and Senator Corker for their 

cooperation in the work of the subcommittee and particularly 

thank Senator Rubio for his help and cooperation as we have 

worked together to establish an agenda for the subcommittee. 

This is one of a series of hearings that we have held in regards 

to the Rebalance to Asia, and we are going to focus today on the 

economic engagement issues. Before we get started in my formal 

comments, let me point out that this has been a year of learning 

for me. My focus on foreign policy issues previous to this term of 

Congress was mostly in Europe and Central Asia in my role with 

the Helsinki Commission. I took on this challenge because of the 

importance of East Asia and the Pacific and also because of the 

rebalance programs. 

I was aided in this by one of our fellows who come to us from 

the executive agencies, Elise Mellinger. I mention that because she 

started with me this year, she is an expert in this area, and she 

did incredible work in helping us to prepare for this responsibility. 

This will be the last hearing that she will be attending. The sad 

news about these detailees is that we lose them after a period of 

1 year. I just want to publicly thank her for her service to the 

United States Senate and to my office. It is a particularly good day 

to do this because it is her birthday. 

So thank you. 

Ms. MELLINGER. Thank you. 

Senator CARDIN. Economic engagement is a critical part of the 

rebalance program. It is critical to stability, it is critical to 

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2

prosperity, it opens markets to U.S. producers, manufacturers, and 

farmers. It creates jobs for Americans. It promotes private investment. 

It was a major focus of my visit to the region earlier this year 

and was a primary focus of Vice President Biden’s trip recently in 

his visit to China, Japan, and the Republic of Korea. Secretary 

Kerry’s trip to Vietnam underscored the importance of economic 

engagement and also indicated that we must use our economic 

engagement to promote human rights. 

I think it is particularly important to underscore that this week 

as we celebrate the life of Nelson Mandela. The mineral wealth of 

South Africa only became unleashed as a result of denying the government the opportunity for economic engagement unless it 

changed its apartheid policies. That policy worked. South Africa 

changed, with a minimal amount of bloodshed. 

I think it really underscores the importance of our economic 

engagements to advance good governance and human rights. The 

Secretary said in his recent trip to Vietnam: ‘‘We are working very 

closely with Vietnam and other regional partners in order to complete the TPP negotiations as quickly as possible, but to realize our 

potential as a partner and for Vietnam to realize its potential as 

a thriving economy—and this is something we talk about openly 

and frankly—Vietnam needs to show continued progress on human 

rights and freedom, including the freedom of religion, freedom of 

expression, and freedom of association.’’

So it is clear that we need to talk on the economic engagement 

front as to the progress made in many countries on labor rights, 

women’s empowerment, and combating corruption, promoting 

democracy, religious freedom, good governance, and the list goes on 

and on and on and on. 

I was pleased to see that Asia-Pacific Economic Cooperation 

Forum goals included expanding economic opportunities for women 

and combating corruption. The ASEAN adopted a declaration to 

safeguard women and children from violence—an important basic 

human right. And the East Asian Leaders summit included human 

rights as a major focus. So we are making progress. 

The United States and China share the goals of increasing 

regional connectivity and prosperity in the Asia-Pacific region. I 

believe it is in the United States interest for China to be a prosperous, peaceful, and strong partner with respect to its neighbors 

and international norms, laws, institutions, and rules. I look forward to seeing more economic reform as China recognizes the 

importance of halting currency manipulation and creating homegrown innovations. I have talked about this before. Currency 

manipulation is unacceptable, and China needs to respect intellectual property. 

Chinese initiatives like creating the new Shanghai pilot free 

trade zone and granting more market access are steps in the right 

direction. I was pleased to see that at the Third Party Plenum in 

November China proposed reforms to boost competition and economic efficiency. Implementing these reforms will be the true test 

and this will require sincere commitment from President Xi and 

other Chinese leaders. I hope that China will quickly begin to 

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3

implement these reforms and that they will include a reduction in 

the role of government in promoting state-owned enterprises. 

However, as former Secretary of State Clinton has said, over the 

long run you cannot have economic liberalization without political 

liberalization. They are connected. And we must emphasize this. I 

was encouraged to hear that at China’s Third Party Plenum the 

government announced its commitment to ‘‘respect and protect 

human rights’’—that is their quote—prohibiting law enforcement 

authorities from extracting confessions by torture, corporal punishment, or abuse, and abolishing the tortuous reeducation through 

the labor system. If properly implemented, these will be groundbreaking reforms. These are signs perhaps that China realizes that 

its authoritarian capitalism cannot be sustained over time because 

the suppression of a country’s people only creates the illusion of 

stability. It does not keep a people from wanting the freedom to express their own opinions without fear of being jailed or killed and 

the freedom to live as they see fit. 

Democracy remains the model which holds the most promise for 

economic growth. We can see this idea taking hold throughout the 

region from Burma to Timor-Leste. 

So we come full circle at this hearing back to where we started. 

The first hearing we held on the rebalance of Asia dealt with good 

governance and we are back to that issue as we tie it together 

through economic engagement. Discrimination against women and 

minorities are contrary to economic development goals. Markets 

cannot effectively operate unless human rights and civil liberties, 

including freedom of speech, association, and the press, are protected. Failing to protect workers’ basic rights undermines a 

nation’s development and violates internationally recognized 

human rights norms. 

Finally, corruption is a critical issue which we must tackle 

through cooperation in both the public and private sectors. Corruption is the enemy of the rule of law. It destroys public institutions 

meant to protect people, denying them the justice and depriving 

them of their human rights. Corruption in Asia is a drag on growing economies, draining billions of dollars from economic development and the livelihood of Asians. It is also a major obstacle to 

reducing poverty in Asia. I am glad to see that APEC and ASEAN 

leaders have recognized the importance of dealing with these 

issues. 

I look forward to hearing from our witnesses about the critical 

issues and the next step in the economic engagement with the 

Asia-Pacific region. 

With that, I would turn to my colleague and friend Senator 

Rubio. 

OPENING STATEMENT OF HON. MARCO RUBIO,

U.S. SENATOR FROM FLORIDA 

Senator RUBIO. Thank you. Thank you for holding this hearing 

and all of you for being here. I think we are all well aware of the 

challenges that we face in the region. Especially the security challenges have been in the headlines over the last few weeks. For 

instance, we have a dictator with nuclear weapons who has just executed his uncle. We have seen China try to assert its territorial 

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claims in ways that jeopardize peace with Japan, South Korea, and 

the entire region. 

These are real threats. But there also are extraordinary opportunities to which we need to pay close attention and dedicate time, 

effort, and resources, not just to our security interests there, but 

also to the real economic opportunities that are a vital component 

of our own enduring prosperity. 

I hope our goals will be ambitious in that regard. The AsiaPacific will not simply hold onto its current share of global activity. 

It is actually going to expand. It is going to grow, and I hope we 

will be an integral part of that growth. For that reason, I think it 

is important to get the so-called ‘‘rebalance’’ right. 

Asia today accounts for about 33 percent of U.S. trade. China is 

our second-largest trading partner. Japan is No. 4. As a block, the 

10 nations in the Association of Southeast Asian Nations would 

rank fifth. Meanwhile, the top four countries on the 2013 index of 

economic freedoms are from the Asia-Pacific region. 

Therefore, I think the question is what more should we be doing 

to ensure that the United States is continuing to succeed economically, particularly in this vital region of the world. The TransPacific Partnership, which I know we will hear a lot about today 

in both testimony and questions, can be an important part of that 

effort and we should do all we can to finalize those negotiations. 

I am very interested in the testimony today to hear an update on 

where we stand with regards to that. 

It is also important to remember that, as Senator Cardin pointed 

out just a moment ago, we are a nation that is built around values, 

that we cannot leave by the wayside our commitment to promote 

democracy, but also respect for human rights. A proactive approach 

for these ideals has to go hand in hand with everything we do 

everywhere in the world. This is especially true in a region of increasing importance like the Asia-Pacific region. These ideals, by 

the way, define who we are as a people and as a nation, and they 

should continue to be an integral part of our efforts overseas. 

So I look forward to hearing from the witnesses today. I hope to 

learn more about the specific initiatives that the administration is 

pursuing and has in mind to address these challenges and these 

opportunities. Mr. Chairman, thank you for this hearing. 

I would just ask that at the appropriate time the written testimony of Mr. Walter Lohman, who is the Director of Asian Studies 

at the Heritage Foundation, be included at an appropriate place in 

the record. 

I thank you, and I thank all of you for being here. 

Senator CARDIN. Without objection, it will so be included. 

We now turn to our first panel. The Honorable Scot Marciel is 

a well-known face before our committee. We welcome him back, the 

Principal Deputy Assistant Secretary, Department of State, Bureau 

of East Asian and Pacific Affairs. Secretary Marciel began his term 

as Principal Deputy Assistant Secretary in August 2013 after serving for 3 years as the U.S. Ambassador to the Republic of Indonesia. Mr. Marciel previously served as the Deputy Assistant Secretary of East Asia and Pacific Bureau, responsible for relations 

with Southeast Asia, and the Ambassador to ASEAN Affairs. 

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5

Our second witness is the Honorable John Andersen, who is the 

Principal Deputy Assistant Secretary for Global Markets at the 

Department of Commerce in the Office of International Trade 

Administration. He is responsible for overseeing both market access and commercial issues. Previously he was the Principal Deputy Assistant Secretary for Market Access and Compliance, and 

prior to that the Senior Director for Western Hemisphere Affairs 

in the International Trade Administration. 

We welcome both to the committee, and we will start with Secretary Marciel. 

STATEMENT OF HON. SCOT A. MARCIEL, PRINCIPAL DEPUTY 

ASSISTANT SECRETARY, BUREAU OF EAST ASIAN AND 

PACIFIC AFFAIRS, U.S. DEPARTMENT OF STATE, WASHINGTON, DC 

Ambassador MARCIEL. Chairman Cardin, Ranking Member 

Rubio, thank you very much for the opportunity to appear today 

before you on the economic aspects of the Asia rebalance. I would 

like to thank the committee for its leadership in supporting our 

engagement with the East Asia-Pacific region. 

Recognizing that America’s future prosperity and security are 

intertwined with the prosperity and security of the East AsiaPacific region, President Obama made a strategic commitment 

when he came into office to rebalance our interests and investments to the region. He set out a clear objective for the United 

States to sustain a stable security environment and advance a regional order rooted in economic openness, peaceful resolution of disputes, and respect for universal rights and freedoms. 

The administration remains committed to this objective. The 

President himself has hosted seven Asian leaders this year, including six visits to the Oval Office. The Vice President, as you mentioned, was recently in the region. Secretary Kerry is just returning 

from his trip, his fourth trip this year, and many other Cabinet 

members have traveled to Asia this year. 

Our economic engagement is aimed at creating jobs and opportunities for the American people, as well as shared prosperity in the 

region, and reinforcing our longstanding engagement in the region. 

The past few generations have produced an extraordinary period of 

prosperity in the East Asia-Pacific region. Tapping into this economic dynamism is important for our interests. Even as we continue to lay the foundation for future economic ties, we are already 

seeing progress in many areas. 

For example, U.S. goods and services exports to the region 

totaled nearly $555 billion last year, which is up 31 percent from 

2008, and were estimated to have supported as many as 2.8 million 

jobs here in the United States. Our companies are the leading 

investors in the region, with cumulative investment of over $600 

billion in 2012. Meanwhile, foreign investment from the region to 

the United States has also sharply increased, again up about 31 

percent since 2008. 

But we want to do more. We are using a whole of government 

effort in close partnership with the private sector, the business 

community. We are advocating for U.S. businesses, working to attract foreign investment and tourism, reduce trade and investment 

FOREI-43947 with DISTILLER

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barriers, and promote prosperity. Secretary Kerry is personally 

advancing the U.S. economic agenda in the region through his

active engagement with regional leaders, business leaders, and 

entrepreneurs. 

Our embassies and consulates are key partners in this effort. 

Most of them have established interagency task forces within the 

embassies to provide economic, commercial, agricultural, and trade 

services to promote exports and advocate on behalf of U.S. companies. We are very actively engaged, working with our colleagues 

from the Commerce Department, in commercial advocacy at the 

highest level on behalf of U.S. firms. In fact, just a few weeks ago 

the State Department worked with the Department of Commerce 

to launch the Select USA summit, which over 170 companies from 

East Asia-Pacific region attended. 

Beyond this, we are also laying the policy groundwork for 

expanded trade and investment. We have a number of bilateral 

free trade agreements in the region, including recently with Korea, 

and are now in the final stages of Trans-Pacific Partnership negotiations. As Secretary Kerry noted recently, ‘‘A shared commitment 

to economic growth and innovation is part of why the Trans-Pacific 

Partnership agreement is a cornerstone of the President’s economic 

policy in Asia. This partnership will drive growth and create jobs 

across the Asia-Pacific region and the United States.’’

APEC also remains a key forum in which we are able to advance 

efforts to reduce barriers to and facilitate trade and investment, 

promote growth, and strengthen economic integration. APEC is 

effective in providing a formal role for the private sector and we 

collaborate closely with the U.S. business community to achieve 

tangible, useful outcomes. 

The TPP negotiations themselves are an important outgrowth of 

the trade and initiative liberalization agenda of APEC. 

We are also increasing our economic engagement with ASEAN 

and bilaterally throughout the region, including intensive bilateral 

engagement with key economies in the region such as China, 

Japan, and Korea, working on things like IPR protection, resolving 

commercial disputes, expanding market access. 

Very importantly, we are also working to do what we can, including with our USDA colleagues, to promote inclusive, sustainable 

growth in the region so that these markets grow. These markets 

which are so key to our future continue to grow, creating prosperity 

there, but also opportunities there. That is why we continue to provide a lot of assistance, with the support of the committee and Congress, supporting this inclusive growth framework. 

I would like to conclude by underscoring the fundamental point 

that the peaceful and prosperous East Asia-Pacific benefits the people of the United States and the region. The State Department is 

totally committed to the Asia rebalance and in particular is dedicated to ensuring that our economic engagement continues to be 

strong and focused on creating prosperity for East Asia and for the 

United States. 

Thank you very much. 

[The prepared statement of Ambassador Marciel follows:]

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PREPARED STATEMENT OF SCOT A. MARCIEL

Chairman Cardin, Ranking Member Rubio, and distinguished members of the 

subcommittee, thank you for the opportunity to appear before you today with 

Department of Commerce Principal Deputy Assistant Secretary John Andersen to 

testify on the Economic Aspects of the U.S. Rebalance to the Asia-Pacific. I would 

also like to thank the committee for its leadership in supporting and promoting 

engagement with the East Asia-Pacific region and advancing U.S. interests there. 

The Department of State looks forward to working with you and other Members of 

Congress to continue to build on our current efforts in the region. 

Recognizing that America’s future prosperity and security are very much intertwined with the prosperity and security of the East Asia-Pacific region, President 

Obama made a strategic commitment when he came into office to rebalance our 

interests and investments to this region. The President set out a clear, overarching 

objective for the United States in the region to sustain a stable security environment and advance a regional order rooted in economic openness, peaceful resolution 

of disputes, and respect for universal rights and freedoms. 

The administration remains committed to this objective and is building an 

increasingly active and enduring presence in the East Asia-Pacific region, including 

through our economic engagement. President Obama has hosted seven Asian leaders in 2013 alone, including six visits to the Oval Office; Vice President Biden traveled to Japan, China, and Korea in early December; and in addition to Secretary 

Kerry’s four trips to the region since assuming office, other Cabinet members including Secretary Lew, USTR Froman, Secretary Pritzker, Secretary Hagel, Secretary 

Jewell, Secretary Sebelius, Secretary Moniz, and EPA Administrator McCarthy have 

all traveled to Asia in 2013. 

We have made significant progress on the rebalance in a number of areas—modernizing our alliances, deepening our engagement with emerging powers such as 

China, strengthening regional institutions, and promoting democracy and human 

rights. But, during his first major speech on the rebalance to the Australian Parliament in 2011, President Obama framed the rebalance by emphasizing that the 

Asia-Pacific is critical to achieving his highest priority—creating jobs and opportunity for the American people. For this reason, the economic pillar of the rebalance 

is paramount and will have widespread and significant positive impacts at home 

and in the region for many years to come. 

The past few decades have produced an extraordinary period of prosperity in the 

East Asia-Pacific region. It has lifted hundreds of millions out of poverty across the 

entire region and fostered dynamic, innovative economies that today are fueling 

global growth. The World Bank recently projected that the East Asia-Pacific region 

will contribute 40 percent of global growth this year, and some forecasters expect 

that nearly 50 percent of world growth over the next two decades will be generated 

in this region, yielding hundreds of millions of new middle-class consumers. 

Tapping into the economic dynamism of the East Asia-Pacific is vitally important 

for U.S. interests. Even as we continue to lay the foundation for future economic 

ties, we are already seeing progress in many areas. For instance, trade with the 

East Asia-Pacific region grew by 22 percent between 2008 and 2012, far outpacing 

the 13-percent growth in global U.S. trade. In 2012, U.S. exports of goods and services to the East Asia-Pacific region totaled nearly $555 billion, an increase of 31 percent since 2008, which supports an estimated 2.8 million U.S. jobs. 

Direct investment in both directions has also helped to solidify our bond with the 

region and demonstrates the lasting commitment of U.S. businesses to the region’s 

development and economic integration. The United States is by far the leading foreign investor in the East Asia-Pacific region with the stock of U.S. foreign direct 

investment (FDI) standing at around $622 billion in 2012, up 35 percent from the 

U.S. investment position in 2008, with nearly one-third located in ASEAN member 

countries. Investment into the United States from economies of the East Asia-Pacific 

is also growing, increasing by 31 percent since 2008 to reach $422 billion by the end 

of 2012. Between the major investments made by our private sector and the potential for U.S. industry to tap the region’s growing consumer base, American businesses recognize that the future economic growth of the Asia-Pacific region and our 

increasing economic ties with the region are centrally important to economic growth 

and job creation in the United States. 

While the East Asia-Pacific region offers enormous opportunities, there are certainly critical challenges as well. We have clear shared interests to address these 

challenges by working together toward greater energy and environmental security. 

For example, rapid economic and population growth has created enormous strains 

on the region’s food, water, forest, marine, and energy resources. In many areas, the 

increased use of fossil fuel for industries and transportation has resulted in danFOREI-43947 with DISTILLER

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gerous levels of pollution that in turn pose dangers to people’s health and accelerate 

climate change. On the political and security fronts, the resurfacing of longstanding 

territorial disputes threatens the stability of the region. How we respond to these 

challenges will determine our long-term ties to the region, as well as the region’s 

future. The Department recognizes that U.S. economic ties to the region are the fundamental underpinning of our relationship and, for the overall rebalance to be successful, we must get the economic component right. 

I would like to emphasize that to get it right requires a whole-of-government 

effort in close partnership with our private sector. Here in Washington, we need to 

work on policy formulation and coordination, and in the field, the various agencies 

within the U.S. missions in the region need to work effectively as teams to implement our programs, initiatives, and policies and to advance U.S. interests. For our 

part, the Department is dedicating diplomatic, public diplomacy, and assistance 

resources to the region in a way that is commensurate with the truly comprehensive 

nature of our engagement. And we are broadening our focus to elevate issues of economic development (including energy, environment, health, and education), commercial diplomacy, and entrepreneurship. I want to emphasize that in Washington and 

through our embassies, we strive to work very closely with the U.S. business community. This partnership is essential to our collective success. 

Secretary Kerry is personally committed to and actively involved in the U.S. economic agenda for the region. For example, he undertook extensive engagement with 

regional leaders, business CEOs, and young entrepreneurs at the Asia-Pacific Economic Cooperation (APEC) Leaders’ Week in Indonesia, the East Asia summit in 

Brunei, and the Global Entrepreneurship summit (GES) in Malaysia in October. 

Secretary Kerry is just now returning from visits to Vietnam and the Philippines 

in which we bolstered our bilateral economic partnerships. Economic, energy, and 

climate issues figured prominently during Vice President Biden’s recent trip to the 

region as well. While trade and investment with the region have increased, we 

understand there is potential for greater growth, and the State Department, in conjunction with the interagency team, has stepped up economic engagement across the 

board, through regional economic initiatives and bilaterally. 

TRADE AND INVESTMENT PROMOTION

The State Department and the U.S. missions in the region are dedicated to 

advancing the President’s National Export Initiative in support of U.S. jobs. Our 

missions have established Interagency Commercial Task Forces to provide economic, 

commercial, agricultural, and trade services in the most efficient and productive 

manner possible and, where other agencies are not present, our economic sections 

are on the front line of export promotion. We are actively engaging in commercial 

advocacy on behalf of U.S. firms. In addition to the advocacy our Ambassadors conduct on a routine basis, we raise commercial concerns with foreign governments on 

the margins of various fora, such as the U.N. General Assembly and APEC. 

Our missions abroad also have been actively promoting investment and tourism. 

With respect to tourism, our recent reciprocal visa waiver agreement with Taiwan 

and significant reductions in visa interview wait times in China have spurred tourist as well as business travel to the States. 

On investment, our Ambassadors are hosting investment promotion seminars, 

talking to business leaders around the region to encourage them to consider jobcreating investments in the United States, and working with American service providers to help educate potential investors about how to comply with U.S. laws and 

regulations. FDI into the United States from economies in the East Asia-Pacific 

region is already growing, but we cannot rest on our laurels. Just over a month ago, 

the State Department worked with the Commerce Department to launch the 

SelectUSA summit. As a result, over 170 companies from the East Asia-Pacific 

region attended and received the message that the United States is ‘‘open for 

business.’’

In announcing an expansion of SelectUSA during the summit, the President noted 

there would be an enhanced role for U.S. embassies and consulates around the 

world to attract investment into the United States. We are committed to build on 

past success in promoting inward investment from the East Asia-Pacific region; 

however, we recognize this may pose resource challenges as we strive also to maintain efforts to promote U.S. exports, assist U.S. companies with commercial deals 

and disputes, monitor and report on economic conditions, and engage host governments on economic and commercial policy. While we can help identify business 

opportunities and facilitate information sharing, in the end, decisions on trade and 

investment transactions are and should be made by companies on business grounds. 

The United States must continue to be competitive. To do so, in part, means fully 

FOREI-43947 with DISTILLER

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resourcing the State Department, the Office of the U.S. Trade Representative, the 

Foreign Commercial Service, U.S. Export-Import Bank (EXIM), the Overseas Private Investment Corporation (OPIC), and the U.S. Trade and Development Agency 

(USTDA). 

TRADE AND INVESTMENT LIBERALIZATION–ENABLING ENVIRONMENT

While the promotion of exports sales and investments provide immediate, tangible 

results for U.S. businesses and, by extension, the country, the Department also 

understands the importance of laying the policy groundwork on which the East 

Asia-Pacific region and the United States can continue to grow with shared prosperity. Even before the rebalance, we were actively promoting a more open trade 

and investment environment in the East Asia-Pacific through our collaboration with 

economies of the region in APEC, and through the full implementation of free trade 

agreements with Singapore, Australia, and the Republic of Korea (ROK). 

These efforts have paid off. Our economic relationship with Singapore is flourishing, with bilateral trade having increased almost 60 percent and U.S. exports by 

85 percent since the United States-Singapore FTA entered into force in 2004. While 

Singapore is host to almost 2,000 U.S. companies, it also accounted for $26 billion 

in foreign direct investment stock in the United States at the end of 2012. The 

United States-Australia Free Trade Agreement has also led to increased trade and 

investment. The United States is Australia’s leading investment partner, with $132 

billion of U.S. investments in Australia and bilateral trade in goods and services has 

nearly doubled since 2004, topping $64 billion in 2012. 

The United States-Korea Free Trade Agreement, or KORUS FTA, is already providing tangible benefits for U.S. manufacturers, workers, and farmers. It is expanding one of the most vibrant trading relationships in the world, one that topped $130 

billion U.S. dollars in goods and services in 2012. We believe that more benefits 

await. By January 1, 2016, Korean tariffs on over 95 percent of exports of U.S. 

industrial and consumer goods to Korea will have been eliminated. 

We are working closely with the Korean Government to ensure that the FTA is 

implemented smoothly and fully and that American companies can take full benefit 

of the trade pact. 

We have also continued to build on our past successes within APEC. The U.S. 

Senior Official to APEC is a part of the Bureau’s team. We coordinate and collaborate with interagency colleagues and the U.S. business community to advance a 

robust work program within the 21-member APEC to address various economic 

issues of interest to the United States in the region. In the past year, the U.S. interagency APEC team worked with our Indonesian APEC hosts and other APEC members to achieve meaningful results for our stakeholders: (1) advancing cooperation 

on combating illegal trade in wildlife as well as illegal logging and associated trade; 

(2) promoting cross-border education opportunities; (3) improving supply chain performance in the region; (4) agreeing on alternative ways to promote job creation and 

competitiveness without implementing local content requirements; (5) promoting 

greater regulatory coherence in APEC economies; (6) implementing APEC members’ 

commitment to reduce tariffs on environmental goods; and (7) establishing a publicprivate dialogue to address non-tariff measures impacting trade in environmental 

goods and services. The U.S. private sector is heavily involved in APEC, and we collaborate closely with the U.S. business community to achieve tangible, useful outcomes in that forum. We are currently consulting with the U.S. private sector and 

with other U.S. agencies to develop a comprehensive agenda for the 2014 APEC 

year, which China will host. 

The United States must engage fully both to tap the growth in the region and 

to ensure that our exports maintain a strong market share in the coming years in 

light of the rising number of bilateral and regional free trade agreements in the 

East Asia and Pacific region. As Secretary Kerry noted recently in his October 18 

op-ed, ‘‘A shared commitment to economic growth and innovation is part of why the 

Trans-Pacific Partnership (TPP) agreement is a cornerstone of the President’s economic policy in Asia.’’ The 12 current TPP partners account for nearly 40 percent 

of global GDP and one-third of world trade. The agreement will provide the United 

States with greater access to some of the most important markets in the world, 

including Japan, which has the world’s third-largest economy and is our fourthlargest trading partner. 

The TPP agreement, an important outgrowth of the APEC trade and investment 

liberalization agenda, will drive growth and create jobs across the Asia-Pacific 

region and the United States. Substantial progress was made by USTR Froman and 

his counterparts during the TPP Ministerial in Singapore December 7–10, generating positive momentum on the remaining negotiating issues. The TPP trade minFOREI-43947 with DISTILLER

10

isters will meet again early next year. We believe this work can move ahead swiftly, 

but at the same time have been clear that substance will drive the timetable. Looking down the road, we see the TPP agreement not just as an important vehicle to 

boost U.S. exports, but also as a compelling platform for regional economic integration as the economic benefits of its high standards become apparent and its membership expands over time. 

The Association of Southeast Asian Nations (ASEAN) is also an increasingly important U.S. economic partner. Collectively, these 10 countries (Brunei Darussalam, 

Burma, Cambodia, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand, 

and Vietnam) have a market of approximately 600 million consumers, GDP of more 

than $2.2 trillion, and economic growth that has been faster than the world average 

for the past decade. Last year, in Phnom Penh, President Obama and the leaders 

of the ASEAN states welcomed the launch of the Expanded Economic Engagement 

(E3) initiative. The E3 is a framework for economic cooperation designed to expand 

trade and investment ties between the United States and ASEAN and to lay the 

groundwork for ASEAN countries to prepare to join high-standard trade agreements 

like the TPP. As part of the E3 initiative, the Department funded the travel of 

ASEAN Economic Ministers to the United States in June 2013 to meet with business leaders in IT, health care, innovation, and logistics. We expect Commerce Secretary Pritzker will lead a trade mission to the region in 2014, and we’ll continue 

to look for opportunities to support U.S. businesses in this dynamic region. 

I would like to take a moment to cite our growing relationship with Burma as 

an example of how we have opened new markets for U.S. business and done so in 

a responsible manner and consistent with supporting our broad-based human rights 

agenda. Since 2011, the Burmese Government has undertaken a series of political 

and economic reforms, and, as a result, relations between our two countries have 

changed dramatically. In that time, the United States has not only eased economic 

sanctions on Burma, we have worked collaboratively with the Burmese Government 

to strengthen the country’s regulatory environment, provided technical assistance to 

facilitate its reentry into the world economy, and helped advise and encourage 

American businesses to enter the Burmese market in a manner supportive of Burma’s reform efforts. As American businesses have entered Burma, they have 

brought their corporate best practices with them, including those on labor rights, 

environmental protection, transparency and corporate social responsibility. This is 

a great example of our government and private sector complementing each other to 

help fundamentally transform the Burmese economy. Through October of this year, U.S. exports to Burma reached over $124 million, 

already far exceeding the combined annual exports of 2011 and 2012. Burma will 

chair ASEAN in 2014 for the first time and has requested U.S. assistance in fulfilling that role, including support for highlighting a key policy theme for its chair 

year, environment and climate change. 

The United States also maintain an intense level of engagement with China in 

keeping with the priorities that President Obama set with President Xi at 

Sunnylands in California earlier this year—notably on the agreement to collaborate 

to phase-down the use of potent greenhouse gasses known as HFCs. We have emphasized practical cooperation to avoid the trap of strategic competition. Our Rebalance to Asia is not meant to contain China as part of a zero sum game, but rather 

to build a foundation of long-term mutual understanding and respect. At the same 

time, we continue to press China on issues of significant concern, such as human 

rights. In the economic sphere, we call on China to strengthen household consumption, allow the renminbi exchange rate to be determined by market forces, protect 

intellectual property rights (including trade secrets), liberalize factor prices, expand 

market access, adopt greater regulatory transparency, and establish a level playing 

field in its markets for private and foreign-invested companies. 

We engage China in high-level dialogues, including the Strategic and Economic 

Dialogue (S&ED), which State and Treasury cochair, as well as the Joint Commission on Commerce and Trade (JCCT), which USTR and Commerce colead. These 

dialogues provide opportunities to raise our top priorities and concerns with the Chinese leadership as well as in comprehensive working-level discussions. Although 

strictly bilateral, we engage at these dialogues on some of the Asia-Pacific region’s 

most dynamic issues, global challenges, such as energy, climate change, financial 

stability. 

Through these bilateral dialogues and through other engagements with China, we 

have made progress that dovetails with our engagement in the region. At the S&ED 

in July, China committed to negotiate a bilateral investment treaty (BIT) that 

would include the key concepts of establishing protections at the market access 

phase and negotiating any exceptions in advance in the form of a ‘‘negative list.’’ 

Although much negotiation still remains, the BIT commitment deepens China’s parFOREI-43947 with DISTILLER

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ticipation in the global rules-based economic system. Such bilateral progress does 

not preclude multilateral advances, but rather strengthens them by raising the bar 

for everyone in the region. 

We are also partnering with the U.S. private sector and governments in the 

region to build essential entrepreneurship skills. Since President Obama hosted the 

first Global Entrepreneurship summit (GES) in 2010—as an outcome of his 2009 

Cairo speech—the United States has expanded programs and built a broad coalition 

of governments, business people, civil society, investors, and academics to educate 

and support entrepreneurs around the world. This year, the Government of Malaysia hosted GES 2013, widening the focus from Muslim-majority countries to a 

greater cross-section of entrepreneurs, including from the East Asia-Pacific. The 

event brought together over 3,000 entrepreneurs, investors, academics, startup organizers, business people, and government officials from over 100 countries. In his remarks at the summit, Secretary Kerry highlighted the central role of entrepreneurship for economic development and growth and areas of U.S. collaboration. 

SUSTAINABLE GROWTH—CREATING SHARED PROSPERITY

The East Asia-Pacific region is poised for economic growth that will make it an 

even more attractive market for U.S. exports, but for that growth to truly transform 

the region it must be responsible and sustainable. To promote environmental sustainability, we have advanced work in APEC to improve energy efficiency, increase 

transparency and reporting of subsidies for inefficient fossil fuels, promote greener 

standards of building construction, combat illegal logging, and reduce wildlife trafficking. To address the economic dimensions of human security in the region we 

support work in APEC to promote sustainable health systems, build resiliency in 

supply chains to natural disaster, and address food security. To build up human 

resources and expand economic opportunities, we are working to connect SMEs to 

global value chains, increase mobility of university students, and promote women’s 

economic empowerment. 

Given the impact a natural disaster can have on a country’s economy, let alone 

its people, the State Department recognizes the importance of humanitarian assistance and disaster relief. The U.S. Government responded to Typhoon Haiyan by 

quickly deploying military personnel and a USAID Disaster Assistance Response 

Team and by arranging airlifts and providing other emergency services for American citizens. In the Philippines today, the Secretary of State announced an additional $24.6 million in humanitarian assistance, bringing the total to about $86 million. We are also working hard to facilitate public-private partnerships that will 

help with the recovery effort. We have also provided support to Palau in the wake 

of Typhoon Haiyan damage there and continue to look at ways we can assist in 

rebuilding in that country. As a Pacific nation, the United States is committed to 

helping our neighbors cope with and recover from such disasters. 

Energy is a key component of U.S. economic engagement with the Asia-Pacific, 

and we are pleased to welcome Singapore and Vietnam to cochair the U.S.-Asia 

Pacific Comprehensive Energy Partnership (USACEP). Through this Partnership we 

hope to bring cleaner and more secure energy to the region and supply electricity 

access to many of the 387 million people in Asia without power. Given the region’s 

estimated $9 trillion needed for investment in electricity alone over the next 20 

years, the potential for energy cooperation is substantial. Our work is to help U.S. 

businesses tap into that potential. Through efforts by the State Department, the 

Commerce Department, EXIM, OPIC, and USTDA, we are working with U.S. companies to develop potential smart grid, wind, solar, biomass, and geothermal energy 

projects throughout the region. We have also worked with the Energy Department, 

Commerce Department, and USTDA to promote the development of China’s shale 

gas sector so that U.S. companies may have new opportunities to invest, apply their 

expertise, and help China meet its energy needs with cleaner-burning natural gas. 

As part of this effort, EXIM and OPIC have made available $6 billion in financing 

resources to support the deployment of American clean energy technology, services, 

and equipment to the region. The State Department, OPIC, and USTDA have also 

announced the creation of the Asia-Pacific Clean Energy Program, a one-stop shop 

in Embassy Bangkok that will provide financing and technical support for energy 

companies seeking to do business in the region. We are confident that this support 

will produce results throughout the region as OPIC and EXIM have worked with 

the private sector to provide over $1.2 billion in financing support for renewable energy and energy efficiency globally last year. 

President Obama’s FY 2014 budget request to Congress provides $1.2 billion in 

State-USAID funding for East Asia and the Pacific. It is essential that funding continue to reflect the priority of the rebalance policy. For instance, the State-funded 

FOREI-43947 with DISTILLER

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and USAID managed U.S.-APEC Technical Assistance to Advance Regional Integration (US–ATAARI) program is integral to our efforts within APEC to build members’ 

capacities in areas such as trade and investment liberalization, domestic regulatory 

environments, and human security. In July 2013, State and USAID launched the 

5-year ASEAN Connectivity Through Trade and Investment (ACTI) technical assistance program, which complements E3 activities and aims to help ASEAN achieve 

its goal of forming an ASEAN Economic Community by 2015. The Lower Mekong 

Initiative is a State- and USAID-funded partnership between the United States, 

Cambodia, Laos, Burma, Thailand, and Vietnam that fosters integrated subregional 

cooperation in the areas of education, health, environment and water, connectivity, 

agriculture and food security, and energy security. 

The State Department, USAID, and other interagency partners such as the Millennium Challenge Corporation (MCC), are also working bilaterally to consolidate 

economic reforms and competitiveness in countries that are emerging in the lower 

middle-income bracket, and help the poorest EAP nations reduce poverty. In the 

Philippines, under the Partnership for Growth framework, the United States is 

addressing the most binding constraints to broad-based economic growth and investment, including helping to promote broad-based, inclusive, and sustainable growth, 

and improve peace and stability in the conflicted areas in Mindanao. Although 

Indonesia has experienced robust growth, 50 percent of its population still lives at 

or below the poverty line. Therefore, U.S. assistance to Indonesia encourages policies that increase competitiveness across a number of sectors and encourage laborintensive economic activities. Programs in Vietnam have promoted judicial reform 

and the implementation of its World Trade Organization commitments. In Mongolia, 

our programs promote private sector competitiveness, financial sector growth, and 

mining industry reforms. These regional and bilateral economic development programs are designed to work in tandem to help build the economic foundation and 

capabilities needed to support regional economic integration and facilitate increase 

bilateral trade opportunities for American businesses. 

The United States remains a key partner for Pacific nations in development and 

addressing global threats like climate change. Since 2010, the U.S. has provided climate change assistance for the Pacific Islands. At the Pacific Islands Forum in 

Majuro, Secretary of the Interior Jewell announced that USAID has launched the 

Pacific-American Climate Fund, a grant-making facility to provide and monitor 

grants for climate change adaptation measures in the Pacific Islands region. 

The Department of Treasury’s Office of Technical Assistance (OTA) also has a significant presence in the region. ASEAN represents one of OTA’s largest investments 

of technical assistance resources, with 19 projects in six countries (Burma, Cambodia, Indonesia, Philippines, Thailand, and Vietnam) emphasizing five core areas: 

budget policy and accountability, banking and financial services, government debt 

issuance and management, financial crimes, and revenue policy and administration. 

OTA’s recently initiated engagements in Burma focus on (1) helping the Burmese 

authorities to build a transparent, accountable, and fair revenue administration system and (2) developing an effective antimoney laundering and counter financing of 

terrorism (AML/CFT) regime. OTA also supports the Partnership for Growth initiative with the Philippines, and Treasury negotiated Tropical Forest Conservation Act 

debt for nature swaps with the Philippines and Indonesia. 

Another very important tool for the reduction of poverty and for fostering good 

governance and sound economic policies in the region is the MCC Compact agreements. The MCC Compacts have delivered solid results for a number of countries 

in the Asia-Pacific region, and we are currently implementing compacts in Indonesia 

and the Philippines. 

I would like to conclude by underscoring the fundamental point that a peaceful 

and prosperous Asia-Pacific benefits the peoples of United States and of the region. 

The Department of State is totally committed to the Asia-Pacific rebalance and, in 

particular, is dedicated to ensuring that our economic engagement with the region 

continues to be robust and reflects that overall commitment.

Senator CARDIN. Thank you for your testimony. 

Secretary Andersen. 

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STATEMENT OF HON. JOHN ANDERSEN, PRINCIPAL DEPUTY 

ASSISTANT SECRETARY FOR GLOBAL MARKETS, INTERNATIONAL TRADE ADMINISTRATION, U.S. DEPARTMENT OF 

COMMERCE, WASHINGTON, DC 

Mr. ANDERSEN. Chairman Cardin, Ranking Member Rubio, 

thank you for the opportunity to speak before you today on the 

Department of Commerce’s engagement in the East Asia-Pacific 

region. I also want to thank my State Department colleague, Principal Deputy Assistant Secretary Scot Marciel, for his leadership 

and dedication to advancing U.S. interests in the region. 

In 2011 President Obama stated that deepening trade and 

investment ties between the United States and Asia was critical to 

our long-term economic expansion and job growth. The Department’s International Trade Administration is responsible for 

strengthening U.S. competitiveness, promoting exports, ensuring 

compliance with our trade agreements, and enforcing U.S. trade 

laws. As such, ITA plays a key role in the Asia rebalance, and our 

efforts are driven by the needs of our primary constituency, the 

U.S. business community. 

The EAP region contains seven of our top 21 priority export markets. These 35 economies account for nearly 28 percent of U.S. 

goods and services, totaling roughly $612 billion. ITA staff in 100 

locations across the country and in over 70 markets around the 

world is dedicated to helping companies enter new markets and 

expand in current ones. 

Areas where we are seeing the most opportunities in the EAP 

region are in health care, energy, and infrastructure sectors. To 

meet these opportunities in the region, ITA began redeploying its 

overseas resources. As a result, over the last 3 years our regionally 

based staff increased from 210 to almost 300. 

Doing business internationally can be risky and the EAP region 

comes with its fair share of challenges and rewards. 

For example, China, our second-largest trading partner, presents 

an extremely complex market. To assist U.S. companies in navigating it, ITA has devoted 14 percent of its overseas resources, representing the largest footprint of any ITA operation outside of the 

United States. Moreover, in our recent consolidation we created a 

separate unit to focus greater attention on China’s commercial 

challenges and opportunities. 

Beyond China, we are working within ASEAN and APEC. In 

October, Secretary Pritzker traveled to Indonesia, Singapore, and 

Malaysia to participate in the APEC CEO summit and to advance 

U.S. commercial interests. Additionally, ITA also plays the lead 

role in APEC’s small- and medium-sized working group and has 

hosted capacity-building workshops on ethical business practices 

for SMEs, energy efficient building standards, and good regulatory 

practices. 

Our FTA’s with Australia, Singapore, and South Korea have also 

helped expand commercial ties with the EAP. While we did not 

conclude the TPP negotiation during this month’s round of meetings, we are closing in on an ambitious next generation comprehensive trade agreement that reflects U.S. economic priorities and 

values. 

FOREI-43947 with DISTILLER

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In addition, ITA’s advocacy and inward investment activities enhance its mission to promote U.S. exports and contribute to U.S. 

job creation and economic growth. ITA’s Advocacy Center, which 

coordinates all U.S. Government commercial advocacy, helps U.S. 

companies win government contracts. For 2013, client companies 

reported wins estimated at over $12 billion in the EAP region. 

To encourage inward investment, the Obama administration created Select USA in the Commerce Department, the only U.S. Government-wide program to attract, retain, and grow business investment in the United States. In 2012 the Asia-Pacific region’s stock 

of foreign direct investment in the United States totaled roughly 

$424 billion. Six weeks ago we hosted the first Select USA investment summit, a completely sold-out event, with more than 1,300 

participants, including international and domestic firms and more 

than 200 representatives from 48 States, 4 territories, and the 

District of Columbia. As my colleague Principal Deputy Assistant 

Secretary Marciel indicated in his remarks, it was a whole of government exercise. 

ITA is also responsible for administering U.S. antidumping and 

countervailing duty laws. We currently have 162 orders in place 

against countries in the EAP region, most of which originate in 

China. In some circumstances, we can refer cases to the U.S. Trade 

Representative’s Office or the recently created Inter-Agency Trade 

Enforcement Center, the ITEC. The ITEC provides critical research, analysis, translation, and support for a number of our ongoing disputes. 

As I noted, the EAP’s growing importance is reflected in ITA’s 

mission. ITA staff will continue to participate and support USTR 

during the TPP negotiations. Today Secretary Pritzker is in China 

getting ready to begin the 2013 JCCT high-level meeting. In 2014, 

Commerce will lead two executive trade missions to the Singapore 

Air Show and to Japan, Korea, and Taiwan to promote the United 

States travel and tourism industry. 

Thank you for the opportunity to speak with you today and I 

welcome any questions. 

[The prepared statement of Mr. Andersen follows:]

PREPARED STATEMENT OF JOHN ANDERSEN

INTRODUCTION

Chairman Cardin, Ranking Member Rubio, and members of the committee, thank 

you for the opportunity to speak about the Department of Commerce’s role in promoting U.S. businesses abroad, and in particular, our engagement in the East Asia 

and Pacific (EAP) region. 

In 2011, President Obama acknowledged that the Asia-Pacific region is critical to 

achieving his highest priority, that of creating jobs and opportunities for the American people. To support the President’s objectives of advancing economic prosperity 

by expanding exports and deepening trade and investment ties between the United 

States and Asia, Secretary of Commerce Pritzker traveled to Indonesia, Singapore 

and Malaysia in October, to participate in the APEC CEO summit meeting and to 

advance U.S. trade priorities, including pressing for the conclusion of the negotiations for a Trans-Pacific Partnership Agreement as soon as possible. 

The Department of Commerce’s International Trade Administration (ITA) is one 

of the primary agencies responsible for strengthening the competitiveness of U.S. 

industry in the global market, promoting U.S. exports, monitoring compliance with 

U.S. trade agreements, and enforcing U.S. trade laws. ITA’s efforts are driven by 

the needs of our primary constituency—the U.S. business community. In 2013, 7 of 

our top 21 priority export markets were located in Asia and 41 percent of the clients 

FOREI-43947 with DISTILLER

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we counseled worldwide, were interested in doing business in the EAP region. There 

is little doubt that Asia is a growing market for companies looking to expand their 

business and ITA continues to engage aggressively on this front. 

THE IMPORTANCE OF EAST ASIA AND THE PACIFIC

The 35 EAP1 economies constitute a total population of more than 2.2 billion people with a combined GDP of $24.5 trillion in 2012.2 This dynamic region represents 

29 percent of global GDP. The Asia and Pacific region 3 is a major market, accounting for 28 percent of U.S. goods and services exports in 2012. Among U.S. merchandise exports, manufactured goods such as electrical machinery, machinery, and aircraft are among the leading products the U.S. exports to EAP countries. Aside from 

manufactured goods, oil seeds such as soybeans are a major export to the region, 

most of which go to China. 

A priority for Department of Commerce in the region is to build partnerships and 

institutions across the Pacific capable of meeting 21st-century challenges and ensuring market access for U.S. firms. Through deeper trade and investment ties we 

intend to contribute to the peace, security, and prosperity of the region as a whole. 

The United States relationships with Japan, the Republic of Korea, Australia, the 

Philippines, and Thailand form a natural cornerstone of our strategic position in the 

Asia Pacific and complement our multilateral efforts to ensure regional prosperity 

and development at a time of evolving challenges. At the same time, a key element 

of our rebalance policy is to continue pursuing a positive, comprehensive, and cooperative relationship with China.

FOREI-43947 with DISTILLER

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FOREI-43947 with DISTILLER


Ander1.eps

In 2012, the Asia & Pacific Region Accounted for 

28% of Total U.S. Exports to the World 

_ .. _<tf __ 

_ ............ -.<t"'-. 

.... 

" '" 

U.S. exports to Asia and the Pac ific Region fo r 2012 

Country Value of Exports in S $l\:lI'e QfU.s. Expons tQ the 

Wortd 

China 5t42.0 bitli()fl 6.4% 

Jo".., SII8.5biliioo 5.4% 

Repubtic ofKorc3 $62.7 billi()fl 2.8"10 

Australia $48.3 billion 2.2% 

It()flgK()flg $45.0 bitli()fl 2.0% 

Asia &- Pacific RegiOl' Total· 

5612.0 billion 21. 7% lotol is _j<Jl' East Asia·PaciflC 

World 51.110.6 billioll .. 

Source: u.s. Bureau of Economic Analysis. "Table 12. U.S. International Transactions. by Art'a." 

(accessed SeptClllOC'J 20. 2013) 
17

SUPPORTING U.S. COMPANIES

ITA currently has staff in over 100 cities in the United States and 73 markets 

around the world, whose goal is to help U.S. companies enter new markets and 

expand in current ones. 

ITA understands the EAP region’s growing demand for U.S. goods and services 

and the needs of American companies doing business there. In fact, in 2006, ITA 

began redeploying its resources from other regions to Asia. From 2010 until 2013, 

our staff increased from 210 to 299 in EAP. In this time of fiscal constraint, ITA 

repositioned staff from other parts of the world to take into account the growth in 

opportunities in Asia. The President’s FY 2014 budget requests additional funds to 

support adding more staff to the region. 

While ITA does not have sufficient resources to place staff in all EAP countries, 

we are maximizing regional coverage in partnership with other agencies. For example, ITA has a formal relationship with the State Department whereby our staff provides guidance and assistance to the State Department in locations where ITA is 

not present. Our offices in Bangkok, Singapore, Beijing, and Sydney support State 

Department staff in Burma, Laos, Brunei, Mongolia, Cambodia, and Fiji. This partnership is an important component of our strategy and efforts to leverage resources 

across the Federal Government. This relationship has also allowed us to maintain 

staff at the Asian Development Bank (ADB) in the Philippines where we provide 

information to U.S. companies on projects funded by the ADB. 

ITA also runs the Advocacy Center which helps U.S. companies—small, medium, 

and large enterprises in various industry sectors win government contracts across 

the globe. Last December, the President established an Interagency Commercial 

Task Force on commercial advocacy in order to better coordinate U.S. Government 

efforts and better support U.S. firms competing for foreign project or procurement 

opportunities. The most active sectors which have requested commercial advocacy 

include: aerospace, defense, energy and power, health care, infrastructure, computers/IT/security, and telecommunications. The Advocacy Center coordinated the 

FOREI-43947 with DISTILLER


Ander2.eps
18

U.S. Government strategy across the Executive branch (Departments of Commerce, 

Defense, Energy, State and Transportation) for U.S. exporters during interactions 

with relevant members of foreign governments. As of September 30, 2013, client 

companies reported 10 wins with estimated contract values of $12.4 billion and U.S. 

export content of $8.4 billion. In addition, the Advocacy Center is managing 207 

cases in the EAP region worth approximately $70 billion in proposed contracts. 

Whether it is educating companies on how to take advantage of growing commercial opportunities in the region, enforcing existing free trade agreements (FTAs) or 

working more generally to improve the region’s business climate, ITA’s goal is to 

ensure U.S. companies have the tools necessary to compete on a level playing field. 

ITA helps level the playing field by monitoring foreign governments’ compliancy 

with their trade agreement obligations, and by enforcing U.S. trade laws. 

MEETING THE CHALLENGES OF DOING BUSINESS

Doing business internationally can be risky and confusing for companies, particularly small- and medium-sized enterprises that are at the core of ITA’s mission. 

ITA’s policy efforts are geared toward improving short-, medium- and long-term successes in international commerce. We do this in three ways: (1) providing direct support to U.S. companies, using existing tools and relationships to help resolve commercial problems; (2) opening markets and improving the business climate: and (3) 

by representing U.S. industry interests during trade negotiations. 

ITA provides direct support for real-time business needs. Its goal is to ensure that 

trading partners in the EAP region implement their trade and investment agreement obligations and otherwise afford market access for U.S. exports. Within the 

EAP region, the United States has FTAs in effect with Australia, Singapore, and 

the Republic of Korea. In order to monitor implementation of these agreements, ITA 

uses its close relationship with U.S. industry, as well as its understanding of the 

region and its presence overseas to ensure that these countries are fulfilling their 

obligations under the FTAs. ITA’s network of foreign and domestic commercial officers, locally employed staff, and industry experts in Washington, DC, and trade specialists around the country work closely with U.S. firms to help them overcome barriers to doing business in foreign markets. 

Let me highlight a few key EAP markets and regional associations where ITA 

plays a critical role helping U.S. companies: 

China 

ITA’s presence in China, with a total of five posts (Beijing, Chengdu, Guangzhou, 

Shanghai, Shenyang) and a staff of over 130 representing several ITA units and 

other Commerce Bureaus, gives us the largest footprint of any ITA operation outside 

the United States. Our Commercial Service staff in China has seen the highest 

number of state-supported trade missions since the inception of the State Trade and 

Export Promotion program over a year ago. In fact, given the growing importance 

and sophistication of the Chinese market, ITA, as part of its recent consolidation, 

created a separate unit to focus greater attention on the Chinese economic area. 

China is our second-largest trading partner and the relationship continues to grow. In 2012, we exported $110.5 billion worth of goods to China, with agriculture 

and transportation equipment representing the largest export sectors. Demand for 

U.S. goods and services continues to grow in China, however, there are many issues 

that U.S. companies need to be aware of and vigilant about before attempting to 

enter the Chinese market. These include registration and protection of intellectual 

property rights (IPR), due diligence on potential clients and partners, and administrative licensing. In addition, China often lacks predictability in its business environment, and its legal and regulatory systems can be opaque, inconsistent, and 

often arbitrary. The U.S. Government uses two main bilateral venues for addressing 

challenges that U.S. companies face in China: the U.S.-China Joint Commission on 

Commerce and Trade (JCCT) and the U.S.-China Strategic and Economic Dialogue 

(S&ED). 

The JCCT is the primary forum for addressing bilateral trade and investment 

issues and promoting commercial opportunities between the United States and 

China. The Secretary of Commerce and the U.S. Trade Representative cochair the 

annual U.S.-China JCCT forum. ITA serves as the lead bureau for Commerce’s participation in the JCCT. At last year’s JCCT meeting, the United States made 

progress in addressing key concerns in our bilateral trade relationship including: 

protection and enforcement of IPR; localization of intellectual property and technology; certain tax provisions; government procurement practices; regulatory obstacles; regulatory data protection for pharmaceuticals; and market access for U.S. 

companies in China’s strategic emerging industries.4 The next JCCT High-Level 

Meeting is scheduled for December 19–20. 

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For the S&ED, the Commerce Department plays a leading role in the Trade and 

Investment Session of the Economic Track of the dialogue. The S&ED met this past 

July and made concrete progress toward expanding U.S. export and investment 

opportunities in China. Most important, the Chinese Government committed to 

enter into substantive bilateral investment treaty negotiations with the United 

States to provide greater protections for U.S. investments in China. China also 

agreed to prioritize enforcement against the theft of trade secrets, to submit a new 

and improved offer to accede to the World Trade Organization (WTO) Agreement on 

Government Procurement in 2013, and to adopt new disciplines on state-owned 

enterprises (SOEs), which would help level the playing field for U.S. companies competing against SOEs. 

Japan 

Japan is the world’s third-largest economy and our fourth-largest trading partner. The United States exported $70 billion in goods to Japan in 2012. Responding to 

an economic recovery package introduced by new Prime Minister Shinzo Abe, Japan 

has shown steady economic growth and its Nikkei stock market has increased over 

50 percent this year. On July 23, 2013, Japan formally joined negotiations for the 

Trans-Pacific Partnership (TPP) during the 18th round of negotiations in Malaysia 

after working out a robust package of actions and agreements with the United 

States. TPP participation creates for Japan a tremendous opportunity to stimulate 

domestic economic reform and continue on the track toward sustained economic 

growth. The participation of Japan, a major U.S. trading partner, as well as close 

U.S. ally, raises the economic significance of a TPP Agreement. With Japan’s entry, 

TPP countries account for nearly 40 percent of global GDP and about one-third of 

all world trade. Japan’s TPP participation, its nascent economic recovery, and prospect for domestic structural reforms create new opportunities for American exporters and investors. Japanese companies are also key partners for U.S. firms in major 

sectors, including civil aviation and defense. 

Since the March 2011 accident at Fukushima Dai-ichi Nuclear Power Plant, U.S. 

firms have assisted Japan in various ways including monitoring at the damaged 

plant, nuclear waste water treatment, decontamination work, and support of integrated dose reduction planning. U.S. firms have the expertise and technology to 

assist with continued cleanup at the plant (decommissioning, water treatment), 

remediation of the area outside the exclusion zone surrounding the plant, and waste 

management. In October 2013, Japan informed the United States of its plans to ratify within the coming year the Convention on Supplementary Compensation for 

Nuclear Damage (CSC), an agreement that establishes an international framework 

for nuclear liability. In its official announcement, Japan noted that ratifying CSC 

would help to facilitate the participation of foreign companies in nuclear decommissioning and contaminated water management at Fukushima. Commerce is working 

with Japan to facilitate partnerships between U.S. and Japanese firms to best assist 

with the recovery. In February 2014, Commerce is organizing a business to business 

forum which will promote these partnerships. 

Lower Mekong Initiative 

The Lower Mekong Initiative (LMI) is a multilateral partnership effort initiated 

by the United States in 2009 for promoting cooperation in the Mekong subregion 

(Burma, Cambodia, Laos, Thailand, and Vietnam) in the areas of education, health, 

environment and water, connectivity, agriculture and food security, and energy 

security. 

Under the LMI Connectivity Pillar, ITA is working with other U.S. Government 

agencies to develop workshops for the health, information and communication technology, aviation, and energy sectors. The workshops will provide an opportunity for 

the LMI countries to highlight numerous active and potential infrastructure 

projects. These workshops will also allow the LMI governments and the U.S. Government agencies to develop successful methods of incorporating private investment 

into infrastructure development through the use of public-private partnerships. The 

workshops will take place in the LMI countries over the next few years. 

Using Existing Tools and Relationships 

ITA is actively engaged with both the Association of South East Asian Nations 

(ASEAN) and the Asia Pacific Economic Cooperation (APEC) on a variety of economic issues. U.S. engagement within these fora focuses on making improvements 

in the region, including by addressing trade and investment barriers. 

ASEAN 5

As part of the rebalance, President Obama announced the Expanded Economic 

Engagement (E3) initiative with leaders of the 10 ASEAN countries in November 

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2012. The Commerce Department plays a key role in this initiative, particularly on 

standards development and practices; small and medium-sized enterprises, and 

trade and the environment. In addition, ITA works with ASEAN to create an environment that enables and encourages U.S. exports by addressing market-access 

issues, ensuring nondiscrimination against foreign firms, improving investment protections, increasing transparency and promoting responsible business activities. This 

past summer, ITA working with the United States Trade Representative (USTR) 

and State organized roadshows to Los Angeles, San Francisco and Washington, DC, 

for the ASEAN Economic Ministers. These events allowed companies and policymakers to discuss opportunities and policies aimed at expanding trade and investment. Further, Commerce leads cooperation between the United States and ASEAN 

on standards and related issues. Together, we introduced initiatives on green buildings, food safety, medical devices, dietary supplements, green chemistry, and electrical and electronic products. Standards, as a core element of U.S. cooperation with 

ASEAN, were highlighted this year during the ASEAN Ministers Road Show and 

the recent ASEAN summit in Brunei. 

APEC 6

Within APEC, ITA spearheaded efforts to implement voluntary codes of business 

ethics for the medical device, biopharmaceutical, and construction and engineering 

sectors through public and private organizations. Each of these initiatives was developed in conjunction with U.S. associations and companies to help ensure a more 

business friendly environment for their industries. ITA also plays a lead role in the 

APEC Small and Medium-sized Enterprises (SME) Ministerial, which focuses on 

ways to empower SMEs so they can enter international markets. SMEs comprise 

the majority of businesses in all 21 APEC member economies, so building the capacity of SMEs to engage in international commerce is a key component of U.S. Government efforts to bolster trade and investment linkages across the Asia-Pacific region. 

ITA has also hosted capacity-building workshops on ethical business practices for 

SMEs, energy-efficient building standards, and good regulatory practices. ITA is 

opening these workshops to Burma, Cambodia, and Laos so as to further integrate 

these economies into the global market. Given that APEC and ASEAN have designated energy as a priority sector, it is important to mention that the United 

States and Indonesia cohosted a regional natural-gas event which was jointly 

endorsed by APEC and ASEAN. This event focused on the changing global gas markets and the development of unconventional gas. In August, ITA led a trade mission 

to Thailand, Malaysia, and the Philippines focused on renewable energy equipment, 

smart grid and green-building technology, water treatment and emissions control, 

and natural gas exploration and development. 

Representing U.S. Industry Interests 

ITA is ensuring that U.S. industry’s interests are taken into account and reflected 

in Trans-Pacific Partnership (TPP) negotiations which will help U.S. companies better compete in the region. The TPP is the focal point of U.S. Government economic 

policy in the region, and seeks to build on trade agreement advances made in the 

United States-Korea Free Trade Agreement (KORUS FTA). 

TPP 

The TPP agreement is both the economic cornerstone of the Obama administration’s rebalance toward the Asia-Pacific, as well as a reflection of the President’s 

commitment to a 21st century trade agenda, including with our NAFTA partners. 

USTR is the lead U.S. Government agency negotiating the TPP agreement, with 

extensive assistance from the ITA. Together, we are advancing the U.S. trade 

agenda, through intensive cooperation preparing for and conducting the TPP negotiations and bilateral meetings with our counterpart ministers from TPP member 

economies. In doing so, ITA works closely with the U.S. business community to 

ensure that its interests are fully reflected in the TPP agreement. ITA seeks input 

from the private sector both informally through its network of business contacts and 

U.S. offices and more formally through the Industry Trade Advisory Committees 

(ITAC). The ITACs are composed of private sector representatives covering all sectors of the U.S. economy, as well as important functional priorities, and provides 

advice to the Secretary of Commerce and the U.S. Trade Representative on the 

negotiation and operation of trade agreements, as well as development, implementation, and administration of U.S. trade policy. 

At a meeting of TPP Ministers in Singapore (December 7–10), considerable 

progress was made across a wide range of areas. On December 10, the TPP Ministers announced substantial progress had been made toward completing the agreement, with progress identified for the majority of key outstanding issues in the text. 

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Negotiators will continue their intensive work during the coming weeks. Following 

that, Ministers intend to meet again early in the coming year. 

Trade Promotion Authority (TPA) 

For over 30 years, Congress has enacted laws providing TPA to guide both Democratic and Republican administrations pursuing trade agreements that support U.S. 

jobs, eliminate barriers in foreign markets and establish rules to stop unfair trade. 

TPA provides special procedures for congressional consideration of legislation approving and implementing those agreements. TPA is a critical tool to keep the 

United States competitive and is connected to the progress that is being made on 

TPP. Having TPA will help bring home a trade agreement that includes some of the 

fast-growing economies of Asia Pacific. Since TPA’s last renewal in 2002, hundreds 

of trade agreements between other countries have entered into force and several 

more are currently being negotiated. While these agreements are not the highstandard, comprehensive trade agreements the United States negotiates, they do 

offer foreign companies better and cheaper access to these markets. This places U.S. 

workers, businesses, and farmers at a comparative disadvantage. In fact, China is 

currently negotiating agreements with other Asia-Pacific partners that could displace U.S. goods, services, and agriculture products and set standards that exclude 

U.S. exports from these countries’ markets. We need TPA to stay competitive. The 

administration supports TPA and looks forward to continuing to work with Congress 

on its renewal. 

U.S.-Korea Free Trade Agreement (KORUS) 

The Republic of Korea (ROK) is currently our seventh-largest trading partner 

with approximately $101 billion in total (two-way) goods trade during 2012. Since 

entry into force of the KORUS on March 15, 2012, trade data shows that KORUS 

has bolstered U.S. exports to the ROK. In fact, exports of U.S. manufactured goods 

to the ROK from January–October, 2013, the latest data available, are 1.6 percent 

higher than in the same period of 2011, before the FTA. U.S. exports of motor vehicles to the ROK in the first 10 months of 2013 are also 54 percent higher than in 

the same period in 2011, pre-FTA. Other industrial goods have also seen notable 

increases, such as pharmaceuticals and electrical equipment. Services exports for 

the first two quarters of 2013 are 21 percent higher than in the same time period 

in 2011 (pre-FTA), and 5.4 percent higher than in the same period last year. Using 

the same time periods, the U.S. trade surplus in services with the ROK has grown 

by 52 percent compared to 2011 and by 21 percent compared to last year. 

LINKING U.S. BUSINESS WITH BUYERS OVERSEAS AND

ATTRACTING INVESTMENT BACK HOME

ITA provides numerous tools to help U.S. companies learn more about the EAP 

markets, and meet potential clients, distributors, and partners. ITA organizes trade 

missions and trade events, and provides market research and export counseling in 

the markets of interest. 

As demonstrated in the chart below, each year ITA’s customers are reporting 

more export successes to the East Asia and Pacific region.

FOREI-43947 with DISTILLER

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An example of the growing interest in this area is how the ASEAN team in Singapore, in collaboration with numerous ITA domestic offices, provided over 150 Gold 

Key services in 2013. A Gold Key service is a custom-tailored approach to supporting a company interested in doing business in a specific country and sector. This 

service includes arranging one-on-one meetings in-country with potential customers 

or partners. With an average of five appointments per Gold Key Service, this translates to more than 750 direct engagements for U.S. companies looking to do business in the region. 

ITA annually hosts a large trade event called Trade Winds. Trade Winds is a 

multicountry trade mission that takes U.S. companies to a key export market where 

they meet local companies and attend business conferences to learn about doing 

business in the region, accompanied by an optional spinoff trade mission with visits 

to additional markets. This past May, Trade Winds was held in Seoul and was the 

largest-ever U.S. trade event in the Republic of Korea. Seventy-two U.S firms participated in the event and over half took part in spinoff trade missions to Hong 

Kong, Japan, the Philippines, and Taiwan. 

ITA prides itself on helping SMEs. For example, ITA’s Baltimore staff provided 

market research to identify opportunities and a financial background report on prospective partners for Haemo-Sol International, LLC, a small manufacturing company with less than five employees headquartered in Maryland. Haemo-Sol International exports specialized cleaning agents and was struggling to break into new 

markets and to increase sales in existing markets. The Baltimore staff suggested 

the company participate in the ExporTech exporter education program. ExporTech 

is a collaborative program between ITA’s domestic field offices and the National 

Institute of Standards and Technology’s Manufacturing Extension Partnership Program to provide export training to U.S. manufacturers. Through ExporTech, HaemoSol attended two trade missions to Asia which resulted in forging new partnerships. 

The company has increased sales and acquired new customers in Japan and China, 

and has seen the export portion of its sales grow from 50 to 66 percent of total revenue since participating in its first trade mission in 2010. 

Foreign Direct Investment (FDI) 

While our trade promotion activities are pivotal to improving the U.S. economy, 

inward investment also contributes significantly to job creation and economic 

growth. ITA is seizing this potential and has been working diligently around the 

world to let investors know that the United States is open for business. In total, 

U.S. subsidiaries of foreign companies accounted for one-fifth of total U.S. exports, 

showing the important relationship between trade and investment. In 2012, the 

Asia and Pacific region’s stock of FDI in the United States totaled roughly $424 billion, led by investment in manufacturing, wholesale trade and information and telecommunications.7 Additionally, U.S. FDI in the region exceeded $623 billion.8

While the EAP region is not our largest source of FDI, it has great potential. As 

it stands, approximately 16 percent of FDI in the United States originates from Asia 

in comparison to over 60 percent originating from Europe. In terms of average 

FOREI-43947 with DISTILLER


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annual growth over the past 5 years, China is the fastest-growing source of FDI in 

the United States. Many of the fastest-growing sources of FDI in the United States 

are located in the EAP region.9 Japan and Australia both rank among the 10 largest 

sources of FDI. 

The United States is the world’s largest free and open market with a longstanding 

open-investment policy. SelectUSA is the federal-level resource for firms and U.S. 

economic development organizations (EDOs). SelectUSA is the only U.S. Government-wide program to attract, retain, and grow business investment in the United 

States. On October 31 and November 1, 2013, the Department of Commerce and its 

SelectUSA program hosted the SelectUSA summit. The event was a huge success 

and was completely sold out. The summit connected 1,300 participants, including 

456 foreign or multinational firms, with more than 200 EDOs from 48 states, four 

territories and the District of Columbia. In addition, over 650 prearranged matchmaking meetings occurred and a number of impromptu meetings took place during 

the 2-day conference. 

SelectUSA, while relatively new, has proven to be a successful program. In July 

2011, RPB Safety Ltd., headquartered in Christchurch, New Zealand, contacted 

ITA’s staff for information on setting up a manufacturing plant in Michigan. RPB 

Safety is a manufacturer of respiratory protective equipment and was already distributing products via its Michigan office. SelectUSA supplied the company with initial information on establishing a business in the United States and the contact 

details at the American consulate general in Auckland to assist in the visa process. 

On August 28, 2012, RPB Safety Ltd. publicly announced its purchase of a new 

manufacturing facility in Michigan and is now investing more than $4 million into 

the commercial venture, with plans to create 30 jobs over the next 3 years. 

ENFORCING DOMESTIC TRADE LAWS

ITA is also in charge of enforcing certain trade laws, including the application of 

antidumping duty (AD) and countervailing duty (CVD) laws.10 ITA also monitors 

and works with USTR to ensure foreign government compliance with trade agreements to counter foreign trade barriers and unfair trade practices to support the 

competitive strength of American industry. 

With respect to the administration of the U.S. trade remedy laws, as of October 

31, 2013, ITA maintains the following AD and CVD orders and ongoing investigations. 

ITA also helps U.S. businesses, especially small ones, overcome foreign government-imposed trade barriers to gain access to and fair treatment in foreign markets 

in Asia, as well as the rest of the world. ITA monitors foreign governments’ compliance with trade agreement obligations and engages with these governments when 

problems arise. An example is when ITA worked with Navistar Inc. from Lisle, IL. 

Navistar’s heavy-duty trucks encountered entry issues when the ROK’s Ministry of 

Environment (MOE) issued a ruling that Navistar’s open crankcase engines were 

noncompliant with the ROK emissions regulations. This determination would have 

limited Navistar’s ability to fully access the Korean market. ITA worked with MOE 

to resolve this issue and to get Navistar an unconditional certification from the 

agency showing that Navistar’s engines were compliant with ROK emissions standards. Navistar projects that sales to the ROK in 2014 will reach 100 units, including 

spare parts, totaling US$15 million. These exports will support several thousand 

unionized jobs in Illinois and in Ohio. 

When ITA is unable to resolve cases, they may be referred to USTR or to the 

recently created Interagency Trade Enforcement Center (ITEC)—which serves as 

the primary forum within the Federal Government to coordinate enforcement of 

U.S. trade rights under international agreements and enforcement of domestic trade 

laws—for further research and evaluation for action. ITEC provides critical 

research, analysis, translation and support for a number of ongoing WTO disputes. 

These disputes include: China Raw Material Export Restraints, China’s Autos and 

Auto Parts Export Bases, and Indonesia Import Licensing, to name a few. 

CONCLUSION

The United States remains actively engaged in the East Asia and Pacific region. 

Secretary Pritzker and Ambassador Froman are on their way to Beijing, China, for 

the JCCT Ministerial meeting. In addition, our TPP negotiators are working to substantially conclude this historic agreement early next year that, once finalized, will 

significantly support economic and job growth here in the United States. 

Secretary Pritzker, at the President’s request, will also lead a CEO delegation to 

Southeast Asia, including Burma, next spring and, in early 2014, Commerce will 

lead two executive trade missions. In February, we will take U.S. companies to the 

FOREI-43947 with DISTILLER

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Singapore Airshow, and in March, we will take U.S. travel and tourism industry 

representatives to Japan, the Republic of Korea, and Taiwan. 

As you can see, the EAP region is growing and there continues to be an incredible 

amount of opportunities for U.S. businesses in the region. The Commerce Department and ITA stands ready to help these companies wherever it can.

————————

End Notes

1 East Asia and Pacific economics include: China, Hong Kong, Macau, the Democratic People’s 

Republic of Korea—North Korea, Taiwan, Japan, Mongolia, the Republic of Korea (ROK-South 

Korea), Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Timor Leste, Vietnam, Australia, Cook Islands (Realm of New Zealand), Federated States 

of Micronesia, Fiji, Kiribati, Nauru, New Zealand (MNNA), Niue (realm of New Zealand), Palau, 

Papua New Guinea, Republic of the Marshall Islands, (The Independent State of) Samoa, Solomon Islands, Tonga, Tuvalu and Vanuatu. 2 International Monetary Fund, World Economic Outlook Database October 2013, Gross 

domestic product based on purchasing power parity (PPP) valuation of country GDP. Country 

population and GDP data are unavailable for the Cook Islands (may be included in New Zealand 

totals), Macau (may be included in China totals), the Democratic People’s Republic of Korea, 

Nauru, and Niue. 3Goods and services trade data is limited and only available for the ‘‘Asia and Pacific’’ region 

as defined by the Bureau of Economic Analysis. This region includes: China, Hong Kong, the 

Republic of Korea, the Democratic People’s Republic of Korea, Macau, Taiwan, Thailand, Mongolia, Japan, Brunei, Burma (Myanmar), Cambodia (Kampuchea), Indonesia, Laos, Malaysia, 

Philippines, Singapore, East Timor, Vanuatu (New Hebrides), Vietnam, Australia, Cook Islands, 

Fed States of Micronesia, Fiji, Kiribati (Gilbert Island), Nauru, New Zealand, Niue, Marshall 

Islands, Palau, Papua New Guinea, Solomon Islands, Tonga, Tuvalu, and Western Samoa. 4 In 2010, China announced its strategic emerging industries (SEI) industrial policy initiative 

to propel Chinese companies into leading positions in emerging technologies and to drive its 

economy in the next decade. These seven industries include biotechnology, new energy, highend equipment manufacturing, energy conservation and environmental protection, new energy 

vehicles, new materials, next-generation IT. 5 ASEAN Economies: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar (or Burma), 

Philippines, Singapore, Thailand, and Vietnam. 6 APEC Member Countries: Australia, Brunei, Canada, Indonesia, Japan, Republic of Korea, 

Malaysia, New Zealand, Philippines, Singapore, Thailand, Taiwan, Hong Kong, China, Mexico, 

Papua New Guinea, Chile, Peru, Russia, Vietnam and the United States. 7 Information as an industry includes: data processing, hosting and related services; broadcasting (expect Internet); motion picture and sound recording industries; newspaper, periodical, 

book, and database publishers; software publishers; other information; and telecommunications. 8 U.S. Bureau of Economic Analysis, ‘‘U.S. Direct Investment Abroad: Balance of Payments 

and Direct Investment Position Data’’ (accessed September 30, 2013). 9 In 2012, growth rate of Chinese FDI in the United States by Ultimate Beneficial Owner 

(UBO) was 70.82 percent, Indonesia’s was 38.05 percent, Malaysia’s was 26.37, the Republic of 

Korea’s was 14.86 percent, New Zealand’s was 8.05 percent, Japan’s was 6.80 percent and Australia’s was 5.51 percent. 10 U.S. trade remedy cases are governed by U.S. laws and international obligations, which 

require fair, objective, and transparent factual determinations. Consistent with these laws and 

obligations, U.S. AD and CVD proceedings are open, transparent and afford all interested parties involved the opportunity to participate and defend their interests. Strong enforcement of 

the AD and CVD laws plays an important role in supporting the USG’s goal of advancing a progressive trade agenda. With respect to the administration of the U.S. trade remedy laws, as of 

October 31, 2013, ITA maintains the following AD and CVD orders and ongoing investigations.

Senator CARDIN. Well, we thank both of you for your testimony. 

Both of you have mentioned that the United States has been 

pretty active in East Asia this fall, with so many meetings focused 

on economic dimensions. You mentioned the APEC meeting in 

Indonesia. We had the ASEAN, the U.S.–ASEAN summit. It was 

followed by the East Asia summit in Brunei. Then we had the 

global entrepreneurship summit in Malaysia. 

So we participated in a lot of meetings. What got done? 

Ambassador MARCIEL. Chairman, that is a good question,

because the meetings themselves, wonderful as they are, it is 

important that we have concrete outcomes. I think in the meetings 

themselves, I would say two things from the State Department perspective. The meetings themselves, for example the APEC meeting, 

there were some very substantive things done, which I will list in 

just a second. 

FOREI-43947 with DISTILLER

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I would say the other thing we really try to do is use these meetings and use these visits as action-forcing events. For example, Secretary Kerry’s visit just this week I think was key to getting a 

long-pending $90 million wind turbine deal with the Vietnamese 

done. I think without his—we effectively used his visit to get that 

finalized. It may have happened anyway, but it probably would 

have taken much longer. 

In terms of APEC itself, there were several outcomes I will just 

go through briefly. There was a lot of focus on improving supply 

chain management, in other words working with countries to try 

to figure out how to reduce barriers to getting the various inputs 

in place, including the setting up of a fund to support that way, 

agreement to implement the agreed-upon reduction in tariffs on 

environmental goods, the APAC environmental goods list, establishing a public-private dialogue to address nontariff measures, and 

promoting cross-border education, which as you know is not only 

good for the education, but also there is a lot of——

Senator CARDIN. Let me just comment. I know you will go 

through the list and we will ask you to supply that. As you point 

out, these meetings are important and the active U.S. participation 

is very important. But results are needed and progress needs to be 

made, and then you have to implement to make sure it is done 

after the meetings are over. 

I would hope that we have a pretty aggressive strategy. You 

talked about additional commitments of resources to Asia. We 

should be evaluating our own progress and be pretty transparent 

about that, so we know whether progress is being made. 

I appreciate your keeping us informed on all of those issues. I 

want to get to TPP, in a couple different contexts. First, it could 

be perceived to be in competition, particularly with China, with the 

Regional Comprehensive Economic Partnership, which the United 

States is not participating in. So I would appreciate your giving us 

your best information as to how these two initiatives either complement each other or work in cross-purposes. 

Then secondly, in your response if you could give us an update. 

We know that the negotiations have not been completed. There is 

great concern whether we are going to lower the bar on a trade 

agreement to accommodate countries that have had very difficult 

records on human rights—Vietnam and Malaysia. We know that 

Vietnam enacted labor rights, but we also know that they have not 

implemented those reforms. 

So can you at least give us the politics of what is happening 

between China and TPP and the other regional discussions and 

whether we are going to insist and are making progress on basic 

good governance with all of the countries, but particularly those 

countries who have a record of not being strong in those areas? 

Ambassador MARCIEL. Chairman, maybe I can start and John 

Andersen will, I am sure, want to add some thoughts. On the question of whether the TPP is in competition with the Regional Comprehensive Economic Partnership, or RCEP, our view is that we do 

not see that these various multilateral efforts are mutually exclusive. We see them really as complementary efforts to promote 

regional economic cooperation and hopefully both serving as building blocks toward an eventual free trade area of the Asia-Pacific. 

FOREI-43947 with DISTILLER

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We of course favor the TPP because it does set very high standards, which we think is very important. 

On the question about lowering the bar and how we deal with 

issues like human rights and labor standards, certainly in TPP, the 

free trade agreement, labor standards are a key part of that. I 

know there has been intensive discussions between USTR, particularly with the Vietnamese, and others, but particularly with the 

Vietnamese, on labor standards. I think everyone is very focused 

on that. 

More broadly on human rights——

Senator CARDIN. Well, what progress is being made? 

Ambassador MARCIEL. The negotiations have been ongoing for 

quite a while——

Senator CARDIN. Can you assure us that we will insist upon minimum standards in this agreement and that—worse than failing in 

TPP would be to negotiate an agreement that does not meet minimum standards. 

Ambassador MARCIEL. I think we are very committed to meeting 

those minimal standards, Senator, absolutely. 

Senator CARDIN. And that is not changing? We have a pretty 

firm grip——

Ambassador MARCIEL. It is not changing. It is not changing. 

Senator CARDIN. A lot of us will be watching closely. 

Ambassador MARCIEL. I understand. As you have noted, Secretary Kerry raised this, not only labor standards but human rights, 

not only publicly, but quite directly in his meetings with the Vietnamese Prime Minister, party General Secretary, and Foreign Minister, and highlighted the connection, not only human rights in 

general, but the connection to things like TPP and other things. So 

he was very direct in his conversations. 

Mr. ANDERSEN. I would just like to add, in Singapore, while we 

made substantial progress and we had obviously hoped to conclude 

before the end of the year, and that was where we were moving, 

we did make significant progress in a number of areas. We also 

narrowed the differences in some of those areas where we recognized the need to make some additional progress. Negotiations are 

going to begin again early in January, at which point, as I said in 

my written statement, I think we are closing in on a high value, 

high quality agreement. 

I would second what Principal Deputy Assistant Secretary 

Marciel said on labor standards. While I have not actively participated in the negotiations, I have been part of many of the other 

free trade agreement negotiations that we have negotiated over my 

30 years, and high quality labor standards have always been a key 

part of that. 

Senator CARDIN. I have been in Congress now for 27 years, voted 

on many trade agreements, been on the Finance or Ways and 

Means Committee most of my career. I must tell you, I do not feel 

that we have had the open dialogue with Congress which instills 

confidence in these areas. We are conducting trade negotiations 

without trade promotional authority. I know that the administration will be seeking that. But I will just tell you this. There has 

got to be a transparent process with Congress, particularly with 

TPP, because it involves so many different countries. 

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I agree with Senator Rubio. A successful TPP offers incredible 

hope, but it is not going to happen unless there is a close working 

relationship between Congress and the negotiators. 

Senator Rubio. 

Senator RUBIO. I would defer to Senator McCain if he wants to 

go first on your questions. 

Senator MCCAIN. Well, I thank the witnesses. I thank the chairman. 

It is a bit of a microissue as compared to the macroissues that 

we are talking about. But I do not know if you are aware or not. 

I could ask either one of the two witnesses. The 2008 farm bill proposed and established a $30 million USDA Catfish Inspection 

Office. The catfish has been called wasteful and duplicative by the 

GAO. GAO recommended that Congress repeal the office. The 

President’s fiscal year 2014 budget proposed to eliminate it. I have 

read reports that the Catfish Office would be a violation of our 

WTO obligations because it places trade barriers on catfish imports 

from Southeast Asia, particularly Vietnam. 

Could you comment on the harm this Catfish Office poses to our 

Southeast Asia relationship and the administration’s views on the 

issue? 

Ambassador MARCIEL. Senator McCain, yes, I am familiar with 

the issue. When I was in Vietnam last month, my Vietnamese 

friends reminded me of it pretty much every 5 minutes. So they are 

very focused on it and have pointed out—and I believe they raised 

it with Secretary Kerry on this trip as well when he was in the 

Mekong Delta, which of course is a big area of growing catfish for 

them. So they certainly see it as very negative and very harmful. 

I apologize, but I do not actually know if we have taken an official position on this. If we could——

Senator MCCAIN. I think the administration has made it very 

clear. Our friends from a certain part of the country allege that 

this catfish is not a catfish, which is one of the more fascinating 

and entertaining aspects of the marine life in the world that I have 

encountered. It is clearly just a blatantly protectionist measure. 

As you mentioned, it has now taken on a dimension which is far 

in exception—it seemed to me far in excess of the issue itself. But 

it really is—when we complain about discrimination against our 

products and then we see this calling a catfish a vasa, I think is 

what they called that catfish which is grown in Vietnam—but I am 

kind of interested that that is such a high-level issue with our Vietnamese friends. I hope that in response that maybe we said, we 

agree with you on that issue. 

But there is still significant persecution of minorities, of Buddhists, of Christians, in Vietnam that, as the chairman pointed out, 

really are not acceptable human rights abuses, and we had 

expected a lot more of the Vietnamese than what they continue to 

do, which actually saddens me a great deal. 

Do you have any comment? 

Ambassador MARCIEL. Well, Senator McCain, I know how much 

you know about Vietnam. What I would say is you are right, there 

are still significant human rights problems as well as religious 

freedom problems in Vietnam. We raise these constantly with the 

Vietnamese. I would say that from my experience, having lived 

FOREI-43947 with DISTILLER

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there 20 years ago and now, there are some areas where it has gotten better and other areas where it really has not. The areas where 

it has gotten better I would say is, for example, increased space for 

people to have conversations and offer comments in the blogosphere and these sorts of things, as well as on religious freedom 

some specific improvements like more increased registration of 

churches and these sorts of things. 

That said, there still remain significant problems both on the 

religious freedom side, as you have said, and of course with continued imprisonment of dissidents, which Secretary Kerry raised very 

specifically on his trip. 

Senator MCCAIN. Thank you. 

Mr. Chairman, I know it sounds like a small item, catfish. But 

it is really just a case of blatant discrimination to call a catfish not 

a catfish and spend $30 million of taxpayers’ dollars to set up a, 

‘‘Catfish Office.’’ A lot of people I talk to, they think I am making 

it up. So I think that we ought to really at some point maybe even 

enact a repeal of the funding for the ‘‘Catfish Office.’’

I thank the witnesses and I hope—maybe you could give us a 

written response on this issue. 

I thank you, Mr. Chairman. 

Senator CARDIN. Senator McCain, it is my understanding that 

the repeal is included in the House version of the farm bill. So this 

might be an issue that we can act on in conference on the farm bill. 

I do not know. I am not a member of the Agriculture Committee 

and I have not talked to Senator Stabenow about this. But I think 

the point that you raise, that in the context of our multilateral 

negotiations there are issues where the United States needs to 

change. Change is not just one way; and issues concerning the 

safety standards, where in this case it was one agency—I think it 

was the Agricultural Department was doing the safety standards 

and there had been no complaints, and the cost issues were much 

less than the change that was made to the other agency—does 

raise questions as to whether it is a nontariff barrier to free access 

to trade, and the United States also needs to self-evaluate its 

practices. 

So I thank the Senator for raising those issues. On the human 

rights matter, you know very well that, as one of the strongest proponents in the United States Senate to advance human rights, you 

know that these subjects do not get attention unless there is something else on the table. So now we have an opportunity to expand 

economic trade, which is great. We are all for it. But it also is an 

opportunity to advance human rights, which is critically important 

to economic growth. 

So I appreciate both issues that Senator McCain raised on these 

matters. 

Senator Rubio. 

Senator RUBIO. Thank you. 

I will begin by prefacing my question. When I look toward my 

first trip to the region next month, where I will be visiting Japan, 

South Korea, and the Philippines, my view is that the region has 

really benefited from a post-World War Two order characterized by 

freedom of commerce and navigation and also by an expansion of 

political rights. 

FOREI-43947 with DISTILLER

29

We have seen these benefits in places like Japan, clearly the best 

example of how those two things have benefited a people. In South 

Korea, a nation whose economy expanded as a result of free enterprise, trade, commerce, and has gone from being a recipient of aid 

to a donor; and beyond that other places have had similar success. 

Taiwan, a small place, but again a place with real success stories. 

This is an order that I think has benefited not just these countries, by the way, but the Chinese people, for whom access to the 

American marketplace has really expanded economic opportunity. 

But while open trade has benefited the Chinese people, the Chinese Communist Party is not all that enthusiastic about expanding 

civil liberties, and in fact is challenging the established principles 

of freedom of navigation and of commerce. As a result, you have 

seen some of the moves they have recently made, and I want to ask 

you about that in a moment. 

So, I would preface my questions by saying that the United 

States obviously needs to be economically engaged in the region, 

but you can see how our security assurances and our security 

arrangements are also critical to, for example, enable freedom of 

commerce and navigation, and how our allies look up to our partnership to assure those. 

By the way, in my recent trip to London a number of policymakers there were very complimentary of the administration’s 

decision to place Marines in Australia as a major step forward in 

terms of reassuring our allies about our commitment in the region. 

But let me just ask you this. I would start with you, Secretary 

Marciel. I would like to get your thoughts on the implications of 

China’s unilateral announcement of an air defense identification 

zone over territory that the United States recognizes as under the 

administration of Japan and also overlapping Korean air space. 

Does the United States recognize this announced ADIZ? 

Ambassador MARCIEL. Senator Rubio, thank you for that question. No, we have told the Chinese—we have said publicly and we 

have told the Chinese, including during the Vice President’s recent 

trip, that we do not recognize——

Senator RUBIO. Have we asked them to retract it? 

Ambassador MARCIEL. What we have told them is we do not recognize it, it is unhelpful, they should not implement it. It has been 

a consistent message. We have also said that it is extremely 

unhelpful, it is adding to tensions in the region. Some of this was 

the way it was done, some of the language that went with it, et 

cetera, and the fact, as you said, Senator, that it extended over an 

area that we recognize as administratively controlled by Japan. 

So for all these reasons we found it very unhelpful, causing tensions and we have continually repeated—Secretary Kerry either 

today or yesterday again repeated in the Philippines that this was 

very unhelpful, we do not accept it, we will not abide by it. 

Senator RUBIO. Well, thank you for that statement. I would just 

add, you said a moment ago that some of it is the way it was done. 

I would imagine that even if they had said it in very diplomatic 

and rosy language we would still be opposed to it, right? 

Ambassador MARCIEL. Senator, there were so many problems 

with it. There is a whole host of reasons that we oppose it. It was 

not just the language. 

FOREI-43947 with DISTILLER

30

Senator RUBIO. Explain for a moment the guidance we have 

given civilian aircraft with regards to reporting in? What is the 

thought process behind that guidance and how does that contradict 

or complement the official position you have stated here today? 

Ambassador MARCIEL. Right. So the position, as I said, is we do 

not accept this, we reject it, it will not change the way the U.S. 

Government, the U.S. military, operates in the region. I want to be 

careful not to speak for FAA, which of course has the regulatory 

authority over the airlines. My understanding is that they did not 

issue specific instructions to the airlines on the Chinese announcement of the air defense identification zone. They did, however, 

remind airlines that the expected practice, the normal practice, 

standard practice, what have you, around the world is that airlines 

will follow notice to airmen around the world. 

Senator RUBIO. But again, our official policy is we do not recognize the zone and by and large we are going to ignore it? 

Ambassador MARCIEL. That is correct, Senator. 

Senator RUBIO. Secretary Andersen, I wanted to ask you. Earlier 

in the year the administration had stated it hoped to conclude TPP 

by the end of this year, which is 10 days. So can you just provide 

an update on the timeline, including the congressional aspect of 

fast track and so forth? 

Mr. ANDERSEN. Yes. Thank you for that question, Senator. As I 

indicated earlier, we did make substantial progress in Singapore in 

narrowing differences and coming to agreements in some of the 

areas. Unfortunately, we were not able to conclude, as we had 

hoped to, before the end of the year. But what we have agreed to 

do is set forward and begin again early in January. 

I would point out that we were not able to conclude, because 

there were still some areas where we were not achieving what we 

had hoped for, particularly in some of the market access areas. As 

we have stated many times in many agreements over the years, we 

are not just going to negotiate just to negotiate. We are going to 

negotiate to get a high quality, high standard agreement, and that 

is what we are still after and that is what we hope to achieve some 

time early next year. 

Senator RUBIO. What about on the congressional side? What do 

you anticipate will be the asks here? What are the existing ones? 

How is that working through? 

Mr. ANDERSEN. Well, as we indicated, the ask that we are working with now is enactment of trade promotion, reenactment of 

trade promotion authority. It will be critical to bringing home and 

implementing this agreement once it is finally negotiated. 

Senator RUBIO. Would you just comment on how do you think 

that not having trade promotion authority would slow or undermine the process? 

Mr. ANDERSEN. It does not undermine the process with respect 

to our ability to negotiate. What it does is make it difficult to actually implement. It will be critical when we get to the implementation phase. 

Senator RUBIO. Does that process and the fact that you need to 

seek congressional approval from a body that has gone through 

some friction here over the last couple months, for lack of a better 

term, does that come up in the negotiations? Are potential partners 

FOREI-43947 with DISTILLER

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aware of how that could slow down the process a bit? Is that in any 

way a factor in terms of how they are approaching these things? 

Mr. ANDERSEN. Good question, Senator. Not to my knowledge 

has it come up. But then again, I have not been directly involved 

in those day-to-day negotiations. I know it has come up in previous 

negotiations. 

If I may go off a little bit from some of my previous experience, 

I was part of the team that negotiated with Chile, the first time 

we announced that Chile was going to be a free trade agreement 

member. Once we lost fast track negotiating authority, those negotiations were put on hold for a number of years. But I cannot speak 

specifically to where or how that is affecting TPP. 

Senator RUBIO. Is it safe to say, does it help? 

Mr. ANDERSEN. It certainly does not. It certainly does not help. 

Senator CARDIN. I have one additional question, Mr. Andersen. 

That is, two of the critical nontariff barriers in Asia that affect U.S. 

access to markets would be currency manipulation and protection 

of intellectual property. Can you just give me an update as to 

whether we have made progress on these issues during some of the 

discussions? I am not talking necessarily TPP. I am talking broader 

than that, obviously, in these two areas. 

Mr. ANDERSEN. Well, I cannot speak in detail about currency manipulation, Senator. As you know, that is——

Senator CARDIN. The Secretary of the Treasury. Everybody 

bounces that issue from one agency—we are well aware of that. 

But I find it hard to believe that you are not engaged in the impact 

of currency manipulation for market access for American companies. 

Mr. ANDERSEN. But I can speak a bit more with respect to intellectual property rights. It is, as you said, one of the three major 

areas where we do get concerns from U.S. companies about doing 

business in the Asia-Pacific. We at the Department of Commerce 

have an Office of Intellectual Property Rights that is there to specifically help U.S. companies overcome and deal with those issues 

as they arise. In fact, we have a Web site—stopfakes.gov—that is 

very active and very much geared toward helping especially smalland medium-size companies deal with those issues. 

We have dealt with intellectual property rights in the JCCT, 

have made some progress. It is an area, as you can imagine, that 

is foremost on the negotiations as we move forward. 

Senator CARDIN. Thank you. 

Mr. Marciel, since Mr. Andersen did not want to take the currency one, I assume that you will give us the answer on currency? 

Ambassador MARCIEL. I am searching desperately—Mr. Chairman, I am searching desperately in my long book for a better 

answer. Unfortunately, I find the same one. But it is really a 

Treasury issue. I have to defer to Treasury. 

Senator CARDIN. Well, you know, we hear that frequently, and of 

course when Treasury is here they say it is in context to all the 

diplomatic problems and bilaterals and trade issues. So everybody 

seems to bounce it. 

But the pace of reform has been slow. At one point in 

globalization, America was strong enough to be able to deal with 

currency manipulation. Today we need to have a level playing field 

FOREI-43947 with DISTILLER

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for American companies to compete. The currency issue is a huge 

matter. It involves more than just one country. There are other 

countries in Asia, other than China, that are also involved in currency manipulation. It is a matter that needs to be on the radar 

screen of everyone engaged in regional economic discussions. 

So I appreciate the fact that Treasury has the lead on this, but 

I would just urge you to be prepared to answer questions as we 

deal with the economic integration within Asia, that currency is a 

matter that is going to be brought up as well as intellectual 

property. 

Senator Rubio. 

Senator RUBIO. No. 

Senator CARDIN. So let me thank both of you again for your testimony. More importantly, thank you for your service. We look forward to continuing to work with you. 

Mr. ANDERSEN. Thank you. 

Senator CARDIN. We will now go to our second panel. As they are 

coming to the table here, let me welcome Mr. Matthew Goodman, 

who holds the William E. Simon Chair in Political Economy at the 

Center for Strategic and International Studies. He has extensive 

experience in three different government agencies and in the private sector. At the White House, Mr. Goodman served as the Coordinator for Asia Pacific Economic Cooperation, APEC, in the East 

Asia Summit; Director for International Economics on the National 

Security Council Staff; and Director for Asian Economic Affairs on 

the staff of the National Security Council. 

Let me also welcome Mr. Derek Scissors, who is a resident 

scholar at the American Enterprise Institute, where he studies 

Asian economic issues and trends. In particular, he focuses on the 

Chinese and Indian economies and U.S. economic relations with 

China and India. He is also an adjutant professor at George Washington University, where he teaches a course on Chinese economy. 

We will start with Mr. Goodman. 

STATEMENT OF MATTHEW P. GOODMAN, WILLIAM E. SIMON 

CHAIR IN POLITICAL ECONOMY, CENTER FOR STRATEGIC 

AND INTERNATIONAL STUDIES, WASHINGTON, DC 

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

Thank you for this opportunity to offer my thoughts on U.S. economic engagement in the Asia-Pacific region. 

Economics is at the heart of U.S. involvement in the Asia-Pacific 

region. This statement is as true today as it was in 1784, when the 

first U.S. merchant ship bound for Canton set sail from New York. 

Trade, investment, and other economic ties across the Pacific today 

are measured in the trillions of dollars, support millions of American jobs, and underpin our national security. 

Like administrations before it, the Obama administration has 

put economics at the center of its Asia-Pacific strategy. But it has 

arguably raised the stakes by making the overall success of its 

rebalancing to Asia contingent on a successful economic strategy, 

in particular completion of a high standard Trans-Pacific Partnership trade agreement, which I will come back to. 

The economic leg of the rebalance is driven by three broad objectives: promoting growth in jobs, upholding and updating the rules 

FOREI-43947 with DISTILLER

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of the international economic system, and supporting America’s 

long-term presence in the region. It is important to note that these 

objectives get to both sides of the coin regarding the relationship 

between economics and foreign policy, that is using diplomatic tools 

to support better economic outcomes, like growth and jobs, and, 

arguably more challenging, using economic tools in a strategic way 

to support foreign policy objectives, such as strengthening the rules 

and supporting our presence in the region. 

In pursuit of these objectives, the Obama administration has 

used a multilayered approach to economic engagement in the AsiaPacific. This has bilateral, regional, and global strands from the 

strategic and economic dialogue with China, to TPP and APEC, to 

the G20, half of whose members are Asia-Pacific economies. And it 

encompasses all aspects of economic policy, not just trade but also 

promotion of strong domestic demand-led growth in large Asian 

surplus economies like China and Japan, negotiation of bilateral 

investment treaties, and strategic use of development assistance. 

But trade and TPP in particular is the sharp end of the spear 

when it comes to Obama economic strategy in Asia. Through TPP, 

the administration seeks to advance all three objectives I mentioned, with an accent on updating the rules. TPP aims to establish 

disciplines on an array of behind-the-border impediments such as 

excessive or nontransparent regulation, preferences for domestic, 

especially state-owned, enterprises, and inadequate intellectual 

property protection. 

I believe the administration’s aim is to make a successful TPP 

the driver and de facto template for a new multilateral system of 

rules. Failure to reach a TPP deal at this month’s ministerial meeting in Singapore was disappointing, but not fatal. Trade talks are 

always darkest and noisiest before the dawn as differences are narrowed to the most politically contentious issues. I remain optimistic 

that a basic TPP deal can be reached by the time of President 

Obama’s planned trip to Asia next April. 

The stakes could not be higher for the White House. Conclusion 

of TPP is the sine qua non of success for the Asia rebalancing strategy. In addition to its economic benefits, a successful agreement 

would anchor the United States more firmly in the Asia-Pacific and 

bolster American leadership there. Without TPP the rebalance 

would contain little of substance that is new and would be perceived in the region as driven primarily by military considerations. 

I will end by highlighting three ways in which I believe Congress 

can play a vital role in supporting the economic leg of the rebalance. First, enacting trade promotion authority legislation would 

give the administration the guidance and certainty it needs to close 

a high standard TPP deal. Without TPA, it is difficult to see how 

USTR can persuade its counterparts that it can fulfill its end of the 

bargain. 

Second, Congress should insist that the administration allocate 

sufficient senior-level staffing and policy attention to Asian economic issues and should provide adequate funding for these activities. In particular, I believe the White House, including both the 

NSC and USTR, as well as the State Department, do not have sufficient resources or share of mind devoted to Asian economics. 

FOREI-43947 with DISTILLER

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Third, Congress can help explain to the American people that the 

United States is a Pacific power with deep and enduring economic 

interests in the region. A successful economic strategy in the AsiaPacific is essential to sustaining American growth and jobs into the 

20th century. It is also essential to our efforts to remain a champion of the global rules-based order and it underpins America’s 

long-term presence in the region, which in turn is critical to the 

region’s security and prosperity. 

Thank you for your attention. 

[The prepared statement of Mr. Goodman follows:]

PREPARED STATEMENT OF MATTHEW P. GOODMAN

Mr. Chairman, Mr. Ranking Member, members of the subcommittee, thank you 

for this opportunity to offer my thoughts on U.S. economic engagement in East Asia 

and the Pacific. 

Economics is at the heart of U.S. involvement in the Asia-Pacific region. This 

statement is as true today as it was in 1784, when the first U.S. merchant ship set 

sail from New York bound for Canton; or in 1853, when Commodore Perry arrived 

in Tokyo Bay in his ‘‘black ships’’ seeking refueling rights for the American whaling 

fleet. Trade, investment, and other economic ties across the Pacific today are measured in the trillions of dollars and are critical not only to U.S. growth and jobs but 

also to our national security. 

The Obama administration has put economics at the center of its Asia-Pacific 

strategy. Indeed, the overall success of the administration’s policy of ‘‘rebalancing,’’ 

or ‘‘pivoting,’’ to Asia rests on its ability to carry out a successful economic strategy 

in the region, in particular completion of a high-standard Trans-Pacific Partnership 

(TPP) trade agreement. 

THE ECONOMIC PULL OF ASIA

U.S. economic engagement in Asia is driven by the numbers. The 21 member 

economies of the Asia-Pacific Economic Cooperation group (APEC) account for 

roughly 55 percent of global gross domestic product (GDP).1 The region contains the 

world’s three largest countries by GDP—the United States, China, and Japan—and 

half of the top 20 economies. Moreover, according to the International Monetary 

Fund in its most recent outlook, the Asia Pacific is the fastest-growing region of the 

world, with real GDP growth in developing Asia expected to average 6.3 percent in 

2013.2

The APEC region also accounts for 44 percent of world trade, with nearly $10 trillion worth of goods and services flowing around the Pacific last year.3 U.S. exports 

to APEC economies totaled nearly $1.2 trillion in 2011, accounting for over half of 

total U.S. exports.4 Our exports to the Asia Pacific have more than doubled over 

the past decade, and 6 of our top 10 trading partners are in APEC. 

Financial flows across the Pacific in the form of both direct and portfolio investment are also substantial. The stock of U.S. direct investment in Asia totaled nearly 

$600 billion at the end of 2011 and grew some $45 billion that year.5 In the same 

year, nearly $20 billion worth of foreign direct investment flowed into the United 

States from Asia-Pacific countries, adding to an accumulated stock of over $400 billion invested here.6 Meanwhile, China and Japan each hold over $1 trillion of U.S. 

Treasury securities,7 and Asians and Americans have trillions of dollars invested in 

each other’s stock markets and other private financial instruments. 

This enormous volume of economic activity across the Pacific translates into jobs 

for Americans. According to one estimate, roughly 1.2 million American jobs were 

supported by exports to Asia in 2012.8 Asian companies investing in the United 

States directly employed some 900,000 Americans in 2011, with many more jobs 

supported indirectly by these operations.9

Our economic engagement with Asia also poses challenges. We have large and 

persistent trade imbalances with a number of major Asian countries, including a 

$315 billion deficit with China in 2012.10 American companies face an array of barriers both at and behind the border in these countries, and unfair trade practices 

in the region burden both our businesses and workers. In addition, macroeconomic 

imbalances—including an excess of savings in many Asian economies—produce 

large financial flows from Asia to the United States that bring near-term benefits 

but may pose longer term risks to the U.S. economy. These challenges require active 

U.S. policy engagement in the region. 

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POLICY OBJECTIVES IN ASIA

Against this backdrop of tremendous opportunities and challenges, U.S. economic 

policy toward the Asia-Pacific region over the past several administrations has been 

driven by three broad objectives. The first is growth and jobs. As described above, 

the Asia-Pacific region is one of the world’s largest and fastest-growing economic 

areas, making it an increasingly important source of demand for the U.S. (and 

global) economy. Among other benefits, stronger demand and growing purchasing 

power in Asia mean more U.S. exports, which in turn are a vital source of growth 

and jobs at home. 

The second broad objective is upholding and updating the rules of the international economy. The open, rules-based system of trade and investment championed by the United States since World War II has produced broad benefits not 

only for this country but for the rest of the world. But the prevailing rules are 

increasingly out of step with the realities of today’s global economy, which is characterized by integrated value chains and digital connectivity; Asia is at the center of 

these trends. As discussed further below, TPP is designed to address this gap by 

establishing ‘‘21st-century’’ rules governing not only tariffs and other border measures but also behind-the-border issues such as intellectual property protection, regulatory transparency, labor and environmental standards, and the investment 

climate. 

The third objective of U.S. economic strategy in the Asia Pacific is supporting 

America’s long-term presence in the region. The United States is a Pacific power by 

nature and necessity (i.e., geography as well as the pull of historical, security, and 

economic forces) but also by design. Successive administrations since World War II 

have worked deliberately to embed the United States in the Asia Pacific through 

an array of political, security, and economic arrangements. The network of U.S. alliances with Japan, South Korea, Australia, and others, and the troops and ships 

deployed in the region, are the most visible manifestation of that policy. Binding 

trade arrangements like the U.S.-Korea free trade agreement (KORUS FTA) and 

TPP can be seen as the economic equivalent of America’s security alliances in the 

region. That is, they enmesh the country in regional affairs and give all Asia-Pacific 

countries an increased stake in each other’s prosperity and security. 

HOW THE UNITED STATES ENGAGES

In support of all three objectives described above—growth, rules, and presence—

recent U.S. administrations have pursued a multipronged approach to economic 

engagement in the Asia-Pacific region. For more than 30 years, Washington has 

worked to promote strong domestic-demand-led growth in large Asian surplus economies. Japan, then the world’s second-largest economy, was the initial target of this 

policy in the 1970s and 1980s, but attention has broadened in recent years to other 

large, growing economies with persistent current-account surpluses, notably China. 

With U.S. and European consumers and governments alike forced to borrow less 

and export more in the wake of the 2008–09 financial crisis, Washington has argued 

that large surplus economies need to consume and import more, or global growth 

will suffer. This is why the Obama administration has made ‘‘strong, sustainable, 

and balanced growth’’ the mantra of its policy engagement with China and other 

large Asia-Pacific economies in both the G20 and bilateral channels. 

U.S. trade policy has also supported the macroeconomic growth agenda. Recent 

administrations have pursued an active trade agenda in the region, including President George W. Bush’s initial negotiation of the KORUS FTA and the Obama 

administration’s launch of the TPP negotiations. Enforcement of existing trade 

agreements has also been an increasingly important feature of trade policy in the 

past two administrations. All of these efforts have been designed to reduce barriers 

to U.S. exports, enhance America’s own competitiveness, boost growth and jobs, and 

reinforce the rules of the international trading system. 

TPP is part of a broader strategy pursued by Presidents since George H.W. Bush 

to tap into and shape aspirations in the Asia Pacific for regional economic integration. Bush’s Secretary of State, James Baker, embraced his Australian counterpart’s 

proposal to create APEC in 1989 as a venue for foreign ministers from the region 

to discuss trade and investment liberalization and capacity-building. President Bill 

Clinton invited his APEC counterparts to a summit on Blake Island off Seattle in 

1993, giving top-level political imprimatur to the forum’s economic integration 

mission. 

Washington’s approach to regional economic integration has been marked by two 

key characteristics that distinguish it from approaches championed by other countries in the region: it is trans-Pacific rather than Asia-centric; and it emphasizes 

high standards of liberalization and rulemaking. 

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The first characteristic is, of course, largely driven by the fact that the United 

States is a Pacific but not an Asian country. But higher level policy considerations 

also play a part. In promoting APEC, Secretary of State Baker was clearly animated 

by concerns about East Asian aspirations for community-building that would 

exclude the United States; he later noted that such efforts would ‘‘draw a line down 

the middle of the Pacific.’’ 11

In addition, strategic considerations in the Western Hemisphere have played a 

part in U.S. insistence on including Pacific-facing Latin American countries in 

regional economic integration efforts. President Clinton invited the Mexican President to the Blake Island summit and soon after championed Chile and Peru’s membership in APEC. It is no coincidence that the TPP negotiations include all five 

APEC economies in the Western Hemisphere: Canada, Chile, Mexico, Peru, and the 

United States. 

The second distinguishing feature of the U.S. approach to regional economic integration is a preference for comprehensive trade and investment liberalization and 

high-standard rules of the road. This has inspired Washington’s approach to APEC 

since the inception but took on new substance with the launch of ‘‘21st-century’’ 

treaty negotiations with Korea and the TPP partners. The George W. Bush and 

Obama administrations have insisted on the broadest and deepest possible liberalization, as well as state-of-the-art disciplines on trade and investment-related policies both at and behind the border. By contrast, Asia-only integration initiatives, 

including bilateral and subregional FTAs, have generally covered only border measures and included numerous exceptions to full liberalization. 

A mix of economic and political considerations lies behind this second feature of 

U.S. regional integration policy. Removing most impediments to trade and investment and imposing tough rules of the road maximize economic efficiency and 

growth. 

Washington believes that the narrower and ‘‘shallower’’ agreements reached to 

date in Asia have done little to improve efficiency and may pose a threat to U.S. 

competitiveness. As U.S. Trade Representative Michael Froman said in a recent 

interview, ‘‘A race to the bottom is not a race we can win.’’ 12 Moreover, congressional support for trade agreements increasingly hinges not only on breaking down 

barriers to U.S. exports but also on advancing other American policy objectives such 

as labor rights, environmental regulation, and intellectual property protection; 

hence the emphasis on these issues by U.S. negotiators in TPP and other recent 

trade talks. 

THE ‘‘REBALANCE’’ TO ASIA

The Obama administration’s economic strategy in the Asia Pacific is broadly consistent with the traditional objectives and approach discussed above. But the stakes 

have been raised by the administration’s strategy of ‘‘rebalancing’’ to this important 

region of the world. 

From its earliest days in 2009, the administration has put the Asia Pacific at the 

center of its foreign policy. This can be seen on three levels: symbolism, including 

Hillary Clinton’s decision to make her first overseas trip to the region as Secretary 

of State; rhetoric, notably a prominent Clinton article in the fall of 2011 in which 

she first articulated the administration’s strategy of shifting resources and attention 

from the greater Middle East to the Asia Pacific; 13 and substance, with the decisions to join a second regional leaders’ forum alongside APEC, the East Asia summit, and to embrace TPP as the centerpiece of the administration’s trade policy in 

the region. 

Economic engagement is critical to the overall rebalancing strategy. In addition 

to its intrinsic value, it helps balance the military and diplomatic elements and thus 

bolster the strategy’s credibility both in the region and at home. While most of the 

focus has been on TPP, the Obama administration has, in fact, pursued a 

multipronged economic policy in the region, covering three levels of interaction. 

Bilaterally, the administration has engaged with most of the major economic powers of the region, in a variety of formats. With China, it reconfigured a high-level 

forum created by the Bush administration and established the Strategic & Economic 

Dialogue (S&ED). Along the S&ED’s economic track, the administration has sought 

to encourage more balanced growth in China, to promote financial liberalization and 

movement to a more flexible currency system, and to advance a bilateral investment 

treaty (BIT). Meanwhile, engagement with Japan has been focused on encouraging 

Tokyo to restructure its economy to generate sustainable growth, including through 

the decision earlier this year to bring Japan into TPP. Renegotiating, passing, and 

implementing the KORUS FTA has been the organizing principle for U.S.-Korean 

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economic relations, while the administration has had active bilateral dialogues with 

other important regional players such as Australia and Indonesia. 

Engagement at the global level is another implicit element of the administration’s 

Asian economic strategy. Largely in recognition of the increasing weight of large 

emerging countries, including China and India, in the global economy, the administration embraced the G20 as the premier forum for international economic cooperation in 2009 and has worked within that group to encourage strong, stable, balanced 

growth in Asian economies. The administration has also worked in other international institutions, such as the World Trade Organization and the World Bank, 

to more deeply embed China and other leading Asian countries in the global rulesbased system. 

A principal focus of Obama administration economic strategy in the Asia Pacific 

has been at the regional and subregional level. While the President himself has not 

attended the last two APEC leaders’ meetings, the administration has remained 

actively engaged in that forum, including as host in 2011. In 2012, the administration launched a so-called ‘‘Enhanced Economic Engagement (E3)’’ initiative with the 

Association of Southeast Asian Nations (ASEAN); this initiative is ultimately 

designed to bring all 10 members of that group into high-standard trade arrangements with the United States. Meanwhile, TPP has been the sharp end of the spear 

when it comes to Obama economic strategy in Asia. 

THE TRANS-PACIFIC PARTNERSHIP

TPP was conceived in the waning days of the Bush administration, when the 

White House notified Congress in late 2008 of its intention to negotiate a trade 

agreement with four small APEC economies—Brunei, Chile, New Zealand, and 

Singapore—that had already reached their own deal 2 years earlier; Australia, Peru, 

and Vietnam soon joined the effort. The Obama administration embraced TPP in 

late 2009, and negotiations among the eight original countries began in March 2010. 

Malaysia joined the talks later in 2010, Canada and Mexico in 2012, and Japan in 

the summer of 2013, bringing the total number of participants to 12. 

TPP illustrates the objectives and characteristics of U.S. economic strategy enumerated earlier. Its three-part purpose is to stimulate American growth and jobs, 

strengthen the rules of the regional (and global) trading system, and lock the United 

States more deeply into regional affairs. As its name and membership suggest, it 

is trans-Pacific in nature, incorporating North and South American as well as Asian 

countries. And it is explicitly designed to produce, as President Obama said in 

announcing his embrace of TPP in late 2009, ‘‘the high standards worthy of a 21stcentury trade agreement.’’ 14

In addition to lowering border barriers such as tariffs, TPP aims to establish disciplines on an array of behind-the-border measures that impede trade and investment such as excessive or nontransparent regulation; preferences for domestic, especially state-owned, enterprises; and inadequate intellectual property protection. The 

hope is that, if successful, TPP will become the driver and de facto template for a 

new multilateral system of rules. 

As I have argued elsewhere, a number of myths cloud regional perceptions of 

TPP.15 One is that the negotiations are ‘‘splitting Asia,’’ since not all Asian economies are eligible to join, while those that are eligible must choose between joining 

TPP, viewed as led by the United States, and an alternative track preferred by 

China, the Regional Comprehensive Economic Partnership (RCEP). Yet in principle, 

TPP is open to any APEC economy willing to strive for high-standard rules; indeed, 

U.S. strategy from the outset was to begin the negotiations with a small group of 

‘‘like-minded’’ countries and to incentivize others to join over time—a strategy that 

is ostensibly working. Conceptually there is no reason that even non-APEC economies like India and Myanmar should forever be excluded; indeed, the logic of the 

E3 initiative is to help all ASEAN countries meet the high standards being sought 

in TPP. 

As for having to ‘‘choose’’ between TPP and RCEP, the seven Asian countries participating in both negotiations clearly view the two approaches as compatible. Moreover, TPP and RCEP could one day converge in a regionwide agreement, or at least 

become interoperable, with potential annual gains to world income as high as $2.4 

trillion by 2025.16

Another myth that until recently was popular in Beijing is that TPP is part of 

an effort by Washington to ‘‘contain’’ China. Yet no Asia-Pacific country wants to 

exclude China from regional integration; on the contrary, all want to deepen their 

economic ties with that country. True, one goal of TPP is to create a level playing 

field that, among other things, will allow other countries to better compete with 

China, but this is a far cry from ‘‘containment.’’ Over the past few months, elite 

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opinion in Beijing has shifted substantially from rejecting TPP outright to seeking 

a better understanding of it; indeed, there are some signs—such as Beijing’s willingness to negotiate a comprehensive BIT with the United States on American terms, 

as well as the recent launch of the Shanghai Free Trade Zone—that China’s leadership is preparing the ground for eventual membership in a high-standard regional 

agreement. 

A third myth is that the high standards Washington is espousing in TPP are too 

ambitious for Asia. Yet all participants—including less advanced members like Vietnam—have made clear that they believe there are substantial welfare gains to be 

had from a high-standard agreement that opens up new market opportunities and 

helps each country address structural impediments in its own economy. Moreover, 

participating countries understand the political dynamics in Washington that, 

alongside the economic benefits, drive U.S. ambition in the talks. And most welcome 

an active U.S. role in championing high-standard rules and norms in the region. 

With the failure to reach agreement at this month’s ministerial meeting in Singapore, it is now clear that the TPP negotiations will not be concluded by the selfimposed deadline of the end of 2013. Although most of the agreement’s 29 chapters 

have reportedly been closed, significant differences among the parties apparently 

remain on a number of challenging issues, notably intellectual property, competition, and environmental standards, as well as the market-access provisions. Moreover, in the absence of trade promotion authority (TPA) from Congress, the Obama 

administration has struggled to persuade TPP partners that it can ultimately 

deliver on U.S. commitments in the talks. 

However, the ministerial statement from Singapore reflects a shared sense of 

determination to complete the agreement as soon as possible. Trade negotiations are 

always darkest—and noisiest—before the dawn, as differences are narrowed to the 

most politically contentious issues. But insofar as they involve political rather than 

technical decisions, the final deals can be done quickly if the will is there. Thus a 

basic accord in the next few months—perhaps by the time of President Obama’s 

planned trip to Asia in April 2014—remains within reach. 

The stakes could not be higher for the Obama White House. Conclusion of TPP 

is the sine qua non of success not only for the administration’s regional economic 

policy but arguably for the entire Asia rebalancing strategy. In addition to its economic benefits, a successful agreement would anchor the United States more firmly 

in the Asia Pacific and bolster American leadership there. Without TPP, the ‘‘rebalance’’ would contain little of substance that is new and would be perceived in the 

region as driven primarily by military considerations. 

CONCLUSION

America’s interests in the Asia Pacific are broad, deep, and enduring. None is 

more important than the U.S. economic stake in the region. As Hillary Clinton explained in laying out the rationale for the rebalancing strategy, ‘‘Harnessing Asia’s 

growth and dynamism is central to American economic and strategic interests and 

a key priority for President Obama. Open markets in Asia provide the United States 

with unprecedented opportunities for investment, trade, and access to cutting-edge 

technology. Our economic recovery at home will depend on exports and the ability 

of American firms to tap into the vast and growing consumer base of Asia.’’ 17

Even beyond near-term recovery, a successful economic strategy in the Asia 

Pacific is essential to sustaining American growth and jobs into the 21st century. 

It is also central to Washington’s efforts to remain a champion of the global rulesbased order. And it underpins America’s long-term presence in the region, which in 

turn contributes importantly to the region’s security and prosperity. For all these 

reasons, the United States is likely to remain an active—even impatient—participant in the economic affairs of the Asia-Pacific region. 

Thank you for your attention.

————————

End Notes

1 U.S. Department of State, ‘‘21st Annual APEC Economic Leaders’ Meeting Fact Sheet,’’ October 8, 2013, http://www.state.gov/r/pa/prs/ps/2013/10/215195.htm. 2 International Monetary Fund, ‘‘World Economic Outlook Database,’’ October 2013, http://

www.imf.org/external/pubs/ft/weo/2013/02/weodata/index.aspx. 3WTO, ‘‘World Trade 2012, Prospects for 2013,’’ April 10, 2013, http://www.wto.org/english/

newsle/pres13le/pr688le.pdf. 4 U.S. Department of State, ‘‘21st APEC Fact Sheet.’’

5 Bureau of Economic Analysis, ‘‘Balance of Payments and Direct Investment Position Data,’’ 

U.S. Department of Commerce, http://www.bea.gov/iTable/indexlMNC.cfm. 6 Ibid. 

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7 U.S. Department of the Treasury, ‘‘Major Foreign Holders of Treasury Securities,’’ August 

2013, http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/mfh.txt. 8 East-West Center, ‘‘Asia Matters for America,’’ http://www.asiamattersforamerica.org/overview. 9Organization for International Investment, ‘‘Insourcing Facts,’’ August 2012, http://

www.ofii.org/resources/insourcing-facts. Estimate based on Asia’s share of overall U.S. inbound 

FDI. 10 Bureau of Economic Analysis, U.S. Department of Commerce. 11 Cited in Claude Barfield and Philip I. Levy, ‘‘Tales of the South Pacific: President Obama 

and the Transpacific Partnership,’’ American Enterprise Institute, December 2009, http://

www.aei.org/files/2009/12/18/09-IEO-Dec-g.pdf. 12 ‘‘U.S. to China: Play by our Economic Rules,’’ The Atlantic, November 13, 2013, http://

www.theatlantic.com/china/archive/2013/11/us-to-china-play-by-our-economic-rules/281433. 13 Hillary Clinton, ‘‘America’s Pacific Century,’’ Foreign Policy, November 2011, http://

www.foreignpolicy.com/articles/2011/10/11/americaslpacificlcentury. 14White House, ‘‘Remarks by President Barack Obama at Suntory Hall,’’ news release, November 14, 2009, http://www.whitehouse.gov/the-press-office/remarks-president-barack-obamasuntory-hall. 15Matthew P. Goodman, ‘‘Global Economics Monthly: Five Myths about TPP,’’ CSIS, April 30, 

2013, http://csis.org/publication/global-economics-monthly-five-myths-about-tpp. 16Peter Petri, Michael G. Plummer, and Fan Zhai, ‘‘The Trans-Pacific Partnership and AsiaPacific Integration: A Quantitative Assessment,’’ Peterson Institute for International Economics, 

November 2012. 17 Clinton, op. cit.

Senator CARDIN. Thank you very much for your testimony. 

Dr. Scissors. 

STATEMENT OF DR. DEREK M. SCISSORS, PH.D., RESIDENT 

SCHOLAR, AMERICAN ENTERPRISE INSTITUTE, WASHINGTON, DC 

Dr. SCISSORS. Thank you, Mr. Chairman. 

I am going to start with something we all know, but I think it 

is a useful reminder. We certainly need to more effectively engage 

the Asia-Pacific on human rights. It seems by recent events we 

need to do so on security. It may be that the public dimension of 

our economic engagement, the government dimension, needs to be 

improved. But the private sector does not need to rebalance to 

Asia. It does not need to pivot to Asia. It never left Asia and it is 

doing extremely well. 

I will give you a quantitative example and a qualitative example. 

Quantitatively, U.S. total trade has gone from $2.3 trillion in 2004 

to $3.9 trillion in 2013, as we near the end of the year, and the 

Asian share is the same. Over that same period, we have seen a 

deepening intensification, greater sophistication, and greater value 

in the supply chains that run through Asia. 

So when we are talking about rebalancing, thankfully for us, the 

private sector leads our economy, and the private sector does not 

need to rebalance. It is doing fine. I want to remind everyone that 

we have a lot of strengths as well as weaknesses in our engagement in Asia that we should recall. 

I want to do some quick run-through of countries that have been 

mentioned by the committee and one that has not that I would like 

to emphasize. In doing that, I want to make the point that I think 

several members of the committee have already made, which is 

that economic engagement is going to strengthen the security 

cooperation and security environment in the region and that is a 

crucial part of the reason for engaging economically. 

The country I want to start with is Japan. Japan is obviously 

engaged in something of a security standoff at the moment and 

what they need in the long term to strengthen themselves in a 

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variety of ways is economic reform. That is not happening. Japan 

has talked about economic reform. They are not implementing it. 

A useful tool to spur them that the United States is involved in 

is in fact the Trans-Pacific Partnership. We want things from the 

Japanese. We have for a long time on the economic front. The TPP 

makes that possible. It will also help Japan economically and in 

terms of security. 

My comment on China is that the key element in dealing with 

the Chinese both indirectly and directly is to deal with state-owned 

enterprises. It is something that the Congress has brought up 

before, absolutely correctly. Therefore the negotiations in the 

Trans-Pacific Partnership concerning competitive neutrality, which 

is a way of handling state-owned enterprises, are a vital element 

of our long-term engagement in Asia and with China. We are also 

going to have to bring up state-owned enterprises bilaterally. This 

is not an easy issue. Happy to talk about it more in Q and A. But 

it is vital. 

Another country I think is very interesting that has been brought 

up by Senator Rubio is the Philippines. The Filipino economy is 

doing better now than it has for some time. It is not a proven, sustained, and durable expansion, but it is an expansion that may 

make them more amenable to economic engagement with the 

United States and with the world. They have a large labor force 

that they are going to need to find employment for. This is a good 

time for us to engage the Philippines and they may be falling below 

the radar a little bit. 

Similarly, Senator McCain brought up Vietnam. He made a very 

interesting point about catfish. I would say that textiles are similar 

in some ways to the catfish issue, but multiplied by a thousand. 

When we are asking for human rights reform in Vietnam, which 

the Communist Party is very reluctant to give us, textiles are a 

lever in which we can make progress on that issue because it is so 

important to the Vietnamese that they get better access to the 

United States market. 

The last country I want to bring up is Taiwan, which has not 

been mentioned, partly because there is a very sensitive security 

situation. They are also not very cooperative economic partners in 

some cases. But I will say that, for both security and economic 

interests—because, for example, on human rights Taiwan is an 

excellent, excellent partner of the United States—we need to not 

wait for the international environment to be right. We need to take 

the initiative, push ourselves and push the Taiwanese. That would 

be another dimension of American engagement I think that could 

be improved. 

I have two themes that I want to close with. One is really 

directed toward the executive branch, and I will agree with the 

chairman that the executive branch’s cooperation with Congress 

has been lacking. I do not know why TPA is coming up this late. 

TPP is almost done and now we are going to get TPA guiding on 

the negotiations of TPP—does not make a lot of sense to me. 

So my advice to the executive branch is that: focus on countries 

that are ready to make internal reform. Japan seems like it might 

be ready. The Philippines, given their economic situation, might be 

ready. There are other countries that are not ready, and simply 

FOREI-43947 with DISTILLER

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negotiating with them endlessly when they are not ready to make 

those changes is not a good use of American resources in engaging 

Asia. 

My advice to the Congress is that priorities need to be set. I will 

give a concrete example. It is only one. It is just an example. I do 

not think currency manipulation is an issue for the Trans-Pacific 

Partnership. I do not have a problem with Congress saying it is. 

If Congress says this is an important issue, that is fine. What I 

want is priorities to be set. It cannot be everything. We have—this 

is true on China, it is true in the TPP. I know the members are 

very well aware of it. We have a lot of groups demanding this issue 

and that issue and the other issue. One thing Congress has to do 

through TPA and informally is guide the administration: These are 

where the buck stops, these two, these three things. That would be 

very helpful in the United States engagement of Asia. 

Thank you. 

[The prepared statement of Dr. Scissors follows:]

PREPARED STATEMENT DR. DEREK M. SCISSORS

It does not, in fact, ‘‘take money to make money.’’ Ideas and innovation can make 

money, so can rich land and skilled labor, especially when these are combined with 

protection of private property and the willingness to compete. 

To successfully engage Asia economically, which will enhance prosperity both at 

home and for American partners, the U.S. does not need to pour in either financial 

or human resources. Those are luxuries. Our wealth, technology, natural resources, 

skilled labor, and—making these much more valuable—our willingness to conduct 

free and open exchange have shaped Asia in the post-war area. If we act wisely, 

they will do so for decades to come. 

It is certainly true that the U.S. must be consistently involved in the institutions 

(acronyms) that matter to Asia, from the Association of South East Asian Nations 

(ASEAN) and the East Asia Summit (EAS) to the Trans-Pacific Partnership (TPP) 

and Asia-Pacific Economic Community (APEC).1 So a bit more funding for plane 

flights, hotel stays, and specialists at the office of the United State Trade Representative and elsewhere would be useful. But U.S. economic openness will count far, far 

more than any combination of government programs and personnel. 

The core of engagement with Asia should be to guarantee to maintain and extend 

that openness, in exchange for steps by our partners to better protect property 

rights and enhance competition in their markets. These steps will vary by country 

and characterizing each situation is a book-length endeavor. A partial list of American priorities includes: (i) accepting in policy terms the benefits of imports and the 

costs of export subsidies; (ii) quickly concluding a strong TPP to boost regional 

economies, especially Japan’s, and (iii) with more difficult partners, matching the 

level of ambition in bilateral talks to the extent and direction of internal reform. 

WHAT MATTERS MOST

Our economic engagement in the Asia-Pacific rests on more than six decades of 

access to the U.S. market. This access was transformative in post-war Japanese economic reconstruction and in the development of Korea and Taiwan. It was transformative in the expansion of the Chinese economy.2 It could yet prove transformative in the development of India and Vietnam. Of course, these countries 

primarily needed, and still need, to make wise policy decisions concerning savings 

and other factors but they frequently make them in order to take advantage of the 

indispensable American market. 

The reference point for understanding the American economic role in Asia, both 

for the U.S. and the region, is our imports from Japan. From zero in 1945, these 

reached $69 billion in 1985. This was almost exactly the same as American imports 

from Canada (our largest trade partner for nearly all of our history) and the equivalent of 5 percent of Japanese GDP, which was then second-largest in the world and 

fast-rising.3 American capacity and willingness to import in these quantities was 

highly visible and highly sought by others. 

South Korea did not have Japan’s prewar legacy of development. In 1960, it was 

comparable in wealth to countries in sub-Saharan Africa and exports to the U.S. 

were negligible. By 2000, its exports to the U.S. exceeded $40 billion, or 7.5 percent 

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of GDP, and South Korea was well on its way to being a rich nation.4 In 1960, Taiwan was only modestly richer than Korea at the time and exports to the U.S. were 

negligible. In 2000, exports exceeded $40 billion, 12 percent of GDP, and Taiwan 

was solidly upper middle-income.5 These facts were well-appreciated for decades but 

now sometimes seem to be forgotten on both sides of the Pacific. 

Chinese development was not initially linked to the U.S. However, the second 

wave of Chinese reform, starting in late 1992, improved corporate efficiency and 

prepared the way for WTO accession, an accession driven by Sino-American agreement.6 From 1992 to 2012, Chinese exports to the U.S. increased by a factor of 17, or $400 billion. In 2012, they were the equivalent of 5 percent of China’s GDP, 

which is second-largest in the world and fast-rising.7 The parallel to Japan is 

striking. 

In light of the Chinese experience, another obvious candidate to walk this path 

is India. There is little sign of India being willing to undertake fundamental reform 

in order to sell on a large scale to the American market, but this was also true in 

China in 1991. Smaller but still notable in size is Vietnam. Through its negotiations 

in the TPP, Vietnam is attempting first and foremost to win market access to the 

U.S. and follow the path of its neighbors.8

Investment has been much less important than trade in Asia-American economic 

relations and can play a larger role. Japan is by far the largest Asian investor in 

the U.S., while flows from Korea and Taiwan, as well as Australia, are inconsistent 

in size. Chinese money goes overwhelmingly into low-yield bonds.9 Drawing steadier 

investment from the richer countries and more productive investment from China 

does not require financial incentives—American respect of property rights, huge consumer market, and natural resources are more than enough incentive. All that is 

needed is information from local governments and a timely, transparent approval 

process at the federal level. 

Some of the implications 

The matter of open American markets to many Asian countries, and the lack of 

reciprocal openness in some cases, has been subject to extensive political debate in 

the U.S. In one important respect, the debate is misguided: the large trade deficits 

the U.S. runs with Asia as a whole, and China in particular, do not necessarily represent lost American jobs. 

Imports from Asia-based producers, even improperly subsidized imports, benefit 

consumers and thus strengthen the American economy. They can even create jobs 

directly here, in offloading, transportation, sales and so on. It is no surprise that 

the sharp downturn in 2009 saw the U.S. trade deficit with our top six Asian trade 

partners at $290 billion while the recovering economy of 2012 saw the deficit exceed 

$430 billion.10 At the same time, subsidized American exports are a type of income 

redistribution program—taxpayer money going to certain exporters—and do not 

benefit the country as a whole. 

It is certainly true that many Asian policymakers have shown mercantilist tendencies over the years, inhibiting American exports and denying the associated benefits to American workers and companies.11 Congress has struggled to influence 

these policies without resorting to denial of access to the U.S., which would harm 

both trade partners and American interests. The solution is to continue to leverage 

our open market. 

Leveraging has already occurred—despite domestic political dissatisfaction, American demands for open trade have powerfully shaped Asia compared to the pre-WTO 

era. More recently, China joined the WTO to protect its access to the U.S., signing 

up for rules put in place at America’s behest.12 Japan, Vietnam, and Malaysia are 

willing to go beyond the WTO and join the American-led TPP for the same reason. 

The institutional engagement with ASEAN and, to a lesser extent at the EAS and 

APEC, offers additional opportunities. 

In contrast, a protectionist turn by the U.S. would be destructive for the region 

and our role in it. A truly closed American market, featuring high tariff walls 

imposed for political reasons, would shatter the Sino-American relationship and 

alienate other countries which are not treaty allies. It would leave the U.S. with 

an unpleasant and possibly untenable role as security guarantor, only, in an economically damaged and increasingly hostile region. 

While withdrawal is not on the table at the moment, fortunately, there is also risk 

from the failure to engage. If restrictive rules of origin in the TPP make it more 

like a bloc than the core of an Asia-Pacific free trade zone, it will force countries 

to decide to be ‘‘with us or against us.’’ This may lead to one of the regional endeavors, such as ASEAN+3, becoming a counter-bloc. Even if nothing so dramatic happens, the absence of American economic leadership will almost surely lead to more 

mercantilist competition within the region, which already lingers just below the surFOREI-43947 with DISTILLER

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face in exchange rate policy.13 The region will see more political tension and offer 

less in the way of benefits to the U.S. 

U.S POLICY TOUR

Writing about Asia is similar to trying to plan a trip to Asia: there are too many 

places to go. The economic kingpins, Japan and China, naturally merit the most 

attention. There are also particularly interesting American choices to be made with 

regard to Taiwan, India, the Philippines, and Indonesia. All involve leveraging the 

U.S. market and other economic strengths to drive Asian policy choices. 

The large economies 

The TPP is not the only game in town but it is the biggest one. It became the 

main event when Japan joined and Tokyo now very much needs a good TPP. 

Prime Minister Abe’s program to end the long period of economic stagnation has 

begun to founder on delays in much-touted structural reform.14 The TPP could 

deliver the painful changes necessary while allowing Abe to claim they are not his 

doing, but rather unavoidable in light of the economic importance of the TPP group 

as well as Japan’s current standoff with China. Agriculture reform in particular 

would improve Japan’s land usage, which constitutes a fundamental shift, and is a 

high American negotiating priority.15 A TPP which both helps reinvigorate Japan’s 

economy and improves access for goods and services in which the U.S. has a comparative advantage would be the single biggest accomplishment of the Asia pivot. 

As ever, China’s impact is multifaceted. In terms of the TPP, most member states 

want China to be able to join. Several, including the U.S., want China to be able 

to join if and only if it fulfills the terms of a high-standard agreement. Negotiating 

with China will involve the same issues as negotiating with other parties but one 

stands out as more pointed: the treatment of state-owned enterprises (SOEs). This 

is being done in the TPP through a chapter on ‘‘competitive neutrality.’’ 

The idea behind competitive neutrality is SOEs should not be granted competitive 

advantages over private firms. But existing versions of competitive neutrality, such 

as Australia’s, were formulated for countries that wish to limit SOEs. It is not clear 

Singapore and Vietnam qualify and it is entirely clear China does not qualify.16

So this is a two-stage process. First, TPP talks must yield a strong version of competitive neutrality that binds hesitant countries. Second, the TPP grouping must 

become a sufficiently powerful lure for China to meet the obligations. 

Beyond the TPP, Asian countries understand that Chinese policy is based essentially on convenience, while American economic policy is based on principle. China 

welcomes foreign commodities and other goods and services that it considers valuable at the time, the U.S. welcomes foreign goods and services that offer quality and 

low prices. This provides the U.S. with a major diplomatic advantage and counterweight to Chinese practices. At the bilateral level, the record shows that negotiating 

change from outside does not work.17 Internal Chinese reform must precede an 

investment treaty, it will not come about from an investment treaty. 

Pivotal smaller economies 

A challenge of a different sort for U.S. policy involves Taiwan. With only 23 million people, Taiwan remains in the top 13 of American trade partners. This impressive performance is also a vulnerability: to remain prosperous, Taiwan must remain 

in the forefront of global trade evolution. This has been extremely difficult due to 

Chinese intimidation of much of the world with regard to Taiwan’s signing bilateral 

and some multilateral trade agreements.18

Offering Taiwan economic alternatives is just as important as the American security commitment in ensuring the island’s citizens can choose their own destiny. 

Given regional politics, the U.S. must either lead a multilateral effort to engage 

Taiwan or work toward purely bilateral accords. While Taiwan-U.S. economic negotiations have sometimes been unpleasant, American shale shipments could have 

extremely high value to Taiwan and enable needed improvements in the treatment 

of agriculture products.19

Other difficult economic negotiations have involved India. To be the kind of economic and, ultimately, security partner the U.S. wants, India must fundamentally 

liberalize rural land ownership, manufacturing labor laws, and economic exchange 

across its own states. Yet the India-U.S. bilateral economic relationship is shaky 

and India is often constitutes the chief obstacle to progress at the WTO Doha 

round.20

The best—perhaps the only—place to make progress may be in forums with Asian 

countries that have successfully liberalized. These have adopted a number of principles India has repeatedly infringed, for example with regard to taxation and intellectual property. Progress may be elusive, but it will certainly damage the relationFOREI-43947 with DISTILLER

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ship and encourage more disruptive Indian behavior in the WTO and elsewhere if 

the U.S. starts closing the door to Indian workers. Taxing Indian labor to pay for 

internal American programs, as in early 2011, is harmful in this regard.21

Two members of ASEAN not currently involved in the TPP and therefore not 

receiving much American policy attention are Indonesia and the Philippines. The 

latter is, of course, a U.S. treaty ally. It boasts an economy where household spending has accelerated to better than 6 percent growth annually and manufacturing 

and services are now far outperforming the traditional sector leaders agriculture 

and mining. 

To maintain this performance and create the jobs necessary to absorb more than 

10 million unemployed will require promarket reform.22 With reform and given the 

large Filipino labor force, a maturing industrial sector would become quite competitive on world markets, making this the most promising time yet to enhance the 

Philippines-U.S. economic relationship. The security relationship means American 

political support for closer economic ties is high, the question of whether a bilateral 

or multilateral approach is superior should be answered by internal Philippines 

politics. 

Indonesia is the largest ASEAN member, with a population about equal to that 

of the U.S. in 1989. It also has a growing labor force and, unlike some of its neighbors, has shown no particular tendency to run large trade surpluses. Indonesia’s policy record, though, is uneven at best. It is contemplating a year-long ban of unprocessed ore exports, which would be illegal under the WTO, and a mercantilist turn 

that could have a considerable impact in the region.23 It is not clear how best to 

engage Indonesia economically and the obstacles and potential in doing so are perhaps the best justification for active American participation in the EAS. 

RECOMMENDATIONS

The U.S. has already changed Asia, especially East Asia, for the better with our 

openness. The ideal course is to continue to do so. Economic engagement of Asia 

should be based on, but not limited to, the following guidelines:

(1) Do not treat imports as if they automatically cause job losses here. Do not 

treat subsidized exports as contributing to national prosperity. 

(2) For foreign investors, provide information rather than opaque or politicized 

review processes. 

(3) Ensure the competitive neutrality provisions in the TPP tightly constrain 

countries that continue to seek to subsidize their state-owned enterprises. 

(4) Quickly conclude a strong TPP that offers Japan benefits in autos and elsewhere in exchange for better access to the Japanese agriculture and services markets. 

(5) Do not move forward on a bilateral investment treaty with China until it is 

clear that relevant internal reform is under way there. 

(6) In the trade and investment framework talks with Taiwan, bundle two key 

commodities: Taiwan can be treated as free trade partner in oil and gas if it is also 

one in agriculture. 

(7) Treat India as a vital but long-term partner. Negotiate under the bilateral economic dialogue for basic reform and do not punish Indian services firm for the failure of their government. 

(8) Be quick in seizing an unprecedented opportunity to engage the growing but 

fragile economies in the Philippines and Indonesia either on a bilateral basis or 

through the TPP. 

The U.S. does not need a large commitment of resources to successfully engage 

Asia economically. We just need the willingness to maintain and extend our 

openness.

————————

End Notes

1 ‘‘Asia-Pacific Economic Cooperation’’ is grammatically irritating. 

2See, respectively, Aaron Forsberg, ‘‘America and the Japanese Miracle: The Cold War Context of Japan’s Postwar Economic Revival, 1950–1960,’’ (Chapel Hill: UNC Chapel Hill Press, 

2000), Charles Harvie and Hyun-Hoon Lee, ‘‘Export Led Industrialization and Growth—Korea’s 

Economic Miracle 1962–89,’’ (working paper series, University of Wollongong, 2003), http://

ro.uow.edu.au/cgi/viewcontent.cgi?article=1066&context=commwkpapers; Robert E. Baldwin, 

Douglas Nelson, ‘‘The Political Economy of U.S.-Taiwanese Trade and Other International Economic Relations,’’ in Trade and Protectionism, ed. Takatoshi Ito and Anne O. Krueger (Chicago: 

National Bureau of Economic Research, 1993) http://www.nber.org/chapters/c8079; and Thomas 

I. Palley, ‘‘External Contradictions of the Chinese Development Model: export-led growth and 

the dangers of global economic contraction,’’ Journal of Contemporary China Volume 15, Issue 

46, 2006, pg. 69–88. 

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3 ‘‘Foreign Trade: U.S. Trade in Goods by Country,’’ United States Census Bureau, Department of Commerce, http://www.census.gov/foreign-trade/balance/index.html and ‘‘GDP (current 

US$),’’ World Development Indicators, The World Bank, http://data.worldbank.org/indicator/

NY.GDP.MKTP.CD?page=2. 4Dani Rodrik, ‘‘Getting interventions right: how South Korea and Taiwan grew rich,’’ Economic Policy Volume 10, No. 20, 1995, http://isites.harvard.edu/fs/docs/icb.topic442978.files/

Rodrik%20l%20How%20Korea%20and%20Taiwan%20grew%20rich.pdf and Charles R. Frank 

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Rodrik%20l%20How%20Korea%20and%20Taiwan%20grew%20rich.pdf and Robert E. Baldwin, 

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US$),’’ World Development Indicators, The World Bank, http://data.worldbank.org/indicator/

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dispatch/news/kyodo-news-international/130914/us-vietnam-basic-accord-clears-major-hurdle-tppdeal. 9 ‘‘Foreign Direct Investment in the U.S.: Balance of Payments and Direct Investment Position 

Data,’’ Bureau of Economic Analysis, U.S. Department of Commerce, http://www.bea.gov/international/di1fdibal.htm and ‘‘Foreign Portfolio Holdings of U.S. Securities,’’ Department of the 

Treasury, Board of Governors of the Federal Reserve (Washington: 2013), http://www.

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Imports Support U.S. Jobs,’’ (Washington, DC: Heritage Foundation, September 12, 2012),

http://www.heritage.org/research/reports/2012/09/trade-freedom-how-imports-support-us-jobs and 

‘‘Foreign Trade: Top Trading Partners,’’ United States Census Bureau, Department of Commerce, http://www.census.gov/foreign-trade/statistics/highlights/top/index.html. 11 ‘‘The Real Asian Threat: Mercantilism,’’ Bloomberg BusinessWeek, April 14, 1996, http://

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2013/08/rules-of-origin-can-make-or-break-the-trans-pacific-partnership and Vidya Ranganathan, 

‘‘Korea becomes the red flag for Asia’s currency war,’’ Reuters, January 31, 2013, http://

www.reuters.com/article/2013/02/01/markets-currency-war-idUSL4N0B01SL20130201. 14 Alexis Xydias, ‘‘Abenomics to Fail Without ‘Third Arrow,’ Allianz Global,’’ Bloomberg, 

November 12, 2013, http://www.bloomberg.com/news/2013-11-13/abenomics-to-fail-without-thirdarrow-allianz-global.html. 15 ‘‘TPP or no, aging farm sector needs true reform,’’ The Japan Times, March 26, 2013, http:/

/www.japantimes.co.jp/news/2013/03/26/business/tpp-or-no-aging-farm-sector-needs-true-reform/

#.Uqp8EtJDtac. 16Derek Scissors, ‘‘Why the Trans-Pacific Partnership Must Enhance Competitive Neutrality,’’ 

(Washington, DC: Heritage Foundation, June 6, 2013), http://www.heritage.org/research/reports/

2013/06/why-the-trans-pacific-partnership-must-enhance-competitive-neutrality. 17 ‘‘Shade of Grey,’’ The Economist, December 10, 2011, http://www.economist.com/node/

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/www.atimes.com/atimes/China/FG14Ad05.html. 19 ‘‘After five years, Taiwan-US trade talks resume,’’ Taiwan Insights, March 27, 2013, http:/

/www.taiwaninsights.com/2013/03/27/after-five-years-taiwan-us-trade-talks-resume/ and Song 

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20Peter Alford, ‘‘India cripples World Trade Organization’s Doha Round hopes,’’ The Australian, December 4, 2013, http://www.theaustralian.com.au/news/world/india-cripples-worldtrade-organisations-doha-development-round-hopes/story-e6frg6so-1226775236139 and Doug Palmer, ‘‘U.S. trade chief urges India to heed to U.S. companies’ complaints,’’ Reuters, July 12, 

2013, http://in.reuters.com/article/2013/07/12/usa-india-trade-chidambaram-idINDEE96B01J20

130712. 21 ‘‘Ignoring India’s concerns, Obama signs 9/11 health care bill,’’ The Economic Times, January 3, 2011, http://articles.economictimes.indiatimes.com/2011-01-03/news/28430935l1lobamasigns-health-and-compensation-act-health-care. 22 ‘‘Philippine Economy posts 7.0 percent GDP growth in Q3 2013,’’ National Statistical Coordination Boar, Republic of the Philippines, November 28, 2013, http://www.nscb.gov.ph/sna/ 

and Poverty Reduction and Economic Management Unit, ‘‘Philippine Economic Update: Accelerating Reforms to Meet the Jobs Challenge,’’ The World Bank, May 2013, http://

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UpdatelMay2013.pdf. 23 ‘‘Foreign Trade, Export by Month, Year 2013,’’ Badan Pusat Statistik, Statistics Indonesia, 

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focus,’’ The World Bank and Bank Dunia, December 2012, http://www.worldbank.org/content/

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http://www.indonesia-investments.com/doing-business/business-columns/go-ahead-for-indonesiascontroversial-ban-on-unprocessed-mineral-exports/item1397.

Senator CARDIN. Well, thank you both for your testimony. 

Dr. Scissors is absolutely correct. Congress has to set priorities. 

If an agreement is negotiated and we do not have TPA, there will 

be 535 priorities. The good thing about doing TPA first is that collectively we can determine the priorities before the fact rather than 

after the fact. 

So it is a little frustrating to many of us that we have not seen 

the TPA bill and that there has not been a more transparent process. It is not just TPP, there are a couple other agreements that 

are floating around, one for Europe particularly that is also very, 

very important. I also appreciate your comments about leveraging 

for change and seeking the priorities to do that. 

So let me talk about China just for one moment and what is happening. China is the largest authoritarian, one-party regime. It has 

been slow to change its ways, but it has made some reform, most 

recently announcing that the reeducation camps are going to be 

ended, that they are progressing on some of their human rights 

issues. In my visit to China, you can see that there has been 

change in this country, there is no question about it. 

So is there enough internal reasons for change in China that it 

is going to happen? Yes, we should try to work on leveraging issues 

of priorities to us. But what is your assessment of the pace of 

reform and whether there is hope that the country will become a 

much more open society in the decades to come? 

Dr. SCISSORS. Thank you, sir. If you had asked me that question 

2 years ago, I would have said it is just hopeless, just forget it, that 

we had a government in charge that was in charge for 10 years, 

that had taken the country backward economically, that had no 

interest in useful foreign policy engagement as far as I was concerned and was not improving the human rights situations of its 

people. 

As you have said, we now have a new government. We now had 

a major meeting a month ago where they talked about a number 

of reforms. That is a good sign. It is certainly better than where 

we were before. Otherwise, it is far too soon to tell. I remain deeply 

suspicious, perhaps scarred by the last 10 years. 

But for example, the Chinese are treating foreign companies 

worse than they were 2 years ago. That is not the only issue. It 

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is not maybe the most important issue. But it is not an encouraging sign. The air defense zone is not an encouraging sign. 

So I would say you are right, sir, we should watch the reform 

promises. But at this moment I am suspicious and I think of China 

as a place where we are going to have a lot of difficulty making 

progress on the things we care about. 

Senator CARDIN. Mr. Goodman, let me let you elaborate on that, 

but if you would focus on one area that is a particular concern to 

me in China. That is the relationship between the local government 

and the national government. As a businessperson, you would need 

to deal with local governments, and the inconsistency among local 

governments and the amount of corruption is legendary. 

How do you see that changing and what can we do so that businesses’ access to China can be more consistent and without the disadvantages brought on by corruption? 

Mr. GOODMAN. Thank you, Mr. Senator. It is a good question. 

The relationship between the center and the local governments in 

China is one of the kind of enduring themes of Chinese governance. 

It has been a sort of pull, tug, and force—a to-and-fro between the 

center and local governments, including over this 30 years of reform, but going back thousands of years. 

In order to really crack this reform nut, they are going to have 

to find a way to both incentivize the local governments to continue 

with the needed changes that they need to take to promote more 

efficient markets and a more competitive playing field, including 

for our businesses. At the same time, they are going to have to 

crack down on corruption and they are going to have to find a way 

to give the local governments the financial resources they need to 

be able to engage in the kinds of investments that are going to support this market-based reform and not wastefully—well, first of all, 

seize land and seize assets from farmers in order to generate revenues and then to spend the money wastefully. 

So it is a huge challenge for the central government and one of 

the reasons that I think I share Derek’s skepticism, or at least caution, about whether they are going to be able to follow through on 

this reform. I think the good news is that, like an alcoholic, the 

first step to recovery is acknowledging you have a problem, and I 

think they have acknowledged that they have a problem and that 

is I think the most important first step. 

But following through and implementing, including on these 

issues of getting the incentives right with local governments so 

they will do the market-based reform, cut down corruption, but 

make the kinds of investments they need, that are efficient and 

support a market-based system, I think is going to be the real challenge going forward and one of the things that we are going to be 

watching very closely. 

Senator CARDIN. Well, Dr. Scissors, mentioned the fact of 

leveraging, which I strongly support. It is in our interest, it is in 

the interest of the region, it is in the interest of China that they 

move ahead with these reforms, that they deal with the problems 

of local government and corruption, that they deal with stateowned enterprises. You are absolutely correct about that issue. 

That is a huge problem that confronts China and other countries 

in Asia. 

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What leverage do we have and how can we advance these issues 

in a more urgent manner? 

Mr. GOODMAN. I think, look. On one level I would say that it is 

up to the Chinese to figure out how to do this, and we are going 

to have on one level a limited amount of leverage and we have to 

I think accept that on one level. On the other hand, there are a 

lot of things they want from us. 

They want our large market. They want our businesses. They 

want our technology. They want our ideas and our experience with 

reform. 

I think it is very interesting that recently they announced this 

opening of a free trade zone in Shanghai. That comes right on the 

heels of the decision to expand TPP to include Japan and I think 

there is a relationship there. I think they see the competitive challenge from a TPP arrangement that includes high standard rules 

and liberal markets in this large economic area as a competitive 

challenge for them and they have to match it in some way. 

I think that that has provided some leverage that has generated 

that change that I mentioned in Shanghai. Their willingness to 

talk about a bilateral investment treaty with the United States on 

the terms that we are seeking of preestablishment, market access, 

and a negative list approach, I think that all came in the wake of 

these developments externally that we were very much a part of 

in our strategy on TPP. 

So I think we do have leverage. But in the end they have got to 

figure this out for themselves. 

Dr. SCISSORS. I completely agree with what Matt said. 

I just want to add one thing. I have been following Chinese outward investment, investment coming out of China, for 15 years and 

this is a booming area for them, and their preferred destination, 

frankly, is the United States because we are big and we have resources and we give investor protection. So one discussion with 

them is: Hey, we want to give you good access to the American 

market, that is part of our principles. But, by the way, these things 

that you are asking for, we do not have them in China. 

That is not going to solve all of our problems. They are not going 

to do everything we want in exchange for investment access. But 

we can improve some of the business conditions for U.S. firms operating in China on the basis of reciprocity. So that is an area where 

we have some leverage. 

Senator CARDIN. Senator Rubio. 

Senator RUBIO. Thank you. 

I wanted to explore first with you, Dr. Scissors, this notion of 

free trade and in particular imports. So I get resistance from people who believe that free trade is a destroyer of American jobs. 

Obviously, free trade has to be fair and there are rules that are 

important, because, as you have just described, one scenario, not 

exactly on point, but you have described a scenario that is a oneway street. Our values of openness allow them to invest, the Chinese to invest here, but when we try to reciprocate there are all 

kinds of impediments to that. 

That has always been a challenge to us on multiple fronts, 

including on the trade front. But in specific on the issue of imports, 

there is this idea that imports into the United States in and of 

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themselves destroy American jobs. But in your written statement 

you have outlined why in fact that is not potentially the case, that 

in fact there are also jobs created through imports from offloading. 

Can you just elaborate on that more, because that is an issue I 

get a lot when I go out and talk about the need to expand trade 

opportunities, not just with Asia but with the entire world. Can 

you elaborate a little bit more on the benefits that imports—

obviously, we want to be able to export, too, but the benefits that 

imports have for American jobs, particularly stable middle class 

jobs? 

Dr. SCISSORS. Yes, sir, I would be happy to. I think this is an important point. This is not to say that unfair competition does not 

exist and the Chinese do not subsidize their firms and these are 

things we should not fight. But I do think that the people forget 

that imports are good for us. They are good for us in a number of 

ways. 

I talked about the electronics supply chain. Not only do we all 

have good quality phones in our pockets, hopefully turned off, and 

some people have big flat-screen TVs at home that are incredibly 

cheap. So that is nice for consumers. But it also saves money, creating resources that are available for other things in the American 

economy. Clothes used to be a big part of Americans’ budget. We 

are all old enough to remember that. They are not any more. Consumer electronics are a declining part of America’s budget. That 

money goes for individuals and for the country as a whole to other 

things, including job-creating activities here. 

So there is an indirect effect. When you do not spend as much 

money and as many resources on things that you can import well, 

you have those things, those resources, available for what you do 

extremely well, which in our case is high-tech manufacturing, agriculture, and so on. 

There is also the direct effect that you referred to, which is imports do not magically appear. You do not say some thing is produced in China or elsewhere and now I have it in front of me. It 

is shipped, it is offloaded, it is transported within the country, it 

is sold, it is marketed. All those create jobs. 

I will give you a specific example. We found that the number of 

jobs that are supported just by shipments of clothing from China 

is larger than the number of jobs supported by the United States 

textile industry. So I understand people’s concern about unfair 

competition from countries. That exists. There is no denying it. But 

it is not the case that imports necessarily cost jobs. There are certainly examples where imports in fact create jobs for the United 

States. 

Senator RUBIO. So just to describe the supply chain for this 

phone for a second, it says here it was innovated and designed in 

California, but assembled in China. Somebody built this phone over 

there and then they had to ship it here. They had to offload it at 

a port of entry. Those were American jobs. Then it had to be transported from the port of entry to a distribution center, again another 

set of American jobs. Then from that distribution center—there 

were jobs there—they were shipped out to the retailers, another 

group of American jobs. Then at the retail level there is somebody 

selling it, another set of American jobs at the retail level. 

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Then whoever buys these things is paying less than they normally would, which means whatever money you are saving on this, 

the difference between how much it would have cost to do it somewhere else and do it where it is happening now and what you actually paid, that difference is now available to spend somewhere else 

because you did not spend it on this. 

Is that an accurate description of how it plays out? 

Dr. SCISSORS. A better one than the one I gave; yes, sir. 

Senator RUBIO. Well then, let me just ask one last one. I do not 

know if you know the answer to this, but my guess is that all of 

those jobs down that supply network that I have described probably pay better than some of the people that are building this. 

Dr. SCISSORS. That is a good point to elaborate on. We have kept 

the higher value-added jobs here. To even extend your supply chain 

further, it does not—the design does not occur here and then suddenly the phone is in China. We actually have production that 

routes through Japan, Taiwan, Malaysia, Korea, various of our 

Asian partners, and then the assembly occurs in China. 

The assembly of the phone is not such a great job and in fact the 

Chinese have very significant labor problems connected to some of 

those jobs. 

Senator RUBIO. Because their wages are increasing and it is forcing it to go elsewhere? 

Dr. SCISSORS. Because their wages should be increasing and 

sometimes they are not, because the conditions are not very good. 

The better jobs associated with consumer electronics, far better 

than in China, are here. What we get is a trade number that looks 

like we are running a consumer electronics deficit with China, but 

we are getting better jobs than they are out of it. 

Senator RUBIO. That is a good way to describe it. 

Mr. Goodman, in your testimony you talked about something I 

thought was interesting, and that is a notion that you said was 

recently popular, until recently was popular in Beijing, that TPP 

is part of an effort by Washington to contain China. But in fact, 

if they decide not to participate in free enterprise and free commerce and free navigation and the benefits of this sort of barrier 

reductions, that is a decision they have made to contain themselves, right? 

I mean, this is not—my understanding of the region is that most, 

if not all, of the countries would like stronger integration with 

China, but on a set of rules based on freedom and freedom of commerce and freedom of navigation and mutual reciprocity on rules, 

et cetera, not on the set of rules that China would like to impose. 

So really the ones—to the extent that there is anybody excluding 

anyone, it is Chinese policymakers that have decided to potentially 

exclude themselves from this and other arrangements because they 

do not like the rules. The rules they want are actually much more 

one-sided, to the benefit of China and to the detriment of their 

neighbors and perhaps the rest of the world. 

Mr. GOODMAN. Thank you, Senator. That is I think absolutely 

correct. I think that the notion of, first of all, of somebody trying 

to contain China economically does not make any sense, because 

everybody wants to engage with them. So I think there was a misunderstanding. 

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In fact, TPP was designed to do the opposite of excluding them, 

which is to pull them into this global rules-based order and, 

frankly, make them follow the rules of the road that we have 

helped champion for half a century. So this notion never made 

sense in terms of U.S. strategy. 

Yes, you are right, on China’s own side, it was only about a year 

ago that they were continuing to say: We do not want these rules, 

we do not want to be part of this system. Then I think what happened, as I say, I think the big change was Japan joining TPP, 

because now you have got the third-largest economy in the world, 

a major competitor for them economically and strategically, joining 

this agreement, and it becomes suddenly an agreement that has 

large heft and, frankly, is the place in the world—frankly, I am 

sorry, but it is not Geneva—where the rules are being written. It 

is in TPP where the rules of the international trading system are 

being written. 

China realized this and I think said: We have got to be part of 

this rulemaking exercise whether we are in TPP, which may be 

challenging, frankly—I am not sure they are ready to reach the 

kind of standards that are being negotiated in TPP. But if not, they 

need to find another way to match this, and that is why I mentioned the Shanghai FTZ. That is why I think it helped drive a 

very forward-leaning reform package at this Third Plenum last 

month. It is why they are willing to talk about a bilateral investment treaty, and it is why they are talking more positively about 

TPP. 

So I think, yes, I think they themselves were their own worst 

enemies in this area, and I think they have figured out that this 

is not the right approach and they have changed course. 

Senator CARDIN. Senator Murphy. 

Senator MURPHY. Thank you, Mr. Chairman. 

I want to continue to explore this question of where the rules of 

the global economy are being set. You know, if we want more 

transparency around these trade agreements or we want more public debate, we should probably think about renaming them. ‘‘TTP’’ 

and ‘‘TTIP’’ creates a little bit of unnecessary confusion out there 

amongst the public. 

But as the chairman of the Europe Subcommittee, we hear a fair 

bit of consternation in places like China and India that TTIP is an 

effort between the United States and Europe to gang up on the 

developing world, to set global standards for product safety and 

financial instruments and food quality that the rest of the world 

will have to live with. 

Mr. Goodman, you are sort of saying the opposite. You are saying 

that really if—or I heard you to say that the rules of the road are 

being set not in Geneva, but in the negotiations on TPP. 

So I just would love for the two of you to sort of explore the interaction on the beginnings of negotiation on a Europe agreement 

coming on the heels of the negotiation with Japan and others in 

TPP, and to what extent is it a fair characterization of the Europe 

trade agreement that this is the United States and Europe essentially trying to get together on standards setting so that those 

standards are not set in Asia, or to what extent—maybe you can 

continue upon what you began to talk about with respect to the 

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fact that maybe the game is not in the Europe negotiations, the 

game is really in what comes out of the TPP negotiations. 

Mr. GOODMAN. Thank you, Mr. Senator. A good question, and I 

am sorry that I was misleading before. What I meant was that the 

place that these rules should be negotiated is Geneva in the WTO. 

Everybody I think understands that you need a multilateral framework of rules and that is the first best solution. 

But it is like trying to climb Mount Everest. We tried the north 

face. We tried going up the multilateral route and, frankly, with 

the exception of this latest thing in Bali, this agreement on trade 

facilitation, which was encouraging but quite small, we really failed 

and we have had to come back down the mountain find another 

way around. 

That other way around I think is TPP currently and TTIP, the 

U.S.-EU negotiations. 

So I would say the same thing about TTIP that I said about TPP, 

that to the extent that is starting to gain momentum and there is 

a real conversation about the rules, I think that is where the action 

is. So it is TTP and TTIP. Ultimately I think the idea and the 

strategy—it is maybe not stated quite this clearly, but now that I 

am not in government I can say it a little more clearly—I think 

this is a strategy of trying to move from TPP through TTIP to 

establish de facto a multilateral set of rules that covers at that 

point 90 percent of the world economy, and the rest of the world 

economy I think will be faced with a choice of trying to aspire and 

attain that level of high standard rules or they are going to be left 

out of the system. To date a lot of those countries that you mentioned have been free riders on the system and if they are not willing to negotiate and participate actively in these negotiations, then 

I think this is the best second-best strategy. 

Senator MURPHY. I want to hear what you have to say, Mr. Scissors, about this as well. But let me just follow up quickly on that 

point. So you have got now two enormous sectors of the global 

economy negotiating simultaneously. What are the potential for inconsistencies in how those two regimes get worked out that frankly 

will work at cross-purposes with the very notion that you are suggesting as to an effective replacement for the WTO? 

Mr. GOODMAN. Well, the good news is that we are on one side 

of both of those agreements, and so we presumably are bringing 

into TTIP the same kind of approach and principles that we 

brought into TPP and have been pushing in TPP. Now, Europe is 

different, and I used to work in Europe on some of these regulatory 

issues when I was in the private sector and it is a very different 

world view. Frankly, I think we are like Mars and Venus on some 

of these regulatory issues with Europe. 

I think in some ways that is going to be a much tougher negotiation. It may not appear that way because of our shared values and 

history and everything, but actually there are some very tough differences on regulatory issues and GMO’s and a range of other 

issues. 

But I think the fact that the United States is pushing a similar 

approach with similar principles, similar standards, means that 

there is less risk of fundamental inconsistency. But of course each 

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negotiation is going to be slightly different and it may come out in 

a slightly different place. 

Dr. SCISSORS. I think it is a big framing question you have asked, 

which is what is the replacement U.S. strategy after the WTO has 

stalled. I think I hate to use this phrase, but it is appropriate: We 

are looking for coalitions of the willing, and if we find a subset of 

countries in Asia, hopefully a very big subset, hopefully eventually 

everyone, we are happy to deal with them. 

The way I see the trans-Atlantic negotiations is a little bit more 

positive—of course, they have barely started, so it is easy to be 

positive—a little bit more positive than you do, which is we are 

going to use TPP as a base. We used KORUS as a base for the TPP 

negotiations. We are going to use TPP as a base for the transAtlantic negotiations. They are going to be difficult in some respects. They may not work. 

But hopefully they will go forward, and so we will start with TPP 

and we will go beyond that in the trans-Atlantic discussion. And 

if we cannot, then we should look toward Latin America, and if we 

cannot do that we should look toward sub-Saharan Africa. We 

should keep looking for partners who are willing to sign these 

agreements. 

One concrete benefit that I see here is, TPP is pushing the 

boundaries or trying to push the boundaries on intellectual property protection. It is still only going to be the first step. We are not 

going to get top-notch intellectual property protection on the first 

round from Malaysia. But we might get it with Europe. So I think 

there is an opportunity there not to have a conflict between the 

agreements, but to use them to build on each other to get to those 

high standards in areas the United States has been trying to get 

to for years. 

Senator MURPHY. I do not mean to sound pessimistic about TTIP. 

I am actually optimistic about it, notwithstanding I think the fact 

that it is going to operate on a very different framework involving 

tradeoffs that are unfamiliar to a lot of Members of Congress than 

what we have seen in agreements with developing economies. But 

I have been a big supporter and supportive of it both from an economic standpoint and a geopolitical standpoint. 

Thank you very much, Mr. Chairman. 

Senator CARDIN. Let me ask one additional question if I might, 

and that deals with your recommendations of where priorities 

should be placed for empowerment of women in Asia. Land reform 

has been a major area of focus for us. I just would like to get your 

advice as to where you think the most progress can be made. 

Mr. GOODMAN. Thank you, Mr. Senator. A very important issue 

and one that is very much part of the conversation in our Asian 

economic discussions. I think you mentioned that in APEC there 

has been a women’s empowerment initiative and a couple of, maybe 

now three, summits that Secretary Clinton, former Secretary Clinton, began. They have been talking about I think some very specific 

ways in which women can be given more opportunities to enter the 

work force, better conditions once they are in the work force, a 

more inclusive approach to growth strategies in the region. That is 

I think an important initiative. 

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54

APEC is a good forum. I did not have the chance to say this 

before, but APEC is actually a very good forum for this kind of 

conversation, because it is nonbinding, it is consensual, it is an 

opportunity to flesh out ideas and share experiences and build capacity. So I would look to that negotiation or that discussion as an 

important forum. 

As you know, in Japan they are trying to empower women 

because demographically they are shrinking, dying, frankly, as a 

country. If they do not bring women into the work force, it is going 

to be impossible for them to grow and thrive as a country going forward. So there is a very active program that Prime Minister Abe 

has announced. 

Now, whether those things are going to—the problem is these are 

very difficult issues of social mores and some of these countries do 

not have traditions of empowering women in this way, and I think 

it is going to take a lot of time and working and conversation about 

these issues to change those social mores. But I do think law and 

policy can contribute importantly, as they have in this country, to 

social change, and I think in a country like Japan we want to try 

to encourage that conversation and legal and policy changes. 

Dr. SCISSORS. I think this is an area where you need to use carrots rather than sticks. I do not see how threatening countries, 

even when they are doing things we really do not like, is going to 

help the standards, living standards for women in those countries. 

Just my opinion. 

The carrots I see, we have a lot of carrots. We have a lot of countries that want access to the U.S. market, better access than they 

have now, protected access, especially in certain areas. I mentioned 

Vietnamese textiles before as an example. I can imagine that we 

can tie access to Vietnamese textiles in the United States to working conditions for women in the textile sector. It seems like a very 

natural link and it is a very powerful lever on our part. 

I would say, to echo Matt’s point about Japan’s demography, it 

is not just Japan. Most of northeast Asia is getting older and they 

are not utilizing women properly in their labor force. So I would 

think that Korea and to a lesser extent China are also going to be 

open to these kinds of initiatives for their own reasons, not because 

they have suddenly seen the light and have the same social view 

that we do, but because they are going to need more contributions 

from women economically than they have allowed so far. So I think 

we could make progress here. 

Senator CARDIN. Thank you. 

Let me thank both of our witnesses. This has been a very helpful 

hearing and I appreciate your participation. With that, the subcommittee will stand adjourned. Thank you. 

[Whereupon at 11:36 a.m., the hearing was adjourned.] 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

PREPARED STATEMENT OF WALTER LOHMAN, DIRECTOR, ASIAN STUDIES CENTER,

THE HERITAGE FOUNDATION, WASHINGTON, DC 

My name is Walter Lohman. I am director of the Asian Studies Center at The 

Heritage Foundation. The views I express in this testimony are my own, and should 

not be construed as representing any official position of The Heritage Foundation. 

FOREI-43947 with DISTILLER

55

I commend the subcommittee for taking such a concerted, detailed look at America’s interests and role—what, I would argue, should be its continued leadership 

role—in the Asia-Pacific. You will find broad agreement among the foreign policy 

community with the commitment to Asia implied in the President’s rebalance. There 

are disagreements over the priorities of the commitment, whether ‘‘rebalance’’ is the 

most constructive way to frame it, or whether enough resources are devoted to it. 

Some would even question whether a rebalance is actually underway. 

It is important, however, for foreign audiences in particular to understand that 

the American commitment to its interests in the Western Pacific—what Chairman 

Royce has called America’s ‘‘near west’’—is very widely supported in Washington. 

As is the case with many national priorities, the debates occur over how the commitment is put into effect and which priorities constitute it. 

STRATEGIC PICTURE

America’s commitment to the Western Pacific is both about the challenge posed 

by China’s rise, and about something much broader. It’s about China, yet it’s not 

about China. In that conundrum may lay the reason for confusion and misperceptions in Beijing and other Asian capitals about the rebalance. 

On the political and diplomatic side, America’s Asia policy is largely about China. 

This is because whatever may have been the situation in the region more than 150 

years ago, before China’s ‘‘century of humiliation,’’ it is the U.S. and its allies who 

have shaped today’s regional order. That order is best characterized by the pursuit 

of a secure liberal international order, characterized by such things as freedom of 

navigation and commerce and promotion of political liberty. It benefits China—if not 

always the Chinese Communist Party—as much as it does any other country in the 

region. This is essentially the same vision that the George W. Bush administration 

and many administrations before it have pursued. 

The problem is that Chinese Government does not necessarily see it this way. It 

poses an alternative to this vision that seems more tightly focused on China’s narrowly drawn national interests. 

The regional order established by the U.S. in the decades following World War 

II was not just strategic and institutional. A concrete geographical order accompanied it. It included Taiwan’s de facto independence, Japan’s administration of the 

Senkaku Islands, and the claims of Southeast Asian nations to land features in the 

South China Sea. This is today’s status quo. Awakened after 150 years, what the 

Chinese call their core interests revolve around changing this status quo, and not 

necessarily through means now acceptable to the rest of the region. China’s narrow 

interests are driving its disposition to the broader order. Thus, much of the diplomatic and security side of America’s Asia policy requires pushing back against 

China and channeling the conflicting interests into administration of established 

institutions and norms, such as the peaceful settlement of disputes and adherence 

to customary international law. 

The Obama administration has sought to frame this effort by appealing to an 

ASEAN-centric architecture, that is, a set of institutions created by the Association 

of Southeast Asian Nations intended to enmesh external regional powers in a web 

of interlocking regional relationships. Involvement in these institutions, the East 

Asia Summit, the U.S.–ASEAN Leaders Summit, and many others, is a good thing. 

My only reservation is that the administration’s approach seems to underappreciate 

ASEAN’s severe limitations in dealing with contention. It also seems to either 

underestimate American power vis-a-vis the ASEAN countries, or seeks to purposely 

blunt that power in the cause of an amorphous accumulation of soft power. At its 

worst, this amounts to serving ASEAN’s interests in pleasing all comers and muting 

differences among them—not necessarily American interests. America has some 

very critical interests in Southeast Asia that in the absence of heavy, uncomfortable 

pressure on ASEAN will not be served. Among them are human rights and security 

issues, freedom of the seas being the most important of the latter. At best, excessive 

deference to ASEAN’s sensitivities and mechanisms will result in an underutilization of time, focus, and resources. 

It should be noted that the Obama administration, as the Bush administration 

before it, also believes that conflicts arising from differences in U.S. and China 

world views can be ameliorated through extensive direct contact with China on 

political and security issues. The effectiveness of this set of tactics is a topic for 

another hearing. Suffice it to say for purposes of today’s hearing that the effort, and 

especially the rhetoric representing it, contributes to the perception of incoherence 

in the rebalance. 

FOREI-43947 with DISTILLER

56

ECONOMIC COMMITMENT TO EAST ASIA AND PACIFIC

The economic side of the American role in Asia is very different. It is not about 

China. And, there are overwhelmingly more advantages in this engagement than 

risk. The challenge the U.S. faces lies in simultaneously countering China in the 

diplomatic and security areas while maximizing the upside of Asia’s burgeoning 

economies, including China. This can be accomplished with a principled clarity in 

America’s vision for the transpacific economy, robust bilateral and ad hoc multilateral economic agreements, engagement of the region’s economy-focused diplomatic 

architecture, and the most effective use of other tools available to American officials. 

The vision is pure and simple: the promotion of a liberal economic order. This 

should be the fundamental goal of our international economic policy. It is not the 

success of American companies per se, pursuit of which can produce misallocation 

of resources and inefficiency. It is support for an open, rule-based economic environment in which American companies can fully compete and the market can determine winners and losers. This applies at home as well as abroad. There is nothing 

of inherently greater value in exports than in imports, and nothing inherently better 

about American investment at home, than foreign investment here. Politically sensitive market segments at home are not more justifiable objects of protection than 

the protections of our trading partners. Both are distortions of the market mechanism. Companies ought to be able to avail themselves of international value chains 

and finance with as few restrictions as possible. They should also bear the cost and 

risks. 

FREE TRADE AND THE TRANS-PACIFIC PARTNERSHIP

The first thing this economic vision means is energetic presidential-level support 

for free trade, and in particular the conclusion of a Trans-Pacific Partnership (TPP) 

that is no less open and encompassing than the agreements that have come before 

it. The TPP is today the explicit economic ‘‘centerpiece’’ of the administration’s 

rebalance. There are several key areas that free trade advocates will be weighing 

in order to determine how free the agreement actually is. In general, they will be 

judging it against the most recent trade agreement the U.S. has struck in Asia, the 

Korea-U.S. Free Trade Agreement. It was not perfect. It would be nice to see aspects 

of it—like precedents in managed auto trade and exclusion of trade in rice—rolled 

back. But at the very least, the TPP should not get worse in terms of protection. 

It should also redress protectionist provisions in previously concluded agreements, 

such as the U.S.-Australia Free Trade Agreement, which retains restrictions on Australian access to the U.S. sugar market. 

Beyond this general guidance, however, the manner in which the following several 

specific areas are addressed will determine the nature, quality, and value of the 

TPP: State-owned enterprises (SOEs), intellectual property rights (IPR), the services 

sector, and rules of origin.1

First, SOEs. As former Heritage Foundation senior fellow Derek Scissors has 

pointed out, there are two main issues involved in consideration of SOEs in trade 

talks: definition of SOE and subsidies. ‘‘Subsidies’’ can come in many forms, from 

actual government budget allocation to favorable access to credit to favorable regulatory treatment. Several of the participants in the TPP talks have major SOEs, especially Vietnam, but also Singapore and Malaysia. The U.S. also has SOEs if one 

includes ‘‘government sponsored enterprises’’ like Fannie Mae and Freddie Mac, and 

the precedents set for government involvement in the private sector following the 

2008 economic crisis. The TPP ought to embrace the broadest possible definition of 

SOEs, and get at the wide range of available subsidies by providing for true competitive neutrality.2 This is one of the most difficult issues at stake in the TPP negotiations. The very nature of state-ownership is preferential and discriminatory. How 

it is dealt with in the TPP negotiations has broad implications beyond the current 

participants. 

Second, IPR. Poor intellectual property rights protection is essentially a tax on 

innovation. It is a redistribution of resources from the business that invests in 

research and development to the business that steals the product. IPR is important 

to the U.S., as it has a strong comparative advantage in innovation. But it should 

be important to other economies as well. Some, like Japan, are in desperate, structural need of more innovation. Others have interest in attracting investments from 

world-class businesses and locking in rules today that will benefit their own businesses in the long run. 

Parties should be looking to a TRIPS-Plus approach (Trade-Related Aspects of 

Intellectual Property Rights-Plus), that is, protection of intellectual property that 

goes beyond the commitment that negotiators have already made in the World 

Trade Organization (WTO), to include among other things, data exclusivity and inFOREI-43947 with DISTILLER

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creased protection against coercion of trade secrets. Trips-plus has been the standard in U.S. negotiated FTAs. TPP is certainly not the time to back away from it. 

Third, services. In services, negotiators should be looking to apply a negative 

list—that is, creating a presumption of openness—on both investments and services 

trade across borders. Open investment regimes and ensuring free flow of data across 

borders are perhaps the most important factors in maximizing services trade. TPP 

should also be looking to enhanced liberalization and protection for investment in 

financial services. 

Fourth, rules of origin. The TPP countries are already tied up in a number of free 

trade agreements (FTAs) among themselves: America’s FTAs with six of the TPP 

countries; the P–4 Agreement among Brunei, Chile, New Zealand, and Singapore, 

which served as the launching pad for the TPP; the ASEAN Free Trade Area 

(AFTA); and an ASEAN-Japan FTA, among others. In rationalizing their rules of 

origin, the aim should be a common set of rules that is as loose as possible across 

the board, including for textiles and apparel. Rules of origin are extremely important to determining the character of the final agreement. Closed rules create a disposition toward trading blocs. Trading blocs by their nature are predominantly political in purpose and therefore not conducive to maximizing economic benefits. As 

such, tight rules of origin detract from the broader, longer-term goals of global free 

trade, and in their worst case implication, can lead to open conflict. 

In the end, the traditional supporters of free trade, like analysts at The Heritage 

Foundation, are going to be looking for a truly economy-freeing agreement. 

China ought to be permitted to join the TPP as long as it can fulfill the provisions 

of the agreement, and as per the process, all the currently participating countries 

agree to its participation. The only stipulation on China’s entry beyond technical 

compliance with the agreement should be the extension of equal opportunity to Taiwan. Similar arrangements were made for China’s entry into the Asia-Pacific Economic Cooperation (APEC) and the WTO. Taiwan’s economy is larger than most of 

those currently represented in the TPP. It would also be among the more developed 

economies represented in the negotiations. The prevention of its participation would 

be an artificial political barrier. Taiwan has been generally neglected in the administration’s rebalance. Exclusion from the TPP would be a serious blow to its efforts 

to fully and formally keep pace with the economic integration taking place around 

it, and would leave it, by default, overly dependent on China. 

In lieu of China’s inclusion in the TPP, the U.S. can engage China in its free-market perspective through mechanisms such as the strategic and economic dialogue 

(S&ED), the Joint Commission on Commerce and Trade (JCCT), negotiation of a bilateral investment treaty, and global forums like the WTO. 

PRINCIPLED ENGAGEMENT OF GOVERNMENT-TO-GOVERNMENT ARCHITECTURE

In addition to ad hoc multilateral trade negotiations like the TPP or bilateral 

trade talks, the U.S. can pursue its free trade vision through the many pieces of 

architecture already in place. The TPP, and the 16-member China-centric Regional 

Comprehensive Economic Partnership (RCEP), have been formally identified by 

APEC leaders as building blocks for an eventual APEC-wide free trade agreement, 

or a Free Trade Agreement of the Asia Pacific (FTAAP).3 Continued leader-level and 

robust participation in APEC is important to ensure that the FTAAP tracks APEC’s 

American-inspired vision for a ‘‘comprehensive, high quality agreement.’’ APEC is 

important for other reasons besides. U.S. participation in APEC is critical to its 

broader strategic position in the region. In turn, an active, leader-oriented APEC is 

a pull on the region to remain outwardly oriented—in this case, looking east across 

the Pacific. 

APEC could do more on this score by also reaching westward toward India. The 

U.S. should encourage it to do so. APEC has already brought India into its plans 

for the FTAAP by referencing RCEP negotiations as a basis for its long-term vision 

for trade liberalization. (India is a part of those negotiations.) If APEC is to maintain its dreams of an FTAAP, it must begin to socialize India in the more routine 

details of its mission. These include information-sharing on regulatory standards, 

rules, procedures, capacity needs, and multilateral initiatives conducted by member 

states outside its rubric, and voluntary harmonization in the direction of freer 

markets. 

The U.S. also has a critical role to play in helping ASEAN achieve its goal of ‘‘a 

stable, prosperous, and highly competitive ASEAN Economic Region in which there 

is a free flow of goods, services and investments, a freer flow of capital, equitable 

economic development and reduced poverty and socioeconomic disparities.’’ 4 It can 

only do that if it is at the table. Forums like the ASEAN Economic (Trade) MinFOREI-43947 with DISTILLER

58

isters, the ASEAN Finance Ministers Meeting, and other sector-specific meetings 

are useful venues for a free-market American message. 

Regional economic integration is real. Most of it is organic, that is, the result of 

millions of individual business decisions, and unilateral government activity to 

facilitate them. The governments in the region are pushing to formalize and expand 

integration. ASEAN integration is the most formally developed. Completion of it will 

be far from European Union-style integration, as ASEAN members have always 

made abundantly clear. It is also behind schedule to meet its December 2015 completion deadline.5 Yet, given the size and diversity of the ASEAN market, it will be 

a major achievement. The U.S. should help it achieve its goal. 

NUTS AND BOLTS OF ECONOMIC ENGAGEMENT

Because of ASEAN’s consultative nature, the history of U.S. economic policy 

toward it is replete with reference to new initiatives, all essentially aimed at the 

same thing—building the capacity that will help it achieve its integrated, free-market vision. The alphabet soup of initiatives include the EAI (Enterprise for ASEAN 

Initiative); the ACP (ASEAN Cooperation Plan); the ASEAN-U.S. Enhanced Partnership; the U.S.–ASEAN TIFA (Trade and Investment Framework Arrangement); 

ADVANCE (ASEAN Development Vision to Advance National Cooperation and Economic Integration); and, now, at least two more, the E3 initiative (U.S.-ASEAN 

Expanded Economic Engagement); and ACTI (ASEAN Connectivity through Trade 

and Investment). 

The U.S. has not lacked new initiatives—the latter two being initiatives of the 

Obama administration. ACTI is essentially the follow-on to the Bush-initiated 

ADVANCE program. Its most important trade-enabling component is the assistance 

it provides to the ASEAN effort to establish a single customs window, first at the 

national, and then the regional level. In concept, ACTI is a very useful, constructive 

program—as was ADVANCE before it. However, even at its modest price ($18 million over 5 years) it must maintain a focus on the intersection of America’s and 

ASEAN’s free trade visions in order to be of most value. 

Some in the business and strategic communities will bemoan the lack of real U.S. 

investment in the development of ASEAN’s infrastructure. But the U.S. Government 

tinkering at the edges of ASEAN’s infrastructure needs—estimated by the Asian 

Development Bank (ADB) at $8 trillion—is a distraction. If those needs represent 

opportunity for American business, they will find their way to them. American participation in ASEAN forums and the assistance that flows from it should support 

the infrastructure of economic freedom. On an individual country basis—still the 

much more relevant measure of economic performance in ASEAN—the region lags 

significantly. Singapore has been consistently ranked No. 2 globally in The Heritage 

Foundation’s annual ‘‘Index of Economic Freedom.’’ The closest in the region after 

that in the 2013 Index were Malaysia at No. 56, and Thailand at No. 61. Roads and 

rail lines developed by the Japanese, Koreans, Chinese, or ADB are public goods. 

To see them as an area of national competition that the U.S. is losing is playing 

ASEAN’s game to maximize the economic contributions of all its interlocutors, not 

America’s. 

The E3 is also a useful initiative, to the extent it is used as a path for lesserdeveloped economies, such as the Philippines and Indonesia, to join the TPP. The 

administration’s expressed intention to use it to negotiate a U.S.–ASEAN Trade 

Facilitation Agreement and regionwide bilateral investment treaty can help reach 

that goal. However, if the E3 does not succeed in readying governments for participation in the TPP, it will remain just another clever acronym in the alphabet soup—

doing good work, but marginal to achieving either ASEAN’s or America’s economic 

vision. 

CONCLUSION

Criticism of the rebalance that it is overly focused on the military is misplaced. 

Economic engagement for the U.S. is not a government activity. This makes it different from some of the other governments in the region. It is certainly much different from American military engagement. If the Commander in Chief determines 

that a carrier strike group should move from the Persian Gulf to the South China 

Sea, it goes. If he determines that 60 percent of the U.S. Navy will now be stationed 

in the Pacific, it happens. The Secretary of State can make as many visits, and the 

U.S. Government can participate in as many regional forums, as the Federal Government’s budget can support. At modest cost, the U.S. Government can initiate as 

many new capacity-building programs as the region can absorb. It cannot compel 

American business participation or even effectively lead it. 

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On the economic side of policy, what the government does best is create opportunity for business through trade negotiations and otherwise promoting a positive 

business environment. The TPP is the big bang of America’s current economic commitment to Asia. When complete, it will encompass 40 percent of global GDP. However, it must truly be the ‘‘comprehensive, high standard’’ agreement promised in 

order to be a game-changer and garner the necessary support of real free-traders 

in Washington. 

America’s commitment to Asia can both protect its political and security interests 

vis-a-vis China, and encompass a broader economic element. In order to do that, it 

must consistently articulate and advocate its vision for, not just transpacific, but 

global, free trade. If it does this effectively—particularly if it successfully concludes 

the TPP—all the other pieces of America’s economic statecraft in the region will fall 

into place, and the other elements of the rebalance, both political and military, will 

assume their proper perspective in the strategy.

————————

End Notes

1Derek Scissors, ‘‘What a Good Trans-Pacific Partnership Looks Like,’’ Heritage Foundation 

Backgrounder No. 2772, March 8, 2013, http://www.heritage.org/research/reports/2013/03/whata-good-trans-pacific-partnership-looks-like (accessed November 17, 2013). 2Derek Scissors, ‘‘Why the Trans-Pacific Partnership Must Enhance Competitive Neutrality,’’ 

Heritage Foundation Backgrounder No. 2809, June 6, 2013, http://www.heritage.org/research/

reports/2013/06/why-the-trans-pacific-partnership-must-enhance-competitive-neutrality (accessed 

November 17, 2013). 3 APEC, ‘‘Pathways to FTAAP,’’ November 14, 2010, http://www.apec.org/Meeting-Papers/Leaders-Declarations/2010/2010laelm/pathways-to-ftaap.aspx (accessed November 17, 2013). 4 ASEAN, ‘‘ASEAN Vision 2020,’’ December 15, 1997, http://www.asean.org/news/item/aseanvision-2020 (accessed November 17, 2013). 5 Asian Development Bank, ‘‘Asian Economic Integration Monitor,’’ October 2013, http://

www.adb.org/sites/default/files/pub/2013/aeim-oct-2013.pdf (accessed November 17, 2013).

Æ

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