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S. HRG. 114–762 

STRATEGIC IMPLICATIONS OF TRADE PROMOTION 

AND CAPACITY-BUILDING IN THE ASIA-PACIFIC 

REGION 

HEARING 

BEFORE THE

SUBCOMMITTEE ON EAST ASIA, THE PACIFIC, AND 

INTERNATIONAL CYBERSECURITY POLICY 

OF THE

COMMITTEE ON FOREIGN RELATIONS 

UNITED STATES SENATE 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

JUNE 16, 2015 

Printed for the use of the Committee on Foreign Relations 

( 

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

FOREI-MBP-19 with DISTILLER

COMMITTEE ON FOREIGN RELATIONS

BOB CORKER, TENNESSEE, Chairman

JAMES E. RISCH, Idaho 

MARCO RUBIO, Florida 

RON JOHNSON, Wisconsin 

JEFF FLAKE, Arizona 

CORY GARDNER, Colorado 

DAVID PERDUE, Georgia 

JOHNNY ISAKSON, Georgia 

RAND PAUL, Kentucky 

JOHN BARRASSO, Wyoming 

BENJAMIN L. CARDIN, Maryland 

BARBARA BOXER, California 

ROBERT MENENDEZ, New Jersey 

JEANNE SHAHEEN, New Hampshire 

CHRISTOPHER A. COONS, Delaware 

TOM UDALL, New Mexico 

CHRISTOPHER MURPHY, Connecticut 

TIM KAINE, Virginia 

EDWARD J. MARKEY, Massachusetts 

LESTER MUNSON, Staff Director

JODI B. HERMAN, Democratic Staff Director

JOHN DUTTON, Chief Clerk

——————

SUBCOMMITTEE ON EAST ASIA, THE PACIFIC, AND

INTERNATIONAL CYBERSECURITY POLICY

CORY GARDNER, Colorado, Chairman

MARCO RUBIO, Florida 

RON JOHNSON, Wisconsin 

JOHNNY ISAKSON, Georgia 

JEFF FLAKE, Arizona 

BENJAMIN L. CARDIN, Maryland 

BARBARA BOXER, California 

CHRISTOPHER A. COONS, Delaware 

TOM UDALL, New Mexico 

(II)

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C O N T E N T S 

Page 

Hon. Cory Gardner, U.S. Senator From Colorado ................................................ 1 

Hon. Benjamin L. Cardin, U.S. Senator From Maryland .................................... 2 

Hon. Tomasz P. Malinowski, Assistant Secretary, Bureau of Democracy, 

Human Rights, and Labor, U.S. Department of State, Washington, DC ........ 4 

Prepared statement .......................................................................................... 6 

Hon. Kurt Tong, Principal Deputy Assistant Secretary, Bureau of Economic 

and Business Affairs, U.S. Department of State, Washington, DC ................. 8 

Prepared statement .......................................................................................... 10 

Jason Foley, Deputy Assistant Administrator, Asia Bureau, U.S. Agency for 

International Development, Washington, DC .................................................... 15 

Prepared statement .......................................................................................... 16 

(III)

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(1) 

STRATEGIC IMPLICATIONS OF TRADE PROMOTION AND CAPACITY—BUILDING IN THE 

ASIA—PACIFIC REGION 

TUESDAY, JUNE 16, 2015 

U.S. SENATE,

SUBCOMMITTEE ON EAST ASIA, THE PACIFIC, AND

INTERNATIONAL CYBERSECURITY POLICY, 

COMMITTEE ON FOREIGN RELATIONS, 

Washington, DC. 

The subcommittee met, pursuant to notice, at 2:50 p.m. in room 

SD–419, Dirksen Senate Office Building, Hon. Cory Gardner (chairman of the subcommittee) presiding. 

Present: Senators Gardner and Cardin. 

OPENING STATEMENT OF HON. CORY GARDNER, 

U.S. SENATOR FROM COLORADO 

Senator GARDNER. This hearing will come to order. 

First of all, thank you for understanding the delay. The Senate 

is still expected to vote on one more in a three-vote series. So we 

will be tag-teaming in terms of making that vote once it is called. 

So I apologize for that and thank you for waiting. 

Welcome to the second hearing for the Senate Foreign Relations 

Subcommittee on East Asia, The Pacific, and International Cybersecurity Policy. 

I want to thank Senator Cardin for his continued efforts in this 

subcommittee and support for holding this important hearing, as 

well as his work as ranking member on the full committee. 

Today’s hearing comes at a critical time. The United States and 

11 nations in the Asia-Pacific are on the cusp of concluding perhaps 

the most consequential free trade agreement in history, the TransPacific Partnership. 

The potential economic benefits for the United States are enormous. According to the Congressional Research Service, total trade 

in goods between TPP member countries reached $1.6 trillion in 

2014. That represents nearly 40 percent of all global trade. 

In my own State of Colorado, trade with countries involved in the 

TPP currently supports more than 260,000 jobs. 

Removing barriers to trade is vital to growing our economy, but 

the TPP is more than just an economic agreement. It is a critical 

test of U.S. strategic leadership in the Asia-Pacific region, a region 

that will be integral to our economic and national security for generations to come. 

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2 

As stated in the 2015 National Security Strategy, sustaining our 

leadership depends on shaping an emerging global economic order 

that continues to reflect our interests and values. Despite its success, our rules-based system is now competing against alternative, 

less open models. To meet this challenge, we must be strategic in 

the use of our economic strength to set new rules of the road, 

strengthen our partnerships, and promote inclusive development. 

Defense Secretary Ash Carter echoed that sentiment when he 

said on April 6 of this year, the ‘‘TPP is as important to me as another aircraft carrier.’’ 

But when the United States is absent, others rush to fill the vacuum with such alternative, less open models, as the National Security Strategy diplomatically stated. So we cannot be surprised 

when a rising China fills that vacuum with policies and programs 

crafted from their own vision of what is beneficial for themselves 

and the region. 

China’s establishment of the Asian Infrastructure and Development Bank is the prime example. While on the face of it the AIIB 

is a positive response to address the infrastructure challenges in 

the region, it is also the clearest evidence yet that the United 

States has a serious credibility gap in the Asia-Pacific region. 

The question before us then, do we want the United States or 

China writing the rules? It is clear that while our partners and allies in the region may welcome additional Chinese investment, they 

want more American leadership and more American standards. 

We know that the standards TPP and U.S. engagement bring include not only economic benefits, such as removal of tariff or nontariff barriers, but fundamental American values such as transparency, good governance, and respect for basic human rights. 

So I hope our witnesses today can address how U.S. economic 

statecraft in the Asia-Pacific reflects our values and cements our 

leadership in this critically important region. 

And with that, I will turn it over to Senator Cardin for his opening remarks. 

OPENING STATEMENT OF HON. BENJAMIN L. CARDIN, 

U.S. SENATOR FROM MARYLAND 

Senator CARDIN. Well, thank you, Mr. Chairman. To Chairman 

Gardner, I want to thank him for his leadership on this subcommittee. I continue to look forward to working with him, and I 

think today’s subject is one of great importance to us, ‘‘Strategic 

Implications of Trade Promotion and Capacity-Building in the AsiaPacific Region.’’ 

I want to underscore the points that our chairman made. The 

IMF projects that in the next 5 years we are going to see the global 

economy grow by over $22 trillion and almost 50 percent of that 

is going to be in Asia. So we have a U.S. economic interest to make 

sure that we are engaged in Asia from a trade point of view. It affects our U.S. manufacturers, producers, and farmers, and we know 

that they can compete as long as they have a level playing field. 

So part of our responsibility is to make sure they have that level 

playing field. 

And when we take a look at most of the trade conditions and our 

trading partners, it is barriers in other countries that we have to 

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3 

get removed. Some of them are direct, such as tariffs. Others are 

a little bit more difficult, such as intellectual property. And some 

are even more difficult when we deal with issues such as labor 

laws, environmental laws, or governance laws. But it is in our economic interest to pursue those. 

It is also in our strategic interests. The alliances for security in 

Asia are critically important to the United States. And we know alliances are being made and we want the United States to have the 

strategic partners we need for U.S. security interests. 

And there is an opportunity here to advance regional stability, 

which should be in all of our interests. Our involvement here gives 

us the opportunity to make it a safer place for people to live, helping U.S. national interests. 

But to me one of the key points is how we leverage this opportunity to advance good governance because good governance is a 

key challenge to all of the issues that we care about in that region 

on stability and values. As one of our witnesses on today’s panel 

recently said, Tom Malinowski, TPP offers the best hope of giving 

the Vietnamese people the space to pursue their rights. I could not 

agree with Mr. Malinowski more. 

It is critically important that as we look at these alliances for 

economic reasons, we are allowing our markets to be open to countries that are challenged in good governance, that we do everything 

to make it clear that they must pursue and enforce internationally 

recognized human rights. They must have a strategy to combat corruption that includes an independent judiciary, an independent 

prosecutor, the funds necessary to operate that, the laws necessary 

to enforce any corruption, the transparency that becomes critically 

important in dealing with anti-corruption, and that they have the 

labor commitments to provide labor protection for their population, 

environmental laws, and just as importantly, that within the trade 

agreement itself, there is enforcement so that we learn the lessons 

from past agreements and so that we have a way to make sure that 

the commitments made under the spotlight of negotiating a trade 

agreement in fact will be carried out after that agreement has been 

ratified. 

TPP presents a particular challenge for us. When you are dealing 

with Vietnam—I have been to Vietnam—it is a country that offers 

tremendous opportunity for the United States. It is a country, 

though, that does not have a tradition of protecting its workers, 

and there is really no right to join a union. We have to make sure 

that those rights exist and are real as a result of what we are 

doing in TPP. 

Malaysia, as you know, is a Tier 3 trafficking country. We have 

got to make sure that those issues are corrected and that there is 

a path forward that is enforceable and workable. 

Brunei has its own challenges on recognizing international 

human rights. 

So there are countries there that have a history that gives us 

pause to say, look, moving forward, we have to make sure that we 

really do have the wherewithal to make the type of progress that 

we know is necessary. 

And then the challenge of capacity-building and the way that we 

use our development assistance. That is a critical factor that has 

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4 

to be reevaluated as we move forward in our trade relations with 

Asia. 

The U.S. strategic challenges are clear. There are other trade initiatives in the region. We have to be mindful about that. We have 

free trade agreements among many countries in Asia that obviously affects the ability of the United States to gain market share 

and influence. And of course, there is the Regional Comprehensive 

Economic Partnership that includes not only the ASEAN nations 

but many of the other key players in that region, including China. 

So I welcome the discussion we are having today. I think it is 

a critically important subject, and I think that as a result, we can 

have a better understanding as to why it is critically important for 

the United States to be actively engaged in the Asia region. 

Senator GARDNER. Thank you, Senator Cardin. 

And now turning to our distinguished panel, our first witness is 

the Honorable Tom Malinowski, the Assistant Secretary of State 

for Democracy, Human Rights, and Labor, a position he has held 

since April 2014. Previously from 2001, he was Washington Director of Human Rights Watch, a leading global organization dedicated to protecting human rights. From 1998 to 2001, he served as 

Senior Director on the National Security Council at the White 

House, where he oversaw the drafting of President Clinton’s foreign 

policy speeches and strategic communications efforts around the 

world. And from 1994—I almost said 1948. I do not know where 

that came from. From 1994 to 1998, he was a speech writer for Secretaries of State Warren Christopher and Madeleine Albright and 

a member of the policy planning staff at the Department of State. 

Welcome, Mr. Malinowski. After your testimony, we will hear 

from Kurt Tong, but please, Mr. Malinowski. 

STATEMENT OF HON. TOMASZ P. MALINOWSKI, ASSISTANT 

SECRETARY, BUREAU OF DEMOCRACY, HUMAN RIGHTS, AND 

LABOR, U.S. DEPARTMENT OF STATE, WASHINGTON, DC 

Mr. MALINOWSKI. Thank you, Mr. Chairman. And I did not get 

that job with Secretary of State George Marshall in 1948. It has 

hurt me ever since. [Laughter.] 

Thank you for the opportunity to testify, Senator Cardin, Senator 

Gardner. This is obviously a very, very timely topic given the lowkey little debate we have been having on this issue in the last 

week. So let me offer some thoughts on TPP from my perspective. 

This is, first and foremost, obviously an economic agreement, but 

as you have suggested, it has huge strategic implications. For the 

first time in the Asia-Pacific, if TPP happens, we will have a group 

of nations that have consented to join their economic destinies together under commonly agreed, enforceable rules with America at 

its center. And that is a big deal. 

The alternative to TPP is not less trade, because trade has been 

expanding with or without trade agreements with all of its creative 

and admittedly disruptive consequences. The alternative would be 

far less cooperation in shaping the rules of trade, including rules 

that protect labor rights and the environment. And whatever rules 

do develop will be shaped by somebody other than the United 

States. 

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5 

Now, my focus, obviously, is on how TPP can help us advance 

values of human rights, democratic freedoms, labor rights. And it 

is not immediately obvious because this is a trade agreement. It is 

not a human rights treaty. And there are critics out there who 

have legitimate doubts. But I believe that it will help us greatly. 

Now, in making the argument, I am not going to suggest to you 

that trade somehow by itself leads to democracy and human rights. 

I think that is a simplistic argument you should be skeptical of. 

Here is what I believe. 

Number one, to promote democracy and human rights and labor 

rights in the Asia-Pacific effectively, we have to stand up for those 

values. We have to speak out. We have to use our voice. We have 

to use our leverage. We have to use our assistance. 

But number two, we also have to continue to lead in the region 

on matters of security and prosperity, otherwise governments in 

the region are not going to listen to us on these other issues we 

care about. In other words, we have to be principled, but we also 

have to be present, and TPP does both. 

Number one, it will be a cornerstone of our strategic presence in 

the Asia-Pacific. It will enable us to continue to play the leading 

role in shaping the region’s institutions and norms for years to 

come. TPP is also principled. Labor rights objectives are built into 

the treaty, enforceable like every other core commitment within it. 

In addition, we have leveraged the interests of countries to be 

part of TPP to advance a broader human rights agenda, for example, to press Malaysia to take stronger action against trafficking, 

Brunei’s recent commitment to sign the Convention Against Torture, which would not be happening absent TPP. 

Now, let me focus in particular on how this will work with respect to the country with some of the biggest human rights challenges among the TPP member countries, Vietnam. We have got 

absolutely no illusions about how far Vietnam still has to go. It is 

still a one-party state. It is still a country where many forms of dissent are prohibited by law. But there is a profound debate going 

on within Vietnamese society and within the government about the 

future direction their country should take, and reformers within 

the government are using the prospect of membership in TPP as 

a way of winning the internal argument in favor of greater openness and freedom. 

Under the spotlight of TPP negotiations, Vietnam has released 

prisoners of conscience. Convictions for political offenses are way 

down from about 61 in 2013 to 1 or 0, depending on who you listen 

to this year, a huge decline. It has ratified human rights treaties. 

It has committed to reforming domestic laws, and it is consulting 

with us on how to do it. Right now in the Vietnamese national assembly, there is a debate underway on introducing the right 

against self-incrimination into the criminal code, something that 

we are working with them on. 

Now, most dramatically TPP requires freedom of association, the 

right to form independent trade unions for the very first time in 

that country’s history. Now, breaking the Communist Party’s monopoly on trade union organizing in Vietnam would be an absolute 

breakthrough, and Vietnam must make this reform or miss out on 

the benefits of TPP. 

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Now, will this be enough? Will this guarantee Vietnam’s transformation into a country that respects human rights? No, it will 

not. Nothing we can do will guarantee that. 

But the question we have before us is, will we be better off in 

pursuit of that goal if this process is allowed to continue with the 

passage of TPA, which preserves that prospect that gives us the leverage to keep Vietnam moving in this direction? Will Vietnam be 

better off if next year its workers have the right to form independent unions, if this debate about legal reform continues, if there 

are fewer political prisoners in jail? From where I sit, the answer 

is absolutely yes. And very few of these things would likely be happening if not for the prospect of TPP membership. I think we would 

be set back considerably if that prospect were taken away. 

So from my standpoint, as the person who has to go to Vietnam, 

negotiate improvements in human rights, TPA and TPP—this is 

not a leap of faith. It is an instrument of leverage, and I hope that 

the Congress will find a way to give us that leverage so that we 

can use it over the next few months to achieve the progress that 

we want to see. 

Thank you. 

[The prepared statement of Mr. Malinowski follows:] 

PREPARED STATEMENT OF TOM MALINOWSKI

Mr. Chairman, thank you for the opportunity to testify today. You have asked us 

to discuss the strategic implications of trade promotion in the Asia-Pacific region. 

This is obviously a timely question given the intense debate now underway on Trade 

Promotion Authority (TPA) and the Trans-Pacific Partnership (TPP) agreement. 

The TPP is, first and foremost, an economic agreement, for which the economic 

case is clear. But as the first trade agreement spanning both sides of the Pacific, 

the TPP will deliver larger strategic benefits as well. The TPP will be a community 

of common interest—a group of nations that have consented to join their economic 

destinies together, according to rules that all must respect and that will be enforced 

if violated. America’s central role in this partnership further cements our leadership 

in the Asia-Pacific, and ensures that the rules being negotiated reflect our interests 

and values. 

The alternative to the TPP, should it fail to materialize, would not be an absence 

of trade in this region. Trade across the Pacific, with all of its creative and disruptive consequences, has been expanding steadily for years, between countries already 

linked by trade agreements and those, like the United States and China, that are 

not. But absent TPP, there would be far less political cooperation between nations 

in shaping the rules governing this growing commerce, including rules that protect 

labor rights and the environment. And to the extent rules and values might still 

develop, countries other than the United States would be shaping them. The fact 

is that the high standards we seek will only happen if we are there to insist on 

them. 

By binding its parties’ economic futures together, the TPP also can deepen cooperation across the region on other matters of importance to the United States. 

There are historical parallels. The European Coal and Steel Community of the 

1950s, for example, was also an economic agreement, but few people remember it 

solely as a common market for two industrial commodities. We remember it as the 

first transnational community forged in post-war Europe, and a foundation for European and transatlantic unity on political and security issues as well. 

In evaluating the potential strategic benefits of TPP, I will focus on how it could 

help us advance human rights and labor rights. Promoting human rights is one of 

America’s core objectives in the Asia-Pacific, and in our Asia ‘‘rebalance.’’ It helps 

build more stable societies by encouraging governments to give people peaceful outlets for political expression and to seek the most reliable source of legitimacy: the 

consent of the governed. It supports our economic goals by promoting laws and institutions that secure property rights, enforce contracts, fight corruption, and ensure 

the free flow of data and information. It empowers citizens to hold their governments accountable on issues like the environment and product safety, which are 

important to the health of our own people. It aligns American leadership with the 

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aspirations of everyday people in the region, and with values that they admire. And 

it distinguishes us from other great powers that define their interests in narrower 

and more cynical terms. 

To say that TPP can help us advance these goals is to say something not immediately obvious to many people who have followed the debate over the agreement. 

TPP is a trade agreement, not a human rights treaty, and some of its parties—Vietnam in particular—have poor human rights records. 

Many people are skeptical of the argument that free trade itself encourages 

democracy. I am one of those people. Authoritarian government can coexist with a 

McDonalds in every city and an iPhone in every pocket. Democracy and the rule 

of law are built by political effort, usually in the face of stubborn political resistance. 

But I am convinced that, on balance, TPP will greatly aid the effort to advance 

human rights in the Asia-Pacific region. 

Promoting human rights in the region depends on using our voice, our assistance, 

and our economic and diplomatic leverage to stand up for universal values and the 

people who are defending them. But governments in the Asia-Pacific are more likely 

to respect our voice on these issues if they know the United States also remains 

committed to maintaining our leadership for security and prosperity in their region. 

In other words, to champion human rights effectively, we must be principled and 

present at the same time. 

TPP will be a cornerstone of our strategic presence in the Asia-Pacific. Its conclusion is the single most important thing the United States can accomplish in its economic and strategic relationship with the region this year. It will help ensure that 

we, the United States and our partners, will continue to play the leading role in 

shaping the region’s institutions and norms. 

And when it comes to labor rights, specifically, TPP is also principled. I know that 

some people have doubts about this, perhaps because many past trade agreements 

put such issues to the side, or had weaker standards than the TPP. But as a candidate for President, then Senator Obama promised to put labor and environmental 

standards at the core of trade agreements and to make them enforceable like any 

other core commitment in the agreements. TPP keeps that promise. In addition, 

we have leveraged the interest of countries to be part of TPP to advance an even 

broader range of human rights and worker rights objectives—for example to press 

Malaysia to take stronger action against human trafficking, and Brunei’s recent 

commitment to sign the Convention against Torture. 

Let me discuss how this will work with respect to the country with some of the 

broadest human rights challenges among potential TPP countries—Vietnam. 

We have no illusions about how far Vietnam must still go to become a country 

that fully respects the human rights of its people. It is a one-party state. It has laws 

that criminalize political dissent. It does not yet fully guarantee freedom of expression, assembly, or association. 

At the same time, there is a high-stakes debate underway in Vietnam about 

whether and how to build a more democratic society under the rule of law. That 

debate is being driven by civil society, but has also been joined by many within the 

government who do not want changes in their society to leave them behind. The 

reformers’ most powerful pragmatic argument is that reform is necessary to secure 

something everyone—from Communist Party leaders to democracy activists—says 

the country needs: a closer economic and security partnership with the United 

States. 

Under the spotlight of the TPP negotiations, Vietnam has released prisoners of 

conscience, bringing the total number down to around 110 from over 160 two years 

ago. In 2013, Vietnam convicted 61 people for peaceful political expression; thus far 

in 2015, there has only been one case in which activists were convicted under statutes criminalizing peaceful expression. Vietnam has recently ratified the Convention 

Against Torture and the U.N. Convention on the Rights of Persons with Disabilities, 

and promised to bring its domestic laws—including its penal and criminal procedure 

codes—into compliance with its international human rights obligations. This will be 

a long and hard process, which some in the Vietnamese Government will resist. But 

the government has been sharing drafts of new laws with its public and invited the 

input of other countries, including the United States, which would have been 

unthinkable a few years ago. 

What’s more, the TPP agreement will include a requirement that Vietnam guarantee freedom of association, by allowing workers to form genuinely independent 

trade unions. Allowing workers for the first time under their system to establish 

and join trade unions of their own choosing would be a historic breakthrough in a 

one-party state. Vietnam will have to make the necessary legal reforms or miss out 

on the agreement’s benefits. And its commitments will be subject to the same 

enforcement provisions as every other core obligation of the TPP agreement. 

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These developments may not by themselves guarantee full respect for human 

rights and labor rights in Vietnam. But the question we must ask is, will we be better or worse off with TPP? I believe there is no question that advocates for human 

rights and the rule of law in Vietnam will be better off if by next year, their country 

has independent trade unions, fewer dissidents in prison, legal reform, and a foreign 

policy that links its destiny with the United States. Without the chance to join TPP, 

it is not likely Vietnam would be making any of these choices. Passage of TPA legislation, which helps preserve that chance, gives us bargaining power to keep pushing 

Vietnam for more progress. And if Vietnam then meets the conditions for TPP itself, 

we will still have leverage, such as via Vietnam’s strong desire for a full lifting of 

restrictions on the transfer of lethal arms. 

It’s hard to see how these goals would advance if TPA fails. The Vietnamese understand our political process, and calendar. They know that approval of a trade 

pact is less likely in the United States next year. If Congress closes the door to an 

agreement now, the Vietnamese Government will turn its focus to internal political 

consolidation—with a Communist Party leadership contest coming up in 2016— 

rather than on what it will take to improve its relationship with the United States. 

In this scenario, there would be zero chance of seeing independent unions legalized 

in Vietnam, less support for the legal reforms we are seeking, and a greater likelihood of a political crackdown. 

Members of Congress concerned about human rights in Vietnam are right to 

maintain a healthy skepticism about its government’s intentions. Congress should 

keep demanding more progress. But Members should also recognize the critical role 

TPA and TPP play in sustaining a process that facilitates securing more progress. 

TPP is not a leap of faith; it is an instrument of leverage, with respect to Vietnam 

and all the nations aspiring to participate in the TPP. I hope that the Congress will 

enable us to continue to use that leverage, and to maintain America’s role as the 

nation shaping the future of the Asia-Pacific. 

Thank you for the opportunity to testify today. I’d be pleased to answer any questions you may have. 

Senator GARDNER. Thank you, Mr. Malinowski. 

Next up we have the Honorable Kurt Tong, who serves as Principal Deputy Assistant Secretary for the Bureau of Economic and 

Business Affairs at the Department of State, a position he has held 

since 2014, not 1948. Before joining the Bureau, Mr. Tong served 

for 3 years as the Deputy Chief of Mission in Tokyo, Japan. Prior 

to his time in Tokyo, he was the U.S. Ambassador for Asia-Pacific 

Economic Cooperation, or APEC, managing all aspects of U.S. participation in APEC while concurrently serving as the Economic Coordinator for the State Department’s Bureau of East Asian and Pacific Affairs, organizing bureau-wide efforts on economic policy. Mr. 

Tong has been a economic affairs diplomat for the State Department since 1990, including serving as Director for Asian Economic 

Affairs at the National Security Council from 2006 to 2008, and as 

Economic Minister Counselor in Seoul from 2003 to 2006. Prior to 

that, he was Counselor for Environment, Science, and Health in 

Beijing, and served as Deputy Treasury Attache ́ in Tokyo and as 

an Economic Officer in Manila. 

Welcome, Mr. Tong. Thank you for your testimony today. 

STATEMENT OF HON. KURT TONG, PRINCIPAL DEPUTY ASSISTANT SECRETARY, BUREAU OF ECONOMIC AND BUSINESS AFFAIRS, U.S. DEPARTMENT OF STATE, WASHINGTON, 

DC 

Mr. TONG. Thank you, Mr. Chairman. I really appreciate this opportunity to testify. 

Today you have asked us to consider how the administration’s 

work on trade promotion and capacity-building supports our Nation’s broader Asia-Pacific strategy, and I look forward to addressing that. 

FOREI-MBP-19 with DISTILLER

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As you know, economic policy engagement with the region is 

deep and expanding, covering many more issues and programs 

than we could possibly discuss fully here today. This engagement 

aims at creating a regional economic system that is open, free, 

transparent, and fair, thereby creating new opportunities for 

growth and jobs here at home, even as it strengthens our strategic 

presence overseas. 

Our work in this area supports American trade and investment 

interests by securing property rights, enforcing contracts, and fighting corruption. It also empowers citizens to hold governments accountable on protecting the environment and product safety. And 

as Assistant Secretary Malinowski explained, it aligns American 

leadership with the aspirations of ordinary people in the region and 

with the values that they admire. 

It is worthwhile to note that our most potent tool in all of these 

efforts is America’s private sector presence in the region. And as 

you noted, total trade in goods and services with the region is at 

an all-time high, reaching over $1.6 trillion last year. And U.S. 

businesses remain the largest source of foreign investment in the 

region. 

But the U.S. Government plays a critical role, including by training thousands of officials on issues vital to our interests, such as 

customs and trade facilitation, information technology connectivity, 

financial regulation, and the like. 

Mr. Chairman, concluding the Trans-Pacific Partnership negotiation remains the single most important thing the United States can 

accomplish with the Asia-Pacific this year. The region is home to 

vibrant economies, some of our closest allies, and some of our most 

demanding challenges. Foreign policy and trade policy are closely 

linked. Trade issues cannot be separated from larger questions 

about America’s global leadership and our global security. 

With the TPP, we are building a stable foundation for our trade 

and investment in the region. TPP unites 40 percent of global GDP 

in articulating the values that we American people want to see prevail, values like protecting worker rights and the environment, ensuring transparency in regulatory processes, and enforcing laws 

fighting bribery and protecting intellectual property rights. 

TPP will also have a broad magnetic effect on the region beyond 

its current membership. In fact, we are already seeing that encouraging more open, fair, and transparent policies among potential future TPP members. 

Mr. Chairman, despite the mixed results of last Friday’s votes in 

the House of Representatives, the administration is committed to 

working with Congress to see trade promotion authority passed, 

and we are committed to concluding the TPP agreement as soon as 

possible. TPP is profoundly in the best interests of the American 

people, but the world will not wait for us. 

If we do not lead, we risk ceding leadership to countries that do 

not share our interests and values. Indeed, China and others have 

already reached agreements that disadvantage us, and they are negotiating more such agreements, which do not protect worker 

rights or environmental interests, do not adequately protect intellectual property rights or help maintain a free and open Internet. 

And they certainly do not address unfair competition from stateFOREI-MBP-19 with DISTILLER

10 

owned enterprises. If these lower quality agreements become the 

standard for the fastest growing region of the world, it will put our 

firms and workers at a disadvantage, result in markets being 

carved up against us, remove us from supply chains, and cause our 

overall national strategic influence to be diminished. 

And, Mr. Chairman, let me stress that this is an urgent matter. 

We need to act now. As economic power spreads more widely 

around the world, we need to face the fact that our opportunity to 

shape rules to our advantage as a Nation may be limited in time 

and scope. Our weight in global economic affairs is challenged as 

the rest of the world becomes a middle income economy, and we 

need to act now while we still have the leverage to succeed. 

Mr. Chairman, in my written testimony, I provided additional detail about other important matters such as our critical engagement 

with ASEAN as it prepares to launch the ASEAN Economic Community this year. That work has great potential to benefit the people of ASEAN, and as the top investor in ASEAN, it has great potential also for the United States. In fact, technical assistance on 

trade capacity-building is undoubtedly among the wisest forms of 

investment that we can make, and I expect Mr. Foley to share 

more ideas with you about that in a minute. Such work not only 

accelerates growth in developing economies, it also creates greater 

opportunities in our own economy, even as it reinforces American 

values such as transparency, good governance, and fair play. 

When I visit and speak with government officials around the 

world, regardless of which corner we are in, Southeast Asia, Central America, Central Asia, Eastern Europe, the top request that 

I consistently hear is for the United States to invest more in teaching and sharing best practices on questions like improving customs 

facilitation, which can both spur trade and help stem corruption. 

And finally, another important priority, of course, for the administration, as well as for Congress, is our economic policy engagement with China. The upcoming strategic and economic dialogue is 

an important opportunity to make further progress, as are the ongoing negotiations toward concluding a bilateral investment treaty. 

So we look forward to support from Congress on all aspects of 

this high priority agenda, and thank you for your attention. I look 

forward to your questions. 

[The prepared statement of Mr. Tong follows:] 

PREPARED STATEMENT OF KURT TONG

Chairman Gardner, Ranking Member Cardin, and members of the subcommittee, 

thank you for the opportunity to testify before you today together with my colleagues, Assistant Secretary of State for Democracy, Human Rights, and Labor, 

Tom Malinowski, and Jason Foley, the Deputy Assistant Administrator in the Asia 

Bureau of the U.S. Agency for International Development (USAID). 

Over the last 6 years, the administration’s sustained ‘‘rebalance’’ to the AsiaPacific has established a ‘‘new normal’’ of extensive collaboration with Asia-Pacific 

allies and partners on important global issues, driven by a high tempo of engagement by the President, the Secretary of State, and other Cabinet and senior 

officials. 

OUR VISION FOR THE ASIA-PACIFIC REGION

The administration’s rebalance to the Asia-Pacific recognizes that our future prosperity and security are inextricably tied to that region. Economies in the region 

have witnessed a period of extraordinary growth over the past few decades as they 

have liberalized trade and opened their borders. Literally hundreds of millions of 

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11 

people have been lifted out of poverty and into a middle class expected to reach 3.2 

billion people by 2030. This growing middle class has expanded trade opportunities 

and growth in countries around the world, including the United States. The rebalance reflects the importance we place on our economic, security, public diplomacy, 

and strategic engagement in the Asia-Pacific, and our strong support for advancing 

democracy, good governance, justice, and human rights. These goals are mutually 

reinforcing elements of a unified strategy. 

Our economic engagement with Asia—aimed at creating a system that is open, 

free, transparent, and fair—creates new opportunities for growth at home, and 

strengthens our strategic presence abroad. It helps to build more stable societies by 

encouraging governments to strengthen rule of law. It supports our trade and 

investment goals by promoting laws and institutions that secure property rights, 

enforce contracts, and fight corruption. It empowers citizens to hold their governments accountable on issues such as protecting the environment and product safety, 

which is also important to the health and well-being of our own people. It aligns 

American leadership with the aspirations of ordinary people in the region, and with 

values that they admire, thus distinguishing us from other great powers past and 

present. 

By the same token, our strategic presence in Asia—our alliances, our trade agreements, our ability to provide security and reassurance to our friends—ensures that 

our partners in the region maintain confidence in our leadership for peace and prosperity. The United States is not the only great power with a vision for the future 

of the Asia-Pacific. To advance the vision we share with so many of the region’s people, we must be principled and present at the same time. 

These are all reasons why this administration is committed to advancing our economic engagement with Asia. Our engagement with the region is deep, enduring, 

and expanding, covering many more issues and programs than we are able to fully 

discuss here. Most important is America’s private sector presence in the region. Our 

bilateral trade in goods and services is at an all-time high, reaching over $1.4 trillion in 2013. U.S. businesses remain the largest source of foreign investment in East 

Asia and the Pacific. But the U.S. Government plays a key market expansion role 

as well, including by providing hundreds of millions of dollars in assistance each 

year to developing Asia, and thereby training thousands of officials on issues vital 

to our interests such as customs and trade facilitation, ICT connectivity, financial 

regulation, energy efficiency, environmental governance and resources management, 

and disaster preparedness. 

THE TRANS-PACIFIC PARTNERSHIP

Concluding the Trans-Pacific Partnership (TPP) negotiations remains the single 

most important thing the United States can accomplish in its economic and strategic 

relationship with the Asia-Pacific this year. The centrality of the TPP to the United 

States Asia policy is fundamental. The Asia-Pacific region is home to some of the 

world’s most dynamic economies, some of our closest allies, and some of our most 

demanding challenges. As our prosperity and security are inextricably tied to the 

region, so too are foreign policy and trade policy inextricably linked to each other. 

Trade issues cannot be separated from larger questions about America’s global leadership. 

As Secretary Kerry recently said, ‘‘If we retreat on trade, our influence on the 

global economy will diminish. And if our economic stature is in doubt, our ability 

to deliver on defense and political challenges will be increasingly questioned. In today’s world, the economic and security realms are absolutely integrated; we simply 

cannot retreat from one without diminishing our role on the other.’’ We have to be 

fully engaged in each of these realms—commercially, politically, and diplomatically. 

With the TPP, we, along with our partners, are building a stable foundation for 

trade and investment in the Asia-Pacific region. Through the agreement, we will 

leverage 40 percent of global GDP to articulate the values that we want to see prevail—values like protecting the rights of workers and the environment, ensuring 

transparency and participation in regulatory processes, and enforcing laws against 

bribery and laws protecting intellectual property rights. These are the same values 

that are vital to a healthy business environment, and are sustainable only in a 

region where rights are respected, institutions are stable, and disputes are settled 

in accordance with the rule of law. 

TPP will include strong and enforceable labor standards and environment commitments, groundbreaking new rules to ensure fair competition between state-owned 

enterprises (SOEs) and private companies; commitments to improve transparency 

and consistency of the regulatory environment, a robust intellectual property framework to promote innovation while supporting access to medicines and an open InterFOREI-MBP-19 with DISTILLER

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net. The agreement will also protect and underscore the need to maintain the free 

flow of data across borders. This is not only vital to the effective working of a modern digital economy, but also enhances the right of individuals to freedom of information, which reflects our democratic values. 

Despite its economic gains, the Asia-Pacific region continues to be plagued by corruption and environmental destruction, and inadequate labor standards persist in 

many corners of the region. TPP will help ensure the region’s future economic 

growth is sustainable and guided by a framework that is cemented in place by us 

and our partners. 

TPP will also have a broader magnetic effect on the region, beyond its current 

membership, by encouraging nonmembers to adopt to open, fair, and transparent 

trade and investment policies in their efforts to attract new economic partners. The 

TPP example can help spur them to make reforms to elevate the standards of their 

trade and investment regimes, and lower tariff and nontariff barriers to trade and 

investment. 

TRADE POLICY LEADERSHIP IN AMERICA’S INTERESTS

The Asia-Pacific’s growing engagement with the world will not wait for us. If we 

do not take the lead, we risk ceding leadership to other countries that do not share 

our interests and our values, and are pushing their own regional initiatives with 

weaker standards. Presently, China and others are negotiating a number of agreements. These agreements do not protect workers’ rights or environmental interests. 

They do not adequately protect intellectual property rights or help maintain a free 

and open Internet. And they do not address unfair competition from state-owned 

enterprises. If these agreements were to become the model for the fastest growing 

region of the world, it would not only put our workers and firms at a significant 

disadvantage, it would also result in Asian markets being carved up, removing us 

from supply chains, decreasing our linkages to important allies, and seeing our overall influence diminished. 

There is another important reason why the United States is pushing for a global 

system of trade agreements that so heavily emphasizes resolving nontariff issues, 

over and above seeking tariff reduction. The comparative advantage theories of the 

19th century British economist David Ricardo described a world of arms-length 

transactions—of commodities sent overseas in simple exchange for other commodities. The economy of the 21st century—and this is especially true for the United 

States, which stands at the apex of the modern economy—is a much more complex 

system, where trade in services ranks with trade in goods, and goods and services 

are often intermixed. Today’s economy is a system where investment begets trade 

and trade spurs investment; where products move electronically as well as physically; and where globalized value and supply chains can witness products crossing 

borders numerous times before being ready for final consumption. In such a 

globalized economy, fair rules are the key to promoting the interests of our people, 

workers, and employers alike—fair rules on issues like investment, regulatory 

transparency and coherence, customs procedures, intellectual property, e-commerce, 

and data protection. 

It is precisely because the United States has the most complex economy—because 

we are the leader technologically, and in services, and in higher value-added manufacturing—that we must use all the tools at our disposal to propagate rules that 

allow us to harness that complexity to our advantage. ‘‘All the tools’’ includes technical assistance—as we negotiate path-breaking reforms in important areas such as 

labor and the environment, we also want to develop technical assistance tools to 

ensure that our trading partners are successful in implementing these reforms. 

And we need to do this now. Thirty years ago, the majority of the world’s population lived in countries classified as low income. Now, the lion’s share live in middle-income countries. These nations are active in international trade and investment 

policymaking, and they influence the rules of the road. While the United States currently has comprehensive trade agreements with 20 countries, primarily in Latin 

America, there are over 200 such agreements in Asia. As economic power spreads 

more widely around the world, we need to face the fact that our opportunity to 

shape the rules to our advantage, as a nation, may be limited in time and scope. 

Our weight in global economic affairs is challenged as the rest of the world becomes 

a middle-income economy. We need to act now while we still have the leverage to 

succeed. 

APEC AND ASEAN

The Trans-Pacific Partnership, then, is an urgent and vital initiative. At the same 

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nomic ‘‘rebalance’’ strategy, it is by no means the only tool at our disposal. And fortunately some other key mechanisms also allow us to reach out effectively and 

expand economic ties with other Asia-Pacific economies that have not yet volunteered to join TPP, or are not yet ready to meet its standards. 

The Asia-Pacific Economic Cooperation (APEC) forum, in particular, has been critical as an incubator for new ideas that are now being incorporated into the TPP. 

When I served as the U.S. Ambassador to APEC, I saw firsthand the potency of its 

work in spreading best practices on not only trade and investment, but also other 

key issues such as environmental protection and promoting more inclusive growth. 

The United States continues to bolster APEC’s role as the region’s premier economic 

forum for advancing free and open trade and investment, and fostering sustainable 

and equitable growth. Its 21-member economies accounted for 44 percent of world 

trade and 54 percent of global GDP in 2013, consisting of both small and large 

economies, and more advanced and developing economies. The practical training 

and policy deliberations that the United States and other key players sponsor under 

the APEC umbrella are intensely valuable. 

Another critical avenue of U.S. strategic economic engagement is through our 

Partnership Dialogues with ASEAN and our support of the ASEAN Economic Community (AEC). We continue to work to deepen our trade relations with all of ASEAN 

through the U.S.-ASEAN Expanded Economic Engagement initiative, as well as 

through bilateral efforts with the individual ASEAN members. When fully implemented, the AEC will integrate the diverse economies of ASEAN and create a region 

with freer movement of goods, services, investment, skilled labor, and capital. Thus 

the AEC has tremendous potential to benefit the people of ASEAN, and as the top 

investor in ASEAN, it has equal potential to benefit the United States. I believe my 

colleague from USAID will mention a number of specific examples of highly successful trade capacity-building programs that USAID has implemented through both 

ASEAN and APEC, among them the ASEAN Single Window project. 

In fact, technical assistance on trade-related capacity-building is undoubtedly 

among the wisest forms of investment we can make. Such work not only accelerates 

growth in developing economies, it also creates greater opportunities for growth in 

our own economy—even as it reinforces the ‘‘export’’ of American values such as 

transparency, good governance, and fair play. When I visit and speak with government officials from middle-income nations around the world, whether in Southeast 

Asia, Central America, Central Asia, or Eastern Europe, their top request of the 

United States is consistently that we invest more in teaching and sharing best practices on questions like improving customs facilitation, which can both spur trade 

and help stem corruption. 

Multilateral development banks are also useful partners in this work. When 

thinking about Asia-Pacific regional economic integration in particular, the Asian 

Development Bank (ADB) has been at the forefront of supporting shared solutions 

and approaches to issues such as water resources management and regional energy 

supply and connectivity. The Greater Mekong Subregion (GMS) program, for example, and the Central Asia Regional Economic Cooperation program, known as 

CAREC, have worked diligently on a subregional basis to promote development 

through cooperation, leading to accelerated growth and poverty reduction. 

The existing multilateral development banks such as the ADB have prioritized 

transparency, sound governance, and social and environmental safeguards in their 

own operations and in the standards they set in the region. As these existing institutions continue their work, there is a set of new actors and institutions that are 

also poised to contribute to development, particularly infrastructure finance, in the 

broader Asia-Pacific region and beyond. The United States aims to communicate 

with such institutions, such as the emerging Asian Infrastructure Investment Bank 

sponsored by China, to help ensure that they have a positive impact on regional 

development. 

CHINA

No discussion of the Asia-Pacific economy would be complete without considering 

the important role of China. The past 30 years have seen China undergo an unprecedented transformation, as hundreds of millions of its citizens emerged from poverty, migrated to cities, and reengaged with the world with a voracious appetite 

driven by voluminous government-led investment. China’s economy has grown a 

staggering 1,600 percent since 1983, reducing the proportion of its population living 

on the equivalent of less than $2 a day from almost 93 percent in 1984 to less than 

20 percent in 2011. The net result is now an economy that rivals that of the United 

States in terms of its gross size and scale of activity. China accomplished this, however, at great expense to its environment, and in a manner that emphasized rapid 

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growth over other social and political development considerations. China’s internal 

focus on building a strong economy while retaining firm government control over 

economic activity remains at odds with the American vision of economic growth led 

by entrepreneurship, adherence to the rule of law, and a free and strong private sector. Concerns about basic aspects of China’s approach to economic policy have deepened in recent months due to the recent spate of regulations and laws introduced 

by China that could cast doubt on the legality of a wide range of normal economic 

activities. 

Because of these differences between the U.S. and Chinese economic policy models, some commentators have suggested that the United States should feel threatened by China’s growing economic role among its neighbors. Indeed, China has 

made no secret of its ambitions to retake what it considers to be its rightful place 

in the region and in the world. There are reasons, however, why the United States 

should not be overly concerned about this, and be confident in our long-term strategies. 

First and foremost, we must remember that, when it comes to influencing economic policy affairs, the quality of ideas matters as much as the quantity of transactions. China is in the process of discovering that, in a globalized world economy, 

possessing a large trading economy does not translate into unilateral monopoly 

power or monopsony power that can be used to twist the arms of one’s neighbors. 

At the same time, possessing large cash reserves can allow one to make a positive 

contribution to regional and global economic development. But it is much harder to 

use such financial might in aggressive or exclusivist ways when the world’s financial 

markets are highly intertwined and capital is a priced commodity. 

In fact, the United States should be reassured, by the experience of the TPP and 

our other initiatives, about the powerful attractiveness of our model of economic cooperation, which is mutually beneficial and respects the needs of all participants. 

Any other model will not work for long in the modern world, and that is a good 

thing. 

So, while vigorously pressing China to open its own markets and show greater 

respect for rule of law inside China, we will continue to confidently prod China in 

positive directions in the regional context. 

Direct bilateral engagement with China is, of course, an urgent business, and the 

upcoming U.S.-China Strategic and Economic Dialogue is an important opportunity 

to make progress in advancing U.S. economic priorities and narrowing areas of disagreement. Presently, on a bilateral basis, one of the most interesting initiatives directly involving the State Department is the ongoing negotiation toward concluding 

a Bilateral Investment Treaty (BIT) with China. These talks offer an important 

opportunity to support economic reform in China, and to promote a more level playing field for U.S. investors in China’s market. We are seeking a high quality BIT 

with a ‘‘negative list’’ reflecting a high level of openness to foreign investment. We 

are also pressing for strong investor protections for U.S. investors, supporting transparency, predictability, and the rule of law. We need to see additional progress on 

the ground in China in terms of economic reform. We need China to do more to welcome American businesses and reassure them that they will not be subject to discriminatory treatment and that their intellectual property will be protected. 

CONCLUSION

In short, the administration is using a wide range of tools, ranging from the 

Trans-Pacific Partnership to trade capacity-building programs to APEC and ASEAN 

and our direct engagement with China, to help build an Asia-Pacific economic system that will allow the United States to realize the full and lasting benefit of being 

a Pacific power. The administration remains committed to working with Congress 

on this high priority agenda. 

Senator GARDNER. Thank you, Mr. Tong. 

Last but certainly not least, we have the Honorable Jason Foley, 

who serves as the Deputy Assistant Administrator in the Asia Bureau of the U.S. Agency for International Development, USAID, 

overseeing East Asia and the Pacific. Mr. Foley is a career member 

of the Senior Executive Service. Previously Mr. Foley served as the 

Director of Strategic and Program Planning in the Bureau of Policy, Planning and Learning. Mr. Foley has worked as the Budget 

Director for Immigration and Customs Enforcement, the Director of 

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Strategic Planning for the State Department, and a Peace Corps 

volunteer in—I am not sure where he was. 

Mr. FOLEY. Benin. 

Senator GARDNER. Benin. Very good. 

Prior to his U.S. Government service, Mr. Foley was a senior 

manager for a consultancy firm where he focused on financial sector reform issues in East Asia. Welcome, Mr. Foley. 

STATEMENT OF JASON FOLEY, DEPUTY ASSISTANT ADMINISTRATOR, ASIA BUREAU, U.S. AGENCY FOR INTERNATIONAL 

DEVELOPMENT, WASHINGTON, DC 

Mr. FOLEY. Thank you, Mr. Chairman, for this opportunity to 

testify today on the role of USAID in trade promotion and capacitybuilding in the region. 

As previously mentioned, the region has experienced remarkable 

growth and prosperity over the past three decades and has lifted 

hundreds of millions of people out of extreme poverty. But in order 

for this growth to be sustainable and therefore continue to benefit 

the region and the United States, there are several development 

challenges that need to be addressed. 

The first, inequitable growth, which can lead to a playing field 

that is not level and also can exclude underprivileged and 

marginalized groups like women. And as Senator Cardin mentioned, the second key challenge is weak governance, which leads 

to ineffective and not well-informed laws and regulatory frameworks. And finally, inadequate social and environmental standards, 

which can lead to forced labor and environmental degradation. 

USAID is best positioned to address these development challenges through sustained U.S. leadership on trade. Specifically, the 

Trans-Pacific Partnership offers us, the agency, an unparalleled opportunity to help reduce poverty, improve human rights, and promote environmental safeguards in the region. I will talk about a 

few examples of what we are doing to address these development 

challenges. 

To help create open and inclusive economies, USAID is working 

with ASEAN, for example, to, one, improve the regulatory framework for trade and investment and thus open markets for U.S. exports; two, harmonize customs regulations that will lower the cost 

of doing business; and three, train small- and medium-sized enterprises, including women entrepreneurs and provide them greater 

access to capital. 

To help strengthen governance, USAID is working with governments, civil society, and the private sector to strengthen the rule 

of law, increase transparency, and enable citizens to play an active 

voice. In Vietnam, for example, we are providing assistance to improve the rule of law in compliance with trade agreements. In 

Burma, we are working to increase land tenure security for 

smallholder farmers by supporting public participation in the development of a land use policy. In the Philippines, we are helping 

to make the country a more reliable trade and investment partner. 

And in Laos, we are supporting key legal reforms needed to fully 

implement trade commitments. 

To help establish social and environmental safeguards, USAID is 

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national standards for protecting the environment and workers 

rights. For example, at this week’s Asia Clean Energy Forum in 

the Philippines, USAID is bringing together U.S. and Lower 

Mekong countries or businesses to explore sustainable and renewable energy development. Through the Tropical Forest Alliance 

2020, which extends to over 400 global companies, USAID supports 

the Government of Indonesia in its efforts to reduce commoditydriven tropical deforestation. And in Cambodia, we are supporting 

improving working conditions and workers’ livelihoods and promoting safe labor migration, freedom of association, and labor dispute resolution. 

In conclusion, Mr. Chairman, East Asia has become a key driver 

of global economic prosperity. USAID has helped to make this 

growth more equitable and sustainable, but our continued success 

requires strong U.S. leadership on trade. For example, our best leverage to improve labor rights and ensure appropriate environmental safeguards comes from 21st century trade agreements such 

as the TPP. 

I appreciate the opportunity to testify today. I look forward to 

your counsel and questions. 

[The prepared statement of Mr. Foley follows:] 

PREPARED STATEMENT OF JASON FOLEY

Chairman Gardner, Ranking Member Cardin and distinguished members of the 

subcommittee, thank you for the invitation to testify on the role of the U.S. Agency 

for International Development (USAID) in supporting trade capacity-building in the 

Asia-Pacific region. It is an honor to appear before the committee, and a pleasure 

to be here alongside my colleagues from the U.S. Department of State, Assistant 

Secretary Tom Malinowski and Principal Deputy Assistant Secretary Kurt Tong. 

It is an exciting and pivotal time for U.S. policy in the region. More people live 

in Asia than anywhere else on the planet. Over the past three decades, the region 

has experienced an unprecedented period of prosperity, propelling hundreds of millions out of extreme poverty. A growing middle class has expanded trade opportunities and driven reciprocal growth in countries around the world, including the 

United States. The 10 member states of the Association of Southeast Asian Nations 

(ASEAN) alone comprise our fourth-largest export market. In the next decade, trade 

volume in Asia is expected to double, and by 2050, Asia’s gross domestic product 

(GDP) is projected to account for more than half of the world’s GDP. 

At the same time, the region faces complex development challenges that threaten 

to derail this growth trajectory—and compromise stability. Governance challenges 

in certain countries limit the full participation in economic growth of marginalized 

segments of society, such as smallholder farmers and women—holding countries 

back from reaching their full potential. Small and medium enterprises—the backbone of any economy—lack the tools and financing they need to succeed in creating 

jobs for the region’s massive youth bulge. In some cases, governments are not doing 

enough to protect their most vulnerable and marginalized from exploitation and 

abuse. The incidence of sex trafficking and forced labor is higher in the region than 

anywhere else in the world, and regulating legitimate labor migration is an ongoing 

challenge. The region’s voracious appetite for natural resources has resulted in some 

of the fastest rates of deforestation in the world, which affects everything from air 

quality to water supply. 

The U.S. Government’s rebalance to the Asia-Pacific recognizes that our future 

prosperity and security are inextricably tied to the region. It is in our strategic 

interest to ensure that economic growth in Asia is sustainable and inclusive and 

contributes to strengthened stability across the region and the United States. 

USAID plays an integral role in achieving this vision. Key to achieving our mission 

of ending extreme poverty and promoting resilient, democratic societies is addressing the quality of economic growth—that it is widely shared and inclusive of all ethnic groups, women and other marginalized groups; that it is compatible with the 

need to reduce climate change impacts and to manage natural and environmental 

resources responsibly; and that it ensures international markets function properly, 

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complies with international rules-based, transparent frameworks and obligations, 

and improves the well-being of all members of society. 

The economies of the Asia-Pacific region are at varying stages of development— 

from emerging to established. USAID works both at a regional level—primarily 

through ASEAN, the Asia-Pacific Economic Cooperation (APEC) forum and the 

Lower Mekong Initiative—and at a bilateral level to overcome the barriers to closing 

this development gap. 

REGIONAL ECONOMIC CONNECTIVITY & INCLUSION

A hallmark of USAID’s regional work is our 5-year ASEAN Connectivity through 

Trade and Investment (ACTI) project, which helps to improve ASEAN’s regulatory 

framework for trade and investment and private sector competitiveness—further 

opening markets for U.S. exports. Specifically, we provide support for customs integration, advancing renewable and sustainable energy solutions, the development 

and application of regulatory and technology solutions to rural broadband access, 

leveraging of information and communication technologies, and trade and investment facilitation—which includes harmonizing business standards in collaboration 

with the private sector to create a more level playing field and boost consumer confidence in the quality of products. 

ACTI prioritizes the economic inclusion of small and medium enterprises 

(SMEs)—which account for the majority of employment in ASEAN member states— 

through business development training, access to financing and market linkage support. We are targeting the vast youth population—which represents 60 percent of 

ASEAN’s total population—as well as women. We know if we can erase gender inequities, we can unlock human potential on a transformational scale. Investing in 

women has a well-documented multiplier effect. Research has found that women 

typically invest more of their income than men do in their children and communities. 

The U.S.-ASEAN Business Alliance for Competitive SMEs, a public-private partnership between USAID and the U.S.-ASEAN Business Council, has already trained 

3,500 SMEs—with nearly half of the individuals trained being women entrepreneurs—in all 10 member states since its launch just over 1 year ago. On removing barriers to financial access, USAID recently entered into a partnership with 

some of ASEAN’s largest banks to fund research grants to study how to improve 

access to capital for SMEs. This program will target and explore the particular 

issues women face in Southeast Asia in accessing capital. 

Regional economic integration presents tremendous potential for global growth. 

USAID is providing support for the establishment and upcoming launch of the 

ASEAN Single Window (ASW), a key benchmark in the establishment of the 

ASEAN Economic Community. By enabling all 10 member states to exchange cargo 

clearance data through a ‘‘single window,’’ the ASW will increase transparency in 

customs systems and improve customs compliance, speed customs clearance procedures, and lower the cost of doing business in the region, allowing increased trade 

that supports jobs and business opportunities in the United States and ASEAN. 

This single window for conducting trade with ASEAN countries will also facilitate 

ASEAN’s participation in global supply chains, creating opportunities for expansion 

for American business. 

We are also supporting APEC members in meeting their commitments by providing technical assistance in a number of U.S. priority areas through the 5-year 

U.S.-APEC Technical Assistance to Advance Regional Integration (U.S.–ATAARI) 

project. Through APEC, we are working to advance regional economic integration, 

harmonize product standards, improve domestic regulations, and reduce or eliminate behind-the-border barriers to cross-border trade in 21 member countries. U.S.– 

ATAARI’s supply chain connectivity assistance, for example, is working to speed up 

and reduce costs associated with customs measures. APEC’s work to reduce trade 

transaction costs, including through these streamlined customs procedures, has 

saved tens of billions of dollars for businesses across the region. 

LEVERAGING PARTNERSHIPS TO MAXIMIZE IMPACT

Across all our programming, we leverage strategic partnerships wherever possible—including with U.S. universities and businesses—to introduce new skills 

training and financial access opportunities, modern technologies, international 

standards, and the American brand of responsible investment. 

In Burma, increased U.S. trade and responsible investment promotes inclusive 

economic development, contributes to the welfare of the people of Burma and assists 

regional integration. As investors begin to turn their attention to Burma, the United 

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ment and business practices, encouraging further change, promoting inclusive economic development and contributing to the welfare of all the country’s people. In 

partnership with USAID, U.S. companies are not only seeking investment opportunities in Burma, but also actively engaging local communities to support broadbased development to benefit all sectors of the population. They are investing millions of dollars in advancing information technology, building the capacity of women 

entrepreneurs, training engineers and managers, and offering apprenticeship opportunities for youth. 

For example, USAID partnered with Hewlett-Packard (HP) to launch HP’s Learning Initiative for Entrepreneurs (LIFE) in Burma, an online business and information technology program. So far, HP has established 6 of 12 planned LIFE centers 

equipped with computers, learning solutions and Internet to enable access to HP 

LIFE e-Learning for urban and rural entrepreneurs. And just this past December, 

we initiated a U.S.-Burma Information Communications Technology Council in collaboration with leading U.S. technology companies—Cisco, Google, HP, Microsoft 

and Qualcomm Incorporated—to maximize ways in which technology can spur 

broad-based economic growth, increase transparency and support Burma’s integration into regional and global markets. 

STRENGTHENING GOOD GOVERNANCE THAT ENABLES GROWTH

Critical to sustainable and inclusive economic growth is good governance that 

encourages an enabling environment where entrepreneurship and innovation can 

flourish. That is why we work with governments, the private sector and civil society 

in countries across Asia to modernize laws and regulations affecting trade and 

responsible investment. We promote a legal and regulatory process that strengthens 

the rule of law, increases transparency, safeguards worker rights, and enables citizens to play an active role in economic reform. 

In Vietnam, USAID partners with civil society and others to help structure an inclusive economic environment that enables trade that benefits all citizens, helping 

Vietnam continue its responsible integration into the global economy. We focus on 

addressing reforms and accountability and expanding the rule of law—both of which 

are of great relevance to Vietnam’s likely commitments under the Trans-Pacific 

Partnership (TPP) trade agreement, while the rule of law underpins nearly every 

U.S. policy priority in Vietnam. 

In Vietnam, USAID works in close coordination with other U.S. Government 

agencies to facilitate activities that are critical TPP-related reforms. This includes 

implementation of, and compliance with, obligations on worker rights and on the environment, including in such areas as wildlife trafficking. This work is critical: We 

want to make certain that our trade agreement partners have both the capacity to 

implement and ultimately follow through with any commitments that they agree to 

undertake. Through our Governance for Inclusive Growth (GIG) program, USAID is 

providing technical assistance to improve compliance with trade agreements, the 

rule of law and expand our access to Vietnam’s growing market for U.S. exports— 

with an emphasis on improving the regulatory environment and labor issues, systems for accountability, and inclusion of vulnerable and historically disadvantaged 

groups, such as women. And our efforts with the Vietnam Chamber of Commerce 

and Industry are driving regulatory reforms and new business enabling policies at 

the local government level, thanks to a Provincial Competitiveness Index we’ve 

implemented. 

Our work in this area also extends to economies achieving year-on-year high 

growth rates, such as that of the Philippines, where one-fifth of the population still 

lives in extreme poverty. Through the Partnership for Growth (PFG), a White House 

initiative implemented in only four countries worldwide, the United States and the 

Philippines collaborate to address the country’s most serious constraints to lasting 

equitable growth that benefits all Filipinos. USAID activities promote trade and investment, greater competition, increased transparency, and improved fiscal policy 

and management—which have a direct correlation to reducing the cost of doing 

business. 

Our assistance has resulted in unprecedented economic growth for the country, 

and has made it a more reliable trade and investment partner. In 2014, foreign 

direct investment in the Philippines increased by 66 percent over 2013, with the 

United States being the largest source of private investment. At the same time, the 

Philippines has become one of the fastest growing markets for U.S. food and farm 

products. 

The next stage of the PFG is to address the income inequality that persists outside the national capital area, through USAID’s Cities Development Initiative, 

which is envisioned to develop growth hubs in a select number of outlying cities. 

FOREI-MBP-19 with DISTILLER

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In the Philippines, we also work through the Trade-Related Assistance for Development (TRADE) project to assist the government in improving trade and investment policy, trade facilitation, competition policy, and public outreach and advocacy 

in line with ASEAN commitments. At the request of the Philippines’ Bureau of Customs, TRADE assisted in the compilation and posting of a comprehensive database 

on import regulations (licenses, clearances, and permits) of various trade regulatory 

government agencies. This led to the issuance of the country’s first-ever Regulated 

Imports List covering more than 7,200 commodities, which is now available online 

and used as a reference by customs officers and the trading public. In the process 

of compiling this list, TRADE also identified redundant, overlapping or unnecessary 

requirements that are effectively serving as nontariff measures that inhibit trade. 

The project thus plans to work toward rationalizing and streamlining these various 

requirements. 

And in Laos, where USAID assistance was instrumental to World Trade Organization (WTO) accession in 2013, regulatory capacity remains limited and threatens 

future sustainable growth. Through the Lao People’s Democratic Republic (PDR)— 

U.S. International and ASEAN Integration project, USAID supports key legal reforms needed to fully implement WTO and ASEAN Economic Community commitments, as well as the U.S.-Lao PDR Bilateral Trade Agreement. The reforms contribute directly to modernizing the legal, policy and institutional framework for 

dynamic private sector growth, the integration of Laos into regional and international markets, and contribute to advancing the rule of law and improving governance throughout many sectors in Laos. 

ENSURING ENVIRONMENTAL AND SOCIAL SAFEGUARDS

Across the Asia-Pacific, we help ensure that investments, particularly in natural 

resource and infrastructure projects, meet domestic and international standards for 

protecting the environment and labor rights, and are sensitive to local communities. 

Indonesia is one of the most biodiverse regions in the world, but it also ranks 

among the world’s top ten countries with the highest rates of deforestation. The 

United States serves as a long-term partner in helping Indonesia conserve its biodiversity. Through the Tropical Forest Alliance 2020, which the U.S. Government 

created in partnership with the Consumer Goods Forum, a network of over 400 

global companies, the Government of Indonesia is actively engaged in efforts to reduce commodity-driven tropical deforestation from soy, beef, palm oil, and pulp and 

paper—which account for nearly 40 percent of global tropical deforestation. Illegal 

and unsustainable deforestation not only puts vulnerable populations at further 

risk, but it also contributes to greenhouse gas emissions and the loss of endangered 

species, such as tigers and rhinos. 

Together with the Department of State, USAID is currently hosting the Lower 

Mekong Initiative Renewable and Clean Energy Business Dialogue in Manila on the 

margins of the Asia Clean Energy Forum. To ensure energy security for a region 

with a 6-to-9 percent annual increase in electricity demand, Lower Mekong countries must collaborate across borders, while leveraging the private sector and establishing sound energy and investment policies essential to help set the countries on 

a path to sustainable low-emissions development. The LMI Business Dialogue will 

directly facilitate this collaboration, while at the same time, creating opportunities 

for U.S. businesses by giving them a seat at the table to discuss clean energy solutions that promote energy security and sustainability in the Mekong subregion— 

home to roughly 60 million people. 

Throughout the region, USAID’s Global Labor Program supports improved working conditions and workers’ livelihoods and promotes safe labor migration. The program links migrant labor organizations throughout the Asia-Pacific region to advocate collectively for strengthened global and regional frameworks to protect migrant 

labor rights. USAID will support a major conference on labor migration in Indonesia, bringing together representatives from government, civil society, multilaterals 

and business in August 2015. 

In Cambodia, our labor program is active, focusing on providing technical assistance and training on policy issues and labor dispute resolutions to trade unions and 

union federations in all economic sectors. USAID is also supporting the Community 

Legal Education Center, a local nongovernmental organization, to promote core 

labor standards and freedom of association of workers. USAID has provided key 

assistance to facilitate collective bargaining agreements between companies and 

trade unions. For instance, over the course of a politically charged year post 2013 

elections, USAID encouraged constructive dialogue between unions and the Ministry 

of Labor. This dialogue led to a reduction in violence and improved communication 

FOREI-MBP-19 with DISTILLER

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resulting in successful talks between the two parties. Ultimately, this resulted in 

an agreement for an increase in the minimum monthly wages for garment workers. 

USAID is also supporting a 5-year program in Cambodia to improve health outcomes for garment workers and their families. It focuses on improving the regulatory environment related to workplace health; improving access to and utilization 

of affordable quality health care for the garment industry workforce through private 

sector, host government and service provider engagement; and informing regional 

and global health standards improvement through a robust evaluation learning 

agenda. 

CONCLUSION

Mr. Chairman, the Asia-Pacific has become a key driver of global politics and economic prosperity and presents tremendous promise for the future—if growth is inclusive and sustainable. Our continued engagement in the region will be critical for 

our own prosperity and security. USAID’s trade capacity-building work helps to ensure the region follows this trajectory and contributes the type of global growth that 

lifts up the poorest of the poor, empowers the disenfranchised, and brings rule of 

law where it’s needed most. 

I appreciate the opportunity to share USAID’s work on trade capacity-building in 

the Asia-Pacific and look forward to hearing your counsel. I welcome any questions 

you may have. 

Senator GARDNER. Thank you, Mr. Foley. 

I will begin questions. And again, I apologize. I will be leaving 

when Senator Cardin returns to take the third vote and then return. 

Mr. Malinowski, you mentioned in your testimony that some of 

the reforms highlighted during your testimony would not have happened without the prospect of the Trans-Pacific Partnership or the 

talks that are being held. What are you hearing now from our 

trade partners with the failure of the House to move forward in a 

meaningful way? 

Mr. MALINOWSKI. All of us are hearing a tremendous amount of 

anxiety. There is a sense of doubt among many of our partners in 

the region about whether the United States is—not only about 

whether we are going to go through with TPP, but with respect to 

our overall posture in the Asia-Pacific. And I think as a result of 

that doubt, my understanding is that the discussions over the specific provisions that we want to see in TPP on labor rights, on the 

environment, on all of the issues that people are rightly concerned 

about are essentially—you know, people are waiting to see how this 

debate turns out. If there is no TPA, then these countries have far 

less reason to make the many times very painful and difficult 

choices we are asking them to make as a condition of entry into 

TPP. They are only going to take those painful steps, politically 

painful in many cases, if they know that there is a realistic prospect at the end of the day that this is going to work out. And that 

is in doubt right now. 

Senator GARDNER. And I do apologize. We are going to have to 

take a short recess so I can go vote before they close it out. When 

Senator Cardin returns, we can resume the hearing, but for now, 

this committee will stand in recess and we will resume when I return or Senator Cardin returns. 

[Recess.] 

Senator CARDIN [presiding]. So with the consent of Senator Gardner, I am going to reconvene the Subcommittee on East Asia and 

The Pacific for the purposes of questioning. I know Senator Gardner will be back as soon as he has a chance to vote on the last of 

FOREI-MBP-19 with DISTILLER

21 

our rollcall votes this afternoon. There should not be any further 

interruptions beyond that. 

And I apologize for not hearing the second two witnesses, but let 

me at least start the discussion with Mr. Malinowski. And the 

other two—you are more than welcome to respond as well. 

I agree with you that we see progress being made on issues important to the United States during these trade negotiations with 

the Trans-Pacific Partnership countries. Yes, they are making 

progress on not arresting people for their conduct that previously 

would have been arrested. They are releasing people from prisons. 

They are showing some sign of legislative action. They are making 

certain commitments on moving forward with labor protections. 

They are dealing with some of the other issues that we have 

brought up. 

My question is that we sign an agreement and then it is much 

more difficult to get the continued interest of these countries. They 

have got what they want—the trade commitments. And enforcement is not easy. If it is not spelled out in specific detail under dispute settlement resolution procedures, good governance is very difficult to enforce. If you have a commitment to reduce tariffs, you 

know whether those tariffs are being collected or not collected. If 

you have a commitment that you will not require corrupt activities 

in order to participate in government procurement, it is not as easy 

to demonstrate that American companies had an honest shot at 

those issues. 

So how do you recommend that we proceed to make sure that the 

type of progress that we have seen on good governance is not only 

for the purposes of negotiating an agreement but will be permanent 

changes made to protect the way a country deals with its citizens? 

Mr. MALINOWSKI. Thank you, Senator Cardin. That is the most 

important question. I would say several things. 

First of all—and maybe let us stick to Vietnam because it is, I 

think, the most challenging and important example here. Some of 

the things that we are talking about have to happen before TPP 

enters into force with respect to Vietnam. So on freedom of association, they have to change the law and they have to change it before 

they get the benefits of the treaty. And we will know when they 

have changed the law. We have been engaged in intensive conversations with them about exactly what that needs to mean. So 

it is not just a slogan, ‘‘freedom of association,’’ but we are bearing 

down on the specific details. 

Then, as you say, they have to enforce the law. And that enforcement becomes subject to the same dispute settlement mechanisms 

as anything else, including the commercial aspects of the trade 

agreement. Enforcement, as you said, is still hard even under those 

circumstances, as we have seen with other trade agreements. But 

will we be better off if we have the law changed and a provision 

in place to enforce it? I would argue, yes, much better off. Will we 

be better off if they continue down the path that they have started 

on in the last year under the spotlight of these negotiations? I 

would argue yes. 

We will also have other leverage in the relationship. For example, Vietnam is very, very eager to see the United States lift the 

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ed, but made clear that a full lift depends on significant progress 

on human rights. 

So this will happen in stages. We have multiple forms of leverage. We have a high degree of commitment across every agency of 

the U.S. Government to move Vietnam, to try to encourage them 

to move in the right direction. And there are many people within 

the Vietnamese system who also, for their own very good reasons 

of national interest, wish to build a more open political system. 

And there is a synergy between what we want and what they want. 

So I cannot think of a better way. It is not perfect, but I cannot 

think of another strategy that gives us a better chance of achieving 

our goals. 

Senator CARDIN. And I appreciate the honesty of that answer, 

and it is true that there will be dispute settlement provisions that 

will be included in, I hope, the trade agreement. At least that is 

if the TPA that passed the Senate and the House is ultimately 

signed. It is certainly in the language that they must, in fact, do 

that. 

The challenge I find with laws in countries that are ruled by a 

Communist Party is that you do not normally find the Communist 

Party written into their constitution or into their laws for that matter. And when you look at the constitutional protections, you look 

at the human rights that are embedded in their principles, they are 

not bad, but everything is subject to the Communist Party. And 

what concerns me is that if we have strong laws, laws that would 

enforce their commitments, that because of the way that a Communist system is organized, it is subject to an authority that is not 

spelled out in statute. How do you overcome that hurdle? 

Mr. MALINOWSKI. It will take time, of course. You have identified 

a central problem within Vietnam and other one-party states. 

I have found in my experience in dealing with them that it is in 

many ways a legalistic society despite the problem that you have 

identified. So, for example, when I have met with senior leaders in 

the Vietnamese Government, including within essentially their secret police, and we talk about cases of political prisoners who have 

been arrested, they cite the law to me, and they are right on the 

law because the law in Vietnam does explicitly allow the government to arrest people for criticism of the Communist Party and 

other so-called crimes. The law does explicitly forbid independent 

trade union organizing. So were they to stop a strike, they would 

be within the law. 

So if we can get changes in the law, we are not all the way there, 

but when we have that argument with them and, more importantly, when their own civil society has that argument with them, 

the law will be on the side of the angels as against now when it 

is not on the side of the angels. So that is one step in what we are 

trying to achieve but not the full step. 

Senator CARDIN. Well, I would just urge us to be as clear as we 

can in the enforcement provisions in TPP, and I would urge you to 

talk not only with our trade partners here in the United States in 

the administration but also with our trading partners. I must tell 

you I was not encouraged in talking to other TPP countries, where 

governance is not an issue as to their lack of interest in the good 

governance provisions of a TPP agreement. They were much more 

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23 

concerned about a particular industry or one of their issues or 

whether we are going to get an agreement—more so than the niceties of us worrying about good governance and human rights and 

anticorruption, et cetera. 

I would just tell you this is an incredible opportunity. It is going 

to be looked upon as the model moving forward, and if we do not 

get this right, it is a huge opportunity loss. And I do not want to 

put too much on your plate, but you are the point person in the 

administration that we look to that will raise these issues and 

make sure that our trade representatives press upon how results 

have to be shown. 

Mr. Tong, if I might, I want to get on to one other issue, and that 

has to do with other trade initiatives in the region and what impact it has on the TPP and the U.S. involvement. We know that 

there is the Regional Comprehensive Economic Partnership in 

which the ASEAN countries are trying to enter into agreements 

with Australia, China, India, Japan, New Zealand, and South 

Korea. That would certainly be a pretty dynamic region if they can 

come to an agreement on trade. 

We also know that there are bilateral free trade agreements in 

the region. We know that all the countries are actively engaged beyond just the TPP, although we do understand there is a good focus 

right now on what is happening with TPP in that region. 

There is the ASEAN Economic Community which is trying to become more significant on trade rules. 

Tell us where the United States currently stands as far as our 

opportunities for strategic partnerships versus other activities that 

are taking place in the region, which we are not part of. 

Mr. TONG. Well, thank you for that question, and I think it is 

a very astute one. 

By way of background, the United States currently has 20 free 

trade agreement partners. In the past few years, there have been 

200 such agreements reached just within the Asia-Pacific that exclude the United States. So there are a lot of activity out there. 

What I would like to convey is a sense that over the past few 

years—I have been working on this for a quarter century. Over the 

past few years, the U.S. has been the one setting the agenda, and 

the momentum has been building behind our initiative in the 

Trans-Pacific Partnership. And what we risk if we do not maintain 

that momentum is dissipation of that momentum in the direction 

of others setting the agenda. 

So what happens to the United States? Well, there is the classic 

question about trade diversion to our disadvantage. If people are 

reaching tariff reduction agreements that exclude us, that does disadvantage the United States. 

The more important question, I believe, is with respect to the 

nontariff aspects because these agreements that are being reached 

among the nations of Asia characteristically do not have the kind 

of nontariff provisions that a high value-added, high-technology, sophisticated economy like the United States needs to see in order to 

fully benefit from participation in this region. And once those 

agreements are reached, the system tends to get locked into place, 

and the expectation for what the rules of the road will be becomes 

lower. And the United States loses its leverage to change that 

FOREI-MBP-19 with DISTILLER

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agenda in a more sophisticated way that benefits our firms and our 

workers by having these more complex and, frankly, invasive nontariff measures, whether it is labor rules or any of the other aspects of these trade agreements. So really, we need to maintain 

momentum behind the Trans-Pacific Partnership. 

Now, you mentioned the ASEAN Economic Community. That is 

an opportunity—and we want to support that because these are all 

developing economies, and their greater integration among themselves is less likely than some of these other agreements to result 

either in diversion to the detriment of the United States or a lowbar approach toward the nontariff measures. And so what we are 

doing is working with the ASEAN Economic Community to try and 

build up the nontariff aspects of what they are attempting to accomplish, as well as help them implement that agreement because 

that will help our firms set up in a regional basis and create more 

export opportunities for the United States. 

Senator CARDIN. I have one followup question for you, if I might, 

Mr. Chairman, and that deals with China. 

In my conversations in the region, including with China, you get 

the impression that China looks at TPP as an effort to isolate 

China and to—for particularly the United States since it is the 

leader in the TPP—of trying to get an advantage over China. I try 

to do my best to assure them that that is not our desire, that we 

want to see China as a strong country. We want them to buy more 

of our products. We want to move forward with our commerce with 

China. In the meantime, China has reached out with certain trade 

arrangements with other countries and they are involved in this regional cooperation. There have been some rumors that they may be 

interested in TPP. 

Can you just share with us your view as to how you see China 

reacting to TPP and what opportunities do we have in the United 

States in regards to China? 

Mr. TONG. Certainly. A few years back, China definitely viewed 

the TPP as an aggressive American attempt to contain their economic space in the Asia-Pacific region. Their view of that has softened over time, and the reason for that is that they have come to 

understand better—not well enough yet in my opinion, but better— 

that the United States objectives for the region of having an open 

and fair system for trade and investment in the Asia-Pacific is 

something that over the long run would be something that China 

would value itself. 

A real issue is Chinese protectionism. Even as China starts to realize that an open system outside its borders is not such a bad 

thing, China continues to take a very protectionist approach toward 

the regulation of its own economy. And therefore, when it reaches 

bilateral agreements in particular with other countries, they tend 

to keep the bar very low both in terms of the amount of tariff relaxation, as well as the nontariff rules. And again, I am repeating myself here, but locking the region into a set of low-quality arrangements is to the detriment of the United States. Therefore, we need 

to maintain momentum behind our initiatives. 

Mr. MALINOWSKI. If I may add to that, Senator Cardin. You mentioned some inklings of interest within China and the TPP. I would 

just say from my standpoint, I would be very happy if China were 

FOREI-MBP-19 with DISTILLER

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interested in the TPP because then they would have to meet the 

freedom of association requirement, and that would be a very good 

thing. 

Senator CARDIN. I hope there is more than just freedom of association requirements. 

Mr. MALINOWSKI. And many, many other requirements. 

Senator CARDIN. Thank you very much for clarifying. 

Mr. MALINOWSKI. As the Assistant Secretary for Human Rights, 

Democracy, and Labor—— 

Senator CARDIN. I am sure you read all the principal negotiating 

objectives that are included in the TPA that we expect are going 

to be complied with in the TPP agreement. 

Mr. MALINOWSKI. Indeed. 

Senator CARDIN. Thank you. 

Senator GARDNER [presiding]. Thank you again for putting up 

with our vote schedule today. 

I wanted to go back to Mr. Tong in terms of following up on one 

of the questions I asked Mr. Malinowski, and that was about the 

aftermath of the House vote this week. In your statement, in your 

opening testimony, you mentioned that foreign policy and trade 

policy are closely linked. What are you hearing? What is the feedback you are receiving after the House aftermath of the vote? 

Mr. TONG. Well, I think Assistant Secretary Malinowski answered this accurately a moment ago in saying that the fundamental reaction is one of anxiety. Our 11 partners in the TransPacific Partnership endeavor very much want this to be a successful initiative. They have put a lot on the line politically, and they 

have put an enormous amount of effort into reaching a high quality 

agreement. And so they are anxious and watching us very closely 

to see if the United States can deliver on its promise of having the 

capability of coming to closure and the trade promotion authority 

being that capability. Trade promotion authority, as you know, is 

Congress telling the administration what to achieve in the agreement in return for promising to consider that agreement as a whole 

once it is reached, not a promise to pass it, just a promise to consider it. 

With respect to the region, if you think about the rebalance strategy, which I think both Congress and the administration have internalized as an important priority for the United States, there is 

a diplomatic aspect to it. A few years back, we would hear from 

friends across the Pacific constantly that we were not showing up 

enough, and the United States has been showing up. We heard 

that they were very concerned and anxious about us maintaining 

our military presence, and we have both maintained and augmented our military presence. And they have asked us to be more 

engaged in the region economically, not just in a material sense, 

but in the sense of shaping the rules of the road for how the AsiaPacific economy works because they know, as was pointed out earlier, that only the United States has that unique commitment to 

actually emphasize in the long term issues of fairness and transparency and how trade investment takes place. 

So this is fundamentally part of a piece in how the United States 

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26 

gion. So we really cannot be successful in an overall sense without 

the economic piece. 

Senator GARDNER. Thank you. 

I want to follow up, Mr. Foley, with you on that engagement 

question. In your testimony, you stated that our continued engagement in the region will be critical for our own prosperity and security. USAID’s trade capacity-building work helps to ensure the region follows this trajectory and contributes to the type of global 

growth that lifts up the poorest of the poor, empowers the 

disenfranchised, and brings the rule of law where it is needed 

most. 

Mr. Tong mentioned the rebalance as well as part of that engagement. 

What percentage of the total would you estimate USAID currently spends on its trade capacity-building efforts in the Asia-Pacific region? 

Mr. FOLEY. Thank you for the question. 

Before I get into specifics in terms of the portfolio, just to add 

on previous comments on the rebalance and how important these 

issues are of human rights and governance and improving the livelihoods of people out there, our role is to help ensure that there is 

an appropriate balance within the rebalance that these core issues 

are focused on. And we do work in Vietnam in improving transparency and accountability. We do work in other countries. But 

what TPP and these type of trade deals allows us to do is to shine 

the spotlight even further and actually get the support of the reformers in these governments that we are working with to push 

deeper. So they provide us the opportunity to do so. 

In terms of our overall portfolio for trade capacity-building, we 

work very closely with the State Department, with USTR, with the 

Department of Commerce. And so we collectively look at what the 

needs are in these different areas that we are working on either 

regionally that we do through APEC or ASEAN, in addition to bilaterally. And so we calibrate based on what the needs are. I can 

get you an exact percentage. I do not have it off hand. 

Senator GARDNER. If you could give me that percentage, that 

would be fantastic, just the estimate of what we currently spend 

on trade capacity-building efforts in the Asia-Pacific region. I think 

that is important to know as we talk about the rebalance and if 

we are actually focusing the proper energy into the rebalance or 

whether we need to reenergize the rebalance. 

Senator GARDNER. Following up on that, the countries in the region where these challenges are most prominent—what are they, 

and what is USAID’s plan to address these challenges? 

Mr. FOLEY. The challenges imposed by? 

Senator GARDNER. In the region when it comes to the trade challenges, trade barriers. And we talked about some of the work you 

are doing. What countries in the region face the most significant 

challenges and what are you doing right now? 

Mr. FOLEY. So our work in APEC and ASEAN is sort of the centerpiece of the regional trade that we are doing that works in a 

number of our countries in Southeast Asia. Looking at Vietnam, 

looking at Burma, looking at Cambodia. And so we address most 

of our trade issues regionally through streamlining customs 

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through our ASEAN Single Window programs, and through APEC, 

ensuring that we reduce the costs of doing business in the region. 

Our bilateral work also supports our regional work, and that 

deals more with the one-to-one U.S. Government and the individual 

countries in areas like improving transparency, rule of law, such as 

we are doing in Vietnam. 

So we come at it regionally and we come at it bilaterally. 

Senator GARDNER. As we negotiate the TPP and the opening that 

it creates, is USAID planning on increasing trade capacity-building 

efforts in the Asia-Pacific region? And if so, to what extent? 

Mr. FOLEY. So that is what we are in discussions right now about 

with our interagency partners, about what the needs are particularly around labor rights, environmental safeguards. What are we 

doing already to support. What are we doing regionally, bilaterally. 

And then based on what those needs are, should the agreement 

pass, we will then be determining what our role is within the interagency and then support as appropriate. 

Senator GARDNER. Do you think efforts to continue building out 

our trade capacity-building efforts within the region would be set 

back with the failure of TPA? 

Mr. FOLEY. You know, I think that my colleagues at the State 

Department could probably answer broadly diplomatically in terms 

of our programs. We are doing this work whether TPP passes or 

not. This is important work that we are doing in building trade capacity. So we continue to do it. Would it be helpful to have this? 

Absolutely. 

Senator GARDNER. Continuing, Mr. Foley, last year the Government Accountability Office produced an assessment of the agency’s 

trade capacity-building efforts and concluded—and I will quote the 

report—‘‘the U.S. Agency for International Development’s 2003 

trade capacity-building strategy does not directly guide TCB activities and parts of the strategy no longer reflect the current TCB environment.’’ 

Have you responded in any way to the GAO study, and what 

steps have you taken to update TCB strategy? 

Mr. FOLEY. I do not know. I will have to follow up and get back 

to you. 

Senator GARDNER. If you would get back to myself and Senator 

Cardin, that would be appreciated. 

Senator GARDNER. My time is up, Senator Cardin. If you would 

like anything—— 

Senator CARDIN. I have one more question. 

Senator GARDNER. Please go ahead and we will go back and 

forth. 

Senator CARDIN. Well, Mr. Foley, I want to follow up on the development assistance program and capacity-building for trade. I 

must tell you there are some who are pretty critical, saying that 

our aid policies were established for a developing world in Asia 

that has turned into an emerging world where you have economies 

that are getting more sophisticated and that we have not really 

changed our aid programs in Asia to reflect the current needs for 

trade capacity. 

There is also a concern, as we rebalance to Asia, that the total 

size of the foreign development assistance in that area is relatively 

FOREI-MBP-19 with DISTILLER

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small compared to the other regions and, therefore, you do not have 

the size going in. And whenever you try to redesign aid programs, 

you have political problems not just within the agency, but within 

the countries we are dealing with. So these are hard issues to 

change. 

But here we are talking about the most modern trade agreement, 

the largest trade agreement, in which a large part depends upon 

countries being capable of handling the commitments that they are 

making under this agreement, and if we have not focused our development assistance to make these modifications and changes in 

the country, then we are not going to succeed. 

So it seems to me that USAID has to take a pretty bold step here 

and be able to tell us how they plan to deal with the realities of 

the nations we are dealing with, particularly in TPP, but also beyond TPP, because the template here, we expect, will be used for 

other participants in TPP to have countries prepared to be capable 

of dealing with a modern trade agreement. 

Mr. FOLEY. It is a very good question, and it raises an issue that 

we grapple with in terms of our resources and how that is shaped. 

Economic governance resources for us, as well as democracy and 

governance—they are sort of part of the discretionary pot. They are 

not earmarked. They are not directives. They are not part of the 

administration-identified initiatives. And so it is often hard to ensure that we have adequate levels to support what the needs are. 

And so we are continuing to look through, as budgets are being developed and implemented, how we can assure that we do have appropriate resources to support this very critical set of issues that 

you have raised. 

Senator CARDIN. Well, I am glad I identified a problem. I would 

like to have some hope of an answer here. 

You know, we adopt these policies for a developing world and developing countries, and there have been changes, somewhat dramatic changes. Vietnam today is not what it was 20 years ago. And 

we need to be prepared to change our priorities to meet American 

needs. I understand budgets are tight. Believe me. I would like you 

to have a larger budget. I really would. But it does mean you have 

to make hard decisions. 

And if what you have said here today—to this panel—that trade 

is critically important to America’s strategic interests and economic 

interests and this is a critical moment with the TPP negotiations 

taking place, then I think we all have to be working in the same 

direction. And therefore, I hope that you will come forward with 

some concrete ways that will give some of us confidence that we 

can vote for a TPP knowing that there will be the tools available 

so that, in fact, particularly the countries of challenge will have the 

ability to comply with the commitments that Congress expects will 

be included in this TPP. 

Mr. FOLEY. We are working on it, and we will seek your counsel 

as we put forth our plans. 

Senator CARDIN. Thank you. 

Senator GARDNER. As you can tell, I think both Senator Cardin 

and I continue to seek answers on how well we are doing and what 

our progress is in the rebalance. And that is why I appreciated 

Senator Cardin’s efforts with my office to make sure that we were 

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29 

able to include in the base bill of the State Department operations 

authorization that we just did last week in the markup that passed 

unanimously out of our committee—we asked that very question. 

Are we doing enough when it comes to the rebalance? What resources have we focused, and what can we learn from where we are 

today with that focus? 

And keeping in line with that same question to Mr. Tong, I will 

turn to you. Depending on how you measure it, in the fiscal year 

2016 foreign operations request, the East Asia and Pacific Bureau 

is about 4 percent of that total, the fiscal year 2016 foreign operations, which basically makes it dead last amongst all of the bureaus for funding. Is that directing enough resources to make the 

rebalance successful? 

Mr. TONG. Boy, I am tempted to answer that question. 

Senator GARDNER. We would encourage you to answer the question. [Laughter.] 

Mr. TONG. Well, I do not work in the East Asia Bureau now, so 

I cannot really speak to the adequacy of its budget. I will say that 

the challenges in the Asia-Pacific are enormous. Certainly having 

worked in that region over the last 25 years, I have never felt flush 

in terms of the amount of resources available in pursuing those objectives. As for which region versus which budget, I am not in a 

position to address that question. 

I would like to comment a bit on what Senator Cardin brought 

up. There was a question about the relationship between trade capacity-building and TPA, and I do think there is a linkage there, 

if a subtle one, which is that trade capacity-building activities will 

be more successful if they are tied to a specific initiative such as 

TPP. 

I think there was also a question about bilateral versus regional 

approaches. And the regional approaches tend to be very efficient 

whether through APEC or through ASEAN or through a TPP 

framework because you have peer pressure from the participating 

economies reinforcing one another as they move forward in their 

understanding about trade policy. 

And then finally, this question about middle income versus—how 

to be providing appropriate support to middle income countries 

versus those that are most in need of poverty alleviation, I do think 

there is a question there that needs to be looked at both in terms 

of trade policy but also in trade capacity-building and our assistance programs. And I look forward to working with USAID on that 

question. 

Senator GARDNER. Thank you, Mr. Tong. 

Shifting to the Asian Infrastructure and Investment Bank, or 

AIIB, I think 56-some nations are now a part of the AIIB, including 

some of our closest allies. There are people who are very concerned 

about the transparency, accountability of the AIIB. They talk about 

rules and governance that remain unclear when it comes to the 

AIIB. But when the United States expressed strong reservations, 

we had a number of allies that went ahead to become a part of it. 

Why do you think they ultimately decided to join the AIIB despite the reservations by the United States? 

Mr. TONG. I think that the nations that have volunteered to negotiate—it is still not yet launched, but negotiate the terms of the 

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30 

AIIB to get under Chinese leadership have identified an opportunity for themselves to participate in something which may provide additional funding to them or in cooperation with them to the 

very important question of infrastructure financing in the Asia-Pacific. 

The United States approach to this question has been less clear 

than it should have been from the beginning. The President made 

a very clear statement on our approach toward this emerging institution in Brisbane last year, but it did not get much public attention, and we should have amplified it more. 

The fundamental view of the administration toward this emerging organization is that it both presents an opportunity, as well as 

a challenge. There is an opportunity in that there may be more 

funding available to this question of infrastructure financing, 

which is a very legitimate demand or concern that there be more 

funds available. The challenge is that with any new institution, 

that it do its business in a way that actually reinforces the best 

practices in the region rather than undermines them. 

And so from the United States approach, we have been trying to 

communicate our concerns, questions, cautions to the participants 

in the initiative both directly with China as the leader of the initiative, as well as with other participants. For example, when I was 

in Beijing a couple weeks ago, I met with the Secretary General of 

the design part of this institution to discuss through some of the 

ways that they are answering all of the concerns that are coming 

from the United States and other partners. And so we need to continue to engage to express in our unique American leadership role 

as, in a way, custodians of the global financial system and the global development policy apparatus that we really want this AIIB organization to make a positive contribution. And so we will continue 

to speak with them on this. 

The other thing that we need to keep in mind is that the amount 

of cash being brought to the problem by this new institution is just 

a supplement of existing organizations, and even with those existing organizations, plus the AIIB, their resources will fall far short 

of the actual demand for infrastructure build-out in the Asia-Pacific 

region. And so really the more fundamental challenge is designing 

good projects and getting the private sector engaged, including the 

U.S. private sector, in meeting this demand. 

Senator GARDNER. And I think that is the interesting point that 

you make because talking about our unclear reaction or I think as 

you said it, we were less clear than we should have been in response to the AIIB, talking about the amount of investments that 

the AIIB will be making in terms of falling short of real needs. 

Should the United States have been more assertive in its efforts to 

create a viable alternative to the AIIB? Should the administration 

have put forward a viable alternative, or should we have worked 

to improve our existing multilateral institutions like the Asian Development Bank? What should have been the response? 

Mr. TONG. We have been working with the Asian Development 

Bank and the World Bank to nudge them, encourage them to be 

more efficient and more effective in the infrastructure space. They 

have other priorities as well in poverty alleviation and health and 

the like, and resources are finite in these questions. But you idenFOREI-MBP-19 with DISTILLER

31 

tify a very important channel for us to express our desires in this, 

which is the multilateral development banks. 

Another is our own efforts through the Ex-Im Bank, OPIC, the 

Trade and Development Agency to help support American business 

and developing economies link up in creating infrastructure solutions. I do not have a new game plan for you or an alternative to 

the Chinese approach led by the United States, but rather, I think 

we just need to do what we have been doing, do more of it, and 

continue to try and do it better. 

Senator GARDNER. Thank you. 

And, Senator Cardin, if you would like to jump in. 

Senator CARDIN. I have no further questions. I found this discussion to be very helpful, and I know we all share the same values 

of what we are trying to achieve. I just think that President Obama 

is committed to a rebalance to Asia. 

Senator Gardner is correct. I share a concern that we understand 

what that really means and whether we are devoting the adequate 

resources to it because I think for a long time the East Asia and 

Pacific Bureau did not get the same attention, same resources in 

all of the different areas, including the attention of the political 

structure of America, including the size of its budget within the 

State Department, including the programs under USAID, including 

some who received grants under the major initiatives. You look at 

the number of countries in Asia, a rebalance to me means that because of the importance, because of the growth, that we are going 

to evaluate how we can do things more effectively in that region. 

Some of it means reallocating resources, but others mean changing 

programs to meet the current needs. And clearly the Trans-Pacific 

Partnership is part of that strategy. I know we are moving in that 

direction, but I do think it is important that we have a coordinated 

effort and that Congress understand that, the American people understand that. 

Senator GARDNER. Thank you. 

And we have another hearing that we are going to be going to 

this afternoon. So we do appreciate the opportunity for everyone to 

participate in this afternoon’s hearing. 

And with that, I think if there is no further business, we can conclude this hearing. So thank you for your testimonies today. Thank 

you to the witnesses for appearing before us today and for providing us your testimony and responses. 

For the information of members, the record will remain open 

until the close of business this Friday, including for members to 

submit questions for the record. We ask the witnesses to respond 

as promptly as possible. Your response will also be made a part of 

the record. 

With the thanks of this committee, the hearing is now adjourned. 

Thank you very much for your time and testimony today and your 

willingness to put up with our vote schedule. The committee is adjourned. 

[Whereupon, at 4:00 p.m., the hearing was adjourned.] 

Æ 

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