East Asia and the Pacific: Remarks to the Business Council for International Understanding

As prepared for delivery

Thank, Richard, you for the introduction. It’s great to be here at the Business Council for International Understanding. Your organization is a great supporter of shared prosperity – helping to promote wise policies that create jobs and opportunities both here at home, and for America’s partners and friends around the world. And the individual companies you represent are leaders in fields from health care, to food, to banking and more.

Prosperity and security are inseparable

My portfolio covers the full range of American interests in the Asia-Pacific – namely implementing President Obama’s “rebalance” policy of increased engagement and attention to the region. So while I don’t focus exclusively on economics, as Secretary Kerry says, every Foreign Service Officer is an economics officer.

You understand the importance of America’s commercial relations with the East Asia-Pacific region, which has over half a billion middle class consumers and accounts for $1.4 trillion in trade with the U.S.

You’re here because you understand that America’s prosperity and Asia’s prosperity are inseparable.

You also understand that our shared prosperity and shared security are just as tightly linked. And that’s why I’m here.

The most important thing we can do for U.S.-Asia relations this year, for both prosperity and security, is completing the Trans-Pacific Partnership agreement. And I’m here to ask for your help. But first, a little background.

Diplomacy and prosperity have enabled each other throughout the Obama administration. Just a few examples:

The global financial crisis of 2008 was the worst global downturn since the Great Depression. Perhaps the decisive difference between the 1930s and this time was that international cooperation in the last six years helped to avoid worst effects. Coordinated action through the G-20 was essential. We’ve also acted to enhance prosperity through our leadership in APEC, the Asia-Pacific Economic Cooperation forum. And we’ve supported ASEAN, the Association of Southeast Asian Nations, which is driving economic integration at the sub-regional level.

America’s alliances and partnerships guarantee security within the region, as they have for seven decades. And they have supported growing economic relationships with many countries – trade nearly doubling in the last decade under our FTA with Australia, implementation of the U.S.-Korea Free Trade Agreement, our Open Skies agreement to liberalize air travel with Japan, and more.

Our work with Asia also supports security and prosperity beyond the region, as we jointly tackle global issues such as climate change, violent extremism now including ISIL, and infectious disease now including Ebola. The economic consequences of all these threats have been clear for many years: the increased costs of natural disasters; the Bali bombings and their devastating effect on tourism; the disruptions to business and travel from SARS. East Asia learned from all these past incidents, and the region’s smart contributions to address today’s global crises helps us reduce the impact of bad disruptions to the regional and global economies.

These are all areas of government-to-government cooperation, but there’s also a huge role for the private sector to play. Businesses like yours are essential to building resilient global supply chains that serve consumers, and also help provide relief in emergencies and support long-term recovery.

Now, let me focus for a bit on what we’ve done recently to support business with one particular country that I know you’re interested in: China. Our diplomacy with China has allowed us to expand the areas where we work together, while managing our clear differences. And that diplomacy over many years, including bringing China into the WTO, has supported China’s economic rise, enabling trade and increased exports to China. In 2014 alone, we made important progress in at least five specific ways:

Let’s start with the Joint Commission on Commerce and Trade meetings in Chicago. There, Commerce Secretary Penny Pritzker and U.S. Trade Representative Mike Froman made great progress in getting China to open to imports of U.S. biotech corn and soy; medical devices and pharmaceuticals; and fair treatment of U.S. businesses facing the competition regulators.

Second, at the Strategic and Economic Dialogue, our biggest bilateral annual gathering held over the summer in Beijing, we intensified negotiations on a Bilateral Investment Treaty. The “negative” list is next, and we’re insisting that it be very high quality – narrowly tailored and widely open to foreign investment, especially since our openness to Foreign Direct Investment (FDI) has allowed new Chinese FDI into the U.S. to surpass our FDI in China.

Third, during President Obama’s trip to Beijing, we reached a key agreement to expand visa validity for business visitors to ten years, a boon for our tourism industry and a win for our companies with interests in China. We also achieved an important bilateral understanding to help the WTO’s International Technology Agreement move forward. We subsequently suffered a setback and there’s still a lot of work to do, but we remain hopeful.

Fourth, our landmark climate progress, also during the trip, is important for long-term public health, and economic health, and it supports the green economy.

That’s 2014. So what’s next, not just with China, but with the entire region? The United States will continue to, one, underwrite regional security; and two, advocate for American business.

We are watching general security and economic conditions that could affect U.S.-Asia-Pacific commercial relations in 2015.

There’s the continuing risk of tensions in the South China Sea. Diplomacy in this area is “a work in progress.” It’s calm on the surface, but militarization and reclamation of disputed outposts and other drivers of tension remain. ASEAN, the Association of Southeast Asian Nations, has floated ideas to manage the tensions and we’ll remain strongly supportive of these diplomatic efforts, such as establishing a binding Code of Conduct sooner rather than later. We raise concerns over tensions on these issues at the highest levels, including with Chinese leaders.

In a welcome development, China and Japan have said they’ll implement crisis management mechanisms and restore relations. Substantive follow-through to these diplomatic steps will be essential for the region to reap the fruits of rapprochement between these two economic powerhouses.

We’ll continue to push for respect for universal rights and freedoms, which are essential for prosperity in places like Burma, Cambodia, and of course, China. They are essential everywhere.

And we will continue our vigilant and active diplomacy with our five-party partners on North Korea. We had a big 2014 in terms of spotlighting the North’s human rights abuses. We continue to make clear that North Korea will not achieve the security and prosperity it claims to want while it pursues banned nuclear weapons and missile programs. And we’re increasingly vigilant against the North’s offensive cyber programs.

We are working actively to ensure that a stable security environment underwrites economic growth for the Asia-Pacific, instead of instability threatening progress. No country can provide the public good of regional security in the way the United States can.

Now, to business. At the top of our business agenda for 2015 is the Trans-Pacific Partnership. In this uncertain political environment, and with growth flat in the EU and slowing in China, the importance of the TPP could not be clearer – it is central to the rebalance.

It will strengthen America’s role as one of the most competitive, most innovative economies in the world, as well as one of the biggest trading partners, and source and destination of foreign investment in the region. TPP will be a big boost to the U.S. economy, advancing President Obama’s top priority of creating good jobs in America. Exports already account for over 11 million jobs, and have contributed nearly a third of U.S. growth in recent years. By expanding access to some of the largest and most dynamic economies in the world, TPP will make those numbers even stronger, including for New York.

Some 977,000 New York jobs are supported by trade with the TPP region. Those workers – many of them at your companies – are exporting nearly $15 billion in services and nearly $18 billion in goods.

Just as important, a high-quality TPP will strengthen our partner economies – other regional economies that share the priority we place on labor, environmental, and intellectual property standards, and on fair competition. Every decade or two, our economic model is challenged, and we must renew it and advocate for it. History didn’t end 25 years ago.

In short: We need TPP to strengthen growth and create jobs and to advance our values and show that our ongoing commitment to the region extends beyond security. This is important to long-time allies like Australia, with whom we’ve had an FTA for a decade now. It’s important to Japan as PM Abe works on structural reforms, the “third arrow” of his domestic economic recovery program. And it’s important to newer partners like Vietnam; 2015 marks 20 years of normalized relations, and TPP will take us to the next level, driving labor reforms and reducing its economic dependence on China.

And as a regional platform, TPP is also important to those regional economies that are not yet part of it, because the promise of open markets and high standards can propel reforms that will enhance the competitiveness of future TPP candidates in the entire Asia-Pacific economy, as well as in the supply and value chains that operate throughout the region.

Our negotiators have made a lot of progress on the talks in recent months, and we believe the end of the negotiations is coming into focus. And when it’s time to go to Congress, we’ll need a broad range of support to help get TPP, and the supporting tool of Trade Promotion Authority, passed.

As we pursue TPP, we’re also working with the countries outside that group, including the world’s second largest economy: China. We’re working on the BIT, as I mentioned, and pushing for fair application of their competition laws and trade enforcement.

That’s a lot of business-related diplomacy, and we haven’t even gotten to the rest of the region, which includes partners like Taiwan and Indonesia. Taiwan is our 10th largest trading partner, and a great example of an economy that has flourished with our security support.

Indonesia is a country with enormous potential. U.S. companies have invested $65 billion there in the last eight years, and the new President, Jokowi, has a business background and is off to a quick start. His interest in improving infrastructure and education should provide substantial opportunities for foreign investment in Southeast Asia’s largest economy.

In Indonesia, and across the region, there’s a lot of interest in business and investment. And the quality of the investments matters. You are among the best advocates for American values. As we work for you, we appreciate the way you practice the ideals that support sustained success – investing in the workforce through training, and in communities and infrastructure; planning for long term sustainability and environmental protection; avoiding corrupt practices. These are some of the reasons American businesses are often the preferred partner for countries and local businesses across the region.

Take Burma. Our rapprochement has resulted in remarkably rapid market opening since 2012. GE, a storied New York company, is helping modernize Burma’s national airline fleet and power grid, and investing $3 million in public health. Pepsi is working on vocational training and exploring agriculture investments.

Coca-Cola has invested $200 million and is working to economically empower Burmese women. Coke also won the State Department’s Award for Corporate Excellence last year for providing disaster relief to the Philippines after Typhoon Haiyan. And there are many more examples of companies ploughing a portion of their profits back into corporate social responsibility activities across the region. This year, we intend to explore how APEC might help expand the practice of CSR to promote more inclusive economic growth in the region.

I believe the United States and the Asia-Pacific region will continue to grow and prosper together, but it depends on wise leadership – in both our political and commercial capitals here and in the region. And it depends on you, the business community, continuing to make and strengthen your connections with businesses and people across the Pacific. Thank you.