Engaging Asia: The Future of U.S. Leadership

Robert D. Hormats
Under Secretary for Economic, Energy and Agricultural Affairs 
National Bureau of Asian Research Engaging Asia 2010 Conference
Washington, DC
September 17, 2010

As prepared for delivery

Thank you for that introduction, Meredith. It's a pleasure to take part in this conference and to follow Under Secretary Flournoy. I understand that earlier this morning there was a panel discussion about the ways we can avoid the pitfalls that threaten our bilateral relationships in Asia. So this afternoon, I'd like to talk about the opportunities for economic growth that result from safeguarding our traditional alliances and bolstering new ones across the Pacific Rim.

Back in 1900, then-Secretary of State John Hay declared: “The Mediterranean is the ocean of the past, the Atlantic is the ocean of the present, and the Pacific is the ocean of the future.” Over a hundred years later, his vision is shared by a new Secretary of State determined to ensure that the tide of economic opportunity rises on both sides of the Pacific.

Secretary Clinton said it best herself last July when visiting Thailand, “The United States is back” in Asia. The message was heard loud and clear as she lead the U.S. delegation to the ASEAN Post-Ministerial Conference and ASEAN Regional Forum in Phuket. All of us at the State Department are following her lead. We fully recognize the importance of the Asia-Pacific region to our country’s economic future. And we are committed to ensuring that the United States is an active, engaged, and constructive partner.

And the reason for our engagement should come as no surprise to this group. The Asia-Pacific region is the most economically dynamic in world. The members of APEC account for 54% of world GDP, 44% of global trade, and 40% of the world’s population (2.7 billion consumers).

Its rebounding growth has been vital to the global economic recovery. The Asian Development Bank (ADB) predicts East Asian emerging economies will grow 8% this year. In addition, the IMF forecasts that the region’s economies will grow faster than the world average through at least 2014.

The United States can’t afford to sit on the sidelines. That’s why we’ve been working to strengthen our engagement with the economies of the region. And our strategy for cooperation is premised on a framework that is:

  • OPEN: allowing for participation from around the world;
  • FREE: with are as few barriers to trade and investment as possible;
  • TRANSPARENT: including easy and clear rules for doing business; and
  • FAIR: so that no one set of players has an advantage over another.

At a time when tariffs have gone down significantly throughout the region, taking on these tasks has significant implications for our objectives to spur long-term economic growth in the 21st century. In fact, they create a foundation upon which we can enhance supply chain connectivity in the region, promote regulatory cooperation, and take the much-needed steps to facilitate trade.

We also recognize that after the recent financial crisis, the world cannot go back to the old “growth as usual.” So we are committed to working with the region to forge a 21st century economic agenda that seeks to attain higher quality of economic growth—not just higher rates of growth—and would foster greater public support for further trade and investment.

I want to mention three tools that we are using to accomplish our goals:

  • Free Trade Agreements (FTAs): including the U.S.-Korea FTA and the Trans-Pacific Partnership (TPP);
  • Regional multilateral organizations: particularly APEC, whose meetings the United States will be hosting in 2011, as well as our partnership with regional groupings like ASEAN; and
  • Our robust bilateral relationships: including historic ties with old friends as well as new bonds of cooperation with emerging leaders in the region.

Let me take a moment to discuss the role that each of these can play in achieving our goal of stronger economic engagement in the Asia-Pacific region.

Free Trade Agreements

Perhaps the best place to start is with our free trade agreements. In fact, we can track the rate of regional economic integration simply by looking at the growth of free trade agreements among Asia-Pacific economies.

In the year 2000, there were only three FTAs in East Asia. Ten years later, we've seen 45 FTAs in effect among or between APEC economies and another 84 in various stages of preparation or development. The Obama Administration is eager to take part in this integration process. And our first task is to implement the U.S.-Korea FTA (known as the KORUS). USTR has been instructed by President Obama to work with Korea to resolve the outstanding issues related to KORUS, and is now engaged in an intensive consultations process with Congress and other stakeholders. With the resolution of these issues, President Obama intends to submit KORUS to Congress for approval in the months following his November meeting with President Lee.

This is a win-win situation. For the U.S., it will contribute significantly to the Administration’s export goals—specifically the National Export Initiative to double American exports over five years and support two million new jobs. And the reduction of Korean tariffs and tariff-rate quotas on goods alone would add around $10 billion to annual merchandise exports to Korea.

We are also working to address issues related to agreements with two other Pacific Rim countries, Colombia and Panama, in order to present them for Congressional consideration.

And we’re making progress in negotiating the Trans-Pacific Partnership (TPP) agreement—talks that currently include the United States, Australia, Brunei, Chile, New Zealand, Peru, Singapore, and Vietnam. The goal is to grow the TPP into a high-standard, broad-based regional trade agreement—one that go a long way towards addressing “behind the border” issues like trade facilitation and supply chain connectivity. It would also create more opportunities for small- and medium-sized companies, prioritize labor and environmental protections, foster development, and promote new technologies and emerging economic sectors.

The second round of TPP negotiations held in San Francisco in June yielded significant progress across the range of issues to be covered in the agreement. Work remains underway as teams prepare for the third round of negotiations in Brunei in October.

Successful efforts on both bilateral FTAs like KORUS and on the TPP will create new and meaningful market access for U.S. exports and help ensure our business remain competitive in Asia-Pacific economies.

Regional Multilateral Engagement

Second, we know that regional economic integration is about more than just FTAs. It is about developing multilateral economic institutions that can play a critical role in addressing economic challenges and removing barriers to trade and investment. Groups like APEC and ASEAN provide collaborative forums for dealing with economic issues.

The United States views APEC as the key forum for regional economic cooperation. APEC initiatives help to create an environment that fosters higher quality growth, addresses trade and investment barriers, and ensures norms and standards for a level playing field.

We’ve already witnessed the impact that APEC has had at a global level. It played a key role in realizing the WTO Information Technology Agreement. It has also been front and center in addressing pressing economic challenges such as standards and conformance, regulatory cooperation, trade facilitation, small business development, and digital trade. The preparatory work APEC has done in these areas helps to define for the region what a high-standard, broad-based agreement should look like.

A great example of how APEC informs and influences regional trade initiatives, is the Trans-Pacific Partnership (TPP). The TPP is one of the most promising models for APEC’s long-term vision of a Free Trade Area of the Asia-Pacific (FTAAP).

We are also working within APEC to set a 21st century agenda for the region that focuses on attaining higher quality economic growth. To this end, APEC is working to define a regional approach to growth that is balanced, inclusive, and environmentally sustainable:

  • Balanced means pursuing macroeconomic policies and structural reforms that will gradually unwind distortions and raise potential output;
  • Inclusive means helping all members of society gain better access to economic opportunity; and
  • By helping to facilitate the transition to green economies by fostering the development of a low-carbon emission energy sector, improving market access for environmental goods and services, and promoting energy efficiency across entire economies, this approach is environmentally sustainable as well.

These important contributions to regional economic growth and cooperation underscore why the United States values APEC so highly and is hosting APEC in 2011.

The United States is also ramping up its engagement with ASEAN through the U.S.-ASEAN Enhanced Partnership. We are building U.S.-ASEAN trade and investment ties and promoting trade facilitation. We have dialogues on trade facilitation, customs, standards, and public-private cooperation. This year, we also established a U.S. Mission to the organization. The Mission will actively work with ASEAN’s Economic Community, whose primary goal is to achieve a single market and production base across all ASEAN Member States by 2015.

Bilateral Dialogues and Partnerships

Finally, we are developing our bilateral partnerships and dialogues to underpin the entire integration process. For example:

  • Japan continues to be one of our most important trading partners with whom we work on a broad range of important issues. As APEC hosts in 2010 and 2011 respectively, Japan and the United States have been working closely together to coordinate our host year agendas. We envision a “one-two punch” where achievements in Japan’s year set the stage for deliverables in the U.S. year.
  • In Indonesia we have been working to advance the Comprehensive Partnership that was launched in 2009. We have signed agreements for cooperation on science and technology. And we are finding new ways to collaborate on energy, environment, and climate change issues.
  • China. And of course, no discussion about U.S. economic engagement with Asia would be complete without talking about our bilateral economic relationship with China. This administration is committed to using the Strategic & Economic Dialogue (S&ED), to engage China on macroeconomic coordination, trade policy, domestic policies, and a host of other bilateral issues.

The U.S. China Joint Commission on Commerce and Trade (JCCT) is a great example of another forum for high-level dialogue to solve and commercial issues. As China continues to grow, we hope it will take a strong interest in APEC and directly engage in deepening regional economic integration to the benefit of both our countries.


In closing, let me reiterate that at no other time has the United States had a clearer vision for economic cooperation in the Asia-Pacific region. By making good use of forums like APEC and ASEAN, by implementing new FTAs, and by broadening the scope of our bilateral dialogues, we can share in the economic opportunity which John Hay predicted more than a century ago. Thank you.