AP4.0, an Operating System for the Asia-Pacific Region

Daniel R. Russel
Assistant Secretary, Bureau of East Asian and Pacific Affairs
CSIS Asia Architecture Conference
Washington, DC
October 11, 2016

As prepared for delivery

Thank you, Amy for the kind introduction, and all of you for being here. It’s great to be back at CSIS. Great to be part of a serious discussion of an important problem-set among people who aren't afraid to out themselves as regional institutional infrastructure nerds; people who don't think of James Hilton's novel when they hear the words “Shangri-la”.

After a stretch of eight straight years in Washington working on our policy and contending with challenges in East Asia and the Pacific, I'm now convinced that the shape of Asia’s architecture is extremely important to American interests.

And its importance to our security, economic and global interests is steadily increasing.

Looking beyond the region, globalization – the increasingly free movement of people, information, ideas, and products around the world – is under attack in some quarters.

Technology-driven openness is being contested by technology-assisted repression. Mainstream thinking about the importance of liberalizing trade and investment to spur growth is contending with Brexit and similar bottom-up challenges in many countries, including ours.

But at the same time, governments and international institutions are notching remarkable successes that are making or will make a real difference in the lives of everyone on the planet.

In the last year alone, the Paris Climate Agreement has been finalized AND brought into force – that’s warp speed by diplomatic standards. This has significant implications for the Asia-Pacific/the Indo-Pacific given the tremendous vulnerability of so many of its nations.

And the fact that massive industrial nations and polluters like China, the U.S., Japan and India were able to make common cause with tiny frontline states such as Nauru, Vanuatu, and Kiribati, is both significant and encouraging.

Building on the lessons learned from SARS, MERS, and the Ebola outbreak in West Africa, countries in the region are upping collaboration on health infrastructure.

Mindful of the threat from ISIL, and particularly the recruitment of young people by social media-savvy violent extremists, counter-terrorism and counter-messaging cooperation is rapidly improving.

The decisive ruling on the South China Sea maritime entitlements of China and the Philippines this July under the Law of the Sea Convention, binding on both parties, has brought the countries in the region face-to-face with practical questions about respect for international law and legal processes.

And twelve Asia-Pacific countries have now finished negotiating the most important addition to the regional rule book in a generation – the Trans-Pacific Partnership.

All these developments, regionally and globally, are bringing -- and will bring -- huge benefits to all of us:

the lives saved in response to pandemics and natural disasters; the jobs created by freer trade and protected by high labor standards; our rivers, ocean, air, food sources and health preserved by strong environmental rules; the rights of nations -- including small nations -- protected by international law.

All of this progress reflects, and is dependent on respect for the laws, rules, institutions, and broadly accepted norms of our increasingly globalized world – what IR theorists call “architecture,” and what might be thought of as the region’s operating system, or “OS”.

Now let’s look at the Asia-Pacific OS.

You could say that “AP1.0” was the first version, the initial post-World War II order, kind of an old mainframe setup with a predominant U.S., admittedly a bit top-down.

But it set up the open architecture of the UN, key institutions of global stability and prosperity like the World Bank, IMF, and GATT, and important security partnerships with allies and former adversaries alike.

The birth of ASEAN 50 years ago marked AP2.0. The colonial era was over, and this OS was based on equality and non-confrontation among nations with significant historic, ethnic, religious, territorial, and political differences. Instead of a mainframe, this represented more of a distributed power model for the region.

AP3.0 came with the formation of APEC in 1989 to accelerate economic openness, and AP3.1 with ASEAN’s steady growth to ten members in '99. You could say that 3.2 came in 2011 when the United States and Russia formally joined the East Asia Summit – the same year that President Obama affirmed the ongoing Rebalance to Asia in his landmark speech to the Australian parliament.

Now we are working toward AP4.0 – a more collaborative, cloud-based system that increasingly works across borders and serves as a common platform for the common good.

Now, I know there are perils in taking any metaphor too far, but let's think about it.

What we're working to develop in the region's 21st century architecture – "AP4.0" – is a platform that supports network connectivity and new applications. It's based on sensible, understandable rules.

It has continuity with the existing system and its upgrades reflect what the customers -- our citizens and governments -- feel they need.

Importantly, it’s rule-based. Some of the rules are less formal norms that have emerged as a result of sometimes painful experiences. Some are principles embraced or even developed by ASEAN. Others are clear-cut international laws and treaties, in some cases being applied now in unprecedented circumstances.

The region's unhappiness with China's rejection of a binding Arbitral decision regarding its and the Philippines’ maritime entitlements shows that the default for the Asia-Pacific has clearly become adherence to rules and norms.

We are building network connectivity. That includes faster trade, integrated supply chains, and moves to liberalize services and digital trade, all enabled by APEC.

It includes connectivity through infrastructure, greater mobility and entrepreneurship, a fledgling economic community, and a new sense of shared identity in Southeast Asia thanks to ASEAN – something we’ve supported through our Young Southeast Asian Leaders Initiative.

And this connectivity is strengthening an inclusive security network— in the first instance, cooperation among an expanding group of U.S. allies and partners who work together to counter terrorism and transnational threats, respond to natural disasters, and to reinforce international norms of behavior.

As Secretary of Defense Carter has emphasized, this is an inclusive network.

That’s not because every country in the region is a U.S. ally. They’re not. But all nations are welcome to make common cause with us against these threats if they will respect the region's guiding principles and norms.

This operating system has cutting-edge new apps, like TPP, which covers some 40% of the world’s economy; like LMI (the Lower Mekong Initiative), that brings together the mainland half of ASEAN to jointly address shared environmental and development interests.

The OS is open-source and customizable.

Each country in the region sets its own preferences and contributes in its own way: through bilateral trade deals; through fishing or boundary agreements; through law enforcement and intelligence sharing arrangements; by participating in military exercises like RIMPAC. They can move at their own pace based on their own interests.

The "operating system" metaphor shows that peace, security, resilience, prosperity and economic growth, social and economic development and opportunity, good governance, food/environmental/ health security... all these things require sound and adaptable regional rules and institutions.

Just take a look at the fault-lines within societies and between neighbors in the region: socialists versus democrats; Muslim vs. Buddhists vs. Hindus vs. Christians; rural vs. urban; wealthy vs. poor… and look at the historical grudges, the old indiscriminate colonial-drawn borders, the competing or divergent interests of the mainland and maritime states, the shortfall of water and the depleting fish stocks.

So why isn’t Asia more like the Balkans or the Middle East?

ASEAN and ASEAN centrality are a very big part of the answer. And while the organization’s mantra of ‘making haste slowly’ may be frustrating at times, ASEAN is an extraordinarily successful regional arrangement.

By keeping peace among its members, ASEAN gives them space to work on their domestic challenges and their differences. By convening the East Asia Summit, ASEAN gives the broader region a forum to address security challenges like the South China Sea and countering nuclear proliferation in North Korea.

In addition, ASEAN is evolving. The strengthening of the ASEAN Secretariat, the empowering of the Committee of Permanent Representatives to ASEAN in Jakarta, the gradual linkage between the different ASEAN-plus groupings... all of these trends enhance ASEAN's relevance and stabilizing role.

The other big part of the answer is the inclusive security network I mentioned. This network is anchored by the U.S. military commitment to the region through our alliances and security partnerships, and through the steps by allies and partners to increase their own capabilities and interoperability.

This inclusive and dynamic security network is rooted in common interests and respect for shared principles, not driven by the imposition of some static master plan. And while we have learned a great deal from the experience of the Cold War, this network is not in danger of creating a new one.

As RIMPAC shows, as the East Asia Summit shows, China and Russia can join with India, Japan, the United States and other great democracies to collaborate with ASEAN to confront terrorism and proliferation and piracy, to respond to natural disasters…

Similarly, there is no rigid master plan for its format. Northeast Asia is not Southeast Asia or the Western Pacific. So we have a variety of examples of trilateral or plurilateral groupings, some regular and others ad hoc – whatever’s best suited to address a given issue.

The “operating system” metaphor reflects the fact that we don’t view regional architecture as static or fixed. It will evolve and adapt to changing realities.

There’s a strong case to be made that this open, principled, inclusive, adaptable, and transparent security network is the future of regional security. The U.S. is going to continue to robustly support it as part of the new normal of sustained engagement. A new normal that we’ve achieved under the Rebalance.

On the economic side, I'd suggest that two critical components of the future are APEC and TPP.

Next month in Lima you'll see that the determination of APEC members to advance economic openness is undimmed.

In 1994, we set the Bogor Goals for free and open trade in the region by 2020, and we’ve made substantial progress, as we have also in areas such as investment, good governance, anti-corruption, global health, women’s economic empowerment, and environmental protection.

Matt Matthews and the next panel will I'm sure explain the value of APEC being ambitious on trade in services liberalization, on digital trade, and in empowering women economically.

APEC shows that a non-binding body can drive consensus, brainstorm ideas, and set goals for economic openness.

But TPP is the new model for a binding agreement that brings developed and developing nations together around the highest common standards in the history of trade negotiations. This is all the more impressive against the backdrop of lowest-common denominator trade deals that have proliferated in the region.

TPP is moving toward ratification in many countries. And while we all know it is an uphill battle here, President Obama has fulfilled the requirements outlined in the Trade Promotion bill Congress passed last year and he is determined to win ratification in the coming months.

Let me give you four quick reasons why I don't subscribe to the beltway skepticism over TPP ratification that go beyond its virtues as an advantageous trade agreement that will create good jobs in the United States:

The agreement has unprecedented provisions for setting and enforcing high labor standards.

The same goes for environmental safeguards.

The same for protection of intellectual property.

I think Members of Congress believe that America should lead, and will recognize the implications for diminished leadership if the U.S. falters.

I noticed that you also have a session today on infrastructure development, and it’s important to recognize how central that is to the prospects for the region's economic success and stability.

The need for infrastructure in Asia is self-evident and I won't lay out the case or the statistics here. But I do want to emphasize the choices and risks in how that infrastructure is funded and built.

Simply put, the region needs infrastructure that is sustainable in terms of cost to build and maintain, in terms of energy use and environmental impact, and in terms of the impact on communities and governments.

Lending without strong safeguards fosters corruption; the people don't get the promised benefits, and they lose faith in their governments and institutions. We've seen this too often in Asia and the Pacific – and unfortunately we're still seeing it in too many places.

An enormous, shiny structure is built, but the operating costs aren't sustainable, it’s not something the community really needed, the use of foreign labor means few jobs were created, or the project’s benefits (like electric power) are exported while the costs (like pollution or displacement of communities) are local and long-lasting.

Veteran lenders like the World Bank and Asia Development Bank have long recognized this and serve as responsible leaders in the region’s infrastructure development. Many of us are working to make these institutions better reflect the region, and to make their decision-making even more inclusive.

There’s also room for new lenders. Open-architecture and shared principles are key elements of the operating system (our policy approach), and that’s true for infrastructure.

From the moment the AIIB concept was first announced, the record shows that we’ve advocated for it to adopt these principles, including: transparency and transparent decision-making; open procurement rules so all companies can bid on projects; rigorous environmental and other standards; and a credible board – preferably a resident board – to provide guidance and oversight.

While it was unclear in the beginning whether the AIIB would be structured to serve as an opaque instrument of national foreign policy, with advocacy from the U.S. and like-minded countries, AIIB’s founders and managers have made good choices on nearly all of these key tenets.

The bank's first projects have only been announced in the last few months, so it’s still early to make judgments…

But not only has a better, more credible AIIB emerged, it is partnering with the World Bank, Asian Development Bank, and Europe’s EBRD on most of its initial projects, allowing the new institution to benefit from the experience of the mature ones.

I'd like to ensure we have time for Q&As so I will wrap up here.

As much as we’ve accomplished in modernizing the region’s operating system, we face a daunting amount of work and no shortage of serious challenges ahead. It is not a given that the Asia-Pacific region will keep building on the open-source architecture.

On the positive side, most nations are doing more to invest in and contribute to the common operating system, and many are giving their citizens more room to contribute as well.

And the IT revolution, the advantages of a knowledge-based digital economy, and the youthful demographics of most developing countries in East Asia are supporting this trend.

But at the same time there’s an alarming increase in sophisticated repression, propaganda, and the push for digital nationalism on the part of some governments.

We have to recognize the risks posed by a dangerous outlier like North Korea, and by the divide-and-conquer techniques of governments that see strong regional institutions as impediments to their own unilateral advantage.

America’s stance is clear. As a resident Pacific power and major trading nation, we want an operating system that is open source, where all countries contribute to, and act in accordance with, the rules.

With that, I'm happy to take questions.