Delivering on the Promise of Economic Statecraft

Hillary Rodham Clinton
Secretary of State
Singapore Management University
November 17, 2012

The video below is available with closed captioning on YouTube

SECRETARY CLINTON: Well, thank you very much. Thank you, President De Meyer, for welcoming all of us here to SMU. Thank you, Ambassador Adelman, for your exemplary service here in Singapore, strengthening and deepening the already very strong relationship between our two countries. Thank you also for the Minister of State and the Minister for Education and the Speaker of the Parliament for being here with us. And thanks to the American Chamber of Commerce and the U.S. ASEAN business council for helping to cosponsor this event.

It has been three years since I was last here with President Obama, when we came for our first APEC meeting. And that trip helped launch what has been called our pivot to the Asia Pacific. As Secretary of State, I have visited the region many times. And I was just in Australia with Secretary of Defense Panetta for our annual AUSMIN consultations with our Australian counterparts. Tomorrow I will join President Obama in Thailand. And then we will go together to Burma and on to Cambodia for the East Asia Summit.

Now, I think one of the questions that may be on your and others' minds is: "Why is the American President spending all this time in Asia so soon after winning re-election?" Well, the answer for us is very simple. Because so much of the history of the 21st century will be, is being, written in this region. America's expanded engagement represents our commitment to help shape that shared future. The strategic and security dimensions of our efforts are well known. But the untold story that is just as important is our economic engagement. Because it is clear that not only in the Asia Pacific but across the world, increasingly, economics are shaping the strategic landscape. Emerging powers are putting economics at the center of their foreign policies, and they are gaining clout less because of their size of their armies than because of the growth of their GDP.

For the first time in modern history, nations are becoming major global powers without also becoming global military powers. So, to maintain our strategic leadership in the region, the United States is also strengthening our economic leadership. And we know very well that America's economic strength at home and our leadership around the world are a package deal. Each reinforces and requires the other.

I must say this is a lesson that Singapore learned long ago. Today the non-stop flow of people, goods, and capital through this small nation is proof that a country does not need to be big to be mighty, to be respected, to be a real leader. Every country wants to do business in Singapore, so every country has a stake in cultivating good relationships with Singapore. With only 1/60 of the population of the United States, Singapore is our 15th largest trading partner. More than 2,000 American companies base their regional headquarters here. Two-way trade exceeded $50 billion for the first time last year. And U.S. direct investment surpassed $116 billion over the last decade. That makes Singapore's security and stability a vital interest for the United States. This connection between economic power and global influence explains why the United States is placing economics at the heart of our own foreign policy. I call it economic statecraft.

Now, these ideas are hardly new. After all, it was Harry Truman who said our relations, foreign and economic, are indivisible. But today that carries renewed urgency. Last year I laid out America's economic statecraft agenda in a series of speeches in Washington, Hong Kong, San Francisco, and New York. Since then, we have turned this vision into action in four key areas: first, updating our foreign policy priorities to take economics more into account; second, turning to economic solutions for strategic challenges; third, stepping up commercial diplomacy -- what I like to call jobs diplomacy -- to boost U.S. exports, open new markets, and level the playing field for our businesses; and fourth, building the diplomatic capacity to execute this ambitious agenda.

In short, we are shaping our foreign policy to account for both the economics of power and the power of economics. The first and most fundamental task is to update our foreign policy and its priorities for a changing world. For the last decade, as you know, the United States focused enormous time, resources, and attention on a war in Iraq that is now over, and a war in Afghanistan that is winding down. Responding to threats will, of course, always be central to our foreign policy. But it cannot be our foreign policy. America has to seize opportunities that will shore up our strength for years to come. That means following through on our intensified engagement in the Asia Pacific and elevating the role of economics in our work around the world.

Here in Asia the United States is taking concrete steps to protect and update an open, free, transparent, and fair economic system that has made the region's spectacular growth possible. Through APEC and ASEAN, we are working with partners like Singapore to improve regulatory standards, harmonize customs procedures, and reduce trade barriers. We've ratified a free trade agreement with the Republic of Korea that will improve competitiveness and transparency, while boosting American exports by as much as $10 billion a year. In negotiations with China and India on bilateral investment treaties, we are seeking a level playing field between American companies and their competitors, including state-owned enterprises.

And with Singapore and a growing list of other countries on both sides of the Pacific, we are making progress toward finalizing a far-reaching new trade agreement called the Trans-Pacific Partnership. The so-called TPP will lower barriers, raise standards, and drive long-term growth across the region. It will cover 40 percent of the world's total trade and establish strong protections for workers and the environment. Better jobs with higher wages and safer working conditions, including for women, migrant workers and others too often in the past excluded from the formal economy will help build Asia's middle class and rebalance the global economy. Canada and Mexico have already joined the original TPP partners. We continue to consult with Japan. And we are offering to assist with capacity building, so that every country in ASEAN can eventually join. We welcome the interest of any nation willing to meet 21st century standards as embodied in the TPP, including China.

The United States is also moving economics to the center of our agenda elsewhere in the world. For example, we want to improve our economic partnership with our allies in Europe. That is every bit as compelling to us as our security partnership through the NATO alliance. So, to that end, we are exploring negotiations with the European Union for a comprehensive economic agreement that would increase trade and spur growth on both sides of the Atlantic.

Africa. Africa is currently home to 7 of the world's 10 fastest-growing economies. I deliberately said that slowly because so many people look surprised when I say it. And so, we are changing the way we do business with Africa. Certainly regarding our development agenda, but also trying to do more to harness market forces and private-sector solutions for these growing African economies.

In Latin America, which remains the destination for 40 percent of all U.S. exports, we have ratified free trade agreements with Colombia and Panama, and we have begun discussions with a new group called the Alliance of the Pacific, formed by Mexico, Colombia, Peru, and Chile to expand their competitiveness in the global marketplace.

Now, our next step will be to transform these regional efforts -- the TPP, the EU agreement, our bilateral trade deals -- into a truly global vision. In the same way that the general agreement on trade and tariffs offered a global blueprint following World War II, we need new arrangements to take on the challenges that inhibit trade today, from non-tariff barriers to preferential treatment for state-owned enterprises.

As we do more to define our foreign policy priorities in economic terms, we also need to update the tools we use. So our second main area of action is finding ways to tap economic solutions for strategic challenges. Just look at what's happening now in Burma. The cost of economic sanctions and the benefits of rejoining the global economy helped spur the government to begin opening up. And we are very grateful to the wise counsel we received from Singapore along the way. The United States is responding not just with growing diplomatic engagement, but also with new economic ties that we believe will help encourage further political and market reforms, and thereby improve stability over time.

This July more than 70 executives from 38 leading U.S. companies visited as part of the U.S.-ASEAN business council delegation. And I understand that the American Chamber of Commerce here in Singapore led a similar trip in August. The United States is also supporting World Bank programs that will provide more than $80 million for infrastructure projects in the country's townships, and financial support for small businesses.

Burma is part of a region where progress has been slowed by insecurity and mistrust. But it doesn't have to be that way. As Burma opens up and establishes new ties to its neighbors, it could become a commercial hub linking markets in India and Bangladesh with Southeast Asia. An Indo-Pacific economic corridor powered by new energy and transportation infrastructure and fewer trade barriers could create jobs and help lift millions out of poverty. It could also promote stability and drive cooperation on shared challenges like narcotics and human trafficking, refugees, and natural disasters.

Now, this all might sound ambitious. And, I confess, it is. But we cannot shy away from big goals. The post-World War II generation that built the modern global order and established institutions and agreements that fostered unprecedented security and prosperity are really the examples we should be following, in those footsteps, thinking bigger, working harder to create the arrangements that will give us another 100 years of security and prosperity.

The same goes for another regional vision we call the New Silk Road, a web of trade and transportation links reaching from the steps of Central Asia to the southern tip of India. Forging stronger economic ties across this region is a key element in our long-term strategy for Afghanistan. If you look at the map, you see why Afghanistan has been fought over and part of the great game for so many generations because of its very strategic position right in the middle of this trading route.

So, even as we move forward with the security transition under NATO ISAF in 2014, and the end of our coalition combat mission, we are focused on shoring up Afghanistan's economic future, because we know that, without that, stability and security will certainly be elusive. This is a point that has too often been missed in serious foreign policy debates. The long, hard work of economic development may not be glamorous, but it is essential, even in war zones. And certainly the increasing economic relationship between India and Pakistan is good news, first and foremost for the Pakistani and Indian business people and consumers, but more generally with the hope that those kinds of ties can lead to even greater cooperation in the future.

We are also using new economic tools to address one of the world's preeminent security challenges: Iran. A broad coalition is revolutionizing how the international community enforces sanctions and builds pressure. We went after Iran's central bank and finance sector, and we reached out to private insurers, shippers, oil companies, and financial institutions to help us target pressure points that make it harder for companies and governments to do business with Iran.

Now we see results. Every major importer of Iranian oil has lowered their consumption. All 27 nations of the European Union have joined a boycott. In one year, Iran's oil exports are down by more than one million barrels a day, costing the Iranian Government at least $3 billion each month. And, in fact, because of increased production in other places in the world, we have not seen the spike in oil prices that so many people feared and predicted.

Now, regimes in places like Tehran and Pyongyang, that violate international norms and beggar their people in pursuit of greater military strength pose a stark contrast with emerging economic powers that are delivering benefits for their people.

The example of Iran also illustrates how powerful economic tools can be when we apply them both creatively and collectively. The Assad regime in Syria, Hezbollah, the Haqqani network, and others, are all vulnerable to sophisticated and meticulous market pressure. Someone has said that the threats we face are perhaps enhanced because of how interconnected we are in the world because of globalization. But so are the responses. And we have to be smarter about how we identify and use them through international cooperation, robust coalitions, and determined diplomacy.

The third major area of focus for economic statecraft is commercial diplomacy that boosts U.S. exports, opens new markets, and levels the playing field for American businesses. Let me hasten to say this is not just about American prosperity. Although, as you might guess, as the American Secretary of State, that ranks very high on my list of priorities. That is always our goal. But this is about finding more opportunities for all of us to prosper together. It's about helping the next wave of emerging economies achieve the same kind of growth that Singapore has enjoyed. It's about rebalancing the global economy so Americans export more, Asians import more, and we avoid financial crises and build middle classes.

So, the United States is stepping up our game, using our network of more than 270 embassies and consulates to advocate for American firms, and help achieve President Obama's goal of doubling U.S. exports in 5 years. With 95 percent of the world's customers living beyond our own borders, this has become an economic imperative. So our diplomats are working to make it easier for U.S. businesses to find answers and get advice about navigating markets. We're helping them connect with foreign partners and compete for contracts. And whenever a U.S. Government official travels overseas now, we try to include business events on our schedules. In fact, later today I will visit a General Electric aviation facility here in Singapore.

We are sending more trade missions, like the one I mentioned to Burma. And this summer I led the first delegation of American CEOs to the U.S.-ASEAN Business Forum in Cambodia. Three heads of state and more than a dozen key ministers were eager to engage with them. Back in Washington, we have convened conferences bringing together business leaders and government officials from more than 100 countries. We're proud to go to bat for the Boeings and Chevrons and General Motors and so many others. But we're also working to help industries large and small that have not been traditional exporters. Ultimately, this effort is more than hooking a big fish here and there. We want every company -- American, Singaporean, or any other -- to have that level playing field and a chance to compete on the merits. That is a recipe for shared prosperity.

Yet in too many places businesses trying to break into markets face resistance, including trade barriers that are going up not along national borders, but behind them. And these obstacles stem from political choices, not market forces. And it will take serious and sustained diplomacy to address them. Wherever companies face discrimination, the United States will stand up for the rules of an open, free, transparent, and fair economic system, and we expect all like-minded economies to share that responsibility.

Now, recently we saw a break-through when India retooled its policy on foreign direct investment. Their old rules barred companies that carry multiple brands in one store -- like Wal-Mart, Target, and Costco, or similar foreign companies -- from doing retail business in the Indian market. That limited competition. But, more than that, it prevented the kind of knowledge transfer and supply chain modernization that India needs. So we and -- I should note -- other countries, as well, raised this issue with India's leaders at the highest level for years. And we are pleased that Delhi has now agreed to loosen its restrictions.

But to take advantage of a more level playing field, American businesses must step up, too. Here in Singapore, U.S. firms operate on every corner. But elsewhere, too many are sitting on the sidelines. I hear it over and over when I travel: "Where are the American businesses?" And at a time when America's domestic growth depends more than ever on our ability to compete internationally, this has to change. And when U.S. businesses do compete, we want to work with them to make sure their suppliers at every link in the chain are meeting international standards like labor rights, intellectual property, and environmental impact.

And, finally, a level playing field means lowering the barriers that keep women from fully participating in the global economy. You knew I would get to that, didn't you? Mountains of evidence make this so abundantly clear. No nation can achieve the kind of growth that we all want and need if half the population never gets to compete. And we cannot afford any longer to exclude the energy and talent that women add to our economies.

The World Bank has done some ground-breaking research on this, pointing out what it would mean to tear down the barriers, some of them still very explicit. There are countries that deny women credit, there are countries that prevent women from opening businesses or running them without male fronts. There are countries that prevent women from inheriting businesses. There are so many still existing legal barriers. And then, of course, there are the attitudinal and cultural barriers that are somewhat less obvious, but no less difficult. And in the World Bank's research, tearing down all those obstacles would raise GDP everywhere in the world, including in my own country. In my own country it would be by nine percent.

So, think about what this would mean in a time where we are still facing global economic problems. And so I always say that we've got to do more, not just because it's the right thing to do, but because we cannot afford not to do it.

The fourth and final area we are focused on is making sure America's diplomats and development experts have all the skills and support they need to actually implement economic statecraft. So, we are focused on recruiting, retaining, and rewarding the most talented people we can find. I appointed the State Department's first-ever chief economist. And I combined our work on energy, the environment, and economics under a single under secretary position to maximize synergy and cooperation. We are ramping up our training curriculum for economic officers, and developing new tools and incentives to help them do their jobs. Now, these kinds of changes unfold over years, but they show a commitment to match our practices to our priorities. And they will help hard-wire economic statecraft into American foreign policy.

Now, let me offer three quick examples that really show the intersection of economics and security. Let's start with cyber theft. Now, most countries outlaw breaking into the headquarters of a company to steal proprietary information. Yet when it comes to cyber theft of that same material, many look the other way or even encourage it. This is more than just bad international behavior. It is bad economics. If we set a precedent that cyber theft is acceptable, everyone will eventually suffer. So I named the State Department's first coordinator for cyber issues, and we are advancing concerted strategies to address these really legitimate and troubling concerns.

Next, on energy. We know energy can be a source of healthy competition, with countries racing to develop new technologies and renewables. But it can also be a source of conflict, fueling corruption and instability. And how the world uses energy is a key factor as to whether we will finally address the threat of climate change. So we have created at the State Department a new Bureau of Energy Resources, and made this issue a priority in our diplomacy.

And finally, the resurgence of state capitalism: a challenge at once economic and strategic. Now, state-owned or state-supported enterprises are not necessarily problematic in all cases. But they do often lack the transparency and accountability that come with private boards and investors. And then, diplomatic challenges arise when states abuse their economic advantage to bully their neighbors or box out competitors, like when we see countries cut off gas flows in the middle of winter over a political disagreement. So, the State Department, working with seven other U.S. Government agencies, launched a comprehensive study on state capitalism. And in the coming weeks, we should see a final report with detailed recommendations for how we engage on the challenges posed.

Now, let me add that many of the questions that I have discussed today about the relationship between strategic and economic issues deserve deeper study. Perhaps, President De Meyer, at this institution. Almost a new foreign policy discipline. And I hope scholars at think tanks and universities will help us explore the implications and design more effective responses.

The ambitious agenda we've been working on, and that I have described to you today, will require a sustained commitment from secretary to secretary, from president to president. And the United States has to keep asking tough questions of ourselves and our partners around the world. We need to form coalitions of like-minded nations that deal in the changing dynamics of power and influence. And, as economic strength and global power converge, all countries need to think about the way their domestic decisions reverberate on the international stage. And that is especially true in my own country.

When I was traveling through Asia last summer, during the height of the debate over the debt ceiling back home, leaders from across the region pulled me aside to ask if the U.S. Congress would actually allow America to default on our debt. Let's be clear. The full faith and credit of the United States should never be in question. Today, as Washington gears up for another round of budget negotiations, I am again hearing concerns about the global implications of America's economic choices. Now, I am out of politics, but let me assure you that, for all the differences between the political parties in my country, we are united in our commitment to protect American leadership and bolster our national security. Reaching a meaningful budget deal is critical to both. It will shore up our ability to project economic power around the globe, strengthen our position in the competition of ideas, shaping the global marketplace, and remind all nations that we remain a steady and dependable partner. For us, this is a moment, once again, to prove the resilience of our economic system, and reaffirm America's leadership in the world.

As Ambassador Adelman said, "I've been in the business of advancing American leadership for a long time now. I've seen the ups and downs firsthand, our greatest triumphs and our wrenching heartbreaks. And through it all, I've only grown more convinced that our global leadership depends on our economic strength, and more confident that the United States has what it takes to keep leading in the 21st century."

This much is clear: the future belongs to those who can anticipate opportunities, who follow the trend lines, not just the headlines, countries like Singapore, which transformed itself into an Asian tiger in the decades after independence, and continues to innovate and excel. Global leadership is not a birthright. Not a birthright for the United States or any nation. It must be constantly tended and earned anew. Americans' ability, however, to reinvent ourselves has been a national strength since the first settlers arrived in search of new shores and new opportunities. It is part of our DNA. It is part of who we are, as Americans. And I know the United States will rise, as we always have, to meet the challenges of this new international landscape, firm in our purpose, innovative in our approach, and unwavering in our determination to succeed. And we look forward to a future of peace and prosperity and opportunity for all. Thank you. (Applause.)

PRN: 2012/T74-09