 Okay everybody, okay everybody, thank you all for coming, we're delighted to have you here. My name is John Hamry, I'm the president here at CSS and it's a real privilege to welcome all of you this morning and a very special privilege to be able to introduce Kevin Rudd who's going to be kicking this off. Two nights ago I had a remarkable experience, I was in a meeting with Prime Minister Rudd and he took us on an absolutely remarkable discussion about Asia, the rise of China, the tensions between our two countries, the United States and China, the implications for both of us and for the region, it was just remarkable and you know in my professional life I've been around politicians for 40 years, I've been around analysts for now for 15 years in this sort of environment but I've never been in this kind of experience before, you know for someone who can walk you into a new space intellectually and help you understand the significance of that space and also its political importance, this is rare, I've been with politicians who when explained to the significance of something will figure out the politics, you know and I've been with analysts who understand the significance and don't have a clue how to think about it politically, you know but very, very rarely and the only other person frankly at my experience like this was Bill Clinton, Bill Clinton had that capacity to walk you into an intellectual place you've never been before and help you perceive its enormous significance and its political import and Kevin Rudd can do that brilliantly and so I, when we asked him if he would come and join us today it was an extra hope and we're very grateful that he was willing to do it, of course the topic is something that he focuses on personally all the time, Prime Minister Rudd is currently, he's affiliated with CSIS and we're very proud of that, he's a distinguished statesman here at CSIS, he's also at Harvard where they get more of his time than I wish and I'm because I'm jealous but he is willing to come here and has been very, very helpful and supportive of us in thinking through these complex issues. He is going to give all of you that opportunity today because you're going to have a rich opportunity for something that's unique and so would you with your applause please welcome Kevin Rudd and thank you for being here. Well thank you John for that great exercise and expectation management. I will not produce magic this morning and there will be no song and dance show but I do appreciate the hospitality of CSIS and I acknowledge the work which it does not just on behalf of the United States but by all individuals around the world who take the disciplines of foreign policy, international relations and strategic policies seriously. It is a first class institute and it brings together first class minds which I presume is why all you folks are here this morning. Secondly you made reference John to my time at the Harvard Kennedy School after I came second in the national elections in Australia last September which is a polite way of saying that I lost. The Harvard guys kindly picked up the telephone and asked me to go to the Kennedy School to think having been in politics for 15 years that's not really been my business for the last 15 years but to think and to think about alternative futures for US-China relations and in particular whether in fact there is a way through some of what we who have professionally followed this for many years regardless some of the intractables in that relationship and Harvard Kennedy School has been very supportive of my work on that and I spent a lot of time talking to think tanks in Washington, think tanks in Beijing, think tanks in Tokyo and think tanks in Delhi and Singapore and Moscow on these questions as well as officials from those governments as well. Of course given the topic that we have been set this morning which is about questions of future regional architecture China does not constitute the totality of that picture nor does the China-US relationship constitute the totality of that picture. So in my remarks here this morning having been invited to do this only two days ago let me seek to stand back and look at the trends at work as I see them across the Asia-Pacific region. Secondly what's going well? Thirdly what's not going so well? Fourthly where does the China-US relationship fit within that for the future and some final remarks on questions of architecture? If you stand back and try and look at the events in the Asia-Pacific region we tend to think that we are unique in terms of those factors which are affecting the global business of international relations. We are not unique the factors at work in the international community in my view are largely comprised of two deep underlying forces which we in the policymaking business or the policy advising business need to be conscious of. One is this overwhelming dynamic of what we call globalization. We use the term a lot we often use it glibly but the sheer manifestation of it in that which we say and do every day and how we perceive one another is profound. Of course the general turbocharging of globalization as we define it by the new technologies are simply compounding and quadrupling and mutating whether it's in financial markets or in economic exchanges or frankly in the resources available to terrorist organizations and so the verities we began talking about a decade or so ago are now actually intensifying in their scope. And the overall dynamics of globalization at the economic level and at the social level and to some extent at the cultural level has been over the last 20 years or so since the end of the Cold War in particular to draw people's cultures countries nations and even governments somewhere closer together. Simply as a product of the dynamic. And this is a virtually unprecedented phenomenon in global history in terms of its intensity its density its complexity but overall a force for the good and then pitched against it of course is a second set of forces which simultaneously acts in reaction to it and seeks to pull nations apart either internally or between one another. And these I could broadly describe as the forces of ethno-nationalism or simply nationalism. Anyone who thinks that we have somehow mysteriously extinguished the forces of nationalism as a consequence of rational economic man ruling the world or rational economic woman rolling the world is deluding themselves. You simply have to be a political practitioner engaged in the business of democratic politics in your own country to know that is not the case. But as you travel extensively across Asia the nationalist agenda in each country is palpable and it's real and it's visible and it's tangible and it actually shapes deeply the thinking of most political elites. Of course if you dig into that deeper what is this ethno-nationalist reaction whether it's what we see in Europe what we see in various extreme forms in the new phenomenon we observe in the Middle East or in some of the emerging and intensifying security challenges in East Asia is that ethno-nationalism often is a deep reaction to the phenomenon of globalization and the deep personalizing dimensions of globalization. And what actually happens in response to that is those who don't win from the globalization project economically or those who lose their identity as a consequence of the globalization project obviously feel threatened, alienated and threatened and they therefore congregate around concepts and ideas and political movements which are about identity, locality and ethnicity. It's palpable, it's real and it doesn't matter which country or which society you're talking about. The task therefore of national, regional and international leadership at present is to navigate the shoals which are constructed by those two underpinning deep geo-economic and deep geopolitical forces and they animate the fundamentals of the what I describe as the technical foreign policy debates which we have on a day-to-day basis in the foreign policy community. Secondly when we turn to how this great drama of globalization on the one hand pulling countries and cultures together versus ethno-nationalism simultaneously tearing them apart or threatening to tearing them apart the central question for the politics of Europe and the politics of Asia and the politics of the Middle East is who will win the forces of globalization or the forces of ethno-nationalism. How this grand debate is resolved globally and regionally is a profound significance for the future of the 21st century. When we look at the European project up until now we can only be but in admiration of what they've achieved coming out of the ashes of the Second World War. Mind you, and without giving unnecessary offence to our European colleagues here today the Europeans were very slow learners. Having torn each other apart in three major conflagrations within 75 years from the Franco-Prussian War through to the Second World War, they finally concluded there are better ways of doing business. And the political architecture of emerging Europe, first the market then the community and then the Union, was very much a political construct seeking to deal with the underlying forces of ethno-nationalism which had effectively destroyed the continent over that scope of time. Come to our part of the world in the Asia-Pacific region. In the period since the fall of Saigon in 1975, really through until very recently, if you were to look at a 35-year sweep, the globalization project in let's call it the Asian Hemisphere has proceeded remarkably successfully. We've had no major conflicts within the hemisphere. We have produced phenomenal economic growth. We have produced extraordinary increases in living standards, unparalleled in human history and the numbers of people that have been drawn out of poverty. And as a consequence, a dynamism to the intra-regional discourse within wider Asia that we hadn't seen before either. Those Westerners looking on to the phenomenon called Asia, which is a European construct in itself when you think of the term Asia, meaning the east, east of where, presumably London, Paris or Berlin or Rome. But if you look at what is unfolded in Asia itself, it's the internal dynamics which have generated so much of the wealth, the prosperity and the success. And the external dynamics with the extra-regional partners has also been important, particularly the relationship with this country and its massive mark at the United States. But the intra-regional dynamics have been extraordinary to unfold and overwhelmingly positive. And to the mutual benefit of all countries within the region. And that has been, I think, so much the story over the last 35 years. But again, to simply sound the alarm, to conclude from that, that the forces of nationalism and ethno-nationalism or religious nationalism in certain cases have simply evaporated and died is simply a false analysis. And the battle royale within the region and for its future will again centre around how these two conflicting forces are contended with. Forces of globalisation, intensely drawing this region together and forces of nationalism seeking always to tear the region apart and sometimes tear nation states apart. So the report card for the last 35 years has been quite reasonable. Then in the last several years we begin to scratch our heads and ask what is happening. And it is a complex and variable picture across the region. We often forget the ancient lessons of international relations history that mutually agree to territorial boundaries help in the business of international relations. This is often seen to be an old concept of old realisms belonging to the verities of ancient international relations and not really relevant to the borderless world of the 21st century to which I will respond with a great observation of Australian philosophy pigs might fly. It's alive, it's well and it's a driving factor in the analysis of these questions to this very day in the Asia-Pacific region. You know the fault lines within the region as well as I do. But if you go simply on a mental map tour of the region starting with the Korean Peninsula, a divide and a state of war which existed still since 1953, through to the East China Sea and Senkoku, Diayudao and you look at the unresolved questions which still remain between China and Korea and between Japan and Korea. If you look at the complexity of what constitutes the South China Sea and all of the dimensions of the conflicting territorial claims involving seven different entities before you then flip around and head through the straights of Malacca onto the unresolved questions of India, Pakistan and Kashmir and then further a field to what is now unfolding in terms of militant Islamism not far to the northwest of there. All of these factors exist not just in theory on paper but are capable of in fact bringing about a conflagration at any given point through poor issue management and the normal politics and dynamics of escalation which unfold as a result. And so in the last three years or so we have seen these unresolved issues come much more sharply to the surface which brings me to my fourth point about how in fact this is to be dealt with in the future and whether or not the US- China relationship is central to most of it. I know enough about the politics of Southeast Asia to know that the Chinese-West relationship is not central to everything. It is an important dynamic but what occurs within Southeast Asia is primarily conducted intra-regionally and to any folks from the ASEANs here today I would simply commend the ASEANs on how they've managed their own regional evolution over the last 40 years. It's been an extraordinary development and I think a lesson to the wider region. But when we then extend the map more broadly across East Asia itself and it's very difficult to escape the central organising dynamic of the China-US relationship and its current state and where it may evolve in the future which is why I've taken a year out at the Harvard Kennedy School to look at it more closely. So let's look for a moment at its dynamics. If you were to take an objective measure about US-China relations over the last 35 years since normalisation in 79 and look at the ebbs and flows of that relationship since on any objective analysis if you arrive from the moon you would have to conclude the relationship isn't in a bad state. There is no immediate palpable sense of crisis in any particular element of the relationship. However when you look at the perceptions which are emerging from within both the Chinese leadership and within parts of the American foreign policy establishment it is much less settling than that. Let me speak about the Chinese perceptions first. The best I can describe China's current perceptions of the United States at the most senior leadership level is that they have concluded internally that it is virtually impossible to develop a long-term strategic relationship with the United States based on mutual trust, mutual strategic trust. And I believe that they articulate this in a number of ways. They articulate this by saying that they believe that the United States is in the business of isolating China, the United States in the business of containing China, the United States is in the business of diminishing China, the United States is in the business of delegitimising China, the United States is in the business of ultimately seeking by indirect means to destabilise the Chinese leadership. These things are never said in polite conversation which is presumably why they've asked an Australian to speak to you this morning. We've never made it in politeness. But I think at this stage of this very important relationship China and the United States it's important we have some very clear baseline reality checks about where things actually lie in Chinese perceptions. So let me flip the table in terms of American perceptions of China and I think this is very important because the level of misperception is profound and I believe growing. I think the American perception of China and I don't see to describe any official here it's simply my observation of the general foreign policy establishment is that China for the American and the global interest is important economically. That the Chinese political system however is inherently unstable and unsustainable. The American perception is that China is pursuing an assertive form of nationalism to mask its own internal political vulnerabilities and is seeking therefore to change the status quo across the rest of East Asia over time. Firstly by means of the economy to economically overwhelm the rest of Asia and then in time diplomatically and then militarily. And furthermore deep American perceptions which raised this question about whether Chinese diplomacy is in fact simply pitted at buying time while the overall correlation of forces moves more profoundly in the direction of one which economically and militarily advantages China before China more overtly and directly then acts to assert its position of preeminence within the region. Again that's never said in polite society either because these things are not the business of day to day diplomacy. But if you get around think tank land a lot and you get around governments a lot you pick up tonalities in respect of capitals and I don't think those generalizations that I have just made are enormously wide of the mark that is represent large departures from reality. Of course others seek to try and be objective about all this and anyone who claims to be perfectly objective is engaged in complete self-delusion as well because we all see reality through our own prisms whether we're conscious of that or not and we Australians are no different. The only advantage we Australians have I think is that at our best which is not always the case we both the West in the East and the East in the West and that is we are long standing and deep allies of the United States for which we make absolutely no apology at the same time with all the countries of East Asia and including the People's Republic of China we've had a deep comprehensive profound long-standing relationship and if you look at public attitude surveys in Australia the United States is very well liked and China is quite well liked and so there's actually a deep attitudinal basis to this in my country as well. So we cannot pretend to be objective because we're US allies on the one hand but at the same time strong and close friends with our counterparts in Beijing on the other. What I've concluded about these different sets of perceptions is that a large proportion of them but not in their entirety do not reflect the objective reality and to give one example in both directions on the containment question. If we define containment as that which is used by the United States against the Soviet Union during the period of the Cold War what we see in terms of America's current operational policy towards the People's Republic of China cannot be faintly described as containment. It has none of the characteristics of classic containment that might be a useful political rhetorical line to be used in the debate but in the days of containment there was a virtually no economic engagement between America and the Soviet Union and any Soviet action anywhere in the strategic regions of the world of relevance to the United States which was everywhere was met with an equal and opposite reaction in one form or another by overt or covert means. That is not the case in the US China relationship. It's of a vastly different character and so we need a more textured understanding in Beijing as to what the nature of US operational policy is but the term containment is not accurate and in my judgment can lead to erroneous policy conclusions in Beijing. Now let me flip the tables again in terms of what I think is erroneous American perceptions of China. When China in its tradition and its current leadership constantly say we as a civilization have never been in the business of establishing overseas colonies when we had the national capacity to do so and therefore we have no such interest again in the future other than to engage the world commercially. I think that's about right. When you look at China's history from the Ming dynasty to the present so many of the animating forces in Chinese history have been how to deal with its profound domestic agenda which have almost overwhelmed every successive generation of Chinese leaders. How do you feed a quarter of humanity? How do you manage the politics of a quarter of humanity? How do you deal with its current manifestations in terms of the impact on air pollution, water quality and the rest? My overall point therefore being that in the case of the perception that our Chinese friends are in the business of incrementally seeking to create a form of Chinese neocolonialism in parts of the world I think is profoundly wrong. It is not consistent with the tradition. It's not consistent with the characterization of actual Chinese behavior on the ground. So where do we go from here? And I'll conclude on these remarks. Given the centrality of this relationship I believe both governments and the region more broadly because of the centrality of the relationship to the region's wider stability and frankly the rest of the world as well as we move into the unfolding decades of the new century. The China-US relationship is in deep need of a new narrative, a common narrative. And here I don't simply speak in terms of some form of foreign policy utopianism or some sort of academic seminar. That's not helpful. I think you need a framework which in somehow some way responds to the idea which Xi Jinping put forward about a new type of great power relationship. If you understand I think why President Xi put that forward it was how do you construct a relationship between China and the United States which doesn't replicate the inevitability of conflict as we've seen in the history of great powers before. Beyond that I think President Xi's concept is basically a headline waiting to be populated. It is an idea. It is a line. It is a sentence but if you go to Chinese think tank land as I do very often the actual internal content of this proposition is very fluid indeed. So what could a possible common narrative look like? Well this is a very complex question but I would leave you with two or three thoughts. A common narrative between China and the United States is important for the reasons I just mentioned that at present I think both countries have narratives about each other but not a common narrative for both of them. The Chinese have many narratives about the United States most of them not publicly articulated and the same in the reverse direction. So what given all of that is possible in terms of a common narrative for the future? I think it requires what I have described most recently as a concept of constructive realism and a concept of constructive realism which builds towards a concept of a common future. That's a word about each of those words. Realism if you spend enough time in this town and you've studied US foreign policy in its 20th century history this is a deeply realist foreign policy establishment and for entirely understandable reasons and when you look at the school as it's evolved here at a theoretical level from Morgenthau to the present it is rich in its deep and it's reflected in the behavior of practitioners. In China realism called by various different things is equally apparent equally part of the Chinese tradition of understanding foreign policy engagement and for every Morgenthau there are probably ten Chinese equivalents. So there is a deep realist foundation to the way in which both countries view each other which has all sorts of potential difficulties arising from that of itself in terms of the expiration of mutual trust before a chance is even given in the first place. But given this is such a profound reality in both conceptual hemispheres in Washington and Beijing it has to be acknowledged and there are real and objective continuing conflicting interests and conflicting values between China and the United States of which the territorial issues that I've just mentioned in the eastern South China seas about one manifestation. These need to be accepted explicitly recognized but critically managed in a manner which concludes that allowing any one of these matters to escalate into crisis conflict of war is mutually unacceptable. That's the realist part. What's the constructive part? The constructive part is this if you look at the possibility of constructing genuine public goods between China and the US both bilaterally regionally and globally the scope is in fact quite wide. If you look at it bilaterally I'm a strong premonit to the early conclusion of the Bilateral Investment Treaty but for a simple reason and that is the more the two economies become in meshed through investment rather than just through trade then frankly the more inseparable they become and the more the mutual interests in each other's progress and advance becomes an indelible imprint within each country. So causing that investment treaty to come into being I think is a genuine public good because it in the long term will transform many elements of the relationship. Regionally and I will touch on this in my concluding remarks there is I think a value to be had in both governments together with those of the region beginning to evolve further the region's existing architecture. The existing architecture has served the region regionally well but it's thin. APEC has performed a valuable role in opening economies internally and to one another across the region. If you look at the tentative moves in terms of a more geopolitical and or national security related discussions there's been some contribution by the AF, the ASEAN Regional Forum, a nascent contribution by the East Asia Summit but frankly this needs to be taken further. Why would both countries be interested in that? I don't think either Beijing or the United States want to trip casually by accident or poor incident management into crisis conflict or war. So therefore what you need is an institution such as those we've seen evolve in Europe over a long period of time and I emphasize evolve over time which begin to create basic confidence and security building measures between not just those two countries but the other regional participants. And over time to begin to evolve through that sort of head of government level regional discourse, a nascent sense of common security rather than divided security. This does not replace the alliance structure, it supplements the alliance structure and of course international models such as those offered by the European Union are not readily applicable. But the idea and the concept and frankly the achievements which we can attribute to the Europeans should be born in mind and this would constitute in my view a genuine regional public good and finally a global public good. The extraordinary turnaround in China and US postures on climate change is for me one of the great unwritten positive stories of the last few years. Having been a participant in the Copenhagen summit on climate change in 2009 and having not slept for two days and seeing that particular attempt to get a global climate change treaty advanced in the face of much intransigence from the governments I've just mentioned was I believe a tragedy. But what's fundamentally changed since then is a 180 degree shift in Chinese policy and the ability therefore for President Obama and President Xi to advance the global commons a global public good by making new national commitments on climate change I believe is a real element in the trust building exercise which brings me to the final element of the equation. First the foundation is realist secondly if you like the superstructure is constructive what can we do together in areas where the interests are sufficiently overlapping or the values are sufficiently overlapping. The third element is over time having a concept that you can harness the political and diplomatic capital from these areas of common cooperation to in fact deal with the underlying fundamental objective realist problems that are referred to at the outset which constitute the constant source of friction. At present there's not a whole lot of diplomatic and political capital to draw upon in terms of dealing with the hard issues but by virtue of a process which deals with things like a bilateral investment treaty things like a new evolution of the region's architecture things like global advances on climate change driven by these the two largest emitters in the world but in time also on intractable questions like North Korea and cyber security and also the rise of militant Islamism. There is a basis to construct a new element of evolving strategic trust between the two which provides a platform for dealing with the unresolved deep challenges of the future. I conclude my remarks with how I concluded them here two nights ago. Deng had this great saying about the Chinese domestic reform process. What Deng said was that this is way back in the late 70s. We want to reform this thing called China in the great openings of new policy economic reform domestically opening to the outside world internationally. Then it's going to be a long process and so he used this marvellous analogy which is you cross the river steps feeling the stone step by step. I think we also need to have that concept alive in our minds about how you can possibly engineer that incremental trust-building exercise between China and the United States as well. Step by step but knowing in fact that there is a destination called the common future. For our Chinese friends here in the audience today, if you're talking about realism, xian shu zhu yi means something in the Chinese context. If you're talking about a constructive approach, jian qi xing or jian che is a positive term in the Chinese context. And a gong tong wei lai or guo ji gong tong ti, not gong gong ti but gong gong chang pin, international or global public goods. It means something in the Chinese discourse. So to frame a common vision, to frame a common concept but not to leave it at a level of political theory but to then have an operational dimension which can be put into practice by regular symmetry between the two countries. That I think provides us a way to navigate our way through. If we don't then I fear that the tendency will be towards inertia, drift and drift becoming current and perhaps in a direction which none of us would want to see for the future. I thank you. Thank you very much, Mr. Rudd. And I would like to open the floor to some questions that if I could, maybe I could start with one. And the question is this. Do you think that American or Chinese economic strategy is sufficient given the broad scope of the region that you describe to us? What advice would you have for both countries in that area? Well, the wisdom of foreign policy has never provided public advice to any government. It's usually likely to be unwelcome. Private advice is usually of a different nature. But let me make some broad observations. And that's looking at from the region out rather than from America or China in. There are some basic metrics here. Metrics while boring are important. China as of 2000, the last couple of years has become the world's largest trading power. It's become the world's largest exporter. It's the world's second largest importer. And if you were to put together simply on trade metrics, China today is the number one trading partner of about 127 countries around the world, the United States about 73. Depending on who you believe, the World Bank, the IMF or whichever journalists just wrote an interesting story. And again, the measures of the relative size of the Chinese and American economies, purchasing parity, pricing or market exchange rates, calculations and what the price assumptions are of PPP. The Chinese economy is projected by a combination of the bank, the IMF and or the OECD to be larger in size than the American economy, somewhere between 2015, 2014, 15 and 2024, 2025. The metrics are really important here. If you are looking at it from the region out, the economic significance of China, both in terms of trade, FDI and prospectively, depending what happens with the liberalization of the of the rem in B in the future, capital flows becomes a much more dominant factor in the economic reality of East Asia than America. I don't think people have quite thought that through in terms of where it all leads. But if you take as your primary assumption that from economic power, other forms of power proceed, there is a fundamental underlying shift occurring across the Asian hemisphere. That in turn, of course, in terms of its forward trajectory goes to questions like the sustainability of Chinese growth over time, goes to the questions of will the growth rate be 7.5, 6.5 or the most negative projections in terms of averaging over the next decade down to something just north of three or early four. So there are a whole series of assumptions which go to how you project, but the projections both by the bank and the fund and the OECD do not assume linear projections. So all I'm saying is as a question of basic economic metrics, China is now more relevant to the economies of East Asia than the United States. And that's a very thin margin at present. But as you see the investment flows unfold, and you see the capital flows unfold depending on regulatory changes in Beijing, that equation is going to change even more profoundly. It's up to the United States to respond to that as they so choose. But that is an unfolding reality in our part of the world. Hugh White is here with us from Australia. If you took the China trade out of the Australian GDP, Hugh, I presume the China trade now would represent imports, exports about 7% of Australian GDP. Now, that's quite a lot of cash for any economy. And we're what a $1.6, $1.7 trillion economy. So replicate that across the economies, smaller economies of Asia, and we're the fourth largest economy in Asia after China, Japan and India. This equation is unfolding. And so part of the American response is the Trans-Pacific Partnership and the diplomacy associated with that. And for which there is a Chinese counter narrative as well. I won't go into the probabilities and relative merits of both proposals. Let me open it up for one or two questions. Andrei, straight here in the middle, please. Thank you. I'm Andrei Sobozio, and I'm the Chief Representative in Vietnam for the Interstate Traveler Company. And it was a wonderful address. Thank you so much. So comprehensive. I just taking notes from your remarks, sir. And the only thing that I have a question on is, in working towards this constructive realism, great term, and you defined it well. But it seems like a fly in the ointment, so to speak, is that it seems like a what? The main optical, the main optical to working towards constructive engagement with all those variables is that of all the parties to the equation, only China, only China continues to violate using violence to intrude into the exclusive economic zones of the Philippines and Vietnam and other countries, and denied that they're doing it. And I've been on business trips, I've seen them come right into the exclusive economic zone and using violence. So I think the truth of all this is just a paraphrase, because I'm conscious that you've got a rest of a program to attend to. And I've got to be at the door in a minute, but I get the question. I think if you were to go through the analysis of each of the disputes from north to south, each has its own internal characteristics. If I was an international lawyer sitting at the International Court of Justice on each of these disputes and where the territorial lines lay, I would probably have different resolutions on each of them. And having spent some time looking at the underpinning legal cases concerning Sankaku Yoyodao, concerning Spratley's Parasols and the intervening seas and the claimant positions of all seven parties. This is a highly variable feast. It's not just that we as an Australian government have traditionally chosen to be neutral on this. There is a reason to be neutral, and that is that the underpinning legal cases are, if they ever came to jurisdiction, are so complex. So if we had another hour, we could go through each of these individually, but I think that would be tiresome for people in this gathering. So rather than have an adjudication which says who's right and who's wrong in each one of these disputes, I simply point to the fact that China now has a more and deliberately more activist, proactive foreign policy and direct pursuit of its interests and has been the case for at least the last year or so for those who observe these things closely. It proceeds from a series of perceptions within the Chinese leadership about the United States, which I sought to articulate before. Therefore, the concrete policy challenges, what do we do in response? And that's what I have sought to articulate today. I'm sure on the rest of your conference, you'll have an opportunity to dissect each element of each dispute. But that is not possible right now. Andrew, your associate professor at Catholic University. You mentioned that the Catholic University is in North East DC. As in Holy Mother Church, that Catholic? Okay. You mentioned that the rhetoric of containment is is a misnomer. It's a misperception of the Chinese. How would you persuade to the Chinese that the strategic the US strategic rebalance to Asia is not a form of hard containment? Well, again, it goes down to the whole question of definitions of containment. I mean, the aligned structure in Asia has existed, as you know, since the 40s and the 50s, and was primarily constructed in those days with principle reference to firstly, a research in Japan in the case of the Australian Alliance, and then laterally in terms of the Soviet Union. So the alliance structures have long existed. There's often a long discourse about more Marines going to Darwin. Well, you know, there used to be one and a half thousand Marines coming each year for three months. Now, we've got two and a half thousand Marines coming each year for six months. Well, I would say hold the next addition of the strategic balance put out by the double I double s in London, because that fundamentally alters the global strategic equation. It doesn't. It's kind of a normal evolution of Alliance arrangements, which actually have multiple applications. So again, I go back to definitions of containment. It doesn't actually fit the term. There are probably other terms which are better used in the international discourse to describe U.S. strategic responses to China. But containment is not one of them. If you are looking at the classic definition of it as framed by Ken and the others in this town in the late 40s. Ladies and gentlemen, please join me in thanking Mr. Kevin Rudd. You just hold your seats. We will have the next panel. Thank you very much. We almost lost one. Good morning and let me add my welcome to you to the CSIS Asia architecture conference. My name is Scott Miller. I'm the program director for the International Business Program here at CSIS. And it's my pleasure to moderate our first panel today, which is going to cover the economic issues in the will be on the table and as part of the conversation in the East Asia summit and the APEC leaders meeting. Strikes me that, you know, for the most of the past 25 years, international economic analysts have been able to rely on a couple of things. First, that East Asia and Pacific economies would grow at a faster rate than the rest of the world economy, which has been true, you know, pretty consistently. There were some hiccups with the Asian financial crisis in the late nineties and otherwise, but overall there's been very solid growth. The second thing that economists could count on was that Asia Pacific economic policy tended to move very steadily and consistently toward more openness and greater economic integration. The progress achieved, if you take this long view, is frankly stunning. Whether you look at growth rates, but more importantly, look at the reduction in poverty, the creation of large and growing middle classes. It is one of the most remarkable performances from an economic development standpoint in all of human history. So there's lots to lots that has been achieved and will that continues to benefit peace and security. Having said that, today it's not quite the same picture and I think that's what we'll talk about today. Today, I think the view of East Asia and the Pacific in terms of economic growth is still very positive. Our more numerically inclined colleagues up the street at the Peterson Institute yesterday held their global economic forecast. And once again, East Asia and the Pacific looks to have demonstrate stronger growth over the next 12 to 24 months than either Europe or the United States. However, there's there have been questions raised about the degree to which convergence, which has occurred between developing and developed economies over the past 25 years, will continue and at what pace it will continue. So there's there are questions being raised. Likewise, on the policy front, there are there are I think important questions about whether economic integration in East Asia and the Pacific will continue or whether in fact it's reversible. There have been some, you know, some large important economies in East Asia and the Pacific who have moved in a direction that's frankly contrary and sort of less liberal than in the past. I would note the large the proliferation of local content requirements, many of the policies in Indonesia being a single, not the only example, but an interesting example of sort of Indonesia first policies, local content requirements, decisions to no longer enforce or abide by bilateral investment treaties, a number of moves that while headline by headline, they didn't amount much, but you put it all together, there's I think an open question about the degree to which East Asia and Pacific economic integration will continue and at what pace. So I think that's the theme that I would like to set for today's conference. We're delighted to have a terrific panel of experts to discuss these and other issues. You have your their biographies in front of you, so I won't read them, but I will introduce them all together and then let's speak in turn. We'll start with Dr. Bob Wang. Bob is a senior official for APEC, the U.S. Department of State. He'll be followed with another U.S. perspective, Ed Britswa, who's director of APEC affairs at the U.S. Office of U.S. Trade Representative. Following that, Mr. Toshi Sakamoto, Deputy Director General for Trade Policy in the Trade Policy Bureau of the Ministry of Economy, Trade and Industry of Japan. Think of Mr. Sakamoto as the as the senior official for Gold APEC and East Asia Summit, and he's really representing that role that's part of his portfolio today. Finally, we'll hear from the business community. One of the great things about East Asia and the Pacific and its economic integration efforts is the degree to which they incorporate business views and the perspective of the enterprise. Dorothy Dwoskin is senior director of Global Trade Policy for Microsoft, but in her role today, she is Vice Chair of the Policy for the National Center for APEC. National Center for APEC is the secretariat for the U.S. Asia Pacific Business Council members, and very active in APEC matters for almost 25 years. In any case, with that, thanks in advance for the panel, and let me turn it over to Bob. Thank you very much, but just wondering before I start, I think this podium is blocking my view on the left side, and I'm wondering if at some point someone can come and maybe move the podium if possible, but if not, don't worry about it. But so I was going to give the left side a little bit more equal treatment. Anyway, let me start in the interest of time to just say that, speaking about APEC directly, that this year I believe will be a good year. I've only been doing this for about a year, and so I think this is a good year for me. In any case, it's only been one year experience, but I think it's been a good year, and part of it is because, for one thing, we know that President Obama this year will almost definitely attend APEC. He hadn't done it in the last two years, so at the very least this year we will, I think, have him in Beijing, because he's also, I think most of you know, going to be doing a bilateral immediately after the APEC leaders meeting, after which he will then go on, he's a very long schedule, he'll be going on to Burma for the EAS, as well as the ASEAN-US summit meeting in Burma, and then doing a bilateral with Burma as well. And then after that he will be heading off to Brisbane in Australia to do the G20 in Brisbane in the 15th and the 16th. So he has a very long trip, and I think this is extremely important because I think it gives, obviously, our highest leader a chance to engage directly with Asia in all aspects, first of all, bilaterally with China, with Burma, and so on, also regionally within EAS, as well as within APEC with 20 members in APEC, 20 other members in APEC, and also with the other ASEAN members. And then finally he goes to Brisbane for a global agenda. So I think in this about seven or eight grueling trip, the President, the Secretary, others will have a chance really to press forward and engage the region in a lot of issues across the board, from economics to politics, security, and so on. So I think it's already starting out, I think, to be a very good year, at least in terms of our engagement with the region. So, but in terms of the substance of APEC itself, in terms of 2014 working with China and with the other, essentially 20 other APEC economies, I would say at least from my perspective seriously, I think it is a good year. I'll let Ed here from USTR talk a little bit more about the trade and investment facets of APEC and what APEC has been doing this year. And I will focus on talking about essentially our work in trying to promote sustainable development and sustainable growth in APEC, as well as our work in trying to increase regional connectivity within the APEC region, which of course, as you know, expands beyond the Pacific over to Peru, Chile, Mexico, and so on. So we're doing a lot of, I think, good work on this. And in many ways, I think I caught part of what Prime Minister Rudd was saying. And in many ways, I think this builds up the kind of cooperation that he talked about in terms of the regional architecture of the region, in terms of working together on many of these different issues. Again, let me just end very quickly. If you don't mind, just go into the list of what we're actually doing, at least in terms of the sustainable development side of our portfolio. There, I think you could probably divide it into three different areas. First area would be environmental, I would say, meaning that we've known, having lived in China for 10 years and other places, we know that sometimes growth actually brings with it terrible consequences in terms of air pollution, water, food safety, and so on and so forth. So we really think that it's important within APEC to start off knowing that there are issues that are going to come from fast growth. We need to, at the same time while we're growing, begin to look at the consequences of that. So in APEC this year, we at the Energy Ministerial in Beijing that I attended in August and Dan Poneman, our Deputy Secretary, was there. We set a target of trying to double the share of renewable fuels by 2030 in the energy mix within APEC itself. We announced and talked about fossil fuels subsidy peer reviews that Peru has already completed. New Zealand will start right after their election now that it's over. And China and the United States have agreed to do fossil fuel subsidy peer reviews with the goal of eventually removing a lot of the inefficient subsidies for fossil fuel. And we're hoping that a few other countries will come in or economies will come in in November to also announce that they will volunteer to do these, again, to try to promote and indirectly renewable fuels within the region in terms of the environment. At the Oceans Ministerial we had in Xiamen in August. There we again came up and we translated a lot of our objectives within our Oceans Conference that Secretary Kerry held in a department in June. We translated a lot of it in terms of getting more policy commitments to, for example, expand protected marine areas along the shores. The one thing that all affect economies have in common is that we all border the Pacific. And so we're trying to expand the areas that are going to be protected. We agreed to begin to remove subsidies for fishing, to prevent excessive fishing, so to actually maintain, sort of, you might say, managed fishery, take measures against illegal fishing in the region. So all of these have essentially are in the environmental area that we are trying to, I think, we're able to emphasize this year. In the second area I think that's going to be very important, and I think China is taking the lead on this as well, and that's anti-corruption. So this year we are going to, we endorsed it at the anti-corruption transparency working group in Beijing in August. And by November I think we should have our leaders essentially endorse what we call APEC principles on the prevention of bribery and the enforcement of bribery laws, anti-bribery laws. So this will be very similar to what OECD, a little bit similar to what we're doing in the Foreign Corruption Practices Act in the United States. So this will be endorsed as well as a sort of APEC general elements of effective corporate compliance programs. In other words, to try to get the private sector as well to get involved in reducing the degree of corruption that is pervasive within the region. And we believe this is important for sustainable growth because if you have bribery, corruption, I think as China is finding out today, eventually it will come back to bite you in terms of the reaction of the people who are left out of the growth. So I think this is very key. Similarly, at the SME ministerial that we had in Nanjing, there was a Nanjing declaration, again this is in September, early September. There we agreed to move ahead on sort of codes of ethics for two specific sectors, medical devices as well as biopharmaceutical. And there we're trying to the goal is to by 2015 double the number of associations throughout the APEC region that will sign on and adopt these codes of ethics in terms of how you deal in the health sector. And they will set up an ethics portal, a web portal, ethics portal that people can have access to. And lastly, in terms of the area of I would say inclusive growth, we're very much focused, this is something that Secretary Clinton started in the U.S. year in 2011 on women economic empowerment. And there we're trying to do many things. Japan is taking the lead on this in many ways. For example, getting examples of 50 companies that have best practices for trying to make it easier, facilitate sort of women participation within the companies, health issues involved there. On our part, we're trying to essentially, we have set up a dashboard of data indicators where we'll begin to measure the sort of women participation in the economy throughout the APEC economies and then start to set targets, look at gap analysis where we can improve, look at best practices. And we're also setting up a portal or an electronic platform that would essentially bring all of the women entrepreneurs within the APEC economies together in this electronic platform to begin to have, you might say, critical mass in terms of working together procurement, sort of supply chain procurement for looking at women enterprises throughout the region, training, access to finance market, and so on. So many of these areas we're working on. Last thing on connectivity, how much time do I have? Two more? A minute or two, OK. On connectivity, we, of course, we'll come up this year with a connectivity blueprint within APEC that will essentially establish certain targets in terms of physical infrastructure, in terms of regulatory convergence to try to get institutional convergence in terms of trying to get regulations more harmonized across the region, and finally in terms of people to people. Tourism in terms of finding different ways to increase that, flows, education within and among the different APEC economies. And in this context, this year APEC will be establishing what we call an APEC scholarship and internship program, and hopefully by the end of the year we'll have about a hundred of these to be announced where we'll try to focus on getting students from especially APEC developing economies to have a chance to go to other economies to either train or to study on scholarships that, in our case, will be provided by companies. In the case of Chinese Taipei, in the case of China, Australia, it'll be more government-provided scholarships. So we think all of this will bring together in terms of the APEC region a greater connectivity. And the last thing just to echo what Prime Minister Rudd was saying, in my one year here working on APEC, I find that working with my counterparts like Sakamoto-san and others, I really found that just meeting four or five times a year in terms of the quarterly Psalms at the APEC meetings, getting together, that we actually have, I feel this, built up a camaraderie of group of people, especially at the working level, who work together with each other every quarter and meet and intercessionally. And that, in many ways, is building up, I think, this community at APEC over the last 25 years that I think will be not a specific outcome for this year, but will be, I think, in the long term extremely important for Asia. Thanks. Thank you, Bob. Ed, tell us about the trade stuff, as it were. Thanks, Scott. I'm happy to talk to you about the trade stuff and the investment stuff, because that's an important part of APEC, too. So it's a pleasure to be here with you all today and to talk to you about our trade and investment agenda in APEC. And my remarks will be limited purely to APEC. And I'm happy to take questions in that regard. But I'd like to talk to you about our expectations for our trade and investment initiatives in APEC this year. And I think, like Bob said, we've got a lot of really good interesting work going on in APEC on a wide array of issues. And many of these issues are broadly supported. Many have been pushed forward by our host, China. And China and the United States are cooperating on a lot of things. And I think it's been a very interesting, at least personally, it's been very interesting to watch China lead a multilateral effort in the span of one year and to see where that ends up. So we've got one month before we are in Beijing again for the APEC leaders and ministers meetings. And I'd like to describe for you some of the specific initiatives that we're working on. But before I go into that, what I'd like to say is that every single year we have an overarching priority that we ensure that APEC remains the premier economic forum in the Asia Pacific for multilateral cooperation on trade and investment issues. That's a significant priority for us because we think APEC can do great things and we want to make sure that it continues to do great things on trade and investment in a very concrete way. When the United States hosted APEC in 2011, we fostered and we achieved a very results-oriented environment. And we delivered a lot of meaningful and concrete results and outcomes to our stakeholders. And these included results on regulatory coherence, green growth, and a broad array of trade and investment initiatives. And rather than discussing our visions for APEC, we developed an agenda that was very action-oriented and focused on the tangible things that APEC could do to promote regional economic integration. So every year, we work along these same lines. We worked with our hosts in the past on these lines, for example, in the Russia year in 2012, where we agreed on the APEC list of environmental goods, which was a significant achievement, building on the commitment to reduce tariffs on environmental goods to 5% or less by 2015. And in the Indonesia year in 2013, we created a new fund in APEC for improving supply chain for performance through capacity building. This was a very concrete initiative. And this year, we're doing the same with China. We're trying to make any outcomes on trade and investment as tangible and concrete as possible. And let me go back to environmental goods. I think this is the most tangible example of a historic commitment in APEC to actually do trade liberalization. And this is also an example of how APEC is contributing to the multilateral trading system, because as many of you know, we just launched a new set of negotiations at the WTO on an environmental goods agreement. The inspiration for that was the APEC list of environmental goods. And we're hopeful that we can really expand on that APEC list, implement the commitments in that APEC list and really create a new initiative at the WTO that really is meaningful for all of our stakeholders. So in terms of our specific initiatives, I'd like to focus on a couple of areas. Good regulatory practices, supply chain performance and also environmental goods and services, I'll describe exactly what we expect to achieve this year on that and then global value chains, which is a very new area for APEC. And I think it's a very interesting area where APEC can do more concrete work in the future. And all of these areas fall under China's priority of advancing regional economic integration. So we try to work very hard with the host to ensure that what we're trying to pursue on trade and investment also falls under their priority. Good regulatory practices. This is an initiative that's near and dear to my heart as a former non-tariff barrier negotiator. We have a responsibility in APEC, not just to address current barriers, but also prevent barriers from occurring. And one of those ways, one of the ways we can do that is to help regulators actually regulate better to produce more effective, legitimate, higher quality regulations and to help regulators actually acquire better information about the proposed regulations so they don't turn into barriers in the future. So there's three good regulatory practices that APEC focused on. This really started in our host year. Internal coordination of regulatory work, which is like how agencies communicate with each other about a proposed regulation, assessing the impact of regulations and conducting public consultations. And I wanna focus on that last one because what we're trying to do this year is create a new set of actions that APEC economies could take voluntarily to improve how they're actually conducting public consultations and working with their stakeholders, acquiring information. These are things like doing early notice of proposed rules, setting a specific timeframe like 30 to 60 days for accepting public comment, building a web portal at the center of government instead of a regulator by regulator approach for doing public consultations. So we're really trying to offer very concrete ways that regulators in the Asia Pacific could do public consultations and acquire better information. Supply chain performance. In 2010, APEC leaders set out a very specific goal, improve supply chain performance by 10% by 2015 in terms of reduction of time, cost and uncertainty. That's a very, I think, ambitious goal. And I think we're on track to achieve it, but we've tried to come up with new ways we can work on that goal. And this year we agreed on a capacity building plan to help the developing economies actually improve supply chain performance and overcome any obstacles they face. And we think this is a great way to help economies, especially developing economies, implement their future trade facilitation agreement obligations. And these are very tangible projects that we're doing, expedited shipments, pre-arrival processing, issuing advanced rulings. We're gonna help developing economies at the economy level instead of doing workshops and information sharing exercises actually implement these types of programs. We also created a new body in APEC called the APEC Alliance for Supply Chain Connectivity. This is a public private body that will help us move forward these capacity building efforts. So we're trying to leverage the expertise and the resources of supply chain experts all over the world to help us with these projects. And trade ministers endorsed both of these initiatives back in May in Shingdao. So we're gonna recognize this progress in the leaders week meetings. Environmental goods and services, as I mentioned, we have this historic commitment, but what is the foremost priority this year is affirming that commitment, ensuring that economies actually implement that commitment next year. It's a huge priority for APEC, it's a huge priority for the United States, but we're also seeking that APEC launched new work on addressing non-tariff measures that impact trade and environmental goods and services. Because if we don't, the tariff reductions won't be as meaningful. Finally, global value chains. Global value chains is, like I said, it's a very new area for APEC. This is about how you add value from the inception of an idea to the delivery of a product. As we all know, production of finalized goods happens in various ways and in various economies. And I think the CSIS folks have drawn a lot of attention to this. So APEC actually has a set of sort of policy principles on global value chains. And they include things like the importance of services, the importance of investment, the importance of SMEs. What we're focusing on in the United States is how we can actually address trade and investment barriers that impact global value chains. And I think the primary example that we're focusing on, and we want to actually do more work on this next year, we want an instruction on this, is how do we actually understand the phenomenon of localization requirements, localization barriers to trade. And as Scott mentioned, I think a big example of this is the requirement that you keep data centers locally. This is a concern that we have all around the world and I think APEC could do great work in helping us understand why economies are doing this and what alternatives that are very trade and investment friendly can we provide to economies instead of using these requirements. So I know there's a lot more to discuss on trade and investment, but I think these are some really good examples of what we're trying to achieve this year. Thank you. Thank you, Ed. Sir. Thanks, Scott. Thanks, CISI colleagues for inviting me. I'm really excited about this opportunity to talk about APEC and the EAS. In APEC, the United States is the closest ally of Japan and both Bob and Ed are good friends of mine and a forming part of the APEC community. And since Bob and Ed thoroughly explained this year's APEC agenda, including our trade staff, I will be just pointing out Japan's priority in this year's APEC agenda. On trade staff, Japan is promoting, putting forward a specific proposal on services. Unlike trading goods, trading services has been left out, kind of left out in the APEC discussions. So we are now focusing this year's services such as manufacturing related services and the environment services. Both proposals are consposed by the United States. And next year, Philippine will be hosting the APEC leaders meetings. As you know, in Philippine, they have a very strong and very competitive service industries. So we intend to come up with a concrete action plan next year in Philippine years. On sustainable development front, as Bob mentioned, we are now implementing 50 companies, exemplary companies, in terms of the empowering women. And 50 companies will be, the name of 50 companies will be announced in the leaders week and which include the seven U.S. companies. So please look forward to it. On the connectivity, Japan emphasized the importance of quality of infrastructure, such as the lifecycle cost and environmental performance and the safety, including resilience to natural disasters. So those are the APEC priorities for Japan. Let me turn to EAS because the name of this session is EAS slash APEC. I think many U.S. people consider APEC is for economic matters whereas EAS is for political or security issues. I slightly disagree with that observation because EAS, Economic Ministers Meeting, was formalized last year. They started some substantial discussions with the input from area, ERIA, which stands for Economic Research Institute for ASEAN and East Asia. They are doing some analysis on industry cluster because the business activities in ASEAN is now cross-border. For example, Japanese automotive companies in Thailand has now shifted its labor-intensive process to neighboring countries like Rao PDR and Cambodia. They produce labor-intensive products in such countries then ship back to Thailand, mother factories on a daily basis. As such, Japanese business activities in Macon region is really cross-border and ERIA is now doing research work how to develop such cross-border industry cluster in the future. And also next year, ERIA will come up with a recommendation on how infrastructure should be developed in ASEAN. They did that research about five years ago, but next year they will revise such study in order to provide input to EAS as well as ASEAN summit. In this regard, I would very much appreciate if US businesses are interested in this work and provide the necessary input. Let me turn to also RCEP, RCEP, Regional Comprehensive Economic Partnership. This is not EAS per se because EAS are 18 countries whereas RCEP is negotiated by 16 countries, not included, US is not included there. RCEP is another mega-FTAs other than TBB and TTIP. Which is negotiated by 16 countries, ASEAN 10 countries and six dialogue partners of ASEAN. Six dialogue partners have its own ASEAN plus one FTA already and 16 countries amount to 48% of global population, 29% of global GDP and global trade and 45% of Japanese export whereas that figure is 30% for TBB. People frequently ask me the question, what's the difference between TBB and RCEP? From my perspective, my personal view is that the TBB is for rule setting whereas RCEP is to strengthen the regional supply chain based upon the business reality. Since you may not have much information on RCEP but taking this opportunity, I would like to briefly explain what merit the United States business communities can get from RCEP. RCEP negotiating a lot of things, not only trading goods but also rule makings such as NTV, non-tariff barriers, TBT, SPS, trade facilitation, investment protection, competition and intellectual property rights. All these rule makings, if agreed, will be applied to university. It's really difficult to apply domestic policies on these areas differently from RCEP countries versus non-RCEP countries. And also if US company establish subsidiaries in one of RCEP countries, that company can benefit from a market access commitment of services under RCEP. So there's a lot of benefit for US business communities if RCEP is successfully concluded. And I believe that the United States are very much interested in e-commerce both in the context of TBB and other international fora. And in this regard, I am very grateful for the publication by US ASEAN Business Council which celebrated the 30th anniversary last night. They published report called Beyond AEC, ASEAN Economic Community 2015. This is really remarkable piece of work. It's a policy recommendation for ASEAN SME competitiveness. In that policy recommendation, they focused on e-commerce, which is very helpful for RCEP negotiations. Actually, I am now drafting RCEP non-paper on e-commerce. And I took the liberty of putting some paragraphs from their recommendation in Japanese non-paper on e-commerce. It was really helpful. And also AEC, ASEAN Economic Community, this is much more advanced efforts than many of you think. On tariff matters, ASEAN 6 countries eliminated 99% tariff tariff lines, CLMV will be eliminated at 93% by 2015 and the remaining seven will be also eliminated by 2018. And ASEAN FDA is one of the most utilized third party FDA by Japanese companies. And the national single window and also service liberalization are also very important undertakings in AEC. So in sum, next year 2015 is very important for EAS and ASEAN because RCEP is supposed to finish the negotiation by the end of 2015 and AEC will be established in 2015 and the post-2015 vision of ASEAN community will be developed. So I believe that it would be nice if Japanese business communities and the US business communities jointly speak up for your business interest on these important issues. Thank you. Thank you, Dorothy. Thanks. Thank you Scott and thanks for asking us to have a bit of a business view on the panel. Since it's baseball season, I guess I get to bat cleanup today. I could say gonads. So I actually have sort of three hats today. As Scott mentioned, I am a vice chair of the National Center for APEC focused on its policy work. At Microsoft working on global trade and economic issues and like a few other souls that I see around the room, I'm one of those recovering trade negotiators and that's a hat that I don't ever seem to be able to take off. So let me tell you a little bit about the National Center. So we're 53 companies in the United States across a wide range of sectors and our mission really is to facilitate the private sector's involvement in APEC. As Scott mentioned, we provide a secretariat to the private sector for APEC issues throughout the year and support the three presidentially appointed advisory committee members who serve with the 20 other APEC economy representatives. We're always looking for more U.S. companies that wanna join. I don't get a commissioner or anything, but you're always welcome to join. So what I thought I'd do is maybe talk a little bit about sort of the business viewpoint and we've been very fortunate in the past number of years that one of our knowledge partners and a member of the National Center, PWC, has done a survey of CEOs and business leaders in the region to prepare for these annual CEO summits and I wanted to share with you some of the high level findings that PWC announced last year. I think they're pretty consistent with previous years and it gives you sort of a good sense of where the business community is on all of these issues because I know having taken a lot of our execs to these meetings, it's like, what does this really mean and is this gonna really affect my bottom line and this is a lot of fluffy stuff in a 15 page declaration. How does this actually affect business? So the PWC survey was pretty interesting last year in terms of saying that there was a lot of confidence in growth and that in fact there was a lot of emphasis on domestic consumption driven growth and more attention to middle income consumers and what that meant according to PWC is that the nature of investment in the region is changing. It's going from beyond just manufacturing capacity expansion to really looking at new products and investments, for example in services. So that was one finding. Second finding was that the partnership strategies of the companies seem to be changing. There's more of an interest in local partners. This is helping with the skills and talent gap and it's also helping more to capitalize on local middle income demand. So I said I work for Microsoft, obviously this is a really happy finding for us. There was an emphasis in the report about data and that data is at the heart of customer demand and business opportunity. And in fact they said that there are four market forces that are individually and collectively redefining customer demand and business opportunity. Mobile computing, cloud computing, social technology and the emergence of intelligent devices. And it pointed to work that needs to be done obviously in the area of data privacy, something that where APEC has already done a lot of work. And that a growing number of business leaders identify that the legal frameworks for cross border data flows is really becoming an emerging barrier for their companies to benefit more from the digital economy. So kind of music to our ears that's been an issue that a lot of the folks in the national center have been looking at. We for our part have looked at the importance of technology particularly for small and medium size enterprise. And there is a pretty strong correlation between those who have adopted technology and more open to technology have become more successful, more integrated as cloud computing becomes more pervasive, there's more opportunity for others to join the global value chain development. So the fourth area that they talked about was the need for further improvements in infrastructure in order for business to grow. Ed's mentioned this, there's been a lot of work pointed out on the need for more work on power supplies, dealing with clogged transit networks, lowering the cost of broadband and really putting an emphasis on public private sector infrastructure models. Again, one of the finding was that lifting regulatory barriers is really essential because we really need to reduce costs in this area. Another finding was that inconsistent regulatory and other standards are really a key blocker to business growth around the region. That different rules for products and services are really increasing complexity and the ability to scale in the region. And this brings in other disciplines for example, such as IP and corporate governance. So I think all of these findings are consistent with the work that the government is doing. The one thing I think that ties all of this together is that in the findings, the business leaders were asked about their view of trade negotiations and how this was going to help. And was it gonna help or the creation of blocks gonna create problems? And I think the finding was really that there is a lot of uncertainty, but it would be very important that no matter how all of these approaches are developed that they really have to look to business to make sure that they're not inadvertently adding new barriers. And Toshi and I had a good conversation yesterday about RCEP and our interests. And I'm pretty confident that Japan's gonna push for a very high value agreement in RCEP that is gonna help raise the gold standard with him and the lead. And I'm sure we'll get a really good agreement from that. We'll watch what he's doing. But in terms of the National Center for APEC, we actually have a lot of work programs and projects underway. And I really just wanna flag those for you. We are doing something on infrastructure investment. We did help create a checklist to really identify for governments the sort of essentials to help deal with making the public private sector investment infrastructure really a reality. It pointed to, for example, the need for creating a business friendly FDI environment. I think that goes to a lot of the issues that Ed raised. A lot of interagency coordination and really some country benchmarking. We have started at the National Center and should have for the meetings in China another contribution on the digital economy really focusing on cross-border data flows and really looking at how business takes advantage of cross-border data flows or should. And then it's really not just a technology issue that anybody who is competing in the global economy really needs to be able to have data cross borders. And then that gets you into a whole conversation about privacy, security, and how all of these issues fit together. Excuse me. We also have done quite a lot of work in the health area. This year we've spent some time looking at the costs and productivity losses that are caused by preventable health conditions. They're called NCDs or non-communicable diseases. This study is actually gonna be reviewed by leaders and there's also some work that's been done in the health sector as Ed mentioned with respect to the supply chain. We've done some work on finance. We have an Asia Pacific financial forum and really looking at integrated financial markets. So that's what we're doing as APEC. We obviously have been working very closely with the US government, as mentioned already, the Women's Empowerment and the Creation of Regional Entrepreneurial Networks. We obviously are very supportive of the expansion of the Information Technology Agreement. For many of you, you know that's pretty near and dear my own heart. The WTO says that for all the time that you leave the ITAN done, you basically are leaving $2 billion of GDP growth annually on the table. So that should be a good incentive to have a very meaningful and expansive and balanced I guess is the other buzzword. ITA concluded and I think APEC played a really important role in Manila in 1996 when we did the first ITA agreement and I think China has an opportunity to help show leadership so that the negotiators can go back to Geneva and put the deal back together. Ed mentioned the work on good regulatory practices. That is obviously something that the private sector here in the US has pushed very hard. There are a lot of disciplines that are already agreed to in the WTO which need to be expanded. We've had a lot of learnings from our own free trade agreements and the work there. So we think that that's been a really good exercise in consultation and development of the issues with the US government. Ed mentioned the goals with respect to supply chain connectivity and a lot of our members are front and center in promoting the trade facilitation agreement that we hope will come to fruition in the WTO and it's great to see that the government is working all of the angles to try and make sure that our partners in APEC are really ready to implement the trade facilitation agreement. We've also done a lot of work on food security partnerships. The mining ministerial is a good example of something where the private sector really pushed to have a discussion about mining and we were able to have the first ministerial meeting. There's obviously been a huge number of projects on the whole question of energy and energy security. And then the National Center and its membership are very engaged on what I would call the bread and butter issues, sort of the trade and investment issues. There was reference to the emerging problems on local content and it's not just data centers. It's if you want to be able to sell your product in a market, countries are going back to the notion that you have to actually establish a manufacturing facility. This is obviously since we're recovering trade negotiator is actually a problem because we did a lot in the WTO to reinforce the obligations that say that that's highly illegal. So we're gonna have to find a way to have a conversation, a more serious conversation in the region because it's becoming a problem that's becoming a problem for a lot of those APEC members who have attracted manufacturing and that they're not gonna be able to scale because there are demands for local manufacturing. So it's localization of data centers is one issue. There's this myth that people think that if you put a data center in country that it's gonna be a huge job creator. It's not, there are lots of economic reasons for looking at where to put data centers, not the least of which are some of the energy concerns that people have. Obviously there's gonna continue to be work on the free trade area of the Asia Pacific and work in studying APEC's contribution to that. And then as I mentioned before, the SMEs. So we're looking ahead to what we think will be a really good meeting in Beijing. Will it be as historic as 2001? There was a lot of activity about China's joining at WTO then and the run up to Doha and we'll have to see how the issues sort out. We're very excited and already working for next year with our friends in the Philippines to really see if we can't make an even bigger push on the private sector involvement throughout the APEC year as in the run up to the leaders meeting. NCAPEC's making its contributions and like I said, we're 53 strong. We'd love to be even stronger and if you have an interest in the National Center we'd be happy to talk to you. Thank you very much for the opportunity. Thank you Dorothy and thanks to all the panelists. What I'd like to do now is open the floor for questions. There are three simple rules for questioning. The first is when you recognize, wait for the microphone. As you recall from the opening remarks we have a large online audience and they won't hear a word you have to say until the microphone gets to you and it is turned on. So wait for the microphone. Second, start by stating your name and the organization you represent. And third, what I call the Alex Trebek rule please make sure your question is in the form of a question. No statements please. So with those let me start. Yes ma'am. Microphone will be here shortly there. Thank you. My name is Jane I'm from Tai Chi Media. My question is about China is pushing the FTAAP in the coming EPEC meeting or the feasibility study for the agreement. So from your perspective from the business, from Japan, from USTR's perspective how do you see the prospect of this agreement? And for Dr. Wang you mentioned about the enhancing construction of infrastructure and connectivity. Could you elaborate more about what does this mean? Thank you. Thank you. Thank you for your question. Officially I'll say you should direct that question to our press office but I'll give you a very brief answer on this. So I think this question was very much litigated by trade ministers at their meeting in Qingdao. There was no consensus at that time on the feasibility study proposal by China and nor was there a question on setting a deadline but there was a lot of support for APEC's contribution to the realization of an FTAAP and I think that's the way Dorothy framed it. APEC is a contributor. It does things like capacity building, information sharing on existing and ongoing RTAs and FTAs, it's done analysis in the past but what it's not is a negotiation body and I think our expectation is that APEC will remain as a contributor and that should be what happens actually at the leaders meeting. On the construction question in terms of connectivity blueprint, the key thing now to note is that as you know ADB studies have, study had indicated that just about $8 trillion worth of sort of demand for construction, infrastructure construction in the region in Asia. And our view is that in the final analysis, the private sector really will have to step in to invest into actually build the infrastructure whether it's power stations or railroads or ports, what not. So what we're doing within APEC, led by Australia by the way, is to actually create a pilot center, right now it's been created in Jakarta but we're trying to expand this to different areas where working with APEC as well is to provide essentially advice on a checklist for example on how to actually improve the investment environment in terms of being able to attract private sector investment. So there are certain kinds of regulations that block this, there are certain kinds of guarantees that are needed and so on and so forth. So essentially Australia for example is putting a finance ministry official in Jakarta to work with their people to look at their investment regulations. And we're hoping to do this again across the APEC economies among those who really need, want to have infrastructure investment. So that's what we're doing because public financing is not gonna be sufficient in the long term. You really need private sector to step in and the way to do it is improving the investment environment. I just would like to add a few words on APEC since you mentioned the Japanese business community. The Japan has a strong ownership on FTAB because the pathway to FTAB was agreed in 2010 in Yokohama leader's summit which set out how APEC should try or should help establish FTAB. As Ed said, APEC is contributor or as put in Yokohama declaration APEC is incubator for realizing FTAB. APEC is not a negotiation forum. We need to understand the clear distinction on that. But as you mentioned there is a debate whether we call analytical work feasibility study or not. I think what I want to emphasize is that all APEC economy, 21 economies are strongly united in the determination to realize FTAB. Thank you. Thank you. I would also note that FTAB has really been a, the free trade area of the Asia Pacific has been a commonly agreed political goal, I think as far back as the Sydney meeting in 2006, if I remember right, if Prime Minister Rudd were still here he could correct me. But so it's been a longstanding political goal. To my mind it's fully consistent with the Bogo goals in many ways and represents an important aspiration. How it's actually executed is yet to be determined as the panelists have said. But I do think it's important to recognize that and China's emphasis on FTAB is wholly consistent with the APEC leaders meetings at least to the past six or seven years. So thank you. Other questions? Yes, sir. Good morning. Thank you. Tenor Colonel Scott McDonald, United States Marine Corps Strategic Initiatives Group. Leading off that comments sir and stepping back towards our theme of Asian architecture. How do TPP and FTAB through APEC, how do we step back and use these structures in order to build an Asia Pacific that is more welcome both for trade and security for all partners in the Asia Pacific? In other words, we talked a lot about specific free trade initiatives which are all to the good. More freedom, more faster, is more better. But how do we make that into an architecture tool? Thank you. I'm happy to talk about what we're doing in APEC but I think for questions on TPP, please direct you to the press office. Thanks. I do have a general comment. I think just again, harking back, by the way, hi, we're served in Taiwan together, right? Yeah, I suddenly recognized you. Yeah, but anyway, I think generally, I can harking back to what Kevin Rudd, Prime Minister Rov was saying, the globalization part and then the ethno-nationalism part, I think the idea is that if you promote trade in whatever form, as you have more interaction, more trade, more interdependence and so on, that by itself is the architecture that essentially binds people together and reduces the ethno-nationalist sort of tendencies that sometimes occurs in the form of perhaps protectionism in trade. But that's, I think, the point. The point is to open the borders, trade with each other, have interdependence, and I think that will create the type of stability that we need in this region. Thanks. With the multiple paths toward FTAP, I think it's important for economies to recognize that their interests lie in fewer, not more solutions along the way. This is a point that Matt Goodman and I discussed at last year's conference. We published a short report on this, but making these agreements interoperable step by step is, I think, a real, a practical way forward that for me and Matt, as we looked at this, is strongly in the interest of the countries. A year ago, there was a lot of talk about whether RCEP and TPP were in conflict. And the point I made at the time the question came up was there are seven economies that are parties to both RCEP and TPP. It's strongly in those seven economies' interests to make sure that the requirements are as similar as possible. Their own industries want that, their own economic operators would find that to be appealing. Ultimately, that's the kind of the way you solve this. It's not necessarily a straight line. It's not all that direct. But step by step, you can get closer to integration by recognizing the underlying incentives. So thank you for the question. Yes, ma'am. Jane Nakano with CSIS Energy and National Security Program. Thank you so much for the great presentations. My question is a little more at the 30,000 feet level, but pretty much following up on what Dr. Wang said. So there is now the new development bank that's finally sort of signed off in July. And then now there's a proposal to have this Asia Infrastructure Development. I'd like to hear the panel sort of assessment or views on what are the key drivers behind these sort of an emergence of new potential architecture, economic architecture, and what that may do to the influence of the existing ones, not just the regional ones like ADB, but then also IMF, the World Bank. And lastly, well, I guess so including what their influence may be on the global sort of economic governance as we know it today. Thanks so much. Hi. Just quickly, I think the driver for all of that, the banks and you talked about AIIB and so on and so forth, I think the driver clearly is a demand in this case, let's say AIIB for infrastructure development in the region. I mean, there really is a need for that, especially in Southeast Asia, but in a lot of other parts of the region. So there's a need for it. And the main issue here that would be something of concern to the United States and to others is that when we actually have these multilateral development banks that we actually do have established standards and that we try to meet the standards in terms of, again, as I talked about this earlier, making sure we don't destroy the environment and when we go about sort of investing in infrastructure, making sure that it's a governance, there's no corruption, because construction industry generally has a number of issues in this area. And so we have to make sure it meets these standards of governance, transparency, environment, labor, and procurement and so on and so forth. That's basically our major concern. So I think as we move ahead with trying to build up different banks and whatnot to meet this huge demand in the region, we just need to have to keep this in mind. Thanks. Is there a question over here? I'm sorry, the sight lines are such that, yes, sir, you're right in the spotlight. Sorry. Hi, thanks. My name's Jimmy Tobine and I work for Alibaba. I have a question about when you design policies for trade, it strikes me that usually what that really means is it's a business to business policy, but business to consumer trade is growing. And I'm wondering if, you know, when you design policies, do you take, you know, that approach, do you look at it like that or is it just mostly, you know, think about it as business to business trade? Thanks. Look, I think just as a general response, let me start by saying the world's changing really fast and who's in international commerce and the scale of firms in international commerce is subject to very rapid change and that's being recognized by policy makers. You know, for instance, you know, 30 years ago, you needed a certain scale to be able to find consumers of your product or service. You needed to be able to establish operations and make contractual relationships with, say, freight forwarders or customs brokers or whatever it would be. You also needed to be able to back up and have the financing to carry off the agreement. You look at today's world and your business is a good example of this where an individual can go on a site like Alibaba or eBay and find a product or service that they just had no way of knowing where it was or how to get to it 10 or 20 years ago. I'm actually an eBay and Alibaba user because I've got a geriatric car in my garage that's very difficult to get parts for otherwise. So this kind of thing can be found when it couldn't be found before. Second, logistics firms are operating as small scale freight forwarders and customs brokers, UPS, Federal Express, FedEx Express, other companies, essentially provide a service that you used to have to create on your own as a firm or an industry. Third, relatively simple financing, electronic financing is vital important to the transaction and can now be done across borders. This changes the scale of operators in the international trading system. eBay's reported on this, the US ITC is reported on this. So it's a very important dimension and it really affects the way governments do consulting. But let me start with that and see if the panelists have anything to add. Let me just add something very quickly. The answer is yes, basically to your question because we had an internet economy actually session in Beijing just prior to Psalm three itself in August. And Alibaba was there and they gave a good presentation, Uber, others. And the idea is to look at the impact of internet on in terms of business to consumer, what Scott says, how that improves it, but also to look at the policy implications behind how do you facilitate that to allow SMEs and others to grow and to continue to facilitate trade between business and consumers? The one thing I would add to that in terms of our APEC initiatives, I think we usually do have a consumer in mind. It's not just about the business. I mean, supply chain for example, yes, many transactions happen between companies, but then to the day, we're trying to help businesses actually reduce their time to market to get product to consumers more quickly, more efficiently and more cheaply. So consumers and businesses, everybody benefits from the work we do on supply chain. And I think many of the other initiatives we have in APEC similarly, they're very expansive in that regard. So I think your question was, do you have policies to make sure that there's a program of consultation? So I can speak for the experience in the United States, where it's actually part of Congress's direction to the executive branch, as far back as the Trade Act of 74, where there is a pretty extensive network of advisory committees. And there is this idea of publishing notice and trying to get information from everywhere about the cost of taking a position. And it gets to, I think, what Ed was talking about in terms of the good regulatory practices. So in terms of developing a trade policy position, some of our best fights in the interagency back in the Stone Age when Giza and Charles were there was you sat down and you had different agencies that had responsibility for, let's say, consumer protection and some of the other issues to make sure that as you were putting a policy together, that it actually worked for everybody. And I mean, I think it's been, it was a pretty successful model that's gone through a couple of hiccups. But I think the code of this good regulatory practice makes it much more participatory and gives the opportunity to make sure that there is this better linkage between business and consumer. But I also think there's sort of a misunderstanding. I mean, a lot of the trade agreements don't tell you how a contract is to be written. So for example, in our business, there are a lot of things in terms of protections with respect to privacy and security. They don't really need to be written in a trade agreement but there are sort of contractual conditions that address some of the customer needs. And you set sort of a broad frame and then you let the business move ahead. So I hope that helps. Thank you. We have time for one more question if there's one. Yes, sir. Thank you. My name is Steve Hirsch. I'm a journalist who writes about Asia periodically. I wanna ask a question that I think is only tangentially related to APEC but I think is important to Asian architecture, the economic aspects of it. It's not a 30,000 foot question. One thing that I never hear discussed in Washington, discussions of the economic shape in Asia right now is the impact, perspective of ASEAN political and economic integration. And the reason I ask this is I just got back from seven weeks in Southeast Asia and the political and economic implications of this development are at the tip of everybody's tongue. Nobody is talking about the kinds of things we talk about here in Washington and Paris, trade negotiations and so forth. They're talking about the massive implications that they see happening. And I'm wondering if the panel has any thoughts on this. Thanks. Thank you for your question. As I mentioned in my first remarks, AEC, ASEAN Economic Community, Economic Integration of ASEAN is really influential and very relevant to U.S. business economies and so is for all Japanese business communities. And as you know, the Japanese companies has made a tons of investment, foreign direct investment in ASEAN countries for many, many years in the past. But these industries are largely manufacturing industries whereas U.S. business are investing in ASEAN in other areas such as service industries like ID, financial industries and distribution. I think the both industry and manufacturing and non-manufacturing are very important and influenced by the initiative of economic integrations. And AEC, Economic Integration has been progressed well for a reduction of tariff as I mentioned earlier. But when it comes to non-tariff barriers, there is a long way to go. They clearly recognize the need to do much more to reduce non-tariff barriers in ASEAN countries. And these issues are relatively more important for probably non-manufacturing industries, I would say. So I think the U.S., I think U.S. economy should and could pay more attention to the development of ASEAN because as I said, next year is a key period, key year because ASEAN will be considering beyond 2015 vision to move forward on ASEAN. I'm not quite sure whether I could answer to your question, but it's my remarks, thanks. That's a great first approximation, but thank you for taking the answer or having that answer. We're at an end here. And so before I thank the panel and you the audience for your attention, let me let you know what happens next. This is the conference equivalent of the fourth inning stretch. You now get to basically stretch your legs for about five minutes while we reset the stage up here and the next panel comes on. But before we do that, please join me in thanking our panelists for this morning's contribution. Will we convene in five minutes?