 very, very pleased that Senator Gartner is with us today. This is a real privilege to have you here, sir, and say thank you, especially for bringing your daughter, Allison, she doesn't normally get to Washington because she's in school, but her dad thought she could use a little civic education. I think your teachers will straighten it out when you get home. So we're on the cusp of a very important decision in the Congress, I rather suspect next week or maybe the week after, we're going to see the House of Representatives take on and pass trade promotion authority, which is that crucial step before we can adopt the Trans-Pacific Partnership. Very important development, important for Japan, important for the United States. I would say important for the world because what we're doing is establishing a norms-based system where rule of law, transparency, accountability, due process becomes the foundation for trade. And I think this is going to be a very important development. I'm sure that Senator Gartner is going to get into that a bit with us today. We're very grateful to have him with us. It's, I was just saying, one of the great benefits of democracies is that we have a way of bringing new leaders up, fresh new leaders for the country, and Senator Corey Gartner is one of those leaders and we're delighted that he's serving at this time. It's not an easy time and we're glad to have him in this service, also especially because he is the chairman of the Asia subcommittee in the Senate Foreign Relations Committee. I asked, I said, it's unusual for a freshman senator to be seeking on a foreign relations committee because it doesn't have as much content. And he said, wait, he said, all of Colorado looks west. Colorado is intensely interested in Asia. It's why he sought this committee and why it's important for him to be our keynote speaker today. So could I ask you with your applause to please welcome and thank Senator Corey Gartner for being with us. Well, thank you very much for the opportunity to be with you today and I wish you the best of luck throughout the remaining portions of your conference. It is an intriguing conference lineup and of course our daughter, Allison, I'm very excited that she is here with us today. As we were going over questions and talking about the speech, I reminded her, I wanted to make sure that you were here to see this so that you could be reminded that no matter how old you are, your homework never ends. I don't know that she appreciated that or not, but it is great to be here today and certainly honored to be among so many of the foremost experts to have this historic dialogue today and the historic transformation and the challenges to future progress of the Asia Pacific region. With crumbling governments, heightened military conflict and an advancing Islamic state, American policy makers and the American public have been focused on the Middle East for the better part of this century. There is no doubt that we face imminent challenges in that region, challenges that may take decades to get under control. But as war and division grip the Middle East, a great opportunity awaits us in the Asia Pacific. That opportunity begins with the most significant economic integration project of the modern era, the Trans-Pacific Partnership. The TPP leads us into a new era where we will need real leadership and commitment from the United States, our traditional partners and emerging allies as well as a rising China to unlock the true potential of the region. But in order to usher in a new era of prosperity in the Asia Pacific, there are numerous historic, economic and security challenges in the region that must also be addressed. As the title of this conference suggests, let me begin with Japan's experience. In the wake of World War II, the United States and Japan were able to accomplish what seemed impossible. Working together from a tragic past, we were able to transform two bitter enemies into two of the world's strongest allies. Burned out cities became bustling factory towns, a population that had been preoccupied with war, focused itself on the path to peace and prosperity. And we found that free people and allowed to dedicate themselves to the pursuit of a better life for themselves and their children can accomplish anything, that the power of prosperity and potential lies within all of us if given the right circumstances, the right to be free and the freedom to prosper. Unlocking this human potential was by no means preordained, but was the result of close cooperation between the United States and the long-term dedication of Japanese leaders to empower their citizens to achieve and innovate. The U.S.-Japan relationship has served as a pillar of stability and security in the Asia Pacific for over 60 years. In the 1980s, former Senate Majority Leader and later Ambassador to Japan, Mike Mansfield, would describe the U.S.-Japan relationship as the most important bilateral relationship in the world, bar none. Japan today is the world's third-largest economy, the fourth-largest trade partner for the United States, and our nations are leading the way to complete the TPP. This relationship is a tremendous example of the path from historical enmity to shared prosperity, common security, and indeed unlocked human potential. But not all nations in the region have dedicated their efforts to promoting freedom and regional prosperity. Just around 600 miles away lies North Korea, the most isolated and repressive regime in the world, a regime that is dedicated to fear and oppression, a regime that callously tosses aside human rights, starves millions of its people, and brutally murders anyone who voices dissent. North Korea not only shamefully ignores human rights and imposes barriers to economic prosperity, but also presents significant military challenges to the United States and our allies in the region. Much attention has been rightfully paid to the possibility that the belligerent state of Iran could obtain a nuclear weapon and further endanger some of our strongest allies in the world. Well, North Korea is already a state that has nuclear weapons and is endangering some of our strongest allies in the world. Some experts estimate that North Korea currently has 20 nuclear warheads and has the potential to possess as many as 100 warheads in the next five years. North Korea has consistently tested ballistic missiles while also expanding the size and sophistication of these missiles. The administration has dubbed their approach to North Korea strategic patience, but strategic patience with North Korea is and has been a strategic failure. I recently introduced a Senate resolution calling for stronger sanctions on North Korea, sanctions that target the regime's financial assets, condemn human rights abuses, and redesignate North Korea as a state sponsor of terror. Additionally, I'm drafting legislation to strengthen and more aggressively target our sanctions. Aside from working to cripple the Kim Jong-un regime, increasing these sanctions will send a strong message to the region. A message that makes clear that the U.S. will remain a force in the Asia Pacific. A message that strategic patience is giving way to strategic engagement with our allies. Unfortunately, the Obama administration has taken a wait and see approach to nations like North Korea, and while they have talked about increasing focus on the Asia Pacific, progress on that front has been slow. In 2011, President Obama announced the Asia pivot, subsequently termed the rebalance, prioritizing engagement in the region, and repositioning and reasserting U.S. leadership. In that speech to the Australian Parliament on November 17th, 2011, the President stated, I have therefore made a deliberate and strategic decision as a Pacific nation, the United States will play a larger and long-term role in shaping this region and its future by upholding core principles and in close partnership with our allies and friends. I know our partners around the world and around the region have enthusiastically welcomed this major realignment of U.S. policy. But four years later, our Asia rebalance has yielded few tangible results, and those of us who support the intent of the policy have been disappointed with this lack of results. The rebalance must be re-energized. I believe that a genuinely effective policy of strategic engagement in the region is one of determined action and consistent leadership, not one that shows up at the end of a presidency when legacy building is on the line, but one that is seamless from one presidency to the next, a permanent focus on the region. While I commend the President's leadership on TPP, his handling of the Asia pivot has not been reflective of presidential priorities. I intend to use my position as chairman of the East Asia and Pacific Subcommittee to bring action to a policy of strategic engagement that benefits the region and the United States. It's time to ensure appropriate resources are flowing to the region. In that same 2011 speech, the President stated, my guidance is clear. As we plan and budget for the future, we will allocate the resources necessary to maintain our strong military presence in this region. That remains an unfulfilled promise. Currently, only 4% of our assistance is spent, the foreign assistance is spent, in the East Asia and Pacific region. That's only 4%. That puts it dead last amongst all the bureaus at the State Department. And the United States spends a mere 1% of its total foreign military financing funds in the area covered by the U.S. Pacific Command. What kind of rebalance is that? Where's the evidence that this administration has allocated the resources necessary as the President has promised? It simply hasn't. Without a consistent focus on the growing economic and security challenges in the Asia-Pacific, this administration's Asia pivot appears to be nothing more than a head fake. How long do we have to wait until the Asia pivot turns from talking points to actual policy? This isn't a question of missing resources alone, but a question of misguided priorities, which sends the wrong message to our friends, allies and adversaries in the region. This administration and the next must conduct a comprehensive overhaul of its spending priorities to get this policy right. In March, I offered an amendment to the fiscal year 2016 budget resolution, which passed unanimously to provide an independent assessment of the administration's spending on the Asia rebalance. I've included similar language in the State Department Reauthorization Bill, which will be marked up later today by the Senate Foreign Relations Committee. And I've similarly worded amendment filed to the fiscal year 2016 National Defense Authorization Act. We must also enhance the capabilities of like-minded partners in the South China Sea region to build a new regional security architecture, particularly focused on maritime security. Last month, the Shangri-La Dialogue at Singapore, Secretary of Defense Ashton Carter announced a new initiative, a new initiative that would provide a boost in U.S. military assistance over the next five years to enhance maritime security efforts with Indonesia, Malaysia, the Philippines, Thailand and Vietnam. This effort is a welcome step, but alone is not enough. These initiatives cannot take place in a policy vacuum. Department of Defense efforts need to be more effectively wedded to efforts of other U.S. government agencies into a coherent and comprehensive strategy of assistance and engagement in the region. It is my hope that in my position on the Foreign Relations Committee that we can work cooperatively with our committees and the administration to bring about such a strategy. But as we consider the future of the Asia rebalance and U.S. engagement in the region, we must also address a rising China. As the President stated in that 2011 speech in Australia, the United States will continue our effort to build a cooperative relationship with China, all of our nations, Australia, the United States, all of our nations have a profound interest in the rise of a peaceful and prosperous China. But now more than ever, we need a renewed policy, a renewed policy focus with regard to China. There is no doubt that the rise of China over the last 30 years has been remarkable. China has lifted 500 million people from poverty since Premier Deng Xiaoping began his economic reforms in 1979 and is now the second largest economy in the world. But China's economy has recently shown signs of a slowdown and without the necessary structural reforms, this slowdown imperils not only the futures of 1.3 billion Chinese citizens, but also the region and indeed the entire global economy. Foremost, these reforms should include significant improvements to China's legal system, opening China's economy to foreign and private investment and altering the way China's state-owned enterprises are owned and operated. The upside of these reforms for China and the world can be enormous. But despite economic success, China is still a poor country by Western standards. As of the latest World Bank estimates, there are more people living in China on less than $2.50 a day than there are citizens of the United States. Bringing those citizens from poverty to Western standards has the potential to radically expand the region's middle class and create higher standards of living in China and beyond. To cause these changes, we need increasing economic engagement with China that brings international norms and transparency. We must continue the efforts to bring China into the global economic order that began with their historic entry into the World Trade Organization in 2001. That entry has demonstrated that international engagement and following the rules can enhance, rather than erode, China's standing abroad. The United States must also continue bilateral economic engagement with China that brings high levels of transparency and accountability. The U.S.-China Bilateral Investment Treaty, or BIT, that is currently being negotiated is an important step. The BIT, which is based on a model text the United States has negotiated with dozens of other nations around the world, will bring legal and economic standards that would allow U.S. companies to compete on a more level playing field and will open up the Chinese economy to additional investment opportunities. But we must also understand that our current economic engagement with China means ensuring that they participate fairly in our system. According to a 2013 report that was authored by Admiral Dennis Blair, the former U.S. commander of PAKOM and John Huntsman, the former ambassador to China, theft of U.S. intellectual property is estimated at over $300 billion annually, and China accounts for 50 to 80% of that amount. Beijing must understand that its behavior with regard to the massive and well-documented theft of intellectual property is unacceptable and antithetical to global prosperity and international norms. Finally, we must consistently work with our partners to offer viable alternatives that address the most pressing economic challenges in the region. When the United States is absent, others rush to fill the void. We cannot be surprised when China fills that void with policies and programs crafted from their own vision of what is beneficial for themselves in the region. China's establishment of the Asian Infrastructure and Investment Bank is the prime example. While on its face, the AIIB is a positive response to address infrastructure challenges in the region, it is also the clearest evidence yet that the U.S. has a serious credibility gap in the Asia Pacific region. Some of the strongest U.S. allies in the world, including the United Kingdom, Australia and South Korea, have indicated that they will join the AIIB, and we need to understand why. Do they view the AIIB as primarily an economic opportunity for their companies? Perhaps, but I would contend that the reason was the lack of leadership from the United States. The AIIB is envisioned as a $100 billion enterprise with China as the largest shareholder that will hold the veto power over major investment decisions. Its rules of governance and standards remain unclear. We should remember that the amount of a capital this institution is going to offer is smaller than existing multilateral institutions that have already been doing development work in the region for decades. Organizations, agencies like the World Bank, the Asian Development Bank, or amounts contributed by other regional leaders, such as Japan. The United States should have worked to strengthen these institutions or offer a viable alternative to promote additional development programs in the region that would have included China, but lessened the fears about the lack of adequate standards of transparency and governance. AIIB is a fact now, and it is my hope that the direct participation of our partners in the AIIB can be a positive influence in the way that the institution is run and managed in the future. China is at a crossroads. The pace of their growth has slowed and sustaining their prosperity is not possible without a change in course. Should they choose a path of cooperation and abiding by international norms, they will find a welcome partner in the United States. Defining that partnership may be challenging, but we do know some of the parameters that Beijing must first address. We know it doesn't include land reclamation activities and contested territories for military purposes. We know it doesn't include allowing rampant theft of intellectual property. And we know it doesn't include undertaking cyber activities aimed at undermining U.S. government and our private sector. While they are exercising their economic muscle in an effort to promote development, it is clear that China's recent activities in the East and South China Seas have been destabilizing and not befitting the great power that China strives to become. China's actions means that the United States must continue to work toward regional stability, including through enhanced security measures. This also means that consistent and assertive diplomatic engagement with China is important to reinforce that these actions fall outside of, is important to reinforce that these actions fall outside of accepted international diplomatic norms. These diplomatic opportunities must be pursued at all high level bilateral dialogues, like the U.S.-China Strategic and Economic Dialogue and in personal discussions between our nation's leaders. In September, President Obama and President Xi will have such an opportunity. In those discussions, President Obama must stress that the United States will not stand for destabilizing aggression, but is dedicated to securing regional economic prosperity. It is my sincere hope, however, that China pursues the path of adhering to rules, embracing peace, and supporting regional economic security. Peace and prosperity will take the combined effort of everyone in the region, including China, as well as our traditional allies who have incineraries of difficult history between them. We know that Japan and South Korea have an especially complex and painful history, but we need these two U.S. friends in the region to establish a viable path forward on overcoming this difficult past so that we may focus on building a better future. Our bilateral partnership with Japan has stood the test of time and tragedy, and our bilateral partnership with South Korea has endured through generations of shared challenges. Just imagine what we could accomplish with a strong trilateral relationship in the region and a strong trilateral alliance in the region. The United States, Japan, and South Korea united as one force for freedom and prosperity, a partnership that looks past adversarial history, one forged through sheer determination and will that liberty and peace in the region must rule. Bound by a commitment to the notion that tomorrow will indeed be brighter than today. Think of the standard that we could set not only for the Asia Pacific, but for the world. Such a partnership would enable a more effective security deterrent to known and emerging threats in the region. It would serve as a force multiplier for our shared economic goals and leadership in the region, such as the promotion of free trade under genuinely high level standards. And it would send a strong message to other powers in the region that great nations with the same values and principles speak with one voice. I'm encouraged that small steps are being taken in this direction. With the first meeting between the defense ministers of Japan and South Korea in four years. While the leaders of Japan and South Korea must take the final step, the United States should continue to encourage reconciliation and a close partnership. Ultimately, the key to unlocking the Asia Pacific's economic potential is to ensure that individual rights and basic freedoms are respected so that citizens of these nations are fully empowered to succeed. We witnessed this in Japan, which rose from the ashes of World War II by standing alongside the United States and enshrining individual freedoms, competition, and a democratic system of governance. That is the example that other nations in the region should look at, to realize its potential, its possibility to unlock the full potential of their citizens. Successfully concluding the Trans-Pacific Partnership is just the first step in this process. Working with Japan, South Korea, and other regional partners, we can ensure that U.S. policies strengthen existing friendships and build new partnerships that will be critical to the region's security and prosperity for generations to come. Opportunity awaits the world in the Asia Pacific. No nation can seize that opportunity alone, but our generation's cooperative leadership will secure it for the next generation. It's been an honor and a privilege to be here today. I look forward to taking some questions and thank you so much and look forward to hearing from you. Thank you. Thank you. Thank you very much, Senator. I'm Mike Green, Senior Vice President for Asia and Japan Chair here at CSIS, and I want to thank the Senator for joining us and for his very proactive leadership as chairman of the subcommittee. If you listen to what the Senator said, especially if you're not from Washington, I hope you'll appreciate that the debate about Asia is not a debate about the importance of the region or the direction we should go, but rather whether we're doing enough. And Senator Garner and his colleagues have really spotlighted areas where, in terms of engagement resources, we can and should be doing more. And for those of us who work on Asia, that's incredibly important and appreciated. We are going to have a few minutes for questions. I'll ask you to raise your hands. We're particularly interested in questions from students from Colorado if there are any in the audience today. But let me first ask the Senator, the rumor is that TPA could pass in the House this week, but if you read the front page of the Wall Street Journal or the Washington Post or Politico, you get the feeling that the consensus for free trade is completely collapsing. So could you give us briefly a sense of the dynamics of international trade politics in the Congress right now? It's about as clear as mud from the outside so maybe you can help us understand it. Well, thank you, it's a great question. And I think I was discussing with some participants this morning to the conference who expressed their optimism that this was very, very close to happening and somebody else said, no, I'd only give it one vary. So very close to happening. So look, Congress remains very supportive of free trade and this notion that there has been a collapse of free trade importance I think is mistaken. I think there's also a mistaken, well there is a disappointing response to some who wish to blame the administration for past grievances they may have that have nothing to do with trade promotion authority and they are using those grievances to taint their vote on TPA. So I think we're overcoming those objections. We're gathering obviously great support, tremendous bipartisan support in the Senate and now with later this week eyes on the house of representatives to see what we can accomplish there where I do believe we have a bipartisan coalition who has coalesced with the votes to support trade promotion authority. But again, I think this has been a mass undertaking with people throughout the country expressing their desire to move forward on TPA which will lead to a successful trans-Pacific partnership. Make no mistake about it, this morning when we talked about the generational opportunity that trans-Pacific partnership represents, it can only happen with the passage of TPA and I believe that members of both sides of the aisle, the House, the Senate, Republicans, Democrats understand the importance of doing this, getting this right and that we will indeed have a successful passage soon. Very good, thank you, important. So please, I think we have time for one or two questions before the Senator has to go back and get to work on the topic he just addressed. Yes, sir. Thank you, my name is Frank Barone and I'm a previous resident of Boulder, Colorado. Very good. So I am one of your voters from many years in your career. I'd like to thank you, I currently live here in Arlington and I'm a private individual investor in the energy area. So I work quite a bit with Congressman Upton's committees on energy and commerce. What role do you see for gas and oil and energy from the United States, Colorado as well, with respect to supporting the trade with Japan? If I understood the question right, it's what role does energy play with the United States and Japan in terms of trade and markets. When I, this great privilege of serving as chairman of the East Asia Committee, subcommittee, one of the first comments that anyone makes coming into my office, no matter where they are from, is about energy and in regards to our ability to provide U.S. energy opportunities to the world, including Japan, that would provide a stable, affordable source of energy. In the House of Representatives last year, I carried HR6, which was the built expedite, the LNG permit process. I am a co-sponsor of this year's efforts led by Senator Barrasso to expedite the permitting of liquefied natural gas exports. This is an opportunity that we have to give our allies around the globe the ability to rely on abundant energy from the United States instead of dictators and tyrants who are tying their hands right now with exorbitant contracts and cutting off their energy supplies at an economic whim or, excuse me, political whim. And so by continued U.S. energy production, by assuring that we have the policies in place necessary to allow this trade to occur, not only will this strengthen the U.S.-Japan economic relationship, help the region in a security standpoint, but help East Europe, Asia, and our allies right now who are facing the brunt of these energy politics in Ukraine and beyond. There's a Coloradan right here. Is that right? I didn't know that. Senator, it's good to have you here. What are we doing in the Congress to see that this fracking can be successful so that we have a better supply of oil and gas in our country and also for export? You know, the entire energy debate over hydraulic fracturing has been a fascinating one. If you look at the votes from last year on HR6 out of the House Energy and Commerce Committee and also on the floor where it passed with a very strong bipartisan coalition. If you look and break down the vote, you will see members of Congress who come from states that have banned hydraulic fracturing or imposed moratoriums on hydraulic fracturing, and yet they voted for HR6, the bill that would expedite the permitting process for LNG exports. The reason they voted for the bill was because they understood the important role that it could play in security. The reason they acknowledged that we have enough to export is the tremendous advancements that we have had in developing our resources, which would not have occurred but for hydraulic fracturing and horizontal drilling combined. And so there's recognition by people who view energy security as a great diplomatic tool that it wouldn't be possible unless we had the ability to reach unconventional resource place, hydraulic fracturing, and horizontal drilling being the contributor to an abundant supply that allows us to export. Recent news also of the EPA report, the Environmental Protection Agency, put out a report in the past week that shows this can be done, hydraulic fracturing is performed safely and responsibly, I think was a significant step forward and hopefully we'll start peeling back some of the moratoriums in those states that have currently imposed them. Let me ask if I could, Senator, follow up question on your point about the Asia Infrastructure Investment Bank. You described it as a fact, it's going to happen. There is demand for infrastructure in Asia. How do we shape that institution so it doesn't undermine the age development bank or the oil bank, but allows us to, or allows China to play a role with all its resources in building up the infrastructure. Well, I think that the fact that you have an AIIB in the first place shows a credibility gap with the United States, the fact that we left a void or vacuum that China felt that it could fill. And because it has others joining, some of our closest allies joining, it shows that we needed to have stepped up our operations, our activities, our policies in a way that we simply did not. So it's fact and now we move forward, knowing that we have great allies who will be a part of an organization that will hopefully be able to bring some kind of international norms, standards, transparency and accountability to this organization. But it also is a cue for us to minimize the credibility gap, to step up our game when it comes to development, to step up our game when it comes to a partnering on infrastructure and other issues in the region so that we can continue to fulfill our commitment and show that we are in this for the long term, not just for the short term. I think that's a theme throughout your speech and your tenure in the committee and it's gonna be a big theme and challenge for the administration and then the next one. We have a good hand to play. We just have to play it, that's right, it sounds like. Well, Senator, thank you very much for opening the conference. Thanks for having me. Enjoy the day. We're going to let the senators party escape and turn to our first speaker from Japan and our partner in this CSIS JETRO annual conference. This is our 13th conference on U.S.-Japan cooperation and the emerging economic architecture in the East Asia and Pacific region. And we've worked with the leaders of JETRO all 13 years and I think this conference has become something of an institution in the Washington debate and discussion about America's role and is both a kind of a zeitgeist check of where we are in Washington and if we're aligned with some of our friends and partners in the region, but also a good way to get ideas and policy proposals and focus on areas where the U.S. could be doing more. So to give us an overview of the trends in Asia this year in terms of trade, diplomacy and economic development, as always we're turning to our top colleague from JETRO, Hiroyuki Ishige, the chairman and CEO of JETRO. He's been running the organization since 2011 after a long and distinguished career in the Ministry of Economic Trade and Industry. So Ishige-san please, we look forward to your presentation as always to help set the scene for us.