 And in that role, he played a very key role in the launching the rebalance idea from that the administration introduced in 2010-2011. And as we just heard from Congressman Forbes, the rebalance is going to continue through the next administration, so good work, Danny. So please join me in welcoming Assistant Secretary Danny Russell. Thank you. Good afternoon, everyone. Thank you very much, Murray, for the introduction. It's a pleasure as always to be back at CSIS. I see that my team negotiated hard and one for me that coveted after lunch speaking slot when everybody is gently slipping into a food coma. But luckily it's an interesting topic and I'll try to keep you awake. I see a lot of familiar faces here. I know that there's a lot of expertise in this audience and I know you've had sessions already this morning and just now from Congressman Forbes on the developments in the South China Sea on the ongoing legal issues. So I'll try to focus on the policy and leave some time for discussion at the end. I'm particularly sorry I won't be able to attend the simulation session where my predecessor and good friend Kurt Campbell is promoted to Secretary of State. Ernie, are you the one that tells him that it's only a simulation? Good luck with that. Let me start by laying out what I think is really the essential context here. The United States has always had interests in Asia and these interests have only grown stronger as our economies have become more closely interconnected and as our people have grown closer through travel and through the Internet. For the last seven decades we've worked with our allies and partners in the region to build shared prosperity and shared security. And in the last six and a half years in particular we've invested in building cooperative relations with every single country in the region. This is the rebalance. Now there are many types of investment that the world and Asia needs in order to grow. Investment in people, human capital first and foremost. Investment in business. Investment in infrastructure. And just as important investment in cooperative capital. Investment in the international law and the order, international order, that infrastructure that facilitates the interactions between countries. That advances regional economic integration and that helps states peacefully manage and settle disputes. The U.S. makes balanced investments in all of these areas. In the last one, the international rules-based system, this has been the essential but underappreciated underpinning of global growth over the last 70 years and that's especially true in Asia where so many economies have grown and continue to grow through international trade, especially through trade with the United States. And these Asian nations have achieved so much in recent decades in reducing poverty and raising living standards and creating opportunities for their people and the development of civil space and civil society. And they've done it through hard work, through cooperation with each other, through partnership with the U.S. and by jointly developing and operating within this rules-based system. And we're helping them to do even more. We're taking broad-based sustainable economic growth to a new level through the TPP, the Trans-Pacific Partnership. The TPP embraces a future that reaches beyond trade and investment to include high standards for environmental protection, for labor rights and so on. TPP's provisions will support a thriving, growing, entrepreneurial middle class that's able to connect with the world and do business through a free and open internet. And we're taking the security architecture to a new level by investing in regional institutions like the East Asia Summit and ASEAN, in addition, of course, to our long-standing commitments to work through global ones like the U.N. And these institutions uphold norms and tackle tough challenges. They can bring parties together to hash out disagreements or when bilateral negotiations and diplomacy don't succeed, help to have those disputes resolved in a peaceful, fair, impartial manner. And standing behind it and supporting these institutions remains our system of alliances and partnerships. This is the network that's helped to keep the peace in the region since the end of the World War and through a series of important agreements with key security partners over the last few years. We've refreshed and modernized them so that they will last for decades. We're taking environmental protection to a new level through our work on ocean preservation on combating climate change and its effects through programs like the Lower Mekong Initiative that help make economic growth environmentally sustainable. And as we pursue this broad and forward-looking agenda for the region, we've worked constructively with China a lot. Through dozens of high-level meetings, 20-sum-odd meetings by President Obama with the president or the premier of China, we've done a lot to gain mutual understanding. We've worked through the strategic and economic dialogue that was just held here in Washington last month. We have worked through an alphabet soup of other consultations and high-level exchanges. The net effect of all this has been to put a floor under the U.S.-China relationship, a foundation that can absorb stress, that could absorb tensions and withstand even a crisis. And in the last few years, I think this hard work has paid off through measurable progress in a range of cooperative efforts, whether it's on low-carbon policies or combating piracy at sea or stemming the Ebola crisis or supporting a better future for Afghanistan, coordination on North Korea, extension of visa validity and other business-friendly practices. There's a lot more there. But unfortunately, the situation in the South China Sea doesn't fit this cooperative pattern. Now, the U.S. is not a claimant, as you know. And I've said here at CSIS and elsewhere, these maritime and territorial disputes are not intrinsically a U.S.-China issue. The issue is between China and its neighbors. And ultimately, it's an issue of what kind of country, what kind of power will China become? But for any number of reasons, the competing claims and the problematic behavior in the South China Sea have emerged as a serious area of friction in the U.S.-China relationship. Let's take a step back and recall, as I'm sure you've discussed in the course of your conversations this morning, that there is a long history of competing assertions of sovereignty and jurisdiction in the South China Sea and even sharp, violent conflicts in 1974 and 1988. Look, there are no angels here. The occupation of land features in this contested space over the years looked a lot like squatter's rights. But that's something that in 2002, the claimants agreed to stop doing. In that year, all the claimants and the ASEAN states signed a declaration of conduct with China. In it and on other occasions, they've committed to exercise self-restraint in the conduct of activities that would complicate or escalate disputes and affect peace and stability, including, among others, refraining from inhabiting the presently uninhabited features and to handle their differences in a constructive manner. That's the declaration of conduct. And in that, they also committed to negotiate a code of conduct that would lay out and would lock in responsible behavior in the maritime area. But in the ensuing 13 years, work on the code has stalled, and the declaration hasn't been sufficient to prevent confrontations or to help the claimants resolve these disputes peacefully. Recently, the level of concern in the region has escalated as the scale and the speed of China's reclamation work has become public. The chairman's statement at the ASEAN leader's summit in April was unusually blunt. It spoke of serious concern about land reclamation being undertaken in the South China Sea, which has eroded trust and confidence and may undermine peace, security, and stability. For ASEAN, trust me, that's powerful stuff. And while China's statement on June 16 that it would stop reclamation soon was, I think, presumably intended to reassure, its actual effect was, in fact, alarming, since the statement went on to say that China would construct military facilities on these reclaimed outposts. So we're pushing the parties to revive the spirit of cooperation embodied in the 2002 declaration. We see broad consensus within ASEAN on a path forward to reduce tension and promote peaceful handling of the disputes. And we support ASEAN's efforts to expeditiously conclude an effective, a rigorous code of conduct that builds on the declaration by translating its cooperative spirit into specific and practical do's and don'ts. But to make this happen, the parties need to create room for the diplomacy. Now, in the famous words of Rich Armitage's dictum number one, when you find yourself in a hole, stop digging. Rule number one. And that is precisely the advice that we're giving to the claimants. Lower the temperature. Create breathing room by stopping land reclamation on South China Sea features. Stopping construction of new facilities. Stopping militarization of existing facilities. These are steps that the parties could commit to immediately. Steps that would cost them nothing. Steps that would significantly reduce tension, reduce risk. Steps that would open the door to an eventual resolution of the disputes. Secretary Kerry has made this point directly to Chinese leaders, to the foreign ministers of all the claimant states. And he'll be meeting all the counterparts early next month in Malaysia at the ASEAN Regional Forum, the ARF. And he'll push for progress. This is an important priority. Now, steps to exercise restraint through a moratorium and through a code of conduct will create the diplomatic space and help keep the peace. But they won't address the question of maritime boundaries or sovereignty over land features. So what's the way forward? Well, when it comes to competing claims, two of the main peaceful paths available to claimants, as we know, are negotiations or arbitration. And countries in the region, in fact, have resolved maritime and territorial disputes peacefully and cooperatively, both through direct negotiations and through third-party dispute settlement mechanisms. Just a few examples. Indonesia and the Philippines recently agreed on a maritime boundary. Malaysia and Singapore used international court and tribunal proceedings to resolve differences concerning the Singapore Straits. The international tribunal of the law of the sea delimited the maritime boundary between Bangladesh and Burma. Hey, it can be done. And there's a common thread that runs through the maritime boundary disputes that have been resolved peacefully. The parties asserted maritime claims, their own claims vigorously. But they asserted their claims based on land features. And the parties were prepared to resolve the disputes in accordance with international law. And this is why we've consistently called on all claimants to clarify the scope of their claims in the South China Sea in accordance with international laws reflected in the 1982 law of the sea convention. Doing so would narrow the differences and offer the basis for negotiations and cooperative solutions. Regrettably, I don't know anybody in the region who believes that a negotiated settlement between China and the other claimants is attainable in the current atmosphere. In addition, the multiple competing claims in some parts of the South China Sea make negotiations that much more difficult. And on top of that is the absolutist political position taken by some claimants who insist that their own claims are indisputable, that they represent territory, however distant from their shores, that was entrusted to them by their ancestors and who vowed never to relinquish even a single inch. Where does that leave us? Well, what about arbitration? As this audience sounds very well, there's currently an arbitration case pending under the law of the sea convention between the Philippines and China. At the heart of the case is the question of the so-called nine dashed line. And whether that line has a legal basis under the international law of the sea, it also asks what maritime entitlements, if any, are generated by the features that China occupies. In other words, regardless of whose jurisdiction it falls under, let's say, would Mischief Reef, for example, be entitled to a 12 nautical mile territorial sea? Would it be entitled to a 200 nautical mile exclusive economic zone, a continental shelf? Those are the questions that the tribunals have been asked to consider. Now, it's really important to note that the tribunal is not being asked, and in fact, isn't authorized to rule on the question of sovereignty over disputed land features. Everyone, every lawyer understands that the issue of sovereignty is beyond the tribunal's jurisdiction. Claimants would need to agree to bring the underlying sovereignty dispute before a court or a tribunal, typically the ICJ, the International Court of Justice. But under the law of the sea convention, the tribunal is authorized to first determine whether it has jurisdiction under the convention over any of the Philippines' claims in the case. And if it does, whether the Philippines' arguments have merit. Now, the United States, of course, is not a party to this arbitration. The United States, as a matter of global policy, does not take a position on the merits of the case. But when they became parties to the convention, both the Philippines and China agreed to its compulsory dispute settlement regime. And under this regime, the decision of the arbitral tribunal is legally binding on the parties to the dispute. It is a treaty. In keeping with the rule of law, both the Philippines and the PRC are obligated to abide by whatever decision may be rendered in the case, whether they like it or not. Now, China has argued that the tribunal lacks jurisdiction. And the tribunal, therefore, has specifically considered this issue in the just-concluded hearings in The Hague by looking very carefully at a position paper published by China. We'll see. But if the tribunal concludes that, in fact, it does have jurisdiction in the case, it will proceed to examine the merits, including potentially the question of the legality of the Chinese nine-dash line. Should it then rule that the nine-dash line is not consistent with un-close? And particularly if the tribunal ruled that the features cited in the case don't generate easy or continental shelf entitlements, suddenly the scope of the overlapping maritime claims and hopefully the points of friction would be radically reduced. But it's also important to remind ourselves that even in this outcome, the important sovereignty and boundary issues would remain unresolved. Now, I've talked a lot about un-close. This is as good a time as any to acknowledge, as my Chinese friends have frequently pointed out, that the U.S. hasn't exceeded to un-close, although accession has been supported by every Republican or Democratic administration since the convention was signed and sent to the Senate in 1994. It's supported by the U.S. military, by industry, by environmental groups, by other stakeholders, certainly by this administration. And for the U.S. to secure the benefits of accession, the Senate has to provide its advice and consent as I hope it ultimately will. But even as we encourage the parties to respect the treaty and to work for long-term solutions, we, the United States, are obligated to protect U.S. interests. And let me take a moment to examine what some of those interests are. Protecting unimpeded freedom of navigation and overflight and other lawful uses of the sea, including unimpeded commerce, by all parties, by all nations, not only by the U.S. Navy. Honoring our alliance and security commitments and retaining, bolstering the full confidence of our partners and of the region in the United States, aiding the development of effective regional institutions, including a unified ASEAN, promoting responsible marine environmental practices in a hugely important waterway, fostering China's peaceful rise in a manner that promotes economic growth and regional stability. And more generally, supporting an international order based on compliance with international law and the peaceful resolution of disputes without the threat or use of force. As a practical matter, in addition to our support for the principles such as the rule of law, we're taking steps to help all countries in the region cooperate on maritime issues. For example, we are investing very considerably in maritime domain awareness capabilities in the coastal states of the region because this allows countries, the littoral countries, to protect safety at sea, to respond to threats, including piracy, marine pollution, illegal trafficking. And importantly, maritime awareness also advances transparency. And that's in line with our call to all the claimants to be more open about their capabilities, about their actions and about their intentions at sea. The U.S. freedom of navigation operations are another element of our global policy to promote compliance with international law at sea. Our goal is to ensure that not only can the U.S. Navy or the U.S. Air Force exercise their navigational rights and freedoms, but that ships and planes from even the smallest countries are also able to enjoy those same rights without risk. The principles underlying unimpeded lawful commerce apply equally to vessels from countries around the globe and under international law, all countries, not just the U.S., enjoy the rights, the freedoms, the lawful uses of the sea, that our diplomacy and that the U.S. military's operations help protect. So for us, it's really not about the rocks and the shoals in the South China Sea or the resources in it or under it. It's about rules. It's about the kind of neighborhood that we all wanna live in. So we will continue to defend the rules, we'll continue to encourage others to abide by them, we'll encourage all countries to apply the principles of good neighborliness to avoid dangerous confrontations. And let me close by mentioning that we've got a host of cooperative initiatives that we're working on for the upcoming ASEAN meetings, both the ARF but also at APEC and the East Asia Summit, all aimed at advancing much more quickly and effectively, they're all able to make progress when tensions in the South China Sea recede. President Obama and Secretary Kerry have shown that they are not afraid to tackle the toughest challenges facing U.S. foreign policy and facing the world. We've seen that again and again. And we're energized here. This is, after all, the fourth quarter of the Obama administration. We're energized to find ways to do more in partnership with our allies, partnership with ASEAN, partnership with China. And for us, for the region, for China, finding a peaceful, lawful and responsible way forward on the South China Sea disputes is a prerequisite to achieving our longer-term, broader goals. So I'd like to make some space for Qs and As. I think this conference is very timely and I eagerly await instructions from my simulated Secretary of State, Kurt Campbell. Thank you very much. Assistant Secretary Russell, thank you very much for those very helpful remarks that sort of put into perspective a lot of our discussion here today. So Assistant Secretary Russell has kindly agreed to take some questions. Maybe we should let our professor have the first question. Thank you very much, Mr. Assistant Secretary. My name is Wuzhen from China. I have two questions if I could make. One is about U.S. policy towards the South China Sea issue. The second one is the land declamation as you just mentioned in your remarks. About the U.S. South China Sea policy, as we know, U.S. South China Sea policy is neutral stance. Do you think this policy is still available and workable from Chinese perspective? This policy is no longer policy of the United States. Actually, United States now is taking sides with other parties. If we look at the Philippine arbitration case, if we look at the second Thomas Shoe issue, if we look at the deployment of last year's oil rig in the sparrows areas. The second question is the land declamation. As I know, China went, you know, stopped construction work in those island reclamation islands. What would it be U.S. actions if China went follow the U.S. requirement as you just mentioned to stop construction works? And does the U.S. State Department share the same stance in this regard with the Pentagon? Thank you very much. Well, thank you very much, Professor Wu. I appreciate your contributions and your questions. And as you said, you don't have to imagine U.S. policy. It's right out here in the open. On the first issue of neutrality, I appreciate the opportunity to clear up what seems to be almost ineradicable misperception on the part of the Chinese. We are not neutral when it comes to adherence to international law. We will come down forcefully on the side of the rules. We take no position, however, on the underlying sovereignty claims. What does that mean? It means that our concern is with the behavior. We're concerned about how claimants make their claims. We strongly believe it should be consistent with international law, and that means based on land features. We also believe that and care about how countries prosecute their claims, how they advance their claims. That means the behavior that the states exercise to advance their interests, advance their territorial claims. And what we seek is peaceful and diplomatic engagement. What we object to is coercion or the threat let alone the use of force to advance the claim. So the area of our neutrality, so to speak, is when it comes to the merits of the underlying sovereignty claims. We don't take a position, and I would say we don't actually care whether land feature X belongs to country one or belongs to country two. In that respect, we're not working to the disadvantage of any of the claimants, and we have the supreme luxury of objectivity. What we do care about is the stability of the region, the universal principles of freedom of navigation, freedom of overflight, lawful, unimpeded commerce, et cetera. But and we also care passionately about the right of a state to make recourse to legitimate international mechanisms as a means of defending its interests or seeking justice or resolution of a problem and a dispute. You know, there's a famous line from Voltaire, I don't agree with the word you say, but I will defend to the death your right to say it. We don't take a position on a word in the deposition of the Philippines. We're not backing the Philippines against China in their case, but we are defending the right of the Philippines or any other signatory, any other party to the convention to lawfully exercise their rights under the convention, just as we support and recognize rights of other countries, including China, to utilize international mechanisms, including say, WTO dispute mechanisms, even to the detriment of the United States. That's not bias, that's fairness. You raise a very important second question, which is what if China agreed that in the interest of regional stability and harmony, it would enter into a reciprocal freeze, a moratorium where neither China nor Vietnam, the Philippines, Malaysia, any claimant construct, undertook large scale construction, upgrades, or certainly militarization. What would our reaction be, what would we do? I can think of few other steps that China could take. That would do more to create an atmosphere in the United States conducive to progress in the US-China relationship. I think that the concerns generated by the tensions and the disputes and the behavior in the South China Sea have raised real concerns and real questions in the minds of so many American citizens. These are questions that would be answered in a very reassuring and persuasive way. If China, in this sensitive area of the South China Sea exercised the forbearance, the generosity of spirit and the good strategic judgment, show restraint and created the space for and the time, both for a code of conduct, which I think we would all like to see completed before the end of this year, and a process that would lead to a resolution of the underlying disputes. Thank you, Mr. Assistant Secretary. I'm Ching-Yi Chan with Shanghai Media Group. Actually, just a few days ago, Admiral Swift actually joined a surveillance mission on board a P-8A Poseidon Plan. So is this, it seems as a move of escalating tension in the region. So is the US, as you mentioned, trying to lower the temperature in the South China Sea by having a commander to surveil the region. And also another issue, we know that President Obama just had a phone conversation with President Xi Jinping. And so what's the preparation right now for President Xi Jinping's very first state visit to the United States? And will there be any informal meeting between them? Thank you. Thank you. Well, I've worked at the White House and I've learned an important rule which is let the White House make news about the president. So I will neither reveal the content of the president's phone conversation with Xi Jinping, nor will I announce the plans for the logistics of the visit later this fall by President Xi. But I will say that the fact that President Obama is in regular touch by phone, through meetings, in capitals, on the margins of multilateral meetings directly with President Xi, with Premier Li Keqiang, is indicative of the importance that we place on good and open lines of communication. And I can also, as a veteran of so many of those meetings, personally attest to the fact that we engage both in the effort to expand the areas of our practical cooperation and to narrow the areas of our disagreement. That's hugely important. I think that one of the things in the readout from the call that you see is that it was prompted by the successful conclusion of the negotiations over a joint comprehensive plan of action with Iran. China was an active member of those negotiations and in implementation has further contributions to make. But at the same time, I know that President Obama has addressed directly to President Xi and to other senior Chinese officials, our deep concern about the situation in the South China Sea and the estrangement, the real tensions growing between China and so many of its neighbors. That serves nobody's interests, at least of all ours. We want to see China enjoy the kind of warm, healthy, stable relations with the countries of ASEAN and with the countries of Southeast Asia that we have. Now, as wise and as organized as the US government may be, don't attribute everything that everyone does to a single plan and certainly not a plan aimed at China. Admiral Swift has just taken over as the commander of US Naval Forces in the Pacific. He's on his first series of visits to allies and partner countries. For Admiral Swift to join a surveillance mission, a routine mission, a P-8 overflight, out of one of these capitals is on a mission unexceptional, unobjectionable, and not indicative of a policy initiative. It is, however, indicative of an important principle that we uphold, which is the principle of transparency. I'll put it very simply. Surveillance flights, good. Combat flights, bad. Transparency is one of the best medicines available to us. Understanding what's going on, seeing what's going on, this is important for all of us and we encourage and we share, frankly, what the information that we observe that we collect freely. That level of transparency is one attribute of the open region that we wanna live in and it's not only an open region, it's a peaceful region. The presence of the seventh fleet, the presence of the US military in the Western Pacific is to keep the peace. That is our goal and that is Admiral Swift's mission. Thank you. John Zan with CTI TV of Taiwan. Thank you, Mr. Secretary, for your eloquent statement of the US policy position on the South China Sea. On the land reclamation effort in the South China Sea, how do you address some of the Chinese argument that it is not the rules that the US is really cared about? It's who does it and the size and the speed with which to do it because they argue that other climates have been doing that for many years when the US remains silent. It is when China does it that the US began to voice opposition. Is there any truth to that? Thank you very much. Well, thanks for the question. The simple answer is that the combination of factors makes what the Chinese have done over the past 14 months unique. First is the sheer scale of the reclamation. We're talking about something on the order of 2,000 acres created in the Spratlys. It's a phenomenal scale. Second is the size, excuse me, the speed. Over two decades, Vietnam, arguably the Philippines slightly, Malaysia slightly reclaimed five acres here, 10 acres there over more than a decade, almost two decades. In just over one year, China has reclaimed 10 or 20, 30 times that, 2,000 acres in a year. This is an astonishing scale and astonishing speed. Third, capabilities. I won't pronounce on the military capabilities of the Philippines or Malaysia or Vietnam, but suffice it to say that they are dwarfed by China's ability to project military power. And fourth, I would say there is the distinction of intent. Like it or not, many countries in the region, many of China's neighbors, seem to harbor concerns about China's intentions. They look back and point to previous incidents, either of violence or of retaliation, including economic retaliation, and wonder what to expect. These are among the factors that, in the eyes of the region, certainly, and by extension in the eyes of the United States, constitute a qualitative difference between what the Southeast Asian claimants have done in the past and what China is currently doing now. All that said, we are not proposing a way forward that disadvantages China. As I've said now again and again, we don't take a position on the underlying claims. We're not saying that China may not, ultimately, have the superior claim to sovereignty over certain land features in the South China Sea in the Spratlys. But we instead argue that in the interest of peaceful resolution and risk avoidance, that all of the claimants, not only China, in light of the current situation, take a step back, put down the dredger, put down the construction shovel, and certainly put down the plan to militarize these outposts. Now, no amount of sand, no matter how high it's piled, will garner any sovereignty. These outposts don't benefit China's claims under international law. But the prospect that these artificial features might be used as platforms for military power projection, which the countries in the region clearly find so threatening, is an unsettling one. So the issue is the behavior. And we're arguing that the solution is restraint in the form of a moratorium by all of the parties, not only by China. So unfortunately, our time is up. But I'd like to please join me in thanking Assistant Secretary Russell for his time. And I'd like to thank the people of his side. Okay, we're back. And our next panel will look at the military balance and regional order in the context of the, of course, the South China Sea. I've got the honor to be working with a set of real professionals up here. Any of you who are alumni of the CSIS, South China Sea Conference, you've met some of these gentlemen before. Peter, I think this is your first year, right? Let me introduce my panel and then I'll ask them to make their comments 10 minutes each and then we'll dig into some questions. You can really stretch these guys out. They know what they're talking about. So save your hard questions for these guys. This is the one to hit them with. On my far left, Dr. Ian Story is a senior fellow at the Institute of Southeast Asian Studies from Singapore. He's worked on ASEAN relations in South China Sea, ASEAN's relations with China in particular, done a lot of work on the region and is a prolific writer on these issues. On my immediate left, my colleague Patrick Cronin, a CSIS alumni, he's senior advisor and senior director of the Asia Pacific Security Program at the Center for a New American Security or CNAS as it's known in town. And I think most of you know Patrick, he's had a long career in and out of the Asia policy leadership of the United States here in Washington. On my right is Dr. Renato Dicastro, friends call him Renee. He's a professor in the International Studies Department at De La Salle University in Manila and holds the Charles Liu Chi Kung professional chair in China studies. So from Manila, he watches China very closely. He was the US State Department ASEAN Research Fellow from the Philippines and Renee writes often for CSIS and our blog, Cogitasia and the Asia Maritime Transparency Initiative website. If you haven't seen that, I can't imagine anyone in this room wouldn't have seen the AMTI but please visit if you haven't. And our rookie for this panel or for the conference and the man who I think has traveled furthest to join us is a good friend and probably one of the most strategic thinkers in Canberra, Peter Jennings. He commenced as Australian Strategic Policy Institute or ASPE as we call it in the business, Executive Director in 2012. Since that time, I have to tell you that ASPE has really taken off as one of the premier think tanks and policy shops in Australia under Peter's very proactive leadership and it's a real treat to have him here to hear Australia's point of view on the issues that we've been talking about. I have no doubt that he'll knock on the door of strategy and hopefully Congressman Forbes people left somebody in the room to take notes. But let's start with Ian and you're on the clock. Thanks very much, Ernie. Good afternoon, everyone. It's a great pleasure to be here. I'd like to thank CSIS for inviting me over here. It's my third time at this conference and it's a great honor to be here. My marching orders today are to address the issue of the regional military and also the paramilitary balance between China and the countries of Southeast Asia and of course that's a very important topic given the ongoing militarization of this dispute. I simply put the gap between the military power of China and Southeast Asia over the past decade and a half has widened into a chasm. In the year 2000, China's defense budget was about $22 billion. Collectively the 10 ASEAN states weren't that far behind. They spent $19.6 billion. But fast forward to 2015 and according to SIPRI, China's defense budget had grown to $216 billion while ASEAN collectively spent $38.2 billion. In other words, China's defense spending was six times, is six times larger than Southeast Asia's. But China's defense budget not only dwarfs that of Southeast Asia but of all of Asia. China has the largest defense budget in the region. China's defense spending accounts for 52.6% of defense spending in Northeast Asia, Southeast Asia, and South Asia. And China spends more on defense than all the 23 countries in those three regions put together. As China's defense spending has risen, the PLA Navy has been a key beneficiary and of course that shouldn't surprise us since the end of the last decade, China's leaders have announced their determination to transform China into a global maritime power. In fact, the 2015 defense white paper which was just published a few months ago, calls for nothing short than a fundamental change in the national mindset away from a traditional focus on the land to one that emphasizes the seas and oceans. A recent spate of reports on the Chinese military has indicated that the PLA Navy continues to suffer from some important shortcomings, but overall has improved training, leadership, and operational efficiency. And while the aggregate size of the fleet has fallen, it has increased the capability of its platforms by commissioning larger and more sophisticated vessels. In short, the Chinese Navy is emerging or has emerged as Asia's largest and perhaps most capable Navy. We mustn't forget the Chinese Coast Guard which has become a very important component of Chinese military power. As tensions in the South and the East China Sea have risen over the past few years, China has used its Coast Guard as the lead agency to advance its territorial and jurisdictional claims and to respond to perceived provocations by the other claimants. We've also seen increasing cooperation between the Chinese Navy and the Chinese Coast Guard. This has been apparent in all the recent standoffs, including at Scarborough Shoal, Second Thomas Reef, the deployment of the drilling rig Hysy981 into Vietnam's EEZ last year, excuse me. Now, the expansion of the Chinese Coast Guard has been pretty rapid. They've added 50 ocean-going patrol boats since 2004 and most recently the new class of Coast Guard vessel displaces 10,000 tons. That's roughly equivalent to a destroyer. China's defense modernization program has equipped it with the assets it needs to advance, its claims in the South China Sea, the transformation of the seven features in the Spratlys that we've heard so much of today into artificial islands on which it is developing fairly extensive military and civilian infrastructure will enable China to station those assets on a permanent basis into the very heart of maritime Southeast Asia. Although China has claimed that the reclamations are primarily for civilian use, that has been met with a great deal of skepticism in the region, to say the least. And most countries, I think, view these reclamations as largely strategic in purpose. Once completed, the Chinese Navy and Coast Guard ships will be able to use these facilities to enforce Beijing's sovereignty and sovereign rights claims to living and non-living resources in the South China Sea. It'll also enable China to increase its maritime domain awareness. And given the construction of airstrips, it's possible or even likely that China may declare an air defense identification zone over parts of the Spratlys. Southeast Asian countries have also been raising their defense spending and buying some impressive new kit. They've equipped themselves with larger, longer range and better armed surface and subsurface vessels that have improved their power projection capabilities. However, by almost every measure, Southeast Asian military power is dwarfed by that of China's. I know it's problematic to look at aggregate figures because they don't take into account capabilities, but even looking at the aggregate figures, they're quite striking. China has 56 submarines, Southeast Asia has 15. China has 24 destroyers, Southeast Asia has none. China has 49 frigates, Southeast Asia has 35. Southeast Asian countries have no aircraft carriers. Also, you need to take into account that many of the vessels that are operated by Southeast Asian navies, especially those belonging to Burma, Indonesia, the Philippines and Thailand are largely obsolete. The reclamations, it seems to me, have triggered a debate in this country about what to do about Chinese assertiveness in the South China Sea, and even some people are calling for a fundamental review of US policy towards China. There's no similar debate been triggered in Southeast Asia. Although the reclamations have generated a good deal of concern in Southeast Asia, regional governments understand that a military response collectively and certainly not individually is largely out of the question given this chasm between the military capabilities of the two sides. Southeast Asian countries are largely committed to existing policies as the alternative seem unpalatable, unrealistic and even counterproductive. The ASEAN states remain committed to the conflict management process that's been going on for over two decades now that is implementing the DOC and negotiating a code of conduct, even though that process looks increasingly irrelevant to events on the water. 13 years after the DOC was signed, it has yet to be even partially implemented, and China's reclamations I would avert are wholly incompatible with the self-restraint clause in the DOC. Talk on a binding, comprehensive and effective code of conduct are ongoing, but progress has been imperceptible. The speculation all along has been that China has been dragging out these talks for as long as possible while expanding and consolidating its military and paramilitary presence within the nine dashed line, and I think the reclamations reinforced that view. Ironically, China's actions over the past two years have actually fostered a greater sense of unity within ASEAN. ASEAN, but, and yet ASEAN appears increasingly unable to influence China's behavior or to persuade it that a binding code of conduct is in everyone's interests. That being the case, the ASEAN members and particularly those that have conflicting claims with China continue to try and balance against China both internally by modernizing their armed forces to provide a modicum of deterrence and externally by supporting the U.S. military presence. But even as they support and facilitate that presence, Southeast Asian states worry about the future. If the United States adopts measures that challenge Chinese assertiveness in the South China Sea, that this could act as a catalyst for China-U.S. rivalry between the two countries, which will inevitably generate serious dilemmas for each and every one of those 10 countries. And on that cheerful note, ladies and gentlemen, I will finish. Thank you. Thank you very much, Ian. Patrick. Ernie, let me add my congratulations to another fantastic South China Sea conference. This is really a first-rate lineup you have and you continue to do the most impressive work on this. I agree with everything my colleague and friend, Dr. Ian Story, just said, let me try to say something slightly different from especially a U.S. perspective by re-emphasizing the fact that this is not primarily a military balance issue. That is to say the South China Sea tensions are intensifying. They are of great concern. There are important military issues and yet there's still not mostly a military issue likely to lead to crossing the threshold into military conflict. That's the good news. But it's worth reminding ourselves as Assistant Secretary Danny Russell reminded this audience just a few minutes ago that this from a U.S. perspective is really about the rules of order and the neighborhood that we want to continue to live in in a rising Asia-Pacific, Indo-Pacific, including in the South China Sea. In the driving force behind America's gradual rebalance to this region continues to be primarily economic. It's economic in the past in terms of the amazing climb of Asian economies that are leading Asia to become again the locus of the global economy for the first time since the 18th century. It's the growth right now in Asia. So if we look at the latest IMF 2015 projections by region, it's the Asia-Pacific that's growing the fastest. Sub-Saharan Africa is a distant second and the other is even more distant. And if we think about long-term forecasts, if we choose one of the more recent forecasts, PWC, for instance, one of the world's leading accounting firms talking about how this is likely to continue, as they think, through the mid-century, with increasing emphasis on Southeast Asia. So these may be the current trends right now. China's widened the gap on the defense spending, for instance, but if we think about what PWC says, mid-century Indonesia moving from ninth to the fourth largest economy, maybe at $42 trillion, $42 trillion. And it's incredible the opportunity that is out there. And that's just to pick one country. Vietnam, even in the short term, the doubling of the Vietnamese middle class from 2014 to just the end of this decade, as some projections have it. So there are huge opportunities economically here. Now, what is unsettling this bright future trajectory is the question of Chinese growing military modernization and increasing assertiveness, including moving away from the hide-and-buyed approach that we saw from a less capable China in previous decades. All of this is a reminder that China's military and non-military security capabilities are anxiety-causing. And Ian has just done a very good job of enumerating some of them. Let me try to embroider on a few of them for some more specific anxieties that I'm feeling about this region. I mean, China's research and development programs, as timing Chung has shown, among others, is a two-level game. On the one hand, they are churning out what he calls good enough platforms that are affordable and can flood the zone while they're also fueling and trying to perfect platforms, air and naval in particular, the best that can be stolen on the internet, to compete at the high end of capabilities. Now, whether they can move up to the next level of capability, big question. But they're looking at this two-level approach to their defense hardware and R&D. And I think that's an important addition to what we've already heard. The general capabilities are cost-effective as we think about their ballistic and cruise missile program. So Dennis Gormley and Andrew Erickson and others have talked at length in their book last year about this dimension of these anti-axis and aerodynamic capabilities, as we would refer to them here in Washington, that are allowing China to gain not just a military defense and threat against U.S. power projection in defense of our interests and allies and partners, but also a psychological gain that allows this salami slicing and the island building binge to make its nine-dash line claim a de facto reality, preempting international legal proceedings, perhaps, and gaining the upper hand on the region, even intimidating them into aligning with China's policy now. It's consistent with China's non-kinetic three warfare, of informational, legal, and psychological warfare. So it's not just physical, it's also psychological. This is very important when you think about what's being built on Mischief Reef and Fahri Cross Reef. I mean, Mischief Reef, 13 miles away from critical Philippine claims and people. And they're watching, there was a great article by Bloomberg just recently talking about how in Pagasa the Filipinos watching the lights 24-7 from the Chinese maritime engineers working to create facilities that could put at risk read bank resources or the second time a Yungan Shoal, the Sierra Madra, for instance. And this is a message that could be sent to Scarborough Reef as well, which is to say the Chinese were saying, we can build overnight on Scarborough. So if you wanna put planes and ships in Subic, we can build faster, and they can build faster. But that doesn't end the game. China is also realizing a very long-term strategy. This has not all happened in the last 10 years, and many have written about Admiral Lu Ha-Ching's dream of sea control in a blue-water navy. And we're starting to see a lot of these capabilities embroider on that vision. The PLA developments that include the rapid upgrading of the capability, the quality of the air and naval forces is very impressive, as well as with the Coast Guard forces as a recent Naval Intelligence report sort of amplified as well. At even lower costs of denying others access to the sea or maintaining control, centers on China's incredible development of contact, magnetic, acoustic, water pressure, remote control, and rocket-rising mines. These mines, as Andrew Erickson and others have written, can be carried on China's 30,000 or so fishing trawlers, 50,000 or so fishing craft. So the quality cannot be matched, as I think Dr. Storey was suggesting. It's very, very difficult. Even the nuclear capabilities that China's building have a psychological element of trying to render a feat the American umbrella and security reassurance to allies and partners. Now, reflecting on this military balance in the South China Sea and U.S. regional responses, smaller states in the region should indeed be vigilant about these trends. Diverse ASEAN members, not surprisingly, are showing various levels of anxiety in response to China's more assertive actions, including its island or base building projects. Surely most governments in Southeast Asia are concerned when Chinese officials claim, as we heard from Danny Russell, about protecting the indisputable claims of their ancestors. The United States' comprehensive rebalance to the Indo-Pacific will and should focus, though comprehensively, economically, politically, as much as the military dimensions of power. Nonetheless, it will include, as it focuses increasingly on Southeast Asia, on military presence and access. We should be there 365 days a year, as my friend Marvonot wrote recently. It'll focus on exercises and training, bilateral, multilateral, some with the Chinese, some without, and it'll focus on capacity building, as Danny Russell said, for maritime domain awareness, but also for assured access generally speaking. There's a long way to go. This is a long-term project, but the United States is right to be focused on working in this area at the request of allies and partners in the region. US military posture is aimed at preserving stability and underwriting the core principles. Again, the Danny Russell articulated, such as the rule of law, the peaceful resolution of disputes without resort to forced coercion. So while this is a regional contest over rules and behavior, there are undeniably important questions about military and power balances. For instance, what about the shifting strategic military and power balance between China and the United States? Is China destined to become, as I've heard some in this town tell me, to become so powerful in the United States so weak that China's rise and even China's bad behavior must be accommodated on the argument presumably that accommodating bad behavior will ensure that China behaves better in the future? I doubt so. I doubt this very much. Now the good news from my perspective is that no major country in this region wants conflict or seeking conflict or is spoiling for fight and that includes China. The bad news is that the United States tends to invest in certain instruments of power with a narrow focus on winning decisive battles at the expense of thinking about less kinetic competitions. Sometimes this is expressed as the Chinese playing Weiqi, we play chess. If we overlook China's long-term strategy to strengthen its position and thereby maneuver us into losing options, we will have focused too much on military technology to the exclusion of political, economic, human and psychological competition. Put differently, exquisite strategies can defeat exquisite military platforms and technology. This is why the United States must hew to a balanced approach of engaging, binding and hedging. This approach must be comprehensive beginning with a strong economic foundation with active diplomatic and political engagement. And I think we heard all of those things from Assistant Secretary Denny Russell just a while ago. A strong national military capability and ever stronger security cooperation with allies and partners, however, will remain necessary to undergird this larger strategic and political vision for a stable, prosperous, inclusive rules-based region. We must keep our eye on this larger balance of power. Thank you. Thank you, Patrick. That's very thoughtful. Before I ask Renee to start, could I ask you to turn the lights down in front of the screen so you can, that folks can see his PowerPoint. And ladies and gentlemen, I give you Renato de Castro. Good afternoon, ladies and gentlemen. It's a great pleasure and honor to be invited again to the fifth annual conference in the South China Sea. First time I got invited, I focused on a micro issue, the Scarborough Shoal in past, in 2012. Now I've been asked to talk about the larger picture, which is, of course, the strategic balance. But my take here is to look at the strategic balance in terms of how it affects a small power. A small power that is caught in what is becoming a big power game. A small power that's trying to prevent the occurrence of what the city has called the notion that the great powers, the big powers would have to do what they have to do. The small powers would simply have to accept their fate. So my take is looking at the strategic balance and how the Philippines is trying to basically survive. And what I perceive as a very fluid and potentially dangerous strategic balance. So just have to look at the South China Sea. We talk in terms of semi-enclosed. The South China Sea dispute has been there since, of course, the 1970s, but it's became relatively dormant. Until, of course, in the 21st century, you have, of course, you have the Code of Conduct, McSine, provided for a degree of normalcy. Until, of course, you have the dramatic change. 2008, China started to move away from its earlier strategy of delaying the resolution of dispute to, of course, actively resolving the dispute that, of course, according to China's terms and, of course, according to China's interests. Fact is, of course, aimed to deter small powers like the Philippines and Vietnam from consolidating their claims in the South China Sea. Of course, as the strategic balancer, the primary security guarantor of the Asian Pacific region, the United States had shown its interests as early, of course, as 2010, when then Secretary Hillary Clinton declared that the United States has vital interests in the South China Sea. And, of course, later strategic rebalancing to Asia. And, of course, Japan has also shown greater increase interests in the South China Sea, of course, in the light of what happened with Japan and China over to Sinkaku, Dayao Island. So you have now, of course, growing interests of the great powers that, of course, transformed the South China Sea not anymore as a simple territorial dispute between China and the claimant states into what my friend Bill would call the dangerous grounds or what Robert Kaplan would call the future of conflict. So it's not simply a case of a territorial dispute. It has become larger than a simple territorial dispute. And, of course, it has generated a strategic balance or strategic impasse where you have big powers basically confronting each other and the small powers caught in the middle, specifically, of course, the Philippines and Vietnam. So instead, of course, of confronting China, the Philippines, and to a certain degree, Vietnam has relied on a balancing technique. And a policy puts the small powers like the Philippines and Vietnam in the middle of what I called a very dangerous strategic balance. So my main focus, of course, is how the Philippines adjusts to this balance of power situation generated by the growing involvement or what I call a big power game and how a small power could possibly survive. So I'll just breeze through this. You have the involvement, of course, of China. China, of course, has a responsibility to heighten the tension or possibly desecrate or even, of course, resolve the tension once and for all. But, of course, that's China's responsibility as an emergent great power. Of course, since the 1990s, China's already indicated its goal, anti-access, already denial. From the take of the Philippines, it's not a simple issue of resources, of boundary delimitation. It has something to do with China's emergence. What will be the future of China's emergence? Will China remain as a status quo player or would be a game changer that will, of course, involve, basically, not only claiming the whole South China Sea, but having a control of the first island chain and pushing the United States Navy, probably as far as Hawaii. I'll just breeze through this. I will not have to discuss this. And, of course, we have the strategic rebalancing that was announced by President Obama. I'll just breeze through this. Everybody's aware of a strategic rebalancing focus, of course. And, of course, you have the growing involvement in Japan. While they observe the situation as early as 2010, 2009, then find it necessary, of course, to get involved with the South China Sea dispute. And, of course, there's also something to do with the strategic rebalancing to Asia. And, of course, Japan's active role right now of establishing and fostering strategic partnership with the two claimant states, Philippines and, of course, Vietnam. And I'll just have to breeze through this. So this is my concern. What's basically happening? Now, I'd call you have a balance, a classic situation of a balance of power situation or a strategic impasse in the South China Sea. Impasse, of course, is China's unable to exert its control over the South China Sea for two reasons. Number one, of course, land features are occupied by the claimant states. And more importantly, China is now taking into account the growing interests of the United States and, of course, Japan in the issue. Stability is maintained by smaller claimant states balancing role of relying on the big powers. And, to a certain degree, it has trapped China in its own security dilemma since it would have to take into account how the United States and Japan would have to respond to greater Chinese assertiveness and possibly even the use of force in the near future. Generates a very fluid situation where in any error or strategic miscalculation by any claimant state could trigger what Mao Tse-deung would call a single spark could start a ferry fire. Doesn't dissolve, of course, the balancing situation provides stability, but for how long? It doesn't resolve the dispute. In a way, we have a similar situation that what happened during the Cold War in Europe. You have, of course, NATO and Warsaw Pact facing each other for a couple of decades. So in the long run, but as the Chinese would look at it, you could not always maintain this strategic impasse or if Mao Tse-deung would call the strategic stalemate or the correlation of force would have to be broken. At a certain point, China might be forced to use force the same way as when China used force against Vietnam in 1979, when, of course, after Vietnam signed a alliance with the Soviet Union then. Of course, China's use of force against possible claimant states could trigger a spawn from the United States because what will be at stake would be the credibility of U.S. security guarantee, of course, especially force would be used against an American ally. On the other hand, this will be a temptation for China to test its anti-access area denial strategy. Similar, of course, I remember during the time of 1941 when the Japanese were thinking in terms of crippling U.S. military pressure, the notion then was to destroy the battle fleet at Pearl Harbor. Now the temptation is to look at the carrier battle groups and how could the missiles along the coast of China could be used to cripple American conventional military capability. So current situation about, say, created in pass, that might be the calm before the storm. So let me just look at how the Philippines is adjusting. Let me just read through. Of course, since 2010, President Kino has already indicated he would challenge China's expansive maritime expansion to South China Sea. Decided, of course, to shift the armed forces of the Philippines away from internal security to territorial defense to build up the capabilities of the armed forces of the Philippines in respect to maritime domain awareness and, of course, limited maritime introduction capability. Directive, of course, the armed forces of the Philippines to shift to the Modernization Act. Then, of course, the recent defense planning that would basically focus the armed forces of the Philippines simply on territorial defense. But, of course, the Philippines has indicated no way could we be able to engage China ahead on. We could only develop a limited capability that would force China to think twice, most twice, before it would have to use force against the Philippines. No way could we basically develop that capability in part with China. No amount of resources, as mentioned. The China's military budget, China's military capability, would the Philippines be able to be on par with China? So we would have to rely in terms of external balancing, relying on our strategic partner, of course, the ally, the United States. And, of course, this indicated by the signing last year of the Enhanced Defense Cooperation Agreement between the United States and China, the strong signal for China that it would have to take and account temporary U.S. military presence in the Philippines. And, of course, will strengthen the Philippines to solve two challenge China's expansive maritime claim to South China Sea, would provide establishment of forward of cooperating sites, security location, and selected areas in the Philippines. We could discuss it later. Sorry about it. Oops, it's kind of fast. And, of course, what's been mentioned earlier is the growing security relationship with Japan, which I could discuss later. Let me just proceed to the conclusion. Of course, maritime expansion second decade is 21st, has generated heightened tension in the South China Sea. The U.S. and Japan has shown interest in South China Sea dispute, deployed or enabled forces to balance China's maritime expansion. It's decade, of course, forced the Philippines to shift its attention from internal security to external defense. The Philippine goal is very modest. No way, again, could we face up to a major China challenge. We could only make China think twice if we'd have to use force or greater assertiveness. Even the Philippines cannot never be able to narrow the strategic gap. The Philippines has so closer security relations with its traditional strategic partner, the United States, and, of course, fostering security partnership with Japan. Showed, of course, interests in terms of providing security assistance, but the same thing we can discuss later, of course, importance of American security guarantee. How credible is American security guarantee to its allies, of course, face with China's maritime expansion in the South China Sea? Oops. Well, something happened. Okay, kind of fast. This is the last point. South China Sea dispute has become a classic case, a protracted conflict irresolution for the Philippines. This meant trying to prolong that impassive balancing that, hopefully, the situation, although it doesn't resolve the dispute, would last for quite some time. But there's a saying, nothing good lasts forever. Such policy, however, discounted possibility that the strategic impasse in the South China Sea might be the provincial calm before the storm. This brings us back to history, going back circa 1941, just before Pearl Harbor, when, of course, the Philippines was caught practically naked or unprepared when push comes to shove on December 7, 1941. So thank you very much, folks, for your attention. I look forward to your challenging questions later. Thank you, Renee. I actually gave you the 39 seconds from Dr. Roman earlier, so you made it with her help. Thank you very much for good comments. Peter, let's turn to you. What's the view from Canberra? And can I just ask the people on the video to tune up our conference picture, please? Just the CSIS slide, please. Peter, over to you. Ernie, thank you very much, and thanks for your kind invitation to be here. I happily claim the longest journey to get here is something just below a little, like, 30 hours. In fact, Canberra is so far away. It's currently about quarter to five tomorrow morning. So I come from the future, ladies and gentlemen. And the future is very dark indeed. I don't know if it's appropriate in my first such gathering to propose an amendment to something of a Washington Institute in the form of Richard Amatige's comment. If you're in a hole, stop digging. I think for this conference, the formulation should be if you're on a shoal, stop filling. And I promise them, my two jokes, ladies and gentlemen, for the next 10 minutes, I want to give you a realist strategist's perspective of what's going on in the South China Sea. And I start by saying that really, the problem we're dealing with here is not so much a problem of an international balance, but an absence of balance. A vacuum in which we see a competition of jumbled interests and capabilities. We're really the challenge for the international community is to try to decide how to moderate Chinese behavior when Beijing is the most motivated actor and other powers either lack the capacity or the degree of engagement to want to play a decisive role. And that leads me to my second point, which is to observe that the South China Sea is also a subset of, for almost every country in the region, a much bigger set of strategic issues at play with relations with China, which is of course true between the US and China as well. And so in some respect, I think what that means is that other countries are prepared to pull their punches when it comes to dealing with China on the South China Sea. Thus, China is in a pragmatic position to strengthen its position by continuing to test the limits of international tolerance for its island construction and other activities. And so far, the obvious conclusion must be that China has indeed been able to make these gains for little or no practical penalty. Now, I propose to spend some time talking through the various players and how I see their situation and I'll spend the least amount of time on China because they've had the most attention. But I do just quickly want to say that as I look at the construction and other manifestations of presence in the region, I see a strong element of opportunism in China's approach. Unlike a lot of maritime capability development that we see in China, where there are intense trials, long-term planning and disciplined introduction into service, what we have in the case of the South China Sea is a rather hasty and undisciplined race to create facts on the ground. In terms of the language which is used to explain those constructions, the arguments which I have heard around counter piracy and HADR lack credibility, counter piracy, because if there is a problem still in the region, it's hundreds of kilometers away to the Southwest. HADR, because the region which is most likely in need of disaster assistance will be the islands themselves. I'm so vulnerable, are they to regional weather patterns? Bonnie also mentioned at the beginning of the day, I think there was little in the way of long-term military utility to these islands in the event of conflict because they wouldn't last very long. So the most obvious strategic utility of construction is simply to assert Chinese presence in peacetime, because no country has the physical capacity or indeed the motivation to want to try to remove the Chinese presence. It's difficult to escape the conclusion that China's more assertive push in the region is motivated by a calculation that it can simply get away with it. Now, turning to other claimant states, well, there are many and the particularities of their claims make for unique factors, but I think there are some common points that need to be taken into account. First, at the moment there is a sense of affront at what is at times quite undisguised dismissal by China of the concerns of the smaller countries. Second, they all face to one extent or another an incapacity of the other claimant states to do anything about Chinese behavior. And thirdly, we see a broad turning to the United States in terms of military cooperation. The tendency of some claimants and non-claimants in the Southeast Asian states to want to get closer to the US as a result of a more assertive Chinese approach might lead people to think that in fact Beijing's policy is more counterproductive. Surely it has more interest in wanting to pursue good relations with ASEAN than it has to assert iron control over the rocks, the islets and the concrete platforms of the South China Sea. But in fact, I think Beijing calculates the opposite and its behavior demonstrates that, which is to say that it figures there is greater immediate value in asserting its control of the rocks. And that's because ASEAN does not look as though it's developing a capacity for concerted response to Chinese action at any time soon. Even if Vietnam and the Philippines and other countries develop closer defence relations with the US, it's not obvious that these ties will translate into effective responses at sea to Chinese claims. Why? Because it seems to me Washington will not want to create an impression in Manila or Hanoi that closer military ties automatically draws the US into more support for other parties' claims. So while it's true to say that China's position doesn't draw at friends, doesn't create friends in the region, it's also true that claimants states try not to alienate Beijing out of concern for damage to their broader relations. I wanted to spend a little bit of time talking about the role of non-claimant states to bring some other people into the equation. As a non-claimant state, for example, Singapore is attempting to use its leverage within ASEAN to encourage a more concerted response to dealing with China. Singapore also works hard to sustain an international focus on the region. One demonstration of this is the annual Shangri-La dialogue in Singapore, which I think very usefully forces senior people from around the region to come and publicly discuss these issues. So it's not accidental that Ash Carter's strong statement at the last dialogue was preceded by a P-8 flight to assert freedom of air access through the region. But the other thing the Shangri-La dialogue does is that it demonstrates the limits to the international community's response to the South China Sea. And so, for example, at the most recent conference, we saw quite a mismatch between two separate proposals put forward by the US and Japan. Proposals which talked about maritime security confidence building initiatives in the South China Sea, neither of which looked like they had been, in any way, tested with the other party before their announcement. So what are the prospects for more concerted action on the part of the international community? A broad assessment, I think, would be to counsel not raising undue expectations with regard to more effective responses. Within ASEAN, I think what we are seeing is a continued difficulty to coordinate a unified policy across the 10 countries, something which China is able to exploit by a very assertive brand of bilateral relationships within the ASEAN 10. I think we're also looking at a situation where Indonesia, typically a country which has led much in the way of ASEAN. Thinking on regional security is going through a very introspective phase. Singapore's position, I would suggest, is worth looking to because it's a bit of a lead indicator about where the region may well be heading in terms of its strategic thinking. And although Singapore is working very hard within ASEAN, a couple of things worth noting is the pace with which it's promoting a much closer defence relationship with the United States. And secondly, the conclusion just in the last few weeks of a comprehensive strategic partnership with my own country, Australia. In some, Singapore is quietly positioning for a world in which ASEAN centrality in regional security is not an effective policy instrument. Now I can tick through other players that would have an interest in wanting to play a more prominent or wanting to exercise an influence on South China Sea, India, the EU, Japan. In each case, I think we will see it's going to be exceptionally difficult for these countries to manage, to lead initiatives. Something which probably hasn't been mentioned much in your previous five meetings earlier is the five power defence arrangements which links Australia, New Zealand, Singapore, Malaysia, and the UK in what is in fact the only multilateral operational military relationship in Southeast Asia. But they're the countries of the five power defence arrangements really have little interest themselves in wanting to say or do things that will significantly change the position. In New Zealand, we have a studied almost effective neutrality between the US and China. In the UK, we have a country struggling to maintain a presence in FPDA at all. In Australia, we have a country which is certainly saying the right things about the importance of freedom of navigation, but which has so far been quite reluctant to assert that through the high profile passage of an aircraft or of an Australian naval vessel. We've spent a lot of time talking about the US, so I won't waste my last two minutes really engaging on that. So much as to say that where I think we're heading is there is a need to define a more coherent policy approach across the international community on the South China Sea. And in the spirit of making some suggestions about what that approach might be, I've got five ideas here that I want to put on the table to inform US and like-minded countries thinking about how to move forward from where we're at. The first suggestion is to say that I think the US needs to extract value from President Xi's proposed visit to the United States in September. We know, as is the case with past presidential level visits from China, the prime Chinese goal is going to put a very high priority on delivering a trouble-free visit, which is going to put a premium on the importance of a successfully managed relationship between the two countries. I think Washington should make clear to Beijing that success on this visit is going to require a substantial discussion on the stability of the South China Sea and a willingness to agree that the interests of the regional powers must be accommodated. I think the broad American approach should be no concessions without concessions, pointing to the need for an openly negotiated outcome. Second, I think the US needs to open avenues for dialogue with Asia Pacific countries and other parties with interests in the South China Sea. And that should be a broadly cast net, including those countries which have substantial trading interests that take ships and aircraft through that part of the world. A Washington summit of the friends of the South China Sea would help to sustain, would help to strengthen the consistency of government-to-government dialogue on the issue, just as the Shangri-La dialogue has done in Singapore. Thirdly, I think we need to have a discussion. Washington needs to have a discussion with like-minded around how to anticipate the responses that would be necessary to handle a Chinese announcement of an ADIZ across the South China Sea. I suspect China will hold back from doing that before President Xi's visit in September. But then after that time and after the US goes into sort of lockdown for your presidential campaign, it seems to me it's possible China might take this next step aimed at consolidating its control in the region. One thing that might be worth thinking about is it worth declaring the equivalent of an international ADIZ where ship and aircraft movements are pulled in a shared and openly available platform for situational awareness. That would effectively undercut any Chinese claim that it needed to operate its own ADIZ for operational reasons. Fourth, I'll skip over this one. It's really about a call to say, let's rethink our language. I don't get why we continue to make calls for greater transparency in Chinese policy statements. It's perfectly clear to me what China's doing in the South China Sea, as it is, I think, to pretty much everyone in this room. So why are we fooling ourselves that this is a vehicle to try to develop better activities? And finally, I think we need to see some pattern of greater degree of international coordination around sustaining military overflights and ship passages into disputed areas in the South China Sea. There are now two USP-8 overflights in the last two months that I know of. But I don't know that that's enough to sustain or to prove that there is sustained international interest in the region. In fact, the opposite's really true. If countries keep saying that they have an importance in strategic overflights and maritime access and they don't undertake those flights and access, it only serves to demonstrate that here is an opportunity that China can exploit. I'll finish there. Thank you very much. I'd like to thank all of our panelists. I get the audience ready to ask some questions. I'd like to use the prerogative of the chair to ask two questions of the panel. And you don't all need to answer it, but I'd be interested in your comments. The first is, I didn't hear anybody talk about the role of the ASEAN Defense Minister's Meeting Plus, the ADMM Plus. And we're talking about military, military outlook and regional structures. That was surprising to me. I was glad to hear the Shangri-La Dialogue mentioned, which I think is useful. But could you comment on whether you think the ADMM Plus within the context, perhaps, of the East Asia Summit is the nascent basis of an effective regional security structure, including for the South China Sea? And number two, could you comment on what you think the role, if any, of Europe is in the South China Sea? We haven't really talked. Peter, you touched on it, I guess. But I think we, I'd like to think about that out loud a bit, if we could. Anybody want to take a cut at either of those? Peter? Lenny, on ADMM Plus, its role, I think, is slow term and diplomatic rather than practical and immediate. But why not think of it as a vehicle to discuss a regional ADIS-ing? Okay, Pat. Thank you. Again, the US perspective would be that the East Asia Summit and the ADMM Plus are the right types of inclusive large institutions that we want to keep the top security issues on the agenda. And the South China Sea being the premier issue, these institutions need to be used, both to keep the dialogue going, but also to think through practical cooperation, as Peter just suggested on an ADIS-ing. Renee? Yes, sir. I was in the Berlin Conference on Asia Security last month. We had a chance to interact with a lot of German, foreign, and defense officials. Primary concern of Europe is that the strategic, US strategic rebalancing to Asia would, of course, divert US attention to Europe. And of course, in the case of Europe, they are now faced with a resurgent Russia. Of course, what happened in Ukraine, what happened in Crimea, they're concerned that the United States might focus all its attention and strategic efforts here in the region, which, of course, would leave Europe vulnerable to what they perceive as a revitalized Russian aggression. Just on the issue of Europe, over the last few years, I've had more and more visitors to my office in Singapore from Europeans who want to talk about the South China Sea, and my initial reaction was always, don't you guys have enough problems as it is without trying to get involved in this? But of course, the answer is, is that there is now a perhaps a bit, a rather late recognition within Europe that the rise of China has global implications, and not just regional implications. There's the huge volume of EU trade that goes through the South China Sea. And also there are concerns that if China is able to persuade or coerce its neighbors into accepting the historical basis of its claims, then that fundamentally undermines international law, and that has implications all over the world, including in Europe. What role can Europe play? I'm often asked this question by Europeans. I think a mediation role is simply out of the question. What Europe can do is at regional and international forums continue to stress the importance of freedom of navigation and upholding the principles of UNCLOS. I think that is pretty much all Europe can do at this point. Thank you for the succinct answers. Gentlemen right here at the head table. Steve Winters consultant. On this question of whether the military significance, if they're militarized of these artificial islands, we heard the argument earlier today also that since they're indefensible, maybe they aren't as significant as some people think. But on the other hand here at CSIS, we have Japanese Admiral Speak, and he laid out his triangle and thought it was very significant. I think it's interesting that in the dispute of the Senkakus, I hear from, again somebody here from a Japanese defense agency that these very small islands, which Japan is now stationing forces on, which are a lot closer to the Senkakus, are in their planning to defend the Senkakus militarily, extremely significant. And also there's just to round this up, there's the argument of Diego Garcia. I was in Diego Garcia how many times and people said, oh, it's totally indefensible. But look at the role that that base has played in the Gulf Wars. I mean, it's just unbelievable. So I just wonder if you also perceive another side to the possible military threat posed by this development. Thank you. Bonnie Glazer, Senior Advisor for Asia. So I have a question for the non-American participants on the panel. Although I know you're not speaking at all on behalf of your governments, I wonder if you could provide some perspectives from where you sit about how your governments view the U.S. role strategy in the region. You heard Assistant Secretary Russell's speech. I'm sure you all observe closely what the U.S. is doing and what the U.S. is not doing in its management of specifically the South China Sea. So if you put yourself in the shoes of officials, whether it's in Canberra or Manila and Ian, if you maybe could speak for Singapore or any of the Southeast Asian countries since you live out there, what do you hear from governments? How is the U.S. viewed in the region? My sense is that there's just a lot of concern about U.S. staying power, capability, and will. So what's the assessment of the rebalance from where you sit? Thanks. No relation to Patrick, by the way, as far as I know. Yes, no relation. Although we once worked at the same organization back in the days of telephone slips, and that got confusing sometimes. Thank you. My question, in a way, follows on the other side of what Bonnie was just raising. And that is, this issue of, I don't take for a minute that China doesn't view U.S. as credible well into the future. And so I think some of the questions we ask are rhetorical questions, but don't get us very far. I want to ask you, but I want to ask a question about the issue of coercion, a course of an aspect of Chinese power. So if you start with a position that China has important economic and political interests in the region, I'd like to press Mr. Jennings in particular to go a little further in talking about, should we be doing more, should we be studying more the actual calculations of China about its course of capability, for instance, the political fallout? Philippines is democracy, they can only go so far without real problems. Vietnam has a long history, they only can only get pressed so far without something happening, either at sea or politically. And things that I don't think China wants to happen. And so how, what good is that power if you're trying to extract oil off Vietnam's EEZ, if that's your interest, there's a whole lot of other things that are falling away. So thank you for making it more multi-dimensional, Mr. Jennings. Let's, who wants to start? Three good questions. Small islands, Renee? Oh. Or wherever you want to start, but I want to make sure all three questions. I want to address Bonnie's question regarding the looking perception regarding the United States. I'm not in government, but I've been asked by government officials to discuss about US foreign policy. So this is basically what I think are the concerns, number one, this is very apparent around 2011. When I gave a talk to a intergovernmental forum, the prospect of US decline. Of course, this was in 2011. Perception, of course, was the United States as a declining power, so what's basically the point? In challenging China, when you have basically the United States will have to push the line, the red line away from the first island chain possibly as far as Hawaii. So what's basically will be the point of relying on your US ally? It changed. I answered a question, they asked me the question and told them, when the first bomb was dropped at Pearl Harbor, the US economy was still suffering from a recession. Six months later, everything changed. That was, of course, 2011. Then, of course, the perennial question is, of course, the credibility of US security guarantee, especially in the case of the Philippines. I will not go further into that. It's, of course, an ocean apart from the security guarantee that's been provided to Japan. Then, of course, the third one, which is, of course, very logical. Philippine concern is basically very regional. The United States is superpower with other global concerns. The South China Sea is only one of the issues that the United States has, of course, looked into. It has other concerns, the Middle East, what's happening, of course, in Central America, so forth and so on. So these are basically the concerns of the Philippines when we have to deal with our superpower ally. All right, well, too, address Steve's question. Yes, I see the role of the islands as being useful to China, first and foremost, in peacetime situations, and there I can think of really three benefits that accrue over a period of time. The first is that peacetime presence will shape behavior. So, for example, we see already questions that your own military's asking about, well, do we fly within 12 nautical miles of these new features, regardless of what the legal situation is, that is an impact which is shaping US behavior. The second one is that it lifts the thresholds for action. So this now becomes a factor that we all have to take into account in thinking about, for example, do we conduct military exercises in the South China Sea? I attended a five-power defense arrangements exercise in the South China Sea in 1998. I'm not sure we'll see an FPD exercise there again because of the added impact of the greater Chinese presence. And then third, I think there is a deep, long-term Chinese interest in wanting to push American military forces as far back as it can from the mainland. A lot of that has to do with how they want to operate their submarines. And we could talk more about that out of session if you wanted to. Bonnie, I'm not going to presume to reflect on my own government's views about these things, but one thing I will say sitting at the Australian Strategic Policy Institute is we hear a lot of concern from people in the region who want to come and talk to us, take the temperature of the US and our various alliance relationships. It's hard for the US to win in that part of the world. With some ASEAN countries, you're never, ever quite going to get the baby bear porridge exactly the right temperature as far as they're concerned. But there is certainly a sense of concern about what is the threshold of American interest to want to engage in the day-to-day diplomacy of the region. And then finally, Mr. Cronin asked about coercion. Yes, clearly, this has both an overt and sort of a below-the-surface impact in my own country. There is, the newspapers are filled daily with commentary about what we can and can't do with regard to our relations with China because of the depth of our economic dependence. And I will say this, we'll never get our new submarines if we don't have a healthy trade relationship with China. So the economic aspect of China's power more broadly, I think, is certainly shaping regional thinking. And that does need to be more actively offset by how the US presents itself and operates in the region. Gentlemen, the question over here from a gentleman over here. As I mentioned, I mean, I think these, you might be right, these reclamations, these man-made islands might be indefensible in time of war, but we're not in a time of war and I don't think any serious analyst is predicting a major conflict in the South China Sea anytime soon. So these islands will enable China to increase its presence in the South China Sea to advance its territorial and jurisdictional claims. One thing I didn't mention is that the station of Coast Guard vessels in this area, they'll be able to provide protection for Chinese fishing boats and also presumably for Chinese oil rigs and survey ships and that kind of thing. So I think there are enormous strategic value to China. As for Bonnie's question, I can't give you, there are 10 countries in Southeast Asia, 11 if you count Timo Leste and 10 different opinions. I don't speak on behalf of Singapore, but I think the Singapore government has been very clear and consistent over the past 20 years. It sees the role of the United States as indispensable in Asia as the indispensable balancing power. Singapore puts its money where its mouth is by facilitating that presence. 130 US ship visits a year. By 2017, 2018, there'll be up to four littoral combat ships forward deployed to Singapore and many other kinds of cooperation as well with the US. On the rebalance, I think that broadly speaking, most countries in the region support it. I think there was a good deal of sort of polite skepticism about the rebalance given America's financial problems and whether if a crisis happened in another part of the world, whether the US would shift its focus back to, well, we all know where the Middle East and to some extent that has happened. But I think as the, was it the Singapore foreign minister who spoke here very recently? I mean, he made it very clear that the central plank of the rebalance is the TPP. So get on with the TPP, pass it. And that, you know, the military, you already have a huge military presence in the region. TPP is the most important factor in the US rebalance. So please pass it. Well, Singapore has really rubbed off on that. Well done. We'll stick one more round. Let's start here. Michael Yehuda, Georgia Washington University. If I could have a dollar for every time an American official has called for end of coercion and for the observance of the rules of law, my bank balance would improve considerably. And it also strikes me that despite all these calls, China has on the whole persisted in ignoring all these requests, if you like. And normally, in a system where there's a rule of law, there's a cost that someone has to pay if it breaks the rules. Now, in what sense do you think, does anybody in the panel think that the United States can bring some costs to bear on China that Beijing would take into account in the sense of perhaps slowing down the way in which it has carried out its policy in the South China Sea? Because according to what the panelists have said, the expectation is that China's military capabilities will increase rapidly and significantly in the South China Sea. And so far, there seems to be no evidence of sufficient pressure that can restrain China. Excellent question. I've got the gentleman here. Good afternoon, Mike Smith from the British Embassy. Much of the debate today when looking at the levers of power has suggested that the competitive aspects of the China-U.S. relationship is not a zero sum game. But in the military sphere, when I read the strategic documentation, the Chinese version talks about seizing the initiative in the Pacific in the military sense. The American documentation talks about maintaining dominance. And to me, that feels much more zero sum than perhaps in some of the other aspects of business. My question is, how concerned should we all be at the ability of the United States to maintain the pace of transformation necessary to maintain dominance when compared with the ability for Beijing to do the same? Good question. And I want to try this young lady here in the back. Leanne Howard, Special Operations Command. Thank you all for your comments. My question goes to earlier comments on the development potentially of a U.S. long-term peacetime competitive strategy, or if we inch towards that. And then Dr. Cronin's comment on psychological and human operations and looking at more emphasis on that vice-kinetic in terms of not only our own planning but our own spending. And spending often leads to strategy. With that in mind, what are other nations in the region doing on this footing? Or are they doing anything on this footing in terms of the counterbalance in approaches? Thank you. Three really good ones. Let me go to the panel who wants to start. Ian, I think you're up first this time. You got anything? Dr. Cronin? And first of all, Professor Yehuda's comments about coercion and can we impose cost? The first reason U.S. officials and academics should be focused on talking about why coercion counters international law and the rules is simply to put out a positive vision. It's important for the United States not to be represented in the region as only unsettling the region, but actually having a positive vision. The second reason we have to talk about it, even if there's no change in Beijing, is to mobilize the region, is to mobilize other actors. Now, specifically on cost imposing, I will enumerate 10 new steps that the United States should undertake this Thursday at the House Foreign Affairs Committee. And when I talk about the policies that we can take, it's more of a menu than sort of an action plan. But there are lots of things we can do beyond the diplomatic and legal cost imposition to offset the ability of China to gain from coercion. So we ought to make sure that at a minimum, there is indeed no free lunch for the Chinese, no vacuum of power to which they just are given this pond. The important point about the South China Sea that I wanted to mention earlier is one that I disagree with my good colleague Robert Kaplan when he uses the Monroe Doctrine and the Caribbean as an analogy for the South China Sea. It goes so far, yes, it's relevant in the sense that China wants basically hegemony over the region the way the United States had hegemony over the Caribbean in the 1800s. But we're not in the 1800s, we're not in spheres of influence, we're hopefully in a more advanced sense of rule of law and a globalized interconnected economy. And as we heard earlier, the economies of the world depend on the South China Sea. It's not just the South China Sea littoral states. And this is documented on the Asian Maritime Transparency Initiative and many other places and Ernie knows as well. And also the economies of ASEAN themselves have far more impact on the global economy, regional economy and the potential for future economy than the Caribbean ever did. So for all those reasons it's a very different situation. Very briefly on this question about whether we can keep pace with transformation, the answer is it's a big challenge. We should be worried, we should be concerned at least. It is a major challenge and that's why people like the Secretary of Defense and the Deputy Secretary of Defense Bob Work, my former boss has been so focused on thinking about third offset strategies. Not just technologies though, not just concepts of operations but also strategically how do we basically move from a sea control kind of strategy to a sea denial? Much more cost effective. Now apply that to all domains. I think there are ways that we can prolong the ability for the United States to play a very effective role to reinforce rules and order through improving even though this is a huge challenge. You were just quickly on to Michael's question. Look, I think we've been frankly about 18 months to two years behind the play in having the right language to respond to the reality of Chinese activity in the region and partly that's because we've all, Australia included, allowed ourselves to be lulled into thinking that the old set of talking points was adequate but these were talking points about not taking positions on regard to sovereignty claims and wanting a sort of a set of legal processes to work their way through to finalization. I mean, I'm here to tell you that if we wait for the legal processes to be finalized, we'll be able to walk from Hainan Island to Darwin in terms of the actual physical activities that are taking place on the ground. So the need is to come up with a strategy and a language which acknowledges that there is direct strategic competition going on and that needs to be joined in some respects. To Mike of the High Commission, yeah, look, that's the $64,000 question but I think that ultimately one can take confidence in the nature of the US approach in the Asia Pacific region. There I'd say, compare the set of friends that the various countries have. There is a success to US soft power which is unparalleled and still I think gives a sense of optimism that the long term will work but in an increasingly competitive environment. And Leon's question about, so what are other countries doing? Well, what Australia tries to do is sort of a largeish kind of medium power is to build coalitions. That's essentially our effort in the region is to build closer associations with the countries of Asia and then North Asia in ways which create a shared stake in wanting to deliver particular outcomes. And I think that's the instinct behind the American approach and the British approach as well, frankly, in our different parts of the world. So yes, there is a strategy where it probably lacks a little at the moment is just not being sufficiently hard-edged or quick enough to be able to respond to the day-to-day events that we have to deal with. Thank you, Peter. And ladies and gentlemen, would you join me in thanking this great panel for their comments? Thank you.