o. that's going to be the basis on which we'll approach things. and i think on the issue of syria, which, jessica, i think you put your finger on, it is true that today you can see the strategy in iraq. by the way, it's kind of consistent with what i was just outlining. in syria, it becomes much more complicated. because yeah, you have to deal with isis, because they're the first things first. the idea that we can in any way partner with assad i think is beyond the pale because of what he's done. he's a war criminal. that's just a fact. this is not a case of they challenge our values.

it is a case that he's gone beyond anything that's acceptable. the question is, can you follow the path of what jessica was raising. is the fatigue and the sense of threat from isis enough to create some kind of convergence there. i don't know. the short answer is i don't know the answer. i'm a big believer -- this also goes back to one of the points that sam used to also raise. if there's one thing that guided sam more than anything else, it was that he said, don't fall in love with your own ideas. and if you think you're right, that's fine. but why don't you test your ideas? what do you lose if you test your ideas? the short answer is, you don't lose a lot. so i'd be quite open to testing certain things, but i also know that if it looks like -- we shouldn't assume necessarily that having the sunnis with us is a given if it looks like we're drawing too close to the iranians, which has clearly been

a sensitivity for the obama administration. if we want sunni tribes, by the way, not just in iraq but in syria, because, yes, you have a syrian opposition that is completely fractured, but it is still largely based on sunni tribes, to the extent to which they're going to be part of this. they also have to be integrated into this. if they're prepared to accept -- and i would test the proposition, if they're prepared to accept some kind of cease-fire, that would be one thing. i would note one thing about assad at this point -- assad seems to be going after isis as an opportunity to go after the syrian opposition that is not isis. he continues to do that. throughout this conflict he has been much more willing to drop barrel bombs on those who are not isis than those who are. he was willing to buy oil from those who were isis. while we think about this idea, i think we have to do it very

clear-eyed. that's again the point. whatever your idea is, be clear-eyed about it but also have a hedge built in. if you test this idea that you have, you better have a hedge and think about the consequences of if it's going to move us if the wrong direction as opposed to the right. that again gets back to the idea of policy planning. the essence of good policy planning is, as you make a decision, don't just think about the first order of consequence, the second order of consequence or the third order of consequence, think about where it is going to leave you over time. all right. let me say something about -- since it is now a quarter till -- let me say something about the israeli-palestinian issue. here i would say something, something else that would have guided sam. i can actually envision him saying this very clearly. when you have -- when you look at your options, don't create two polar opposites. don't put yourself in a position

where you're going to solve the problem or you're going to do nothing. because if you're going to solve the problem, if you can't solve the problem, you you're going to be left with doing nothing. if you do nothing in this part of the world, one thing we've seen is that you have vacuums and the vacuums invariably get filled and we know who fills the vacuums. they're all the worst forces. that applies also i think in terms of israeli-palestinian diplomacy. the choice we have cannot be if we can't solve the whole conflict right now, there's nothing to be done, we'll wash our hands of it. one thing we know that that will produce is a much worse situation which later on if we try to do something about it, the challenge to us, the test to us, the problem for us will be dramatically worse. in some ways i would say that's what happened in syria. we applied that principle of we're not going to put boots on the ground so there isn't much to be done an we've seen what's happened. i would say in diplomacy between

israelis and palestinians, you can see very much the same kind of implication when you do nothing, the vacuum gets filled. so where are we today. well, i would say that it would be really desirable to be able to solve the conflict. i see the prospect of solving the conflict right now to be pretty close to nil. i don't see -- >> i've been around analysts now for 15 years in this sort of environment but i've never been in this kind of experience before. for someone who can walk you into a new space intellectually and help you understand the significance of that space, and also its political importance. this is rare. i've been with politicians who, when explained the significance of something, will figure out the politics. you know? and i've been with analysts who understand the significance and don't have a clue how to think about it politically. you know?

but very, very rarely -- and the only other person, frankly, my experience who's like this, was bill clinton. bill clinton had that capacity to walk you into an intellectual place you've never been before and help you perceive its enormous significance and political import. and kevin rudd can do that brilliantly. when we asked him if he would come and join us today, it was an extra hope and we're very grateful that he was willing to do it. of course, the topic is something that he focuses on personally all the time. prime minister rudd is currently -- he's affiliated with csis. we're very proud of that. he's a distinguished statesman here at csis. he's also at harvard where they get more of his time than i wish. because i'm jealous. but he is willing to come here and has been very, very helpful

and supportive of us in thinking through these complex issues. he is going to give all of you that opportunity today because you're going to have a rich opportunity for something that's unique. so would you with your applause please welcome kevin rudd. and thank you. >> well, thank you, john, for that great exercise in expectation management. i will not produce magic this morning and there will be no song and dance show. but i do appreciate the hospitality of csis and i acknowledge the work which it does, not just on behalf of the united states but by all individuals around the world who take the disciplines of foreign policy, international relations and strategic policy seriously. it is a first class institute and it brings together first class minds which i presume is why all you folks are here this morning.

secondly, you made reference, john, to my time at the harvard kennedy school. after i came second in the national elections in australia last september, which is a polite way of saying that i lost, the harvard guys kind of picked up the telephone and asked me to go to the kennedy school to think. having been in politics for are 15 years, that's not really been my business for the last 15 years. but to think. and to think about alternative futures for u.s.-china relations. and in particular, whether in fact there is a way through some of what we who have professional followed this for many years regard as some of the intractables in that relationship. and harvard kennedy school's been very supportive of my work on that. i spent a lot of time talking to think tanks in washington, think tanks in beijing, think tanks in

tokyo, and think tanks in delhi and singapore and moscow on these questions, as well as officials from those governments as well. of course, given the topic that we've set this morning, which is about questions of future regional architecture, china does not constitute the totality of that picture, nor does the china-u.s. relationship constitute the totality of that picture. so in my remarks here this morning, having been invited to do this only two days ago, let me seek to stand back and look at the trends at work as i see them across the asia pacific region. secondly, what's going well. thirdly, what's not going so well. fourthly, where does the china-u.s. relationship fit within that for the future.

and some final remarks on questions of architecture. if you stand back and try and look at the events in the asia pacific region, we tend to think that we are unique in terms of factors which are affecting the global business of international relations. we are not unique. the factors at work in the international community in my view are largely comprised of two deep underlying forces which we in the policy making business or the policy advising business need to be conscious of. one is this overwhelming dynamic of what we call globalization. we use the term a lot. we often use it glibly, but the sheer manifestation of it in what we say and do everything today and perceive one another is profound. of course the general turbo charging of globalization as we define it by the new technolo technologies are simply

compounding and quadrupling and mutating, whether it is in financial markets or economic exchanges, or, frankly, in the resources available to terrorist organizations. so the verities we began talking about a decade or so ago are now actually intensifying in their scope. and the overall dynamics of globalization at the economic level and at the social level, and to some extent at the cultural level, has been over the last 20 years or so since the end of the cold war in particular to draw people's cultures, countries, nations, and even governments -- some are closer together -- simply as a product of the dynamic. this is a virtually unprecedented phenomenon in terms of its density and complexity. but overall, a force for the good. then pitched against it, of course, is a second set of forces which simultaneously acts

in reaction to it and seeks to pull nations apart, either internally or between one another. these i could broadly describe as the forces of ethno nationalism or simply nationalism. anyone who thinks that we have somehow mysteriously extinguished the forces of national itch as a consequence of rational economic man or woman ruling the world is deluding themselves. you have to understand politics in your own country to know that's not the case. but as you travel extensively across asia the nationalist agenda in each country is palpable, real, viz wsible and tangible and it actually thinks deeply the thinking of most political ideas. of course if you dig into that ethno nationalist reaction, whether it is what we see in europe, whether it is what we see in

various extreme forms if the new phenomenon we observe in the middle east or in some of the emerging and intensifying security challenges in east asia. ethno nationalism often is a deep reaction to the phenomenon of globalization and the deep personalizing dimensions of globalization. what actually happens in response to that is those who don't win from the globalization project economically or lose who lose their identity as a consequence of the globalization project obviously feel threatened, alienated and threatened, and they therefore congregate around concepts and ideas and political movements which are about identity, locality an ethnicity. it is pal basketba it is palpable and real. the challenge at present is to navigate the shoals between those two deep geoeconomic and

geopolitical forces and they animate the fundamentals of the what i describe as the technical foreign policy debates which we have on a day to day basis in the foreign policy community. secondly, when we turn to how this great drama of globalization on the one hand pulling countries and cultures together versus etno nationalism simultaneously tearing them apart, or threatening to tear them apart, the central question for the politics of europe and the politics of asia and the politics of the middle east is who will win the forces of globalization or the forces of etno nationalism. how this grand debate is resolved globally and regionally is a profound significance for the future of the 21st century. when we look at the european project up until now we can only be but in admiration of what they've achieved coming out of

the ashes of the second world war. mind you, and without get iting under the fence with europeans here today, they're slow learners. they finally concluded there are better ways of doing business. the political architecture of emerging europe, first the market, then the community, then the union, was very much a political construct seeking to deal with the underlying forces of ethno nationalism which have effectively destroyed the couldn't fent ovntinent over th time. come to our part of the world in the asia pacific region. in the period since the fall of saigon in 1975, really through until very recently, were you to look at a 35-year sweep, the globalization project in, let's call it the asian hemisphere, has proceed remarkably

successfully. we've had no major conflicts within the hemisphere. we have produced phenomenal economic growth. we have produced extraordinary increases in living standards. unparalleled in human history and the numbers of people that have been drawn out of poverty. as a consequence, a dynamism to the intraregional discourse within wider asia that we hadn't seen before either. those westerners looking on to the phenomenon called "asia," which is a european construct in itself when you think of the term, "asia," meaning the east. east of where? presumably london, paris or berlin. or rome. but if you look at what is unfolded in asia itself, it's the internal dynamics which have generated so much of the wealth, the prosperity and the success. and the external dynamics with the extra regional partners has also been important, particularly the relationship

with this country and its massive market, the united states. but the intraregional dynamics have been extraordinary to unfold and overwhelmingly positive. to the mutual benefit of all countries within the region. and that has been i think so much the story over the last 35 years. again, to simply sound the alarm, to conclude from that that the forces of nationalism and ethno nationalism or religious nationalism in certain cases have simply evaporated and died is simply a false analysis. the battle royale within the region and for its future will again center around how these two conflicting forces are contended with. forces of globalization. intensely drawing this region together and forces of nationalism seeking always to tear the region apart and sometimes tear nation states

apart. so the report prompts us to ask what is happening and it is a complex and variable picture across the region. we often forget the ancient lessons of international relations history that mutually agreed territorial boundaries help in the business of international relations. this is often seen to be an old concept of old realisms belonging to the verities of ancient international relations and a not really relevant to the borderless world of the 21st century, to which i would respond to the great observation of australian philosophy, pigs might fly. it is alive, it's well and it is a driving factor in the analysis of these questions to this very day in the asia pacific region. you know the fault lines within the region as well as i do. but if you go simply on a mental

map of the region, starting with the korean peninsula, dividing the state of where which existed still since 1953, through to the east china sea, and senkaku, and you look at the unresolved questions which still remain between china and korea and between japan and korea. if you look at the complexity of what constitutes the south china sea and all of the dimensions of the conflicting territorial claims involving seven different entities, before you then flip around and head through the straits of malacca on to the unresolved questions of india, pakistan and kashmir, and then further afield to what is now unfolding in terms of militant islamism not far to the northwest of there.

all of these factors exist not just in theory and on paper but are capable of in fact bringing about a conflagration at any given point through the normal politics and dine knicks of escalation which unfold as a result. so in the last three years or so seen these unresolved issues come more sharply to the service which brings me to my fourth point about how in fact this is to be dealt with in the future and whether or not the u.s.-china relationship is central to most of it. i know enough about the politics of southeast asia to know that the china-u.s. relationship is not central to everything. it is an important dynamic but what occurs in southeast asia is primarily conducted intraregionally. to any folks from the as ons

here today, i would simply commend the aseans on how they've managed their own regional evolution over the last 40 years. it's been an extraordinary development and i think a lesson to the wider region. when we then extend the map more broadly across east asia itself, it is very difficult to escape the central organizing dynamic of the china-u.s. relationship in its current state and where it may evolve in the future which is why i've taken a year out of the harvard kennedy school to look at it more closely. so let's look for a moment at its dynamics. if you were to take an objective measure about u.s. china relations over the laust 35 yeas since normalization in 1979, and look at ebbs and flows of that relationship since, on any objective analysis, if you arrive from the moon, you weyhx have to conclude the relationship isn't in a bad state. there is no immediate palpable

sense of crisis in any particular element of the relationship. however whub look at the perceptions which are emerging within both the chinese leadership an within parts of the american foreign policy establishment, it is much less settling than that. let me speak about the chinese perceptions first. the best i can describe china's current perceptions of the united states at the most senior leadership level is that they have concluded internally that it is virtually impossible to develop a long-term strategic relationship with the united states based on mutual trust, mutual strategic trust. and i believe that they articulate this in a number of ways. they articulate this by saying that they believe that the united states is in the business of isolating china.

the united states is in the business of containing china. the united states is in the business of diminishing china. the united states is in the business of delegitimizing china. the united states is in the business of ultimately seek iin binders to limit the chinese relationship. this is why they've asked for an australian to speak to you this morning. we've never majored in politeness. but i think at this stage of this very important relationship, china and the united states, it's important we have some very clear baseline reality checks about where things actually lie in china's perceptions. so let me flip the table in terms of american perceptions of china. i think this is very important, because the level of misperception is profound and i believe growing. i think the american perception

of china -- i don't seek to describe any official here. it is simply my observation to the general foreign policy establishment -- is that china, for the american and global interests is important economically, that the chinese political system, houf, is inherently unstable and unsustainable, and the american perception is that china is pursuing an assertive form of nationalism to mask its own internal political vulnerabilities and is seeking therefore to change the status quo across the rest of east asia over time. firstly, by means of the economy, to economically overwhelm the rest of asia, and then in time diplomatically, and then militarily. and furthermore, deep american perceptions which raise this question about whether chinese diplomacy is in fact simply pitted at buying time while the overall correlation of forces moves more profoundly in the

direction of one which economically and militarily advantages china before china more overtly and directly acts to exert its position of preeminence in the region. again, that's never said in polite society either because these things are not the business of day to day diplomacy. but if you get around think tank land a lot and you get around governments a lot you pick up generalizations with respect to certain capitals. i don't those generalizations represent wide departures from reality. of course, others seek to try and be objective about all this. anyone who claims to be perfectly objective is engaged in self-delusion as well. we all see reality through our own prisms whether we're conscious of that or not. we australians know different. the only advantage we australians have, i think, is

that at our best db which is not always the case -- we both the west and the east and the east in the west, that is we are long standing and deep allies of the united states for which we make absolutely no apology. at the same time, all the countries of east asia, including the people's republic of china, we've had a deep comprehensive, profound long-standing relationship. and if you look at public attitude surveys in australia, united states is very well liked. china is quite well liked. so there's actually a deep attitude basis to this in my country as well. we cannot continue to be objective because we're u.s. allies on one hand, but at the same time strong and close friends with counterparts in beijing on the other. what i've concluded about these

different sets of perceptions is that a large proportion of them, but not in their entirety, do not reflect the objective reality. to give one example in both directions. on the containment question, if we define containment as that which was used by the united states against the soviet union during the period of the cold war, what we see in terms of america's current operational policy toward the people's republic of china cannot be faintly described as containment. it has none of the characteristics of classic containment. that might be a useful political rhetorical line to be used in the debate, but in the days of containment there was virtually no economic engagement between america and the soviet union, and any soviet action anywhere in the strategic regions of the world of relevance to the united

states which is everywhere was met with an equal and opposite reaction in one form or another by overt or covert means. that is not the case in the u.s.-china relationship. it is of a vastly different character. and so we need a more textured understanding in beijing as to what the nature of u.s. operational policy is. but the term containment is not accurate, and in my judgment can lead to erroneous policy conclusions in beijing. now let me flip the tables again in terms of what i think is erroneous american perceptions of china. when china in its tradition and its current leadership constantly say, we, as a civilized nation, have never been in the business of establishing overseas colonies when we had the national capacity to do so, and therefore we have no such interest again in the future, other than to engage the world commercially, i

think that's about right. when you look at china's history from the ming dynasty to the present, so many of the animating forces in chinese history have been how to deal with its profound domestic agenda which have almost overwhelmed every successive generation of chinese leaders. how do you feed a quarter of humanity. how do you manage the politics of a quarter of humanity. how do you deal with its current manifestations in terms of the impact on air pollution, water quality, and the rest. my overall point, therefore, being that in the case of the perception that our chinese friends are in the business of incrementally seeking to create a form of chinese neocolonialism in parts of the world i think is profoundly wrong. it is not consistent with the tradition, it is not consistent with the characterization of

actual chinese behavior on the ground. so where do we go from here. i'll conclude on these remarks. given the centrality of this relationship, i believe both governments and the region more broadly because of the centrality of the relationship to the region's wider stability, and frankly, the rest of the world as well, as we move in to the unfolding decades of the you this century, the china-u.s. relationship is in deep need of a new narrative. a common narrative. and here i don't simply speak in terms of some form of foreign policy utopianism or some sort of academic seminar. that's not helpful. i think you need a framework which somehow, in some way responds to the idea xi jinping put forward with a great new type of power of relationship. i think why president xi put

that forward, it was how do you construct a relationship between china and the united states which doesn't replicate the inevitability of conflict as we've seen in the history of great powers before. beyond that, i think president xi's concept is basically a headline waiting to be popula d populated. it is an idea. it is a line. it is a sentence. but if you go to chinese think tank land, as i do very often, the actual internal content of this proposition is very fluid indeed. so what could a possible common narrative look like. well, this is a very complex question. but, i would leave you with two or three thoughts. a common narrative between china and the united states is important for the reasons i just mentioned. at present i think both countries have narratives about each other but not a common narrative for both of them. chinese have many narratives

about the united states, most of them not publicly articulated, and the same in the reverse direction. so what, given all of that, is possible in terms of a common narrative for the future. i think it requires what i have described most recently as a concept of constructive realism. and a concept of constructive realism which builds towards a concept of a common future. a word about each of those words. realism, if you spend enough time in this town, and you've studied u.s. foreign policy in its 20th century history, this is a deeply realist foreign policy establishment. for entirely understandable reasons. when you look at the school as it's evolved here at the theoretical level, it is rich, deep and reflected in the

behavior of practitioners. in china, realism called by various different things is equally apparent, equally part of the chinese tradition of understanding foreign policy engagement, and for eveso there realist foundation to the way in which both countries view each other which has all sorts of potential difficulties arising from that of itself in terms of the expiration of mutual trust before a chance is even given in the first place. but given this is such a profound reality in both conceptual hemispheres in washington and beijing, it has to be acknowledged. there are real and objective continuing conflicting interests and conflicting values between china and the united states of which the territorial issues that i've just mentioned in the east and south china seas about one manifestation.

these need to be accepted, explicitly recognized but critically managed in a manner which concludes that allowing any one of these matters to escalate into crisis conflict of war is mutually unacceptable. that's the realist part. what's the constructive part. the constructive part is this. if you look at the possibility of constructing genuine public goods between china and the u.s., both bilaterally, regionally and gloebll globally scope is quite wide. if you believe bilaterally -- and i do for a simple reason -- that is the more the two economies become enmeshed through investment, rather than just through trade, then, frankly, the more inseparable they become and the more their mutual interests in each other's progress and advance becomes an indelible imprint within each country. so causing that investment

treaty to come into being i think is a genuine public good. because in the long term it will transform many elements of the relationship. regionally -- i will touch on this in my concluding remarks -- there is i think a value to be had in both governments to get with those of the region beginning to evolve further the region's existing architecture. the existing architecture has served the region reasonably well but it is thin. apec has opened a valuable role in opening economies internally and to one another across the region. if you look at the tentative moves in terms of a more geopolitical and/or national security related discussions, there's been some contribution by the asean regional forum, a nascent contribution by the east asia summit, but frankly this needs to be taken further. why would both countries be interested in that. i don't think either beijing or the united states want to trip

casually by accident or poor incident management into crisis conflict or war. therefore, what you need is an institution such as those we've seen evolve in europe over a long period of time. in i emphasize "evolve." which begin to create basic confidence and securing measures between those in the region and other participants and over time to begin to evolve through that sort of head of government level regional discourse a nascent sense of common security rather than divided security. this does not replace the alliance structure. it supplements the alliance structure. of course, international models such as those offered by the european union are not readily applicable. but the idea and the concept and, frankly, the achievements which we can contribute to the europeans should be born in mind. this would constitute in my view a general regional public good and final a global public good.

the postures on climate change is to me one of the great unwritten positive stories of the last few years. having been a participant in the cope hakoeppecopenhagen summit change in 2009, having not slept for two days and seeing that particular atent pnt to get a gl climate change treaty advanced, with much intransigence from the governments i just mentioned, was i believe a tragedy. but what's fundamentally changed since then is a 180-degree shift in chinese policy. the ability therefore for president obama and president xi to advance the global commons or global public good by making new national commitments on climate change i believe is a real element in the trust building exercise. which brings me to the final element of the equation. first, the foundation is realist. secondly, if you like, the super structure is constructive due together in areas where the

interests are sufficiently overlapping or the values are sufficiently overlapping. the third element is over time having a concept that you can harness the political and diplomatic capital from these areas of common cooperation to in fact deal with the underlying fundamental objective realist problems that i referred to at the outset which constitute the constant source of friction. at present there's not a whole lot of diplomatic and political capital to draw upon in terms of dealing with the hard issues. but by vir u of a process which deals with things like investment treaties, things like a new evolution of the region's architecture, things like global advances on climate change driven by the two largest emitters in the world. but in time also on intractable questions like north korea and cyber security and also the rise of militant islamism. there is a basis to construct a new element of evolving

strategic trust between the two which provides a lat foplatform dealing with the unresolved challenges of the future. i conclude my remarks here how i concluded two night ago. dunn had this great saying about the chinese domestic reform process. what dunn said was -- this is way back in the late '70s -- if you're going to reform this thing called china in the great openings of new policy, economic reform, domestically opening to the outside world international ly. then it's going to be a long process. so he used his marvelous analogy which is you cross the river steps feeling the stones step by step. [ speaking chinese ] i think we also need to have that concept alive in our minds about how you can possibly engineer that incremental trust building exercise between china and the united states as well. step by step but knowing in fact

that there is a destination called a common future. for our chinese friends here in the audience today, if you talk about realism, [ chinese word ] means something in the context. there are positive terms in the chinese context. [ chinese word ] or [ chinese word ] international and global public goods means something in the chinese discourse. so to frame a common vision, to frame a common concept but not to leave it at a level of political theory, but to then have an operational dimension which can be put into practice by regular symmetry by the two countries. that i think provides us a way to navigate our way through. if we don't, then i fear that the tendency will be towards inertia, drift, and drift becoming current, and perhaps in the direction in which none of

us would want to see for the future. i thank you. >> thank you very much, mr. rudd. i would like to open the floor to some questions that, if i could, maybe i could start with one. the question is this -- do you think that american or chinese economic strategy is sufficient given the broad scope of the region that you describe to us. what advice would you have for both countries in that area. >> well, the wisdom of foreign policy is never provide public advice to any government. it's usually likely to be unwelcome. private advice is usually of a different nature. but let me make some broad observations. that's looking from the region out rather than from america or china in. there's some basic metrics here.

metrics, while boring, are important. china as of 2000 -- last couple of years has become the world's largest trading power. it's become the world's largest exporter. world's second-largest importer. and if you were to put together simply on trade metrics, china today is the number one trading partner -- about 127 countries -- around the world. the united states, around 73. depending on who you believe, the world bank, the imf or whichever journalist just wrote an interesting story, and again, the measures of the relative size of the chinese and american economies, pricing, market exchange rates, calculations and what price assumptions are of ppp, the chinese economy is projected by a combination of the bank, the imf and/or the

eoeoc dch eocd -- oecd to be twice in size of the american economy between 2024 and 2025. metrics are really important here. if you look at it from the region out, the economic significance of china both in terms of trade, fdi, and perspectively, depending what happens with the liberalization of the rmb in the future, capital flows become a much more dominant factor in the economic reality of east asia than american. i don't think people have quite thought that through in terms of where it all leads. but if you take as your primary assumption that from economic power, other forms of power proceed, there is a fundamental underlying shift occurring across the asian hemisphere. that in turn of course in terms of its forward trajectory goes to questions like the sustainability of chinese growth

over time, goes to the questions of will the growth rate be 7.5%, 6.5% or the most negative projections of averaging over the next decade averaging down to something 4% or north of 3%. but the projections both by the bank and the fund and the oecd did not assume the near projections. all i'm say something as a question of basic economic metrics, china is now more relevant to the economies of east asia than the united states. that's a very thin margin at present, but as you see investment flows unfold and you see capital flows unfold depending on regulatory changes in beijing, that equation is going to change even more profoundly. it's up to the united states to respond to that as they so choose. but that is an unfolding reality in our part of the world.

hugh white is here with us from austral australia. if you took the china trade out of the australian gdp, hugh, i imagine chinese exports would be 20% of australian gdp? that's quite a lot of cash for any economy. we are a $1.6 trillion economy. replicate that across smaller economies of asia and we're the fourth largest economy in asia after china, japan and india. this equation is unfolding. so part of the american response is the transpacific partnership and the diplomacy associated with that. and for which there is a chinese counter narrative as well. i won't go into the probabilities and relative merits of both proposals. >> let me open it up for one or two questions. andre? >> thank you. i'm the chief representative

from vietnam for the intrastate traveler company. wonderful address. thank you so much. so comprehensive. i just was taking notes from your remarks here. only thing that i have a question on is, in working towards this constructive realism, great term. you defined it well. but it seems like a fly in the ointment, so to speak -- >> seems like a what? >> a main obstacle to working towards constructive engagement with all those variables is that, of all the parties to the equation, only china -- only china -- continues to violate using violence to intrude into the exclusive economic zones of, you know, the philippines and vietnam and other countries. and deny that they're doing it. i've been on business trips, i've seen them come right into the exclusive economic zone using violence. so -- >> i think the truth of all this is -- just to paraphrase --

because i'm conscious you've got the rest of the program to attend to and i've got to be out the door in a minute but i get the question. i think if you were to go through the analysis of each of the disputes from north to south, each has its own internal characteristics. if i was an international lawyer lxra$ng at the international court of justice on each of these disputes and where the territorial lines lay, i would probably have different resolutions on each of them. and having spent some time looking at the underpinning legal cases concerning senkaku, concerning spratly islands and the intervening seas and the claimant positions of all seven parties, this is a highly variable feast. it is not just that we as an australian government have traditionally chosen to be neutral on this. there is a reason to be neutral, and that is that the underpinning legal cases are, if they overcame the jurisdiction, are so complex.

so if we had another hour we could go through each of these individually but i think that would be tiresome for people in this gathering. so rather than have an adjudication which says who's right and who's wrong in each one of these disputes, i simply po point to the fact that china now has a more active pro-activist party in the last year or so. it proceeds from a series of perceptions within the chinese leadership about the united states which i sought to articulate before. therefore, the concrete policy challenges is what do we do in response. that's what i have sought to articulate today. i'm sure in the rest of your conference you'll have an opportunity to dissect each element of each dispute. but that is not possible right now.

>> andro yo, associate professor at catholic university. >> which university? >> catholic university. >> okay. >> east d.c. >> as in holy mother church? that catholic? okay. >> you mentioned the rhetoric of containment is a misnomer, a misperception of the chinese. how would you persuade to the chinese that the strategic -- the u.s. strategic rebalance to asia is not a form of hard containment? >> well, again it goes down to the whole question of definitions of containment. i mean the alliance structure in asia has existed, as you know, since the '40s and '50s. and was primarily constructed in those days with respect to the lateral lines of the soviet union. there is often more discourse of more marines going to darwin.

we've got 2,500 marines coming each year for six months. i would say hold the next addition of the strategic balance put out by the iiss in because that fundamentally alters the global strategic equation. it doesn't. it's kind of a normal evolution alliance arrangements which actually have multiple applications. so, again i go back to definitions of containment. it doesn't actually fit the term. there are probably other terms which are better used in the international discourse to describe u.s. strategic responses to china but containment is not one of them. if you are looking at the classic definition of it, as framed by cannon and the others in this town in the late '40s. >> ladies and gentlemen, please join me in thanking mr. kevin rudd. [ applause ]

>> i just hold your seats, we will have the next panel come up. thank you very much. good morning, and let me add

my welcome to you to the csis asia architecture conference. my name is scott millevçho÷ i'm the program director for the international business program here at csis. and it's my pleasure to moderate our first panel today, which is going to cover the economic issues that will be on the table, and as part of the conversation in the east asia summit and the apec leaders meeting. it strikes me that, you know, for most of the past 25 years, international economic analysts have been able to rely on a couple of things. first, that east asia and pacific economies would grow at a faster rate than the rest of the world economy. which has been true, you know, pretty consistently. there were some hiccups with the east asia asian financial crisis in the late '90s, and otherwise but overall there's very solid growth. the second thing that economists

pacific economic policy tended to move very steadily and consistently toward more openness and greater economic integration. the progress achieved, if you take this long view, is, frankly, stunning. whether you look at growth rates, but more importantly, look at the reduction in poverty, the creation of large and growing middle classes. it is one of the most remarkable performances from economic development standpoint in all of human history. so there's lots to -- lots that has been achieved and will -- that continues to benefit peace and security. having said that, today it's not quite the same picture. and i think that's what we'll talk about today. today, i think the view of east asia, and the pacific in terms of economic growth is still very positive. our more numerically inclined colleagues up the street at the peterson institute yesterday held their global economic

forecast and once again east asia and the pacific looks to demonstrate stronger growth over the next 12 to 24 months than either europe or the united states. however, there have been questions raised about the degree to which convergence, which has occurred between developing and developed economies over the past 25 years will continue, and at what pace it will continue. so there's -- there are questions being raised. likewise on the policy front, there are, i think, important questions about whether economic integration in east asia and the pacific will continue, or whether, in fact, it's reversible. there've been some large, important economies in east asia and pacific who have moved in a direction which frankly contrary and sort of less liberal than in the past. i would note the large -- the proliferation of local content requirements. many of the policies in indonesia being a -- not the only example, but an interesting example of sort of indonesia first policies, global content

retirements, decisions to no longer enforce or abide by bilateral investment treaties. a number of moves that, while head line by head line they didn't amount to much you put it all to the there's i think an open question about the degree to which east asia and pacific economic integration will continue and at what pace. so i think that's the theme that i would like to set for today's conference. we're delighted to have a terrific panel of experts to discuss these and other issues. you have their biographies in front of you so i won't read them but i will introduce them all to the and then let them speak in turn. we'll start with dr. bob wang. bob is senior official for apec the u.s. department of state. he'll be followed with another u.s. perspective, ed brzytwa who is director of apec affairs at the office of u.s. trade representative. following that mr. toshiyuki

sakamoto deputy director general for trade policy and the trade policy bureau of the ministry of economy trade and industry. think of mr. sakamoto as the senior official for both apec and east asia summit and he's representing that role, that's part of his portfolio today. finally we'll hear from the business community, one of the great things about east asia and the pacific and its economic integration efforts is the degree to which they incorporate business use and the perspective of enterprise. door they dwoskin is senior director of global trade policy for microsoft, but in her role today, she is vice chair of the policy for the national center for apec. national center for apec is the secretariat for the u.s. asia pacific business council members, and very active in apec matters for almost 25 years. in any case, with that, thanks

for in advance for the panel and let me turn it over to bob. >> thank you very much. but just wondering before i start, i think this podium is blocking the view on the left side, and i'm wondering if at some point someone can come and maybe move the podium, if possible. but if not, don't worry about it. so give the left side a little bit more equal treatment. anyway, let me start in the interest of time to just say that speaking about apec directly, that this year i believe will be a good year. i've only been doing this for about a year so i think this is a good year for me, in any case. it's only been one year experience. but i think it's been a good year, and part of it is because for one thing, we know that president obama this year will almost definitely attend apec. he hasn't done it in the last two years, so at the very least this year he will. i think have him in beijing. because he's also, i think most

of you know, going to be doing a bilateral immediately after the apec leaders meeting, after which he will then go on, he has a very long schedule, he'll be going on to burma for the eas as well as the sasean-u.s. summit meeting in burma then doing a bilateral with burma, as well. then after that he will be heading off to brisbane, in australia, to do the g-20. in brisbane on the 15th and the 16th. so he has a very long trip and i think this is extremely important. because, i think it gives obviously our highest leader a chance to engage directly with asia in all aspects, first of all bilaterally with china, with burma, and so on. also regionally within eas, as well as within apec with 20 members in apec, 20 other members in apec, and also with

the other asean members. and then finally, he goes to brisbane for a global agenda. so i think in this, about seven or eight gruelling trip the president, the secretary, others will have a chance, really, to press forward and engage the region in a lot of issues across the board, from economics to politics, security, and so on. so i think it's already starting out, i think to be a very good year at least in terms of our engagement with the region. so, but in terms of the substance of apec itself, in terms of 2014, working with china, and with the other essentially 20 other apec economies, i would say at least from my perspective seriously it is a good year. all that here from the usgr talk a little bit more about the trade investment facets of apec

and what apec has been doing this year. and i will focus on talking about essentially our work in trying to promote sustainable development and sustainable growth in apec, as well as our work in trying to increase regional connectivity within the apec region, which of course, as you know, expands beyond the pacific over to peru, chile, mexico and so on. so we're doing a lot of, i think, good work on this. and in many ways i think i caught part of what prime minister rudd was saying. in many ways i think this builds up the kind of cooperation that he talked about in terms of the regional architecture of the region in terms of working to the on many of these different issues. again, let me just then very quickly, if you don't mind, just go in to the list of what we're actually doing at least in terms of the sustainable development side of our portfolio. there, i think you could

probably divide it into three different areas. first area would be environmental. i would say. meaning that with no -- having lived in china for ten years and other places we know that sometimes growth actually brings with it terrible consequences in terms of air pollution, water, food safety, and so on, so forth. so we really think that it's important within apec to start off knowing that there are issues that are going to come from fast growth. we need to, at the same time, while we're growing, begin to look at the consequences of that. so, in apec this year, we at the energy ministerial in beijing that i attended in august, and then our deputy secretary was there, we set a target of trying to double the share of renewable fuels by 2030 in the energy next within apec itself. we announced and talked about fossil fuel subsidy peer reviews that, that peru has already

completed, new zealand will start right after their election. now that it's over, and china, the united states, have agreed to do fossil fuel subsidy peer reviews with the goal eventually removing a lot of the inefficient subsidies for fossil fuel, and we're hoping that a few other countries will come in, or economies will come in, in november, to also announce that they will volunteer to do these. again to try to promote and indirectly renewable fuels within the region in terms of the environment. at the ocean's ministerial we had in august, there we again came up and we translated a lot of our objectives within our oceans conference that secretary kerry held in the department in june, we translated a lot of it in terms of getting more policy commitments to, for example, expand protected marine areas along the shores. the one thing that all economies have in common is that we all

border the pacific. and so we're trying to expand the areas that are going to be protected. we agreed to do -- we begin to remove subsidies for fishing. to prevent excessive fishing so to actually maintain sort of you might say manage fishery. take measures against illegal fishing. in the region. so all of these have essentially are in the environmental area that we will trying to, i think, were able to emphasize this year. in the second area i think that's going to be very important, and i think china is taking the lead on this, as well, and that's anti-corruption. so this year, we are going to, we endorsed it at the anti-corruption transparency working group in beijing in august. and by november i think we should have our leaders essentially endorse what we call apec principles on the prevention of bribery, and the enforcement of bribery laws,

anti-bribery laws. so this will be very similar to what oecd, a little bit similar to what we're doing in the foreign corrupt practices act in the united states. so this will be endorsed as well as a sort of apec general elements of corporate -- effective corporate compliance programs. you know, to strike at the private sector, as well, to get involved in reducing the degree of corruption that is pervasive within the region. and we believe this is important to sustainable growth. if you have bribery, corruption, i think as china's finding out today, eventually it will come back to bite new terms of the reactions of people who are left out of the growth. so i think this is very key. similarly at the sme ministerial we had in nanjing, again this is in september, early september, there we agreed to move ahead on

sort of codes of ethics for two specific sectors, medical devices, as well as biopharmaceutical, and there we're trying to -- the goal is to by 2015 double the number of associations throughout the apec region. that will sign on adopt these codes of ethics in terms of how you deal in the health sector. and they will set up an ethics portal, web portal, ethics portal, that people can have access to. and lastly, in terms of the area of i would say inclusive growth, we're very much focused, this is something that secretary clinton started in the u.s. here in 2011 on women economic empowerment. and there we're trying to do many things. japan is taking the lead on this in many ways. for example getting examples of 50 companies that have best practices. or trying to make it easier, facilitate sort of women participation within the

companies, health issues involved there. on our part we're trying to essentially -- we have set up a dashboard of data indicators, where we begin to measure the sort of women participation in the economy throughout the apec economies, and then start to set targets, look at gap analysis where we can improve, look at best practices, and we're also setting up a portal, or a electronic platform that would essentially bring all of the women entrepreneurs within the apec economies together in this electronic platform to begin to have, you might say, critical mass in terms of working together, procurement, sort of supply chain procurement for looking at women enterprises throughout the region, training, access to finance market and so on. so, many of these areas we're working on, last thing on connectivity.

how much time do i have? okay. on connectivity, we of course we will come up this year with a connectivity blueprint, within apec, that will essentially establish certain targets in terms of physical infrastructure, in terms of regulatory convergence to try to get institutional convergence in terms of trying to get regulations more harmonized across the region. and finally in terms of people to people. tourism in terms of finding different ways to increase that flows, education, within and among the different apec economies. and in this context this year apec will be establishing what we call an apec scholarship internship program, and hopefully by the end of the year we'll have about 100 of these to be announced, where we'll try to get -- try to focus on getting students from especially apec developing economies to have a

chance to go to other economies to either train or to study on scholarships that in our case will be provided by companies in the case of chinese taipei, in the case of china, australia, it will be more government provided scholarships, so we think all of this will bring to the in terms of the apec region, a greater connectivity. the last thing just to echo what prime minister rudd was saying, in my one year here working on apec, i find that working with my counterparts like sakamoto-san and others, i really found that just meeting four or five times a year in terms of the quarterly apec meetings getting to the that we actually have, i feel this, built up a camaraderie of group of people, especially at the working level, who work together with each other every quarter, and meet and intercessionally, and that in many ways is building up, i think, this community at apec over the last 25 years that i think will be,

you know, not specific outcomes for this year but will be, i think, in the long-term extremely important for asia. thanks. >> thank you, bob. ed, tell us about the trade stuff, as it were. >> thanks, scott. i'm happy to talk to you about the trade stuff. and the investment stuff. because that's an important part of apec, too. so, it's a pleasure to be here with you all today, and to talk to you about our trade and investment agenda in apec. and my remarks will be limited purely to apec, and i'm happy to take questions in that regard. but i'd like to talk to you about our expectations for our trade and investment initiatives in apec this year. and i think like bob said we've got a lot of really good, interesting work going on in apec. on a wide array of issues. and many of these issues are broadly supported. many have been pushed forward by our host china, and china and the united states are cooperating on a lot of things. and i think it's been a very interesting, at least

personally, it's been very interesting to watch china lead a multilateral effort in the span of one year and to see where that ends up. so we've got one month before we are in beijing again for the meetings and i'd like to describe for you some of the specific initiatives that we're working on. but, before i go in to that what i'd like to say is that every single year we have an overarching priority that we ensure that apec remains the premier economic forum in the asia pacific for multilateral cooperation on trade and investment issues. that's a significant priority for us. because we think apec can do great things and we want to make sure that it continues to do great things. on trade and investment in a very concrete way. when the united states hosted apec in 2011, we fostered, and we achieved, a very results oriented environment. we delivered a lot of meaningful and concrete results and outcomes to our stakeholders. and these included results on regulatory coherence, green

growth, and a broad array of trade and investment initiatives. and rather than discussing our visions for apec we developed an agenda that was very action oriented and focused on the tangible things that apec could do to promote regional economic integration. so, every year we work along these same lines. we've worked with our hosts in the past on these lines, for example, in the year 2012 where we agreed on the apec list of environmental goods, which was a significant achievement. building on the commitment to reduce tariffs on environmental goods, to 5% or less by 2015. and in indonesia year, 2013 we created a new fund in apec for improving supply chain performance through capacity building. this was a very concrete initiative. this year we're doing the same with china, trying to make any outcomes on trade and investment as tangible and concrete as possible. and let me go back to environmental goods. i think this is the most

tangible example, of a historic commitment in apec to actually do trade liberalization. and this is also an example of how apec is contributing to the multilateral trading system. because as many of you know, we just launched a new set of negotiations at the wto, on an environmental goods agreement. the inspiration for that was the apec list of environmental goods. we're hopeful we can expand on that apec list, implement the commitments in that apec list and really create a new initiative with wto that really is meaningful for all of our stake holders. so, in terms of our specific initiatives, you know, we -- i'd like to focus on a couple of areas. good regulatory practices, supply chain performance, and also environmental goods and services, i'll describe exactly what we expect to achieve this year on that. and then global value chains. which is a very new area for

apec. and i think it's a very interesting area where apec can do more concrete work in the future. and all of these areas fall under china's priority of advancing regional economic integration. so we try to work very hard with the host to ensure that what we're trying to pursue on trade and investment also falls under their priority. good regulatory practices. this is an initiative that's near and dear to my heart as a former nontariff barrier negotiator. we have a responsibility in apec not to build current barriers but prevent current barriers from building. one of the ways to do that is to help regulators regulate better, produce more effective, legitimate higher quality regulations and to help regulators actually acquire better information about the proposed regulations so that they don't turn into barriers in the future. so there's three good regulatory practices that apec focused on, and this really started in our host year. internal coordination of

regulatory work, which is like how agencies communicate with each other about proposed regulation. assessing the impact of regulations, and conducting public consultations. and i want to focus on that last one because what we're trying to do this year is create a new set of actions that apec economies could take voluntarily to improve how they're actually conducting public consultations and working with their stakeholders, acquiring information. these are things like doing early notice of proposed rules. setting a specific time frame like 30 to 60 days for accepting public comment. building a web portal at the center of government, instead of the regulator by regulator approach for doing public consultations. so we're really trying to offer very concrete ways that regulators in asia pacific could do public consultations, and acquire better information. supply chain performance. in 2010, apec leaders set out a very specific goal. improve supply chain performance by 10% by 2015 in terms of reduction of time, cost and

uncertainty. that's a very, i think, ambitious goal. and i think we're on track to achieve it. but we've tried to come up with new ways we can work on that goal, and this year we agreed on a capacity building plan to help developing economies actually improve supply chain performance and overcome any obstacles they face. we think this is a great way to help economies, especially developing economies, implement their future trade facilitation agreement obligations. and these are very tangible projects that we're doing. expedited shipments. prearrival processing. issuing advance rulings. we're going to help developing economies at the economy level, instead of doing workshops and information sharing exercises actually implement these types of programs. we also created a new body in apec called the apec alliance for supply chain connectivity. this is a public/private body that will help us move forward these capacity building efforts. we're trying to leverage the expertise and the resources of supply chain experts all over

the world to help us with these projects. and trade ministers endorsed both of these initiatives back in may, so we're going to recognize this progress in the leaders week meetings. environmental goods and services. as i mentioned we have this historic commitment but what is the foremost priority this year is affirming that commitment, ashoeing that economies actually implement that commitment next year. it's a huge priority for apec it's a huge priority for the united states but we're also seeking that apec launch new work on addressing nontariff measures that impact trade and environmental goods and services because if we don't, the tariff reductions won't be as meaningful. finally global value chains. global value chains is like i said it's a very new area for apec. this is about how you add value from inception of an idea to the delivery of a product. as we all know, production of finalized goods happens in various ways and in various economies.

and i think the csis folks have drawn a lot of attention to this. so aspecific actually has a set of sort of policy principles on global value chains, and they include things like importance of services, and the importance of investment, the importance of smes. what we're focusing on in the united states is how we can actually addresshqdz trade and investment barriers that impact global value chains. and i think the primary example that we're focusing on and we want to actually do more work on this next year, we want an instruction on this, is how do we actually understand the phenomenon of localization requirements. localization barriers to trade. and as scott mentioned, i think a big example of this is the requirement that you keep data centers locally. you know, because this is a concern that we have all around the world, and i think apec could do great work in helping us understand why economies are doing this. and what alternatives that are very trade and investment friendly can we provide to economies instead of using these requirements.

so, i know there's a lot more to discuss on trade investment but i think these are some really good examples of what we're trying to achieve this year. thank you. >> thank you, ed. sir? >> thanks, scott. thanks for inviting me. i'm very excited about the opportunity to talk about the apec, and the eas. in apec, the united states is the closest ally of japan. both bob and ed are good friends of mine and are forming part of the apec community. since bob and ed thoroughly explained this year's apec agenda, including trade stuff, i will be just pointing out japan's priority in this year's apec agenda on trade stuff japan is promoting putting forward

specific proposal on services. unlike trading goods, trading services has been left out. kind of left out in the apec discussions. though we are now focusing this year's services, such as manufacturing related services, and environment services, both proposed by the united states. and in next year philippine will be hosting the apec readers meetings. as you know, in philippines, they have a very strong and a very competitive service industries, so we intend to come up with a concrete plan next year, for philippine years. on sustainable development from, as bob mentioned, we are now implementing our 50 companies, exemplary companies in terms of the importing women. and 5 companies will be, the

name of 50 companies will be announced in the leaders week which include seven u.s. companies. on the connectivity, japan emphasized the importance of quality of infrastructure, such as the life cycle cost, and environmental performance, and the safety including natural disasters. so those are the epic priorities for japan. let me turn to esa. because the name of the session is eas/epic. i think many u.s. people consider apec is for economic mothers where as eas is for political or security issues. i totally disagree with that observation. because eas, our economic ministers meeting was formalized last year, they started from

substantial discussions with the imput from eraa, e-r-i-a which stands for economic institute for asean and east asia. they are doing some analysis on industry traffic. because the business activities in asean is now cross border. for example, japanese automotive companies in thailand has now shifted its labor intensive process to neighboring countries li . they produce conducts in such countries then ship back to thailand mother subsidies on a daily basis. as such, japanese business activities in the region is really cross border, and eria is

now trying how to develop such industry cross border in the future. also next year eria will come up with a recommendation how infrastructure should be developed in asian. they did that research about five years ago, but next year they will revise such study in order to provide input to eas as well as asean summit. in this regard, i would very much appreciate if u.s. businesses are interested in this work and provide the necessary input. let me turn to also rcep, r-c-e-p, regional comprehensive partnership. this is not eas, because eas are 18 countries where rcep is negotiated by 16 countries. not included, u.s. is not included there.

rcep is another mega fta other than tpp and ttip which is the -- which is negotiated by 16 countries, asean 10 countries, and the 6 dialogue partners of asean. six dialogue partners have its own asean plus one fta already. and 16 countries amount to 48% of global population, 29% of global gdp, and global trade, and 45% of japanese export. whereas that figure is 30% for tpp. peep frequently ask me the question, what is the difference between tpp and rcep. from my view tpp is for cities and rcep is to strengthen the

regional supply chain based on the business reality. since you may not have much information on rcep but taking this opportunity to briefly explain what merit the united states business communities can get from rcep. rcep negotiating, not only trading goods, but also rule makings, such as ntb, nontariff barriers, tfp, investment protection, competition, and property rights. all these rule making if agreed will be applied to university. it's really difficult to apply domestic policies on these areas differently from, you know, rcep countries, a progress of rcep countries. and also if u.s. company establish subsidiaries in one of rcep countries, that company can

benefit from commitment of services under rcep. but there's other benefits for these communities if rcep is successfully concluded. and the -- i believe that the united states are very much interested in e commerce both in the context of tpp, and other internation international, and in this regard i am very grateful for the publication by u.s. asean business council which celebrated 30th anniversary last night. they published the report called beyond aep, asean economic community 2015. this is really work piece of work. it's a recommendation for asean, sme competitiveness, in that

recommendations they focused on e-commerce which is very helpful for rcep negotiations. actually i am now drafting rcef nonpaper on e-commerce, and i took the liberty of putting some paragraphs from their recommendation in japanese nonpaper on the commerce. it was really helpful. and also aec, asean economic community this is much more of the advanced than many of you think on tariff, crmb will be eliminated as 93% by 2015 and the remaining 7 will be also eliminated by 2018. asean is one of the most utilized by japanese companies. and national single window and

also services are also very important undertakings in aec. so in sum, next year, 2015, it's very important for eas and asean, because rcep is supposed to finish the negotiation by the end of 2015, and aec will be established 2015, and the post-2015 vision of asean committee will be developed. so i believe that it will be nice if japanese business communities, and the u.s. business communities, join for your business interests on these -- on these important issues. thank you. >> thank you. dorothy? >> thanks. thank you, scott. and thanks for asking us to have a bit of a business view on the

panel. since it's baseball season, i guess i get to bat cleanup today. i can say go nats. i actually have sort of three hats today. as scott mentioned, i am vice chair of the national center for apec focused on its policy work. at microsoft working on global trade and economic issues, and like a few other souls that i see around the room, i'm one of those recovering trade negotiators. and that's a hat that i don't ever seem to be able to take off. so let me tell you a little bit about the national center. so we're 53 companies in the united states across a wide range of sectors. and our mission really is to facility the private sector's involvement in apec. as scott mentioned, we provide a

secretary to the private sector for apec issues throughout the year, and support the three presidentially appointed advisory committee members who serve with the 20 other apec economy representatives. we're always looking for more u.s. companies that want to join. i don't get a commission or anything. but you're always welcome to join. so what i thought i'd do is maybe talk a little bit about sort of a business viewpoint, and we've been very fortunate in the past number of years that one of our knowledge partners, and a member of the national center, pwc, has done a survey of ceos and business leaders in the region to prepare for these annual ceo summits. and i wanted to share with you some of the high level findings that we -- that pwc announced

last year. i think they're pretty consistent with previous years, and it gives you sort of a good sense of where the business community is on all of these issues. because i know having taken a lot of our execs to these meetings, it's like, what does this really mean? and is this going to really affect my bottom line? and this is a lot of fluffy stuff in a 15-page declaration. how does this actually affect business? so, the pwc survey was pretty interesting last year in terms of saying that there was a lot of confidence in growth, and that, in fact, there was a lot of emphasis on domestic consumption driven growth. and more attention to middle income consumers. what that meant, according to pwc, is that you know the nature of investment in the region is changing. it's going from beyond just manufacturing capacity expansion to really looking at new products, and investments, for

example, in services. so that was one finding. the second finding was that the partnership strategies of the companies seem to be changing. there's more of an interest in local partners. this is helping with the skills and talent gap. and it's also helping more to capitalize on local mid am income demand. so, i said i work for microsoft. obviously this is a really happy finding for us. there was an emphasis in the report about data and that data is at the heart of customer demand and business opportunity. in fact, they said that there are four market forces that are individually and collectively redefining customer demand, and business opportunity. mobile computing, cloud computing, social technology, and the emergence of intelligent devices. and it pointed to work that

needs to be done. obviously in the area of data privacy, something that -- where apec has already done a lot of work. and that a growing number of business leaders identify that the legal frameworks for cross border data flows is really becoming an emerging barrier for their companies to benefit more from the digital economy. so, kind of music to our ears. that's been an issue that, you know, a lot of folks in the national center have been looking at. we, for our part, have looked at the importance of technology, particularly for small and medium sized enterprise, and there is a pretty strong correlation between those who have adopted technology, and more open to technology have become more successful, more integrated, as cloud computing becomes more pervasive, there's more opportunity for others to join the global value chain

development. so the fourth area that they talked about was the need for further improvements in infrastructure in order for business to grow. ed's mentioned this, there's been a lot of work pointed out to -- out on the need for more work on power supplies, dealing with clogged transit networks, lowering the cost of broadband, and really putting an emphasis on public/private sector infrastructure models. again, the finding was that lifting regulatory barriers is really essential, because we really need to reduce costs in this area. another finding was that inconsistent regulatory and other standards are really a key blocker to business growth around the region. that different rules for products and services are really increasing complexity, and the ability to scale in the region. and this brings in other

disciplines, for example, such as ip and corporate governance. so, i think all of these findings are consistent with the work that the government is doing. the one thing i think that ties all of this together is that in the findings, the business leaders were asked about their view of trade negotiations, and how this was going to help. and, you know, was it going to help, or was the creation of blocks going to create problems. and i think the finding was really that there is a lot of uncertainty, but it would be very important that no matter how all of these approaches are developed, that they really have to look to business to make sure that they're not inadvertently adding new barriers. and toshi and i had a good conversation yesterday about our staff and our interests, and i'm

pretty confident that japan's going to push for a very high value agreement in rcep, that is going to help raise the gold standard with him in the lead, i'm sure we'll get a really good agreement from that. we'll watch what he's doing. but in terms of the national center for apec we actually have a lot of work programs and projects under way and i really just want to flag those for you. we are doing something on infrastructure investment. we did help create a checklist to really identify four governments the sort of essentials to help deal with making the public/private sector investment infrastructure. really a reality. pointed to, for example, the need for creating business friendly fdi environment. i think that goes to a lot of the issues that ed raised. a lot of interagency

coordination, and really some country benchmarking. we have started at the national center and should have, for the meetings in china, another contribution on the digital economy really focusing on cross-border data flows. and really looking at how business takes advantage of cross-border data flows, or should, and then it's really not just a technology issue that anybody who is competing in the global economy really needs to be able to have data across borders. and then that gets you into a whole conversation about privacy, security, and how all of these issues fit together. excuse me. we also have done quite a lot of work in the health area. this year we've spent some time looking at the costs, and productivity losses that are caused by preventable health

conditions. they're called ntds or noncommunicable diseases. the study is actually going to be reviewed by leaders, and there's also some work that's been done in the health sector, as ed mentioned, with respect to the supply chain. we've done some work on finance. we have an asia pacific financial forum and really looking at integrated financial markets. so that's what we're doing as apec. we obviously have been working very closely with the u.s. government, was mentioned already the women's empowerment and creation of regional entrepreneurial networks. we obviously are very supportive of the expansion of the information technology agreement for many of you, you know that's pretty near and dear my own heart. the wto says that, you know, for all the time that you leave the ita undone you basically are leaving $2 billion of gdp growth

an actually on the stable. so that should be a good incentive to have a very meaningful and expansive and balanced, i guess, is the other buzz word, ita concluded, and i think apec played a really important role in manila in 1996, when we did the first ita agreement, and i think, you know, china has an opportunity to help show leadership so that the negotiators can go back to geneva and put the deal back together. ed mentioned the work on good regulatory practices. that is obviously something that the private sector here in the u.s. has pushed very hard. there are a lot of disciplines that are already agreed to in the wto, which need to be expanded. we've had a lot of learnings from our own free trade agreements and the work there. so, we think that that's been a really good exercise in consultation and development of the issues with the u.s.

government. ed mentioned the goals with respect to supply chain connectivity, and a lot of our members are front and center in promoting the trade facilitation agreements that we hope will come to fruition in the wto, and it's great to see that the government is working all of the angles to try and mike sure that our partners in apec are really ready to implement the trade facilitation agreement. we've also done a lot of work on food security, partnerships, the mining ministerial is a good example of something where the private sector really pushed to have a discussion about mining, and we were able to have the first ministerial meeting. there's obviously been a huge number of projects on the whole question of energy and energy security. and then, you know, the national center and its membership are very engaged on what i would

call the bread and butter issue. sort of the trade and investment issues. there was reference to the emerging problems on local content, and it's not just data centers. it's, if you want to be able to sell your product in a market, countries are going back to the notion that you have to actually establish a manufacturing facility. this is obviously since i am a recovering trade negotiator is actually a problem because we did a lot in the wto to reinforce the obligations that say that that's highly illegal. so, we're going to have to find a way to have a conversation, a more serious conversation, in the region, because it's becoming a problem, and it's becoming a problem for a lot of those apec members who have attracted manufacturing. and that they're not going to be able to scale, because there are demands for local manufacturing. so it's, you know, localization of data centers is one issue.

there's this myth that people think that if you put a data center in country that it's going to be a huge job creator. it's not. there are lots of economic reasons for looking at where to put data centers. not the least of which are some of the energy concerns that people have. obviously there's going to continue to be work on the free trade area of asia pacific, and work in studying apec's contribution to that. and then as i mentioned before, the smes. so we're looking ahead to what we think will be a really good meeting in beijing. will it be as historic as 2001? there was a lot of activity about china's joining the wto then and the run-up to doha, and we'll have to see how the issues sort out. we're very excited, and already working for next year with our friends in the philippines, to

really see if we can't make a -- an even bigger push on the private sector involvement throughout the apec year, in the run-up to the leaders meeting. apec's making its contributions. and like i said, we're 53 strong. we love to be even stronger. and if you have an interest in the national center, we'd be happy to talk to you. thank you very much for the opportunity. >> thank you, dorothy. and thanks to all the panelists. what i'd like to do now is open the floor for questions. there are three simple rules for questioning, okay? the first is, when you're recognized, wait for the microphone. as you will recall from the opening remarks, we have a large online audience, and they won't hear a word you have to say until the microphone gets to you, and is turned on. wait for the microphone. second, start by stating your name and the organization you represent. and third what i call the alex trebek rule, please make sure your question is in the form of a question.

no statements, please. so with those let me start. yes, ma'am. microphone will be here shortly. >> thank you. my name is jane, my question is about china is pushing the ftaap in the coming apec meeting, or the feasibility study for the agreement, so from your perspective, from the business, from japan, from ustr's perspective, how do you see the prospect of this agreement? and for dr. wong, you mentioned about the enhancing construction of infrastructure, and connectivity. could you elaborate more about what does this mean? thank you? >> thank you. >> thank you for your question. officially i'll say you should direct that question to our press office. but, i will -- i'll give you a very brief answer on this. so, i think this question was

very much litigated by trade ministers at their meeting in qingdao. there was no consensus at that time on the feasibility study proposal by china. nor was there a question on setting a deadline. but there was a lot of support for apec's contribution to the realization of an ftapp. i think that's the way dorothy framed it. apec is a contributor. it does things like capacity building, information sharing on existing and ongoing rtas and ftas. it's done analysis in the past. but what it's not is a negotiation body. and i think our expectation is that apec will remain as a contributor. and that should be what happens actually at the leaders meeting. >> on the construction question, in terms of connectivity blueprint, the key thing now is to note is that as you know adp study had indicated that just

about $8 trillion worth of sort of demand for construction infrastructure construction in the region in asia, and our view is that in the final analysis the private sector really will have to step in to invest in to actually build the infrastructure, whether it's power stations or railroads or ports, whatnot. so what we're doing within apec, led by australia, by the way, is to actually create a pilot center. right now it's been created in jakarta, but we're trying to expand it to different areas, where working abec, as well, is to provide essentially advise on a checklist for example on how to actually improve the investment environment in terms of being able to attract private sector investment. so there are certain kinds of regulations that block this. there are certain kinds of guarantees that are needed. and so on and so forth. so, essentially australia, for example, is putting a finance ministry official in jakarta to work with their people to look at their investment regulations,

and we're hoping to do this again, across the apec economies. among those who really need and want to have infrastructure investment. so that's what we're doing. just public financing is not going to be sufficient in the long-term. you really need private sector to step in and the way to do it is improving the investment environment. >> i just direct a few words on ftap since you mention the japanese business community. the japan has strong ownership on ftap because the pathway to ftap was agreed in 2010 at yokohama leaders summit. which set out how apec should try or should help establish ftap. as ed said, apec is contributor. or as put in yokohama declaration, apec is incubator

for the allies in the ftap. apec is not a negotiation forum. we need to have -- we need to understand the distinction on that. but as you mentioned, there is debate whether we call on the feasibility study or not. what i want to emphasize is that all apec economies are strongly united in the determination to realize ftap. thank you. >> thank you. i would also note that ftap has really been an area of the asia pacific has been a commonly agreed political goal i think as far back as the sydney meeting in 2006, if i remember right. if prime minister rudd were still here he could correct me. but so it's been a long-standing political goal to my mind it's fully consistent with the volcker rules in many ways, and represents a -- represents important aspiration. how it's actually executed is

yet to be determined as the panelists have said. but, i do think it's important to recognize that and china's emphasis on ftap is wholly consistent with the apec leaders meetings at least in the past six or seven years. so thank you. other questions? yes, sir? >> good morning. thank you. lieutenant colonel scott mcdonald united states marine corps strategic initiatives group. leading off that comment, sir, and stepping back towards our theme of asian architecture, how do tpp and ftap, through apec, how do we step back and use these structures in order to build an asia pacific that is more welcome both for trade and security for all partners in the asia pacific? in other words we talked a lot about specific free trade

initiatives, which are all to the good. more freedom, more better. but how do we make that into an architecture tool? thank you. >> i'm happy to talk about what we're doing in apec. but i think the questions on tpp please direct you to the press office. thanks. >> i do have a general comment. you know, i think just again harking back, by the way, again, hi, we serve in taiwan together, right? >> yeah. >> i suddenly recognized you. but i think generally, harking back to what kevin rudd, prime minister rudd was saying, the globalization part, and then e the, you know, ethnonationalism part i think the idea is to promote trade in whatever form. as you have more interaction, more trade, more interdependence and so on that by itself is the architecture that essentially binds people together, and reduces the sort of the ethnonationalist sort of

tendencies that sometimes occurs in the form of perhaps protectionism in trade. but that's i think the point. the point is to open the borders, trade with each other, have interdependence and i think that will create the type of stability that we need in this region. thanks. this region. thanks. >> with the multi. paths toward eftap, i think it's important for economies to recognize that their interests lie in fewer not more solutions along the way. this is a point that mack goodman and i discussed at last year's conference. we published a short report on this. but, you know, making these agreements interoperable step by step is, i think, a real -- a practical way forward that for me and matt, as we look at this, is strongly in the interest of the countries. a year ago there was a lot of talk about whether rsep and tpp were in conflict, and the point i made at the time the question came up was there are seven

economies that are parties to both. it's strongly in those seven economies' interests to make sure the requirements are as similar as possible. their own industry is one thing. their own economic operator would find that to be appealing. ultimately that's the way you solve this. it's not necessarily a straight line. it's not all that direct. but step by step you can get closer to integration by recognizing the underlining incentives. so thank you for the question. other questions? yes, ma'am. >> with csi's energy national security program. thank you so much for the great presentations. my question is a little more at the 30,000 feet level but pretty much following up on what dr. wang said. so there is now the development that's finally sort of signed off in july, and then there's a proposal to have this asia

infrastructure development. i would like to hear your panel's assessment or reviews on what are the key drivers behind these sort of emergence of new potential architecture, economic architecture, and what that may do to the influence of the existing one, not just the regional ones like adb but then also imf, the world bank? and lastly -- well, i guess sort of including what their influence may be on the global sort of economic governance as we know -- as we know it today. thanks so much. >> hi. just quickly, i think the driver for all of that, the banks and you talked about aib and so forth, i think the driver clearly a demand in this case, say aib, for infrastructure

development in the region. i mean, there really is a need for that, especially in southeast asia but in a lot of other parts of the region. so there is a need for it. and the main issue here that would be something of concern to the united states and to others is that when we actually have these multilateral development banks that we actually do have established standards. and we try to meet the standards in ferms of -- again, i talked about this earlier -- making sure we don't destroy the environment when we go about sort of investing in infrastructure. make sure it's the governance, no corruption, because construction industry generally has a number of issues in this area. and so we have to make sure it meets these standards of governance, transparency, labor, and procurement and so-and-so forth. that's basically our major concern. so i think as we move ahead with trying to build up different banks and what not to meet the huge demand in the region, we need to keep this in mind. thanks. >> is there a question over

here? i'm sorry. the sight lines are such that -- yes, sir. you're right in the spotlight. sorry. >> hi. thanks. my name is jimmy tobin, i work for alibaba. i have a question about when you design policies for trade, it strikes me that usually what that really means is it's a business-to-business policy. but business-to-consumer trade is grow, and i'm wondering if, you know, when you design poll sis do you take, you know, that approach? do you look at it like that? or is it just mostly, you know, think about it as business-to-business trade? thanks. >> look, i think just as a general response let me start by saying the world's changing really fast. and who's in international commerce and the scale of firms in international commerce is subject to very rapid change and that's being recognized by policymakers. you know, for instance, you know, 30 years ago, you needed a

certain scale to be able to find consumers of your product or service. you needed to be able to establish operations and make contractual relationships with, say, freight forwarders or customs brokers or whatever it might be. you also needed to be able to back up and have the financing to carry off the agreement. you look at today's world, and your business is a good example of this, where an individual can go on a site like alibaba or ebay and find a product or service that they have no way of knowing where it was or how to get to it 10 or 20 years ago. i'm an ebay and alibaba user because i have a geriatric car in my garage that's very difficult to get parts for otherwise. so this kind of thing can be found when it couldn't be found before. second, logistics firms are operating at a small scale with customs brokers, u.p.s., federal expre express, fed ex express, other companies, essentially provide a

service you used to have to create on your own as a firm or an industry. third, relatively simple financing, electronic financing is vitally important to the transaction and can now be done across borders. this changes the scale of operators in the international trading system. ebay's reported on this. so it's a very important dimension and it really affects the way governments do consulting. but let me start with that and see if the panelists have anything to add. >> let me just add something very quickly. the answer is yes, basically, to your question because we had an intereconomy actually session in beijing just prior to august. and alibaba was there, and they gave a good presentation. uber, others. and the idea was to look at the impact of internet in terms of business-to-consumer, how that -- scott says, how that improves it, but also to look at the policy implications behind how do you facilitate that to

allow smes and others to grow and to continue to facilitate trade between business and consumers. >> one thing i would add to that in terms of our apec initiatives, i think we do usually are the consumer in mind. it's not just about the business. i mean, supply chain, for example, yes, many transactions happen between companies, but at the end of the day we're trying to help businesses actually reduce their time to market to get product to consumers more quickly, more efficiently, and more cheaply. so consumers have been in businesses, everybody benefits from the work we do on supply chain. i think many of the other initiatives we have in apec are similarly expansive in that regard. >> so i think your question was, you know, do you have policies to make sure that there's a program of consultation. so, you know, i can speak for, you know, the experience in the

united states where it's actually part of, you know, congress' direction to the executive branch as far back as the trade act of '74 where there is a pretty extensive network of advisory committees, you know, and there is -- but there is this idea of, you know, publishing notice and trying to get information from everywhere about the cost of taking a position. and it gets to i think what ed was talking about in terms of the good regulatory practices. you know, so in terms of developing a trade policy position, some of our best fights in the interagency back in the stone age when charles and gaza were there, you sat down and you had different agencies that had responsibility for let's say consumer protection and some of the other issues to make sure that as you were putting a policy together

that it actually worked for everybody. and i think it's -- it was a pretty successful model. it's gone through a couple hiccups, but i think the code of -- this good regulatory practice makes it much more participatory and gives the opportunity to make sure that there is this better linkage between business and consumer. but i also think there's sort of a misunderstanding. i mean, a lot of the trade agreements don't tell you how a contract is to be written. so, for example, in our business, you know, there are a lot of things in terms of protections with respect to privacy and security that don't really need to be written in a trade agreement but there are sort of contractual conditions that address some of the customer need. and, you know, you set sort of a

broad frame and then you let -- you let the business move ahead. so i hope that helps. >> thank you. we have time for one more question if there is one. yes, sir. >> thank you. my name is steve hirsh. i'm a journalist who writes about asia periodically. i want to ask a question that i think is only tangentially related to apec but i think is important to asian architecture, the economic impacts of it, and it's not a 30,000-foot question. one thing i never hear discussed in washington, discussions of the economic shape of asia right now, is the impact perspective of asean political and economic integration. and the reason i ask this is they just got back from seven weeks in southeast asia, and the political and economic implications of this development are at the tip of everybody's tongue. nobody is talking act the kind of things we talk about here in washington and par,