Thank you very much, Mr. Chipman, and thanks to all of you for being here today. I also wish to acknowledge and thank Mr. Ronnie Chan, chairman of the Asia Society, and Mr. Norman Chan, chief executive of the Hong Kong Monetary Authority.
And I am so pleased to be here and to have this opportunity to speak with you today, and it was made possible by the U.S., Hong Kong, and Macau chambers of commerce and the Asia Society. And I thank the chamber very much on a personal level for its support of the U.S. Pavilion at the Shanghai Expo. I have been called the mother of the pavilion, which is actually one of the nicer things I’ve been called – (laughter) – during my very long public career.
And I am delighted to be back in Hong Kong, a city I have admired ever since I first visited about 30 years ago when my husband, who was then governor of Arkansas, led the first ever trade mission to East Asia from our small state. Hong Kong stood out then, as it does today, as a symbol of the open exchange of goods and ideas. People were drawn to this place from every part of the world, even far away Arkansas, as evidenced by a good friend of ours from Arkansas, Nancy Hernreich Bowen, who is here with us today.
Now, since that time, Hong Kong has changed a great deal. Certainly, the skyline attests to that. And after all, few things have stood still in East Asia. But one thing about Hong Kong has not changed – the principles that find a home here. Under the “one country, two systems” policy, this remains a city that bridges East and West and looks outward in all directions, a place where ideas become businesses, where companies compete on the merits, and where economic opportunity is palpable and real for millions of people, a place that defines the fierce and productive economic competition of our time.
That is why businessmen and women continue to flock to Hong Kong, and an opportunity to meet some of the Americans who have called Hong Kong home for 20, 25, even 30 years. And it is why I have come here today to talk about how the nations of this region and the United States can intensify our economic partnership on behalf of ourselves, each other, and the world, and how together we can work toward a future of prosperity and opportunity for people everywhere.
But before I talk about where we need to go together, let’s consider how far we’ve come. The economic rise of the Asia Pacific region is an astonishing historic achievement that is reshaping our world today and into the future. In Hanoi, bicycles and water buffalo have given way to motorcycles and internet cafes. Small Chinese fishing villages like Shenzhen have become megacities with their own stock exchanges. And while much work remains to improve labor practices and expand access to the formal economies, the numbers tell a powerful story.
Thirty years ago when I first came to Hong Kong, 80 percent of the people of this region lived on less than $1.25 a day. By 2005, that number had dropped to 20 percent. In the Lower Mekong Region countries, per capita GAP has more than tripled in the last 20 years. And in Thailand alone, the poverty rate fell from 42 percent in 1988 to 8 percent today. Never in history have so many people climbed so far, so fast.
And though this progress is largely due to the hard work and ingenuity of the people of Asia themselves, we in the United States are proud of the role we have played in promoting prosperity. Of course, we helped Japan and South Korea rebuild, patrolled Asia’s sea lanes to preserve freedom of navigation, promoted global shipping, and supported China’s membership in the WTO. Along with our treaty allies – Japan, South Korea, Australia, Thailand and Philippines, and other key partners like New Zealand and Singapore – we have underwritten regional security for decades, and that in turn has helped create the conditions for growth.
And the U.S. continues to contribute to Asia’s growth as a major trade and investment partner, a source of innovation that benefits Asia’s companies, a host to 350,000 Asian students every year, a champion of open markets, an advocate for universal human rights, and a guarantor of stability and security across the Asia Pacific. The Obama Administration has made a comprehensive commitment to reinvigorate our engagement as a Pacific power – shoring up alliances and friendships, reaching out to emerging partners, and strengthening multilateral institutions.
These efforts reflect our optimism and enthusiasm for what is happening in Asia today. Of course, countries in this region are grappling with challenges. We all are. But we are bullish on Asia’s future, and while the United States is facing its own difficulties, make no mistake: We are bullish on America’s future too.
America remains an opportunity society – a place to excel, a country of possibility and mobility where a brilliant idea hatched in a college dorm room or a product invented in a garage can find a global market and grow into a multibillion dollar company. Our workers are the world’s most productive. Our inventors hold the most patents. And today, we are reinvesting in our fundamentals – infrastructure, clean energy, health, and education. And we are doing the critical work of shoring up our financial system so that it protects investors and curbs excesses.
Now, as I have traveled around the region, a lot of people have asked me about how the United States is going to resolve our debt ceiling challenge. Well, let me assure you we understand the stakes. We know how important this is for us and how important it is for you. The political wrangling in Washington is intense right now. But these kinds of debates have been a constant in our political life throughout the history of our republic. And sometimes, they are messy. I well remember the government shutdown of the 1990s; I had a front row seat for that one. But this is how an open and democratic society ultimately comes together to reach the right solutions. So I am confident that Congress will do the right thing and secure a deal on the debt ceiling, and work with President Obama to take the steps necessary to improve our long-term fiscal outlook. Through more than a century of growth, the American economy has repeatedly shown its strength, its resilience, and its unrivaled capacity to adapt and reinvent itself. And it will keep doing so.
As we pursue recovery and growth, we are making economics a priority of our foreign policy. Because increasingly, economic progress depends on strong diplomatic ties and diplomatic progress depends on strong economic ties. And so the United States is working to harness all aspects of our relationships with other countries to support our mutual growth. This is an issue I recently addressed at the U.S. Global Leadership Coalition, and will again in a larger speech about America’s strategic and economic choices this fall. But economic issues have been front and center in my travels during the past two weeks – to Greece, which is working to put itself back on the path to economic stability, and to four rising centers of economic growth: Turkey, India, Indonesia, and then China.
Now, naturally, much of our economic diplomacy is focused on East Asia and the Pacific. The American Chamber in Hong Kong represents 1,200 companies, and thousands more looking to this region for new customers and markets. Last year, American exports to Hong Kong totaled $26 billion – that’s more than the Indonesian export amount of $20 billion — and our exports to the Pacific Rim were $320 billion, supporting 850,000 American jobs.
Now, numbers like these reflect how closely America’s future is linked to the future of this region. And the reverse is true as well. Because the future of the Asia-Pacific is linked to America’s. We are a resident power in Asia—not only a diplomatic or military power, but a resident economic power. And we are here to stay.
Now, while the U.S. economy and those in the Asia-Pacific are well positioned to grow together, our success — neither of ours — is preordained. Prosperity is not a birthright, it’s an achievement. And whether we achieve it will be determined by how we answer a defining question of our time: How do we turn a generation of growth in this region into a century of shared prosperity?
The United States approaches this question with great humility, and with hard-won lessons learned from overcoming difficult economic challenges throughout our history.
We must start with the most urgent task before us: realigning our economies in the wake of the global financial crisis. This means pursuing a more balanced strategy for global economic growth – the kind that President Obama and President Hu Jintao have embraced, and the G20 is promoting.
This demands rigorous reform by all nations, including the United States and the countries of Asia. We in the United States are in the middle of a necessary transition: we must save more and spend less. And we must not only save more and spend less, we must borrow less, as well. Our partners must meet this change with changes of their own. There is no way around it: Long-term growth requires stronger and broader-based domestic demand in today’s high-saving Asian economies. This will raise living standards across the region, create jobs in America, improve business for many in this room, and help stabilize the global economy.
For years, my image of the global economy was an inverted pyramid resting on the shoulders of American women, since we are the primary consumers in the world. And therefore, it seems to me that that is no longer a sustainable model. And so we have to change how we do business internally and externally. And, above all, we must reach agreement on the rules and principles that will anchor our economic relationships in the coming decades.
Last March in APEC meetings in Washington, I laid out four attributes that I believe characterize healthy economic competition. And these are very simple concepts, easy to say, hard to do: open, free, transparent, and fair. Hong Kong is helping to give shape to these principles and is showing the world their value.
First, we must seek an open system where any person anywhere can participate in markets everywhere.
Second, we must seek a free system, one in which ideas, information, products and capital can flow unimpeded by unnecessary or unjust barriers. That is why President Obama has mobilized a government-wide effort to attract foreign investment to America. Now, in the past, foreign investment has been seen as controversial. But today we know it helps create growth and jobs, and it can attract American dollars held overseas back into the U.S. economy. As we welcome investors to our country, we hope that all investors, including those from America, will receive an enthusiastic welcome overseas.
Third, we must seek a transparent economic system. Rules and regulations need to be developed out in the open through consultation with stakeholders. They must be known to all and applied equally to all. Hong Kong is a testament to the power of transparency, good governance, the rule of law, freedom of the press, an independent judiciary, and a vibrant civil society, all of which help to explain why so many people choose to do business here.
Openness, freedom and transparency contribute to the fourth principle we must ensure: fairness. Fairness sustains faith in the system. That faith is difficult to sustain when companies are forced to trade away their intellectual property just to enter or expand in a foreign market, or when vital supply chains are blocked. These kinds of actions undermine fair competition, which turns many off from competing at all.
A growing number of countries in Asia are proving the value of these principles. And the United States deeply believes in them, because their value has been proven time and again, not only in times of prosperity but also in times of hardship, as well. At the end of the Vietnam War, there was a thriving commentary around the world on the idea of America’s economic decline. That seems to be a theme that kind of repeats itself every couple of decades. But all the while, then and now, these principles were nurturing a system of entrepreneurship and innovation that allowed two college students to found a small tech startup called Microsoft. And today, they are helping power companies like Solyndra, a green-energy startup in California that began producing solar panels in 2007 and now installs them in more than 20 countries worldwide.
Every time in history when the United States has experienced a downturn, we’ve overcome it through reinvention and innovation. Now, these capacities are not unique or innate to the people of the United States. They are activated by our economic model, which we work hard to keep open, free, transparent, and fair, a model that has its imperfections but remains the most powerful source of prosperity known to humankind.
Of course, no nation is perfect when it comes to safeguarding these principles, including my own. We all recognize the temptation to bend them. And we all recognize the inevitability of human nature’s capacity to look for ways around them. Some nations are making short-term gains doing that. Some developing countries—admirably focused on fighting poverty—might be slow to implement at home the same rules they benefit from abroad. And a number of nations, wealthy in the aggregate but often poorer per capita, might even think the rules don’t apply to them.
In fact, all who benefit from open, free, transparent, and fair competition have a vital interest and a responsibility to follow the rules. Enough of the world’s commerce takes place with developing nations, that leaving them out of the rules-based system would render the system unworkable. And that, ultimately, that would impoverish everyone.
The businessmen and women of Asia seek the benefits that these principles offer. Malaysian manufacturers want access to markets overseas. Indian firms want fair treatment when they invest abroad. Chinese artists want to protect their creations from piracy. Every society seeking to develop a strong research and technology sector wants intellectual property protections because, without them, innovation comes with a much higher risk and fewer rewards. People everywhere want to have the chance to spend their earnings on products from other places, from refrigerators to iPods.
Now, these four principles are easily uttered and embraced, but they do not implement themselves. So our challenge is always to translate them into practice. And my country is hard at work doing that, and we encourage other governments to join us in this effort.
The United States is taking steps to promote these principles around the world through multilateral and regional institutions, new trade agreements, and outreach to new partners, to enlist us all in the quest for inclusive, sustainable growth. These steps are connected to and build upon the work we are doing to revitalize our own economy.
First, we are working through regional and international institutions to achieve balanced, inclusive, and sustainable growth. That starts with our commitment to APEC, the premier organization for pursuing economic integration and growth in the Asia-Pacific region. And President Obama is pleased to be the chair and host of APEC this year in Hawaii.
We want APEC to address next-generation trade and competition challenges, like strengthening global supply chains; empowering smaller companies to connect to global markets; promoting market-driven, non-discriminatory innovation policy. We are pursuing a low-carbon agenda by working to reduce barriers to trade in clean-energy technologies, and we hope to reach agreement on implementing transparency principles to promote economic growth and the rule of law on a 21st century field of play.
Because burdensome regulations and incompatible sets of rules in different countries can hold back trade and growth every bit as much as tariffs, we are also working at APEC to find common ground on transparent, effective regulation, with broader public consultation and better coordination. The quality of the rules we put in place is just as important as our willingness to enforce them.
And I have to mention that discrimination against women is another barrier to fair competition and economic growth. A 2007 United Nations study found that the Asia-Pacific loses at least $58 billion of economic output every year because of restrictions on women’s access to employment and gender gaps in education. So, as host of APEC, we are organizing a high-level Summit on Women and the Economy in San Francisco this September.
We are also working though the World Trade Organization to address continuing challenges to fair competition. Take government procurement. The purchases that governments make represent an important part of the global economy, and citizens everywhere deserve to know that their governments are getting the best product at the best prices. Consistent with the WTO Government Procurement Agreement that we signed, America lets companies from other nations who have signed that same agreement compete for appropriate American Government contracts. We would naturally expect countries that want access to our government contracts to offer our companies genuine access to theirs in return.
Across the full spectrum of international institutions—the G8 and G20, the IMF, OECD, ILO, WTO, and others—we are working to level playing fields and encourage robust and fair economic activity. Just as the WTO eliminated harmful tariffs in the 1990s, today we need institutions capable of providing solutions to new challenges, from some activities of state-owned enterprises to the kinds of barriers emerging behind borders.
We also support innovative partnerships that develop norms and rules to address these new concerns. We should build on the model of the Santiago Principles on sovereign wealth funds, which were negotiated jointly by host governments, recipient governments, the World Bank, IMF, OECD, and the sovereign funds themselves. This code of conduct governing sovereign investment practices has reassured stakeholders – investor nations, recipient nations, and the private sector. And it may prove a useful model for other shared challenges, like ensuring that state-owned companies and enterprises compete on the same terms as private companies.
As a second step, we are pursuing new cutting-edge trade deals that raise the standards for fair competition even as they open new markets. For instance, the Korea-US Free Trade Agreement, or KORUS, will eliminate tariffs on 95 percent of U.S. consumer and industrial exports within five years. Its tariff reductions alone could increase exports of American goods by more than $10 billion and help South Korea’s economy grow by 6 percent. So, whether you are an American manufacturer of machinery or a Korean chemicals exporter, this deal lowers the barriers to reaching new customers.
But this trade deal isn’t simply about who pays what tariff at our borders. It is a deeper commitment to creating conditions that let both our nations prosper as our companies compete fairly. KORUS includes significant improvements on intellectual property, fair labor practices, environmental protection and regulatory due process.
And let me add that the benefits of KORUS extend beyond the economic bottom line. Because this agreement represents a powerful strategic bet. It signals that America and South Korea are partners for the long term—economically, diplomatically, people to people. So, for all these reasons, President Obama is pursuing congressional approval of KORUS, together with necessary Trade Adjustment Assistance, as soon as possible. He is also pursuing passage of the Colombia and Panamanian Free Trade Agreements as well.
Now, we have learned that, in our system, getting trade deals right is challenging, painstaking work. But it’s essential. We consider KORUS a model agreement. Asian nations have signed over 100 bilateral trade deals in less than a decade, but many of those agreements fall short on key protections for businesses, workers, and consumers. There are a lot of bells and whistles, but many of the hard questions are glossed over or avoided.
Beyond that, there is now a danger of creating a hodgepodge of inconsistent and partial bilateral agreements which may lower tariffs, but which also create new inefficiencies and dizzying complexities. A small electronics shop, for example, in the Philippines might import alarm clocks from China under one free trade agreement, calculators from Malaysia under another, and so on—each with its own obscure rules and mountains of paperwork—until it no longer even makes sense to take advantage of the trade agreements at all. Instead, we should aim for true regional integration.
That is the spirit behind the Trans-Pacific Partnership, the so-called TPP, which we hope to outline by the time of APEC in November, because this agreement will bring together economies from across the Pacific—developed and developing alike—into a single trading community.
Our goal for TPP is to create not just more growth, but better growth. We believe the TPP needs to include strong protections for workers, the environment, intellectual property, and innovation. It should also promote the free flow of information technology and the spread of green technology, as well as the coherence of our regulatory system and the efficiency of supply chains.
We are working to ensure that the TPP is the first trade pact designed specifically to reduce barriers for small and medium-sized enterprises. After all, these are the companies that create most of the world’s jobs, but they often face significant challenges to engaging in international trade. So, the TPP aims to ensure fair competition, including competitive neutrality among the state-owned and private enterprises.
The idea is to create a new high standard for multilateral free trade, and to use the promise of access to new markets to encourage nations to raise their standards and join. We are taking concrete steps to promote regional integration and put ourselves on a path over time to bring about a genuine Free Trade Area of the Asia Pacific.
Finally, we need to pursue strategies for achieving not just growth, but sustainable, inclusive growth. Now, it is a maxim of mine that foreign policy must deliver results for people. Because ultimately, our progress will not be measured by profit margins or GDP, but by the quality of people’s lives – whether men and women can work in dignity, earn a decent wage, raise healthy families, educate their children, and take hold of the opportunities to improve their own and the next generation’s futures.
The United States supports a number of endeavors to promote inclusive growth in the region. Our Millennium Challenge Corporation, for example, makes large-scale investments in partner countries to reduce poverty through growth. We have a compact with the Philippines to invest in roads, community development projects, and more effective tax collection. We are negotiating a compact with Indonesia to promote low carbon development, and we began a threshold partnership with Timor-Leste earlier this year to fight corruption and improve children’s health.
Across the region, we are partnering with governments to encourage and help them uphold their commitments to inclusive growth by practicing good governance, providing public goods like health and education, and creating tax systems that improve revenue collection and ensure that everyone pays their fair share. We are supporting civil society and citizens alike in holding governments accountable, supplying job training and networking, and being a strong voice for bringing opportunity to places where it is scarce.
And we are working very closely with the private sector. Two years ago, I created a Global Partnership Initiative to support a new generation of public-private partnerships focused on everything from protecting and developing the Lower Mekong region to helping more families gain access to clean cookstoves, to protect them from the harmful smoke that kills two million people worldwide every year, and puts black soot carbon into the atmosphere.
We also launched the Global Entrepreneurship Program, to identify promising entrepreneurs, training them, linking them with mentors and potential investors, advocating for supportive policies and regulations, helping spread best practices. And we are supporting initiatives like Partners for a New Beginning, which supports economic opportunity, education, science and technology exchanges between the United States and Muslim communities worldwide, and we just opened a chapter in Indonesia.
We are connecting entrepreneurs with Diaspora communities in the United States that are eager to help fund new projects in countries where they have family ties. And we are looking to the private sector to help us. There are so many ways that we are grateful to the private sector. After all, it drives what we are talking about today. But we do need to try to consider, even within the constraints of modern financial practices and expectations, not just short-term benefits but long-term consequences. The work that each of you do in your businesses can help lift people’s lives, promote human rights and dignity, and create new markets, creating a virtuous cycle. Or it can further ensnare people in poverty and environmental degradations, creating a vicious cycle.
So that’s our agenda, and you can see why I’ve come to Hong Kong to talk about it, because here, we have a perfect example of what can be done and how important it is to lead in the economic realm with the kind of principles that Hong Kong has developed on. Now, we know very well that the future is arriving at a breathtaking pace, and the choices we make today will define what is possible economically for so many millions of people
And so while the specifics are forever changing, many of the ideals that guided us in the 20th century are the same ones we need to embrace in the 21st – a belief that a good idea is a good idea no matter where it comes from or from whom, a willingness to embrace change, a culture driven by marriage, faith in the notion that a rising tide of economic growth and innovation can improve everyone’s quality of life whether they live in Hong Kong or Appalachia. It is up to us to translate those enduring principles into common practice, shared prosperity, the opportunity for as many people as possible on both sides of the Pacific to live up to their God-given potential.
And what is standing in the way of achieving that vision? Well, there are many issues and challenges we can enumerate, but ultimately, it comes down to leadership – leadership in both the public and the private sector. We were blessed over the last part of the 20th century with farsighted and effective leaders in many parts of the world, leaders who set the rules that created the economic growth that we enjoyed in the 20th century, leaders who changed course in their own nations and catalyzed the extraordinary growth that we have seen in a country like China, leaders who had visions, private sector leaders who were able to look over the horizon and understand the consequences of not just this quarter’s results but the decades. We need that leadership again. We need it everywhere. And we need it both in governments and in business. That’s why the partnership between the public and private sectors is so essential.
Sitting in the office of the Secretary of State and knowing that I’m here in this position after so many luminaries in my own country have held it, it is a very humbling experience. And I often marvel at what they achieved. And I think a lot about George Marshall and Harry Truman and the Marshall Plan. What an amazing decision – to rebuild former enemies with an eye toward the future. And I think about it in very personal terms, because at the end of World War II, my late father had served in the Navy, so when he left service as so many men of that time did and returned to private life, the last thing he wanted to hear his president or secretary of State say was, “Guess what? We’re going to still be taxing you to send money to Germany, to Europe. We’re going to rebuild Japan because we believe it is in the best interests of your children.”
But it wasn’t only our public leadership who sounded that note. It was also our business leadership as well who basically said, “Okay, we get it. And we’re willing to do our part as well.” In fact, when support for the program was flagging, the White House and the State Department called the heads of large corporations and universities and asked them to fan out across the United States making the case. So the United States invested $13 billion over four years, which in today’s money would be about 150 billion.
Imagine leaders today in either government or business going to their people and saying something similar. When the Berlin Wall fell, Helmut Kohl said, “We’re going to pay what it takes to reunify Germany and we’re going to rebuild our neighbors because the wall is gone,” and people said, “Oh, what a incredible investment of our money. We won; we should be the ones getting all the benefits.” But no; it was a decision that was supported by both government and business.
We face a lot of similar challenges today, and we need visionary leaders in both government and business. But those leaders need to be guided by these principles. Whether we’re talking about politics or economics, openness, transparency, freedom and fairness stand the test of time. And in the 21st century, every citizen who is now potentially connected with everyone else in the world will not sit idly by if those principles do not deliver, and if governments and business do not make good on when we’ll provide long-term opportunity for all.
This agenda is good for Asia, it’s good for America, it’s good for business. Most importantly, it’s good for people. And I absolutely believe it will help us create more a peaceful, stable, and prosperous world for the rest of this century. Thank you all very much. (Applause.)