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Speeches and Remarks

Remarks by U.S. Consul General Stephen M. Young - "America's Renewed Commitment to Asia and what it Means for Hong Kong and Macau" to The American Chamber of Commerce in Hong Kong

May 3, 2012

(As Prepared For Delivery)

Introduction

Thanks Richard. As always, it is a pleasure to address the Chamber. I know you have heard me say this before, but I think it bears repeating. We at the Consulate greatly value our relationship with AmCham, and see our working partnership as essential to promoting our large and growing U.S. business interests here in Hong Kong.

Today, I'd like to talk about America's "pivot" to the Asia-Pacific region, which is essentially an expansion and intensification of our already significant role in the region. Having spent much of my professional career in Asia, and having witnessed many of the unprecedented changes that have occurred in this part of the world, I can tell you that this is indeed the Asia-Pacific century.

I will structure my remarks around what Secretary of State Hillary Clinton, in her article published in Foreign Policy magazine, called the "Six Key Lines of Action" to achieving President Obama's goals in Asia. And then I'll talk about what this means for U.S. relations with Hong Kong and Macau, particularly with respect to our business community.

Why a "Pivot" to the Asia-Pacific?

By virtue of its geography, the United States is both an Atlantic and a Pacific power. While we are proud of the enduring web of partnerships and institutions we have built across the Atlantic, such as NATO, it should not be forgotten that the United States has been, and always will be, a Pacific nation. Asian immigrants helped build America, and millions of American families cherish their ties to this region. Asia has seen generations of Americans serve, and even give their lives, so democracies could take root and free market economics could lift hundreds of millions to prosperity. During his thirty years of military service, my father spent time in Japan, Korea, Taiwan, Vietnam, and Thailand, so I grew up well aware of the American stake in this part of the world. Small wonder that my own career has centered on this dynamic region, and I can attest from my own experience that the U.S. commitment to Asia is long-standing and deeply rooted.

The Asia-Pacific region -- with the constant support of the United States -- has undeniably become a key driver of global politics and economic growth. Nearly half of the world's population is located here, and more than half of global economic output originates here. It is home to several of America's key allies and important emerging powers including China, India, and Indonesia. Active participation in Asia's growth and dynamism is central to American economic and strategic interests and a key priority for President Obama. The President has made a strategic decision to emphasize the United States' enhanced long-term role in this region and commitment to its future.

So what does all this mean? It means we seek security, which is the foundation of long-term peace and prosperity, and we seek an international order in which the rights and responsibilities of all nations and all people are upheld, where international law and norms are enforced, where commerce and freedom of navigation are not impeded, where emerging powers contribute to regional security, and where disagreements are resolved peacefully. That is what we have strived to achieve, and it is the future we seek to help consolidate for the Asia-Pacific.

How do we get there? Obviously our strategy must account for and adapt to the rapid and dramatic changes playing out across Asia. With this in mind, our work will proceed along six key lines of action. They are:

(1) strengthening bilateral security alliances;
(2) deepening our working relationship with emerging powers, including China;
(3) engaging with regional multilateral institutions;
(4) expanding trade and investment;
(5) forging a broad-based military presence; and
(6) advancing democracy and universal human rights

Let me briefly address each of these in turn.

1) Strengthening Bilateral Security Alliances

Our treaty alliances with Japan, the Republic of Korea (ROK), Australia, the Philippines, and Thailand are the foundation of our Asia-Pacific efforts. These alliances have supported regional peace and security for more than half a century, providing the safety net that has made such a vital contribution to the region's remarkable economic ascent.

Our alliance with Japan, a cornerstone of peace and stability in the region, demonstrates how our common vision of a stable regional order with clear rules of the road is put into practice. As one of the two largest donor countries in Afghanistan, and in its collaboration on counter-piracy operations off the Horn of Africa and humanitarian assistance and disaster relief from Pakistan to Haiti, Japan has proven its commitment as a responsible stakeholder in the international order.

Our alliance with the ROK also grows stronger and deeper, as we continually develop our combined capabilities to deter and respond to North Korean provocations. This was highlighted by President Obama's late-March visit to the ROK for the Nuclear Security Summit. Economically, we are also making progress together. The landmark U.S.-Korea Free Trade Agreement that entered into force March 15 will eliminate tariffs on 95% of U.S. consumer and industrial exports within five years and open up Korea's $580 billion services market to American companies. This agreement will create substantial export opportunities for both our countries and support tens of thousands of new export-related jobs both in Korea and the United States.

We are also modernizing our alliance with Australia. With our recently announced force posture changes, American and Australian military forces will work even more closely together and have new opportunities to train with other allies and partners from the Pacific to the Indian Ocean, and it will allow us to respond faster to the full range of challenges, including humanitarian crises and disaster relief.

With our longtime Southeast Asian allies, the Philippines and Thailand, we are renewing and strengthening our relationships. In the Philippines, we are increasing our alliance activities such as joint training focused on humanitarian and disaster relief, and working to support Filipino counterterrorism efforts through our Joint Special Operations Task Force. With Thailand--America's oldest treaty partner in Asia--we are working to enhance the region's network of humanitarian and disaster relief facilities.

2) Deepening Relationships within the Region

Even as we update our alliances to meet new demands, we are also deepening relationships with both emerging powers and longtime partners to help solve shared problems. Our outreach to China, India, Indonesia, Singapore, New Zealand, Malaysia, Mongolia, Vietnam, Brunei, and Pacific Island countries is a key component of our engagement with the region. We are asking these emerging partners to join us in shaping and participating in a rules-based regional and global order.

The largest of these emerging partners is, of course, China. It has now been 40 years since Air Force One touched down in Beijing and President Nixon reached out to renew the friendship between two great nations and peoples. President Nixon's mission was to bring China into the international system of trade and diplomatic relations. I am pleased to note the spirit of that visit has endured through both Republican and Democratic Administrations until this day, because the United States has a profound interest in the rise of a peaceful and prosperous China. We all are witness to the remarkable progress China has made in just a few short decades under Deng Xiaoping's visionary policy of reform and opening. Like so many other countries before it, China has prospered as it has become part of the open and rules-based system the United States helped to build and works to sustain.

One of the top priorities for this Administration has been to identify and expand areas of common interest with China. As a result, we launched the U.S.-China Strategic and Economic Dialogue in 2009 to build trust and expand the areas where we cooperate. In fact, today in Beijing, Secretary of State Clinton and Treasury Secretary Geithner, along with Vice Premier Wang Qishan and State Councilor Dai Bingguo have begun the fourth round of the S&ED. The S&ED helps to develop thriving and mutually beneficial bilateral trade and investment links between our countries. Our relationship generates economic benefits for Americans, but we need to do more to ensure that those benefits are sustained. And for trade and investment to be healthy, the playing field has to be fair, rules-based, and transparent.

This week in Beijing Secretary Clinton is also co-chairing with Chinese State Councilor Liu Yandong the third U.S.-China Consultation on People-to-People Exchange (CPE), a dialogue that aims to enhance and strengthen ties between the citizens of the United States and China in the areas of culture, education, sports, science and technology, and women's issues. This high-level forum is an example of the U.S. government's efforts to facilitate discussion on cooperation between both government and private-sector representatives in a broad, strategic manner.

In recent years, China has been a partner in helping to reduce tensions on the Korean Peninsula and preventing proliferation worldwide. The United States seeks more opportunities for cooperation with Beijing, including greater communication between our militaries to promote understanding and avoid miscalculation. We will attempt to do this, even as we continue to speak candidly to Beijing about the importance of upholding international norms, meeting international commitments, and respecting universal human rights. All of these themes played out during Vice President Xi Jinping's recent visit to the United States and in meetings between President Obama and President Hu Jintao, most recently during the Nuclear Security Summit in Seoul. We will continue to seek China's cooperation and communication in these areas during the annual Strategic and Economic Dialogue, which is taking place this week in Beijing.

3) Engaging with Regional Multilateral Institutions

As the United States works to strengthen bilateral relations with its close allies and emerging partners, we have not forgotten the importance of multilateral cooperation. A robust and coherent regional architecture in Asia would reinforce the system of rules and responsibilities set out in the WTO and other agreements, from protecting intellectual property to ensuring freedom of navigation, which forms the basis of an effective international order.

This is why the United States has moved to fully engage the region's multilateral institutions. America signed the Treaty of Amity and Cooperation with the Association of Southeast Asian Nations (ASEAN). We opened a U.S. Mission to ASEAN in Jakarta in 2010. President Obama became the first U.S. leader to participate in the East Asia Summit last November, based on the premise that this grouping has the potential to be the region's premier forum to discuss political and strategic issues. We are also committed to reinforcing APEC's role as the Asia-Pacific's premier regional economic institution, focused on advancing economic integration and trade linkages across the Pacific.

4) Expanding Trade and Investment

The United States recognizes Asia as a center of future economic growth. Our participation in the region's multilateral institutions, particularly APEC and ASEAN, is in keeping with our broader commitment to elevate "economic statecraft" as a pillar of American foreign policy.

Trade with Asia is critical to the U.S. economy, as exemplified by our dynamic trade relationship with APEC members. Six out of our top 10 trading partners are in APEC. U.S. trade with APEC members is over $2.3 trillion a year, over half of our total annual trade. That trade supports five million American jobs. As we strive to meet President Obama's goal of doubling U.S. exports by 2015, naturally we are looking for opportunities to do even more business and increase economic openness in the Asia-Pacific region.

To accomplish this goal, we are pursuing new cutting-edge trade deals, including the Korean-U.S. FTA agreement that I mentioned earlier, that raise the standards for fair competition and open new markets. We expect increased business opportunities to be generated by ASEAN's connectivity initiative, a key component of ASEAN integration.

We are also making progress in negotiating the ambitious Trans-Pacific Partnership, or TPP. This is going to be a high-standard, 21st-century regional trade agreement that will include traditional trade agreement issues that increase market access for goods and services, strengthen intellectual property protection, and reduce technical trade barriers. But it will also include new and emerging issues such as regulatory coherence among the member countries, helping small and medium-sized enterprises participate more actively in international trade and ensuring state-owned enterprises compete fairly with private companies. This is not designed to be a closed club. I see no reason why Hong Kong could not seek to be a participant in this ground breaking trade agreement.

5) Forging a Broad-Based Military Presence

Asia's remarkable potential for economic growth, however, depends on the security and stability that has long been supported by the United States. This is why President Obama has made continuation of the U.S. military presence in the region -- including the nearly 80,000 American servicemen and women stationed in Japan and the ROK-- a top priority and why he announced that reductions in U.S. defense spending will not come at the expense of our commitment to the Asia-Pacific region.

6) Advancing Democracy and Human Rights

Our most potent asset as a nation is the power of the values to which we aspire -- in particular, our steadfast support for the universal values of democracy and human rights. As President Obama so eloquently stated in his address to the Australian Parliament last November, "prosperity without freedom is just another form of poverty…Every nation must chart its own course, but it is also true that certain rights are universal; among them, freedom of speech, freedom of the press, freedom of assembly, freedom of religion, and freedom of citizens to choose their own leaders. These are not American rights…or Western rights. These are human rights. They stir in every soul, as we have seen in the democracies that have succeeded here in Asia."

This is why as America deepens its engagement with partners in Asia, we will continue to encourage them to meet their international human rights commitments and embrace reforms that will improve governmental transparency and accountability, strengthen rule of law, protect human rights, and advance political freedoms. Reforms that give people a greater stake in the success of their nations make societies more stable, prosperous and peaceful.

Hong Kong

Now I would like to focus on Hong Kong, and highlight how the U.S. policy goals that I have mentioned are being advanced through our work here. Many of you were in the audience when Secretary of State Hillary Clinton delivered a major policy address here last July, and some of you also probably noticed that her article, entitled "America's Pacific Century," in last November's issue of Foreign Policy magazine featured a picture of Victoria Harbor as the backdrop. I think both underscore Hong Kong's important position in the region and in U.S. strategic planning.

Under the Hong Kong Policy Act enacted by the U.S. Congress in 1992, the United States is committed to supporting Hong Kong's autonomy and unique way of life, as guaranteed under the Sino-UK Joint Declaration and codified in the Basic Law. The United States continues to support "one country, two systems," through which Hong Kong has been a leader in protecting civil liberties, rule of law, and human rights. Hong Kong's independent and internationally respected judiciary remains one of the most essential pillars of a society that has benefited from the free flow of information and respect for individual rights, including opportunities for people to protest and dissent.

Furthermore, long-standing U.S. policy has supported the express desire of the people of Hong Kong to participate in free elections by universal suffrage at the earliest possible date. We are often asked about what form that electoral system should take, and we continue to hold that that question should be answered through a broad and inclusive dialogue between the Hong Kong people, the political and civil society organizations the public has formed, and their government. I believe that dialogue was at play in the close interest displayed by the public in the policies and personalities of the candidates in this spring's Chief Executive campaign. We congratulate Mr. C.Y. Leung on his selection as Hong Kong's next Chief Executive and look forward to watching this dialogue further expand during his term, in anticipation of full universal suffrage in the Chief Executive election in 2017 and for the Legislative Council in 2020, in accordance with the Basic Law and the aspirations of the Hong Kong people.

On the business side, the strong presence of American firms here is directly related to Hong Kong's long-standing commitment to free trade. AmCham currently represents over 1,200 U.S. companies doing business in Hong Kong, of which over 800 are either regional offices or headquarters. U.S. companies appreciate the city's free market orientation, transparent legal system, and well-established rule of law, which together provide a stable and predictable foundation for growth. Hong Kong's model is one that many economies in Asia could usefully emulate.

Although its population is less than that of metropolitan Chicago, Hong Kong is America's 10th-largest export market for goods (surpassing Singapore) and 7th-largest market for agricultural products. Moreover, in the past two years, U.S. exports to Hong Kong grew the fastest (73 percent) among America's top 20 export markets. How did we achieve such remarkable figures? Hong Kong's open trading system was key, but active business promotion by AmCham and Hong Kong's Trade Development Council helped too. The results have been phenomenal.

However, trade is only part of the equation -- investment is the other. America remains the world's largest recipient of foreign direct investment (FDI). In 2010 there was $228 billion worth of investment flow, which goes towards supporting millions of U.S. jobs. Over the past few years, one interesting trend in terms of global capital flows was China's adoption of the "Go Abroad" policy. We saw the results of this policy in 2009, when for the first time China's outbound FDI exceeded its inbound FDI. The U.S. has also benefited from this trend. From 2005-2010, China was America's fasting growing source of FDI at a 53% annual average growth rate, though the growth was coming from a lower base than many developed countries. As many of you know, Hong Kong's role in this new shift of capital flows is invaluable as Hong Kong is reportedly the conduit for 65% of all Chinese outbound investments.

President Obama has noted that in this era of global capital mobility, the U.S. faces "increasing competition for retaining and attracting the industries of the future and the jobs they create." That is why in 2011 he launched the SelectUSA initiative, to provide a centralized investment promotion infrastructure and resources. The SelectUSA office can facilitate investment inquiries and help companies as they deal with various federal regulators on issues such as visas or the environment.

Here at the Consulate in Hong Kong we are eager to work with service providers -- such as investment bankers, accountants and lawyers -- to facilitate increased investment to the U.S. from China, Hong Kong and Macau.

As a reflection of the strong American business presence here, we estimate there are approximately 60,000 American citizens in Hong Kong, many of whom work in the financial services sector. Naturally, we at the Consulate pay close attention to the issues of concern to Americans living here. One of those issues that we hear a lot about is the need for a tax agreement between the U.S. and Hong Kong.

Another tax issue that we have heard a lot about lately is the Foreign Account Tax Compliance Act, or FATCA. This law was enacted by Congress in 2010 to combat tax evasion by U.S. persons holding investments in offshore accounts by requiring them to report those assets to the IRS. (Some of you may have noticed FATCA-related changes when filing your tax returns this year). In addition, the law requires foreign financial institutions to report directly to the IRS certain information about accounts held by U.S. taxpayers, or by foreign entities in which U.S. taxpayers hold substantial ownership interests. While the law and its requirements are rather complex, I wanted to mention today that we have been listening to the concerns of Americans here in our Consular district related to FATCA. Working with the U.S. Treasury and the Hong Kong Government, we are striving to minimize the burden which the law's reporting requirements place on individuals and financial institutions.

In that regard, let me underscore Hong Kong's important role as a link between Mainland China and international financial and commercial networks. I think it is no exaggeration to say that Hong Kong is on the leading edge of the reshaping of global financial markets. That is why so many State, Treasury and Commerce Department officials, from their Secretaries on down, visit Hong Kong. The United States is keenly aware of the trends and business opportunities that Hong Kong presents.

Speaking of opportunities, I would like to reiterate the U.S. government's willingness to "go to bat" for any U.S. companies seeking better market access or success with upcoming government procurements, what we in the business call "commercial diplomacy." I'll highlight two commercial diplomacy success stories from 2011. The first was the Consulate's assistance to Raytheon in securing a multi-million dollar tender for the Hong Kong airport's traffic control system. The second was support for the motorcycle company Brammo which won a contract to sell its 100% electric motorcycles to the Hong Kong police force. Working with our partners here, we want to make the most of Hong Kong's potential for market development.

Regionally, Hong Kong plays an important role in APEC and serves as a model for the free-trade principles we support. Hong Kong's membership in APEC, as well as in the World Trade Organization, the Asia Development Bank, and the Financial Stability Board are concrete examples of the success of "one country, two systems." We will continue to support Hong Kong's active participation in all these organizations.

In addition, the U.S. and Hong Kong cooperate as full-fledged partners on a wide range of pressing law enforcement and security issues, including money laundering, trade in illicit drugs, and IPR violations. The United States supports Hong Kong's continuing efforts to combat these illegal trades, to robustly enforce strategic trade controls and to fully implement internationally mandated sanctions, particularly against Iran and North Korea. These efforts are directly correlated to Hong Kong's continued prosperity as a leading global trading hub.

Given our goal of expanding trade and investment, it is natural for the United States to support the successful, open, and transparent economic integration of the Pearl River Delta (PRD). As Hong Kong and the Mainland continue to build stronger, more extensive ties -- for example through the Closer Economic Partnership Arrangement (CEPA) -- the United States hopes to play a role in more liberalized cross-border services, education, and trade. This can help promote trade between and through Hong Kong and the world's two largest economies. As Hong Kong looks to the PRD for growth opportunities, we are confident it will also continue to build upon its role as a regional and global hub. As the esteemed President of AmCham Hong Kong has put it, a hub cannot have all its spokes pointing in one direction.

At the same time that Hong Kong's proximity to the Pearl River Delta brings economic opportunity, it also exposes the city's residents to the airborne pollutants from factories located in the PRD. We share the Hong Kong community's very valid concerns about air quality here. You are probably aware of the recent Employment Conditions Abroad International report (only the latest of several such reports) highlighting Hong Kong's poor rating on air quality compared to other major Asian cities. An earlier University of Hong Kong study estimated that air pollution has been far more lethal than SARS or bird flu. We are encouraged by the Hong Kong government's plans to implement new Air Quality Objectives by 2014, but we would welcome moves towards compliance with international air quality standards. Our experience in the U.S. has shown that clean air and economic competitiveness are by no means mutually exclusive. As a result of our Clean Air Act, since 1990 the U.S. has been able to achieve a 41% reduction in 6 major pollutants while realizing a 64% increase in GDP. We believe the U.S. has a lot to offer in this regard, and will continue to foster collaboration between U.S. and Hong Kong government agencies, academic institutions, NGOs and green tech and service industries in order to help Hong Kong meet its air quality challenges.

Of course, the ease of travel has a direct bearing on the growth of business. So let me mention another issue that I know is of key concern to the members of the multinational business community here: visas. Under a pilot program implemented in Hong Kong in February this year, we are able to offer to qualified applicants the option to renew their visas without an interview by a consular officer. As a result, we are able to provide better customer service and keep wait times to a minimum. Generally, appointments can be made for the next day, with wait times of at most 5 days during the peak of the travel season. My consular colleagues and I are always looking for other ways to make it easier for business travelers to get their visas and travel to the U.S.

Macau

Let me now turn to the Macau SAR, where the United States is the second-largest foreign investor -- after Hong Kong! American companies, particularly in the gaming and hospitality industry, have readily recognized the unique position of Macau and have responded by building new casinos, hotels and exhibition centers and employing tens of thousands of Macau residents. The number of U.S. citizens in Macau is now estimated at over 4,000. Clearly, U.S. engagement with Macau represents a significant commitment.

It is remarkable to consider that Macau has grown faster than any other economy in the world over the past several years. Macau's GDP per capita, at roughly US$70,000, is now the highest in Asia. Obviously this rapid growth presents the government with significant challenges, and it must make important decisions about transportation, infrastructure, health care, labor, immigration, and the environment in order to make the growth sustainable. The United States will continue to work with the Macau government toward that objective.

Many of the major issues on which we are now expanding our engagement in the Asia-Pacific are also relevant to Macau. Promoting trade and investment opportunities and ensuring an equitable environment for foreign corporations are issues that we are continually assessing with our partners in Macau. As Macau seeks to diversify its economy, the potential for foreign investment is very promising. To be successful, however, we continue to look to the government of Macau to ensure that all foreign investors, including those from the United States, are treated fairly and in a transparent manner, including in recruiting labor and guaranteeing investor rights.

Increasing regional economic integration and strengthening governance are all areas where we work with Macau. Our cooperation on law enforcement, in particular, has been excellent. We are committed to continue to provide training, information, and technology to help Macau strengthen the rule of law, provide an open and fair business environment, and enhance prosperity for the people of Macau. We are also aware of political developments currently underway in Macau and are looking forward to the results of reforms proposed for the Legislative Assembly and the Chief Executive Election Committee. We hope these changes will reflect the wish of the people of Macau to have a greater say in their government.

Conclusion

As you can see, the dawn of the 21st century is an exciting time for the Asia-Pacific region. While the United States has never faltered in its commitment to and engagement with Asia, we are now striving to strengthen our relations in this region through a durable and consistent web of partnerships and institutions that embrace international standards of rights, openness, transparency, and fairness.

We hope to achieve this on a wide range of issues, but the United States cannot do this alone; it will require partnership with the peoples and governments of this region in order to be successful. Many of you in this room can be involved in this future. As the people of the United States and the people of Hong Kong and Macau find more ways to work together to build a secure, open, free, transparent and fair future in the Asia Pacific region, the impact on the whole world will be enormous.

Thank you.

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