The US and Australia: Partners in Sustaining Prosperity in the Asia-Pacific – Thomas Nides

Thomas Nides is Deputy Secretary of State for Management and Resources, serving as Chief Operating Officer of the Department and as alter ego to Secretary Clinton. Appointed by President Obama, he was confirmed by the Senate on 22 December 2010 and sworn in on 3 January 2011. Prior to joining the administration, Thomas Nides was the Chief Operating Officer of Morgan Stanley from 2005-2010. On a visit to Australia, Thomas Nides addressed The Sydney Institute on Tuesday 6 September 2011.

THE UNITED STATES AND AUSTRALIA: PARTNERS IN SUSTAINING PROSPERITY IN THE ASIA-PACIFIC

THOMAS NIDES

Sixty years ago this week, our countries signed the Australia-New Zealand-US Treaty.  It was a time of tension and uncertainty across the Asia Pacific. World War II had ended. The Cold War was beginning. And we cemented a partnership that has withstood the test of time.

Today’s Asia-Pacific is a very different place. Skylines are rising and poverty rates are falling.   Hundreds of millions of lives have been transformed by peace and growth. Amid all the change, what has not changed has been our friendship with the Australian people and your government.  Our soldiers have fought side by side in every major war for a century. Our alliance has anchored a stable, secure Asia-Pacific. Together we have made the world a safer place. We view Australia as a go-to ally and partner in Asia and across the world.

Today, America is focused on a changing Pacific. We are strengthening and broadening alliances like this one. We are reaching out to emerging powers like China, India and Indonesia.  We are more engaged than ever before with institutions like ASEAN and the East Asia Summit—and we have the frequent flier miles to prove it. Being a resident Pacific nation isn’t just about our military or diplomatic presence. We are engaging as an economic power and partner as well.

That’s what I’d like to talk about today. Before moving to the State Department, I served as Chief Operating Officer of Morgan Stanley. I approach these issues not just as a diplomat but as a recovering businessman. In that spirit, I would like to focus my remarks on how America and Australia can work together to achieve shared prosperity, fair economic competition, and sustainable growth across the Asia-Pacific region.

I start with the idea that our economic futures are linked – to each other’s and to the growth of the region we share. America understands that 70 per cent of global purchasing power is outside our borders. Our economic revival depends on our ability to reach new markets, new customers and new centers of growth. The Asia-Pacific now accounts for over one-third of global economic output and $320 billion a year of America exports. Australia, for its part, has deep economic ties on both sides of the Pacific. Your economy is even more focused on foreign trade than ours. You export to China, Japan and Korea, while America remains Australia’s largest partner for inbound and outbound investment. Asian economies look to both of our countries as sources of innovation and trade and as champions for open markets.

The key question now is: how can we create the conditions that will sustain shared economic progress across our region? As Secretary Clinton put it six weeks ago in Hong Kong: “How do we turn a generation of growth into a century of shared prosperity?”

We know we have plenty of work ahead to sustain America’s leadership in the global economy.  Rest assured, we are working on it.  We are investing in our infrastructure, clean energy, health, and education.  And – as I can tell you – we are also reforming our financial system.  And, while progress in democracies can be messy and halting, Congress has raised our debt ceiling. And we continue to work to make the difficult choices necessary to rein in our deficit.

We also know that our country has enduring strengths that aren’t going anywhere:  more patents than any other nation; the world’s best universities; the most productive workers in the world; and a culture of entrepreneurship where a couple of kids in a dorm room can create a company like Facebook. People and nations have bet against us before. Those of you who are old enough know that the last time we had these discussions about American economic decline, a group of young Americans were quietly inventing Microsoft, Apple and the Internet. As Mark Twain would say, reports of our demise are greatly exaggerated.

Together, America and East Asia have work to do to rebalance the global economy. As Chinese President Hu Jintao, President Obama, and the G20 have all agreed, America must borrow and spend less and save more. Many Asian economies need to act on their recognition that growth requires stronger and broader-based domestic demand.

But we have an even greater and more sustained challenge. We have to come together to agree on the rules and principles that will guide economic competition. It’s no surprise that we look to Australia as a kindred spirit in promoting what truly are shared values. As Secretary Clinton has explained, we seek a global economic system that is open, free, transparent and fair. Let me take a minute to explain what these principles mean to us.

Open means that people everywhere can participate in markets anywhere. We seek to open our economy to trade and investment from talented people everywhere. This includes Australians who have not only stolen the Tour de France from the Europeans – they have taken over Hollywood and the Oscars as well. Did you know that Google Maps was developed by the company’s team here in Sydney? And the highly complex trailing edge components – you may know them as “wing flaps” – on Boeing’s Dreamliner passenger jet – with radically improved fuel efficiency in civil aviation – are being manufactured down in Victoria. We count on this type of openness as a source of strength, and we value our collaborations with you.

Second, we seek a free global economic system. Free means that ideas, information, products and capital can move without unfair and unnecessary barriers. That includes everything from Internet freedom to open doors for American and Australian investors in every country. Third, transparent means that regulations are known to all and applied equally to all. It means widespread participation in writing the rules and broad respect for the rule of law.

Finally, these three contribute to a fourth principle, which is fairness. This is what sustains the faith of people, companies and governments. And it is challenged when supply chains are blocked, or when countries refuse to protect intellectual property or force companies to give it away just to enter a new market. Without fairness, there is no trust. And without trust, people tend to protect their narrow interests, at the expense of shared growth

These values don’t belong to any one country. They are Australian values every bit as much as they are American values. They don’t belong to Westerners only. These are the values of businessmen and women across Asia – from Vietnamese manufacturers to Indian investors to Chinese artists.

These principles are easy to say and difficult to implement. But those who enjoy the benefits of an open system must take responsibility for sustaining it. Let me tell you about the steps we are taking to promote these principles around the world.

First, we are promoting trade and investment. Our countries have had a high-quality free trade agreement since 2005 and we’ve seen trade surge between our two countries.

America and Australia are working to sign cutting-edge trade deals with other partners as well.  We are aiming to sign deals that don’t simply lower tariffs for certain goods – although that’s certainly important. We want to do more. We seek to open up markets and provide protections for our investors and for high value-added services sectors – both areas where the US and Australia enjoy strong comparative advantages.

We recognise the importance of a “fair go” for our citizens at home, and want to see fair competition abroad as well. Our FTAs include provisions to ensure that our trading partners respect intellectual property rights and don’t allow anti-competitive practices that hurt consumers and competitors. Similarly, both the US and Australia know that strong labor rights and environmental protections have been essential ingredients of shared prosperity at home, and we want to see our trading partners playing by the same rules. Accordingly, we integrate these concerns into our FTAs to ensure that free trade does not just promote growth – but promotes the right kind of growth.

That is the spirit that defines the AUSFTA and economic relations with Australia. It inspires the bilateral free trade agreements that America is close to finalizing with South Korea, Colombia, and Panama. And we are hopeful that, as Australia negotiates deals with the large economies of East Asia, it too will insist on promoting economic growth that is widely shared and sustainable.

Even as we pursue bilateral deals, we are mindful that our longer-term goal is to create high standards that will allow for true regional integration. And the most promising vehicle to get us there is the Trans-Pacific Partnership, or TPP. The idea is to bring together economies from across the Pacific – from Brunei and Vietnam to Peru and Chile to the United States – to form a single trading community.

The TPP can be an economic game-changer for the entire region.  It can set the stage to bring about a genuine Free Trade Area of the Asia Pacific. But we need to do this right – and we are counting on Australia to help.

Second, we are working through Asian economic institution to promote the principles of fair economic competition. We are pleased to be chairing APEC this year. Australia was a founding member of the APEC forum 20 years ago and remains a leader in working toward the Bogor goals for free trade and investment. APEC is every bit as vital to Australia’s economic future as it is to our own. We welcome your partnership, and we appreciate your help on APEC’s structural reform agenda and so many other shared challenges.

Third, we are partnering with Australia to find better and smarter ways to promote development. This lies at the heart of our efforts to create stable, cohesive societies – as well as new customers and markets for our products.

When Secretary Clinton and Foreign Minister Rudd meet in San Francisco next week, they’ll discuss some of the ways we’re working together to reduce poverty. Without stealing my boss’ thunder, I will mention that AUSAID has a wealth of experience and expertise for other donors, including the United States, to draw on, especially in Southeast Asia and the Pacific. Australia has a special opportunity to help those countries build the capacity, the institutions, and the regulatory framework to be part of Asia’s economic future.

AUSAID and USAID are also working together to confront the sources of instability and extremism in front-line states. In Afghanistan, Australian aid dollars are funding education for young girls; and in Pakistan, AUSAID is helping the country recover from the disastrous floods of July last year; and in Libya, Australia has been the third-largest provider of humanitarian assistance. We are grateful for your efforts.

The final part of our strategy I want to mention is this: we are creating new partnerships with other governments, with NGOs and with the private sector.  I have made it a focus of my work to mobilize the American business community to invest in places where there are not only profits to be made – but important national interests at stake. We have brought together business owners to connect them with opportunities in Iraq and Afghanistan. Earlier this summer in Baghdad, I celebrated the opening of the American Chamber of Commerce in Iraq.  And we are working with the US Chamber of Commerce to encourage companies to invest in ways that help Japan’s recovery.

All of our companies – American companies, Australian companies, Asian companies – have an important role to play in promoting inclusive, sustainable growth.  Sometimes, this is as simple as asking the private sector to do so. At other times, we need to work together to set new standards for responsible corporate behavior – for human rights, economic inclusion, labor rights and environmental stewardship. And all the time, we have to urge companies to recognize the long-term stakes of building prosperity as well as the need to make a quick profit.

It’s a big agenda. We are working to create jobs at home by strengthening the global economic system.  We are working bilaterally, multilaterally, and with a wide range of actors. We are working to sustain the system of rules-based competition that is key to prosperity everywhere.  And we are working to improve the character of that system to make growth more inclusive, more sustainable and more beneficial to more people.

All of those challenges point us toward Australia. At the turn of the last century, an American Secretary of State declared that “the Pacific is the Ocean of the future.” That future is now. Our challenge is to seize it and shape it to bring prosperity to Americans, Australians and people everywhere.  And as we do – just as we always have – we will look to Australia as a trading partner, an ally and a friend.