MS. DUDLEY: Thank you very much. And thank you, everyone, for joining the call today. Our hope is to provide you all with a more detailed sense of the Vice President’s schedule and goals during his trip to China, Mongolia, and Japan.
With us today, we have National Security Advisor to the Vice President Tony Blinken, Senior Director for Asian Affairs on the national security staff Danny Russel, and Undersecretary for International Affairs at the Department of Treasury Lael Brainard. This call will be on the record, and our speakers are happy to take questions after they give some brief opening statements at the top.
We’d like to keep this call as focused on the Vice President’s trip as much as possible. So with that, I’m just going to go ahead and turn it over to Tony Blinken and let him kick it off.
MR. BLINKEN: Amy, thanks very much and thanks to everyone for joining the call today. Let me run you through the big picture of the Vice President’s trip with some highlights from the schedule and then turn it over to Danny, and then to Lael, to go into more detail on some of the policy questions we’re looking at.
This is the Vice President’s first trip to East Asia as Vice President. But, I think as many of you probably know, he traveled to Asia many times as a senator, including back in 1979 as part of the first Senate delegation to China after we normalized relations.
This trip that starts tomorrow is part of the administration’s dedicated effort over the last two-and-a-half years to renew and intensify the U.S. role in Asia. We’ve pursued a consistent strategy set out by President Obama to expand our presence and our influence in the region. The Vice President’s trip is a reflection of our belief that the United States is a pacific power whose interests are inextricably linked with Asia’s economic security and political order.
The trip begins with four days in China, Beijing, and the southwestern city of Chengdu. We then travel to Mongolia for a day, and finally to our close ally Japan for two days. The dates specifically are China, August 17 through 22; Mongolia, August 22nd; and Japan, August 22nd to the 24th.
So let me just give you a quick preview of each part before I turn it over to Danny and to Lael. Let me start with China. This trip to China originated in President Hu Jintao’s state visit in January, when President Hu Jintao formally invited the Vice President to China and we in turn invited Vice President Xi to the United States. These reciprocal visits are mentioned in the January 2011 U.S.-China joint statement.
One of the primary purposes of the trip is to get to know China’s future leadership, to build a relationship with Vice President Xi, and to discuss with him and other Chinese leaders the full breadth of issues in the U.S.-China relationship. Simply put, we’re investing in the future of the U.S.-China relationship.
The schedule, very broadly — there is obviously a lot more detail that will come out in the days ahead. But let me just give you the headlines from our three days in Beijing and one day in Chengdu. Day one in Beijing, we’ll have a welcoming ceremony. There will be two meetings with Vice President Xi and a meeting with the head of China’s National People’s Congress Wen Jiabao, and finally a formal banquet hosted by Vice President Xi in the evening.
The second day, also in Beijing, will begin with a roundtable discussion with U.S. and Chinese business leaders. And we’ll be talking about the business communities’ experiences operating in each other’s countries — the opportunities, the obstacles — the role that governments can play to enhance cooperation and address some of the challenges that our business communities face. And then, in the afternoon, the Vice President meets with Premier Wen and with President Hu.
Day three is both Beijing and Chengdu. The Vice President will spend some time with the embassy staff. And, of course, we have a new ambassador in China, Gary Locke. So he’ll be meeting with them. And we’ll be spending some time traveling to Chengdu in the afternoon.
And then, day four in Chengdu, a quick word about that. Given the growth and urbanization of China’s western provinces and also U.S. investment there and the fact that no U.S. leader has visited there, we decided to travel to Chengdu in Sichuan Province. In Chengdu, the Vice President will give a speech on U.S.-China relations at Sichuan University. He’ll meet with senior provincial officials from Sichuan.
He then travels to Dujiangyan City, jointly with Vice President Xi. They’ll visit a high school that was rebuilt following the 2008 earthquake. And then, in the evening, we expect the Vice President and Vice President Xi to have an informal dinner at a local restaurant in Chengdu.
That then brings us to Mongolia, something we are very excited about. This is, on one level, a truly historic visit. I’m sure many of you will recall the last visit of a Vice President to Mongolia. That was in 1944, when FDR’s Vice President Henry Wallace toured Asia and included a stop in Mongolia.
Mongolia offers an important example of a successful transition to a strong democracy and a partner with whom we’re expanding cooperation in a broad variety of diplomatic, economic, and defense areas. Like China, this visit to Mongolia is a reflection of our broader effort to engage emerging powers as a way to build a secure, prosperous, and democratic Asia.
I think many of you know the Mongolian President Elbegdorj was here not too long ago. He met with President Obama in the Oval Office in June. And this trip builds on that important visit.
So we arrive in Ulaanbaatar on the morning of August 22nd. The Vice President meets with the Prime Minister and then with the President. And the Mongolians are going to host a cultural display of traditional Mongolian sports for us. I’m told that may include archery, wrestling, and horse racing. And we’re looking forward to that.
And, finally, Japan. The Vice President will be in Japan for two days. He is visiting Japan to underscore that the U.S.-Japan alliance is strong. And, of course, Japan is an ally, but also a friend. And the U.S. stands with and supports Japan and the Japanese people as they recover from the March earthquake, tsunami, and nuclear emergency.
So while he is in Japan, the Vice President will meet with Prime Minister Kan. He is going to visit the northeastern city of Sendai, where American forces took the lead in reopening the airport after the earthquake. And it also — he is going to have an opportunity to thank American military and civilian personnel for the remarkable support and assistance they provided during Japan’s so-called “triple disaster” earlier this year.
So that’s a broad overview of the trip and stops. Let me turn it over to Danny Russel to go into more detail on the policy, and then to Lael Brainard.
Danny.
MR. RUSSEL: Okay, thanks Tony. And let me pick up on some of the points that you made, hopefully without being duplicative. Namely that the visit by the Vice President to these three important Asian countries is of course timely, but it really also needs to be seen in context in the continuum of our policy approach to Asia.
You’ll see that the schedule and the substantive agenda for the meetings exemplifies that approach that’s been taken by the Obama administration since day one, since we’ve been investing heavily in the Asia-Pacific region. And our policy approach has been built on strengthening U.S. alliances and expanding our cooperation with emerging powers, and also working together in the effort to help to develop regional institutions in the Asia-Pacific region.
I also want to mention that the Vice President’s trip beginning tomorrow kicks off a very busy diplomatic calendar for our Asia policy that extends through the fall, when President Obama will host APEC in Honolulu in November and then will also attend the East Asia Summit in Bali, Indonesia. So planning for the upcoming meetings will I’m sure be very much on the Vice President’s mind when he is in Beijing and in Tokyo.
On China, I guess I would start by reminding everyone that President Obama has met with President Hu Jintao already nine times and with Premier Wen Jiabao three times since 2009. It seems likely that our two presidents will have meetings at some of the upcoming major multilateral events this fall.
And, as Tony mentioned, the Vice President’s trip and Vice President’s Xi Jinping’s reciprocal visit to follow are part of the continuum of interactions between the leaders of our two countries. I think what’s particularly important is that this will be the first time that a very senior U.S. official has spent a substantial amount of time with Vice President Xi Jinping.
They have met and begun developing a relationship. But I think this visit provides an opportunity for the Vice President to talk extensively with Vice President Xi about the breadth of issues in our bilateral relationship and in the region.
And, as Tony said, it’s an example of our investing in the future of the U.S.-China relationship. The context, as I’ve said, for this meeting between the two vice presidents is that we make a point of sustaining regular and high-level contacts with Chinese leaders as a way to ensure that we’re able to speak directly and speak authoritatively about the entire spectrum of issues that we are working together on.
And what makes the visit timely is that both of our countries are trying to tackle a range of security and economic issues — North Korea and Iran’s nuclear weapons programs of course; bilateral and global economic issues, which Lael will speak to; the security architecture in East Asia; stability and security in South Asia and Afghanistan and Pakistan. These are the sorts of issues that we should expect the Vice President to discuss with Vice President Xi, as well as other members of China’s senior leadership during the trip.
Naturally, there are issues that the Chinese themselves typically raise like Taiwan and Tibet. And there are issues that every senior official who meets with Chinese leaders is going to raise, like human rights.
I think the key point with regard to the Vice President’s meetings is that they are part of the continuum, and they continue and expand the ongoing and the constructive dialogue that President Obama has been conducting since he and Vice President Biden came into office.
Now, to Mongolia — Mongolia is taking over this year the chairmanship of the Community of Democracies. And one of the points that the President made when he hosted President Elbegdorj in the Oval Office in June is that Mongolia has an activist approach to strengthening democratic principles throughout the world. And it’s particularly credible and influential, given the tremendous strides that Mongolia itself has made since the end of the Cold War.
So the Vice President’s trip to Mongolia is clearly a strong expression of support for Mongolia’s growing democracy. And the trip reflects also the tremendous strides that we’ve made together in diplomatic and security cooperation.
On the diplomatic side, Mongolia has been working with us on a raft of important issues — non-proliferation, peacekeeping, on human rights. On the defense and security side, Mongolia is making substantial contributions of troops to the operations both in Iraq and Afghanistan. So there is a lot of good work and a lot to talk about.
The third stop, Japan, is significant I think in two respects. One is as pertains to Japan’s recovery and reconstruction after the March triple disaster. And I think the other significant element in the Vice President’s visit to Tokyo and Sendai is underscoring the tremendous strength and great importance of the U.S.-Japan alliance.
The President and the Vice President recognize that the U.S. economy and the global economy has a big stake in Japan’s full and fast recovery. So this trip I think offers the Vice President the opportunity to see for himself the great strides that the Japanese are making, and in many areas with the help of U.S. companies and certainly with the full support of the U.S. government.
I know the President and the Vice President are confident Japan will emerge stronger than before, and the sooner that happens, obviously the better, given Japan’s role in regional security and global trade and finance and so on.
There’s a lot going on at this particular time, so in addition to economic issues, certainly the Vice President will be discussing security issues in Northeast Asia, particularly regarding North Korea and issues such as stability in Afghanistan where Japan is making an immense contribution. Of course, there are alliance coordination issues and there are bilateral issues to touch on.
But I think fundamentally, given the strength of the U.S.-Japan relationship, the Vice President’s visit serves to demonstrate how much we care about our friends.
So why don’t I stop there and turn it over to Secretary Brainard.
MS. BRAINARD: The economic side of the trip obviously is very important. The trip provides an opportunity for Vice President Biden to advance American economic interests in the dynamic region in Asia broadly. Of course, our trade and investment ties with China in particular are growing rapidly in both directions and we expect this to continue to be a vitally important trade investment relationship in terms of our broader jobs and exports agenda.
If you look over the past year, U.S. exports to China have grown faster than to the rest of the world and have now topped $100 billion over the last year. And, of course, those experts are supporting hundreds of thousands of American jobs in a whole variety of sectors ranging from high-tech to soy beans, from aircraft to autos.
We’ve also seen a very rapid expansion of Chinese foreign direct investment into the U.S. market. It more than doubled over the last year to $6 billion, which is also part of the President and the Vice President’s national jobs and exports strategy.
The Vice President will be carrying the message that we need to continue to work to level the playing field for American workers and American businesses. We’ve made quite a bit of progress over the last year, but we’re going to need to continue working on that front. If you look at the exchange rate, we’ve seen appreciation since China moved to allow its exchange rates to resume flexibility in June of 2010.
We’ve seen nearly 7 percent bilateral appreciation against the dollar in nominal terms. Of course, that is even greater if you adjust for the faster rate of inflation in China relative to the United States. We’re going to keep pushing on that front. The exchange rate remains substantially undervalued, but we have seen some important progress there to date.
Through the President’s visit with President Hu in January through the JCCT, through the Strategic and Economic Dialogue we’ve also made some progress. China has removed discriminatory procurement policies and it has agreed to strengthen enforcement of intellectual property rights in a number of very important ways. But, of course, those agendas are a work in progress. We’re going to continue pushing on that.
Both China and the United States have tremendous mutual interest in seeing a stronger global economic recovery. And China has a very important role to play in that process. China needs to reorient its economic strategy away from a traditional reliance on net export-led growth to a domestic demand-led growth strategy. And that’s something that we’ve been working together I think very effectively in the G20 and in the Strategic and Economic Dialogue and in the President’s and Vice President’s dealings with Chinese senior leadership.
And so, the Vice President is going to continue pushing on that front. And he will also have an opportunity to discuss some of the vital trade issues with the business community. Those are very important commitments made in the JCCT and the S&ED and in the President’s visit to continue to improve the protection of intellectual property and to continue to open their markets to U.S. exports.
I think it’s important to stress that we each have challenges. China has the challenges of moving from an export-led to a domestic demand-led economy. They have challenges associated with an aging workforce. They have challenges of moving from technology adopters to technology originators. And, as you know, we are also taking on our fiscal and growth challenges with that very important deal that the Vice President was so critical in securing two weeks ago.
And so, we’re both working very hard to address our respective challenges in a way that I think will be good for our citizens and good mutually for growth in each other’s economies and good for the world economy.
So with that, let me turn it back over to Tony.
MR. BLINKEN: Great. Amy, I think we’re ready to take any questions.
MS. DUDLEY: Yes, I think we’re ready for questions.
Q Yes, thanks for doing this call. I want to ask you a little bit — you mentioned that human rights would be something that would be discussed. Vice President Xi, just a month ago, was in Tibet and was talking a little bit about how — worried about the separatism, as he puts it, from the Dalai Lama’s group. What’s your message going to be on human rights and specifically on Tibet considering — particularly if it involves Vice President Xi in Tibet?
MR. RUSSEL: Hi, Danny here. Let me take that. As you know, the President just met with the Dalai Lama at the White House last month. And so our position on Tibet is consistent and clear. And as we always do, I think the Vice President can be expected to reinforce the message to the Chinese that there is great value in their renewing their dialogue with the representatives of the Dalai Lama, with the goal of peacefully resolving differences.
More broadly, the protection of human rights globally is a central part of President Obama’s foreign policy in China as it is elsewhere. And, as we do consistently, we will raise our concerns about the human rights situation throughout China. We do this directly and privately with Chinese leaders and policy makers. And, as the Vice President did during the S&ED — the Security and Economic Dialogue in Washington in May — we’ll also make our views known publicly as well.
Q Hi, thanks for doing the call. Obviously, the trip is coming after the prolonged debt debate here. And we saw some of China’s warnings since then about getting our fiscal house in order. How much — I guess, can you go into a little bit of what we might expect to hear from the Vice President in terms of his message to the Chinese about our fiscal situation?
MR. BLINKEN: Lael, do you want to start?
MS. BRAINARD: Yes, thanks. I think the — obviously, the Vice President will be in a good position to talk about the very strong deficit reduction package that we concluded here recently. Obviously, the United States has the capacity, the will, and the commitment to tackle our major fiscal and economic challenges.
The agreement that was reached, the Budget Control Act that was signed on August 2nd, is a major step in this direction both enacting $900 billion in deficit reduction right up front through discretionary spending caps, followed by a process for cutting an additional $1.5 trillion through the bipartisan committee whose members have now been named.
But as you’ve seen in the last week, there continues to be extremely strong investor demand for U.S. Treasury securities, recognizing that this market continues to be the deepest, most liquid in the world and I think recognition widely in China and around the world that the U.S. economy remains the most flexible, the most innovative. And, again, as China moves forward to address its challenges, as we move forward to address our challenges, we have very strong mutual interests. And I expect that those are the issues that the Vice President is going to want to raise with the Chinese just as they want to move forward in creating a more hospitable environment.
To become a more innovative economy, they’re going to need to start addressing some of the fundamental problems that our companies have been encountering in their market for some time — protection of intellectual property, trying to dismantle a set of financial controls that tend to channel cheaper credit to state-owned enterprises and starve both their more innovative firms’ capital and also create an un-level playing field for our firms.
So I think as we move forward on addressing our fiscal challenges, Chinese policy makers know that they can no longer count on the U.S. consumer to provide that demand to the global economy. They’ve got tremendous capacity to help bolster global growth by switching to a domestic demand-led growth strategy. And there’s tremendous opportunity for U.S. companies to assist them in doing that and to help create jobs here at home.
Q Thank you very much. Secretary Clinton has promised Senator Cornyn that the decision on F-16 sales would be made by October 1st. Are you concerned at all that any F-16 sales announcement might have an impact on Vice President Xi Jinping’s reciprocal visit to the United States or even President Hu’s trip to Hawaii for the APEC summit, so much so that Vice President Biden will try to explain to the Chinese why the U.S. has to do what is required by law to do? Thank you.
MR. RUSSEL: Hi, Danny here. I’ll take that. Well, I think it’s important to make clear that on the issue of Taiwan that the Vice President has no plans to raise the Taiwan issue, certainly not arms sales during his trip. He is not going to China to address that issue. He is going, as we described, to address the broad spectrum of security, economic, political issues that we and China have to work together on.
Now, it would not be surprising at all for the Chinese interlocutors to raise Taiwan, as they typically do, and convey their views and their concerns. Our China policy is unchanged. It’s based on the three U.S.-China communiqués. And our policy towards Taiwan is based on the Taiwan Relations Act, and there is no change in that. We take our obligations under the Taiwan Relations Act very seriously and we don’t negotiate these issues with China.
I think that the fact of the matter is that there has been considerable progress in cross-Strait dialogue to reduce tensions. And this is something that’s in everyone’s interest and something that we hope will continue. We think that our policy and the Taiwan Relations Act supports an environment that is conducive to the improved relations across the Taiwan Strait and that at the same time U.S.-China relations will continue to flourish.
Q Hi. Thanks for doing the call. Which U.S. and Chinese business leaders will be at the meeting with the Vice President in Beijing on the second day of the trip? And then, also will the issue of cyber theft and phone hacking come up in the wake of the McAfee study last week?
MR. BLINKEN: In terms of the business leaders and representatives, we’ll get you a list. I don’t have that at hand, but we’ll get you a list and put that out in the next day or so.
MR. RUSSEL: Tony, just on the second part of the question, I won’t comment on a specific report, but I will say that cyberspace is global and both the U.S. and China are major users of cyberspace, and we therefore both have real vulnerabilities. And, as a result, we began under the Strategic and Economic Dialogue, conversations with the Chinese, which we can discuss cyber security issues and enhance our understanding of our respective systems in order to promote cooperation in addressing both incidents and in system protections.
Q Hi, thanks very much. Just a quick follow up question first for Danny. Can you comment on the report regarding Taiwan today that the United States refused its request for 66 new Lockheed Martin F-16s? And then, a follow up for Ms. Brainard as well, do you feel as though the Vice President will have to defend the U.S. and its position on debt and deficit? I know you mentioned the recent deal, but does this feel in that sense that the Vice President will have to really do a sales pitch while he is there? Thank you.
MR. RUSSEL: Right. No, I won’t comment specifically on a particular story other than to say, as I did, that we take our obligations under the Taiwan Relations Act very seriously. That’s manifest in the Obama administration’s decision to conclude an arms sale to Taiwan last year.
And this really isn’t what the Vice President’s trip is about. The Vice President’s trip is about deepening our relationships and our cooperative efforts in Asia.
MS. BRAINARD: Yes, I think on the economic front I think the Vice President, of course, is going to want to share with foreign leaders in all three countries the plan that President Obama, Vice President Biden have worked on both to address the deficit, the long-run deficit in the Budget Control Act, but also to help support U.S. recovery, which is very important around the world.
China has a huge interest in strong growth in the United States. And, again, there are a lot of strengths of the U.S. economy that I think China is quite interested in helping to learn about. And just if you look at the very strong rate of foreign direct investment into the U.S. economy over the last year, you’ll see tremendous Chinese interest in the many strengths across a whole variety of sectors that the U.S. has.
So, again, Chinese leaders are confronting a set of challenges there having to do with demographics, having to do with a need to move from various labor-intensive, very capital-intensive, export-oriented growth to growth that is supported by domestic consumption; to growth that is much more innovation, intensive; and growth that requires the much more sophisticated financial markets. And so, there’s a lot of strengths that U.S. companies, the U.S. economic model, can now bring to bear as Chinese leaders think about their own domestic growth challenges.
MR. BLINKEN: Let me just add a quick footnote to that. This is Tony. I think you’ve got to also put this in a broader context, and I know the Vice President will want to do that as well. As President Obama recently reminded the American people, and I’m sure the Vice President will have an opportunity to do that on his trip, and I quote — this is from something the President said last week — “For all the challenges we face, we continue to have the best universities, some of the most productive workers, the most innovative companies, the most adventurous entrepreneurs on earth.”
And, as Lael suggested, it’s the many strengths of our economy that have helped our country withstand economic and financial challenges over the years; strengthen the economy’s institutions, flexibility, the ability to innovate, the ability to give Americans, as well as those who come to the United States, an opportunity to pursue a prosperous future. So that broader context will certainly be part of the Vice President’s trip.
Q Hi. Yes, I was just curious about more specifics on the Vice President’s Japan portion of the trip, especially the particular date that he will be visiting Sendai.
MR. BLINKEN: So for the Japan piece, he will be in Japan for two days. And he’ll be there — arriving on the 22nd, and he will be in Sendai on the 23rd.
Q Thank you. Could you elaborate a little bit on the currency issue, such as the Vice President is going to talk to China on the value of the dollar and also the appreciation of the RMB? And also, one question for Mr. Blinken — to this speech that the Vice President is going to give in Chengdu, what are some of the key issues that he is going to discuss relative to the U.S. and China relations? Thank you.
MS. DUDLEY: I think this is going to be our last question.
MS. BRAINARD: If you reflect on how the world is growing right now, obviously it is critically important for the continued sustainability and greater balance in global growth for the emerging markets that have capacity, that have untapped domestic demand to be able to play a greater role as consumers in some of the advanced economies including the U.S. build back their balanced sheets. And that is a widely acknowledged shared challenge that if we do it successfully, it would be good for all of us.
In China, in the 12th Five Year Plan, Chinese leaders have obviously agreed with the need for China to chart a economic course that is much more domestic demand-led. A critical part of the adjustment mechanism in the global economy is for China to allow its exchange rate to move more quickly. And I think Chinese leaders have acknowledged that. They recognized that this is important in China that the — the exchange rate to absorb more of the adjustment. It really takes the pressure off of inflation, and so you would see less inflationary pressures as well.
So it’s something that we think is very important for global growth. It’s of course critically important for U.S. exports and jobs. But we think it’s also directly in the interests of Chinese goals to lessen inflationary pressures.
We’ve seen some appreciation of the exchange rate. As I’ve said, we’ve seen the exchange rate appreciating on a bilateral basis, nearly 7 percent now. And if you take into account inflation, it’s been somewhat faster. But we’re not satisfied with that rate of appreciation. We know that it remains substantially undervalued. And the Vice President will want to put special emphasis on that, because it’s important for China, it’s important for other emerging markets, and it’s important for U.S. jobs and exports.
MR. BLINKEN: And on the speech, I’m going to let the speech mostly speak for itself in a few days time. But just very broadly, as I mentioned at the top, the Vice President has been engaged with China for more than 30 years. And he was in China in 1979, as part of the first delegation of U.S. senators after relations were normalized. He met with then Vice Premier Deng Xiaoping. And he of course has been back since and has been very engaged.
So he has a vantage point to really speak about the broad sweep of the relationship over the past few decades. How China has evolved, how the relationship has evolved, the work that we’re doing together cooperatively across an incredibly broad range of issues — security, economic, and others — and also some aspects of our competition, because we also have a competitive relationship, but one that need not be zero sum, where one side’s gain is the other’s loss.
And I think one aspect of the speech that — one issue that he is likely to emphasize in the speech as well are some of the challenges of building an innovation economy in the 21st century. But the bottom line on the speech and indeed on the trip I think — and this will be reflected in what the Vice President says — is that for President Obama, for the Vice President, the bottom line is that it’s two great powers and global actors in this century. China and the United States face many similar challenges and share many common responsibilities.
And the Vice President and President have the conviction that the more we can act on those challenges and on those responsibilities together, the more our people and the world will benefit. And that’s the larger message of the speech in Chengdu. Thanks very much.
MS. DUDLEY: All right. Thanks, everyone, for getting on the call today. If you do have any follow up questions, feel free to direct to me or my colleagues in the Vice President’s press office. Look forward to updates on the trip and thank you everyone, again.