Thank you, Henrietta, for that kind introduction and for your service, both in government and here at the Asia Society. And thank you, Suzanne, for bringing us together today. I am honored to be with you, especially in these beautiful surroundings. For almost sixty years, this organization has connected cultures— Asian and American—our ideas, leaders and people.

Of course, one of those people, a real presence here at the Asia Society, was your chairman and my friend of thirty years, Richard Holbrooke. Richard was famous for his work from the Balkans to South Asia. But he was also a real Asia hand as the youngest-ever Assistant Secretary of State for East Asia. Richard dedicated himself to the idea that progress and peace was possible—a lesson we carry forward, not only in Southwest Asia, where he worked so hard, but across the Asia-Pacific. I’ve come here today because this project has never been more consequential—the future of the United States has never been more closely linked to the economic, strategic and political order emerging in the Asia-Pacific.

Last November, I gave a speech in Washington outlining how the United States is rebalancing our global posture to reflect the growing importance of Asia. As President Obama’s second term begins, I want to focus on some of the specific challenges that lay ahead.

This is especially timely because this is a period of transition in Asia. New leaders have taken office in Tokyo and Seoul. In Beijing, China’s leadership transition will be completed this week. President Obama and those of us on his national security team have already had constructive conversations with each incoming leader. We’ll be seeing elections in Malaysia, Australia and elsewhere. These changes remind us of the importance of constant, persistent U.S. engagement in this dynamic region.

Why Rebalance Toward Asia

Let me begin by putting our rebalance to the Asia-Pacific in context. Every Administration faces the challenge of ensuring that cascading crises do not crowd out the development of long-term strategies to deal with transcendent challenges and opportunities.

After a decade defined by 9/11, two wars, and a financial crisis, President Obama took office determined to restore the foundation of the United States’ global leadership—our economic strength at home. Since then the United States has put in place a set of policies that have put our economy on the path to recovery, and helped create six million U.S. jobs in the last thirty-five months.

At the same time, renewing U.S. leadership has also meant focusing our efforts and resources not just on the challenges that make today’s headlines, but on the regions that will shape the global order in the decades ahead. That’s why, from the outset—even before the President took office—he directed those of us on his national security team to engage in a strategic assessment, a truly global examination of our presence and priorities. We asked what the U.S. footprint and face to the world was and what it ought to be. We set out to identify the key national security interests that we needed to pursue. We looked around the world and asked: where are we over-weighted? Where are we underweighted?

That assessment resulted in a set of key determinations. It was clear that there was an imbalance in the projection and focus of U.S. power. It was the President’s judgment that we were over-weighted in some areas and regions, including our military actions in the Middle East. At the same time, we were underweighted in other regions, such as the Asia-Pacific. Indeed, we believed this was our key geographic imbalance.

On one level, this reflected a recognition of the critical role that the United States has played in Asia for decades, providing the stabilizing foundation for the region’s unprecedented social and economic development. Beyond this, our guiding insight was that Asia’s future and the future of the United States are deeply and increasingly linked. Economically, Asia already accounts for more than one-quarter of global GDP. Over the next five years, nearly half of all growth outside the United States is expected to come from Asia. This growth is fueling powerful geopolitical forces that are reshaping the region: China’s ascent, Japan’s resilience, and the rise of a “Global Korea,” an eastward-looking India and Southeast Asian nations more interconnected and prosperous than ever before.

These changes are unfolding at a time when Asia’s economic, diplomatic and political rules of the road are still taking shape. The stakes for people on both sides of the Pacific are profound. And the U.S. rebalance toward the Asia-Pacific is also a response to the strong demand signal from leaders and publics across the region for U.S. leadership, economic engagement, sustained attention to regional institutions and defense of international rules and norms.

What Rebalancing Is, and What It Isn’t

Against this backdrop, President Obama has been clear about the future that the United States seeks. And I would encourage anyone who has not already done so to read the President’s address to the Australian parliament in Canberra in 2011. It is a definitive statement of U.S. policy in the region; a clarion call for freedom; and yet another example of how, when it comes to the Asia-Pacific, the United States is “all in.”

As the President explained in Canberra, the overarching objective of the United States in the region is to sustain a stable security environment and a regional order rooted in economic openness, peaceful resolution of disputes, and respect for universal rights and freedoms.

To pursue this vision, the United States is implementing a comprehensive, multidimensional strategy: strengthening alliances; deepening partnerships with emerging powers; building a stable, productive, and constructive relationship with China; empowering regional institutions; and helping to build a regional economic architecture that can sustain shared prosperity.

These are the pillars of the U.S. strategy, and rebalancing means devoting the time, effort and resources necessary to get each one right. Here’s what rebalancing does not mean. It doesn’t mean diminishing ties to important partners in any other region. It does not mean containing China or seeking to dictate terms to Asia. And it isn’t just a matter of our military presence. It is an effort that harnesses all elements of U.S. power—military, political, trade and investment, development and our values.

Perhaps most telling, this rebalance is reflected in the most valuable commodity in Washington: the President’s time. It says a great deal, for instance, that President Obama made the determination that the United States would participate every year in the East Asia Summit at the Head of State level and hold U.S.-ASEAN summits; that he has met bilaterally with nearly every leader in Southeast Asia, either in the region or in Washington; and that he has engaged with China at an unprecedented pace, including twelve face-to-face meetings with Hu Jintao.

Let me turn to each pillar of our strategy and several of the challenges we face in 2013.

Alliances

First, we will continue to strengthen our alliances. For all of the changes in Asia, this much is settled: our alliances in the region have been and will remain the foundation of our strategy. I feel confident is saying that our alliances are stronger today than ever before.

Our alliance with Japan remains a cornerstone of regional security and prosperity. I am not sure American-Japanese friendship has ever been more powerfully manifest than it was two years ago today, on 3/11, after the tsunami and Fukishima nuclear crisis. As allies and friends, Americans inside and outside government rushed to lend a hand to Japan’s disaster response and recovery.

That same spirit of solidarity was evident when Japan’s new Prime Minister, Shinzo Abe, became one of the first foreign leaders President Obama hosted in his second term. They had excellent discussions on trade, expanding security cooperation, and the next steps toward realigning U.S. forces in Japan. Looking ahead, there is scarcely a regional or global challenge in the President’s second-term agenda where the United States does not look to Japan to play an important role.

With the Republic of Korea, the United States is building on our joint vision for a global alliance and deeper trading partnership. I just returned from Seoul, where I attended the inauguration of President Park, Korea’s first woman president. I was struck by how much our leaders have in common in terms of their priorities and vision. When we met, I conveyed to President Park President Obama’s unwavering commitment to the defense of the Republic of Korea, and President Park gave her full support to modernizing our alliance and continuing the effort to partner on a wide range of regional and global issues. During my visit, President Park accepted President Obama’s invitation to visit Washington, and I can announce today that we look forward to welcoming her to the White House in May.

In Japan and South Korea, the United States can look to new leaders who are firmly committed to close security cooperation with the United States. This is no accident and no surprise, because polls in both countries show public support for their alliance with the United States in the range of 80 percent. At the same time, it is clear that, as we look forward, maintaining security in a dynamic region will demand greater trilateral coordination from Japan, Korea and the United States.

With Australia—following the President’s visit and joint announcement with Prime Minister Gillard of the rotational deployment of U.S. Marines—we are bringing our militaries even closer. Prime Minister Gillard has been an outstanding partner in our efforts to advance prosperity and security to the Asia-Pacific region. The United States has reinvigorated longstanding alliances with Thailand and the Philippines to address counterterrorism, humanitarian assistance and disaster relief. Philippine President Aquino’s visit to Washington and President Obama’s visit to Thailand and meeting with Prime Minister Yingluck both speak to another key facet of our strategy—the United States is not only rebalancing to the Asia-Pacific, we are rebalancing within Asia to recognize the growing importance of Southeast Asia. Just as we found that the United States was underweighted in East Asia, we found that the United States was especially underweighted in Southeast Asia. And we are correcting that.

In these difficult fiscal times, I know that some have questioned whether this rebalance is sustainable. After a decade of war, it is only natural that the U.S. defense budget is being reduced. But make no mistake: President Obama has clearly stated that we will maintain our security presence and engagement in the Asia-Pacific. Specifically, our defense spending and programs will continue to support our key priorities – from our enduring presence on the Korean Peninsula to our strategic presence in the western Pacific.

This means that in the coming years a higher proportion of our military assets will be in the Pacific. Sixty percent of our naval fleet will be based in the Pacific by 2020. Our Air Force is also shifting its weight to the Pacific over the next five years. We are adding capacity from both the Army and the Marines. The Pentagon is working to prioritize the Pacific Command for our most modern capabilities – including submarines, Fifth-Generation Fighters such as F-22s and F-35s, and reconnaissance platforms. And we are working with allies to make rapid progress in expanding radar and missile defense systems to protect against the most immediate threat facing our allies and the entire region: the dangerous, destabilizing behavior of North Korea.

North Korea

Let me spend a few moments on North Korea.

For sixty years, the United States has been committed to ensuring peace and stability on the Korean Peninsula. This means deterring North Korean aggression and protecting our allies. And it means the complete denuclearization of the Korean Peninsula. The United States will not accept North Korea as a nuclear state; nor will we stand by while it seeks to develop a nuclear-armed missile that can target the United States. The international community has made clear that there will be consequences for North Korea’s flagrant violation of its international obligations, as the UN Security Council did again unanimously just last week in approving new sanctions in response to the North’s recent provocative nuclear test.

U.S. policy toward North Korea rests on four key principles:

First, close and expanded cooperation with Japan and South Korea. The unity that our three countries have forged in the face of North Korea’s provocations—unity reaffirmed by President Park and Prime Minister Abe —is as crucial to the search for a diplomatic solution as it is to deterrence. The days when North Korea could exploit any seams between our three governments are over.

And let me add that the prospects for a peaceful resolution also will require close U.S. coordination with China’s new government. We believe that no country, including China, should conduct “business as usual” with a North Korea that threatens its neighbors. China’s interest in stability on the Korean Peninsula argues for a clear path to ending North Korea’s nuclear program. We welcome China’s support at the UN Security Council and its continued insistence that North Korea completely, verifiably and irreversibly abandon its WMD and ballistic missile programs.

Second, the United States refuses to reward bad North Korean behavior. The United States will not play the game of accepting empty promises or yielding to threats. As former Secretary of Defense Bob Gates has said, we won’t buy the same horse twice. We have made clear our openness to authentic negotiations with North Korea. In return, however, we’ve only seen provocations and extreme rhetoric. To get the assistance it desperately needs and the respect it claims it wants, North Korea will have to change course. Otherwise, the United States will continue to work with allies and partners to tighten national and international sanctions to impede North Korea’s nuclear and missile programs. Today, the Treasury Department is announcing the imposition of U.S. sanctions against the Foreign Trade Bank of North Korea, the country’s primary foreign exchange bank, for its role in supporting North Korea’s WMD program.

By now it is clear that the provocations, escalations and poor choices of North Korea’s leaders are not only making their country less secure – they are condemning their people to a level of poverty that stands in stark contrast not only to South Korea, but every other country in East Asia.

Third, we unequivocally reaffirm that the United States is committed to the defense of our homeland and our allies. Recently, North Korean officials have made some highly provocative statements. North Korea’s claims may be hyperbolic – but as to the policy of the United States, there should be no doubt: we will draw upon the full range of our capabilities to protect against, and to respond to, the threat posed to us and to our allies by North Korea. This includes not only any North Korean use of weapons of mass destruction—but also, as the President made clear, their transfer of nuclear weapons or nuclear materials to other states or non-state entities. Such actions would be considered a grave threat to the United States and our allies and we will hold North Korea fully accountable for the consequences.

Finally, the United States will continue to encourage North Korea to choose a better path. As he has said many times, President Obama came to office willing to offer his hand to those who would unclench their fists. The United States is prepared to help North Korea develop its economy and feed its people—but it must change its current course. The United States is prepared to sit down with North Korea to negotiate and to implement the commitments that they and the United States have made. We ask only that Pyongyang prove its seriousness by taking meaningful steps to show it will abide by its commitments, honor its words, and respect international law.

Anyone who doubts the President’s commitment needs look no further than Burma, where new leaders have begun a process of reform. President Obama’s historic visit to Rangoon is proof of our readiness to start transforming a relationship marked by hostility into one of greater cooperation. Burma has already received billions in debt forgiveness, large-scale development assistance, and an influx of new investment. While the work of reform is ongoing, Burma has already broken out of isolation and opened the door to a far better future for its people in partnership with its neighbors and with the United States. And, as President Obama said in his speech to the people of Burma, we will continue to stand with those who continue to support rights, democracy and reform. So I urge North Korea’s leaders to reflect on Burma’s experience.

Emerging Powers

Even as we keep our alliances strong to deal with challenges like North Korea, we continue to carry out a second pillar of our strategy for the Asia-Pacific: forging deeper partnerships with emerging powers.

To that end, the President considers U.S. relations with India—the world’s largest democracy—to be “one of the defining partnerships of the twenty-first century.” From Prime Minister Singh’s visit in 2009 to the President’s trip to India in 2010, the United States has made clear at every turn that we don’t just accept India’s rise, we fervently support it.

U.S. and Indian interests powerfully converge in the Asia-Pacific, where India has much to give and much to gain. Southeast Asia begins in Northeast India, and we welcome India’s efforts to “look East,” from supporting reforms in Burma to trilateral cooperation with Japan to promoting maritime security. In the past year, for example, India-ASEAN trade increased by 37 percent to $80 billion.

The United States has also worked hard to realize Indonesia’s potential as a global partner. We have put in place a wide-ranging Comprehensive Partnership. We have welcomed Indonesia’s vigorous participation in the region’s multilateral forums, including hosting APEC and promoting ASEAN unity. We are also working with Indonesia and Brunei on a major new initiative to mobilize capital to help bring clean and sustainable energy to the Asia-Pacific. And, of course, no U.S. President has ever had closer personal ties to an Asia-Pacific nation than President Obama does with Indonesia—a warm relationship that was on full display in November 2010 when the President visited Jakarta.

China

The third pillar of our strategy is building a constructive relationship with China. The President places great importance on this relationship because there are few diplomatic, economic or security challenges in the world that can be addressed without China at the table and without a broad, productive, and constructive relationship between our countries. And we have made substantial progress in building such a relationship over the past four years.

As China completes its leadership transition, the Administration is well positioned to build on our existing relationships with Xi Jinping, Li Keqiang and other top Chinese leaders. Taken together, China’s leadership transition and the President’s re-election mark a new phase in U.S.-China relations – with new opportunities.

Of course, the U.S.-China relationship has and will continue to have elements of both cooperation and competition. Our consistent policy has been to improve the quality and quantity of our cooperation; promote healthy economic competition; and manage disagreements to ensure that U.S. interests are protected and that universal rights and values are respected. As President Obama has made clear, the United States speaks up for universal values because history shows that nations that uphold the rights of their people are ultimately more successful, more prosperous and more stable.

As President Obama has said many times, the United States welcomes the rise of a peaceful, prosperous China. We do not want our relationship to become defined by rivalry and confrontation. And I disagree with the premise put forward by some historians and theorists that a rising power and an established power are somehow destined for conflict. There is nothing preordained about such an outcome. It is not a law of physics, but a series of choices by leaders that lead to great power confrontation. Others have called for containment. We reject that, too. A better outcome is possible. But it falls to both sides—the United States and China—to build a new model of relations between an existing power and an emerging one. Xi Jinping and President Obama have both endorsed this goal.

To build this new model, we must keep improving our channels of communication and demonstrate practical cooperation on issues that matter to both sides.

To that end, a deeper U.S.-China military-to-military dialogue is central to addressing many of the sources of insecurity and potential competition between us. This remains a necessary component of the new model we seek, and it is a critical deficiency in our current relationship. The Chinese military is modernizing its capabilities and expanding its presence in Asia, drawing our forces into closer contact and raising the risk that an accident or miscalculation could destabilize the broader relationship. We need open and reliable channels to address perceptions and tensions about our respective activities in the short-term and about our long-term presence and posture in the Western Pacific.

It is also critical that we strengthen the underpinnings of our extensive economic relationship, which is marked by increasing interdependence. We have been clear with Beijing that as China takes a seat at a growing number of international tables, it needs to assume responsibilities commensurate with its economic clout and national capabilities. As we engage with China’s new leaders, the United States will encourage them to move forward with the reforms outlined in the country’s twelfth Five Year Plan, including efforts to shift the country away from its dependence on exports toward a more balanced and sustainable consumer-oriented growth model. The United States will urge a further opening of the Chinese market and a leveling of the playing field. And the United States will seek to work together with China to promote international financial stability through the G-20 and to address global challenges such as climate change and energy security.

Another such issue is cyber-security, which has become a growing challenge to our economic relationship as well. Economies as large as the United States and China have a tremendous shared stake in ensuring that the Internet remains open, interoperable, secure, reliable, and stable. Both countries face risks when it comes to protecting personal data and communications, financial transactions, critical infrastructure, or the intellectual property and trade secrets that are so vital to innovation and economic growth.

It is in this last category that our concerns have moved to the forefront of our agenda. I am not talking about ordinary cybercrime or hacking. And, this is not solely a national security concern or a concern of the U.S. government. Increasingly, U.S. businesses are speaking out about their serious concerns about sophisticated, targeted theft of confidential business information and proprietary technologies through cyber intrusions emanating from China on an unprecedented scale. The international community cannot afford to tolerate such activity from any country. As the President said in the State of the Union, we will take action to protect our economy against cyber-threats.

From the President on down, this has become a key point of concern and discussion with China at all levels of our governments. And it will continue to be. The United States will do all it must to protect our national networks, critical infrastructure, and our valuable public and private sector property. But, specifically with respect to the issue of cyber-enabled theft, we seek three things from the Chinese side. First, we need a recognition of the urgency and scope of this problem and the risk it poses—to international trade, to the reputation of Chinese industry and to our overall relations. Second, Beijing should take serious steps to investigate and put a stop to these activities. Finally, we need China to engage with us in a constructive direct dialogue to establish acceptable norms of behavior in cyberspace.

We have worked hard to build a constructive bilateral relationship that allows us to engage forthrightly on priority issues of concern. And the United States and China, the world’s two largest economies, both dependent on the Internet, must lead the way in addressing this problem.

Regional Architecture

This leads to the fourth pillar of our strategy—strengthening regional institutions— which also reflects Asia’s urgent need for economic, diplomatic and security-related rules and understandings.

From the outset, the Obama Administration embarked on a concerted effort to develop and strengthen regional institutions—in other words, building out the architecture of Asia. And the reasons are clear: an effective regional architecture lowers the barriers to collective action on shared challenges. It creates dialogues and structures that encourage cooperation, maintain stability, resolve disputes through diplomacy and help ensure that countries can rise peacefully.

There is no underestimating the strategic significance of this region. The ten ASEAN countries, stretching across the Indian and Pacific Oceans, have a population of well over 600 million. Impressive growth rates in countries like Thailand – and a 25-percent increase in international investment in 2011—suggest that ASEAN nations are only going to become more important, politically and economically.

Since taking office, the Obama Administration has signed ASEAN’s Treaty of Amity and Cooperation and appointed the first resident U.S. Ambassador to ASEAN. As I said, the President has traveled every year to meet with ASEAN’s leaders– and will continue to do so going forward. The President also has made a decision to participate at the Head of State level every year at the East Asia Summit, consistent with the United States’ goal to elevate the EAS as the premier forum for dealing with political and security issues in Asia.

Looking ahead, it is clear that territorial disputes in the resource-rich South and East China Seas will test the region’s political and security architecture. These tensions challenge the peaceful underpinnings of Asia’s prosperity and they have already done damage to the global economy. While the United States has no territorial claims there, and does not take a position on the claims of others, the United States is firmly opposed to coercion or the use of force to advance territorial claims. Only peaceful, collaborative and diplomatic efforts, consistent with international law, can bring about lasting solutions that will serve the interests of all claimants and all countries in this vital region. That includes China, whose growing place in the global economy comes with an increasing need for the public goods of maritime security and unimpeded lawful commerce, just as Chinese businessmen and women will depend on the public good of an open, secure Internet.

Economic Architecture

Finally, the United States will continue to pursue the fifth element of our strategy: building an economic architecture that allows the people of the Asia-Pacific –including the American people—to reap the rewards of greater trade and growth. It is our view –and I believe history demonstrates – that the economic order that will deliver the next phase of broad-based growth that the region needs is one that rests on economies that are open and transparent, and trade and investment that are free, fair and environmentally sustainable. U.S. economic vitality also depends on tapping into new markets and customers beyond our borders, especially in the fastest-growing regions.

And so President Obama has worked with the region’s leaders to support growth-oriented, job-creating policies such as the U.S.- Korea Free Trade Agreement. The Administration has also worked through APEC and bilaterally to lower economic barriers at and within borders, increase and protect investment, expand trade in key areas, and protect intellectual property.

The centerpiece of our economic rebalancing is the Trans-Pacific Partnership (TPP)—a high-standard agreement the United States is crafting with Asia-Pacific economies from Chile and Peru to New Zealand and Singapore. The TPP is built on its members’ shared commitment to high standards, eliminating market access barriers to goods and services, addressing new, 21st century trade issues and respect for a rules-based economic framework. We always envisioned the TPP as a growing platform for regional economic integration. Now, we are realizing that vision—growing the number of TPP partners from seven when President Obama took office to four more: Vietnam, Malaysia, Canada and Mexico. Together, these eleven countries represent an annual trading relationship of $1.4 trillion. The growing TPP is already a major step toward APEC’s vision of a region-wide Free Trade Area of the Asia-Pacific.

The TPP is also attractive because it is ambitious but achievable. We can get this done. In fact, the United States is working hard with the other parties to complete negotiations by the end of 2013. Let me add that the TPP is intended to be an open platform for additional countries to join – provided they are willing and able to meet the TPP’s high standards

The TPP is part of a global economic agenda that includes the new agreement we are pursuing with Europe—the Transatlantic Trade and Investment Partnership. Transatlantic trade is nearly one trillion dollars each year, with $3.7 trillion in investments. Even small improvements can yield substantial benefits for our people. Taken together, these two agreements—from the Atlantic to the Pacific—and our existing Free Trade Agreements, around the world could account for over sixty percent of world trade. But our goals are strategic as well as economic. Many have argued that economic strength is the currency of power in the twenty-first century. And across the Atlantic and Pacific, the United States will aim to build a network of economic partnerships as strong as our diplomatic and security alliances—all while strengthening the multilateral trading system. The TPP is also an absolute statement of U.S. strategic commitment to be in the Asia-Pacific for the long haul. And the growth arising from a U.S.-Europe agreement will help underwrite NATO, the most powerful alliance in history.

Conclusion

In conclusion, I believe President Obama’s strategic focus on the Asia-Pacific is already a signature achievement. But its full impact will require sustained commitment over the coming years.

I would leave you with a simple thought experiment that says a great deal about the role of the United States in shaping the way forward. I think it’s fair to ask: without the stabilizing presence of U.S. engagement over the past seventy years, where would the Asia-Pacific be today?

Without the U.S. guarantee of security and stability, would militarism have given way to peace in Northeast Asia? Would safe sea lanes have fueled Pacific commerce? Would South Korea have risen from aid recipient to trading powerhouse? And would small nations be protected from domination by bigger neighbors? I think the answer is obvious.

Credit for the Asia-Pacific’s extraordinary progress in recent decades rightly belongs to the region’s hardworking and talented people. At the same time, it is fair to say – and many leaders and people across the region would agree—the United States provided a critical foundation for Asia’s rise.

As such, the United States will continue to work to ensure that the Asia-Pacific grows into a place where the rise of new powers occurs peacefully; where the freedom to access the sea, air, space, and cyberspace empowers vibrant commerce; where multinational forums help promote shared interests; and where the universal rights of citizens, no matter where they live, are upheld.

The Obama Administration has worked to make our rebalance to the Asia-Pacific a reality because the region’s success in the century ahead –and the United States’ security and prosperity in the 21st century—still depend on the presence and engagement of the United States in Asia. We are a resident Pacific power, resilient and indispensable. And in President Obama’s second term, this vital, dynamic region will continue to be a strategic priority. Thank you.

Tom Donilon