[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]

THE U.S.-PHILIPPINES ALLIANCE: DEEPENING THE SECURITY AND TRADE
PARTNERSHIP

=======================================================================

HEARING

BEFORE THE

SUBCOMMITTEE ON TERRORISM, NONPROLIFERATION, AND TRADE

OF THE

COMMITTEE ON FOREIGN AFFAIRS
HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

SECOND SESSION

__________

FEBRUARY 7, 2012

__________

Serial No. 112-120

__________

Printed for the use of the Committee on Foreign Affairs

Available via the World Wide Web: http://www.foreignaffairs.house.gov/
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COMMITTEE ON FOREIGN AFFAIRS

ILEANA ROS-LEHTINEN, Florida, Chairman
CHRISTOPHER H. SMITH, New Jersey HOWARD L. BERMAN, California
DAN BURTON, Indiana GARY L. ACKERMAN, New York
ELTON GALLEGLY, California ENI F.H. FALEOMAVAEGA, American
DANA ROHRABACHER, California Samoa
DONALD A. MANZULLO, Illinois DONALD M. PAYNE, New Jersey
EDWARD R. ROYCE, California BRAD SHERMAN, California
STEVE CHABOT, Ohio ELIOT L. ENGEL, New York
RON PAUL, Texas GREGORY W. MEEKS, New York
MIKE PENCE, Indiana RUSS CARNAHAN, Missouri
JOE WILSON, South Carolina ALBIO SIRES, New Jersey
CONNIE MACK, Florida GERALD E. CONNOLLY, Virginia
JEFF FORTENBERRY, Nebraska THEODORE E. DEUTCH, Florida
MICHAEL T. McCAUL, Texas DENNIS CARDOZA, California
TED POE, Texas BEN CHANDLER, Kentucky
GUS M. BILIRAKIS, Florida BRIAN HIGGINS, New York
JEAN SCHMIDT, Ohio ALLYSON SCHWARTZ, Pennsylvania
BILL JOHNSON, Ohio CHRISTOPHER S. MURPHY, Connecticut
DAVID RIVERA, Florida FREDERICA WILSON, Florida
MIKE KELLY, Pennsylvania KAREN BASS, California
TIM GRIFFIN, Arkansas WILLIAM KEATING, Massachusetts
TOM MARINO, Pennsylvania DAVID CICILLINE, Rhode Island
JEFF DUNCAN, South Carolina
ANN MARIE BUERKLE, New York
RENEE ELLMERS, North Carolina
ROBERT TURNER, New York
Yleem D.S. Poblete, Staff Director
Richard J. Kessler, Democratic Staff Director
------

Subcommittee on Terrorism, Nonproliferation, and Trade

EDWARD R. ROYCE, California, Chairman
TED POE, Texas BRAD SHERMAN, California
JEFF DUNCAN, South Carolina DAVID CICILLINE, Rhode Island
BILL JOHNSON, Ohio GERALD E. CONNOLLY, Virginia
TIM GRIFFIN, Arkansas BRIAN HIGGINS, New York
ANN MARIE BUERKLE, New York ALLYSON SCHWARTZ, Pennsylvania
RENEE ELLMERS, North Carolina

C O N T E N T S

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Page

WITNESSES

The Honorable Kurt Campbell, Assistant Secretary, Bureau of East
Asian and Pacific Affairs, U.S. Department of State............ 8
The Honorable Peter Lavoy, Ph.D., Acting Assistant Secretary of
Defense, Asian and Pacific Security Affairs, U.S. Department of
Defense........................................................ 18

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

The Honorable Edward R. Royce, a Representative in Congress from
the State of California, and chairman, Subcommittee on
Terrorism, Nonproliferation, and Trade: Prepared statement..... 4
The Honorable Kurt Campbell: Prepared statement.................. 11
The Honorable Peter Lavoy, Ph.D.: Prepared statement............. 20

APPENDIX

Hearing notice................................................... 32
Hearing minutes.................................................. 33

THE U.S.-PHILIPPINES ALLIANCE: DEEPENING THE SECURITY AND TRADE
PARTNERSHIP

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TUESDAY, FEBRUARY 7, 2012

House of Representatives,
Subcommittee on Terrorism,
Nonproliferation, and Trade,
Committee on Foreign Affairs,
Washington, DC.
The committee met, pursuant to notice, at 2 o'clock p.m.,
in room 2172 Rayburn House Office Building, Hon. Edward R.
Royce (chairman of the subcommittee) presiding.
Mr. Royce. This meeting of the Subcommittee on Terrorism,
Nonproliferation, and Trade will come to order.
Today we are focusing on deepening the security and trade
partnership between the Philippines and the United States. It
is really a rejuvenated relationship, a relationship that goes
back, of course, many, many years to the point in time when,
with our traditional ally, the Philippines, we stood shoulder-
to-shoulder in fighting Japanese aggression. The Philippines is
one of five treaty allies that the United States has in Asia.
Last year marked our alliance's 60th anniversary.
Now, for those of us here in the House, I think there is no
blunting the fact that there is a feeling that the Philippines
has been largely ignored in U.S. foreign policy for the last
few years. We need to change that. This is the first
congressional hearing focused solely on the U.S.-Philippine
relationship in many years. Fortunately, we are going to hear
today that there are a lot of things changing in terms of the
relationship between the Philippines and the United States
right now.
Since 9/11, the U.S. and the Philippines have been very
closely cooperating on counterterrorism. The Abu Sayyaf group,
the Moro National Liberation Front, the Moro Islamic Liberation
Front, those groups are responsible for the deaths of over
100,000 Filipinos. And that struggle goes back decades.
U.S. Armed Forces have worked under the armed forces of the
Philippines to provide training and logistics and other support
to root out these terrorist organizations. And Philippine
forces have had a good deal of success. As all of you know,
last week Philippine forces killed some of Southeast Asia's
most wanted terrorists, including Marwan, a key link to the Abu
Sayyaf terrorist group.
So, security cooperation has intensified lately. The U.S.
and the Philippines regularly conduct joint military exercises.
U.S. ships make regular port calls, and last year the United
States transferred the Coast Guard cutter Hamilton to the
Philippine navy. The navy there rechristened that the Gregorio
del Pilar. I have written the Defense Department requesting
that the Philippines be given priority when other vessels are
transferred. Another capital ship will soon arrive in Manila,
and there is talk of even greater military cooperation between
the two countries.
Both countries have serious concerns about Chinese
aggression in the South China Sea. At least nine times last
year Chinese ships fired live rounds at Filipino fishermen.
They severed Philippine oil supply cables. They harassed
Philippine ships, sometimes merely miles from the Philippine
coast. The U.S. and the Philippines want peace and stability in
the region. That is going to be key to the global economy. It
is going to be key to the growth of the economy in the
Philippines. But this is going to require a balance of power.
Cooperation I think is made easier by the good feelings the
people of each country have for one another. Filipino-Americans
have helped create a very positive impression of the
Philippines, and public opinion polling shows that the
Philippines population is one of the most pro-American
populations anywhere in the world.
Economic cooperation is important as well. For too many
years, the Philippines has suffered from economic malaise, as
some of its neighbors have had their economies soar. The
problems have been many. Corruption has been a problem, poor
infrastructure, lack of competition, and generally harmful
economic policies. But there are signs the conditions are
improving. There are efforts underfoot to change that
equilibrium. What is certain is that the many skilled Filipinos
deserve better than the economy they have had to survive in.
The U.S. can help in this regard. I am supporting
legislation, the SAVE Act, to restore to the Philippines
preferential access to the U.S. market for many clothing items
it lost when the global apparel quota system was lifted 7 years
ago. Of course, since then, the Philippines apparel exports to
the United States have shrunk from $3 billion to $1 billion a
year. Hundreds of thousands of Filipinos have lost their jobs,
which have shifted to China. We should give an ally like the
Philippines a leg up in competing for international apparel
orders.
The SAVE Act has bipartisan support, and I am hopeful it
can advance this year. It is in the Ways and Means Committee
right now. It is gaining more and more support, more and more
traction.
The Philippine Government has trade aspirations. It has
expressed an interest in joining the Trans-Pacific Partnership,
a proposed trade agreement involving nine countries, including
the United States, Australia, Malaysia, New Zealand, Singapore,
and Vietnam. The Deputy U.S. Trade Representative has a Manila
trip planned for this month to discuss the TPP and other trade
issues.
The Philippines needs to come up to speed. Due to its
regulatory shortcomings and its treatment of intellectual
property and red tape and other trade and investment inhibiting
factors, there are changes that need to occur. Well, the United
States can help in that regard.
The Partnership for Growth Initiative aims to assist the
Philippines to improve many of the conditions that impede its
economy and participation in TPP-like trade agreements. This
also would help put the Philippines on the map for more trade
and investment vis-a-vis competitors like China.
This week I will be holding a hearing on some of these
issues, but we are starting with this hearing today that looks
at the deepening of the security and trade partnership.
With that said, I would like to turn to Mr. Sherman for any
opening statement he might have.
[The prepared statement of Mr. Royce follows:]

----------

Mr. Sherman. Thank you.
Can you tell us about this upcoming hearing? I yield to the
chairman.
Mr. Royce. We will start with this hearing here today, and
I will yield to you.
Mr. Sherman. Okay. I will look forward to the additional
hearing that you referenced.
Thank you for holding these hearings.
Back when I was in private practice is when Marcos fled to
Hawaii with, I think it was, 27 Bekins boxes of his financial
records, the roadmap to his stolen assets. Back then, I served
as part of the legal team that got those Bekins boxes and,
ultimately, the assets to the government of Corazon Aquino. We
followed the U.S.-Philippine Tax Treaty then, and I think the
fact that we adhered to the treaty, even when the
administration at that time was reluctant to do so, further
cements our relationship with the Philippines, that we take our
treaty obligations seriously. The Philippines is an important
ally in a strategically-critical region, especially given the
aggressive economic and military rise of China.
I would like to recognize the 3.5 million Filipino-
Americans who have made such outstanding contributions to our
country. Southern California, and especially the San Fernando
Valley, is honored and blessed to have a vibrant Filipino-
American community.
The U.S.-Philippine relationship has a long history going
back to the 19th century. But, since 9/11, this relationship
has grown, particularly in the area of counterterrorism.
Filipino security forces have successfully disrupted and
weakened al-Qaeda-affiliated organizations, and the Philippine
Government has acted in cooperation with the United States.
Abu Sayyaf and Jemaah Islamiyah--JI I can pronounce--
carried out multiple terrorist bombings throughout the
Philippines in the past decade. About 600 U.S. soldiers are
assigned to the U.S.-Philippine Joint Special Operations Task
Force and were sent there after 9/11 to assist the Philippines
in its effort to combat terrorism. With U.S. support, these
groups' connections to al-Qaeda and their capacities have both
been weakened.
Most recently, on February 2nd of this year, the Malaysian
terrorist known as Marwan was reportedly killed in a U.S.-
backed strike, though we don't have confirmation of his death
yet. American counterterrorism troops have helped Filipino
troops track Marwan for years using satellite and other
surveillance. Marwan's death, if true, would be a major success
in disrupting a terrorist network responsible for numerous
deadly bombings in the Philippines and for training a large
number of militants.
Tensions are high in the South China Sea where China, the
Philippines, Vietnam, Brunei, Malaysia, and Taiwan all have
overlapping territorial claims and are fighting over areas that
may contain oil and gas resources. Too often, we hear of
worrisome incidents of Chinese aggression against the
Philippines and other nations of the South China Sea,
especially near the Spratly Islands.
In February of last year, a frigate from China's navy fired
shots at three fishing boats from the Philippines. In March of
last year, the Philippine Government reported that two patrol
boats from China attempted to ram one of its surveillance
ships.
Secretary of State Hillary Rodham Clinton visited the
Philippines in June of last year and committed to supporting
the defense of that island nation. Philippine Foreign Secretary
Rosario aptly stated that the Philippines is a small country
but, in his words, ``prepared to do what is necessary to stand
up to any aggressive action in its backyard.'' We should
provide the Philippines with the necessary resources to meet
this need, but we must be certain that we are not brought into
a conflict in the South China Sea.
All these developments are, of course, seen in the context
of the President's recent pivot toward Asia. For the past
several months, the administration has emphasized a shift in
U.S. military resources and diplomatic focus away from the
Middle East and toward Asia and the Pacific. I see the dangers
of Asia and the Pacific. I am not sure there has been a
lessening of dangers in the Middle East.
Recent agreements have been reached to allow thousands of
U.S. Marines to rotate through northern Australian, and U.S.
Navy warships in Singapore. The President has announced in
November that the U.S. would deploy 2500 Marines in Australia
and would shore up alliances in Asia. Not surprisingly, the
Chinese do not find this helpful.
The agreement with Australia amounts to the first long-term
expansion of U.S. military presence in the Pacific since the
end of the Vietnam War. This shift comes despite necessary cuts
in the Pentagon budget. We need to balance our need to provide
for security in Asia with the budgetary situation in the United
States. The U.S. deployment to Australian, the largest since
World War II, will start this year with a company of 250
Marines in Darwin and, as I mentioned, eventually 2500.
One question I will want our panel to answer is, what
should the U.S. be doing to help our allies in Southeast Asia,
including the Philippines, deal with these security challenges
without necessitating a large buildup of U.S. forces in the
region.
Finally, as to trade, the chairman pointed out that the
Philippines has expressed interest in joining the Trans-Pacific
Partnership. I will simply point out that many of these trade
deals have turned out extremely badly for American working
families. As we look at the TPP, we have to see not only what
expansion of exports would be involved, but also what expansion
of imports and the effect on our trade deficit.
I look forward to hearing from our witnesses on this and
other matters.
Mr. Royce. Thank you, Mr. Sherman.
Before I introduce our two witnesses, I would like to
recognize the presence of the Ambassador, Jose Cuisia, the
Philippine Ambassador to the United States. I would just like
you to stand for a minute.
This hearing today comes a day after a very powerful
earthquake hit the Philippines, and our hearts go out to the
Filipino people, those who lost their lives in this quake. The
thoughts of the committee are with the Filipino people, Mr.
Ambassador. Thank you.
Kurt Campbell is the Assistant Secretary of State for East
Asian and Pacific Affairs. He has held numerous positions in
government, including Deputy Assistant Secretary of Defense for
Asia and the Pacific. He has also held various positions in
academia and think tanks in the past, and he has served as an
officer in the U.S. Navy.
Dr. Peter Lavoy is the Acting Assistant Secretary of
Defense for Asian and Pacific Security Affairs. Previously, he
held several senior positions in the Office of the Director of
National Intelligence. Dr. Lavoy is the author and editor of
several books and journals on security policy in Asia.
We thank both of our witnesses. We will begin with
Assistant Secretary Campbell.

STATEMENT OF THE HONORABLE KURT CAMPBELL, ASSISTANT SECRETARY,
BUREAU OF EAST ASIAN AND PACIFIC AFFAIRS, U.S. DEPARTMENT OF
STATE

Mr. Campbell. First of all, Chairman Royce, may I thank you
for your interest and focus on Asia, but particularly on the
Philippines. It is much appreciated. We have noted in recent
years there has been lots of testimony on other parts of the
world, but in recent years not as much focus on Asia as we
would like to see in the Legislative Branch. And so, we
appreciate that you are doing this, and we hope to see more of
these hearings going forward.
Let me just say at the outset I very much appreciate your
recognition of Ambassador Cuisia. I would just simply say that
we in the U.S. Government are extraordinarily impressed by the
team; first of all, by the leadership that President Aquino has
demonstrated since he has come to office. He has a rare
integrity, a passion for his country, a commitment to our
relationship. He has nominated and put in place a very strong
team from the Foreign Minister, Foreign Minister del Rosario,
the Defense Minister, Defense Minister Gazmin, and also a
wonderful Ambassador that is a patriot, but also determined to
build stronger relations between the United States and the
Philippines.
I know we got started a little bit late. So, in the
interest of time, I would like to just submit my full testimony
for the record, with your permission, sir, and just highlight a
few key points, if I may. I would just like to say a couple of
things just at the outset to, hopefully, frame our overall
discussions.
My own view, gentleman, is that I believe that we are on
the verge of a renaissance in the relationship between the
United States and the Philippines. And frankly, this hearing
helps us along this path.
I am not going to read from my statement, but I would
simply point out one sentence at the end of the first paragraph
which I think is particularly pertinent in this regard. I think
we are in the process of turning the page from really a
previous legacy of paternalism to a much more equal partnership
between our two countries. I think that is particularly
significant for the Filipino people.
As you underscored, I think the United States is in the
midst of an extraordinarily important shift in the focus of
American foreign policy. To Congressman Sherman, we completely
agree that there are enormous threats and challenges that will
persist in the Middle East and South Asia, but it is also the
case that enormous possibilities are also apparent in the
Asian-Pacific region. I think by almost any measure, most would
argue that the lion's share of the history of the 21st century
is going to be written in the Asian-Pacific theater. So, I
think the United States--and this is a proud, I believe,
bipartisan commitment--is in the process of stepping up our
game in the Asian-Pacific region while at the same time
maintaining our critical security and political commitments in
the Middle East and South Asia.
What we are seeing in Asia is a multifaceted strategy.
First, starting with the strengthening of our alliances,
Congressman Royce, you talked about our five alliances,
enormous historical significance, the Philippines key among
them.
We are also attempting to diversify our relationships in
the region as a whole. Today Secretary Clinton is hosting the
Indian Foreign Minister, India playing an increasingly
important role not only in the subcontinent, but as a player in
the Asian-Pacific region.
We are diversifying our strategic and military strategy.
Dr. Lavoy will speak about this. Part of what we are doing is
ensuring that we are balanced in our approach. We will keep a
strong commitment in Northeast Asia, but we will focus more of
our attention in Southeast Asia.
We recognize how important it is to have a strong,
predictable, credible relationship between the United States
and China. That will be a challenge, but it is important. Every
country in the region wants a better relationship with China.
It is important for us to respect and understand that. Also,
the United States wants a better relationship with China. We
need to work on that relationship. It will be one of the most
consequential relationships for the United States in the 21st
century.
In addition to stepping up our diplomatic game generally,
we will focus on a number of key partnerships like Indonesia,
working more closely with Vietnam and others. We also believe
that a key component of our overall approach will be our
economic role in the Asian-Pacific region.
I am pleased and proud that we passed the Korea Free Trade
Agreement. I know there were some concerns, but I think it is
going to be important for American prosperity going forward.
I think the Trans-Pacific Partnership has the prospect for
providing a very high-quality trade agreement. We very much
appreciate the interest that countries like the Philippines
have expressed.
I would simply say, Congressman Royce, that as we go
forward we will have, I think, important people-to-people ties.
I believe our security and strategic relationship will
diversify. But at the core relationship has to be a deeper
economic component, and I commend you on your support for
innovative ideas that will bring our two peoples together.
Let me simply say that we have tried to amplify our
engagement through a series of high-level visits. I think you
will see more of that coming in the next few months.
As you indicated, Secretary Clinton visited the Philippines
a few times, but was there last in November. We commemorated
the 60th anniversary of our alliance on the deck of the USS
Fitzgerald, a U.S. warship in harbor, where we signed the
Manila Declaration, which commits our two countries to a broad
and diverse strategic partnership going forward.
President Aquino met President Obama subsequently in Bali,
and we were able to talk about the areas of our common
endeavor, including, as you suggested, the Partnership for
Growth. This is a major initiative designed to combat and
support the Philippine effort, which is very serious, at
getting at the root of some of the challenges that the country
has faced with respect to corruption and inefficiency. We are
very proud to support this initiative, and we think it is
already making a difference on the ground in the Philippines
generally.
We believe that over the course of the next several years
there will be enormous opportunity for the United States and
the Philippine Government to work closely together. We are
looking at a host of areas of cooperation on the defense side.
Peter, Dr. Lavoy, will talk more about that.
But we are also working much more closely together in
multilateral fora at the East Asia Summit, which the United
States joined for the first time; the U.S. ASEAN summits, and
the ASEAN Regional Forum.
I would simply say, just in quick conclusion, gentlemen,
that there is no country in Asia that is more welcoming to the
United States, more supportive of a stronger relationship, and
more on our side, rooting for us at every step of the way.
What is important about our overall effort in Asia is that
it is bipartisan. Obviously, we are operating in a season of
occasional political back-and-forth, but the truth is that the
great foundations of American engagement in Asia have been
bipartisan: Trade, economic, security, political, human rights
of the kind that Congressman Sherman spoke eloquently about.
I just want to commit to you that, as we go forward, we
will work closely with this committee and others, as we have
done in the past, getting your advice and your counsel and your
support as we strengthen one of the great alliances that the
United States has the pleasure of being involved in, and that
is the U.S.-Philippine relationship.
Thank you very much.
[The prepared statement of Mr. Campbell follows:]

----------

Mr. Royce. Thank you, Dr. Campbell.
Dr. Lavoy.

STATEMENT OF THE HONORABLE PETER LAVOY, PH.D., ACTING ASSISTANT
SECRETARY OF DEFENSE, ASIAN AND PACIFIC SECURITY AFFAIRS, U.S.
DEPARTMENT OF DEFENSE

Mr. Lavoy. Thank you very much. Chairman Royce, Ranking
Member Sherman, thank you for the opportunity to join my
colleague, Assistant Secretary Kurt Campbell, to testify on the
deepening of the security partnership and the longstanding
alliance between the United States and the Republic of the
Philippines.
As Secretary of Defense Panetta recently said, ``We are
balancing our global posture and presence and emphasizing the
Pacific.'' This region is growing in importance to the future
of the United States economy and our national security. Our
relationship with the Philippines is an important part of
achieving these national security objectives in this important
region.
As one of five defense allies in the Asia-Pacific, the
Philippines plays a critical role in our efforts to achieve
important security objectives in the region, including in the
areas of maritime security and counterterrorism. Specifically,
we believe that U.S. forces in the region, working alongside
our partners, help promote stability.
The evolution of our 60-year-old alliance with the
Philippines has weathered a series of ups and downs, but has
always moved along in a positive trajectory. We currently have
new opportunities to refocus our bilateral defense cooperation
and advance our mutual security interests in tangible ways.
There are three reasons for this.
First, the current Government of the Philippines is deeply
committed to defense reform and modernizing its defense
capabilities, initiatives for which it is turning to the United
States for support.
Second, our efforts to help the Philippines build its
counterterrorist capabilities have been highly effective in
reducing the operating space of known terrorist groups.
And finally, the Defense Department has a new strategy that
prioritizes Asia and is consistent with the President's recent
remarks at the Pentagon.
Our bilateral military engagement is currently focused on
assisting the armed forces of the Philippines to transition
from an inward-focus on domestic threats to an outwardly-
focused military that needs to be reorganized to address
external concerns. We are working to help the Philippines meet
its strategic objective of establishing a credible security
presence and awareness in the maritime domain. We are
accomplishing this through security assistance focused on
maritime security capabilities to help the Philippines play a
greater role in promoting regional safety and security in that
domain.
The cornerstone of our security relationship with the
Philippines rests on ensuring stability in the region and
providing increased capacity to jointly respond to missions
such as conducting disaster relief and humanitarian operations.
We continue to work with all elements of the Philippine defense
establishment to further develop the armed forces into a
modern, professional military capable of defending its
sovereign territory, upholding and promoting our shared values
of human rights and democracy, and serving as a net contributor
to regional security.
Another evolving security challenge is the increase in
tension over land and maritime claims in the region. We do not
take a position on the competing sovereignty claims over land,
but believe that our partnerships in the region work toward
ensuring security. In this endeavor, we continue to encourage
the Philippines and all nations to settle their disputes
through a collaborative diplomatic process.
This renewed focus on security issues is made possible by
the great strides the Philippines has made in achieving its
counterterrorism objectives. The successes in countering
terrorism in the southern Philippines provides the Philippines
armed forces the space and opportunity to refocus strategic
security objectives from domestic threats to external concerns.
We have made significant investments in countering
transnational terrorist groups through Operation Enduring
Freedom-Philippines. The personnel of JSOTF-P, or the Joint
Special Operations Task Force-the Philippines, continue to work
in support of the AFP to reduce potential threats to U.S.
security from transnational terrorist organizations seeking an
operational safe haven in the southern Mindanao region, while
demonstrating to local and national leaders the importance of
promoting our shared values of human rights and democracy. As a
recent example, on Thursday morning the AFP conducted a
successful operation targeting key leaders of terrorist groups
that have plagued the southern Philippines for years.
In conclusion, I would like to emphasize the strategic
importance of the relationship between the Republic of the
Philippines and the United States, which we must continue to
develop. I look forward to working with you, Mr. Chairman, and
with members of the subcommittee and Congress, to seek
opportunities to influence positively the future direction of
this relationship.
I stand by, along with my colleague, Kurt Campbell, to
respond to any questions you may have on these very important
issues.
[The prepared statement of Mr. Lavoy follows:]

----------

Mr. Royce. I thank you very much, Dr. Lavoy.
Would you like to comment just for a minute on the role the
U.S. played with the Philippine armed forces taking down this
terrorist organization not too many days ago? If you are free
to do so, I would love to hear some commentary on that.
Mr. Lavoy. Well, sir, I can say generally that we have
provided a great deal of support to the Philippines in
countering a variety of terrorist threats. The Philippines have
enhanced their counterterrorist capabilities immensely and are
performing very effectively. But I can't talk about this
specific operation or any other specific operations in this
setting.
Mr. Royce. Well, I mentioned in my opening statement the
ships that are being transferred through the Excess Defense
Articles Program, the new flagship being an example. I know the
Dallas, the Coast Guard cutter, is due to sail for Manila soon.
But having written the Secretary of the Navy on this, I am
pleased to see this move along.
I understand there is some interest in the Philippines also
on F-16s, refurbished F-16s. Dr. Campbell, would you like to
comment on that potential? Or should I turn that to Dr. Lavoy?
Okay. Go ahead.
Mr. Lavoy. Thanks very much. Thanks, Kurt.
We have been working with the Philippines Government on
identifying ways that we can enhance our mutual security
capabilities. That, of course, entails working with the
Philippines to help it modernize its armed forces and reorient
to external security requirements.
Sir, you mentioned the transfer of the high-endurance
cutter, the Hamilton, to the Philippines, which took place
August last year. I think that was a very significant
accomplishment. This is now renamed by the Philippines as
Gregorio del Pilar. It is now the flagship of the Philippine
navy. And I am happy to note that it just completed its first
patrol in the vicinity of the Spratly Islands just 2 days ago,
on the 6th of February.
You also indicated that there is a likelihood of
transferring additional military equipment to the Philippines,
including an additional cutter, the cutter Dallas. This is
pending Congress' approval and consent. I believe that takes
place in 2 days, if I am not mistaken. So, we look forward to a
positive supporting consent by Congress.
On the issue of F-16s, right now we are considering a range
of military capabilities that the Philippines have requested,
but I want to emphasize that affordability and sustainment are
critical criteria in our evaluation of these additional
supplies.
Thank you.
Mr. Royce. Thank you, Dr. Lavoy.
Dr. Campbell.
Mr. Campbell. Yes, just I would simply say, first of all, I
support everything that Dr. Lavoy has stated.
We have previous experience of working with the Philippine
military. At times in the past, I think we have built
capabilities that were hard to sustain, that were inefficient.
One of our goals is to make sure that we take the appropriate
steps with them, building the kind of capabilities that will
support not only independent Philippine capabilities, but will
allow for greater interoperability and engagement with the
United States.
In that respect, Dr. Lavoy, and his excellent team, has led
a very intensive effort with the Philippines to identify what
are the best ways that we can spend, frankly, scarce resources.
I should also say that to support that as well is a
discussion that we are having about how the United States can
work more effectively with the Philippine armed forces to
support our mutual goals and missions, not just in Mindanao, as
you have discussed, but, as Peter indicated, more in the
maritime realm as well.
I will say that the Philippine Government has asked us to
look carefully at a variety of things. For instance, they have
suggested that, look, the ships that you provided us, you have
stripped a lot of the gear out of it; is it possible to see
what can be done to transfer that to the Philippine Government?
I think it is a very reasonable request. And so, under Peter's
leadership, we are looking to see what we can do to support in
an effective, cost-efficient way, supporting Philippine
capacities in this regard.
Mr. Royce. Dr. Campbell, another question I was going to
ask you: When I talk to those involved in the Filipino-American
community here about doing business in the Philippines, they
say that one of the impediments is the necessity for reform
there. And likewise, when we look at trade liberalization and
trade and investment issues in the Philippines, there is this
question of how to encourage reform because corruption could be
a major obstacle to economic growth. That is the concern, I
think, of many in the business community in the Philippines.
There is a Global Competitiveness Report that also said
that that was the hurdle to doing business in the Philippines.
Now President Aquino has this new anti-corruption campaign
underway. I was going to ask you, what major hurdles exist with
respect to that campaign and how much headway is it making for
economic reform in the Philippines and rule of law in business
transactions?
Mr. Campbell. Thank you, Congressman Royce.
I, too, try to talk with the key players that do business
in the Philippines. You characteristically hear three concerns.
One, as you suggested, the corruption issues, which have in
the past been very challenging.
Second, some infrastructure issues, some inefficiencies in
that regard.
And third, some legal challenges.
My own sense is that you have seen some substantial
improvements in a few of the legal inhibitions that have caused
difficulties, and you see some major companies that have been
able to overcome them.
And I also believe that, with respect to the prospects of
greater trade engagement, that some of the issues associated
with foreign ownership, there are some creative ways around
that, as has been demonstrated in other parts of Southeast
Asia.
Inefficiencies have also improved generally. The
infrastructure is improving in a number of places in the
Philippines. I think that really leaves some of the corruption
issues. I have to say I think we are just very impressed with
the intensity, the unflagging focus of the Aquino government on
this. This is not simply one of those circumstances where it
is, hey, don't watch what I'm doing; listen to what I'm saying.
The senior officials in the government are practicing what they
preach. I think they have taken the bull by the horns with
respect to corruption in the Philippines.
I listened very clearly as--and I think it is all right to
repeat this--President Aquino made clear that his legacy, what
he wants to leave when he leaves office is a track record and
an experience that is impossible to turn back on; that a new
way of doing business, a clean government ethos remains as the
critical gift that he and his administration bestow to his
nation. Anything we can do to support that, we will.
The Philippines, Congressman, I will say they are growing.
They are not growing as fast as some Southeast Asian countries.
But we really, frankly, with the right steps, we could see
enormous possibilities there in the years to come.
Mr. Royce. Well, we know that conditionality exists in
these TPP-like trade agreements. We know that those reforms
will have to be made. I think the Partnership for Growth
Initiative intends to play a role here in terms of our
engagement with the Philippines in order to try to ensure that
those reforms that you have articulated go through.
Let me turn to Mr. Sherman for his questions.
Mr. Sherman. I will start by disagreeing with Dr. Campbell
when he says that support for these trade deals is bipartisan
here in Congress. That is true only if you look at the
Democratic and Republican Party. If you look, instead, at
Congress having a Wall Street Party and a Main Street Party, it
is only the former that supports these trade deals.
Looking at the issues we are here to deal with, we have got
an unusual circumstance. We provide MFN to China and then
accept the most outrageous corruption of the trading
relationship with China that enriches China. That allows them
to build up their defense. Then, we ask the American taxpayers
to provide the weapons, and in some cases the men and women, to
offset this Chinese aggressive defense or military posture.
And so, it would seem illogical that we are both financing
the Chinese expansion and then we are financing the response,
but it is not illogical at all from the standpoint of corporate
profits. You see, there are huge corporate profits by giving
China total access to our markets, whether they give us access
to theirs or not on paper or in reality. And then, there are
significant corporate profits in responding to the Chinese
military buildup. So, we do have a logical policy. It is just a
policy whose logic is driven by Wall Street and not by the
interests of either our national security or of working
families.
That being said, I have talked about the dispute in the
South China Sea. What can the United States do to have that
dispute resolved by an international tribunal rather than this
constant jockeying for oil and gas and other resources?
Mr. Campbell. Thank you.
I would simply say, on the first point, my own view would
be that one of the keys to American prosperity in the 21st
century will be to increase American exports substantially.
Mr. Sherman. Reclaiming my time and asking you to respond
to my question, I will simply say that we have tried these
trade deals. They have destroyed hundreds and thousands of
American families. To assume that continuing to do what we have
done will yield to a different result is the definition of
insanity.
Now what can you tell me about international law in the
South China Sea?
Mr. Campbell. The United States has a national interest in
the maintenance of peace and stability, freedom of navigation,
respect for international law, and unimpeded lawful commerce in
the South China Sea. We oppose the threat or use of force by
any party to advance its claims or interfere with legitimate
economic activity. We do not take sides on the competing
territorial disputes over land features in the South China Sea.
We support a collaborative, diplomatic process by all claimants
for resolving the various disputes without coercion. We believe
all----
Mr. Sherman. Dr. Campbell, if I can interrupt----
Mr. Campbell. Can I answer the question that you asked?
Mr. Sherman. I know you have got your standard talking-
point response. Is there an international tribunal to which we
could persuade the parties to submit these claims?
Mr. Campbell. Do you want me to just finish my answer or
prefer not?
Mr. Sherman. I would prefer you answer the question, but--
--
Mr. Campbell. We believe all parties should pursue and
clarify their territorial claims and accompanying rights to
maritime space in accordance with international law, including
as reflected in the 1982 Law of the Sea Convention. In this
regard, we have commended the Philippines for progress in
harmonizing their maritime laws with international law, and
pledge to continue to support their efforts.
We welcome the recent progress between ASEAN and China on
steps related to the declaration on the code of conduct of
parties in the South China Sea and dialog toward a code of
conduct, but we also think much more needs to be done in this
regard.
Mr. Sherman. Dr. Campbell, if I can interrupt again,
because my time is expiring, what are you doing to try to turn
our current trade deficit with the Philippines into a trade
surplus?
Mr. Campbell. As I was trying to suggest, I think one of
the most important things that the United States can do going
forward will be to encourage American firms and those companies
that historically have not needed to export, to export to the
Asian-Pacific region, the largest growing middle classes in the
world.
If you look at the top 1,000 American companies, the vast
majority of American exports to the Asian-Pacific region come
in the top tier of those companies. I think one of the most
important things that we can do is encouraging those firms,
whether they are based in your District or other Districts,
that have normally sold their products mostly to the American
people, to have the opportunity to export those same products
to Asia and elsewhere.
Mr. Sherman. I would say that government needs to do more
than send out an email to companies saying, ``Hey, have you
thought of Asia?'' It is up to us to open the markets, to make
sure that access to U.S. markets is contingent upon our access
to theirs, and our failure to export is not because of the
laziness of American entrepreneurs or their lack of knowledge
of Asia; that America is failing over the last 30 years because
our Government has been a failure, particularly in the area of
trade.
And I yield back.
Mr. Royce. Mr. Rohrabacher.
Mr. Rohrabacher. Thank you very much.
I would certainly associate myself with the observations of
my colleague, Mr. Sherman, that we need to make sure that, if
the Philippines is going to succeed and be a prosperous
country, they need to make sure they understand it is not going
to be a favor from someone else. It is going to be the fact
that we are treating each other as adults and treating each
other fairly. With access to our markets, we should have access
to theirs as well.
Let me note I have a long history of working with the
Philippines, and I think that President Aquino is just a
shining light of hope for us who were waiting for someone of
that caliber to emerge. We couldn't be happier. Those of us in
this foreign policy arena, we are rooting for him and had some
good meetings with him when we were in the Philippines. I think
the United States, as you are demonstrating today by your
testimony as well as what this administration has been doing,
that we actually are making this a higher priority to try to
get something done now that they have got a good leader who
might be able to make some differences.
One thing we have to do is make sure that we differentiate
between a democratic government and a dictatorship. I am afraid
that we have trade laws--this goes back to what Mr. Sherman was
talking about--we have trading laws now that seem to actually
have Most Favored Nation status and such with Vietnam, where
they haven't had any democratic reform whatsoever, and China,
and some of these other countries, where the Philippines have
been struggling to have democracy and they have a free press.
And yet, we treat them, actually, we treat them worse when it
comes to trade than we do with these dictatorships.
We have American companies investing, and to a large
degree, in Vietnam and in China. Yet, they are dictatorships.
And there's the Philippines right there who could use that
investment. So, I would hope that, now that they have a
President who is committed to bringing down the level of
corruption, that we will reverse that emphasis; that, instead,
we will be looking at people to invest in a country that is a
democratic country that is now committed to ending that barrier
of corruption that has been working against them.
But let me just say, about the security issues, I
congratulate this administration and both of you. I
congratulate our Special Forces teams. I visited them not too
long ago down in the southern Philippines. What a wonderful
victory it was for the people of the Philippines and for all of
the people of the world who are standing together against
terrorism and this threat of radical Islam. Radical Islam was
in the Philippines being supported by international causes. It
is good that we stood in solidarity with the people of the
Philippines against this radical Islamic threat. Now we have
gotten at least some of their leaders, and, actually, I
understand there were leaders from other countries there as
well. So, that is wonderful.
The last point, and I will be happy to comment. Sorry, I
wasn't here earlier and I apologize; I have been running back
and forth between meetings here.
China is, as we know, where I believe the threat of radical
Islam is in that part of the world now, and especially the
Philippines will recede, due to the strong stand that we have
taken and the success that we have had in cooperation and
standing beside the Filipino Government and Filipino military.
We need to stand as aggressively and as solidly with the
Filipino Government in their confronting an aggressive,
arrogant China, expansionist China, as we have stood with them
against radical Islam. We have had success against radical
Islam now, but China has to be put right up there as just as
great a threat.
The Chinese are trying to steal the mineral rights and the
wealth that belongs to the people of the Philippines. The
Spratly Islands are, as we know, possibly in a very mineral-
rich area. If we let the Chinese with their superior military
take by force from the Philippines, it is international theft
at its worst.
I am very pleased; again, the administration deserves kudos
for providing this Coast Guard cutter, but I think that we need
to work with the Philippines to provide them much more than
just an old Coast Guard cutter. Because, again, they fought
radical Islam. We have had a great success there. That is a
success for both of us. Stopping Chinese aggression in the
South China Sea will be a victory for all the people who
believe in peace and freedom in that region and in the world.
So, I have had my say. If you have any comment, please feel
free. If you disagree, don't say it. [Laughter.]
All right. Well, thank you very much. Again, I want to
congratulate the administration. This is a good example of the
positive things they have been able to accomplish. I have my
disagreements in other areas, but I think we ought to recognize
a success when we see it.
Thank you very much.
Mr. Royce. Thank you. And I will say I share my colleague's
interest in seeing investment move from China to the
Philippines. That is one of the things we want to see happen.
That is one of the policy goals. From my standpoint, that is
why I am backing the SAVE trade bill, the engagement with the
Philippines on this trade initiative.
I did want to make mention of a resolution which I and
Congressman Rohrabacher support. That is House Resolution 352.
That resolution calls for a peaceful and collaborative
resolution of the maritime dispute between what China calls the
South China Sea and what the Philippines calls the West
Philippine Sea. The resolution calls for all parties of these
territorial disputes to refrain from threatening force or using
force to assert territorial claims.
The reason we think there is such an important opportunity
to push this resolution and have it heard is because the entire
diplomatic community, every country in the world, perceives
this in the same way that the Philippines perceives it. Only
China, China alone, perceives these waters as an extension of
its territory. They are out of step.
That is why multilaterally I think the United States and
the Philippines and Indonesia and Malaysia and other countries
in the region, Vietnam, can all work in tandem toward an
international resolution that moves us away from the bellicose
use of force and rhetoric that we see, and sort of unites the
international community in a resolution to try to resolve this
without the aggressive behavior that we have seen on the part
of China here.
I wondered, Dr. Campbell, if you would like to make any
additional comment on that.
Mr. Campbell. Thank you very much again.
I would associate myself with the comments that you have
made. I have looked at both bills that you have submitted, one
on the SAVE Act and, also, the second one that you have just
suggested.
I would just say, on the first one, I think it is really
something that we have to look at seriously. I think there is a
lot here that I think both your body has to think about and we
have to focus on as well.
Let me just say, some have suggested that the South China
Sea is none of our business. I would simply point out that, by
most measures, 50 percent, literally 50 percent of the global
tonnage of shipping passes through the South China Sea every
year and, by value, probably somewhere between a quarter and a
third. So, it is an artery in the global economy.
And so, the maintenance of peace and stability, and how
issues there are resolved, are extraordinarily important to us.
I happen to believe, just as you have indicated, Congressman
Royce, that in many respects how these issues will be
discussed, how they will be resolved in many respects is a 21st
century case study on how the rules of the road will be
established and maintained.
I think the United States, we are not a claimant. We are
extraordinarily careful how we talk about these things. I
appreciated Congressman Sherman's questions, but you will note
we have a very clear set of statements that we make.
We believe that there is a process underway. The United
States believes that we can play a constructive role in this
process. Ultimately, the peaceful resolution of disputes, and
finding a legal internationally-recognized framework for how to
deal with these issues, we believe it is in the best interests
and preserves the interests of all those involved.
Mr. Royce. Dr. Campbell, I thank you. I thank you for your
testimony today, Dr. Lavoy.
I am sorry we started a little late. That was because of
the votes on the Floor.
Mr. Campbell. Thank you.
Mr. Royce. But we appreciate you. We know you are headed up
to the State Department now for a meeting.
Again, we thank the witnesses.
Mr. Campbell. Thank you very much.
Mr. Lavoy. Thank you.
Mr. Royce. Ambassador, thank you for attending as well.
[Whereupon, at 3:49 p.m., the meeting was adjourned.]

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