[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


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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

                              ----------                              
                                                                   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

                              ----------                              


                       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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