core sector communique

Panetta on New U.S. Defense Strategy, Asia-Pacific Policy

U.S. Department of Defense

Office of the Assistant Secretary of Defense (Public Affairs)

June 2, 2012

Remarks by Secretary Panetta at the Shangri-La Dialogue in Singapore

SECRETARY OF DEFENSE LEON PANETTA: Thank you very much, John, for that kind introduction.

Ladies and gentlemen, it is an honor to have the opportunity to attend my first Shangri-La Conference. I want to commend the International Institute for Strategic Studies for fostering this very important dialogue, this very important discussion that is taking place here this weekend.

I am, as I understand it, the third United States secretary of defense to appear at this forum, across administrations from both political parties in the United States. That is, I believe, a testament to the importance that the United States places in this dynamic and critical region of the world.

It is in that spirit that I have come to Singapore, at the beginning of an eight-day journey across Asia that will take me to Vietnam and to India as well.

The purpose of this trip, and of my remarks today, is to explain a new defense strategy that the United States has put in place and why the United States will play a deeper and more enduring partnership role in advancing the security and prosperity of the Asia-Pacific region, and how the United States military supports that goal by rebalancing towards this region.

Since the United States grew westward in the 19th century, we have been a Pacific nation. I was born and raised in a coastal town in California called Monterey, and have spent a lifetime looking out across the Pacific Ocean. As a fishing community, as a port, the ocean was the lifeblood of our economy. And some of my earliest memories as a child during World War II are of watching American troops pass through my community, trained at the military reservation called Fort Ord, and were on their way to face battle in the Pacific.

I remember the fear that gripped our community during World War II, and later when war again broke out on the Korean Peninsula. Despite the geographic distance that separates us, I've always understood that America's fate is inexorably linked with this region.

This reality has guided more than six decades of U.S. military presence and partnership in this region -- a defense posture which, along with our trading relations, along with our diplomatic ties, along with our foreign assistance, helped usher in an unprecedented era of security and prosperity in the latter half of the 20th century.

In this century, the 21st century, the United States recognizes that our prosperity and our security depends even more on the Asia-Pacific region. After all, this region is home to some of the world's fastest growing economies: China, India, and Indonesia to mention a few. At the same time, Asia-Pacific contains the world's largest populations, and the world's largest militaries. Defense spending in Asia is projected by this institute, the IISS, to surpass that of Europe this year, and there is no doubt that it will continue to increase in the future.

Given these trends, President Obama has stated the United States will play a larger role in this region over the decades to come. This effort will draw on the strengths of the entire United States government. We take on this role not as a distant power, but as part of the Pacific family of nations. Our goal is to work closely with all of the nations of this region to confront common challenges and to promote peace, prosperity, and security for all nations in the Asia-Pacific region.

My colleague and my good friend Secretary of State Hillary Clinton has also outlined our refocus on the Asia-Pacific, emphasizing the crucial part that diplomacy, trade, and development will play in our engagement.

The same is true for defense policy. We will play an essential role in promoting strong partnerships that strengthen the capabilities of the Pacific nations to defend and secure themselves. All of the U.S. military services are focused on implementing the president's guidance to make the Asia-Pacific a top priority. Before I detail these specific efforts, let me provide some context for our broader defense strategy in the 21st century.

The United States is at a strategic turning point after a decade of war. We have significantly weakened al-Qaida's leadership and ability to attack other nations. We have sent a very clear message that nobody attacks the United States and gets away with it. Our military mission in Iraq has ended and established -- established an Iraq that can secure and govern itself.

In Afghanistan, where a number of Asia-Pacific nations are playing a critical role in the international coalition, we have begun our transition to the Afghan security lead and to an Afghanistan that can secure and govern itself. Recent meeting in Chicago, NATO and its partners -- over 50 nations -- came together to support General Allen's plan to accomplish this goal. In addition to that, we joined in a successful NATO effort to return Libya to the Libyan people.

But even as we have been able to draw these wars to a hopeful end, we are confronted today by a wide range of complex global challenges. From terrorism -- terrorism still remains a threat to the world -- from terrorism to the destabilizing behavior of Iran and North Korea, from nuclear proliferation to the new threat of cyberattack, from continuing turmoil in the Middle East to territorial disputes in this region.

At the same time, the United States, like many other nations, is dealing with large debt and large deficits, which has required the Department of Defense to reduce the planning budget by nearly half a trillion dollars or specifically $487 billion that were directed to be reduced by the Congress in the Budget Control Act over the next decade.

But this new fiscal reality, challenge that many nations confront these days, has given us an opportunity to design a new defense strategy for the 21st century that both confronts the threats that we face and maintains the strongest military in the world.

This strategy makes clear the United States military, yes, it will be smaller, it will be leaner, but it will be agile and flexible, quickly deployable, and will employ cutting-edge technology in the future. It makes equally clear that while the U.S. military will remain a global force for security and stability, we will of necessity rebalance towards the Asia-Pacific region. We will also maintain our presence throughout the world. We will do it with innovative rotational deployments that emphasize creation of new partnerships and new alliances. We will also invest, invest in cyber, invest in space, invest in unnamed systems, invest in special forces operations. We will invest in the newest technology and we will invest in the ability to mobilize quickly if necessary.

We have made choices and we have set priorities, and we have rightly chosen to make this region a priority.

Our approach to achieving the long-term goal in the Asia-Pacific is to stay firmly committed to a basic set of shared principles -- principles that promote international rules and order to advance peace and security in the region, deepening and broadening our bilateral and multilateral partnerships, enhancing and adapting the U.S. military's enduring presence in this region, and to make new investments in the capabilities needed to project power and operate in Asia-Pacific.

Let me discuss each of these shared principles. The first is the shared principle that we abide by international rules and order.

Let me underscore that this is not a new principle, our solid commitment to establish a set of rules that all play by is one that we believe will help support peace and prosperity in this region.

What are we talking about? These rules include the principle of open and free commerce, a just international order that emphasizes rights and responsibilities of all nations and a fidelity to the rule of law; open access by all to their shared domains of sea, air, space, and cyberspace; and resolving disputes without coercion or the use of force.

Backing this vision involves resolving disputes as quickly as possible with diplomatic efforts. Backing these principles has been the essential mission of the United States military in the Asia-Pacific for more than 60 years and it will be even a more important mission in the future. My hope is that in line with these rules and international order that is necessary that the United States will join over 160 other nations in ratifying the Law of Seas Convention this year.

The second principle is one of partnerships. Key to this approach is our effort to modernize and strengthen our alliances and partnerships in this region. The United States has key treaty alliances with Japan, South Korea, Australia, Philippines and Thailand. We have key partners in India, Singapore, Indonesia, and other nations. And we are working hard to develop and build stronger relations with China.

As we expand our partnerships, as we strengthen our alliances, the United States-Japan alliance will remain one of the cornerstones for regional security and prosperity in the 21st century. For that reason, our two militaries are enhancing their ability to train and operate together, and cooperating closely in areas such as maritime security and intelligence, surveillance and reconnaissance. We are also jointly developing high-tech capabilities, including the next generation missile defense interceptor, and exploring new areas of cooperation in space and in cyberspace.

In the past several months we have strengthened the alliance and our broader strategic objectives in the region with a revised plan to relocate Marines from Okinawa to Guam. This plan will make the U.S. presence in Okinawa more politically sustainable, and it will help further develop Guam as a strategic hub for the United States military in the Western Pacific, improving our ability to respond to a wide range of contingencies in the Asia-Pacific region.

Another linchpin of our Asia-Pacific security is the U.S. alliance with the Republic of Korea. During a year of transition and provocation on the Korean Peninsula, this alliance has been indispensable, and I have made it a priority to strengthen it for the future. To that end, even as the United States reduces the overall size of its ground forces in the coming years in a transitional way over a five-year period, we will maintain the United States Army's significant presence in Korea.

We are also boosting our intelligence and information sharing with the Republic of Korea, standing firm against hostile provocations from North Korea while transforming the alliance with new capabilities to meet global challenges.

The third shared principle is presence. While strengthening our traditional alliances in Northeast Asia and maintaining our presence there, as part of this rebalancing effort we are also enhancing our presence in Southeast Asia and in the Indian Ocean region.

A critical component of that effort is the agreement announced last fall for a rotational Marine Corps presence and aircraft deployments in northern Australia.

The first detachment of Marines arrived in April, and this Marine Air-Ground Task Force will be capable of rapidly deploying across the Asia-Pacific region, thereby enabling us to work more effectively with partners in Southeast Asia and the Indian Ocean and tackle common challenges such as natural disasters and maritime security.

These Marines will conduct training and exercises throughout the region and with Australia, strengthening one of our most important alliances and building on a decade of operational experience together in Afghanistan. Speaking of that, I welcome and applaud Australia's announcement that later this year it will assume leadership of Combined Team Uruzgan, and will lead our security efforts there through 2014.

We're also continuing close operational cooperation with our longtime ally, Thailand. The Thais annually host COBRA GOLD, a world-class multilateral military exercise, and this year we will deepen our strategic cooperation to meet shared regional challenges.

We are energizing our alliance with the Philippines. Last month in Washington I joined Secretary Clinton in the first-ever "2+2" meeting with our Filipino counterparts. Working together, our forces are successfully countering terrorist groups. We are also pursuing mutually beneficial capability enhancements, and working to improve the Philippine's maritime presence. Chairman Dempsey will be traveling from here to the Philippines to further our military engagement.

Another tangible manifestation of our commitment to rebalancing is our growing defense relationship with Singapore. Our ability to operate with Singaporean forces and others in the region will grow substantially in the coming years when we implement the forward deployment of the Littoral Combat Ships to Singapore.

As we take existing alliances and partnerships in new directions, this rebalancing effort also places a premium on enhancing partnerships with Indonesia, Malaysia, India, and Vietnam, and New Zealand.

In the coming days I will travel to Vietnam to advance bilateral defense cooperation, building off of the comprehensive memorandum of understanding that our two nations signed last year.

From Vietnam, I will travel to India to affirm our interest in building a strong security relationship with a country I believe will play a decisive role in shaping the security and prosperity of the 21st century.

As the United States strengthens these regional partnerships, we will also seek to strengthen a very important relationship with China. We believe China is a key to being able to develop a peaceful, prosperous, and secure Asia-Pacific in the 21st century. And I am looking forward to traveling there soon at the invitation of the Chinese government. Both of our nations recognize that the relationship -- this relationship between the United States and China is one of the most important in the world. We in the United States are clear-eyed about the challenges, make no mistake about it, but we also seek to grasp the opportunities that can come from closer cooperation and a closer relationship.

I'm personally committed to building a healthy, stable, reliable, and continuous mil-to-mil relationship with China. I had the opportunity to host Vice President Xi and later Defense Minister General Liang at the Pentagon in the effort to pursue that goal. Our aim is to continue to improve the strategic trust that we must have between our two countries, and to discuss common approaches to dealing with shared security challenges.

We are working with China to execute a robust military-to-military engagement plan for the rest of this year, and we will seek to deepen our partnership in humanitarian assistance, counter-drug, and counter-proliferation efforts. We have also agreed on the need to address responsible behavior in cyberspace and in outer space. We must establish and reinforce agreed principles of responsible behavior in these key domains.

I know that many in the region and across the world are closely watching the United States-China relationship. Some view the increased emphasis by the United States on the Asia-Pacific region as some kind of challenge to China. I reject that view entirely. Our effort to renew and intensify our involvement in Asia is fully compatible -- fully compatible -- with the development and growth of China. Indeed, increased U.S. involvement in this region will benefit China as it advances our shared security and prosperity for the future.

In this context, we strongly support the efforts that both China and Taiwan, both have made in recent years trying to improve cross-strait relations. We have an enduring interest in peace and stability across the Taiwan Strait. The United States remains firm in the adherence to a one-China policy based on the Three Communiqués and the Taiwan Relations Act.

China also has a critical role to play in advancing security and prosperity by respecting the rules-based order that has served the region for six decades. The United States welcomes the rise of a strong and prosperous and successful China that plays a greater role in global affairs.

Another positive step towards furthering this rules-based order is Asia's deepening regional security architecture, which the United States strongly supports. Last October, I had the opportunity to be the first U.S. secretary of defense to meet privately with all ASEAN defense ministers in Bali. We applaud the ASEAN Defense Ministers Meeting Plus for producing real action plans for multilateral military cooperation, and I strongly support the ASEAN decision to hold more frequent ADMM-Plus discussions at the ministerial level. We think this is an important step for stability, real coordination, communication, and support between these nations.

The United States believes it is critical for regional institutions to develop mutually agreed rules of the road that protect the rights of all nations to free and open access to the seas. We support the efforts of the ASEAN countries and China to develop a binding code of conduct that would create a rules-based framework for regulating the conduct of parties in the South China Sea, including the prevention and management of disputes.

On that note, we are obviously paying close attention to the situation in Scarborough Shoal in the South China Sea. The U.S. position is clear and consistent: we call for restraint and for diplomatic resolution; we oppose provocation; we oppose coercion; and we oppose the use of force. We do not take sides when it comes to competing territorial claims, but we do want this dispute resolved peacefully and in a manner consistent with international law. We have made our views known and very clear to our close treaty ally, the Philippines, and we have made those views clear to China and to other countries in the region.

As a Pacific power, the United States has a national interest in freedom of navigation, in unimpeded economic development and commerce, and in a respect for the rule of law. Our alliances, our partnerships, and our enduring presence in this region all serve to support these important goals.

For those who are concerned about the ability of the United States to maintain a strong presence in the Asia-Pacific region in light of the fiscal pressures we face, let me be very clear. The Department of Defense has a five-year budget plan and a detailed blueprint for implementing this strategy I just outlined for realizing our long-term goals in this region, and for still meeting our fiscal responsibilities.

The final principle -- shared principle that we all have is force projection.

This budget is the first in what will be a sustained series of investments and strategic decisions to strengthen our military capabilities in the Asia-Pacific region. I would encourage you to look at the increasing technological capabilities of our forces as much as their numbers in judging the full measure of our security presence and our security commitment.

For example, over the next five years we will retire older Navy ships, but we will replace them with more than 40 far more capable and technologically advanced ships. Over the next few years we will increase the number and the size of our exercises in the Pacific. We will also increase and more widely distribute our port visits, including in the important Indian Ocean region.

And by 2020 the Navy will reposture its forces from today's roughly 50/50 percent split between the Pacific and the Atlantic to about a 60/40 split between those oceans. That will include six aircraft carriers in this region, a majority of our cruisers, destroyers, Littoral Combat Ships, and submarines.

Our forward-deployed forces are the core of our commitment to this region and we will, as I said, sharpen the technological edge of our forces. These forces are also backed up by our ability to rapidly project military power if needed to meet our security commitments.

Therefore, we are investing specifically in those kinds of capabilities -- such as an advanced fifth-generation fighter, an enhanced Virginia-class submarine, new electronic warfare and communications capabilities, and improved precision weapons -- that will provide our forces with freedom of maneuver in areas in which our access and freedom of action may be threatened.

We recognize the challenges of operating over the Pacific's vast distances. That is why we are investing in new aerial-refueling tankers, a new bomber, and advanced maritime patrol and anti-submarine warfare aircraft.

In concert with these investments in military capabilities, we are developing new concepts of operation which will enable us to better leverage the unique strengths of these platforms and meet the unique challenges of operating in Asia-Pacific. In January, the department published a Joint Operational Access Concept which, along with these related efforts like Air-Sea Battle, are helping the Department meet the challenges of new and disruptive technologies and weapons that could deny our forces access to key sea routes and key lines of communication.

It will take years for these concepts and many of the investments that I just detailed, but we are making those investments in order that they be fully realized. Make no mistake -- in a steady, deliberate, and sustainable way the United States military is rebalancing and bringing an enhanced capability development to this vital region.

Earlier this week I had the opportunity to deliver the commencement address at the U.S. Naval Academy. And there I had the pleasure of handing a diploma to the first foreign student to achieve top graduate honors, a young midshipman from Singapore: Sam Tan Wei Chen.

I told that graduating class of midshipmen that it would be the project of their generation to meet the challenges and seize the opportunities that are emanating from the Asia-Pacific region.

By working in concert with all elements of American power, I truly believe that these young men and women will have the opportunity to play a vital role in securing a century of peace and prosperity for the United States and for all of the nations of this region.

Over the course of history, the United States has fought wars, we have spilled blood, we have deployed our forces time and time again to defend our vital interests in the Asia-Pacific region. We owe it to all of those who have fought and died to build a better future for all nations in this region.

The United States has long been deeply been involved in the Asia-Pacific. Through times of war, times of peace, under Democratic and Republican leaders and administrations, through rancor and through comity in Washington, through surplus and through debt. We were there then, we are here now, and we will be here for the future.

Thank you.

(Applause.)

MR. CHIPMAN: Mr. Secretary, thank you very much for that comprehensive and detailed explanation of how the U.S. will rebalance toward the Asia-Pacific. We will take a number of questions. I invite those who wish to take the floor to hold up their name cards horizontally, which gives me a slightly better chance of reading them. I cannot guarantee that all of you will get in. I will ask a few people in the first round and if we need to, we will bunch up later. I will also try to ensure a diversity of national intervention. So that will also be guiding my selection. Thank you very much. Indeed, I've got the majority of you down. In about 10 minutes, I might ask those of you who haven't had the floor to try a second time.

The first question from Mr. Bao Bin. If you just press the microphone in front of you and the camera should catch you. Raise your hand so we can see you. There you go. Go ahead.

Q: Thank you, Mr. Chipman. I'm Senior Colonel Bao from the Academy of Military Science, PLA, China.

Mr. Secretary, you clearly define U.S. policies towards the Asia-Pacific region. We welcome the United States to play a constructive role in maintaining the peace and stability in Asia-Pacific. And my question is that, can you elaborate a little more on how U.S. will develop its military-to-military relations with China. Thank you.

SEC. PANETTA: I appreciate the question because it is something that we are devoting a great deal of effort to try to promote. We think that a strong mil-to-mil relationship with China would be extremely important in dealing with the issues that both of our nations confront.

The way we are approaching this is to develop a series of high-level exchanges between our two countries. We've already begun that and we'll continue that obviously, hopefully, with my visit to China sometime in the summer.

In addition to that, we have discussed the ability to develop teams that can work together to focus on some of these more difficult areas such as cyber and what we can do to exchange information and try to ensure that we develop perhaps some standards when it comes to the use of cyber. Space is another area that we want to develop the opportunity to discuss with them ways to approach our abilities to use space.

In addition to that, obviously, we will continue to have exchanges with our military commanders, our PACOM commander. Hopefully, we'll be visiting China to discuss with them what we are doing in the Pacific.

So the key here is to try to strengthen our mil-to-mil context so that we can have greater transparency between our two countries. But more importantly, we can take steps to confront the mutual challenges that both of our countries face: the challenge of dealing with humanitarian crisis and disaster relief; the challenge of nuclear proliferation; the challenge of trying to deal with North Korea; the challenge of trying to deal with drug addiction and narco-trafficking; the challenge of dealing with piracy on the high seas; the challenge of dealing with maritime navigation and improving our lines of communication. These are all common challenges that we face. And the best way to do that is by improving our mil-to-mill relationship.

MR. CHIPMAN: Mr. Kato from Japan. If you can put your hand up so the camera catches you. There you go. Mr. Kato over there. Go ahead.

Q: Thank you, Mr. Secretary, for a very comprehensive, articulate presentation. While the U.S. is rebalancing to Asia is welcomed by most of the regional allies and partners, the response from China is mixed to say the least. One of the scholars recently stated in a conference similar to this that China sees U.S. back to Asia security policy targeted of China and is a direct and strategic threat. And you just said in your presentation that you reject this kind of idea, but I have to say that the reality is that rebalancing has triggered some strategic distrust, especially on part of China, which could destabilize the region. How do you deal with this kind of perhaps unintended but negative consequence of the strategic shift? Thank you.

SEC. PANETTA: Thank you for the question. In many ways, the key is for the United States and China to maintain close lines of communication so that we develop an element of trust in our relationship. And our problem in the past is that oftentimes despite the effort at establishing better relations, there was a large element of distrust between our two countries.

I think what both of us have to recognize is that we are powers in this region. We have common interests in this region. We have common obligations to try to promote peace and prosperity and security in this region.

And yes, the United States has been a power presence in the Pacific in the past and we will remain so and strengthen that in the future, and that's true for China as well. But if both of us work together, if both of us abide by international rules and international order, if both of us can work together to promote peace and prosperity and resolve disputes in this region, then both of us will benefit from that. Both countries will benefit from that.

And it isn't just military. It isn't just defense. It's diplomacy. It's trade. It's economic. It's the ability to share in a number of areas that will determine the future of our relationship. But if we can broaden that relationship, if we can establish that kind of communication and that kind of trust, then I think it will be to the benefit of all of the countries in the Asia-Pacific region.

MR. CHIPMAN: Mr. Demetri Sevastopulo from the Financial Times. There you go.

Q: Thank you. Secretary Panetta, over the past three years, the U.S. increased rhetoric on being a Pacific power has been matched by an increased frequency in incidents in the South China Sea involving China in most cases and its neighbors. You say that the U.S. doesn't take sides in territorial disputes, but unless the U.S. takes a more aggressive stance on China's actions in the South China Sea, is the U.S. not in danger of being seen as a more impotent power as you're trying to protect yourself as a more potent power?

SEC. PANETTA: I think the key to being able to deal with the territorial disputes that we see in the Scarborough shoals and that we've seen elsewhere is to build the kind of code of conduct standards that the ASEAN nations are working towards and that we can be helpful in trying to assist in developing.

Pursuant to developing that code of conduct it is very important that the ASEAN nations develop a dispute forum that can allow for the resolution of these disputes. It is not enough just simply to develop a code of conduct. You've got to back it up with the ability to negotiate and resolve disputes in this area. And that is what the United States is encouraging.

It's pretty clear that every time these events take place that we always come very close to having a confrontation, and that's dangerous for all countries in this region.

Again, the key to this is that both China as well as the ASEAN nations have to develop international -- have to abide by international rules and order, but more importantly have to develop a code of conduct that can help resolve these issues. That's the only effective way to get this done. It isn't enough for the United States to come charging in and trying to resolve these issues. This is a situation where the countries here have to come together. We will support them. We will encourage them, but ultimately they have to develop a code of conduct and a dispute forum that can resolve those issues. That's the most effective way to deal with those kinds of conflicts.

MR. CHIPMAN: From France, Francois Heisbourg.

Q: Thanks very much, John. Thank you, Mr. Secretary for having laid out so clearly and so precisely America's new strategic approach. However, it is built on fiscal and economic premises which will not necessarily prevail over the period of time under which this new strategic approach is supposed to unfold. In fiscal terms, by the end of this year, if nothing else happens or is done, you will have so-called sequestration; that is, some $500 billion of new defense spending cuts by the end of the decade.

And secondly, the economic news in the States as in Europe and indeed elsewhere is not exactly conducive to the sorts of spending levels on which your new strategy is approached.

And finally, the political background, and here comes the question: what is your confidence -- given that fiscal, economic and political backdrop, what is your confidence that this is going to become a bipartisan solid new American strategy rather than simply the project of President Obama's administration?

SEC. PANETTA: Okay. Let me address the issue looking at each part of your question.

First of all, understand that it was the United States Congress taking the first step to try to deal with the debt issue that developed the Budget Control Act. And that part of the Budget Control Act that related to defense required that we cut $487 billion out of defense over the next 10 years.

Because of my own background as OMB director and as chairman of the House Budget Committee, I have always believed that defense has to do its role with regards to fiscal responsibility in the United States. And it was for that reason that we made the decision that we would take that number and develop a strategy, a defense strategy that would implement those savings over the next 10 years, but would do it in a way that would be tied to a defense strategy that would maintain our military power in the world. And working with the service chiefs, working with the under secretaries we developed that strategy and we developed the budget that would meet those goals. So I do not think that we have to choose obviously between our national security or fiscal security. I think we can do both. And I've always believed that. And I think we have done it with regards to the proposal that we've made.

So, number one, the plan that we developed, the strategy that we developed and the budget we developed implements those reductions over a period of time, but does it in a responsible way that protects our defense posture for the future. We recognize that. I think the Congress recognizes that as well.

Secondly, with regard to sequester -- sequester is not a real crisis. It's an artificial crisis. The Congress itself developed that as a weapon to try to force them to make decisions with regards to further deficit reduction and they put that gun to their head to basically say if they didn't do it, the gun would go off.

It's been set because of the failure of the Super Committee sequester is now supposed to take effect in January. Both Republicans and Democrats recognize that that would be a disaster. Sequester would impose another $500 billion in defense cuts if it we were to go into effect. I know of no Republican, no Democrat who believes that should happen. Having said that, obviously, they have the responsibility then to take action now to de-trigger sequester from taking effect. I believe that they will work to do that. I really do, because I think there isn't anyone that wants that to happen, so I'm confident that ultimately Republicans and Democrats will find a way to de-trigger that artificial crisis that they put in place.

The third point is with regards to the confidence level I have that ultimately Republicans and Democrats will deal with the larger issues that we confront in our economy, particularly with regards to the deficit.

In my history in the Congress, I participated in every budget -- major budget summit beginning with Reagan, President Reagan, continuing with President Bush. As OMB director for President Clinton developed the budget, the deficit reduction plan that President Clinton put in place.

In every one of those -- every one of those -- it was important for Republicans and Democrats to put everything on the table and to look at every area of spending, not just defense, not just domestic spending, but at entitlements and at revenues. And it was because we put all of those elements together in those packages that we ultimately were able to balance the budget.

I know the politics of this is difficult both for Republicans and Democrats, but I ultimately believe that because it is so important to our country and to our economy that ultimately they will find the courage that is required here to be able to develop that kind of approach to deficit reduction.

MR. CHIPMAN: Next is Norodom Sirivudh adviser to his majesty, the king of Cambodia.

Q: Thank you, Mr. Chair. Cambodia is a host of ASEAN and we will host ARF, an East Asia Summit. It seemed to me that your next destination was Vietnam and India and we hope that the U.S. president and yourself and Hillary Clinton would visit us, Cambodia. So it seems to me that we have been very encouraged by this peaceful relation between U.S. and China. So it seems that India sharing borders with China and Vietnam too and now one country's sharing borders with Vietnam to Myanmar have faced a lot of change and evolution. How you can imagine the next cooperation between U.S. and Myanmar and in particular in the area of defense? Thank you, sir.

SEC. PANETTA: Obviously, we encourage the reforms that they are hoping to put in place. As you know, the State Department has taken steps to relieve some of the sanctions that were placed on Myanmar and try to encourage them, again, to move in the right direction. I think that part and parcel of that, assuming that they are able to implement reforms and to continue the kind of political efforts at opening up their system that a part and parcel of that would be discussions with regards to how we can improve our defense relationship with their country as well.

You know, let me emphasize here that the United States today, in dealing with the countries of the Asia-Pacific region, that this is not a Cold War situation where the United States simply charges in, builds permanent bases and tries to establish a power base in this region.

This is a different world. This is a world in which we have to engage with other countries to help develop their capabilities so that they can develop their own security and be able to defend themselves in the future. And so that means a role where we engage with those countries, where we can develop these kinds of rotational deployments and exercises, where we can provide guidance and assistance, where we can develop their capabilities in their country to try to provide a partnership in the effort to promote peace and prosperity. And we will encourage that kind of relationship with every nation that we deal with in this region, including Myanmar.

MR. CHIPMAN: We're going to take just two more questions but together and then the secretary can answer them both. Bonnie Glaser and then Josh Rogin. Bonnie Glaser first, then Josh and then the secretary can answer both.

Bonnie, go ahead.

Q: Thank you, Mr. Secretary. You just talked about the need for the United States to help countries in this region to develop their own capabilities and enhance their own security. And you discussed specifically in your remarks the efforts that the U.S. is making to bolster the Philippines' capability to defend itself. Even as these steps are I think very welcomed by the region, nevertheless I hear from many sources in this region that there are growing concerns that this may embolden the Philippines and perhaps other countries whose capabilities are being enhanced and that in fact this may risk greater confrontation. So how does the United States strike the right balance between deterrence and strategic reassurance?

MR. CHIPMAN: Josh?

Q: Thank you. Last year, Mr. Secretary, your predecessor, Robert Gates, met on the sidelines of this very conference with Chinese Defense Minister Liang Guanglie. This year, of course, that's not possible because the Chinese government declined to send any senior level officials to the Shangri-La Dialogue. Of course, nobody knows exactly why China decided to downgrade its presence at this forum, but several clues suggest that China is expressing its opposition to the increasing U.S. role in multilateral regional affairs. For example, a front-page commentary in the People's Daily this week says that China's disputes with its neighbors related to the South China Sea, quote, "have nothing to do with the U.S."

I'm wondering: do you agree that U.S. is, as the commentary quoted, "an external force of hegemony" that is intervening improperly in the South China Sea? Were you disappointed that the Chinese government decided not to send any high-level officials to this dialogue? And what do you think this says about China's willingness to engage constructively with the United States on regional issues of mutual concern? Thank you.

SEC. PANETTA: Okay. First of all, with regards to the issue in the Philippines, I think it's important to understand that countries -- a real respect for the sovereignty of countries requires that we do everything we can to help support those countries develop their capabilities and be able to secure and defend themselves, but at the same time encourage them, as I said, to abide by the principles that I laid out here. And the key principle is to abide by an international set of rules and standards and order that all nations should abide by.

I don't think we should take the attitude that just because we improve their capabilities that we're asking for more trouble because that will guarantee that the only powers in this region then are going to be the United States and China as opposed to other nations having the ability to engage in defending and promoting their own security, and I think that would be wrong.

So I think that it is a positive step to be able to encourage and develop those capabilities and at the same time make very clear that those countries in exchange have to abide by a clear set of rules and requirements and regulations that all nations should abide by. And that's something that frankly has to be done on the diplomatic side as well.

The outreach here to the countries of Asia-Pacific, as I stressed, cannot just be on the military side. It has to be on the diplomatic side. It has to be on economic development. It has to be in a number of other areas that expand the relationship between countries. And if we can do it on that broader set of issues and engage on a broader set of issues, then I think we'll have a much better chance of being able to assure that all countries will seek to resolve their disputes peacefully, as opposed to engaging in conflict.

With regards to China, you know, our relationship with China, we approach it in a very clear-eyed way. We're not naïve about the relationship and neither is China. We both understand the differences we have. We both understand the conflicts we have, but we also both understand that there really is no other alternative but for both of us to engage and to improve our communications and to improve our mil-to-mil relationships.

When I was director of the CIA dealing with a number of countries, there were disputes. We had differences, but at the same time we had strong intelligence relationships because they understood it was in their interest and we understood that it was in our interest. And that's the kind of mature relationship that I think we ultimately have to have with China.

You know, we will have ups and downs. That's the nature of these kinds of relationships. We have that with Russia. We have that with other countries in the world. There are up and down relationships. There are moments when you agree. There are moments when you disagree, but you maintain lines of communication. You maintain lines of diplomacy. You maintain the kind of contact that will allow you to talk with one another and hopefully be able to resolve those differences and to focus on those areas where you do agree and on those areas where you can develop a better relationship.

So that's what we're intent on doing here with China is to build that kind of relationship recognizing that we're going to have disputes, recognizing that we're going to have conflicts, but also recognizing that it is in the interest of both China and the United States to resolve these issues in a peaceful way. That's the only key to advancing their prosperity and to advancing our prosperity.

(Distributed by the Bureau of International Information Programs, U.S. Department of State.)