Speeches: Forum on Latvian Presidency and EU Policy Towards Central Asia

(As prepared for delivery)

It’s always an honor to be invited to speak at the Central Asia and Caucasus Institute. But I have to admit it’s also a little daunting because of the presence of the eminent scholar of Central Asia, Dr. Fred Starr. So from the very beginning, Fred, let me ask your indulgence and recognition that I am, after all, both a diplomat and a bureaucrat – a diplocrat, if you will – representing official U.S. government policy.

As someone who has been involved in U.S. Central Asian policy for more than a decade, let me say that some might see our policy as a little too aspirational and a little too unfocused, but I would argue that the concept is right. And I am grateful that we have a partner like Latvia that has a similarly far-sighted vision for the region.

I want to commend Latvia for having designated Central Asia as one of its priorities of its EU presidency. I think this is increasingly seen as prescient and very timely.

The five countries of Central Asia all to one degree or another practice a multi-vector foreign policy, balancing Russia, China, the United States, and the European Union. Over the past year, I have watched each of the five countries readjust the balance of their relationships and incrementally open up a bit more to both the United States and to the European Union – as well as to each other. I would judge this is because of events in Ukraine, as well as because of unease about the future of Afghanistan.

It’s an honor to share the stage with Eduards Stiprais, with whom I had an excellent conversation in Riga in February when I was there to brief on our Central Asia policy and to seek the government of Latvia’s advice and recommendations how we might coordinate our work both bilaterally with Latvia and multilaterally with the European Union.

I left Riga with a great admiration for the work Latvia is doing in Central Asia, including training for Central Asians at the Graduate School of Law in Riga, a program that we help to fund and for which we increased our funding after I met with the people in Riga who run this exemplary program.

We all know that priorities are reflected in how resources are spent, especially in the constrained budget environment that many governments, including our own, are facing.

So with the EU greatly increasing its seven-year budget for Central Asia to over one billion dollars for 2014-2020, it’s pretty clear that the Europeans are giving this region a new emphasis.

We recently finished updating our Central Asia policy, which is founded on two distinct principles: (one), that our security is enhanced by a stable, secure Central Asia, and (two) that regional stability is best achieved through sovereign, independent Central Asian states with secure borders, linked economies and populations, and accountable governments.

Based on those principles, we are promoting three main objectives: (1) security and stability, (2) trade and investment, and (3) good governance and human rights.

I needn’t point out that these objectives are mutually reinforcing and create a virtuous circle: security and stability are a condition for commerce, commerce is sustained by good governance, good governance and human rights enhance stability, stability supports more commerce, and on and on.

Today, I want to focus on the second objective of our policy for Central Asia, which centers on trade and investment.

I’m sure many of you are quite familiar with our New Silk Road initiative, so I’ll just briefly explain that the initiative’s objective is to increase economic connectivity among the countries of Central Asia and South Asia, along both north-south and east-west trade networks.

We are increasing connectivity by helping our partners in Central Asia along four lines of effort: (one), building a regional energy market, (2) improving trade and transport routes, (3) streamlining customs and border crossings, and (4) creating linkages between peoples and between businesses.

Essentially, we are trying to enhance the virtuous networks of global trade, investment, and knowledge-sharing, while suppressing the vicious networks of transnational crime, trafficking, and terrorism.

Now, this involves much more than just new roads and rails, though those are certainly a prerequisite.

And while, most recently, our New Silk Road initiative focused mostly on north-south connectivity — between Central Asia and South Asia – we’re also looking at ways that U.S. leadership can help improve east-west connectivity, between Europe and Asia.

To start with, for over six years we have worked closely with our partners in Central Asia, the South Caucasus, Turkey, and the rest of Europe – including Latvia – to transport goods in and out of Afghanistan through the Northern Distribution Network.

We’re now seeking to build on the close partnerships forged through the NDN to support the development of an east-west trade network, stretching from China and India to Central Asia, across the Caspian to the South Caucasus, Turkey, and the rest of Europe.

Several other efforts to develop trade corridors are also underway.

The Lapis Lazuli trade corridor transiting Turkmenistan, which Afghan President Ghani highlighted at the Joint Session of Congress last month, holds great promise. As does the Silk Wind route, which goes through Kazakhstan to China.

We’re also closely watching the EU-sponsored Eastern Partnership Network, which runs across Europe to Azerbaijan, as well as the Trans-Caucasus-Central Asia network (TRACECA) that would run through Azerbaijan, over the Caspian, across Central Asia, and into East Asia.

And then there’s the EBRD- and ADB-supported Central Asia Regional Economic Cooperation network that spreads across all the Central Asian nations and branches west into Azerbaijan, south into Pakistan, and east into China.

So we encourage the countries involved to continue the hard and often tedious work that will make these proposals a reality; we are ready to assist in whatever way we can.

As I mentioned earlier, these networks require more than just new roads and rails — potholes and broken track aren’t the only barriers to trade.

High tariffs, antiquated customs processes, complicated border crossings, and other policy issues also hamper the flow of goods. They result in trade that is costlier, slower, and smaller.

It’s probably more than a coincidence that the low level of trade among the countries of Central Asia strongly correlates with their low position on the World Bank’s trading-across-border rankings.

Viable north-south and east-west trade networks will require regulatory reforms and regional cooperation to reduce delays, documents required, and overall costs – including the costs of corruption. Removing these bottlenecks will greatly enhance the region’s competitiveness.

But fixing these policy barriers to trade requires political will at the top and coordination among various levels of government and among governments.

And so, we want to elevate our diplomatic engagement across the region and use our convening power to bring these countries together, to help solve some of these difficult issues like customs and border crossings.

We’ve already seen the efficacy of such an approach in the successes of the CASA-1000 energy project, which brought together a grouping of countries that had never before worked together on a development project. With last Friday’s signing ceremony in Istanbul, CASA-1000 is closer than ever to becoming a reality.

China, through its Silk Road Economic Belt and other initiatives, certainly has a lot to offer when it comes to financing, planning, and building the infrastructure that is so vital to trade. We see China’s investments in Central Asia as a welcome development, so long as those investments lead to broad, balanced, and sustainable growth.

I’d like to underscore balanced because, while China is the largest trading partner of Kazakhstan, Kyrgyzstan, Tajikistan, and Turkmenistan, and is Uzbekistan’s second-largest partner, 80-90 percent of China’s exports to those countries are finished goods, while, conversely, more than 85 percent of China’s imports from those countries are raw materials. Central Asia’s economies definitely have some room to grow in terms of export diversity, which is part of our own efforts and the EU’s as well.

We see China’s involvement as complementary to our own – Central Asia is definitely a region where everyone wants to see “all boats rise.” In fact, we have been consulting with China, looking for areas of common interest where we can cooperate. I’ll soon travel to Beijing with an interagency team to do just that – for the second time in less than a year.

And so, we’re looking forward to working with the EU, China, India, and the countries of Central Asia and the South Caucasus, to enhance and further develop those east-west networks that truly have the potential to transform global trade flows, for the benefit of all.

To conclude, I want to say thank you again to Latvia for its leadership, and of course to Fred Starr and SAIS, for bringing us together for this important discussion. I look forward to any questions that might follow.