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East Asia and the Pacific: U.S. Policy Towards East Asia and the Pacific

It’s a pleasure to be here with the Baltimore Council on Foreign Affairs to discuss U.S. policy toward East Asia and the Pacific. I appreciate the opportunity to be here tonight, because I believe it’s important to explain our policies; to connect with Americans outside the Beltway and get your feedback.

I have worked on Asia policy in the State Department and at the White House for decades. Early in my career, I had the great privilege of working for former Senate Majority Leader Mike Mansfield, when he was Ambassador to Japan. And so I learned quickly, and have seen countless times since, the importance, and the contributions of the Senate, and of individual Senators in our country’s international relations.

Congress may not always poll well at home, but to nations around the world, it embodies American democracy. And when members travel and meet with world leaders, people listen. So it’s important to have thoughtful, knowledgeable, eloquent leaders, especially on the Foreign Relations Committees. Leaders who speak with force and clarity to advance American interests and values.

And Marylanders are very lucky to have such a leader in Senator Ben Cardin, Chairman of the Foreign Relations Subcommittee on East Asia and the Pacific. I’ve valued his wise counsel and advocacy for strong U.S. involvement in the region. It is a privilege to work with him. He is in Vietnam as we speak, en route to the Shangri-La Dialogue in Singapore, where he will participate in a range of foreign policy discussions.

And of course I must also recognize the contributions of Senator Barbara Mikulski, who is a strong supporter of diplomacy and development as Chair of the Appropriations Committee, and is a leader on the Intelligence Committee as well. Maryland is doubly blessed to have these two great Senators.

The Port of Baltimore below us is older than the United States – a reminder that your city has always been a player in international trade, and thus in America’s relations with the world. And that brings me to the foundation of President Obama’s policy toward the Asia-Pacific region.

That policy is built on a simple idea: the region is hugely consequential to the U.S. The broader Asia-Pacific region – from the Pacific Coast of the Americas, through the island nations of the Pacific, to Australia and the Asian continent, constitutes over half the world’s people and economic output. Within that area, the East Asia-Pacific region that I’m responsible for accounts for about one-third of the world’s people and one-quarter of global economic output… and the numbers are growing.

As a resident Pacific power and a trading nation, the United States depends on a stable, prosperous Asia. The Asia-Pacific region matters for U.S. jobs and U.S. security.

Yet, when we looked at how our government’s resources were distributed – diplomatic and development personnel and funds, military assets, and the time and attention of senior leaders – we realized that the distribution of our resources didn’t match the growing importance of the region and our goals there. The distribution was out of balance.

So over the last five-plus years, we have worked to rebalance – this means strengthening our alliances and partnerships, building up regional institutions, and engaging with emerging powers, such as China and Indonesia. Let me give you a few details on each of these three areas.

We have strengthened and reinvigorated relations with our five treaty allies in the region – Australia, Japan, the Republic of Korea, the Philippines and, despite recent unfortunate developments, Thailand.

We have upgraded our economic and trade engagement. For instance, we ratified the Korea-U.S. free trade agreement and have worked to fully implement it. We’re negotiating the Trans-Pacific Partnership, or TPP, which includes allies and other partners as well.

And we have strengthened security cooperation with our allies, from our work with Japan and South Korea to counter the North Korean nuclear threat, to the new defense cooperation agreement signed during the President’s recent trip to the Philippines, to our rotational deployment of Marines to Australia. The strength of our alliances was highlighted by President Obama’s recent visit to Japan, South Korea, and the Philippines.

Our growing ties with emerging powers were highlighted by the President’s stop in Malaysia in April. At the same time, we have rededicated ourselves to collaboration with longtime friends like New Zealand, Singapore, Taiwan, and the Pacific Island nations, as well as renewed engagement with Burma.

Second, we are helping to build up the region’s security and economic institutions.

For example, take the Association of Southeast Asian Nations, or ASEAN – a group formed not by us, but by countries in the region that see elements of a shared destiny and which also have shared concerns.

We were the first non-ASEAN member to have a dedicated mission to ASEAN. President Obama participates annually in the East Asia Summit, a meeting of 18 of the region’s leaders convened and chaired by ASEAN. In the Asia-Pacific Economic Cooperation, or APEC, forum, we work closely with 20 member economies from across the Asia-Pacific to expand trade and investment, promote sustainable growth and strengthen regional ties. And as I mentioned, we are negotiating the TPP. This is an ambitious, comprehensive, and high standard agreement that will promote growth and create jobs both at home and in the region, and includes nearly 40 percent of global GDP.

These regional institutions and agreements are becoming an increasingly important part of the international system of the 21st century. This is worth putting in context, because the international system – a lot of which we take for granted – is unique in world history. For instance, never before have people, companies, and nations been able to travel and trade more freely. Most Americans take the ability to fly overseas for granted. They think about the cost, of course, but not about the global network of treaties, agreements, and institutions like the International Civil Aviation Organization that make it possible.

This international system, these global and regional organizations, provide another long-term benefit as well. Because beyond what you read about any single meeting or accomplishment, these bodies inculcate a mindset of working together. Working together on a daily basis can help nations peacefully resolve disputes, and advance each other’s development.

As countries see the value of working together on a growing range of issues, this mindset and the structures that support it become more and more self-sustaining. And so, too, does the shared understanding that rules and norms, and not size and power, determine the outcome of disagreements. While each group and each time is different, the benefits of global cooperation and regional integration are clear.

And today, in Asia and the Pacific, regional institutions are driving real accomplishments, whether:

  • negotiating jointly toward a code of conduct for claimants in the South China Sea;
  • improving management of shared resources, like fisheries;
  • eradicating diseases; or
  • addressing pollution that crosses borders.

Our support of regional institutions will be highlighted by the President’s participation in the Asia-Pacific Economic Cooperation forum in China, and the East Asia Summit in the fall.

We also have initiatives that bring neighbors in the region closer both to us and to each other, such as the Lower Mekong Initiative. This initiative helps Burma, Cambodia, Laos, Thailand and Vietnam work together to tackle common challenges, including education, infrastructure, agriculture and the environment.

The third pillar of the rebalance that I mentioned is engaging with emerging powers. By this we have traditionally meant our engagement with countries like Indonesia (with which we have developed a comprehensive partnership and a hold annual joint commission meetings on a range of issues), India (with which I hold very productive East Asia Consultations as well as trilateral meetings on the Asia-Pacific with Japan) and of course, China. But a broader definition of emerging powers could include countries like Vietnam, Malaysia, and, hopefully someday, Burma.

Expanding people-to-people ties is important throughout the region, and especially with emerging powers. We have increased people-to-people ties through programs like the Young Southeast Asian Leaders Initiative. President Obama launched this initiative on his recent trip to Asia, with youth from across the region to develop patterns of interaction among the region’s future leaders.

These three pillars support and reinforce each other.

Strengthening our alliances provides a foundation of security for the region, giving countries the confidence and the space to move forward on their collective interests and strengthen regional institutions. Unforeseen challenges, such as the coup last week in Thailand, can strain relations with an ally.

But other challenges can bring allies closer together. Amidst the terrible loss of life and devastation of Typhoon Haiyan, our support for the Philippines, along with that of other allies, has been a bright spot.

Building up those institutions, in turn, helps the region develop the rules of the road that I mentioned. And those rules – developed by and for the nations of the Asia-Pacific – provide the environment for trade, prosperity, and for solving problems.

Our engagement with emerging powers makes clear that the U.S. seeks partnerships and collaboration. It shows that we are committed to building positive-sum relationships. And it shows that we are prepared to welcome the peaceful rise of countries like China.

As the invitation to this event mentioned, relations with China are an important component of our policy toward the region. So let me share the Administration’s approach to our bilateral relationship.

How have we pursued the rebalance with China? By committing to develop a bilateral relationship where we expand areas of cooperation and constructively manage differences. By agreeing that both sides must continue to actively develop bilateral relations and avoid a drift toward strategic rivalry. And by strengthening our engagement with China at all levels, the helps to promote mutual understanding about each other’s intentions, thereby reducing the risk of miscalculation.

By expanding engagement at the highest levels. President Obama has met with his Chinese counterparts some 19 times, and Secretary Kerry and other cabinet members meet with their counterparts on a regular basis. These meetings help us build and maintain the relationships we need to seize opportunities and address concerns:

Our high-level Strategic and Economic Dialogue, chaired jointly by Secretaries Kerry and Lew and their Chinese counterparts, is a key venue for both sides to achieve progress toward these shared objectives. We will have two days of intensive senior-level engagement in Beijing this July. We will use them to candidly address areas of disagreement, while at the same time expanding areas of cooperation.

This Dialogue brings together senior teams from across both governments to tackle some of the most vexing bilateral, regional, and global issues. Issues include the denuclearization of the Korean Peninsula, climate change, elimination of Syrian chemical weapons stockpiles, food security, maritime security, global health, human rights, economic rebalancing, and energy security.

Our economies are increasingly intertwined, with investment flowing both ways:

  • In the last decade-and-a-half, cumulative Chinese investment in the U.S. has gone from near zero to $36 billion. Our Mission in China has done a lot to facilitate that investment.
  • And the U.S. Commercial Service, under the Department of Commerce has opened new offices in China.
  • And we agreed last year to pursue a “high-standard” bilateral investment treaty – one that can level the playing field for U.S. firms operating in China and create jobs here at home.

We cooperate on protecting the environment:

  • Last year, Secretary Kerry and State Councilor Yang Jiechi created a high-level Climate Change Working Group that has made significant progress.

We cooperate on socio-cultural issues:

  • Through the U.S.-China Consultation on People-to-People Exchange we work to enhance and strengthen ties between citizens of the United States and the People’s Republic of China in fields such as culture, education, science and technology, sports, and women’s issues.
  • The State Department supports more Americans studying in China than in any other country. Approximately 700 students, scholars, and teachers will conduct research, teach, or study Chinese in China through one of our exchange programs. This is in addition to the support we provide for Chinese students and scholars to study and conduct research in the United States.
  • China is the top sender of foreign students to the U.S., with over 230,000 in 2013. We are encouraging more American students to study in China through the 100,000 Strong Initiative and Foundation.

But I believe we must do much more to expand cooperation in the years to come. The logic of our shared interest should compel greater coordination and cooperation.

We share an interest in upholding the rules-based international system under which China has achieved historic levels of economic development. The United States has advocated for and embraced China’s inclusion in multilateral fora like the World Trade Organization, the G-20, and APEC, which China hosts this year. These groups create an environment conducive to China’s continued economic growth.

And more broadly, we know that free access to information, free speech, and the rule of law have been proven ingredients for unlocking human potential in societies across the world. As China works to move up the value chain into innovative industries and the global creative economy, its incentive to reform will increase.

These are all reasons why I believe China should strengthen its contributions to the international system, accepting its constraints to gain its far greater benefits. The U.S. accepts constraints – we lose some trade cases in the WTO, and some votes at the U.N., but we accept that, because the benefits far outweigh the costs.

As the President said yesterday, “America benefits when those norms are not only being upheld by us individually, but where all countries buy in… And China now as a rising power needs to be part of that….”

We will always need to protect our interests where they diverge. We have, and will continue to have, real differences. The question is how we deal with them. The test of our engagement, of our diplomacy is whether we are able to expand practical areas of cooperation on regional and global issues and at the same time manage these differences candidly and constructively.

In fact, this is the challenge of diplomacy writ large – working together when we can, and working to resolve disagreements peacefully when they arise. And that diplomacy depends on the support of the American people. It depends on people like you, who understand that spending on diplomacy and development is just one percent – less than one percent – of the Federal budget.

You understand that we need to invest in these tools. As President Obama said at West Point yesterday, this is “one of the hard-earned lessons of Iraq and Afghanistan, where our military became the strongest advocate for diplomacy and development. They understood that foreign assistance is not an afterthought, something nice to do apart from our national defense, apart from our national security. It is part of what makes us strong.”

Because when you only have a hammer, every problem becomes a nail.

Relations with the Asia-Pacific region matter to all Americans – for our economy, our security, and the advancement of our values.

And they matter to Baltimore, and all of Maryland. For instance, international students contribute over $400 million to the Maryland economy per year. The nearly-complete expansion of the Panama Canal is expected to bring more ships from the Pacific to the East Coast; the rebirth of American manufacturing creates more potential exports, and growth in the Asia-Pacific region should create more demand for our goods, and more two-way trade.

But your involvement – as business leaders, as academics, as engaged citizens – is essential to realizing these possibilities. So thank you. Thank you for the invitation, thank you for engaging with your friends and neighbors on the value of diplomacy; and thank you in advance for your thoughts and questions tonight. Let’s open it up for discussion.

Obama gets down to business in Malaysia

Author: Shankaran Nambiar, MIER

President Obama’s two-day visit to Malaysia is a feather in Prime Minister Najib’s cap. But it is a decoration that carries certain obligations given the implications of what Obama has conveyed.

The decision to include Malaysia as part of Obama’s Asia tour was strategically timed since the Trans-Pacific Partnership (TPP) agreement is still being hotly debated there.

Obama made it clear that ‘the United States is once again playing a leadership role in the Asia Pacific’. He qualified this statement by adding that ‘a key part of our strategy is expanding our ties with Southeast Asia, and that includes Malaysia’.

The United States generously extended its resources to assist Malaysia in its MH370 search and rescue operations, demonstrating its keenness to support Malaysia in a time of need. It also shows the United States’ interest in making its presence in the region felt.

In Obama’s eyes, Malaysia has a pivotal role to play in the region both by virtue of its geography (‘Malaysia is central to regional stability, maritime security and freedom of navigation’) and its economic progress.

The United States expects Malaysia to be its partner in helping to pursue growth and development in ASEAN. This strategy will open up more opportunities for American business in the region. It will also attract more foreign direct investment into the region, create more employment and provide more business opportunities for local suppliers and vendors.

But the United States needs a partner that will equally share burdens. This means Malaysia will have to espouse the same values as the United States — at least as far as notions of economic liberalism and governance are concerned. Cooperating as partners of equal standing implies that Malaysia should aim to be an economy that is more competitive, productive and innovative.

However, Malaysia’s ability to be innovative has been called into question.

Frederico Gil Sander, a World Bank economist, has remarked that the country’s sub-standard education system would affect the quality of human capital in Malaysia. He suggests that this would be a constraint to becoming a high-income nation.

Productivity measures the efficiency of goods and services production. In addition to the efficient use of labour and capital, innovation also contributes to higher productivity. Having only a small pool of skilled labour would be an impediment to higher productivity gains arising from the use of knowledge and innovation.

This casts a shadow on Malaysia’s prospects as a regional leader that can be counted on to drive growth in the region. It also puts in doubt Malaysia’s ability to work with the United States in achieving a vibrant ASEAN.

The question of competitiveness is a complex one. Malaysia has made much progress in becoming a competitive destination for investment and business. This is undeniable and has been proven by its rankings in various indices. It has been necessary for Malaysia to reinvent itself as a business-friendly economy to ensure its survival as a nation due to its small domestic market and limited technological capabilities.

The spectacular development that Malaysia has attained raises the bar of expectations. The regional environment is more competitive today: it is not sufficient to merely be a provider of fiscal incentives, subsidised utilities and an abundant supply of poorly skilled labour to attract investment. Even less so if one wants to attract high-quality investment.

The TPP is one strategy that offers Malaysia the possibility to stand ahead of the pack in this respect. Coupled with the proliferation of trade agreements that some of Malaysia’s neighbours have signed, an agreement that gives an added edge becomes something of a necessity.

Obama’s visit can be read as a nudge to remind Najib to take the TPP seriously. This demands reconfiguring the domestic economic environment.

Presently, government procurement is used as a policy instrument to address national policy concerns. It is a route to encourage the growth of bumiputera (Malay) entrepreneurship. State-owned enterprises in Malaysia, scantly disguised as government-linked companies (GLCs), enjoy specially carved out markets and privileges. The TPP will put a stop to this.

Bumiputera businessmen, by and large, would feel threatened by the TPP. This places a huge burden on Najib’s shoulders. He will have to effectively convince them that the way ahead depends on sacrificing sure short-term gains for uncertain long-term benefits. Rarely in the world of business can one avoid risks and trade-offs.

Obama also declared that prejudices against people from different religions and race have no place in the modern world. ‘Malaysia won’t succeed if the non-Muslims do not have the same opportunity’, he said.

Extending these remarks to the world of economics, it is clear that the Obama administration would frown on discriminatory behaviour that undermines the efficient workings of the market, as well as practices and acts that limit productivity and the fair reward of economic contribution.

The United States, in effect, has forewarned Malaysia that it expects a different economic culture to prevail. The Obama administration expects political and economic liberalism to pervade Malaysian society.

Malaysia’s progress has brought greater demands on itself. Investors expect a higher degree of transparency than that practiced now, better government delivery mechanisms, less government participation in business and, above all, a corruption-free environment.

If more investment is to flow into the country, the traditional requirements will no longer suffice. Investors expect much more from Malaysia. And so too does the TPP. This is the sharp road that has to be taken to reach developed-country status.

Obama has used the right signs to indicate what the TPP demands; and Najib seems accommodating. Still, he has to convince a resistant domestic constituency that this is the direction in which the world is moving.

Mahathir Mohamad, the former prime minister, holds a diametrically opposed view, as does Perkasa, an influential hard-line pro-Malay organisation. Both think that the TPP will damage Malaysia; and Mahathir has lashed out against the need to give the non-Malays a level playing field domestically.

Obama’s visit to Malaysia was a definite success for Najib. But whether Najib will enjoy success in the follow-up to Obama’s visit is another question altogether.

Shankaran Nambiar is a senior research fellow at the Malaysian Institute of Economic Research, and author of the recently published book, The Malaysian Economy: Rethinking Policies and Purposes. The views expressed are his own.

An earlier version of this article appeared in the Edge Financial Daily.

Methamphetamine trafficking increases, new psychoactive substances flood markets according, to new UNODC report

PRESS RELEASE

Tokyo/London/Vienna – 20 May 2014 (UNODC) – Synthetic drugs are taking an ever-greater share of the illicit drugs market, according to a new report by the United Nations Office on Drugs and Crime (UNODC).  New psychoactive substances (NPS) are also flooding a market for synthetic drugs long dominated by amphetamine-type stimulants (ATS), such as ecstasy and methamphetamine, which are more widely used than cocaine, opium or heroin.  

“There is a dynamic and unprecedented global expansion of the synthetic drugs market both in scope and variety”, said Jean-Luc Lemahieu, Director for Policy Analysis and Public Affairs at UNODC. “New substances are quickly created and marketed, challenging law enforcement efforts to keep up with the traffickers and curb public health risks.”    

Rates of methamphetamine seizures are higher than ever across the world, largely driven by the rise in seizures in East and South-East Asia as well as in North America, according to the 2014 Global Synthetic Drugs Assessment .  Methamphetamine, which can seriously harm users, continues to spread in Asia, posing a growing challenge to health care providers and drug control authorities dealing with large youthful populations. Methamphetamine supply grew rapidly in Asia, already the largest market for ATS, between 2008 and 2012 when methamphetamine seizures tripled to 36 tons.

New international supply channels are linking formerly regional ATS markets. Supply routes to Asia, the largest market for ATS and ecstasy worldwide, have emerged from West Africa and the Americas, supplementing methamphetamine manufacture in Asia. West Africa seems to be becoming a trans-shipment point for methamphetamine trafficked to East and South-East Asia via South Africa or Europe. Since 2009, about 86 per cent of ATS originating from West Africa seized at Western European and Japanese airports were destined mainly for Japan as well as Malaysia.  Turkey may also be emerging as a transit point for methamphetamine smuggled from Western Asia to East and South-East Asia.

The report confirmed signs of an expansion of the use and manufacture of ATS in Europe already observed in 2011.  Methamphetamine seems to be replacing amphetamine, particularly in Eastern Europe and the Baltics.  Amphetamine continues to be the main ATS used in the Middle East.

Ketamine, a veterinary anaesthetic, is more widely misused in East and South-East Asia. Mainland China and Hong Kong accounted for almost 60 per cent of global ketamine seizures between 2008 and 2011.

Surge in new psychoactive substances

 Marketed – often wrongly – as ‘legal highs’ and ‘designer drugs’, NPS are proliferating but in the absence of an international framework, responses to the problem vary significantly from country to country. None of the 348 NPS reported globally in over 90 countries at the end of 2013 is currently under international control. However, in 2014, the United Kingdom requested the international control of mephedrone, a potentially fatal substance, under the 1971 UN Convention on Psychotropic Substances. The use of synthetic cannabinoids, which mimic the effects of cannabis, is soaring; the total number of these substances almost doubled from 60 in mid-2012 to 110 by 2013.

 Synthetic drugs have gained in popularity among the young. In parts of South and Central America, ATS use in younger age groups sometimes even exceeds that of cannabis and/or cocaine. In North America and Europe, certain NPS are more widely used by young consumers than traditional illicit drugs.

 A particularly worrying development is that NPS are no longer restricted to niche markets. Evidence from almost all regions of the world indicates that tablets sold as ecstasy or methamphetamine contain substances other than the touted active ingredients – increasingly, they comprise chemical cocktails that pose unforeseen public health challenges. Emergency services may therefore find themselves unable to identify life-threatening substances and powerless to administer the proper medical treatment.

 Khat, a plant-based NPS until recently confined to traditional use in East Africa and parts of the Arabian peninsula, is increasingly being trafficked from East African countries, such as Ethiopia and Kenya, to European destinations, such as the UK and the Netherlands, and even as far afield as North America.  Saudi Arabia has reported by far the largest khat seizures in the Middle East.  Lately, khat has also been seized in East and South-East Asia, as cultivation of the plant has extended to that region.

  For more information please contact:

In Vienna: Preeta Bannerjee, Public Information Officer, Phone: +43 699 1459 5764

Email: preeta.bannerjee[at}unodc.org

In London:  Angela Me, Chief, Research and Trend Analysis Branch, Phone: +43-699 1459-5273

Email: angela.me[at]unodc.org