In the latest episode of Pacific Polarity, Ambassador Kurt Tong offers sharp reflections on American diplomacy in Asia. He underscores growing demands on the State Department’s capacity, particularly as issues like trade increasingly intersect with domestic politics, requiring careful coordination across multiple U.S. federal agencies

Jersey Lee

Welcome to this episode of Pacific polarity. Today we’re speaking with Ambassador Kurt Tong. Ambassador Tong is Managing Partner at The Asia Group, where he leads consulting teams focused on Japan, greater China and Korea, and on East Asia regional policy matters. He is a former senior U.S. diplomat with around 30 years of experience, including roles as Principal Deputy Assistant Secretary for Economic and Business Affairs, ambassador to APEC, consul general in Hong Kong, and as director for Asian economic affairs at the National Security Council. A key architect of the Trans-Pacific Partnership and U.S.-Korea Free Trade Agreement, he also played a leading role in the Six-Party Talks with North Korea, and U.S. economic engagement across the Asia-Pacific. Ambassador Tong, great to have you on.

Kurt Tong

Great to be here.

Jersey Lee

As Consul General to Hong Kong and Macau through much of the first Trump presidency, were there ever times when you found out about a new US policy via tweet, and how did you handle that situation? What would be your advice to your former colleagues, given the higher stakes in this second Trump presidency, on managing diplomatic relations with this uncertainty looming over them?

Kurt Tong

I think that President Trump is, as you note, well known for using a variety of ways to get out his message. He's used his social media, I think, more than any president has to both conduct political debates as well as make announcements about his objectives with respect to policy, so that's different. Every president will change policy and find different ways of explaining that, both to other governments, to their own government, to the congress, to the public, so I tend to focus on more the policy itself rather than the delivery mechanism.

What you're implying, and I think it's quite self-evident, is that in the second Trump administration, the president has come in with a high degree of determination to change a lot of things about US policy and about the conduct of the US government.

So that's a well-known fact and, I haven't worked for the administration for six years, so I don't have any direct experience with the second Trump administration. But it's certainly a different type of administration than a lot of people are used to.

Richard Gray

At a recent congressional hearing, Wendy Cutler argued the cultural challenge within the state department is that economic affairs tracks are viewed as less desirable than the political affairs tracks. Do you agree that this is a substantive issue, and if so, what can be done to remedy the undervaluing of economics within American diplomacy? Especially as we think about Asia, where politics, security, and economics are pretty intricately intertwined.

Kurt Tong

I don't know the context in which Wendy said that. I was, for a couple of years, as you noted in the introduction, the principal deputy to the Assistant Secretary and the Economic Bureau of the State Department. And when a gentleman named Charles Rivkin was my boss, the Assistant Secretary, Charlie and I were conducting a very concerted effort to strengthen the economic function within the State Department. Because for decades, really, the question of how economic policy get made and how does the State Department get involved in that process and shape it, and then coordinate the other aspects of foreign policy together with economic policy.

I've thought about this problem a lot. It's not a recent thing by any means. I actually think that the recognition both publicly and internally of the importance of economic policy in diplomacy is continuing to go up year by year, including in the current administration; the difficulty is how do you institutionalize that and then how do you carry it out in practice.

So one of the problems for the state department is that it doesn't have statutory authority over the making of international economic policy; financial policy is made by Treasury Department, trade policy by USTR—all this is more complicated than just one agency, but the lead agency is USTR; agricultural by Agriculture; industrial promotion and trade controls, which have become more and more important recently because of US-China friction, by the Commerce Department; energy policy by the Energy Department, and so on down the line.

The State Department traditionally only had management over a few narrow areas. Back when the US had textile quotas, the State Department did textile quotas. The aviation negotiations have traditionally always been done by the State Department. And then the State Department has had some statutory authority over economic sanctions and also has had some authority over licensing of military related exports. Having foreign service officers at embassies work in the state department in Washington and then still know enough about this very complex policymaking process, to do a good job, is really complicated.

So what we were trying to do is increase the opportunities for diplomats to get experience on US domestic economic policy formation, because unlike human rights policy for example, something that affects other countries more than affects the United States, trade policy affects the US as much or more than it does the counterparty country, so it's absolutely a matter of both domestic policy and foreign policy.

In that context, it's unrealistic for the State Department to think that it's going to be put in charge of everything, and be allowed to decide everything for the U.S. So in that context, knowing more is the way to empower the diplomats to make them more effective. A lot of efforts have been made over the years to try to strengthen that—the individual capability to understand the issues and negotiate them with foreign governments—because that's often required of economic issues focused diplomats. And I think a lot of progress has been made.

Recently, I'm quite concerned about the downsizing of the State Department functions and the removal of one of the most important tools of foreign economic policy, which is overseas development assistance.

So more than the issue that you cited and the way that you cited it, I think the deeper concern is, is the State Department maintaining its full functionality given the intense budgetary and political pressure that it's been put under? And is the U.S. giving away some of its most important tools of foreign economic policy, which is development assistance? And I think I'm very concerned that the answer to both of those is bad.

Richard Gray

Yeah. And as a related note, one of the things that I wanted to talk about was the role of investment, both public and private. And so, through your work at the Asia Group, how do you think about the role commercial relationships play in enhancing these bilateral relations?

While the United States currently is restricting market access through tariffs and some upping the ante of export controls, it still is a pretty large recipient of and disperser of FDI in the Asia-Pacific. A little over a year and a half ago, I attended an event with Singaporean Ambassador Lui, and he says something along the lines of, China is our largest trading partner, but America is our most important investor. And while investment and trade in consort would certainly be an ideal for more comprehensive economic engagement, to what extent can private sector investment be a stopgap for these market restrictions? And as you're indicating, this is perhaps even more pressing with the closure of USAID, where private investment is both going to have to fill the diplomatic gap for trade access and public investment. How do you think about these things playing out, the role that companies are playing, and perhaps the broader aperture of what U.S. diplomatic relations might be like with some of these valves cut off?

Kurt Tong

Yeah, that's a very complex question that you've asked. The U.S. is both the number one source of outbound direct investment, portfolio investment, financing in general, as also the largest licensor and supplier of productive technology. And those often go together. the money and the technology and the managerial capabilities that go with them.

It's also the biggest host of inbound investment because it's the largest economy, and traditionally has been very, very open for the most part to foreign investment in the US, because foreign investment is good for an economy.

The political view of outbound investment over the years has varied and been a bit contradictory; so when people think about, do we want these Fortune 100 companies to be successful and have their stock prices go up and create more jobs in the United states, the answer is yes; these companies often say that in order to grow and be successful, they need to be globally competitive, not just competitive inside the United States, and they say that in order to be globally competitive, they often need to invest overseas and produce overseas and often produce and import things back to the United States that have been produced overseas, because those are cost-effective approach to making money and growing their companies.

The political contradiction comes not from, if you ask any politician or American citizen, do you want your most successful companies to be successful? They say, oh yeah, we w