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Democratic National Convention 2004: Council on Foreign Relations Foreign Policy Discussion

Introductory Speakers: Walter Shorenstein, founder, Shorenstein Center on the Press, Politics, and Public Policy, Harvard University, and William J. Perry, professor, Center for International Security and Cooperation, Stanford University; former United States secretary of defense (1994-97)
Speakers: Graham T. Allison, director, Belfer Center for Science and International Affairs, Harvard University, Elizabeth C. Economy, director and senior fellow, Asia Studies, Council on Foreign Relations, Alex Jones, director, Shorenstein Center on the Press, Politics, and Public Policy, Harvard University, Joseph S. Nye Jr., Sultan of Oman professor of international relations, John F. Kennedy School of Government, Harvard University, and Benn Steil, acting director, Maurice R. Greenberg Center for Geoeconomic Studies, and Andre Meyer senior fellow in international economics, Council on Foreign Relations
Moderator: Richard N. Haass, president, Council on Foreign Relations
July 28, 2004
Council on Foreign Relations

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(Note: The transcript begins with the panel discussion.)

RICHARD HAASS: Well, let me— can people hear? Let me— [technical difficulties]--let me first of all thank so many of you for turning out here this afternoon. I'm tempted to think that the motto for this campaign, if this is any indication, is someone's going to have on their wall, "It's the world, stupid." [Laughter] Clearly, foreign policy issues have come to the fore, and I take the turnout here today in some ways as reflective of that.

What we are going to do here is have a conversation. I'll take advantage of the talent to my left and my right. We'll begin amongst ourselves, and then we'll open it up to you all to raise questions either on issues that we've raised or issues that we haven't had a chance to get to. Let me just make a few thank you notes before I begin. One is to Bill Perry, who just spoke. Bill Perry is someone— it wasn't simply what he did when he was in government, but how he did it that I thought brought real honor to this country. And it's always a personal pleasure to be associated with him in any way.

Also with Walter Shorenstein, who's done so much for Harvard University, for the Kennedy School, and really for this society as a whole. The idea that we have the Council on Foreign Relations, which now I'm president of, and the Kennedy School coming together is, to me, particularly welcome, since I spent nearly four years working with several of the people up on this stage here at the Kennedy institution. So the fact that we are joining forces here today is, I believe, a welcome and good thing.

All of this wouldn't have been possible without help also from Coca-Cola and Janet Howard, from Akin, Gump, [Strauss, Hauer, and Feld], from ChevronTexaco, and from BellSouth. And I do want to thank them and the people here who are representing them for contributing the resources and the time and the commitment that make it possible for us to bring together this event. [Applause]

Let me dispense with very long introductions, and also I hope the ambassadors in the room will not— will forgive me for not going through all my excellencies, because if we did that, we wouldn't have time for the event. But let me give very brief, sort of cliff note introductions to the five people who are up here. Starting to my immediate right is Benn Steil. Benn is a senior fellow at the Council on Foreign Relations, and the acting director of the [Maurice R. Greenberg] Geoeconomics Center at the Council.

Graham Allison is [the] second of the six people sitting up here who's a former dean of the Kennedy School of Government, and one-third of the people here fill that. Graham is well-known, I expect, to all of you for his work on nuclear weapons, on terrorism over the years, and he is now a professor at the Kennedy School.

The most recent former dean, sitting around two yards to my left here, Joe Nye, who is the father of many good ideas, many big ideas, including soft power, but also is, he hopes, and I'll predict here, about to be become a very popular novelist, with his first novel coming out this fall. And I hope it will shock you and scandalize you when you read— when you realize what Harvard professors think about in their spare time. [Laughter]

To Joe's left is Elizabeth Economy. Liz is also at the Council on Foreign Relations— she's a senior fellow, her specialty is China— and just put out a book on China's environmental policies, "The River Runs Black," which is a fascinating study not simply of the environment in China and environmental policy, but also the quiet emergence of a civil society movement there— in this case, environmental groups— and the impact it's having on the Chinese political scene.

And last, but far from least, is Alex Jones, the only person up here who's been clever enough to win a Pulitzer Prize and now runs the center at Harvard— after a distinguished career in journalism— runs the center that bears the name of Mr. Shorenstein and his family.

So again, what I propose to do is to take a few minutes to start things off, asking some questions, and then I'll open it up to you. And in some cases, let me warn you, I may take the liberty of the chair in calling on some people I've run into already at the reception, and I see around the room, just to draw them into the conversation, because we have extraordinary talent, not simply up here, but also out there today.

Let me begin with Graham. There's been tremendous controversy over the— what the administration called pre-emptive military strikes, the use of what academics traditionally have called preventive strikes, in the case of Iraq, against what people thought would be the weapons of mass destruction program. Right now, whoever's elected this November is going to face nuclear challenges, in particular coming from Iran and North Korea, probably from other places as well. For all the controversy that surrounded what's happened in Iraq, could you imagine a time when a President [George W.] Bush or a President [John] Kerry would have to contemplate the idea of a preventive or pre-emptive military strike?

GRAHAM ALLISON: Yes. And let me elaborate. I think the— while I fault President Bush for his aim, I don't fault him for pulling the trigger in the case of a willingness to use U.S. force, if necessary, unilaterally in the case of Iraq. I think he's— President Bush has said, and candidate Kerry agrees, that the gravest threat we face is that of weapons of mass destruction in the hands of terrorists. He said that was the reason why we went to Iraq. It just happens that he got the wrong target.

There is, in fact, North Korea, which is today reprocessing material that will allow it to make six more nuclear weapons. And we know about North Korea, that it's missiles-are-us currently; you've got money, they sell missiles. And that it would be willing to become nukes-are-us— God forbid. Hard to imagine. But for anybody who thinks that North Korea couldn't sell nuclear weapons or material, they should look carefully at what happened in Libya. North Korea already sold to Libya more than a bomb's worth of nuclear material.

So, if you say, "Can I live in a world, can I imagine civilization as we know it in which North Korea is not only a nuclear weapons state, but has a nuclear weapons production line, and would even be prepared to supply, sell nuclear weapons to somebody like al Qaeda or other terrorists?" I can't. So I, in this new book I've just published called "Nuclear Terrorism: The Ultimate Preventable Catastrophe," I say that we should play out the hand on North Korea now that includes all the carrots that we can assemble and all the sticks that we can assemble. But I believe if we're unable to pose a credible military threat which would, Richard, in your terms, constitute some form of preemption, so it's before we were attacked, I would try to do it with as many colleagues as could be assembled— certainly the Chinese and the Russians, I think— if they properly understood their interests. But the ultimate threat would be a willingness to use military force to prevent North Korea running a nuclear weapons production line, since I can't imagine how if they're running such a production line I can prevent them selling weapons.

And in the Iranian case, I also have a chapter trying to deal with that topic, in which I believe it's also necessary, as soon as an American government sort of focuses on the issue— Iran is just about to sneak under the goal line of having a nuclear weapons infrastructure; that is, the capacity to enrich uranium and reprocess plutonium. If they get across that line, the ability to police anything beyond that is very, very— almost nonexistent.

HAASS: Let me just— I see Charlie Rose. Let me act in the best Charlie Rose tradition of asking a follow-up here. It was 40 years ago that another senator from Massachusetts, with similar initials, talked about the possibility of a world in which you could literally have two dozen nuclear powers. If Iran and if North Korea are allowed to become and are widely seen to be nuclear weapon states, do you think that's essentially the tipping point, to use Malcolm Gladwell's [writer for The New Yorker and author, "The Tipping Point: How Little Things Can Make a Big Difference"] phrase? If we don't deal successfully with those two, are you concerned that others will follow suit?

ALLISON: Absolutely. I think what has not been sufficiently appreciated, particularly because we got consumed by Iraq and because the putative reason for Iraq was weapons of mass destruction that they might have or might transfer to terrorists, that the picture has been so clouded that it's hard to be clear about it. But I believe the following two things.

One, if North Korea succeeds in becoming a nuclear weapon state, which it could do at any moment— so it could test a nuclear weapon, declare that it has an arsenal and thereby complete its production line so that it would be able to produce another dozen weapons a year— I believe historians will judge that the greatest failure in American diplomacy ever. And the consequences of it will be, first, we'll see dominoes fall as other states become nuclear weapon states in Asia. Japan, I would think, would be first, but I could also imagine South Korea, and God knows what would happen in Taiwan.

But the more important concern for me as an American— I mean, that's just nuclear proliferation in that area in which there might be a local nuclear war, horrible as that is to imagine. But I can imagine quite well North Korea selling nuclear weapons to people like al Qaeda, and once they have a weapon, the rest of the lines of defense are very, very porous. In the Iranian case, you could see an Iran that had become a nuclear weapon state, and I think you'll also see dominoes fall quickly, and which I would predict among them would be Egypt and Saudi Arabia.

HAASS: I wanted to get this off on a positive note. [Laughter] Just to warm up. And we'll get to other depressing subjects soon enough. But again, it is hard to exaggerate the stakes and the sense, I think, historically where we are. Let me slightly switch course for a second and turn to Joe Nye. I felt former deans should get priority here, for some reason. I respect hierarchy, if nothing else.

ALLISON: I thought you were doing age. [Laughter]

HAASS: That's interesting. One of Joe's many tours was as the head of the National Intelligence Council, which is this group of individuals who have various regional and functional expertises and often turn out the National Intelligence Estimates that you hear so much about. Joe, I wanted to bring this to some recent issues raised by the 9/11 [Commission] report and your own view about whether it would be wise that we quickly move in this country to creating a so-called intelligence czar, a director of national intelligence that would have powers of appointment and control over resources that no individual in the intelligence world currently does.

JOSEPH NYE: If all we did was create a czar, the answer would be no. So the czar idea or the director of national intelligence idea has merit, but only if it's coupled with a lot of other things. The idea that the— that you'd have somebody in the White House who would pull together 15 different agencies, 80 percent of whose budget is now controlled by the secretary of defense, and who would be responsible for coordination of that, that's useful, but that's not going to fix problems. I mean, czars who are top-down only have a long tradition of not succeeding in the American governmental system. Our colleague, [Harvard University Professor] Ash Carter, likes to say the trouble with czars is the barons ignore them and eventually the peasants kill them. And if you look at the drug czar, that's a good case in point. So I think you have to do a number of other things in addition.

The 9/11 Commission [National Commission on Terrorist Attacks Upon the United States], which I think did a very good job in their report, talks about a counterintelligence center, a fusion center which would take the current system and elevate it. It also talks about a number of ways in which we have to change operations. We have to do a much better job on collection, essentially on hiring spies. You know, in the Cold War you could put a spy in an embassy. Al Qaeda has no embassies, so that doesn't work. So you have to have— you have to have much better non-official cover as a default.

In addition to that, we have to improve the analysis that we do, which has sometimes been badly corrupted. If I look at the declassified National Intelligence Estimate of October 2002 which was a— the document which they rested the Iraq claims on, that was a shabby bit of work, and then it was made even worse when the vice president went forward and said Iraq had reconstituted its nuclear program. Not even the National Intelligence Estimate said that. But I mean, the work on the analysis was poorly done. We're going to have to get in a system of much more red team, blue team; of challenging each account, whichever way it comes out. So you're going to have to make changes in collection, you're going to have to make changes in analysis, you have to train many more analysts at lower levels in language and culture, where we're severely deficient. These are all equally important or perhaps more important than just creating a czar per se.

My own preference— I had an op-ed in the Los Angeles Times last week saying that what we needed to do was create within the National Security Council [NSC] four strong deputies— one for political military affairs, one for economic affairs, one for what I call soft powers, which includes everything from broadcasting to aid, and another to oversee intelligence. Now, how that would fit with the director of national intelligence, I assume a director of national intelligence would be operational, and the NSC deputy would be coordinating this with the foreign policy dimensions.

So there are a whole series of things that I think need to be done. I think the 9/11 Commission report itself said no one of our recommendations is sufficient; they have to be taken as a package. So my view is yes, but it's a yes, but, or a yes, and.

HAASS: We would expect nothing less from an academic. [Laughter] Let me turn to Benn Steil for a second and get some economic issues in here. The United States now is running enormous deficits, both a current account deficit on the trade side, and also an enormous fiscal deficit. [Economist and author] Herb Stein is often quoted as saying, "Things that can't go on forever, won't." And I guess the question I would have is, can this go on forever, and if not, what might bring it to an end? But also, how much should this bother us? Is this necessarily a bad thing that the United States is running these enormous deficits? And one could argue that we're obviously providing an awful lot of fuel for economic growth around the world. So why is this necessarily such a bad thing?

BENN STEIL: Economics is often a difficult and complex subject with many different valid opinions, but I really do think that Herb was on to something here. [Laughter] Starting with the budget deficit: we're currently running a budget deficit, going to about 4.5 percent of GDP [gross domestic product]. That wouldn't be too worrying if this was just a short-term issue; in other words, we were just spending a little too much because of a war, for example. But think about what's coming up before us over the next 10 years. In just 10 years' time, three federal programs— social security, Medicaid and Medicare— will account for nearly half of all federal outlays. We've got problems coming up in front of us. A Congressional Budget Office report recently indicated that even if we were to exceed their estimates on growth by one-third, or a full percentage point, we would still have budget deficits in the realm of 2 percent of GDP going on for the next decade, and that's without taking account of the problems in social security and health care spending coming up in the future.

Now, how does that relate to the other deficit, and foreigners and foreign policy and the things that we're concerned about? Well, we're funding a lot of this deficit spending with foreign capital that's been pouring into the country. And foreign capital is a very good thing. But there's a reason to be worried about not just the amounts of capital that we're importing, but exactly who we're importing this capital from.

If you go back two decades, when our current account deficit was about half

what it is now as a percentage of GDP, 2.8 percent of GDP, about 8 percent

of treasury securities outstanding -- that is, U.S. government debt— was

held by foreign governments. You know what that figure is up to now? Twenty-three percent of our outstanding government debt is now held by foreign governments. This is held in the form of central bank reserves. Asian central banks, for example, hold over one trillion dollars in dollar reserves.

Now, if central banks around the world were to get concerned that we were borrowing just a bit too much and that this might be unsustainable, they might decide to rebalance their reserves. Currently they've got two-thirds of their reserves in dollar-denominated assets. What if they were just to decide to lower that— to be cautious— to, say, 50 percent, and move some of their assets into euros? This could lead to a very precipitous decline in the dollar. This would lead to much higher interest rates at home because we'd need to dampen inflation expectations, and we'd need to induce people to continue to hold our debt. So this is going to damage investment, it's going to damage economic growth, and it's going to damage our living standards.

I think equally important, it's going to damage confidence abroad in our economic policies. This is going to weaken our influence over global norms in commerce. For example, almost all trade in international commodities is denominated in dollars. That's not written in stone any place; that could change. We have enormous influence within the International Monetary Fund [IMF]. That's not written in stone; that could change. Part of that influence is based on our success in the 1990s and a general view that we knew what we were talking about. I think that's beginning to weaken somewhat.

Now what should we be doing? Well, certainly in the short term there's virtually nothing we can do about the current account deficit directly, but we can control the budget deficit, and we need to. It's national private savings that's significant in determining our growth prospects in the future. We have very little influence over private net savings in the United States, but we do have very considerable influence over public net savings. We need to get to grips with the budget deficit, and we need to do it soon.

HAASS: Liz Economy, when I look out at the potential foreign policy crises a new president might have to face, one of them is obviously with China over Taiwan. And I guess I have a two-part question for you, which is, how worried are you about that, about a Taiwan crisis? And asking perhaps the same question a slightly different way, should we take China seriously when it tells us it has clear red lines that it is prepared to potentially go to war over? Or is China so committed to what a lot of analysts now call the peaceful rise school, that China's so committed to, say, several decades of focusing on its own internal economic growth that we really don't have to take this problem as all that potentially likely?

ELIZABETH ECONOMY: I have to say that over the past 10 years that I've been looking at this issue, I've been relatively sanguine. Even when China was lobbing missiles across the Taiwan Strait, I really saw it as the crisis of the moment and one in which both sides, Taiwan and the mainland, had a real interest in stability over the long term.

But I think in the past few years we've actually seen a deterioration in the situation. And I think each of the major actors is partly to blame— Taiwan certainly. [Taiwanese President] Chen Shui-bian has pushed the envelope, and frankly, I think he's probably already crossed several of China's red lines, several of the lines that they'd had in their heads, in his rhetoric, in his independence rhetoric and, I think, in his referendum effort, and now talk about constitutional reform, et cetera. So I think, you know, there's one part there. I think the mainland has been basically uninterested in sitting down with Chen. I think they waited four years out, hoped he wouldn't be re-elected, and now they're a little bit confused about exactly what they're going to do.

And I think the U.S. has a part to blame in this, too, because I think that at the outset of the administration, we really didn't know what we were going to do about the Taiwan-China cross-straits relationship, and I think we were speaking out of two sides of our mouth. We essentially had a defense department and a vice presidential office that was running around with Taiwan, pushing very aggressively to develop closer military-to-military relations. And we had a state department that, at the same time, was trying to reassure the mainland that nothing was changing; the status quo held. And clearly that wasn't the case. And meanwhile, we really weren't doing anything to get the two sides to sit down together, politically.

So I think, yes— to answer the first part of the question, I think the situation is a serious one right now. Now as to whether China— we should take China's threat seriously, in terms of there is a red line, and we are willing to use military force – I do think we should take it seriously. I think that the idea that China would not sacrifice its economic development— its sort of economic development for the moment over Taiwan is wrong. I think that Taiwan, in many ways, trumps everything. So I think that we do need to take it seriously.

China's peaceful rise, which is a theory that has been enunciated— and about a year ago, Zheng Bijian, who's one of [Chinese President] Hu Jintao's top political advisers, came up with this idea of heping jueqi, [meaning] China's peaceful rise. And the idea was really to reassure China's neighbors, reassure the United States that China, as it was an emerging power, was not going to be a disruptive power; it was not going to be a threat to the international system, as a lot of people had been talking about.

The truth is, though, heping jeuqi sort of translates into something a little bit different, which is: the great rejuvenation of the Chinese nation. And so the meaning is a little bit different from peaceful rise. And I think it has implications for Taiwan, also, because clearly the mainland conceives of Taiwan as part of the mainland. They consider this an internal affair. And so again I think that we need to take very seriously China's threats that it would be willing to use military force.

HAASS: As I told you, there would be more optimistic things to come. [Laughter] I'm glad I haven't disappointed you. Alex, you've been patient there. It's now late July. In probably, what, about 10 weeks, give or take, there's going to be, if all goes as planned, a presidential debate devoted to questions of foreign policy and national security. What do you think the challenge is for the journalists, the three or so journalists who are going to be asked to lob the questions in that debate? What's the question, what's the challenge to them? What should we hope they accomplish?

ALEX JONES: This is the optimism part of the program; is that the— [laughter]. I think in the past, the debate format has been the particular enemy of having meaningful debate, because the candidates have been able to enforce rules that effectively did not really allow the persons, or person, in the case of [host of "The NewsHour"] Jim Lehrer, who was moderating and asking the questions, to either follow up or to contradict or to correct or to say, "But the record shows," and so forth.

I think this gets to a core problem of campaign coverage, perhaps coverage at all times, but it seems to be particularly omnipresent during this campaign because both candidates have [an] apparatus in place to respond instantaneously to anything that anyone else says on the other side of the political equation, which has left a lot of news organizations reporting what this one said and what that one said, rather than what the facts are or what, to the best of a reasonable person's knowledge, the facts are.

I think that in a debate, it will be very important for the journalists— and I assume it will be journalists who will be conducting these interviews, moderating these debates— to have the flexibility to be able to say, "That's not so," or "The facts don't bear it out," to challenge; if nothing else, to keep the candidates as honest as possible. And then, of course, the obligation of the person who's going to be doing the inquiring is going to be to find those places where there is genuine interest and also whether there are gaps, gaps such as the question of whether it matters to the candidates how the rest of the world views America. Does it matter to these candidates? Does it matter to George Bush what the Europeans and the Asians think? Does it matter that the American standing in the world has gone down? And, if so, trying to flush those kinds of things out. There are going to be many obvious questions about Iraq, about the economy, about various social issues.

Without the ability to put the candidates in a position of having to genuinely own up to the facts, I think the debates will tend to be the relatively empty vessels they have been in the past. They may be good for letting people get a feel for who the candidates are, but I don't think that they are going to be terribly useful in getting the candidates to really address issues in a way that would be very, very meaningful if it were otherwise.

HAASS: Let me put out a question for everybody on this panel and begin by positing two points: that, first, there's an awful lot of anti-Americanism out there; and, secondly, that we pay a price for that. The cost of the anti-Americanism? We can't get countries to share burdens, for example, in Iraq. We can't get the sort of military or economic support we'd like to see. It could have long-term consequences in terms of alienating future leaders from the United States.

What is the one thing that you would think that the next American president could and should do to dramatically reduce the intensity or degree of anti-Americanism? What would really make a difference? Graham, why don't I start with you?

ALLISON: I would say a humble foreign policy. [Laughter.]

HAASS: So you actually think style and tone would matter as much as anything?

ALLISON: I think Bill Perry, in his introductory remarks, reminded us about how, in cases equally hard to the ones that we are now seeing, in which we say it's impossible to get agreement among parties, a patient person who listens and who's prepared to get on a plane, as Bill has been repeatedly willing to do, and fly out to an area and listen to people and hear their differences and occasionally even learn something from them and go back again, and who doesn't imagine that he has all the answers to all the problems and actually conducts himself in such a way.

I think that actually there's quite a long history of this in American foreign policy being relatively successful, and I think the exception to this— I mean, there's been pluses and minuses if we go through the record, but I think that Bush had the best line about foreign policy in the last election. A humble foreign policy seems to me to be the right posture for what is inevitably a unipolar power relative to all the others, who inevitably— whatever we do structurally makes other people nervous and suspicious and whatever. So there's a burden that one begins with, but I think it's actually a great line and I think it's one that you can see quite vivid examples of in the course of American history, and I think one's seen rather sharp departures from what I would think of as the mainstream in American foreign policy in the current administration.

HAASS: Let me then slightly restructure my own question. I'll posit that, that questions of tone, style, process all matter; consultations, what you called humility, and so forth. Are there any substantive changes that you think are both realistic and desirable, on one hand, that would also have a tremendous— an appreciable impact, a measurable impact on anti-Americanism?

STEIL: I think we should be willing not only to share leadership on certain critical issues in international affairs, but we should actively seek to share our leadership. Let me give an example where I think we've been relatively successful, and perhaps the administration hasn't gotten as much credit as it might deserve: North Korea. We were, in fact, successful in keeping North Korea from turning this into a bilateral issue between the United States and North Korea. We actively engaged South Korea, Japan, and China. We got them to host regional forums. We got them actively involved, and we got them to play a role in leadership in this particular issue. We not only regionalized, but we made it into an issue that was of genuine concern to the entire world. We've gotten the EU [European Union] involved in a meaningful way, and I think these are the sorts of actions that will build confidence, not just among our allies, but those who are traditionally skeptical of our motives; I would think, in particular, of China.

HAASS: I will give people a shot at it, and then we'll open it up to you. We'll have to go down the line. Joe?

NYE: Yeah, I think we're going to have to make changes in the substance of foreign policy. Obviously it's not just the style, but I think we have to review and recommence negotiations about global climate change. We ought to stop our frontal attack on the International Criminal Court and let them try some cases and see whether— if they succeed, whether we might want to change our attitudes on that. There are a whole series of things where we have taken positions which, even if you have critiques about part of them, where you didn't have to go way out on the fringe, as we did. We have to get the Middle East peace process going again with much more effort than we've put into it. We have to make sure that there's some sort of a political solution in Iraq. There are a whole series of substantive changes we have to make. As they say in advertising, you can't sell a product if it's a lousy product.

But with that said, we also have to do an awful lot better job of presenting our message. I mean, it's quite extraordinary that the world's greatest communicating nation is being out-communicated by people on Al-Jazeera and living in caves. I think the— if you look at America and what it spends, and this is a bipartisan comment, because the U.S. Information Agency was abolished during the Clinton administration— after the Cold War, we cut back nearly by a third of what we spend in this area. We've cut back in international broadcasting.

If you look at the hours of broadcasting the Voice of America [VOA] does to Pakistan in Urdu— remember, Pakistan's a front-line state— we do two hours of broadcasting a day in Urdu. Total American expenditures in the year 2002 on public diplomacy for the Muslim world— not just Arab, Muslim world— 150 million [dollars]. It's about two hours of the defense budget.

Or if you look at what America spends on broadcasting exchange programs and public diplomacy, it's about one billion [dollars] a year, which is about equal to what France or Britain spends, though we're five times larger. Or another way of putting that into a fraction is, it's about one quarter of 1 percent of what we spend on our hard power. If we were to get a ratio of soft power to hard power that it was just 1 percent spent on delivering messages as well as bombs, it would mean quadrupling the budget, plus the need to organize in the White House in a way where we get this message to reinforce itself. So, yes, change the product because you can't sell a lousy product, but we got to do a much better job than we're doing now selling it.

HAASS: I don't know if I have hard power or soft power, but if people could shut down their cell phones, it would be wildly appreciated. Liz?

ECONOMY: Yes. Let me begin by saying that I agree with Benn, that I think one of the important foreign policy moves of the Bush administration was really to bring the North Korea problem into a multilateral context. But to go back to what Secretary Perry mentioned, there is a problem, then, that you have your allies disagreeing with you. And I think part of the problem that we've seen with the process in North Korea is that North Korea has been able to play off China, Japan and South Korea a little bit against— off of the United States because they really bring a sort of different and distinct point of view from the one that the U.S. offers in terms of the sort of assistance and sort of the how you're going to do the tit for tat— which comes first and who provides it.

But in terms of what we ought to be doing differently, I think what I hear mostly when I'm in Asia is that the United States is rapidly losing its standing as the pre-eminent source for political and social change in these countries. You know, when you talk to people in Taiwan or South Korea, people remember how much the United States did to advance democracy in these nations. And I think that when you talk to people in Thailand or even in Singapore sometimes and other Southeast Asian countries, there's a sense that the United States has sort of abandoned its commitment to these kinds of issues in favor of this war on terror. And so there's a sense, I think, from scholars, from human rights activists in many countries, that the United States is not playing the kind of role that it's played traditionally, I think which gained us a lot of respect and trust from the peoples of these countries.

HAASS: Alex, you get the last word before I open it up.

JONES: Yeah. I want to go a little bit deeper into what Joe Nye was – began talking about, because I think that there is a belief that good coverage, bad coverage, good image, bad image, how we are viewed, one way or the other, is purely a matter of manipulating the message. And I absolutely do not believe that to be the case. I believe that the most – the biggest mistake, and one of the certain great misconceptions about the coverage of the Iraq war and its aftermath, is that it has entirely to do with the American media either being too soft and changing its mind or being right and then turning, you know, against the Bush administration. The fact is that the story changed. The story of the war, the combat war in Iraq, was a very triumphal story for the United States. That war was won. That made a very positive story— a positive story, whether you liked the war or not, in terms of a military triumph. And the war since then, the battle since then, has turned bad, and the coverage has reflected that.

One of the things that–not just the Bush administration; I think it's a temptation for any administration–is to try to manipulate the message despite what the reality is. As Joe said, the product has to be there. The reality has to change. But it would be a very bad–in my opinion–strategic move for any administration to do what I think has happened under the Bush administration, which is increasingly to politicize things like the Voice of America–not only to cut back on the hours, but to politicize the way news is reported and the way things are done.

I think, if you will think back, one of the great powers and levers that the United States had in the Cold War was to be viewed by countries where the media was controlled as an honest broker of information. It was an honest broker of news, and that was the tradition. I think that is an extremely important thing, maybe even more important now, in a world in which you can get versions of everything, and everyone has a version–for the media, especially the media that is controlled by the United States government, to really play it straight, to observe those principles of objectivity, which have been traditions of American journalism that are not really observed by many other places but have been the vehicle for making our message, when it was good, one that could be believed. And if you have a good message and you aren't believed, it's not going to do you any good, if the reality is good and nobody believes your story. I think, in order to be believed, you have to tell the truth. And make the story good because the news is good. Make it consistent. When it's bad, let it be bad. But if you are going to do anything, Richard, as far as I'm concerned, you would take your hands off things like the Voice of America and let it go straight.

HAASS: Great. Well, I realize that we've been talking for a bit of time. We've barely touched on Iraq. I don't think anyone's mentioned Afghanistan, and no one's mentioned Colombia or the crisis in the Sudan, India, and trade. So we haven't gotten to exactly every issue. And [what] I wanted to do now is open it up to you all to raise questions about things we have raised or haven't raised. And what we'll do–I think we've got microphones, and we will come around to you. I'll do my best to recognize you. If people could just identify themselves and keep their questions as on-point as they can, I'll do my best to keep the answers on-point. Center.

QUESTIONER: Hi, Tim Wirth from the U.N. Foundation. Senator Kerry has made energy one of the four central themes of his campaign. [British] Prime Minister [Tony] Blair has said that when he assumes the chair of the EU and the Group of 8 [industrialized nations], climate change is going to be one of the two issues that he's going to focus on. Those two are, as you know, directly related. Joe, you mentioned the need to reorganize in the intelligence area and thinking about that, and also in thinking about how we deal with our voice in foreign policy. The issues of energy and climate are also extremely difficult to get a handle around institutionally. Our institutions don't respond very well to those. What advice would you or others have, you know, to an incoming administration about how they might be able to reorganize the institutions, or how do they go about getting the kind of impact so that this sort of panel is discussing issues like energy and climate, you know, as central to what we're doing around the world?

NYE: Well, Tim, I think the most important thing would be the sense of priorities that are set at the top, and as you pointed out, Senator Kerry has said that this is a top priority. And the relationship between energy and climate change will obviously be on the agenda for him, as it hasn't been–energy has been on the agenda for this administration, but it's been on the production side, and there's been very little relationship to the implications for climate change. I think the very fact that you would have a president, in a Kerry administration, who sees the connection between the two, is an important start. That means you have— I think, the most important part of it, is, you know, you can create various posts and institutions, but they don't work unless they are given clout from the top. But within that framework, if a president has that view, your old job is going to become increasingly important in the State Department. The Department of Energy–who becomes secretary of energy could make that a much more interesting and integrated function than it is now. And you're going to have to have a piece of this in the White House, whether it's the–a stronger counsel of–on the environment, or how it will be dealt with, I think, is not 100 percent clear. But the most important thing is the priority and the connections that are set by the president himself.

HAASS: Sir.

QUESTIONER: Bill Emmott, I'm from The Economist; therefore, I should confess that I'm a journalist. One thing that's difficult to work out, as an outsider, is whether we should be looking at the difference between the candidates as one of continuity, and the question being competence, or whether it's really a question of change.

Notable listening to Graham; he wants a humble preemptive strike on North Korea. [Laughter] Liz Economy wants more promotion of democracy, therefore presumably we want the Greater Middle East Initiative [to promote democracy] extended much more widely across the world and done more vigorously. What is the real difference? How can we really choose on foreign policy between these two candidates? Is it about execution, or is there really a question of difference? You're dealing with the same problems, the same predicaments if you come into office.

HAASS: Graham, you want to take shot at that?

ALLISON: I think it's a great question, and I think that the differences are more profound than are generally recognized. But in the context of a campaign people are careful about saying things, and so it often looks–and so the storyline is, well, they look like almost Tweedledum and Tweedledee. I would make three big differences.

First is with respect to the grand project of America in the world and your belief about what America is about in the world. In the aftermath of World War II, the people we now honor as the founding fathers conceived of a project at which America would be a beacon, would be a projector of democracy and a market economy, would create international institutions, would build strong alliances, and would be about a project; and that project actually won the Cold War and was terrific. President Bush and many of the people in his administration reject that project. They think that project was a– either it's history and past, or it's not the way to go going forward. And then Kerry, as he says–he said the one thing he would most do would be to return to the mainstream of American foreign policy in the period since. So that's first.

Second thing, with respect to the most urgent threats, Bush and Kerry agree entirely in describing nuclear terrorism as the gravest threat Americans and the civilized world face, and both of them are able to discuss the topic that way. They then–the question is, what to do about it? I would say about–I can't explain otherwise why we went to war with Iraq when Iran and North Korea posed much graver dangers of nuclear weapons in the hands of terrorism than either saying this gang can't shoot straight or can't aim. And when I look at their execution in a case like Iraq, I would say ideology has gotten in the way of realism. So realism, or as I— and pragmatism are sometimes even dismissed as, "Well, you're not sufficiently optimistic," or, "you're not hopeful enough." When [former Army Chief of Staff General Eric] Shinseki said it's going to take 350,000 troops to do Iraq, he was absolutely spot on. But the administration tried to do it with maximalist objectives and minimalist means. I just say that's just very, very poor execution. And I could go on with some more, but I think that if you look at the differences with respect to, first, the grand project; secondly, what are the most important priorities–lists differ–third, with respect to what would you do–again, quite different.

HAASS: Bill, let me just give a slightly different answer to that, in the sense that it's also possible the next president, whoever it is, whether it's George Bush or John Kerry, I would suggest, is going to face far more constraint than George Bush did four years ago. Benn Steil has already talked about the economic situation–far more constraining this time. He's going to inherit a war on terrorism, a major commitment in Iraq, a major commitment in Afghanistan. The situation with North Korea is arguably much more difficult than it was three, four years ago. Iran has surfaced as a more difficult situation. The Israel-Palestinian situation's deteriorated. And I think that it's a question, perhaps, for today but essentially for the future–is to think about the scope for policy change that a second Bush administration or a first Kerry administration would have. And it's possible, you know, that the nature of the in-box that will face–that will confront this new president has the potential to somewhat circumscribe his latitude, because you don't start from a clean slate. And all of us who have served in government know you do inherit an in-box. And my sense is that the in-box for this next president [is] going to be towards the difficult end of the spectrum, certainly compared to what Mr. Bush had four years ago. Robin. We will get you a–if you wait 30 seconds, we will get you a microphone. Stacy's fast.

QUESTIONER: Thank you. Robin Duke, Council on Foreign Relations. I would like to just pose a question regarding the possibility–which I hope won't happen–that if Bush were elected, how you would look at our high court, Supreme Court, and the appellate courts. Wouldn't that be, in effect, affecting our country for the next 30 years?

HAASS: That's a little bit outside the expertise, I would think, of this panel, unless someone wants to put on his robes.

JONES: Absolutely it will. You know, of course it will. And I think that the–no matter who wins the presidency, that's going to be a huge issue, and I think it's going to have, you know, certainly an effect on things like what will happen in this country if there is another attack–God forbid, a nuclear attack or any kind of attack.

I think that in Graham's new book he says that unless things change, a nuclear attack is inevitable. We've been told from the beginning that some kind of another attack is inevitable. And I think that one of the real profound questions is what's going to happen to this country when that happens. The courts are going to have a lot to say about that. And I think that who is in the Supreme Court and these other courts that you described is going to be, ongoing, of profound importance.

HAASS: Professor Nye wanted—

NYE: Just let me add a note to that. I think it's extraordinarily important, because if you look at America's standing in the world now, the pictures of tortured or abused prisoners at Abu Ghraib [prison in Iraq] have become iconic, just the way the little girl fleeing from napalm was iconic during Vietnam. We're at the lowest level we've been in public opinion internationally since the Vietnam days. But it's worth remembering we've recovered from Vietnam, and we can recover from this. And the reason is because we're a democracy with independence of the courts and an independent legislature.

And the fact that the Supreme Court took the decisions it took, the fact that there have been congressional hearings opening up the questions of command chains on the questions of Abu Ghraib, this is absolutely critical. If we are going to recover our soft power, you've got to remember the lesson from Vietnam was that when people were protesting in the streets during Vietnam, they weren't singing "The Internationale," they were singing Martin Luther King's "We Shall Overcome." Independent courts are absolutely essential to the recovery of the soft power of the United States.

HAASS: All the way in the back there.

QUESTIONER: Thank you. Joan Michelson, Michelson-Cooper Marketing. I'm in the communication business, and so I want to bottom-line this a little bit. The people who are making the decisions are the people who the public elect, one vote at a time. The public, in my experience, does not understand the linkage, really, between foreign policy and their own lives, short of the 9/11 attacks. [New York Times columnist] Tom Friedman has addressed this in his columns, on outsourcing as a way of reducing terrorism and helping other countries, which reduces foreign aid; falls on deaf ears. We in this room are a bit of the intelligentsia, but we're not the people who are–we can't vote everybody into office who we want to make these decisions that we're talking about and these policies. How do we make the connection? How do we provide the linkage to elect people who can follow your ideas and your suggestions appropriately to increase America's standing and what we do with that power in the world?

HAASS: Who wants to take that? Mr. soft power? OK.

NYE: Well, I think if you look at the position of the United States today, we are, as I mentioned a minute ago, at a low we haven't seen since Vietnam. And you're not going to recover that overnight, or quickly. Just a change in an election doesn't change it automatically. But you can think of historically what are the things that have happened in the past.

Well, for one thing, we recovered after Vietnam because we changed our policies on Vietnam. Another thing, you noticed in the 1970s [former U.S. President] Jimmy Carter brought the theme of human rights forward, which became a beacon, unpopular at the time, but did become very important over time. [Former U.S. President] Ronald Reagan continued that in the 1980s. There are ways to essentially not only change policy, but the way we present ourselves. If you combine that improvement of the product, as I would put it, with a re-organization and an investment in the resources of advertising our soft power, I think you could imagine half a dozen years from now a situation where the United States would recover from the low it's in at present.

QUESTIONER: Thank you. I'm Jim Sasser, a former ambassador to China and former colleague of Tim Wirth's for many years. Economic question. The point was made that foreign ownership of our public debt has risen from 8 percent to 23 percent in just a few years.

STEIL: Foreign government ownership.

QUESTIONER: Foreign government-owned debt. Now, this debt is primarily, as I understand it, held by Japan and China. If memory serves me correctly, the Chinese bought about 100 billion [dollars] worth of our bonds over the past year and a half or two years. There's an old saying that political power follows economic power. Now, the question comes, how long will the Asians ride with us before they start moving elsewhere, putting their funds, for example, in euros. I understand that we're China's largest market, enormous market for Japan, so they want to see this economy prosper. But what do you see as factors which would precipitate this foreign government debt moving out of the dollar and out of the U.S. into other places and leaving us, for want of a better term, in the economic lurch?

STEIL: I would first add South Korea to your list. South Korea has built up an enormous war chest of dollar reserves on the order of a half a trillion dollars. I think much of this is a reaction to the Asia crisis. They never want to be in a position again where they have to come hat in hand to the IMF or the U.S. Treasury to ask for a bailout.

But let me stick specifically with this question of what would motivate these central banks actually to start selling dollars. We can't be complacent about it for the following reason. If you consider what gold used to represent in terms of the reserves of central banks, it used to be very significant. Over the course of the 1980s, the gold price declined precipitously from 615 [dollars] an ounce to 387 [dollars] an ounce. Over that period, though, central banks built up their reserves of gold. But once it fell in the range of 350 [dollars] an ounce, they decided it was no longer in their interest to continue to have such a significant component of gold in their reserves because this was a bad investment, and if they didn't get out before the others did, then they were going to suffer a significant capital loss. So over the course of the 1990s, central banks around the world were huge net sellers of gold, and they drove down the gold prices themselves with their big selling. By the end of the 1990s, gold was down to well below 300 [dollars] an ounce.

Now, what I'm suggesting to you is that if we don't start addressing the problems with our budget deficit and our need for importing prodigious amounts of foreign capital, eventually these Asian governments are going to say this is just too dangerous. This is a bad investment. This investment won't sustain its value over time. We've got to be a little more prudent and at least increase the role of, say, the euro in our portfolio. And given how much foreign debt is owned by these central banks, even a rebalancing from, say, two-thirds of foreign reserves to one-half could have a very significant impact on the dollar. It could really beat the dollar down and undermine confidence in the private sector as well. And I think this is something we need to pay attention to, and we need to pay attention to it now.

HAASS: We've got a lot of hands. We don't have too much time, so I'll ask people to keep questions short and we'll do our best to keep our answers short. Sir, all the way in the back? I don't have my glasses, so I can't see everybody. I apologize.

QUESTIONER: All right. I am a senior foreign analyst of French television. I would like to ask a question concerning Iran. Don't you think that we are still paying today the price of a strategic miscalculation the occidental world made 25 years ago when we decided to drop our backing to the Shah and put [Ayatollah Ruhollah] Khomeini in power? Iran, you said it or you alluded to it, is preparing the nuclear bomb. Iran is against the occidental values, against the United States. Iran is harboring al Qaeda and its works. So instead of speaking of Iraq–of course, it's an obsession for all of us–but what about Iran?

HAASS: Let me take the liberty of answering that. I don't think it's terribly useful in 2004 to have debates about what might have been done 25 years ago and to try to do counterfactual histories. I would just say on Iran–and my organization just put out a study on it a few days ago–I think there's a certain reality that Iran does have a nuclear weapons program, is actively supporting terrorism, and I don't see any evidence that the government of Iran, the current government run by clerics, is going to disappear soon enough for those problems to disappear with it. Or, to put it another way, I think a real challenge for the new administration will be, how does one address with the current government of Iran the problems the United States now has with it vis-à-vis terrorism or nuclear weapons? But I–essentially regime change will not be the answer to our strategic requirements in Iran, and our policy needs to begin to reflect that. George Vradenburg?

QUESTIONER: George Vradenburg, a member of the Council. I'd ask a question about trade policy. We've had a bipartisan commitment to free trade now for a couple of decades. The recent WTO [World Trade Organization] decision on agricultural subsidies of cotton and the Bush administration reservation about giving up sovereignty to international institutions suggest that perhaps a future Bush administration may begin to resist, sort of, the traditional free-trade policies and delegation of these decisions to the WTO. [The] Democratic platform seems to suggest reservation with respect to free trade because of concerns about American job losses. My question is whether or not you see in either administration some pullback from our general national commitment to free trade.

STEIL: I suppose you want me to take that one. With regard to the WTO, first of all, I think we should see the WTO dispute settlement mechanism as a tremendous success–tremendous success. You have to understand that international trade has grown so significantly that unless we had some international mechanism to mediate and arbitrate these disputes, we would be at each other's throats, throwing sanctions at each other constantly in order to resolve them. I view our commitment to the WTO dispute settlement mechanism as being like Ulysses tying himself to the mast, for our own interest, to stop ourselves from bringing down the international legitimacy of the World Trade Organization in international trade. I think it's an absolutely wonderful thing.

But I'd add one quick point to this, because I really think that the trade debate over the course of the campaign is not going to be particularly helpful or productive. We're probably going to focus on things like whether, if we tinker with the tax code just a little bit, we can stop all this outsourcing nonsense. Even if Ralph Nader is elected president, and we never sign another free trade agreement again, free trade is going to continue to grow at a prodigious rate. Let me just give you one example. At the end of this year, a 30-year-old agreement to restrict international trade, called the Multifiber Arrangement is going to expire. This means that all import quotas on textiles and clothing is going–are going to be eliminated, overnight; this is going to happen on January 1st, no matter who is elected president. This is going to lead to a massive global reorganization of production in the clothing and textile business; it's going to lead to greater dominance of China in these markets; it's certainly going to lead to greater imports in the United States.

So we need to start having a real debate in this country about how to assist workers in adapting to this environment and how to protect their livelihoods. I'm talking about questions like expanded trade adjustment assistance; I'm talking about more radical ideas, like wage insurance; I'm talking about even more radical ideas like perhaps decoupling health insurance from employment. These are the sorts of debates I think we need to have on the trade front.

QUESTIONER: Jeff Hirschberg, governor, U.S. International Broadcasting. A couple things that have been said here that I'd like to respond to, and I have a couple comments and then a question.

HAASS: Jeff, could I be really an obnoxious presider and ask you to keep it short and focus on a question?

QUESTIONER: Sure. First thing: VOA hasn't been politicized. Second thing: With respect to Urdu, stay tuned; there will be more. Even the 9/11 Commission has stated that U.S. International Broadcasting is underfunded and [has] been woefully underfunded, which it is. So the question I have for you is, instead of wondering about the past, why don't you all help us with additional funding?

HAASS: That's a question that has its own answer. Sir?

QUESTIONER: I'm Robert [inaudible] from Capistrano Beach, California. Any of us that have been recently–in the last year–to Europe have sampled the intense dislike of America and even the hatred that is there. And I wonder that if their leaders in the European Union, as we are all at one point a democracy or another, were to support us in some sort of action, whatever it may be, I question if the population would support them. I question that they could make that kind of decision. What do we need to do to rapidly change that and to put America back where they had us? It was like the savior on the white horse. We don't need to be the white horse, but we were loved and respected, and that's entirely been lost. It's terrible.

HAASS: I'm going to have your question answered by doing a mean thing to one of my friends: David Manning, Her Majesty's ambassador. David, why don't you give us a perspective from where you sit?

DAVID MANNING [Great Britain's ambassador to the U.S.]: Well, Richard, I'm very conscious that there are a lot of other European ambassadors in the room, so they will have their own views about this.

[Transcripts Ends.]

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