Council on Foreign Relations
NANCY ROMAN: [I’m] Nancy Roman, the vice president and new director of the Washington program here at the Council on Foreign Relations. And I'm glad to have so many of you here. We realized from a journalist's perspective there were a lot of news hooks upcoming around which we could attach, just to bring you some Council wisdom and expertise. As you know, [President George W.] Bush is traveling to Europe for three summits. There's the G-8 [Group of Eight] summit, the U.S.-EU [European Union] summit, the NATO [North Atlantic Treaty Organization] summit, and we thought this was just a good time basically to talk to you and give you a chance to ask questions to us.
The Council is in an extremely enviable position of being a nonpartisan not-for-profit, which basically means that we have no dog in the hunt. We begin from the very idealistic perspective, in which I deeply believe, that says that if you bring reliable information and analysis to the process sooner, you end up in a better place. But we don't lobby, we don't advocate for any outcome in particular. So we hope that you'll use these human resources that are here just as resources for you.
And I'd like to thank Marie Strauss, in the back, who organized this, if you would just put up your hand, since those of you hopefully will deal with her in the future. She and Lisa Shields work in our communications department in New York. And we hope that you'll see the Council as a resource when you're working on stories, preparing for trips, even when we may not have the time and wherewithal to pull together something quite this official. But anyway, we are going to begin today. I'll introduce people one by one rather than all at once.
We're going to start with Charlie Kupchan. He is the Council's senior fellow and director of European studies. He was a former [National] Security Council official under President [Bill] Clinton. He's a professor at Georgetown University. And he's recently completed, a couple of months ago, he oversaw a task force effort here at the Council on transatlantic relations, with [former Secretary of State] Henry Kissinger and [Harvard University President] Larry Summers. That was a big job. Some of you were here when we rolled that out. But he clearly can touch on the upcoming trip and the summits as well. Charles?
CHARLES KUPCHAN: Thank you, Nancy. What I thought I would do in my opening remarks is try to give you an overview of U.S.-European relations, try to touch on some of the different political dimensions that will shape the atmosphere during the coming month as Bush goes from Italy to France to Ireland and then back to Turkey. And I think it's safe to say that President Bush will be engaging in a series of summits with the main European powers in the EU at what is, arguably, one of the lowest points in U.S.-European relations since World War II. And in the public imagination, Iraq looms largest as the cause of the deterioration in the transatlantic dialogue, but I think it's important to see Iraq as at least as much of a symptom as a cause. And I see four main drivers pushing the transatlantic relationship into troubled waters. And let me begin just by touching on those four main engines of change.
One is the end of the Cold War and the degree to which that made Europe less dependent on the United States for its security, and the U.S. more interested in Asia and the Middle East in terms of setting its strategic priorities. The second main change that I think is at work is the evolution and maturation of the European Union as a collective political body, less willing to follow America's lead. The third is generational change on both sides of the Atlantic. The individuals that kept the relationship on course are retiring from politics. What happened between George W. Bush and [German Chancellor] Gerhard Schroeder would have never happened between [former President] George H.W. Bush and [former German Chancellor] Helmut Kohl, because they bring to the table a very different set of historical circumstances. In that sense, the default Atlanticism of the leaders of the past five decades is diminishing, and it is being replaced by a different set of attitudes towards one another that I think will make it difficult to keep the Atlantic relationship on course. I'll come back to that in a second. And the final driver of change that I'd point to is the erosion of the bipartisan consensus in this country behind liberal internationalism, behind a centrist, moderate brand of American leadership that was born during World War II, when [former U.S. President] Franklin Roosevelt reached out across the aisle to moderate Republicans and built a centrist coalition behind a moderate brand of internationalism that lasted through the 1990s. I think that coalition has come apart. It came apart before Bush came to office, but it has certainly become much more fragile since he's been in office. And I think that the unraveling of that coalition has a lot to do with the more abrasive tone of American foreign policy— tone and substance— that has set Europe on edge.
Where are we then in terms of the U.S.-European dialogue and the relationship? I think that Iraq, the Iraq war, the standoff in the [United Nations] Security Council was clearly the lowest point in the dialogue since World War II. We then had a hiatus, a period of recovery soon after Saddam Hussein fell, in which both sides attempted to reach out to the other. I think we're now headed back in the other direction, a deterioration of relations for several different reasons. One is the chaos in Iraq and the daily loss of life. Two, the degree to which Europe does not believe the Bush administration has a clear plan for bringing stability to Iraq. Third, the prisoner abuse scandal. And finally, fundamental differences in perspective on the Middle East peace process and, in particular, the Bush administration's recent backing of the [Israeli Prime Minister Ariel] Sharon plan for withdrawal from Gaza.
So as I look at Europe's political landscape and try to gauge the atmosphere that Bush will find when he arrives, I would point to several key features. First, that the pro-war coalition in Europe has weakened substantially over the last few months. The key turning point was the [March 11] Madrid bombings and the fall of the [Prime Minister José María] Aznar government. The disappearance of Spain from that pro-war coalition has made life much more difficult for [British Prime Minister] Blair, [Italian Prime Minister Silvio] Berlusconi and [Polish President Alexander] Kwasniewski. Blair is fighting for his political life. Berlusconi is now up against Romano Prodi, who is leading the center-left on an anti-war platform coming up into the elections for the European Parliament that take place in only 10 days. And Kwasniewski is trying to continue to back Bush, but he finds himself with a difficult time demonstrating what he has received in return for his support for the United States— unable to get contracts for Polish firms, unable to convince President Bush to give Polish tourists visa-free access.
I think we're also seeing a shift in what used to be anti-Bush sentiment to something that is more closely anti-American sentiment. And I think that is particularly worrisome in terms of how we get the relationship back on course. I was in Germany just 10 days ago, met an American father who has been living there for over a decade. He tells me that his children, who attend German public schools, are now isolated and taunted simply because they're Americans. So there is a deeper undercurrent of anti-American sentiment that I think is affecting the politics of Europe, and the European politicians are not being particularly responsible in trying to beat back that anti-American sentiment; indeed, they are tapping into it for electoral gain and in some ways fueling rather than resisting anti-American attitudes.
A final point I'll make here: I do think it's safe to say that European governments for the most part would prefer to see [Senator] John Kerry [D-Mass.] win the next [presidential] election. In that sense, they are trying to figure out how to keep this month on target, not have a train wreck, and at the same time not do George Bush any favors; that is to say, not give him things that would increase his chances for re-election, such as new troops in Iraq or a NATO decision to go to Iraq.
Let me end with a guess at what the implications are of this analysis for what will happen over the next few weeks. I expect a month in which there will be a facade of unity but very little progress on the core issues of Iraq and the Middle East peace process, more agreement on the greater or broader Middle East initiative— but I'm going to leave that to my colleagues. I don't think that France and Germany are going to budge on the issue of sending troops to Iraq. Both [French President Jacques] Chirac and Schroeder have come out in recent weeks and made it very clear that they have no intention of putting troops on the ground [in Iraq]. That means that it is very unlikely that NATO is going to step up to the plate in the Istanbul [NATO] summit. Indeed, the discussion in Washington is not about who's going to go to Iraq; it is much more about who's the next to leave Iraq. And that's not only because there is a political rift, but simply because Iraq is a very dangerous place, and European governments are not interested at this point in sending their troops into harm's way.
Finally, I think the two main dangers for President Bush are, first, that against the backdrop of summitry, which I think will provide a show of solidarity, there will be a worsening of the situation in Iraq. And that situation may well worsen after the [June 30] handover [of Iraqi sovereignty] or in the approach to the handover, and it will make it difficult for Bush, I think, if the security situation erodes. The other danger is that he will, to some extent, come home empty-handed. John Kerry, over the last couple of weeks, has laid out what he thinks President Bush needs to accomplish to make this month a success. If he does come home without a demonstration of beef, of real concrete progress on Iraq and on the Middle East peace process, Kerry will surely try to take advantage of it. Thank you.
ROMAN: OK, thank you. OK, I'm going to speak just very briefly about the economic agenda at the G-8 summit this weekend. By way of my background, I have previously been in journalism and politics, with my most recent job having been president of the G-7 Group, a private consulting firm that advised Wall Street on political implications and political developments and their implications on institutional investors' money. And so with that, I would just say, briefly, whenever— having watched these summit meetings over the past five years pretty closely, there's always two agendas, of course: the official agenda and then the unofficial agenda. Steven Cook in a minute will talk about the president's greater Middle East agenda, which is part of the official agenda, and Princeton will talk about what hopes are to be achieved on the part of the African heads of state who will be attending. But I would be very surprised if one of the dominant points of discussion at the agenda isn't oil and the price of oil. You know, there was some possibility that perhaps that might not have been the case, because the [G-8] deputies did seek to address it. You know, the weekend before last, the deputies came out with a pretty strong statement calling on OPEC [Organization of the Petroleum Exporting Countries] nations to step up production [of oil]. And probably— I think one of the takeaways from this summit will be that the heads of state will reiterate that call. Probably, it would have less of a market impact the second time around, although it still is significant, I would say.
You know, the last time— a couple of weekends ago when the deputies and the finance ministers were preparing for the summit, they were really feeling pretty good about economic growth. I mean, you have worldwide growth at 4.3 percent. That's as high as it's been in 15 years. And talking to these officials, you know, on and off the record over the years, I had a sense that, really, there was a sincere confidence that the global recovery was taking root. I think for a long time there were so many negative developments— between 9/11, the corporate governance scandal, the war— that people were really afraid to trust in this recovery. But I think the public line that you heard coming out of the deputies' meeting the week before last was actually what they really think. Obviously, oil now is a complicating factor. Oil at $40 a barrel, I think, most people thought was absorbable. The estimates, you know, range between three-tenths of a percentage point and five-tenths of a percentage point in growth for every $10 increase in a barrel— price of a barrel of oil. But I think they thought they could withstand that, you know, with growth at 4 or 5 percent. But I'm— I think they're little bit worried as oil creeps towards $45 [per barrel]. So I would expect some discussion there. And I'm sure Gene will want to touch on this as well. I guess I'll leave it at that, because we can— if you want to take this up any further, we can do it in the Q&A.
I would like to introduce Princeton Lyman, who is the head of Africa studies at the Council on Foreign Relations and a senior fellow with us. He has previously served as the U.S. ambassador to both South Africa and to Nigeria. He's done just an enormous amount of good work for the Council, part of which has recently involved focusing on the Africa agenda as part of the summit upcoming. And he can tell you a little bit about the report that he's done for the Council himself. Princeton. Thank you.
PRINCETON LYMAN: Thank you very much, Nancy. You have copies of the report that we've done. The question you might ask is, why focus on Africa at the G-8, when so many other issues are going on? And, in fact, the G-8 has had a special relationship with Africa going back now three years, and for good reason. At the end of the 1990s, Africa was the one continent that just had not participated in the expansion of global trade and investment of the '90s. In fact, its share of world trade had gone down. Its share of [foreign] direct investment was minimal. Vast poverty. And that was beginning to impact in a variety of ways on the G-8. Security became a major issue in Africa. Conflicts had multiplied. In the last few years, troops from Britain, troops from France, troops from the United States have been required to get involved in helping overcome conflicts in Africa. The overwhelming number of U.N. peacekeepers is now in Africa. The U.N. peacekeeping budget will soon pass $4 billion, and the G-8 pays most of that budget.
But third, the vast poverty in Africa had begun to impact directly on the worldwide trade negotiations, in which the G-8 has a major stake. Africa provides 40 members of the 147 members of the World Trade Organization [WTO], and now, and as you could see at the meeting at Cancun not far back, that acting as a bloc and joining with other developing countries, they've been able to stop the negotiations in the Doha Round [of WTO negotiations] and make demands that they weren't making in the Uruguay Round or in the early stages of the World Trade Organization. So dealing with the range of African issues became a major concern of the G-8. Now the Africans came to the G-8 in 2001 and said, "We too are concerned with these issues," and laid out a plan that's now called the New Partnership for African Development, NEPAD, in which the Africans pledged themselves to improvements in governance, in human rights, in economic policy, in conflict resolution, and in peace operations, in return for which they asked from the G-8— and the developed countries in general— not only assistance in these areas, and more assistance, but major progress on trade, particularly [in] the areas of agriculture, agricultural subsidies, and tariffs, which were costing Africa and other developing countries literally billions of dollars in lost revenue and opportunity.
Out of that, the G-8 endorsed the partnership and, in 2002, created the Africa Action Plan, which had over a hundred mutual commitments that each side had agreed to make. At [the G-8 summit in] Evian [France] last year, they refined this further. And Great Britain has said that they will make Africa, when Great Britain is in the chair next year— and the U.K. will be in the chair of both the EU and the G-8 at the same time— have said they want to make Africa the center of the meeting next year. And, as you may have heard, Tony Blair has created an international Africa commission to prepare for that. Now, with all of this and all of the concerns, there is finally one that certainly the United States has a major stake in, and that's the terrorist problem in Africa. It's not separate from the rest of the world. We've had embassies blown up in East Africa. We have American troops in East Africa worrying about terrorism. We've had Green Berets in the Sahel region of [western] Africa. South Africa just announced that they had arrested some al Qaeda representatives in South Africa and deported them. Africa is not outside the worldwide concern over terrorism, and the atmosphere, the conditions of poverty, of instability, et cetera, open the doors to that.
For all these reasons, Africa needed to remain on the G-8 agenda and it was very important for it to do so. Yet, as the U.S. began to prepare for the summit this year, there were clear indications that, unlike the last three years, the United States might not invite African leaders this year. And that sent a message not only to the other G-8 partners but to the Africans that they were going to lose momentum on this partnership, and that somehow Africa was going to be marginalized again, and that would reinforce all the problems that had occurred before. I'm happy to say the United States changed that position a couple of weeks ago and made the decision to invite six African leaders: Algeria, Nigeria, South Africa, and Senegal, who were the ones who presented originally the new Partnership for Africa Development; Ghana, which has been eligible for the administration's Millennium Challenge Account; and Uganda, which has figured very largely in the campaign against HIV/AIDS. This is a welcome development.
What we are urging in the report is that this not be just symbolic. But in all three things that the G-8's dealing with, and we've taken the themes in the report that the U.S. has identified— freedom, security, prosperity— Africa has to be seen as part of the worldwide concern. And the undertakings that were begun in 2002 have to be continued. There's a lot for the Africans to discuss with the G-8 in all these areas, and I think it is of particular importance that there's progress in these areas and a recommitment. And that's what the Africans are looking for from the G-8, as well as to provide, on their part, a recommitment to this partnership that began three years ago— that opens the door, perhaps, for, oh, better negotiations on the obstacles in the trade area and a resolution of the confrontation over agricultural trade and subsidies, which is blocking progress in the Doha Round. So for all these reasons, Africa remains critical for the G-8 agenda. We highlighted that in the report. And we hope that it will now remain high on the G-8 agenda.
ROMAN: Thank you, Princeton. OK, I'd like to introduce Steven Cook now, on the end. He is our next generation fellow at the Council. He's based in New York. His expertise is in Arab politics and the Middle East. And I think he'll be addressing Iraq as well as the president's Greater Middle East Initiative, Broader Middle East Initiative. Among the credentials that I find most impressive of his is that he is fluent in Arabic. So, Steven?
COOK: Thank you, Nancy. It's a pleasure to be with you all today. Since mid-February, when the pan-Arab daily Al Hayat leaked what was widely reported, but inaccurately so, as the administration's Greater Middle East Initiative plan, people in the region and Middle East watchers have been eagerly anticipating this summit of the G-8. The document that was actually leaked contained proposals that the United States wanted to negotiate and discuss with its European partners. As some of my colleagues have already pointed out, the name of the proposal is no longer Greater Middle East Initiative, it's Broader Middle East Initiative. Although the coverage will essentially be the same, Middle East— [the expression] Greater Middle East has become toxic in the region.
I'll just divide my brief remarks into three areas: first, optics of the summit; second, the substance of the proposal that is being presented at the Sea Island [G-8] meeting, and the meanings of the proposal. First, on the optics. The fact that the Bahrainis, the Yemenis, the Jordanians, the Algerians, and, interestingly, the Turks are coming is important in a number of respects. Arab and Muslim representation— Muslim representation, of course, being Turkey— gives the impression that the United States and the G-8 are seeking a partnership in the process of reform. From the Arab side, participation sends the message that Arab countries will not be dictated to by external powers, and that they own part of this initiative. As the Tunis declaration [following the Arab Summit] indicated last weekend, they are collectively interested in reform issues. But it's also important to inject some reality into the question of participation. The countries that are coming are either easy sells or they desperately want something from the United States. On the easy sell side you'll find the Bahrainis, whom I am told by senior Bahraini officials that senior U.S. government officials told them that the Broader Middle East Initiative doesn't really apply to them. The Algerians, of course, want something from the United States— security cooperation— and we want the same from them. Still, as important as this attendance may be, it's equally, if not more, significant that the Egyptians and the Saudis will not be in attendance.
And just before I move on to the substance of the Broader Middle East Initiative, I just want to make a note on the Turkish presence. The Turks are very sensitive about their participation. They're there— their presence is to demonstrate that they can— that there is a democracy in the Muslim world, led by a party with Islamist roots, and that they are a model of sorts for the rest of the Islamic world, though I disagree about the relevance of the Turkish model for the Arab world. From the Turkish perspective, they are concerned that they'd be lumped in with the Middle East as they move forward with their drive for EU membership, but at the same time they get something political out of this. They help the United States on the Broader Middle East Initiative, it will help the United— it will help them in councils between the United States and the Europeans, and the United States lobbying on behalf of the Turkish— Turkey getting a date for negotiations on EU membership this December.
Moving on to the substance of the initiative, basically there are four components. One, reform for the future, which is an APEC [Asia Pacific Economic Cooperation]-like government-to-government [set of] talks to promote cooperation and support of reform. There will be no standing secretariat or standing staff. The yearly meetings will include the finance, trade, and foreign ministers. There are no foreign— no ministers having to do with social development or internal political development. And countries will be able to opt in in a sort of name-and-shame type forum. At the same time, there will be a parallel dialogue with civil society groups and business groups. The second component is a democracy action group, sometimes referred to as the democracy assistance group. This will coordinate the efforts of U.S., European, and other foundations that sponsor NGO [non-governmental organization] initiatives to promote reform. The effort is part of— it's part of an effort to maximize the work that's being done in the reform-related area. The third component is a literacy core for the broader Middle East, perhaps the least controversial of them all. This is, obviously, to promote literacy in a region that is desperately illiterate, and [is] particularly focused on the question of women's literacy. And the final leg of the initiative is a micro-finance project. That has been discussed along the same lines as a small and medium [size] business-type initiative through a Middle East-type international finance corp[oration]. We can get into that in the question and answer.
Well, what does this all mean? Well, what's being presented is actually a scaled-down version of the initial paper that the United States sent to the Europeans for discussion. Notice there's no discussion of a Helsinki-type forum, [that led to reforms in Eastern Europe] or a variety of carrots and sticks. This is a result of a number of factors. First, European opposition and ambivalence to it. Europeans, quite simply, did not want a Greater Middle East Initiative or a Broader Middle East Initiative to overshadow their own Barcelona process, which was launched in 1995, which focuses on economic and political development in the Mediterranean countries. And the Europeans, quite frankly, didn't want to put a lot of money into this effort. Third, there was Arab opposition. After the leaked document came out in Al-Hayat, the administration faced stinging criticism from Arab allies and foes alike for neglecting to engage in consultation with Arab leaders. And as we all know, the concept of shura, or consultation, is very important in the Arab world. And to some extent, the Arabs had reason to be annoyed. If they were going to be the target or subject of an initiative to promote political reform or political change in the region, they felt, quite rightly, that they should have been consulted. The fourth factor is Iraq and the Arab-Israeli conflict, which I'll get into in more detail in a moment. But just suffice it to say for the moment that the United States lacks the kind of credibility to roll out a broad initiative demanding reform as long as we are involved in a difficult situation in Iraq and we are perceived as supporting the Sharon government— we are perceived by Arabs as supporting the Sharon government.
And finally, the administration doesn't necessarily seem committed to some sort of grand reform initiative. Government officials that I've spoken with recently say that the administration actually doesn't want to pour a lot more money into this initiative than already has been allocated to programs like the Middle East Partnership Initiative and the like. So, basically, what we will find in the proposal is not terribly different from what we know from USAID [U.S. Agency for International Development] and Middle East Partnership Initiative programs and projects. To my mind, the biggest issues that are missing are accountability and conditionality. And with all the discussion of inclusion and the inclusion of women in the political process, there's one major group that is missing, and that is the role of Islamist movements. I'm not talking about extremist or radical Islamist movements, but those Islamist movements that have signaled their willingness to play by the rules of the game. There just doesn't seem to be any discussion or recognition. And these groups are, to some extent, the most prestigious, and the most politically potent, and they stand on the edge of demanding social change in the Arab world.
The initiative will be launched in documents containing a political statement that will address the need for a resolution of the Arab-Israeli conflict and stability in Iraq. The original draft prepared by the United States actually buried the issue of Arab-Israeli conflict, and this goes to some of the division that my colleague, Charlie, was talking about between the United States and Europe on these issues. But the document that the United States produced was taken by the Germans, it was rejiggered, and the statement now, as it reads, which will be used, gives much more emphasis to the peace process. And of course all of this is taking place against the backdrop of both violence in Iraq and efforts to forge ahead with the credible political process there. I think that the announcement of a new Iraqi government yesterday can help the process in some extent. The [U.S.] president will go to the summit with the ability to say, "We have named a new government. We are moving forward with a credible political process. We are doing what we said we were going to do." But of course the issue of credibility will once again be compromised by the way in which this went about. The appointment of [Iraqi Prime Minister] Iyad Allawi, someone who had close ties with the CIA, fundamentally undermines the United States' position that it was impartial and allowed the U.N. to take the reins on this, in addition to the fact that there are many members of the outgoing [Iraqi] governing council on the new Governing Council. So, all in all, I think the Iraq situation is a mixed start. And as the United States moves forward with a new resolution in the U.N., it will also have a significant impact on this Greater Middle East Initiative. I don't expect too much from it down the road.
ROMAN: Thank you. OK, many of you know Gene Sperling has served as President Clinton's economic adviser. He is currently wearing many hats. Not only is he advising the Kerry campaign on economics, he's also a senior fellow here at the Council doing some important work on girls' education and the critical role that it plays in global development. Gene, I'm not entirely sure which issues you're going to take on, but— [laughs.]
GENE SPERLING: When you're going clean-up, most of the things you want to talk about have been touched on a little. So let me— let me just highlight several issues quickly. One, on the economic issues: if you went to sleep in 1990 and woke up right now, you might hear some of the background sparring sounding somewhat the same, in the sense that you're already seeing a little bit of jostling going back and forth between Europe and the U.S. on— if the global recovery is not as robust, you know, where does the blame fall? And you see Chirac out there saying, quote, "At a time when France and Europe are pursuing vital but difficult reforms, the stronger growth being enjoyed today by the U.S. is being financed by increased deficits." U.S. officials are pointing to only 1/3— 1.3 percent growth in the euro zone this quarter and talking about the need for structural reform, getting rid of structural rigidities. So you're seeing a debate, but one that you would have heard a decade ago too: deficits in the U.S. versus structural rigidities in Europe. But you can see a little bit of the heating-up going on. The OECD [Organization for Economic Cooperation and Development] and the IMF [International Monetary Fund] have put out very critical things of the U.S. fiscal position. The U.S. doesn't want to be lectured about this in international forums in an election year, and they are throwing some elbows back. So whether or not things stay polite or there's background jostling is probably, you know, like watching the basketball game yesterday. You know, if somebody throws an elbow, somebody's likely to throw an elbow back.
The one thing that's somewhat different than, I think, years ago is that there is a little bit more worry, I think, from the European side about what the impact is on exchange rates. And I think, from Europe's side, they are worried about being double-squeezed. And when they're— and that goes to the fact that when they look at the current account deficit that the U.S. has now, perhaps one of the reasons Chirac is pressing on the deficit is because the other way you could current account down is to have further dollar depreciation. Well, if you're Europe, when the U.S. devalues— excuse me, if you have current dollar depreciation/devaluation and you still have China pegging their currency to the U.S. dollar, you get double-burned in Europe. You get— and this is what they feel now, you get the U.S.--you get currencies literally on both sides devalued and putting more pressure on them. So you can see— and I looked— and I tried to find Chirac's last quote, and it was in Reuters, on May 13th, I think. And he said this situation, you know, carries risk, especially for exchange rates, and we will discuss it. So again, I think you can see some of the jostling and you can see Europe worrying that they're going to have to bear the brunt and not wanting to take the blame. So again, this is probably part of what Nancy calls the kind of unofficial agenda or, you know, well, whether men will behave badly, in and outside the meeting.
Now the one place I could see them being a little bit in agreement is that when you hear a message, if you— obviously, OPEC will meet on Thursday. But if there is a message, as Nancy suggests, on oil and the impact for growth, I think that that message would be most directly at OPEC. But I think there could be a subtle message towards the central banks in Europe and the U.S. Obviously, higher oil prices are— you know, I don't know if this is a word— but stagflationary. They both are bad for inflation and they're bad for growth. And central banks have to decide which way they want to respond. In the EU, I think people have been disappointed. Inflation was 2.5 percent. A lot of people fear this will prevent the ECB [European Central Bank] from cutting rates, even though growth probably will average around 2 percent for the year. Obviously, the U.S. government would prefer for [Federal Reserve Chairman Alan] Greenspan to be more concerned about growth than inflation during an election year. So one place of potential common interest in the U.S. and the G-8 countries is that, to the degree there is a central bank reaction to higher oil prices, that they be more concerned with its impact on consumer spending and growth than its impact on inflation. So I could see some degree of potential unity there.
Another issue that I would, perhaps, be looking at a little is debt relief, and most initially Iraq debt relief. Obviously the 19 countries in the Paris Club [of creditor nations] are owed 42 billion [dollars]. If you look at Germany, who has been one of the larger creditors and holdouts, Schroeder has— his line has been, quote, "We only negotiate with a government that is legitimate." In other words, until they see a legitimate handover [of sovereignty], they're not going to talk. That's probably the official line. Whether now with the transition, it’s more imminent— whether that discussion picks up here, I think, is somewhat likely. Ed Balls, who many of you know is the spokesperson for [British Chancellor of the Exchequer] Gordon Brown, was talking about this when he was here. So again, I think whether the question— I think Iraq debt relief is an issue that could come up.
Now, the more— the line is obviously you have to deal with a legitimate government, but I think we all know there's an undertone which goes to reconstruction contracts. And you know that in a lot of countries you're going to hear: we're not going to give debt relief so that there will be more funds to go to private construction companies that aren't in one's own government. So I do think that, to the degree Iraq debt relief comes in, it will blur into overall reconstruction sharing, benefits sharing— burden sharing and benefits sharing.
Now Oxfam and the very effective British NGOs never miss a chance to push for debt relief for poorer countries, and they have very effectively gotten Gordon Brown and Tony Blair pushing that if there's discussion of Iraq debt relief, there will be discussion of debt relief for poorer countries as well. And at the finance ministers' meeting, there did seem to be progress towards getting rid of what is called the sunset clause, which is of the 38 countries that are eligible for deeper debt relief under the HIPC [Heavily Indebted Poor Countries] initiative, 27 are in completion or in the process. And they are pushing to make sure that the other 10 or 11 are not cut off by this date. So I think that is something where there were favorable comments coming out of the G-7 finance ministers' meeting, and that you could see some positive statements, as well, on removing the sunset clause for the higher debt relief.
Now, as Nancy said, what I do here is I run the Center for Universal Education. So, obviously, we have looked to— those of us interested in this issue have looked to the G-8 for, hopefully, bold leadership on the cause of universal basic education. In 2002— in the Canada 2002 G-8 there was a broad report on universal basic education. In this light, this will be— as Steve mentioned, there will be a literacy component likely in the Mideast project. I think the good news is that you're seeing the administration talking and thinking about education in broader foreign policy and security terms and realizing that the under-funding of public education in Pakistan may have created openings for financing of schools that preached hate. And so I think there's a greater awareness there. I think the problem is that most people expect the proposal to be quite modest, not particularly coordinated, and reactive as opposed to pre-emptive. And what I mean is that the normal thing one sees is a smaller building on existing projects, building on literacy programs, calling it a literacy core, telling you how much money over 10 years— those kind of things; but really more kind of modest incremental. Not coordinated— it goes to the point Steve says. It's not— most of the major NGOs have no idea what's going on. Most of the G-8 other sherpas [deputies] did not feel that there was much openness to a broader education initiative, and so it's not, I think, part of a broader, more coordinated effort to do something. Which really leads to my last point and something I would just build on what Princeton said: I always say that we need a pre-emptive— the administration talks about pre-emption. I think we need a pre-emptive policy in education, which is when— there's becoming almost kind of sick jokes that the way to get bold leadership on education is that you first have to be attacked by the United States. And what you'd like is to have a more pre-emptive policy on education. And I think this becomes important because, one, when it looks like we're doing education in areas that look more narrow and security-interested, I think it is greeted with greater skepticism. When we were at the U.S.-Islam Forum, a few officials— a few people made comments to me, you know, you only care about educating our children to the extent they don't, you know, perform violence on your country. Or a few female leaders from a Mideast country told me that previously they had been looked at as just kind of silly women trying to do curriculum reform; now they were being looked at as tools of the U.S. And so, to the degree you have a broader and more pre-emptive policy on education, you do two good things. One, it looks like it is more— reflects the heart of the United States in truly trying to help reach broader poverty reduction goals, as opposed to serving narrow interests. Secondly, it's pre-emptive and preventative. And, for example, we had the minister of education from Kenya here, and again, Kenya's a country where there's concerns on the terrorism side, yet could be the cutting edge of democracy, where the new president called for universal basic education in his inaugural address and eliminated fees. So this more pre-emptive approach, where you would have a bolder strategy for education in Africa and the Mideast might be perceived as more generous and more pre-emptive, and might be, therefore, received better, and also might put us in a position where we were preventing gaps from being filled with terrorist-sponsored schools, as opposed to waiting till it happens and then only acting in a reactive manner.
ROMAN: OK. Thank you. I think we'll move right away to questions.
QUESTIONER: George Condon, Copley News Service. I should direct this, I guess, to Charlie. There's been a lot of talk in here about the G-8 Summit and general relations. Let me ask two questions about the two summits that follow. You mentioned the EU has become more mature and assertive. How is that likely to show up in the Irish [EU] summit? And in the NATO summit, because of expansion of the alliance, are we likely to see so-called old Europe and new Europe split? What do you expect at the NATO summit?
KUPCHAN: The European project is obviously something that is very much in train. It hasn't been a good year for European integration inasmuch as the war was as divisive within Europe as it was across the Atlantic. I think there is a new momentum to European integration that has followed the change of government in Spain. That's largely because it was a coalition of Spain and Poland that was digging in its heels to block the reform of the voting rules in the EU. Therefore the last summit in Brussels essentially collapsed, because they couldn't reach agreement on the constitution. It now appears that that is not the case, and that there will be forward movement on constitutional issues over the course of this year, whether during this presidency or the next. How will that manifest itself in EU/U.S. summits? Probably not in any significant way, other than I don't expect to see as much significant progress between the EU or individual European member states and the United States on the central issues of the day. I am struck when I got to Europe now of how determined Europeans leaders are to say, "We are not going to show up to the party." I was in NATO headquarters recently briefing the NAC, the North Atlantic Council, on this report, and I was quite struck that, in that forum, they are not even talking about going to Iraq. They dismiss it out of hand. Now, it may be that by the time we get to Istanbul, that will change. I doubt it.
The final point I'll make is that I think the old Europe-new Europe divide is already beginning to diminish, and that's partly because new Europe has realized that its expectations were somewhat illusory. I think Poland, for example, believed that it was going to become America's new great ally, and all the troops that are leaving Germany were going to move east and set up shop in Poland. They're not. They are going to leave Germany and set up shop in Kansas. There may be a few rapid deployment forces in Poland, Romania, and Bulgaria, but the alliance is not moving, wholesale, into Eastern Europe. And there also is, as I mentioned in my opening remarks, a bit of a political backlash against strong support for the war with Poles and others saying, "What have we gotten out of support for Bush and for the Iraq War other than a headache in Iraq?"
Finally, I do think that the strongest pro-American sentiment in Central Europe rests with the older generation, and that younger Poles, Czechs, Hungarians, Latvians will have a stronger affinity for Europe than their elders, partly because they will watch European TV; they will study in Bruges and Strasbourg. So I think that divide will, over time, diminish.
ROMAN: OK, right here, table in the middle?
QUESTIONER: Michael Backfisch, Germany's business daily, Handelsblatt. Another question for Mr. Kupchan. You said in the weeks to come, we'll have a facade of unity. But, on the one hand, we have a considerable movement on the part of U.N. resolution negotiations. The administration, firstly, acknowledges a deadline for the multinational forces, among others. So considering caveats coming from France and Germany and other nations, couldn't it be that there is a re-evaluation on the part of the [Bush] administration because things in Iraq are more difficult than they originally thought? Or is it purely politically motivated because they want to minimalize the attack of John Kerry— the president being a unilateralist, and that also being a cost for this highly publicized TV meetings with the president's good old friends, Chirac and Schroeder?
KUPCHAN: Is your question getting at why did the U.S. change its position on Iraq? I think the main reason it changed its position is because it realized it was in deep trouble, and that Iraq was essentially going down the drain. And, in that sense, they said we can't continue to disband the army and exclude the Baathists [members of Saddam Hussein’s political party] and use military force to suppress [insurgency in] Najaf and other areas, because it's not going to work. It' going to blow up in our face. And I think this shift was largely driven by pragmatism and by the sense that the United States will do whatever it needs to do to try to get a modicum of security and stability in Iraq. It is not driven by a sense of we are going to go back to the allies. I think one positive benefit will be that there will be more common ground now than there was before because there is a move to restore sovereignty, because the U.S. will go back to get another U.N. [Security Council] resolution and, in my estimation, will succeed in getting that resolution. But, in the end of the day, the change in U.S. strategy was driven by the fact that the strategy that the administration was pursuing up until a month or two ago was not working.
QUESTIONER: [Inaudible]--domestic implications?
KUPCHAN: No question that the biggest threat to Bush's re-election is Iraq, and he has tried to get that problem fixed. Kerry's clear plan to re-engage the U.N., to try to get help from others, to try to move more quickly to restore sovereignty, I think, has helped push Bush in that direction. And, my personal opinion— and this is just a guess— no matter who wins the election in November, the U.S. is going to start heading for the exits in Iraq.
ROMAN: OK. There are a lot of questions. So if I could just ask both questioners and respondents to keep the questions tight. Right there, in the blue shirt, please?
QUESTIONER: Phil Dine, St. Louis Post Dispatch. Also for Charles. As far as the transatlantic problems, in addition to feeling aggrieved, do the European leaders feel at all responsible? Are they concerned about the rift and do they feel they've contributed to it?
KUPCHAN: They certainly feel aggrieved in the sense that there is an appreciation across Europe that, number one, life without the Atlantic alliance may not be all that rosy and, number two, that if United States fails in Iraq, implications for the broader international system could be quite considerable. The Europeans do not want the U.S. to fail in Iraq. They would like to see things move successfully there. I don't sense that the Europeans feel responsible, largely because they see that their position— and here I'm talking about the anti-war coalition— has been vindicated. No WMD [weapons of mass destruction], no link to al Qaeda, no progress on the [Israeli-Palestinian] peace process— the region has been essentially stirred up, not tamed, and al Qaeda recruitment has picked up. So they generally feel that their assessment of the war going into the conflict was accurate. I share that assessment. I do think that it's safe to say that there were mistakes made in Europe, and I would point to two in particular. One, that Schroeder used the Iraq mess to electoral gain and stirred up anti-American sentiment in a way that's going to be extremely difficult to shut down, even if there's a change of government in this country. And, two, the Europeans— and Schroeder and Chirac in particular— made what could have been a private diplomatic dispute into a much broader social clash, because they used TV and speeches and press conferences as their main diplomatic conduit, and that meant that this was in full view for everyone to see.
ROMAN: OK. Right there.
QUESTIONER: Bogdan Kipling, Kipling News Service. One for Mr. Kupchan and one for Mr. Sperling. You mentioned earlier in your remarks, you said something about the solidarity that may come out of the summits. In light of what you have said subsequently and what has been said here, isn't that solidarity a pure illusion? And for Mr. Sperling, the— you know, what good can the OPEC ministers or the Bush administration or anybody else do, in view of what the terrorists are doing in Saudi Arabia, which is— it's the terrorists that are literally at the moment driving the price of oil up and up and up?
KUPCHAN: I think solidarity will be quite shallow, but that it is in the interests of neither the Bush administration nor European leaders to have a public row. And so, I think that all in question will behave and that the photo ops will indicate solidarity but, as I said earlier, I don't expect to see anything concrete in the near term. I think what will happen is they will step away from and around the immediate crises in Iraq and in the Middle East peace process and focus on those areas where there is agreement, and that is on the Broader Middle East Initiative.
SPERLING: It's a good question. I mean— I think the simple answer is everything helps. You were right in the following: I think that the estimates of how much the rise in oil prices is due to a risk premium, you know, vary anywhere from $6 to $15. So you do have a very significant amount of the increase that is due to people fearing a more serious disruption to— due in some vague way to threat of terrorism or conflict or perhaps disruption in Saudi Arabia. All that said and done, you still have basic economics of supply and demand. And so, as much as that risk premium may be adding to a kind of core amount to the degree that there was not only more oil being pumped by OPEC but a perception of Saudi Arabia's willingness to— well, both a perception that they have excess capacity and are willing to do it. That certainly would help, but you're right in that you have a risk premium, which adds on top of whatever the amount is, based on the more normal economic calculations of supply and demand. But you're talking about perceptions and so, again, to the degree there was a perception that Saudi Arabia has excess capacity that they were willing to use, that would certainly help moderate some of the prices that are being driven by the risk premium. So I still come back to kind of everything helps. If OPEC— you know, I think one of the things I learned in the White House is it's very difficult to know exactly what the information is. It's very hard to know when somebody promises doing 2 million [barrels of oil] more, are they actually promising an additional 2 million of where they are or are they already 2 million— do they already think they've had 2 million barrels of leakage, and they're just confirming that. So this is a world that is very much affected by perception about the future. Anything that helps on the supply side is going to help moderate prices, even if it's from very high levels to slightly less high levels.
QUESTIONER: [Inaudible]--Saudi Arabia. The price of oil, in fact, could be going down.
SPERLING: Not that I disagree, but I think it's just too— you know, I think it's just too complicated. It was very high. You have the more favorable comments coming out of OPEC that started to see it drift down, but it was still, what, high 39 [dollars per barrel]. It's back up to where it was a bit before. So, you know, these are the kind of perceptions that affect things. So I don't— I just think anybody who tried to make that precise of a calculation would— when there are so many different factors playing— I mean— I don't think there's any question that it was down a little under 40, and it went back up over 42 or something after that, so— but the kind of— so I don't think— there's no question that that hurt, but whether or not there would have been something else or— that could have affected things. I think things can change, you know, they can change daily based on signals, based on perception, of anything in the future. One thing I've seen is that this is not just temporary. We're seeing this is affecting, as Alan Greenspan said, future market prices as far as six years out.
ROMAN: OK, right here.
QUESTIONER: Roger Runningen of Bloomberg News. Gene mentioned [Iraqi reconstruction] contracts, and I have that question as well. To anyone who wants to tackle it, how much of a mistake was it for Bush, early on, back in December and November and so on, to exclude countries from contracts? And what are the consequences if he loosens that policy next week at G-8 or negotiates with them as a means of inducement to get other countries to contribute more?
COOK: My sense is that this is one of the few things that the Bush administration now has to use to entice greater cooperation and get some cooperation on the Security Council resolution. Other than that, I think it's likely that they'll move in that direction, but beyond the question of contracts, the administration doesn't have much to offer. Charlie will probably be able to discuss the kind of European calculations there, but it strikes me that it was a mistake, because— and this speaks to the [Bush] administration's arrogance and hubris going into this conflict that it was going to be actually an easy rebuilding process and that they'd be able to cut the Europeans out, because who would need them? Because this will be, essentially, something that will be done and over with relatively quickly and achieve stability in a short period of time. Nobody ever imagined, at least people in the administration, didn't imagine that the situation would deteriorate such it has. So in the effort to garner some European cooperation, this is one of the things that the administration has to offer.
KUPCHAN: All I would say is that it's hard for me to believe that you— that when [former Secretary of State] James Baker is going around having discussions on debt relief that, if you're in a country, Germany, France, you're going to be a little worried at your own domestic political level. There is a perception that you are giving debt relief to free up funds to go solely to other countries, private construction countries. So I just— all I would say is that— I won't get into the initial decision. I'm just saying that, to the degree that Iraq debt relief, that the U.S. and Great Britain want to make more progress on that, I believe those that they're trying to reach, like Germany and France, will probably want to bring this up as part of that discussion.
ROMAN: OK, right here.
KUPCHAN: Only to say that the political consequences of that decision were much greater than the economic consequences. I think the role that construction contracts played, both in the lead-up to the war and the aftermath, has been exaggerated, and the main problem of Bush's decision is that it simply— it created [an] even more entrenched sense of a political divide and a sense that the U.S. was punishing countries that opposed the war.
ROMAN: OK. Right here.
QUESTIONER: Joe Davidson with Focus magazine and BET.com. I'd like to give Princeton a question. The question is— given the fact that the administration has really trumpeted its AIDS program, its international AIDS program and the Millennium Challenge Account, why do you think it was reluctant to invite the African leaders? And do you think that the Iraqi model for debt relief will be followed in Africa, as many debt relief advocates advocate.
LYMAN: Well, on the first question, I think there's a problem in this administration and in previous ones to, sort of, always think of Africa simply in humanitarian terms. So you have the Millennium Challenge Account. You have HIV/AIDS, OK. But when it comes to strategic issues, we don't think about Africa in those terms. And what we've tried to point out and emphasize in this report is that, in actuality, whether it's terrorism or whether it's world trade or whether it's some of these other issues, peacekeeping and conflict, Africa is centrally involved, and I think, over the course of the last few months, there has been more and more understanding that's a fact. I think the Europeans pressed this point very hard with the Americans as well. On debt relief, I wish that were the case. Africans certainly looked at this, and one African leader said to me, "You mean you have to be devastated by war or be attacked, et cetera, before someone will come and offer you debt relief? What happens if you're managing your country without all of that, and you have a debt problem?" I think the Africans will raise this. I think it's very much on their agenda, but, in the short run, I'm not sure the administration is going to respond that way. But I think the precedent of Iraq is going to be brought up again and again by those who are pressing for much greater debt relief. Part of the problem with the HIPC program that Gene mentioned, heavily indebted poor countries— is that it doesn't hit the middle-income countries, so-called middle income countries in Africa like Kenya, like Nigeria, which also have huge debt problems. They are a political as well as an economic problem.
LYMAN: I think there will be a lot of good talk about making progress, particularly on the trade issues, although I doubt if they'll get anything concrete. I think the agriculture subsidy issue is too complicated to deal with there. I think there will be a lot of talk on peacekeeping and peace resolution issues— the Sudan peace process now moving forward, and an initiative both in the U.N. and the United States on new peacekeeping training. I think there will be discussion of that and HIV/AIDS and foreign assistance. I think [there] will be more overall recommitment to some of the things that they've always talked about before rather than any new major breakthroughs.
ROMAN: OK. We have many more questions than we have time, so I'm going to start bundling here. Let's take three in the back there, and then people can respond as they will.
QUESTIONER: Kathy Ward, International Crisis Group. Another question for Princeton. You just mentioned Sudan. Do you think there is any chance or there should be any discussion at the G-8 meeting, either on the Darfur [region of western Sudan] crisis or, given the fact that he's still meddling in Liberia and causing instability, and the Nigerians are going to be there, on [former Liberian President] Charles Taylor and getting him to the [International Criminal] Court?
LYMAN: Yes, I think Susanne will be— I'm sorry—
ROMAN: One more on Africa.
QUESTIONER: Just also to follow-up on the peacekeeping part. This is Don Kraus from Global Solutions, for Princeton. The president's global peace operation initiative, which is also supposed to be on the G-8 agenda, to double the amount of peacekeepers trained and available worldwide: do you see any progress being made on that, on actually funds coming up on the table, other nations? The U.S. is only supposed to fund, like, 45 percent of that?
LYMAN: Well, quickly on Sudan— I think Sudan will be discussed, because that's a major peace process with a lot of implications. I think Darfur definitely will be discussed because a peace process between the North and South [of Sudan] that doesn't deal with the Darfur problem is not going to solve that problem. I expect there will be statements out of the G-8 on that. On Charles Taylor, no, I don't think that's going to come up very much there. On peacekeeping, I think you have the problem— we have the problem again, the U.S. announces initiatives in which they want others to pay most of the freight, and Europeans often talk about that— "Ah, another initiative we're supposed to pay for." On the other hand, the EU itself has also come up with a peacekeeping initiative. So ideally there will be some meshing of these initiatives and coordination and commitments to them. We'll have to see if they can put them together.
ROMAN: OK, right here.
QUESTIONER: Siegfried Buschschulter, Deutschland Radio. Mr. Kupchan, what was it that turned anti-Bush sentiment into more general anti-Americanism? And how long could it take for anti-Americanism to reverse? Maybe by pro-Kerry sentiment if he were to be elected the president?
ROMAN: Wait, before you answer that, any other questions along those lines?
KUPCHAN: I think it's a combination of time, simply the accumulated effect of what Europeans take to be a shift in the quality and character of American leadership, which they find difficult to accept. And I think that the Iraq war has been a kind of public relations fiasco and, in particular, the prisoner abuse scandal seems to have dried up what little sympathy was left in Europe for the conflict in Iraq. And what I find most worrisome is the generational issue that I talked about earlier; that is to say, if you think about who has kept this relationship together for the last 50 years— it tends to be the World War II and post-World War II generation— people like Kissinger, [former National Security Adviser Brent] Scowcroft, Father Bush, on the other side of the Atlantic, the generation of Poles and others. And they are now all retiring from politics, and the new, younger generation will not bring to the table the same Atlanticist spirit. Indeed, younger Europeans may well not just be Atlanticist, but anti-American. And if that happens, I think we're in deep trouble, because Kerry would then be up against an EU that could potentially define its identity in opposition to the United States.
A final comment— no question that there would be a sigh of relief in Europe if Kerry is elected. I think that it would be wise for the Europeans to keep their expectations in check. That is to say that, even if Kerry wins, I think U.S. foreign policy would change in significant ways but continue in other significant ways and, in that sense, I think we're in for the long haul in terms of differences between the U.S. and Europe.