Beyond Trade: Economic Engagement with the Middle East

Thursday, December 3, 2009

DAVID AARON: If we could all come to order.

Today we have the pleasure of hearing from Paul Ryan, who is the ranking member on the U.S. Budget Committee, and also in terms of this discussion here, a senior member of the Ways and Means Committee, which, as you all know, deals with trade. Now, I have some reminders that I'm supposed to give to the audience. First of all, to turn off -- I guess I ought to do it too -- turn off -- (laughter) -- your cell phones, Blackberries and all these other things.

Secondly, this is to remind you that this session is on the record. It's not operating by Chatham House rule. Now, what we're going to do is we're going to have some remarks from Congressman Ryan, who is not only a senior member of the Ways and Means Committee, but has been in Congress for six terms. He's from Wisconsin, a state that I dearly love and have relatives still living there.


AARON: They live in Madison.

RYAN: Oh, okay.

AARON: So it's a lovely place.

RYAN: (Inaudible.)

AARON: And then after his remarks I will -- I am -- I will ask a few questions, and then we will simply throw him to the wolves. Is that all right?

RYAN: Great.

AARON: Okay. Congressman, please.

RYAN: Thank you. You know, it's nice to -- I've never been here before. I'm coming out of my cocoon of Heritage, AEI and the Cato Institute. (Laughter.) So -- but it's nice to be here. I appreciate the invitation. I'm not sure if my remarks are going to be in agreement or not with some people here, but I'll go ahead and do it anyway. Well, constitutionally speaking, the presidency is primary on foreign policy. Congress plays a supporting role, funding, trade, issues like that.

I want to talk specifically about trade in a particular area, but first, let me simply get off on the note. We had the Jobs Summit that's occurring in the White House today, and our employment rate is probably going to be 10.5 (percent), 10.6 (percent) when we see the new data coming out, which is very, very high. There is a missed opportunity that is out there, and that is trade. We could immediately boost jobs in this country through trade, and we could immediately improve foreign policy, and we could do a great deal of good in the Middle East with respect to our foreign policy if we engage.

Unfortunately, that is not the agenda that is being pursued by this White House. I think from a foreign policy standpoint -- and you're the experts here -- this administration has really gone back to an old, real politic agenda. And there seemed to be a severing of human rights with the interests of our country. And I'm one of the people who believe that this country is extremely unique. I do believe in the notion of exceptionalism simply because we're the first country to be founded on equal, natural rights. That's a very special idea, and it's an idea where we -- it is in our interests to promote these ideals across the world. And nowhere is this more easy to describe, to display, to advance than through trade.

And one of the things that I worked on in one of my portfolios in the Ways and Means Committee is to shepherd through the trade agreements with Middle Eastern nations. That's the way we work in Ways and means. We divide up regions of the world to be specialists to shepherd these things through. And we got off to a good start. The 9-11 Commission was very clear. We need to do other things than simply, you know, have wars in Iraq and Afghanistan to fight terrorism, to have an effective counterterrorism strategy.

And what I would argue is that we're off to a good start with what we call the MEFTA, the Middle East Free Trade Area Initiative, launched by the last administration. It got off to a very good start. And the idea of the MEFTA was basically 20 moderate Muslim countries in the Middle East, in the Arab peninsula, in the Maghreb region, and to get these 20 countries on the path toward free trade agreements, starting with TIFAs, getting them involved in the WTO and going into ultimately having free trade agreements.

Now, why is this helpful, and why is this good and important? Number one, just from a purely economic standpoint, it's good for U.S. exports. It's good for promoting jobs. Number two, it's good for promoting jobs and economic activity and development in this countries. But more importantly, number three, this is a way to help expand democratic capitalism, because through each of these trade agreements we require things like the Rule of Law and forcible contracts, women's rights, advancements towards openness, transparency and democracy. These are the things we get when we get these trade agreements.

And more to the point is that our relationships with these countries aren't between the sultan or the amir and our diplomats. The relationships are between human beings, individuals, economic actors, small businesspeople, big businesspeople going and finding opportunities. And when we engage in trade, we engage in exchanges of mutual interest when we benefit on each side of the transaction. And it is that -- we're not putting boots on the ground. We're not sending the 82nd Airborne. We're sending economic agents. We're opening up societies so that they can exceed what free and open trade and free markets can do to improve society.

And what I see the MEFTA becoming, if it ever gets back on track, is you will see a series of Berlin walls throughout the Middle East. You will see nations in which we engage in -- where they have dropped their Israeli boycotts, where they have opened trade, where they have enforceable contracts, the rule of law. They have the basic building blocks of freedom, liberty, and democratic capitalism, and human progress flourishes. Economic activity improves. The rising tide starts living the votes. And then you'll have the other side of the Berlin wall in these closed countries, in Syria and other nations, where they do not see that kind of progress. And I think the people in this 21st century -- you know, it's not Eastern Europe of the 20th century anymore where they can just be shielded from seeing the progress that is on the other side of the wall. This is a century in which everybody will see what ideas work and what ideas don't work.

And that's why I believe from a foreign policy standpoint, from a moral standpoint advancing trade in the Middle East is extremely important and worth our national interest pursuits. Unfortunately, all of these efforts have been completely thwarted, and this administration is not a pro-trade administration. We have what we would call "T'd up" trade agreements. Colombia, Panama, and Korea -- Colombia and Panama are not large from a trade volume standpoint. Korea's an enormous opportunity from an economic standpoint, but these have very important foreign policy issues involved, and we're doing nothing. We're languishing.

Unfortunately, I think our new government really likens itself to advancing more of a progressive social welfare state, and under a social welfare state kind of a system you have economics that are command and control economies. You have economies that are not free and open with progressive -- you know, you have a progressive system whereby you regulate such things, and that is not a mindset that lends itself well to free and open trade. And so it's as if the domestic agenda is also poisoning the international agenda. It's also as if the interest groups that are involved, unions in particular, are prohibiting the advancement of trade. And I would simply argue that the labor unions -- they have a problem with trade in our hemisphere, and they have a problem with trade with large blocks, like Korea, because of autos or because of beef and things like this.

But I would argue that they really don't have a big problem with trade in the Middle East. I, you know, negotiated with Charlie Rangel and others, the implementing legislation to Bahrain, to Oman. We did Morocco and Jordan, and we really did not have much labor union problems with those agreements. These are very bipartisan agreements. And so what I'm simply saying is there is a bipartisan group ready in Congress to move these bills. I cofounded the Middle East Partnership Caucus in Congress in 2005 to shepherd these agreements through. I did it with Joe Crowley, a Democrat from New York, with Greg Meeks, a Democrat from New York, along with some other Republicans.

We have a ready-made group of bipartisan legislators who know that this is in our national interests, who are ready to move these bills forward, who are ready to advance this cause. But you have to have an administration and a USTR engaged on doing these things. We have I think 20 -- 12 TIFAs in place right now, Trade and Investment Framework Agreements, with the nations of this region. These TIFAs really don't exist anymore for all practical purposes. They're not going anywhere. We're not having the kinds of meetings we have, and a TIFA is simply the pre-discussion to getting toward formal free trade agreements.

Problem is with trade is if you're standing still, you're going backwards. You know, since 2005, there have been 64 trade agreements enacted worldwide, and we were the party to five. The E.U., arguably one of our biggest competitors, is, you know, doubling its efforts and moving and cutting bilateral deals. So because we are doing nothing, we are losing on trade. That's bad for us economically. But more to the point, I would argue we can advance the notion of human rights, of individual rights. We can advance our strategic interests from a foreign policy standpoint, from a point of promoting democracy, free markets in the Middle East through trade agreements, which are actions of mutual beneficial behavior. And that, to me, is the big missed opportunity that's being created right now.

I'll leave it at that, only to say -- and monetary policy -- I think we have some -- I'd love to get into monetary policy if we have a chance, because I think there's some real cause for concerns with monetary policy, and I think our monetary policy from a Treasury standpoint, and now from a Federal Reserve standpoint, needs improving as well. And that's going to frustrate and complicate future trade problems.

But the missed opportunity is the Middle East. We have a ready bipartisan group in Congress to advance this. We have zero leadership at the other end of Pennsylvania Avenue, and that's what's needed to help create jobs in America and to advance our interests in the Middle East without putting one boot on the ground from -- with a camouflage uniform on.

AARON: Well, thank you very much. Could you maybe outline for us the specific actions that you'd like to see the administration take in regard to these agreements?

RYAN: So -- yes, excuse me. (Clears throat.) When you've got three little kids, you get a cold every three weeks. Revive these TIFAs. I would basically announce that you're going to start these discussions again with the new administration. We have TIFA teams, and I would send our teams into these nations to begin the talks, invite their teams into our nations. We have issues with respect to each individual country, with the Emirates and the Qataris. We have these agency rule issues. That's a problem. We've got to work through those. We have a great partner, a woman named Sheikha Lubna who's the finance minister over there. And they understand these problems, and I also think Kuwait is one that's an easy T-up.

The Bush administration made a very important strategic decision, which is not to negotiate in block with the GCC, but to do it individually by country by country. That was important, successful. The Bahrainian agreement is a great stock agreement, which then was replicated with the Omani agreement. That needs to be continued on. We are moving up the coast to Kuwait. That needs to be picked up, and then we need to work on the harder, more difficult ones, like the Qataris, Emirates. At the end of the day for this to really work and for this to be an effective trading block, Egypt has to be a part of this. We have issued with Egypt. We have issues with -- well, everybody knows the issues with Egypt with respect to the Muslim Brotherhood and some of the anti-democracy, you know, moves that have been made there.

But we need to engage with Egypt some more, and we need to ultimately move toward a trade agreement with Egypt. That's an important block. That's sort of the economic linchpin of the area, and this is something that the administration needs to send signals that they're going to do this, and then literally start with the blocking and tackling of reviving these talks and then making sure that we turn TIFAs into actual free trade agreement discussions.

AARON: You mentioned the linkage between our trade and investment relationships and free trade agreements in connection with human rights.

RYAN: Yeah.

AARON: That suggests that we should be conditioning these free trade agreements on improvements in human rights, certainly in Colombia and in Peru and some other places, this has been a very controversial dimension to these trade agreements. Are you suggesting the same thing for the Middle East?

RYAN: I'm suggesting free trade is pro-human rights. They go hand in hand. Open trade does -- economic liberty is a component of human rights, and advancing economic liberty by opening trade does the same thing. Whether or not -- you know, in Colombia it's sort of a labor union -- there are some issues with protections of labor union leaders and things like that. That's a unique problem, I think, to Colombia. But in Bahrain we did do pro-labor things. In Oman, we made sure that unions can be formed. We made sure that they changed their laws so that strikes can occur.

So we did do pro-labor, pro-human rights things, Israeli boycotts, and there are lots of things that we require as -- that their domestic laws change in order -- as a condition to have these trade agreements. And I am a supporter of those things. I do think by using the leverage of trade agreements you can get these countries to open up and to respect human rights, and that to me is the -- it's the carrot approach, and it's -- approach that has been very effective.

Morocco is a very good example. If you go look at the Moroccan agreement, we advance human rights so farther and so much faster than decades of diplomacy with the Moroccan government than we did with our trade agreement. The trade agreement advanced the labor laws in Morocco far faster and better than any attempt we had made in the past. So yes, I do think there's a component of individual and human rights that ought to be a part of these trade agreements.

AARON: Would you draw the line at labor, or would you extend this into political issues, women's rights, that sort of --

RYAN: No, I think women's rights is a big key part of it, and we have -- that also has been a part of it as well, especially -- you know, Yetta have -- HuNaia, the ambassador to Oman -- I think she's still the ambassador to Oman -- she's a -- she does a very good job of describing what it is we did with respect to promoting women's rights as a condition toward trade agreements. So, yes, I do. I think, again, this is the best leverage, the best tool, because these countries want trade agreements with Americans. They want a trade agreement with our country. So this is the best opportunity we have to do these things. So, yes, I do. I think that's a -- we should do that.

AARON: What is your reaction to the current economic situation in the Gulf with the --

RYAN: The Dubai --

AARON: -- problem with the Dubai debt repayment issue?

RYAN: I see that as more of a symptom of the current credit crisis. That is part of the global deleveraging that's occurring across the world. It obviously is not a systemically risky problem because credit spreads didn't go haywire after that default took place. That to me looks just like a classic bubble, a classic commercial real estate bubble that just burst. It has not spread contagion, and so I don't really se that as a systemic event. I see that as a bubble bursting in an area where you had over building and over speculation. And the problem there is not that they're going through a deleveraging process. The problem is we need enforceable contracts. We need the Rule of Law for economic trade to prosper and continue.

And, you know, I've got a constituent in Milwaukee who put together a real estate deal in Dubai, a billion dollar commercial real estate property on the shore, on the coast of the Gulf, purchased the land, put the group together, and then there was a problem with the agent, with the local Emirate, who went to the government and then basically got them to decide that it was -- that there were archeological significance, so therefore, they couldn't build on the property. And there was no dispute mechanism to settle this, and so it's just going to be one of these by the -- (chuckles) -- amir. And now we've finally got the court system to start and process this.

But those problems -- you know, you cannot have investment if you really don't have -- you know, if you don't have Rule of Law, if you don't have enforceable contracts. Those are the kinds of problems that are going to be the undoing of the real estate system, or of Dubai, not the over leveraging of a bubble where you have deleveraging that's occurring. That to me is basically something that's happening with banks and funds across the world. So we've got to go to the root cause of trade and investment problems in this area, and to me it's the lack of enforceable contracts, Rule of Law, and clear and consistent dispute settlement mechanisms. And that's the problem we have in that country.

AARON: In addition to the Emirates, and Dubai in particular, there are other countries along the Gulf that are engaged in intense, if you will, sanctions busting with Iran. Can these negotiations do anything about that?

RYAN: Sure, especially in the UAE. The port there is apparently -- I think that's right. So one of the things we've had in these talks when we were doing trade in the Middle East was we worked on those issues. We worked on the sanctions with Iran. We worked on ending Israeli boycotts. If you want a trade agreement with America, you drop your Israeli boycott. That is a condition. You also can put as a condition tightening sanctions on Iran. So absolutely. You can advance our Iranian policy. You can advance our Middle East policy through these trade agreements because they want these trade agreements. So absolutely.

I think if you look at just the Port of Dubai and the problems we have there with Iran sanctions, there's -- these are Swiss cheese holes. You can drive Mack trucks through the holes of these sanction regimes. So absolutely I think that's a great opportunity to fix these problems.

AARON: And it's your impression that the authorities in Dubai would rather have a free trade agreement with us than continue their --

RYAN: Especially now that they want investment coming into Dubai, not fleeing Dubai. They're going through a de-leveraging process right now which could be really ugly, just like it's going on around the world. And if momentum occurs with the deleveraging that's occurring there beyond just a speculative real estate bubble that popped, that's going to be a problem. And so they want to have foreign direct investment coming back in that country, and the way to do that is to have enforceable contracts, the Rule of Law, transparent markets. And if we want to have an agreement that gets those things, we ought to have these other agreements as well.

AARON: Let me just give you one last shot at the monetary policy issue, because I'm sure a lot of people here would be quite interested in your views on that as well.

RYAN: So thank you -- (laughs) -- for asking that. There's talk. It's just talk, but there are meetings and talks in some central banks of ending the dollar as the world's reserve currency. I don't believe we're at anywhere near in the future going to see the end of the dollar as the world's reserve currency because there's really nothing to replace it. But I do think just the mere talk of this should set off alarm bells. That is very disturbing. And what I'm concerned about is the administration is not doing anything materially to try and suspend that discussion. We are engaging in a weak dollar policy. This administration inherited a weak dollar policy from the last administration.

And this weak dollar policy, of allowing the short-term weak dollar to try and give us a pop in our economy and GDP statistics to inflate our exports, comes directly at the expense of the medium and long-term. And if the dollar, the world's reserve currency, loses confidence in -- as a store of reliable value, that is going to be a big problem for us, for our economy. It's going to be an inflation problem, but it's also going to be a worldwide problem, you know, especially in the Middle East where we -- where crude and commodities are denominated in dollars.

The mere discussion of moving off of dollars will be very disruptive to us. If we have a crash in the dollar, which -- I don't think we're going to have a crash, probably have a steady decline. But if we, God forbid, have a crash in the dollar, that is going to be so disrupting to our country from an inflation standpoint. We're not going to be able to finance our budget deficits like we have been if that occurs. We're not going to be able to have the kinds of budget deficits and the kinds of things that we will have to do to our budget that will be foisted upon us by the bond markets will be very cruel, very ugly, very immediately, and it's going to harm people in this country.

So we need to have a strong dollar policy, and we need to have a monetary policy. In my particular opinion, we should rewrite the Humphrey-Hawkins law. We should go toward a system, not unlike the ECB, where we have a single mandate. We have a dual mandate right now, which is price stability on the one hand and full employment on the other hand. And it's premised upon a discarded notion called the Phillips curve, which has been proven inaccurate time and again. And I believe that we are having -- conducting monetary policy that is at odds with each other.

The Federal Reserve has one primary mission, and that mission is price stability, is maintaining our currency as a reliable store of value. And we ought to fix its mission to be focused on price stability, a single mandate instead of a dual mandate Fed, in my opinion, would do so much more to stabilize the dollar, stabilize trade, stabilize the world's reserve currency, and by stabilizing the world's reserve currency, that is one of the best things you can do in the short, medium, and long-term to promote free enterprise, prosperity, and economic engagement and trade.

Having all of these currency fluctuations is very disruptive for investment. Investors do not know what the horizon's going to look like, so they're hedging their bets. They're putting money in less productive uses. They're squirreling it away into commodities and other areas and not into investment, which is going to create jobs. So we need to solidify the value of the dollar for our own purposes to protect ourselves from future inflation, but also for worldwide trade and activity. And we're basically selling the medium and long-term for a little short-term pop in GDP statistics that I think is just -- it's not worth it.

AARON: Well, thank you. At this point I would like to open the floor to others who probably know a good deal more about all these issues than I do. Don't be shy. Yes.

RYAN: You mind -- I can't read. I don't have my glasses, so you mind just saying who you are and --

AARON: I would ask you to identify yourself and any affiliation that you would like to --

QUESTIONER: David Bohegan (sp) with Pegasus Energy Efficiency Fund, and I want to go back to Dubai and investment, but take it the other way and a few years back. And one of the signal economic events with Middle East economic relations has been Dubai Ports World.

RYAN: Yeah.

QUESTIONER: And I'm interested what your sense is of Congress and the Administration toward foreign direct investment coming from the Middle East to the United States in an Obama Administration or this era.

RYAN: It's going to get worse before it gets better. I think the political -- the politics of this is worse. The farther we get form 9-11 in that sense is better. First off, I think we should change our tax system to encourage more foreign direct investment. I would switch to a territorial system from a worldwide system. That's a little bit off your topic, but I think if we do that, you'll encourage more foreign direct investment, and you'll have more companies domiciled in the U.S. instead of overseas.

I also think one of the mistakes we're making is -- and we made this after 9-11 for obvious reasons -- is visas. We need to have students from the Middle East come to America to study, and they're going to Europe instead of America now. And that's a big problem I think. You know, I've traveled to the region a few -- a number of times, mostly to promote trade agreements, and, you know, the idea of having -- of sitting across the table from somebody who went to, you know, University of Michigan, who went to Stanford, who went -- who studied here, who understands our system, our culture, the benefits of free enterprise, of enforceable contracts to the Rule of Law -- that is indispensable, and that is one of the areas where I think we need to engage. We need to reengage in having students come from the Middle East to America, and we need to fix that Visa problem, which we really cranked down on for understandable reasons, but we need to fix that again.

And I think if we have more engagement, trade, more engagement on Visas, that will help those kinds of issues. That will help calm down the Dubai port hysteria problems by having more mutual engagement. The more Americans and the more Emirates -- they get to know each other -- that engage in mutual, beneficial economic arrangements, the better we're going to be able to calm those kinds of hysterical moments from every occurring again. And that's kind of the way I see it.

AARON: Heba (ph)?

QUESTIONER: Good morning. Thank you very much.

RYAN: Good morning.

QUESTIONER: My name is Heba El-Shesli (ph). I'm the director for Middle East and North African Programs with the Solidarity Center. So I work with trade unions in the Middle East, in about 14 countries and in all the countries that you mentioned, actually, Bahrain, Oman and others.

First, I want to thank you very much because you included workers and worker rights and Rule of Law, enforcement of contracts, women's rights, all of that, so thank you very much. What I'd like to comment on is use of the carrot and use of the FTAs, is the procedural question.

RYAN: Yeah.

QUESTIONER: Please, don't offer these carrots right away, I mean, in the sense -- is don't sign the agreement --

RYAN: Yeah.

QUESTIONER: -- until a lot of those -- you know, the devil's in the details. Once those details are sorted out -- because you can sign the agreement, and then afterwards -- you know, we have a lot of expressions in Arabic, believe you me, that it'll take a long, long time for these things to come to fruition.

RYAN: Let me ask you this.

QUESTIONER: So we have power. You have power. Use it, and use it wisely.

RYAN: But can I ask you a question?

QUESTIONER: Sure. (Laughs.)

RYAN: So I'm thinking -- I remember Oman and Bahrain in particular.

QUESTIONER: Mm-hmm, Bahrain, right.

RYAN: We had all these letters exchanging whereby we required, you know, certain labor law --


RYAN: -- changes to occur in these nations. Is it enough to get commitments in writing that the laws will change, or is it wait 'til the laws are changed?

QUESTIONER: Exactly, second, please. And actually, the trade unions in Bahrain got zero information from their governments. They got all their information from us, because we are able -- this information --

RYAN: Yeah.

QUESTIONER: -- we can talk to USTR. We can get a lot of -- and actually, they were with us supporting, and we would have them even talk to USTR. So please, that's just --

RYAN: Okay.

QUESTIONER: -- UAE, please -- no respect to freedom of association. I mean, we're talking fundamental issues.

RYAN: Right, right.

QUESTIONER: What I'd like to propose sometime, I hope, procedurally is myself with my good friend -- with -- in the Center for International Private Enterprise, John Sullivan -- if we can give you a briefing, you and your staff --

RYAN: I'd be delighted. (Clears throat.) I'm sorry, I've got a chest cold, so I keep coughing.

QUESTIONER: -- give you a briefing -- no problem -- I have four, so -- (laughs) -- I know -- give you a briefing on --

RYAN: Sure.

QUESTIONER: -- every country from the business, corporate perspective and from the trade union perspective.

RYAN: I'd be delighted to do that. What I would like to do is get moving on these things so we can start having these kinds of discussions. Unfortunately, nothing's happening.

QUESTIONER: Thank you.

RYAN: Great. That'd be wonderful.

AARON: I think Mr. Findalachi (ph) has -- Findacali (ph) --

QUESTIONER: No, please, you were --

QUESTIONER: Good morning. I'm -- (inaudible) --. I'm an investment banker. One of the countries you've been mentioning is Saudi Arabia. It is larger than all these countries that you've spoken of combined in terms of its total economy, GDP -- (off mike). Of the 70 or 80 contracts that went out for bid over the last eight years that were in excess of $1 billion, only two U.S. contractors submitted bids, competed. This is not -- (inaudible). (Off mike.) This is outside of -- (off mike). What do you attribute -- of the fact we're not aggressively pursuing this business? Saudi Arabia alone, including -- and if you add up some of the -- (inaudible) -- Gulf countries, they have a spending program --

RYAN: Yeah.

QUESTIONER: -- that's already budgeted --

RYAN: Yeah, they've done amazing -- big Kenzian stimulus program, right.

QUESTIONER: -- that's close to ($100 trillion ?) combined -- (off mike). Trade agreements and all these things are very nice things on paper, but we can go out and sell products and employ people, and that is something we're not doing. We're losing to the Germans. We're losing to the Italians, forgetting about losing to the Koreans and the Chinese, which is a normal thing. What is our competitive advantage, and what can we do about that?

RYAN: Well, our problem with Saudi Arabia in particular -- we have a TIFA with Saudi Arabia. I'm not sure that it's been very active from the get go. I know the Saudis wanted us to begin with -- to do a GCC agreement in block, which would've taken forever and never really probably ever happened. And I know there was pressure in the beginning to not do agreements with Bahrain and some of the other neighboring countries by Saudi Arabia because they did not want these agreements. You know, obviously, I think we've made the right decision.

And so I don't see a great -- on the Saudi side, the things that they would have to do to actually get in a trade agreement with us with respect to the Rule of Law, to individual rights -- I don't see the Saudis coming anywhere close to doing this anywhere in the near future. So yes, it's a huge economy. It would be a great opportunity, but the individual rights, the human rights that are required to get a trade agreement I just don't see happening. But I do see the other moderate Muslim countries in the area doing this, and I think the trend will help, you know, encourage them to join in this list.

But through the TIFA and through -- I don't know if we have an investment -- we don't have a investment framework with them. I think we should -- we can do a BIT and we can do a TIFA, which are ways of making sure that we have investment frameworks. That is something you could probably pursue with Saudi Arabia in order to get more U.S./Saudi trade. But a trade agreement with Saudi Arabia -- I just don't see that as bearing fruit anywhere in the near future given the fact that they're not going to do the kinds of things that we would require and we should require in trade agreements.

AARON: Do you think Foreign Corrupt Practices Act is an impediment to U.S. competitiveness in Saudi Arabia? And I put the question initially back to you as well.

QUESTIONER: It is not for the kind of business that I see, but it is in areas like aircraft orders, defense orders, things like that -- (inaudible). So there's quite a bit of, you know, government (and public intervention ?). It is becoming less so because Europeans also cracking down on the Japanese on that stuff, but it is an issue. I for awhile did not believe that we need trade agreements with --

RYAN: No, we don't.

QUESTIONER: So our focus on trade agreements, to move it to more ideological -- (inaudible) -- is what -- doing business.

AARON: Mr. Geoffrey, (ph) you were --

QUESTIONER: (Off mike.)

AARON: -- second.

QUESTIONER: Ruben Geoffrey, CSIS. Congressman, thank you very much for that overview. It was extremely helpful, and I -- (inaudible) -- points -- (inaudible) -- important. Hopefully, someone's listening. Just the risk of shifting regions ever so slightly, but sticking with trade -- Afghanistan, Pakistan, have a pretty clearly articulated Afghan policy, military surge accompanied by components of greater civilian efforts dedicated largely to economic development. Do you see that as opening up an opportunity to dust off and resurrect and actually do something legislatively in the way of reconstruction opportunity zones, free trade zones in Pakistan, Afghanistan designed to promote and accelerate economic development?

RYAN: Absolutely, I do see that, but I don't know if this Congress would -- I don't know if -- I personally see it, but I don't know if you'd see it in this Congress. Here's the problem. The way it works in the House at least, is we have this pecking order of things, and if you're going to get to a trade agreement like you (addressed ?), you've got to dispose of the ones on the docket right now. You've got to do Panama. You've got to do Colombia. You've got to do Korea. Then you can get on to these other things. I don't know. (Laughs.) So I wouldn't get my hopes up.

AARON: That's very interesting.

Mr. Sullivan.

QUESTIONER: Hi. Sorry. John Sullivan from the Center for International Private Enterprise. You won't be surprised, since I'm from the U.S. Chamber of Commerce, that I'm -- (inaudible) --

RYAN: You're here. (Laughs.)

QUESTIONER: -- applauding everything you're saying. Terrific. The one area I wanted to just maybe encourage you to talk a little bit more about -- you sort of mentioned that Syria is behind the Berlin wall. I've been there a couple times now, and we've started a project on entrepreneurship development in Syria. So I think there are some other economic levers, and I have a really strong sense that there is a growing young Syrian business community which is quite different from the old crony --

RYAN: Sure.

QUESTIONER: -- guard and that if we could find that --

RYAN: I think we're seeing that everywhere, yeah.

QUESTIONER: -- if we could find a couple of other economic levers and open them instead of using economics as -- you know, it's kind of an extension of your remarks, but instead of using economics to punish people, use economics as a way -- and business opportunities as a way of identifying these young emerging new leaders in the business communities of the region. Getting them on our side might help put some pressure not just on getting trade agreements, but on the Rule of Law and those other issues you're talking about.

RYAN: Yeah, every time I go to this region I find that somebody like in my -- in the X generation who has studied abroad, who understands this, who wants to get out from under, you know, the boot of the old school. And so I see generationally the Middle East changing and modernizing and moderating, and we should encourage that. Now, with a country like that, those things will have to be informal. Those things will not be formal between our governments. But obviously, we should encourage, you know, informal transactions like that. I agree with that.

QUESTIONER: We actually got funding from the DRL to do this. So I think maybe subtly and quietly if we could -- (inaudible) --

RYAN: Yeah -- (inaudible) -- we're not going to start a TIFA with Syria, you know? You know, we're not going to send -- (laughs) -- our trade people to Syria to -- but sure.

QUESTIONER: Yeah, but we sent a -- (inaudible) -- to Syria.

AARON: Yeah, I guess would just comment on this, having spent some time with President Assad. I think there are no question they want to open up to the world, but whether they're willing to take the political steps required in regard to Hezbollah and Israel and the rest -- that's the big question, and I --

RYAN: (Inaudible.)

AARON: -- and they're kind of trying to do it, not really have to do it, and -- but I think the more that they kind of do it, the more they are actually going to do it. And this new generation is very important. You got a two finger here?

RYAN: (Inaudible.)

QUESTIONER: I wanted to just follow up on this point. I'm Steven Koltai. I run the Global Entrepreneurship Program at the State Department in the Office of Commercial and Business Affairs. And one of the things that I think is really important to mention related to this whole issue of entrepreneurship -- and I'm deeply grateful and excited that you raised it, John -- is that, you know, what we do as a country is not just what we do as a government. And there is an extraordinary range of American NGOs, academic institutions --

RYAN: Right, right.

QUESTIONER: -- corporations. You know, one of the things I have been surprised at in the world that I've been working on, which is really cooperative in terms of putting together lots of different pieces, are the number of American companies who have entrepreneurship training programs specifically in places that the U.S. government itself would actually have a hard time doing a lot in. So I think that that is an area that we have an advantage in. We have a lot more to do. We can do it in a more coordinated and more effective way, but I would just urge that be part of the conversation as well.

RYAN: These are perfectly complimentary efforts, and what I'm saying is we have no leadership on this issue right now. We're just silent on it. And so if anything, just showing that we're in favor of advancing this agenda, if anything, would help those kinds of complimentary efforts. And those kinds of complimentary efforts are the precursors, are the foundations on which you start building actual relationships and actual talks government to government. So the whole point of all of this is more human interaction, more people engaging in transactions to each other's benefit. That is what trade does, and that is what improves human interaction and progress. So to me, this is all complimentary, and we as a government need to be leading this, talking about it, giving voice to it, encouraging it.

And from just a strategic standpoint, if we sit on the sidelines, we get cut out of all of this. We can help shape -- you know, I really do envision -- you know, Ronald Reagan -- when he set a Western hemisphere trade agreement, people thought he was crazy when he talked about that. Then Bill Clinton gave us NAFTA. So, you know, these things are not such far-fetched ideas, and it begins with these kinds of engagements, but it requires leadership to really push them forward.


QUESTIONER: Thanks. My name is Bill Mako. I'm from the World Bank. Thank you for coming over today. It's very interesting. And I appreciate a lot of these comments about visa and ease of human exchange and so forth. I work a lot in both Saudi and the other Gulf states, and it seems like 95 percent of the Saudi professionals I meet went to school in the United States --

RYAN: Yeah.

QUESTIONER: -- and they're just personally hurt at the --

RYAN: Yeah, I hear that all the time.

QUESTIONER: -- travel restrictions, and you can tell they had a real fondness for the United States, so I think we were -- as a result of their personal experiences, so I think we're losing a lot on that.

But looking at the Gulf region, I mean it does feel to me from spending a lot of time there that the case of Saudi and the case of the other Gulf states are very, very different.

RYAN: Yeah.

QUESTIONER: I mean, Saudi clearly has a lot of challenges. They've got a middle income -- lower middle income population who needs jobs. I think the hydrocarbon to citizens ratio is a lot lower in Saudi than it is in some of the other Gulf states. So certainly, anything that can be done to improve trade and investment opportunities there I think is very important. I guess I would raise a question to you on that as to how important -- how would you make the tradeoff between promoting trade investment with Saudi versus some of these broader social changes that can be very sensitive matters in the kingdom, is one question.

And then second, on the other GCC states, I mean, it just seems basically to me the trade opportunities are they buy weapons systems, large capital goods, power generation, et cetera, and consumer goods and basically export oil. I mean, I don't see a lot of domestic entrepreneurial activity unfortunately --

RYAN: Well --

QUESTIONER: -- than some of the other GCC states. So just two questions for you.

RYAN: Yeah, okay. So the first one -- you have to worry about setting a bad precedence --


RYAN: -- and I think that matters a great deal, especially in this region. So I think it's worth our efforts more to advance agreements with the other GCC nations that are more ready to change, more primed to go, more moderate in their political rights. And so that to me will help facilitate more change. That's why I think we're better off going to Kuwait and then, you know, Qatar and UAE, you know, and going up to Tunisia. We've got some investment problems up there, but there are -- you know, with the French and everything. But we're better off going with low hanging fruit nations I think, number. Number two, yeah, there are big, durable goods, but if you get agreements -- look at Bahrain. I helped get a concrete manufacturer that makes pre-cast concrete to build large buildings. We call it spancrete. I have no doubt that this is built out of spancrete, this building right here.

Well, we were able to get a Waukesha, Wisconsin manufacturer of the machines that makes the spancrete set up in Bahrain to build these kinds of machines and to have distributions of spancrete. So now you've got a Wisconsin manufacturer, medium sized family business now, because of the trade agreement in Bahrain, setting up more entrepreneurs throughout the Gulf who are using their machinery to produce for the construction industry the kinds of pre-cast concrete that's being used to -- all these skyscrapers. So that is, you know, entrepreneurial. You know, these are businesses with ten to 50 employees building these things because of the free trade agreement we have, because of the fact that we have a contract that that they can rely upon.

And so yes, right now in the kind of trade environment -- it's General Electric and General Dynamics and Lockheed Martin, but when you actually break down these barriers, you get the small businesses from Wisconsin who are exporting, and actually, that's what's helping their sales, and that's why they're not laying people off right now in this particular company. So I can go example by example by example. Knocking down these barriers allows the entrepreneur to get in the smaller business, and that, in turn, allows small businesses to be created in these countries. And so it's all about knocking down barriers to entry to the marketplace for both people in the -- for the people in the Middle East and for our businesses.

AARON: Mr. Alden.

QUESTIONER: Thank you. I'm Ted Alden from the Council on Foreign Relations. I wanted to second your comments as well on the Visa issue, which is something that I've written a lot about, I know David was working on when he was at the Commerce Department. I wanted to try to turn your attention to an opportunity to make progress on that, and it has to do with something called the National Security Entry/Exit Registration System, which applies fairly specifically to people coming from the Middle East. This was set up after 9-11 as an effort to try to identify people we were worried about.

And the main component of it is still in place, so if you're traveling here now from Saudi Arabia, from Yemen, from Bahrain, from any of these countries, you're a male who comes in from these countries, when you arrive at the airport, you're automatically pulled into secondary screening, and that can take, you know, two hours if you're lucky, ten hours if you're not. It takes a long time to go to go through. It's very labor intensive for Customs and Border Protection.

No apparent security benefits from this. That was the conclusion the 9-11 Commission -- I worked recently on a task force here at the council broadly on immigration policy that was chaired by Jeb Bush and by Mack McLarty, and one of our recommendations was that this program be eliminated. And there were people on that task force -- very strong security background, Robert Bonner, who was the former head of Customs and Border Protection, Fran Townsend, who was President Bush's Homeland Security advisor.

This issue is on the table right now. The State Department and DHS are meeting on it. I'm told the secretaries of each of those departments will be talking about it later this month. If you talk to people coming from the Middle East, it's a source of huge frustration. And actually, if you look at the Visa numbers, they have recovered to pre-911 levels, at least before the recession, had from everywhere in the world except from these -- (inaudible) -- countries. And I think it's a pretty direct consequence of the fact that traveling here is a very unpleasant experience --

RYAN: (Inaudible), yeah. I hear that a lot.

QUESTIONER: -- for those people, so I would -- you know, if it's an issue that you continue to be interested in, I would encourage you and others in Congress to weigh in with DHS, weigh in with State, and say, look, as long as we can do this consistent with our security interests, which I believe we can, and there are people who know a lot more about it than I do who believe we can, it's a program we should get rid of.

RYAN: Yeah.

QUESTIONER: It's a needless impediment to travel from the Middle East. It's called the National Security Entry/Exit Registration System.

RYAN: Yeah.

QUESTIONER: NSEERS is the acronym that's used. So thank you for that, and thank you for your -- (inaudible).

RYAN: Yeah, I mean, this is not my committee assignment, so usually --


RYAN: -- you specialize these things in your committees, but I have -- I've sat behind the Foreign Service officers, you know, at our -- and watched this take place, so I've sort of seen this system and how it works.

Yeah, my thinking is, look, this new generation of young people in these countries are going to be the future. They're going to be the ones who are -- you know, they're the moderates. And I would much rather have them come to Ann Arbor and Madison instead of anywhere else. That is such a huge boon to us, and they -- I hear it all the time when I go over there. So I think, yeah, we have to move fast before impressions are cast in stone and before they stop sending their kids over here. So I agree with that. (Inaudible) --

QUESTIONER: Yeah, and I think we've got an opportunity. I think this is -- you know, we've lost a lot of ground, but --

RYAN: Yeah.

QUESTIONER: -- the fact is American universities are still the best in the world. Everybody wants to come here.

RYAN: Yes.

QUESTIONER: This is a mistake that we can undo --

RYAN: Yeah.

QUESTIONER: -- and put ourselves back on a positive path here. It's not too late by any stretch.

RYAN: Good point. Thanks.

AARON: Gentleman next to you. I can't see your name.

QUESTIONER: Ollie Tolba (ph). Thank you very much. Quick word about Saudi Arabia. Want to echo what Hani (ph) said earlier. We work with a lot of Middle East -- a lot of U.S. companies that are looking at the Middle East, trying to figure out their strategies, their entry strategies. And I come across very few that make a considered decision not to go to Saudi Arabia because of economic circumstances or financial calculation. It's just still a little bit too foreign, a little bit of a bridge too far. And so there's a lot of work to be done there just in the simple blocking and tackling of a commercial relationship. Don't need an FTA to really exploit that relationship --

RYAN: Sure.

QUESTIONER: -- a hell of a lot more than has been done already. But that's actually not my question. My question is about the KORUS FTA.

RYAN: About the what?



QUESTIONER: Here's an FTA that's been languishing for some time. Conventional wisdom in Washington -- I believe everybody basically said hard to see this actually passing any time on the horizon because of the economy, because of the jobs question, because of --

RYAN: The unions.

QUESTIONER: -- the unions, because of what I agree is this administration's reduced hospitality towards free trade and the elections in 2010.

RYAN: Right.

QUESTIONER: So here we are a couple weeks ago, and the president makes an announcement and pushes in a few chips, political chips into this -- into the pot. And I think we know why, because it came on the heels of the --

RYAN: Right.

QUESTIONER: -- Asia trip.

RYAN: Right.

QUESTIONER: But, you know, starting to get a little traction, a little conversation. How do you see that playing out?

RYAN: I don't see it happening. I mean, look, we've been sending all these letters, the Ways and Means Republicans, trying to encourage this. I don't think it's going to happen. I think we'll get Colombia. I mean, it would be such an embarrassment if we don't do Colombia. I mean, you know, we're humiliating our allies. I think we'll get Colombia. I think we'll (be able ?) to muscle that through. We have the votes for Colombia. We know that. We've whipped that thing pretty well, and Panama as well, and we'll get those. But because of getting those, the unions will make -- you know, will let those two go through. I cannot imagine that the AFLCIO and the Change to Win Coalition's going to allow Korea -- Korea's big. It's the 13 largest economy in the world. And so the bigger the economy, the more opposition you get from organized labor. And I just don't see it happening. I really don't.

Look at what the UAW got on tire imports. Look at what they did on the contracts with the creditors with respect to TARP. They had a lot of pull. And having had four auto plants in my district, which -- I lost all four in 2008. I know this sector pretty well. And it's a sector that's hurting obviously. I do not believe that they're going to allow a free trade agreement with Korea. Autos, I think, will be the sticking -- we've got the beef thing pretty much worked out. As much as you hear in Washington that the auto thing is getting worked out, I don't see Korea happening.

AARON: In the back.

QUESTIONER: Stephen -- (inaudible) -- CSIS, former Ways and Means --

RYAN: Yeah. Hey, Steve.

QUESTIONER: -- Security Council, and it was great working with you where you were such a leader on those issues, including on the Bahrain/Oman agreements, which, as I think you highlighted, I don't think get appreciation for how much they truly reformed the labor laws in those countries, and we've really lost that leverage.

My question is really on kind of a second area, which I think you touched on where I don't think the overall impact of trade relations is appreciated in terms of building ties and kind of resolving conflict. It's easy to forget Europe pre-World War II and before the -- (inaudible) -- World War II is the most war-torn area. We've seen some pretty remarkable results in the Middle East, not only in those FTAs, where they dismantled all aspects of the -- (inaudible) -- boycott -- (inaudible) -- state I think we put billions of dollars of assistance. It wouldn't have gotten that with the QIZs --

RYAN: Yeah.

QUESTIONER: -- where Tom Friedman's written about --

RYAN: Yup.

QUESTIONER: -- Egypt, expected protests against these, and there are protests for them. More people wanted these jobs. What kind of thought has been -- gone in as using ways to facilitate kind of the now stalled peace process through trade, mobilizing this -- (inaudible)? I'm think maybe QIZs on steroids or other types of things. I've had some interesting conversations with Arab chamber -- you know, some of the APEC groups, others. I'm wondering if there's any thought to that, or there's any consideration of that as a way to go forward.

RYAN: Yeah, I've met with Arab chambers. I've met with -- asking us to extend these QIZs, to do more QIZs. So it's a perfect example of the future of the world with -- in the peace process through trade. So yeah, we should do QIZs on -- I mean, the free trade agreements are basically QIZs everywhere, is the way I -- that's what they are. So I'm for all these QIZs, for expanding them. We met with USTR fairly recently on that. I think that ought to be a component of it, but I don't, again, see any -- and that's -- that shouldn't be a political problem domestically here, but I just don't see it being a priority. I don't know what USTR does these days. They're great people. Don't get me wrong. I've worked with them a lot. (Laughter.) They're really good people, but I don't know what they do these days.

QUESTIONER: Related question.

AARON: Yeah, please.

QUESTIONER: Jim Berg from Washington Trade Daily. Just a follow-up on that and the role of I guess diplomacy versus trade policy. Has there been any thinking in the caucus of giving the State Department more authority on setting trade policy and letting USTR be what it wants to be, a trade enforcer and lawyers?

RYAN: No, there hasn't been any thought on that. I don't see diplomacy versus trade policy -- those don't -- I don't -- versus is not in my vocabulary with these two words. They don't belong in the same sentence as far as I'm concerned. But back in the day we used to put these restructuring bills in the hopper on trade where we tried to unify all of trade in a way into one agency. There are lots of proposals out there inside the Executive Office of the President, outside of the EOB. Take the commerce stuff, move it into USTR, or strip all the other stuff out and have USTR just be trade enforcement. There's two schools of thought: one hyper trade agency that does both, or divide up the different agencies. One's enforcement. One's cutting the deals.

I like the USTR kind of how it is. I mean, I wouldn't mind adding to it. I don't like the idea of sending it over to Foggy Bottom. I think that you're going to bureaucratize this stuff. I think having a lean, nimble USTR, going out, getting trade agreements, very professional -- I think if you send this stuff over to Foggy Bottom, it gets caught up in the bureaucracy. So I wouldn't support doing that.

AARON: Mr. Leto? (ph)

QUESTIONER: Paul Leto from Jones Day and from the Council on Foreign Relations. Congressman, thank you for sharing your time with us today. Slightly broader question, which is can you tell us about how the current and future budget deficits will impact America's ability to pursue our foreign policy and defense goals, and with specific reference to two points: one is the actual resources, our ability to allocate resources, and then second, our relations with other countries, China most prominently.

RYAN: Yeah, they're our creditors now, so how do you -- how can you advance human rights with your banker? (Laughter.) Yeah, pretty tough. This is really important, Paul. You know, the debt to GDP ratio is scheduled to get to 400 percent by the time my kids are my age. So our current trajectory -- forget about the health care entitlement that's moving through Congress. Forget about cap and trade. The current trajectory is that our government goes from 20 percent of GDP, which is the 40-year rolling average, to 40 percent of GDP by the time my kids are -- (inaudible) -- '30s. And to borrow all of this, which is what the trajectories -- we're going to have -- go to 400 percent of GDP. You can't do that. It's literally not a sustainable position.

And so the sooner we bite the bullet and recognize that this is going to be a major problem -- that's why I put out this very detailed entitlement reform bill, if you want to -- I didn't get into entitlement reform, but I have a bill called The Roadmap for America, which is an actual bill scored by the actuaries, real legislation, wiping off the unfunded liabilities over time of our entitlement programs, keeping our government around 20 percent of GDP throughout this century, fulfilling the mission of health and retirement security, and literally paying off the $62 trillion unfunded liability that we owe to Medicare, Medicaid and Social Security, and it's literally a way to do that. And I'll be putting a new one out next year with new CBO numbers showing how we can actually pay off our debt and maintain, you know, the kinds of things we want to do with its government.

So it can be done. There's no political will to do it. It's the third rail politics, the demagoguery. Problem is both political parties are afraid to step out on this issue because the other one will get them in the next election. We have to get beyond that, and if we don't get beyond it soon, the credit markets will kill us. And so in the meantime we're borrowing about 43 percent of our budget this year. China's number one. Japan is number two. And so we have to -- we will have a real big problem if they don't keep buying our paper. And there will come a day where they'll stop buying our paper because they will make one of two conclusions: we will either inflate our way out of this problem; we will monetize our debt.

And obviously, despite what Larry Summers and Ben Bernanke say, the temptation to monetize our debt down the road will be enormous, or god forbid, you know, we will default. I don't think we'll default because we'll monetize our debt before a default would ever take place. And so that is going to crank up our interest rates. By the end of this budget cycle, our interest on debt will be $700 billion. It's a little over two -- it's $200 billion and change. So the interest on our debt will be $700 billion. So we will be completely beholden to our creditors because just the interest we will be paying, which is determined by their willingness to buy our paper, will be a -- will be the second largest -- I think it's the second largest function of our budget.

So for our own foreign policy, for our own sovereignty, it is so important that we get a handle -- and it's really entitlements. I mean, discretionary spending is -- we can't keep doing double digit increases in discretionary spending, but it's the entitlements. And the great thing is if we act now on entitlements, you literally can prevent the current retirees from having disruption in their lives. And what the numbers show us is if you do entitlement reform now, people over 55 won't have any big disruptions in their lives. They've already organized themselves around these programs, Medicare and Social Security, and the reforms occur to people under the age of 55. And I would argue that they're reforms that make the programs better; a defined benefit safety net with a defined contribution system stacked on top based on your wealth, based on -- you know, means tested.

That maintains a safety net society. It also maintains a system that's sustainable, but more importantly, passing this legislation shows credit markets, hey, we're getting our debt under control. We're turning the curve downward, and our interest rates will be much lower. We won't be relying on foreign countries and central banks to buy our paper. And if this talk about losing reserve status continues, our interest rates are going to be pathetic. So for all of those reasons, sound money with monetary policy by centralized -- getting the Central Bank focused on price stability, budget enforcement and entitlement reform to get our debt paid off.

We don't have to pay off our debt in the next ten years. It's impossible to do that. But we have to show that we have this thing under control, that it's heading in the right direction. And if we just do that, I think we're going to be fine, and then our hands are freed on foreign policy to do what it is we think is important and in our national strategic interests. We will not be able to conduct the kind of foreign policy that we believe is in our national interests because of this debt problem, because of the need to have foreign nations and central banks buy our paper. It's just that simple.

Sorry, I get going on that issue -- (inaudible) --

(Cross talk.)

AARON: We have one last question here. We're going to have break it up now, but I do want to give one last question to Michael Gfoeller from the U.S. Central command.

QUESTIONER: Hi. So I'd just like to thank -- (inaudible) --

RYAN: Are you from CENTCOM?

QUESTIONER: I am. I'd like to thank you for making these excellent points about the usefulness of developing economic levers in order to encourage peace and stability in the Middle Peace. Couldn't agree with you more in terms of your overall logic. I just wanted to address this issue of the NSEER system one more time, having some experience in how this thing actually works. There are some specific changes you could make that would make it much easier to administer the system, even in its current form, while doing much less damage to our foreign relations with the GCC countries, which at this point, if I'm not mistaken, actually hold more in U.S. Treasury bills than China does collectively. So it's an important thing.

One of the big problems is that there's at least a dozen ways to write any Arabic name in English letters.

RYAN: Yeah.


QUESTIONER: Our NSEERS database is conducted in the Latin alphabet. So we have an enormous number of false positive hits when we do terrorist screening on names abroad, and this causes us to stop for secondary screening, which can last as long as ten hours. Individuals, like the president of Aramco, for example, who moved the annual Aramco meeting to Indonesia after being held up at the -- Houston at one point for ten hours because of a false hit -- you know, the people from TSA who stopped him at the airport have no idea what Aramco is, I'm sure, let alone who the president of Aramco might be. So they can hardly complain. They just look at the computer screen.

RYAN: Yeah.

QUESTIONER: But a relatively small investment in Arabic name recognition software, which is available out on the market, could improve the accuracy of the database enormously because there's only way in Arabic to write a given person's name, 12, as I say, if you lose Latin letters, because you just can't represent about half the sounds in the Arabic alphabet with Latin letters. I'm sure my friends down at the end of the table would agree with that. That would -- (laughter) -- remove maybe 80 percent of the false hits.

The other problem with the database is that there are -- there's no lead agency in administering it. About a dozen agencies feed names into it. There are bureaucratic incentives for adding names --

RYAN: Yeah.

QUESTIONER: -- but you get no bureaucratic points on your annual efficiency report for removing names. We need to re-look at the incentive structure, 'cause as -- I'm sure you'd agree with me -- life is all about incentives, and people working in the bureaucracy --

RYAN: I do agree with you.

QUESTIONER: -- have no incentive to slim the database down to something that might actually be useful. So we end up --

RYAN: Have you said this --

QUESTIONER: -- stopping a lot of people who don't need to be stopped.

RYAN: Have these ideas been sent to the Hill? Have you guys come and testified? Is there a report that's been send to the Hill on this?

QUESTIONER: Not to my knowledge. But I'm just --

QUESTIONER: Maybe an opportunity for a hearing.

RYAN: Yeah, why don't you -- yeah, I mean, I don't know if -- yeah.

QUESTIONER: I can give you a lot of stuff if you want. (Laughter.)

RYAN: No, no, like I said, it's not my committee. It's Homeland Security, but --

AARON: It would be helpful if the Pentagon were supportive of this -- (inaudible).

RYAN: Yeah.

QUESTIONER: Well, the Pentagon is very interested in, obviously, in seeing faster treatment of Visas for foreign military officers who want to come to this country for training, and we often get false hits on foreign military officers who'd like to come for training. And that obviously hurts our outreach efforts.

One final idea --

RYAN: Yeah, it's --

QUESTIONER: -- you might want to consider is giving U.S. ambassadors the authority to exempt from onerous screening requirements people of obvious national security interest.

RYAN: I agree with that.

QUESTIONER: And right now we can't do that. So --

RYAN: I agree with that.

QUESTIONER: -- we had a situation where the son of a cabinet level official in Saudi Arabia was on an exclusion list for, you know, a year -- it took us a year to get him off the database. And this particular individual was a 12-year-old boy. But, you know, the name recognition software falsely identified him as being somebody else.

RYAN: My college roommate's the SEAL team commander of SEAL Team IV, and his interpreter in Iraq was going to stay in Iraq and die or come here and live. And this guy did a lot for our country. And it was -- jeez, it was pulling teeth getting -- you know, just getting through that system.

(Cross talk.)

AARON: Paul -- well, thank you very much.

RYAN: Yeah, I --

AARON: We have a strict rule on closing on time.

RYAN: I agree. Send us -- send us something, will you?

AARON: I want to thank you very, very much for your comments and taking us more broadly into a number of other issues that were extremely, extremely interesting. So --

RYAN: Thanks for bearing with my cold.

AARON: -- thanks again. We appreciate it. (Applause.)







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