Republican National Convention: Council on Foreign Relations Foreign Policy Discussion

Tuesday, August 31, 2004

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New York, N.Y.

(Note: The transcript begins with the panel discussion)

RICHARD HAASS: To be frank, I'm hard pressed to think of another time in modern memory when the foreign-policy agenda was as full as it is today. The United States is involved in conflicts in Iraq and Afghanistan, as well as in a global struggle against terrorism. Both North Korea and Iran appear bent on developing nuclear weapons. The North [Koreans], indeed, may already have several. And these are developments that could cause a good many other countries to follow suit, as well as provide terrorists with a source of the most dangerous weapons known to man. Civil war rages in Colombia; Israelis and Palestinians no longer negotiate directly; ethnic cleansing and widespread killing is the norm in the Darfur region of Sudan; and the Doha trade round [of the World Trade Organization talks] hangs in the balance. I could go on, but I won't, because you get the idea. It comes as little surprise that a recent national poll commissioned by the Council and the Pew [Research Center for People and the Press] showed that in this presidential campaign, national security and foreign-policy issues are dominating and are uppermost on the minds of most Americans who plan to vote.

Before turning to the talented people sitting up here, let me just take a moment to single out a few individuals here today. I want to join Hank in expressing my special thanks to Clyde [Tuggle] and to his colleagues at Coca-Cola, to Barclay Resler [vice president for government relations, The Coca-Cola Company] and to Janet Howard [vice president, The Coca-Cola Company], who really have not only been generous, but to me, they and Coke represent corporate citizenship at its best. And we are deeply appreciative of that. [Applause.] I also want to thank some of our co-hosts: Ken Duberstein [chairman and CEO of the Duberstein Group], Carla Hills [chairman and CEO of Hills & Company], Vin Weber [former congressman, R-Mich.], Mallory Factor [chairman of Mallory Factor Inc.], and Congresswoman Katherine Harris [R-Mich.]. Let me also acknowledge two other people who are here. One is Bill McDonough [chairman and CEO, Public Company Accounting Oversight Board]. And I'm very sad to say, not that Bill's here, but this is his final day as a member of our board. And to Walter Shorenstein [founder and former president, The Shorenstein Company], who was good enough to partner a similar event of ours when we had it up in Boston. It's always a pleasure to work with Walter.

The format this afternoon is straightforward. We will begin with my asking some questions of each of the panelists who are arrayed before you. I will then open it up to you to ask your questions on any matter of foreign policy or national security, regardless— or as they like to say in the city I used to live in, irregardless— [laughter]--of whether anybody up here has mentioned it. Let me reserve for myself the right to ask some of you in the audience to answer some questions. There's too much talent in this room, as I look around it, for us to do all the answering up here. I may even venture to give one or two answers myself. And let me also make clear, since I noticed a few members of the media here, that this event is very much on the record.

Let me begin by introducing our four panelists. Closest to me here on the platform is Max Boot. Max is the Olin senior fellow in national security studies. His latest book has the provocative title, "The Savage Wars of Peace: Small Wars and the Rise of American Power." And many of you also know Max from his many writings, including a weekly column for the Los Angeles Times. Next to Max is Elizabeth Economy, who is the C.V. Starr senior fellow and director of Asia studies here at the Council. Her most recent book, soon to be a major motion picture, is "The River Runs Black," a critical study of China's environmental policies. Third is Stephen Flynn. Stephen Flynn, appropriately enough for this week, is the Jeane J. Kirkpatrick senior fellow for national security studies. Steve's a retired U.S. Coast Guard commander; one of this country's experts, real resources on homeland security; and the author of the recently published and widely acclaimed book, " America the Vulnerable." Last but far from least is Benn Steil. Benn is the acting director of the Maurice R. Greenberg Center for Geoeconomic Studies and is also a senior fellow here in international economics. Max— I'm sorry, Benn is the— Benn is the editor of the journal International Finance, and his next book, "Financial Statecraft," will be published in the spring.

Let me begin with Max, then I'll sit down as soon as I finish the question. Max, there are three schools of thought about the Iraq war, if I've got it right. There are those who basically think it was a good policy choice and it's being implemented about as well as could be expected, given the difficulties. The second school is those who think it was a good policy choice but it's being implemented poorly. And there's those who think it was the wrong choice, and to make it worse, it's executed poorly. What is your view?

MAX BOOT: Good question, Richard. [Laughter.] First let me say how delighted I am to see all of you here. I've never seen this many Republicans in one room at the Council, so this is great for me to see. [Applause.] And I'm glad— also glad that we have the other party well represented here, with a number of prominent members of the news media in the audience as well. [Laughter.] So we have a— very bipartisan [group] here. [Applause.]

Now the question on Iraq. I guess I would opt for choice B, which is that it was a good policy, [but] not as well implemented as it could have been. I think clearly we've made a lot of mistakes. I think President Bush was just acknowledging the obvious recently when he said that we were— that the administration was caught off guard by the catastrophic success of the invasion of Iraq. Clearly the preparation for phase four, the postwar phase of the occupation of Iraq, was not up to the same standard as the planning for the first three phases of the Iraq operation. Now we've clearly made mistakes. I think things could have been better, but I think we also have to keep in mind that mistakes are made in every single war. I mean, if you look at World War II, I mean, you can look and count on both hands the number of huge mistakes made by the Allies, even in a winning cause. And I'm reminded of something like Operation Market Garden, which was depicted in that great movie, "A Bridge Too Far," where thousands of Allied paratroopers lost their lives in a misconceived operation, far more soldiers than have died in Iraq. Or if you look at the conclusion of World War II and the fact is that poor planning for the postwar phase eventually led to the Korean and Vietnamese Wars, because we didn't— nobody on the U.S. side did very good planning for what we would do in Asia and the occupied territories that Japan gave up.

So I think in some ways it's par for the course to have a lot of mistakes being made, and I think we have made a lot of mistakes. I think we're gradually starting to recover. I don't think we're going to win a quick or easy victory because you never win quick or easy victories when you're fighting against a counterinsurgency. I do think that the odds of our ultimate success are better than fifty-fifty; in other words, I think we're more likely to win than not, but that's going to require a lot of stick-to-it-iveness. That's going to require a lot of fortitude; it's going to require a long-term commitment. And that's going to be the big question mark, because we're not going to lose the battle for Iraq in Najaf, we're not going to lose it in Falluja, we're not going to lose it in Baghdad, but we could easily lose it in Washington, New York, L.A., and Chicago. That's where the battle is going to be fought and decided.

I think this election is going to have a lot to do with the final outcome in Iraq. And the kind of determination that the next president shows to staying the course and defeating the insurgents will have a lot to do with whether we win or not, because I think, ultimately, just as in the case of Vietnam and a lot of other insurgencies we've fought, such as in the Philippines, it comes down to our will, our determination to succeed. That's what's ultimately going to matter. And I think at the moment we still have it, but we could, you know, easily lose it.

HAASS: Thank you. We'll come back to you in a minute for something else. Let me turn to Liz Economy for a second. Liz, there's a whole group of academics and others who are generally described as realists, and essentially who are, as they look down the road, predicting, at a minimum, U.S.-Chinese competition, and worse, many of them are predicting even conflict— the idea that the major power of the day, in their view, sooner or later inexorably will find itself in some sort of conflict with the rising power of the moment. What's your sense of this, in particular when— almost to give you a double-barreled question— when the Chinese speak about their strategy of peaceful rise, do they mean it as a long-term strategy or only as a tactic to buy time, and then, once they've economically grown over the next few decades, the Chinese are essentially thinking about breakout?

ECONOMY: All right. I think China's strategy— I think it is a strategy in the sense of peaceful rise or heping jueqi, which was enunciated about a year and a half ago by one of [Chinese President] Hu Jintao's top advisers, was really an effort to assuage the fears of the United States, and in particular China's neighbors, that China was not going to pose a threat to global security, as many have argued in the United States. Of course, heping jueqi actually translates more closely to the great re-emergence of the Chinese nation, which has a different meaning than peaceful rise certainly, and I think that bears keeping in mind. I think what we see now is that China is clearly— simply by virtue of its very rapidly growing economy, is reconfiguring the global economy. You know, it is the largest consumer of coal, the second-largest consumer of oil and timber, the largest producer of steel in the world. It is remaking the commodities market.

Beyond that, I think there is a clear strategy at this point for China to emerge as the regional power within Asia. And I think it's doing a very good and a very subtle and effective job of filling what I think has become a vacuum in our own policy in the region. And it's advancing not only in the trade realm, and a lot has been written about China's moves in this regard— pushing forward on regional trade agreements, beginning to ratchet up its bilateral assistance throughout the region for development, especially to many of the poor countries in the region— but also on the security front China has been moving forward, trying to develop regional security agreements that exclude the United States or strengthening its own bilateral security arrangements with countries like Singapore and Thailand and Malaysia. And even beyond that, I think, in an area where the United States clearly holds the trump cards— in areas that require good governance; on transnational issues, like the environment; public health— these kinds of areas, I think, China is trying to make some strides, trying to position itself as a future leader, actually putting some money into regional public health initiatives. It has a long way to go, and I think without its own domestic reform politically, it's not going to get very far. But I think that you can see that it does have a goal of emerging as a power within the region.

Does that necessarily mean we're going to come into conflict with China? I don't think it has to mean that. But I think we have to be sensitive to the changes that are taking place and begin to develop a strategy to counter them, when necessary, and to support them when they suit our purposes. And just— not to take too long, because we've been cautioned not to speak too long— but I guess, you know, there are advantages to the United States, of course, in terms of burden sharing. It would be nice to have somebody else in the region to help with some of the issues that are confronting the region— for example, on issues like public health. So it could be helpful. On the other hand, you know, when President Bush walked into APEC [the Asian-Pacific Economic Cooperation meeting] three years ago and was able to turn the entire agenda around from, you know, trade and development to countering terrorism, that was important for us. And that showed our influence within the region. And we don't want, at any point, to be in a position where we can't accomplish that. So I think that we have to be watchful, we have to be careful, and we need to re-engage with the region, I think, more than we have.

HAASS: Thanks. Let me turn to Steve for a second. Here we are in New York. As last night's speeches made clear, it's, you know— we're roughly three years after 9/11. You've just published this book on homeland security, which to some extent is— I don't know if "indictment" is too strong, but there's a— clearly strong elements of criticism. Thinking ahead, if the new president, whether it's Mr. Kerry or Mr. Bush, were to call upon you for advice on homeland security, what is it you tell them? What is it that needs doing most?

STEPHEN FLYNN: Well, first, I think that what we're talking about is the unfinished business of the war on terrorism. And it's relatively easy for me to be nonpartisan on this issue because I think both parties are struggling with how to deal with, I think, the core reality of 9/11, which was to reveal how soft a target America is and remains. Now what we've done is we've, sort of, fallen back on how we traditionally have dealt with national security issues, which is to treat them from the water's edge up. If we can take care of the problem over there, hopefully we won't have to deal with it here. My concern is, I think it way overestimates what our military and intelligence capabilities can provide us in the near to medium-term. Quite simply, we will not have the military capability to take on the kind of threat that is represented by catastrophic terrorism for quite some time in terms of reformation or the revolution in military— serious kind of thing that's really just beginning to get some traction.

But the other side is— the big talk here is on intelligence, of course, and focused now with the 9/11 Commission's report, because we all know of the existence of stovepipes. My other core concern is there's not much in the stovepipes. So sharing is not as much of a challenge for us as how do we garner intelligence to basically be able to provide a very— mobilize and respond to threats based on intelligence?

So, first and foremost, I think we have to recognize the soft target issue as an incentive for why our enemies, and I think this is important— versus just terrorists— our enemies are using catastrophic terrorism as the weapon of choice. In the whole history of warfare, it's always about looking for the other guy's vulnerabilities. We will spend more this year on conventional military capability than the next 30 nations combined, and by 2008, because there's not a lot left over, we'll do more than the whole world combined. Now, the Brits at the height of their game, when the sun never set on the empire, their goal was two capital ships for every one that the great powers could come up with.

So what we face here is that an adversary is not going to confront this military. The power base is built on critical infrastructures— first and foremost I'd put on the list, that I've been focused on heavily— in the transportation-logistic trade area, the critical infrastructures— finance, energy, transportation logistics, and so forth. They were built with four imperatives over the last two decades, essentially: how to make them as open as possible, efficient as possible, reliable as possible, and the use as low-cost as possible. And security was viewed as raising costs, undermining efficiency, undermining reliability, and leading— [inaudible]--in the system.

So we had this paradox. [The United States is] the world's dominant power, but the power relies on open networks with virtually no security built in them, and al Qaeda figured out that that is a soft spot. And so building and focusing on how we take the things that are most valuable to us and make them more resilient, less attractive [as a target for terrorists], is something that I want to— I think that we have to really make a focus of our attention, away from just the offense and begin to deal with the defense. So my quip is there's strength in not only being able to deliver a punch, but being able to receive one.

And if you really look at, I think, the success of the Brits dealing with a problem that, Richard, you, of course, know very well, the IRA [Irish Republican Army], and working that problem is, in part, the British resilience— as well as the Israelis' resilience, and I've even looked at the Swiss as folks who have been doing this for a long, long time. [These countries that] are still democracies but have figured out how to deal with the threat as an ongoing problem— that forces the adversary to rethink terrorism as the primary tool for achieving their end. So that's— I know I've made that sort of broader, but we can hopefully focus [more on it] in the question-and-answer.

HAASS: Let me just ask one follow-up, if I can, on that, Stephen. Can that be done— what it is you want done, can it be done without necessarily generating five columns from [New York Times columnist] Bill Safire that, in the process of doing it, we have done real damage to the protection of civil liberties and basic freedoms in this country? Do you see any tension, if you will, between the homeland security agenda and the democratic agenda for this country?

FLYNN: I would argue it can't be done unless it is part and parcel with our core civil liberties and the working forces of our market. I take it as axiomatic that no security measure will be sustainable if it's just about security. Basically what happens is complacency sets in, it becomes stationary, and the bad guy works around it. It's only when it provides another dual benefit that it's sustainable, and the benefit either has to do another public good or private good, because that allows us to be dynamic and organic and ongoing.

And so a problem that I've looked very closely at is the transportation logistics issue. I want to more effectively manage the risk that the system could be used as a poor man's missile, in terms of a container— and that would lead to profound disruption, because we use a kill switch to turn it off, visibility and accountability in this system to police it is in the marketplace called supply chain visibility and asset visibility. And so there are in fact opportunities where prudent things can make these networks more secure— not all of them, but in quite a bit of them— can be market-reinforcing, and many of the things— and it's a primary message I derive— what I think we've really missed the boat on to date— using my Coast Guard metaphor— but it's really engaging the American people and the private sector as partners, equal partners, in this war on terrorism.

You know, we've really— and I think this is a hangover from the Cold War— that we basically as citizens said, "Now, federal government, take care of us. We pursue happiness; you take care of this problem." Thermonuclear war, we couldn't really come up with a different way to do it, but now it is civil society and the critical infrastructure the private sector owns that is the most likely target. And just like in the Second World War, where we had to reach out to the best and brightest in our society, reach out to citizens at the Victory Garden kind of level, is something I think we need to do in this war on terrorism. And so it's about being candid about this, and really not this top-down approach, this very paternalistic approach— "Give us information, go away. You know, we'll take care of you"--but really an ongoing partnership. Government— and I found this from talking to the intelligence community— they simply don't understand the sectors that are most likely targets, these critical networks. They need the experts in the private sector to be a part of that. And so I would suggest that this engagement, at the end of the day, really is going to make us a stronger society; our civil liberties will still be protected; the things we value will be protected for other purposes; and we should take a deep breath and get on with this business.

HAASS: Thank you. Let me turn to Benn Steil for a second and the economic side. [Washington Post reporter] Bob Woodward, in his recent book ["Plan of Attack"], quoted Vice President [Dick] Cheney as purportedly saying that Ronald Reagan showed that budget deficits didn't matter. As we sit here today, the United States is running a budget deficit of more than $450 billion, if my facts are right, and a trade deficit of more than $500 billion. And I guess the question that those of us who are not economists would want to have answered is: Should we be worried?

STEIL: Yes, we should be worried. Let me start with the budget deficit, and then I'll explain what its relation is to our external deficit [and] why we should be concerned about both. The budget deficit, if it's not addressed, if it's left unaddressed, will eventually lead to higher interest rates here, will lead to lower investment, lower growth, and a lower standard of living. Now, why can't we just grow out of this problem? Well, if you look at the Congressional Budget Office forecast for growth for the next 10 years, even if they're very pessimistic, even if we exceed them by a full percentage point every single year for the next 10 years, we're still going to be running an annual budget deficit on the order of 2 percent of GDP [gross domestic product], and that's just too much. And when we look out beyond 2014, things get even worse, because in 2014, just three federal programs— Medicaid, Medicare, and Social Security— are going to account for 50 percent of federal outlays. So we've got problems going forward and we need to address these now. Now, what's the relationship between the budget deficit and the external deficit, the current account deficit? These are often called twin deficits. They're not quite twins. I would characterize them more aptly as particularly ugly first cousins. [Laughter.] Roughly speaking, for every $100 increase in the budget deficit, we suck in approximately 25 more dollars of foreign capital to help plug the gap. Now this, in itself, is not a bad thing, I mean foreign capital assists us in investing here in the United States, in building our productive capacity. I would say the most worrying thing about the foreign capital that we're importing at the moment is its source. OK? If we go back 20 years [to] 1985, when the current account deficit is half what it is now as a percentage of GDP, it was 2.8 percent of GDP, roughly 8 percent of U.S. external debt— these are our liabilities— was owned by foreign governments. OK? That figure today is up to 23 percent. Twenty-three percent of our debt is owned by foreign governments. Why should we be concerned about that? Well, this foreign debt is mainly held by foreign central banks in the form of reserves. In fact, about two-thirds of currency reserves held by central banks around the world are held in dollars. And no one wrote this into international law. They do this because they feel it's in their interest.

Now, what if they were to change their mind and decide that, over the long term, the dollar is a bad bet; it's in relentless decline because the United States is not being fiscally responsible? Well, then they would start selling dollars on a massive scale, and if they were to reduce their holdings from two-thirds to, say, just 50 percent, to diversify into euros, for example, that could have a really cataclysmic impact on the level of the dollar and it could undermine confidence in our economic policies and it could undermine our influence with international institutions and even on the norms that currently operate in international finance; for example, the fact that virtually all international commodity trade is denominated in dollars. It doesn't have to be that way. No one ordained this.

Now in the 1990s, for example, central banks were huge net sellers of gold. They decided, after the relentless decline of the gold price in the 1980s, the decline from $615 an ounce to $387 an ounce, that this was a bad investment and that they should diversify out of gold more into dollars, and they drove the gold price down even further. By the end of the 1980s, gold was at $279 an ounce. And much of that decline was accounted for by central bank sales. Now, we do not want to put ourselves in a situation where we are encouraging foreign central banks to sell dollars, perhaps for gold or for euros, precisely because we are being fiscally irresponsible at home.

HAASS: Now we know why it's the dismal science. [Laughter.] Let me— I never thought I'd look to change to terrorism for a bit of relief, but let's do it. [Laughter.] Max, as we meet here today, there's something of a debate or exchange on the whole question of whether the war on terrorism can be won. And the question I have is, what would constitute victory? And what would it take to achieve that?

BOOT: Well, I think it's very hard to know what would constitute victory. And I guess this is something that President Bush was getting at with his comment, which I guess— the classic Washington definition of a gaffe is telling the truth inadvertently, and I guess that's what he got into trouble doing. [Laughter.] You know, it's probably not helpful to have the president say we can't win, because I think that does send a dispiriting message to folks abroad. It does, perhaps, encourage the wrong people, the people on the other side. But I think it is very hard to know how you define victory in a struggle like this. I think victory is possible over the long term, but it's like the victory against communism. You can argue: Well, we brought down the Soviet Union, we brought down the evil empire. But you could say: Well, there's still a communist government in Cuba, there's still communist governments in Vietnam and China, so perhaps we haven't won a final victory against communism. I mean, you can still argue that. It's a very long-term struggle. When you think about it, we've been really battling communism on a global basis since about 1917— you know, it takes a while, and I think we're looking at the same kind of global long-term, multi-decade struggle in the war against terrorism.

I think we're not going to just end terrorism as a weapon of war. I mean, that's crazy. That's like, you know, saying we're going to end murder around the world, or something like that. I mean, terrorism is a method. It's not something that's susceptible to being ended. But I think we can destroy the power of the Islamist terror network, which is the enemy that we face today, the extreme radical Islamist groups. I think they are capable of being defeated so they can no longer pose a significant threat to the United States or our allies. I think that's essentially— if I understand the tenor of his comments, I think that's what President Bush was trying to get at. I think that is possible to do, but again, it's going to take many decades.

I mean, I think we are— if you use the Cold War analogy, I think this is probably like the early 1950s in the Cold War, where we've established the policy, we've allocated some resources, we've won some victories, but you know, we have a few more decades to run before we're going to significantly overcome the evil that we face in the world today. So it's not going to be very satisfying. It's not going to be like winning in Grenada or winning in Panama or winning in the Gulf War, where you have a big victory party, a big bunch of parades, and you can say, "OK, we can all go home." But, you know, that's life. And sometimes when we do that, when we go home too early, we realize that we're sacrificing long-term political victory when we've— for the illusion of short-term military success. I mean, this has to be a long-term struggle, and we have no choice but to fight it.

HAASS: Thank you. Liz, I've got one more question for you at this point. In your book on environmental policy, you write a lot about the role of civil society and environmental groups in China, and in some ways argue that it's— environmentalism has become a back door towards elements of a political reform movement. What is your assessment of the state of political reform, the relationship between the Communist Party and the political process? And since we're trying to be prescriptive here, how much should this matter in U.S.-Chinese relations, and should we be doing things that we're not, in order to encourage political reform in China?

ECONOMY: Well, I have to say I am enormously optimistic, actually, about the future of political reform in China. And I don't think we need to be battling communism anymore in China, because if China ever were a true communist state— maybe for a few days under Mao— it certainly isn't today. There is significant reform taking place at the grass-roots level, first in terms of the development of the civil society, nongovernmental organizations [NGOs]--and, as Richard points out, the environment really is a leading part of this movement, and in large part because a lot of the people that started environmental NGOs in the early 1990s were refugees from Tiananmen. And they didn't really know anything about the environment, but they were looking for an avenue to push political reform, and they thought that the environment would be a relatively safe arena, just as it was in some countries of former Eastern Europe and the republics of the former Soviet Union. So you've seen these environmental NGOs over the past decade or so move from very simple sort of environmental education kinds of things to their position now, where they're actually stopping dams from being built. It's an enormous transformation over the past decade. That's one aspect of political reform as it's taking place on the ground.

I think the leadership is also under significant stress from Taiwan and from Hong Kong. You know, you have in Taiwan an example of a very successful democracy, of a Chinese nation having a very successful democracy. You have in Hong Kong clear demonstrations of yearning and aspiration from part of the mainland at this point for a greater voice in how Hong Kong is being governed; for democracy, for the ability to choose their own leader. So I think that you see the Chinese leadership at this point quite uncertain about how to respond to these stresses, and I think over the next decade we're going to see a fundamental shift in the way that they respond toward greater openness. And finally, I think even within the Chinese system to date, you're seeing great change. You know, people that are being elected to local congresses, local political congresses in China that are going through free elections, are running as independents; not as members of the party, but running as independents. These people are participating in debates. They're going door-to-door to get elected. They're doing polling of their constituents to find out what people in their districts want to have changed. Business people are being elected or appointed to the National People's Congress, and they're forming little think-tank groups to help them understand how they should be more responsive to the people of China. So, all of these things are really leading to a systemic transformation. Again, this is a slow process— maybe 10 [years], maybe 20 years— but I think it is inevitable.

And in terms of what the United States is doing or should be doing, I actually think we have it about right at this point. I think over the past eight to twelve years we've ratcheted up our assistance in terms of programs like rule of law or supporting nongovernmental organizations, pushing for greater market reform, pushing for China to adhere to its international obligations. I think all of those things are things that help to transform the system in ways that the Chinese government does not find threatening. It really is the peaceful evolution that the former— first President Bush enunciated, you know, a decade and a half or more ago. I think that's what's taking place. I think what's not helpful— and which we continue to do, however— is, you know, trying to hit them over the head every April at the U.N.Human Rights Commission, censuring them for human rights abuses. China clearly does not belong in the same group with Cuba or with Myanmar or North Korea. And I think what we find every time we do this is that they retrench, you know, and promises that have been made to move forward in human rights— you know, letting U.S. special rapporteurs come in— then the Chinese pull back and say well, we're not going to let them in now. So I don't think that that kind of beating over the head is particularly helpful. Rather, I think, sort of working in ways to infiltrate or infuse the system with change, I think that's the way that we're helping to get the job done.

HAASS: Thanks a lot. We could go on up here, but we won't. As I said before, there's too much talent in the room for us to do most of the talking. So what I'd like to do is call on you all to make points, questions. We've got microphones. I just ask that you let us know who you are— name and your affiliation. And again, we'll do our best to answer your questions, except for the difficult ones.

QUESTIONER: Hi, I'm John Harwood with The Wall Street Journal, and I have a question for Richard. [Laughter.] Democrats— John Kerry and others— have made the argument that the way the president's gone about the war on terrorism, and in particular the execution of the Iraq war, has made America less safe by, in essence, breeding more terrorists rather than eliminating them. The president has embraced that argument, said it's essentially ridiculous on its face; that, you know, they believe that you lose by fighting them; we believe you win by fighting them. Do you think that that's a ridiculous argument on its face, or do you think it's plausible?

HAASS: A couple of things to say in response to that. One is, I actually think over the last three years— we're basically on the third anniversary now of 9/11— I do think it's been one of the relatively unheralded accomplishments of the last three years that we have made the world a far more difficult place for terrorists to operate. If you look at the degree of intelligence focus in the United States and other countries on terrorism, if you look at the degree of international coordination, you look at the degree of law enforcement coordination, you look at the loss of Afghanistan as a sanctuary, you look at the arrests and so forth, I think we have clearly made progress in weakening terrorism. And I also think— coming back to some of the things Steve was talking about— I think we've made some strides, some significant strides in homeland security. Neither, obviously, precludes, or in any way is inconsistent with, the argument that we need to do more against terrorism and more in favor of homeland security.

One other thing that we've done that I think is incredibly important is we've finally put on the agenda the policies to deal not with today's terrorists, but with potential terrorists. And I actually think the idea of introducing a degree of reform into our policies toward Arab countries— economic reform, political reform, social reform, education reform— I think corrects an important omission in American foreign policy. And we're finally getting to the day when an American president meets, say, with his Egyptian counterpart and they don't spend the entire time talking about the Palestinian problem. But hopefully they will spend some of the time now talking about Egypt— and that's one-third of the Arab world— and what happens in that society. And one of the lessons, I think, of 9/11 is what happens in these societies is important not simply to them, but it's important to us— that this line between what's domestic and what's foreign, again, has gotten blurred. And increasingly, the business of foreign policy here, to some extent, is the business of domestic policy there, and the fact that that is on the agenda, again, is vital.

I'm slightly avoiding your question, because I come back to what [Defense Secretary] Don Rumsfeld said, which is— when he raised the question— it's very hard to get the measure in terms of what it is we're doing, the progress we're making against terrorism as opposed to things that are out there— that might radicalize people and so forth. I don't know how to measure that balance. No one publishes those kinds of statistics. I would think that probably both are happening. I think— to me it's not impossible that you've got both phenomena going on, that we are making progress against terrorism; at the same time, clearly new people are becoming terrorists. For some the cause is the Palestinian issue, for some the cause is Iraq, for some the cause is Afghanistan. For many the cause is more existential. And I don't think it— I don't think, if you will, there's a policy response to what motivates a lot of these people. I think their causes, their motives are so fundamental, there's no way they could ever be satisfied by traditional politics. I don't know how to weigh the two other than to— [inaudible]--I come back to something Max said before. I think it is going to play out over decades. And the analogy that I like to use is not war, because wars tend to imply beginnings and ends; wars imply battlefields, when we have to worry about shopping malls; wars imply soldiers when the real problem is noncombatants. There's not going to be a USS Missouri surrender ceremony [like the one that ended World War II]. The metaphor I like is disease. We are basically dealing with this virus called terrorism, and we are going to have to find ways to go after the virus; we're going to have to find ways to hopefully make— do things so people don't come down with the virus. We're going to have to find ways of dealing with the consequences when the virus strikes. And as in the case of disease, you can't eliminate disease. What you can do, though, is reduce it to a manageable proposition. That's what, by the way, I would say is the definition of victory. It's not the elimination of terrorism; that's beyond our power. It's the reduction of it so it no longer drives our lives, it no longer drives our national security strategy. It's reduced, if you will, back in some ways to where we thought it was pre-9/11— as a problem out there rather than necessarily the driver of either our national security policy or our domestic life.

FLYNN: Can I build on that analogy just for a moment?

HAASS: Sure.

FLYNN: Which is, you know, when you think about really how the medical establishment has struggled with HIV and AIDS, the goal would be to have a vaccine, the ability to go in and eliminate HIV so people could live free of it. The reality is it's an incredibly complex virus and it actually doesn't kill you. What it does is it compromises your immune system and then natural pathogens kill you. And so most of the medications that have been developed have been about how to bolster the immune system to coexist with the virus, and over time it's a chronic illness, but it's not a terminal illness. And one of the cases I'm trying to make in the issue of infrastructure protection and broader civil society resilience is about bolstering what is, in fact, the real base of our power, which is not our military might, it is our civil society; it is the infrastructure and the economic might that we have, and focusing on ways in which we can bolster that system simultaneously while we're still at work with the vaccine. But not relying solely on that focus is, I think, central to dealing with the reality of our time.

BOOT: Can I just quickly jump in on John's point, because I think it is a central one. And it's on my mind because I happened to write on that very issue this week in The Weekly Standard, if you'll forgive the plug. But I think that the point I was trying to make there is that I think that, you know, Kerry can certainly make a lot of legitimate criticisms of Bush, and I think there have been a lot of diplomatic missteps. A shining example is the way we've mishandled Turkey, which I think has been a disaster from start to finish. But you can look at a lot of others. I think we've made a lot of missteps. We haven't sold our policy very well to Europe or the rest of the world.

But I think where Kerry is wrong, dead wrong, demonstrably wrong, is in saying that because of this, we are not getting the cooperation we need to win the war on terrorism. In fact, if you look at the evidence, we are getting much more cooperation now than we ever did before even when Bill Clinton was pursuing a lot of the same policies that John Kerry now advocates. We're getting much better cooperation from the French, from the Germans, from the Saudis, from the Pakistanis. Lots of people who are not huge fans of the war in Iraq, for example, are nevertheless providing substantially more cooperation on intelligence, on busting up terrorist rings now than they ever did in the past. Now, why are they doing that? Pretty obvious, it's self-interest, because the al Qaeda threat has gotten so much bigger since 9/11. They've not only hit us, they've hit Spain, they've hit Saudi Arabia, they've hit all over the place. All these countries are now drawing in and cooperating with us. And look, at the end of the day, it doesn't matter that much what the level of U.S. popularity is, because this is a life-or-death issue. And countries like France, Germany, Pakistan, and Saudi Arabia, all these other countries, they know that to protect the lives of their own citizens, they have to work with the United States— with our military, with our intelligence, with our various resources— and that's exactly what they're doing. And we're getting a much higher level of cooperation now than we did a few years ago. And so it's hard for me— now, Kerry claims that he's going to sweet-talk all these countries into giving even more cooperation, and that would be great if he does, but I have to say I remain a little bit skeptical of that.

HAASS: We will do our best to keep our answers shorter so we can give more of you a chance to weigh in.

QUESTIONER: This is a planned conspiracy between me and Harwood, but let me follow up and ask you, Richard, as a Middle East person, if it is fair or unfair to argue that American policy— in the following ways, at least, and perhaps others— has in fact contributed to a worsening terrorist problem. The failure to provide real security in Iraq; the failure to plan for an occupation and pull one off effectively; aligning our policy so closely with [Israeli Prime Minister Ariel] Sharon's; and our handling— first of all, our committing of the Abu Ghraib crimes [alleged abuse of detainees at an Iraqi prison], and then our handling of them; do those all constitute choices or mistakes that will, in fact, worsen the problem and recruit more terrorists?

HAASS: I think you make a fair point, and this is that clearly certain things we've done, I think, some of the— not necessarily what we've done in Iraq but how we've done it— clearly Abu Ghraib has stimulated alienation considerably. I think that our policy towards the— or the perception of our policy towards the Israeli-Palestinian issue has again, for some, exacerbated the problems, contributed to terrorism, though I would hasten to add there that, again, even if our policy— U.S. policy towards the Arab-Israeli question looked like Mr. Carter's or Mr. Clinton's, it wouldn't begin to satisfy the political goals of a lot of there people who are terrorists. They're not interested in a two-state solution; they want a one-state solution, and it's called Palestine, and there's no place for Israel on that map.

So again, I think there are things that we've done which were on the negative side of the ledger, and all I was trying to say is I think there's also things that the United States has done that are on the positive side of the ledger. And I'm not trying to avoid your question; I just don't know how to measure it in any way rigorously, Bob, to give you, if you will, a kind of net assessment, in part because there's so much of this which is subterranean. Indeed, if we knew more about the problem it would be less of a problem, because we'd be able to deal with the problem better. So the answer is, I think, you know, whether it's people sitting here at the Council or people sitting in the intelligence community, it's a little bit hard to track exactly where we are now, and also it's a moving picture. But I think essentially what I'm trying to convey is there've been positives and there've clearly been some negatives. I just don't yet know how to do a net assessment on it. Jeff?

QUESTIONER: Jeff Greenfield from CNN. And, Max, I'm with the Rosa Luxembourg memorial wing of that. Steve, explain something to me. If three suicide bombers walk down 42nd Street in two weeks and blow themselves up and wipe out a few hundred tourists and probably cost New York City billions of dollars in lost tourism, A, what kind of steps could possibly prevent that? What is the— what is the— if not the vaccine, what's the equivalent of a treatment to make that kind of terrorism threat, you know, manageable? And is there any conceivable policy, any conceivable step any government could take, that could stop that? And if that's not complicated enough, how come it hasn't happened yet?

FLYNN: Well, I really think there's two tiers of the terrorism issue that we're struggling with. You've introduced one of them, which would be just use the psychological impact of terrorism by killing people randomly in big urban places that would have costs on tourism and an impact on businesses and people who want to live here, insurance, and so forth. The other is a more focused going after the critical infrastructure that underpins our society, and that is you target these global networks because one, there's opportunity, but also because there's real risk of market failure in these systems when people realize how dependent they are on them; the lights suddenly go out and you realize you need electricity. Or when suddenly there is— when the transportation system grinds to a halt and you have no warehouses. The cascading effects of that are huge military benefits.

So one of the areas that I— by making these systems more resilient, you do a couple of things that help you on the intel side. That is, if you'll harden a bit these targets, in the process of doing this, terrorists— these folks want to be successful. They're not just randomly throwing suicide bombers around to see how it will go— to see if it will work. They're— as we learned from [Homeland Security Secretary] Tom Ridge just over a month ago, they stake places out, something not very sexy like financial institutions; they stake it out and they want to go through the routine of being successful. What— basically more money, more expertise, more planning time, and more rehearsals to target things that are of real value to us. If they want to hit the most vulnerable parts of our society where there's the biggest economic benefit, they would need to do all those things, and that's more money, more expertise, spend more time planning and spend more time rehearsing, which gives smoke signals off that helps your intelligence side of the picture. If they hit it, and it's a blip economically, they're much less attractive targets. You don't go after electric grids— they're not very sexy; it's hard to show it on CNN— if you don't have an impact. But if you shut down— blackouts— we're running brownouts for three to six months because there are no spare electrical transformers in the United States— and today there are four spare transformers in the entire nation— then that's an attractive target.

Now let me go to your second one, which is people-killing, psychological, and so forth. There, I'm afraid, I have to be sort of more cold-hearted. It's a resilience issue. It's what the Brits have faced and it's what the Israelis have faced, which is that society learns over time that they have to work their way through these random acts of terror. I would suggest that we can do it. We just had a messy hurricane, it involved deaths. Higher is the amount of deaths in automobiles; about 44,000 people died last year— it actually came down a thousand; I think it's 43,000 people died last year in cars. It's about people managing their risk and acclimatizing to it that, over time, will make that terror less disabling; and, I would argue, over time also make it less attractive militarily for doing it.

So it really is the notion here that there is deterrent value by putting in place safeguards. And the analogy I'd really ask you to think about is safety. A hundred years ago you talked about putting safety— workplace safety, product safety, environmental issues into the private sector. You know, accountants of industry hyperventilated and said, "This will— I can't compete if you make me do this." And they also said, "Get out of my face. I'm private sector. Who are you telling me what to do?" Over time there was market value for taking safety measures and integrating them that made it sustainable. And increasingly, we have to look not at just "what if an act of God or what if human error in the design of systems we depend upon or what if mechanical error," but "what if somebody with malicious intent targets us?" And if we look through that final lens— what if somebody with malicious intent targets it— we'd build things a little bit different; we'd make ourselves more resilient. It would go for the ongoing approach. But, over time, what we'd do is we'd chip away at why catastrophic terrorism is an attractive means of warfare. If you succeed, and it's a localized event, you're a mass murderer and a vandal, there's almost a certainty of retribution, with no tangible impact on U.S. power. But if the system is so vulnerable you can get market failure from carrying out an attack, you're creating an open invitation for our enemies to continue to try to exploit this. But they will stake out, they will take their time, they're not just randomly throwing suicide bombers around, and I think that in part explains the three-year—

QUESTIONER: May I just quickly—

HAASS: Actually, I'm going to say no. Is there anyone here— I want to make sure— any delegates here who want to ask a question? Back there. In the back. Great.

QUESTIONER: I'm Alan Weh, from New Mexico. I want to address the question asked by The Wall Street Journal— I think that gentleman over there— because I just returned from Iraq, after nine months' military duty. And the question I believe The Wall Street Journal gentleman asked was, did the war in Iraq create more terrorists? I think that was the question. If one understands what's going on in Iraq, you'll understand that the war in Iraq, if anything, is reducing the number of terrorists. The combat activity going on in Iraq is not all terrorists. You've got former regime loyalists. You've got Shia militia sponsored by Iran, and they've got their own agenda, and it has nothing to do with terrorists. Probably 95 percent of the fighters in Iraq, once settled, aren't going to pack their bags, get a false passport, try to come to the United States and blow up another World Trade Center. The real terrorists that are there are there because it's a target-rich environment for them. You've got a lot of people like us that you can take an easy shot at. It's not quite as easy over here. But the fact is that our presence there— and oh, by the way, we have a shameful scandal in the prison incident. But that's just a breakdown in military discipline. And if you look at it too close, you'll read more into it. But that's all it is. And frankly, the way our press, to credit our press— the fact that we treated it so openly— would the other side, would the Muslim world treat it so openly? I don't think so. So we had a problem, and we're fixing the problem. And when we fix the problem, we'll have a few officers court-martialed as well, as they should. And that'll be put behind us.

HAASS: Is there a question that specifically you'd like to raise to the panel, sir?

QUESTIONER: No, I guess I'm not asking a question, Dr. Haass. [Laughter.]

HAASS: All right.

QUESTIONER: I'm trying to give you a little insight into what it's like in Iraq. [Applause.]

HAASS: Got it.

QUESTIONER: And I'll finish by saying one thing.

HAASS: Yes, sir.

QUESTIONER: This Iraq operation's a noble cause for the United States, and when it's done, we achieve our goals— whoever wins the election is still going to be in Iraq. And if we can achieve another Jordan, if we can put a wedge between Syria and Iran, and stabilize more countries in a very volatile region, we'll have done the world a favor. Thank you. [Applause.]

HAASS: All right. Thank you. Any of the delegates here who specifically want to— sure.

QUESTIONER: I'm Dr. [Raghavendra]Vijayanagar, a delegate from Florida for the RNC [Republican National Convention] and a heart surgeon. If you analyze all the problems of war and terrorism around the world, including Kosovo, that part of Eastern Europe, the denominator is religious war. Basically, it's a religious war. It's Islam against all the other religions. I feel that it's the lack of understanding by the West about Islam. Maybe that's what the problem is, and I think that's a fundamental cause for this war going on. Maybe there should be a better understanding of the West of Islam and maybe more cooperation, more embracing of Islam or more say in the world affairs. I think that could be one of the reasons why this terrorism can be eliminated. I'd like to have your opinion.

HAASS: Do you want to take that?

BOOT: Well, I don't— I mean, I respectfully disagree. I don't think this is a war against Islam. If it were a war against over a billion Muslims, we would be in deep, deep trouble; deeper trouble than we are actually in, I think, because I think what you're seeing is a war within Islam between a small minority of fanatics who are trying to hijack parts of the Islamic religion and combining it with aspects of European totalitarianism— totalitarian ideology. And so the toxic brew that motivates al Qaeda and other extreme Islamists, I don't think that represents the majority or even a significant minority of Islamic thought or Muslims around the world. It's a very small movement, and I think it is one that is manageable. I think that's why I ultimately do have confidence that, although it does tap into some latent sympathy among a number of Muslims, in terms of the actual ideology, this is not mainstream Islamic ideology. That's why I do have some confidence that we will ultimately prevail.

Let me— if I could just briefly return to the other issue that's been brought up here, which is— and it relates to it, believe it or not— which is the question of how do you win the war on terrorism. I mean, I think a lot of the stuff that Steve Flynn is talking about is right on. We do need to have a good defense. We do need to harden ourselves. We have to be realistic about the limits of that. We are a free society. We are a gigantic country. We are never going to be able to harden every single target or we're never going to be able to prevent every single attack just by waiting for it. We've got to go out and kill the bastards before they kill us. That's how you win the war on terrorism. [Applause.] And it's not just killing them— it's not just killing them, it's also not waiting for them to try to— and, sure, we need Geiger counters. We need to detect the nuke before it's smuggled into New York, but what we really need to have is the intelligence networks out there that are going to penetrate the guys who are planning to smuggle the nuke and get them before it winds up on our shores. That has to be the crux of our efforts. I think a good offense is how we're going to win. And, of course, we have to have a good defense as well, but we have to stay on the offense, and I think that's what we're doing. We've made a lot of mistakes, but I think by and large we're on the right course in terms of what we're doing in places like Afghanistan and Iraq because we are going out and killing the bastards before they wind up here.

HAASS: Just to show that there's no institutional positions at the Council on Foreign Relations— [laughter]--I think, though, it is important when one thinks about offense and defense to divide offense into two areas. One is the offense against existing terrorists, and I don't take issue with anything Max just said, but part of offense has got to be to essentially persuade people that this is not the career choice they want to make. We want to discourage people, younger people, from becoming terrorists when they come of age, and this has to do in part with the choices we make in our foreign policy. I think it also has a lot to do with the quality and nature of the societies these young people grow up in. If they continue to grow up in societies where they get no education worthy of the name, where they do not have political and economic opportunity, they should not be— it should not surprise any of us in this room that a lot of these people are going to be ripe targets for what people happen to say on Fridays in mosques. So we've got to have a big chunk of our foreign policy designed to essentially prevent people, or discourage people, from becoming terrorists in the first place. If we're only playing offense against existing terrorists, I worry about the numbers game. Of course, in the modern age, only a small percentage of successes on their part could have horrific consequences for us.

FLYNN: I think, Richard— because this is the heart of the debate, I just want to throw it out. I think we're really mirroring what I would hope would be the debate that would be taking place on these sets of issues. The case that I'm making here in part— I'm trying to be pragmatic about this. Sure, it would be great if we had the intelligence and we had the military capabilities to take bad people out; by all means, do it.

Transcript ends...

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