'War by Other Means: Geoeconomics and Statecraft'

'War by Other Means: Geoeconomics and Statecraft'

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In conversation with CFR Vice President James M. Lindsay, Robert D. Blackwell, CFR Henry A. Kissinger Senior Fellow for U.S. Foreign Policy, and Jennifer M. Harris, CFR Senior Fellow, discuss their new book, War by Other Means: Geoeconomics and Statecraft. The authors discuss geoeconomics relationship with geopolitics, how geoeconomic policies are currently being deployed across the globe, which countries are most effectively employing geoeconomic policies, and what some of their prescriptions are for the United States’ use of geoeconomic policies going forward. 

LINDSAY: Good evening, everyone. Welcome to tonight’s Council on Foreign Relations meeting. I am Jim Lindsay, senior vice president and director of studies here at the Council on Foreign Relations. I also want to welcome everyone who’s joining us via the wonders of the Internet as we livestream tonight’s lively and timely discussion.

It is my great pleasure and honor to introduce tonight’s guests. I think you’re going to learn they are both terrific talents, and I’m very proud to be their colleague.

First, to my immediate right is Ambassador Robert Blackwill. He is the Henry A. Kissinger Senior Fellow for U.S. Foreign Policy. Now, Bob has had an illustrious career in public service, having held numerous and will say distinguished foreign policy posts over the years. I am—beg my pardon, Bob—not going to go through all of the posts you’ve had. Let me just hit a couple of the highlights. Bob has served for—or under five presidents. He was U.S. ambassador to India from 2001 to 2003. He did multiple stints on the staff of the National Security Council, including as deputy assistant to the president and deputy national security adviser for strategic planning under George W. Bush. Between his government stints, Bob was on the faculty at Harvard’s Kennedy School of Government for a dozen years. He wrote a lot. By my count, he has written, co-written, co-edited 10 books, one of them being the best-selling book, with Graham Allison, “Lee Kuan Yew: The Grand Master’s Insights on China, the United States, and the World.” And just this year the Indian government honored Bob with the 2016 Padma Bhushan Award for distinguished service of a high order. So, congratulations, Bob.

Our other guest is Jennifer Harris. Jen is a senior fellow here at the Council. Before joining the David Rockefeller Studies Program, Jen served on the staff of the National Intelligence Council and on the policy planning staff of the U.S. State Department, where she was a lead architect of Secretary Clinton’s Economic Statecraft agenda. Jen is both a Truman and a Rhodes Scholar, quite an accomplishment.

And tonight, however, we’re not here to sing their past praises; we’re here to talk about the publication of their terrific new book, “War by Other Means: Geoeconomics and Statecraft.” So please join me in welcoming Bob and Jen. (Applause.)

Congratulations, Bob, congratulations, Jen, on the publication of the book.

BLACKWILL: Thank you.

LINDSAY: I will note that The Weekly Standard called it “readable and lucid”—(laughter)—and—

BLACKWILL: It’s better than the alternative. (Laughter.)

LINDSAY: Oh, it’s—I’d take it. That’s pretty good. And a reviewer in the Indian Express was so taken with the book that he urged Indian diplomats and strategists to read it because it was relevant to what they do.

Let’s begin with the basics. Looking at the subtitle of the book, it contains a word that many people either may not be familiar with, or have heard in a variety of different contexts, and that’s the word “geoeconomics.” So I’m going to turn to you first, Bob: What do you mean by “geoeconomics”?

BLACKWILL: Well, that turned out to be a question that Jen and I worked hard on in the early stages of our research. If you, to our surprise, look in the literature exhaustively, you find the constant use of the term without any definition, and people, scholars, and public policy practitioners using the term without ever defining what they think it is.

So we thought hard about it, and came up with the definition which we think distinguishes this particular discipline from others, which is that geoeconomics is using economic tools for geopolitical purposes. So it’s not using economic tools for economic purposes, although those are fine, notable objectives. It’s using these economic tools to advance a government, a nation’s geopolitical interests. And the book is organized around that definition, and we look at which countries are skillful at using those instruments for geopolitical objectives and which ones are less apt.

LINDSAY: So geoeconomics is a subset of geopolitics, rather than something different from geopolitics?

BLACKWILL: I would say it’s parallel to geopolitics. Most—and maybe Jen would chime in; we’ll see if we even agree. But if you look at geopolitics and you go back to the 19th century and Mackinder and all of that, you discover that it has a very strong geographic orientation, and a geographic orientation based on security, OK? And this is a different notion, both because technology of course has erased many of those boundaries, but also the great strategists from Sun Tzu forward don’t usually talk about economics as a means to geopolitical objectives. And without giving you the punchline, the United States for most of its history understood the utility of these economic instruments for geopolitical purposes, from the Louisiana Purchase to the Marshall Plan—both of which, of course, were dominated by geopolitical considerations—but in more recent decades have forgotten that historical legacy.

LINDSAY: Did you want to jump in here, Jen?

HARRIS: Sure. In practice, a lot of people know what geopolitics looks like when they see it. It’s more or less the way in which states are struggling for control over territory, often by reference to a set of geographic factors, right: population, military, including certain economic factors. But where—what we’re really trying to describe is how states are pursuing those same aims, but rather than reaching for traditional diplomatic or military tools, they are reaching for a whole host of economic tools. And this can take the form of everything from trade and investment policies that are wielded more, again, in pursuit of certain geopolitical aims; or certain aspects of the cyber domain, the way in which countries are acting—

LINDSAY: So, for you, cyber as part of geoeconomics.

HARRIS: Some of it. Some of it. Certainly some cyberattacks that have been state-sponsored, the goings-on in various nuclear facilities, we don’t consider that within the realm of what we’re talking about. But where we see states taking to cyberattacks against the banking sectors of others countries to vent a geopolitical grievance, like we saw in the early days of the Russia-Georgia conflict in 2008, where some of Russia’s opening shots were cyberattacks aimed at the Georgian banking sector, that is very much within the realm of what we’re looking at.

LINDSAY: I take it from your opening remarks, Bob, that you came to the conclusion that some states are good at geoeconomics and some states aren’t. Who’s really good at it?

BLACKWILL: China. You’d have to start with China. And as we discuss in the book at some length, this isn’t a perfect scorecard. China doesn’t always do it well. But for two decades or so, as China became more powerful, they have begun quite systematically to use incentives—interest-free loans—and disincentives—coercive measures—to affect the geopolitical positions of other nations.

Lee Kuan Yew put it like this, which is vivid. He said, “the Chinese say publicly all states are equal. But when we do something that they don’t like, they say: have you noticed the size of our market? And know your place; don’t offend 1.2 billion Chinese.”

So they calibrate this. If Japan does something geopolitically they don’t like, Japanese imports of automobiles to China diminish. If the Philippines don’t act in ways in the South China Sea that Beijing doesn’t like, Philippine fruits and vegetables rot on the—on the docks of Chinese ports. And so forth. So I think they, with this enormous wealth they now have to use, have been the most skillful—not perfect, but skillful—in reminding other countries that there is an economic price to pay for geopolitical behavior that China doesn’t like.

LINDSAY: So, Jen, who else makes the list of countries that are good at geoeconomics?

HARRIS: Certainly, as Bob mentioned, China tops that list, but China’s not alone. You know, Russia’s pipeline politics I’m sure is well-known to all of you. But we also see Russia slapping very questionable sanctions on Ukrainian chocolates that happen to be owned by Petro Poroshenko months, in fact, before we saw protester really fill the Maidan Square. And we also see this—you know, the Gulf countries in 2015 alone spend some $12 billion in the contest for favor with the new Egypt. Just, what, last week we saw the Saudis threaten to dump U.S. Treasury bills if, in fact, Congress goes through with pinning liability for 9/11 on the Saudis. So certainly, you know, China is a leading practitioner, but by no means all there is. There’s ample examples from India, Brazil, on through as well.

LINDSAY: OK. Two words I haven’t heard: United States. So is that because the United States is just mediocre at the practice of geoeconomics, or is it bad at it?

BLACKWILL: You take this one, Jen.

HARRIS: (Chuckles.) Well, I think it’s really a forgotten or a lost art in American statecraft. And digging back through the history, what actually was some of my favorite research for the book—as someone who ran from history in grad school and college, it’s sort of cosmic irony that this would prove to be some of the most interesting, anecdote-filled pieces of the project—but you really see for the—about the first 200 years of American history, you know, U.S. leaders quite comfortable flexing U.S. economic muscle in pursuit of explicitly geopolitical aims.

There certainly were—you know, the high-water marks are pretty well-known to all of us: the Marshall Plan. But even, you know, things like the Louisiana Purchase. As much as Jefferson liked a good deal, his main motivation was keeping the French from gaining a foothold on the American continent, and potentially setting a pretty young and exhausted U.S. Army up for a confrontation with Napoleon’s troops that we probably wouldn’t win.

Even, you know—and some of the—some of the pieces that are in some ways familiar, but yet not, of U.S. geoeconomic statecraft, Lend-Lease comes to mind. Churchill once called this a declaration of economic war, except it was one that he felt was aimed as much at Britain as Berlin, and he wasn’t unfounded in this. You know, the terms of what was really about $660 billion worth of American aid that we were lending to our allies in World War II came at some cost. We were unilaterally controlling the level of British gold, and, you know, unilaterally controlling British exports, and seeking to rewrite the terms of the postwar order with the U.S. interests at the center. And none of this was lost on the British.

LINDSAY: I think a lot of people—

BLACKWILL: Could I just chime in. One more sense the British are at issue here, two more. One, during the American Civil War, when the British were tempted to be sympathetic to the Confederacy because of their dependence on Southern cotton, the government—the U.S. government, the Lincoln government—told them that if they wish to have all of their assets in the United States expropriated, this would be a good way to do it. And then, of course, Suez comes to mind, in which the United States—the Eisenhower administration—so appalled by the British-French invasion of Suez, threatened basically to destroy the British pound if they proceeded. And that was the end of the intervention that the British were—it wasn’t Eisenhower and Dulles’ general opposition to this, it was that Harold Macmillan, who was at Number 11—he was the finance minister to Anthony Eden—said they can do it, and they’ll do it. And Eisenhower would have done it, because Ben-Gurion lied to him in writing about the Israeli involvement in this. So we used to know how to do it.

HARRIS: And none of these are things, right, that we can imagine our friends in the administration, on either side of the aisle, Republican or Democrat, really contemplating with any seriousness today.

LINDSAY: But I would imagine a lot of people hearing this story would say, well, wait a second, the United States resorts to financial sanctions, trade sanctions quite regularly. They were used to try to bring the Iranians to the negotiating table. We applied them against Russia in the wake of the Russian seizure of Crimea. So do those not count as geoeconomics? Or is it geoeconomics done badly?

HARRIS: So we try to be pretty upfront in the book that we see sanctions as kind of the exception that proves the rule. Right now, the Obama administration has about 30 sanctions programs in place, which is more than any other president in history, I think more than several combined. And it’s not just a story about innovation and quantity, these are really sanctions that are different in kind.

But even as you have seen, you know, real sort of progress made in the sanctions realm, you don’t see it encased within a broader diplomatic strategy that, for instance, managed to get the French to turn off military shipments to Russia sooner than the seven months of long, hard conversations that it took. Or, you know, conversations within NATO about what are the proper responsibilities and shared understandings are around what is owed to military allies when it comes to economic coercion.

LINDSAY: What about something like the Trans-Pacific Partnership? There’s been a lot of talk about TPP not being solely about trade, but about trying to set the geopolitical order in East Asia. Is this an indication of geoeconomics getting back on the U.S. agenda, or do you think it’s more symbolism than reality?

BLACKWILL: Well, it isn’t symbolism, but it’s a matter of sequence. And we go into it in the book in some detail.

Our analysis—and there’s lots of documentation available which supports this—is that we do not negotiate trade agreements with geopolitical objectives in mind. We simply don’t. These are trade agreements negotiated by our experts on trade, which of course are seeking to reinforce U.S. national interests, and make America wealthier, and open up the global economy, and so forth. But they are negotiated solely on trade criteria.

After they are agreed, and when administrations have to sell these agreements to the U.S. Congress, they suddenly recognize and assert their geopolitical importance. Ash Carter says that the TPP is worth one aircraft carrier, OK? Colin Powell made similar comments about NAFTA. These are all made after the fact, when we’re trying to persuade the Congress—administrations are trying to persuade the Congress to approve them.

To put it differently, if you did imagine that there should be geopolitical objectives in the TPP, in the agreement, of course you would address Chinese coercive pressure on the nations of Asia. Of course you would have that in the agreement, because it’s persistent and it’s been relatively effective in many cases. There’s not a word about that. And what it demonstrates, at least in our view, is that these able, dedicated trade people don’t consider that as an important element in their negotiation, and there’s no one there who makes that case.

And then we do—just to finish, we look at the history of the bureaucratic politics of this. And the story which Jen, who was in, as our chairman said, the Clinton—or the Obama administration for Hillary Clinton, working at the State Department, the bureaucratic politics over these decades has reduced the role of the State Department in these trade negotiations, partly at the insistence of the Congress. So they’re basically far at the margin of this today.

So, negotiate them with no geoeconomic content and sell them with a geoeconomic/geopolitical argument is the history of these agreements.

LINDSAY: So, Jen, I take it that the clock is running down on the administration you worked in. Next January we’re going to get a new president. Leaving aside whoever is going to win the race, from your vantage point, what should the next administration do if it were serious about geoeconomics? What would that look like?

HARRIS: So Bob and I sketch out a 20-point prescription agenda in the final chapters of the book, which I will not recount right now. (Laughs.) In part because I would hope that all of you agree with us, but reasonable minds can and should and will differ on, you know, the particular tacks to take. And a lot of this is going to be fact-bound. Our project is really less to argue a case for what to think about the geoeconomics rules and more to lay out a framework for how to think about them.

And so, to me, any prescriptive agenda would have—whatever the particulars of it—would have four basic ingredients. One, I think you do need a common reference point, a common conceptual framework with a clear definition that allows us to be clear with ourselves, bureaucratically, and clear with our allies. In order to call out geoeconomic coercion when it’s happening to our allies in Asia, we need to know what it looks like. And so I think that’s point one.

Point two would be to really begin to work this into the bloodstream of some of our alliances. Our relationship with Europe is a great example. You know, NATO is the closest military alliance probably the modern world has ever known, and yet we remain one of four or five countries that has not moved beyond very basic most-favored-nation status with the EU in trade terms. We lack any economic counterpart for what NATO represents on the security side, even as it’s very clear that when Russia wants to, you know, flex geopolitical muscle, it is reaching for these economic tools, as we’ve—as has been put on pretty clear display in Ukraine. So I would want to see us begin to prioritize, you know, certain geoeconomic responses within some of our closest sort of security relationships.

Third, resources. You know, this in part a dollars and—

LINDSAY: Money.

HARRIS: This is, in part, a dollars-and-cents issue; $713 million—one of my favorite numbers that I have been quoting a lot these days—Monday through Wednesday in Afghanistan. And so when it comes to arguing, you know, for what we could do for Ukraine in terms of giving that country a viable economic foundation or how we might begin to steel our allies in Asia against the kind of geoeconomic coercion that Bob is talking about, our entire aid envelope for Ukraine last year, I believe, was about $340 million—less than half of Monday through Wednesday in Afghanistan. So it is, in part, a dollars-and-cents issue.

But it’s also about how this money is authorized. When I was in the State Department, we actually put out a pretty good geoeconomic theory of the case in the president’s first and I believe only response to the Arab Spring: his May 2011 address, which really took full on the revolutions across the Middle East. Forwarded a pretty economic theory of the case. It was loan guarantees. It was a billion-dollar debt swap for Egypt. It was a set of enterprise funds for Tunisia and Egypt that were modeled after what we had done pretty successfully after the Soviet Union.

Three years later, when I left the State Department, those enterprise funds had yet to cut their first check. We were still arguing with ourselves, as an administration, about how to spend this billion-dollar debt swap, even as our Egyptian counterparts in terms of who we were negotiating with had since revolved. And, you know, events have basically just outpaced us. So we—you know, we need the ability and the wherewithal from Congress to be able to move a little bit more quickly in how we spend this money, separate and apart from how much money we have to spend.

LINDSAY: Bob, anything you want to add to that in terms of guidance to the next administration?

BLACKWILL: I guess—well, they’re not—they’re not calling me all that often to ask. (Laughter.)

But I’ll just make one point, which Jen and I emphasize in the book, which is that beginning to use these economic tools for geopolitical purposes is not a replacement for American military might, which has to remain the most stabilizing force in world order, in my opinion. However, what we do argue is that we’ve become too instinctively dependent on that instrument.

And one example of that—and I don’t know if there’s anybody here who works on the Hill or is watching who works on the Hill, but have a look at what the hearings are on the Hill and try to find a hearing that looks at economic issues in the Foreign Relations Committee. They look at almost solely security questions. This is not to argue, of course, they shouldn’t be looking at security questions. But they don’t think of economic means worth exploring in public hearings to accomplish some of our strategic objectives in the Middle East, other than, as you said, Chairman, sanctions.

We understand what sanctions do. We’re very good at it in many ways. But beyond sanctions, they simply don’t think in that way.

And what—you mentioned the next administration. What we would like the next administration to do is address this American asset—we have the biggest economy in the world, with this enormous economic power—address this asset systematically; and think internally, how do they organize themselves that, in NSC meetings—we’ve all been in up here—that it actually comes up, because usually the people who might address that aren’t in the room. Aren’t in the room. So that’s our dream, I guess is the word.

LINDSAY: Well, fair enough. What I want to do now is bring our members into the conversation. Let me remind everybody that this meeting is on the record. I will also ask you to wait for the microphone and speak directly into it. I would also ask that you please stand, state your name and affiliation. And if people would keep their questions concise, we can get everybody a chance to talk on this provocative topic, we’ll do that.

Let’s start over here. And Sam is going to come with a microphone right behind you.

Q: Oh, you’re over here, OK. Snuck up on me. Hi. John Sullivan with George Mason University, formerly with the Center for International Private Enterprise.

Do you include U.S. foreign assistance in your range of instruments that you look at? It would seem to me logical to do it, not that U.S. foreign assistance is often used strategically. But it could be.

HARRIS: Yes, we do, both economic and military. Military is among the least interesting of the bunch. Only there because money’s fungible, so military assistance that we are giving is freeing up budget space for the Egyptians or others that they put to other ends.

And, yeah, I think we do need to have a real conversation about the use of economic assistance as a foreign policy tool, and what constitutes an acceptable versus unacceptable use of, you know, U.S. aid. We also need to have a conversation about how the world has changed, and what new tools in the assistance space we should be considering. I, for one, would like to see the U.S. begin to look at instruments that would allow for things like OPIC to take equity positions in addition to debt. That is a thing that’s pretty routine and happens as a regular course across our European counterparts, not to mention the likes of what the Chinese state-led policy banks are throwing out at—you know, their going-out strategies across Latin America and Africa. That’s something.

BLACKWILL: Can I just chime in and say—and Jen mentioned Egypt earlier. I like this question because it allows me to give you this one, which is not rhetorical.

So what would you think will have the biggest influence on the future of the Middle East: the war in Yemen or the future of the Egyptian economy? And I think most of us would know the answer to that. And yet, we do pitifully little on the future of the Egyptian economy.

Now, this isn’t to suggest that economy is our responsibility or that we can fix it. But imagine a NSC meeting in which the subject was how can we use American economic tools comprehensively to bolster the economic future of Egypt. And I posit that that economic future will be more decisive regarding American vital national interests than most of what preoccupies the administration and its predecessors, and the media.

LINDSAY: Let’s go over here to Professor Hollifield.

Q: Jim Hollifield, this year at the Wilson Center, normally at the Tower Center at SMU in Dallas.

How do you take into account sort of conventional macroeconomic policy—exchange-rate policy, interest-rate policy? I mean, the U.S. does control the world’s reserve currency. So how do you think about Bretton Woods?

And secondly, if we have stopped doing this—I think we did it, certainly, in the ’50s and ’60s—stopped doing this, why did we stop doing it?

BLACKWILL: I think the question—I’m going to turn this one over to Jen about because it’s—I think it’s a terrific question. The back half we really have struggled a lot with, about. We think we know what happened. Why did it happen? And we got into this a little bit on the trade side, saying that the Congress and successive administrations basically took any strategic perspective out of the trade negotiations through bureaucratic politics by having a trade representative, taking it out of the State Department, and so forth.

But over to Jen.

HARRIS: It’s almost overdetermined. So we trace this story about when the U.S. sort of abandoned, you know, economics as a first resort, and why, to about the end of the Cold War, around Vietnam. A couple things were going on at that time, right? One, there are—there’s some bureaucratic politics, as Bob mentioned—the USTR being pulled out of the State Department and given its own independent mandate. It’s also the first generation of economic insecurity the country had experienced since the Great Depression. It was no longer clear that we had economic carrots to be spending about on our geopolitical agendas. It was also the rise of the multinational corporation, complete with a lobbying presence here in Washington, that began to change some of the discourse in Congress. And you see that, you know, line up very well in terms of the Congressional Record.

But to be a little provocative, I think one theory about a lesser-appreciated factor has more to do, actually, with what’s going on in the discipline of economics than foreign policy. Namely, it was the sort of—right the moment when Keynes is going out of fashion and Milton Friedman was coming into fashion. And we happened to be up against an adversary, in the Soviet Union, who made no particular love of markets and had no particular use for trade, and so every win for the United States in terms of freeing trade and liberalizing markets was also a win for us in geopolitical terms. And so perhaps it was no accident, actually, that you saw this happy convergence between the U.S.’s geopolitical interests and the neoliberal economic orthodoxy that we began seeing kind of rising toward its own.

And it worked pretty well for a while. I think in the early years after the Cold War, we faced no great adversary that required us to rethink whether this happy alignment still exists. But now we’re up against countries like China and Russia that, once again, appear to have no particular distinctions between state and market, and are pretty comfortable exercising power in economic terms. And I think maybe it’s time to ask whether this happy alignment of our—of our security and our economic sort of orthodoxies still exists.

LINDSAY: Avis. Eric (sp) will bring you a microphone.

Q: Avis Bohlen, retired Foreign Service officer, former sometime colleague of Robert’s.

I just—I had a few skeptical thoughts in—

BLACKWILL: Good.

Q: —reaction to what you said, and also a question. The first point, I think, Jen, you already answered. I was going to say that it’s so much in our ideology about free markets and non-interference. And I would also add another point, that the U.S. government has a lot less control over the U.S. economy than a country like China does over its economy. So it just wasn’t in our thinking, and not just since Milton Friedman. I mean, you know, we’ve been pushing free trade since the Marshall Plan, as you—as you mentioned. So it’s—I really question whether we’re—you know, what’s the word?—ideologically set up—set up to do this, or materially set up to do it.

The second point is the balance of our interests. You mentioned the example of the French not being willing to give up selling the boats to Russia. Well, I mean, come on, that was tiresome. The French are always tiresome, as we know. (Laughter.) But you know, they’re a very important ally. We’re going to unleash the full power of the United States economy to achieve this? I mean, I think there is always a balance of interests, and we have a lot of interests around the world which are going to really preclude this.

Third point is I think—

LINDSAY: Well, Avis, if I may, can I hold you there so I let them have a chance to answer? We have a lot of questions in the audience I want to get to.

Q: Could I just mention that I think USAID has always been a political instrument, and I saw it in Eastern Europe in the—(off mic).

BLACKWILL: Thank you, Avis. Nice to see you. For those of you who don’t know, Avis is one of the premier experts on how tiresome the French can be. (Laughter.) Day by day by day. Enormous patience and skill on her part.

We don’t suggest in the book that these instruments be used crudely in every case. But what we do say is that administrations, in the kinds of meetings that you used to routinely go to when you were here in policy positions, is that they be at least raised to see if they have potential. So we don’t want to hit an ant with a sledgehammer, but we want to use these economic instruments the way we routinely—routinely—use security coercion, or at least imploration. So that’s that.

But the second is, more broadly, we used to—and we have a chapter in the book on the history of American use of this—we used to do this with the people in the room, the counterparts of the current Cabinet members, who just as a matter of course thought this way. And among—and I won’t mention names here—but among those who resist our policy prescriptions are former secretaries of the Treasury, because, as those of us who have worked in government know, they tend to think of their business as too important for foreign policy considerations. Or the trade rep—I’m not speaking now about any particular one of them—who tend to think, and the Congress in particular tends to say, oh, I know what these people at the State Department are thinking; they want to trade away American jobs for geopolitical purposes. And so we used to know how to do this. It wasn’t questioned that this—these were effective tools. Sometimes they could be used badly, but that they were available. And that’s, at least in our experience—which covers certainly the period since the end of the Cold War—not the case.

I’ll give you one other example, which you’ll be, Avis, very familiar with. What’s the primary geopolitical action—successful action in the 1990s? It’s Helmut Kohl going to Russia and writing a check for German unification. That—what better example of the use of an economic instrument to pay for the departure of the Red Army from East Germany and for the apartments that were built for them and—a beautiful, beautiful example.

Meanwhile, we were doing—trying to do enterprise funds for—I was in the administration, in the White House—for Eastern European transformation. And we had no money. So basically it’s we had no money.

So we used to know how to do it, and we hope we’ll learn how to do it again.

LINDSAY: Mr. Paris.

Q: Jonathan Paris, former Middle East fellow here and—I’m a former Middle East fellow and currently a London-based analyst.

Just quickly on Egypt, of course the Egyptian economy is important, but it’d be nice if we could help them keep their planes from falling out of the sky, because that really impacts on their tourism.

But my question is on China. China seems to have a good—a good deal going in Africa, for instance. They get a military base in Djibouti when they put in $12 billion of infrastructure in Ethiopia and Djibouti. And what do we get stuck with? We get stuck with doing all this counterterrorism against Boko Haram in Mali.

So, you know, maybe the problem is they’re getting a free ride on the counterterrorism and they get to get these chits, you know, building ports, and then they get a whole bunch of security benefits from all their infrastructure.

BLACKWILL: I think Jen leaves for China tonight, so maybe she should speak to that.

HARRIS: (Chuckles.) Oh, I think you’re absolutely right. And I think you’re beginning to see strands of this bubble up in the context of the U.S. general election. It’s not too dissimilar from some of the noises that Donald Trump certainly has made in questioning whether our allies are free-riding.

And China has been masterful in its ability to parlay either the present reality of its economic power or the projections of future growth, which probably matter just as much, into sort of its geopolitical throw-weight.

And so we could not agree more. I think this is—you know, Britain has a project to try to get—force Washington to begin to wake up and confront what are not easy questions. Absolutely these tools are, again, not to be used lightly, nor are they without controversy or costs. And we try to be quite clear about that.

The problem is not that they cost something. Of course they cost something. But so too do every other form of statecraft, especially our military.

BLACKWILL: And I’d say I just think it’s a good question about the Chinese in Africa. They use the construction of soccer stadiums as a geopolitical instrument. And if you—I think they’ve now built over 30 of them. And they are coincidentally in proximity to the home villages of the president of the country.

So this is pretty micro, but exactly what you say. Now, they can make mistakes, they can overdo it, or so forth. But look at the—at—which we do in the book—the connection between Chinese economic assistance to Africa and African votes at the U.N. on issues we care about. And—

HARRIS: Or recognition of Taiwan.

BLACKWILL: —or—yes, so—or recognition of Taiwan, where there’s a direct correlation. So that, using assistance for their geopolitical goals, is routine for them.

LINDSAY: Go to the back of the room.

Q: Yes, hi. Thank you. The name is Mercedes Fitchett with the Department of Defense. Back in 2003 after the Iraq invasion, where we were building the whole coalition effort, we actually used the—over $18 billion in U.S. free construction projects as a stick and a carrot for increasing the number of countries. And I recall there was a huge battle with France in terms of them being able to bid on contracts, that they weren’t part of the coalition.

But did you all happen to take a look at what we did with that—with that tool in terms of growing the coalition in your book as a case study?

BLACKWILL: Yeah. I was the presidential envoy to Iraq when you were—when you were working those, which was—doesn’t entirely explain our failure there but is a major part of it.

Let me make this distinction. And you were involved in it, so you’ll have much more details and maybe a definitive thought different from mine.

When we were—and I was at the White House—we were working our way through this, we didn’t think of those reconstruction efforts—first of all, it’s, of course, total chaos, as you know and very little systematic thinking of any kind in any case. But insofar as we did think about it, we did not think about the long-term future of Iraq and how we might spend this money.

Most of the recommendations that came in that we spent money in Iraq were from our military commanders, who were trying—and of course it was important that they try—to stabilize wherever they were: in the western desert, up north, and in the south near Basra. So we didn’t think about it in the kind of geoeconomic terms that Jen and I discussed in the book.

Secondly—now, I will display a prejudice—our geoeconomic thinking was infected by the virus of “one man and woman, one vote” and, quote, “election objectives” in both Afghanistan and Iraq. And we became mesmerized by these election processes at the expense of geoeconomic thinking.

So summing up, we spent our money—that money very badly in—obviously in both those countries, very badly. And I think one of the reasons was that we didn’t, as Jen was urging and as we urge in the book, we didn’t think of these as tools beyond the either pure development in a micro-area or tools beyond bringing these people to democracy, which, as we’ve seen, would have meant—since it failed, of course, completely—would have meant changing their entire culture and political sociology.

So we didn’t—

HARRIS: Just one postscript of optimism, I’ll have you know, which is that it’s also true, though, that we find that a lot of U.S. military leaders are some of the most powerful surrogates and champions for exactly the argument that we’re pushing. As we describe in the book, when I was in the early, tough stages of thinking through Secretary Clinton’s economic statecraft agenda, I sat down with Admiral Mike Mullen and sort of heard him riff on some of this.

And he gave more powerful expression to some of these realities than anybody I had met before or since. And he just said, you know what, compare the man hours, woman hours we, the U.S. military, have spent thinking through the size and composition of the Afghan National Security Forces to the man/woman hours we have spent thinking through a viable economic blueprint for that country’s future.

And until we get that balance closer to where it should be, I think we should expect to, you know, continue paying for it and influence—(inaudible).

BLACKWILL: Right, and Bob Gates, as you know, in his book and in his public speeches urges much more funds for the State Department for essentially geoeconomic objectives. And Leon Panetta did the same, and Ash Carter does the same, so far essentially to deaf ears in the Congress.

LINDSAY: OK, we have time for one more question. Before I take it, I want to remind everybody in the room this conversation has been on the record. I will also let people know that copies of Bob and Jen’s book are available for sale at the back of the room. Those joining us on Internet can—

BLACKWILL: So lock the doors. (Laughter.)

LINDSAY: —always go on Amazon.com and other e-retailers. With that said, sir, you have the last question.

Q: Thanks very much. Karan Bhatia with General Electric.

I was wondering if you could comment on a thesis that I think may be a corollary to what you’re talking about, which is that the intentions and the ultimate objectives of a number of these other countries you referred to are in fact more economic in their core. So you look at One Belt, One Road, for instance, in China, or you look at the position that a number of European countries have taken on sanctions, at the end of the day you sort of look at those and you say, yeah, there’s a core strong economic element to it, advancing their economic interest, whereas in the United States we tend not to think about foreign policy in those kinds of terms.

Would you agree with that? Is that—is that a notion that sort of sits well alongside the thesis of your book? How do you see that idea?

BLACKWILL: Well, I think that—

Q: (Off-mic)—General Electric—

LINDSAY: I’m sorry?

Q: It’s another question that I think should have been asked, is (would ?) General Electric have geopolitical ambitions—

LINDSAY: I’d like to hold that for another meeting. I’d like to give Bob and Jen an opportunity to wrap up and then—

BLACKWILL: One Belt, One Road—well, we don’t know for sure, since the Chinese government systematically lies about its strategic objectives, as we know. So we don’t know for sure, but I do think it has a strong economic core. But I think at its base, it’s geopolitical. That is to say, if you look at the behavior in the last 20 years, they systematically build up dependencies, which they use for their geopolitical purposes. And they do it again and again and again. And they remind people of these dependencies, nations, when it matters.

So it’s both. So it’s both. But I think if you believe it’s only—which is what the Chinese, of course, say, which is One Belt, One Road is only for the benefit of the people of Asia, period. Well, it has that dimension, if it produces wealth and jobs and so forth. But I can tell you I spend quite a bit of time in Central Asia, and they—the people in Central Asia do not take at face-value that there are no geopolitical Chinese objectives in this—in this policy.

LINDSAY: Any final word, Jen?

HARRIS: So I think you’re—Karan, you’re getting to one of what was, I think, the hardest questions for us in the book, which is, how do you know it when you see it? Countries rarely—sometimes they do helpfully signpost pretty explicitly like the Saudis did last week or as the Chinese have done in conditioning certain investments by sovereign wealth funds on Costa Rica’s disavowal of Taiwan. There are pretty smoking-gun cases.

But more often and usually in the cases of where it’s most effective, it’s much more the stuff of correlation than direct causation. And so it—but it’s also the case that just because there is some economic—you know, presence of economic rationale doesn’t negate also the present of geopolitical rationale. You know, all the better if there are twofers and threefers, I think, for the Chinese.

But there are certain cases where, you know, deals just don’t make economic sense, and yet they happen anyway. And even in some of the IPOs that Chinese state-owned enterprises have come into, you know, New York and listed on our stock exchanges, when you actually go through and read the securities filings—I have done that—not the—you know, the most fun weekend I’ve ever spent, but they’re very up-front about the fact that these are companies that are owned by the Chinese government, that there are certain objectives that are political that will occasionally trump—it’s all kind of there black-and-white when you sort of know what you’re looking for.

So, you know, I think there are certain cases where you are going to just have to, you know, initiate some kind of a smell test. But just the sheer presence of economic motivation doesn’t negate, you know, the co-presence of geopolitical rationales.

I just wanted to also add—

BLACKWILL: Can I just—

LINDSAY: I will—I will give the ambassador—I’ll give you the final word.

BLACKWILL: Well, no, no, just one last one, which we can—another good example from China, which is in this category Jen was mentioning, notice the eerie coincidence that in the—in the preliminaries to the visit of a Chinese president to the United States for a summit with our president, notice the eerie coincidence of major Chinese purchases of Boeing aircraft.

They just do this routinely, and it’s not just Boeing. It’s Brazilian aircraft. We go into lots of examples. And I can assure you that in our—in the deliberations of our highest councils of government, these sorts of notions—and of course the private sector for us, so it’s not completely analogous—but just thinking through what do we—what economic instruments do we have in order to deal with the rise of Chinese power or to deal with China—sorry, Russia and their use, of course, of pipeline politics, or to help foster our national interests in the Middle East, what are they? And they just don’t come up in the conversation.

LINDSAY: That is going to have to be the final word on a very complex, timely, and deep subject. However, the good news for everybody in the room is that you can talk to Jen and Bob as we wrap up. And of course all of you are more than welcome and encouraged to buy a copy of “War by Other Means.”

So please join me in thanking Bob and Jen for a stimulating conversation. (Applause.)

HARRIS: Thank you.

(END)

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