Cspan radio app. Next, a conversation on the u. S. China relationship during the coronavirus pandemic. Well hear from former Trump Administration National Security advisor hr mack master. Mcmaster. This event forum hosted by the Hoover Institute was held by video conference. For more than a century our mission has been dedicated to generating policy ideas that promote individual, economic and political freedom, private enterprise and representative government. Today we bring you our newest online virtual series entitled hoover capitol conversations. This series will bring Hoover Institution fellows together with policymakers for indepth informed discussions examining some of the major policy challenges facing the United States and the world. By bringing together the players in policy development and policy execution, we hope to pull back the curtain on some of the discussions that happen behind closed doors traditionally. I hope you enjoy this fireside chat between those who generate the ideas enabling a free society and those who turn them into actionable policy. Welcome and thank you for joining us. As part of todays discussion, we will be taking audience questions, and i encourage you to submit yours using the q a button at the bottom of your screen. Today we will talk about economics with the undersecretary and hoover senior fellow and former National Security advisor hr mcmaster. As undersecretary of state for economic growth, energy and the environment on june 21, 2019, the former ceo and chairman of docu sign from 09 to 19, hes known for bringing Transformational Leadership to many sectors of our economy including factory automation, engineering, commerce, education, and philanthropy. Hr mcmaster, senior fellow at the Hoover Institution, he was our countrys 26th National Security advisor and served as a Commission Officer in the United States army for 34 years before retiring as Lieutenant General in june of 2018. His latest books entitled battlegrounds, the fight to defend the free world and its available for preorder on amazon. Welcome, gentlemen, thank you for being here. Thanks. Keith, what a pleasure it is to be with you and thanks for taking the time out of your super busy schedule to be with us at hoover. Real pleasure to see you. I want to thank you for your service at this critical time. You know, sometimes our government gets lucky. We have the right leader, the right place, at the right time, and certainly its the right time as we can see with developments in hong kong, the results of the communist Party Congress and how the communist party is tightening tightening its grip on hong kong, and so as undersecretary, the first question i would like to ask you is that youve really built i think on the National Security strategy that we worked on during the first year of the Trump Administration, with an emphasis on an Economic Strategy, and i thought as were watching these events develop, as were in the midst of the covid19 crisis, can you tell us more about what youre doing to ensure that america can maintain its competitive advantages in this environment . Sure. Thanks, hr. It is great to be here with you and ive got a great affinity for hoover. I have spent most of my career in Silicon Valley, and theres no one id rather be discussing this with than you, hr. Your thinking on china has particularly had a big influence on me, and so to answer your question, secretary pompeo charged me with developing an operation operationalize and Global Economic Security Strategy to maximize National Security, combat chinas economic aggression and drive Global Economic growth to advance prosperity and peace around the world. And this is an extension of the National Security strategy, which you developed when you were National Security advisor. And this strategy contains three pillars. The first pillar is all about building off the foundation of success of president trumps first three years in the administration to support the recovery of the pandemic and ignite a new area of growth and opportunity. And it contains priority actions, just like the National Security strategy does, for keeping America Running and keeping america healthy, keeping america safe, keeping america working, learning, innovating and investing. It also has new ideas in terms of economic stimulus, to spur growth and opportunity for the american people. And hr, the second pillar is called make america strong and safe. Its a menu of policy options to turbo charge economic competitiveness and safeguard american assets. When we talk about turbo charging economic competitiveness, it includes investing in the american worker, increasing access to capital, accelerating the digital transformation, rebuilding our infrastructure, strengthening our Industrial Base and extending our r d lead in ten Critical Technology sectors, vital to National Security. And when we talk about safeguarding our asset, it includes our financial, educational, healthcare, and Public Research systems, and this means putting an end to chinas wholesale abuse of intellectual property, open markets, supply chains, and even stock exchanges. And i think one example we recently saw was nasdaq, its listing to prevent the chinese and their companies from deceiving america investors about their revenues and their profits. And this pillar contains a multitude of ideas to establish reciprocity with every nation we do business with and strengthen our export screening, prevent Harmful Technology transfer, and ensure that American Innovation and Critical Technology sectors like 5g and ai are protected. The third pillar is titled form a network of trusted partners. This gets to the issue of Public Private partnerships and economic diplomacy by forming a coalition with our allies and our partners. The u. S. Government cant win the economic competition on its own. We shouldnt have to, not when there are so many other companies and countries who share our values and our interests. Thats why this third pillar calls on u. S. Companies to join the United States and our partners around the world in adhering to certain values and demanding that everyone they do business with adheres to them, and im happy to expand on that, you know, on the rest of our discussion, but it comes back to what you raised in your question, and that is Corporate Responsibility isnt just social responsibility anymore, as we used to say. It is also National Security, and u. S. Companies are on the Global Economic front lines. We need them to be first in line of defense to ensure that our assets and our economic interests are protected. And you know, since ive been in the administration, my first time serving in the government, as you know, and im really impressed with the work thats been done to support these companies and what we need to do to win this fight against chinas economic aggression. Keith, thanks. A lot of what you are alluding to in the pillars and in the strategy involves a competition that was going on before even covid started; right . And it seems to me like covid has accelerated a lot of these trends or has actually, you know, thrown back the curtain on some of the Chinese Communist partys behavior. Do you see it that way . How do you see really what china has done in this pandemic, in the covid19 experience . What can we learn from it about what the Chinese Communist party is trying to achieve and the kind of economic aggression that weve seen the party engage in . Yeah, and hr, theres no doubt about it. Everything that we see, gathering from our intelligence, that president xi looks at this time of the pandemic as the time to accelerate their grand strategy for global world domination. And you know, i borrowed one of your concepts from Chinese Communist party the threeprong strategy of concealment and coercion, and i know you reference that in your new unreleased spellbinding book which by the way, thank you for my early edition. [laughter] available in september. I didnt think you would mind. So let me just if you dont mind, im going to answer your question by pointing out this is the perfect covid19 and what the chinese are doing is a perfect example of the three prong strategy, of concealment, cooption and coercion. As for concealment, we see the devastation of hiding the virus outbreak, you know, for the world, and the pandemic is a result of a concealment of the virus. They silenced whistleblowers, expelled press from china. They scrubbed social media of any mention of the virus. And by the time the world found out about it, the virus had spread beyond control, and today the ccp is using concealment tactics to shirk accountability. I will give you a couple examples. It forced an apology and retraction from an Eu Ambassador who wrote an oped saying the virus came from china. It also attempting to shift the blame to the u. S. Using state run press outlets on social media to spread disinformation. So lets move on to cooption. Their cooption is endless. We have seen china attempting to coop everything from supply chains to international organizations, attempting to use the u. N. And who to spin a message that its a generous selfless nation providing hope in chaos. Of course the truth is the ccps humanitarian assistance pales in comparison to its for profit sales of ppe which after about half a billion a day adds to about a half a billion a day. In a very real sense china is coopting the crisis itself to turn a profit. In terms of coercion, we see their so called face mask diplomacy tactics of the ccp is a force for countries to support it. For example ccp donated 26,000 masks to various friendly Political Parties and you can bet those donations were in selfinterest. We also saw their coercion in myan mar in return for ppe. In bangladesh local media, selfinterested donations to select Political Parties in bang da learn. Bangladesh. Were seeing this all over the world and i think citizens are waking up to it. That may be one silver lining. Its given political will to government officials everywhere. We see very few countries or companies are fooled anymore. So were moving quickly to align our parties behind a common plan of action to head off this chinese economic aggression. Keith, you mentioned the sensitivity now, renewed sensitivity that covid has exposed on supply chains involving pharmaceuticals and ppe and medical and so forth. And of course one of the aspects of the competition with the Chinese Communist party that predated covid was the competition in the area of communications and really concerns over data, data that we know that party has systematically try to exfill trait through a sustained campaign in espionage, that it wants to use in ways that would leave us less secure as a country and data it wants to exploit so it can get to a dominant position in the emerging data economy. Could you explain what you are doing in this arena of competition, involving 5g hardware and architecture, but also just more broadly in the area of communications . Yeah, i mean, youre so right, hr. If you look at what they are doing in the communications area, and by the way, i didnt realize until i went out to washington that china has a National Intelligence act that requires any company, chinese company, stateowned or otherwise, and any citizen to turn over any information proprietary technology, intellectual property or data upon request to the ccp or to the government or to the pla or suffer the consequences. And you know, ive had my intellectual property ripped off, and this whole area of 5g is such an important part of our communications infrastructure, and, you know, when you look at Companies Like huawei and zte, it is really a trojan horse, and you know, weve got a lot of efforts in that area. As a matter of fact, a couple of fridays ago, we announced what we called the 5g trifecta, and the first part of that was the announcement where they will invest 12 billion dollars to the United States, and its a massive sum to develop the worlds most sophisticated 5 nanometer chip fab in arizona. You know, one way of looking at it is [inaudible] like a grand slam out of the park, but more importantly it is strategic because this means chips critical to our lives and National Security will once again be made in america where the Semiconductor Industry was first invented, right, right where you guys are right now. The chips from this fab will power everything from the most sophisticated smart phones to the 5g base stations. So this will create thousands of jobs up and down the supply chain and have a broad ripple effect. And they are going to train hundreds of workers. And probably most interesting is a really highskilled worker. Over three quarters of the folks that work in the plant have masters degree or above, and theres also phenomena in the Silicon Valley business, in the silicon business called clustering, and thats how Silicon Valley really became Silicon Valley. So this deal is the first of many hopeful to come and it is a powerful example of the way Many Companies are realizing u. S. Is the most trustworthy partner. The other thing we did along these lines too is we announced the foreign direct product rule in terms of closing loopholes on huawei and zte from dodging exports, and since its addition to the entity list a year ago, huawei has continued to benefit from its loophole to make u. S. Electronic Design Software and manufacturing equipment to continue producing its own semiconductors, so we shut that, and that rule that ends with this new rule. The third thing, the third part of the trifecta is what secretary pompeo announced a couple weeks ago and it is called the clean path initiative, the 5g clean path initiative, and it requires all 5g data entering or exiting u. S. Diplomatic facilities to transmit only through trusted equipment and never through equipment from untrusted vendors, like huawei and zte. And the 5g clean path embodies the highest standards of security against untrusted, high risk vendors, by blocking their ability to siphon Sensitive Information into the hands of the prc. The other thing were doing too is were encouraging all our allies and partners to join us and also private Sector Companies in requiring a 5g clean path, and were also, you know, we think this is some of the reasons behind some of the things that youre seeing now with regard to the u. K. Saying hey, we dont want untrusted equipment, so i think its making an impact, hr. Keith, thanks. You know, this is an area of competition that i think we were largely absent from because we had been operating under this assumption that there was sort of an arc of history that guaranteed the privacy of our free economic systems over closed authoritarian system and the status economy that we see with china. And you are really i think pioneering way ahead on returning to that arena of competition and of course doing so in a way that preserves our free market principles and our innovation and our creativity as a nation. I would like to ask you about the relationship with the private sector in particular. You came from the private sector. Youre now reentering this arena of competition knowing, right, that this has to be almost a whole of society endeavor. We have a program at hoover called the tech track two dialogue that i find immensely rewarding with others and inviting together senior people from government and senior people founders, ceos of tech companies. It was a very vibrant dialogue, eye opening i think on both sides as we shared perspectives. What have you learned about the partnership with the private sector . What can every day American Companies do to assist in this competition to help preserve our free market economic system, preserve our competitive advantages and return, you know, to this competition that has been kind of a oneway competition in favor of the Chinese Communist party for quite some time . Yeah, hr, i couldnt agree with you more. This is a passion of mine, having come to government from the private sector, and you know, our good friend at the Hudson Institute and your coauthor of the National Security strategy told me during a fire side chat, she said i was a walking Public Private partnership, so i wear that badge with honor. And chinas economic aggression is the reason why i actually first came to government, why i went to washington. The truth is i understand these issues facing the u. S. Businesses really at a personal level. You know, i grew up in ohio. My father owned a machine shop. You know, good times there were five of us. And tough times it was just me and him. I saw how chinas weapons of mass production devastated Midwest Companies and gutted the sme business, the heart and soul of our economic engine. Also when i was a vp at gm, i could see when you build a manufacturing plant in china, you are not just handing over the blueprints, but you are handing over the process engineering, your training of people and then later, you know, as a tech executive, i have had my intellectual property ripped off by the chinese and i learned this is an occupational hazard for any American Company whether you do business with china or not. Now i can see the intelligence state department, it is beyond my comprehension how long they have been doing it, how systematic they are, and what they have stolen, and so with this responsibility of heading up americas economic diplomacy, i made it a mission to get u. S. Companied involved in our efforts u. S. Companies involved in our efforts. One of the things i did was at the beginning of the year brought secretary pompeo to Silicon Valley for four days and, you know, he doesnt go anywhere for four days, but i think it was a great trip, and we had private conversations with numerous ceos. I had a dinner at my home in San Francisco with 36 ceos, where we discussed not only does the ccp pose a real and urgent threat to democracy and National Security, but a real and urgent threat to their business because china has picked out hightech as the major battleground, and their objective to is put these Great Companies out of business, and you know, this was also when the secretary discussed Public Private cooperation, the Hoover Institute, as you know, firesad chat with the secretary. Fireside chat with the secretary. Private Public Partnership is also a critical component in the economic Security Strategy and a culmination of this is our vision that we call the Economic Prosperity network which is comprised of countries, companies, and Civil Society who share common values, operate under a set of trust standards, and those are things that we would call american values. Europeans would call them democratic values. Around the world probably a better translation is trust principles, and they include things like integrity, accountability, transparency, reciprocity, respect for rule of law, respect for sovereignty of nations, respect for property of all kinds, respect for the planet, respect for rights of labor respect for human rights, and it is in all areas of economic collaboration, whether its trade, commerce, money flows, digital, energy, infrastructure, education, research. And, you know, i think this has proved to be just a great something that when in my bilateral meetings with countries, it just resonates with them because they share those Common International partners, and at the end of the day, it is really about trust because trust is the base of every relationship and you do business with somebody else because you trust them. And so this idea, this Network Provides a tangible means for companies to partner in a whole of nation effort to defend economic and National Security. And, you know, we know hr that ccp strategy is to seduce with money and reinforce with intimidation, retaliation. And there is strength in unity and solidarity, and it provides us all with strength, in numbers as companies and countries seek to confront the threats of chinas aggressive retaliation tactics. this is a big debate. You saw the headline in the economist recently. You know you see the narrative that well its much better than having a democratic open and free society even though we dont really know what happened and shes china because you cant trust the data that comes out of it Chinese Communist party. What is your sense as her contacts of the diplomat to the degree where getting more International Cooperation and a secretary pompeo said this is in the u. S. China problem, to Chinese Communist party versus free and open Society Problem area in. I think you are so right h. R. President trump did a great job of waking up the u. S. In terms of chinas economic malign tactics. But i think now particularly with the pandemic the rest of the world is waiting now and you know economics has been our partners breadandbutter and my team in the state department and that includes thousands of economic officers staged around the world. You know i mentioned earlier with what we have seen in 5g and this is including with the uk and greece, those are two examples of how to help our partners understand economic and National Security. For those who they do business with and i think whats going on in hong kong is also another group, what countries are realizing through this pandemic ended to mensturate to start difference between america and all of our other allies and i think the things that we have been able to accomplish proves what likeminded partners can and must do in our interest. All these bilateral meetings with their loot leaders theres no sustaining prosperity without liberty. That is the best way to secure liberty is to align themselves with strength in numbers and the United States and our Economic Prosperity network is a new framework for countries to add to themselves and the values of trust freedom and prosperity and rule of law. The u. S. Remains a beacon of hope for freedom and the world wants us to leave and thats exact why would we attend to do with china. Or could be a statement more aligned with hoovers mission. Thanks for having this conversation. Theres so much ive learned from my colleagues here and elizabeth who was with us yesterday and who spoke on the third revolution was brilliant and how he has oriented the Chinese Communist party to closed authoritarian system reversing the trend we have seen in china previously. Thank you so much for having a conversation with you and back to our director tom and to the audience who i know have a lot of questions. Thanks. Im going to ask some of the better questions if i might. Christian asks where is the key Economic Strategy america uses not just punish the Chinese People but to alter the behavior of the Chinese Communist party . E i mean the whole focus is the Chinese Communist party and we have no e4 whatsoever with the Chinese People. We admire and respect them. We love them. The Chinese People through history have invented everything from spaghetti to gunpowder and they have some of the best scientists and entrepreneurs, technicians and pulitzers. One thing secretary pompeo said is that you know the United States and able chinas rise because we really believed that capitalism equals democracy and they proved us wrong on that. Its time to take off those rosecolored glasses and treat the communist party not as we hope but how they are and thats exactly what we are doing. If you look here again at what they are doing in hong kong if they follow through which is what they are talking about thats the end of hong kong long country to system ruled. They will lose their sovereignty. They lose their freedom and they live in fear and total censorship. So its the communist party. They are hellbent on two things. Number one first and foremost his regime preservation and the second is the stated goal is that they will be the dominant global superpower on the 100th anniversary in 2049 and its not just an ordinary superpower. Its an orwellian state. Authoritarian rule is like 1984. Thats what they want to export to the nations around the world. I would imagine a lot of Economic Strategies are in economic disengagement of some type or another. Craig asked as the u. S. Companies against pulling their supply chains out of china what is the likely chinese response . Well by the way i think one of the things youve seen is what they are doing in hong kong and its interesting because when we announced the trifecta some anonymous official party member said they are going to retaliate against hong kong and cisco and bullying boeing but thats a catch22 for them. I think we are going to see that response but i think we are prepared to handle that response and we want to make sure that other nations are ready for that response. You Software Example the tweet by the general manager of the eastern rock sympathetic to hong kong and within 24 million 24 hours 100 cleans sponsorships were dropped from the chinese Apparel Companies probably know as orders like that come from the top. China could move that back so we have the playbook. The nda was a visible one particularly because they came back as the ceo and they said we they wanted to fire the general management and we wanted an initial apology to china and hears the words we want you to use otherwise we will and up canceling. For every one of those theres about 100 other ones that we dont see and they go on every day and they go on every day and its time we got to really stand up. We also have to shine a light on ourselves. The big one for example is the financial system. Theres 150 Chinese Companies that are listed on the new York Nasdaq Stock Exchange and these are the only companies that dont have to do sarbanesoxley. They can be thirdparty audited. It seems to be off but thats my own personal problem. But what really upsets me if you think of the ultimate constituency at u. S. Businesses who on these stocks and they have gotten away with it for so long in use are recently that esb is not going to increase their allocation of these chinese stocks. Esp is our lawyers and Civil Servants and what we see is a pension Fund University endowment with funds everywhere reduce it. And totally eliminate their ownership. They are not transparent and you can see that in copy where they have allocated the next revenue stock. Its great for big universities like stanford as well. Your last pillar has to do with allies partnering with us and terry has a question to that asks how would you assess the willingness of our allies in the european nation to challenge chinas initiatives . Terrys concern is that person trump picked a lot of fights with their friends and they may not be willing to get behind this country and this president. C thats a good question. I can tell you the demeanor has changed and ive had a lot of recent dialogs for example with officials of the eu and they go you they go you know we have got our differences and trade and those kinds of things but the existential threat is china and i think europe is particularly waking up to that. Its interesting one of the first trips i went on was over in germany. I had a closeddoor session with 25 german ceos. I have come to know a lot of those folks over the years in my duties as ceo. When you close those doors they understand that chinas economic warcraft doctrine is one of concealment and deception and also one of parasitic relationships. Their strategy was 1949 in russia and in the early 80s on the United States in out squarely on the back of countries like germany over in the United States. I think they are waking up to that and you can see all kinds of things. They bought their number number one. By the company and they snuck up and became a huge shareholder at the national so i think they are realizing that and i think countries around the world, i think its in form part of my role in terms of economic diplomacy with these countries and theres nothing thats more united than the common rival. Heres a couple of questions that i will combine that has to building our strength to get this competition going. Chinese economic expansion it would seem we need domestic expansion to strengthen the supply their supply chain and to achieve this we would need labor which would require advanced ai robotics automation. How do you see these investments towards this rolling out and christie asked how does the state department bring ai into the economic statecraft . With regard to supply chains i think that point is spot on and the supply chain is shifting overlap because of the labor differences. Its not as much of a factor as it is any more exactly because of the point of automation and things like robotics and ai and manufacturing. That was the world i came out of. Its now the largest manufacturer in the world. Thats really a big factor. Its also something that our team is very focused on is both supply chains produce us some of the results of that and we are working not only with the interagency but with the top consulting firms in terms of analyzing the key critical supply chain and areas Like Pharmaceuticals and Rare Earth Minerals automotive and conductors and all those areas. We have woken up and how theyve been tangled those. That was part of their overall strategic plan. I think you are seeing a lot of things now for example United States congress to really rally the troops and do some of the things necessary to help our u. S. Companies bring those supply chains back or pull them out of china. I dont think youve seen in the u. S. Companies expand their manufacturing capacity or production facilities in over the last couple of years. Youve seen them bunch of them come out. They either go to our allied partners went to mexico so you are seeing that. We go a lot of questions on 5g. We are kurds by the uks repudiation and whats her governments plan to assert 5g . T. J. Observes what does the competitive 5g packets look like and the dependency this creates . I think thats a great question. This is probably the first major paradigm shift and there are a lot of reasons behind it. Theres no doubt in my mind that we can catch up and we have spent a lot of time talking to a lot of the leaders who are focused in this particular area because its going to be such a big industry and to create such a great opportunity. Up to this point what scared everybody off was china was just treating while way and cte as an extension of the communist party which it really is. They were subsidizing the heck out of them and so their aim was just to put the three major suppliers who are right now anderson and samsung that business. Now i think when youve seen some of the moves we have made to neutralize those entrusted benefits from trying it creates a great opportunity. You are going to see no doubt in my mind some Great Innovation come out of the companies along the lines of telecommunications. We are talking to them you know almost on a daily basis. And you speak to the question about whether you are kurds by uks recent repudiation of while way . Heck yeah. We were scratching our heads originally in this because they are part of a five. The Intelligence System and we shared the intelligence with them on some of the things that while way has done. Their sales guys talking about we will sign an agreement no backdoors but in a business which is the Software Business we are changing up the software every day so it comes down to one thing and one thing only its who do you trust and for the european telcos you trust to european 5g providers or do you trust these two companies that are run by former members of the pla where they have the National Security act. So its really encouraging and we are beginning to see that all over the world. One last question eric asked is there an effort underway underway to grow the number of countries in the economic disparity network . Potentially countries from africa to europe or latin america . Absolutely. If you look at this effort and a year ago when i was sharing this at the conceptual stage with so many of my lateral meetings and i have a ton with the south african and southeast nations. Outside the response i got from one Southeast Asian finance minister. He goes firing the United States as an alternative to the one way told road to beijing and i think what they understand is this is a unified and equitable alternative to that one road initiative. I have been fortunate enough in my career to build two networks. One was the her aretha network which has 7 trillion of commerce on an annual basis and the other is the Global Trust Network that adds 800 million unique users and hundreds of thousands of companies. When you are building a network there are three objectives. Number one you maximize the number of members. The power of the network is the number of members. The second one is to reduce the friction between the nodes. The software is missed is also trust standards and thats exactly what we are doing with the Economic Cost 30 network to the third one is to maximize the value for each one of those nodes for each one of those members so one of the things that we are doing is we are putting together prosperity partnerships or developing nations that dont just include our regular tools out of her diplomatic toolkit but also the United States great private sector. When i say private sector im also talking about educational set your and the social set your. When you look at things like habitat for humanity the Gates Foundation Opportunity International the biggest microloans in the world this really means a lot and unwrapping all those things around that. The United States is the most generous country in the world. It just dwarfs what any other country has done. The one thing i can tell you we are not good at in the United States government we are not good at marketing ourselves and we need to do a better job of telling that story and brand the good old usa because we done so much for so long. A great note to and on. Keep in h. R. Thank you so much what a wonderful conversation. Thank you so much really appreciate you having me and h. R. Thank so much and thanks to the folks who call then. Called in. You can step on out now. I dont want to step out. Youll have to drag me out of my own card. Shes imprisoned in two days later she hangs herself in herself. You know what tragic and unexpected result that the whole, that exchange that we saw was by the way goes on and on and on and on and we just saw a small snippet of it, when i put that on line i realize what i wanted to write about it does if you break that exchange down moment by moment you see multiple failures of understanding of empathy, of the million things
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