Michael levi is the david m. Rubenstein senior fellow and director of the program on Energy Security and Climate Change at the council on Foreign Relations. He was previously nonresident science and Technology Fellow at the foreignpolicy studies at brookings and the director of the federatifederati on of american scientists are teaching security projects. He is the author of the power surge, Energy Opportunity in the battle for americas future. On Nuclear Terrorism and the future of arms control. He received a bachelor of science with honors from Queens University in kingston in mathematical physics and his ph. D. Is from the university of london. Treat please join me and walk coming our authors. [applause] our format this evening is going to be a little different than usual. Im going to start by asking a few questions and then we will turn it over to the audience. Michael, elizabeth its nice to have both of this evening. I would like to start by setting the stage for us. Why did you read write this particular book a book that looks at chinas quest for resources so broadly from the minerals to food and Energy Insecurity and want her and more . First let me thank you heidi for having us this evening and thank the World Affairs counsel. Its a pleasure to be here and thank you to all of you for coming out on this cold and chilly night. Each of us probably has a slightly different reason for why we came to write this book. I think for me it really began initially number of years ago as my work on the environment. My first book was largely focused on domestic considerations of Chinese Economic Development and the ramifications for the environment but as i began to look at it i saw what china was doing at home was likely to be what china was going to be doing abroad. In many respects the same kind of Development Practices that would lead to the same kind of environmental challenges abroad that china was facing at home. That was my original impetus for starting to do research on this topic in 2006 and 2007. But as mike and i sat down and began to think about writing this book together a really became for me much more a function, an issue was that was at the heart of chinas rise and how china is transforming the world. If you look at this issue of chinas resource quest you see that it does in fact address all of those issues that we think about when you think about chinas rise and how it china has transformed itself. What is chinas impact on security and what is chinas impact on Global Governance . [inaudible] these are the kinds of questions in many respects that it tries to get that through this prism. This is how it involves an intellectual challenge. For me im at a similar place but i come at it from a different starting point. At first i should thank you for having us here tonight. Its great to be here. Where i started was at the broad intersection of economics and International Politics and security. If you look at how people thought about Foreign Policy during the cold war its really split into two areas. We thought about economics and markets and how we dealt with our friends and we thought about security and adversarial relationships when we looked at how the United States and the soviet union dealt with each other. There were two pretty different spheres but in most times in history they are not so separate and particularly when you see a rising power Rising Economic power increasingly taking political responsibilities of the world. The two tend to clash and ive tried to a lot of my work to understand that intersection. Liz talked about her last book in my last book talked about their consequences for Economic Security and the environment to understand how those pieces fit together. As i looked at that i started to appreciate more broadly to get a handle on this place for Economic Security. If you look at history, rising powers tend to engender concerns on economic front, political and security front through their efforts of secure resources. Countries that pretty do pretty much do it anything they want to, they have people in technology and capital but you have to deal with the resources that are on your lap and if you dont have then you go out. Whether it is ancient greece or japan in the 1960s and 70s and 80s this is an inevitable part of what happens with the rising power but to Say Something about the last part of your question why so broad . In order to get a real sense of whats happening i do think you need to look across these different resources. If you look at people who study oil and come to conclusions about chinas resource they have a different picture of china and the world then you get if you look at someone who studies food we talked about this early on that to really get the full sense of whats happening we have to look at a variety of resources because it turns out the way china is dealing with each of these varies enormously. Let me go to your subtitle. Give us a few examples of how its changing the world. So there are obviously a lot of examples that i will tell you where its had a bigger impact than any other area and one that i look at for the future. One of the striking things when we were doing this was the repeated conclusion that chinas biggest impact in a lot of ways is in. So we focus on china investing in this or that part of the world of the possibility that china might becoming gauge militarily because of its resource quest. These are the exciting things but if you really drill down on of the biggest impact so far in a lot of ways comes because china buys an enormous amount of resources. On the market, but with a very globe broad global consequences and youve seen enormous rises in the price of oil, a gas, iron ore, of copper that wouldnt have happened had this huge demand not emerge so rapidly from china. The consequences of that touches everything, not just the countries that china buys from but other producers that are able to develop our resources and sell them for more that has economic consequences but also environmental and social ones and it also has an impact on consumers around the world. We pay more for our resources because of this emergence of china. That to me is probably the vegas thing that happened so far. When i look at the future im very interested in whats going to happen with the security of the path through which chinas resources travel. We take for granted that we can produce oil in west africa and have it end up in the United States are in japan or any other part of the world. We expect that this Global Economy run seamlessly and we forget its underpinned by power and underpinned by decisions by powerful players about who can. With whom and if you look at the future i dont think you can be completely certain that we will have that same security under pinning. I think if youre looking for big ways that china could change the world in the future and im talking multiple decades out you are looking at the security and up innings of that. One of the things that interested me was how [inaudible] this is a way china is transforming the worlds governance landscape and if you look at for example issues like transparency and if you look at things like labor safety the practice is chinas of whom are very much the ones that china is bringing abroad. The minister minister of Land Resources considered to be one of the most corrupt in the Mining Industry so you might expect to some extent when chinas Mining IndustriesCompany Brought their used to dealing with things that deal with bribes and this is something we found across the resource landscape. In terms of the environment as well. The Chinese Companies recently started to do things like Environmental Impact assessments on the homefront so again the Chinese Companies began going abroad and a lot of them did Environmental Impact assessments and for countries whose own governance was not that strong of course they didnt bother enforcing any kind of laws in terms of undertaking these Environmental Impact assessment say you found undermining of governments governance. When it comes to labor as well one of the things that we found her research is Chinese Labor practices has two impacts. One is that many resource rich countries will report that Chinese Labor practices are at the bottom of the barrel and their Safety Practices are much worse than the Safety Practices of the americans and the pay is much less than other countries. To some extent thats true and to some extent its not. The story is more nuanced than that but also what you see is this enormous influx of Chinese Labor. It really is very different from any other country and has caused a lot of tension for a lot of countries. Here too you find countries react very differently. Countries with strong capacity tend to pass laws which says Foreign Companies have too hired nine mining workers from mongolia for every Foreign Worker that they bring in or they will task the wages of the Foreign Worker by 15 . They will find different ways to try to limit this influx of Chinese Labor. The Chinese Laborers are much harder workers. You see this again acrosstheboard whether countries in africa or southeast asia. Theres this sense that workers in one of the interviews that we did the chinese officials said they want holidays. They wont labor unions and this kind of thing. The Chinese Workers will work seven days a week and 12 to 18 hours a day. So in many respects when it comes to issues of labor and the environment and transparency with the chinese how they work at home is how much is very much how they work abroad. Later perhaps in our discussion i would love to talk about the way this is changing because there are a lot of treasures on china both of me outside and then from the bottom up within china. As we see better practices in terms of Corporate Responsibility to china on the homefront in here too having an impact on how china behaves abroad. This is one of the positive things that we have found over the course of our research. I think thats another way in which chinas transforming a landscape. It want to come back to the Strategic Access to resources but first i want to go to a point you both made about china obviously not being the first emerging power that went out looking for resources. Tell us how its different than the english experience or the spanish for the United States for that matter. One of the interesting things about the work that we did that those of us took a piece of the historical puzzle and since my background is china i took the china party and since mike is more global he took the other part but from the chinese perspective what was fascinating was to look back even before but that was where we focus our book so not quite 700 years can see there are many strains of continuity in how china approached its resource quest dating back centuries. Its really quite surprising to me in fact some of the things we discovered for example, there is always a strong degree of state control in the over resources that the Chinese Government was always interested in dictating what would be grown. They wanted to grow rice or grain, they could want to grow tobacco so they try to pass laws that would say you can grow tobacco because the demand is too great for grain. Things like resource of security, fear of not having enough resources especially grain. Again it dates back centuries. Its one of the things we track throughout the book that this is still a central part of the chinese mindset is concern over whether or not china can use grain and food as selfsufficient. China going out did not begin 15 or so years ago. China again dating back looked outside of its borders in particular for rice but also for silver and for wood. And sometimes it was expansive in its land grabs for example taking over taiwan, a fertile land for rice and sugarcane. I think one of the really interesting things that are a little bit different from other countries is the strong strain of continuity and probably the degree of central State Government control attract really all the way through the history of china. Let me flag one precedent and to go to the most recent other example and thats japan. If you look at a lot of the writing in this country about the rise in japan and japans demand for resources particularly oil and or its very similar to what reid reid today. There are a lot of lessons you can take from that. This evolution we have seen in china, first they buy on the International Market and then they start investing up broad in order to improve what they see as their security and supply. That strains the marketing creates a lot of tension that eventually things start to work themselves out and then you see a lot of pieces of that pattern reemerging with china. We are not at the end of the pattern yet and things could still diverge but we have seen that sequence of trying to picture things on the market it not being satisfied with that investing abroad, some tension but now may be a bit more of a rationalized approach to it. The striking thing you see with japan that i think you are starting to see in china is there are big fears that because the state is so dominant in japan japan will take the world away from markets. Theres a big focus of american policy for a long time because we want markets to govern the distribution of resources. It turns out Global Markets and a lot of these things are extraordinary powerful and very difficult to undermine a global market. We have seen the same thing and we know japan did not for example take away the global oil market. Now we see a similar thing with china. There were a lot of fears throughout the 2000th at china through his efforts to lock up resources would fundamentally break the market as a way of governing a lot of resource. And they havent. They invest a lot of broad but they procure most of their resources through the markets and their places were actually china not intentionally has driven us in a more market ace direction. Essentially nothing the iron ore before a certain writing this look i assume been commonplace to a lot of people in this audience but one thing that happened over the last decade or so is the china because it had so many small producers competing with each other to get at this iron ore for their steel mills through no delivered policy ended up with rising the iron ore market. They went from a persistent dominated by bergrin users to a much more normal market today. This is another important lesson. Even when the Chinese Government cant accomplish its goals china can change the world in big ways theres a really important distinction there. Just because china doesnt accomplish what it wants to doesnt mean it doesnt have a large import. One reads all the time news articles that begin with some reference to every ago in africa these days there are chinese businesses there gobbling up all of the minds and the resources of every sort and also usually in the same article there will be a reference to the fact that American Companies arent doing so well because the United States is more interested in human rights issues and Fair Elections in things like that and just dont bother governments with that. Tell us about the specifics of how china deals with its african resources. Let me offer a few words and then maybe mike will want to jump in as well. Something else we found surprising when we were doing research for this book is exactly what you began with which is the sense that china and is in africa and other places as well cobbling up resources and developing a direct pipeline, resource pipeline. But in fact if you look at africa china is the fourthlargest source of Foreign Direct Investment in africa, not the first and behind United States. In many respects it speaks to what mike just mentioned which is a much bigger aspect of chinas resource engages in. As opposed to investment in many cases so i think that bears remembering. That also holds true in many areas. For example with ran land we have read in the media about chinese land grants but in fact china is a distant third after canada and the United States in terms of overseas land investment. Such as some surprising facts that change your impression of how much china is gobbling up those resources in ways that other countries are also not dissipating. To your question about africa, i think the biggest challenge that china faces to some extent is china went in there and has a long history of engagement dating back to the 60s. It has many longstanding ties with african leaders, zimbabwe for example, an old friend of chinas and when china began an uptick in terms of Resou