Transcripts For CSPAN3 Panel On Trade Policy And Financial Regulations 20180214

The Georgetown University Mccord School of Public Policy. This was a part of a daylong conference on free trade and the benefits for america as well as other countries. This hour and ten minute Panel Focused on Financial Regulations and trade agreements. Perfect. So, im michael lobarman, im one of the conference chairs for the mccourt policy conference. Id like to start by thanking those who arrived and those who have been with us from this morning or just arrived from the u. N. Ambassadors panel. Think the next panel is really in some respect at the heart of the trade subject. Financial services is integral to our everyday lives and integral to the modern economy. At least in the western world and developing world. Every modern economy relies on Financial Services. Its also in many respects a good kind of like the digital section that we dont often think about how it crosses borders. We just assume when we go to atms, we will take money out of the bank and assume we have that same service when were on vacation in other countries as well. There is a infrastructure in place that supports a very complicated global web of services, but its not one that we engage with in everyday discussions, but its a very important one. The Financial Services is incredibly important industry and not only because of everyday lives, but simply because of the size of goods and services that cross across natural borders. Its also one that i think in recent years, especial yet last decade, has become much more important to the Global Political discussion. How do you regulate this industry, whats the best way to do so, how do we make sure its gains are shared in by everyone and how dwo we make sure it contributes positivity towards the economies it resides . I think we have an excellent panel to discuss these topics. So monitoring this panel will be knack lass. He cofounded the brugles think tank and 2002 in brussels. His research is primarily about Financial Systems and Financial Services policies and he frequently briefs senior economic officials in europe, the United States and asia and has testified at parliamentary hearings in member states. Hes been a financial and here in the senate. Hes been a financial policy expert for the European Commission, european parliament, International Monetary fund and the world bank. So a lot of organizations trust his judgement. Next, we have robert, who i will start off by saying you cannot trust my judgement on because hes also my current professor. Bob kyle is a highly respected lawyer assisting clients with Public Policy in washingtonbased problems he previously served in senior positions in both the white house and congress. Hes skilled in challenges that involve the International Dimensions and substantive complexity of the Global Economy. He brings 15 years of private sector experience in helping clients solve difficult problems and widely seen as one of the most savvy and effective attorneys helping people in washington. Prior to joining he served in the Clinton White house, first as a special assistant to the president for International Trade and finance, the National Security council and the Economic Council and one as the project assistant developments of the office and management budget he oversaw a 300 billion budget overseeing most functions of the government. Hes focused his time on a variety of areas. Next we have frank, who is cochair of patten boggs International Trade progress. Trade policy, trade legislation and International Trade negotiations. He is chair of the India Practice Group and leader colombia desk Latin America Task force. He other executive branch trade agencies, the u. S. InterNational Trade commission, u. S. Custom services in the u. S. Congress. Hes represented foreign multinationals from all over. Again, someone who really does know the needs of both governments and corporations in respect to the Global Economy and trade. Next we have douglas midland, who works in the Financial Division within opecs structured finance and Insurance Department where she underwrites loans across a range of sectors and geographies. He spent tyke working with opecs for all deals in the structured finance and finance departments. He previously worked at Morgan Stanley new york, as a fellow member of the next Generation Council sr21. A Nonprofit Research group. And holds a masters in art and International Relations from john hopkins. Finally, walter is a senior Legal Counsel at the Legal Department of the inf. A Belgian National and holds degrees in both law and business administration. Prior to working for the imf, he worked for belgian and European Central banks. So with that, i will leave it to the people with much more impressive resumes than me and we can start the conversation. Thank you so much. That was, indeed, an impressive setting of the scene for this panel. Were going to talk about trade, but also about investment, about Financial Regulation. Thats the distinctive attribute of this panel. Going beyond the core trade stuff of exchanging goods. There is a lot of jargon in that area. There are lots of acronyms, lots of specialized knowledge. Inevitably so. So i encourage our panelists to go into the weeds but to explain. If you use an acronym, explain it and those kinds of things, but i think we shouldnt shy away from going into at least some of the technical stuff because otherwise its difficult to be relevant. So without further noise from me, lets go first to our panelists. Ill ask each of them to make relatively brief introductory statements and then ill take it from there. Bob . Thank you, nicholas. I wanted to begin by asking one very important question and my comments with center around that, and that is, where is the Global Economy heading . What path are we on . So are we on a path where there will be greater nationalistic trade policies, a decline in embrace of international institutions, a path that is more characterized by the policies of President Trump, Marine Le Pen and brexit, or are we on a path where for several years here we may be through that period, but we will then return to the postworld war ii path that evidenced greater globalism, gradual embrace of global institutions. Which paths are we on. Thats what id like to talk about. First, let me thank Michael Oberman and georgetown for putting this together. Michaels done a great job. Hes helps by another student in my coalesce. And a special shout out to lesl leslie lets go back to this question, which path are we on . All of us like to think we live in a bit of a special era and were at a big Inflection Point. Its not just a speed bump, its a true Inflection Point. Let me begin by giving the contrarian view and the position that maybe this isnt a particular Inflection Point going back to the 1800s and looked at 60 developed countries and examples of what happened politically in those countries after you had a financial crisis. And they found a very clear pattern. Four things happened. First of all, it takes about a years for a country to get out of the economic effects of a financial crisis. Those are the eight years weve just been about through with the election of President Trump. Two, you saw an increase in most countries of farright politics. Think populism as well. Three, you saw a distinct challenging of the traditional political parties. So think Bernie Sanders challenging the democratic Traditional Party and donald trump challenging the traditional republican party. And four, you saw an increase in confrontational politics. Have we seen weve seen that as well. Now, after that eightyear period is over, gradually those effects dissipate and things go back to a little bit more the way they were before the period. And so if you believe that pattern, then this is a speed bump. Weve changed things but we eventually return to that. Thats one point of view. The second way to look at it, though, is this isnt a speed bump, it is more an Inflection Point. And there are certainly unresolved tensions in the Global Economy that we need to think about. One is, what do we do about middle income workers in developed countries and their capacity to compete and have good livings, given lowwage workers in emerging markets and also the rise of automation . Thats an unresolved issue. Thats not going to resolve itself within the eightyear period. Second, what about immigration and the pressures that that causes in countries. Good and bad, but the problems that countries have absorbing greater immigrant populations. Again, not likely to be resolved in eight years. And, three, i would just throw out global architecture. Were changing into a world in which the Power Centers tend to be the United States and china. Yet we have a g20 that is still built a little bit, you get a sense its a derivative of the g7 and a world war ii structure. We have other structures that probably need to be aligned to the tend has a tendency to work out those problems and Inflection Points and difference of approaches. Which one of those are we in . Im not sure we know the exact answer to that, but it has enormous implications for the Financial Services area. Because Financial Services traditionally has not been something that is sort of most affected by trade negotiations, and, in fact, thats been handled by treasury departments and financial departments, its a bureaucratic thing, but more importantly, probably whats made the greater difference in investment, which is what im going to focus on, is more what i would call competitive reform, that emerging markets needed to reform and liberalize investment in order to get Foreign Investment and create jobs for their people. That probably had a much greater impact over the last decades than trade negotiations. If this construct of globalization and openness changes, what does it mean for that dynamic thats occurred and the democracies that have grown up in a number of those countries, including in latin america and elsewhere . So thats a big deal in this area. The second thing id point out is just what happens to the question of using and the intersection between National Security and Foreign Investment, you know . In this country we have cfius, the committee on Foreign Investment in the United States its the process our country uses to affect Foreign Investments into the country that could affect National Security negatively and block investments if that needs to be done. So forth. Many of you are probably familiar with it. The Trump Administration has been very difficult in terms of approving investments by Chinese Companies that might touch in these areas, and that is likely probably to continue for some period of time. Other countries are beginning to use this mechanism not only to block Foreign Investment, but maybe as a trade tool to block investments and block other countries from gaining power. To what extent do those mechanisms start to become a tool of trade and investment policy and not as much National Security policies or the two get blurred. Thats an issue thats out there and needs to be addressed. With that, just throwing those out. Maybe we can talk about that more in the q a, but i wanted to throw out those large ideas to kick this off. Terrific. Thank you, bob. Thank you for having me here. Bob really piqued my curiosity about the history of trade negotiations. Im readying a very interesting book now called clash over customers, which i think is the First Comprehensive history of u. S. Trade policy, going back to the founding of the country. And it strikes a couple of themes that bob touched on, maybe inadvertently, but the notion that trade policy and Monetary Policy are related is reflected in what has happened historically when the u. S. Economy has been threatened by International Developments that really have more to do with Exchange Rate fluctuations, they have to do with monetary and fiscal policy, the reaction many times by congress and then by the president or the administration is protectionist trade legislation, which really doesnt fix the underlying problem. So that sets the stage for where we are now, and addressing bobs question somebody is this a multilateral world or a unilateral world . I think we all share some concerns about where the u. S. Is heading now on trade policy. You may not know that every president is required to file essentially annual report on trade. Its a National Trade agenda. The latest one is due in less than three weeks on march 1st, but President Trump filed his report last year. He talked about a couple of things that probably shouldnt surprise you, but what struck me most was a discussion where he talked about National Sovereignty also takes precedence over trade policy. And to me that means that this is an administration that is going to look to implement policies on a unilateral basis and not on a multilateral basis. If you look at what happened last year, its very clear that the president likes to sign executive orders. There are lots of Photo Opportunities of him signing those executive orders, initiating studies, bringing complaints. That dont require an adjudication determination by an independent body, like the International Trade commission, but can we done by the president , those are the 232 investigations. To me it sets a troubling precedent because i worry that if the u. S. Were to lose a wto case, they have and they will, i can see this administration saying, we werent elected by International Bureaucrats in geneva, we were elected by the people of the United States and protecting their jobs. So if you say we violated the wto, do whatever you want, im not changing a thing. That can be the beginning of a very dangerous process in trade policy. So, let me briefly go over in the short time i have some of the developments on trade negotiations. Bob talked about nafta and some of the other agreements. First of all, you know the regulations from dodd frank from 2010 sort of set the framework and they talked about the need for some sort of regulatory harmonization. Bob is right. Financial services and Financial Regulations really arent the primary topic of trade negotiations, whether its nafta or tpp, theyre done separately through treasury and other agencies. But i will point out some things. Nafta, well, you know we are renegotiating that. The u. S. Has a big competitive advantage in Financial Services. 4. 3 billion surplus in Financial Services with canada, 1. 1 billion surplus with mexico. With respect to the tpp that youve heard about, we now have the tpp 11. President trump withdrew from that Transpacific Partnership agreement. When he withdrew, there had been a number of reservations that have been taken off the table because they were at the insistence of the United States. Very quickly on Financial Services, the text isnt public, theyre about to sign this agreement very soon, but there are commitments with respect to Financial Services regarding regulated Financial Institutions and investor and investment crossboard trade in services will also be addressed in the tpp. Finally, there is something called the ttip, which i think is still alive. The u. S. European trade agreement. Very quickly, one of the big issues for ttip and it may come back, regulatory coherence. Why dont we make standards and regulations the same between countries . In this case, between the eu and the United States. The big banks on wall street put together a big pool of money to launch a campaign that said this is a great idea. Were all in favor of regulatory coherence on Financial Services. What they really meant was here is our opportunity to water down dodd frank. We are going to have regulatory coherence with the europeans and therefore all of these restrictions that we hated, we have an international basis for getting rid of. The democrats responded, caught on to that and said there is no way youre going to dilute dodd frank because ttip is in limbo, well wait to see how that develops, but i think its an important process to examine as you use the trade and Financial Services. Very quickly on brexit. I know you talked about it before. There are some interesting Financial Services issue, and the only thing i would mention very quickly is that just today the commission released, and i havent seen these notices, but notices to the fnchl Services Stakeholders highlighting the implications of brexit in the following areas. Financial instruments, banking and payment serves, posttrade Financial Services, asset management, Credit Rating insurance agency, insurance, reinsurance and statutory audits. All of that beginning today from the European Commission that will allow stakeholders to comment on brexit. With that, im going to turn it over. Ive learned a lot. Thank you to the mccourt scott for having me as well. Aside from being probably the least accomplished person up here on the panel easily, i also have very little, in faeanythin to do with trade. Like i said, ive already learned a lot. My background, i have been focused more on the investment side and look forward to speaking to that a little bit. I will also note in terms of my introduction, the one point that was left out that im probably the most part of is im also a georgetown alum. I got my bachelors degree at georgetown, studied a year in beijing at bueijing university, and so my background at georgetown, my time spent in east asia, i will definitely pull from those experiences, really, to kind of speak to todays topics. And alsoed into to just point out coming from opec, a u. S. Government agency, a lot of the views im able to share today will be that of my own and not those of the agencies. I thought it would be worthwhile to speak a little bit about opic. We are a small u. S. Government agency, about 250 people give or take, and we have roughly a 29 billion cap in terms of capital available for us to invest in developing countries. Were at about 22 billion in terms of existing assets. And we are open in about 160 countries, all developing, for we support investment into the private sector into these respective countries. We have to partner with private sector investors, and our projects cannot be government or publicly owned. So very much our investment is going into the private sector and helping local economic growth. The products we have available to do so is our financial products. So longterm longterm debt. We also have Political Risk insurance to actually help incentivize Equity Investments into countries that would do so if not for various reasons largely related to even Financial Regulation. And lastly, we have a product that supports private equity funds. Basically implementing a deadlike structure into and gplp structure for private Equity Investments. One thing id say my experience in terms of my time at georgetown as well as since then and now at opic is, you know, it requires us to go to the countries where were investing. So you do walk away with an interesting perspective. Again, all of the countries where we operate are developing. It requires us through our Due Diligence to really understand whats going on politically, what are the Financial Regulations by which we need to abide in order to support investment . What are the relevant entities involved, whether, you know, i do a lot of infrastructure and powerrelated projects, so, you know, whether its the administrative power or the administrative finance, were usually meeting with those individuals as well. So i think, you know, just in light of todays discussion, and as bob accurately pointed out, you know, there is this interest in terms of a shift in mindsets, kind of a resurrection, i guess, of more nationalist perspectives and being a country that has seen a political a political shift to a certain extent, how is that being perceived abroad . I would say that, you know, there is kind of two answers to that, and i think it also speaks to how spheres of influence may be carved up with more traditional allies or kind of similar mindsets as far as nationalistic mindset goes. You do see countries, you know, point out the philippines as a good example of where actually our the perception of u. S. Investment has significantly improved because you have two heads of state that are a bit more lined than they have been in the past. You know, there are very similar there are other countries, you know, that would fit the same mold. Ive also spent a lot of time in japan through my japan at opic, and oddly enough, it certainly isnt a developing country, but the rationale there is really a similar strategic objective in, you know, with a very impressive rise of china and so far certainly mixed results, but overall a Successful Development model in terms of how china is investing abroad across the eurasian land mass. How the u. S. And the japanese can Work Together to provide an alternative mechanism, an alternative framework for supporting investment in developing countries. Also out of the experience in japan has been, what is the reaction to pulling out of the tpp . Very much the countries that have been involved all along are still Going Forward and negotiating the tpp. Its now called tpp11. And there is kind of still this mindset, i guess, you know, recent news aside in the Trump Administration, perhaps showing some interest in reentering those discussions. Well see what that ultimately comes to. But tpp11, the mindset, at least in the countries, you know, with which ive interacted, still have this kind of mindset of just wait it out. This is only four years and the u. S. Will likely come back and well figure this all out and it will become this kind of, you know, entity that was originally envisioned. So i guess thats those are kind of my perspectives in terms of how the past year has gone, at least in terms of the investment world and im happy to dive into some of the more other details. All right. Thank you. Good afternoon. As youve heard, i work for the International Monetary fund. As my colleague, all of my opinions are my own and i dont formally represent the fund. I want to focus on two objectives to give an International View and the monetary issue questions broader Financial Stability issues of trade, openness of trade and Financial Services. The 23u7fund as an organization supportive of trade, openness, incrowdi including in the field of Financial Services. You may have seen our managing director is quite madis quit open in advocating trade. However, the fund is not dogmatic about trade. One must recognize that trade openness causes negative side effects. A colleague mentioned the midwest. He talks about nafta. You know, i would invite each one of you to contemplate, for example, what nafta has done on farming in mexico where the salary of a farmer in places today is 40 cents per day. 40 u. S. Dollar cents per day. Policymakers must consider the negative side effects of trade when it comes to the midwest. When it comes to Financial Services, the biggest problem is that unbalanced opening of trade to Financial Services may create financial instability. I dont have time to go into the details, but believe me, it can. Now, what is very important to understand, however, is that trade openness and Financial Stability are not mutually exclusive. Theyre not a zero sum game. Its perfectly possible to design regulatory, supervisory, legal, institutional frameworks that contribute at the same time to more open trade and more Financial Stability. Now, the problem in the world is that most countries do not have that kind of framework. And they really suffer from a double problem. The first problem is overprudence. What do i mean by that . You know, countries have looked at what happened at the north atlantic in the past ten years. Theyve seen what the ballooning Financial Sector can do, what kind of prices it can cause, their terrified by this and they really believe that by having very rigid, tough Financial Regulation, theyll avoid the kind of trouble weve had in the north atlantic over the past ten years. Now, they say sign 10, 20, 30 free trade agreements. Nothing changes there, all right . And im going to give you a very practical example. One way Financial Services are traded across borders is through branches of banks, a bank of country x opens a branch in country y to start providing Banking Services to the public over there. All right . You look at the western hemisphere of this continent, mexico has entered into nafta with the United States. Foreign ownership of banks, but Branch Banking is not allowed in mexico. In brazil, the second largest economy on the continent, you can only open a branch of a bank by direct authorization of the president of the republic, the head of state. In colombia, following free trade agreements, oh yeah, you can come open a branch in colombia, but were going to regulate your branch in exactly the same way as we regulate the Colombia Bank means makes any usefulness obsolete of opening a bank in kilometer bay. These are all examples of overprudens. At the same time, you have underprudance. Thats a problem on the continent of africa, but it exists on this continent as well. Very enthusiastic about trade and say, oh, you all come in, but they dont have a Regulatory Framework that helps them dealing with crossborder Financial Services. For those of you who like technical aspects, regulatory tool kit that tool that you use in your tool kit for crossborder banking is, for example, low Asset Maintenance requirements. If you open a bank in another country, your regulation will require you hold as much local assets as well as local deposited to make sure they dont go abroad. Youd be amazed the countries that have a good local Asset Maintenance rule, you can count them pretty much on two hands. Also the question is how do we approve that . How do we more widespread use of Financial Services chapter freed frayed agreements would help. Id like to confirm the point of the first speaker. The impact of free trade ingredients on trade and Financial Services is relatively minimal. It becomes, however, useful, and thats really your point, i think, if you combine entering into free trade agreements with a more profound and comprehensive and wholistic Regulatory Reform of the Financial Sector in your country and opening up is just a part of the picture, but the bottom line is really that you just try to improve generally your regulatory and institutional and supervising frarks. No frameworks. What we really believe works, and why i was so happy seeing the title of this session, is that a way to open up trade and Financial Services is, indeed, by harmonization of Regulatory Frameworks. We have seen that in europe where we really have experienced and understood that harmonization of Regulatory Frameworks is almost a precondition for opening up and removing your barriers in the sector of Financial Services. Now, if you look at whats happening globally, you have bodies such as the committee on banking supervision, where really the Central Banks come together and they set standards for banking supervision, you have the Financial Stability board that has standards for Bank Resolution and crisis management, including crossborder, but the problem of those standards is that theyre really 10,000milehigh. And they will not help to overcome the overprudence that so many countries have and theyre not granular enough to overcome the overperusence that other countries have. What do you believe . We believe in the staff of the fund that the solution is in the harmonization of supervisory rules, but, but, but at the regional level. We dont think that something major will happen the global at the global level, but at the regional level where you have countries with broadly similar supervisory cultures, language, legal regimes, legal traditions, thats really where they can come together and start opening up. So in some, i really think you have a great title for this session. There is a direct link between harmonizing Regulatory Frameworks and opening up, but, in fact, it should not be a line, it should be a triangle. The third should be Financial Stability. Lets keep in mind as we move towards opening up. Thank you very much, w the out outer. Very thoughtprovoking. Ill give the floor to the audience, but before that, ill ask one followup question to you i encourage you to make a succinct answer so we have as much time as possible for interaction with all the rest of the participants. Starting with you, bob, you mentioned a cfius, the committee on Foreign Investment in the United States, and you mentioned the risks that there is some blurring of the line between National Security imperatives, which is the of cfius and broader concerns like, you know, economic nationalism, industrial policies, protection of local champions and the like. This is not new. This has been actually the very important of creation of cfius was to, if my memory is correct in the 1980s to response in waivers in World Investment from japan, which was an ally. There has been a lot of investment in the u. S. Of countries which arent allies but with which we have a complicated foreign relations, you know, like the gulf countries or china or others. So this tension between National Security and economic nationalism is inherent in cfius. And my question to you is, to coin a word, is the Trump Administration unprecedented here . Is there something really new in whats happening now or do we just have, you know, a rerun of things we had, i remember when dubai ports world, for example, was investing in u. S. Ports or Chinese Investments in a few u. S. Technologies in the last 15 years or more. So the Trump Administration different . Yeah, thats a very good question, and i think the short answer is it remains to be seen. It has been hard through the cfius process to get investments by Chinese Companies approved. Probably more than in past administrations. As you know, and youre right that this debate about National Security versus using it for other purposes is a longstanding debate. This comes down a little bit to the bureaucracy of the United States. The cfius committee is headed by the treasury department, and that was probably done quite consciously by past treasury departments because they wanted to be able to be sure that we had an open investment regime generally tempered by the need to deal with National Security preps, rather than something where inward Foreign Investment was choked off entirely. It remains to be seen entirely how the interagency politics of that is going to play out in this administration. You also have members of congress, notably senator cornyn, who has introduced a bill that would lower the threshold for having to review traditional transactions but also try to deal with joint ventures and sharing of information with other countries through the joint venture. That is a sort of an unprecedented approach to using cfius. Im not saying good or bad but it is unprecedented i think its fair to say. The question was will Congress Push it in that direction as well . So i think were still midstream on that. Frank, you mentioned a very interesting relationship between wall street firms and trade negotiators with ttip and you gave this stylized view that wall street was pushing for quote, unquote, globalist regulatory coherence, harmizati harmonization views because it serves their interests to possible dismantle some of the dodd frank regulations. Now, steve bannon is no longer in the white house. There have there have been many indications that the Trump Administration was not exactly antiwall street, nor is congress at this point, so would you extrapolate that insight . The direction of travel for the Trump Administration, despite the America First agenda, is one of Global Financial regulatory harmonization because thats what wall street wants . Thank you. Thats a very interesting question. Before i answer that question, can i add ten seconds to your question. Sure. To bob. Which i think this bill of senator cornyn is extremely important. It is an effort by congress, not the Trump Administration, to broaden, as bob said, cfius powers and i dont think there is any opposition to that bill. Its very difficult for a member of congress to oppose legislation to a bill that is going to make it more difficult for companies to you can say the chinese are going to take over all of our cutting edge technology. What if it destroys jobs . Well, i think the point of the legislation is to say we need to protect National Security even more than we have, and mr. Trump on this one, were with you. Democrats and republicans. Because it will hard to vote against it. Just my prediction. But to your issue, you raised this fundamental debate which weve all been reading about, the tension within the white house on trade policy. There are those who you can call extremists, America First, who tend to look at a very unilateral approach come hell or high water to protect jobs, go back to the campaign. There are those who you might call realists or whatever it is. Led by the national Economic Council that take a more measured approach to say, we need to live up to our commitments on a multilateral basis and we cant we cant really go wild on some of these trade actions. Ttip, first of all, if ttip is resurrected, which is by no means a certainty. I heard prior ambassador osullivan speak about this a few months ago. If i can quote him while hes not here, he said were still open to talk about ttip. I u. S. eu trade agreement. Very wouldnt been approached on that but were open. You know, donald trump withdrew from tpp within days of being president. He has not done anything with respect to dismantling or disrupting ttip. Its sort of in a state of suspension. If it comes back, which it may, and this issue is raised, it may be a litmus test as to which school is going to prevail in the white house. Think in terms of dodd frank regulation, regulatory coherence, in my view, there doesnt seem to be a great political argument for opposing wall street on this because its not a jobs issue, you know, i think donald trump would look at dodd frank and say, look at how many thousands of pieces of religion regulation we have. This is part of the problem. Its not an action thats going to say, wait a minute, youre betraying the coal miners in West Virginia and the Steel Workers in ohio by backing wall street. On this issue, think theyre totally sprite. Separate. Doug, you raised my appetite by alluding to the chinese one belt, one road project, so this idea of the new silk road, right, that china would finance projects to have seamless infrastructure for trade and investments throughout eurasia and eastern africa. And you mentioned discussions on the joint alternative approach from the u. S. And japan, if i heard you correctly, that would be for the countries in southeast asia, east africa, eastern or or Central Europe that would be in opposition to the chinese belt and road. Can you tell us more about this. Sure. I think id like to phrase my answer i guess in a way of what the strategy is as well as what i think the challenges remain, and, you know, its also important to note that, you know, the one belt, one road strategy, you know, its traditionally known as, you know, kind of the cross aeurasi land mass and the indian ocean. I forget which one is the belt, which one is the road. Thats the road. I knew it was kind of flipped in terms of logic, but, no, i mean, its important to note that, you know, opic leadership absolutely takes a much more cognisant approach of National Security interests, in terms of how opic is utilized as a tool for a Foreign Investment. We are thinking through not just, you know, traditionally weve basically looked at and were a small agency so this is really how our resources have been devoted is, you know, in terms of u. S. Interest in investing and developing countries, how can we support that specific project . Its really on a project by project basis. And the idea now is, well, can we think a bit more broadly . Can we actually have a regional strategy, a specific country strategy . And, you know, taking lessons from the past, is it smart to look at this as throwing in dollar for dollar or is it or is it, you know, kind of taking a cue from i guess being a more digital digitally connected world and where communication is much broader and in your face, can we take a bit more of a strategic view of looking at it on a country by country basis and saying, you know, even a single pr win can actually do a lot more damage than say a dollar for dollar meaning, you know, if theyre putting up ten power plants, lets put up 12, you know . I think weve learned our lesson that that just doesnt make sense and its a waste of money. So they being the chinese here . Yeah, absolutely. By far the largest competitor i guess you could say when youre saying when youre looking at potential projects, when youre looking at potential u. S. , japanese or whatever projects, that not only source goods, thats not what or quite frankly, thats not what our focus is. Again, its not necessarily the procurement of equipment, but the actual investment. Were more traditional project finance. So the strategy is, is to take a regional approach of what countries do do we see as being in the u. S. National interests in increasing our role in that country . And through that, you know, basically old school projection of soft power. And how can we go about doing that . They are our interaction with the japanese is not only to enhance, you know, what was already a strong alliance, but to how to utilize each others strengs. Strengths. And, quite frankly, were still walking through those exact details, but the idea is that in a lot of countries or Companies Already Work Together. Its just a matter of in what form of partnerships does it make sense the most . And we dont want to be overly restrictive. I mean, no sustainable project is ever going to come together by saying it has to be this percentage from each, you know, and u. S. Components have to fit this mark and japanese components have to fit that. It does need to be flexible in order to be sustainable. And we already have some existing projects that weve kind of hailed as early successes. We recently closed on a solar facility in jordan in which, you know, opic is a lender and japanese nexi bank is providing insurance from smbc. So we have a model that we know works. Its now a matter of how can we be flexible and develop a framework that addresses not only the private sectors needs, but, you know, delivers what is actually needed in the host country. Can you give us a sense of the geographical priority countries or subregions here . Is it same as one belt, one road or is there more specificity to it . Yes. I would say its more on a country by country basis. For instance, indonesia, vietnam, myanmar are particular countries of interest in southeast asia. In terms of south asia, india and sri lanka in particular are countries are interest. You know, kenya and even gentlem djibouti, you know, also stand out as, you know, some of those we already have a pretty sizeable portfolio. Others we have virtually nothing. You know, part of the question is why, and, you know, this kind of goes to my point earlier of framing my response partially in terms of what are the challenges. I guess it goes to the topic of todays presentation is, is a lot a lot of the aspects that just the National Aspects that make the environment ready for investment is how far are they along in terms of Financial Regulation and what are the policies that are in place that actually increase the level of comfort for investors . Fascinating. Wouter, on that note, you told us to reap the benefits of crossborder financial integration, basically, you highlighted two things if i heard you well. One is develop the domestic financial regulatory and supervisory environment, make it better, and the second one is regional harmonization. So my obvious question here is, what about china . Because china is so big, it hang a huge domestic Financial Sector, which is by some measures now bigger than the u. S. , bigger than the eurozone. It is also very closed and potentially not only if it opens up, its not only that they could import financial instability but they could also export financial instability. How does the imf look at that . If you want to comment on it. Its a good question. And personally i have been more active in other regions. I havent given it that much thought. Okay. But i think the fundamental question is really how what is the specific nature of the chinese Financial System and how does that fit with its regional partners . It would be fair to say that the state and Public Policy plays or continues to play a big significant role in the chinese Financial Sector. And that will not necessarily in and of itself facilitate crossborder integration, i think. A States Economic structure surrounded by countries that are relatively free market, you know, its they say opposites attract. This may be true in human love, but in when it comes to the Financial Sector, im not i mean, there is no reason why it couldnt work in theory, but in practice it may be challenging. Okay. We may come back to that, but its well time to open it up to the floor. I encourage you to raise your hand, introduce yourself briefly, pretend to ask a question and well take it from there. Yes please. I think we have roving microphones. Yes, please. Ill take two or three questions and come back to the panel. Im marsha wiss, more importantly a former law partner of bob kyles, and ill also taught International Investment law for a long time and International Finance project at georgetown law. Id like to follow up on something that bob said in the again. Its this study of every eight years after a crisis, prum presumably a financial crisis, things right themselves and now a lot of people are looking back to smoot holly and commitments say the protectionism created by the smoot holly tariff led to trade wars, probably led to the depression, maybe led to war, world war ii. So im curious as to whether that is an log alog to where we now. How dangerous is the trade nationalism that europe perhaps through le pen, certainly the United States, is getting into . Because im a french then over there. Youll have the floor later. Thank you. My name is francis. Im from china. While our speaker mentioned that infrastructure played a very Important Role in the trade development, well, in china we have a vivid description called if you want to be rich, you first need to build a road. But infrastructure is a very high investment industrial, which means the country needs a lot of money. So my question is for speakers. Do you think that in developing the infrastructure the country should deregulate Financial Regulations so that they can easily raising fund from the foreign investor, for example, should the deregulation of the Financial Derivative such as the cdsyou. And we take the fourth question here. And ill stop for this round after that. Hi. My name i am a publicpolicy master student here. No connection to any the gentleman there. This is not a planted question. I was surprised to hear the optimism, both over having a good impact because of increased scrutiny over joint ventures, but also your optimism over the incentives that different congressional representatives have. When senator gordon proposed the bill, it was a hilarious situation where trump put out all these deals after his asia trip, that wish on that maybe some of the deals would not work out under the new scrutiny, most specifically, theres a pipeline project in alaska the people questioned about whether it would hold out to scrutiny. We have the organization for International Investment that is been pushing back in terms of how this will actually potentially hurt u. S. Company interest abroad, and that is softening some of the bills. Im curious about what incentives you think congressional representatives, in light of that, have to vote for increased scrutiny and what do you see as the potential drawbacks of moving in this direction . So we have four great questions. Even greater is that they are perfectly in line with the topic of our panel. Which doesnt happen that often. We have financial regulatory administration. Weve Infrastructure Investment and we have the bill. First of all, im glad that marcia asked this question. We Work Together and one of the Great Projects we worked on together is that we actually represented jesuits, which is highly relevant today. The great thing about that representation is at the end of every conference call, your client said god bless you. I dont have a lot of clients is a god bless you at the end of the conference call. He was very nice and a wonderful priest working with us on the project. I think in answer to your question, i dont think we are there yet i dont think the burst towards nationalism, in some countries, the nationalistic approach has manifested itself. Doesnt always win out. I dont know that it necessarily leads to smoot hawley. There are number of republicans who are basically freemarket republicans. I dont think this is a uniform kind of problem. I think that what you look at is other forms of nationalism. And other ways of shutting off globalism and free markets and so forth. I would argue that the United States has really benefited in mode enormously in terms of what other countries have done in terms of opening markets and investment. It has encouraged democracy and other parts of the world. I think what you have to look out for is that there could be policies that would reverse that. I dont really see tariffs as rising at this point right now. We live in a much more complex world than we did then in the sense that you can have regulatory barriers. We have lots of other things that we could discuss. Wto investigations ago beyond the regular discussions. There could be areas where we could have that kind of resurgence. Sometime in the late 16th century, they control the port of nagasaki. I dont know if you have that there. Hours involved iraq. That is a different geographical. A couple of points. On smoothawley, bob is right. Were in a different world. Smoothawley, to begin with, did not cause the depression. It certainly didnt help. It compounded a problem. It didnt raise tariffs as much as earlier tariffs bills did. If you look at the mckinley tariff, the underwood tariff, the tariff rates actually rose much higher under those bills and smoothawley. But all of those bills represented how congress and the president set trade policy. They did it to completely change the tariff act, which is kind of a dinosaur these days. We dont do that. We stopped doing that with the reciprocal trade agreements of 1934 when fdr was president. When we looked at reciprocity as part of trade. That then became improved under the trade expansion act of 1962 and then became even better under the trade act of 1974. Congress does not really respond to smoothawley because the mechanism has changed. But i think that bob is right, it is a more complicated world and i think were going to look at other avenues for basically getting the same result. May talk about a couple other things . The question about Financial Services and free trade and who really needs free trade, i can tell you shortly after 9 11, president bush was very interested in negotiating free trade agreements with countries in the gulf and the middle east. For larger political reasons. I was hired by the central bank of one of those countries that had a precursor agreement called a the ifa. And they wanted to have a free trade agreement. The central bank analyzed everything. The look to what they would get what they would give. And they said, what is in it for us. It would be to be aligned with United States. But economically with Financial Services, there is nothing in it for us. Builds that question, i still stand by the urging caution. The right thing to do in terms of not going to extreme with cornyn. Politically at some point, some member of congress is going to say yes, very interesting points. Too bad you are not an american corporation. Maybe it is not fair, but i think politically that is what is going to win the day. I think the only question that i was asked that i can really speak to is the one on Chinese Investment and infrastructure and Financial Regulation. The question was directly, would it be in chinas interest to open up, i cant necessarily answer that, but i will say the you can see through the management of it. You can see that the way that china has learned to work within postworld war ii largely western institutions and kind of utilize that gray zone on how to work within those institutions and yet push the boundaries. Have actually been extremely successful. My question would be, i guess, why would they want to open up . Theyve done a pretty excellent job in terms of investing in infrastructure, developing a Development Model, that so far is working. I think the major difference, a lot of people have compared chinas Development Model to the Marshall Plan postworld war ii. Major deference is that the u. S. , other than size, which the Marshall Plan was not actually that big, but the other major difference was that the u. S. Already had military troops deployed and pretty sophisticated branch of embassies. To a large extent, the chinese are kind of finding their way through the dark. Yes, they have had mixed success because of that. I think that is to be expected. But they are finding their way. Quality of infrastructure is improving. Sentiment of infrastructure is mixed, but you will have your successes and your downsides. And then importantly, china had to develop that way because there is a heavy amount of domestic investment. They have now gone abroad with that investment. They are still having an overhang in terms of supply at home. Another huge focus is on ai and 5g technology. That is a missing component in terms of productivity in terms of capital labor and what is going to actually you just of the china was pushing the boundaries within the system of western created international institutions. Can you give me more of a sense of what you mean by that . I understood that as china is not abiding by the rules. Can you develop . Sure, i mean. Specifically, would be to the management of currencies, whether to peg or to pull off that peg and let free flow, so the kind of more managed of that, as well is how they interact with the dub eto. But i guess observed behavior is that donald trump was elected on the idea that he would declare the currency a problem. How does that square. And as for wto at this point, china is supporting the ruling processes and sentiment more clearly than the u. S. , i guess. So, how do you reconcile that . I think in terms of the currency manipulator, i dont really know i think there are multiple rationales in terms of why he has backed off of that mindset. I think north korea plays heavily into that. I cant really necessarily speak to that. In terms of wto and, im no trade specialist, so i havent really dived into the policies, per se. But there is kind of a sense of understanding what the rules are and working within those roles and at the same time, pushing boundaries. I guess i can go in to to me to have better trade lawyers and we have here . [ laughter ] maybe they should hire some of hours. Coming to lauras question, the asking the y is a very good starting point. It is a difficult question to answer. At the end of the day, i think that, especially in the Financial Sector, you have to ask yourself, what is the endgame in terms of Market Structure . Who will be the providers of Financial Services in my country 10 years from now . And, i think i really should stress the shock that the past 10 years have caused amongst policymakers in that regard throughout the world. If you look at how european and u. S. Banks came in latin america and the speed with which they withdrew during the crisis, many countries and many policymakers and countries will tell you that its almost like a tsunami. It comes in and a big wave. It creates havoc in the Financial Sector, it destroys the week Financial Institutions, but that when they blow up at home, they run faster than light and you end up with nothing. That is definitely one consideration. The other consideration is what if they dont run . They basically eat all of my weaklings and i end up with the Financial Sector that is dominated 95 or 85 by foreign Financial Institutions . Who will make the Big Decisions in terms of financing my companies . Think about idiosyncratic markets. How do you finance coffee . How do you finance cocoa . How do you finance toy production and small villages . I dont think that a lot of people in new york or london who know about that. You are absolutely right. It is a very complex factor. I just think that one has to be pragmatic on that. Oligarchy doesnt work, either. Financial repression is as noxious can be as noxious as Financial Stability. You have many systems with vested interests. Oligarchs that basically rip off the poor and the humble people in the middle class. So opening up in a balanced way can create positive shocks to Financial Systems. We can make it more professional. It can make it more competitive. It can create a more open mindset. Again, it is not a panacea. I think that is really if the freetrade comes into pressure today, some people have an ideological feeling about that, i think that it will survive. It will be because people are pragmatic and realistic in the understand the upsides in the downsides. As much as the upsides must be applauded, the downsides must be addressed. I think you have some more to say about this. I think with regard to this question of will people support the bill or not . I think that frank is exactly right. When it comes to a vote, they will support it. With these kind of bills, it is really prior to it coming to a vote. The question is will force his way and that moderated . Will there be an education process about the effects of could have and that would change the content of the vote . It looks like the cornyn bill is already going through some of that already. Yes, when it comes to a vote, it will be hard to vote against it, because of the nature of the bill, but my experience, the real game is before it gets to a vote. How will it be changed . I would have tons more questions. I think we already covered a lot of ground. I know that you probably have more questions. But the organizers of this conference have set a world class example of being disciplined with time and a also have to thank you for your time discipline. We will have to cut it there. I would suggest he will join me in giving a big hand to our panelists. [ applause ] thank you very much. Coming up, Veterans Affairs secretary testifies about his Budget Proposal thursday. He appears before the house Veterans Affairs committee. Now more from the conference on free trade. This panel looks at how trade policies impact to the internet and data flows across borders. This is one hournd