Forces baltic air policing. Establishment of a very High Readiness joint task force. Nato and whales made commitments that indicate to me that all of them take that responsibility seriously. The problem we could potentially have is the asymmetric nature of it, where there might be a dispute about whether its actually happening. So were working with our nato allies to work through that. And of course the situation there is with those Large Russian speaking populations in the baltics, especially in astonia, it could give him the same excuse that hes tried to use with regard to crimea. Let me ask you about Mental Health. And ive been enormously impressed with some of our special operations forces. That they are now realizing that the stigma against Mental Health counseling, they are really trying to turn it around because its performance enhancement, not only of the body but of the mind as well. To what degree are you all trying to implement that same thing across the board of the department of defense . To a great degree. Because it actually when it started under bill mccraven when he was so com commander now under joe botell they realize its exactly what you say. So they found a way to turn it into the positive. Its a combat multiplier. So not only something you do after the fact but you build in the services you need right from the start. And all the services are learning lessons with each other. Final question for either of you. Training 500 a month or every three months for the free syrian army, is that really going to be productive . Ill take that first if i may, chairman. That is a small number. That is but grows over time. It is paced by the throughput of the training centers. I think that the its the u. S. Effort needs to be just one effort. There need to be others in the region who participate in this. It gets back to something we were discussing earlier about the need for the defeat of isil to be a lasting defeat and for regional partners to be involved. So the only thing id say is that there needs to be an effort there need to be other efforts besides the u. S. Effort here in accordance with the discussion were having earlier. Senator graham. Oh im sorry. General did you want to no. I just want to say we need a partner on the ground and we need something in which we can have this coalition coalesce around. Senator graham. Thank you. Lets continue that thought. Have you been told, general, by the arab forces in the region, the arab leaders that were not going into syria unless we can get rid of assad . There are some of them that say that and others who dont. But yes ive heard that. Well, the reason they are saying that is they dont want to defeat isil and turn assad syria over to iran that. Assad is a puppet of iran. Do you agree with that . I do. So a lot of arabs are saying i want to destroy both enemies of the region assad wells isil. So i dont see any chance of a Regional Force until you put assad on the table. The authorization to use military force. Ive got a very specific question. The people were training throughout the region to go in and fight isil, the free syrian army, the young men that are going to join this cause, what would happen if the assad air force, the air power through migs and helicopters with barrel bombs, if they begin to attack the people we train because assad knows one day they will turn on him. Under the authorization to use military force can we protect the people we train against an attack by assad . Well first of all i think we have an obligation to those weve trained to protect them. The manner in which that would be done is something that is being discussed. But in my view we have an obligation to do that. It goes with the training part. I do senator. I agree with you both. And ive asked the white house General Council this very question. And he told me very quickly, no. The authorization to use military force would not allow us the United States to engage if air forces of assad. That is not included within the authorization. That to me is a very important point. Could you check with the white house and see where they come out on this at a later time. In f the sanctions were released tomorrow, if the iranians got sanction relief, general, what do you think they would do with the money given their behavior on the ground today. I cant speak to that senator. But heres what i will say. I am under no allusions that ending their Nuclear Program ends the problems weve got with iran in the region, whether processes, arms trafficking, cyber. So this is an adversary as someone pointed out earlier has actually led to the deaths of american servicemen on the battlefield. So i think we have to keep an eye on them in that regard as well. Would you agree with me that the most likely outcome given their behavior today is that they are not going to build hospitals and schools. They are probably going to put the money into their military. You know, senator, i think they will probably distribute their money like we do. I just hope they dont sequester it. Well, i tell you what i just hope we dont give them more cash because i think they are wreaking havoc as it is. Secretary carter do agree with me that the iranians are wreaking havoc throw the region without a nuclear web . Weapon . I do agree. Look at yemen to syria and iraq and lebanon and elsewhere, and that is why i think that it is important that we remain vigilant and prepared. And i think we in the department of defense need to and will be prepared for iran across a very wide front. Would you agree with the following statement. The iranians with a Nuclear Weapon would be the most Significant National Security Threat that israel faces and the United States would face . The certainly the id let the israelis speak for themselves. I think they have. I think so too. That two things i would say is that we need to be concerned about iranian behavior beyond their Nuclear Program well lets look at it the other way. Can you think of anything off the top of your head that would beat out an iran with Nuclear Weapons . Well that is there may be a close tie with north korea with Nuclear Weapons. Well they have already got Nuclear Weapons. I understand. But in terms of the danger posed by a difficult state possession of Nuclear Weapons. Do you think it is more destabilizing for iran to get a Nuclear Weapon than north korea . In terms of the mideast . In terms of the mideast surely. Have you been told by arab allies that anything you give the iranians on the nuclear front, were going to want the same thing or more . . The iranians get the Nuclear Capabilities do you think the others will want to capability to match the iranians, there are those who have said of that and that is one of the reasons we oppose iran getting the Nuclear Weapon because it could be the beginning of the powder train. And that would just unleash proliferation in the middle east. So the Prime Ministers warning in that regard today is probably well heeded. I did not hear the Prime Minister today. But i certainly think that the danger of a run away Iranian Program stimulating run away Nuclear Programs elsewhere in the mideast is very serious. Thank you both for your service. Senator lee. Thank you mr. Chairman. Thanks to each of you for being here. Thanks for all you do to keep our country safe. Secretary carter the department of defense is calling for a background in 2017, citing it has nearly 20 more infrastructure than it find necessary. Can you give a more detailed explanation as to what the Department Finds within its infrastructure that is unnecessary or in excess and why . And also can you describe to us what improvements you think need to be made to the brak process to avoid the kinds of costover runs that we experienced in the 2005 round . Thank you. We are requesting another run of brak. And the basis for that is a measurement of our infrastructure against our current holds of equipment and our needs. So for example it is aircraft fleets versus apron space. And that kind of analysis that creates that measures the amount of excess infrastructure that were carrying. With respect to brak rounds the 2005 brak round was not what we are seeking, that kind of brak ground. Were looking for the kind of brak that occurred in the 1990s, where true savings occurred. And you might say why didnt savings occur in the 2005 brak ground . It is because when it came time to reconfigure bases, that is a time by the way where the Defense Budget was growing very rapidly. We decided that the the department decided at the same time to modernize a lot offen installations at the same time it was it was consolidating others. And that created far fewer savings than a pure brak ground would. So were seeking brak authority. I know thats not an easy thing to get. But we simply have to reduce tail. Or we have to take it out of tooth. And i dont think anybody wants that okay. A lot of americans became frustrated last summer when we saw the Iraqi Security force ss, on whom we had just spent 25 billion training and equipping over the course of the last decade. Quickly free from a much smaller and less welltrained, less wellequipped isis force in northern iraq, giving up ground and leaving behind a lot of weapons and leaving behind a lot of equipment that had been provided for them. A lot of it by us. So mr. Secretary, you just returned from a visit to the middle east to look into our strategy there and how things are going there. Can you discuss for us with us a little bit the oversight we exercise over the train and equip missions in iraq and in syria . And tell us a little about whats being done to make those forces accountable for the training and equipment that were giving them just to make sure that something similar doesnt happen. Make sure that our veminvestments not in vain. Thank you senator. Let me give that a start and ask chairman dempsey to chime in also. You exactly put your finger on it. What happened last year was an unwillingness of the iraqi forces to fight using the equipment and training that the United States had given them. And the reason for that was a political failure on the part of their government to keep the promise that had been made to the country to keep it a multisectarian state. And that was not what was happening under maliki. And that is the reason why the forces folded. And so the most important thing we do Going Forward is to make sure that iraq doesnt decline into sectarianism. And so that is the most important thing we can do and as the political thing rather than a technical thing involving the training. But it is job one. Insofar as their training is concerned ill let the chairman speak to that. But were giving them training. And were going to give them support when they go into battle. And we are now and we have been now for quite some time conducting a Bombing Campaign against isil in order to blunt their offense and prepare the way for the counter offensive. Let me ask the chairman if he wants to add anything. Just in terms of the oversight senator. Four locations. Ischial and taji and besmaya. The training is oversight. Once the support is built around the supply chain. So this things were giving them, there is a tether that goes out to where they are operating. And to this point, our program is to take and pull some units offline who exist, regrain them put them back out. As well as to help the iraqis manage their own training base. Does that answer the question . I think thats helpful. If i can as my clock is ticking down. Let me just ak one other quick question that either one of you can answer. How are u. S. Defense and intelligence agencies adapting to the collapse of the Yemeni Government and the loss of our primary Counter Terrorism partner against one of the most capable al qaeda off shoots . What are we doing on that front . Well ill start and chairman please add. First thing is that the al qaeda in the Arabian Peninsula which is in yemen is a very serious off shoot of al qaeda. Very serious for us because they are determined to attack us. Let me make that absolutely clear. And therefore our Counterterrorism Operations in yemen are critically important. And therefore the restoration of a government there that will cooperate with us is very important to us. Now were trying to do everything we can to continue to combat aqap in the face of what is going on with the houthis and the government in sana. But it will be much better for us if were able to reconstitute or assist in the reconstitution of a government there in sana. I know our diplomatic colleagues are working on that but it is important to our counterterrorism effort. Chairman. Our diplomatic effort is to to try to keep the country together but counterterror effort is based mostly outside of ayden in the south. We still have a partner there who has an interest in keeping al qaeda in the Arabian Peninsula under pressure. Our fear is that if the country does devolve into civil war weed lose that platform. Thank you. Thank you very much. Thank you mr. Chairman. Well i want to thank the witnesses for a long afternoon of testimony. And i believe that its important that all of our colleagues as well as the American People understand your message. And that is that sequestration cannot continue. Without, as you responded to senator king, without putting the lives of the men and women who are serving in uniform today in danger. And i thank you for that frank and candid testimony and i thank you for being here this afternoon. Thank you. Thank you. This hearing is adjourned. I know that my speech has been the subject of much controversy. I deeply regret that some perceive my being here as political. That was never my intention. I want to thank you democrats and republicans for your common support for israel. Year after year decade after decade. [ applause ] i know that no matter on which side of the aisle you sit, you stand with israel. [ applause ] the remarkable alliance between israel and the United States has always been above politics. It must always remain above politics. [ applause ] because america and israel, we share a common destiny. The desk nisdestiny of promised lands that Cherish Freedom and offer hope. Israeli is thankful for the support of americans people and americas president s, from harry truman to barack obama. We appreciate all that president obama has done for israeli. Now, some of that is widely known. [ applause ] some of that is widely known, like strengthening Security Cooperation and intelligence sharing, opposing israeli resolutions at the u. N. Some of what the president has done for israel is less well known. I called him in 2010 when we had the carmel forest fire. And he immediately agreed to respond to my request for urgent aid. In 2011 we had our embassy in cairo under siege. And again provided assistance at the crucial moment. Or his support for more missile intercepters last summer when took on hamas terrorists. [ applause ] in each of those moments, i called the president and they was there. And some of what the president has done for israel might never be known. Because it touches on some of the most sensitive and Strategic Issues that arise between an american president and an israeli Prime Minister. But i know it. And i will always be grateful to president obama for that support. [ applause ] gathered with me are colleagues, all of whom opposed the appearance of Prime Minister netanyahu today. Some who attended the event, some who didnt but all of whom have something to say about his appearance. First of all again these remarks are only attributable to me. Everyone can speak for him or herself. First id like to congratulate senator boehner and the Prime Minister netanyahu on their theater. Now they can go home and say they lectured people on apparently things we didnt know. I think the speech validated all of the reasons i said i was opposed to the speech. I expected the Prime Minister to speculate on and mischaracterize the negotiations and a potential deal. For instance, he continually said that the deal ends in a certain period of time and there are no restrictions would be no restrictions on irans Nuclear Program after the deal expired. That is not the case as we have been a advised by the white house. I again this is part to strategy that he used. I resented the condescending tone that he didnt think anybody in congress or the country or the threat that a nuclearized iran presents. I think the president has made it very clear we understand that threat. I dont think there is any doubt that everyone in congress and the administration understands that iran has been a bad actor in the region, that it has sponsored terrorism, that it has done things that we would like to see changed. We all know that. It is nice of him to remind us. And i also resent the fact that he was telling us how to negotiate when the administration and their representatives have been at this for two years now with the cooperation and participation of five other major nations in the world. This speech was straight out of the dick cheney playbook. This was fear mongering at its ultimate. Phrases like nuclear war is inevitable if a deal were to be accepted. Phrases like this would pave the way to iran having a nuclear bomb. These are things that ie1 think are, again part of what dick cheney would have done and did. This has been Prime Ministers pattern. Hes gone to the u. N. And done the same thing. I understand also all of us do, all of us who desperately support israel and care very deeply about Israeli Security that israel perceives its threat differently than we might. But i dont think there is any question that the administration and all of us understand that threat and are trying to thwart it. With live coverage of the u. S. House on cspan and the senate on cspan two. Here on cspan3 we complement that coverage by show i dont go thank you most relevant public hearings and Congressional Affairs events. And on weekends cspan three is the home to nation tv. Good morning everyone. Thank you for coming. Im mike ohanlon with brookings center. Would like to welcome you to an event on chinas rise for implications for american strategy and the u. S. Defense budget. And im joined by a very capable and Accomplished Panel that has different elements of expertise on different aspects of the question. I also see a lot of expertise in the audience. The basic question is where is chinas military today . Where are they headed in the future . How is china employing its military . And more generally whose their Foreign Policy all about and what does it mean to us in terms of american policy and strategy and defense spending . And at that latter point i may weigh in a little as well as a speaker but in the first questions i want to get through questions and pose them to my panelists. Starting nekts next to me we have professor bud cole of the naval excuse me, the national war college. But his distinguished career was in the u. S. Navy when he was in the armed force of the United States. Retired after 30 years of service. He was largely if not exclusively in the Pacific Theater and surface ships. So he has a great deal of operational experience. But for a couple of the decades now hes been an amazing and prolific author on many aspects of chinas military, starting with not only the navy but generally the entire force structure. So were going to look for him for think act where is chinas military today and where its headed. Next to him is richard bush who run ours east asia center here at brookings. And a longstanding expert both as a practitioner in the u. S. Government. Worked on capitol hill. And then worked in the u. S. Government largely on taiwan issues for many years. And hes been here at brookings for about 15 years now working on east asian security. Just one of the most prolific but also one of the most rigorous and careful and thoughtful scholars on the entire region. So im delighted to have him on the panel as well. And next to him is david dollar from our John Thornton center orn china studies and he is a former u. S. Government official based in beijing for a number of years with the u. S. Treasury as our lead economics and finance person there. Prior to his service in the u. S. Government he worked for the world Bank Including a long stint on and in china with the world bank as well. So he will be particularly helpful in thinking through the question of where is china headed in terms of its economy which of course is the foundation for National Power for military capable hightech technology and production of the weaponry. And the sense that china creates throughout the world of where the country is headed and to what extent it is potentially rivaling the United States. The broader perception of china us pour and what it does to the diplomatic 13ks and the region and how all these things fit together. Without further i do id like to walk through the questions one by one beginning with dr. Controlcole and asking for a few minute of thought how you see the military today. For many of you as know the budget is estimated a being the equivalent of roughly 150 billion a year, plus or minus lets say 25 to 50 depending who you are talking to. And almost regardless where in that range it might actually be most properly located it is easily the number two power behind the United States by spending. If all of power were about just spending levels wed be in no imminent danger because the United States is still spending some 550 550 or so billion a year. Three or four times chinas amount. But more how this comes into play in chinas main theater. So it is a little more complicated than comparing the Defense Budget levels. With that as prelude. Dr. Cole, thank you for being here. And i love your sense of how you see chinas military position, capability today and where you think its headed in the coming years. Thanks im delighted to be here this morning. Especially see such a large turnout. The way i usually characterize chinas military and modernization, which has certainly been significant over the last quarter century is they are improving at the moderate pace. I dont see any big Crash Program going on with the Peoples Liberation army. Having said that, as mike said, were the u. S. Military responsibilities are global in nature, china so far has been able to focus primarily on the western pacific and on asia. And what we have seen in a significant shift is a way from the historic Chinese Concern about threats from mainland asia to now being able to focus on the maritime realm. Off the coast of the east and to a certain extent to the southeast. One of the remarkable things about chinese diplomassy in the last quarter century is the way they have resolved their border disputes with everybody except india really. Its formally been resolved. I think thats what happened in the Chinese Military most significantly in the last four or five years is shift in emphasis from the army being the chief beneficiary of budget increases to the navys air force and second artillery, that is the chinese Missile Forces receiving the most emphasis in the budget koupss. This is a interesting situation buzz if we look at the command and control of the Peoples Liberation army, it is still very much centered on the army. Where most of the budget emphasis seems to be shifting to other services. I think this indicates a shift in National Attention and concern to not only the maritime element but the ability to maintain a certain minimum level of the nuclear deterrence. And if i could ask how you see their capables today relative to what you do might have predicted for 2015. I think one of the Big Questions and it effects perception is not only how was they are improving and how good they are but how does this compare with expectations. Because the up or down on that is as much as anything what shapes peoples perceptions. So how would you compare where they are today to what you might have predicted five or ten years ago. I dont think we should be be surprised what we see in china. The large military budget increases come not so much in my view from a shift in emphasis of National Spending from other sectors to the military but rather simply from the fact that the chinese economy has been expanding so impressive will that there is simply more money available to devote to the military. Its within the military weve seen resource allocation changes. If we look back in history at the rise of various other great power, i think we should expect china to be devoting more and more resources to a modern military, in this case a 21st century capable military. Now when admiral willard was head of Central Command he made a statement i think in 2009 which he said chinas improvement has competed our expectations almost in every category it. Sound like you are a little more restrained than that assessment. Am i reading that correctly . General terms yes, sir. Specific capability, for instance im a little surprised on how efficiently theyve progressed, apparently, in the area of the cruise missiles. But in general terms i i dont think i would sign up for what admiral willard said. Whatever chinas actual military spending level might be, most people seem to agree its about 2 of their domestic gross product. And david might want to comment as well. Do you agree with that number . And secondly do you see that as reinforcing your argument that we should interpret their build up as gradual. 2 is less than ours. Were 3. 5 still. And it is not a historically very big number. The number game is too hard for me to play frankly. Even if we knew the accurate figures coming out of china on defense spending which we dont, i dont think. Again, i think that they are still spending at a relatively moderate rate. And i think they are doing it deliberately because they are focusing not on trying to match the u. S. But rather they are focusing i think on specific strategic situations taiwan, for instance as well as East China Sea and other topics well probably get into. Richard, would love your thoughts on what weve been discussing and especially how weve seen chinas behavior in recent years. Thank you very much. And i agree with everything that bud has said. Let me comment a little bit on the military budget. I think specialists believe first of all that gradually things that have been off budget or not publicly announced or going on budget. Second, the pla was for many, many years starved of resources. Because the regime did not have the resources to get to it. And so a lot of this is catch up. Particularly in the area of pay. Third, although the we talk about double digit growth. The real growth rate has declined. The best estimate ive seen is from about 11. 4 in 20u 3 to 8. 3 in 2012. The Defense Budget has a share of gdp in real prices has interestingly stayed in a range of 1. 28 to 1. 45 over the last decade. And finally, the share of the military budget as a share of state expenditures has declined. Now whats important for the United States is how these resources are used and what is the effect on our National Security interest. And again i think some context is important. First of all, we have to recognize objectively that for decades, a militarily weak china lived in a state of fairly profound insecurity. The United States was there on its doorstep. We fought a war in korea. We almost fought in vietnam. And i think the primary and underlying goal is to reduce that insecurity in their defense policy. Not all of chinas fears are wellfound ed wellfounded. There is a tendency to misread the intentions of adversaries and a tendency to want to make the other guy to make all the concessions. But the fears have enough of a basis in reality to compel responses. And i think that is what were seeing. I agree with bud that the primary motivation and focus of chinas military build up since the late 1990s was taiwan and dealing with what they perceived was the threat of separatism, taiwan independence. And that is given a focus to what they have done. Of course military capabilities are dual use. And what you can use for taiwan you can use for other purposes. I think there is a strategic larger Strategic Focus to what china is doing. And that is to create more of a strategic perimeter. More strategic depth. China for many years had to think about defending against the United States at the coast. That is a terrible place to have to defend your country. And so if i were a Chinese Defense planner i would be want to be doing exactly what they are doing. The problem is of course that space is already occupied. Were there japan is there. There are Southeast Asian countries there. And thats the reason that we will we have frictions with china and we will continue to have them. Then you have Natural Resource competition as well. Now, i dont the current worry on everybodys mind of course is whats happening in maritime east asia. And as chinas military capabilities and Law Enforcement capabilities have grown it has grown somewhat more aggressive in its actions in the maritime domain. Putting japan on the defensive around the sengkaku islands and establishing its presence and strengthening its presence in the various land forms. And presence in the South China Sea. How you respond to each little move on chinas part is not easy. But there are other ways to deal with these problems. There is diplomacy. And what weve seen in the last six months i think is a shift away from more coercive actions to more diplomatic ones. Including talk about some kind of cbm regime around the senkaku islands. Talk about the binding code of conduct in the South China Sea. I think china has realized that its recent behavior has created a great deal of anxiety among its neighbors. That is not in chinas interest. It is not in chinas interest to take on the United States at this point in its development. And so they are backing off. How long this will last nobody knows. But, you know, it is possible that it will last and that the military will be kept in the background as a tool of National Power. If i can follow one a couple of other questions before i go into david. One, because were going to talk about u. S. Policy in the second round of questions and thoughts from all of you. Im just trying to blash good piltry baseline and you both contributed already to understanding that. But you both talked about improved capability. Could you give a vivid sense of new Capability China has now it didnt before in strategic terms. Bud mentions missile. What does that mean for china . To what extent could china more threaten taiwan than years ago . Well taiwan is a place where we have seen a change. And chinas development of long range precision strike capabilities particularly Ballistic Missiles but also cruise missiles and more advanced Fighter Aircraft has changed the military calculus across the taiwan strait. It has created a much more formidable deterrent against any effort to separatism. Moreover i think the improvement of chinas air and naval capabilities is such that some experts at least believe that it would be difficult for taiwan to defend itself with what i think was the traditional strategy of trying to establish air and sea control over the taiwan strait. That would be the preferable strategy. But that may not be possible anymore because of the plas growing capabilities. And one more thing if i could on this before going to david and thinking about chinas underlying economic strength and power. You gave a somewhat fairminded as is characteristic for you, a fair minded interpretation of why china is building up a military. But i know you also probably have concerns about their behavior and have hinted at a couple. If i could ask what this might mean for u. S. Defense strategy and budget and so forth, are there any areas you wish had been different or concerns or trend lines ss you think we might have to factor in specifically as we anticipate where american strategy may have to go . The one i worry about right now and i dont worry as much today as i did maybe eight months ago is the way in which china rather coercively promotes its claims both in the East China Sea and the South China Sea. Its not that i fear that china is going to take the senkaku islands. Because once you take them they are damn hard to hold. And i think the Japan Self Defense forces would do a good job in defending them. What i worry about more is a modest clash between the Law Enforcement capabilities of the two countries that then spins out of control because of bad crisis management, because of domestic nationalism. And so something that shouldnt have happened and shouldnt have been a happened and should not have been a big deal becomes a big deal and we become involved. We think about how american policy may respond. You refer to the cbms that the president worked on in november. My understanding, i want to check with both of you on this point to make sure we get this clear, as welcome as that is none theless, it a lessless less it applies to the United States and china. Those are the instruments that have been involved. I think that china has a poor record of calculating what a u. S. Response would be. Or what is going on in the south china or East China Sea. And i worry that the Chinese Military maybe the National Command in beijing have the ability to contain unintended escalation of military clash. I think that should be a major concern. I agree with that. There have been discussions very recently between china and japan on various kinds of measures to reduce the risk of a situation in the senkakus. And those as i understand it will include coast guards. It is still a work in progress for us and for japan and china. But drawing in china to this kind of discussion is a really good thing. So david i think were all curious about where china is headed as well. We know that whatever it might want to do with its military budget, it is the economy that ultimately provides the foundation not only for the size of the budget, but for the High Technology capacity of its armed forces and weaponry modernization, and the progress and the chinese economy that shapes the perception, or whether this is something that will level off. So we welcome your thoughts on the strength of chinas economy. It is a great pleasure to be here. You have probably seen the announcement this year that in purchasing terms, china has passed the United States as the biggest economy in the world. And that purchasing calculation is essential if you want to compare Living Standards across countries. If youre talking about weight in the World Economy, i say you want to measure in Market Exchange rates. And on that basis the u. S. Economy right now is about 70 bigger than the chinese economy. Right now the numbers are relatively simple, china about 10 trillion and the u. S. Is about 17 trillion. Chinas growth is slowing down. I think most analysts accept that if china follows through on reform, it has the potential to continue to grow at 6 or 7 out to about 2030. A lot of uncertainly. There is other scenarios for the u. S. Many people think about the u. S. Sustainable growth rate is about 2 real. Im more hospital mystic i think if the u. S. Followed through they have potential for 3 . That adds up to the most likely scenario that by 2030 china will be about the same size as the u. S. Economy in 2030. That is a useful way to think about the near future. Some people extrapolate the growth rate further. And after a few decades they think china will be bigger than the u. S. Economy. I think there is a number of reasons why china is likely to slow down after 2030. Even if it is doing well. It has a lot of challenges. It has very severe demographic challenges. So the working age population peaked in china and started to decline. The urban labor force will decline. After 2030 the population will start declining. The labor force is projected to decline by 120 million people. It is hard to grow well when your force is shrinking. It is easy if your labor force is growing. The United States is the only advanced economy where it will grow at a healthy rate throughout the century. It is not obvious to me that is it will be growing faster. A lot depends on. I think it is just as likely as china being the largest economy later in the century. Were talking about scenarios hear. It is nice to be on a panel with you again. The last time was in taiwan but you werent there because you were having knee surgery. So you were on a screen about 30 feet high. Thank you for that crisp explanation. What i like to do now is go down the row and ask the second big question. This one is simpler and its the same for all of you. To get the conversation started. The conversation that i know we will have with all of you in a few minutes as well. What should the United States do about the Current Situation that we see in china. We all laid out a number of aspects. Military authorization. Economic future prospects for chinas long term growth. What does this mean about americas long term response. And the congress here will have to cope with the question of do we tolerate the possibility of the Defense Budget being sequestered or held to the sequestration efforts that is looming to 2016. And regardless of whether we go to sequester or not, well be three times as well endowed as the chinese, but the trend lines are getting interesting. You can see these two countries on the same graph on a way that was not so evident before. Maybe with the Defense Budget or maybe sooner. Right now were spending more than 3 for gdp. Richard and david points out that maybe it is more like 1. 5 in china. If you do the math or 450 billion divided by the one trillion economy it is much less than ours but if their budget were to grow as a percent of gdp these could begin to converge to some extent. The question that i want to ask all of you is what if anything should we do about it can i go first . Im not a military strategic person at all. The most important issue is to maintain u. S. Share of global gdp. There are a lot of reasons why developing countries are developing faster than rich countries. The u. S. Share has a tendency to decline. I just want to make a point that whether the u. S. Grows at 2 or 3 makes a small difference. But it makes a huge difference so just briefly things like investing in infrastructure strengthening education, and immigration is a key factor in u. S. Growth and we can reform our immigration policy to make it more rational so that all of these smart students that come to the u. S. From around the world, we should make it easier for these people to stay if they want. So we can influence our Economic Growth rate fairly significantly and out 20 or 30 years it will make a huge difference. So if a could link that to the u. S. Defense debate, and the budget debate, sounds like youre not worryied if the budgets will be 500 billion or 550 billion. You might be equally concerned about whether we sequester the domestic investment accounts. Just briefly the u. S. Has a shortterm fiscal situation in good shape. We can afford to spend modestly more money. Im not a security person but if the compromise is so spend more on infrastructure education, and defense, within a sustainable fiscal frame work, that would be a good compromise. For those of us not following this in great detail it is budget week. I think as much of you know but he is trying to increase spending on domestic, defense, and discretionary in the house. About 35 billion to 40 billion each relative to the control act and the sequestration. We cant get around that existing law. He is trying to do what youre suggesting, but the controversy comes in to how do you pay for it. With defense you always have a safety valve, you can put more into the war supplemental. And you can play that game to some extent. With nondefense you dont really have that safety valve. Richard, over to you and we just would love your thoughts on how you feel the u. S. Defense debate should wereflect all of these concerns. Let me start with the pivot. And i think that the pivot really is not a new policy. It is an adaptation of an old policy to new circumstances. And i think our policy towards asia has been based for decades on an active military, economic diplomatic and political presence in the region so that we set the context in which our friends, allies, and potential addversaryies make their National Defense decisions and decide what risks they want to take. We have been in a way the cop on the beat that creates peace in the neighborhood. It is very important for us in the region that we continue to be able to do that. So i see sequestration on defense as a critical challenge. And there seems to be a growing consensus. The president and republicans on the hill that we need to find some way around it. Experience over the last four years does not make me terribly optimistic that we can get to the goal that we want to achieve. I agree very much with david that we need to strengthen these pillars of National Power that allowed us to emerge in the 20th century as a force for peace and stability and prosperity around the world. Within east asia, i think the most difficult challenge is calibrating our responses to chinese moves in the east and South China Sea so that in a way that encourages restraint and doesnt feel they can constantly nibble away at the current status quo. We may have a bit of a challenge coming up because taiwan is having an election about this Time Next Year and that may bring about changes in how china perceives the situation. I think in summary that we have the capacity to continue to play the kind of role that we have played in the past and that would be a good thing. Whether we have the will to do so and the political system to express that will is another question. Thank you, that was very well stated. I want to understand what your message is which is if sequestration were to occur and you are against it, but if it were to occur your concern would be the signal it would send about functioning as a government and what we promised to an effect, and maybe less so what it means for military programs and more for the sense of the leadership. I mean it is very important what the signal is. And it is certainly that both to our friends and allies, but also to china. Because that changes the risk calculation of all of them. But i do think that sequestration, if it were continued over an extended period of time, the rest of the whole ten years, it would have an important impact on our ability to continue the policy of deployment which is really the basis of peace and security in the region. Sometimes our friends complain that the president of the United States has not shown up at a major meeting. And i understand that. I think it is far more important that the Aircraft Carrier battle group shows up. If we cant do that then were living in a very different world. Pud over to you and cureious about your take. A recent chief and navel operations said if sequestration takes full effect the u. S. Navy will not be able to maintain the constant presence that we followed since roughly i suppose, the korean war. But instead that the battle groups and carriers in the United States. Possibly in hawaii and one close to japan would only be able to steam out in times of crisis which changes the whole time line and paradigm of how you respond to a crisis. I think the most likely areas, and ill stealing something from several years ago, the area of most concern right now are the east china and yellow sea. These are the areas that im convinced are Vital National areas with china. And we have defense treaties, and we have a special relationship with taiwan singapore, and with australia. This is the area it seems to me of most likely conflict. This is an area where hopefully we can use diplomacy instead of Aircraft Carriers. I think chooi that is playing a risky game especially in the South China Sea. When i talk to sounder parts they wonder where the threshold is. What would it take to invoke a u. S. Military response. I dont know where that threshold is. It is a relatively dangerous situation and i think it goes back to what i said earlier ant beijings response. It seems to me the East China Sea, given the commitment to main sen the senkakus that china is trying to show that control does not exist on a day today basis. But in the South China Sea, i think china is moving ahead and building artificial islands, simply using military power like they did against the philippines, and i guess there is a strategy, but the end result is the same. It is using armed forces to force your claims. In the case of the philippines, they cant object to it at sea. As far as u. S. Future strategy is concerned, i think our strategy is fairly consistent. I would argue that the u. S. Military strategy has not been clearly delineated particularly well since perhaps 1986. I think that is understandable. It is hard to have a meaningful strategy when you dont have a specific single opponent in mind. It was easy to define a military strategy against japan and the soviet union, its not easy to do that now. What the u. S. Military is facing right now in the post iraq and afghanistan years is defining the ends they want. And what means do they need to reach those ends. Its not an easy solution and in the era of declining budgets and possible sequestration, its a difficult problem so solve. So let me ask one more question about the South China Sea that you mentioned in your question. I know we have a lot of participation very soon on this and other questions. But this is a good place i think to bring it all together as we wrap up this faze of the event. What is the u. S. Role in the South China Sea. You all talked about u. S. Presence being important, but you have not talked about a direct u. S. China conflict. Youre not engaging for how to win the all out war. How do we think about the u. S. Role in the South China Sea. Just in term that we can latch on here. We have a defense treaty, but they claim some of the lie lands in the South China Sea. I dont believe the u. S. Government has ever forthrightly said that we agree with the philippines sovereignty. One good question, so we have been playing very careful diplomatic maim. U. S. Policy as i understand it is very straightforward. We dont back any nations claims to sovereignty. We urge everybody to resolve their differences peacefully but we will not assistant by and accept any attempts by any of the claimants to interfere of freedom of navigation. And so the danger is you know the well known line that china has published beginning as possibly early at 1922. They keep saying that they claim the land features and associated waters. If we were to get into the you night United Nations. There is uncertainty with respect to that. But concern in the South China Sea is there would be now transfer of the ships using that sea. I would only add that chinas ability to incrementally improve its presence in the land forms of the South China Sea can have an effect on hour friends and allies assess our resolve. It is hard to figure out what you want to do as each little action takes place. David, any thoughts on thank you very much, everyone. I think we have a lot on the table, a lot of thoughts and expertise among you. Once the microphone comes to you to state your name clearly and pose a question. If you can correct your question primarily to one person i prefer it. If it doesnt work out that way i prefer it. Lets start with round one. With these gentleman. Thank you very much. It seems please identify yourself. Sorry. Im from George Washington university. It seems to me that there are two elements in what we have heard. One is that there is somehow quite a lot of continueity in u. S. And china relations and chinas emergence. I think one element that constitutes a major change for the United States is the relationship with china with the relationship with allies in ways that has not happened before. In a sense that chinas immediate challenge is not directed at the United States. But it is directed in its neighborhood. And its leader has articulated an order in which it is very difficult way. So in the United States, the main thrust centers on china but the challenges are going to be much more. In once sense the United States hats to demonstrate to their allies that the United States has sufficient resolve, sufficient cape abouts to deal with the threats that exist to them. On the other hand, the United States does not want them to be provocative regarding china. And what is provocative depends on perceptions and so on. And this sense it seems to me that the United States is facing a kind of that they not before. And this will create all kinds of difficulties. One of them coordinating all of the elements. There is the economic, political, the military and so on. So so what extent do you think we are here, beginning to think creatively as to how to deal with this challenge . Thank you, front row, please . Im arnold zeitland. I have been teaching in china. I think david might be the first to respond to my question. Im wondering if it is possible to compare u. S. And China Military spending on the ppe basis for costs in china in some sectors that are much less. David you want to start . I was afraid someone would ask this question. Im not an expert on the Chinese Military budget. When you make the general correction you are raising chinas gdp by 70 as the current estimate. One initial thought is take that and raise that by 70 . It would of course be the same share of gdp, right . But it would be 70 higher. I think in terms of thinking about the soldiers that probably make sense if you did hire an equivalent soldier in china it it makes sense to do that price comparison. So i dont know how much of the Chinese Military budget goes to equipment versus pay for soldiers. Basically the price of an equivalent in quality peace of weaponry may be similar. So you know probably the answer is you wouldnt want to make the full 70 adjustment, but in thinking in real terms, you would want to make some adjustment. If i could speak to michaels question, my response would billion that this is not a new problem, its a version of an old problem. Because we have had to reassure our allies about our resolve ever since those alliances were created. We have had to worry about independent action by our allies. For example one purpose in south korea was to make sure that south korea didnt go north. And that is not a concern today. It was a concern earlier on. Similarly the republic of china there was understanding at the time that if the republic of china was considering any action against the mainland, any major action it would need prior approval. There was a series of incidents where there was a lot of argument over what Major Initiative and what is not. I think what makes this more complicated today is chinas greater power and its greater ability to expand its power and influence in the region which is the First Political in the competition. More over, another new development is nationalism in all of the countries concerned. Which greatly complicates how national leaders, including in china assess threats to their National Security, and respond to those perceived threats. You want to have a go at any of that . I would like to. I think that they have really struck a main cord here. Folks like me have to constantly remind ourselves that the relationship is much broader than that. And that the economic and dip diplomatic relationship is extremely important. Several years ago when mike mullen was a chairman of the joint chiefs of staff, he called folks together and said we need to get away from looking at a military relationship, and look at a broader scope for how they deal with chinese counter parts. Im not p,aware of what has come of that, but that was his idea. He was the chairman that said that the most important National Security problem in this country was economics not some sort of military balance. I also note that the overall strategic situation is based on geography. We have some instances, but geography matters. If youre in singapore, seoul tokyo, taipei you have to Pay Attention to that. I once suggested to the deputy minister of defense that perhaps, before the end of this century, that south korea would give up the mutual Defense Alliance for the governing body of the entire peninsula. I didnt get a response. But thinking very long range, i think those sorts of thoughts need to be considered. I will just toss in one thought on this if i could. With the u. S. Korea relationship, in the mid 2000s, they asked seoul what they asked what they meant and to some extent we wanted advanced permission for other contingencies in the region. And the relationship between the president and some parts of the Bush Administration were not so strong in this period, and president noh, even though im not a being fan of his ten yur in south korea had a reasonable response. And he said you want to yous force about taiwan problem . Or something else. I have to laif here and i need some say. But if you want to use may country as a staging base for continual air combat bases, maybe i should have a say, where the Bush Administration essentially stood down the request which i think was the right way to go. And one other point on korea. We did a book on it last year and spent a lot of time on korea thinking about a possible contingency, and our focus was on how the United States and rok might want to work with china to involve china in managing that crisis rather than assuming china would stay out, or assuming that china should stay out, and this was an area where we thought for a number of reasons a collaboration, even though it would have some risks of its own, would be more prudent than trying to keep china at arms length. We have a couple friends over here, let me take these two. Hi earlier michael you asked a question about what about chinas focus on military development as a surprise to you. There is one surprise at least for me over the last 18 months or two years china has announced the goal to become a maritime power. A maritime power is not just a navy but it is a navy, coast guard,ship building merchant marine fishing it is ports it is an elaborate vision. And i guess a related surprise is in terms of the navy, for the strategy that has been discussed, essentially keeping the United States away from the coast of china the navy only needed submarines. And the rest of the pla had miss missils to deal with that. By my calculations china will have the second most balanced powerful navy in the world. Theyre going to be a Global Maritime power. This is not particularly sinister or scarey but i just never thought a great panel, thank you very much. I guess my first question goes to richard. I, perhaps also overly simplisticly simplistically would say that one reason why china has behaved how it has is because it can. And that goes to economic develop and the military on top of that and et cetera et cetera. So in Going Forward in doing the things that china feels will be in its interest to do, well leave it, have it behave in what we would interrupt in an assertive manner. Or whether they will feel sufficiently confident they can protect and promote their interests and claims and the rest of that in a way you were describing of more recent vintage. Whether this more moderate approach to protecting and promoting chinese interest is something we should expect to see or whether the Strategic Vision is something that we think china needs to expand their influence in a way that will lead it to use their military capabilities in ways that are challenging to us. To you want to start with mike and then well go to richard . I think it is a great point. Chinas focus chinas focus to maybe ten years oogt was on taiwan. Hai ago was on taiwan. And i think this was done because they felt if they could deploy submarines, they could slow down u. S. Intervention. I think they believe they have achieved that. They are back to a three faze strategy. Having a global based military. I think they want to be able to exert control to an island chain. It is certainly very ambitious. It extends out about 18 nautical miles from the coast of china. Whether or not they can achieve that by 2015 is still an open question. They have made great progress in being able to achieve the earlier step. It runs from japan through thaiian and the philippines and two indonesia. They have done that with submarines and navel ships but by virtue of their land based missiles. I think they believe that taiwan is no longer a problem from any sort of balance or measure. I think they focus on gaining control in the three seas, and i think they want to prevent from happening what it does not approve. What we may have seen and this is a bit of unexpected nature to the Chinese Military a building and many of these units go beyond that. To the mediterranean e to the west coast of africa. I think we are seeing a perhaps unplanned, but none the less expansion of chinese ability to deploy ships far beyond regional waters. But not necessarily to the indian ocean or the persian gulf. Since december of 2008, they have had Counter Piracy measures. They are slowly beginning to deploy more and more ships. The fact that earlier last year they sent a conventionally powered submarine and the indian navy tends to take a exaggerated view of chinese navel aspirations, but were seeing increased distant deployments. On mikes question if i remember my World History correctly, there are not too many cases of a continental power becoming a maritime power. The soviet union tried and failed. Were the only one. So what china is setting for itself is not a small goal. It will be a huge achievement if they make it. I agree with you that once you have the capabilities there is the temptation to use them. And i think that temptation is not just in the minds of the pla. A friend of mine was vacations where the john john navel base is, and the taxi was taking him to a hotel, and the taxi driver was complaining about the fact that china spent all of this money on these ships but it doesnt use them. Why dont we use them for something . More seriously, i think it is impossible to make a sort of general prediction about this. I think that were going to be on the look out for cases both recently and as we go forward of exactly how china decides whether to use military power to deal with the specific problem. And here we get into somebody that is the quality of chinese Decision Making and its confidence or lack of confidence in its ability to control escalation. Anything to add . No. Lets go to another round. Lets go a little further back. Here in the front row, do these two over here and then well work back. Please. In the back. Thank you, thank you for the opportunity and for all of the presentations. I heard it mentioned thejf South China Sea would be the most risky. And i have also heard about the geography and the message that the u. S. Sends to china warding sequestration and all of that informations. I would like to ask about the role of vietnam and in the big picture both economically and politically and military wise. So were expecting a code of conduct, so where do you see for the code of conduct to be effective, we would need to have an mechanism to enforce it. Where would the u. S. Be in that enforcement. And right now, were talking about chinas building islands. And if we let that proceed that would under mine not only the u. S. , but the whole International Community and asean as well. And the International Law that were trying to bring forth in the code of conduct. So where do you see the u. S. Can rally the elected nations security counsel to have something to say in it . Thank you. Well go to the woman in the third row and then back to the panel. Thank you i am a recent graduate from syracuse university. And i love this topic. My question is for david. We talked about how chinas economy has been slowing, last year it was 7. 4 i believe. And i just recently read in the wall street journal that there was a restructuring in the peoples bank of china and they were able to free up about 100 billion u. S. Dollars for lending. What is the implications economically and for their pill tear overall and for us as well. Would you like to start with that question . Yeah. Chinas economy is slowing, mostly for natural reasons. There has been overinvestment. So it is notch ral for the economy to be slowing down and basically it is a healthy thing that has been managed well. But they dont want the economy to slow too much. They got disappointing data the first data coming in in the beginning of 2015. So they made a typical monetary easing move to reduce the Research Requirement and free up something arent 100 billion. I think for this discussion, the important issue is the medium and long term growth of the economy. China has a lot of reforms to carry out in terms of the household registration system, financial liberalization. They have a lot of closed sectors to the economy and they would benefit from opening those up. Richard . The thank you, it is an excellent question. Vietnam is very interesting because it seems to me if there is a clash tweak between vietnam or china, on wednesday the head of the Vietnamese Communist Party and head of the Chinese Communist party are having a love fest somewhere. That goes back to the point of geography. China is right there. The u. S. Is a long way away but i think the idea of balance explains why honai is coming to an agreement. But vietnam will be very wise about this i think as the balance goes forward. Farce as far as the code of conduct, the decision to design a code of conduct has made sporadic improvement at best. I think beijing that even with a general code of conduct the bilateral relationships have to decide who is right and who is wrong. I also know that with respect to island building, i think malaysia was the first to do this, and the philippines and taiwan were the first to dredge dirt. The interesting point will come when under the United Nations conventional law of the sea should china claim unclosed rights for these man middle age structures, even though they dont qualify as islands, that is something that will have to be decided. I was once again structure how a treaty, an International Treaty can be so indefinite with so many grey areas. Im not holding my breath about the conclusion of a binding code of conduct. I think china, at least, may not want to restrict their flexibility by accepting rules. I think that if we ever get to it the enforcement will have to be among the countries concerned. But i do think the United States believes it will be very useful if the countries concerned can have a binding code of conduct. On vietnam, i agree and another thing to be said is that it does have a capable military. Even that can be a force for stability. And you can contrast the capability of the vietnamese military with the military of another Southeast Asian nation that i wont name. Can i say one more word. I think vietnam has a great opportunity, it is an initial negotiator. If the Transpacific Partnership can be implemented and vietnam can meet the standards, vietnam will be the biggest winner. It would be very important, and it would tie it to the United States and japan economically. It would be good if china joins the tpe. By the way two factoids as we look to the next round we have not talked a lot about australia today, they have a very good fiscal position and theyre spending about 6 of their gdp on their military. That gives you some gauge. Like wise there is a lot of talk about Prime Minister aba. Is there there is many things going on in japan, some i support, some im concerned about, but it is still plus or minus 1 of gdp. So it has not moved despite the talk of japan doing more. I think it is interesting people talk about arms races et cetera. I just offer that quick perspective. Pat malloy, and then the gentleman in the blue vest. Im a trade lawyer and a former member of the u. S. China commission. My question is to mr. Dollar. They use a term called comprehensive National Power meaning you build your economic strength and upon that you will build economic power. The concern is about chinas rise and why we need to deal with that. My concern is that since the wto, the United States has about 3 billion in trade deficits with china. Last year it was 340 billion. Some economists say this is contributing to chinas growth at the expense of our own growth and jobs in this country and economic strength in this country. And were feeding chinas growth. Wont it make sense as part of the pivot toward asia to start to rebalance this economic relationship so its more balanced rather than beating chinas growth at their own expense expense . I am martin apple. My discussion point is very straightforward and simple. All of the things that youre measuring have a common vulnerability and that is the connection between them. We know about the sleeper agents and all of these things being developed on both sides of the ocean, shouldnt we be tracking this as much as the others because it really under lines their success . Thank you david you want to go to the trade question. I share the sentiment behind your question and certainly if we go back a number of years to the period before the global final crisis the imbalance between the United States and chao in a and more generally imbalances in the world it reached extreme levels. It was around 7 of gdp and lots of people warning that was unsustain able and that proved to be true. I argue that we have made quite a bit of progress and it makes sense to look at the overall imbalances, right . If the u. S. Have a trade deficit with china, it would not be such a big concern. Our big deficit has come down to about 3 gdp. And i think those are sustainable numbers and their reasons why that may not be disadvantageous for the United States. My worry now is those imbalances will start rising again. The u. S. Economy is performing in a haeltealthy way. It is definitely an issue we need to continue to focus on. One aspect is the Exchange Rate where we have an intense dialogue with china. At this point i feel the bigger issue is market access. And if China Remains closed in many important sectors, both in terms of trade and foreign investment, i think it is in their interest to open up sectors to have a significant effect on the United States economy and the United States would benefit from being able to export more and invest more in china. I think that is where the dialogue is now, and thats why things like Transpacific Partnership, and investment treaty, these are very important because they would signal that china is serious about opening up and Meeting International standards appropriate for its level of development. I think things are hanging in the balance now as to whether but make that progress in terms of market access. If we dont, i think there is a danger those imbalances will come back and the u. S. Will have to think about other potential strategies. Thank you for the question. I think you make an extremely good point if only because the most difficult military domains to manage are the new ones where you dont have an experience and at least informal rules on how to conduct yourselves. I think cyber is doubly tricky because the attribution problem is so severe. I think that if there was problems with the pla navy, air force, or missiles we would be able to figure out quickly that china was involved. Cyber attacks are a different story. This deserves all of the attention it is getting and should probably get more. The first requirement i think is for our institutions to build up their defenses in a serious way, whether it is u. S. Government u. S. Critical infrastructure, the u. S. Corporations. It probably doesnt hurt if we also build up a fairly row bus capability to remind china that were not just going to play defense. Ultimately the management of this new domain will require diplomacy and creation of rules where rules dont exist. That may be a tall order but it is worth trying to achieve. So the gentleman in the back. And then well go to the gentleman standing right back in the against the wall. Thank you im mark wall. Formally an advisor at the u. S. Pacific command. First, how would you say chao in a is reading the situation in the ukraine, and what lessons may you or may not be drawing from the wests response there for their approach in the three cs . And secondly, taiwan might not be the focus these days, but they are facing new elections, it looks like they may become a bigger risk factor what should we be paying attention to there . In the back, please. Hi, nick weinstein. I appreciate any input from any of the panelists, but im directing this at david. If china catches up with the u. S. In terms of economy, how will it contribute and how will it look like in terms of global institutions and power structure . Thank you. So, as i see it china is pretty well embedded in the current set of global institutions. It is an important member of the imf and world bank and world trade organization. In those groups, the economic groupings which im more qualified to talk about there is power, the voting shares, et cetera, they should be shifting away from the developed economies toward the developing economies. I emphasize the point that the u. S. Can aspire to keep roughly its share of gdp, which i think is a realistic aspiration, but thats not realistic frankly for europe or japan because of their demographics and other factors, europe and japan are likely to be a slightly declining share of the World Economy and developing countries are likely to be a gradually increasing share of the World Economy and that has a lot of positives. For the terms of those institutions, it makes sense for the voting shares and the power shifting in the world. Thats broadly accepted. In the imf, there was a discussion about reallocating shares. Unfortunately, u. S. Hasnt ratified this. Its fair to the point of view of the chinese, its fair to say there should be some reluctance on the part of the United States and the existing powers to let china kind of take its natural place in these institutions. So, i see china now hedging to some extent. Its still starting a new investment bank, a silk road fund. I see that as chinese hedging behavior that makes a lot of sense. I hope the result of that is to galvanize the existing powers except that the power should be shifting. I would relate this also to the Trans Pacific partnership. The chinese perceive that to some extent as an effort on the part of the u. S. To exclude them. I see it on a part of the u. S. To set new high standards for trade in the 21st century. I hope that it succeeds and i hope china joins, so i think this is an interesting moment in history where over the next decade or so, it will not be clear if chinas really throwing its weight into strengthening the existing institutions and having a kind of a well agreed set of economic rules. Or if china will gradually be shifting more toward the developing an alternative set of institutions, which is not likely to be a good thing. For the World Economy. I think its indeterminate right now, and i think there are a lot of things we can do to encourage china to playing in the existing institutions and bolstering those. A lot of economics is win win, so on the economics side, it would be good if we could agree with china and economic rules that lead to more trade and more investment. Mark wall and i were colleagues some time ago at the American Institute in taiwan. Its really nice to see you. I havent studied chinas view of ukraine closely, but i would expect that they would have a mixed view. First of all, there would be deep concern about what they perceive, under line perceive, as the u. S. Stimulating this quote, unquote Color Revolution from at least some chinese views. The situation we have today was started by the United States and theres not, they dont focus as much on the internal reasons why the intraukraine dispute occurred, and, you know, we see this replayed in their situation in hong kong, for example. Second, they may see a couple of opportunities. One is if the United States gets deeply involved in the dispute between ukraine and russia, that may distract us and divert us from paying so much attention to east asia and so much attention to them. Similarly, there may be sort of a view that if we can strengthen our relationship with russia, its a useful card to play against the United States. I hope they would think twice about moving too close to russia, which after all, its a country that violated an International Treaty. In facilitating the breakup of ukraine. I think in particular they should worry about the precedent that russia has set by stimulating separatism in a small entity particularly through a referendum. At least some people in china with maybe a sense of humor would see the an analogy there. Thanks. I certainly think richard hit that nail on the head and i just add with respect that taiwan, does not lead to taiwans importance have been reduced. From a military estimate by the pla, i dont think they believe that the taiwan military is a significant opponent. I think that the p. L. A. Military in a taiwan scenario is much more concerned about u. S. Military intervention. Having said that, im not sure that the pla calculations of that sort are very accurate. I think for the last decade and a half, ive become convinced that the pla has grossly underestimated the capability of the Japanese Selfdefense forces, for instance, but certainly in terms of strategic importance, i think taiwan remains at the head of the list. In beijing. Mark im sorry i didnt answer your taiwan question. I really think its way too early to make a sound judgment. We do not yet know who the candidates will be. Although people think they know. We do not know what the mainland policies of those two candidates will be. We dont know who will win. And so, there are a lot of variables at play. I do fear that there may be an overreaction on beijings part if the doctor were to become taiwans next president. But i hope they would not overreact, remain restrained and see how the situation develops before taking any kind of preemptive or assertive action. One last point on ukraine, then well go to our final two questions. I think another dimension to this is what extent has american policy in ukraine seen us being seen as being officially resolute. Ill use this as an opportunity to do an advertisement. Susan rice is going to be up here, that one, too, will be covered live. Shell be talking about the president s National Security strategy. Where these kinds of linkages are certainly on peoples minds. Im not a complete defender of the policy on ukraine or anywhere else, but i would observe that i think theres been a salutary effect, a beneficial effect in that, whether what were doing towards putin with sanctions is adequate to stop putin its a pretty good deterrent against a truly rational actor doing something similar because i think the chinese frankly, are a little more capable of rational Decision Making than putin right now and the economic consequences, sanctions, may not be enough to get putin to desist, but there are pretty powerful signal that is the World Community is capable of applying sanctions in a more effective way than we were before and in a way that has a certain bite. Thats an optimistic interpretation. Something to it as well. So, time for two more questions. Woman here in the fourth row and then right behind her. And then well be done. I am lieutenant margaret morton. I have just been in west pack for the last four and a half years and im now here this d. C. So, you talked about defining the ends to then determine what our means would be on this subject of chinas expansion and our policy towards it. If you could define those ends, my question would be what would your answer be and if you could put any percentage of our gdp towards defense spending, what do you think it would take in order for us to maintain position and a role of foreign president s. Following on that, if sequestration does go through, how would that affect our policy in terms of relying on our allies to support our role there since we did discuss china kind of pushing us out towards the Second Island chain and what would it take for us to maintain our position . Last question. Gil rozman, formerly of princeton. Richard, when you brought up what china should think about what russias doing, i think you underestimated what china is doing about that and one thing is strengthening military ties with russia so what can russia sell china . What is the possibilities, this is the main theme here of a strengthened Chinese Military through new connections with the Russian Military and how should the u. S. Respond to that . I think what well do is just work down the row and answer your questions and any concluding thoughts. Folks may have. Ill begin with one thought on u. S. Military spending. I dont want to peg things to a certain percentage looking out indefinitely to the future. Even if sequestration occurs, im hopeful that the dynamics of the president ial race will change the calculus of the United States, so it wouldnt last more than two years, i would hope. I think there is a case for modest, real increases in the u. S. Defense budget and heres a very, i hope, stark way to put it. That i hope is compelling. A paying
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