college. >> the last time taxes or this typewere this high there was a good reason. we were fighting world war ii. some say growing federal surplus means washington has more money to spend. they have a backward. the surplus is not the government money. the surplus is the people's money. c-span has aired every minute of every party convention since 1984. and we are in the countdown to this year's conventions. you can watch every minute live on c-span c-span radio, and streams ated at c-span.org. >> richard armitage it says u.s./japan relations have drifted. his comments came at the center for strategic and international studies panel on a new report focusing on the u.s. and japan. other panelists included michael green and randy schreiber, a former deputy. this is one hour and 20 minutes. >> let me ask you find seats. ok, we're going to get started. hello. welcome. i want to say greetings to all of you. when richard said he would issue his report, on the 15th of august i said you are crazy. nobody is in washington. this is absolutely fabulous. i am delighted to have everyone here. it does speak to the very importance of the topic of the day. welcome all of you. we are delighted to have you here. we are very pleased that secretary arm attachedarmitage and secretary nye have been appalled and the studies and have shaped the direction for the policy traject tree in united states. i think it has had a sick of against impact as well. -- a significant impact as well. they see the signal againstsignificance of the events of today. what you have before you is a fine study would truth because you can do. i think that will be the thrust of the day. i read their jokingly said this look like an old dutch masters print except the two at the end. thank you we have some diversity. i was a thank you to all of you for having been participants in this effort. let me turn it to you to get into the content. >> we are gratified to be with our landlord. we are grateful to csis for all of the assistance. i want to say thanks to our colleagues who assisted all before you and three others. victor is traveling. frank was an observer to the process. you are looking at a bipartisan group. all three of our reports have had bipartisan participation. we think that is one of the important signals. if you look at this group, we are not all old. some have a little more modest than others, but in a way, you are seeing a new generation of folks interested in japan. we are hopeful this will encourage people in japan to step up security issues in japan's place in the world. if i may tell you what we are going to do. after my introduction, i will read a short paragraph from joe nye. we will ask mike green to talk about where we are in the alliance. these will only be five minute segments. there will be plenty of time for questions. that will be followed by bob mcnally talking about security. kevin is going to talk about the macro issue trade and macroeconomics followed by david asher who will talk about an idea he came up with that we're calling [inaudible] randy schreiber will talk about the real rise of china. that is the background. everything that is going on. isabel will speak about the p ko. we have some views on it. then mike and i will wrap it up. we will turn it over to you. you will be able to stand up. please identify yourself and ask your questions. i will ask mike gruen to sort of in see -- green to sort of emcee. >>this report comes at a time as some drift in our relationship. kirk campbell and his colleagues in the department of state's have done their best to keep this relationship stable. because of this real rise of china and the difficulties emanating from north korea and the dynamism of asia and because of broader security concerns and staying in the same place is not sufficient. we have got to move forward. for an alliance such as ours to thrive we have to approach it from the perspective of a tier one nation. a tier one nation has economic weight, a capable military forces global vision, and willing to take leadership of international concerns. it is clear that we think the u.s. can better support this alliance. there is not a question in the minds of most of you and none of us about the fact that the united states is going to be a tear one nation. it will continue to be a tier one nation. japan, it is time for a decision. does the japan continue as a tier one nation? 50 tier two -- if the tier 2 is ok i guess the close report and do not read further. we say that japan is capable of remaining a tier one nation. we have questions about japan's dissipation. -- disposition. we believe japan need a strong u.s.. for japan to remain standing shoulder to shoulder with the united states, she is going to have to move forward with us. you will see at the end of our report that we have recommendations for the united states recommendations for japan and recommendations for our alliance. let me read from the following and then turn things over. he has asked me to say the following appeared for nearly two decades i have at the pleasure of working with rich to promote our shared the view as the alliance is the central bedrock of a stable and prosperous east asia. this is the third in a series of bipartisan reports designed to develop a better understanding of the importance of that relationship to the united states and the world. we are appealing to americans to rise above any partisanship in reforming the importance of our relationship with japan. thank you for coming. let me turn to two things. combewhat distinguishes these reports is the premise that the united states as an asia pacific power is right to anger its strategy in an alliance with the major maritime power japan. this is not a question of choosing between japan or china. it is about how you approach the whole region. and could 2007, the report was u.s.-japan of like getting asia right. this has a long pedigree in strategic thought toward asia. 200 years ago in the war of 1812 captain david porter was cut off by the royal navy. he announced the planned to attack british shipping in the pacific. it was the first u.s. warships to enter the pacific. merchants knew about trade with china. pressure came back and said as a maritime power we have to anger this with the other maritime presence in japan. in the middle of world war two they argued that we didwe needed a piece where japan was an angerchor of stability. it is also premised on this maritime approach. when joe nye took over in the 1990's, it became policy and has been a bipartisan approach ever since. it is a recognition of our role as an asian pacific power and a maritime power. that is the premise from which we started these reports. the second point is the united states has an interest and principal with japan alignment with japan. when a national interest in it being a first tier power appeared japan can achieve that objective. there are untapped power of sources in japan that would unleash sources of influence on the international scene. japan in the area of soft power is a first tier superpower. japan and the united states is the most trusted country in the world. japan is consistently ranked no. 1 in terms of respect. samsung research institute does a survey on national brands. japan was no. 2 and after march 11 2011, and they moved up to #one. soft power has enormous potential. the self-defense forces are a resource that has not been sufficiently utilize. today in japanese polling the courses are usually listed as the most trusted institutions. they are there. they're loosening some of the constraints that will get a real asset to japan and the world. the role of women, goldman sachs has done studies that suggested japan had participation and the force at the oecd level that g.d.p. would increase by something like 0.3%. which is quite considerable. for japan the number is roughly 16 term. joining into free trade agreements would unleash competitive forces of the japanese economy in give japan a real influence in shaping regional trade and architecture. it is not just about the bilateral economic relationship. it is about japan and powering itself internationally by being the leader in foreign trade agreements. these are some of the areas despite the well known challenges japan has with energy, there is some real potential. part of our purpose is to explain why it is in u.s. interest that the potential be tapped. >> thank you. the importance of energy in our economies and our national security is often overlooked but cannot be overstated. it is something we took on board when our group took this project. in the context of the alliance, we identified several challenges and opportunities that are emerging. i would like to review them. first, nuclear power. we are mindful of the tragedy's from march 11, 2011 and 16 our condolences of those inflicted by the earthquake we day and send our condolences of the affected by the earthquake. we applaud the prime minister's wise decision to initiate a cautious restart. before, japan was the third largest consumer of nuclear energy. nuclear-powered remains the only substantial source of base load efficiency generation. it is critical for japan to sustain economic growth. the nuclear shutdown is starting to reverse japan's extraordinary progress. in the 1970's, at 80% of japan's energy use was oil. last month fuel consumption is up 60 4% a year ago -- 64% a year ago. it would also stymie development of civilian nuclear power. as china plans to join major vendors, and japan cannot fall behind. these plants will be built all over the world. japan will benefit from the state services. for our part, we need to remove uncertainties regarding the disposal of nuclear waste and tokyo and washington must take forward the lessons of fukushima and promote safe world leadership. the second issue is natural gas. i have enjoyed how it can surprise you. he would have thought we would be talking about the united states as an exporter of natural gas because large increases in reserves has turned the united states into the world's fastest- growing producer of natural gas. the lower 48 will be exporting in 2060. when we wide in the panama canal, it will allow a 80% to pass through their and supply -- there and supply competitive gas. japan needs the natural gas. we have it. our country started natural gas trade in 1969. the united states should extend its exports. the united states must reject calls to limit exports. this is not a time for restores nationalism. it is time for a resource alliance. we should not be inhibiting private sector plans. the united states should put japan on a level playing field with other customers for our lng. the united states should guarantee and no guarantee barring a national emergency. the third area we discussed was protecting international energy security in the global energy. the vitality of modern civilization and future global growth will depend on increasing flows of access to fossil fuels for a long time. even as they become less dependent, in the world will still rely heavily on energy supplies from the persian gulf. the persian gulf is a crucial supplier of lng. as china and other nations followed are steps in become this it depends on the stability of our respective markets. this year she cut imports to iran by over 1/3. going forward at tokyo's increased participation in efforts to combat piracy, confront regional threat to peace and secure the sea lanes will be needed and welcome. methane hydrates. this is longer. it is as operational. they are natural gas crystals are buried in the ice formations. the are boundfound to be 10 years japanese global consumption. they can be high as $700,000 trillion cubic feet. like shale gas we know it is fair. we have not figured out how to get out of the crest safely and cost effectively. these are technical problems with countries with the skill and motivation can sell. we cooperate closely in the development of large scale methane hydrates production. in may a field trial successfully extracted met in hydrate by pumping in co2. the united states and japan should accelerate progress on researching and developing environmentally responsible production of methane hydrates. a cautious restart a nuclear power, a new chapter in our bilateral trade enhanced protection of the global economy and methane hydrates appear as promising areas to deepen and succeed. thank you appearing. >> thank you for the opportunity. in trying to say where we are now in global economy and comparing it to the moment when we last together in 2008, what a difference four years makes. we were in the trough of the u.s. financial crisis that had morphed into a global economic crisis. an actual contraction in world trade. if you look at where we are now i know we have the lowest u.s. consumer debt in decades. the u.s. exports have increased 43% and they are target to hit president obama's aspirational 50% growth. american companies today are sitting on top of more cash than at any time in history since 1963. bob has described a very dynamic energy situation. i would submit there is at least as much dynamism in the manufacturing sector with 3d printing that are offering significant promises to the two countries that are the leaders in innovation and productivity, u.s. and japan. what do we do with this tax? have to step out of the shadow of 2008? -- how do we step out of the shadow of 2008? on the investment side, we have seen some largely on chronicled movement in investment. it is very important. since 1998, we have seen a doubling of u.s. investment in japan. that is good news. we have not seen corresponding moments this direction. what is clear is underneath the surface for companies. when we wring our hands about some features, that anxiety are not shared by a lot of corporations. they seem to be progress. they want to act on it. as we come up with recommendations, david asher challenge us to not just think about how to keep the bicycle up bright and moving forward but how to create a new paradigm that not only operated to u.s. and japanese advantage but improved the outlook for trade. >> thank you very much. japan is a nation in a period of great challenge. there is a tremendous prospect for opportunity and economic development and advancement. japan is a country that has really never tapped into its service sector liberalization projects. as a country that faces a rapidly declining working population, it debt and deficit, we frequently look at the prospect that japan may face. we do not pay attention to the opportunities for japan to advance the state side economy. we forget japan is still the second-largest economic partner for the united states. especially if you count for the production in china. the army tiitage-nye report would really cement the relationship between the u.s./japan bought between canada and the trade free trade zone. the context is that japan already has a pre trade agreement with mexico. there is really no reason why the united states should be left out of this process. what we see is an opportunity for japan to address it long- term investment and economic prosperity needs to buy creating a much deeper and stronger relationship with the u.s. and taking advantage of the huge economic opportunities for investment here. returns on capital are very strong. returns in japan are really low. we see free trade agreement as a way as increasing the sense of confidence between our countries. it will allow japanese investment to flow into the u.s. and north america at large. we see an opportunity for japan to invest in the energy sector. bob mcnally talked about natural gas. the u.s. is awash of natural gas. prices are washed out. there is relatively little investment going on because of this asymmetry. the japanese countries have an opportunity they are taking advantage asif in canada. the u.s. has to change its policy. we need to make sure japan can invest with security and safety in american natural gas and energy opportunities. the only way to do that is through a free trade agreement. the bottom line is that free trade is not as complicated and equation for japan to solve as people think. the working population among farmers in japan is alarmingly in decline. the agricultural issues have been blocking free trade for years. they are not that substantial. japan has negotiated free-trade agreements with many countries. the united states which people thought they could not. including mexico. i think we need to break the barrier of free trade and move forward in a way that will help our license for the next 50-100 years. >> thank you. we make a few comments about relation with neighbors? >> i let that some by david a. about free trade relations. the section i am speaking about is relations. the main point is the u.s., at japan, and korea share extremely important trilateral of national interests. it is hard to place on the u.s. agenda wtwo issues that are as important. as how do we together approach the rise of china and how do we deal with the issues of north korea? these are very difficult issues that are key to the stability of asia and peace in the region and the growing friendship between the united states and china. we really have to focus on these issues together. we cannot achieve our common interests unless we were together. there are a lot of ways to build trilateral cooperation. we have talked about cooperation. in japan and the cutbacks from the nuclear power position, may be tempted to not recognize the important world ridewide role of non- proliferation and nuclear- powered. japan's role is well recognized and respected around the world. for japan to retreat from that position and not move forward there would be a big mistake. likewise south korea has important nuclear safety track record and a roll of transparency. together the three countries of the united states, 3 and japan can make significant progress to promote and assured the safety of nuclear power and our commitment to non-proliferation. the second area is overseas development assistance where they are world leaders and where we share a common interest. japan and korea have been very is a mental in promoting of debt is common to us in iraq and afghanistan. this will continue to be a model. the third area is u.s.-japan security cooperation. there has been a lot of bilateral activity between korea and japan that can be built and promoted and encouraged. together we can move forward having crossed servicing agreement between the two w zero countries and having a sharing of information will go a long way toward promoting the cooperative. that we share. i am really a product of the korean war. my parents met in japan because of the korean war. they were married and in japan. i was made in korea. i was born in america. i think i can really empathize with japan and korea and all the emotion that goes on between the two countries over their natural interest. both countries have legitimate stakes and questions involving historical claims. it is more than that. it is emotion and feeling. it is at the death of what the means to be japanese and korean. these are very difficult issues to which the united states cannot resolve. and they need to be looked oat addressed by the people themselves. for us to expect the japanese or korean government to go against public opinion and take some enlightened position is a little far-fetched. what we're asking for is that maybe we look at encouraging the track two dialogue that exists between the countries were historians get together and resolve and get a point of consensus where people can talk openly and directly to each other and broaden this into a public understanding. why are we interested in? we are interested in this as people who are facing a difficult future. we need to go forward together. we need to move forward tog