White House National security adviser john bolton, education secretary, betsy devos and white house budget director Nick Mulvaney speak at the wall street journals annual meeting for chief financial officers. Leading off talking about the Administration Strategy on china, russia, mexico, north korea and iran. [ applause ] thank you for joining us. We have a meeting coming up in a few days in osaka japan, china will be a big topic, we are in a trade spat, a trade war with china and we have concerns about their accomplishments regarding china at the g 20. The first thing is not to have excessive expectations about anything that happens at these meetings. They are forum for people to have probably the more bilateral meetings and in that sense its not too different than the opening of the un general assembly, its not people going for the thrill of the un because you can speed date with other foreign leaders and put others together but with respect, with vladimir putin, these are opportunities to meet on some Critical Issues that are potentially very important. So, i dont have any doubt that the overall trade issue will be the dominant topic but there are a lot of other issues to discuss as well and, we will see how it develops as we figure out how much time we have and talk to the representatives of other countries to see what their priorities are and work it together. The chinese model of technology and subsidizing homegrown enterprises and feeling need them the world as world beaters as well as militarization in the South China Sea than other parts of asia, it seems to be working. Why would they necessarily want to change the model . Well, its working to an extent but a lot of statistics are overstated and i think that a lot of the issues within the economy are still hidden and theres a lot of transparency but its successful and you will have a lot of progress over a period of time. , i dont think that every economic statistic they claim to have is necessarily accurate. The thing we are operating under is the ability to project Strategic Force in asia around the world and this depends critically on their economy. And, with an economy that is been based over the years on theft of intellectual property for technology transferred against foreign investors, the trade talks weve been on, have not been what weve called classic wto trade talks, i will lower tariffs 10 if you lower tariffs, thats really kind of the sub issue being discussed the real issues are what we call structural issues, will china establish a legal and forcible system that protects intellectual properties for foreign businesses and entities , can we count on them to enforce that and what will be the mechanism to bring back into effect . That is why the talks are so complicated. Those are great goals and have been goals for three decades of negotiating with china as you well know. But, its not the china model, they rely upon the theft of the intellectual property forcing companies to transfer its why theres such a critical point and why we in the west as a whole have to reassess many of the assumptions weve operated under at least since china joined the wto. I remember vividly 20 years ago , the experts saying, if you let china into the wto, the pressure to comply with International Norms will change their system, will change their model that they will do all these things. Well, they looked at the wto they mastered its complexities and dominated it, abused it and have grown far wealthier without changing the basic model number and, then this was a mantra that went on well before joining the wto, since the 80s and the 90s. If chinas Economic Advancement and modernization proceed, there will be an inevitable democratization of chinese society. I remember, i can hear people telling you this year after year, they are really highly competitive elections in china, and it will grow from the village level to the province level and then a National Level and that will all come when capitalism dominates china and everything will be fine. You now have an authoritarian leader who i think is widely acknowledged to be the most powerful chinese leader, so to critical elements that underlay western Economic Policy with respect to china have shown to be fundamentally wrong. Are the tariffs, theres bipartisan support, for something to be done about china and the tariffs are a step in that direction but for you have to ask yourself, if youre xi jinping, and you are running the communist party, do you want to mess with that because its working . Its a huge patronage system for him. Why change that model just because the United States has put some tariffs on me . I think it has had an Enormous Economic impact inside china. And i think the prospect of more terraces tariffs or continue tariffs have had a significant element on the thinking of Foreign Corporations and others who have put elements in their supply chain inside china. I think the chinese leadership was shocked that President Trump with these terrorist in effect. Remember, im an old arms control negotiator. There is a far side cartoon, of course they dont have those anymore. But a far side cartoon, a picture of a cavalry ford in the old west, wooden stockade. Cavalry soldiers looking at it. The indians circling the ford. Firing arrows that are fire arrows so that the ford is starting to burn. One soldier turns to the other and says, hey, the indians are firing fire arrow status. Are they allowed to do that . So, the chinese said, they have put tariffs on us. How did that happen . That is the kind of attention getter that i think, we can say, in hindsight here is absolutely necessary to get the attention of the chinese leadership. And it has their attention. So, you have heard notion that if one global power seeds another global power on the rise, that inevitably this leads to conflict. Athens, sparta. I think this is absolute nonsense. I think this is academic claptrap of the were started. The idea that what happened in ancient greece is suddenly dictating what happens to us now is just, there is no trap. There is the rise of china that has to be dealt with. So, teach in paying xi jinping ultimately does what . How does this play out . What does xi jinping do to satisfy the u. S. Demands . I think there is they are still absorbing the fact that we are not accepting that they get to play by different rules. You cannot say that we are living in a freetrade world when one of the Major Economic powers is pursuing unabashedly mercantilist policies. Inside the structure that should be a freetrade organization. You cannot say that somehow, donald trump is violating principles of free trade when he is trying to deal with an economic power that couldnt care less about freetrade. Now, will the chinese change that . I dont know. But are we going to live with it forever . Is the argument, my goodness, you cant do this, you can do that, because china holds all this u. S. Debt. That is sort of formulation which we have heard for years is a path to surrender. I just think that has been a mistake and i think President Trump has reversed that. So, as you play that out, it is really now for the chinese to say, they found out about us. And now, what are we gonna do . Or, the chinese do what they have done, which is play rope a dope, waited out. Another election, another president , another round of negotiations. But that. Lets put it that way, if President Trump wins, which we are certainly planning on, do they think theyre going to get better terms in a second term . I would not count on that. Russia meddled in our election. You brought up the notion that a serious act on the part its an attack on the constitution. Yes, you did. They continue to metal. The metal not just here, but in europe and other parts of the world. Have we done enough . As far as rush is concerned . It wouldve been tough enough for them to stop this. Deadly, the meddling continues. I think we are doing a number of things. Think we had to act against the history of passivity and inaction on the part of the previous administration. So, one of the things that we did that i cant talk too much about because its all classified, but we issued a new, National Security president ial memorandum number 13. News pin number 13 as we call it. s fundamentally changed the way the United States government changed decisions about offensive Cyber Operations. To free up the capabilities across the board to engage in more addicting cyber activities. The purpose of which is to say to russia or anybody else that is engaged in Cyber Operations against us, you will pay a price. If we find that you are doing is. And we will impose costs on you , until you get the point that it is not worth your while to use cyber against us. So, this is, in the cyberspace, since, creating structures of deterrence. One way, you avoid conflict, is to convince your potential adversaries that they will lose a lot more than a stand to gain. And i think we did that, frankly, pretty successfully in the context of the 2018 election. And i think we are now looking at beyond the electoral context, a whole range of other activities to prevent this kind of cyber interference. In election campaigns were certainly a very high priority put in the economic space as well. But, the cyber interference continues from russia, does it not . We have not in 68 months fully established the conditions of deterrence we want. And it is not a game that never ends, either. So, the activities continue. I would say, it is not just russia that is engaged in these activities. China, if you recall the Vice President s speech about 67 months ago that chinese influence operations in our country, very important speech. I would urge everybody to read it if you havent. That is continued. And we continue our responses to that as well. This is under offensive initiative with notable, you can get into the details of it, she said. I would love to, by the way. Give us a rough idea of what this means. What you mean when you say take a more offensive i do speak hypothetically. So, lets say there is an entity out there that is trying to interfere in american elections. And offensive campaign means preventing them from doing that. Destroying their capabilities. Doing something else. And it does not have to be completely symmetrical. Another was, to respond to efforts in cyberspace to disrupt elections, response does not have to be only in cyberspace. So, we are looking at really, the full range of things we could do. This is russia is a delicate issue for the president. The criticism of him that he has underplayed the russian interference in the u. S. Election because he is concerned that acknowledging it might delegitimize as electoral victory. Is that a factor playing into what we are doing with russia that is holding us back from being tougher . I dont think it has. And i think the molar report has now demonstrated there was no russian collusion. I think if you look at the range of sanctions that the administration has imposed on russia in a variety of areas, it has been very tough. We have stood up against russian violations of the intermediate range Nuclear Forces treaty. We have withdrawn from it. Because, the way it was for years, particularly under the last administration, the u. S. And russia were the only two countries bound by the inf treaty. And the whole world. China was never bound, china, north korea never bound. To countries bound. Russia was violating a. That means under one under that treaty, one country was limited by the inf treaty. Were living it. So, we got out of it. That was quite a blow, i think to russias strategic framework as well. Lets move to a run for a minute. The iaea says that iran is increasing production of enriched uranium. What is the line, i dont want to use redline, but lets use the redline. What is the the line of limitations that the u. S. Feels that iran simply cannot cross before some escalated action by the United States as needed . I think iran has already crossed a lot of lines in terms of violations of the iran nuclear deal. I think the iaea has another report that has just come out that talks about their violation of the limitations on the use of more advanced, more sophisticated centrifuges, the mechanisms used to enrich uranium. We see them preparing by july 8 , according to iran, blowing past the number of the limits that you mentioned on storage of reactor grade enriched uranium, heavy water, and on the limit, one of the most important limits that they would not enrich beyond reactor grade, moving toward rep weapons grade. So, i think they have demonstrated that they are still, they have certainly not made a strategic decision to give up the pursuit of Nuclear Weapons. I think the president s decision to withdraw from the treaty, from the deal, and to impose economic sanctions has had a devastating effect on the iranian economy. And i think we are going to continue to pursue them. Whats the endgame . How does dis iran gives up the pursuit of Nuclear Weapons, Ballistic Missiles, terrorist activities and other malign activities of the region. Why would the give up Nuclear Weapons that they see as an empowering tool for their own self survival . Among other reasons, they agreed to it and lied about it. So, we have now impose costs on them that are, even our friends in europe said, unilateral american sanctions wont really have an effect. They have had a devastating effect on a run. North korea, similarly, how does it end . North korea gives up Nuclear Weapons. Sees that again as the ultimate empowerment of his regime. He doesnt want to be another qaddafi. He wants to remain the leader of north korea. The one where you do that is you have nukes as a deterrent against the United States paris the president in defiance of a lot of the conventional wisdom has held to summit meetings with kim jong un. He has given him a vision of what north korea could look like. The Economic Future it could have. He has talked about what a great location north korea has. All that seacoast, all those resort possibilities. Great Economic Future. He has held the door open. All they have to do is give up the pursuit of Nuclear Weapons. Are they abiding by the agreement reached in singapore . Well, what they have said was that they are not going to test Ballistic Missiles, intercontinental range Ballistic Missiles or nuclear, have nuclear tests. That is continued. They are doing a lot of other things that still indicate they have not made a strategic decision to give up the pursuit of deliverable Nuclear Weapons, which is why we continue the maximum pressure campaign. Another summit . Sure. I think its entirely possible. It is really, kim jong un holds the key paragraph is that in the cards . Is there a discussion of another summit . We are ready when they are. So, it is anytime that they want to schedule it. So, your boss, the president , has dialed back some of the comments you have made on north korea. And iran, notably when they had recent missile tests. He said was a violation of their agreements. It was a violation of Un Security Council sanctions, which i know, because i wrote the first one in 2006. Right. The president said, well, i dont know. Maybe will cut off the, maybe they shot off a couple of lesser weapons. When that kind of disagreement happens, does that signal to our rivals, discombobulated and inform policymaking in the United States . In our allies . I dont think its really disagreement. He was talking about the pledge he thought he had from kim jong un. Not to test icbms. Which is true. They have not tested it yet. But we have, it is not surprising, we have substantial reason to believe that north korea, iran, venezuela, russia and china have made a decision to, and you can see it publicly, to try to so this information about the administration. And to say that the president and his advisers are divided and things like that. We have got the foreign minister of around talking about the b team, which im happy to be included in with bibi netanyahu, of saudi arabia. This is the wall street journal. Thats my point. The stenographers of these regimes and the American Press immediately pick it up thats unfair. No, its not. Will give you an example. Not from the wall street journal, but the New York Times. I saw this in japan recently when the president met the emperor and Prime Minister abbi. Had a cold. So i didnt go to this formal dinner. That was duly noted in the New York Times, like sort of criminology. Boltons absence at the dinner was noted. Will, noted by the New York Times and cnn. I was asleep, trying to shake michael. That they didnt bother to ask about that. But, the president has a different take on foreign policy. Then you do at times. There are disagreements that is in public. Does that shake up our allies and adversaries . Or is it just part of the game . He was a hidden truth. There are disagreements within allied governments on foreign policy, too. That is how it works. The president in our system makes the final decision. I like to say, and it is completely accurate on the National Security advisor. I am not the National Security decisionmaker. And i think everybody und