The Biden administration’s international economic agenda: National Security Advisor Jake Sullivan

thank you great good afternoon I'm Amy Lou I'm the current president of Brookings and it is my pleasure to welcome all of you here in the room and those who have joined us on Zoom to today's event featuring President Biden's National Security advisor Jake Sullivan now um I'm doing a little homework getting ready for today I learned that Jake Sullivan was voted most likely to succeed by his class of 1994 at Southwest High School Minneapolis and since then Jake has been a Rhodes scholar a graduate of Yale law school a supreme court clerk director of policy planning and Hillary Clinton state department and now National Security advisor in the Biden Administration so I think it's safe to say his classmates were right I also think it's safe to say that we're lucky to have someone so capable in this role right now because as you all well know a lot has happened since January of 2021 since he took on the mantle there's been the admin flow of a pandemic the U.S withdrawal from Afghanistan Russia's full-scale invasion of Ukraine and resulting sanctions the Russian Detention of Wall Street Journal reporter Evan gerskovic escalating tensions with China over Taiwan and the shooting down of a Chinese spy balloon bans on apps like Tick Tock as well as active debates here at home about the private and security of concerns of such platforms a worldwide burst of inflation and passage of the most significant series of U.S legislation to invest in Technology Innovation infrastructure climate resilience and place-based Industrial policy and I could go on these events Mark that not only is it a quite a time to be a man managing National Security right now they also point to the complexity of today's highly globalized world and that's because all the events that I just mentioned are hyper interconnected and I believe this is the reason that Jake Sullivan is with us today and why he is why his visit is hosted here by Brookings and in particular the Hutchin Center on fiscal and monetary policy today's highly globalized World means that economics and National Security couldn't be more interconnected and for our part here at Brookings where um where we cover issues from foreign policy to Global development to domestic economics AI governance cities and Regional prosperity we too strive to connect these dots every day so the policy ideas respond to these complexities and to the real world tensions trade-offs and opportunities that they present now for today's event Jake will open with remarks about International economic policy at a time when the post-world war and the post-cold war Paradigm just doesn't fit these new realities now following Jake's remarks Jake will be joined by David Wessel director of the Hutchin Center who will moderate a short follow-up discussion with Jake before turning to all of you for some questions now one quick note about David before I scootal out of here David was part of the class of 1971 at the Richard C Lee High School in New Haven and since then David spent 30 years at the Wall Street Journal he shared two Pulitzer prizes for journalism he's published several books including one on opportunity zones and today he is leading one of Brookings Premier Research centers so David I have no idea what your high school classmates designated you with but I am sure you can claim most likely to succeed as well so with that please join me in welcoming Jake Sullivan [Applause] thank you so much Amy for that very kind introduction and for setting the scene today and I look forward to the conversation as well um but I'm afraid that before we get to the conversation I'm going to have to trouble you with some many minutes of remarks so you can hear uh the the perspective of the Biden Administration on this very important topic I want to start by thanking all of you for indulging a national security advisor to discuss economics as most of you know secretary Yellen gave a very important speech just down the street last week on our economic policy with respect to China today I'd like to zoom out to our broader International Economic Policy particularly as it relates to President Biden's core commitment indeed to his daily direction to us to more deeply integrate domestic policy and foreign policy after the second world war the United States led a fragmented world to build a new international economic order it lifted hundreds of millions of people out of poverty it sustained thrilling technological innovations and it helped the United States and many other countries around the world achieve new levels of prosperity but the last few decades revealed cracks in those foundations a shift in global economy left many working Americans and their communities behind financial crisis shook the middle class a pandemic exposed the fragility of our supply chains a changing climate threatened lives and livelihoods Russia's invasion of Ukraine underscored the risks of over-dependence so this moment demands that we Forge a new consensus that's why the United States under President Biden is pursuing a modern industrial and Innovation strategy both at home and with Partners around the world one that invests in the sources of our economic and technological strength that promotes Diversified and resilient Global Supply chains that sets high standards for everything from labor and the environment to trusted technology and good governance and that deploys Capital to deliver on public goods like climate and health now the idea that a new Washington consensus as some people have referred to it is somehow America alone or America and the West to the exclusion of others is just flat wrong this strategy will build a fairer more durable International economic order for the benefit of ourselves and for people everywhere so today what I want to do is lay out what we are endeavoring to do and I'll start by defining the challenges as we see them the challenges that we Face to take them on we've had to revisit some old assumptions then I'll walk through step by step how our approach is tailored to meeting those challenges when President Biden came to office more than two years ago the country faced from our perspective four fundamental challenges first America's industrial base had been hollowed out the vision of public investment that had energized the American project in the post-war years and indeed for much of our history had faded it had given away to a set of ideas that championed tax cutting and deregulation privatization over public action and trade liberalization as an end in itself there was one assumption at the heart of all of this policy that markets always allocate Capital productively and efficiently no matter what our competitors did no matter how big our shared challenges grew and no matter how many guard rails we took down now no one certainly not me is discounting the power of markets but in the name of oversimplified market efficiency entire Supply chains of strategic Goods along with the industries and jobs that made them moved overseas and the postulate the Deep trade liberalization would help America export goods not jobs and capacity was a promise made but not kept another embedded assumption was that the type of growth didn't matter all growth was good growth so various reforms combined came together to privilege some sectors of the economy like Finance while other essential sectors like semiconductors and infrastructure atrophied our industrial capacity which is crucial to any country's ability to continue to innovate took a real hit the shocks of a global financial crisis in a global pandemic laid bare the limits of these prevailing assumptions the Second Challenge we faced was adapting to a new environment defined by geopolitical and security competition with important economic impacts much of the international Economic Policy of the last few decades had relied upon the premise that economic integration would make Nations more responsible and open and that the global order would be more peaceful and cooperative that bringing countries into the rules-based order would incentivize them to adhere to its rules it didn't turn out that way in some cases it did in a lot of cases it did not by the time President Biden came into office we had to contend with the reality that a large non-market economy had been integrated into the international economic order in a way that posed considerable challenges the People's Republic of China continued to subsidize at a massive scale both traditional industrial sectors like steel as well as key industries of the future like clean energy digital infrastructure and Advanced biotechnologies America didn't just lose manufacturing we eroded our competitiveness in critical technologies that would define the future economic integration didn't stop China from expanding its military Ambitions in the region or stop Russia from invading its Democratic Neighbors neither country had become more responsible or cooperative and ignoring economic dependencies that it built up over the Decades of liberalization had become really perilous from energy uncertainty in Europe to supply chain vulnerabilities in medical equipment semiconductors and critical minerals these were the kinds of dependencies that could be exploited for economic or geopolitical leverage the third challenge we faced was an accelerating climate crisis and the urgent need for a just and efficient clean energy transition when President Biden came into office we were falling dramatically short of our climate Ambitions without a clear pathway to Abundant supplies of stable and affordable clean energy despite the best efforts of the Obama Biden Administration to make significant Headway too many people believed that we had to choose between economic growth and meeting our climate goals President Biden has seen things totally differently as he's often said when he hears climate he thinks jobs he believes that building a 21st century clean energy economy is one of the most significant growth opportunities of the 21st century but that to harness that opportunity America needs a deliberate Hands-On investment strategy to pull forward innovation drive down costs and create good jobs finally we Face the challenge of inequality and its damage to democracy here the prevailing assumption was that trade-enabled growth would be inclusive growth that the gains of trade would end up getting broadly shared within Nations but the fact is that those gains failed to reach a lot of working people the American middle class lost ground while the wealthy did better than ever and American manufacturing communities were hollowed out while cutting Cutting Edge Industries moved to metropolitan areas now the drivers of economic inequality as many of you know even better than I are complex and they include structural realities like the digital Revolution but key among these drivers are Decades of trickle-down economic policies policies like regressive tax cuts deep cuts to public investment unchecked corporate concentration and active measures to undermine the labor movement that initially built the American middle class efforts to take a different approach in the Obama Administration including efforts to pass policies to address climate change invest in infrastructure expand the social safety net and protect workers rights to organize were stymied by Republican opposition and frankly our domestic economic policies also failed to fully account for the consequences of our International economic policies for example the so-called China shock that hit pockets of our domestic manufacturing industry especially hard with large and long-lasting impacts wasn't adequately anticipated and was inadequately adequately addressed as it unfolded and collectively these forces have frayed the socioeconomic foundations on which any strong and resilient democracy rests now these four challenges were not unique to the United States established and emerging economies were confronting them too in some cases more acutely than we were so when President Biden came to office he knew the solution to each of these challenges was to restore an economic mentality that Champions building and that is the core of our economic approach to build to build capacity to build resilience to build inclusiveness at home and with Partners around the world the capacity to produce and innovate and to deliver public goods like strong physical and digital infrastructure and clean energy at scale the resilience to withstand natural disasters and geopolitical shocks and the inclusiveness to ensure a strong vibrant American middle class and greater opportunity for working people around the world all of that is part of what we have called a foreign policy for the middle class the first step is laying a New Foundation at home with a modern American industrial strategy my friend and former colleague Brian deese has spoken about this new industrial strategy at some length and I commend his remarks to you because they're better than any remarks that I could give on the subject but in summary a modern American industrial strategy identifies specific sectors that are foundational to economic growth strategic from a national security perspective and where Private Industry on its own isn't poised to make the Investments needed to secure our national ambitions it deploys targeted public investments in these areas that unlock the power and Ingenuity of private markets capitalism and competition to lay a foundation for long-term growth it helps enable American Business to do what American Business does best innovate scale and compete this is about crowding in private investment not replacing it it's about making long-term investments in sectors vital to our national well-being not picking winners and losers and it has a long tradition in this country in fact even as the term industrial policy went out of fashion in some form it remained quietly at work for America from DARPA and the internet to NASA and Commercial satellites now looking over the course of the last couple of years the initial results of this strategy are actually quite remarkable the financial times has reported that large-scale investments in semiconductor and clean energy production have surged almost 20-fold since 2019 and a third of the Investments announced since August involve a foreign investor investing here in the United States we've estimated that the total public capital and private investment from President Biden's agenda will amount to some 3.5 trillion dollars over the next decade consider semiconductors which are as essential to our consumer goods today as they are to the technologies that will shape our future from artificial intelligence to Quantum Computing to synthetic biology America now manufactures around 10 percent of the world's semiconductors uh production in general and especially when it comes to the most advanced chips is geographically concentrated elsewhere this creates a critical economic risk and a national security vulnerability so thanks to the bipartisan chips in science act we've already seen in orders of magnitude increase in investment into America's semiconductor industry and it's still early days or consider critical minerals the backbone of the Clean Energy Future today the United States produces only four percent of the lithium 13 percent of the Cobalt zero percent of the nickel and zero percent of the graphite required to meet current demand for electric vehicles meanwhile more than 80 percent of critical minerals are processed by one country China clean energy Supply chains are at risk of being weaponized in the same way as oil in the 1970s or natural gas in Europe in 2022 so through the investments in the inflation reduction Act and the bipartisan infrastructure law we are taking action at the same time it isn't feasible or desirable to build everything domestically our objective is not autarky it's resilience and Security in our supply chains now building domestic capacity is the starting point but the effort extends beyond our borders and this brings me to the second step in our strategy working with our partners to ensure they are building capacity resilience and inclusiveness too our message to them has been consistent we will unapologetically pursue our industrial strategy at home but we are unambiguously committed to not leaving our friends behind we want them to join us in fact we need them to join us creating a secure and sustainable economy in the face of the economic and geopolitical realities will require all of our allies and partners to do more and there's no time to lose for Industries like semiconductors and clean energy we are nowhere near the global saturation point of Investments needed public or private ultimately our goal is a strong resilient and Leading Edge techno-industrial base that the United States and its like-minded Partners established an emerging economies alike can invest in and rely upon together President Biden and European commission president Ursula vanderline talked about this here in Washington last month they've released a very important statement that if you haven't read I really encourage you to read Because at its heart what the statement said was the following bold public investments in our respective industrial capacity needs to be at the heart of the clean energy transition and president bonderline and President Biden committed to working together to ensure that the supply chains of the future are resilient secure and reflective of our values including on labor they laid out practical steps in the statement to achieve those goals like aligning clean energy incentives the respective's incentives on on each side of the Atlantic and launching a negotiation on Supply chains for critical minerals and batteries shortly after that President Biden went to Canada and he and prime minister Trudeau established a task force to accelerate cooperation between Canada and the United States towards exactly the same end ensuring our clean energy Supply and creating middle class jobs on both sides of the border and just a few days after that the United States and Japan signed an agreement deepening our cooperation on critical mineral Supply chains so we are leveraging the inflation reduction act to build a clean energy manufacturing ecosystem rooted in Supply chains here in North America extending to Europe Japan and elsewhere this is how we will turn the IRA from a source of friction into a source of strength and reliability and I suspect you will hear more on this subject at the G7 in Hiroshima next month now our our cooperation with our partners is not limited to clean energy for example we're working with several countries in Europe the Republic of Korea Japan India and we're also working with Taiwan to coordinate our approaches to semiconductor incentives analyst projections on where semiconductor investments will happen over the next three years have shifted dramatically with the United States and key Partners now topping the charts let me also underscore a critical point our cooperation with Partners is not limited to Advanced industrial democracies fundamentally we have to and we intend to dispel the notion that America's most important Partnerships are only with established economies not just by saying that but by proving it proving it with India and everything from hydrogen to semiconductors proving it with Angola on carbon-free solar power with Indonesia on its Just Energy transition partnership with Brazil on climate-friendly economic growth so this brings me to the third step in our strategy moving beyond traditional trade deals to new international economic Partnerships focused on the core challenges of our time the main International economic project of the 1990s was reducing tariffs on average applied U.S tariff rates were nearly cut in half during the 1990s today in 2023 our trade weighted average tariff rate is 2.4 percent which is low hysteric historically and it's low relative to other countries of course those tariffs aren't uniform and there's still work to be done bringing tariff levels down in many other countries too as Ambassador Tai has said we've not sworn off Market liberalization we do intend to pursue modern trade agreements but to define or measure our entire policy based on terror production misses something important asking what our trade policy is now narrowly framed as plans to reduce tariffs further is simply the wrong question the right question is how does trade fit into our International economic policy and what problems is it seeking to solve project of the 2020s and the 2030s is different than the project of the 1990s we know the problems we need to solve today creating those Diversified and resilient Supply chains mobilizing public and private investment for a just clean energy transition and sustainable economic growth creating good jobs along the way family supporting jobs ensuring trust safety and openness in our digital infrastructure stopping a race to the bottom in corporate taxation enhancing protections for labor in the environment tackling corruption that is a different set of fundamental priorities than simply bringing down tariffs and we have designed the elements of an ambitious Regional economic initiative the indo-pacific economic framework to focus on those problems and solving those problems we're negotiating chapters with 13 indo-pacific Nations that will hasten the clean energy transition Implement tax fairness and fight corruption set high standards for technology and ensure more resilient Supply chains for critical goods and inputs let me speak a bit more concretely had ipf been in place when kovid wreaked havoc on our supply chains and Factory sad idling we would have been able to react more quickly companies and governments together pivoting to new options for sourcing and sharing data in real time that's what a new approach can look like on that issue as on many others our new America's partnership for economic Prosperity launched with a number of our key Partners here in uh in the Americas is aimed at the same basic set of objectives meanwhile through the uscu trading Technology Council through our trilateral coordination with Japan and Korea we are coordinating our industrial strategies to complement one another and avert a race to the Bottom by all competing for the same targets now some have looked at these initiatives and said but they aren't traditional ftas that's exactly the point for the problems we're trying to solve today the traditional model doesn't cut it the era of after the fact policy patches and vague Promises of redistribution is over we need a new approach simply put in today's world trade policy needs to be about more than tariff production and trade policy needs to be fully integrated into our economic strategy at home and abroad at the same time the Biden Administration is developing a new Global labor strategy that advances workers rights through diplomacy and we will be unveiling the strategy in the weeks ahead it builds On Tools like the rapid response labor mechanism in usmca that enforces workers Association and collective bargaining rights just this week in fact we've resolved our eighth case with an agreement that improved working conditions a win-win for Mexican workers and American competitiveness we're in the process now of continuing to lead a historic agreement with 136 countries to finally end the race to the bottom on corporate taxes that hurt middle class and working people now Congress needs to follow through with the implementing legislation and we are working with them to do exactly that and we're taking another kind of new approach that we think will be a critical blueprint for the future linking trade and climate in a way that has never been done before the global Arrangement on steel and aluminum that we are negotiating with the European Union could be the first major trade deal to tackle both emissions intensity and over capacity and if we can apply it to steel and aluminum we can look at how it applies in other sectors as well we can help create a virtuous cycle and ensure our competitors aren't gaining an advantage by degrading the planet now for those who have posed the question the Biden Administration is still committed to the WTO and the shared values upon which it is built Fair competition openness transparency the rule of law but serious challenges most notably non-market economic practices and policies threaten those core values so that's why we're working with so many other WTO members to reform the multilateral trading system so that it benefits workers accommodates legitimate National Security interests and confronts pressing issues that aren't fully embedded in the current WTO framework like sustainable development and the clean energy transition in some in a world being transformed by that clean energy transition by Dynamic emerging economies buy a quest for supply chain resilience by digitization by artificial intelligence and by a revolution in biotechnology the game is not the same our International economic policy has to adapt to the world as it is so that we are capable of building the world that we want this brings me to the fourth step in our strategy mobilizing trillions of dollars in investment into emerging economies with solutions that those countries are fashioning on their own but with capital that is enabled by a different brand of U.S diplomacy we've launched a major effort to evolve the multilateral development bank so they're up to the challenges of today 2023 is a big year for this as secretary Yellen is outlined we need to update the bank's operating models especially the World Bank but the regional development Banks as well we need to stretch their balance sheets to address climate change pandemics fragility and conflict and we have to expand access to concessional high quality Finance for low-income and for middle-income countries as they deal with challenges that span Beyond any single nation's borders we saw an early down payment on this agenda last month but we'll need to do much more and we're very excited for AJ bongo's new leadership at the World Bank to make this Vision a reality at the same time as we are evolving the multilateral development Banks we've also launched a major infrastructure a major effort to close the infrastructure Gap in low and middle income countries we call it the partnership for Global infrastructure and investment pgii pgii will mobilize hundreds of billions of dollars in energy physical and digital infrastructure financing between now and the end of the decade and unlike the financing that comes in the Belt Road initiative projects under pgii are transparent and high standard and in service of long-term inclusive and sustainable growth and in just under a year since this initiative launched we've already delivered significant investments in everything from the mines needed to Power electric vehicles to Global subsea Telecom cables at the same time we're committed to addressing the debt distress faced by an increasingly large number of vulnerable countries we need to see genuine relief not just extending and pretending and we need to see all bilateral official and private creditors share the burden that includes China which is work to build its influence through massive lending to the emerging World almost always with strings attached we share the view of many others that China now needs to step up as a constructive force in assisting debt stressed countries finally we're product we are protecting our foundational Technologies with a small yard and a high fence as I've argued before our charge is to usher in a new wave of the digital Revolution one that ensures that next Generation Technologies work for not against our democracies and our security we've implemented carefully tailored restrictions on the most advanced semiconductor technology exports to China those restrictions are premised on straightforward National Security concerns key allies and partners have followed suit consistent with their own security concerns we're also enhancing the screening of foreign investments in critical areas relevant to National Security and we're making progress in addressing outbound investments in sensitive Technologies with a core National Security Nexus these are tailored measures they are not as Beijing says a technology blockade they are not targeting emerging economies they are focused on a narrow slice of technology and a small number of countries intent on challenging us militarily a word on China more broadly as president bonderlein put it recently we are for de-risking and diversifying not decoupling we'll keep investing in our own capacities and in Secure resilient Supply chains we'll keep pushing for a Level Playing Field for our workers and companies in defending against abuses our export controls will remain narrowly focused on technology that could tilt the military balance we are simply ensuring that U.S and Allied technology is not used against us we are not cutting off trade in fact the United States continues to have a very substantial trade and investment relationship with China bilateral trade between the U.S and China set a new record last year now when you zoom out from economics we are competing with China on multiple Dimensions but we are not looking for confrontation or conflict we're looking to manage competition responsibly and seeking to work together with China where we can President Biden has made clear that the U.S and China can and should work together on global challenges like the climate like macroeconomic stability Health security food security managing competition ultimately requires two willing parties it requires a degree of strategic maturity to accept that we must maintain open lines of communication even as we take actions to compete as secretary Yellen said last week in Her speech on this topic we can defend our national security interests have a healthy economic competition and work together where possible but China has to be willing to play its part so what does success look like the world needs an international economic system that works for our wage earners works for our Industries works for our climate works for our national security and works for the world's poorest and most vulnerable countries that means replacing a singular approach focused on the oversimplified assumptions that I set out at the top of my speech with one that encourages targeted and necessary investments in places that private markets are ill-suited to address on their own even as we continue to harness the power of markets and integration it means providing space for partners around the world to restore the compacts between governments and their voters and workers it means grounding this new approach in deep cooperation and transparency to ensure that our investments and those of our partners are mutually reinforcing and beneficial and it means returning to the core belief we first championed 80 years ago that America should be at the heart of a vibrant International Financial system that enables Partners around the world to reduce poverty and enhanced shared prosperity and that a functioning social safety net for the world's most vulnerable countries is essential to our own core interests it also means building new Norms that allow us to address the challenges posed by the intersection of advanced technology and National Security without obstructing broader trade and innovation this strategy will take resolve it'll take a dedicated commitment to overcoming the barriers that have kept this country and our partners from building rapidly efficiently and fairly as we were able to do in the past but it is the surest path to restoring the middle class to producing a just and effective clean energy transition to securing critical Supply chains and through all of this to repairing faith in democracy itself as always we need the full and bipartisan Partnership of Congress if we're going to succeed we need support from Congress to revive America's unique capacity to attract and retain the brightest Talent from around the world we need the hills full partnership and our reform initiatives in development finance and we need to double down on our investments in infrastructure Innovation and clean energy our national security and our economic Vitality depend on it let me close with this President Kennedy was fond of saying that a rising tide lifts all boats over the years Advocates have trickled down economics appropriated this phrase for their own uses but President Kennedy wasn't saying what's good for the wealthy is good for the working class he was saying we're all in this together and look at what he said next if one section of the country is standing still then sooner or later a dropping tide drops all boats that's true for our country that's true for our world economically over time we are going to rise or fall together and that goes for the strength of our democracies as well as for the strength of our economies as we pursue this strategy at home and abroad there will be reasonable debate and this is going to take time the international order that emerged after the end of the second world war and then the Cold War were not built overnight neither will this one but together we can work to lift up all of America's people communities and industries and we can do the same with our friends and partners everywhere around the globe as well this is a vision the Biden Administration must and will fight to achieve this is what is guiding us as we make our policy decisions at the intersection of Economics National Security and democracy and this is the work that we will do not just as a government but with every element of the United States and with the support and help of of Partners both in government and out of government around the world so I'm grateful for your patience today and hearing me out I thank you very much and I look forward to the conversation thank you all right well thank you very much Mr Sullivan and it's an honor to have you here uh you covered a lot of ground in this speech and I'm only going to touch on a couple things and I'm going to ask for a couple questions from some of my colleagues in the audience and I think I want to start with China which is a big question about our International economic strategy and I want to start with a very simple question do you think that a prosperous growing China is in our national interest or not well secretary Yellen actually laid out in Her speech review is that we are not trying to constrain China's economic growth in that every country having a stable functioning economy that's delivering for its people is good for overall global stability and National Security but at the same time we have also been equally clear that there is a slice of technology that we believe is used for the gaining of military advantage that the United States needs to protect and has taken steps to protect under this Administration and we will continue to do that and we also believe that any country whether it's China or anyone else absolutely dominating critical Supply chains in ways in which they could use the leverage of that dominance to harm American workers the American people or American Security this is not in our interest and it is not in our partner's interest it's not in the world's interest and so uh I quoted Ursula vanderline in my speech but we converge with key European leaders in saying we are for de-risking not for decoupling and uh de-risking fundamentally means having resilient effective Supply chains and ensuring we cannot be subject to the coercion of any other country in your September speech you said that you thought the U.S needed to maintain as large a lead as possible in Technologies you gave a couple of examples Advanced logic and memory checks that didn't sound like a national security argument you emphasize National Security today but are you basically saying we are determined to prevent China from competing with us on the on these Advanced Technologies well first we sell American companies sell and American inputs are in the products of other companies sold to China in semiconductors and many other Technologies in biotechnology and clean energy technology and Biden Administration has not taken steps to cut that off well we have taken steps to do is for the most advanced semiconductors logic and memory chips as I referenced in that speech we have said that there's a certain category and class of input that we are not going to permit to be sold to China because we do regard that as a national security challenge now uh if you look at the totality of the speech I gave last September it was an Unapologetic case for the United States maintaining our technology leadership over everyone that we be the Leading Edge Technology Innovation Powerhouse in the world we should continue to be but the speech had a very short section on export controls and a very long section on the kinds of Investments that we need to make to maintain that edge investments in our own industrial and Innovation base attracting the world's best talent to come here to start the companies and invent the things that are going to keep us on the Leading Edge and of course working with allies and partners to build the kind of ecosystem that is going to keep us with the kinds of Technology leadership that have sustained us for decades so I am very much for American Technology leadership but on the question of restrictions and Export controls as I said in a speech at Georgetown on our national security strategy that is subject to the basic core principle small yard high fence I see okay so it seems to me that the international economic architecture that followed the end of World War II and was refined after the end of the Cold War sort of has an assumption that economies the big economies would pretty much run their economies in similar ways with some differences it didn't anticipate the rise of China the Soviet Union was economically insignificant so as you point out China's too big to exclude and you say we want to de-risk but not decouple but it seems to me that we don't yet have the rules or the institutions to accommodate a big economy that has quite a different approach to the economies are so how do you think we can reshape these institutions and rules so that every interaction doesn't become a crisis well that's I mean that really is truly the core of our strategy and and it's each of the elements that I laid out you know I mentioned in the speech that we are not walking away from the WTO but the WTO needs fundamental reform to account for the exact thing you just said the presence of this massive non-market economy that just has a different structure to it than the way the WTO is envisioned to be operating with everyone else we can't wait for WTO reform though we have to be pursuing a range of other strategies to deal with the fact of China as it is that includes things like the global Arrangement on soil and aluminum how you deal with emissions intensity and over capacity in in an area like steel it includes the indo-pacific economic framework how do you get Diversified and resilient Supply chains so that no one country can uh can Dominate and it includes measures the United States will have to take itself to respond to particular abuses that harm American workers and consumers so at the G7 both in Cornwall and then again last year in Elmo the G7 spoke about how we could collectively align our approaches to deal with certain non-market economic practices that are fundamentally harmful um and and have a coherent and coordinated I guess on Think Tank row what we call pluralateral approach non-multilateral approach and that's got to be part of it as well and that in the end the way that we are going to build an international economic architecture is not going to be with kind of Parthenon style clear pillars as we did after the end of the second world war but something that feels a little bit more like Frank Geary you know that's a mix of structures and substances but could be you just gave a gift to the political cartoonist but could be equally beautiful could be equally beautiful or differently beautiful um uh you anticipated some of my questions on what is your attitude towards trade and I think you gave pretty uh solid answers there but I wonder if you could talk a little bit about how you think about foreign direct investment both Inward and outward and one of the things I wonder about is given that every Chinese company is somehow connected with the government or certainly connected with the Communist Party are we moving towards a situation where we just don't want FDI from China and how narrow are you thinking of making the rules that limit U.S companies uh foreign direct investment look it's you put your finger on what is a difficult conundrum you know the the PRC and its senior officials talk about a quote-unquote technology blockade and they talk about this notion that we're trying to suppress the economic growth of this country that is not the object of this administration's policy or the work that we're doing with allies and partners but we do have an issue which is that the PRC has a series of policies that link its major industrial Champions to its National Security Enterprise in ways that harm America's national security and so how do you effectively de-risk without decoupling and there is no uh clear mathematical formula for that so just to give an example we have talked for some time about doing a set of outbound investment regulations which we have not funded for targeted on National Security why has that not appeared yet it's neither because we're lazy or because we're not doing the work it's because we're trying to take care to answer your question in a way that is sustainable and effective to draw the line in a place that really does Target National Security but also accounts for the fact that there's a massive bleeding of uh kind of core commercial activity into the National Security realm given the structure of the PRC economy so it requires an incredible amount of very thoughtful very deliberate work and and taking modest steps and then sort of seeing how that works and then taking further steps and so as we work on the outbound investment regimen it is precisely this issue that you have raised that we are trying to Grapple with and and come up with a sustainable model for how to solve so when do you think we're going to see that uh we'll see um let me ask two more questions and I want to turn to the audience um you've outlined a very broad set of objectives for U.S International economic policy and uh there there's a sense on almost anything anybody could think about there but I want to ask you about Africa Africa 1.4 billion people about the population of China the Administration has talked a lot about Africa sent lots of senior officials there but I'm wondering how does Africa fit into this framework and what's your pitch to the African governments and people as part of how do they fit in this stretch well first an entire pillar of the strategy is devoted to how we mobilize uh capital in in constructive ways to be able to deal with precisely the challenges facing African countries that's a combination of reforming our multilateral development Banks so they are just lending at a different scale and with a different ambition than they have before which is a key demand of our African Partners it means making the partnership for Global infrastructure and investment truly effective vehicle for responding to the infrastructure needs of these countries and and this Angola example that I referred to a two billion dollar investment in the deployment of solar there is a down payment on a longer term effort it means debt relief uh and having the emerging uh the the advanced economies of the world come together with the United States in the lead around driving debt relief but also bringing the PRC into it in the Zambia case is a is a highly relevant case on that but then it also means that for the core things that are are at the heart of what we're looking to do resilient Supply chains clean energy transition a technology ecosystem of trust and openness it means dealing countries in Africa the Americas southeast Asia into the equation in a serious way and so clean energy infrastructure digital infrastructure as well as physical infrastructure has to be part of the theory of the case of building that is at the heart of the Biden Administration policy so this is a big year for all of this and when we go to the G7 and Hiroshima it won't just be the G7 countries that are there it'll be the leaders of some of the most critical Advanced uh emerging economies in the world as well and then moving our way into the G20 in India in the fall driving forward on this whole issue of development finance Clean Energy transition and the digital Revolution this is something that as National Security advisor I actually put a lot of my time into and it was core to the agenda of the African leader Summit when the president hosted all of the African leaders last December so finally the world is a complicated place and you covered as I said earlier an enormous amount of territory in your very thoughtful speech but I wonder if you could think about your classmates at uh in high school classmates in Minneapolis and as well as say the leaders of the G20 and how would you explain your International economic strategy in a couple of sentences instead of 20 Pages well if I was going to do in a couple of sentences I couldn't wouldn't have subjected everybody here to mine I've given you an opportunity to write the lead here no I mean basically what I would say to people and it might be more than a couple sentences but not many more is our economic strategy stopped really focusing on building the things we need to build and we're at a moment now where we need to build capacity to produce the goods and invent the Technologies of the future and we're going to make the Investments do that us plus everyone else who wants to get in on the deal and then we are going to build the resilience we need and that's especially true so that no natural disaster and no geopolitical shock can stop us from getting the things we need when we need them and we do those two things we build capacity and resilience what we will end up doing is building an economy that works for the middle class for middle class people here for working people everywhere in the world that's basically our strategy and it has a lot of different dimensions about deploying capital and everything else but at the end of the day what we are trying to do is build the capacity to make things and deploy them and the resilience to be able to withstand the shocks of today's world from the climate crisis to a global pandemic to a war and if we can do those two things then whether it's the Russian invasion of Ukraine or covid-19 or economic coercion from the PRC um will be able to deal with that and will also be able to offer people a good paying job at a good wage with a job that has the Dignity of building something that is going to deliver the the advanced industry and innovation of the future so that was more than two sentences but basically that's the vision strip away all the policy stuff that's what our International Economic Policy really has to do it sounds like you're saying is the criteria is what's in it for us that wasn't a very globalist internationalist answer you gave so is that intentional or did I just or am I misrepresented no because I think fundamentally uh and as I said in the speech the that we're not shifting from the old Washington consensus to a new one that's better America alone it's actually that the needs of establishing emerging economies alike are aligned around this need to build what are we going to do to solve the climate crisis we have to deploy clean energy infrastructure at a unimaginable scale everywhere and we've got to build that what are we going to do for the next pandemic we are going to have to build and deploy the capacity for medical countermeasures everywhere in the last pandemic showed that not having mRNA vaccine Manufacturing in Senegal or Buenos Aires whoever hurt the world and that hurt us too so that the theory of building is yeah unapologetically that we are going to build here we are going to restore our capacity in Industry Innovation here in this country no doubt about it but we are going to ask everyone else to do the same thing and if we all collectively do that and then we align so that we're not just competing against each other in totally inefficient ways we will be in a much better position all of us collectively but um I say all of that and then return to the fundamental underlying proposition which is the job is National Security advisor is to wake up every day and say what is going to make the lives of Working Families in this country better safer and easier I do ask that question first before I asked about anyone else anywhere else I think we've come up with an answer to that question that serves the common interest as well as the national interest but yeah I'm going to look out for the national interest and for the you know the needs of the middle class here in the United States thanks I'm going to turn to the audience why don't we start here if you could introduce yourself hi Jake Caroline Atkinson you talked a lot about the importance of jobs and getting rid of inequality on inequality of course I completely agree but these steps that you've laid out are probably less effective than extending the child tax credit or doing other domestic policies that are nothing to do with building and on the jobs at the moment we actually have a lot of jobs we don't have a shortage of jobs we have a shortage of workers and we have high inflation and a lot of the measures of holding out Goods that are produced elsewhere exacerbate the inflation problem and don't help us to do jobs so I'm interested in your response to that thanks well first I think that to have a long-term solution uh to the the question of inequality and the question of inflation we need to have productive sources of growth in this country that are sustainable over the long term so this is not just about a solution for the next year when unemployment is where it is it's a solution it's a solution for the next 50 years when making these kinds of investments in my view are going to put this in economy this economy in a position where we can generate more productivity and more Innovation because we are not fully Outsourcing our industrial capacities that's point one point two is that at the end of the day we can't just measure how many people have a job we also have to look at the Quality and character of those jobs as well and I think that can be improved upon by the kinds of Investments we're talking about and then point number three is I 100 agree with you and in fact in my speech I talked about the need for a social safety net the need for stronger protections for workers and collective bargaining rights the need for us to make sure that we are pursuing the kinds of policies that are embedded in the Biden economic agenda so that at the end of the day we have the kind of basic social infrastructure from care to education and on down the line I don't see anything inconsistent with that and making sure that we are doing this but when I look at it in our International economic policy it seems to me that this core concept of building is fundamental and connected to what a very important thing we are doing it here at home is the modern industrial strategy is not the totality of the Biden administration's economic Economic Policy as you know what he has done for the Affordable Care Act what he has done for child poverty what he has done for the care economy these are equally important to making sure that the domestic compact is solid but in my jobs National Security advisor in addition to cheerleading and advocating those positions I have to think about how we take what is um the element of our domestic uh strategy that gets the most attention overseas which is you're putting all this money into all of these things how does that relate to me what does that do for me whether you're in Europe or you're in Asia or or Africa or Latin America and try to cohere that that's why in my remarks you saw more of an emphasis on the issue of our investments than you did on the social safety net side of things but the building an economy from the bottom up in the middle out as the president has talked about is fundamentally about both of those things thanks Dan thank you Dan Jurgen uh Jake uh one of the takeaways from your speech is that a strategic strategic minerals is where National Security uh uh national uh policy economic policy and energy policy all come together it's pretty challenging further by the way on strategic minerals to your list I would ask important to add copper which is the mineral of electrification yeah but uh but it takes 16 to 20 years to open a tier one mine you pointed out 90 of processing I think was the number is in is processed in China just can you elaborate a little bit more you're thinking on how to deal with something that involves these amount of lead times and we've just seen Chile nationalize part of its lithium business yeah I think there are actually two issues one is how do you just bring overall more capacity online rapidly more rocks out of the ground uh the Second Challenge is how do you deal with the fact that these are incredibly turbulent markets where prices go up and come down quite radically and you see prices falling off a cliff even at a moment when there are massive Investments because of dislocations in in just the basic uh critical minerals market so we have to address both of these um on the question of trying to find ways to incentivize getting more rocks out of the ground a lot of that is going to turn on the kind of steps that for we are taking for example with our negotiations with the European Union in Japan and then thinking about how do we do similar kinds of things with the major critical mineral producing states now this raises a couple of hard questions one is the labor practices in those countries and second is how we relate our climate goals to our broader environmental goals and I would just argue I would make the case that fundamentally we need to have a deep conversation with American organized labor at the table about how actually getting into critical minerals type agreements with countries in Africa or southeast Asia or the Americas you mentioned Chile is important in order to realize the kind of industrial outcomes we are looking for here in the United States that's something we're going to have to work through and that that is a huge challenge then there's the question of Market incentives the IRA produces a lot of incentives to generate more but it is insufficient we are going to have to take further steps to try to find ways to both smooth the markets and to get more minerals onto the market given the gap between what we have right now and what we are going to need if we're going to realize our objectives for that I think we're ultimately going to have to think about a larger conversation of both critical mineral producing countries and then clean energy technology producing countries what exact shape that takes whether it's a critical minerals Club as some have talked about whether it's building out 30d type Arrangements whether it's a fuller negotiation of some kind whether it's taking the mineral security partnership that we've already launched in building it out we are now in the thick of trying to figure that out I it's a hard problem because it has all of these different layers to it and there is a reason why um you know people hear about just the the um call for more mining more Mining and think wow that I don't feel great about that and there's a reason for that but on the other hand there are just certain realities that you have laid out in your remarks that we're going to have to contend with so it's something we think a lot about with my colleagues with Ambassador tithe secretary yellin secretary raimondo as well as Leo Brainerd and others and we are trying to work through that in inside the by Administration and then work effectively with stakeholders on the hill in labor in the business community and of course the major off takers as well as working with the key International Partners on it or one more the gentleman here thank you I'm Harlan Allman with the Atlanta Council thank you for your comments my question is your follow-on speech that you're going to have to make about how do you make this work as you know during covid an obscene amount of money was wasted disappeared so how do you guarantee to the American public that there's somebody in charge coordinating all these parts that you're providing the proper oversight that this money is going to be well spent and it's going to become effective at a time when there are members of the opposition who want you to fail tell me how this works yeah so a couple of things on this front uh the first is that um the way the Biden Administration has thought about these major pieces of legislation is that there's kind of an ultimately accountable senior official who is specifically charged with implementation in the case the bipartisan infrastructure law that's Mitch Landrieu in the case of the inflation reduction act that's John podesta in the case of the chips and science act it's secretary raimondo and so there is a person at the end of the day who wakes up in the morning and goes to sleep at night thinking about how do you actually run an accountable effective and uh meaningful implementation in these programs that ensures speed while also ensuring accountability I acknowledge this is very difficult and I mentioned in my speech maybe a little too elliptically towards the end the problem of the kinds of barriers that have come into place not just in this country but in other countries that have robbed us of the ability to move fast and part of that is policy part of that is politics to your point of people wanting to find whatever little thing let's say I didn't go 100 right nothing goes 100 right in the market nothing's going to go 100 right in public investment the question we have to ask ourselves is can we pull together on a bipartisan basis in the country and say we have no choice but to make these Investments at this scale and we are going to have to acknowledge that as we do so we we have to achieve a level of meaningful accountability but perfection in in the deployment of everything is going to be difficult I am hopeful that we can overcome the politics of that and I would Advocate uh for that because I think our national security depends on it as well as our economic growth but the combination of policy and political obstacles here were aware of them it's why when the president passed these laws he didn't just say okay I've got them done now let's put them on autopilot he actually built entire implementation ecosystems led by talented senior officials in each case to get after these challenges and it's why all of this is being done in a constant dialogue with with both parties and both houses of Congress so that they feel continually invested even though they've passed the bills that they have to keep working this as we go forward I think we have time for one more quick one and time thank you for giving us a really uh thoughtful and and uh credible and much needed I think framework to think about all of this it still left me with two questions first question is you talk about a very narrow slice but how do you keep that slice narrow when we're talking not just about semiconductors but AI nuclear fusion 5G Etc doesn't sound so easy and it has to be narrow to be credible I think second question is there seem to be a bit of an inherent contradiction in what you said on the one hand we need our allies uh for making this possible on the other hand it's unavoidable that you're gonna hurt asml you know all the examples that you're going to hurt some in just the Allies that that we need so much so how are you going to give them or have you thought about the incentives you can give those countries that often have been more successful in exporting to China then we have been and feel that we are now help or hurting them to come look this is the core of the conversation that we're having particularly with their European Partners but also at Japan with President Yoon of the ROK who was just here yesterday and the two questions in a way are kind of related and I guess one way I think about answering is in the the pure military context of NATO we talk about burden sharing but that's easily defined as how much of your GDP are you spending on defense and how much of your defense budget are you spending on major military systems the two percent of 20 requirement burden sharing when it comes to taking some economic hit to protect your National Security is harder to quantify and then harder to implement but it's the fundamental concept that is what makes alliances function effectively and we have enough muscle memory in my view and enough trust between this president who has invested deeply in allies uh and our core allies in Europe in the indo-pacific and elsewhere to be able to have that conversation in a way that produces good outcomes I think we have done so we have proven this concept out in the semiconductor space quite effectively and we can do so in others as well it's not going to be a one-size-fits-all approach but it's going to be on the core concept that you cannot ask a country to just take all the hit for the collective National Security you need to share the burden effectively on the question of what to do about and it connects to this earlier difficulty around you know dual use Technologies in a system that has civil military Fusion this is fundamentally a challenge from our perspective uh we believe that we can by being very precise and methodical and detailed actually effectively draw lines and if you look at the October 7th export controls this was not a five sentence executive order saying generally we're going to do the high-end stuff I mean it was down to the tool with Incredible specificity and incredible rigor now does that mean that there aren't going to be judgment calls and contestibility of course there is and then the other piece of it that I think is really important is because we are seeking to do this with allies and partners not always exactly at the same time in the semiconductor case we went first that conversation has its own kind of bounding its own way of placing some breaks on rushing forward with expanding the the yard so broadly that it it ends up swallowing the entire field but I cannot give you an I don't think it's a contradiction I think it's just um you know a hazard of an occupational hazard of dealing with technology and National Security in the modern environment and at the end of the day through practice through refinement through consultation and through rigor I think we can continue to maintain a small yard continue to refine a high fence and look at the very hard questions for example in the AI context of what the difference is between a deeply military application of AI and something with a much kind of broader commercial use and and how you you slice the salami on that so uh thank you Jake for taking so those questions and for such an expansive set of remarks which I think will be well studied and thank you all for coming I have one favor to ask if you could just stay in your seats until the Mr Sullivan leaves that would make the security people happier we want him to come back and so forth so thank you thank you all thank you very much

Channel: Brookings Institution

Views: 39,153

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Id: A2sa-p2whkk

Length: 75min 20sec (4520 seconds)

Published: Fri Apr 28 2023