<html><body><P>American Enterprise Institute</P> <P>January 12, 2009</P> <P>[Edited transcript from audio tapes]</P> <P><BR>Proceedings:</P> <P> <TABLE cellSpacing=1 cellPadding=1 width="100%" border=0> <TBODY> <TR> <TD> <DIV class=BodyText>2:15 p.m. </DIV></TD> <TD> <DIV class=BodyText>Registration</DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText>2:30  </DIV></TD> <TD> <DIV class=BodyText><EM>Panelists:</EM> </DIV></TD> <TD> <DIV class=BodyText><A class=eResources href="http://www.aei.org/scholars/scholarID.92/scholar.asp">Dan Blumenthal</A>, AEI</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText>Aaron Friedberg, Princeton University</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText><EM>Moderator:</EM> </DIV></TD> <TD> <DIV class=BodyText>James Mann, Johns Hopkins University School of Advanced International Studies</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText>4:00 </DIV></TD> <TD> <DIV class=BodyText>Adjournment <BR></DIV></TD></TR></TBODY></TABLE><BR> James Mann:  Okay, I think we re going to start if people can get seated.  The usual reminder to turn off your cell phones.  I am Jim Mann, I am going to moderate this panel.  I am author-in-residence at Johns Hopkins School of Advanced International Studies.  I have read this report over the weekend and I am going to serve as moderator.  I will introduce the two panelists and they will each speak about the report they ve written.  Then I will put on my favorite old role hat as reporter and ask them a couple of questions and then turn it over to all of you who may have questions of your own.<BR> Dan, are you going first on this?  Okay.  Dan Blumenthal is at the American Enterprise Institute.  He is also on and has been Vice-Chairman of the US-China Economic and Security Commission.  I did get the name right this time.  And also served in the Department of Defense as Senior Director for China, Taiwan and Mongolia in the first George W. Bush administration.  Dan?<BR> Dan Blumenthal:  Thank you very much.  And thank you very much for all of you for coming here.  I wanted to first start by explaining why we undertook this project, why we did this report, who was involved, who signed on to it and why.  We started this about a year and a half ago or a little bit over a year ago and we involved -- we started a working group that involved a mix of Asia specialists and defense and security specialists.  They include Jim Thomas, who is a former head of strategy at the Department of Defense and they include Ashley Tellis from the Carnegie Endowment for International Peace.  And then other AEI colleagues, such as Nick Eberstadt, a North Korea specialist, in economics and demography and a colleague, Tom Donnelly, a specialist in military affairs, and Gary Schmidt, a specialist in security affairs, and Misha Auslin, a Japan hand.<BR>And the decision we made early on was to keep it small, include a group of people with a basic like-minded philosophy, not that agreed with everything, but we didn t want it to be a report, like you see in a lot of different instances, that falls back on the lowest common denominator with long dissensions and these types of things.  We wanted to keep it small and we really wanted to keep it, we really wanted to make it a strategy making process.  And we thought that if you included everyone with every point of view, you would just simply not get there.  <BR>We were very happy after the report came out to send it out to more senior officials or scholars who have been involved in American foreign policy making or with Asia for a number of years.  And I think really got a wide spectrum of people to endorse it, from former Deputy Secretary of State Richard Armitage to former head of policy planning Steven Krasner, former deputy of National Security Advisor J.D. Crouch and then others to provide positive commentary.  We didn t get any negative commentary.  I guess we wouldn t have known what to do if we had, but I am sure we will as it s released now.  <BR>And I think we can say that it really represents a way of thinking about Asia strategy, at least within a broad school of thought you can call it the center right, you can call it what you will, but really representing a broad school of thought in American foreign and defense policy.  And we hashed out issue by issue, two or three hours a session for over a year and really wanted to pay attention to the details and to linking up the ends that we thought were important for America with the means that we thought we could pursue.  But why do this at all?  I mean, why is this in any way important to do?  <BR>Well, Aaron and I both served in government, as did most of our colleagues on the report and noticed that while this great transformation in world politics and economic affairs was happening, there s no one really sitting down and thinking it through comprehensively.  What s playing out in Asia right now before our eyes is akin to other world historical events, we think, such as the rise of the West or the rise of the United States in the 19th century.  <BR>And we focus on pieces of it, have been as a nation, as a government over the last few decades, but never really stop to think for a moment what this means, what is unfolding before our eyes and how we want to shape and how can we shape it and what is most important to us.  So we wanted also to focus on what is most important for US interests and we also wanted to be more candid than is usually the case in such reports about particularly the issue of China which Aaron will get to.  Because we believe, as Aaron will explain, that a lot of the talk and rhetoric over the last thirty years about the relationship with China confuses and obscures more than it enlightens.  And we will get into that later.  But the statistics, I think, are well known.  We get into them somewhat in this report.  <BR>The rise of Asia is, again, akin to any world historical event looking back over the last few centuries.  In 1950, the share of world output in Asia was 16 percent, by 1998, 34 percent.  By 2030 it could be as much as 44 percent again, present trend continuing, which is an if, obviously.  But it seems to be trending that way.  And that s more than Europe and the United States output combined.  In the meantime, defense budgets, as they were dropping everywhere else after the Cold War have doubled in Asia over the last two decades, mostly attributable to China, which is well known to many in this audience 10 percent annual increases in the past decades.  <BR>But across the board, the destructive power of militaries and arsenals throughout Asia has increased tremendously, from ballistic missiles and submarines to, in the cases of India, Pakistan and North Korea, nuclear arsenals.  Counting the United States and Russia, six of the nine nuclear states are in the Asia Pacific, six of the nine nuclear states.  The economic and trade issues, we feel them today in a global downturn, so do our Asian partners and friends.  A quarter of our exports go to Asia, a third of our imports come from there.  So the statistics, this kind of shift of world power is clear.  <BR>So what does it all mean for the United States?  Well, first I d say Asia is and will continue to be and even increase in importance as an arena of high politics, high diplomacy, issues of war and peace.  A disruption of economic growth within Asia or between the United States and Asia would affect the livelihoods and well-being of all Americans.  A conflict between the nations in Asia would almost certainly draw in the United States in one form or the other and has the potential to involve weapons of mass destruction, given what I just described.  <BR>So as this transformation occurs, what should our main objectives be?   And we decided on a few, and the first is obvious and everyone can say it, which is paying more attention.  During the first two centuries, America focused its foreign policy mostly on Europe.  That was obviously the playing field for high politics, major conflict and so forth.  Now attention must be sustained upon Asia.  You also see the demographic shifts in the United States where the population of Asian-Americans is growing.  The only faster population is that of Hispanics.  People with ancestral roots, business ties, cultural ties is shifting rapidly here within the United States.  But pay attention is not a strategy or not an objective.  What are the aims we have in mind?  <BR>Well, the first one I think should be non-controversial, it s the one that the US has pursued in one shape or another for the last century with varying degrees of success, which is simply preventing the domination of the region by a hostile power or coalition or partners.  And that is in order to protect the homeland.  We saw in the earlier part of the 20th century what happened when a hostile power rose, as well as continuing the prosperity within Asia rather than having some sort of enervating effect on trade and allowing the region to spiral into dangerous security competitions.  And also allow for the continued building by Asians of the democratic institutions that have been truly remarkable.  The transformation in that region, from Taiwan to South Korea to Japan, mostly peacefully from an autocracies to democracies.  <BR>So in the second objective is related and we call it helping as much as we can, Asians shaping Asia that is prosperous, peaceful and free.  You might notice that sounds a lot like what the United States set as a goal for Europe after World War II and the Cold War, Europe whole and free.  But we thought the United States had a strong interest in Asia that was not like its past, not characterized by conflict as in the 20th century or by imperial or hegemonic domination like in the 19th century.  <BR>So just like in the Cold War and after the Cold War, we had this objective of a whole and free Europe.  So must we help Asians do the same.  And we also concluded that all of these elements must coincide.  Today, war within the European Union is unthinkable.  Once the countries of Europe decided and came together around a set of values, liberal economic and liberal democratic values, historical divisions could be put in the past as could territorial issues were easier to deal with and so forth.  All of the elements of prosperity, peace and freedom must come together.  <BR>Conflict in the EU is unthinkable today, however conflict between the EU and Russia is still a possibility, and we think that s no accident.  It s because of a policy that the Europeans took and the Americans: took a whole, free and prosperous Europe.  Now what does that mean in Asia?  It means an Asia without militarized spheres of influence, without divisions along ideological lines and without exclusive economic blocks.  All of which we can see, the elements of which if we are not careful, emerging, and Aaron will get into that later.  <BR>And let me, I think I need to conclude yes, I do.  Let me conclude with a few thoughts before giving it over to Aaron.  I assume what is foremost on people s minds here is what does this have to do with anything the Obama administration is going to do?  Well, first I would say that President-Elect Obama inherits an Asia policy that is in decent shape.  Clearly the early energy and attention that the Bush administration paid to upgrading traditional alliances with Japan, the defense relationships with Taiwan, as well as creating new partnerships with countries like India and Singapore, had very much in the back of their minds, they had very much in the back of their minds that they did not want to see an Asia that was becoming dominated by China.  And they had a very receptive audience in these countries.  Everyone sort of coalesced around the basic idea without stating it that whatever happens in Asia, we can t let China grow too dominant.  <BR>So there is some success there, but success with a couple of caveats.  The first is the North Korea policy is a shambles now.  We are stuck in endless negotiations over mechanisms that the DPRK seems unprepared to allow.  But I think importantly for the long-term, these North Korea issues are becoming actually more about China.  <BR>At this point, I would argue, and I think we would argue that all of the parties are probably most anxious about what happens in the long-run on the Korean peninsula if there is some sort of succession crisis in stability, what exactly are China s plans for the peninsula.  And to varying degrees, you will have South Korean and Japanese allies openly expressing anxiety and angst about this issue.  In some ways, an issue that is becoming more of a platform of instability than even the Taiwan Strait.  Second, I would argue that in the latter term, the Bush term, Sino-Centrism took over much of the policy, much to the concern and consternation of the allies.  <BR>In terms of geo politics, I would say that that means taking our eye off the central land, which is, again, shaping the kind of Asia that most benefits us.  Sort of sacrificing for the promise of short-term but often illusory gain, such as hoping to inch forward on this or that protocol with North Korea, sacrificing the longer term aims of shaping this kind of Asia that is most enduring and most satisfactory to our interest for the short-term promise of illusory gain.  <BR>But you know, after saying that, I would guess that no one in the Obama team, just as like nobody in any administration, has ever sat down as their first order of business and said well, you know what?  We re going through a world historical transformation, let s all sit down and spend six months or so thinking about really how to deal with that.  What does engaging and hedging with China really mean and so forth.  But if they do, we are here.  We have a blueprint ready for them to go and ready to discuss it with them.  So with that, Aaron? <BR>James Mann:  Sorry, a couple of introductions to Aaron, who is a professor at the Woodrow Wilson School at Princeton University and also served from 03 to 05 on the staff of the Vice President of the United States.  <BR> Aaron Friedberg:  Thank you very much.  You have the report in front of you, this is not overly long, but somewhat lengthy documents.  I have twelve minutes in which to summarize it.  I can tell you there is nothing more painful for a professor than having to say anything in twelve minutes, but I will do my best.  And in order to, not to go on too long, I want to concentrate on one issue.  We do talk about a number of different things, including Korea, but let me limit my remarks principally to China, because China in our view is really the key.  It s at the heart of Asia and it also has to be at the heart of our strategy for dealing with Asia.  China s participation will be crucial to building this Asia prosperous peaceful and free, if that s what we are going to achieve.  <BR>And it is also, at least at this point, the only state in Asia that might conceivably have at some point the power and perhaps also the desire to challenge our goal of preventing Asia from being dominated by a hostile power.  Now it s one thing to say China is at the center, it s another thing to say what China is going to look like ten or fifteen or twenty years from now.  There are many plausible alternative futures for China.  <BR>And let me just say a few words about the three, each of which has important and distinct implications for American interests and for the region as a whole.  The first is a world in which China continues to grow wealthier and stronger, but also undergoes a significant domestic political transition towards liberal democracy.  And as presidents of the United States have repeatedly said, this is the preferred scenario for American policy.  We believe most Americans would agree.  <BR>I think that this outcome would be best for the Chinese people, but also in the long run for the prospects for peace and stability in Asia.  There might be problems along the way, but in the long run, a democratic China would be more transparent, it would be more secure.  It would be better able to reach accommodations with its neighbors, less prone to use force and threats of force.  So that is one possibility.  <BR>A second is somewhat broader, it s almost a family of scenarios is a world in which China stumbles.  It experiences economic difficulties and setbacks, perhaps political turmoil as well.  And these events, if they occur, would have, I think, most would agree far reaching but unpredictable effects.  It would obviously be a bad thing for the global economy if China were to encounter economic difficulties.  <BR>These kinds of problems, political instability, very slow growth and so on, could cause China to turn inward, making it less willing and less able to participate in solving global problems of various kinds.  But it could also, those kinds of circumstances, could also lead to a country that behaves more assertively, perhaps even more aggressively as countries experiencing internal difficulties have sometimes done historically when their leaders try to rally domestic support or use force to seize resources and so on.  <BR>A third possible alternative future for China is one in which China continues to grow richer and stronger, but it retains something resembling its present authoritarian regime.  And this is, you will recognize essentially a straight line projection from where we are out, let s say, fifteen or twenty years.  And we think that this is, in fact, what the world looks like, there are some potentially troubling implications.  <BR>We think that under these circumstances, the military buildup that we ve seen in China for the last fifteen years would continue.  We think it s likely that the Chinese government would continue to provide support for other non-democratic regimes, both in Asia and in other parts of the world.  We think it likely that such a China would continue and perhaps increase its efforts to exert a preponderant influence in Asia while at the same time attempting to constrict and limit the presence and influence of the United States.  <BR>So in other words, in such a world we believe that what we would see is an intensification of the competitive aspects of the current mixed relationship between the United States and China.  And in such a world, our concern is that there would be a greater risk of confrontation and perhaps conflict.  So if there is this broad range of possible alternative futures and we are sitting where we are now and thinking about what our policies and strategy have to be, it is clear that we need to design a strategy for China and for Asia that increases the odds of the outcomes we favor, but also prepares us to deal with all three of these eventualities, including those that are problematic for the United States.  <BR>If you look back to the end of the Cold War, late 1980s, early 1990s, it s clear that the United States has, in fact, through successive administrations, democratic and republican, pursued a mixed strategy towards China.  And different terms have been used to describe it, but it basically has had two elements.  On the one hand, what is generally been referred to as engagement, the most important aspect of which now clearly is the economic element, trade, investment and so on.  Diplomatic engagement, that is how things started out in the 70s, but the diplomatic relationship has evolved and now we think of ourselves as having quite a broad array of issues that we try to deal with successfully with China.  <BR>And there is, of course, also a societal engagement, a flow back and forth between the two countries, which would have been unthinkable half a century ago.  And from the American perspective, the aim of this part of our mixed strategy, the engagement part of the strategy, is to reduce the risks of conflict, to reap the gains of cooperation.  And also and again, this is something that American presidents have said periodically, to encourage a process of political reform and liberalization in China.  That s always been a stated or barely unstated objective of this part of American policy.  <BR>So that s the one half.  The other half is what I ll call balancing, sometimes Chinese analysts refer to this as the containment element of American strategy, but I don't think that s actually a correct term.  This part of the strategy has concentrated on strengthening our alliances and quasi-alliance relationships in Asia, as the United States has done since the 1990s with Japan, quasi-alliance relationships with Singapore and now with India.  Maintaining and in recent years strengthening the US military presence in the Western Pacific, most dramatically in the last couple of years by building up US forces in Guam.  <BR>And also, at least periodically, doing things or trying to do things in combination with our friends and allies to slow down the process of China acquiring sophisticated arms and particularly trying, with mixed success, to limit China s access to certain technologies that clearly have a strategic significance.  And the aim of this part of America s mixed strategy has been to preserve a favorable balance of power in East Asia.  In other words, a balance of power that favors the United States and its friends and allies and which, as a result, deters the possibility of aggression and limits the prospects for conflict.  <BR>So that is, in brief, I think the story of what American strategy has actually been.  Of course, there is always a lot of debate in political campaigns, candidates accusing one another of being soft on China and so on.  But the actual policy if you look at it hasn t changed that much.  And we in this report don't advocate dramatic departures from this strategy, but rather we recommend some adjustments in it.  If you like, a sort of rebalancing, a readjustment of our strategic portfolio.  And in particular, although this isn t all we recommend, but in particular strengthening that balancing part of the two part strategy.  <BR>Let me just say a few words about some of the recommendations that are contained in the report.  First, regarding the engagement half of the equation, we very strongly believe that this must continue, it will continue.  There is a great deal to be gained on both sides from continuing the policies that have been pursued over the last thirty years and more.  <BR>And the global economic crisis is only the latest example of a problem which is going to be much more difficult to deal with if there isn t cooperation between the United States and China than if there is, and of course there is a long list beneath that of other problems.  So continued engagement.  But first we feel strongly that it s important for political leaders in this country not to exaggerate what has been achieved through the policy of engagement.  Both as regards the process of political reform in China, which as readers of James Mann book will know, has not advanced nearly as far as many people in the United States hoped and believed that it would ten or fifteen years ago, but also regarding specific problem with which we ve tried to deal with China.  <BR>Dan mentioned North Korea, I think our view that although the United States government has repeatedly praised the Chinese government for its role in dealing with the North Korean nuclear problem, in fact that support has been insufficient, obviously, to achieve the desired result and in certain ways China has not been as helpful as it could have been on that problem.  Has not been as helpful as it could be, we had hoped, on Iran and so on.  So we shouldn t exaggerate what has been achieved.  <BR>We think it is also important for political leaders and decision makers to acknowledge that there are certain risks involved in a strategy of intensive engagement.  And we mention in the report a number of them, one of the most obvious is maintaining some degree of security and protection for technology transfer.  It becomes more and more difficult the more integrated our economies become, but it is an important concern or it should be.  <BR>Over time, it s also, we believe, important and it has become, I think, more evident how important it is to correct the large economic imbalances that have grown up in the relationship over the last twenty or thirty years.  These are, we think, unhealthy for strategic, as well as for economic reasons.  So continue engagement with these caveats.  Regarding the balancing side of the equation, we think that it s important to continue to do what in fact the Clinton administration, the Bush administration have done, which is to work on these alliance and quasi-alliance relationships.  And much of the report is devoted to an assessment of the current state of relations between the United States and Japan, the ROK, Taiwan, Australia, various Southeast Asian countries and India.  <BR>In each of these cases, we feel that significant progress has been made over the last ten or fifteen years, but that that progress is not assured.  And in fact, there are problems that we face in each one of these relationships with which the new administration is going to have to deal.  Just as one example, the free trade agreement that is pending between the United States and South Korea.  If that in fact is turned down by the United States, we are concerned that this would be a significant setback for a relationship that has recovered from serious difficulties over the last few years.  So that s number one, continue to work on these alliances and quasi-alliances.  <BR>Number two has to do with the issue of regional institutions, about which there has been a great deal said and written in recent years.  Our basic view is that there can be and needs to be something in between the bilateral hub and spokes structure that has existed throughout the period since the end of the Second World War linking the United States to each one of its various partners.  Something between that and what has been discussed and perhaps is beginning to get underway, which is the creation of some very broad, all-inclusive, Pan-Asian institution of some kind.  <BR>We are rather skeptical about what those institutions are going to be able to achieve, particularly in the area of security.  We don't have anything against them, but we don't think that that s where the bulk of American energy should go.  Instead, we believe that it is possible and desirable to strengthen the connectivity among the democracies of the region.  Not by creating some kind of Asian NATO; we don't believe that that s in the cards, but by working on trilateral, quadrilateral combinations which have begun to spring up.  <BR>The United States, Japan, Australia, India, Japan, India, Australia, the United States, Japan, ROK we think all of this is to the good to have a network of networks, of loose relationships, strategic relationships that create the groundwork for something more, if it s necessary.  And we also think that over time, it s desirable to work towards the creation of some kind of regional council of democratic states.  Not a military alliance, but a council where the democracies of the region can confer and agree on joint policies to deal with some of the problems that they face collectively.  <BR>Regarding hard power or military power, our report goes into some detail in describing the steps that we think may be necessary to respond now to an ongoing, now over two decade long, Chinese military modernization effort.  We believe that it s going to be necessary over the next few years, starting soon, for the United States and its allies to respond to the continuing buildup of Chinese cruise and ballistic missiles, to the development and deployment of now a substantial Chinese submarine fleet, development of anti-satellite weapons.  The Chinese have tested computer network attack techniques and so on.  <BR>Finally, on the soft power front, we conclude by noting that despite a good deal of anxiety, particularly in the United States about the way in which our country is viewed in various parts of the world, in fact, if you look at the most recent opinion surveys, the United States continues to be viewed quite positively, and indeed more positively than China, in most Asian countries.  And as a result we think that there s actually a lot for the new administration to work with.  Things are not as dire in this regard as they are sometimes said to be.  <BR>Perhaps the most important thing that we can do to nurture our soft power in Asia is to retain our openness to goods, to ideas, capital and people flowing to and from the region.  If I could just close by quoting the last sentence of the report as long as those who wish to do so can travel, trade, invest and study and live in this country, we can be confident that the virtues of our system will continue to speak for themselves.   <BR> James Mann:  Thanks.  As promised, I am going to be reporter for a few minutes and raise some of the questions that occurred to me over the past few days as I read through this.  And either of you can either take any of the questions.  First on the question of some kind of grouping of democracies, what if it turns out that American allies in Asia, Japan, the ROK, Australia for example, don't want an institutional grouping of democracies?  Or to take it even a step further, I mean, is there a possibility that in seeking to promote the idea of an institutional grouping of democracies against resistance, the US could actually set back the cause it seeks to achieve?<BR> Aaron Friedberg:  Well, I think it s a very good question and one the United States has to lay the groundwork for.  I think that President Bush went to Australia and announced such a grouping a couple of years ago without much diplomatic groundwork and it got nowhere.  But I think the institutions that have been the most promising have not come from the United States.  In fact Japan, Japan was pushing very hard for a grouping of at least the four big democracies after the tsunami relief efforts, which just happened to be most -- happened to involve mostly the big democracies in Asia, India, Japan, Australia and the United States.  <BR>And so Japan pushed, I think, very hard and actually had a vision for what they called the ark of freedom and prosperity in the Asia Pacific.  I think the United States was less than enthusiastic about it, and some of the countries for varying reasons were less enthusiastic.  Not because it was a democratic grouping, in this case, but in the case of Australia as far as I understand it, it would, they feared, get in the way of a grouping they were trying to form just trilaterally.  But I think that democratic urge, the urge to be known as a democracy, identify as a democracy within Japan, within South Korea increasingly.  <BR>They are talking about having their own global vision for the alliance that includes work, more work with NATO countries, building upon the work they ve already done in places like Afghanistan and Iraq, within Japan to varying degrees, within Taiwan, Australia s constant fear of isolation within the region.  I think it s coming from Asia and I think it s more of a question of the United States embracing it, perhaps providing some cover to some of these countries who will obviously receive a lot of pressure from China to join.  But I think that India talks more or talked more about being known as a democratic great power.  So again, this is more indigenous, I believe and I ve seen, to Asia and Asians than it is America has been so far more resistant than some of the Asian countries.<BR> Dan Blumenthal:  You ve unerringly put your finger on the one issue that probably generated the most debate and disagreement within our group and there is a range of views on how plausible this is.  I think everyone would agree that some movement in this direction is desirable, everyone in our group.  The question is in what form, how fast.  And as Stan says, I think our view is that to the extent that others express interest in this, we ought to be receptive, there may be things that we can suggest as well.  <BR>One other point I think is important to note and we try to convey it in the report, we believe that it s necessary for us to desensitize ourselves a bit to Chinese reactions to things that we feel we need to do in our own interests.  That we ve gotten in a mode of being, we think, overly concerned with the expressions of discontent and unhappiness from Chinese diplomats for this thing or that thing.  <BR>This is partly because in the last few years, we feel that we ve been very dependent on the Chinese to help us with, for example, North Korea.  But we believe that that s, perhaps, an exaggerated hope.  But in general, we shouldn t be going out of our way to stick a finger in anybody s eye, but we also shouldn t be hesitant, we think, about proceeding in ways that are consistent with our values and also with our strategic interests.  We encourage people to try to shape our behavior if we appear to be overly responsive to every objection that is raised.  And this is an area where I think that s going to be crucial.  We re going to have to overcome some of that.  <BR> James Mann:  Let me ask, I guess, a more political question.  I guess you referred to this as basically a like-minded group.  This is a days before a new administration takes off.  Should people view this as an opposition strategy?  Is it a republican strategy, is it a conservative strategy, a neo-conservative strategy?  What is it - it s a what?  <BR> Aaron Friedberg:  Well, I don't think, honestly we started this well before the electoral process got underway, certainly well before we knew what the result was going to be, so our thought was, aside from the politics, if we now had the time to sit around and think about what we believe an appropriate policy should be, what should it look like.  And I don't think it would have come out differently if we had been thinking about it in some more calculatedly political way.  <BR>That said, I think, at least in my own mind, having gone through this exercise, I feel that I have in my mind a set of criteria, things I m going to be watching for, I will be interested to see whether the incoming administration does or doesn t do.  And as Dan suggests, I think we could also apply some of those retrospectively and I think even though both of us participated in this now outgoing administration, we wouldn t necessarily give it very high grades on some of these categories of things that we would like to see happen.  So in that sense, we are omni-directionally critical aside from parts and politics.<BR> Dan Blumenthal:  As I mentioned at the outset, we included a broad spectrum of like-minded people from the -- however you want to call people, realists or neo-conservatives or paleo-conservatives or right deviationists -- but you ll see the people who both are involved and who signed on, I don't think, I don't know what their affiliation is, Admiral Fargo s commentaries.  Some are clearly - but I think you can say that this is a kind of big tent, we didn t want to put known democrats on the spot during our campaign year and say sign this or don't and put them in the uncomfortable spot of saying this is the silly season and we re not going to sign it even though we agree with it.  <BR>I have a hunch that people I know going into the Obama administration agree with large parts of it, but we were mindful of the political season in that sense.  We wanted high intellectual fire power without descending to the lowest common denominator.  Again, when you have some of these task forces that the think tanks put out, you get sort of mish-mosh I think of sometimes the dissents are longer than the product themselves and so on.  But this was something that, as you can see who endorsed it and who signed onto it, a large group of people who aren t known to agree on very much, have agreed to.  <BR>And I think it is a document that those of us who are outside of government in a loyal opposition certainly are hopeful will be adopted or it s a standard to be set, something that we certainly look to in the future.  This is, after some very considered research and thought, this is the way we think the United States should go.  We have a lot of people who agree with us.  And I think it is a standard that we hope to hold people to.  <BR> Aaron Friedberg:  Just one other quick word.  Dan mentioned this and I think I touched on this in my remarks and there is some of the report.  Several of the things that we describe, and as I mentioned, this continuity in the strategy began in the 1990s, particularly the efforts to maintain US forces in East Asia and to develop our capabilities there to strengthen the alliance with Japan.  So this is not a Republican versus Democrats issue.  <BR>James Mann:  One more issue and then I want to turn it over to the audience.  The China section of the report holds out with maybe different wording than the Clinton or current Bush administrations, the argument that engagement will help change China s political system.   So the question comes up what if China s political system just doesn t change very much.  Would that then become an argument against engagement or what would it mean?  And, of course, I would want to ask what, you ve addressed this, but let me ask again, what engagement really means as a policy anyway.  <BR>Dan Blumenthal:  I think we point out that engagement means a lot of things and it also means a distinction between the many people and parts of society within China who are more unhappy with their system than we are with their system.  And obviously, the signing of the latest charter by more than 300 Chinese intellectuals and activists that really goes to the heart of the matter and calls for a multi party state with freedoms of association and an independent judiciary.  This was not American spurred, this is Chinese spurred.  <BR>Engagement means a lot of things, but one thing for our government and our people to remember is engagement does not just mean engagement with the Chinese communist party.  There is obviously an important practical element to engaging with the Chinese government on a number of issues, but speaking to those in China who want justice and want reform and want transparency is not something that we should shy away from.  So I don't think we think it s going to inevitably lead to political reform; I think that we think and have assessed that China is a much more pluralistic place than it was thirty years ago.  There are many Chinese fighting hard for changes in reform.  <BR>We should certainly be engaging with them, as well as with the government, and not be afraid to do so. Engagement should have a direction and a shape.  The shape again should always have in mind this kind of Asia that we think is in the United State s interest.  If it goes off the rails and again engages in the kind of ritualized happy talk about how good things are, I think that s not the right kind of engagement.  I think that if it prohibits us from talking to Chinese who want change, that s not the right kind of engagement.  <BR>So I think it s very multi-directional, very multi-dimensional at this point.  But one thing we wanted to highlight is that the American people should know and American political leaders should know is that there is a big and perhaps even growing difference between the Chinese people and their government.  <BR>Aaron Friedberg:  I guess I would say that most of us in the group are, I guess are cautiously pessimistic.  I think what s striking to most people, most of us in this group anyway looking back over the last twenty or thirty years is the resilience of the regime.  And in spite of the fact that all sorts of thing have happened that many people were saying twenty years ago inevitably would lead to political reform, the internet and village elections and so on, in fact that hasn t happened.  And it s conceivable to us that it isn t going to happen for quite some period of time.  And yet during that time, China could become wealthier and stronger.  So I think that is, in a way that s the fundamental problem we face.  At the same time, we don't feel that there is any alternative, politically or in other ways, to continuing with the engagement aspects of our policy.  And certainly there is always hope that they will contribute eventually to favorable change.  So we have to hope that that will be the case, but we re not going to bet everything on it.<BR>Dan Blumenthal:  One more thing.  We divided the report up into different sections and there s a lot of debate about the wording engagement, balancing and hedging - three distinct activities.  I think Aaron described two of them, engagement and balancing.  I think hedging means hedging against outcomes, one of which you described, which is it doesn t, quote unquote, work.  You know, that in fact at some point we assess as a nation that we ve been engaging, China has grown stronger, more prosperous, still authoritarian and aggressive.  <BR>You have to hedge against that possible outcome as a country as a policy planning matter, as well as a possibility for sustained instability within China.  That s where, I think, we were careful to draw the difference in what we re doing now, which is just maintaining a balance of power and then hedging against some of those unsoothing scenarios that may plausibly unfold over the next few years.  <BR>James Mann:  Okay, I m sure there are lots of questions from the audience, I hope we have a good discussion.  So yes?  Could each person identify, briefly identify yourself.<BR>Aziz Haniffa:  Yes, I m Aziz Haniffa from the newspaper called India Abroad.  This is a question for both panelists.  And Jim, as a China scholar I would like some of the after some of the outpeak of terrorist has become [indiscernible] for the Obama administration in terms of a foreign policy priority.  With the type of focus that would have to be paid to both [indiscernible].  And the fact that in terms of the balancing you all spoke about vis-�-vis China and the fact that conservative [indiscernible] like the [indiscernible] have usually called for some sort of a counterweight to China and vis-�-vis the support for the US/India nuclear deal, etc.  And the support that China gives Pakistan and then [indiscernible].  What would you recommend that sort of the Obama administration take in terms of a balancing policy towards China vis-�-vis India in terms of both Pakistan and Afghanistan?<BR>Dan Blumenthal:  We decided not to include Pakistan for a lot of reasons.  It s too, you know, difficult is one of them.  Not that China is easy.  We decided to stick also I think the Pacific command and central command definitions of Asia.  But obviously Pakistan factors in quite a bit, first and foremost, as you said and I said at the outset, with so many problems in President Elect Obama s inbox, it s hard to imagine him tasking his national security council to say go out and think me up a long term strategy for the Asia Pacific.  More likely he ll have to deal with the teetering of Pakistan, the possibility of conflictual relations with India and Pakistan and the problems in Afghanistan.  <BR>But I will say we didn t touch upon the Pakistan question, but I will say that Pakistan is one of those areas where the Chinese certainly could help stabilize things.  But if they don't stabilize things or they don't help in the ways that they could, we shouldn t fall back into our sort of habits of praising them for just showing up or holding a meeting.  There s a lot that China did within Pakistan.  Jim Mann knows more about this I think than the rest of us up here, that created some of these problems to begin with and some sense is they have great obligations to help clean it up.  I think the Obama administration will be looking to China to help stabilize Pakistan, as will Pakistan, as has Pakistan.  <BR>But this is one of the areas where we don't have to, we have to graduate from the situation where we just kind of pat China on the back for not behaving badly or for just engaging in the most minimum of activity.  We think, I don't know if we said it in the report, but we think that the US breakthrough with India has effects across the board, not just on the future disposition of power within Asia, but also getting India to feel more confident over time and less focused on Pakistan as a problem.  And I think that was, to some extent, happening until the recent Mumbai attacks.  So there are great reasons to do what we are doing with India and to continue to do so and probably to even continue to do so during this current crisis.  <BR>Aaron Friedberg:  Let just add that if you look at the strategic problems that the United States faces and that India faces, there is considerable overlap, obviously.  There s a concern about China in the long run.  There s clearly a concern in both countries about terrorism.  So there s a lot to cooperate on and I think that s been the basis for the progress that s been made in recent years.  But having said that, as you know, the US preferred approach to dealing with Pakistan and dealing with Afghanistan has run counter to the preferred Indian approach.  And so this is a source of ongoing tension, relatively minor I think at this point, but potentially could grow.  <BR>So looking forward, I think the question is how we re going to manage these problems and differences that we have with India while at the same time maintaining the progress towards a much deeper, broader strategic relationship over the next several decades.  I think the groundwork has been laid for that, but it s not inevitable that we ll get there if we allow ourselves to be tripped up over shorter term issues.  <BR>Just one other comment.  Dan mentioned that the Chinese responsibility, to a considerable degree, the problems that the world faces now in the area of proliferation trace back to China.  Not exclusively to China, but Pakistan nuclear program, which gave us A.Q. Khan, which almost gave us a Libyan bomb built to a Chinese design, which has given Iran some assistance, North Korea.  The Chinese have substantial responsibility for the problems that we and others are trying now to clean up and I hope that they will choose to be helpful in this.  The test, I think, in the near term is going to be how helpful they are in applying pressure to Iran and so far they haven t been that helpful.<BR>James Mann:  Yes, Chris?<BR>Chris:  I had two questions really.  One is if you were [break in audio] to stress to them that it isn t just the alliance part of the stuff that we are looking at you guys for, there s other things.  How would you try to calm them down on this thing that we read every day oh, my god, the Americans are tilting.  And I had a very specific question if I could I apologize.  Dan, you said and I thought it was very interesting, the third part engagement, balancing and number three is hedging.  And you defined hedging as, you ve got to hedge against that outcome where engagement doesn t work.  And you defined that as a stronger, more prosperous, still authoritarian and aggressive China, if I understood you correctly.  So my question from that is do you define aggressive simply in terms of China building a national strategic capacity per se, do you make a distinction between what we might call legitimate or expectable great power behavior versus things that are somehow over the line.  Thanks.<BR>Aaron Friedberg:  To start on the first one, the impression, if I gave the impression, was just my haste to get through the report.  Because when you get the chance to look at it, we start the section where we talk about friends and allies with Japan, emphasizing Japan s importance and also responding to what we think is a misplaced tendency on the part of some people in the United States recently to regard Japan as kind of a burnt out case or a country that s now back in the trough, hopeless political problems and incapable of getting itself straightened out and so on.  And that is often an argument for focusing more on China.  <BR>We disagree with that completely.  We think that s entirely inverted and that in fact the emphasis of our policy should be continuing to build on the progress that was made with Japan over the last ten or fifteen years.  That s going to depend, in part, on their getting their domestic political problems squared away and beginning to move forward again.  But there is nothing, I think, we would agree that s more important to the long-term than our relationship with Japan.  <BR>Dan Blumenthal:  I would add to that, we started off with the grand objectives of the United States, which is how we think we should and how we think we can, given the different instruments of power we still have, have a role in Asia s transformation to being the center of world politics and economic life, which is something that is playing out before our eyes and will continue to play out in the next few decades.  And we set out these two broad objectives, one is that it shouldn t look like it s past, not dominated by anybody or conflict-ridden, as well as prosperous, whole and free.  <BR>Asia is one area of the world where there still are territorial conflicts that can lead to, disputes that can lead to conflict, unresolved issues on the Korean Peninsula, unresolved issues between China and Taiwan, unresolved issues between a lot of different people.  And Japan has been and will continue to be, we think, a positive player in building this kind of Asia that benefits Americans and benefits Japanese.  <BR>So again, it starts off with the grand objective and then we get to China because it has the capacity, probably the only one that has the capacity and perhaps the inclination to stand in the way of what we think should be US objectives.  <BR>On the second question, which is almost how do we know if China has crossed a certain line, I think if you look at China, China compared to Russia right now, Russia, some argue is on the decline, but very aggressive.  They invaded a neighbor, which I think would be crossing a line.  The trend is not behaving that way.  <BR>I mean, the difficulty we think with China is that in many ways I think opponents of this particular strategy would say well, China is behaving very well and very responsibly.  And we say yes, in some ways, but look at the latent and emerging possibilities and look at what, if you start to piece the puzzle together, what we think they are trying to do, which is buy some time to grow and perhaps reshape an order in Asia that they don't particularly like.  <BR>Now if they gain the power to do that over time and behaved more you can imagine a whole family of possibilities, set of possibilities, a more Putin-esque China that actually was bellicose and even crossed a line in terms of the use of military force or threats of military force.  You can imagine all sorts of kinds of Chinese behavior that would require you to change into more of a, take that hedge and make it into more of a policy where you actually have to hold the line against real Chinese threats, whether they be military action or other forms of coercion.  <BR>So again, it s the kind of thing that if our analysis is correct, that China is biding its time as it is building its power, you know, to make more aggressive plays in the future, then you have to hedge against those plays.  And you know pretty well where those, you can see pretty well where those lines will be crossed, whether it s the Taiwan Strait, whether it s on the Korean Peninsula.  Again, you can go through all of the different, whether it s in the Indian Ocean none of this has happened yet.  It could happen, it may happen and you have to hedge against it.  <BR>James Mann:  Okay.  Yes, Eric?<BR>Eric McVadon:  Eric McVadon, the Institute for Foreign Policy Analysis.  I wonder how your report handles the issue of shaping China s policy.  Some people consider that sort of an arrogant expression.  I guess it might reduce it to, if China gets shaped, it expects to do some mutual shaping, which might have something to do with Taiwan and our alliances, so let me fold that in and say how does your report handle how the alliances turn out?  But please tell me what you do about the term shaping. <BR>Aaron Friedberg:  I don't think we use the term, which reflects a certain skepticism about it, at least as it s been used with reference to Chinese defense policy.  And we don't get into this at great length, but what impresses me and I think others in the group is the purposefulness, momentum, scale, scope and pace of the Chinese military buildup.  It doesn t seem to be responding particularly to things that we haven t yet done, but to anticipating things we might do.  I suppose we could argue about that.  I think shaping in the larger sense though, the concern about the impact of our behavior on China s domestic political development is a real issue.  And again I said before that we don't see an alternative to engagement.  We continue to hope that it will work.  <BR>I think there is a strong argument to be made at this point that if the United States and others were to adopt a very hostile posture towards China, that would strengthen the hands of people in China who don't want to move towards political reform but want to build up military and so on even more.  So there is some yes, there is some connection there, but we don't think that it is so tightly coupled that we can modulate what we do or don't do in our defense budget in order to produce a response.  <BR>As far as alliances go, I think this is a one-sided game where it s a game where the two sides are very different.  For the United States, the goal is building and strengthening alliances relationships.  For China, it is weakening those relationships or draining them of strategic significance.  China isn t going out and looking for allies; it is signing various strategic partnership agreements and so on with other countries.  But I do think that it s looking over time to erode the ties that bind the United States to Australia, Korea, Japan and other countries in the region for fairly obvious reasons.  That if China is going to emerge as the major player, the dominant actor in the region, in the long run it s going to have to do that to ease the United States back, if not out, of East Asia.<BR>Dan Blumenthal:  I would say that your ability to shape is limited, right?  So you can work to take certain options off the table by having a strong military deterrent and strong alliance relationships.  For example, you could make aggression towards Taiwan so unpleasant and risky that you ve shaped Chinese policy and in the sense of the way you ve handled your own military presence and your own alliance relationships.  You can also more positively help to create institutions within Asia that China would want Chinese people, I should say, Chinese people would want to become part of.  <BR>And perhaps in that way create certain incentives within Chinese politics, as we discussed, a more value-based organization that holds out its hand towards China should China make the requisite changes.  But again, you have to recognize two things.  One is you are pretty limited in terms of you yourself as a country can control and what you can manage with your allies.  And the other is to recognize that China is shaping you constantly and that s part of the engagement and we talk about it a little bit, they are shaping their perceptions.<BR>In their engagement with us, there is no question that there s a few games going on, one of which is to shape the perception of a peaceful China, a peaceful development, a peaceful rise.  The ASAT test was a rogue element in the PLA and the CCP had nothing to do with it.  You know, China I guess what we are arguing is we can do what China does, which is benefit from the trade and investment and try to find areas of common ground. But at the same time, shape the environment and shape the relationship in ways more beneficial to us, just as they are doing to us.  <BR>As Aaron said, they are trying to put pressure subtly on some of the alliances and they are certainly trying to shape the perceptions of Americans and others about what their long-term intentions are.  Not that they necessarily have all decided what their long-term intentions are, but certainly they are trying to shape a perception that it is peaceful, there s no other option on the table.  <BR>James Mann:  Yes?<BR>Kevin Barron:  Hi, I m Kevin Barron with Stars and Stripes.  Recently, the last couple of weeks or months, Secretary Gates and Petraeus have been calling for non-military solutions to Afghanistan and the entire central region.  Just last week, General Petraeus had the U.S. Institute for Peace headlining that sentiment at an event there.  And in this report, it seems that the solutions to the growth in China s power, especially its military buildup, is a call for even greater American buildup American arms, subs, it mentions space weaponry, new bases with missile defense and really fairly a token mention of soft power.  So is this report at odds with what Petraeus and Gates are saying right now and what seems to be the tide of military foreign policy towards a greater combination of those two elements of soft and hard power of civil military strategies?<BR>Aaron Friedberg:  Well, as you point out, Gates and Petraeus were talking about Afghanistan, not talking about China.<BR>Kevin:  But it extended to all of the terrorist and other, you know, conflicts in the region.  <BR>Aaron Friedberg:  Well, I don't know exactly what they said, but I suspect or I hope that the Secretary of Defense would not have said our only response to China s military buildup should be soft power, whatever that means.  Obviously there has to be some mix of elements.  But my concern, I think I ll express it as my opinion, I think others in the group agree that we have reached a point or are very close to a point where we are going to have to make some decisions as a country about procurement programs for forces that will not be available for ten or fifteen years or more that will be necessary to counter and offset developments that China has now put and train and begun to deploy.  <BR>I think we ve been able to defer some of those decisions for awhile.  We ve dealt with the changing military situation, in part, through increasing deployments of existing forces in the region, but I think we re getting to the end of the period of time in which those are going to be satisfactory solutions.  My concern is that for a variety of reasons, not least our economic problems and our preoccupation with other strategic problems, we may continue to defer those decisions, which could leave us in a position some years down the road of relative disadvantage and that could be a very dangerous situation to be in.  <BR>Dan Blumenthal:  I think the idea of a militarized foreign policy is obviously a straw man.  I mean, Secretary Gates has not, certainly not given up the instrument of military power as a tool of state craft.  He s written a national defense strategy which mentions China quite often in terms of the types of capabilities and alliances that we need to maintain a favorable balance of power.  And obviously, never in statecraft can the two be divorced.  <BR>The reason that Asia has prospered and now has more democratic rule, people living under democratic rule than any other region of the world, one of the main reasons is because elites in Asia could forego the pursuit of costly security competitions, WMD programs and that sort of thing because they felt secure.  So no one is talking about a militarized, I don't really know what that means besides perhaps a Nazi Germany or something like that.  But obviously the instrument of military power has not been given up by the United States in its diplomacy and even more so, I think, as China grows its military power, nor has it been given up by China in its diplomacy.  <BR>And as long as it hasn t been given up by China, it s only prudent and wise as we further our interests in the region and protect our allies and protect the continued prosperity of the region to make sure that the Chinese and are allies know that we re there.  <BR>James Mann:  In the back there, young lady?<BR>Ms. Perkins:  Ms. Perkins from Congressional Executive Commission on China.  I think, I haven t heard that much of a discussion about human rights or rule of law in US/China relations.  And I m curious what the panelists think about in the Obama administration, what kind of role can human rights or rule of law play in our foreign policy towards China.<BR>Dan Blumenthal:  We mentioned it, it s kind of the overlay to the entire report, which is participants varied on the degree to which we should actively pursue democracy promotion in China as a strategic priority.  But they did not disagree on the fact that if there was democratic change in China, the possibilities for peaceful accommodation are greater.  So that s the sort of grand strategic prize.  Now it was assessed by the group that the promotion of democracy as a priority, the cost and benefits have to be weighed like any other strategic priority and also what means do you have to achieve them.  <BR>Now what we do allude to is that we have a lot of things going for us in that regard in that the Chinese people themselves, many of whom are taking greater and greater risks to call for changes in their own country.  This is not an American made idea.  And you know, the question then becomes within the engagement sphere, how to deal with those people, how to encourage them without making yourself, without creating even greater suspicion with the CCP, who you need for other things.  Now this a very difficult balancing act that I think all presidents, to varying degrees, have had to play out.  <BR>I don't know about the Obama administration.  I think that they will be facing an economic crisis for which they think China will play a great role.  So in that sense, my own assessment, and this is deviating from the report, is they wouldn t want to rock the boat on democracy initiatives.  The same thing with their assessment of the role China can play in North Korea, Pakistan, Afghanistan.  This, I think, will play out during a year in which human rights abuses will probably increase in China because of the economic slowdown, as well as the various anniversaries, the anniversary of the Tibet uprising.  <BR>So I think that those who are pressing for, and we argue that all American strategists should be pressing for strategic reasons, as well as humanitarian reasons, reform in China, are going to be facing a difficult road over the next year.  Mostly because of Chinese activities, but also because of the global recession and the other crisis we face.<BR>Aaron Friedberg:  Just on this point I think it goes back to the issue that was raised earlier about shaping and China s ability to shape American responses.  I think this is an area where we ought not to allow ourselves to be dissuaded from saying things that we believe to be true by the belief that somehow if we don't say them, we re going to get more cooperation from China on issues one through twenty-nine.  Presumably if China does cooperate with us on things like North Korea or Iran, it s very much for their own strategic reasons, not because we ve been nice to them or have refrained from saying nasty things about them.  <BR>Now that said, we haven t, as a country I think, worked out a successful mix of prudent silence and avoiding unnecessary confrontations on the one hand, and also finding effective ways that are not simply ritualized of calling attention to the Chinese government s continuing abuses of human rights.  I think administrations tend to start off full of steam and wanting to say this or that and then become very quiet as time goes on because they have other issues on which they need Chinese cooperation.  There needs to be some better balance than that and it s partly, I think, a question of finding, picking the issues on which an American president, for example, wants to stake his or her prestige and speak out.<BR>James Mann:  Let me ask -- pursue that with one question.  When people talk about American policy towards China politically, there tends to be a paradigm in talking about the last twenty or thirty years.  Which is that oh, every American presidential candidate or presidential candidates tend to criticize American China policy, take office and then the larger dynamics puts them in a position of backtracking on their campaign rhetoric over two years.  And I don't mean to <BR>Dan Blumenthal:  It s called about face, actually.<BR>James Mann:  I was going to say that I mean to speak lightly of this because I fit into the conventional wisdom.  The paradigm may be running out.  I mean, we have now a candidate, I mean a president elect who really didn t.  And beyond Obama, I think really I was struck during the campaign with the extent to which China really was not an issue largely speaking.  So that raises the question is it possible you will have a candidate who -- a new president who hasn t criticized China policy and is largely committed to continuing existing policy, but is it possible he will be pressed or it will turn out that he will change American policy towards China because of larger economic issues?  I mean, are we going to see a reverse about face?<BR>Dan Blumenthal:  That s a very interesting question.  I think that the issues that did come up during the campaign were about economics and sort of technical issues about whether China should be designated a currency manipulator.  And president elect Obama said they should and signed on to some legislation in the Senate that does that.  I think he will face pressures internally in American politics to quote, unquote get tougher with the Chinese on trade matters.  <BR>And besides the general issue of correcting imbalances that we touched on in the report, if you re going to pick a fight with China, my own view is that s not where to pick it.  You can get into some pretty bad trade wars at a pretty bad time if you do that, but that s where he will be facing pressures.  I think he ll be facing political pressures from Congressional democrats on issues of Tibet this year because of the anniversary.  <BR>And then you never know what the Republicans are going to do now that they re not in power.  I mean, the other President Bush got a pass on a lot of the things we criticized, in fact, in the latter years of his presidency with respect to some of the Sino-centrisms, some of the decisions on Taiwan arms sale or lack thereof, some of the decisions on North Korea.  But now Republicans are in opposition and many Hill Republicans have sort of built up this reservoir of concern about China on proliferation issues, the ASAT test is still very much on people s minds.  And there can be all sorts of pressures on him if he doesn t tack a certain way on China.<BR>So I think that so there s this element, there is very strong element of domestic politics with regards to China because of the deepness of the economic relationship.  I think people didn t predict how much friction actually would occur in the economic relationship, which might be foremost and the human rights issues might be pushed a little bit back.  <BR>But some of the military and proliferation issues might be pushed into the fore by Republicans, so you could have this combination of unhappiness on the Hill that I think is there I think it s latent, I think it s there.  And then there is what we re trying to do.  And again, if I m correct and China will be even tougher on dissent this year and on rule of law issues and on human rights issues, there might be some incidents that force a president with little experience on China to do this kind of reverse about face that you talk about.  Of course, the betting at first would be that he seeks their help on a number of issues and puts the other issues back and has to sort of fend off Congressional critics.  But it could happen.<BR>James Mann:  Aaron, some thoughts on that and what do you think China s priorities will be over the next four years in dealing with this administration?<BR>Aaron Friedberg:  Well, I do think, I agree with Dan that the biggest threat to the relationship in the near term is on the trade issues, the economic issues.  It s not Taiwan or sort of strategic questions.  And in that sense, this relationship is the reverse of the relationship between the United States and Japan in the 1980s.  You have these trade frictions, but they were constrained in the end by a political and strategic relationship.<BR>In this case, you have an economic relationship that s sort of holding the whole thing together and the strategic ties are sort of pulling in the opposite direction.  So if there is trouble on the economic front, all bets are off because I think a lot of other things will come to the fore.  It does seem to me the people around Obama from what we know of their track records are very strongly opposed to protectionism and will do what they can to dissuade him from giving into those pressures.<BR>As far as China s objectives, I think, my sense is that the Chinese strategic analysts, to the extent that I am familiar with what they are saying, are very content overall with the situation that they ve come to now after eight years of Bush.  They were very worried at the beginning, became even more worried in some ways after 9/11 and then have been able to get very close to us and get in a situation with us where we re very reluctant to do anything that rocks the boat.  And they would like that to continue because I think they feel that it serves their advantage, it allows them to go forward with the things that they re doing and want to do in the region and globally.  But it keeps us from responding very rigorously or pressing.  <BR>The economic crisis, though, can throw everything into a cocked hat.  I think the concern that the leadership has to have is over domestic instability and as Dan says, that s likely to increase, probably already has significantly increased.  And we just don't know what impact that is going to have on their foreign policy behavior.  As I mentioned, there is one school of thought that holds that if they have a lot of trouble domestically, they are going to be very, very cautious in dealing with the outside world and I think that s very plausible, but it s at least conceivable that the opposite is true.  You are under pressure, you re Hu Jintao, Hu Jintao s successor, there are all kinds of domestic problems, what s the thing that you can do if you can t produce economic performance at quite the rate that you were doing to mobilize public support?  Well, maybe it s to pick some kind of fight with Japan or Taiwan or the United States.  <BR>James Mann:  We have time for, I think, let s get two more questions.  <BR>Peter Sharp:  Peter Sharp from MITRE Corporation.  There s an interesting disjunction in the language on page four of the report, the lower left hand corner.  The bold faced headline says prevent domination by a hostile power or coalition.   And the text says prevent domination by any single power without the adjective hostile.   <BR>It seems to me that if we try to imagine what the world looks like from Beijing, that s a critical difference.  They see the United States as determined for the foreseeable future to prevent their [indiscernible] in Asia no matter what their policies are.  Or do they see a prospect that there could be harmony, that there could be a reconciliation of the things most important to them with the things most important to us?  And surely that has a lot to do with driving some of their choices and ought to, in turn, drive ours.<BR>Dan Blumenthal:  Okay, I m going to blame that on the editors, first of all.<BR>James Mann:  A great tradition.<BR>Dan Blumenthal:  Right.  Look, you have, I mean historical comparisons are treacherous and long in the tooth and so on, but you know, you have situations where emerging powers have worked out peaceful accommodations, the United States and the UK being, I guess, the prime one and the UK and Germany being one that didn t work out so well, it took sixty or so years to work out.  And you know, in the US and UK relationship, there were so many factors pushing it towards accommodation, but one of which was this feeling in the UK that they wrote about and talked about in Parliament that we shared they used to use more racial terms but we shared a common liberal order, a common vision of the world.  That was a factor not to be discounted in the peaceful accommodations.  There were other issues, there were other strategic issues.<BR>I don't think anyone in this working group thinks that it s impossible to work out a peaceful accommodation with the emerging power of China.  I think everyone in the working group agrees that it would be a lot easier to do if China s political order changed.  And I ll just give you one quick reason why, which might answer your second question, and that is that the CCP does view, no matter what we say or do, the current political ordering, current domestic politics in China views the United States as hostile, no matter what we say, no matter what we do, because its legitimacy rests upon some thin reeds.  It constantly believes that the United States is trying to bring it down.  <BR>So even when we have senior level officials in the United States government saying actually what we re trying to do is make you stronger.  No matter what we do, whether it was during the Color Revolutions of 2005 or whether it was Bill Clinton s peaceful evolution strategy or President Bush s personal strategy of trying to convince Hu Jintao that it is in his own interest to develop a multi-party democracy, no matter what we say or do, they think the West, broadly defined, is trying to bring the CCP down and other elements within China is trying to bring it down.<BR>So obviously if you have a system that rests on greater legitimacy, they will be less fearful that that s our true intent no matter what we say or do.  And that s why China is both engaging, balancing and hedging against us.  I think the only long-term solution to that is a change in politics in China.  I don't think I m alone, I think a lot of people in China think that, too.  So I hope I sort of answered your question.<BR>James Mann:  Sorry, go ahead.<BR>Aaron Friedberg:  Just very quickly.  I think this question of whether there is the possibility of accommodation between the United States and China is, in some ways, it s the central strategic question on both sides.  If you look at how Americans talk about and how Chinese, at least those whose writings we can read, talk about it, it strikes me that 75 percent of Americans are very optimistic about the possibility of this convergence in accommodation and maybe 25 percent are pessimistic.  The fractions are inverted on the Chinese side and you get a lot of people saying, as Dan says, the Americans are out to get us no matter what they say.  <BR>My own view of it is that in theory, if you could factor out all of the ideological, emotional, unpredictable factors that shape international politics and regard it purely as a matter of cold blooded calculation, of course there would be an intersection and the two sides could work out an agreement that would divide Asia in some way or whatever it looked like.  <BR>But that s not all there is to it and in particular these domestic political dynamics, ideological dynamics which make the Chinese very fearful of us and make us ultimately very suspicious of them, are powerful disruptive forces.  Just a final point, the Chinese say the Americans or the CCP says that the Americans are out to overthrow us.  Well, in a sense, you know, when American presidents say we hope for a transition, peaceful transition to liberal democracy, what they hear is we re looking to put you out of a job.  So we shouldn t be surprised that they feel this way.  <BR>James Mann:  I see one question at the back, it s the last question go ahead.<BR>Jihun Sohn:  I m Jihun Sohn with Voice of America, the Korean service.  In terms of North Korea, what do you think will be the biggest challenge or challenges for the incoming administration and how should the incoming administration deal with such challenges?  Thank you.  <BR>Dan Blumenthal:  I think, and I referred to this earlier, North Korea has not made a decision to give up its nuclear program.  So let s start with that premise and try as best we can to protect ourselves against cases of proliferation and deter aggression by the North Koreans and so forth.  But I actually think the bigger challenge that s going to grow, and I mentioned this before, is the uncertainty with respect to the future of leadership within North Korea and Chinese plans with regard to instability within North Korea and the anxiety that that is causing within Seoul and Tokyo.<BR>James Mann:  Last thought?<BR>Aaron Friedberg:  I think the most important thing that the new administration has to do is to acknowledge that the current policy has not succeeded and a continuation of the current policy is unlikely to succeed and then sit back and figure out where it wants to go.  But just to continue what we are doing now is not going to get us where we want to be.  <BR>James Mann:  Good.  Thank you all for coming.  </P> <P>[End of Session]<BR>[End of Transcript]</P> <P><BR>[End of transcript]</P></body></html>